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The views expressed by Andrew Quinlan and Dan Mitchell on this weblog are solely their own and are not necessarily those of their employers, The Center for Freedom and Prosperity Foundation and The Cato Institute, respectively. |
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The Market Center Blog |
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Observations and insights on the global fight |
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CF&P's Market Center Blog Archives |
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Monday, June 30, 2008 ~ 7:14 p.m., Dan Mitchell Wrote As the presidential campaign drones on, Barack Obama and the Democrats are fleshing out the promise of "change" with some specific, big-government policy proposals.
Many are familiar, perhaps because they already have been tried - in Argentina. That country has gone from South American breadbasket to world-class basket case. For the long version of how it happened and why
Americans might not want to try it, hop on a flight to Buenos Aires. ...The constitution once held limited government and private property to be among the highest ideals of the land. But in the 1920s these
protections, which had made the country a magnet for immigrants and the seventh-largest economy in the world, began to erode. An early example of this assault on liberty was when Congress imposed a rent freeze
to deal with a housing shortage after World War I. This only exacerbated the problem, and in 1922 a politicized Supreme Court widened state powers to allow the regulation of rents. That decision put
property-rights protection on a slippery slope. A decade later the Court gave the legislature the power to regulate interest rates. The interventions didn't end there, and as state control of the economy
expanded and the nation grew poorer, the country could not recover its footing. Economic populism and labor militancy took hold; protectionism blossomed and Argentina became a welfare state. ...Americans reading
that laundry list may note that it sounds a lot like the mindset of the left wing that will dominate the Democratic Party's convention and choose Barack Obama as its candidate in August. From nationalized health
care and government-owned refineries to punishing taxes on the rich, Argentina has been there, done that. There are good reasons to find the resemblance disturbing.
Sunday, June 29, 2008 ~ 5:51 p.m., Dan Mitchell Wrote ...there are those who think that the United States should follow policies more like those in Europe, often with no stronger reason than the fact
that Europeans follow such policies. For some Americans, it is considered chic to be like Europeans. If Europeans have higher minimum wage laws and more welfare state benefits, then we should have higher minimum
wage laws and more welfare state benefits, according to such people. If Europeans restrict pharmaceutical companies' patents and profits, then we should do the same. Some justices of the U.S. Supreme Court even
seem to think that they should incorporate ideas from European laws in interpreting American laws. ...Minimum wage laws have the same effects
in Europe as they have had in other places around the world. They price many low-skilled and inexperienced workers out of a job. Because minimum wage laws are more generous in Europe than in the U.S., they
lead to chronically higher rates of unemployment in general and longer periods of unemployment than in the U.S. - but especially among younger,
less experienced and less skilled workers. Unemployment rates of 20% or more for young workers are common in a number of European countries. Among workers who are both younger and minority workers, such as
young Muslims in France, unemployment rates are estimated at about 40%.
Saturday, June 28, 2008 ~ 12:29 p.m., Dan Mitchell Wrote "I believe there needs to be a thorough and complete investigation of speculators to find out whether speculation has been going on and, if so,
how much it has affected the price of a barrel of oil. There's a lot of things out there that need a lot more transparency and, consequently,
oversight." Those are the words of presidential candidate John McCain. This man is the Republican? There's more. "I am very angry, frankly, at
the oil companies not only because of the obscene profits they've made but at their failure to invest in alternate energy to help us eliminate our
dependence on foreign oil. They're making huge profits and that happens, but not to say, 'We're in this so we can over time eliminate America's dependence on foreign oil,' I think is an abrogation of their
responsibilities as citizens." Let me get this straight. A potential president of a putatively free country scolds companies for "obscene profits,"
failure to invest in competing products, and therefore irresponsible citizenship. Why? Is McCain running for national economic commissar? This is not the first time McCain has displayed what I would call an
anti-capitalist mentality. ...It's clear McCain does not understand how markets work or why they are good. He certainly doesn't understand the
role of speculators and other middlemen. He's not alone. Speculators are among the most reviled people in history. When they were members of
ethnic minorities, they have been easy targets for economically illiterate people who were jealous of their success. McCain wonders "whether
speculation has been going on." He needn't wonder. Speculation always goes on. Speculation means to take a risk on what the future holds in
hopes of making a profit. The world's stock and commodities markets are based on this principle. Sen. McCain must have meant it when he said. "I
know a lot less about economics than I do about military and foreign policy issues". ...McCain apparently doesn't understand is that
speculators perform a valuable service. ...The prices of commodities often change unexpectedly, making business risky. The speculator brings a degree of certainty to otherwise risky ventures. When supplies of a
commodity are plentiful and prices low -- but speculators expect the price to rise later -- they buy -- cushioning the collapse of prices. When supplies
become scarcer and prices rise, they sell -- easing the shortage and lowering the price. Also, speculators may agree to buy a commodity in the future for a price locked in today. This reduces the risk for an oil
producer or farmer who fears investing because he doesn't know what price his product will sell for next year. As a result of these activities, volatile supplies and prices are evened out over time.
Friday, June 27, 2008 ~ 7:12 p.m., Dan Mitchell Wrote In another example of junk science run amok, NASA scientist James Hansen wants oil executives put on trial for giving "misinformation"
about his global warming theory. Is this where society is headed? ...Only in totalitarian systems is dissent a criminal offense. Hansen, who 20 years
ago Monday cranked up the global warming scare with his congressional testimony, is a clever promoter. By fusing his pseudo science with the
wild-eyed efforts of eco-activists, media dupes and pandering politicians, he's been able to convince the public that his flawed theory is actually
holy writ. ...We wonder: Will it be up to NASA's secret police to make the arrests that will be necessary to drag these men before the tribunal?
...Hansen's comment is revealing. It's the sort of declaration made by a desperate man trying to hang on to his declining relevance. Hansen
knows the climate of fear he has stoked is receding as more people start to see through his nonsense.
Friday, June 27, 2008 ~ 6:33 p.m., Dan Mitchell Wrote How badly do the major credit-rating firms have to perform before investors stop using their services? That's a trick question, because
investors aren't allowed to stop using them. State and federal regulations that lock in the rating oligopoly remain untouched by recent "reforms."
The major credit-rating agencies - Standard and Poor's, Moody's and Fitch - assess the likelihood of default on corporate bonds and other debt
instruments. Their famous failures in rating mortgage-backed securities have led to several recent efforts at reform. ...At the federal level, since
the enactment of a 2006 law to encourage more competition, the SEC has anointed seven other firms as "Nationally Recognized Statistical Rating
Organizations" (NRSROs), the same favored status enjoyed by the big three. Two weeks ago, the SEC proposed more disclosure of the firms'
track record and more investor-friendly descriptions of rated securities. If the SEC now follows through at a meeting today on its plans to eliminate
regulations requiring the use of NRSRO-rated securities, investors will be freer to discover the best methods for judging credit risk. ...The biggest
remaining problem is that other state and federal regulations still lock out competitors. The Federal Reserve, Wall Street's new lender-of-first-resort,
will only accept investment-grade securities as collateral under its various lending facilities. This makes sense to protect taxpayers, but what doesn't
make sense is that the Fed will not accept ratings by anyone not named S&P, Moody's or Fitch. Even companies designated NRSROs by the SEC
are not acceptable. The Fed defines investment-grade securities as those "rated BBB- or higher by at least one of the three principal credit rating
agencies and no lower than that by the others." The irony here is that the Fed, which felt compelled to clean up the subprime mess caused in part
by faulty ratings from the big three, is now perpetuating the same oligopoly that helped create the mess.
Thursday, June 26, 2008 ~ 10:03 p.m., Dan Mitchell Wrote ...the most alarming thing about Mr. Obama's proposal is that the $250,000 threshold, above which the payroll tax would be applied, refers
to household income, not individual income. So it's quite deceptive when he claims that the $250,000 threshold will "ensure that lifting the payroll
tax cap does not ensnare any middle class Americans." Suppose your household consists of you and your spouse, each earning wages of $150,000 per year. Currently, you are each subject to the payroll tax up
to $102,000 of wages, so together you are taxed on $204,000. Under the Obama plan, you'd be taxed again on another $50,000 of wages. At the current payroll tax rate of 12.4% - 6.2% from wage-earners and 6.2%
from their employers - your household would be looking at a tax hike of $6,200 per year. ...But that tax bill could be higher still. While the payroll
tax has always been calculated just on wages from labor, Mr. Obama hasn't decided yet what forms of income will be included in the $250,000 threshold. It's an open question whether it might include interest on
savings and capital gains... Worst of all, even the small contribution to Social Security solvency that Mr. Obama's plan might make is entirely
illusory. In fact, the more taxes his plan collects, the worse Social Security's long-term situation gets. That's because all plans based on collecting taxes and saving them in the Social Security Trust Fund for
future benefit payments rely on the U.S. government being able to redeem the Treasury bonds that trust fund holds. There's only one place that the
money to redeem those bonds can come from: taxes. So ironically, any tax dollars collected today will have to be collected all over again - plus
interest. You like the idea of paying more taxes today for Mr. Obama's Social Security plan? Then just wait 20 years or so, because you'll get to pay more taxes all over again.
Thursday, June 26, 2008 ~ 9:43 p.m., Dan Mitchell Wrote France has just lost one of its greatest chefs. Alain Ducasse, the holder of 14 Michelin stars and a worlwide restaurant and hotel empire, has given
up his French citizenship for the privilege of becoming a Monegasque, we hear today. Ducasse, 51, whose interests turn over about 160 million million euros a year, has gone into tax exile. He could have chosen
Switzerland and kept his citizenship but Ducasse, a southerner by birth, has ties to Monaco, where he owns the three-star Louix XV. Monaco
imposes no income or wealth tax on its residents -- provided they are not French. ...So, the wheeze for French would-be exiles is to become a
Monaco citizen -- a privilege accorded very sparingly. Prince Albert II has just granted this "sovereign order" to Ducasse. There are only 8,000
Monaco citizens and there is a long waiting list for French candidates. ...Because of the wealth tax plus steep income and social security taxes,
many high earners and very well off people moved over the past two decades to London, Brussels and other capitals as well as the traditional
haven Switzerland. They are not returning in noticeable numbers, mainly because the wealth tax remains and they do not trust their country to
reverse policy at the drop of a hat. Sarko has maintained the Impôt sur la Fortune (ISF) as the 26-year-old annual tax is known (the exiles call it
Incitation à Sortir de France). The tax gathers relatively little income and drives capital abroad but the public supports soaking the rich, so scrapping it is politically unacceptable. But Americans should not be overly amused by this story. At least French taxpayers have the freedom to choose another nation's tax system. The United States imposes an exit tax (a policy almost always associated with despicable regimes such as the Soviet Union and Nazi Germany), making it very difficult for people to dump the internal revenue code.
Wednesday, June 25, 2008 ~ 6:00 p.m., Dan Mitchell Wrote
To be sure, based on a scientific poll of my children, President Kennedy clearly does not have the charisma and charm of the person in this video (http://www.youtube.com/watch?v=qBAr0MzRFU0), but he clearly understands that there is a relationship between tax rates, taxable income, and tax revenue. And while a bit of Keynesianism is detectable (the discredited notion that tax cuts boost the economy by putting money in people's pockets, which somehow overlooks the fact that government only gets the money to put in people's pockets by first taking it out of their pockets), it is worth noting that Kennedy's proposal was a pure supply-side mix of permanent tax-rate reductions.
Tuesday, June 24, 2008 ~ 5:27 p.m., Dan Mitchell Wrote Sen. Barack Obama has a bad idea for "extending the life of Social Security." He has proposed applying the Social Security tax to incomes
above $250,000, in addition to the current tax on incomes up to $102,000. It's unfair, he explained, for middle-class earners to pay Social
Security tax on "every dime they make" while the very rich pay on "only a very small percentage of their income." Reporters cited the Obama
statement without asking for the logic behind having someone making $100,000 pay on every dime and someone making $250,000 pay on just 41% of income, while someone making $10,000,000 would pay on 98.5%
of income. There is no economic principle or theory of tax law that would endorse such a result. ...There is a very good and principled reason why
Social Security taxes are paid on just $102,000 of income: Benefits are calculated based on that same $102,000 of income. The fundamental principle of linking taxes and benefits was established when Roosevelt
designed Social Security. He wanted to make sure that it was not a welfare system, calling Social Security "a base upon which each one of
our citizens may build his individual security through his own individual efforts." ...Under the current formula, lower-wage workers get a slightly
better deal than do higher-wage workers, assuming the same life expectancy. The economics of what Sen. Obama is proposing should be at least as troubling. A high-income entrepreneur would see his or her
federal marginal tax rate rise to 53% from 37.7% under Sen. Obama's tax plan. He proposes a 4.6 percentage point hike in the personal income
tax rate, a loss of some itemized deductions, and a 12.4 percentage point hike in the Social Security payroll tax. This would take a successful
entrepreneur's effective marginal tax rate higher than what it was under Jimmy Carter or Richard Nixon, when the maximum tax on an entrepreneur was 50%. One of the lessons from the disastrous economics
of the 1970s and the subsequent Reagan tax cuts is that everyone - particularly entrepreneurs - responds to incentives. If you take away 10%
of a high earner's after-tax income at the margin, he will cut his taxable income by at least 4%. . But the principle remains that as workers' wages
rise so do the taxes they pay, and so do the benefits they will get from the system. Sen. Obama would do away with this principle by requiring
higher-end workers to pay taxes without getting any extra benefits linked to their higher contributions. This would be a big step toward turning
Social Security from a contributory pension scheme into just another welfare program. ...Sen. Obama is planning on a combined series of tax hikes to produce $42,000 in tax revenue, but consensus economic
modeling suggests the government's net take would rise only $14,000. We should also keep in mind that the economic well-being of the country is
not measured by how much taxes the government can collect, or even the size of the deficit. Rather, it is measured by the country's productive
capacity. Our theoretical entrepreneur's 11.2% decline in taxable income reflects both less effort on his part and a less efficient use of his income in
order to avoid confiscatory tax rates. Or, to put it directly, Sen. Obama's plan would reduce an entrepreneur's after-tax profits by $70,000 -
$56,000 in lost profits and $14,000 more in taxes - just to produce a net revenue gain to the government of $14,000. It is shocking to think that
we have a presidential candidate who would make the private sector $5 poorer in order to make the government $1 richer.
Monday, June 23, 2008 ~ 7:17 p.m., Dan Mitchell Wrote Queues of frustrated foreigners crowd many an American consulate around the world hoping to get into the United States. Less noticed are
the heavily taxed American expatriates wanting to get out-by renouncing their citizenship. In Hong Kong just now, they cannot. "Please note that
this office cannot accept renunciation applications at this time," the consulate's website states. Apart from sounding like East Germany before
the fall of the Berlin Wall, the closure is unfortunately timed. Because of pending legislation on President Bush's desk that is expected to become
law by June 16th, any American who wants to surrender his passport has only a few days to do so before facing an enormous penalty. ...Congress
has turned on expats, especially those who, since new tax laws in 2006, have become increasingly eager to give up their citizenship to escape the
taxman. Under the proposed legislation, expatriates surrendering their citizenship with a net worth of $2m or more, or a high income, will have
to act as if they have sold all their worldwide assets at a fair market price. ...That expats want to leave at all is evidence of America's odd tax
system. Along with citizens of North Korea and a few other countries, Americans are taxed based on their citizenship, rather than where they live. So they usually pay twice-to their host country and the Internal
Revenue Service. As this makes citizenship less palatable, Congress has erected large barriers to stop them jumping ship. ...it may have the
opposite effect. Under the new structure, it would make financial sense for any young American working overseas with a promising career to
renounce his citizenship as early as possible, before his assets accumulate. The second embarrassing feature of American tax law is that exit taxes historically have been adopted only by the world's most reprehensible regimes. As Richard Rahn explains in the Washington Times, America should not mimic the Soviet Union by confiscating the wealth of people who displease the ruling elites: One of old Soviet Union's actions that was most heavily and correctly criticized by human-rights activists both left and right was its confiscation
of the wealth of those who chose to leave the U.S.S.R. The right to emigrate is considered by civilized people to be a basic human right. Regretfully and embarrassingly, the U.S. Congress has just passed a law
that places a higher tax burden (and in some cases wealth confiscation) on those who choose to permanently leave the United States, and may
make some "tax hostages." ...People who choose to renounce their citizenship are often looked upon as traitors, both by those in totalitarian
and authoritarian states, and unfortunately sometimes by those in democratic societies, even when their intentions are benign. Many who immigrated to America over the last four centuries had some, or most of,
their wealth in the old country taken from them in one form or another. This was rightly considered unjust. Yet, the descendants of many of those
who suffered just voted to do something similar that differs only in degree, but not in kind or spirit. ...The apologists for Fidel Castro and
Hugo Chavez will be able to point to this new U.S. law and ask why this is any different from the property takings by the aforementioned thugs?
Yes, it is bit different, but behind it is the same mean-spiritedness, and disregard for property rights and the right to emigrate because of
political beliefs. Such laws only make the United States look hypocritical to the rest of the world.
Monday, June 23, 2008 ~ 4:21 p.m., Dan Mitchell Wrote Senate debate over Lieberman-Warner - the America's Climate Security Act - brought to national attention an under-recognized yet rising threat
to liberty and limited government: corporate America. Several of the largest corporations worked with environmental special interest groups
and left-wing politicians to pass so-called "cap-and-trade" legislation to address global warming concerns. By pushing for the legislation, these
companies hoped to get revenue in the form of government subsidies plus accolades from the media for taking measures to "save the planet."
Never mind the impact on the everyday citizen, who pays for it all with higher taxes and increased energy prices, a loss of liberty, a reduced
standard of living and fewer consumer choices. ...Companies with weak leaders and poor stock performance seem especially vulnerable to the
temptations of the Left. GE provides a case in point. GE's share price has fallen during CEO Jeff Immelt's seven-year reign. Now Immelt seeks the
visible hand of government to guarantee revenue and, perhaps, protect his job. Immelt became a leader in seeking cap-and-trade legislation to
promote sales of renewable energy equipment, like wind turbines, that tap energy sources that are not cost-competitive without subsidies. GE also
wants to profit by trading in the carbon dioxide market. ...In advancing Immelt's climate change business strategy, GE is ignoring contrary scientific and economic data. While GE's actions may make the activists
in the left's Corporate Social Responsibility movement happy, GE's actions are irresponsible. Perhaps the most important lesson from the debate of Lieberman-Warner is the recognition that CEOs can be as
much of a risk to liberty and limited government as any left-wing politician.
Sunday, June 22, 2008 ~ 3:49 p.m., Dan Mitchell Wrote What are people who receive FEMA assistance doing to help themselves? ...NBC 15's Andrea Ramey asked those who have been staying for free in
hotel rooms after they moved out of FEMA supplied travel trailers. What she found out is there are some who are doing very little. The scorching
heat puts many at the Quality Inn poolside, but for Gwenester Malone, she chooses to beat the heat by setting her thermostat to sixty degrees.
Malone's room for the past three months, along with three meals daily, have all been paid for by taxpayers. "Do you work?" asked NBC 15's
Andrea Ramey. "No. I'm not working right now," said Malone.Malone says she can't drive and it's too hot outside to find work within walking
distance. "Since the storm, I haven't had any energy or pep to go get a job, but when push comes to shove, I will," said Malone. Just a few
blocks away, Kelley Christian also stays at a hotel for free. She says she's not taking advantage of her situation, but admits it's easy to do. "It's too
easy. You know, once you're there, you don't have to pay rent," said Christian. "I kept putting it off and putting it off and now, I'm tired of
putting it off." She says she'll be out of the hotel and in an apartment by the end of the month. Push came to shove for Christian when police
found a meth lab in a hotel room directly below her. "All kind of people in white suits pulled all kind of chemicals out here. There was enough to
line up about three cars worth of chemicals. It scared the heck of me," said Christian. Taxpayers also paid for that meth lab. The men police
arrested were receiving FEMA assistance. The hotel owner says he'll now have to spend $5,000 to clean out the room. As for Malone, she says she's
not seeing any drug activity at her hotel. It's too nice she says. Why would she want to leave?
Sunday, June 22, 2008 ~ 3:30 p.m., Dan Mitchell Wrote A lawmaker says U.S. taxpayers are being bilked to the tune of millions of dollars by a biofuel subsidy that helps to lower gas prices in Europe,
and he's leading the charge to close the apparent loophole. "In 2007 this subsidy cost the American taxpayer $300 million, and it's projected to
cost the American taxpayers $600 million next year," said Rep. John Shadegg, R-Ariz. The scam - as Shadegg and others call it - is known as
"splash and dash." It stems from an existing $1 subsidy for every gallon of biodiesel fuel blended with regular diesel in the United States. Here's
how it works: Biodiesel is produced abroad using South American sugar cane or Asian palm oil and shipped to the United States, where it's
blended with just a "splash" of regular diesel. A typical tanker-load of about 9 million gallons of biodiesel requires just 9,000 gallons of
American diesel to make it qualify for the subsidy. But every gallon in the shipment garners a buck. The ship then makes a "dash" for Europe,
where its fuel is sold below market rates. ...Shadegg wants to end "splash and dash" by eliminating the subsidy for any biodiesel exported from the
United States, which he says harms energy independence. Shadegg is pushing his bill in the House, which has already passed measures to stop
the scam. ..."Taxpayers should be outraged because they are subsidizing foreign consumers of biodiesel," said Shadegg. "That is insane, and it's a
ridiculous burden to put on American taxpayers."
Saturday, June 21, 2008 ~ 12:19 p.m., Dan Mitchell Wrote Most governments have reduced their top tax rates and spending-to-GDP ratios over the last decade or so, according to data published by the
OECD, IMF and World Bank. But slimmer governments have done so at a faster pace, and to significantly lower levels. Their highest tax rate on personal income fell to a group average of 30% in 2006 from 36% in
1996. Top corporate rates were lowered to an average of 22% from 30%. Their average ratio of total government outlays to GDP fell to 31.6% in 2007, from an average peak level during the previous two decades of
40.4%. Investment growth jumped to an average annual rate of 5.9% in 2000-2005, from 3.8% over the previous decade. Exports have risen by 6.3% annually since 2000. The net result was a surge in economic growth.
The IMF reports that GDP soared in the slimmer-government group at a 5.4% average annual rate from 1999-2008 (including its forecast for the current year), up from a 4.6% rate over the previous decade. Over that
same period, the bigger-government group was more timid in its tax reductions. Their highest individual rates declined to an average of 45% from 49%, and corporate rates to 29% from 35%. Furthermore, their
average spending-to-GDP ratio only fell to 48.3% from a peak of 55.2%. The bigger-government group therefore failed to gain any competitive advantages in global markets by generating or attracting larger
investment funds. Their investment growth slowed to an average annual rate of 0.8% in 2000-2005, from 4.1% in 1990-2000. Their export growth rate almost halved to 3.1% annually in 2000-2005, down from 6.1% in
1990-2000. The bottom line is a drop in their average annual GDP growth rate to 2.1% in 1999-2008, from 2.3% over the previous decade. ...Slimmer-government countries also delivered more rapid social
progress in some areas. They have, on average, higher annual employment growth rates (1.7% compared to 0.9% from 1995-2005). Their youth unemployment rates have been lower for both males and
females since 2000. The discretionary income of households rose faster in the first group. This allowed their real consumption to increase by 4.1% annually from 2000-2005, up from 2.8% in 1990-2000. In the
bigger-government group, the growth of household consumption has slowed to a 1.3% average annual rate, from 2.1% during the 1990-2000 period. Faster economic growth in the first group also generated a more
rapid increase in government revenue, despite (or rather, because of, supply-siders suggest) lower overall tax burdens. ...The early supply-siders were right. My findings firmly reject the widely held view
that lower taxes inevitably result in cuts in public services, slower growth and widening income inequalities. Today's policy makers should take note
of how tax cuts and the pruning of inefficient government programs can stimulate sluggish economies.
Saturday, June 21, 2008 ~ 11:31 a.m., Dan Mitchell Wrote France has dropped plans to push forward with tax harmonisation under its European Union presidency, following Ireland's rejection of the Lisbon
treaty. ...The relegation of the tax base proposal - a long-standing French objective - is the first sign the Irish No vote is having a knock-on effect
on the EU's policy agenda, particularly on those issues deemed to encroach on national sovereignty.
Friday, June 20, 2008 ~ 8:21 p.m., Dan Mitchell Wrote Barack Obama and John McCain are busy demonstrating that in close elections during tough economic times, candidates for president can be
economically illiterate and irresponsibly populist. In Raleigh, N.C., last week, Sen. Obama promised, "I'll make oil companies like Exxon pay a
tax on their windfall profits, and we'll use the money to help families pay for their skyrocketing energy costs and other bills." Set aside for a minute
that Jimmy Carter passed a "windfall profits tax" to devastating effect, putting American oil companies at a competitive disadvantage to foreign
competitors, virtually ending domestic energy exploration, and making the U.S. more dependent on foreign sources of oil and gas. Instead ask this: Why should we stop with oil companies? They make about 8.3 cents
in gross profit per dollar of sales. Why doesn't Mr. Obama slap a windfall profits tax on sectors of the economy that have fatter margins? Electronics make 14.5 cents per dollar and computer equipment makers
take in 13.7 cents per dollar, according to the Census Bureau. Microsoft's margin is 27.5 cents per dollar of sales. Call out Mr. Obama's Windfall Profits Police! ...This past Thursday, Mr. McCain came close to
advocating a form of industrial policy, saying, "I'm very angry, frankly, at the oil companies not only because of the obscene profits they've made,
but their failure to invest in alternate energy." ...And do we really want the government deciding how profits should be invested? If so, should
Microsoft be forced to invest in Linux-based software or McDonald's in weight-loss research? Mr. McCain's angry statement shows a lack of understanding of the insights of Joseph Schumpeter, the 20th century
economist who explained that capitalism is inherently unstable because a "perennial gale of creative destruction" is brought on by entrepreneurs
who create new goods, markets and processes. The entrepreneur is "the pivot on which everything turns," Schumpeter argued, and "proceeds by
competitively destroying old businesses." ...Messrs. Obama and McCain both reveal a disturbing animus toward free markets and success. It is
uncalled for and self-defeating for presidential candidates to demonize American companies. It is understandable that Mr. Obama, the most
liberal member of the Senate, would endorse reckless policies that are the DNA of the party he leads. But Mr. McCain, a self-described Reagan Republican, should know better.
Friday, June 20, 2008 ~ 5:09 p.m., Dan Mitchell Wrote According to the February 2002 Federal Register, people can be arrested if they act in a way that "might distract or inhibit a screener from
effectively performing his or her duties ... A screener encountering such a situation must turn away from his or her normal duties to deal with the disruptive individual, which may affect the screening of other
individuals." That means it is a federal offense, and a fine of up to $1,500, for any alleged "nonphysical interference" that makes a TSA
screener "turn away" from whatever he was doing. What's nonphysical interference is solely up to the discretion of a TSA screener since it isn't
defined in the regulations. TSA agents can levy fines for a passenger disagreeing with the behavior or arrogance of a screener. The TSA has made little effort to control screener behavior. Bovard reports that in
March 2004, airline passengers filed almost 3,000 formal complaints with the federal government over the conduct of TSA screeners. Hundreds have complained about the rudeness of TSA screeners. And yet, none of
these passenger complaints resulted in disciplinary measures. In fact, passengers filed four times more complaints against the TSA than against airlines.
Thursday, June 19, 2008 ~ 6:27 p.m., Dan Mitchell Wrote Myth No. 1: Heroin and cocaine have a permanent effect. Truth: There is no evidence of that. In the 1980s, the press reported that "crack babies"
were "permanently damaged." Rolling Stone, citing one study of just 23 babies, claimed that crack babies "were oblivious to affection,
automatons." It simply wasn't true. There is no proof that crack babies do worse than anyone else in later life. Myth No. 2: If you do crack once, you
are hooked. Truth: Look at the numbers -- 15 percent of young adults have tried crack, but only 2 percent used it in the last month. If crack is so addictive, why do most people who've tried it no longer use it?
...People have free will. Most who use drugs eventually wise up and stop. And most people who use drugs habitually live perfectly responsible lives,
as Jacob Sullum pointed out in "Saying Yes". Myth No. 3: Drugs cause crime. Truth: The drug war causes the crime. Few drug users hurt or rob
people because they are high. Most of the crime occurs because the drugs are illegal and available only through a black market. Drug sellers arm
themselves and form gangs because they cannot ask the police to protect their persons and property. In turn, some buyers steal to pay the high
black-market prices. ...no one robs convenience stores for Marlboros. Alcohol prohibition created Al Capone and the Mafia. Drug prohibition is worse. It's corrupting whole countries and financing terrorism.
Wednesday, June 18, 2008 ~ 2:14 p.m., Dan Mitchell Wrote The Constitution of the United States of America begins with the words "We the people". If the leaders of the European Union ever succeed in
creating a similar document it will open with the phrase "They the people". The reaction of most EU governments to the decision of Irish
voters to reject the Lisbon treaty has been extraordinary. There has been contempt - suggestions that the Irish people are fearful, uncomprehending
and irrational; there has been denial - Wolfgang Schäuble, the German Interior Minister, said that "a few million Irish cannot decide on behalf of
495 million Europeans"; and there have been threats- plans to force Ireland out of the EU "temporarily"... Underlying all this has been a
combination of arrogance and unreality. European leaders are busy briefing that nothing has changed and that the treaty sails on. But, of course, it cannot. Mr Schäuble is simply wrong. A few million Irish can
indeed decide on behalf of 495 million Euro- peans. This is not simply because no one has asked those 495 million Europeans for their opinion.
It is because the EU is still a community of nations, not a superstate. It also does not appear to have occurred to European leaders how deeply
ironic it is for them to suggest that Ireland's vote can simply be ignored. Their entire case for the Lisbon treaty rested on the argument that new
rules were needed for the Union to function. How can they now argue that rules are irrelevant and can be overruled when inconvenient? A column in the Financial Times, meanwhile, expresses disappointment (but certainly not surprise) that the French and Germans - having already decided to ignore their own voters - plan to ignore the will of the Irish people: ...it is worth remembering what happened last time. The Irish were simply made to vote again and came up with the "right" verdict the second time
round. The EU is like some hideously persistent suitor who will not take No for an answer. The treaty that the Irish have just rejected is a
reworked version of the EU constitution that was itself rejected by the French and Dutch in referendums in 2005. If the EU would not accept rejection from the voters of France and the Netherlands, why would
anyone imagine that the Irish will be allowed to block the forward march of European unity? A Franco-German statement issued within hours of
the Irish referendum purred that: "We give the democratic decision of Ireland's citizens all the respect that it is due." How much respect is that?
Well, not very much, evidently. The statement made clear there was no question of abandoning the Lisbon treaty.
Wednesday, June 18, 2008 ~ 1:51 p.m., Dan Mitchell Wrote Barack and Michelle Obama send their children to an upscale private school. When asked about it during last year's YouTube debate, Sen.
Obama responded that it was "the best option" for his children. Several hundred low-income parents in our nation's capital have also sent their
children to private and parochial schools, with the help of a federal program that provides Opportunity Scholarships. Like Mr. and Mrs. Obama, most of these parents are African-American. And like Mr. and
Mrs. Obama, they too believe the schools they've chosen represent the "best option" for their children. Now these parents have a question for
Mr. Obama. Is Mr. Change-You-Can-Believe-In going to let his fellow Democrats take away the one change that is working for them? ...In a recent survey by Education Week, the D.C. public schools ranked fourth
from the bottom in terms of graduation rates. Test scores for basics like math and reading are also near the bottom. It's not for lack of money: A
recent U.S. Census Bureau report says the district school spending clocks in at more than $13,400 per child -- third highest in the nation. It takes a
lot of money to run a school system as lousy as D.C.'s. ...some of Mr. Obama's Democratic colleagues -- e.g., California's Dianne Feinstein --
have said that D.C. should be allowed to give the program a chance. In contrast, Mr. Obama's silence is thundering across the district.
Wednesday, June 18, 2008 ~ 12:38 p.m., Dan Mitchell Wrote The pursuit of profit is putting the historic role of the press as the watchdog of democracy at stake, MEPs from all political parties have
warned. Measures to protect editorial independence and quality of content are desperately needed in order to prevent interference from owners, shareholders or governments, says a report adopted Tuesday in
the European Parliament's culture committee. "The cases of unrestricted ownership concentration or of scarce content pluralism in the media are
endangering cultural diversity and freedom of expression not only within national markets but also at European level," said Socialist committee
chair Katarina Batzeli. Passing 33 votes to one, with no abstentions, the report had the support of all parties. Liberal MEP Marielle de Sarnez said
in the wake of the vote that Europe needed to pay attention to "the risk to independence posed by the existence of media groups owned by large companies."
Tuesday, June 17, 2008 ~ 7:21 p.m., Dan Mitchell Wrote When Democrats in Congress finagled a jump in the minimum wage last year, they crowed about their victory. Now Americans are finding out
what it cost as the unemployment rate shoots up. ...The minimum wage was hiked 14% to $5.85 an hour last July. Next month, it will go up an
additional 12% to $6.55 an hour. In July 2009, it's slated to rise 10.7% to $7.25 an hour. If that sounds like a lot, the actual cost is much higher
after you fold in taxes, benefits and Social Security that businesses pay on behalf of young workers. It should surprise no one that youth unemployment is rising. When you raise the cost of anything, you'll
demand less of it. That's true in the labor market, especially since young workers are the least educated, least trained and overall least productive
of all workers. ...Economist David Neumark of the University of California, Irvine, has found a 10% minimum wage hike cuts employment of young, unskilled workers by 8.5%. As Kristen Lopez Eastlick of the
L.A. Examiner noted, "In the past 11 months alone, the U.S.' minimum wage has increased by more than twice that amount." We're not against
young people getting paid more. We just think it should happen after they work a while, gain some experience and actually become valuable to their employer - rather than having higher pay mandated by the federal
government.
Tuesday, June 17, 2008 ~ 6:36 p.m., Dan Mitchell Wrote ...what about "entitlements"? That's the government's ironic term for programs that transfer money from people who earned it to people who
didn't. Entitlement? How can you be entitled to someone else's money? To finance "entitlement" programs, the government threatens force against
the taxpayers who provide the money. Why are people who favor compulsion called humanitarians, while those who favor freedom are stigmatized as greedy? ...What we really need is a top-to-bottom freeing
of the economy, including the health-care industry, and massive cuts in government both spending and taxes. This would leave us wealthy enough to take care of ourselves, with private charity assisting those who
can't manage.
Monday, June 16, 2008 ~ 3:30 p.m., Dan Mitchell Wrote The European Union's politicians and institutionalized bureaucracy were stunned and affronted at the audacity of the Irish people,
who...unexpectedly bucked their own political establishment by voting against the EU reform treaty. ...An impressive multimedia campaign opposing the pact was orchestrated by technology entrepreneur Declan
Ganley. It emphasized the dictatorial powers the deal would give the Brussels bureaucracy, the threat to the low business taxation in Ireland
that attracts investment, the supremacy of Euro law over Irish law, and a provision that lets changes be made without member-country approval.
...the Irish rejection of the Lisbon Treaty should be seen as more than just a sign of the troubles ahead for the peoples of Europe as they become
victims of a self-inflicted dictatorship of the bureaucrats. The very notion of a United Europe was always fundamentally misguided. ...Many centuries ago, Irish monks saved Europe from itself by preserving the
moral and intellectual foundations of civilization. Unfortunately, the continental powers are unlikely to let the Irish save Europe from itself a second time. You may be wondering about the last sentence in the excerpt. If the Irish voters rejected the Constitution/Treaty, how can the bureaucrats prevail? The answer is simple and indicative of how the political elite have little use for democracy. As this EU Observer report indicates, the Eurocrats - for all intents and purposes - intend to ignore the Irish vote and press forward on the referendum: The European Commission has called for ratification of the Lisbon treaty to continue, despite the No result in Ireland's referendum. "This vote
should not be seen as a vote against the EU… [It] has not solved the problems which the Lisbon Treaty is designed to solve," commission
president Jose Manuel Barroso said in Brussels on Friday. ...Mr Barroso said he believed "the treaty is alive" and "we should go on and try to find
a solution." It is "important now that the EU does not fall again in depression and does not forget there are other issues to deal with," he
added. In a joint statement later on, France and Germany also called for the ratification of the Lisbon treaty to continue. "The ratification
procedure has already been achieved in 18 countries. Therefore we hope that the other member states will continue the process," the Franco-German declaration reads. This arrogance is typical of European elitists. Libertas, the group that led the campaign to defend Irish sovereignty, has an excellent webpage detailing some of more absurd statements made by the continent's out-of-touch politicians. Perhaps even more distressing, though, is the fact that some Irish politicians are siding with the Brussels bureaucracy and conspiring on ways to impose the Constitution/Treaty, even though the Irish people rejected the referendum. The EU Observer explains: Irish Prime Minister Brian Cowen has said that his country's referendum on the Lisbon Treaty result must be respected, but was unclear on
whether to rule out a second referendum on the document. ...In a resounding defeat for the treaty, only ten out of 43 Irish constituencies voted in favour of the Lisbon Treaty. A majority of Irish people - 53.4
percent - voted against the EU's Lisbon treaty in Thursday's referendum, while 46.6 percent voted in favour... shortly after, in an interview on Irish
public television station RTE, asked by the presenter what he felt about comments from other European leaders saying that ratification should
continue, he said: "It's a matter for those governments to proceed as they wish. Pressed whether he could rule out a "Lisbon Mark II", the Irish
leader replied: "I'm not prepared to surmise on that. ...Other Irish politicians were scornful of the idea of continued ratification. European
Commission president Jose Manuel Barroso earlier in the afternoon had said the remaining ratifications "should continue to take their course."
Patricia McKenna, a former Irish Green MEP and leading No side campaigner reacted angrily to the suggestion: "It is completely unacceptable that anyone in Europe should continue with ratification. "It
shows complete contempt for the voice of the people. They simply fail to understand why people are voting No." "It's time for the EU bureaucrats
and senior politicians to come to grips with the fact that they cannot forge ahead without the consent of the people." ...Mary Lou McDonald, a
Sinn Fein MEP and the face of her party's No campaign, objected to French European affairs minister Jean-Pierre Jouyet's mid-afternoon
suggestion that ratification continue and that some "legal arrangement" could be cobbled together. ...Declan Ganley, the millionaire businessman
and founder of Libertas, the centre-right anti-Treaty group campaigning around tax harmonisation issues and against European 'red tape', called
the vote: "A great day for the Irish people and a great day for Irish democracy." ...Mr Ganley also warned against moves to push forward
with the same text. "[European Union leaders] need to listen to the voices of the people. The people of France and Holland have already spoken and now the Irish are making their voice heard."
Monday, June 16, 2008 ~ 1:25 p.m., Dan Mitchell Wrote Voters punished the Conservatives for breaking their promises to keep taxes low. Today, voters are turning against Labourites largely for
keeping their word. As the price tag on Labour's master plan for Britain continues to rise, voters are now saying they don't want it. ...Mr. Brown's
reputation as chancellor of the exchequer was based on strong global growth. But while the world boomed, Mr. Brown spent. Since 2000, Britain has been the second-most profligate country of the 30-member
Organization for Economic Cooperation and Development, topped only by South Korea. British public spending since 2000 has risen by 7.7 percentage points of GDP while key EU members such as Germany,
Austria, the Nordic countries, Greece and Spain all have managed to hold their spending below the growth of their economies. These massive transfers from the market to the state have resulted in decelerating
productivity growth and a worsening fiscal position. ...Something big is happening in British politics: Taxation has re-emerged center stage. And
as an issue, taxes favor the Tories. Conservative leader David Cameron was quick to exploit the change in the public mood, giving a speech with
the Thatcherite theme of making government live within its means. And the policy lessons come more naturally to the Conservatives. Instead of
squeezing the tax base and (as the Laffer curve predicts) collecting less revenue than you'd hoped, do the opposite. As happened under Conservative governments in the 1980s, tax reforms that cut people's
marginal rates and create far more winners than losers are good for the economy – and for winning elections.
Monday, June 16, 2008 ~ 12:45 p.m., Dan Mitchell Wrote The well-documented rise in economic inequality in the United States over the last two decades is somewhat misleading. Almost all Americans,
whether considered "rich" or "poor," are better off economically today than in previous times. Furthermore, due to the high degree of income
mobility in the United States, most people move between income groups throughout their life. ...household income varies substantially for several
reasons that are often ignored... High-income households are not likely to consist of one person earning a very high income (as is often assumed);
rather, they are likely to have two or more income earners: In 2006, a whopping 81.4 percent of families in the top income quintile had two or more people working, and only 2.2 percent had no one working. By
contrast, only 12.6 percent of families in the bottom quintile had two or more people working; 39.2 percent had no one working. The average number of earners per family for the top group was 2.16, almost three
times the 0.76 average for the bottom. ...Many redistribution advocates fail to see that raising marginal tax rates on higher incomes would, in
fact, increase measured inequality. The reason is that an increase in the marginal tax rate would discourage work. This reduction in the supply of
labor would drive up the before-tax pay of the highest earners. All other things equal, their after-tax pay would decrease and after-tax inequality
would fall - but (before-tax) measured inequality would rise. The income distribution should be judged not by how equal it is, but by how people obtained what they have. Inequality due to government-granted
privileges, in the form of subsidies, quotas and so forth, is arbitrary and unfair, while inequality due to income earned through work and investment is just.
Sunday, June 15, 2008 ~ 4:21 p.m., Dan Mitchell Wrote Banks and investment banks whose health is crucial to the global financial system should operate under a unified regulatory
framework…according to Timothy Geithner, president of the Federal Reserve Bank of New York. …Mr Geithner called the system "a confusing mix of diffused accountability, regulatory competition and a complex web
of rules that create perverse incentives and leave huge opportunities for arbitrage and evasion".
Saturday, June 14, 2008 ~ 11:50 a.m., Dan Mitchell Wrote Friday's market rout in employment, oil, the dollar and stocks was not the end of the world, but it is a warning. The message is that the current
Washington policy mix of easy money and Keynesian fiscal "stimulus" is taking us down the road to stagflation. … Washington has been on this
path in earnest since the credit market blowup last August. The Fed slashed interest rates dramatically to save Wall Street and prevent a recession, ignoring the risk to the dollar. Meanwhile, Congress and the
White House agreed to about $168 billion in "stimulus," mainly in the form of tax-rebate checks to prop up consumer spending. If you don't feel
stimulated by this repeat of nostrums from the 1970s, join the club. … European Central Bank President Jean-Claude Trichet signaled that he'll
soon raise rates no matter what the Fed does. Mr. Trichet is right not to want to repeat the Fed's mistake, but his action didn't help confidence in
the greenback. As for those rebate checks, they were promoted in January by the Democratic Party's main policy intellectuals, including former Treasury Secretaries Robert Rubin and Larry Summers. The idea
was that the rebates would tide the economy over until the credit crunch passed and the Fed's easy money began to work. The checks have been at
least one-third distributed, and we're still waiting for their growth kick. Much of the cash is going to pay for $4 gasoline and higher food prices.
In any event, such temporary rebates provide at best a short-term lift to consumer spending and do nothing to change the incentives to save or invest. … the born-again Democratic Keynesians are already demanding
a second round of nonstimulating stimulus. They now want tens of billions of dollars in new public spending and a housing bailout this year, while in
stark contradiction promising a huge tax increase to reduce the deficit next year. The one thing they rule out is a tax cut that would work.
Friday, June 13, 2008 ~ 7:11 a.m., Dan Mitchell Wrote Senator Obama will go for the "low-hanging fruit" first – that is, chasing down wealthy tax evaders, individual and corporate. Obama signed on to
the Tax Haven Abuse Act, a bill introduced in 2007 by Sens. Carl Levin (D) of Michigan and Norm Coleman (R) of Minnesota. Senator Levin figures that secretive offshore tax havens cost the federal government
$100 billion in lost tax revenues each year. That's part of the total "tax gap" – the amount of unpaid taxes owed by individuals, corporations,
and other organizations – estimated by the Internal Revenue Service (IRS) to be $345 billion. … Obama has frequently referred to Ugland House in Grand Cayman, a building that houses thousands of tax haven
corporations, as "the biggest tax scam on record." Comisar is hopeful that Obama will push for the Levin bill, if elected. Maybe closing or
limiting tax havens is "an idea whose time has come," she says.
Friday, June 13, 2008 ~ 7:00 a.m., Dan Mitchell Wrote Harmonisation of business taxes will be the number one priority of the French Presidency of the European Commission, which begins next
month, officials from the French Department of Finance told business leaders. A meeting of Medef, the largest French business lobby group, was told that Nicolas Sarkozy's government plans to bring forward
concrete measures aimed at harmonising the European corporate tax base and, by extension, all tax rates, as early as September. This would seem to undermine assurances given by Jose Barosso, the president of the
European Commission, on a visit to Ireland last April when he said that Ireland's tax rates would not be threatened. There is also evidence that
the European Commission may be deliberately hiding plans to harmonise corporate tax rates until after Ireland goes to the polls on the Lisbon Treaty …The Irish Independent has seen copies of the agenda prepared
for the July 2 meeting of the European Commission's 'Competitiveness Council. It shows the plans have now developed to the point that Laszlo Kovacs, the EU Commissioner for Taxation and Customs Union, and the
main driver of the tax harmonisation plans, was due to give a presentation on the subject to the Council. A Commission spokesman confirmed that the item has been removed from the latest edition of the
agenda. One source said it was specifically taken off because of sensitivities over the Irish poll on the treaty. … Turlough O'Sullivan, director general of business lobby group IBEC, said: "I am absolutely
convinced this is a Trojan horse to bring in common tax rates."
Thursday, June 12, 2008 ~ 5:16 p.m., Dan Mitchell Wrote Gibraltar's Chief Minister Peter Caruana announced in the 2008 budget his intention to bring forward a 3% cut in corporate tax originally
scheduled to take place in 2009, meaning that the corporate rate will drop by 6% this year. "Last year, and in order to signal the Government's
seriousness of purpose in reducing corporate tax rates, I reduced corporate tax rates to 33%, and said that I would reduce it further this
year to 30%, with a signalled reduction to 27% next year," Caruana told Parliament in his budget speech. "In order to further signal the
Government's commitment I am advancing that timetable by one year, and therefore the corporate tax rate is now reduced by 6% from 33% to
27% with effect from this year that is the year of assessment 2008/09," he added. Caruana explained that he envisages a further cut in the rate next
year, before moving to the rate of between 10% and 12% from 2010, adding that: "My strong preference will favour the bottom end of that range."
Wednesday, June 11, 2008 ~ 12:36 p.m., Dan Mitchell Wrote The New Brunswick government is considering a fundamental rebalancing of the tax system tilting towards consumption taxes and relieving citizens and businesses from the burden of hefty income taxes with a flat tax by 2012. Finance Minister Victor Boudreau released the government's discussion document on tax reform on Wednesday that proposes replacing the system of four different tax brackets with a single rate of 10 per cent, which would tie the province with Alberta for the lowest tax rate. Large businesses also stand to gain under the various proposals that could see their corporate taxes fall from 13 per cent as far as five per cent, giving it the lowest rate in Canada. …To pay for the deep tax cuts, the document is suggesting the Harmonized Sales Tax be raised by two per cent, essentially moving into the tax room vacated by the federal government. …Niels Veldhuis, a senior economist at the Fraser Institute, insisted the 10 per cent single rate would act as an incentive to keep young New Brunswickers home and attract new immigrants to the province. "I would label this as a revolutionary document because it doesn't focus on one aspect of the tax system. It goes through and delineates what are the major problems with New Brunswick's taxes, from personal income tax, corporate income tax, to capital taxes to property taxes," Veldhuis said. "I think this is a model for the other provinces because these are very important topics; the province | ||||||||||