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www.freedomandprosperity.org |
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The views expressed by Andrew Quinlan and Dan Mitchell on this weblog are solely their own and are not necessarily those of their employers, The Center for Freedom and Prosperity Foundation and The Heritage Foundation, respectively. |
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The Market Center Blog |
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Observations and insights on the global fight |
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CF&P's Market Center Blog Archives |
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Saturday, December 31, 2005 ~ 5:34 a.m., Dan Mitchell Wrote: The European Union is a relative novice in using threats of antitrust enforcement to collect cash and dispense favors. But inexperience is no excuse for running amok. Fred
McChesney of Northwestern University, writing in Regulation magazine, noted that "EU antitrust enforcement includes a permanent bureaucracy, largely unreachable by individual national authority, applying
and enforcing its own dictates." This must be great fun for power-mad bureaucrats, and quite lucrative. The EU blocked a U.S.-approved merger between Boeing and McDonnell Douglas to the advantage of their
European rival, Airbus. The EU blocked potentially useful mergers between GE and Honeywell, and between Sprint and MCI, to protect favored competitors -- not competition. Larry Lindsey, former director of the
National Economic Council, has warned of "the use of EU's antitrust policies against challenging American firms." ...The only thing more stupid and wasteful than U.S. antitrust is European antitrust.
What European bureaucrats do to hobble or pillage any European businesses is none of our business. What they do to pillage or hobble American businesses, on the other hand, is very literally our business. And
our money.
Saturday, December 31, 2005 ~ 5:54 a.m., Dan Mitchell Wrote: To briefly expand on two of the other myths: Republicans shrink government? Not in the past 75 years. At one of his State of the Union
speeches, President Bush was applauded after talking about "spending discipline," but since he became president, the government has hired a
million more people and increased spending more than on President Clinton's watch. It's not just because of terrorism. During Bush's first five years, spending at the Department of Labor was up 31 percent,
Agriculture: 38 percent, Education: 81 percent. And the new prescription drug benefit is yet to be counted. Put a politician in power, and he'll take your money and spend it. That's what politicians do. Even
Republicans. "Life getting worse" is myth No.1 because in TV newsrooms, I hear a constant whine about life getting worse: avian flu
will kill us if terrorism doesn't get us first; crime and pollution keep increasing, and the poor are suffering. But in truth, life keeps getting
better. We live longer than ever, and with less pain (think about dental care in the 1960s). Crime is down. In America, even poor people have homes, cars, and access to music and other entertainment that was
once only available to royalty. Pollution? The air and water keep getting cleaner.
Friday, December 30, 2005 ~ 11:11 a.m., Dan Mitchell Wrote: The repeal of the protectionist Byrd Amendment in Congress's year-end reconciliation bill is more than a rare legislative victory. It's closer to a
Christmas miracle. Named after the West Virginia Senator who snuck it into law without debate in a 2001 appropriations bill, Byrd directs antidumping and countervailing duties into the pockets of U.S.
companies that petition for the tariff protection. Byrd was nothing more than a wealth transfer from U.S. consumers and industries that use imports to a small network of savvy protectionists. The miracle is that
repeal happened even with all that concentrated "interest" flowing to politicians who supported Byrd.
Thursday, December 29, 2005 ~ 2:00 p.m., Dan Mitchell Wrote: America now imposes the highest corporate income tax rate among the 30 wealthiest countries. ...the U.S. combined state and federal
corporate tax rate of 39.3% is 10 percentage points higher than the OECD average. ...for those who don't think corporate tax rates matter
in attracting jobs and capital, consider that Ireland, the nation with the lowest corporate tax rate (12.5%), has become the Hong Kong of the West with the fastest pace of economic growth and jobs in the
Eurozone. The two new reports also suggest that the high U.S. corporate income tax rates are economically self-defeating. As the CBO says in its usual academic jargon: "The distortions that the corporate
income tax induces are large compared with the revenues that the tax generates . . . Those distortions bring about reductions in economic efficiency." ...When Chrysler merged with a German auto company
several years ago, it became Daimler-Chrysler, not vice versa -- a decision based in part on the tax regimes of the two countries. When CEOs find Germany to have a more favorable tax system than the U.S.,
there is something terribly wrong with our tax code. Oh, and Germany has since lowered its corporate tax rate by 13 percentage points, while ours remains essentially unchanged. There has been a great hullabaloo
in recent years about so-called "Benedict Arnold" companies (in John Kerry's phrase) that move facilities offshore to Bermuda, the Cayman
Islands and other international tax havens to avoid paying U.S. taxes. That happens because a company incorporated in the U.S. is automatically obliged to make Uncle Sam a one-third shareholder by
paying the first 35% of all profits in taxes. Congress has been debating new layers of punitive taxes to impose on those who flee offshore. This will simply ensure that those companies and the profits they make
overseas will never come back. Congress had a better idea with the 2004 Homeland Investment Act; it allowed companies to bring their foreign profits back into the U.S. this year at a one-time tax rate of
5.25%. The result: an estimated $300 billion repatriated back to these shores and a $15 billion revenue windfall for the U.S Treasury.
Thursday, December 29, 2005 ~ 12:37 p.m., Dan Mitchell Wrote: The institution of private property offers the liberty-oriented solutions to both the school prayer and the smoking issues. I believe it's a
parental right to be able to decide whether one's child will, or will not, say a morning prayer. Conflict emerges because of government-produced education. While there might be an argument for
government financing of education, there's absolutely no argument for government production of education. Therefore, if each parent were given an education voucher to pay for education, those parents wishing
prayers, or those against prayers in school, could enroll their children in the school that meets their preference. Thus, conflict would be eliminated. ...Private property would solve the smoking issue. ...The
liberty-oriented solution might be to post a sign saying you don't permit smoking, and customers wishing otherwise wouldn't enter. The same principle would apply to restaurant owners who wished to permit
smoking. I fear that too many Americans have contempt for the principles of liberty and opt for solutions that employ the political arena to forcibly impose their wills on others.
Thursday, December 29, 2005 ~ 9:19 a.m., Dan Mitchell Wrote: Luxembourg and Ireland - both 'low tax' countries - topped the EU's GDP per capita rankings in purchasing power parity figures in 2004.
GDP per capita in the Member States ranged from 43% to 227% of the EU25 average in 2004. GDP per capita in Luxembourg was more than twice the EU25 average, while Ireland was about 40% above average.
...Eurostat points out, a touch sourly, that GDP per capita in Luxembourg is very high partly due to the large share of cross-border workers in total employment. While contributing to GDP, they are not
taken into consideration as part of the resident population which is used to calculate GDP per capita. That simply means, of course, that Luxembourg is more successful than the countries around it at
attracting workers.
Wednesday, December 28, 2005 ~ 12:37 p.m., Dan Mitchell Wrote: President Vladimir Putin's outspoken liberal [in the European, pro-market sense] economic adviser Andrei Illarionov announced his
resignation to protest what he said was an end to political freedom in Russia. "It is one thing to work in a partially free country, as Russia was
six years ago. It's another when the country has stopped being politically free," Illarionov, 44, was quoted as saying by ITAR-TASS news agency on Tuesday. He said he expected Putin to accept his
resignation. ...Illarionov has long been the highest profile critic within the Kremlin of the Putin administration. Just last week, in what may
have been his last major press conference as adviser, he said: "Russia has ceased being a free and democratic country."
Wednesday, December 28, 2005 ~ 12:00 p.m., Dan Mitchell Wrote: Both Wal-Mart and General Motors have recently announced they will offer HSAs to their employees. A survey by Watson Wyatt and the
National Business Group found that 8% of large employers will offer them this year, with 18% planning to do so next year. Overall, more than a million Americans are already enrolled in employer-sponsored or
individually purchased HSAs. The basic idea behind an HSA is mating a high-deductible insurance policy with a tax-free savings account to help pay pre-deductible expenses. According to Treasury regulations
released recently, the annual deductible for 2006 must be at least $1,050 for an individual. This gives individuals an incentive to be cost-conscious as they look for health care, even as they are protected
against catastrophic illness or large medical bills. And over time if they're healthy, they can build up savings tax free to pay for care when
they do get sick. ...The real point of insurance, after all, isn't to cover routine check-ups but to protect us from financial crisis in the event of
unexpected injury or illness. Workers being asked to share ever-larger portions of their health care costs are finally starting to recognize that
company money going to pay for health insurance means smaller wage increases.
Wednesday, December 28, 2005 ~ 10:19 a.m., Dan Mitchell Wrote: Secretary-General Kofi Annan lost his temper - hurling insults at a widely respected senior member of the U.N. press corps. Beyond the
who-what-when-where-how of this episode, the big question is: Why? The broad answer is that the U.N. Secretariat, despite all the recent talk of reform, evidently remains a place of secrecy and privilege, run
by high officials who don't mind talking about their global goals and grand legacies, but find it highly irritating to be held to normal standards of good governance or subjected to anything resembling the
workings of a free press. And in this particular case, given the ferocity of Annan's reaction, one has to wonder if there is even more to it. This is where the missing Mercedes comes in. The Mercedes was purchased by Kojo Annan in his father's name four days before the
Hotel de Crillon meeting--and about two weeks before Cotecna won the U.N. contract. The use of the U.N. chief's diplomatic status qualified the car for a $6,541 discount on the purchase price and a $14,103 tax
exemption when it was imported to his native Ghana. Mr. Volcker's investigators found a memo on the computer of Mr. Annan's personal assistant asking him to authorize a letter to Mercedes. "Sir, Kojo asked
me to send the attached letter re: the car he is trying to purchase under your name. The company is requesting a letter be sent from the U.N. Kojo said it could be signed by anyone from your office. May I ask
Lamin to sign it?" the assistant wrote. Neither Kofi Annan, his aide Lamin Sise, nor his assistant, Wagaye Assebe, can recall what happened, and the original documents have disappeared--but somehow
the Mercedes was purchased with the diplomatic discount anyway. Abdoulie Janneh, the U.N. official who arranged the tax exemption in Ghana was recently promoted to U.N. under-secretary-general, in
charge of the Economic Commission for Africa. Amid the clutter of unanswered questions, one query has the virtue of simplicity: Where is
the car? I have been asking this for weeks at the U.N.'s daily briefing. It was this question that triggered Kofi Annan's outburst. He clearly wants
me to shut up. I'm afraid, Mr. Secretary-General, that would be the wrong thing for me to do. Every schoolboy knows that.
Tuesday, December 27, 2005 ~ 1:45 p.m., Dan Mitchell Wrote: ...the former eastern bloc countries are the latest to capitalize on globalization. ...Their fervor is alarming its old-school neighbors in the
West. ...While Franz Müntefering, until recently SPD chairman, garners public approval for condemning the evil power of international capital, the EU newcomers are putting it to profitable use. ...While nearly 5
million Germans are out of work and not a day passes without some company, politician or union griping about the corporate exodus to Eastern Europe, new jobs are being created daily in what were only
recently decrepit planned economies. ...Until the end of the 1990s, Slovakia was considered the "black hole" of Eastern Europe, the problem child holding up negotiations for EU membership. Today
foreign financiers value the little country as an investment jewel. Last year alone, Sario - the government agency for foreign investment - recorded 47 projects worth EUR1.7 billion, and 35,000 new jobs are
being created. With plenty more on the way. In the first half of 2005, some 40 further projects worth EUR2 billion were under negotiation,
the agency reported. ...Slovakia's meteoric rise began as late as 1998... Since then, launching a company just takes a matter of days, the national pension system is being supplemented by capital funding, and
unemployment benefits are accorded only to those who actively look for work and are willing to do part-time community service - until a real
job materializes. But the heart of Slovakia's reforms is a flat tax rate. Since January 1, 2004, a uniform rate of 19 percent has applied to income, corporate and value-added taxes. ...The state and its
bureaucrats have beaten a hasty retreat. The Baltic countries, Estonia first and foremost, are viewed around the world as extremely liberal, open-market economies. ...For HWWA analyst Andreas Polkowski, the
eastern European countries are "miniature economic laboratories." The popular theories of the neo-liberal economist Milton Friedman and others have been implemented "verbatim," he says.
Tuesday, December 27, 2005 ~ 12:09 p.m., Dan Mitchell Wrote: The cost of paying every member of Congress a million dollars a year is absolutely trivial compared to the vast amounts of the taxpayers'
money wasted by cheap politicians doing things to get themselves re-elected. You could pay every member of Congress a million dollars a year for a century for less money than it costs to run the Department of
Agriculture for one year. ...You are not going to get the most highly skilled or intelligent people in the country, people with real-world experience, while offering them one-tenth or less of what such people
can earn in the private sector. ...How many people in the top layer of their respective professions are going to sacrifice the future of their
families -- the ability to give their children the best education, the ability to have something to fall back on in case of illness or tragedy, the
ability to retire in comfort and with peace of mind -- in order to go into politics? ...by and large, you get what you pay for. What we are getting
as cheap politicians are often a disgrace -- and enormously costly as reckless spenders of the taxpayers' money in order to keep themselves getting re-elected. Whatever the problems faced by the country, the
number one priority of elected officials is to get re-elected. Nothing does that better than handing out money from the public treasury. Cheap politicians are expensive politicians, currently costing the
taxpayers more than a trillion dollars a year. ...Many people today marvel when looking back at the leaders who created the United States of America. Most of the founders of this country had day jobs for years.
They were not career politicians. George Washington, who took pride in his self-control, lost his temper completely when someone told him that a decision he was going to make could cost him re-election as
President. He blew up at the suggestion that he wanted to be President, rather than serving as a duty when he would rather be back home. Power is such a dangerous thing that ideally it should be wielded by
people who don't want to use power, who would rather be doing something else, but who are willing to serve a certain number of years as a one-time duty, preferably at the end of a career doing something else.
Tuesday, December 27, 2005 ~ 10:24 a.m., Dan Mitchell Wrote: Prime Minister John Howard's government, to its credit, is starting to roll back the pain, given that it's expected to be A$11.5 billion over
budget in 2005-06. About time. Australians are taxed 15% on pension savings contributions, 10% on most goods and services, and heft some of the highest marginal income tax rates in the developed world, save in
socialist havens like Sweden. At present, folks earning A$63,001 to A$95,000 pay a 42% marginal rate; those above A$95,000 pay 47%. Next year, those brackets will be bumped up, to A$70,001 to A$125,000
and A$125,001, respectively. But the tax rates themselves won't change. Assuming Australians' wealth will increase over time, more people will likely move into the higher tax bracket; in effect, still
penalizing them for working hard and earning more. No wonder the antipodeans retire at some of the earliest ages in the developed world. Shades of Europe, n'est pas? Now, after all that taxation, instead of
giving that extra cash back to all employees, Canberra wants the board of guardians to invest it for only a small portion of the population -- the
public servants. ...There's also the sticky question of how hands-off the government will be, given the mother lode of cash it's intending to sock
away. Mr. Costello has already publicly implied that most of the money will be invested onshore. There have also been hints that the fund could
be a repository for unwanted assets, such as the government's shares of its effective telecommunications monopoly, if its ongoing privatization
goes belly up. All of this is of course contradictory to the future fund's proposed independence. If Canberra is meddling like this before the
thing is even created, what might it do when it's up and running, and flush with A$18 billion in cash?
Monday, December 26, 2005 ~ 3:45 p.m., Dan Mitchell Wrote: The technocratic answer to the problem of financing public expenditure on public goods, at least economic cost, was given by ...Frank Ramsey
(Keynes' young Cambridge colleague). It involves the taxing of goods with the most inelastic demand most heavily. ...Hence the Ramsey Rule for optimal taxation. But, this rule assumes that the government is
benevolent. Suppose instead it is predatory, and not merely interested in raising a given revenue but in maximising it, at least cost. What taxes
would it choose? As Brenann and Buchanan (in their The Power to Tax) showed, it would choose Ramsey taxes! This has led to a search for a system of taxation which limits the ubiquitous fiscal predatoriness of
governments. The flat tax (first advocated by Robert Hall and Alvin Rabushka: The Flat Tax, Hoover Press) is the answer. In its pure version a flat tax replaces multiple marginal tax rates with a single
marginal tax rate, and abolishes all the complex systems of allowances and reliefs, which governments use for social engineering, or for buying
votes. ...the future of the flat tax might lie in countries which, like the East Europeans, are moving from the plan to the market. The Chinese are said to be considering its adoption. If the Kelkar Commission's
recommendations were fully adopted in India, it would only be a small step to move to a full-scale system of flat taxes in India. This would
curb the traditional fiscal predation of the state and its associated ills like the black economy, and have a favourable impact on the country's growth rate.
Monday, December 26, 2005 ~ 4:38 a.m., Dan Mitchell Wrote: ...in addition to violating the Constitution's Commerce Clause, there's also evidence that direct shipping bans reduce competition and inflate
prices. That's the conclusion of a new paper by Alan Wiseman of Ohio State University and Jerry Ellig of George Mason University, who conducted a useful analysis of Virginia's wine market. ...They found that
"while average bricks-and-mortar prices still exceeded average online prices in 2004, the size of the price difference decreased by nearly 40%
compared to 2002," when direct wine shipments were illegal. "More broadly speaking," write the authors, "this result clearly supports
theories that predict how government mandated market restrictions inhibit competition and facilitate higher prices, and how the removals of those bans will facilitate more efficient market outcomes."
Sunday, December 25, 2005 ~ 6:21 a.m., Dan Mitchell Wrote: Americans are "stingy." This was the accusation hurled at the U.S. almost exactly one year ago today by Jan England, United Nations
Undersecretary for Humanitarian Affairs... Even by U.N. standards, it was a particularly absurd anti-American slur--although it no doubt expresses the view of many foreign elites, who have come to believe
that government is the only true source of goodness and charity. ...The quarter trillion dollars a year that Americans provide to sustain the Red
Cross, the Salvation Army, Catholic Charities, the American Cancer Society, their local churches, universities and such is greater than the entire GDP of most countries. ...We suspect that Americans give to
private charities because they recognize that these initiatives work best. Bobby Jindal, a Congressman from New Orleans whose own home was
badly damaged by flood waters, tells us that "by far the most effective relief efforts have come from private charitable aid organizations.
FEMA and other state/local government agencies set up bureaucracies and red tape, while private businesses and charities moved in swiftly to
alleviate the human suffering on the ground." ...There is a mythology in the philanthropic world that Americans are motivated to give by the
somewhat selfish pursuit of a tax deduction. But a surprisingly large percentage of charitable gifts aren't even itemized on tax forms. Moreover, the Tax Foundation has provided compelling evidence that
over the past 50 years--as tax rates on the highest earners have fluctuated from a high of 90% to a low of 28%--American giving has hardly deviated from 2% of personal income. In the 1980s, as tax-rate
reductions reduced the value of the charitable tax deduction by about half, the level of charitable giving nearly doubled. This suggests that
charitable giving would continue to flourish under a flat-rate tax system with no deduction. ...when it comes to funding self-serving bureaucracies that don't produce results--such as much of the U.N. and
most other multi-government foreign-aid schemes--Americans are skeptics. For good reason. Study after study has documented that there is no correlation between the amount of foreign assistance a nation
receives and its subsequent rate of economic development. Think Africa, which has received hundreds of billions of dollars in aid to little positive effect. This suggests that the optimal amount of U.S.
government development aid may be zero.
Saturday, December 24, 2005 ~ 2:43 p.m., Dan Mitchell Wrote: In an interview with the Daily Telegraph, Oliver Letwin said a future Conservative government should make wealth redistribution its goal.
...Mr Letwin's words will be seen as a break with traditional Conservative policy, which has focused on wealth generation rather than redistribution. It will be seen as a further sign new Conservative
leader David Cameron is seeking to move the party towards the centre ground of British politics into areas traditionally occupied by Labour and the Liberal Democrats. ...His words contrast with Margaret
Thatcher, who said in a 1975 speech shortly after becoming Tory leader: "We have gone as far as we possibly can with the redistribution of income. We really now must concentrate on creating more growth so
that the size of the cake is bigger."
Saturday, December 24, 2005 ~ 10:25 a.m., Dan Mitchell Wrote: Angela Merkel, the German chancellor, will propose to attach a declaration on the "social dimension of Europe" to the failed EU
constitution, in a bid to save the charter. ...The declaration should help reassure French and Dutch voters, who rejected the treaty in referendums last spring, largely in protest against globalisation,
enlargement and liberalisation of the service markets. ...Germany takes over the rotating EU presidency in the first half of 2007 and could play a key-role in reviving the constitution, Elmar Brok, a prominent
member of Ms Merkel's CDU party in the European Parliament pointed out. "It will be the main task for the German EU presidency", he said.
Friday, December 23, 2005 ~ 12:42 p.m., Dan Mitchell Wrote: Prof. Jeffrey Sachs, the U.N.'s Chief Advisor on the Millennium Development Goals, believes Africa needs more cash... His Green
Revolution would spend that money to improve agricultural infrastructure, soil nutrients, water quality and seeds ability to survive harsh climates and insects, and better agricultural infrastructure.
These, however, are precisely the benefits that come from property rights, which also inspire the motivation to invest in, improve and preserve the land -- motivation that does not come from aid, central
control and state serfdom. Prof. Sachs is right about tougher seeds but not about more aid. By his own calculation, "out of every dollar of aid
given to Africa, an estimated 16% went to consultants from donor countries, 26% went into emergency aid and relief operations, and 14% went into debt servicing." He could not account for how much of the
remaining 44% got siphoned off by corrupt officials, nor could he explain why $400 billion dollars of aid over the last 30 years has left the average African poorer. ...African leaders must be pushed to reduce
economic intervention, free financial markets, remove bureaucratic obstacles to setting up businesses, establish property rights and enforce
contract law. These are the forces that release entrepreneurial energy. But the ruling cliques will do none of these unless forced to do so as a condition of aid.
Friday, December 23, 2005 ~ 9:24 a.m., Dan Mitchell Wrote: We don't need the government to force businesses to spend half their profits on accountants, because free markets police themselves. Those
that serve customers well are rewarded with more customers; those that do well for investors attract them. Bad guys who cheat get a reputation for cheating. They lose customers, lose investors and go out
of business. ...The competition of the market protects us better than the ever-mounting pile of rules legislators pass. And it keeps the costs reasonable, because the private sector has to bear its own burdens,
while government forces its costs on others. ...Enron and the other recent business disasters are evidence of the market working. Government regulators didn't discover the deceit. Enron's lies were
revealed when private security analysts raised questions and private investors started dumping the stock.
Thursday, December 22, 2005 ~ 8:42 a.m., Dan Mitchell Wrote: New reports by the Census Bureau and the Federal Reserve Board on the economic well-being of the typical American family reveal that over
the past three decades, the vast majority of families have experienced a rapid growth in their income and wealth. Now that nearly six out of 10 households own stock and two out of three own their own homes, the
average family -- for the first time ever -- has net worth (assets minus liabilities) of more than $100,000. Median family income has climbed to
more than $54,000 a year. ...The Census data ...show, for example, that in 1967 only one in 25 families earned an income of $100,000 or more in real income, whereas now, one in six do. The percentage of families
that have an income of more than $75,000 a year has tripled from 9% to 27%. But it's not just the rich that are getting richer. Virtually every
income group has been lifted by the tide of growth in recent decades. The percentage of families with real incomes between $5,000 and $50,000 has been falling as more families move into higher income
categories -- the figure has dropped by 19 percentage points since 1967. This huge move out of lower incomes and into middle- and higher-income categories shows that upward mobility is the rule, not
the exception, in America today. ...the U.S. is still the pre-eminent meritocracy, where economic success is still predominantly powered by hard work and saving, not inheritance and privilege.
Thursday, December 22, 2005 ~ 7:49 a.m., Dan Mitchell Wrote: Jose Manuel Barroso, President of the European Commission, has ...hinted at the possibility of an EU tax to fund the budget. ..."We have
to find a way of avoiding such a direct link between national budgets and the European budget," Barroso said. "We have to think about some
reform of the resources of the EU...We should look at a system...that would go beyond negotiations between countries," he added. ...One of
these options is likely to be a proposal for an EU tax, an idea supported by the EU's Christian Democrat leaders including Wolfgang Schussel,
Austrian chancellor, Edmund Stoiber, Bavaria's chancellor, and Nicolas Sarkozy, leader of France's centre-right UMP. However, such a proposal is likely to be fiercely opposed by a number of member states,
including the United Kingdom, Ireland the Czech Republic, Estonia and Slovakia, which would all have the power to veto the measure. Karl Aiginger, director at the Austrian Institute of Economic Research (WIFO) is also supporting the idea. Speaking in a press conference on
Monday together with Christoph Leitl, president of the influential Association of European Chambers of Commerce and Industry (EUROCHAMBRES), he called on the incoming Austrian EU presidency
to test the possibilities to launch a discussion on a common EU tax. ...A number of countries, with Britain as the most outspoken, have traditionally opposed contributions to the budget through direct EU
taxes - something which can only be agreed unanimously by member states.
Wednesday, December 21, 2005 ~ 10:55 a.m., Dan Mitchell Wrote: After the usual midnight haggling, EU leaders agreed the next seven-year EU budget on Saturday morning, with both the UK and
Germany giving up money which will go towards development support in the 10 new member states, including Cyprus and Malta. The UK finally agreed to surrender EUR10.5bn of its budget rebate over the
seven years, up from an original EUR8bn ...The overall budget grows to 1.045% percent of EU output, well below the 1.24% demanded by the European Commission, but up from the UK's original 1.03% proposal.
...Conservative foreign affairs spokesman William Hague said, predictably: "Seldom in the course of European negotiations has so much been surrendered for so little. It is amazing how the Government
have moved miles while the French have barely yielded a centimetre." [Blair] promised not to sign any agreement that would continue wasting 40% of the EU budget on farm subsidies that benefit only 5%
of the population. And as leverage he had the British rebate -- negotiated by his iron-clad political forebear, Lady Thatcher, to compensate the U.K. for the fact that the budget is heavily skewed
toward farm-rich countries like France. But instead of using it as a bargaining chip to win the kind of subsidy cuts that would do away with
the very rationale for the rebate, the chèque britannique became an end in itself. Mr. Blair tried to hold onto as much of it as possible without
being blamed for holding up "progress." The price Mr. Blair was willing to pay for being considered a "good European" again was EUR10.5
billion from the U.K. Treasury and, even more costly, his economic principles. All he got in return was a promise of another look at the budget in 2008.
Tuesday, December 20, 2005 ~ 1:02 p.m., Dan Mitchell Wrote: ...the two sides have agreed to a compromise that will raise taxes on individuals and corporations in an attempt to gather more revenue... Is
this a grim assessment of the U.S. economic situation? No -- such is the sad state of affairs in Germany, a country that just a few months ago seemed like it would finally emerge from the economic Dark Ages that
have defined much of the Continent's situation in recent decades. Instead, one of Europe's most important economies may sink even further into its high-tax, high-unemployment and low-growth miasma.
...what are good tax rates? It's useful to begin with consideration of a simple principle: Taxes distort behavior. From this powerful little sentence comes the key insight that should inform our thinking about
setting tax rates. Any tax, even the lowest and the fairest, will cause people to consume less or work less. Taxes that are inordinately high
only exacerbate this reaction, and the aggregate accumulation of these individual decisions can be devastating to an economy. Good tax rates, then, need be high enough to generate sufficient revenues, but not so
high that they choke off growth and, perversely, decrease tax revenues. ...What makes this [America's] economy so vibrant is its participants' willingness to take chances, innovate, acquire financing, hire new
people and break old molds. Every increase in capital gains taxes and dividends is a direct tax on this vitality. Americans aren't risk-takers by
nature any more than Germans are intrinsically less willing to work than Americans. The reason the U.S. economy is so much more vibrant than Germany's is that people in each country are playing by different
rules. But we shouldn't take our vibrancy for granted. Tax rates matter. A shift back to higher rates will have negative consequences.
Tuesday, December 20, 2005 ~ 11:58 a.m., Dan Mitchell Wrote: Japan's ruling Liberal Democrat Party (LDP) has ruled out an increase in the 5% consumption tax in the fiscal year which begins in 2007 as
part of plans to tackle Japan's ageing society and rising public debt. ..Raising the country's consumption tax rate to between 10% and 15% is an idea that has been endorsed by the government's tax advisory
panel on numerous occasions. However, the move would be a politically sensitive one, and Prime Minister Junichiro Koizumi has stated that he
will not increase the tax whilst in power - although his time as head of the ruling Liberal Democratic Party is set to come to an end next September. Instead, the ruling coalition recommended last Thursday the
scrapping of income, residential and corporate tax breaks and raising liquor and tobacco levies beginning in 2006 in a bid to raise 2 trillion
yen (US$17 billion). Ultimately, the tax reform proposals call for "a complete overhaul of the tax system," with an increase in consumption tax to be discussed for 2008.
Tuesday, December 20, 2005 ~ 10:16 a.m., Dan Mitchell Wrote: The most important thing to know about the global trade talks that ended Sunday in Hong Kong is that French President Jacques Chirac
thinks they were a success. That means they were a bust for everyone else, especially the world's poor. ...What a shame. The Doha round was meant to give developing countries the opportunity to use their
comparative advantage in agriculture in exchange for goods and services from the developed nations. In its original form, it would've given an enormous boost to the world's neediest nations -- and, as is
often forgotten, provide cheaper goods to consumers globally. The rich nations deserve a big share of the blame. A draft proposal to give the
poorest countries duty-free and quota-free access to their markets met with resistance from the U.S. and Japan. The Americans argued that if they gave the likes of Bangladesh and Cambodia free access to the U.S.
market, the domestic textile lobby would object. Japan wanted protection for its coddled rice industry. Europe, led by France, was the worst of all in protecting its subsidies.
Monday, December 19, 2005 ~ 11:05 a.m., Dan Mitchell Wrote: Coverage by public television and radio is conservative compared to the rest of the mainstream media. Meanwhile, almost all major media
outlets tilt to the left. These are just a few of the surprising findings from a UCLA-led study, which is believed to be the first successful
attempt at objectively quantifying bias in a range of media outlets and ranking them accordingly. ...The results appear in the latest issue of the Quarterly Journal of Economics, which will become available in
mid-December. ...Of the 20 major media outlets studied, 18 scored left of center, with CBS' "Evening News," The New York Times and the Los
Angeles Times ranking second, third and fourth most liberal behind the news pages of The Wall Street Journal. Only Fox News' "Special Report With Brit Hume" and The Washington Times scored right of the
average U.S. voter. ...Five news outlets - "NewsHour With Jim Lehrer," ABC's "Good Morning America," CNN's "NewsNight With Aaron
Brown," Fox News' "Special Report With Brit Hume" and the Drudge Report - were in a statistical dead heat in the race for the most centrist
news outlet. Of the print media, USA Today was the most centrist.
Monday, December 19, 2005 ~ 10:21 a.m., Dan Mitchell Wrote: ...long-term care is Medicaid's biggest single cost -- and many recipients of this largesse are anything but poor. One reason is that, for purposes
of Medicaid nursing home eligibility, people are allowed to retain unlimited income as long as their medical expenses -- including long-term care -- are high enough. Another big reason is that they can
also keep unlimited assets in the form of home equity, a business or other kinds of wealth. ...hundreds of eligibility "loopholes" ...allow
individuals, especially those advised by Medicaid planning attorneys, to qualify for Medicaid long-term care benefits without spending down their own wealth for care. ...he House of Representatives recently
passed legislation to curtail a few of the most egregious abuses. ...AARP has nevertheless gone ballistic, claiming that the House reforms
"seriously threaten the ability of millions of Americans to get needed long-term care services" and "will deny millions of older and disabled
Americans the long-term care services they need and leave them vulnerable to substandard care." ...AARP's position and tactics are wrong, hurtful and dangerous. ...Denying public welfare to people with
three-quarters of a million dollars in home equity does not reduce their access to care. ...The more fundamental questions to ask are why Medicaid should be used as a kind of inheritance insurance for
middle-class baby-boomer heirs -- and how this practice protects Americans most in need? ...Boil it all down and you're left with only one conclusion. Faced with the choice of supporting the use of Medicaid for
people genuinely in need, or grabbing what it can for its well-heeled members and their heirs, AARP took the low road.
Sunday, December 18, 2005 ~ 11:18 a.m., Dan Mitchell Wrote: Oregonians, like many others, have been fighting to force their state government to honor property rights. Like reformers in other states,
residents here had seized upon the one tool more powerful than entrenched state politicians: the ballot initiative. In 2000 and again in 2004, voters passed measures to protect landowners from state
regulations that reduced their property value. ...initiatives are only as powerful as the court system lets them be. Two separate judges struck
down the property measures on embarrassing legal grounds. ...Oregon's property regime traces back to the 1970s, when elites worried that all
the rednecks in the pretty parts of the state might get the uppity idea of developing their land and ruining urbanites' weekend playground. A new law gave the state control of land use, stripping power from
counties that were far better positioned to respond to local needs. The law was also behind "urban growth boundaries," within which
development was fair game. Anything outside was labeled "forest" or "farming" or "open" land and frozen in time. In addition to its abuse of
constitutionally protected property rights, the law has also had devastating economic effects. Property prices inside the boundary artificially skyrocketed, while rural areas were barred from
development that would create new jobs. No other state has been foolish enough to pass a copy of the law.
Saturday, December 17, 2005 ~ 11:55 a.m., Dan Mitchell Wrote: Few opponents of energy development in what they call ``pristine'' ANWR have visited it. Those who have and think it is ``pristine'' must
have visited during the 56 days a year when it is without sunlight. They missed the roads, stores, houses, military installations, airstrip and
school. They did not miss seeing the trees in area 1002. There are no trees. Opponents worry that the caribou will be disconsolate about, and their reproduction disrupted by, this intrusion by man. The same was
said 30 years ago by opponents of the Trans-Alaska Pipeline that brings heated oil south from Prudhoe Bay. Since the oil began flowing, the caribou have increased from 5,000 to 31,000. Perhaps the pipeline's
heat makes them amorous. ...For some people, environmentalism is collectivism in drag. Such people use environmental causes and rhetoric not to change the political climate for the purpose of environmental
improvement. Rather, for them, changing the society's politics is the end, and environmental policies are mere means to that end. The unending argument in political philosophy concerns constantly
adjusting society's balance between freedom and equality. The primary goal of collectivism -- of socialism in Europe and contemporary liberalism in America -- is to enlarge governmental supervision of
individuals' lives. This is done in the name of equality.
Friday, December 16, 2005 ~ 8:55 a.m., Dan Mitchell Wrote: An astonishing 99% of Frenchmen don't want Jacques Chirac to run for a third term, a new opinion poll shows. So how can such a discredited
politician still be calling the shots on the EU budget? Apparently, even the British haven't learned that appeasement never works -- whether it's
with Nazis, terrorists or French presidents hooked on agro-subsidies. Tony Blair's offer to forgo part of the British rebate without touching the Common Agricultural Policy, which still eats up 40% of the EU
budget, produced a rather predictable reaction from the main beneficiaries of the CAP. Sensing vulnerability on the prime minister's part, Mr. Chirac immediately declared the offer unsatisfactory and
demanded more. ...Sir Charles Crawford, the British ambassador to Warsaw, wrote an "internal" email that somehow found its way to the
press. The CAP is "the most stupid, immoral state-subsidized policy in human history, give or take communism," he wrote. "It's a program
which uses inefficient transfers of taxpayers' money to bloat rich French landowners and so pump up food prices in Europe, thereby creating poverty in Africa, which we then fail to solve through
inefficient but expensive aid programs." ...At the EU summit starting Thursday, Mr. Blair could return to his original agenda and propose
serious CAP reform in exchange for cuts in the rebate. Not that such a budget would have the slightest chance of being passed. But at least he'd go down fighting for the right principles.
Thursday, December 15, 2005 ~ 10:04 a.m., Dan Mitchell Wrote: Just when you thought the budget mess on Capitol Hill couldn't get more embarrassing, Congress is now set to sneak $7 billion of spending
to fight the avian flu into an appropriations bill without a penny of offsetting spending cuts. White House and Congressional leaders have apparently concluded that there's nothing that can be cut from the $600
billion-plus Health and Human Services budget. ...It turns out that the Centers for Disease Control (CDC), the agency asking Congress for the
avian flu spending, is also in the final stages of completing a $60 million taxpayer-funded Visitors Center. ...A CDC spokesman promises that
the center will be "a world class destination," with red ants, rats, monkeys, art work and a giant model mosquito, all of which will make
the museum a "must-see place for tourists." ...This giant memorial to Ebola, the West Nile virus and such is one small component of the
CDC's new Taj Mahal of a "campus" in downtown Atlanta. Its cost in the hundreds of millions of dollars rivals some of the glitziest casino
hotels in Las Vegas. The center will have limestone bridges, waterfalls and Japanese gardens and fountains. ...To build Congressional support, the Senate is proposing to name the buildings after Senate
appropriators Tom Harkin and Arlen Specter. But the House has revolted against naming the buildings after sitting members of Congress, so now there is a move afoot to name them after Mother
Teresa and Rosa Parks. What's next, the Mary Magdalene cranberry research center?
Thursday, December 15, 2005 ~ 9:32 a.m., Dan Mitchell Wrote: The spending process has been so twisted by the Republican majority that it has become inherently dirty. The instruments of this perversion
are "earmarks," special provisions attached to spending bills that direct federal money to specific projects. Earmarks are how Congress diverts
spending to pork-barrel local priorities and to other special interests. This practice has long existed, but Republicans have made it part of the
fabric of their governing. ...The number of firms registered to lobby members on the appropriations committees increased from 1,865 to 3,523 between 2000 and 2004, according to Knight Ridder. ...This is a
corrupting process because it depends on congressmen prioritizing special interests, slipping earmarks into bills with no debate, and getting rewarded for it with campaign contributions. ...It is hard to
imagine a practice or culture more inimical to the spirit of the Republicans who took over Congress in 1994. A decade later, the GOP has embraced the tactics of the corrupt, free-spending Democrats they
overthrew.
Wednesday, December 14, 2005 ~ 11:14 a.m., Dan Mitchell Wrote: The introduction of a flat tax this year has boosted budget revenues, raised people's incomes and reduced unemployment, Prime Minister
Calin Popescu Tariceanu said Sunday. Since Jan. 1, when the government replaced the country's progressive taxation of 18 to 40 percent for individuals with a flat tax of 16 percent, budget revenues
grew by 20 percent compared with the same period last year, Tariceanu said. "These figures show the results are much better than our most
optimistic evaluations," he said... Unemployment fell from 6.2 percent to 5.5 percent, while inflation also fell from 9.3 percent in 2004 to an
estimated 8.5 percent this year. Average income after tax increased from about 600 lei (US$200; euro170) last year to 740 lei (US$250; euro210) per month in September.
Wednesday, December 14, 2005 ~ 10:11 a.m., Dan Mitchell Wrote: Voters in the small central Swiss canton of Obwalden have approved new laws which will substantially cut income tax for individuals and
corporations... From January 1, corporate tax in Obwalden will be cut to 6.6%, making it the lowest rate in Switzerland. For individuals, those earning up to CHF70,000 will pay 8% (down from 10%); those with
income up to CHF300,000 will pay up to 6%; and those earning more than CHF300,000 will see tax cut to 1% from 2.35%. Property tax will also fall by at least 30%. ...the move is likely to excite opposition ...the
Social Democratic Party has pledged to help coordinate a Europe-wide campaign against what it calls "increasing competition" among
countries seeking to attract the rich and famous, and has warned that a "race to the bottom" on tax will endanger public finances. ...the Swiss
tax system has also raised eyebrows in Brussels. In a letter sent to the Swiss Mission in Brussels in October, the European Union suggested that certain parts of the Swiss corporate tax regime "may be
incompatible" with Switzerland's obligations under the 1972 Free Trade Agreement between Switzerland and the European Union. Guido Jud,
head of corporate tax in canton Zug, told swissinfo recently that he was "surprised" by the EU's viewpoint. "The rules on taxation in
Switzerland have not changed recently so we do not see why, in 2005, there should be suddenly be a problem," he stated.
Wednesday, December 14, 2005 ~ 9:25 a.m., Dan Mitchell Wrote: Everyone knows you are stubborn and loath to acknowledge any mistake--in part because your many enemies would never let you forget
it. We know you'll never admit any error on Iraq, and there's no chance you'll change course on the tax cuts. So let's choose something that even your strongest supporters in Congress deeply regret: the Medicare
drug benefit. Do you know how many Republican Senators and Representatives have said privately that it is the worst, most regrettable vote of their careers? The drug benefit will add trillions to the national
debt over time; because of its complexity, it is overwhelmingly disliked by the very seniors it is designed to help; and like most government programs, it is guaranteed to become massively more unwieldy and
costly in the future, as new provisions and baubles are added on. Eliminate it, or at the very least, cut it way back by limiting it to the poor. Your gigantic, additional Medicare entitlement underlines the
Bush Administration's reckless overspending. The ocean of red ink you have created will be an enormous black, or, red mark on your legacy in the history books. Why not do something about it while you still can?
All at once, you can please your party, make better policy, and change your image by confessing a big goof. People will be amazed at your display of humility. Sometimes, the best politics is counterintuitive.
Wednesday, December 14, 2005 ~ 7:46 a.m., Dan Mitchell Wrote: The real problem is the pro-spending mindset ingrained in long-time legislators. It's called "Potomac Fever," and it causes members of
Congress to see themselves as philanthropists with unlimited means to solve every problem in society. Potomac Fever is fueled by the thousands of interest groups in Washington that trumpet the benefits of
favored programs. For legislators, spending rewards their egos because they get lauded in the media for their noble public service, they get praised by program beneficiaries, they get toasted at gala dinners in
their honor, and they get buildings and highways named after them. Unfortunately, members of Congress forget that they are spending other people's money. They don't consider the private activities that
would occur if resources weren't redirected to Washington to fund their "philanthropy." They become program advocates, rather than referees
who judge program merits against concerns about tax levels and adherence to the Constitution.
Wednesday, December 14, 2005 ~ 7:13 a.m., Dan Mitchell Wrote: Two to three million people | ||||||||||