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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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Sunday, November 30, 2008 ~ 10:03 p.m., Dan Mitchell Wrote: Michelle and Barack Obama have settled on a Washington, D.C., school for their daughters, and you will not be surprised to learn it is not a public institution. Malia, age 10,
and seven-year-old Sasha will attend the Sidwell Friends School, the private academy that educates the children of much of Washington's elite. ...The Obamas are fortunate to have the means to send their
daughters to private school, and no one begrudges them that choice given that Washington's public schools are among the worst in America. Most D.C. parents would also love to be able to choose a better school
for their child, but they lack the financial means to do so. The Washington Opportunity Scholarship Program each year offers up to $7,500 to some 1,900 kids to attend private schools, but Democrats in Congress
want to kill it. Average family income for kids in the voucher program is about $22,000. Mr. Obama says he opposes such vouchers, 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." The example of his own children refutes that: The current system offers plenty of choice to kids "at the top" while abandoning those at the bottom. Link to this Blog Entry2008-11
Saturday, November 29, 2008 ~ 5:51 p.m., Dan Mitchell Wrote: Up until the 1930s, the United States maintained a small federal government that mostly focused on the limited number of things the
Constitution authorized it to do. Americans were responsible for their own food, clothing and shelter, and if they could not take care of themselves, they looked to their extended family, their neighbors, their
churches and local governments to give them a helping hand. Charity in America in those days did not mean the federal government compelling you to hand over some of your property to the state so the state could
hand it over to someone else. Americans did not believe in spreading the wealth -- they believed in earning it. The term compassionate conservative had not been coined. There was no federal welfare state
before the 1930s. That year, according to historical data published by the White House Office of Management and Budget, the entire federal government spent only 3.4 percent of gross domestic product. Because
federal tax receipts equaled to 4.2 percent of GDP in 1930, there was a federal budget surplus equal to 0.8 percent of GDP. ...In fiscal year 2009,
according to OMB's estimates, the federal government will spend 20.7 percent of GDP while taking in 18 percent of GDP in taxes. The Treasury will borrow 2.7 percent of GDP, much of it from foreign
creditors, to make up the difference. And that does not count the $700 billion the Treasury will borrow to fund the financial industry bailout.
Today, the federal government eats up more than twice as much of our national wealth as it did in 1940 and more than six times as much as it did in 1930. What did Americans get for this massive increase in
government? More of their life is now mortgaged to the government, and they are now more dependent on government. ...We got to this place because politicians for decades have been telling voters they would give
them something for nothing -- when what they really meant was they would take money from one set of people and give it to another.
Friday, November 28, 2008 ~ 3:54 p.m., Dan Mitchell Wrote: It's an undying Democratic Party myth that Franklin Roosevelt's New Deal spending helped end the Great Depression (or at least relieved
suffering). The hard fact is that unemployment stayed well into the double digits until the early stages of World War II. There seems less argument over a more recent case of failed big-government stimulus,
that of Japan in the 1990s. The incoming administration should study that lost decade well, because it started with disturbing parallels to our own time and place. Japan got into trouble with the collapse of a
real-estate bubble and a subsequent breakdown of its banking system. ...Then it made another error that the pending Obama administration seems tempted to repeat. It tried to revive the economy by increasing the
government's share of it. The result was plenty of pork and almost no growth. Japanese government spending (at all levels) grew from 31% during the '90s to 38% of GDP more recently. Meanwhile, average
Japanese annual economic growth fell from 4.1% in the '80s to just 1% in the '90s. From '92 to '99, industrial output grew only 0.7% compared with nearly 40% in the U.S., which spent the decade reducing
government spending as a share of GDP (this was the era of a GOP Congress that took its job seriously).
Friday, November 28, 2008 ~ 3:00 p.m., Dan Mitchell Wrote: As widely predicted, Alistair Darling introduced a new top level of tax, which will be imposed on people earning over £150,000 a year. They will
pay 45p in the pound, up from 40p, from April 2011. Less anticipated though was the clawback of the personal allowance for higher earners, which will see some taxpayers effectively paying paying 60p in the £1,
according to leading accountants. These changes will not just affect the 1pc of taxpayers earning more than £150,000 a year. It will potentially
affect 650,000 people earning more than £100,000 a year. To further rub salt into the wound these higher earners will also pay an additional 1pc
in National Insurance costs, giving an effective taxation rate of 61pc - a rate not seen since the late 1980s. ...Mike Warburton, a tax partner at
Grant Thornton, said: "This means that those earning between £100,000 and £107,000 and £140,000 and £147,000 are effectively paying a rate of 60p in the £1, due to the gradual withdrawal of the personal
allowance." The loss of £1 of allowance means every £2 earned is taxed as though it were £3 of earnings - which means the rate at which you are taxed is effectively pushed up from 40pc to 60pc.
Thursday, November 27, 2008 ~ 10:51 a.m., Dan Mitchell Wrote: What we are talking about is a golden political opportunity for politicians to use the current financial crisis to fundamentally change an economy
that has been successful for more than two centuries, so that politicians can henceforth micro-manage all sorts of businesses and play Robin Hood, taking from those who are not likely to vote for them and
transferring part of their earnings to those who will vote for them. ...what has in fact been done has been to create a huge pot of money-- hundreds of billions of dollars-- that politicians can use to give out
goodies hither and yon, to whomever they please for whatever reason they please. ...It is one of the few parts of the legacy of the Bush administration that the Democrats are not likely to criticize. Much as we
may deplore partisanship in Washington, bipartisan disasters are often twice as bad as partisan disasters-- and this is a bipartisan disaster in the
making. ...increasing numbers of economists and historians who have looked back at that era have concluded that, on net balance, government
intervention prolonged the Great Depression. ...Government policy in the 1930s was another bipartisan disaster. Despite a myth that Herbert
Hoover was a "do nothing" president, he was the first President of the United States to step in to try to put the economy back on track. With the
passing years, it has increasingly been recognized that what FDR did was largely a further extension of what Hoover had done. Where Hoover made things worse, FDR made them much worse. Herbert Hoover did
what Barack Obama is proposing to do. Hoover raised taxes on high-income people and put restrictions on international trade, in order to try to save American jobs. It didn't work then and it is not likely to
work now. Perhaps the most disastrous of all the counterproductive policies of the federal government was the National Industrial Recovery Act under FDR, which set out to do exactly what the politicians today
want to do-- micro-manage businesses.
Wednesday, November 26, 2008 ~ 6:32 p.m., Dan Mitchell Wrote: The president-elect has directed his economic team "to come up with an Economic Recovery Plan that will mean 2.5 million more jobs by January
of 2011." And right on cue, the media have described the plan in glowing terms. ...Such promises are easy for politicians to make because a
growing economy creates enormous numbers of new jobs, no matter who sits in the White House. Since Eisenhower's first term, the economy has created an average of 1.5 million new jobs each year. Since Reagan's
first term, the average has been about 2.5 million a year. And Reagan, who inherited an economy as bad if not worse than the current one, saw
6.3 million new jobs created four years after he entered the White House. If Obama just manages to hit the post-World War II average, there would
be 3 million more jobs by 2011. What's more, Obama's promise doesn't keep pace with projected growth in the labor force. The BLS projects that roughly 2.6 million new workers will enter the labor pool over the
next two years. If that's the case, Obama's plan would leave the unemployment rate slightly higher in 2011 than it is now. Moreover, Obama's stimulus plan could eventually total $700 billion, the
Washington Post reports. So, as former Council of Economic Advisers chief Gregory Mankiw notes, each job Obama "creates" will cost $280,000.
Tuesday, November 25, 2008 ~ 10:10 p.m., Dan Mitchell Wrote: Barack Obama's election has elicited debate about whether he will drive America toward a European-style economy, one that is heavy regulated
and relies on high taxation of the rich to redistribute income and finance generous government programs. How ironic, then, that Europe itself is moving away from European-style taxation... In the past five years
alone, 33 countries, including 20 in Europe, have cut their top personal income tax rates, according to a study released just before the U.S.
presidential election (and predictably ignored in the U.S. media) by the accounting firm KPMG International. Even more impressively, in the
past four years, 60 countries have cut their corporate income tax rates, according to a World Bank survey. The tax-cutting binge is taking place
in what some have called "Old Europe." France, Germany, Italy, and Spain have cut their top personal income tax rates since 2003. Germany,
Italy, Spain and the U.K., meanwhile, have trimmed corporate tax rates, too, in just the past year. ...In Asia-Pacific, Hong Kong's low taxes (top
rate, 16 percent) have continued to make it a magnet for both people and money and prompted tax cuts in other countries. Australia cut its top
income tax rate two percentage points to 45 percent to try and lure back talent fleeing to Hong Kong and Singapore, but Australia has a long way
to go to be competitive. Singapore has countered by slashing its top rate to 20 percent from 22 percent. ...Although there was plenty of talk about
U.S. tax policy in the presidential campaign, little of it seemed to have anything to do with international competitiveness. ...During the presidential campaign, Obama justified his plans to raise taxes on those
earning more than $250,000 a year on the grounds that these households needed to "pay their fair share." ...According to the OECD calculations,
in the U.S., the top 10 percent of households earn one third of the country's total income and pay 45 percent of all household taxes. That's the highest ratio of taxes-to-income among OECD members. In France,
for instance, the top 10 percent earn a quarter of national income and pay 28 percent of all taxes; in Sweden they earn 26.6 percent and pay
26.7 percent of all taxes; in Canada, it's 29 percent of earnings and 35 percent of all taxes.
Monday, November 24, 2008 ~ 7:44 p.m., Dan Mitchell Wrote: Something else is increasingly obvious about Paulson: He doesn't have a clue. Remember when he went before Congress and asked for a "really
big number" to throw at the credit crisis? Neither Republicans nor Democrats wanted to be the ones to take the hit for Americans' plunging
portfolios and accelerating sense of economic crisis. Maybe both parties had a lingering sense of responsibility, of the need to rise above
partisanship to "do the right thing." So they gave to this man the power to pass our money around like popcorn or peanuts. And the stock
markets plunged anyway. ...I remember vividly standing in the lobby of a local hospital, watching a few minutes of the bailout bill testimony on
television. A woman in green scrubs -- a lab technician -- stopped with me to watch. I will never forget the sheer fury in her voice. "The bums,"
she muttered. "They take care of each other -- who's going to take care of us?" ...But let us draw a line in the sand, here and now, to prevent the
emergence of that horribly deformed system, crony capitalism. No more bailouts.
Sunday, November 23, 2008 ~ 9:16 p.m., Dan Mitchell Wrote: Bruce Marks, founder of the leftist Neighborhood Assistance Corp. of America, makes a good living shaking down banks for loans to deadbeat
borrowers that he thinks are entitled to homes. Last month, he and about 100 urban protesters stormed Fannie Mae's headquarters, demanding it stop foreclosures on subprime houses — the same homes his group
pressured Fannie to fund. ...Marks founded Boston-based NACA last decade to fulfill his warped sense of the American dream. He thinks owning a home is a right, not a goal. And he thinks every American
should have a house — even those who can't pay for one. ...Congress' banking committee chiefs, Sen. Chris Dodd and Rep. Barney Frank, are also demanding banks stop foreclosures. And guess who they've invited
to testify about that? That's right: Marks, who has proposed stopping all resets on subprime adjustable mortgages and allowing late payments for
up to 90 days. Marks insists that regulators "force" lenders to restructure their loans to prevent foreclosures from going forward. "For
noncooperative lenders," he says, "the regulators can and must impose 'cease and desist' orders."
Saturday, November 22, 2008 ~ 10:09 p.m., Dan Mitchell Wrote: A look at Obama's platform suggests that he plans four big changes that, if implemented, could have terrible economic consequences. Think of
them as the Four Horsemen of Obamanomics. The First Horseman is a bill, the "Fair Currency Act," that Obama co-sponsored last May. If this
bill becomes law, it could ignite a trade war similar to the Smoot-Hawley catastrophe that contributed to the Great Depression. ...The Second
Horseman is "card check." Card check allows union organizers to form a bargaining unit once they receive signed authorization forms, or "cards,"
from a majority of employees. The National Labor Relations Act currently permits this, but also allows employers to challenge the results and require a secret-ballot election. The Employee Free Choice Act,
which passed the House last year and was defeated only by Republican opposition in the Senate, would take away the right to challenge card-check petitions except when fraud or coercion is suspected.
Arguments against card check often focus on fairness: By taking away the option of a secret-ballot election, card check would make it easier for
union bosses to intimidate workers into acquiescence. But consider, also, the impact of further unionization on businesses: Costs would skyrocket,
profits would tank, and bankruptcies and job destruction would follow. The Third Horseman is tax policy. While much of the political debate centered on Obama's plan to increase marginal tax rates on the
"wealthy," a little-known footnote to his plan was a call to end the deferral of tax on the profits of U.S. multinational corporations. This is
the most alarming of his many proposals. ...The Fourth Horseman is regulation. As a candidate, Obama blamed deregulation for our economy's woes, and promised to crack down with new regulations if
elected. One can bet that Obama's efforts will not focus solely on the financial sector, and that many new costs will be imposed on American businesses generally. This despite the fact that most deregulation has
been achieved on a bipartisan basis, and widely hailed as successful. Trucking and air travel, for example, are two industries that deregulation has made more efficient. Given this list of bad policies, it's
little wonder that investors have headed to the exits. The collapse of housing prices and the financial calamity that ensued certainly started
the process, but it's hard to imagine that the market would have plunged this far without the magnifying effect of Obama's policies--and the most
chilling thought is that the market probably has not fully factored the Four Horsemen into current stock prices.
Friday, November 21, 2008 ~ 9:26 p.m., Dan Mitchell Wrote: City and state politicians want voters to believe that they have been careful stewards of taxpayer money, searching out waste far and wide,
and genuinely doing everything they can to control government bloat. Ah, no. New York City did witness a reduction in public employment in 2002 and 2003, during the last period of slower economic growth. But
the city quickly resumed its habit of ever-growing payrolls, and they have kept growing rapidly in the years since -- to an estimated record this June
30 of 313,965 employees on the public dime, according to the Mayor's office. That's an increase of more than 40,000 public workers in a year
when Wall Street has been enduring historic losses and laying off tens of thousands of people.
Thursday, November 20, 2008 ~ 8:38 p.m., Dan Mitchell Wrote: The picture that emerges is of a slow global decline in top rate personal income taxes, from an average of 31.3 percent in 2003 to 28.8 percent in
2008. …The highest personal income taxes are paid by citizens of the European Union. But it is here that we have seen the steepest falls in average tax rates, from 41.5 percent in 2003 to 36.4 percent in 2008.
…Perhaps the most significant new development in this period has been the introduction of flat rate taxes into Europe, often introduced at a
much lower level than the highest variable personal rate. So far, it has been mainly Eastern European states that have taken this step, notably
Estonia, where rates have fallen from 26 percent in 2003 to a flat 21 percent in 2008, Slovakia has gone from 38 percent to 19 percent, Lithuania, which in 2007 fell 6 points to 27 percent and this year a
further 3 points to 24 percent, and Romania where rates have gone from 40 percent to 16 percent. …Overall, it appears from our survey that taxes on personal incomes are in slow decline in many countries around
the world. We see the same trend in corporate income tax rates as well. Link to this Blog Entry
Thursday, November 20, 2008 ~ 7:21 p.m., Dan Mitchell Wrote: Imagine there's an elderly widow down the street from you. She has neither the strength to mow her lawn nor enough money to hire someone
to do it. Here's my question to you that I'm almost afraid for the answer: Would you support a government mandate that forces one of your neighbors to mow the lady's lawn each week? If he failed to follow the
government orders, would you approve of some kind of punishment ranging from house arrest and fines to imprisonment? I'm hoping that the average American would condemn such a government mandate
because it would be a form of slavery, the forcible use of one person to serve the purposes of another. Would there be the same condemnation if
instead of the government forcing your neighbor to physically mow the widow's lawn, the government forced him to give the lady $40 of his weekly earnings? That way the widow could hire someone to mow her
lawn. I'd say that there is little difference between the mandates. While the mandate's mechanism differs, it is nonetheless the forcible use of one
person to serve the purposes of another. ...This is why socialism is evil. It employs evil means, coercion or taking the property of one person, to
accomplish good ends, helping one's fellow man. Helping one's fellow man in need, by reaching into one's own pockets, is a laudable and praiseworthy goal. Doing the same through coercion and reaching into
another's pockets has no redeeming features and is worthy of condemnation. Link to this Blog Entry
Wednesday, November 19, 2008 ~ 8:55 p.m., Dan Mitchell Wrote: Is the stock market trying to tell us something? It seems like every time Treasury Secretary Henry Paulson goes on TV, stock prices drop. I can
see why. Businesses would be reckless if they made investments that might lead to recovery when they have no idea day to day what Paulson or his successor might come up with next. By my count, Paulson is now
on his third plan for how to spend the pile of cash Congress gave him. ...Why would a bank revalue its dubious assets to 50 cents on the dollar when Paulson might have paid 90 cents? Why would a firm renegotiate
with its creditors if the Treasury might offer a better deal? Changing the rules in the middle of the game [has] thrown the market into a tizzy,"
said Art Hogan, chief market strategist at Jefferies & Co.. ...As usual, government's stumbling, bureaucratic "solutions" exacerbate problems
that free people, allowed to pursue their own self-interest, would address on their own. We'd still suffer some tough times -- it's painful when
bubbles pop -- but recovery comes sooner when businesses must quickly fix their own mistakes -- or die.
Wednesday, November 19, 2008 ~ 8:16 p.m., Dan Mitchell Wrote: Should you keep paying your mortgage? If you have significant equity in your home, absolutely. If you don't, it's getting harder to answer that
question, especially when our government keeps giving people who owe more than their homes are worth so many reasons not to pay. Last week, the government announced a program that will substantially lower
payments for many homeowners who have little or no equity, but only if they are at least 90 days delinquent. Critics say the plan, which applies to loans owned or guaranteed by government wards Fannie Mae and
Freddie Mac among others, could encourage people to suspend payments. ...Last year, Congress started removing some financial hazards of default when it passed a bill that temporarily waives the
income tax on mortgage debt that is canceled when a homeowner is foreclosed upon, sells a home for less than the remaining debt (a short sale) or gets a loan modification that reduces the principal balance.
...Peter Schiff, president of Euro Pacific Capital, predicts that many homeowners who have little or no equity will stop paying their mortgage
and then reduce their income to get the biggest payment cut possible. They could stop working overtime or, if two spouses work, one could quit. After the modification, they could try to boost their income again.
"This is a once-in-a-lifetime opportunity," Schiff says. "People are going to feel like complete morons if they don't participate. The people getting
punished are the ones who never made an irresponsible decision to buy a house they couldn't afford." The government is offering loan servicers
$800 for every homeowner they get into the plan. Schiff predicts that loan agents "will be cold-calling people trying to get them into it. Just
like they encouraged people to overstate their income to get a bigger loan in the first place, now they will encourage them to understate their income to qualify for a smaller loan."
Tuesday, November 18, 2008 ~ 9:28 p.m., Dan Mitchell Wrote: The plain, ugly fact is that both major political parties are committed to spreading the wealth in one form or another. It's all just a question of
how much and how quickly. Who is Peggy the Moocher? She's Peggy Joseph, a voter in Sarasota, Fla., who exulted...at a Barack Obama rally
that this was "the most memorable time of my life." Why? As she told a Florida reporter on a YouTube video that has been viewed by hundreds
of thousands: "Because I never thought this day would ever happen. I won't have to worry about putting gas in my car. I won't have to worry about paying my mortgage. You know. If I help [Obama], he's gonna
help me." ...But the damning reality for fiscal conservatives is that John McCain's plan for homeowners underwater on their mortgages was even
more generous than Obama's. His $300 billion "rescue" involved directing the Treasury Secretary to "purchase mortgages directly from homeowners and mortgage servicers." That was on top of the
trillion-plus-dollar "bank" bailout supported by both presidential candidates, the White House and the Democratic leadership; the $85-plus
billion to AIG; the $25 billion to automakers; and the $200 billion in capital and credit lines to Fannie and Freddie. And who knows what else
we'll be redistributing to the indebted states of New York, California, Massachusetts and all the other Peggy the Moochers, large and small, lining up for their piece of the bailout pie. McCain assailed massive
government spending -- while promising to heap on more massive government spending to pursue home ownership and retention at all costs. It was the Republican, not the Democrat, who entrusted the
Treasury Department to renegotiate individual home loans and become chief principal write-down agents for the nation. Both private and public entities are planning for a McCain-esque homeowner salvation plan for
borrowers in the red. ...The only sane thing to do in response? Stop paying your mortgage and get in line. ...The bailout bonanza blurred the differences between the two major political parties.
Monday, November 17, 2008 ~ 7:48 p.m., Dan Mitchell Wrote: Two prominent "Republicans" are using the financial crisis as cover to raise taxes. New York City Mayor Michael Bloomberg and California
Gov. Arnold Schwarzenegger must not escape blame. ...Both Bloomberg and Schwarzenegger risk devastation of the already beleaguered economies under their care by enacting massive new taxes. It comes at a
time when the ill effects of such measures might well end up being falsely blamed on outside forces — rather than on these two shameless tax
hikers. Bloomberg...is reneging on a $400 property tax rebate and asking the city council to raise homeowners' already astronomical property
taxes by 7%. ...The mayor is also planning a 5-cent enviro tax on plastic grocery bags in hopes of adding $16 million to Big Apple city coffers.
...Three thousand miles away, Schwarzenegger plans a big sales tax hike to deal with a budget gap that may reach $24 billion by mid-2010, just as
he tried to do earlier this year against fierce Republican resistance in Sacramento. In Los Angeles alone, the plan will raise sales taxes to 10.25%, well above the 7.25% state rate. ...a nearly 10% tax would be
imposed on oil drilling and a 5-cent-per-drink tax on alcohol would be enacted.
Sunday, November 16, 2008 ~ 2:22 p.m., Dan Mitchell Wrote: The swaggering governator will host an international summit next week "to discuss and develop strategies aimed at combating climate change."
Along with California's chief executive, five other governors plan to attend the extravaganza — between, of course, pleading for bailouts from Washington for their ailing state economies. Also invited are
officials from Australia, Brazil, Canada, China, the EU, India, Indonesia, Mexico, New Zealand, Poland, Spain and Britain. In case you don't remember, California in 2006 passed the most sweeping greenhouse gas
limits for any state in the union. Under this plan, CO2 output would be slashed by 25% by the year 2020. This is equivalent to removing 6.5
million vehicles from the road. Sounds great. Except that greenhouse gas output has yet to budge, and the promised boom from "green jobs"
promised by Schwarzenegger and his Democratic friends are nowhere in sight. California's jobless rate is now officially over 7%, nearly a point
above the national average. Instead, the greenhouse gas limits approved by Schwarzenegger will cost California billions of dollars in lost output
as businesses locate elsewhere and take jobs with them. The one-time Golden State is rapidly deteriorating from a cutting-edge, high-tech economy to the fiscal equivalent of a Third World nation. ...Meanwhile,
California's nonpartisan budget analyst on Tuesday predicted the state will have a $27.8 billion deficit over the next 20 months. This is a
mind-boggling gap, equal to roughly 26% of the state's $103.3 billion in annual general-fund spending. And if nothing's done, the deficit will average $22 billion a year for the next five years. This, not global
warming, is California's true disaster in the making. ...overall spending under Schwarzenegger has soared $41 billion, or more than 40%. General-fund spending has jumped by $27 billion to $103.3 billion, a
35% increase. Growth under Davis was less than half that.
Saturday, November 15, 2008 ~ 10:18 p.m., Andrew Quinlan Wrote: . . . Network neutrality, or net neutrality, is the beneficent-sounding name for sweeping new government regulatory power that would prohibit
Internet service providers from innovating in their own networks. This could lead to much less broadband investment by private companies, and
could potentially force government subsidization, control, and outright nationalization of the Internet. The implications of this are chilling.
Friday, November 14, 2008 ~ 5:07 p.m., Hubbel Relat Wrote: CF&PF Video: The Economic Case for Tax Havens CF&PF Video: The Moral Case for Tax Havens
Thursday, November 13, 2008 ~ 3:19 p.m., Dan Mitchell Wrote: Too often the [Bush] policy agenda was determined by short-sighted political considerations and an abiding fear that the public simply would
not understand limited government and expanded individual freedoms. How else do we explain "compassionate conservatism," No Child Left Behind, the Medicare drug benefit and the most dramatic growth in
federal spending since LBJ's Great Society? John McCain has long suffered from philosophical confusions about free markets, and his presidential campaign reflected as much. Most striking was his inability
to explain his own health-care proposal, or to defend his tax cuts and tax reform. Ultimately, it took a plumber from Ohio to identify the real
nature of Barack Obama's plan to "spread the wealth." ...A Rasmussen poll of Oct. 30 reported that 31% of likely voters believed that "taxes
will go down" under an Obama administration versus just 11% under a McCain administration. Shockingly, 19% of self-described conservatives believed Mr. Obama would cut taxes; only 12% thought Mr. McCain
would. The response by Mr. McCain to the financial crisis on Wall Street was the defining moment of the campaign. In what looked like a tailor-made opportunity to "clean up Washington," the Republican
nominee could have challenged the increasingly politicized nature of Federal Reserve policies, and the inherently corrupt relationships between Fannie Mae, Freddie Mac and various Democratic committee
chairmen. Instead, his reaction was visceral and insecure: He "suspended" his campaign and promised "to put an end to the reckless
conduct, corruption, and unbridled greed that have caused a crisis on Wall Street." ...Ronald Reagan...didn't feel a need to qualify the meaning
of his conservatism. He understood that big government was cruel and uncaring of individual aspirations. Small government conservatism was, by definition, compassionate -- offering every American a way up to
self-determination and economic prosperity. ...What will be the fate of free market capitalism in America? Will the 2008 election look more like 1932 -- or 1992? On both occasions, Republican presidents had
abandoned their party's principles for bigger government policies that exacerbated difficult economic times. On both occasions, Democrats
took control, largely hijacking the small-government, fiscally responsible rhetoric of their opponents. Of course, FDR's election ushered in the New
Deal, the most dramatic expansion of government power in American history, together with policy changes and economic uncertainty that inhibited investment and growth and locked in massive unemployment
for nearly a generation. ...Will Democratic overreach give the small-government movement the opportunity to reassert itself in the GOP? Former Congressman Dick Gephardt has warned President-elect
Obama and the new Democratic majorities to be humble and measured. But with a legislative agenda driven by Nancy Pelosi, George Miller and Mr. Rangel, the temptations may be too great. In 1992, Republican
backbenchers including Newt Gingrich, myself, Bob Walker and John Boehner rose up to challenge the Clinton administration's agenda on taxes, spending and government-run health care. But before we could
beat the Democrats, we had to beat the old bulls of our own party who had forgotten their principles and had become very comfortable as a complacent minority. We captured control of Congress in 1994 because
we had confidence in our principles, and in the American people's willingness to understand and reward a national vision based on lower taxes, less government and more freedom.
Thursday, November 13, 2008 ~ 2:00 p.m., Dan Mitchell Wrote: When the government said it would spend $700 billion to rescue the nation's financial industry, it seemed to be an ocean of money. But after
one of the biggest lobbying free-for-alls. in memory, it suddenly looks like a dwindling pool. Many new supplicants are lining up for an infusion of
capital as billions of dollars are channeled to other beneficiaries like the American International Group, and possibly soon American Express.
...The Treasury Department is under siege by an army of hired guns for banks, savings and loan associations and insurers — as well as for improbable candidates like a Hispanic business group representing
plumbing and home-heating specialists. That last group wants the Treasury to hire its members as contractors to take care of houses that the government may end up owning through buying distressed
mortgages. ..."Unfortunately, I don't have a lot of good news for them individually," said Jeb Mason, who as the Treasury's liaison to the
business community is the first port-of-call for lobbyists. "The government shouldn't be in the business of picking winners and losers
among industries." Mr. Mason, 32, a lanky Texan in black cowboy boots who once worked in the White House for Karl Rove, shook his head over
the dozens of phone calls and e-mail messages he gets every week. "I was telling a friend, 'this must have been how the Politburo felt,' " he said.
...The first wave of lobbying came in early October when Mr. Paulson announced the plan to buy troubled mortgage-related assets from banks. The Treasury said it would hire several outside firms to handle the
purchases, and would dispense with federal contracting rules. Law and lobbying firms that specialize in government contracting fired off
dispatches to clients and potential clients explaining opportunities in the new program. Capitalizing on the surge of interest, several large firms,
including Patton Boggs; Akin Gump; P & L Gates; Fried, Frank, Harris, Shriver & Jacobson; and Alston & Bird, have set up financial rescue
shops. Alston & Bird, for example, highlights its two biggest stars — former Senator Bob Dole and former Senator Tom Daschle. Mr. Dole
"knows Hank Paulson very well" and has been "very helpful" with the financial rescue groups, said David E. Brown, an Alston & Bird partner
involved in its effort. "And of course, Senator Daschle is national co-chair of the Obama campaign," Mr. Brown added, noting that because Mr. Daschle is not a registered lobbyist, his involvement is
limited to "high level advisory and strategic advice." Ambac Financial Group, in the relatively obscure bond insurance business, never needed
lobbyists before, said Diana Adams, a managing director. But its clients persuaded the company to hire two Washington veterans — Edward Kutler and John T. O'Rourke — who helped arrange a recent meeting
with Phillip L. Swagel, an assistant Treasury secretary. "We haven't really asked for much in the past," Ms. Adams said. ...Some lobbyists,
Mr. Mason said, had called him even though they did not have any clients looking to get into the program or worried about its restrictions. They
were merely seeking intelligence on which industries would be deemed eligible for assistance. He suspects they were representing hedge funds that wanted to trade on that information.
Wednesday, November 12, 2008 ~ 10:15 p.m., Andrew Quinlan Wrote: There has always been contempt for economic liberty. Historically, our nation was an important, not complete, exception. It took the calamity of
the Great Depression to bring about today's level of restrictions on economic liberty. Now we have another government-created calamity that has the prospect of moving us even further away from economic
liberty with the news media and pundits creating the perception that the current crisis can be blamed on capitalism.
Tuesday, November 11, 2008 ~ 11:11 p.m., Andrew Quinlan Wrote: What the Republican party badly needs is a Night of the Long Knives.
Monday, November 10, 2008 ~ 8:33 p.m., Dan Mitchell Wrote: In the Washington mind, there are two kinds of private companies. There are successful if "greedy" corporations, which can always afford to pay
more taxes and tolerate more regulation. And then there are the corporate supplicants that need a handout. As the Detroit auto makers are proving, you can go from being the first to the second in the blink of
an election. For decades, Congress has never had a second thought as it imposed tighter emissions standards on GM, Ford and Chrysler, denouncing them for making evil SUVs. Yet now that the companies are
bleeding cash, and may be heading for bankruptcy, suddenly the shrinking Big Three are the latest candidates for a taxpayer bailout. One $25 billion loan facility has already been signed into law, and Senator
Debbie Stabenow (D., Mich.) wants another $25 billion, this time with no strings attached. ...We hope Messrs. Bush and Paulson just say no. The
Tarp was intended to save the financial system from collapse, not to be a honey pot for any industry running short of cash. The financial panic has
hit Detroit hard, but its problems go back decades and are far deeper than reduced access to credit among car buyers. As a political matter,
the Bush Administration is also long past the point where it might get any credit for helping Detroit. But it will earn the scorn of taxpayers if it
refuses to set some limits on access to the Tarp. If Democrats want to change the rules next year, let them do it on their own political dime. ...A
Detroit bailout would also be unfair to other companies that make cars in the U.S. Yes, those are "foreign" companies in the narrow sense that
they are headquartered overseas. But then so was Chrysler before Daimler sold most of the car maker to Cerberus, the private equity fund. Honda, Toyota and the rest employ about 113,000 American auto
workers who make nearly four million cars a year in states like Alabama and Tennessee. Unlike Michigan, these states didn't vote for Mr. Obama.
Sunday, November 9, 2008 ~ 4:32 p.m., Hubbel Relat Wrote: California Governor Arnold Schwarzenegger Thursday proposed several stringent measures to curb spending and increase taxes in order to deal
with a budget shortfall, this office said. The proposals include a steep increase in state sales tax, a five cent tax on every alcoholic drink sold
and an estimated $4.5 billion in welfare and other budget cuts. . . . Schwarzenegger's Republican colleagues in the legislature fiercely opposed previous attempts to raise taxes, forcing a record delay in
passing the state budget last month. . . . Schwarzenegger also proposed extending the sales tax to new categories such as vehicle repair, veterinarian services, amusement parks and sporting events. Plus a
separate 9.9 percent tax on the extraction of oil in California and a $12 increase in annual vehicle registration fees. . . . The governor called for
$2.5 billion in cuts from schools and community colleges and for lowering health and welfare subsidies to the aged, blind and disabled. . . .
The governor said "drastic measures" were needed because the state has lost so much money in tax revenue since the legislature passed the state budget in September.
There are plenty of ways to play the redistribution game. One is to get rid of deductions for retirement savings, and Democrats are considering a
plan to do just that. ...the real issue here goes beyond any particular tax proposal. It's about motive and means. Leading Democrats share Barack
Obama's penchant for redistribution, and they know that there are many routes toward that goal, some not so obvious. They also know how to
play on fear — in this case, of stock market risk — as a way to sell ideas that might otherwise be unpalatable to most voters.
Friday, November 7, 2008 ~ 8:00 p.m., Dan Mitchell Wrote: Liberals have triumphed politically; soaking the rich has become more acceptable. But conservatives may have won the intellectual argument;
making the rich poorer doesn't make everyone else richer. If Barack Obama and John McCain agreed on anything, it was this: Greed is bad. They competed in denunciations of reckless investment bankers and
avaricious CEOs. ...Judged only by economic inequality, the financial crisis is a godsend. It will probably narrow the gap — though still vast — between the rich and everybody else. But what good will that do?
Economic inequality also declined in the Great Depression. The country wasn't better off. By and large, the poor aren't poor because the rich are
rich. They're usually poor for their own reasons: family breakdown, low skills, destructive personal habits and plain bad luck. ...much of the
income of the rich and well-to-do comes from what they do. If they stop doing it, then the income and wealth vanish. No one gets it. It can't be
redistributed because it doesn't exist. Everyone's poorer. ...Wall Street bonuses will drop by 43% and cap gains income by 35%, he estimated.
People in New York would be better off if the securities industry were still booming, even if there were more economic inequality. ...Scapegoating
and punishing all of the rich won't do us any good if the resulting taxes dull investment and risk-taking, discouraging economic growth that benefits everyone.
Thursday, November 6, 2008 ~ 10:56 p.m., Andrew Quinlan Wrote: Barack Obama's economic plan would raise federal tax rates on capital gains, dividends, and other forms of capital income. Many voters might
respond with a collective shrug. These tax hikes would only affect the wealthiest Americans, right? Think again.
Wednesday, November 5, 2008 ~ 6:00 p.m., Andrew Quinlan Wrote: . . . Unfortunately, very few people are asking whether it is a good idea to let politicians and bureaucrats intervene in private markets, and this is
the fundamental issue — regardless of whether they are trying to hurt companies or help companies. The absence of any adult leadership, combined with the precedent created by the Wall Street bailout, seems to
have triggered a feeding frenzy in Washington. The auto industry is first in line, but it may just be a matter of time before every poorly-managed
and uncompetitive industry looks to line its pockets at the expense of taxpayers.
Tuesday, November 4, 2008 ~ 4:44 p.m., Dan Mitchell Wrote: It was probably inevitable given the allure of $700 billion, but the speed with which the business and political classes are lining up for a stake
from the Troubled Asset Relief Program (the Tarp) is still remarkable. It's as if they think the taxpayers have graciously laid on a buffet and anyone
seeking cheap capital can tuck in. General Motors and Chrysler are looking for a little extra cash to smooth over their potential merger, never mind that Detroit's auto makers were only just blessed with $25
billion in taxpayer loans. State governments also want a chunk, notably those that have been most spendthrift. As recently as fiscal 2007, former New York Governor Eliot Spitzer raised spending by 11%. Now, with
Wall Street's implosion, current Governor David Paterson is predicting a deficit of $47 billion over the next four years. But why should Pensacola
pipefitters finance welfare benefits in Buffalo? Then there are the insurance companies, which seem to think they can mau-mau Treasury into cutting them in. MetLife, Prudential, the Hartford and New York
Life, among others, have let it be known that they too might desire public capital. ...Before the bailout queue from Treasury starts extending across
the Potomac and down past Richmond, Secretary Paulson is going to have to start firmly and frequently saying no.
Monday, November 3, 2008 ~ 3:55 p.m., Dan Mitchell Wrote: Top personal income tax rates around the world have fallen by an average of 2.5% in the past six years, as governments strive to balance
their need for revenue with the impact of increasing global labor mobility, a new study from KPMG International has found. Worldwide, top personal tax rates have fallen from an average of 31.3% in 2003 to
28.8% in 2008. But European Union (EU) taxpayers still pay the highest rates, at an average of 36.4%, followed by taxpayers in the Asia Pacific countries with an average of 34.6% and those of Latin America at
26.9%, KPMG said. At a country level, the highest tax rates in the world are paid by the people of Denmark, with a top rate of 59% for the whole
six years, followed by those of Sweden, whose rate came down last year from 57% to 55%, and those of the Netherlands, who have paid 52% for
the whole period. Excluding those countries which levy no tax at all, the lowest EU rate is in Bulgaria, with a newly introduced flat rate of 10%,
down from 24%. In Asia Pacific the lowest is in Hong Kong, with 16% and in Latin America it is in Paraguay with 10%. Of the 87 countries surveyed, 33 have cut their rates in the past six years and only seven
have a higher top rate in 2008 than they did in 2003. Among the large western European economies, France has made the most significant cut in its rates, from 48.1% in 2003 to 40% in 2007. Germany has gone from
48.5% to 45%, having briefly stood at 42% in 2005 and 2006. But across the EU it has been the introduction of flat rate taxes in the Eastern European states that has had the most impact, KPMG said. As well as
Bulgaria's new flat rate of 10%: Estonia has cut its rates from 26% in 2003 to a flat 21% in 2008; Slovakia has gone from 38% to a flat 19%;
Lithuania last year fell 6 points to 27% and this year a further 3 points to a flat 24%; Romania has cut rates from 40% to a flat 16%; and the
Czech Republic, this year, introduced a flat rate tax set at 15%. In the Asia Pacific region, tax competition between Hong Kong and Singapore
has led Singapore to cut its rate from 22% for 2003 to 21% in 2006 and 20% in 2007. ..."Australia also cut its personal tax rate by two points to 45% last year," said Rosheen Garnon, head of KPMG's International
Executive Services practice and a partner in the Australian firm, "but if the intention was to attract back high value Australian workers who have temporarily moved to Hong Kong or Singapore, it may not be
enough." ...Mexico and Panama stand out for their steady, year-on-year reductions. In the past six years, Panama has gone in stages from 33% to
22%, while Mexico has gone from 34% to 28%. ..."We do not foresee a time when personal income taxes will fall so far that they become irrelevant to people moving from country to country. But it is entirely
possible that the relative level of indirect taxes will begin to play a much greater part in people's decisions on where in the world to go for work," Garnon concluded.
Monday, November 3, 2008 ~ 1:11 p.m., Dan Mitchell Wrote: The European Union does not envisage putting Switzerland on a tax haven blacklist, as Germany has threatened, the EU's ambassador to
Switzerland has said. Michael Reiterer said that Switzerland could not be compared with Liechtenstein over tax issues. "Switzerland has concluded
a taxation of savings agreement with the EU, an anti-fraud agreement is being ratified, and Switzerland cooperates over stopping money
laundering," Reiterer told the Sonntag newspaper. "This is a different situation to Liechtenstein."
Sunday, November 2, 2008 ~ 2:19 p.m., Dan Mitchell Wrote: Switzerland bristled Wednesday at Germany's suggestion that the Alpine state should be placed on a blacklist of tax havens, with some saying that
it is a veiled attempt at weakening the financial center. "The hatchet between Switzerland and its neighbors has once again been dug up,"
Swiss daily Le Temps said on its front page after Germany made the suggestion during a meeting of 17 Western countries in Paris. ...According to Le Temps, Switzerland has nothing to fear. "Switzerland,
which has a veto right in the OECD, has nothing to worry about this new blacklist of tax havens," it said.
Sunday, November 2, 2008 ~ 1:53 p.m., Dan Mitchell Wrote: The French have also always wanted to stifle competition from low-tax jurisdictions, so that it is no surprise that as part of the new world order
he has in mind Sarkozy sees an end to such "social competition," and a closing down of "tax havens." And lest French capital be unable to
compete with foreign capital, he would have a European-wide sovereign wealth fund to buy up firms threatened with takeovers by foreigners. "I
will not be the French president who wakes up in six months time to see that French industrial groups have passed into other hands." ...Then
there is the question of enhancing the powers of the International Monetary Fund, a Sarkozy goal enthusiastically supported by Britain's Labour prime minister Gordon Brown. ...Sarkozy, serving a 6-month
term as president of the European Union, sees an opportunity to replace the American model of capitalism with the statism that has produced economic sclerosis, persistent high levels of long-term unemployment,
and a rigidity that forces reliance on protectionism, overt and covert, of the sort for which the EU farm policy is a model.
Saturday, November 1, 2008 ~ 8:17 p.m., Dan Mitchell Wrote: Swiss Foreign Minister Micheline Calmy-Rey scolded a German leader in an interview published Saturday and denied Switzerland was a tax
haven. In remarks to Der Spiegel, the German weekly, she said Switzerland was "astonished" at the tone of remarks Tuesday by German Finance Minister Peer Steinbrueck, who grumbled Berne was not tipping
Germany off about tax evaders. She warned him not to try to place Switzerland on an Organization for Economic Cooperation and Development (OECD) black-list of nations that assist foreigners to evade
taxes. This would be a breach of a German-Swiss taxation treaty, she charged. "It would not be the approach one expects from a state bound by the rule of law," added Calmy-Rey.
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