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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, September 30, 2006 ~ 6:52 p.m., Sven Larson Wrote: Today the U.S. Supreme Court announced it will review Washington v. Washington Education Association and Davenport v. Washington Education Association in its upcoming session,
giving hope to millions of teachers across the country that they may no longer be forced to pay union dues that fund political causes with which they disagree. "This is excellent news and a first step
toward securing the First Amendment free speech rights of teachers and 17 million union-represented employees across the country," said Michael Reitz of the Evergreen Freedom Foundation (EFF), an initial
complainant in the case. "We look forward to the oral arguments and are optimistic that the Court will restore justice for teachers." The cases began in Washington State where teachers have been
embroiled in a conflict with the NEA-affiliated teachers' union over whether the union has a right to use nonmembers' dues however it chooses. (Nonmembers have resigned from the union but are forced to pay
collective bargaining fees.) Passed by nearly 73 percent of voters in an initiative, Washington's paycheck protection law has been on the books for over a decade. It requires that union receive the
"affirmative authorization" of workers prior to spending their mandatory dues or agency fees on politics. The union flagrantly violated the law, even admitting to multiple violations during a state
investigation.
Friday, September 29, 2006 ~ 7:41 a.m., Dan Mitchell Wrote: The US and Canada share the spotlight with such countries as the Republic of Congo, China, Brazil and Germany in having some of the
highest effective tax rates on capital among 81 developed and developing countries, according to a study by the CD Howe Institute, the Canadian conservative think tank. The 2006 Tax Competitiveness
Report scores 81 developed and developing countries according to their tax treatment of business investment. The study was co-authored by Jack M. Mintz, Professor of Business Economics, Rotman School of
Management at the University of Toronto and Fellow-in-Residence at the Institute and Duanjie Chen, George Weston Tax Analyst at the Institute. … Unsurprisingly, the most tax-favoured jurisdictions include
Hong Kong at 6.1%, Singapore at 11.5% and Ireland at 14%, reflecting their low corporate income tax rates. … "The US certainly looks like a
high-tax country when it comes to business taxation," Chen and Mintz noted, agreeing with the conclusions of the Presidential tax reform panel
that the US corporate tax system is "a major barrier to investment and growth, degrading other strengths of the US economy." "Instead of
using the tax system to interfere with economically sound business decisions, it would be much better to have a broadbased neutral corporate income tax with low rates to create a better business
environment. Simplification would make it easier for taxpayers to comply with the system and for the IRS to administer the tax system," they observed. "The saving in compliance and administrative costs
would be good for the US economy as well," they added.
Friday, September 29, 2006 ~ 7:15 a.m., Dan Mitchell Wrote: …the Beijing-appointed chief executive is coming up with bad ideas all by himself. Last week Donald Tsang declared the end of "positive
noninterventionism," or laissez faire governance. Predictably -- and encouragingly -- the claim ignited a furor in Hong Kong, whose prosperity was built on free trade and small government. But the Donald
held firm. On Tuesday, he argued in an op-ed published in a number of Chinese- and English-language newspapers that "government has to
adapt its work" to suit "changing needs." We thought that was the role of the private sector. Thanks to "positive noninterventionism," Hong
Kong boasts one of the world's wealthiest, most flexible economies. In the 1960s, the city industrialized; in the 1970s, it exported; in the 1980s,
it moved its manufacturing base to mainland China; in the 1990s, its service sector blossomed. Today, average unemployment hovers between 3% and 4%; growth is forecast at around 6.2% this year, 5.5% next
year. Mr. Tsang has a better idea. The government needs "to act when there are obvious imperfections in the operation of the market mechanism," he wrote. Perhaps he's forgotten a few recent government
ventures. Take Hong Kong Disneyland, to which the territory shelled out HK$23 billion ($2.95 billion) in subsidies. After a year, the park has proved a flop. Or Cyberport, a government-backed entree into the
hi-tech era. Now it's just another property development. … "Positive noninterventionism" was the term coined in the 1980s by former Financial Secretary Sir Philip Haddon-Cave to encapsulate the Hong
Kong's government's longstanding policy of minimal meddling in the economy. This week Mr. Tsang insisted that only the name has changed and that he still believes in the principle of "big market, small
government." If so, it doesn't help to talk about the death of a policy that has provided the foundation for Hong Kong's economic success.
Thursday, September 28, 2006 ~ 8:49 a.m., Dan Mitchell Wrote: More London-based insurers are likely to follow Hiscox P.L.C. and Omega Underwriting to Bermuda in a bid to compete with rivals already
based in the tax haven. The firms' announcements they are moving their headquarters has reignited the debate over whether London can resist the growing challenge from the tiny Atlantic island, which has quickly
transformed itself into a leading insurance center. Despite the London insurance market's attempts to overhaul its business practices to make
itself a cheaper and more attractive venue, the simple issue of lower tax is an incentive for businesses with international reach, which can be
conducted anywhere, to move offshore. "I think it's inevitable others will follow us," said Bronek Masojada, chief executive of Hiscox. While Mr.
Masojada said the company's decision was prompted primarily by the fact that over half the group's business now comes from the United States and Bermuda, he agreed that "the tax and regulation issues are a
combined second." The logic of moving overseas is simple and compelling. Moving to Bermuda means you can cut your tax rate to close to 10% from around 30% in the United Kingdom. "More than
halving your tax rate obviously has a fairly substantial effect on your net earnings and your value to shareholders," said Gerald Farr, insurance
analyst at Seymour Pierce. A move to the tax haven could boost your company's value to shareholders by up to 20%, said Mr. Farr.
Thursday, September 28, 2006 ~ 8:22 a.m., Sven Larson Wrote: Imagine you sign a two-year lease with your landlord. After the first year, you decide you're tired of paying rent and would like to buy the
property instead. You make him an offer, which he rejects as too low. In response, you go to the board of aldermen and ask them to declare the apartment blighted, condemn it, and turn it over to you for
redevelopment. It might sound absurd, but something very similar is happening right now in Saint Louis. The story demonstrates just how ripe for abuse Missouri's eminent domain laws have become. And there's
little reason to think the eminent domain bill the state legislature passed in May will prevent such abuses in the future, because the "blight"
loophole being used by the city was not closed by the legislation.
Thursday, September 28, 2006 ~ 8:09 a.m., Sven Larson Wrote: Not the least unfortunate aspect of the United Nations is its habit of providing Third World despots with a prominent pulpit to speechify
against the agency's principal sponsor: the United States. Last week was no exception, as three worthy claimants to the title of most anti-American head of state -- Iran's millenarian President Mahmoud
Ahmadinejad; Venezuela's Castro protégé President Hugo Chavez; and Bolivia's Bolshevist President Evo Morales -- descended on Turtle Bay to
diabolize President Bush, denounce American foreign policy, and revel in the adulation of the UN's correspondingly anti-American membership. The results were entirely predictable. Ahmadinejad thundered against
the "aggression, occupation and violation of international law" by the United States and pronounced the establishment of Israel a "tragedy;"
Chavez snarled that President Bush was "the devil," derided free-market capitalism as one of the "great evils and the great tragedies" and
identified the United States as the main agent of "international terrorism;" Morales, the most conciliatory of the three, raged against
American efforts to inhibit the Bolivian cocaine industry as "an instrument of recolonization or colonization."
Wednesday, September 27, 2006 ~ 8:39 a.m., Dan Mitchell Wrote: In almost all studies it has been found out, that the tax and social security contribution burdens are one of the main causes for the
existence of the shadow economy. Since taxes affect labor-leisure choices, and also stimulate labor supply in the shadow economy, the distortion of the overall tax burden is a major concern of economists.
The bigger the difference between the total cost of labor in the official economy and the after-tax earnings (from work), the greater is the incentive to avoid this difference and to work in the shadow economy.
Since this difference depends broadly on the social security burden/payments and the overall tax burden, they are key features of the existence and the increase of the shadow economy. …Empirical results
of the influence of the tax burden on the shadow economy is provided in the studies of Schneider (1994b, 2000, 2004, 2005) and Johnson, Kaufmann and Zoido-Lobatón (1998a, 1998b); they all found
statistically significant evidence for the influence of taxation on the shadow economy.
Wednesday, September 27, 2006 ~ 8:24 a.m., Sven Larson Wrote: ...an individual's skills and personal choices are far more important in determining household wealth than inheritances. In fact, the contribution
of inheritance is surprisingly small. More importantly, skills acquired through education, entrepreneurship and hard work determine whether individuals move from one wealth level to another. ...The principal
argument for the estate tax is the notion that without it wealth would become more concentrated in the hands of financial dynasties. However, wealth is highly mobile ¡ª being raised in a rich family does not
guarantee that these children will be rich themselves when they retire. Only one in five children of the rich will themselves be rich when they
reach retirement age. On the other hand, more than half of the children whose parents are in the bottom half will end up in the top half by the time they retire.
Wednesday, September 27, 2006 ~ 8:00 a.m., Dan Mitchell Wrote: A primary reason why health care costs are soaring is that most of the time when people enter the medical marketplace, they are spending
someone else's money. When patients pay their own medical bills, they are conservative consumers. Economic studies and common sense confirm that people are less likely to be prudent, careful shoppers if
someone else is picking up the tab. Thus, the increase in spending has occurred because third parties — employers, insurance companies or government — pay almost all the bills. …For every $1 worth of hospital
care consumed, the patient pays only about three cents out of pocket, on the average; 97 cents is paid by a third party. For every $1 worth of
physician services consumed, the patient pays less than 10 cents out of pocket, on the average. For the health care system as a whole, every time patients consume $1 in services, they pay only 14 cents out of
pocket. Thus the incentive for patients is to consume hospital services until they are worth only three cents on the dollar, on the average. The
incentive is to consume physicians' services until they are worth only 10 cents on the dollar. And for the health care system as a whole, patients
have an incentive to utilize everything modern medicine offers until the value to them is only 14 cents out of the last dollar spent. Health care
costs over the past 40 years have risen as the proportion of health care paid for by third parties has increased. Prior to the advent of Medicare
and Medicaid in 1965, health care spending never exceeded 6 percent of gross domestic product. Today it is 16 percent. These two government programs unleashed a torrent of new spending and led to rising health
care prices. For instance, a recent study by Amy Finkelstein of the Massachusetts Institute of Technology found that half the growth in health care expenditures was due to Medicare. …Cosmetic surgery is
one of the few types of medical care for which consumers pay almost exclusively out of pocket. Even so, the demand for cosmetic surgery exploded in recent years. …Despite this huge increase, cosmetic
surgeons' fees remained relatively stable. The average increase in prices for medical services from 1992 through 2005 was 77 percent. [See the figure.] The increase in the price of all goods, as measured by the
consumer price index (CPI), was 39 percent. Cosmetic surgery prices only went up about 22 percent. Thus, while the price of medical services generally rose almost twice as fast as the CPI, the price of cosmetic
surgery went up slightly more than half as much. …Another example of price competition is the market for corrective eye surgery. In 1999, only a few years after LASIK was approved, the price was about $2,100 per
eye, according to the ophthalmic market research firm MarketScope. Within a short time, competition drove the price down to a slightly more than $1,600. The cost per eye of the standard LASIK is now about 20
percent lower than six years earlier. …When patients pay with their own money, they have an incentive to be savvy consumers. A second reason is supply. As more people demanded the procedures, more surgeons
began to provide them. Since almost any licensed medical doctor may obtain training and perform cosmetic procedures, entry into the field is relatively easy. A third reason is efficiency. Many providers have
operating rooms located in their clinics, a less-expensive alternative to outpatient hospital surgery. Surgeons generally adjust their fees to stay
competitive and usually quote patients a package price. Absent are the gatekeepers, prior authorization and large medical office billing staffs needed when third-party insurance pays the fees.
Wednesday, September 27, 2006 ~ 7:54 a.m., Sven Larson Wrote: If tax dollars are not a panacea for Tennessee's education woes, where can the state turn to ensure quality instruction for the workforce of
tomorrow? The answer may lie in taking a signal from the business community and allowing teachers to become entrepreneurs. The idea is not as radical as it may seem. In Athens, teachers, including Socrates,
Plato, and Aristotle peddled their services to potential students. This system helped produce one of the most literate, sophisticated societies in
history. In the early United States, families and towns contracted with entrepreneurial teachers to educate their children. Long before the
creation of public education, these arrangements helped produce literacy rates above 80 percent. In Minnesota, a group of teachers are taking
their cue from history-and from the business community. Fed up with the status quo, these teachers sought a better way to deliver education.
Rather than being employees of their local school district, they formed a cooperative and sold their services to a charter school. The charter school saw its enrollment double after contracting with these
enterprising teachers. Bill Gates was so impressed that his foundation donated more than $9 million to start other cooperatives in the region.
The cooperative has been so successful that it now provides its services to 2,500 students in more than 30 schools in urban, suburban and rural
neighborhoods in Wisconsin and Minnesota. The first charter school with which the cooperative contracted boasts ACT scores higher than the national average and a 90% satisfaction rate among its students and
their parents.
Tuesday, September 26, 2006 ~ 12:06 p.m., Sven Larson Wrote: [The] world body moved ahead on September 19 with a plan for global taxes to generate more foreign aid. This new scheme could make the
oil-for-food scandal look penny-ante. There was a minor media breakthrough on this matter, with the New York Times noting, "A group of countries led by France plan to raise at least $300 million next year,
mostly through taxes on airline tickets, to help pay for the treatment of children with AIDS, tuberculosis, and malaria, a senior French official said yesterday. The countries, acting through a new Geneva-based
organization called UNITAID, plan to pool their buying power and have asked former President Bill Clinton's foundation to negotiate with drug
companies for volume discounts." Some reports say the plan envisions spending of $450 million. The Times was careful not to describe these as
international or global taxes. But the taxes are designed to go for global purposes and finance international agencies. In an official press release,
the U.N. announced, "UNITAID will be funded by innovative financing mechanisms such as a contribution on air tickets...and the Secretary-General congratulated the Governments of France, Brazil,
Chile, Norway, and the United Kingdom for leading the way in developing the initiative." The phrase, "innovative financing mechanisms," is a euphemism for global taxes. By insisting the money
will go to fight deadly diseases, the U.N. hopes that opposition to global taxes can be overcome.
Tuesday, September 26, 2006 ~ 8:44 a.m., Dan Mitchell Wrote: Presenting the last budget prior to the election on November 22, Holland's long-serving Finance Minister Gerrit Zalm stated that the
government will continue to cut the rate of corporate income tax, which will fall to 25.5% in 2007 from 29.1%, putting it below the European
Union average. This represents a 5% cut in corporate tax since 2005. In addition, small and mid-sized companies whose profits are liable to income tax will receive an exemption of 10%. There will also be a small
income tax cut for individuals, with the lowest tax bracket reduced by 0.50% and the second bracket by 0.05%. Unemployment insurance contributions, which are paid by all working persons, will also be cut by
1.35%.
Tuesday, September 26, 2006 ~ 8:17 a.m., Dan Mitchell Wrote: Sweden became internationally known as the country that went from rags to riches with the second highest growth rate in the world between
1890 and 1950. Then, economic policy took a more socialist turn and it became a prime example of a society with a big state taking care of people from the cradle to the grave - using their own money. And in the
1990s, there was quite a lot of attention around the Swedish market-oriented reforms. The summary of Swedish success and failure is a story of markets against the state. Every time Sweden has taken a step
towards freer markets, it has been very successful. And every time it has increased the size and power of the state, success has sooner or later faded away. During the phase when Sweden went from agriculture and
poverty to industry and wealth, the economy was very open and flexible. …Entrepreneurs started up small businesses easily in a dynamic environment with low taxes and strong property protection. In fact, the
tax pressure rose only from 10 to 20 per cent of GDP between 1890 and 1950. During the socialist phase, however, the size of the state exploded. The tax pressure increased to 50 per cent of GDP during the three
decades up to 1980. Many companies were socialised by the state. The state interference in markets grew and the ultimate aim was a more centrally planned economy. The socialist period created problems.
Growth decreased and Sweden started its decline in the OECD list of countries in GDP per capita. Inflation soared and so did budget deficits, at times at around ten per cent of GDP. Unemployment reached high
levels. Problems with matching supply and demand in markets with state intervention and in the welfare monopolies were mounting. Only one of the 50 biggest companies today has been started before 1970, which
indicates which period was successful and which one that was not. This was followed by a rather intense period of market-oriented reforms from
the late 1980s to the mid 1990s. …Marginal tax rates were cut, making education and work more profitable. Many markets, such as telecom, taxi, finance and gas - were de-regulated. …A pensions reform
substantially reduced the level of state pensions and allowed citizens to invest part of the state pension in the private market. Where does that
put Sweden today? A neo-liberal country that became socialist and then embarked on market-oriented reforms in several areas. Today, Sweden contains both socialism and free markets. But the same truth as before
applies: where there has been free-market reform, there is success, and where there is socialism, there are problems.
Monday, September 25, 2006 ~ 11:13 a.m., Sven Larson Wrote: The European Court of Justice has just ordered the British to adopt some of the more rigid work rules of Continental Europe. One reason
the British have prospered more and have almost half of the unemployment rate of Germany and France is the British have much more flexible work rules. Now the European Union demands the staff in
British firms have at least 11 hours off between work days, a minimum of one day off per week, and an extended break at least every six hours.
Such rules may seem reasonable on average, but they ignore the reality of necessary "crunch time" at many accounting firms at tax time, law
firms during intense negotiations, high-tech firms at critical product development times, retailers during the week before Christmas, hotels and restaurants during high season, farms during harvests, and in news
rooms during critical events, etc. They also deny employees the fundamental freedom to bunch their working time if they so choose, and to work as hard and to earn as much as they wish. ...France, Germany
and some of the other European countries have extremely rigid work rules, such as the French requirement that workers not work more than 35 hours weekly, even if they want to, and the almost impossibility of
firing workers, no matter how lazy and incompetent. The predictable result is there has been little growth in private-sector employment in these countries -- the U.S., with a smaller population, has created more
private sector jobs in the last four years than Europe has in the last 20.
Monday, September 25, 2006 ~ 8:59 a.m., Dan Mitchell Wrote: …unless we can exploit the dramatic demographic and economic changes that are before us, our future will be much poorer. Instead of
stepping into an easy retirement, many retirees will tumble into a future marked by bankrupt government social programs and declining asset
values that will quickly deplete their cherished nest eggs. This forecast is not based on an unpredictable future, but on events that have already
transpired. Aside from immigration, we know almost exactly how many people over the next 20 years are going to reach the working age of 20 and the retirement age of 65. …In the U.S. in 1950 there were seven
people of working age (20-65) for every retiree, and even today, there are almost five. But by 2030, when the last of the baby boom generation
retires, that ratio will fall by nearly one-half, down below 3 to 1. The aging of the population in Europe and Japan is even more extreme than
in the U.S. In Japan by mid-century, the ratio of workers aged 20-65 to retirees will fall to just over one-for-one. At that time the most populated
five-year age segment in Japan will be those aged 75-80. The same will be true in Italy, Spain, Greece and other European countries.
Monday, September 25, 2006 ~ 8:45 a.m., Dan Mitchell Wrote: …last year, the federal government spent more than $477 billion on some 50 different programs to fight poverty. That amounts to $12,892
for every poor man, woman, and child in this country. And it does not even begin to count welfare spending by state and local governments. For all the talk about Republican budget cuts, spending on these social
programs has increased an inflation-adjusted 22 percent since President Bush took office. Despite this government largesse, 37 million Americans
continue to live in poverty. In fact, despite nearly $9 trillion in total welfare spending since Lyndon Johnson declared War on Poverty in
1964, the poverty rate is perilously close to where it was when we began, more than 40 years ago. Clearly we are doing something wrong. Throwing money at the problem has neither reduced poverty nor made
the poor self-sufficient. But government welfare programs have torn at the social fabric of the country and been a significant factor in increasing out-of-wedlock births with all of their attendant problems.
They have weakened the work ethic and contributed to rising crime rates. Most tragically of all, the pathologies they engender have been passed on from parent to child, from generation to generation. Welfare
reform was supposed to fix all that. And, indeed, it has had some positive effects. Welfare rolls are down. Since 1996, roughly 2.5 million families have left the program, a 57 percent decline. Critics predicted
that welfare reform would throw millions into greater poverty. Instead, it led to modest reductions in poverty, particularly for children, black
children, and single-mother households. Most of those who left welfare found work, and of them, the vast majority work full-time. As you would expect, studies show that as former welfare recipients gain work
experience, their earnings and benefits increase. …An enormous amount of evidence and experience shows that private charities are far more effective than government welfare programs. While welfare provides
incentives for counterproductive behavior, private charities can use their aid to encourage self-sufficiency, self-improvement, and independence.
Private charities can individualize their approaches and target the specific problems that are holding people in poverty. One definition of insanity is doing the same thing over and over and expecting different
results. Perhaps that's something to keep in mind the next time we hear a call for more welfare spending.
Monday, September 25, 2006 ~ 8:16 a.m., Sven Larson Wrote: The Arizona Constitution declares that "governments . . . are established to protect and maintain individual rights." As the lawmaking branch of
government, the legislature has the potential to be the greatest guardian or the greatest offender of those constitutionally enshrined rights.
...During the 2006 legislative session, legislators considered nearly 1,600 bills, memorials, and resolutions on issues from equine dentistry to
income tax relief. ...As the most comprehensive analysis of the Arizona Legislature, the annual Goldwater Institute Legislative Report Card measures each legislator's votes against the yardstick of the state
constitution. ...This year the legislature increased ongoing General Fund spending (FY 2007) by more than 12 percent over FY 2006 (a permanent spending increase of $1.09 billion); failed to pass a comprehensive
school-choice reform bill or an institutional mechanism to limit General Fund growth; and added dozens of well-intentioned but detrimental commissions and regulations. Indeed, legislators' lowest scores once
again came in the Regulation category, indicating a collective failure to protect the public from the burden of excessive regulation. ...Between
2003 and 2005, average scores rose nine points in both the House and Senate. This year's scores have returned to 2003 and 2004 levels. The Regulation category continues to be the major point of weakness, with
legislators imposing more rules and limitations on the free market. Average scores are highest in Constitutional Government.
Sunday, September 24, 2006 ~ 6:17 p.m., Dan Mitchell Wrote: Rebalancing the voting to reflect economic progress is probably overdue. But in this case it's also like rearranging flowers before a funeral. Since
the collapse of Bretton Woods in 1971, the IMF has been searching for a mission. Before the days of global capital markets, it financed bankrupt
governments. Later, in the 1990s, it bailed out private-sector investors who had made bankrupt bets on governments. Lately, with the world economy humming, the IMF has been scrambling for a new purpose.
…Good advice certainly would be welcomed in developing countries, which would benefit from cleaner government and more openness to trade and foreign investment. But is the IMF the institution to provide
this kind of counsel? Indonesia is still suffering from the fallout from the Fund's advice during the 1997-98 Asian currency crisis; South Korea
and Thailand have only recently recovered. Argentina isn't exactly a poster child for IMF smarts (see above). This week, too, the Fund focused on all of the wrong problems. Its meetings were peppered with
talk of looming global imbalances, unstable exchange-rate regimes and the buildup of central bank reserves. These conditions have persisted for years without damage to the global economy. Perhaps the Fund would
do its 184 members a better service by focusing on strengthening economies so foreign-exchange fluctuations, for instance, wouldn't have such a large effect. It's ironic that the Fund met in Singapore, which
boasts one of the most business-friendly environments in Asia, and somehow missed this point. We didn't hear one serious discussion of how low taxes, simple and clear regulatory regimes, and protection of
property rights boost economic growth.
Saturday, September 23, 2006 ~ 10:30 a.m., Sven Larson Wrote: The eurozone risks breaking up in the near future putting the entire EU single market into jeopardy unless member states - particularly Italy -
undertake crucial economic reforms, according to a new report. Entitled Will the eurozone crack?, the report by the London-based Centre for European Reform, argues that instead of European Monetary Union in
1999 leading to progress in the reform needed for membership of a single currency zone, it resulted in national governments becoming complacent and no longer feeling obliged to push through unpopular
economic changes. The result is that today the 12-nation zone faces a situation where Italy, the laggard among the EU economies that matter, could eventually be forced to leave the common currency because the
economic costs of staying in outweigh those of leaving. "A failure by Italy to regain competitiveness would ultimately bring into question its
membership of the eurozone and the sustainability of EMU itself," says the 59-page report which puts the odds of an Italian eurozone exit as high as 40 percent.
Saturday, September 23, 2006 ~ 9:48 a.m., Dan Mitchell Wrote: One of the best illustrations for the simplification of government is the federal income tax system. It is time to throw out our 55,000-page tax
code — which is impossible to follow accurately any more — and replace it with a flat tax. …There would be no estate tax, no accounting games,
and we'd get rid of most of the tax accountants and lawyers. If possible, employment taxes would be merged into the flat income tax so as to make them more progressive. Today, they are the most regressive taxes
we have. …If a true flat tax were enacted, individuals and businesses would save billions of dollars in time and money. They no longer would have to keep track of documents and spend billions of hours on
bookkeeping and accounting. They would be free! One of the biggest benefits of a true flat tax, however, would be for our form of government. A true flat tax would eliminate the extensive involvement
of businesses in government — leaving the governance of America to its individual citizens. This is because, with the eliminate of 90 percent of
the tax code, businesses would have little incentive to get involved in government via lobbying and politics because their major activity — i.e., getting favorable tax breaks — would be no longer exist.
Friday, September 22, 2006 ~ 8:51 a.m., Dan Mitchell Wrote: Revenues to the state budget increased in real terms by 15.27 percent - to approximately 11 billion euros - in the first eight months of the
current year, said the president of the National Agency for Fiscal Administration (ANAF), Sebastian Bodu. The ANAF official said that accumulated funds of the state budget, the health insurance budget,
state social insurance, unemployment insurance and local budgets will represent this year 32.3 percent of the gross domestic product, compared to the 30.4 percent registered in 2004. Bodu believes the advance in
revenues should put an end to the discussions regarding an eventual "hole" in the state budget caused by the introduction of the flat tax, at
the beginning of 2005. Between January and August, collections from the profit tax increased by 8.86 percent, while those from revenue tax increased by 30.67 percent.
Friday, September 22, 2006 ~ 8:30 a.m., Dan Mitchell Wrote: Vaclav Klaus…is an unapologetic free-marketer, fan of the United States and critic of the EU's insatiable drive for centralization of
decision-making in Brussels. He wants the EU to return to its humbler roots as a free trade association. As such, Klaus has been criticized for
his apparent lack of commitment to the European "super-state" and successfully caricatured as the antithesis of a good EU citizen. But Klaus's views are today more relevant than ever and the EU leaders
would do well to listen to him. …The European project is faltering, as member states cannot agree on the most basic issues pertaining to the
future economic and political direction of the EU. That is why faith in the European project is now more important than ever. That is also why
critics of the European project are increasingly treated like apostates. The British writer G.K. Chesterton once quipped, "When people cease to
believe in God, they don't believe in nothing, they believe in anything." European politicians, it seems, have found their new religion. Sadly, it may be a false one.
Friday, September 22, 2006 ~ 7:44 a.m., Dan Mitchell Wrote: People often picture families at all quintiles looking pretty much alike except for income and ethnicity. But that picture is false. One of the
main ways they are not alike is in the number of people working in the household. In the lowest quintile, 58.7 percent of households had no one earning money, 35.9 percent had one earner, and only 5.5 percent of
households had two or more earners. (These percentages total 100.1 percent due to rounding.) In the highest quintile, by contrast, only 2.6 percent had no one earning money, 21.1 percent had one earner, and a
whopping 76.3 percent had two or more earners. In the middle three quintiles -- which, unfortunately, the Census didn't break down further -- only 14.9 percent had no earners and 42.8 percent had two or more
earners. In the lowest quintile, 64.2 percent of the heads of household (the Census now calls them "householders") did not work at all and only
14.0 percent worked full-time year-round. By contrast, in the highest quintile only 11.3 percent of heads of households did not work, while
73.0 percent worked full-time year-round. In the middle three quintiles, 26.3 percent of heads of households did not work and 54.7 percent of
heads of households worked full-time year-round. The message is clear: if you want to have an extremely high probability of avoiding the lowest
quintile, get a job, ideally a full-time job, and live with someone who has a job. … Only 17.9 percent of households in the bottom quintile had a
married-couple family; by contrast, 79.0 percent of households in the top quintile had a married-couple family.
Thursday, September 21, 2006 ~ 11:15 a.m., Sven Larson Wrote: In short, populists argue, the market is broken. The rules are rigged. The reigning ideology in Washington must be upended. Unions must be
revived. Globalization needs to be reorganized. The problem with this narrative is that it doesn't really fit the facts. First, workers over all are
not getting a smaller slice of the pie. Wages and benefits have made up roughly the same share of G.D.P. for 50 years. Second, offshore outsourcing is not decimating employment. According to the Bureau of
Labor Statistics, outsourcing is responsible for 1.9 percent of layoffs, and the efficiencies it produces create more jobs at better wages than
the ones destroyed. Third, jobs are not more insecure. Workers are just as likely to hold a job for 20 years as they were in 1969. Fourth, workers
are not stuck in dead-end jobs. Social mobility is roughly where it was a generation ago. Fifth, declining unionization has not been the driving
force behind inequality. David Card of the University of California , Berkeley , has estimated that de-unionization explains between 10 and 20 percent of the rise in inequality, and that effect was probably
strongest decades ago. These days the working class is not falling behind the middle or upper-middle class. Instead, the big rise in inequality is
within the office parks, among people who were never unionized. Middle managers are falling behind top executives.
Thursday, September 21, 2006 ~ 8:24 a.m., Dan Mitchell Wrote: When the International Monetary Fund and the World Bank convene their annual meetings in Singapore in the next few days, they will be
eager to discuss a common problem: how to justify their existence in a world that no longer wants or needs them. …In a world of floating exchange rates and open capital markets, the IMF's raison d'être no
longer exists. Its "clients" are rapidly repaying their outstanding loans. Macroeconomic accountability has improved world-wide, not because
the fund mandates it but because without the guarantee of IMF rescues, investors now impose their own discipline. If hazards remain it is because, with the IMF still hanging around looking for work, future
bailouts cannot be ruled out. The IMF's sister, the World Bank, is also facing an existential crisis on its lending side. The bankers at the International Finance Corporation, which is dedicated to the private
sector, now busy themselves financing big business, a job that ought to be left to the market. The bank's main business of lending to governments in middle-income countries -- that neither seek nor require
bank loans -- is drying up. More broadly, foreign aid as a tool for development has increasingly come under scrutiny as wasteful and even counterproductive. If only the bank would pay more attention to its own
research, specifically the annual report titled "Doing Business," which looks at the regulatory policies and tax climate of 175 countries. The
2007 edition was released last week and, not surprisingly, finds that poor countries could be much better off if only they would stop discouraging legal, tax-paying business activity.
Thursday, September 21, 2006 ~ 8:00 a.m., Dan Mitchell Wrote: The median household income of Wal-Mart shoppers is under $40,000. Wal-Mart, the most prodigious job-creator in the history of the private
sector in this galaxy, has almost as many employees (1.3 million) as the U.S. military has uniformed personnel. A McKinsey company study concluded that Wal-Mart accounted for 13 percent of the nation's
productivity gains in the second half of the 1990s, which probably made Wal-Mart about as important as the Federal Reserve in holding down inflation. By lowering consumer prices, Wal-Mart costs about 50 retail
jobs among competitors for every 100 jobs Wal-Mart creates. Wal-Mart and its effects save shoppers more than $200 billion a year, dwarfing such government programs as food stamps ($28.6 billion) and the
earned-income tax credit ($34.6 billion). People who buy their groceries from Wal-Mart -- it has one-fifth of the nation's grocery business -- save
at least 17 percent. But because unions are strong in many grocery stores trying to compete with Wal-Mart, unions are yanking on the Democratic Party's leash, demanding laws to force Wal-Mart to pay
wages and benefits higher than those that already are high enough to attract 77 times more applicants than there were jobs at this store. … Liberals think their campaign against Wal-Mart is a way of introducing
the subject of class into America's political argument, and they are more correct than they understand. Their campaign is liberalism as condescension. It is a philosophic repugnance toward markets because
consumer sovereignty results in the masses making messes. Liberals, aghast, see the choices Americans make with their dollars and their ballots, and announce -- yes, announce -- that Americans are sorely in
need of more supervision by ... liberals. Before they went on their bender of indignation about Wal-Mart (customers per week: 127 million), liberals had drummed McDonald's (customers per week: 175 million) out
of civilized society because it is making us fat, or something. So, what next? Which preferences of ordinary Americans will liberals, in their role
as national scolds, next disapprove? Baseball, hot dogs, apple pie and Chevrolet?
Wednesday, September 20, 2006 ~ 8:59 a.m., Dan Mitchell Wrote: Governments and financial sector authorities in the Caribbean should keep a close eye on the latest initiative by European Union (EU) tax
officials to cast their tax net beyond their own shores. On 4th September, the European Commission is reported to have said that it wants to extend the European Union Savings Directive (EUSD) to Hong Kong,
Singapore, Japan, Macao, Bahrain, Dubai, Canada and the Bahamas. The EUSD requires countries either to provide information on interest paid into the bank accounts of EU citizens to the tax collectors in their
country of origin, or to apply a withholding tax on the interest payments that is then remitted to the revenue departments of the relevant EU
countries. The inclusion of the Bahamas on the EU list is ominous. For when the Organisation for Economic Cooperation and Development (OECD) launched its so-called "harmful tax competition initiative" in
2000, it identified the smallest and weakest nations in the world to name and shame; many of them were in the Caribbean. There followed an unrelenting three-year campaign against these countries, describing
them as "non-cooperative countries and territories" (NCCTs) and demanding that their Head of Government sign a letter committing to the removal of "harmful tax practices" which included information
exchange. Almost every Head of Government of a small country signed a letter which was promptly displayed trophy-like on the OECD website.
Fortunately, the Republican administration, which came to power in the United States under President George W Bush, disagreed with the high-tax stance implicit in the OECD initiative, and this helped to
weaken the OECD resolve. In the end, the OECD juggernaut was brought to halt by the resistance of some of its other members – Switzerland, Luxembourg and Liechtenstein in particular - who refused
to go along with the demands of their more strident sister states in the OECD for fear of the harmful effect on their vital financial services
sector. …After the first nine months of the operation, EU tax officials were clearly dissatisfied with their haul from the traditional tax havens
in the EU and dependent territories in the Caribbean such as Anguilla, the British Virgin Islands (BVI) and the Cayman Islands. Figures bandied about are a high of US$100 million from Switzerland through
US$4 million from Guernsey to less than fifty thousand United States dollars from the BVI. The theory now seems to be that the monies have left Europe and its dependencies, where the EUSD has been enforced,
and wandered off to Hong Kong and Singapore in particular. The Bahamas is named because, apart from Cayman and the BVI, which are already captured in the EUSD, it has the most financial institutions in
the region.
Wednesday, September 20, 2006 ~ 8:40 a.m., Sven Larson Wrote: "The OECD has been on a long process of backing down," says Jason Sharman, a University of Sydney researcher who wrote the forthcoming
book Havens in a Storm - the Struggle for Global Tax Regulation. "It started off with ambitious aims and has pretty much become a voluntary
exercise." After early successes in places like Vanuatu, the OECD has made little headway. The project began to wither in 2001 - when the Bush Administration found its voice. Behind the scenes, right-wing think
tanks had been rallying congressmen and Administration officials to the cause of tax competition. The lobbyists say they fought on a question of
principle: since when do Republicans punish countries for having low tax rates? ...Dan Mitchell, who chairs and co-founded the Center for Freedom and Prosperity and is an influential fellow at the Heritage
Foundation, is credited with being the key agitator. "It's a moral issue. It comes down to what's the best way to deal with tax evasion," he says.
"The option we prefer is to lower tax rates and reform your system - the Reagan example" ..."Or you can go the other way: destroy privacy,
destroy due process, strip away people's constitutional rights and create some massive Orwellian world." ... Mitchell says it did not take long for
congressmen and the Administration's top economists, Glenn Hubbard and Larry Lindsay, to see that European nations like France were conspiring at the OECD to eliminate tax competition and protect their
high-taxing and inefficient regimes. ..."The OECD was a cockroach and we turned a light on in the room," says Mitchell. "And they said OK, it's
repulsive, let's stamp it out." ...Mitchell and his colleagues did not confine their efforts to Washington and Paris. They travelled the Caribbean pointing out that tax havens are not exclusively found on
palm-fringed islands. ...They explained that a company in the state of Delaware, for example, faces no company tax, no requirement to conduct a genuine business and has no need to have a physical presence
in the country. Wyoming and Nevada allow owners to nominate bogus directors and receive anonymous "bearer" shares - which are notoriously difficult to trace. ...Thomas Bayer claims OECD countries
are shutting down developing world tax havens like Vanuatu and Nauru so they can steal their business. ..."I would say America is probably the
largest violator. You can still set up companies without disclosing beneficial interests, and nobody says a word," he says. "The agenda of
the OECD is to squeeze out the small centres because that business will not disappear ... it will go back to them."
Wednesday, September 20, 2006 ~ 8:32 a.m., Sven Larson Wrote: In May, President George W. Bush signed a bill passed by Congress that sharply raises tax rates for overseas citizens with salaries plus taxable
benefits totaling $93,000 a year or more. The biggest effect so far has been on businesses. The new law taxes much more of the rent assistance provided by companies for employees abroad. The United States is the
only developed country that taxes its citizens while they are overseas, so nationals of countries like Canada, Britain, Australia and New Zealand
can often afford to work for less and do not need to ask employers for costly tax assistance. "The concern is universal between the companies,
where they feel they're losing their competitive advantage if they hire Americans," said Harley Seyedin, chief executive of First Washington Group, a power company, and president of the American Chamber of
Commerce in Guangzhou. "Most companies are looking outside the U.S. if they need to hire." Americans living overseas, particularly those facing
high taxes on employer-provided benefits like housing assistance and tuition for children in school, are wondering not only whether they can
afford to stay, but also whether their employers will try to transfer them home. "You really have to be able to differentiate yourself to justify
someone hiring you over a Brit or an Australian or a Canadian," said Robert Keys, a partner in the Hong Kong office of PricewaterhouseCoopers. Keys and other tax experts said that in poring
over the two main changes enacted in May - higher marginal tax rates and higher taxes on housing assistance - they had found several features
that were not obvious at first. Initial discussions of the tax increase in Washington focused on its cost to corporations, notably oil companies,
which often help pay their overseas employees' tax bills. But many companies demand that Americans become employees of their overseas subsidiaries and give up their expatriate benefits, including tax
assistance, if they settle down and stop moving to another city every several years. ...Until this year, the first $80,000 earned overseas was
excluded from taxation in the United States, with the next dollar earned overseas treated as though it were the first dollar of income and scarcely
taxed. Taxes paid to foreign countries can then be used to reduce tax liability in the United States as well, although this also reduces the value of the $80,000 exemption. The new law increases the exclusion to
$82,400. But under a provision known as "stacking" in the new law, the next dollar of income is now being taxed as though it were the 82,401st dollar of income.
Wednesday, September 20, 2006 ~ 8:11 a.m., Dan Mitchell Wrote: …the rich world cannot disown all interest in global poverty and inequality: to some extent, the fate of every individual in the world
affects us. …Redistribution needs to be globally progressive—that is, to satisfy the same criteria that we require from redistribution within a nation-state. …How could it be done? By creating a global body
(Agency) that would be financed by a tax raised from the rich in rich countries (that is, a tax on goods or activities with very high income
elasticity) and which would transfer these funds to poor individuals in poor countries. A global redistribution through taxes that would be levied by an international body is an idea that may seem far-fetched
today, but which the logic of development we have recently witnessed—away from the nation state—suggests may eventually come to pass.
Tuesday, September 19, 2006 ~ 9:56 p.m., Dan Mitchell Wrote: This study evaluates the 50 states between fiscal years (FY) 1994 to 2004, examining the impact that the level of taxation has on three
important measures of economic prosperity: population growth, personal income growth and employment growth. This time period was chosen because it is a full decade long, includes an entire business cycle
(i.e., recovery from 1991 recession to the boom in late 1990s to the recession in 2001 and back to the recovery from 2001 recession), and includes the most recent tax burden data available by state. …The ten
lowest tax states had an average tax burden of 9.5 percent, while the ten highest tax states averaged 13 percent. The lowest tax states level of taxation was 27.2 percent lower than the highest tax states.
Correspondingly, the low tax states had population growth that was 172.1 percent higher, personal income growth that was 31.9 percent higher, and employment growth that was 78.6 percent higher.
Tuesday, September 19, 2006 ~ 6:16 p.m., Dan Mitchell Wrote: Europe's left likes to hold up the "Swedish Model" as the perfect amalgam of capitalism and socialism. But even in its home country,
paying punishing taxes to finance a generous welfare state isn't that popular anymore, as Sunday's elections show. The Swedish Social Democrats had their worst result since 1914, as Fredrik Reinfeldt and
his four-party center-right Alliance ousted incumbent Prime Minister Göran Persson. …Unemployment is officially around 5% but include those on job training programs, early retirement and sick leave, and the
figure soars to about 17%, according to McKinsey. Mr. Reinfeldt argued that if you add in Swedes on some form of government handout and those who want to work but can't find a full-time job, the unemployment
figure is closer to 40%. …The Alliance scored particularly well among the young, whose unemployment rate is 25.9%. It appears that the prospect of spending one's life on the dole, no matter how generous
those welfare payments may be, is not every young Swede's dream. If those actually living under the much-vaunted Swedish Model opt for change, there is hope for the rest of Europe. Unemployed you say? We can't really offer you a job... but we could classify you as mentally disabled to improve our labor market statistics!
That's the message 25-year-old Swedish citizen Jessica Pettersson got from the state unemployment office. Pettersson has a high school degree in economics and has worked in a post office and in a grocery store,
among other jobs. After being out of work for a while, her supervisor at the unemployment agency told her that she ought to meet with a
work-psychologist since "it is so hard to be without a job". Petterson told the Swedish daily paper Expressen that she had no desire to go to a
psychologist but was persuaded to do so by the unemployment agency. The psychologist gave her a number of tests that she found stressful and humiliating, such as building objects with wooden blocks. To her
surprise the psychologist said that Petterson should be classified as disabled since she wasn't good enough at mathematics. Jessica was shocked to hear this: "I might not be a math genius, but I know how to
count," she told the paper. The unemployment agency explained that it was simply a matter of changing a code in her status as unemployed. If
she agreed to be classified as mentally disabled she would be entitled to a range of government subsidies. …Alarmingly, what happened to Petterson is not an isolated incident in Sweden. The state unemployment
agency is constantly attempting to force people to "admit" to being disabled. Today 19.3 percent of those seeking jobs at the unemployment
office are being classified as disabled. Stockholm University professor Mikael Holmqvist, who has done research on the subject of Samhall's
workers, believes that most of these people are in fact not disabled at all. They have been lured or threatened into agreeing to become classified as
such. The reason for this is simply that if you are disabled you are removed from the statistics of open unemployment, something that the current Social Democratic government greatly appreciates. It is bad
enough that the Swedish government hides the country's true unemployment rate by hiring people through various state projects and by manipulating official statistics. But classifying healthy young people
as disabled is truly a shameful exercise. The good economic numbers out of Sweden are for real, but the nanny-state enthusiasts get their causality backward. The country
bounced back from a painful recession in the past decade in spite of its socialist system, not because of it. The "Swedish model" crowd
conveniently ignores that the revival came after free-market reforms in the early 1990s, including cuts in marginal tax rates and welfare benefits, the creation of independent central bank, and deregulation. A
nationwide school voucher program was put in place and pensions partially privatized. The ruling center-left Social Democrats, which took
power in 1994, played their part, too, by repealing the death tax. If only American pols were as innovative. … Sweden still has one of the highest income tax rates and most expensive welfare systems in the OECD.
Unemployment is officially 4.5%, but it rises to 17% if the hidden jobless (people on sick leave, retraining or in early retirement) are included, according to the McKinsey Global Institute. High labor costs and
iron-clad firing rules prevent companies from hiring. Youth unemployment is 25.9%, according to Eurostat.
Tuesday, September 19, 2006 ~ 10:33 a.m., Sven Larson Wrote: Remember Kojo Annan's Mercedes? The car that reporters kept asking about last year, finally sending Kofi Annan into a temper tantrum at a
televised press conference? I'm talking of course about the green Mercedes SUV that Kofi Annan's son, Kojo, back in 1998, bought in Europe and shipped to Ghana - saving himself more than $20,000 in the
process by making false use of his father's name and privileges as United Nations secretary-general. ...The tale of Kojo's luxury car is emblematic
of both the abuses of privilege, and the cover-ups, that are hallmarks of today's U.N. Many of the mysteries surrounding that car have yet to be solved - including how a Mercedes imported into and registered in
Ghana in the name of U.N. Secretary-General Kofi Annan (documentation can be found here ) ended up wrecked seven years later in Nigeria. (Assuming the car was indeed wrecked, or for that matter,
that it indeed ended up in Nigeria. Neither Kojo, nor Kofi, nor the U.N. has released to the public any evidence, documentary or otherwise, of
this alleged wreck). To make even the simplest journey to Nigeria, from Ghana, the car would have had to motor across at least two other countries, Togo and Benin. Did it cross these borders while registered in
Kofi Annan's name? Did it travel with diplomatic plates? If so, who drove it under U.N. auspices? Was ownership ever transferred out of Kofi's name? If so, are we to believe that the staff of the U.N.
Development Program office in Ghana, which handled the paperwork for the customs exemption and car registration in Ghana, in the secretary-general's name, kept no further records whatsoever of the fate
of a Mercedes presumably belonging to their top boss back in New York? ... But what's really at issue here is not simply money - or a Mercedes -
but the integrity of a United Nations that in handling crises demands the public trust. And what we still need from Kofi Annan is not a quip, but
serious answers to the many questions still out there ... about that Mercedes
Tuesday, September 19, 2006 ~ 10:00 a.m., Sven Larson Wrote: Several EU member states are pressing the European Commission to introduce a broad health services law to protect the sensitive sector from
competition, while MEPs are calling for more legal clarity in the whole area of public services. The EU executive is currently preparing new
health services legislation to be unveiled in December. The initiative is in reaction to several rulings by the European Court of Justice boosting
patients' mobility across the bloc - but leaving a legal minefield which the commission wants to clear up. Brussels is also acting because health
was removed from a law opening up the market in services, currently in the legislative pipeline in Brussels. But a group of eight member states
with social-democrat health ministers - which regularly meet to discuss problems of European legislation interfering with their countries' health
systems - wants to see a more protectionist proposal than so far outlined by health commissioner Markos Kyprianou.
Monday, September 18, 2006 ~ 4:16 p.m., Sven Larson Wrote: With United Nations support, the governments of Kenya and Uganda are attempting to confiscate all arms from the pastoral tribes of the
Kenya-Uganda borderlands. The "forcible disarmament" campaign has displaced tens and tens of thousands of people, turning them into starving refugees. The United Nations and some NGOs relentlessly
promote the theme that gun ownership is contrary to human rights. Yet the UN and the NGOs are too often silent about the extreme human rights violations which are currently being perpetrated as a result of the
UN gun control campaign. United Nations gun control is the cause of a massive humanitarian crisis in East Africa. Any new United Nations Programme of Action on small arms should include concrete measures
to ensure that U.N. gun control does not lead directly to rape, pillage, murder, and de facto ethnic cleansing.
Monday, September 18, 2006 ~ 8:25 a.m., Dan Mitchell Wrote: Yesterday Chicago Mayor Richard Daley issued his first veto ever, striking down a living-wage bill that would require "big box" retailers
like Wal-Mart and Office Depot to pay a super-minimum wage of $10 an hour plus $3 in benefits to all employees by 2010. The national minimum is $5.15, and in Illinois the minimum is $6.50. …In his veto message,
Mayor Daley, a pro-union Democrat, declared that the wage law would "drive jobs and businesses from our city, penalizing neighborhoods that
need additional economic activity the most." Wal-Mart and Target have announced plans to cease expansions in the city if the law is enacted.
The city already loses $300 million a year in sales tax revenues when Windy City residents go bargain hunting in the suburbs. And of course if Wal-Mart, Home Depot and the others were to abandon the city,
Chicago residents would be paying a great many millions more a year in higher prices. Still, the City Council has vowed a veto override vote later
this week. What then? Well, the poor get stuck while those with the financial means will drive out to the suburbs to do some Wal-Mart shopping. It turns out that the wage bill's chief sponsor, Alderman Joe
Moore, shops at suburban big-box retail stores, for the usual reason. His campaign committee has purchased $30,589 worth of supplies at big-box retailers outside the city, according to disclosure forms.
Alderman Moore isn't alone out there with a cart among the high stacks. A review of Illinois State Board of Elections disclosure forms finds that
the 35 aldermen who voted to stick it to the "big box" retailers have spent $114,000 patronizing these non-Chicago stores.
Sunday, September 17, 2006 ~ 3:42 p.m., Dan Mitchell Wrote: The EU has failed to meet a key target set in 2001 to increase the number of people with jobs in order to meet the challenge of an ageing
society, new Eurostat figures have revealed. EU leaders meeting in Stockholm in 2001 agreed that in 2005, at least 67 percent of people in the union aged 15-64 should be employed in order to finance rising
pension and social costs due to an ageing population. But figures released by Eurostat, the EU's statistical office, revealed on Monday (11
September) that only 63.8 percent of EU citizens in that age group had a job in 2005. … The euro area, which in 2005 did not include any new member states, recorded an employment rate of 63.5 percent – even
worse than the average in the EU-25.
Saturday, September 16, 2006 ~ 7:30 p.m., Dan Mitchell Wrote: After years of hard work by drug warriors in Afghanistan, the country no longer produces 87 percent of the world's illicit opium. Now it
produces 92 percent, according to the latest suspiciously precise estimate from the U.N. Office on Drugs and Crime (UNODC). … Afghanistan is one of the world's poorest countries, and the UNODC estimates that
opium accounted for more than 50 percent of its GDP in 2005. By his own account, then, Costa is demanding that the Afghan government wipe out half of the country's economy, with conspicuous assistance
from U.S. and British forces. Does that sound like a recipe for peace and stability? It's no mystery why barely subsisting Afghanis choose to grow
opium poppies instead of legal crops, contrary to the wishes of foreign governments. According to the UNODC, a hectare of poppies earned farmers some $5,400 last year, about 10 times what they could get by
growing wheat. Western governments, the United States foremost among them, created this incentive by banning opium to begin with, thereby enabling criminals (including terrorists) to earn a risk premium.
Having artificially boosted the price of opium, the United States now asks desperately poor Afghan peasants to resist this financial attraction for the sake of Westerners who fail to resist the pharmacological
attraction of heroin. Even if drug warriors were successful in curbing Afghan opium production, an effort Costa says could take 20 years, there are plenty of other places to grow poppies. As with coca, the most
that has been achieved by attempts to eradicate opium has been to move production from one country to another, with no lasting effect on drug use.
Friday, September 15, 2006 ~ 8:47 a.m., Dan Mitchell Wrote: Let's examine just a few statements by the framers to see just how much faith and allegiance today's Americans give to the U.S. Constitution.
James Madison is the acknowledged father of the Constitution. In 1794, when Congress appropriated $15,000 for relief for French refugees who fled from insurrection in San Domingo (now Haiti) to Baltimore and
Philadelphia, James Madison said disapprovingly, "I cannot undertake to lay my finger on that article of the Constitution which granted a right
to Congress of expending, on objects of benevolence, the money of their constituents." Today, at least two-thirds of a $2.5 trillion federal budget
is spent on "objects of benevolence." That includes Medicare, Medicaid, Social Security, aid to higher education, farm and business subsidies,
welfare, etc., ad nauseam. James Madison's vision was later expressed by Rep. William Giles of Virginia, who condemned a relief measure for
fire victims. Giles insisted that it was neither the purpose nor a right of Congress to "attend to what generosity and humanity require, but to
what the Constitution and their duty require." Some presidents had similar constitutional respect. In 1854, President Franklin Pierce vetoed
a bill to help the mentally ill, saying, "I cannot find any authority in the Constitution for public charity," adding that to approve the measure
"would be contrary to the letter and the spirit of the Constitution and subversive to the whole theory upon which the Union of these States is
founded." President Grover Cleveland vetoed many congressional appropriations, often saying there was no constitutional authority for such an appropriation. Vetoing a bill for relief charity, President
Cleveland said, "I can find no warrant for such an appropriation in the Constitution, and I do not believe that the power and duty of the General Government ought to be extended to the relief of individual
suffering which is in no manner properly related to the public service or benefit." Constitutionally ignorant people might argue that the
Constitution's "general welfare" clause justifies today's actions by Congress. Here's what James Madison said: "If Congress can do
whatever in their discretion can be done by money, and will promote the General Welfare, the Government is no longer a limited one, possessing enumerated powers, but an indefinite one, subject to particular
exceptions." Thomas Jefferson echoed, in a letter to Pennsylvania Rep. Albert Gallatin, "Congress has not unlimited powers to provide for the
general welfare, but only those specifically enumerated." ... James Madison explained the constitutional limits on federal power in Federalist Paper No. 45: "The powers delegated by the proposed
Constitution to the federal government are few and defined . . . [to] be exercised principally on external objects, as war, peace, negotiation, and foreign commerce."
Friday, September 15, 2006 ~ 8:30 a.m., Dan Mitchell Wrote: One in five Britons — nearly 10m adults — is considering leaving the country amid growing disillusionment over the failure of political parties
to deliver tax cuts, according to a new poll. The extensive survey conducted by ICM, the polling company, shows that — contrary to the current approach of both Labour and the Tories — an overwhelming
majority of voters do want to see cuts in income and inheritance tax. …Last week Stephen Byers, the former Labour minister, argued for the abolition of inheritance tax. He said that the levy of 40% on estates
worth more than £285,000 was a "penalty for hard work, thrift and enterprise". This weekend George Osborne, the shadow chancellor, responded by advocating the abolition of stamp duty on shares to
"repair the damage" done by Labour's raid on pension funds. The Tories say the move would increase the average pension fund by £8,000. …It found that emigration is a possibility for more than one in five
people. Asked if they had thought about moving abroad, 16% said they had given it "serious thought" and a further 6% said they planned to do so.
Friday, September 15, 2006 ~ 7:49 a.m., Dan Mitchell Wrote: Last May, Alain Lamassoure said a tax of 1.5 euro cents (1p, 1.9 US cents) on texts and 0.00001 cents on e-mails could help fund the EU in
future. But the proposal caused fury across the blogosphere, and some 2,000 e-mails swamped his message board. Mr Lamassoure then backtracked and said he would no longer push the idea. … "Who let this
guy out of the lunatic asylum?" reads one message written in English. "Take his computer away, give him back a typewriter, and please don't
listen to his bullshit any more." One French writer expressed nostalgia for a time when "those who bled the people white were burnt at the
stake." Another wrote: "In France we keep coming up with new taxes but we never get rid of the old ones. All this ends up in the bottomless pit we call the treasury."
Thursday, September 14, 2006 ~ 10:17 a.m., Sven Larson Wrote: Romania takes the second place in the world classification of the states with the best performances in the area of economic reforms between
2005 and 2006, according to a survey conducted by the World Bank, the first one being Georgia. According to analysts, between 2005 and 2006,
Romania registered progress in licence assigning, labour force, obtaining of loans for investments, investors' protection, exterior trade and the implementation of bankruptcy procedures. Romania holds one of the
main places in the classification regarding the rhythm of reforms in six of the 10 fields taken into account. One of the most important advantages of the accelerated rhythm of reforms will be Romania's
positioning, next year, on the 49th place, of 175, in the classification of states that offer the most favourable conditions for the development of
business, 22 places above the level this year. According to the survey, the wish for EU accession inspired the reforms from Croatia and Romania. Also, Romania takes the 7th place in the classification of the
states where it is easy to start a new business, depending on the number of procedures, the necessary time, the costs of the operation and the necessary minimum capital.
Thursday, September 14, 2006 ~ 9:51 a.m., Sven Larson Wrote: For three decades, South Carolina state and local government spending has grown faster than revenues. Annual government growth has also
outpaced the per capita income growth. Three times state lawmakers have responded with swaps and reforms to the tax system. Despite the relief, the counties, cities and school districts have engaged in a
perpetual increase of fees and property tax millage in addition to the adoption of local option sales taxes. The swap of funds has actually driven up revenues and expenditures at all levels of government. Since
the 1995 property tax relief bill millage has been raised in 44 counties. The burden of excessive spending growth is borne by taxpayers. Higher
taxes and reduced personal income decrease private sector investment. The rush by school districts to raise millage this year and the history of government growth in the wake of revenue swaps suggest that local
spending will continue to spiral out of control in South Carolina.
Wednesday, September 13, 2006 ~ 4:39 p.m., Sven Larson Wrote: Estonia's economy expanded a mind-boggling 12 percent from April to July, fuelled by robust domestic consumption and strong growth in
exports, the Statistical Office reported on Sept. 4. The data is based on preliminary information, and surpassed analysts' expectations. Hansapank's Maris Lauri said first-quarter statistics showed that the
impact of domestic consumption has been growing from quarter to quarter, and this trend apparently continued in the second quarter. "Although export has also been growing at a fairly fast pace, strong
domestic demand brings in lots of imported goods, which weakens the foreign sector's impact on Estonia's economic growth," Pajula added.
But Estonia's economy has been white-hot, forcing the Finance Ministry to adjust its annual growth figures last month to 9.6 percent from 8.2 percent earlier this year.
Wednesday, September 13, 2006 ~ 1:18 p.m., Sven Larson Wrote: Now comes the latest monthly spin about Pennsylvania's employment picture. Governor Rendell, commenting on July's jobs report for the
Commonwealth, said 'Pennsylvania's economy continues to grow, adding jobs each month'. Continuing the quote, he said, 'That is great news, because it means business decision makers recognize Pennsylvania
is one of the best places to expand, invest or set up shop'. Additionally, the Governor waxed exuberant because an 800 increase in construction
jobs boosted the total since January of 2003 to 10,300 saying, 'Steady growth in construction jobs is a good indicator of future economic expansion'. Once again, the Governor's interpretation of the information
in the July jobs report can only be described as self-serving spin, in large part because of what he continues to ignore. He says that business
decision makers are opting for Pennsylvania. The problem is that of the 44,800 or 0.8 percent net increase in private sector jobs over the past
twelve months, 29,400 were in education and health and 13,300 were in professional and business services. The only other sector with greater than one percent growth over the last twelve months is leisure and
hospitality, posting a gain of 6,700 jobs. Of that increase 4,000 were in eating and drinking places. Thus, except for eating and drinking places, there is not much evidence of businesses deciding to locate in
Pennsylvania. The job gains in the health and education sector growth reflects in large part the growth in demand for existing entities. Meanwhile, the loss of another 14,700 manufacturing jobs is clearly not
an indicator of businesses locating operations in Pennsylvania.
Tuesday, September 12, 2006 ~ 8:54 a.m., Dan Mitchell Wrote: Markets are more fundamental than is technology to prosperity. For evidence, look no further than the fact that billions of people today
remain desperately poor. People in Niger and North Korea are starving to death now, even though the technical knowledge for growing and distributing basic foodstuffs is readily available across the globe. Many
Latin Americans and Eastern Europeans still carry their goods to and from market on wooden carts, despite the easy availability of automotive technology. Countless other people today dwell in earthen
huts, have no indoor plumbing, die of malaria, and suffer all manner of other dangers and indignities that are easily avoided with commonplace
technologies. It is manifestly mistaken to suggest that technology is the reason for our prosperity. Clearly, our prosperity must rooted in something deeper than technology -- something that both promotes
technological advance and, even more importantly, encourages the use of technological knowledge to make widely available the goods and services that we Americans today take for granted. That something else
is economic freedom which spawns complex markets. As shown again and again by researchers who study the relationship between prosperity and economic freedom, the greater is economic freedom, the greater and
more widespread is prosperity.
Tuesday, September 12, 2006 ~ 8:19 a.m., Dan Mitchell Wrote: The monthly American job-market numbers -- up or down a couple of hundred thousand -- mask this underlying reality of churn in our
economy. Over the past year, 4.5 million Americans a month, on average, left their jobs or were shown the door. Some 4.8 million people started new jobs each month over the same period. Some of that
movement is the product of individual choice, some of it is upheaval. But all of it represents millions of minute economic adjustments that are
going on constantly around us. Tuesday's trifecta of headline-making corporate realignment is the same process writ large. There's an alternative to all this disruption and churn. It can be observed firsthand
in the Land That Time Forgot, Western Europe. Europe's so-called social-market democracies have created practically no new net jobs in the last two decades. Their employment rates mostly hover closer to 10%
than 5% -- but their employment churn rates are fairly low. This stagnation is a multidecade natural experiment in proving the old adage
that businesses that can't fire don't hire. America has a miniature version of this system right here at home. It's called the public sector, where the
job-turnover rate is half what it is in the private sector, and at times only a third. This is good for job "security," but less good for adapting to new
challenges or correcting mistakes. "Commerce Department Overstaffed -- Layoffs Announced" is not a headline we expect to see any time soon.
Monday, September 11, 2006 ~ 8:57 p.m., Dan Mitchell Wrote: ...a growth rate of less than 1 percent is not exactly a reason to break out the Champagne, but for EU leaders, used to enduring complaints
about how desperately they need to reform to catch up to and compete with the US in a global economy, it's at least reason for a minor celebration ...bad news is already starting to rain on the EU's economic
parade. New figures released after the quarterly growth numbers show that growth in Europe's service industries -- from banking to telecommunications, the biggest part of the economy - have probably
slowed in August. True, this could be explained away by the summer break. But impending tax hikes in Germany and Italy threaten more severe and longer-term damage. You read that right. Tax hikes.
Undaunted by economic growth figures, Germany plans its biggest tax increases since the end of World War II. The value-added-tax (VAT) would go from 16 percent to 19 percent. Italy is flirting with a capital
gains tax increase and an inheritance tax. According to Bloomberg analysts John Fraher and Simon Kennedy, these governments "are taking a risk with economic growth by lifting taxes as their economies
gain momentum". Ironically, these governments fail to appreciate that their tax revenues have already been going up as a result of the economic upturn. Handelsblatt, Germany's main financial newspaper,
reports that the combined tax take of federal and local governments through July was running some $25 billion ahead of official forecasts. By
increasing the rates, Germany risks not just crippling growth but also encouraging tax evasion.
Monday, September 11, 2006 ~ 8:41 p.m., Dan Mitchell Wrote: ...the hottest issue in this fall's Democratic primary for governor of Massachusetts: income tax cuts. Two of the three Democratic candidates
in this bluest of blue states have endorsed cutting the state flat-rate income tax to 5%. One of them, Democratic Attorney General Tom
Reilly, insists the tax cut would mean "real money in people's pockets," and he pledges to be a "strong, unwavering voice to stand up and hold
the line on taxes." The leading Republican candidate heading into the September 19 primary, Lieutenant Governor Kerry Healey, agrees. The lone dissenter is former Clinton Administration U.S. Attorney Deval
Patrick, who sounds like his former Washington colleagues in claiming "we can't afford it." Voters disagree. An August 27 Boston Globe poll
found that 57% of Democratic primary voters support the tax relief plan. This is the same electorate that has given the nation Ted Kennedy, Michael Dukakis and John Kerry. Perhaps liberal Northeasterners aren't
as fond of high taxes as their political leaders assert. Earlier this year, the heavily Democratic legislature in Rhode Island slid down the Laffer
Curve by chopping its top income tax rate nearly in half as part of a plan to lure departed jobs and workers back to the state. Meanwhile, a property tax revolt is brewing in New Jersey. ...Bay State voters have
often shown they like taxes about as much as they do the New York Yankees. Though Democrats outnumber Republicans five to one in the state, the last four governors have been fiscally conservative and
tax-cutting Republicans. In 2000, despite heavy opposition from the Boston media and lobbyists, 59% of Massachusetts voters approved a ballot initiative to cut the income tax rate to 5%, from 5.85%. ...The
pro-tax coalition has also found an unlikely ally in the state Chamber of Commerce and other business groups, which insist the government has
unmet spending needs. "The big businesses lobby against tax cuts here," says David Tuerck, director of the Beacon Hill Institute, a local
think-tank. "They much prefer to spend the money on corporate welfare projects." The Institute's new study estimates the tax cut would create
8,000 new jobs and raise incomes by more than $450 million over the next four years. Current Governor Mitt Romney says the state's $1 billion revenue surplus more than justifies the tax cut. "We'll either
spend that money or give it back to the citizens," he says. "Those are our options." It says something about the public mood that, even in the
cradle of modern liberalism, voters don't seem to trust politicians to spend the dollars wisely and want more of their money back.
Sunday, September 10, 2006 ~ 1:27 p.m., Dan Mitchell Wrote: The European Commission has proposed boosting the minimum rate of excise duties on alcohol by up to 31 percent, stressing that the move will
only affect a few countries as most EU member states already charge taxes well above the bloc's limit on alcohol. ...In the Czech Republic for example, brewers have called on their country's finance minister
Vlastimil Tlustý to oppose the proposal which would push the beer tax up by around one cent. Mr Tlusty responded "We resolutely disagree
[with the tax rate hike] and we will use all the means to avoid it," according to news website Aktualne.cz. Finland however advocated the
opposite direction as it took up the EU's presidency in July, with the country's prime minister Matti Vanhanen - a staunch tee-totaller - promising he would push for further hikes in the EU's minimum tax rate
on alcohol. Helsinki charges the highest tax of EUR1.42 on one litre of beer, while Prague only levies around nine cents per litre.
Sunday, September 10, 2006 ~ 11:18 a.m., Sven Larson Wrote: German finance minister Peer Steinbruck has said he will give Brussels good news on his country's public finances, announcing that Berlin will
comply with EU budget rules for the first time in four years. Mr Steinbruck told the German parliament on Tuesday (5 September) that Berlin will report a budget deficit of 2.8 percent of GDP [Gross
Domestic Product] in 2006 to the European Commission. The EU's stability and growth pact, the rules underpinning the euro currency, stipulate a maximum budget deficit of 3 percent of GDP. ...Germany's
government led by the conservative German chancellor Angela Merkel has prioritised the restoration of public finances, introducing an unpopular increase in value-added tax to boost revenues.
Saturday, September 9, 2006 ~ 2:36 p.m., Dan Mitchell Wrote: A new poll published in the Financial Times suggests it may very well be. The survey found that a majority of the continent's workers would
actually like to work more, not less. They actually oppose government efforts to restrict the number of hours they can spend on the job. This
should cheer economic reformers, but will the unions be so happy? Their very reason for existence is to negotiate shorter hours for workers. It
appears they have been too successful in Europe; the shop floor is in revolt largely because workers are afraid they will lose jobs through outsourcing if they do not become more competitive. According to the
poll, conducted by market researchers Harris and the FT, a majority of workers in four of the five main economies of the European Union -- Germany, France, Spain, Italy and the UK -- support the idea that the
government should not be allowed to dictate the numbers of hours a person can work in a week.
Friday, September 8, 2006 ~ 11:09 a.m., Sven Larson Wrote: At the 2001 EU Council of Economic and Finance Ministers meetings in Brussels, EU finance ministers pushed for the adoption of a Tobin tax on
foreign exchange transfers, projecting revenue of US $13 trillion for MDGs. In 2004 France and Belgium separately adopted a variation of the Tobin tax - a currency transaction tax (CTT) - to raise money for the
European Union's Third World development fund; the laws will not become effective until parallel measures are enacted in other EU member states. The governments project that the CTT could raise US
$50 billion per year for MDGs. In January 2004 Brazilian President Luis Inácio Lula da Silva joined French President Jacques Chirac in establishing a multilateral working group on ''innovative financing
mechanisms'' to support MDGs; U.N. Secretary General Kofi Annan endorsed the creation of the ''Lula'' working group. Later in 2004 the Lula group proposed a tax on arms trading and persuaded 100 nations
to endorse the ''New York Declaration'' on innovative financing for MDGs. In 2005 the United Nations hosted the Millennium +5 Summit, at which the Lula group issued a report criticizing the current MDG
spending as inadequate and called for a global tax on airplane tickets to support MDGs; 66 nations endorsed the report. At the 2005 G-8 summit
in Gleneagles, Scotland, Chirac renewed calls for a global airline ticket tax and won support from several G-8 leaders. France moved forward with plans to introduce an airline ticket tax domestically. The French
airline ticket tax became effective January 1, 2006. In March 2006 an alliance of 12 nations - Brazil, Chile, Congo, Cyprus, the Ivory Coast, Jordan, Luxembourg, Madagascar, Mauritius, Nicaragua, Norway, and
the United Kingdom - agreed to adopt similar proposals.
Friday, September 8, 2006 ~ 8:58 a.m., Dan Mitchell Wrote: Economists call Estonia the Baltic tiger, the sequel to the Celtic tiger as Europe's success story, and its policies are more radical than Ireland's.
On this year's State of World Liberty Index, a ranking of countries by their economic and political freedom, Estonia is in first place, just ahead
of Ireland and seven places ahead of the U.S. (North Korea comes in last at 159th.) It transformed itself from an isolated, impoverished part of
the Soviet Union thanks to a former prime minister, Mart Laar, a history teacher who took office not long after Estonia was liberated. He was 32
years old and had read just one book on economics: ''Free to Choose,'' by Milton Friedman, which he liked especially because he knew Friedman was despised by the Soviets. ...The growth over the past
decade has produced so much unanticipated revenue that the tax rate is being gradually reduced to 20 percent. Laar's political rivals still
complain that his flat tax unfairly helps the rich, but as he notes, the level of income inequality in Estonia actually declined during the past
decade. ''People think a progressive tax system is fairer,'' Laar says. ''But in the real world rich people find a way to avoid high taxes. With a flat
tax, they stop worrying about sheltering their income or working in the gray economy. There is less corruption because it's easier to pay the
tax.'' Since Laar started the revolution, the flat tax has been adopted by its Baltic neighbors and a half-dozen other countries, including Russia,
Ukraine and Romania. Such radical reform is still taboo in Western European countries like France, but they can't seal their borders against this threat.
Friday, September 8, 2006 ~ 8:30 a.m., Dan Mitchell Wrote: Soon it will be safe to be caught dead in Virginia. Last week Democratic Governor Tim Kaine and the Republican-controlled legislature struck a
deal to abolish the state's estate tax, effective July 1 next year. The tax only brings in about $140 million a year to Richmond from several
hundred estates, but the levy has made it harder for Virginia to compete for small businesses and retirees with Florida and the 24 other states that no longer have a death tax. So when Governor Kaine proposed
killing the tax earlier this year, the legislature overwhelmingly approved.
Thursday, September 7, 2006 ~ 9:48 p.m., Dan Mitchell Wrote: Italy has wasted an estimated £5.5 billion on building 126 "phantom" hospitals that have not treated a single patient, says a report.
Confesercenti, a union representing small business, lists examples of new hospitals where construction work ran into problems linked to policy changes or budget cuts. In one example, in Torre Annunziata, near
Naples, work on a hospital started in 1965. Construction stopped in 1972, but recommenced in 1978, only for the money to run out in 1980. There was another spurt of building between 1984 and 1990. ...Many of
the buildings have also enjoyed European Union funding. In Avellino, more than £4 million was spent on a children's cancer centre in 1992,
but the facility has yet to install a single bed. It now takes 18 years on average to complete a hospital in Italy, by which time most are woefully
unsuited to housing modern machinery. ...the problems of bureaucratic waste and corruption are widespread. It was announced last week that
an office set up to shut down 139 pointless public works was itself still open - four years after it was supposed to close. Its own running costs had been £34 million a year.
Thursday, September 7, 2006 ~ 8:22 a.m., Dan Mitchell Wrote: With money still pouring into Asia's bursting coffers, it's easy for governments to forget that investment can leave just as easily as it
comes. ...It's not a huge cut -- Mr. Abdullah proposes to trim the rate to 26% over a two-year period, from 28% -- but it's a start. It's about time,
too. Compared to neighboring Singapore, with corporate taxes at 20%; Taiwan, at 25%; or Hong Kong, at 17.5%, Malaysia's rate looks high. Many countries, from China to India, are instituting special economic
zones stuffed with tax incentives, with an eye to attracting FDI. Even Indonesia, which isn't famously investor-friendly, is mulling cutting corporate taxes to 25%, from 30%. Much more needs to be done.
According to KPMG's 2006 corporate tax survey, investors in Asia shoulder the highest average rates in the world, at nearly 30%. Latin America's rates average around 28%. Europe, thanks to competitive tax
regimes in newly-acceded European Union countries, comes in at 25%.
Thursday, September 7, 2006 ~ 7:45 a.m., Sven Larson Wrote: Mexico's agricultural system is a great example of how that country stays poor and produces millions of desperate would-be immigrants. In
the 1917 land reform, privately held farms were expropriated and given in small plots to farmers who were members of communally owned collectives. These ejidos, or communal farms, were unproductive of
course, in spite of government subsidies. Worse, the owners were denied property rights. The land could not be sold, rented or used to collateralize debt. As the Peruvian economist Hernando de Soto would
point out, the land was a "dead asset," useless for wealth generation. A 1992 constitutional amendment bequeathed property rights to the
ejidatorios, but Mexico's famously corrupt bureaucracy has effectively blocked the reform. By 2002, only 1 percent of the land had been privatized. Forty-two percent of Mexico's rural population lives in
"extreme poverty," according to government statistics. Pemex, the nationalized oil company, provides another example of how Mexico's
statist economic policies are dysfunctional. Mexico is the fifth-largest oil producer in the world. Yet Pemex is going broke, partly because its
profits provide one-third of all government revenue, partly because foreign investment is forbidden. Mexico's proven oil reserves are nearly
exhausted but Pemex, $85 billion in debt, lacks the capital for further exploration and development. Sure, no foreigners are sharing in the profits - but a huge natural resource advantage has been squandered.
Even Mexico's successful maquiladero plants,
Thursday, September 7, 2006 ~ 7:12 a.m., Dan Mitchell Wrote: A study of "income, earnings and poverty" in the United States released last month by the Census Bureau's American Community Survey includes
two lists of U.S. counties with the highest median household incomes for 2005. One cites the 10 richest counties with populations greater than 250,000; the other, the 10 richest counties with populations between
65,000 and 250,000. Of the 20 counties on the two lists, eight were within commuting distance of Washington. All boasted median household incomes far above the national median of $46,242. ...Why are
the Washington suburbs so wealthy? The Census Bureau study did not directly answer that question. But a report in The Washington Post cited
local economists who said it "is a side effect of the enormous flow of federal money into the region through contracts for defense and homeland security work in the five years since the Sept. 11, 2001,
attacks, coming after the local technology boom of the 1990s." But this answer is too narrow. In 2006, according to the Office of Management
and Budget, the federal government will spend more than three times as much on its "human resources" functions ($1.7 trillion) as it will on
"national defense" functions ($535.9 billion). As defined by OMB, "human resources" spending includes such things as education, training,
employment, social services and health programs, as well as Medicare and Social Security. If it is reasonable to assume that many of the relatively wealthy Americans who live in suburban Washington are
slopping at the trough of federal defense spending, it is also reasonable to assume many are slopping at the trough of non-defense spending.
After all, there's more slop in that trough. ...Male employees of private companies, whose median earnings were $41,038, lagged behind male employees of nonprofits ($42,875), state governments (45,698), local
governments ($45,788) and the federal government ($54,054). The median earnings of women working for the federal government ($46,849) exceeded by more than $16,000 the median income of women
working for private companies ($30,824).
Wednesday, September 6, 2006 ~ 8:22 a.m., Dan Mitchell Wrote: Even though France, like other European welfare states, hides some of its true unemployment in various government programs, joblessness
stands at around 10 percent. In 2004 only 13 percent of unemployed workers in the US could not find work within 12 months - in France the same number was 42 percent. In 2002 the French lost more than twice
as many weeks per worker due to sick leave compared to the US and a recent study by US and European researchers found that the wage and benefits returns to long-term employees in France has since 1976 been
consistently lower than in the US. According to the "Global Entrepreneurship Report 2000" the percentage of those who were starting new businesses was five times higher in the US compared to
France. ...The long term consequence of an economic policy that punishes entrepreneurship and hard work regulates the job market while creating ample options to live off government remains the same:
stagnation, high unemployment and gifted people fleeing the country. That the French economy has its fair share of problems is no mystery for
anybody with a slight understanding of economics, or just plain common since. What is more puzzling is why the American left is so eager to reform their own nations economy towards the more socialist and clearly
failed model of France.
Wednesday, September 6, 2006 ~ 8:13 a.m., Dan Mitchell Wrote: State lawmakers, who are struggling to curb soaring property taxes and cut state expenditures, say that the practice of holding multiple positions
- and earning more pension credits as a result - has added a huge burden to the state's troubled pension system. In some cases, the multiple jobs
entitled employees to annual pensions worth more than $130,000. In one instance, a lawyer in southern New Jersey earned about $186,000 a year and pension credit from 11 towns where he works as a municipal court
judge. In another case, a lawyer from the Jersey Shore earned about $287,000 annually - he is the top earner among the roughly 5,000 state employees with multiple positions - while working as a judge in eight
towns. One lawyer from Secaucus, Herbert Klitzner, earned about $227,000 as the general counsel for both North Bergen Township and the Union City school district. Mr. Klitzner, who has been a public
employee for 25 years, would qualify for an annual pension of about $103,000 if he retired now.
Tuesday, September 5, 2006 ~ 10:36 a.m., Sven Larson Wrote: The world's bureaucratic elites, including the United Nations, are demanding that the rich nations spend 0.7 percent of their gross
domestic product on development aid. This is more than $300 billion a year, or well over $3 trillion over the next decade. The demand for such
huge funds is given as the main rationale for global taxes to be levied on the world's taxpayers, outside the control of and accountability to national governments. ...[Even] if such funding were available, who
would administer it? Kofi Annan and other U.N. officials claim they should do it, but the U.N. is incapable of presenting a set of books for its
own operation that can be audited and was responsible for the largest financial scandal in the world's history -- the Iraq oil-for-food program. The World Bank can make the argument that they are the most
experienced global aid institution -- but their "experience" is one of many more failures than successes. The fact is that no international body
with unaccountable bureaucrats spending other people's money on projects is likely to succeed, particularly when the conditions are not ripe
for success. The taxes, whether they are imposed, as the French already have, on international airline fares, or international financial transactions, or on energy, are not costless. The argument is made that
these taxes will be paid by the rich but will, in fact, be paid by workers (in terms of higher unemployment) who supply the goods and services being taxed. The rich will merely choose to consume less of what is
heavily taxed.
Tuesday, September 5, 2006 ~ 9:12 a.m., Sven Larson Wrote: Many states across the country now believe that setting tax policies to attract new retirees or retain current residents is an economic growth
engine for the future. This is a pattern that becomes clear in the study. States, like Illinois and Pennsylvania, who have incurred large out-migrations, have moved to exempt all retirement income, including
Social Security, from state taxes. This has been done in an effort to stop the large outmigration of the 1990s. Some states, like Mississippi, have
enacted similar legislation in an effort to attract more retirees from the north to the south by creating policies that will give an enormous
economic advantage to retirement there. Other states are looking at the impact of not only income taxes, but also estate and inheritance taxes on retirees. Wisconsin appears to be doing almost nothing. They have
introduced a long-term phase out of taxes on Social Security income, but that is hardly innovative compared to the rest of the country. Over the
next several years as more data becomes available, we will highlight this issue because nothing will have a bigger impact over the latter half of
the decade than what Wisconsin senior citizens decide to do with their net wealth. Whether they come or go will impact everyone in the state because of the taxes they pay and the energy they provide their local
communities. It behooves state government to closely examine this population and create policies that will ensure Wisconsin thrives with a growing boomer population over the next generation.
Tuesday, September 5, 2006 ~ 8:44 a.m., Dan Mitchell Wrote: Here's a brief history. The U.S. Army Corps of Engineers fined one landowner $300,000 for "destroying" wetlands because he cleared a
backed-up drainage ditch on his property. The Fish & Wildlife Service told one landowner he couldn't use 1,000 acres of his property so the endangered red-cockaded woodpecker could have a place to dwell.
Another owner was prevented from clearing dry brush near his home to make a firebreak because it would disturb the Stephens kangaroo rat. Building a deck on his house brought one owner a $30,000 fine for
casting a shadow on wetlands. Smoking bans are another violation of private property rights supported by most Americans. If a person owns a restaurant, it is his right to decide whether or not he will permit
smoking. If a restaurant owner wishes to permit smoking, he might put up a "Smoking Permitted" sign and let customers decide whether they
wish to enter. Similarly, if an owner didn't permit smoking, he might put up a "No Smoking" sign and let customers decide.
Monday, September 4, 2006 ~ 8:57 a.m., Dan Mitchell Wrote: Hong Kong and Singapore will on Monday be named as possible targets in the European Union's drive to tax wealthy citizens who have moved
hundreds of billions of euros in savings offshore. Laszlo Kovacs, EU tax commissioner, wants to bring the booming Asian financial centres into Europe's tax net, amid signs that tax avoiders are looking for more
distant shelters for their money. ...The move follows the relative failure of the EU law to tax offshore savings closer to home, after investors in
countries such as Switzerland and Luxembourg took advantage of the directive's loopholes. The commission does not have figures for the scale of the problem, but German citizens are thought to have
EUR300bn-EUR500bn in offshore savings. In the first six months of the law's operation, Switzerland raised only EUR100m in withholding taxes on the vast savings held there by EU citizens. But Mr Kovacs believes
another reason for the low tax yield from the EU savings directive is that some Europeans have moved their money to Asia. A spokeswoman
for Mr Kovacs said it was important to create "a level playing field" between big offshore centres. ...The Singapore government is likely to
resist any moves that could damage its private banking industry.
Monday, September 4, 2006 ~ 7:41 a.m., Dan Mitchell Wrote: ... despite investing large sums to obstruct drug traffickers from using banks to launder money, lenders still face a big challenge identifying
terror networks in their midst. ... banks say they are still in the dark when it comes to trawling through transactions and spotting patterns
that might immediately identify an account holder with potential ties to terrorism. "Is it possible to identify a terrorist beforehand by way of his
financial profile? The answer is absolutely not," said the anti-money-laundering executive. ... Bomb plotters, real or suspected -- such as a group of British Muslims charged this week with conspiring to
blow up airliners crossing the Atlantic -- can escape the most sophisticated surveillance because the amount of money needed to fund an attack is so low. ...Many suspects have no criminal records, making
their identification even more difficult.
Sunday, September 3, 2006 ~ 2:16 p.m., Dan Mitchell Wrote: This week's back-to-school ads offer amazing bargains on lightweight backpacks and nifty school supplies. All those businesses scramble to
offer us good stuff at low prices. It's amazing what competition does for consumers. The power to say no to one business and yes to another is awesome. Too bad we don't apply that idea to schools themselves.
Education bureaucrats and teachers unions are against it. They insist they must dictate where kids go to school, what they study, and when. ...Every economics textbook says monopolies are bad because they
charge high prices for shoddy goods. But it's government that gives us monopolies. So why do we entrust something as important as our children's education to a government monopoly? The monopoly fails so
many kids that more than a million parents now make big sacrifices to homeschool their kids. Two percent of school-aged kids are homeschooled now. If parents weren't taxed to pay for lousy government
schools, more might teach their kids at home.
Saturday, September 2, 2006 ~ 12:37 p.m., Dan Mitchell Wrote: Most of us aren't paid just in "wages" but in wages and benefits. And when the two are put together, total compensation is up 8.7% since
2003, for an average annual gain of 3.5%. Why is this? Wages may not be soaring (up just 0.7% since 2000), but benefits are (13.1%). In other
words, we're making more but getting it in the form of tax-free benefits. The Times' implication - that we are somehow falling behind in the Bush
years - is simply not true. If you want to know how we're really doing, look at what we spend and the wealth we're building. Here, too, you get
a radically different picture. Consumer spending in the second quarter hit $8.053 trillion, up $659 billion, or roughly 4.2% a year, since 2003. How can we spend so much more if we have less? Yes, we've been
putting more on credit cards. But we've been doing that for 40 years. A better answer is that we're wealthier. We now own about $53.8 trillion in
stocks, cash and real estate - up a whopping 35% just since 2002. That "wealth effect" fuels spending.
Saturday, September 2, 2006 ~ 10:22 a.m., Dan Mitchell Wrote: The post-Katrina spend-fest in Louisiana will be remembered as one of the greatest taxpayer wastes in U.S. history. First came the FEMA
$2,000 debit-cards fiasco intended to pay for necessities that were used for things like flat-panel TVs and tattoos. Then came the purchase of thousands of mobile homes that cost as much as $400,000 per family
housed; the $200 million for renting the Carnival Cruise Ship; millions more in payments that went for season football tickets, luxury vacation
resorts, even divorce lawyers. Federal flood insurance policies surely will encourage many to rebuild in the same flood plains and at the same
height as before. ...Where rebuilding progress has been swiftest in New Orleans, it has been companies like Wal-Mart and Home Depot that have stepped up to make contributions along with the $4 billion in
charitable donations. While billions of dollars of federal flood insurance payments and community development dollars remain tangled in red tape, the private insurance industry has made at least 80% of its
payments to homeowners. Given the famously ingrained culture of political corruption in New Orleans--a system designed to siphon public money of any sort away from its intended purpose--President Bush was
right to call on Congress to convert New Orleans into a massive "enterprise zone." That included tax breaks for new business investment,
health savings accounts for those without medical insurance, school vouchers for families located where schools have been ruined and a reappraisal of all regulations.
Friday, September 1, 2006 ~ 4:41 p.m., Sven Larson Wrote: The Maine Medicaid system is large, expensive, and continues to grow. At the same time, private sector employment in Maine continues to trail
the national average, putting in doubt future Medicaid funding. Consider that in calendar year (CY) 1998, the portion of Maine's population below age 65 who were enrolled in Medicaid was less than the national
average. However, by CY 2004, Maine Medicaid was almost 66 percent larger than the national average. Currently, Maine Medicaid covers over 260,000 people. Maine's percentage of population under 65 years old on
Medicaid is the highest in the country, covering 22.2 percent compared to a national average of just 13.4 percent. ...Consider the following challenges: Since CY 2003, Maine Medicaid increased by more than the
entire population of Bangor - almost 36,000, or 15.5 percent. Since fiscal year (FY) 2003, state-financed Medicaid spending increased by over $320 million, or 59 percent. Between FY 2003 and FY 2006, Maine
Medicaid spending increased at twice the national average. Since FY 2003, Maine Medicaid enrollment increased faster than the national average. Since January 2003, private sector job growth in Maine has
been one-fifth (20 percent) of the national growth rate. Maine Medicaid poses serious challenges to the next Maine Legislature and Governor. Compounding the Medicaid challenges, Maine elected officials also have
to contend with a lackluster economy, which is responsible for generating a large portion of the Medicaid funding. Reversing both trends will be key to Maine's future economic success and fiscal survival.
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