Archive for February, 2007
Hubris Today
USA Today writes in an editorial:
That’s one reason the proposed XM-Sirius combination, announced this week, may be the rare merger that is good for consumers.
The rare merger that’s good for consumers? That’s rich coming from the flagship newspaper of Gannett, the rapacious media conglomerate that has swallowed up the major independent papers in Iowa, Mississippi, Kentucky, Tennessee, Arizona, Vermont, and other states.
Now, to be sure, USA Today did endorse the radio merger. And I don’t question the right of newspaper owners to sell their papers to Gannett. But USA Today ought to acknowledge that its parent company has been built on mergers (or takeovers) that in the eyes of critics reduced competition.
The rare merger that’s good for consumers? Mergers often benefit consumers; they can generate efficiencies and reduce costs. And the market is the best test [.pdf] of which mergers work and which don’t.
Filed under: General; Regulatory Studies; Tax and Budget Policy
FBI Scandal
The FBI looked the other way when it knew that several people were being framed for a crime they did not commit. Some might say, “Well, we all know there were certain abuses when Hoover was running the bureau in the ol’ days.” But behold the argument advanced by the attorney representing the United States government:
Yesterday, a Justice Department lawyer argued that the FBI had no duty to share internal documents with state prosecutors and insisted the state was responsible for convicting the men in the slaying of Edward “Teddy” Deegan in Chelsea.
“The United States is not liable to plaintiffs because they were convicted as a result of a state prosecution,” Bridget Bailey Lipscomb said. “The FBI did not initiate this prosecution, and there is no duty of the FBI to submit to state or local governments any of its internal files.”
The government is not denying the fact that it knew what was happening. Nor is it saying the plaintiffs were wronged but are asking for too much money. The government is instead arguing that it had no duty to come forward.
At a minimum, one might ask what the FBI means when it says that one of its “core values” is “Accountability [by] accepting responsibility for its actions and decisions and the consequences of its actions and decisions.” Maybe the director means that his agents will not arrest people who bring lawsuits against the bureau alleging illegal conduct. Maybe he means something else.
At worst, criminal laws were broken here. An ordinary citizen can go to jail for suborning perjury. It is also a crime to stand by and let a crime take place without notifying the authorities (misprision of felony). The feds evidently believe they are not bound by these rules. Pretty shocking. Even if the judge rules against the Department of Justice, we should not forget what it argued in this case.
To listen to a Cato event on the FBI’s informer scandal, go here.
Would You Like Fries with that Arrogance?
This isn’t really my beat, but it pushed my buttons (and not in a good way) all the same. Prince Charles, first in line for the British throne, has reportedly called for a ban on McDonald’s.
A known organic food advocate, Prince Charles was touring a diabetes center in Abu Dhabi when he made what McDonald’s assumes was an “off the cuff” remark about how banning McDonald’s was the “key” to improving diets.
This offends me on so many levels. First, as a libertarian I object to anyone telling others what they can put in their mouths. Second, the fact that the remarks come from someone whose power is derived solely through heredity (and, to my knowledge, has no qualifications in nutrition or public health) annoys me even more.
But mainly I am offended by the gall of a Brit casting aspersions on the quality of any cuisine.
Hey! Teacher! Let the Facts Be Known, ‘Cause…
From today’s Cincy Enquirer:
More than 11,500 Cincinnati Public School students are eligible to receive state-paid vouchers to attend private schools next year, but state officials say that Cincinnati Public officials are hindering them from getting the word out.
The district is the only one in the state that has refused to provide to the state the addresses of students who are eligible for tuition vouchers.
This Saturday and next, the Ohio Department of Education is conducting free parent information sessions in Cincinnati to describe how students attending 27 Cincinnati schools that are in “academic watch” or “academic emergency” are eligible to receive Ohio EdChoice Scholarships to attend private schools.
All in all, CPS is just another brick in America’s educational Berlin Wall. They can try to keep kids from escaping to freedom, like East German border guards during the Cold War, but eventually that wall is coming down.
The only thing that these folks can do is choose whether to help the process of educational liberation, or hinder it.
Someday their grand-kids or great-grand-kids, who will enjoy school choice, will ask them which side they were on. How will they answer?
Giuliani
A new poll shows that Rudy Giuliani has pulled into the frontrunner position for the Republican nomination for President. Thus, it is worth looking at his fiscal performance as New York City Mayor (1994 through 2001).
A good source of data are the Comprehensive Annual Financial Reports issued by the city’s comptroller. See the CAFR for fiscal 2002, which contains 10 years of historical data.
Total NYC general fund expenditures.
1994: $31.3 billion
2001: $40.2 billion
representing a 3.6 percent average growth rate.
NYC Outstanding General Obligation Bonds.
1994: $22.9 billion
2001: $26.8 billion
representing a 2.3 percent average growth rate.
The data suggest that Giuliani exerted reasonable fiscal control, particularly in comparison to prior NYC mayors, or President Bush. For example, NYC debt more than doubled in the five years prior to Giuliani entering office. But more analysis needs to be done.
Filed under: General; Government and Politics; Tax and Budget Policy
“Cleaning Those Foreigners’ Clocks”
While a lame argument is disappointing for the opportunity cost of having read it, a lame argument put forth as rebuttal to one’s own assertions can be affirming. But, to paraphrase a colleague, there’s nothing better than being challenged with lame arguments by adversaries who have wide media circulation. For that, I thank you, Pat Buchanan.
Buchanan takes exception to the arguments I make in this piece, which appeared in the Washington Times last week. The theme of my op-ed was that Congress should curtail its instinct to blame trade for everything that’s wrong with America. I even go as far as to suggest that, with strong economic growth, strong job creation, and a low rate of unemployment, things might not be all that bad in America. And at the very least, Congress should take the time to honestly assess the meaning of the trade deficit. What Congress would find is that the deficit is highly pro-cyclical (meaning that is shrinks when the economy contracts, it grows when the economy expands, and grows faster when the economy grows faster – see some of Dan Griswold’s work on this topic). I also suggested that the trade account has very little to do with trade policy, and much more to do with demand in the United States and abroad, as well as differences in habits of savings and consumption.
For those empirically sound (and verifiable) assertions, Buchanan lampoons libertarians for possessing some religious-like devotion to their beliefs regardless of the facts before taking two of my points out of context to serve as springboards into his xenophobic, isolationist, nationalistic rage.
When we win at trade, it doesn’t mean they lose (“cleaning those foreigners’ clocks”). We are all winning at trade as the economic pie grows larger and larger—so much so that the large U.S. economy can grow at a moderate-to-strong pace every year with the exception of two for the past quarter century, while the small-to-medium-sized Chinese economy simultaneously can grow by double digits every year during the same period.
But rather than reinvent the wheel under which arguments like Buchanan’s have been reliably squashed throughout the years, I invite you to peruse this collection of timeless commentaries from Cato scholars and others about Buchanan-like views on trade and globalization.
Filed under: General; International Economics and Development; Trade
Inquiring Minds Want to Know
The Hill reports on a senator’s curiosity about 527 groups:
“I promised a group of people that we would do some hearings on it,” said Feinstein. “We’ll take a look at the 527, what it is today and where it appears to be going. I’d like to know exactly what 527s are doing. My exposure to them is necessarily limited, as it is for most members. It’s when you have a 527 weighing in against you that you want to know where this money is coming from.” (emphasis added)
Not that Senator Feinstein would do anything to harm the people weighing in against her. She is just curious, eager to learn.
Filed under: General; Government and Politics; Law and Civil Liberties; Political Philosophy
Articles in the Financial Times and the Economist Defend Tax Competition
The Economist has an entire section on the “offshore” world in the latest issue. Among the key findings are that so-called offshore financial centers promote growth and discourage wasteful government:
…the most vexing problem that highly mobile financial flows pose for governments is that when they cross borders they may take tax revenues with them. …As companies become ever more multinational, they find it easier to shift their activities and profits across borders and into OFCs. …Financial liberalisation—the elimination of capital controls and the like—has made all of this easier. So has the internet, which allows money to be shifted around the world quickly, cheaply and anonymously. …tax, regulatory and other competition is healthy because it keeps bigger countries’ governments from getting bloated. Others argue that OFCs may be an inevitable concomitant of globalisation. “Even if today’s OFCs were somehow stamped out, something like them would pop up to take their place,” says Mihir Desai of Harvard Business School. Some academics have found signs that OFCs have unplanned positive effects, spurring growth and competitiveness in nearby onshore economies. …International organisations have launched various initiatives to try to get OFCs to tighten supervision, co-operate more with foreign governments to catch tax cheats and, at least in Europe, eliminate “harmful” tax practices. OFCs think such initiatives are designed to force them out of business. The countries that set these standards “are an oligopoly trying to keep out smaller competitors. They are both players and referees in the game. How can they be objective?”, asks Richard Hay, a lawyer in Britain who represents OFCs. …the broader concern over OFCs is overblown. Well-run jurisdictions of all sorts, whether nominally on- or offshore, are good for the global financial system.
A column in the Financial Times takes an even stronger position. It notes that tax competition encourages more responsible behavior by lawmakers. It also explains that low taxes are not akin to subsidies, and points out that anti-tax-competition advocates will not be satisfied until all pro-growth tax policies are exterminated:
Who You Gonna Believe, Me or Your Lying Eyes?
Here’s Representative Barbara Cubin’s (R-WY) letter to state legislators regarding the REAL ID Act, as reported in the Casper Star-Tribune: “The new driver’s licenses will allow state and federal law enforcement to check the authenticity of a license, but will not grant access to state databases of private information.”
Now here’s section 202(d) of the REAL ID Act:
To meet the requirements of this section, a State shall adopt the following practices in the issuance of drivers’ licenses and identification cards: . . .
(12) Provide electronic access to all other States to information contained in the motor vehicle database of the State.
(13) Maintain a State motor vehicle database that contains, at a minimum–
(A) all data fields printed on drivers’ licenses and identification cards issued by the State; and
(B) motor vehicle drivers’ histories, including motor vehicle violations, suspensions, and points on licenses.
Who you gonna believe?
Filed under: Foreign Policy and National Security; Law and Civil Liberties; Telecom, Internet & Information Policy
The Growing Welfare State
Unemployment is low, the stock market is booming, we’ve had 10 years of welfare reform — and “America’s welfare state is bigger than ever,” reports the Associated Press.
The number of families receiving cash benefits from welfare has plummeted since the government imposed time limits on the payments a decade ago. But other programs for the poor, including Medicaid, food stamps and disability benefits, are bursting with new enrollees.
The result, according to an Associated Press analysis: Nearly one in six people rely on some form of public assistance, a larger share than at any time since the government started measuring two decades ago.
Note that this story only looks at the welfare state for the poor. Far more than one in six Americans are dependent on such government programs as Social Security, Medicare, unemployment compensation, and so on, as Sen. Jim DeMint has been warning for years. More than 48 million people received a Social Security check last year, for instance.
But the AP investigation does show the weakness of welfare reform after 10 years. As Cato scholars have noted, many people have left the “welfare rolls” only to remain dependent on Medicaid, food stamps, housing subsidies, and other means-tested transfer programs.
The AP report was printed on many newspaper websites, but it didn’t appear in the nation’s largest papers. It should get more attention. Presidential candidates should be asked whether they think it’s bad that almost 50 million Americans are on welfare or welfare-related programs. What would they do to reduce dependency? And how long can a nation remain free if half its citizens are dependent on government hand-outs?
Pots & Kettles at the RNC
Somehow, I’ve found myself on an email distribution list for the Republican National Committee’s opposition research team. Every couple of days or so, I get something documenting how the Democrat of the moment is out to lunch on this or that issue, speaking or acting hypocritically about some matter, or is an all-around crook or ne’er-do-well. These packaged emails - intended primarily for the press - are the equivalent of political drive-by shootings with footnotes.
Today’s edition, however, is exquisite. Titled “Hillary’s Kerryaoke on Energy,” it purports to document Hillary Clinton’s crazy statements and votes on energy policy. Here’s what we learn:
- Hillary Clinton is a big proponent of energy independence and calls for a big Manhattan-style project to get us there. “‘If we landed a man on the moon and brought him back safely to Earth within a decade as President Kennedy had promised in 1961, we know we can do this,’ said Clinton to the AP the other day in the course of promoting her $50 billion program to reduce the nation’s dependence on foreign oil. The RNC’s complaint? She sounds just like John Kerry did in 2004. My complaint? She sounds just like President Bush, who proposes to spend at least that much to jack-up the Strategic Petroleum Reserve - and that’s before we even begin tallying up the costs associated with his ethanol madness, his clean coal, nuclear power, and renewable energy subsidies, and a plethora of related costly interventions.
- Hillary Clinton wants to impose special taxes on oil company profits to help fund this $50 billion initiative of hers. Can’t complain with the RNC attack here. But someone ought to remind these young operatives that George Bush is likewise happy to levy special taxes on oil companies to fatten government coffers.
- Hillary Clinton voted 17 times against ethanol subsidies and even once dared to cast a procedural vote against an energy bill containing clean coal subsidies. The RNC is outraged - OUTRAGED! - that the New York Senator would eschew federal attempts to rig energy markets and intervene in private investment decisions.
- Hillary Clinton has voted eight times to prevent drilling in the Arctic National Wildlife Refuge. I’m not sure that the “free market” position is to drill, but I am pretty sure that drilling there would have no appreciable impact on U.S. energy security.
You’ll probably hear some echoes of this RNC hit-piece on right-wing talk radio shows over the next week or so. The point the RNC is trying to make is that she TALKS a good game regarding energy independence, but hasn’t always voted that way. Well, if I have to choose between someone who means the crazy rhetoric he is dishing out and one who really doesn’t, I’ll take the latter.
Government Identity Programs in Collapse?
Government Computer News has had a number of articles recently about the problems besieging the Transportation Worker Identity Card (or TWIC), one of a number of government identification systems nominally responding to the post-9/11 threat environment. It should be no surprise to government watchers that a service provider for TWIC, viewed by many as unqualified, happens to be in the district of the former Chairman of the House Appropriations Committee’s Homeland Security Subcommittee.
The REAL ID Act is a bigger government identity control project, by far, which attempts to force states to convert their drivers’ licenses into a national ID card. Regulations implementing REAL ID are widely expected to be released this week.
Even while the architects of the surveillance state gather to talk about implementation, the Washington Post has an article out today that is probably best taken as the first post mortem on REAL ID.
The headline (”As Bush’s ID Plan Was Delayed, Coalition Formed Against It”) wrongly attributes REAL ID to the Bush Administration, which was not a proponent of REAL ID, though the President did accept it as part of a military spending bill. The article correctly attributes responsibility to Rep. James Sensenbrenner (R-WI), the former Chairman of the House Judiciary Committee.
Though the Bush Administration has room to distance itself from this colossal unfunded national surveillance mandate, a prominent member of the Administration appears to have consumed the REAL ID Koolaid - in quantity.
“If we don’t get it done now, someone’s going to be sitting around in three or four years explaining to the next 9/11 commission why we didn’t do it,” Homeland Security Secretary Michael Chertoff told the Senate’s Homeland Security Committee on Feb. 13.
Secretary Chertoff’s shameless terror-pandering is matched only by his ignorance of identification’s utility as a security tool. People who understand identification know that it does not provide security against committed threats.
It’s unfortunate that government works by trial and error, but this trial may soon show that a national ID is error.
Filed under: Cato Publications; Foreign Policy and National Security; Law and Civil Liberties; Telecom, Internet & Information Policy
Market Education Could End the Culture War
Over at SayAnythingBlog, Rob notes a case of two Boston families complaining that their children were taught about homosexuality in elementary school. The parents, apparently religious conservatives, objected to the lesson being taught without parental consent. A federal judge has just told them: tough luck.
Yet another skirmish in the culture war. We’ve gotta keep fighting it, and we’ve gotta keep racking up winners and losers, right?
Wrong. Rob notes:
this is exactly the sort of thing school vouchers would solve. School crossing the line and teaching your kid about things you find morally offensive? Or things that should wait until they’re a little older? Take your kids to a different school.
While I’ve argued that education tax credits do a better job than vouchers of avoiding such conflicts (scroll down the linked page to “Conviction, Compulsion, and Conflict”), this is essentially the same argument that Cato’s ed. staff has been making regarding all the values battles that arise due to our official government school system.
A free market in education can allow families to obtain the sort of education they value for their own children without forcing them to impose those values on their neighbors. Our existing school system, by contrast, creates an endless battle over what will be taught in the schools.
Rob gets it, and a lot of other people are starting to get it, too.
Europeans Want More Tax Harmonization — Which Means Higher Taxes
There already is a minimum fuel levy in the European Union, but governments are allowed to impose higher taxes (but never lower taxes, of course). This tax difference is causing some truckers to drive longer distances to buy fuel where diesel taxes are lower. The proposed response to this alleged problem is to reduce the difference in the tax among jurisdictions. Needless to say, the Euro-crats have decided that the solution is higher tax rates for all nations.
The EU Observer reports on the latest evidence that tax harmonization is always a scheme to increase government power:
EU tax commissioner László Kovács is set to table a proposal to harmonize the minimum level of excise duties at €359 per 1000 litres of diesel in 2012 and subsequently at €380 in 2014, a move which would see most EU states increasing their current rates.
According to Mr Kovács’ paper — seen by EUobserver — such a rise would stamp out so-called fuel tourism, as big trucks now make detours from their routes to tank in a state where it is the cheapest, generating more greenhouse gas emissions as well as losses to some EU states’ coffers. Germans, for example, are willing to drive two to four additional kilometres for each euro cent price differential compared to a neighbouring country in the case of gas oil. Fuel tourism cost Germany €1.9 billion in 2004.
…[O]ne Lithuanian diplomat [is now] saying the Brussels proposal should be scrapped as it would translate into an overall increase in prices and inflation. “It could freeze Lithuania’s euro hopes”, a diplomat told EUobserver, adding “taxes remain one’s competitive edge and countries with high rates have taken a voluntary risk”.
Filed under: International Economics and Development; Tax and Budget Policy
Sunstein, Hayek, and Wikipedia
University of Chicago law professor Cass Sunstein may not be among libertarians’ favorite thinkers, but Sunstein is, in his own way, a strong advocate of individual liberty and free markets.
Hayek fans will enjoy Sunstein’s op-ed in today’s Washington Post, in which he describes how individuals are using computer-age technology to aggregate information. A snippet:
Developing one of the most important ideas of the 20th century, Nobel Prize-winning economist Friedrich Hayek attacked socialist planning on the grounds that no planner could possibly obtain the “dispersed bits” of information held by individual members of society. Hayek insisted that the knowledge of individuals, taken as a whole, is far greater than that of any commission or board, however diligent and expert. The magic of the system of prices and of economic markets is that they incorporate a great deal of diffuse knowledge.
Wikipedia’s entries are not exactly prices, but they do aggregate the widely dispersed information of countless volunteer writers and editors. In this respect, Wikipedia is merely one of many experiments in aggregating knowledge and creativity that have been made possible by new technologies.
Sunstein’s op-ed goes on to discuss intriguing experiments with events futures, which should delight Cato friend Robin Hanson:
But wikis are merely one way to assemble dispersed knowledge. The number of prediction markets has also climbed over the past decade. These markets aggregate information by inviting people to “bet” on future events — the outcome of elections, changes in gross domestic product, the likelihood of a natural disaster or an outbreak of avian flu.
Filed under: Political Philosophy; Telecom, Internet & Information Policy
Fairly Ridiculous
A Maryland legislator has introduced an absurd bill that would allow the state to seize unused funds on gift cards.
From WJLA-TV’s website:
Democratic Delegate Joseline Pena-Melnyk testified Thursday before a House committee that after four years, the state should take money on old gift cards as abandoned property. She argued that companies are unfairly keeping money paid for gift cards and gift certificates.
To Delegate Pena-Melynyk, “fairness” apparently means confiscating money from individuals and businesses and spending it on her priorities, in this case public education.
If I learned one thing during my 13 years in Maryland’s public education system, it’s that taking people’s stuff isn’t fair.
Filed under: Government and Politics; Tax and Budget Policy
Scared Stiff? Watch John Stossel
Tonight, John Stossel of ABC News offers a special report entitled “Scared Stiff: Worried in America.” The two-hour program, which is a special report of ABC News’ “20/20″ and airs at 9pm Eastern, is a follow-up to Stossel’s very first special 12 years ago, “Are We Scaring You to Death?”
Among Stossel’s interviewees tonight are two familiar faces for Cato fans: adjunct fellow Veronique de Rugy (of AEI) and former visiting fellow John Mueller (of Ohio State University). Vero will discuss her research into the billions of dollars wasted in the name of “terrorism defense” and John will put the terrorism risk into context by comparing it to the far-more likely risk of drowning in a bathtub or being struck by a deer.
A Pox on Unanimity
In Slate, Doug Kmiec criticizes the Court’s decision in Philip Morris v. Williams for its lack of unanimity and argues, echoing the fashionable arguments of Chief Justice Roberts, that unamimity helps promote “clear rules” because judges must “work out their disagreements before they write their opinions.”
I’ve previously suggested (here) that this is backwards. Unanimous decisions are, on balance, likely to be less clear than 5-4 decisions:
It’s not clear that Roberts’ prediction (that consensus on the Court yields clarity, precision, and narrowness) is right. Consensus-building in Congress, another multi-member voting body, is purchased at the price of legal fuzziness. The more amorphous and open-ended the statute — the more the statute defers tough questions — the more members of Congress agree to add their names to it.
While consensus building on the Supreme Court is a simpler prospect, there’s no reason to think the same basic dynamic won’t apply here too: Supreme Court justices will purchase broad agreement at the price of clarity, harming the rule of law.
In a very good post, Ilya Somin makes a similar point, writing in response to Kmiec, here:
Many of the complex balancing tests and complicated exceptions to rules that legal commentators like to make fun of in Supreme Court opinions are the result of the need to “count to five” — corral the five votes needed to create a binding Supreme Court decisons. Counting to nine is usually likely to require more compromise — and thus more complicated balancing tests and exceptions — than counting to five.
Adam Smith and Globalization
Here’s Cato’s own H.L. Mencken Research Fellow P.J. O’Rourke discussing his new book, On the Wealth of Nations on the Newshour with Jim Lehrer.
Can anyone identify the peculiar contraption that P.J. is typing on?
P.J. spoke here a few weeks ago, and also gave this podcast interview.
Filed under: Cato Publications; International Economics and Development; Tax and Budget Policy
George Lucas Rediscovers a Sci-Fi Classic!
I’m indebted to George Lucas for conceiving Star Wars and the Indiana Jones franchise —episode 4 in 2008, whoooo! But the latest issue of his education magazine, Edutopia, rediscovers a cult science fiction classic that’s particularly dear to my heart: The 1991 Sandia National Labs report titled “Perspectives on American Education.”
The “Sandia Report,” as it’s known to its devotees, claimed that America had not suffered an academic decline as critics alleged. Though the original Sandia Report was never published, it became an instant hit. Anyone wanting to defend the record of U.S. public schools seemed to have — and quote — a copy.
By far, the Sandia Report’s most popular claim was that despite declining average SAT scores, SAT performance was actually going up! How could that be? “Simple” explains Lucas’ Edutopia:
[S]tatisticians call it Simpson’s paradox: The average can change in one direction while all the subgroups change in the opposite direction if proportions among the subgroups are changing.
Sandia claimed, as Edutopia repeats, that “[b]etween 1975 and 1988, average SAT scores went up or held steady for every student subgroup.”
The funny thing is they didn’t. The scores for at least one of the ethnic subgroups went down, the subgroup that made up the majority of test takers: white students.
Religious Think Tank Defends Tax Competition
A scholar from the Acton Institute looks at the tax battle between Swtizerland and EU leaders in Brussels, and exposes the misguided morality of the politicians who denounce tax competition:
The war of words was ignited by the French rock star Johnny Hallyday’s decision in late 2006 to move to Gstaad, Switzerland, because he was tired of France’s exorbitant tax-rates. Mr. Hallyday joins an exodus of individuals and companies from France, Germany, Italy, and Austria taking advantage of Switzerland’s 21 percent overall tax-rate and considerably lower corporate tax-rates. Liechtenstein, Switzerland’s tiny neighbor, maintains even lower tax-rates and has benefited from a similar flight.
For corporate tax-exiles in Switzerland, the situation is especially advantageous. Each canton sets its own corporate tax-rates. This has triggered intense competition between cantons anxious to attract new businesses. In January 2006, for example, the central Swiss canton of Obwalden reduced its corporate tax-rate to 6.6 percent. Over 11 months, it attracted 376 new companies. No wonder large corporations such as Google and IBM have located their European headquarters in Zurich.
Outside Switzerland, the response has been extraordinary. Some French socialists have accused Switzerland of “looting” its neighbors. This is somewhat strange, given that no-one is forcing these individuals and companies to move to Switzerland. Some would suggest that the real “looters” are French governments of left and right who have raised taxes over the past 40 years to such levels that even many relatively modestly well-off French citizens have left or invested their capital in off-shore tax-havens.
…“Tax-harmonization” in the EU, incidentally, never means lowering tax-rates. It invariably involves raising taxes to the same high level. It was on this basis that, when faced with companies leaving Germany to base their headquarters in 19 percent flat-tax Slovakia, Germany’s ex-chancellor Gerhard Schroeder once accused Slovakia of “un-European” behavior. To be truly European — apparently — means giving about half your income to the government.
Filed under: International Economics and Development; Tax and Budget Policy
The European Commission Is Free Market?!?
There is nothing terribly newsworthy in a story from the EU Observer about a move to the left by the European Commission, but it is revealing that the report indicates that the Brussels-based bureaucracy has a free market reputation.
This is, after all, the bureaucracy that pushes for tax harmonization between countries and operates a Soviet-style agricultural subsidy system. But, then again, maybe the bureaucrats are free market when compared to French and German politicians:
The European Commission on Wednesday appeared to be trying to shrug off its reputation as a free-market bulwark, releasing a vision on the future of the EU’s single market which is notably sensitive to social concerns.
…The current team of commissioners led by Jose Manuel Barroso generally has a pro-market reputation, not least in Germany and France.
…The paper also states that “many European citizens have raised concerns about the perceived disruptive impacts of globalisation,” adding that it is a “matter of social justice” to “anticipate and accompany change for the people and sectors directly affected by the market opening.” Brussels already runs the so-called Globalisation Adjustment Fund which was introduced by Mr. Barroso in 2005 after French president Jacques Chirac criticised the EU for failing to respond to massive lay-offs in France by U.S. computer maker Hewlett-Packard.
Filed under: International Economics and Development
The Wisdom of Walter Williams
George Mason University’s Walter Williams is a skilled economist who can spout jargon when necessary, but it is his ability to put economic principles in common-sense language that sets him apart from most of his peers. How many Americans would cease worrying about the trade deficit, for instance, if politicians copied Walter’s words and explained that America and Japan (or China, or Germany, etc.) do not trade with each other:
When I purchased my Lexus, did I deal with the U.S. Congress, the Japanese Diet, George Bush and Shinzo Abe, or did I deal with Toyota and its intermediaries? If we erroneously think of international trade as occurring between the U.S. and Japanese governments, then all Americans, as voters, have a say-so. But what is the basis of anyone having a say-so when one American engages in peaceable, voluntary exchange with another person, be they Japanese, Korean, British, Chinese or another American?
Filed under: International Economics and Development
Tax Cuts North of the Border
America traditionally has enjoyed a competitive advantage over Canada, but the Conservative government in Ottawa has announced addtional tax cuts, including reductions in the corporate rate. The rest of the world is responding to tax competition, and the high corporate tax rate in the US is becoming an ever-larger problem for American companies in the global marketplace. Unfortunately, there is no groundswell — or even idle gossip — for a reduction in America’s punitive corporate tax. Tax-news.com reports on the new tax cuts in Canada:
Jim Flaherty, Canadian Minister of Finance, has announced that he will table the second budget of Canada’s Conservative administration under Prime Minister Stephen Harper on March 19, 2007. …Key tax measures contained in the 2006 budget included the long-promised 1% cut in Goods and Services Tax to 6%, a 2% cut in the general corporate tax rate by 2010, eliminating the corporate surtax on all corporations by 2008, axing the federal capital tax, and increasing the amount of income eligible for the lowest rate of corporate tax for small businesses. In addition, this bottom rate will be reduced by 1% to 11% by 2009.
Filed under: General; International Economics and Development; Tax and Budget Policy
Parents More Schooled. Kids Less Educated. — NAEP
The 2005 NAEP Reading and Mathematics test scores for 12th Graders have just been released.
Here’s the detail you’ll hear in all the media coverage: Reading achievement has hit its lowest point in the entire period since the first comparable score was collected back in 1992. (The math test has changed, so no trend analysis is possible).
Here’s a detail you won’t see in many news stories: The highest degree earned by students’ parents has gone up substantially since 1992. In that year, 41 percent of students reported that at least one of their parents was a college graduate. Today, it’s 47 percent. Researchers have long known that parents’ level of education is a strong predictor of children’s academic success, so this increase in the share of college graduates among parents should be associated with higher student achievement (other things being equal). But achievement went down. Significantly. If the home environment is now more conducive to learning, but less learning is actually taking place, that leaves… the schools.
So: No, the NCLB isn’t helping. No, more money isn’t helping (it’s up more than 20% per pupil since 1992, in real inflation-adjusted dollars). It’s. The. Schools. We suffer from an education monopoly. Monopolies are bad.
A one-size-fits-few state-run school system simply can’t produce the kind of innovation and improvement we take for granted in the competitive, free enterprise sector of our economy. We need to inject parental choice and competition into our education system if we want to see the trend lines going up instead of down.
New at Cato Unbound: Inequality Denialism = Global Warming Denialism?
The Earth is heating up, and so is the conversation on income inequality at Cato Unbound! University of Oregon economist and proprietor of the popular econo-blog, Economist’s View, writes:
This debate reminds me of the debate over global warming, though using the word “debate” implies there is more disagreement than there really is.
[...]
The inequality debate appears to be unfolding similarly with those who would like to avoid policies to address inequality, policies such as more progressive taxation, hoping to keep the first question open as long as possible or claiming that the rise in inequality is the inevitable result of natural market forces and we should not interfere.
Cornell University economist Richard Burkhauser takes exception:
I give Mark Thoma high marks for raising the rhetorical stakes in this debate to the point where those who remain more skeptical of the evidence for substantial increases in income inequality since 1989 are relegated to the status of contrarian ideologues unwilling to sign onto Mr. Gore’s “Inconvenient Truth.” But isn’t this a bit much, even for a true believer?
Burkhauser goes on to argue that there has been no detectable increase in inequality within the bottom 99 percent of the in