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The views expressed by Andrew Quinlan and Dan Mitchell on this weblog are solely their own and are not necessarily those of their employers, The Center for Freedom and Prosperity Foundation and The Heritage Foundation, respectively.

The Market Center Blog

Observations and insights on the global fight
for economic freedom and prosperity

CF&P's Market Center Blog Archives
April 2004

Friday, April 30, 2004 ~ 3:55 p.m., Dan Mitchell Wrote:
A journey of a million miles begins with a small first step. Holland will have the rotating Presidency of the European Union later this year, and the Dutch Prime Minister has stated that catching the US economy will be a key goal during his nation's tenure. This will require dramatic reductions in the size and power of government in Europe, steps that seem very unlikely - at least in Old Europe. But the Prime Minister did say that he wanted less regulation, which is a tiny step in the right direction. The EU Observer reports:

[Dutch Prime Minister] Mr Balkenende said, "We need to concentrate on the European economy because, if you compare it to the American economy, you can see that Europe is behind. We need a new strategy". In fact, Europe already has such a strategy called - in Brussels jargon - the Lisbon strategy. The goal of this strategy is to make the EU the "most competitive, knowledge-based economy in the world by 2010". But this means taking over the US and the signs are that Europe is falling further behind America, not closing the gap.... Mr Balkenende also suggested that the EU needs to cut through some of the red tape that can hold back business, saying, "we need to lighten the administrative load in Europe because the business climate could be improved".
http://euobs.com/?aid=15394&rk=1

Friday, April 30, 2004 ~ 9:45 a.m., Dan Mitchell Wrote:
Canada's assault on freedom. In a fascist mix of totalitarianism and egalitarianism, two provinces in Canada are prohibiting citizens from using their own money to purchase health care. Presumably, oppressed Canadians will still be able to get decent health care in the United States, but maybe Canada can hire former East German border guards to interrogate citizens at the border:

Just over a month ago governments in British Columbia and Ontario implemented new legislation effectively forbidding citizens from using their own incomes to purchase health services.1 Incredibly, this ban was not targetted at peripheral services, but at core services that the government deems medically necessary. More specifically, the ban focuses on conventional medical services where citizens are on government waiting lists and where they would like to find a timely, private alternative.
http://www.fraserinstitute.ca/admin/books/chapterfiles/Oh%20To%20Be%20 a%20Prisoner!-Jan04ffesmail.pdf

Friday, April 30, 2004 ~ 6:53 a.m., Dan Mitchell Wrote:
Tax competition promotes economic liberalization in Europe. KPMG has released a new study showing how jurisdictional competition is pushing tax rates down. The accountancy firm notes that tax rates are falling as nations try to improve their competitive position prior to enlargement:

European Union enlargement probably will create new pressures on western European countries to reduce corporate tax rates in order to keep businesses investing, a study from KPMG LLC showed. Poland and Slovakia, two of the 10 states due to join the 15- nation union this weekend, have in the past year made the biggest cuts to their corporate tax rates out of 69 nations surveyed, the accountancy firm said. ``I don't think there's any accident their tax rates have gone down'' in the same year they enter the EU, said John Battersby, KPMG's head of strategic tax policy, in an interview. This may ``lead to increased tax competition. Practically every country in the world is aware that businesses have the option to do business somewhere else.''
http://quote.bloomberg.com/apps/news?pid=10000085&sid=aqCTY8MHk_ T0&refer=europe

Friday, April 30, 2004 ~ 3:25 a.m., Dan Mitchell Wrote:
Three cheers for WTO ruling against US cotton subsidies. Politicians from both parties steal money from taxpayers and consumers in order to line the pockets of wealthy cotton growers. This policy also has the effect of creating more poverty and misery in less-developed nations. The World Trade Organization wants the US to get rid of these unfair subsidies, and the Wall Street Journal urges the next President to use the ruling as an excuse to do the right thing:

Powerful Ag interests in the U.S. want no part of this and no wonder. According to Oxfam, "the largest 10% of cotton farms receive three-quarters of total [U.S. subsidy] payments." The Environmental Working Group Web site lists the top 20 recipients of cotton pork in the period 1995-2002, with total U.S. cotton subsidies topping $10 billion. Eight are in Mississippi, seven in California, and two in Arizona. Arkansas's Tyler Farms topped the list with more than $24 million in handouts. That's more than twice its next closest rival, J.G. Boswell of California, which took in subsidies of $10 million-plus. Paring back freebies of the rich and powerful isn't easy. But the WTO ruling offers a politically convenient excuse for whoever wins the election to do the right thing next year.
http://online.wsj.com/article/0,,SB108310911552795472,00.html?mod=opini on (subscription required)

Thursday, April 29, 2004 ~ 11:00 a.m., Dan Mitchell Wrote:
UN corruption: pervasive and dangerous. The Wall Street Journal continues its ground-breaking coverage of the sleazy "oil-for-food" scandal at the United Nations. Claudia Rosett's latest article explains why high-level kick-backs, bribes, and pay-offs are both morally reprehensible but also a source of possible terrorist financing:

In a world beset right now by terrorist threats--which depend on terrorist financing--it's time to acknowledge that the U.N.'s Oil-for-Food program was worse than simply a case of grand larceny. Given Saddam's proclivities for deceit and violence, Oil-for-Food was also a menace to security. By letting Saddam pick his own business partners and draw up his own shopping lists, by keeping the details of his contracts and accounts secret, and by then failing abjectly to supervise the process, the U.N.--through a program meant to aid the people of Iraq--enabled Saddam to line his pockets while bankrolling his pals world-wide. In return, precisely, for what? That is a question former Federal Reserve Chairman Paul Volcker might want to keep in mind as he heads up the official investigation, finally agreed to by U.N. Secretary-General Kofi Annan, into Oil-for-Food.
http://www.opinionjournal.com/columnists/cRosett/?id=110005011

Thursday, April 29, 2004 ~ 9:48 a.m., Dan Mitchell Wrote:
Senator Allen fights to keep Internet free from government intervention. Revenue- hungry politicians - primarily at the state and local level - see the Internet as a potential gold mine of new tax revenue. Yet the lack of taxes and regulation is a key reason why the Internet has prospered, as Virginia Governor George Allen explains in today's Wall Street Journal:

By giving more people access to knowledge and information, the personal computer and the Internet have empowered tens of millions of Americans as consumers and entrepreneurs, and as citizens in our free society. The content on the Internet and access to it have exploded primarily because government regulators and taxers have stayed out of the way. While governments are, by nature, drawn to take "their share" of any successful private venture, for the Internet to keep growing and for our citizens to keep benefiting from it, government must fight its instinct to meddle and to burden creativity. That's why Congress passed a law in 1998 temporarily banning taxes on Internet access. In November of 2003, the temporary moratorium on Internet-access taxes expired, and this week the Senate will face this issue once again. Once again, the answer is clear. We must keep access to the Internet tax-free.
http://online.wsj.com/article/0,,SB108311007430995505,00.html?mod=opini on (subscription required)

Thursday, April 29, 2004 ~ 6:09 a.m., Dan Mitchell Wrote:
World Bank tries to keep Montenegro poor. International bureaucracies must hate the poor, or at least it certainly seems that way. A recent Heritage Foundation report by Ana Eiras notes that, "The Montenegrin government is trying to implement tax cuts and other reforms to create more opportunity for businesses and thus foster economic growth. However, by threatening to withhold the next three loans, the World Bank, which disagrees with the effects of the proposed reforms, is coercing Montenegrins into raising taxes..." This is hardly an unusual example. The World Bank and the International Monetary Fund are notorious for imposing statist policies on low-income nations. Ms. Eiras explains why this may be happening and suggests a new approach:

The World Bank's dealings with Montenegro illustrate how World Bank officials use their power to advance their own interests, not those of the country that they are presumably trying to help. In fact, the mere presence of the World Bank and other international financial institutions (IFIs) severely undermines any serious domestic effort to implement reforms, often while politicians around the world use IFIs to enrich themselves at the expense of their people. The Bush Administration should end the harmful activities of IFIs and set an agenda for effectively reforming the lending practices of these institutions. Countries like Montenegro will have far better prospects of advancing reform and developing their economies without the IFIs standing in their way.
http://www.heritage.org/research/internationalorganizations/em926.cfm

Thursday, April 29, 2004 ~ 5:21 a.m., Dan Mitchell Wrote:
Competition may save Western Europe by forcing reform. The EU Observer has an excellent article highlighting the beneficial impact of competition in an expanded EU. The low-tax nations of Eastern Europe will draw jobs and capital from Western Europe. This will force welfare states like France and Germany to either reform or die a quicker death:

...the EU will soon inherit member states with growth rates that the sluggish EU 15 can only eye jealoulsy from the West. Growth last year in the accession countries was over four times faster than the current EU 15. Whilst economic output increased in 'old Europe' by a sluggish 0.8 percent, the new member states stormed ahead by 3.6 percent. And some new member states, especially the Baltic states, are already revelling in their reputation as "tigers", showing very fast growth. Estonia grew by 4.8 percent last year, Latvia by 7.5 percent and Lithuania by a staggering 8.9 percent. ...But aside from the impulse of higher growth from the new member states, what will the impact of enlargement be on business and the economy? The main immediate effect should be to shake up the economies of 'old Europe' as it faces up to competition from more dynamic markets to the East and South. ...Firms looking to invest in the EU will also take taxes into account. Currently, corporate tax levels in the accession countries are considerably lower than in the old EU 15. According to a study by French bank Société Générale, there is a zero percent corporate tax burden in Estonia. Taxes in Lithuania and Cyprus amount to 15 percent and 19 percent in Latvia, Slovakia and Poland. In contrast, Germany levies 38.7 percent, France 35.4 percent, Spain 35 percent, Italy 34 percent and the UK 30 percent. So old member states may find investment (and jobs) drift away from them, especially countries on the border, such as Germany. In fact, this process has already started. In April, the German industrial giant Siemens announced it was relocating from Germany to Hungary where costs were 30 percent lower. And France is looking into ways it can persuade companies to stay on French soil.
http://euobs.com/?aid=15271&rk=1

Wednesday, April 28, 2004 ~ 6:53 p.m., Dan Mitchell Wrote:
Washington Post columnist condemns Kerry tax plan, calls for tax reform. Robert Samuelson correctly notes that John Kerry's give-with-one-hand, take-away-with-the-other-hand proposal will make the tax code more complicated and hurt US competitiveness. But he does give Kerry credit for drawing attention to the corporate income tax, the most punitive part of the internal revenue code:

What Kerry proposes is lowering the U.S. corporate tax rate from 35 percent to 33.25 percent -- and limiting the ability of U.S. multinationals to defer taxes on future foreign profits. The idea is to discourage U.S. companies from moving operations to countries with lower corporate tax rates. But the practical effect would be to put U.S. multinationals at a disadvantage against many foreign multinational firms, whose taxes would be lower. A study by the Institute for International Economics, a think tank, suggests that the Kerry proposal would inspire massive efforts at evasion or cutbacks in U.S. operations abroad -- which, if Slaughter is correct, could hurt U.S. job growth. The plan's basic defect is that it barely lowers the cost of operating in the United States; it mainly increases the cost of operating elsewhere. American companies might do less abroad without doing much more at home. But Kerry is on to something. The corporate tax is a monstrosity. It promotes widespread tax avoidance, raises a diminishing share of governmental revenue and discourages efficiency. It's an exercise in cynicism and waste that the next president ought to overhaul.
http://www.washingtonpost.com/wp-dyn/articles/A47944-2004Apr27.html

Wednesday, April 28, 2004 ~ 11:51 a.m., Dan Mitchell Wrote:
Wall Street Journal defends East European nations from tax harmonization threat. The European edition of the Wall Street Journal vigorously defends low-tax jurisdictions in Eastern Europe, arguing that their pro-growth policies should not be undermined by Western Europe's welfare states. Most interesting, the Journal points out that the low-rate corporate tax systems actually raise about the same amount of money as the high-rate systems in places like Germany

In 2002, corporate and personal income taxes collected in Germany equaled 10.1% of GDP, according to the OECD. In Poland, the figure was 9.9%; in Hungary, 10%; and in the Czech Republic the number was 9.7% of GDP. So even if some of the so-called tax-dumpers among the accession countries have lower rates, there's not much evidence that they collect significantly less in revenue as a result. Indeed, Germany's corporate tax burden as a percentage of GDP, at 1.3%, is one of the lowest in Europe, and far lower than low-tax Ireland's 3.4%, despite Ireland's 12.5% corporate-tax rate. Maybe Germany should try lowering it's rate to 12.5%; it might collect more revenue that way. All of which is to say, this brouhaha over "tax dumping" and "excessively" low tax rates is not about the amounts collected at all, whatever Mr. Schroeder says. It is a thinly disguised attempt by the countries in Europe with the highest costs of doing business to raise their competitors' costs commensurately, and so defuse the competitive threat. Luckily for Central and Eastern Europe, tax policy remains a national issue, and the EU requires unanimity to impose measures such as minimum tax rates. The EU's new members should stick to their guns -- and their low, flat tax rates. Germans, rather than griping, should start studying their neighbors. They might learn something about taxes and economic growth.
http://online.wsj.com/article/0,,SB108310507067895222,00.html?mod=opini on (subscription required)

Wednesday, April 28, 2004 ~ 11:34 a.m., Dan Mitchell Wrote:
The German collapse. High-tax welfare states destroy prosperity and undermine freedom, and the German economy is a good example. Writing in the Wall Street Journal Europe, a German journalists bemoans the deterioration of his nation's economy:

Real wages have been in decline for a decade and a half. In 1998, the government promised to reduce the number of unemployed to 3.5 million. Back then, this was considered not very ambitious but now it seems unattainable. More than 4.5 million people are currently without a job and the already overstretched welfare state has to take care of them. The state has to borrow ever more money to meet its commitments. Germany has more debt, more welfare recipients and more unemployed than at any other time in its postwar history.
http://online.wsj.com/article/0,,SB108301462308893890,00.html?mod=opini on (subscription required)

Wednesday, April 28, 2004 ~ 9:31 a.m., Andrew Quinlan Wrote
State politicians seek to undermine Constitutional protections against taxation of interstate commerce. Even though state tax and spending levels are at record highs, greedy politicians in state capitals want to impose taxes on the Internet. Yet as the Wall Street Journal points out, this is precisely why America's founders put the Commerce Clause in the Constitution:

This is precisely why we have a Commerce Clause. It was devised to prevent state and local entities from taxing interstate commerce. The Internet's unique architecture and decentralized nature lend themselves to the very type of tax abuse that the Constitution guards against. Under Mr. Alexander's bill, not only could Internet access still be taxed, but so could all types of Internet usage. Thousands of localities nationwide would be allowed to levy fees on electronic correspondence that neither originates nor terminates in their jurisdiction -- from e-mails to Google searches to J. Crew.com purchases.
http://online.wsj.com/article/0,,SB108302270893994195,00.html?mod=opini on (subscription required)

Tuesday, April 27, 2004 ~ 8:19 p.m., Dan Mitchell Wrote:
California State Treasurer puts his own political ambition above retirement security for state employees. The state of California manages one of the world's biggest investment funds, a pot of money that is supposed to be prudently invested to preserve and enhance the retirement income of state workers. Unfortunately, a greedy politician named Phil Angelides is diverting that money to enhance his own political ambition. By making investment choices based on politics rather than economics, Angelides is threatening the retirement security of tens of thousands of workers. Kevin Hassett of the American Enterprise Institute points out in USA Today that this also undermines the overall economy:

The American economy has been a wonder because we have constrained capricious government intervention into private enterprise. State pension funds are messing with our formula for success. The biggest economic failures of the 20th century were the communist countries that ceded ownership of capital to the government. Others, such as Japan, suffered because their financial sectors were heavily influenced by politicians. Corrupt officials steered loans to businesses that made the highest campaign contributions rather than to those that had the best ideas. Japan is still trying to fix the mess that ensued. Socialism is bad medicine in large or small doses. Which is why the recent actions of state pension funds, especially the California Public Employees' Retirement System (CalPERS), are so troubling. ...California state Treasurer and radical CalPERS board member Phil Angelides, a Democrat with gubernatorial ambitions, ...[wants] CalPERS to invest its $166 billion in public money in a targeted way, buying up enough shares of some companies to have a significant voting block. He can then use that power to force policy changes. ...This is unacceptable in a free society.
http://www.usatoday.com/news/opinion/editorials/2004-04-26-oppose_x.htm

Tuesday, April 27, 2004 ~ 6:42 p.m., Dan Mitchell Wrote:
The high cost of "free" health care. Syndicated columnist Tom Sowell brilliantly dissects Hillary Clinton's latest call for government-run health care. The left has largely destroyed the free market in health care already by having government pay for nearly half of all health care costs and by using the tax code to create a system where insurance picks up the tab for almost everything else. The result is a system where consumers have very little incentive to monitor costs and exercise choice. Not surprisingly, the left uses government failure as a reason to seek even more government:

Senator Clinton parades the usual litany of reasons why the government should run the medical system, beginning with "soaring health costs and millions of uninsured." But, not only does she offer nothing that will actually reduce those costs, she declares that "our mental health delivery system is underfinanced." In other words, she wants to spend more money on shrinks. Can you imagine what will happen to costs if unverifiable diseases and unverifiable cures provide blank checks to be paid by the taxpayers?...What the lovely phrase "universal health care" boils down to is politicians and bureaucrats forcing people to get their medical treatment and pharmaceutical drugs the way the politicians and bureaucrats decide. Somehow, the notion seems to be insinuated that the government can do it cheaper and better. But name three things that the government does cheaper and better than private individuals and organizations. It would be no trick at all to name dozens of things that the government does worse and at higher costs.
http://www.townhall.com/columnists/thomassowell/ts20040427.shtml

Tuesday, April 27, 2004 ~ 5:15 p.m., Dan Mitchell Wrote:
President of Czech Republic blasts EU. In a strongly worded stated, Vaclav Klaus condemns the bureaucratic, pro-harmonization mindset of the European Union. Klaus certainly captures the attitude of the Franco-German bureaucracy in Brussels, though there is still a chance that the EU can be salvaged if the Constitution is rejected and tax competition forces governments to liberalize. The EU Observer reports on Klaus's comments:

Czech President Vaclav Klaus, an avowed eurosceptic, has launched a scathing attack on the European Union just days before his country joins the club. Writing in today's Handelsblatt, Mr Klaus says, "The EU does not consist of freedom and openness but rather of bureaucracy, regulation and harmonisation". His comments follow others he made last week when he claimed that his country would "cease to exist" as an independent entity once it joined the EU.
http://euobs.com/?aid=15354&rk=1

Tuesday, April 27, 2004 ~ 2:06 p.m., Andrew Quinlan Wrote:
House leadership blasts Clinton-O'Neill IRS regulation. The Bureau of National Affairs reports on the strongly-worded letter from members of the House leadership to Treasury Secretary Snow. The various leaders vigorously condemned the IRS's illegal interest-reporting regulation and asked for its immediate withdrawal:

Four members of the House Republican leadership wrote April 22 to Treasury Secretary John Snow, asking that he intervene to cancel a proposed Internal Revenue Service regulation (REG-133254-02) that would require U.S. financial institutions to report interest paid to nonresident aliens to the IRS. House Majority Leader Tom DeLay (Texas), Majority Whip Roy Blunt (Mo.), Republican Conference Chairwoman Deborah Pryce (Ohio), and Chief Deputy Majority Whip Eric Cantor (Va.) called the regulation "burdensome and unnecessary" and said it was "potentially harmful to the current economic recovery and future efforts at tax reform." The letter, released by the Center for Freedom and Prosperity, which has been orchestrating publicity for widespread opposition to the proposal, called it a "misguided Clinton-era regulation," and an accompanying news release said that Bush supporters in Congress want it cancelled. ...The rules have been widely criticized by private sector groups, and more than 40 lawmakers have asked Treasury to withdraw or review the regulations. Currently, nonresident alien bank deposit interest is not taxed and no statute calls for the reporting of such interest.
http://pubs.bna.com/ip/BNA/der.nsf/is/a0a8m4q6k8 (subscription required)

Tuesday, April 27, 2004 ~ 12:11 p.m., Dan Mitchell Wrote:
Even biased studies confirm that Europe is falling farther behind the United States. The World Economic Forum has a report on EU competitiveness showing the EU far behind the US. These results are especially interesting since the study uses two criteria - "social inclusion" and "sustainable development" - that penalize nations for market-oriented policies. The Financial Times reports:

The US remains significantly more competitive than the majority of European Union member states, despite attempts by European leaders to turn the EU into the world's most competitive and dynamic region by 2010. ...The study seeks to track Europe's progress towards the so-called Lisbon goals, a string of economic targets agreed upon by EU leaders in March 2000. The goal was to challenge US economic hegemony by making Europe "the most competitive and dynamic knowledge-based economy in the world by 2010". However, the European Commission itself conceded earlier this year that the EU was falling further behind the US in some crucial areas. Economic growth and productivity growth, in particular, have been lagging behind US rates, leading many analysts to conclude that Europe stands little chance of overtaking the US within the next six years.
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullSt ory&c=StoryFT&cid=1079420630795&p=1012571727166 (subscription required)

Tuesday, April 27, 2004 ~ 8:41 a.m., Dan Mitchell Wrote:
Vote for the EU Constitution....or else! British voters are being subjected to more threats and sour-grapes brinksmanship from Brussels. In a stunning display of disloyalty to his own country, the British Commissioner is the one threatening voters if they don't approve the new Constitution giving massive new powers to the bureaucrats:

The UK would have to leave the EU if it voted no in a referendum on the Constitution, according to British Commissioner Chris Patten.
http://euobs.com/?aid=15334&rk=1

Tuesday, April 27, 2004 ~ 4:03 a.m., Dan Mitchell Wrote:
More success for Russia's flat tax. International bureaucrats opposed Russia's flat tax when it was first proposed by in 2000. They claimed that it would deprive the Russian government of needed tax revenues and have no measurable effect on the economy. One wonders what they are saying now? We have three years of evidence, and it is increasingly clear that the flat tax is a big success. As Alvin Rabushka of Russiaeconomy.org explains, the flat tax is boosting growth and encouraging greater compliance:

On January 1, 2001, a 13% flat-rate tax on personal income took effect in Russia. (The general principles and beneficial economic effects of the flat tax appear in The Flat Tax [http://www-hoover.stanford.edu/
publications/books/flattax.html].) Russia's 13% flat tax replaced a three-bracket system, which imposed a top rate of 30% on taxable income exceeding $5,000. The flat tax has been remarkably successful by every conceivable measure, and has encouraged such other countries as Serbia [http://www.russianeconomy.org/comments/032304.html] (2003), Ukraine [http://www.russianeconomy.org/comments/
052703.html] (2004), and Slovakia [http://www.russianeconomy.org/
comments/110303.html] (2004) to implement flat taxes of their own. ...Even China has taken the step of translating The Flat Tax into Chinese for consideration by the Ministry of Finance. ...In the three years since the top rate of PIT was reduced from 30% to 13%, real flat tax revenue has risen by 79.7%. Russia's budget is relatively healthy. Tax compliance has improved. And incentives to work, save, and invest remain strong.
http://www.russiaeconomy.org/comments/042604.html

Monday, April 26, 2004 ~ 8:59 p.m., Dan Mitchell Wrote:
Higher tax rates lead to more tax evasion and less revenue. Bruce Bartlett's blog (www.trendmacro.com/a/talkingpoints/default.asp) is a must-read for policy experts, particularly since Bruce relentlessly culls through academic literature to find articles that are relevant to the policy process. His latest discovery is a National Bureau of Economic Research paper that recently was published by the Journal of Political Economy. The authors find that higher tax rates mean less tax revenue, just as predicted by the famous Laffer Curve. Unfortunately, the political hacks at the OECD and EU are oblivious to economic theory and real-world evidence:

Tax evasion, by its very nature, is difficult to observe. In this paper, we present a case study of tax evasion in China. The novel feature of our approach is that at a very disaggregated level of individual products, we can measure evasion relatively precisely, by comparing the values that China reports as imports from Hong Kong, with what Hong Kong reports as exports to China. We can match up this evasion gap' with the tariff (and VAT tax) schedule at the product level. The result is striking: using the data in 1998, we find that on average, a 1 percent increase in the tax rate results in a 3 percent increase in evasion; these results hold using data from 1998. The result is similar when a first-difference specification is used with data in 1997 and 1998. This relationship is nonlinear: the evasion elasticity is larger at high tax levels. Furthermore, the evasion gap is negatively correlated with the tax rates on closely related products, suggesting that part of the evasion takes place by mis-reporting the type of imports, in addition to under-reporting the value of imports. This effect is even more pronounced when the evasion gap is measured using quantities rather than values.
http://papers.nber.org/papers/w8551

Monday, April 26, 2004 ~ 3:26 p.m., Dan Mitchell Wrote:
More evidence of Sweden's collapse. Richard Rahn, former Chief Economist for the US Chamber of Commerce, writes in the Washington Times about the deterioration of the Swedish economy. The rapid growth of government has turned one of the world's wealthiest economies into a sclerotic welfare state. Using figures from a paper by a Swedish economist, the article notes:

The extent of the failure of the Swedish model are both shocking and little known. For example, no new net jobs have been produced in the Swedish private sector since 1950. (By contrast, the U.S. created more than 60 million new private-sector jobs during the same period, from 52 million in 1950 to about 115 million in 2002.) "None of top 50 companies on the Stockholm stock exchange has been started since 1970."

Again, contrast this with the U.S. where many of our biggest companies had not been born or known of in 1970, such as Microsoft, Intel, Wal-Mart, Home Depot, Cisco, etc., Mr. Karlson's litany of failures of the Swedish model include: "Sweden has dropped from fourth to 14th place in 2002 among the OECD countries (i.e., affluent industrialized countries) in terms of GDP per capita since 1970." ...As the welfare state undermines the ability to engage in productive activity to support oneself, and individual liberty and responsibility, there will be a corresponding loss in dignity. This loss of dignity debilitates both the individual and society.
http://www.washingtontimes.com/commentary/20040425-102740-9436r.htm

Monday, April 26, 2004 ~ 2:21 p.m., Dan Mitchell Wrote:
German Chancellor seeks EU "lebensraum." By opting against a referendum, Gerhard Schroeder has shown that he doesn't trust German voters. He also doesn't trust voters in other nations, so he has proposed some sort of mechanism for imposing the EU Constitution even if it doesn't receive the necessary support from all nations. The EU Observer reports on Schroeder's disdain for democracy:

The EU needs to find a way of introducing the Constitution even if it is not ratified by all member states, said German Chancellor Gerhard Schröder over the weekend. In an interview with Focus magazine, Mr Schröder said, "we ought to find an arrangement by which the Constitution can still come into force if the process of ratification in a country has not yet been brought to a conclusion". ...As it stands, the Constitutional Treaty needs to be ratified by all member states before it can come into force.
http://euobs.com/?aid=15336&rk=1

Monday, April 26, 2004 ~ 9:39 a.m., Dan Mitchell Wrote:
Mexican case shows dangers of government-to-government information sharing. Revenue bureaucrats from place like France, Germany, and even the United States - motivated by a desire to enforce bad tax laws and prop up oppressive welfare states - think it is a good idea for governments to collect and share information on cross-border investments. Yet this is a very risky policy, one that paves the way not only for fiscal abuse, but also human rights abuse, ethnic persecution, religious attacks, and criminal behavior. Sharing information with nations like France and Greece can even undermine the fight against terrorism. But too often, as this Associated Press story illustrates, the US government only shuts the barn door after the horse has escaped

The U.S. Treasury Department, angry about the leaking of confidential information, has stopped sharing information with Mexico on everything from money laundering to terrorism financing, a blow to cross-border crime fighting. ...The U.S. Embassy in Mexico City said Friday that the Treasury Department had suspended cooperation a day earlier, pending "guarantees that all delicate information will be protected." In Washington, officials said they wanted to make sure information they shared with Mexico was kept secret. "The breech of confidential information is a serious matter that the Treasury Department and the U.S. government will not take lightly," said spokeswoman Molly Millerwise. "It is critical that we have the utmost confidence in our information-sharing relationship with all foreign governments."
http://www.lasvegassun.com/sunbin/stories/w-sa/2004/apr/24/042403800.ht ml

Sunday, April 25, 2004 ~ 12:30 p.m., Dan Mitchell Wrote:
Politicians uber alles in Germany. Not surprisingly, Socialistchell Chancellor Schroeder has rejected a referendum on the new constitution in his country. Voters, after all, might not make the right decision:

German Chancellor Gerhard Schrder has said that a referendum is not necessary. He said he saw no difference between whether the Constitution is legitimised through parliament or by referendum.
http://euobs.com/?aid=15320&rk=1

Sunday, April 25, 2004 ~ 11:27 a.m., Andrew Quinlan Wrote:
A long way to go in California. Governor Schwarzenegger has made some progress in "New France," but California is still burdened by crazy left-wing laws. Tom Sowell writes in Townhall.com about a farmer who is charged with murder for accidental deaths:

In a state where hardened criminals are coddled, and sometimes lionized, a California dairy farmer named Patrick Faria and his herdsman were charged with murder in the accidental death of two dairy employees who fell into a sewage pit and drowned while Mr. Faria was away. The rationale is that the farm was not in compliance with the innumerable safety rules that bureaucrats can dream up, even if nobody can keep track of all these rules.
http://www.townhall.com/columnists/thomassowell/ts20040423.shtml

Saturday, April 24, 2004 ~ 3:15 p.m., Dan Mitchell Wrote:
The hidden cost of government-run health care. The US health care system has been severely harmed by excessive government intervention, and some politicians think the solution is even more government. Advocates of nationalization cite the Canadian system, but this would make the problem even worse by creating rationing. Such a system also would have a discriminatory impact, as Pierre Lemieux explains in an article in the Wall Street Journal:

Canadian public health insurance is not only compulsory, it is also monopolistic. The system is administered by provincial governments under strict guidelines imposed by federal law and federal subsidies. Private insurance covering publicly insured services is illegal. Physicians are forbidden to accept private payments above the fees billed to the government. ...what now exists is a three-tier system. The very rich (like Robert Bourassa, the late Premier of Québec) go to the U.S. for rapid, personalized, high-tech treatments. The second tier is made of "the well informed and aggressive, who can push their way to the front of the treatment line." The poor and those with no connections get stuck in the queue.
http://online.wsj.com/article/0,,SB108267290367391256,00.html?mod=opini on (subscription required)

Saturday, April 24, 2004 ~ 1:19 p.m., Dan Mitchell Wrote:
Why not copy Ireland? The EU Observer has an article stating that it will take decades for East European nations to catch up with existing EU members. This article contains some good points - particularly the acknowledgment that EU subsidies may undermine reform. But the article failed to note that it is possible for a nation to make giant strides in a short period of time, which is exactly what happened when Ireland slashed tax rates and enjoyed an economic boom that turned the "sick man of Europe" into the EU's second richest country:

In an interview with the Financial Times Deutschland, Willem Buiten [Chief Economist of the European Bank for Reconstruction and Development] said, "Poland will need 40 years to catch up with the EU average". The others will need between 15 and 30 years, according to Mr Buiten. Moreover, another representative of the top bank expressed the concern that the new member states might become too dependent on EU handouts rather than implementing necessary economic reform. "There is a danger that the accession countries will leave the reforms of their economies to one side and rely on payment transfers from the EU", said EBRD Vice-President Hanna Gronkiewicz-Waltz. "We saw something similar after the entry of Spain, Greece and Portugal", she added.
http://euobs.com/?aid=15319&rk=1

Friday, April 23, 2004 ~ 5:07 p.m., Dan Mitchell Wrote:
Treasury officials have difficult task - teaching Europeans that lower tax rates are good for growth. The Bureau of National Affairs reports that US government officials want to convince European politicians to lower tax rates in order to spur growth, but this may be an impossible task. German and French policy makers probably understand the relationship between taxes and growth, but they feel that the political benefits of class warfare politics are more important. Indeed, this is why Europe's welfare states advocate tax harmonization. But this also is why the EU economy will never catch up with the US economy. American politicians may be short-sighted and greedy, but they seem like Adam Smith clones compared with the kleptocrats that govern places like France and Germany:

Treasury Department officials intend to showcase how changes to U.S. tax policy have helped fuel the economic recovery as they work to convince the financial ministers of the world's other major economic powers to take similar actions, Treasury Under Secretary for International Affairs John Taylor told reporters April 22. Taylor called tax policy and job creation the two key themes to be discussed with the financial ministers at the April 23-25 meetings of the Group of Seven richest nations because of the potential impact that cutting marginal tax rates can have on long-term economic growth. Earlier in the week, Treasury Secretary John Snow specifically criticized the tax policies of Germany and France, which are lagging the other major world economies in growth.
http://pubs.bna.com/ip/BNA/der.nsf/is/a0a8k6m1j4 (subscription required)

Friday, April 23, 2004 ~ 3:49 p.m., Andrew Quinlan Wrote:
The hidden cost of high tax rates. Senator John Kerry thinks that higher tax rates will result in a windfall of new tax revenue, but this ignores the fact that people will change their behavior when government increases the cost of productive behavior. Alan Reynolds of the Cato Institute uses a personal story to explain why Kerry's class warfare tax plan will backfire:

I have discovered a fool-proof strategy for beating the income tax, the Social Security tax and the Medicare tax: Lower your income. Lowering your income is much easier than increasing your income. And it helps you avoid the nasty traps Congress sets to catch those foolish enough to earn too much money...
http://www.townhall.com/columnists/alanreynolds/ar20040422.shtml

Friday, April 23, 2004 ~ 1:00 p.m., Andrew Quinlan Wrote:
The EU needs less government, not another "high-level group." The European Commission has announced that a dozen "wise men" will be part of a committee to decide what Europe must do to become the world's most competitive economy. Needless to say, this goal is a fantasy because the politicians keep increasing the burden of government. Even labor union bosses, who certainly are part of the problem, recognize that this new group is a farce:

The make-up of a "high-level group" to discuss ways of helping the EU economy catch up with the US was unveiled today in Brussels. Chaired by former Dutch prime minister Wim Kok, the group will investigate ways to advance the so-called Lisbon Strategy, which is the EU's goal to become "the most dynamic, knowledge-based economy in the world by 2010". This strategy is widely seen as a failure with little or no progress made towards achieving the aims. ...When the group was announced in March, the Secretary-General of the European Trades Union Confederation, John Monks, said, "we are frankly sceptical about a high-level group. One thing we have not lacked in Europe is high level groups".
http://euobs.com/?aid=15298&rk=1

Friday, April 23, 2004 ~ 12:29 p.m., Dan Mitchell Wrote:
Three cheers for free speech. Neil Boortz has a great column defending "shock jock" Howard Stern. Government's proper role is to protect life, liberty, and property, not to regulate people's private lives. Boortz is particularly on target when disputing the notion that the government should own the airwaves:

Howard Stern has been doing what he has been doing, vulgar as it can be, for 20 years. I've searched to the ends of the Internet and as many of Nebraska's best weekly's as I could, and I have yet to turn up one story about one single human being anywhere in this vast country of ours who was in any way harmed by anything they heard from a radio dialed to Stern. Not once have I heard even whispers of a situation where a Howard Stern broadcast violated any individual's right to life, liberty or property. ...It is not the role of the government to determine what we can or cannot listen to on the radio. For adults, it's a matter of choice. For children, it's a matter left up to parents. Every modern radio I have ever seen has a minimum of two knobs. Votes for or against programming can be cast with a simple twist of either one. ...Americans have bought into the ridiculous concept of "public ownership of the airwaves," an idea created by politicians for no purpose other than to legitimize government control.
http://www.townhall.com/columnists/nealboortz/nb20040423.shtml

Friday, April 23, 2004 ~ 11:44 a.m., Dan Mitchell Wrote:
French politicians backtrack on referendum promise. Now that Tony Blair has promised to let British voters decide whether to approve a new EU constitution, this has increased pressure for democracy in other European nations. Not surprisingly, the French are resistant, regardless of campaign promises:

Alain Juppé, Mr Chirac's closest political advisor, said "When it comes to choosing [between putting it through parliament and putting it to a public poll] we would like to take a concerted approach with our partners and in particular with Germany". ...Last year, during his re-election campaign, Mr Chirac pledged to have a referendum.
http://euobs.com/?aid=15283&rk=1

Friday, April 23, 2004 ~ 5:19 a.m., Andrew Quinlan Wrote:
AEI expert and former Polish Minister says tax competition could save Old Europe. Radek Sikorski of the American Enterprise Institute comments on the impact of EU expansion. Most notably, he shares Dan Mitchell's hypothesis (www.techcentralstation.com/022704E.html) that market-oriented East European nations may rescue welfare states from self-destruction by forcing much-needed economic reforms:

...economic ideas are likely to flow from east to west in the next few years. Several of the new members have adopted the flat tax and have experimented with bold welfare reforms as well; Poland, for instance, has privatized its pension system with Chilean-style personal retirement accounts, a policy that Western Europe will one day have to adopt in order to stave off budgetary collapse. If the East is allowed to compete, it will not only work itself out of poverty but may prove the salvation of moribund Western economies. Enlargement may do for them what the dustmen's strike did for Britain in 1979-spur long-delayed reforms that liberate labor markets, adjust welfare policies, and lead to long-term dynamism.
http://www.aei.org/publications/pubID.20347/pub_detail.asp

Friday, April 23, 2004 ~ 1:16 a.m., Dan Mitchell Wrote:
The Economist slams European constitution. In a hard-hitting essay, the Economist criticizes the proposed new European constitution. The magazine also argued in favor of letting voters decide the issue. As this passage indicates, the Economist specifically endorses the unanimity requirement for tax matters:

This is not just a matter of delivering Mr Blair's "red lines", such as preserving national vetoes on tax, social security, foreign policy and defence, even though these remain crucial. Just as important, encroachment into areas of criminal and civil law ought to be curtailed, and made subject to unanimous vote; and the idea of a European public prosecutor should be dropped. It would be desirable, too, to junk the verbose Charter of Fundamental Rights...
http://www.economist.com/displayStory.cfm?story_ID=2610999

Thursday, April 22, 2004 ~ 6:15 p.m., Dan Mitchell Wrote:
Treasury Department official praises tax competition, call for reform of outmoded US tax rules. Greg Jenner, the Acting Assistant Secretary for Tax Policy, recently spoke about the importance of tax competition. He noted that America's policy of worldwide taxation is anti-competitive, and highlighted the need to modernize tax policy so that US-based companies could more effectively compete in the global economy:

Reducing the tax on capital matters in the international arena because businesses today compete for capital on a global playing field. ...Global competition. That's what it's all about. Viewed from the vantage point of today's global marketplace, our tax rules appear outmoded, at best, and punitive of U.S. economic interests, at worst. ...What does that mean for our international tax rules? Again, let's review where we are. The subpart F rules date to 1962. At forty-something those rules are showing their age - and for those of us in the same situation, it seems that each year is a little less kind. We also made fairly significant changes to the international tax rules in 1986. That makes those rules teenagers and like most teenagers, they are hard to understand, messy, inconsistent, and display little regard for the real world. Things have changed dramatically in the global marketplace, but our tax rules have not. At this point, we wear them like a coat that is several sizes too small.
http://www.treas.gov/press/releases/js1449.htm

Thursday, April 22, 2004 ~ 4:25 p.m., Dan Mitchell Wrote:
German politicians have no clue. The so-called German tax amnesty is a bust. Politicians hoped to get 5 billion additional Euros to spend, but only a tiny fraction of that money is expected to materialize because greedy German lawmakers still don't understand that taxpayers are unlikely to be swayed by a one-time amnesty if their future income will still be subject to confiscatory tax rates. Tax-news.com reports:

The German authorities are hoping that the amnesty on income from secretly held foreign accounts will reap some EUR5 billion in tax payments this year. However, German daily Handelsblatt has reported that only EUR76.9 million had been collected as a result of the initiative in the first quarter of 2004. ...Whilst the tax will only apply on a portion of the declared income, critics of the scheme have argued that the tax rate has been set too high, and will thus deter many Germans from taking part.
http://www.tax-news.com/asp/story/story.asp?storyname=15780

Thursday, April 22, 2004 ~ 2:43 p.m., Dan Mitchell Wrote:
Australia needs real tax reform. Compared to Europe, Australia has a low tax burden and greater economic freedom. But that is damning with faint praise. Tax rates are too high - especially when compared to Asian competitors. Tax-news.com reports that the business community is agitating for tax rate reductions, albeit very modest reforms:

The ACCI is urging the government to eliminate bracket creep as part of a five point plan of income tax reform, which also calls for a reduction in the number of income tax brackets, an increase in the top income tax threshold to $75,000, and a reduction in the top rate of tax to 40% from the current 42%. ...Australias income tax regime is too punitive by international standards and reduces the incentive to work and accumulate capital, stated the ACCI.
http://www.tax-news.com/asp/story/story.asp?storyname=15784

Thursday, April 22, 2004 ~ 11:32 a.m., Dan Mitchell Wrote:
Will Europeans voluntarily become serfs? A commentary in today's EU Observer explains why bureaucrats in Brussels are so instinctively hostile to democracy. Simply stated, voters are increasingly reluctant to approve the loss of freedom and sovereignty to a socialist super-state:

The main problem with a referendum is that, faced with one, relatively simple question, the people may not vote as expected and, recently, referendums to do with the "European project" have not gone well from the federalists' point of view. ...In the last ten years or so there has been a gradually growing perception that the EU is not popular with the people in Europe, who have gone along with it without realising its implications and not really seeing any alternative. The infamous democratic deficit will become even greater with a no vote in any member state, and particularly in Britain. There is something to the theory that European integration has to keep moving to stay upright: every time it wobbles, its ability to reach the final destination becomes more doubtful.
http://euobs.com/?aid=15276&rk=1

Thursday, April 22, 2004 ~ 11:12 a.m., Dan Mitchell Wrote:
Politicians steal private property. The Wall Street Journal opines today on the growing abuse of "eminent domain" by local governments. The power of government to seize property is troubling even when it is for a genuinely public purpose. But when it occurs to line the pockets of local political hacks, it is best characterized as corruption. The Journal identifies the key issue:

Whereas years ago the "public use" provision of the Fifth Amendment meant invoking eminent domain for, say, a highway or school, expansive court rulings now allow local politicians to seize private property from Citizen A and hand it over to a Citizen B they believe will prove a better class of taxpayer. The slippery slope here is obvious. Because businesses will always pay governments more than homeowners (and large businesses will yield more than small), it's no coincidence that governments tend to invoke eminent domain powers on behalf of the rich and politically well-connected at the expense of the mom-and-pop shop or the family that simply wants to keep the home it's lived in for generations.
http://online.wsj.com/article/0,,SB108259009061490047,00.html?mod=opini on

Thursday, April 22, 2004 ~ 10:13 a.m., Andrew Quinlan Wrote:
EU Commissioner calls for cost-benefit regulatory analysis. There are thousands of bureaucrats in Brussels that seem to think that the world will end if they don't impose new regulations. This, of course, is one of the reasons why the EU economy is stagnant. One small but positive step would be to require cost-benefit analysis before new regulatory burdens could be imposed, and Tax-news.com reports that one EU commission is interested in this modest reform:

Speaking at the Irish Business and Employers Confederation's EU Presidency Conference on Monday, European Commissioner for Enterprise and the Information Society, Erkki Liikanen discussed the need for the European authorities to regulate with an eye to competitiveness and growth. ..."Is enough attention being paid to the trade offs between the protection of public interests such as the environment and the burdens of regulations on our businesses? Also, the cumulative effect of rules on the capacity of our businesses to enhance their competitive performance is an important element."
http://www.tax-news.com/asp/story/story.asp?storyname=15781

Thursday, April 22, 2004 ~ 9:27 a.m., Dan Mitchell Wrote:
The Soviet mentality still lives in Russia. Tax-news.com has a disturbing story on a speech by the Russian Finance Minister. Alexei Kudrin asserted that the first responsibility of a business is to pay taxes. Utter rubbish. The first responsibility of a business is to earn a profit for shareholders. Kudrin would have been on stronger ground if he emphasized instead that tax evasion is less justifiable as tax rates are reduced:

Russian Finance Minister Alexei Kudrin told businessmen at the recent Russian Economic Forum in London that a firms first priority when doing business in Russia is to fulfil its tax obligations to the state.
http://www.tax-news.com/asp/story/story.asp?storyname=15767

Thursday, April 22, 2004 ~ 8:51 a.m., Dan Mitchell Wrote:
Europe's protectionism robs from the poor to subsidize the rich. Oxfam is far from a market-oriented organization. Indeed, the Center's first publication (http://www.freedomandprosperity.org/Papers/oxfam/oxfam.shtml) was a strongly-worded critique of the British-based charity's deeply flawed attack on low-tax jurisdictions. But that doesn't mean that Oxfam is always wrong, as can be seen by reviewing their recent study condemning the European Union's protectionist sugar subsidies. The new report estimates the special interest transfers to wealthy sugar producers and the economic damage to poorer nations:

Behind the statistical fog emanating from Brussels, Europe is the world's most prolific subsidy-user and biggest dumper. Currently, the EU is spending EUR3.30 in subsidies to export sugar worth EUR1. In addition to the 1.3bn in export subsidies recorded annually in its budgets, the EU provides hidden support amounting to around EUR833m on nominally unsubsidised sugar exports. ...Developing countries figure prominently in the ranks of losers from CAP-sponsored sugar dumping. Translated into foreign-exchange losses, world-market distortions associated with EU sugar policies cost Brazil $494m, Thailand $151m, and South Africa and India around $60m each in 2002. These are large losses for countries with significant populations living in poverty, acute balance-of-payments pressures, and limited budget resources.
http://www.oxfam.org.uk/what_we_do/issues/trade/bp61_sugar_dumping.ht m

Thursday, April 22, 2004 ~ 7:36 a.m., Dan Mitchell Wrote:
Treasury Secretary Snow makes the right point. Testifying before Congress, Treasury Secretary John Snow correctly stated that companies have an obligation to protect the interests of shareholders. This is a welcome development, particularly since the White House had tried to muzzle the Chairman of the Council of Economic Advisers for defending outsourcing several months ago. But Senator Shelby of Alabama was also correct to note that policy makers should fix the bad features of the tax system - such as the high corporate rate - that make US companies less competitive. BNA reports:

Treasury Secretary John Snow dismissed lawmakers' calls for the Bush administration to take a policy stance against firms that outsource workers overseas during an April 20 Senate hearing. "The management of American companies have a fiduciary duty to pursue the best interests of their owners. And that means pursuing the best ways to stay profitable and competitive and, in fact, they're required by law to serve the interests of their investors," Snow told the Senate Appropriations Treasury Subcommittee. ...Shelby said the Bush administration should be more concerned about fixing tax policies that encourage companies to send work overseas.
http://pubs.bna.com/ip/BNA/der.nsf/is/a0a8k3h3a9 (subscription required)

Thursday, April 22, 2004 ~ 7:25 a.m., Veronique de Rugy Wrote:
Treasury Secretary Snow makes the wrong point. Alechemists used to believe that there was a magic formula that could turn cheap metals into gold. More recently, quacks have tried to invent a perpetual motion machine that generates more energy than it uses. Even more silly, some people think that more IRS agents will "pay for themselves" by squeezing more money out of taxpayers. Unfortunately, Treasury Secretary Snow defended this absurd version of black magic. Yet as the Bureau of National Affairs notes, Snow had to admit that there is no evidence for this odd assertion:

Snow told a Senate Appropriations Treasury Subcommittee that the Bush administration is seeking an additional $300 million for IRS enforcement, which would be used mainly to increase the amount of scrutiny on the tax filings of wealthy individuals and corporations. "There is an impression that big companies and the wealthy are not paying their fair share of taxes and we want to make sure we are adequately enforcing the tax code," Snow told the Subcommittee on Transportation, Treasury and General Government. However, under pressure from Sen. Robert Bennett (R-Utah) to provide evidence that such an increase in the enforcement budget would yield an increase in federal revenues, Snow said he is unaware of any studies that could make his case.
http://pubs.bna.com/ip/BNA/der.nsf/is/a0a8k3y9x7 (subscription required)

Thursday, April 22, 2004 ~ 5:31 a.m., Dan Mitchell Wrote:
Another international bureaucracy promotes additional government intervention. There must be some sort of secret initiation ritual for people who work at international bureaucracies, a ceremony where they pledge to interfere with markets and promote higher taxes. Well, maybe that is a bit of an exaggeration, but it sure seems as if people who get tax-free salaries inevitably think that the solution to every problem - real or imagined - is higher taxes and more government control. The Financial Times reports on a new World Health Organization scheme to tax unhealthy food:

The World Health Organisation is continuing to advise governments to consider using taxes to help combat obesity... In the final version of its draft global strategy on diet, physical activity and health, the WHO suggests governments should use fiscal measures to discourage consumption of too much sugar, salt and saturated fat.
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullSt ory&c=StoryFT&cid=1079420453872 (subscription required)

Wednesday, April 21, 2004 ~ 10:38 p.m., Andrew Quinlan Wrote:
More evidence of UN corruption. ABC News (http://abcnews.go.com/sections/
WNT/Investigation/oil_for_food_ripoff_040420-1.html) is reporting on rampant malfeasance and venality at the United Nations. The network reports that, "At least three senior United Nations officials are suspected of taking multimillion-dollar bribes from the Saddam Hussein regime, U.S. and European intelligence sources tell ABCNEWS. One year after his fall, U.S. officials say they have evidence, some in cash, that Saddam diverted to his personal bank accounts approximately $5 billion from the United Nations Oil-for-Food program." Regardless of how one views the issue of Iraq, the breaking story confirms that international bureaucracies have a dismal record of corruption. The Wall Street Journal's daily webupdate connects the dots:

The report also includes a list of other politically connected individuals, companies, and institutions who received Iraqi oil contracts--including four Frenchmen, two of them ex-government officials. Did France and Russia, which threatened to use their Security Council veto in hope of discouraging the coalition to liberate Iraq, back Saddam in order to keep the money rolling in? As for the U.N., how in the world can anyone claim with a straight face that this cesspool of corruption, tyranny and anti-Semitism is qualified to convey "legitimacy" to the new Iraqi government or anyone else?
http://www.opinionjournal.com/best/?id=110004984

Wednesday, April 21, 2004 ~ 4:30 p.m., Dan Mitchell Wrote:
The Swedish nightmare. In a devastating article, a Florida economist reports on the complete destruction of the Swedish economy caused by bloated government and confiscatory taxes. This Orlando Sentinel article is a must-read. It shows how left-wing "compassion" destroys the social capital of a nation:

Here in the nation that has always considered itself a paradise amid the snowflakes, the economic and social costs of its mentality are coming due. Alcoholics can retire on government pensions. The average worker calls in sick one day a week. ...Although the country has an official unemployment rate of 6 percent, 12 percent of the work force is on disability. Another 4 percent is paid by the government for jobs that require no work. In effect, this creates a society in which 22 percent of the potential work force is not productive. ...In Sweden, 75 percent of small businesses have no employees. The reason is the heavy cost of taking on the responsibility of employing another person. ...Employers pay 32.7 percent of their employees' salary in payroll taxes -- four times the U.S. rate. Insurance requirements and hourly-wage scales are much higher than in the United States. Municipal income-tax rates on individuals run 32.7 percent; the state gets 20 percent to 25 percent, depending on location; and the federal government takes up to 56 percent of what income is left. Swedish law limits overall taxation to 85 percent of salary. In addition, there is a "value-added" tax on purchases that runs from 12 percent to 25 percent, depending on the item. ...60 percent of Swedes in a public-opinion poll said it was acceptable to call in sick without being ill. Regardless of whether employees are ill or not, it is illegal for an employer to take any recourse. Sick days are doubly expensive for employers who often hire a substitute worker. ...The sick-pay cycle is made worse when "ill" employees work a "black job," one that is unreported for tax purposes, while receiving sick pay. Such workers can more than double their incomes. Young Swedes are particularly involved in such work. While visiting Uppsala University, Sweden's top college, I talked with 40 students and only two said they have not held a "black job." ...The state not only encourages disability for alcoholics but makes it easier than working for a living. In fact, there is almost no financial advantage to working a low-wage job in Sweden compared with collecting welfare or disability benefits. The state pays people to stay home and remain drunk. Treatment is optional. ...Because the tax on hard liquor is 87 percent of the retail cost, registered alcoholics who use their welfare funds to purchase booze are in effect largely reimbursing the government with their purchases.
http://www.orlandosentinel.com/news/opinion/orl-inssweden18041804apr18, 1,2481320.story   (registration required)

Wednesday, April 21, 2004 ~ 3:00 p.m., Dan Mitchell Wrote:
Insight on race, profiling, and discrimination. Walter Williams of George Mason University has two superb articles on discrimination. The first article, a Townhall.com column, explains why profiling is a logical way of reducing information costs. He notes that differences in crime rates lead to discrimination against blacks - oftentimes by other blacks, because people want to minimize risks. This should make people angry, Prof. Williams writes, but they should target their anger at the thugs who commit crimes and thus create an incentive for discrimination:

Needless to say, the law-abiding black person who's refused a taxi ride or pizza delivery or pulled over by the police is justifiably annoyed and offended. The rightful recipients of his anger should be those blacks who have made black synonymous with high crime and not the taxi driver or pizza deliverer who might fear for his life or the policeman trying to do his job.
http://www.townhall.com/columnists/walterwilliams/ww20040421.shtml

Williams' second article is a thorough (but very readable) treatise in the Cornell Journal of Law and Public Policy. The article explains that discrimination is the exercise of free will. Sometimes decisions to discriminate are benign - such as the choice of what to have for dinner. Other times, discrimination is morally repugnant - as occurs when a bunch of rednecks don't want blacks in their favorite bar. Williams explains, however, that a free society respects individual rights and allows people to make their own choices of how to use their own time and their own property:

If people are free to discriminate in favor of, or against, a particular university or wine, what argument can be made against people having that same right with respect to choosing any other object of desire, including the race or sexual characteristics of their mates, employees, tenants, or club members? If one shares the value of freedom of association, why should some associations by choice be permitted and others denied? If a man is not permitted to bring a court action against a woman who, for any arbitrary reason she chooses, refuses to have a dating relationship or establish a marital contract with him, what is the case for bringing court action for other similarly arbitrary refusals to deal with another, such as in the contexts of employment, renting or selling a house, or club membership?
http://www.gmu.edu/departments/economics/wew/articles/recent/discriminatio n.pdf

Wednesday, April 21, 2004 ~ 2:09 p.m., Andrew Quinlan Wrote:
Fannie Mae uses threats to protect its ability to loot taxpayers. Fannie Mae is a nominally private company, but it has a special government charter and it receives huge subsidies from the federal treasury. To protect this privileged status, the Wall Street Journal reports that an astounding one-third of Fannie's employees exist to help the "company" keeps its snout buried in the public trough. Interestingly, Fannie does not want to divulge the salaries of its senior officials - especially the high-priced lobbyists that dominate the payroll:

Fannie's political intimidation only raises questions about what, exactly, is going on inside the black box that are its business operations. Perhaps Fannie's most highly compensated include not financial risk managers but, instead, political risk managers. This is a company of 4,700 employees, of whom fully one-third are in the persuasion business, either as legal, lobbying or public relations minions who try to influence politicians. And just where does this money for the highly compensated come from? Well, a nice chunk comes from the implicit subsidy that Fannie enjoys as a government-sponsored enterprise. According to a recent study by the Federal Reserve Board (which joins a long list of studies with similar conclusions), the perception that the federal government stands behind Fannie gives it a 40-basis-point funding advantage over private competitors.
http://online.wsj.com/article/0,,SB108250656038288779,00.html?mod=opini on (subscription required)

Wednesday, April 21, 2004 ~ 1:10 p.m., Dan Mitchell Wrote:
The slow death of the EU savings tax directive. Great news from Switzerland, where leaders have refused to capitulate to the EU's bait-and-switch assault on financial privacy. As the Financial Times acknowledges, the EU wants to use the Schengen convention to eviscerate Swiss bank secrecy laws - even though the EU wants Switzerland to acquiesce to a savings tax directive scheme that ostensibly protects the right to financial privacy. Thankfully, the Swiss are not stupid and are refusing to make huge concessions when they know that the bureaucrats in Brussels have no intention of complying with their side of the deal:

The EU savings tax directive is supposed to take full effect next January, but Joseph Deiss, Switzerland's president, said his country could not co-operate without a separate agreement on border controls. The European Commission is pressing Switzerland to sign an agreement on the directive by the end of June, but Bern wants eight further deals with the EU on matters such as agriculture and the environment. Most of those additional deals are completed, but Switzerland is seeking important concessions on the Schengen convention on border controls. ...Bern is seeking concessions to ensure its authorities do not have to exchange information on tax evasion, which is not a criminal offence in Switzerland. Switzerland is also resisting pressure from fellow members of the Organisation for Economic Co-operation and Development, the club of rich nations, over its crackdown on tax evasion. Last year Switzerland blocked agreement on proposals for exchange of banking information between OECD countries from 2006 in order to verify people's tax liabilities. Austria, Belgium and Luxembourg also refused to support the 2006 deadline because of their banking secrecy systems.
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullSt ory&c=StoryFT&cid=1079420448193 (subscription required)

Wednesday, April 21, 2004 ~ 12:44 p.m., Dan Mitchell Wrote:
Blair poses false choice on EU constitution. To his credit, Prime Minister Tony Blair is allowing voters to decide whether the United Kingdom should become a colony of Brussels by approving massive new powers for the EU bureaucracy. But he errs by claiming that Britain will lose all influence unless voters approve the EU constitution. By definition, nation-states will lose a great deal of their sovereignty if the new constitution is approved. As we say in America, "Having a seat at the table is not desirable if you are a turkey and it's Thanksgiving." The EU Observer quotes Blair's silly assertion

"It is time to resolve once and for all whether this country, Britain, wants to be at the centre and heart of European decision-making or not; time to decide whether our destiny lies as a leading partner and ally of Europe or on its margins".
http://euobs.com/?aid=15250&rk=1

Wednesday, April 21, 2004 ~ 11:49 a.m., Dan Mitchell Wrote:
The Brussels power-grab. The Wall Street Journal Europe needs only one paragraph to summarize why the new EU constitution should be tossed in the trash bin. Instead of a simple document that restricts the power of government in clear language, the new documents is a 264 page (with more probably on the way) monstrosity that is deliberately indecipherable to most citizens:

In theory, the project started out promisingly enough; a constitution for Europe was supposed to simplify and rationalize the EU's structure and legal status. What we got in the end, however, was neither simple nor rational. If Europe must have a constitution, it should be written in the best traditions of the form -- it should be short enough to be read and understood by the average citizen; it should clearly delimit the powers of the union and the rights of citizens vis-à-vis the state; and, it should explain the interaction of the various bodies that constitute the union's apparatus.
http://online.wsj.com/article/0,,SB108249905612888492,00.html?mod=opini on (subscription required)

Wednesday, April 21, 2004 ~ 11:15 a.m., Dan Mitchell Wrote:
Decentralization could be the key for Iraq's future. This website has favorably commented on