Archive for March, 2007
NYT Clueless on Libertarianism
In Sunday’s New York Times, Times economics columnist David Leonhardt reviews Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement by Brian Doherty.
It might have made sense to get a libertarian, or someone familiar with the libertarian movement, or a political historian to write the review. Instead, the Times turned to someone who knows something about economics. Since the Times is the most important book review venue in the country, it’s worth taking a close look at Leonhardt’s complaints.
The first half of the review retells the story of Ayn Rand and the Objectivists, which is fine. It’s an interesting story, though it’s probably the part of the book most likely to be already familiar to Times readers. After the Randian opening, Leonhardt writes:
The story of the American libertarian movement, like the story of its most famous salon, has been a combination of small numbers and big influence. It has never really emerged from the fringe, for the simple reason that most Americans want their government to educate the young and care for the old. But over the last few decades, they have also grown increasingly skeptical of collectivist policies that go beyond the basics. Libertarian thinkers — Rand, Milton Friedman, Murray Rothbard and others — have helped foment this skepticism and then enthusiastically pointed to the alternative.
Fair enough. Most movements are small, even those that have big effects. “Fringe” is a subjective issue; if a movement produces several Nobel laureates and a chairman of the Federal Reserve Board, and plays a role in such policy reforms as the end of the draft, deregulation, sharply reduced taxes, and freer trade, is it still on the fringe?
Heartland Insurgency
On Tuesday, it was Nebraska senators Chuck Hagel (R) and Ben Nelson (D) who provided the winning margin for a Senate bill to begin a phased withdrawal of troops from Iraq.
Today it’s five-term congressman Lee Terry (R-Neb.) deciding that Attorney General Alberto Gonzales should resign.
Pretty soon, the neocons are going to be calling for an invasion of Nebraska.
Filed under: Foreign Policy and National Security; General; Government and Politics; Law and Civil Liberties
Government Should Not Interfere with Company Pricing Decisions
It is currently illegal for a company to insist that a retailer sell a product at a certain price. Politicians claim that this policy, known as resale price maintenance, results in higher prices. This surely is true, but the key question is why a firm would want to insist on higher prices, especially since the retailer reaps the benefit?
The answer, as Steve Chapman explains in his column, is that some products are more likely to do well if the retalier has an incentive to give potential consumers more time, advice, and service. But this won’t happen if consumers can benefit from this attentiveness at one store and then buy the product at another store:
For a manufacturer to make an agreement with retailers to sell only at a specified minimum price is illegal — even when it promotes competition and offers benefits to consumers. …[E]stablished federal law … treats resale price maintenance agreements as invariably malignant. …The assumption is that if you let manufacturers control retail prices, they’ll hose consumers for their own profit.
But if they wanted to hose consumers, they could just raise the wholesale price they charge to retailers. That way, they would get the full proceeds of the rip-off, instead of sharing them with stores. So it’s reasonable to assume there is some motive besides price-gouging at work.
…Why would a company making purses or televisions or running shoes want to keep prices at a certain minimum? Maybe to induce stores to offer exceptional service or technical assistance. A store can afford to do that only if it can charge a commensurate price. But a service-oriented store can’t charge a commensurate price if a consumer can come in, get lots of help and then go across the street to Discounts Galore and buy the item at 30 percent off. By setting a floor, the manufacturer can prevent “free-riding” by bargain outlets.
In our hypercompetitive retail environment, if the strategy doesn’t serve customers, manufacturers who use it won’t survive. Consumers who can’t get one brand at a discount price will defect to other brands.
Filed under: Regulatory Studies; Tax and Budget Policy
Sweden Repeals Wealth Tax
Globalization has been an ally of taxpayers. Because it is increasingly easy for jobs and capital to cross borders, politicians are being forced to eliminate or reduce taxes that penalize productive behavior.
The latest example comes from Sweden, which is now eliminating its tax on wealth:
Maybe the next Bjorn Borg won’t feel compelled to move to Monaco now that Sweden plans to scrap a decades-old “wealth” tax that imposes levies on assets — not just on income. …The move, expected to be approved by parliament later this year, underscores the country’s efforts to keep successful Swedes and their capital at home by changing its fabled but costly welfare state.
“It’s not sustainable to keep taxes that radically diverge from other countries,” Finance Minister Anders Borg, who is not related to the tennis great, told The Associated Press on Thursday. “Not if you want the money to stay in the country.”
Sweden is not alone. The article notes that other nations have been forced to eliminate this punitive levy on capital: Read the rest of this post »
Filed under: Government and Politics; International Economics and Development; Tax and Budget Policy
Is Giuliani a Supply-Sider?
Writing in the Wall Street Journal, Steve Forbes endorses Rudy Giuliani and makes a reasonably compelling argument that he believes in smaller government:
Rudy Giuliani…cut taxes and the size of government…. Mr. Giuliani delivered, overcoming the initial resistance of the overwhelmingly Democratic City Council. He ultimately prevailed 23 times, including cuts in sales, personal income, commercial rent and hotel occupancy taxes.
…Mr. Giuliani always made fiscal discipline a priority: instructing city commissioners to cut agency budgets even when the deficits had turned to surpluses. Mr. Giuliani set out to cut the size of city government, insisting that New York should live within its means. New Yorkers saw their quality of life improve with more effective delivery of services while the bureaucratic ranks were being thinned by nearly 20,000 — a near 20% decrease in city headcount, excluding police officers and teachers.
But there are reasons to question Giuliani’s pedigree. In a post on the New York Sun’s political blog, Ryan Sager quotes Giuliani trashing the flat tax:
“It [the flat tax] would really be a disaster and it’s totally inconsistent with the movement of the Republican Congress toward giving more responsibility to state and local government,” Mr. Giuliani said on CNN’s “Capital Gang,” on March 9, 1996.
To be sure, even good policymakers sometimes say silly things because of competing political interests. Nonetheless, it is difficult to reconcile Giuliani’s recent supply-side rhetoric with his harsh 1996 statement. If he had merely expressed concern, that would be understandable, but claiming that a flat tax would be a “disaster” suggests a genuine hostility to the flagship policy goal of supply-side economics.
Filed under: Government and Politics; Tax and Budget Policy
‘Security Is the New Freedom’
That’s what David Brooks declares in yesterday’s New York Times. In the column, he argues (yet again) that limited-government conservatism is dead, and that what should take its place is an orientation that focuses less on “negative liberty (How can I get the government off my back) and more [on] positive liberty (Can I choose how to live my life).” We also learn from Brooks that since “The ’security leads to freedom’ paradigm is a fundamental principle of child psychology,” it must be the right way to look at man’s relationship to the state.
Since Brooks cites Tyler Cowen’s contribution to Cato Unbound, now’s as good a time as any to carp about that essay. I can’t agree with Professor Cowen that the libertarianism of the future ought to share the Left’s focus on ‘positive’ liberties and make its peace with big government. The 21st century libertarianism he’d like to see, a doctrine that seems to view principled distrust of government as an anachronism, isn’t libertarianism at all. It’s modern liberalism with a greater appreciation for markets — Thomas Friedman without the mixed metaphors. If modern liberalism moves in that direction, the world will be better off, and if libertarians can help encourage that transition, we should.
Yet I don’t understand why the continuing resilience of the welfare state constitutes an “intellectual crisis” for libertarianism. An ideology is in intellectual crisis, it seems to me, when certain of its core tenets turn out to be wrong. That people still like the idea of free stuff from government doesn’t count unless libertarianism has been in crisis from its inception.
In any event, my guess is that any political prediction that Cowen, I, or any other aspiring Hari Seldon might choose to make will, in a matter of decades, look as quaint as one of those 1950s magazine pieces on our Jetsons-style future. Given the difficulty of predicting the future, we might do better to focus on what’s true instead of what we believe to be politically possible.
If the welfare state impedes human flourishing, if the drug war is an abomination, if the New Deal constitutional revolution was an intellectual fraud from top to bottom, then libertarians ought to say those things. Because they’re true. Because they’re not said often enough. And because describing the world accurately is the first step towards changing it. Read the rest of this post »
Filed under: Cato Publications; Government and Politics; Law and Civil Liberties; Political Philosophy
Another Loss for the Online Gambling Nannies
I have yet to digest the official ruling (for the most committed trade nerds, it’s available here), but the United States has been dealt yet another blow in its dispute with Antigua and Barbuda over Internet gambling.
According to a World Trade Organization report released to the public today, the United States has not complied with the rulings and recommendations of a previous panel’s verdict that the United States’ ban on online gambling services was in violation of its commitments to the WTO (more here). Translation: the United States has not made any changes to its restrictions on gambling over the Internet that would make its laws WTO-consistent.
The United States will probably appeal this latest ruling, but if it loses that appeal and continues to refuse to change its laws, then the state of Antigua and Barbuda could retaliate to recover the damage that it claims has accrued to its online gambling industry as a result of the U.S. ban. Retaliation usually involves placing tariffs on the goods of the offending country, in this case the United States. (That is, of course, an economically insane way of “punishing” the violator, but I digress.)
Radley Balko is hoping that Antigua and Barbuda will instead choose to kick the United States where it hurts, and suspend its obligations to protect the intellectual property rights of American companies.
Filed under: International Economics and Development; Law and Civil Liberties; Trade
Destructive Compassion
Columnist Dennis Prager has a disturbing story to tell:
This past weekend, a friend of mine attended his 13-year-old son’s baseball game. What he saw encapsulates a major reason many of us fear for the future of America and the West.
His son’s team was winning 24–7 as the game entered the last inning. When he looked up at the scoreboard, he noticed that the score read 0-0. Naturally, he inquired as to what happened — was the scoreboard perhaps broken? — and was told that the winning team’s coach asked the scoreboard keeper to change the score. He and some of the parents were concerned that the boys on the losing team felt humiliated. In order to ensure that the boys losing by a lopsided score would not feel too bad, the score was changed.
Read the whole thing. If this keeps up, they’ll revise the tortoise and the hare story so that the race ends in a tie.
Pure Protectionism
Several years ago, I appeared on the radio show of the late and much-missed David Brudnoy to discuss deregulation of taxicabs. I advocated a free market and an end to licensing and medallions. We got a call from a spokesman for the taxicab industry, who was outraged. Public safety! he exclaimed. “Without licensing, you could have some crazy person driving a cab and have an accident and you could have a mudda an’ a dotta killed! Do you want to be responsible for that?!”
I remembered that call when I saw the letter in the Washington Post from Michael C. Alin, executive director of the American Society of Interior Designers. Responding to George Will’s column on the absurdity of licensing for interior decorators, Alin writes:
In one of the worst hotel fires in U.S. history, 85 lives were lost and more than 700 people were injured at the MGM Grand Hotel and Casino in Las Vegas in November 1980, partly because some of the materials in the interior finish and furnishing fueled a rapid spreading of the fire. If furniture is placed in such a manner that it impedes egress during an emergency, people will die. Should a nonqualified, non-educated person select the materials for the interior of a hospital, school or high-rise building?
Will had blithely and insensitively mocked the idea of criminal penalties for impersonating an interior designer:
In Las Vegas, where almost nothing is illegal, it is illegal — unless you are licensed, or employed by someone licensed — to move, in the role of an interior designer, any piece of furniture, such as an armoire, that is more than 69 inches tall. A Nevada bureaucrat says that “placement of furniture” is an aspect of “space planning” and therefore is regulated — restricted to a “registered interior designer.”
Placing furniture without a license? Heaven forfend.
I hope that Will is suitably chastened now that he understands the real risks of letting just anyone pick out wallpaper and position furniture.
Filed under: Government and Politics; Immigration and Labor Markets; Tax and Budget Policy
The Fact of Voter Fraud
I was surprised to see left-Democratic lawyers Michael Waldman and Justin Levitt casually acknowledge in a Washington Post op-ed that “Lyndon Johnson won a 1948 Senate race after his partisans famously ‘found’ a box of votes well after the election.” Johnson’s “miracle of Box 13″ has been discussed for years, but I didn’t expect to see Democrats at the Brennan Center casually accept it.
It certainly makes you think about LBJ’s huge influence on American politics. The Great Society was the biggest expansion of the state since the New Deal, and no one, including Ronald Reagan, has made a dent in it since.
Johnson apparently won election to the Senate through fraud, and there’s pretty good evidence that he also became vice president in a fraudulent election. (Not to mention the argument that Kennedy-Johnson didn’t even win the popular vote, since he shouldn’t be credited with Alabama’s votes for unpledged Democratic electors who did not vote for the Democratic ticket.) Would America be a very different place if Lyndon Johnson had not won one of those controversial elections?
It seems ironic that Waldman and Levitt’s reference to a monumentally important stolen election comes in a parenthetical aside in an article titled “The Myth of Voter Fraud.”
David Brooks Gets It Wrong
In an op-ed (TimesSelect) from today’s The New York Times, David Brooks writes that Reagan-Goldwater small government conservatism is out-moded in today’s society. He is wrong for three important reasons.
First, as I argued in my book, Leviathan on the Right, the 2006 congressional elections should have shown Republicans that big government conservatism was an electoral loser. It wasn’t just Iraq and scandal that brought about the Republican defeat; it was a belief that the party had abandoned its basic principles. If voters wanted massive increases in domestic spending and a federal takeover of education, why not vote for Democrats?
Second, big government doesn’t work, whether practiced by liberals or conservatives. In the wake of the government’s failure to deal with Hurricane Katrina, the Virginia mess, and all the other examples of government failure, does Brooks really believe that big government can fix health care, the economy, and even our families?
Finally, Brooks is wrong because, regardless of political fashion, freedom really does matter. Americans should be free to raise their families, run their businesses, choose their doctor, or support their favorite charity without the interference of big government.
Brooks tells us that “security leads to freedom.” To which Ben Franklin offers the still-timely reply: “He who surrenders freedom for some temporary security, deserves neither freedom nor security.”
The Adam Smith Bank Note
What does Adam Smith think of his bank note? Lawrence White has the answer.
Filed under: Finance, Banking & Monetary Policy; Political Philosophy; Tax and Budget Policy
David Brooks Reads Cato Unbound — and You Should Too
As his column today reveals, even the New York Times’s David Brooks is reading this month’s discussion at Cato Unbound on the future of libertarianism.
Today is the last day of the discussion, so don’t miss out! In today’s edition, Cato’s Brink Lindsey discusses “Post-Apocalyptic Libertarianism“ and Virginia Postrel talks about “The Libertarian Cultural Tradition” [.mp3] in the Cato Daily Podcast. Don’t miss Postrel’s thoughts yesterday on ”What Was Wrong with Socialism?” and “Principles, the Welfare State, and Libertarian Cultural Traditions,” or Tyler Cowen’s pithy “Quick Hits” from Tuesday. Tom Palmer promises to chime in before the clock runs out, so don’t stop hitting refresh.
In April, Cato Unbound will tackle the science, culture, and politics of happiness with a mostly stellar lineup featuring historian Darrin McMahon, author of the Happiness: A History; psychologist Barry Schwartz, author of The Paradox of Choice: Why More Is Less; sociologist Ruut Veenhoven, editor of the Journal of Happiness Studies; and, well. . . me, author of a soon-to-be-released Cato Policy Analysis on the reliability and policy implications of the new “happiness research.”
(Ways and) Means to an End
The House Ways and Means Committee released their trade policy vision on Tuesday, and it should give cause for concern to free-traders who thought a compromise could be reached between the Democratic majority and the administration on how to advance the trade agenda. There are few details on how exactly trade agreements could be made acceptable to Democrats in the immediate future, and plenty of demands that could give potential trade partners cause for alarm.
The administration must give 90 days’ advance notice to Congress when seeking its approval for trade agreements, under the terms of the trade promotion authority delegated by Congress to the President. Because that authority expires on July 1, there are only two working days left to iron out differences on completed trade agreements (those with Peru, Colombia, and Panama, and possibly the still-under-frantic-negotiation agreement with South Korea). The Democrats’ one-pager was lamentably short on details about how to make these agreements acceptable to them.
In the longer-term, if the new majority’s trade strategy is indicative of its overall approach to trade policy (and we have every reason to believe that it is) then negotiated trade liberalization looks to be over for the next two years at least. Unless, of course, the secret 15-page proposal (mentioned in this NY Times piece) presented to the administration contains more of substance, and less of the deal-breaking demands, than what was released to the public.
The details we do have from the one-pager, however, do not paint a pretty picture. The Democrats’ plan proposes new emphasis on labour and environmental standards (including some standards to which, some critics point out, the United States is not a party), non-tariff barriers, calls for immediate action (italics in original) on currency manipulation in China and Japan, and more help for workers displaced by trade. Organized labor has welcomed it, of course, although–bizarrely–so have some Republican members of the committee, including the ranking Republican, Jim McCrery (R-LA). Steven Pearlstein in an article in yesterdays Washington Post, called some of the demands “political poison pills.”
Previous Cato research on some of these topics can be viewed here, and my colleague Dan Ikenson gave an interview on BBC on Tuesday night on the Dems’ proposal: view here.
Filed under: Government and Politics; International Economics and Development; Tax and Budget Policy; Trade
DC Gun Laws
Eugene Volokh has thoughts on what constitutes a violation of the DC law regarding firearms possession. Today’s Washington Post says police and lawyers are unsure about what is legal and what is illegal–at least with respect to members of Congress and their staff. The DC police say Senators may have guns in their offices, but it would be a crime for the members to carry or transport a handgun from their residence to their office. To get around that bizarre reading of the law, one lawyer suggests that Senators have a DC police cruiser transport their weapons to and from their offices. Good grief.
Everyone seems to agree that Senator Webb’s staffer, Phillip Thompson, meant no harm. Given that, shouldn’t Thompson invoke his constitutional right to a trial by jury? I wish he would, but that is not likely to happen. Prosecutors can extort guilty pleas from people like Thompson by using plea-bargaining tactics (pdf). DC prosecutors will give Thompson an offer he can’t refuse: waive your right to a trial and plead guilty and you’ll get probation. If Thompson says he’d like to have a jury trial, prosecutors will warn him that if he goes that route, the city will throw the book at him and add a criminal “count” for every single bullet (”unregistered ammunition”) that was in his possession. Not many people are willing to risk years in prison by taking a case to a jury.
Bottom line: A crazy quilt of laws and extorted guilty pleas.
A Jailed Blogger and What You Can Do
I’ve got a detailed piece on National Review Online on the case of Abdelkareem Nabil Soliman, sentenced to four years in prison in Egypt for the crime of … blogging.
Filed under: General; Law and Civil Liberties; Telecom, Internet & Information Policy
Still Dissing Reagan
Twenty-seven years after his election as president, journalists still like to take a poke at Ronald Reagan whenever they get the chance. A Washington Post story today on lawyer-actor-senator Fred Thompson’s possible presidential candidacy notes that equal time rules could require TV stations to take “Law and Order” off the air during if Thompson becomes a candidate and then says
In the 1970s and 1980s, stations dropped “Bedtime for Bonzo” and other Reagan movies during his campaigns for governor of California and for president.
Yes, no doubt they did drop Reagan’s most amusingly titled movie. But they presumably also dropped such movies as Dark Victory, Brother Rat, Knute Rockne All American, The Hasty Heart, and Kings Row. But those just don’t sound as goofy.
I wonder how many liberal journalists have ever watched Bedtime for Bonzo. It’s actually quite funny to see Reagan as a young liberal college professor trying to prove the “nurture” side of the nature-vs.-nurture and saying that there are no bad kids, just bad environments.
It’s Only Disclosure!
Policymaking in First Amendment area begins with a presumption of liberty. That is, strong reasons must be given to restrict basic liberties.
Mandatory disclosure of campaign finance activity requires such strong reasons. The U.S. Supreme Court has given three reasons for mandated disclosure: to deter corruption, to inform citizens so they can predict what a candidate might do in office, and to help enforce contribution limits.
Not much is known about how the policy of mandated disclosure actually relates to these “state interests.” No one has been much interested in examining their effects because no one much objected. Mandatory disclosure was thought of as the least intrusive means to regulate campaign finance and political activity. Hence, even people inclined to criticize campaign finance regulation were heard saying, “it’s only disclosure.”
Since the agenda of possibilities was limited, alternatives were not considered in light of the costs and benefits of disclosure. Now that’s changing. Dick Carpenter and the Institute for Justice have conducted a survey to learn more about the likely effects of disclosure, especially in the context of a ballot initiative. The results do not encourage complacency about mandated disclosure. The study is well worth a look.
Bob Bauer comments on the Institute for Justice study during his insightful remarks on the fifth anniversary of you-know-what.
Filed under: General; Government and Politics; Law and Civil Liberties
Query for Economic Historians
How did Adam Smith feel about fiat money?
Filed under: Finance, Banking & Monetary Policy; Political Philosophy; Tax and Budget Policy
Congress vs. President
Since the news media keeps saying that we’re heading for a “constitutional showdown” between President Bush and the Congress, it’s time for a pop quiz.
Who wrote the following passage?
“Congress’s power to compel members of the executive branch to obey its legitimate requests for information has long been deemed critical to the functioning of our democracy and has been upheld by the Supreme Court.”
A. Hillary Clinton
B. Dick Cheney
C. Thurgood Marshall
D. John Yoo
The correct answer is D, John Yoo. See “How Congress’s Subpoena Power Works,” Wall Street Journal, May 28, 1997. Interestingly, ten years later, there’s another op-ed in the Journal, but today’s piece (subscription required) argues that the Bush Administration can resist congressional subpoenas that relate to the current controversy concerning the firing of the U.S. Attorneys.
McCain vs. Ware
Yesterday, Senator McCain took issue with Wolf Blitzer’s statement that “everything we hear, that if you leave the so-called green zone, the international zone, and you go outside of that secure area, relatively speaking, you’re in trouble if you’re an American.” Here’s McCain’s response:
MCCAIN: You know, that’s why you ought to catch up on things, Wolf.
General Petraeus goes out there almost every day in an unarmed Humvee. You want to — I think you ought to catch up. You see, you are giving the old line of three months ago. I understand it. We certainly don’t get it through the filter of some of the media.
But I know for a fact of much of the success we’re experiencing, including the ability of Americans in many parts — not all. We’ve got a long, long way to go. We’ve only got two of the five brigades there — to go into some neighborhoods in Baghdad in a secure fashion.
Then Michael Ware, a reporter who has been in Iraq for years, came in for a later segment, and challenged Senator McCain’s claim:
Filed under: Foreign Policy and National Security; Government and Politics
Traditional Values on Screen, and on Trial
Deploring the Sixties and the sexual revolution has become big business. Myron Magnet may have kicked it off with his book The Dream and the Nightmare, which focused on the poor. (The publisher bills this as “the book that made George W. Bush President,” but honestly, I don’t think you can blame Magnet for that.) He followed that with Modern Sex: Liberation and Its Discontents. For the younger generation, Wendy Shalit offered A Return to Modesty. Like a lot of conservative authors, she told us that the ladies of “Sex and the City” are a walking embodiment of “the failure of sexual liberation.”
No doubt the new rules about sex, gender, courtship, and marriage have indeed brought much heartache. But there’s a reason people threw over the old rules. We can point to some sociological explanations–the pill, for instance. Not to mention the pill appearing on the scene at the same time as the explosion in college attendance and the Vietnam war. See Brink Lindsey’s forthcoming book The Age of Abundance: How Prosperity Transformed America’s Politics and Culture for some of that story.
But there’s also a more personal reason that the old rules failed: they too caused a lot of pain. Friday night the TCM channel will broadcast a sweet and sad movie, Cheers for Miss Bishop, released in 1941 and set in the late 19th and early 20th centuries. Miss Bishop graduates from college and stays on to teach for 50 years. She never marries. And that means, given the strictures of the time, that she never experiences a full love affair. In her youth she is engaged to a young man, but he takes a tumble with her less-respectable cousin, so of course she can’t marry him. Twenty years later, mirabile dictu, she gets another chance, with a cultured and educated visiting professor. But his wife won’t give him a divorce, and she can’t go off to Italy with a married-but-separated man. So it’s back to spinsterhood for Miss Bishop.
I can never remember if this movie is called Cheers for Miss Bishop or Tears for Miss Bishop. It’s presented as a touching story, with 50 years of students returning to celebrate the difference she made in their lives. And so she did. But she gave up two chances at real happiness because of the strictures of the old rules. The old rules certainly had their uses — there were fewer STDs and fewer fatherless babies (there’s an irony, considering that it was the pill that helped to usher in the new world) — but they also condemned some people to lonely lives.
Watch Tears — I mean, Cheers for Miss Bishop Friday night and give two cheers for the sexual revolution.
Is the Czech Republic Joining the Flat Tax Club?
Although the government lacks a majority in Parliament, the Czech Republic’s Prime Minister has announced a 15 percent flat tax. According to Tax-news.com, the proposal will be unveiled next month:
Czech Prime Minister Mirek Topolanek has reportedly stated that his government’s plan to introduce a flat income tax is a near certainty. In comments made to the daily Hospodarske Noviny newspaper, Topolanek said that at the moment, a 15% flat tax rate is “certain”. … The reform package will be published by the government in April. … Initially, the coalition had planned to introduce a flat tax at a rate of 17% to 19%. Corporate tax in the Czech Republic was reduced to 24% last year, and personal income tax rates are levied at progressive rates to a maximum of 32%.
Given the government’s precarious hold on power, it is unclear whether the proposal will be enacted. A Czech news service notes that the economic community likes the flat tax, but there is some concern that it will not get enough votes:
Analysts are cautiously optimistic that the government’s upcoming flat tax and other tax reforms, set to be announced April 3, may strengthen public finances. However, while all the analysts spoken to by CBW agree a tax reform is much needed, and that the proposals published thus far would have a positive impact on the economy, they caution that the draft legislation is still a long way from the law books and is likely to change before it gets there. … David Marek, macroeconomic analyst, with brokerage Patria Finance said that the lower corporate tax rates are the most important part of the reform because they will give the Czech Republic one of the lower corporate tax rates in Europe and encourage foreign direct investment.
But if it did get enacted, it would create additional pressure on Western Europe’s welfare states. One can only imagine that French and German politicians are praying that the flat tax is not adopted.
Market Education Debate, Part Three
Sara Mead of Education Sector continues our discussion of education markets here. She rounds out her post by impugning my professional integrity, but not before she has misrepresented my position. I’ll begin at the beginning.
Mead claims that I advocate letting Chilean children languish under its current voucher system which financially discriminates against private schools serving the poor. I said no such thing. Among the many changes I would make to the Chilean system, the first would be to equalize public and private sector funding levels.
Mead then manages to combine two distinct errors into a single sentence: the first, a misrepresentation of the evidence, and the second, a non-sequitur. She writes: “Leave aside that it’s not clear [that expanding Chile’s choice program] would be desirable, since poor students in Chile’s private schools perform less well than those in its public schools.”
First, as I pointed out in my previous post, Chile’s government schools only outperform the private sector when they receive between 150 and 300 percent of the voucher amount – and it is government schools serving the poor that enjoy targeted federal funding programs not available to the private sector. When they receive only about as much as the voucher, or even somewhat more, government schools perform worse. So, by equalizing funding across sectors, Chile could make significantly more efficient use of its educational dollars in serving all its children. This 2002 finding by Sapelli and Vial is discussed in detail in the pieces to which I have previously linked.
Second, the non-sequitur: Even if Chile’s government schools were outperforming its private schools in serving the poor (which, taking funding levels into account, they are not) it would not follow that the choice program lacked value. That’s because the competition produced by the choice program has been improving achievement simultaneously in both government schools and private voucher schools. This result was demonstrated by researcher Francisco Gallego, and is also cited in the pieces I’ve linked to.
Next, let’s turn to the Netherlands. Ms. Mead complains that “Coulson doesn’t even engage with my argument that the situation of the Netherlands is fundamentally different from that of the United States in ways that make it unhelpful as an example here.” Mead presented no such argument. She simply claimed, without rational justification, that because the Dutch adopted a voucher system to end religious strife and ideological dissatisfaction over the content of government schooling, their experience doesn’t apply to us. A claim is not an argument, and this particular claim is simply wrong.
Europe Takes Another Step Toward Tax Harmonization
Even though several nations are opposed, the European Commission plans to harmonize the definition of taxable income for corporations. It is true that the current system is a hassle for multinational companies, requiring 27 different tax returns for firms operating in all EU nations. But there are good ways and bad ways to address this problem. Allowing firms the option of choosing the “common” tax base would ensure that the bureaucrats in Brussels had less of an incentive to use the new system as a way of extorting more money from businesses. Another option would allow firms to use their home country’s definition of taxable income – an approach that would promote rather than retard tax competiiton since governments would have an incentive to attract companies by using a pro-growth definition of taxable income. Needless to say, the European Commission is not using either of these approaches. The EU Observer reports:
The European Commission is set to press ahead with introducing a single EU company tax base by 2010 in only a limited number of member states, circumventing national veto power in the sensitive tax area. … EU member states are deeply divided over possible harmonization, with 12 capitals in favour, five to seven against and the rest remaining undecided. Britain, Ireland and the Baltic states fear that the next step for Brussels would be interference in the levels of their corporate taxes, an area where EU states compete with each other as well.
Filed under: General; International Economics and Development; Tax and Budget Policy
Five Years Is a Long Time, Part 3
Here’s what McCain-Feingold did and did not do.
1. BCRA successfully prohibited most party soft money fundraising by federal officials.
So what? 527 groups took up most of the slack.
2. Parties raised as much hard money in 2006 as they had soft and hard money in 2002.
Yes, but they did not raise as much soft and hard money as they would have in 2006 if BCRA had not been passed. This had an interesting consequence…
3. BCRA cost the Democrats 20 House seats in the 2006 election.
4. BCRA made it illegal to broadcast advertising for a movie criticizing the president of the United States.
If the ads were to run 30 days before a primary or 60 days before a general election. Unless, of course, the film enjoys the media exemption.
5. BCRA criminalized attempts to get people to contact their member of Congress.
If they mention a member’s name in an ad, if it’s 30 or 60 days, you know the drill. But the Supreme Court may yet overturn this part of the law.
6. BCRA may destroy the presidential public financing system.
By raising the hard money contribution limits, thereby making it possible for presidential candidates to run outside the system. But credit must also go to the Internet for lowering the costs of fundraising.
7. BCRA enabled a majority of the Supreme Court to be cowardly in the face of a frontal assault on the First Amendment.
Did I say cowardly? I meant BCRA gave the Court the chance to show “