Archive for February, 2008
Collins Still Working to Preserve REAL ID
No state will comply with the REAL ID Act’s requirement to begin issuing a national ID by the forthcoming statutory deadline, May 11th.
Because of that, the Department of Homeland Security is giving states deadline extensions just for the asking. Interestingly, it’s turning around and spinning the acceptance of those extensions as commitments to comply. Many of the states shown in green on this map have passed statutes outright refusing to implement the law. (For readers new to Planet Earth, the color green typically means “go.” Green is a strange choice of color for states that have legally barred themselves from issuing the DHS’s national ID.)
With her state — the first in the nation to pass anti–REAL ID legislation — considering refusing even the deadline extension, Sen. Susan Collins (R-ME) is once again working with DHS in support of the national ID law.
She has written a letter to the governor of her state, asking him to go ahead and take the waiver, playing into the DHS strategy. Followers of REAL ID know that delaying implementation helps a national ID go forward by giving the companies and organizations that sustain themselves on these kinds of projects time to shake the federal money tree and get this $11 billion surveillance mandate funded.
The cumulative profit margin of the airline industry is less than 1%. Should even a single state refuse to accept this national ID mandate, the airline industry, airport operators (faced with reconfiguring their operations), and travelers groups would be on the Hill in an instant. The Congress would have to revisit the issue.
Evidently, Senator Collins doesn’t want to risk the chance of an up-or-down vote on whether the United States should have a national ID. Her work behind the scenes in favor of REAL ID reveals where she stands.
Filed under: Law and Civil Liberties; Telecom, Internet & Information Policy
Libertarians for Obama?
At Freedom Communications, the media company founded by the tenacious libertarian publisher R. C. Hoiles, which is still largely family-owned and freedom-oriented, they had an internal lunch debate on presidential politics the other day. According to Orange County Register columnist Frank Mickadeit, their corporate philosopher Tibor Machan advocated voting for the Libertarian Party. But the company’s CEO, Scott Flanders, had a different view:
But there was a hush as Flanders reasoned that Obama is the best candidate to work on four top libertarian reforms: 1) Iraq withdrawal, 2) restoring the separation of church and state; 3) easing off victimless crimes such as drug use; 4) curtailing the Patriot Act.
As it happens, a few days earlier I had talked to a leading libertarian writer, who told me that he supposed he’d vote for Obama on the basis of the Iraq issue.
Libertarian voters should be up for grabs this year, the Republicans having done such an effective job of pushing them away. But the Democrats don’t seem to be making much of a pitch for them. At the last Democratic debate, Clinton and Obama spent the first 30 minutes proclaiming their devotion to socialized medicine and protectionism. But maybe issues of peace and civil liberties — combined with the Republicans’ loss of credibility on fiscal and economic issues — really will push some libertarians into the arms of the Democrats, especially if the Democratic nominee is not self-proclaimed “government junkie” Hillary Clinton.
One in 100: Behind Bars In America, 2008
A new report, One in 100, from the Pew Charitable Trusts is drawing attention to the remarkable growth in the U.S. prison population. The Washington Post reports: “With more than 2.3 million people behind bars, the United States leads the world in both the number and percentage of residents it incarcerates, leaving far-more-populous China a distant second.”
I do not think our prison population should be some function of the overall adult population in the United States. But, still, when the freest country in the world is locking up more people than a much more populous totalitarian state, policymakers ought to pause and ask themselves this question: Do so many Americans really need to be kept behind iron bars? I addressed that question in a Washington Post article a few years ago — just as our prison population was breaking the two-million-prisoner mark. The short answer is no.
The subject is not that complicated. Social engineers thought that a ban on drug use would work. It has not. Federal and state drug laws are broken millions of times each and every month. The social engineers have tried increasing the penalties and stepping up enforcement in order to “send messages.” The courts and prisons are busier than ever, but the drug trade continues to thrive.
When the prisons are overflowing in certain jurisdictions, the system starts backing up and the police will focus on the most violent offenders and only the “major drug traffickers.” In the jurisdictions where there is some extra prison bed space (such places are few and far between), the police can “crack down” on (low level) drug dealers and users. Given that reality, one must recognize the folly of the conservative policy prescription, which basically is: Let’s build some new prisons. The liberal policy prescription of “home monitoring” and “drug treatment” do not address the core problem.
The costs of incarceration are keeping the most zealous drug warriors in check because they cannot persuade enough people to spend whatever it takes to enforce the law against the possession and ingestion of an arbitrary list of substances. The course we are now following is nothing but a series of stop-gap measures — i.e., the police will ignore some drug dealing, the judges will send more people into drug treatment (whether they need it or not), and the wardens will have the inmates set up cots and bunk beds in the cafeterias and exercise rooms at night.
For additional Cato work on this subject, go here.
Don’t Make a Federal Case Out of It
Federal agents investigate, arrest, and prosecute local law enforcement agents on a fairly regular basis. Unfortunately, state and local police rarely investigate, arrest, and prosecute federal agents. I suspect the locals are just intimidated by the FBI, Secret Service, IRS, etc. When something suspicious or questionable happens, the feds tell the locals something to the effect of “Back off. We’ll handle this ourselves-internally.”
So Arizona officials deserve some credit for pressing ahead and treating Border Patrol Agent Nicholas Corbett like any other suspect. According to the local prosecutor, Corbett’s story does not hold up and sufficient evidence points toward his guilt. If that is indeed the situation, this case should be simple: Prosecute. The fact that the victim didn’t have a visa in his pocket does not matter. It also does not matter that Corbett had a federal badge in his wallet.
The Arizona officials did mess up one important aspect of this case. Why is this matter in federal court? Well, I already know why because this typically happens in these rare circumstances when a federal agent is prosecuted. The more precise question is: Why didn’t the Arizona officials object to the transfer to federal court? One news story alludes to juror bias, but that does not hold up. Where are the jurors in federal court coming from? Rhode Island? The issue isn’t really rural vs. big city either because, again, if you name any big city in Arizona, there are going to be Arizona courts there!
The thinly veiled reason for the removal procedure is that the state process is supposedly rigged/biased against the federal agent. Arizona officials should have recognized this and defended their justice system instead of just rolling over.
Agent Corbett has a right to a trial — like any other person accused of a crime. The point here is that he would have had the opportunity to argue self-defense in the Arizona state courts. And if he is convicted but thinks his trial was unfair, he can appeal and try to persuade a higher court with specifics. This case belongs in state court, not federal court.
Washington Post Takes Even-handed Look at “Middle Class Squeeze’
If you believe Lou Dobbs and most politicians on the campaign trail, you would think the great American middle class has basically vanished—squeezed to death by falling home values, rising medical and tuition bills, and competition from low-wage workers in Mexico and China.
Today’s Washington Post business section provides a valuable reality check. In a story headlined, “An Upside for the Middle Class: Lost Amid the Stresses Are Gains in Standard of Living,” reporter Michael A. Fletcher provides an even-handed assessment of just where the American middle class stands today.
The article reports what the doomsayers have been saying about rising levels of consumer debt, “flattening wages” and rising income inequality. But it also quotes from a range of experts that trade, technology and economic growth have raised the standard of living for most Americans.
Here are a few facts from the Post article that you won’t learn from CNN’s Lou Dobbs Tonight:
Items once considered luxuries—dishwashers, central air conditioning, video cameras—are now common. The average size of new homes has increased 40 percent in the past generation. And as many consumer items cost less, Americans are shopping more. In 1991 the average American bought 33.7 pieces of apparel; by 2002 he or she bought 48 items, according to Boston College sociologist Juliet Schor. In 2005, she said, Americans were projected to discard more than 63 million computers.
Americans are twice as likely to travel overseas than they were in 1980, and overall they spend more than ever for other recreation, including sporting events, movies and plays—the mark of an ever-improving quality of life, some researchers say.
Of course, supporting a middle class family can be and often is hard work. But we shouldn’t allow ourselves to be panicked into grasping for big-government solutions to an economic crisis that does not exist.
For a more in-depth look at how most Americans are faring in this era of expanding trade and globalization, you can check out my recent Cato study, “Trading Up: How Expanding Trade Has Delivered Better Jobs and Higher Living Standards for American Workers.”
Filed under: General; International Economics and Development; Trade and Immigration
NCLB Wobegon
The No Child Left Behind Act hoodwinks parents and the public, allowing politicians to take credit for expanding student “proficiency” no matter how little kids actually know. What’s the trick? Let’s go to South Carolina, where yesterday the state’s House of Representatives passed a bill that in two years would change the state’s testing system and produce “dramatic” proficiency increases.
Sound suspicious? Don’t worry, no standards will be harmed in the making of this miracle:
The state is not lowering its standards, [Rep. Bob] Walker said.
The change is in wording, such as the meaning of “proficient.”
“Our ‘proficient’ is above grade level,” he said, while No Child Left Behind defines proficient as being at the appropriate grade level.
“You will see a dramatic increase in your level of proficiency,” Walker said.
Of course you will. It just it won’t mean anything.
Candor With the Court
President Bush and Attorney General Michael Mukasey owe the Supreme Court an explanation. Four years ago, one of Bush’s top lawyers, Solicitor General Paul Clement, told the Supreme Court that the administration did not use coercive methods on prisoners to extract information. Given the recent admission by CIA Director Michael Hayden that three prisoners were waterboarded, we now know that the Supreme Court was misled. If Mukasey hopes to get the Justice Department back on track, he must find out how this happened and take corrective action.
In the spring of 2004, the Bush administration was advancing its sweeping vision of executive power before the Supreme Court. An American citizen, Jose Padilla, a suspected terrorist, had been arrested at Chicago’s O’Hare airport. Padilla was then moved to a military brig where he was held in solitary confinement for two years. The government refused to allow Padilla to meet with anyone, including his lawyer. According to the Bush administration, once a prisoner is designated an “enemy combatant,” he loses the legal protections of the American Constitution—even if the prisoner is an American citizen arrested in the United States. Because of the grave issues involved, the Supreme Court decided to hear Padilla’s constitutional objections and rule on the controversy.
Although the central issue in the Padilla case concerned the president’s power to imprison American citizens, the Supreme Court wanted to examine the breadth of the Bush administration’s legal claims. Solicitor General Clement argued that America was at war and that the president, as commander-in-chief, could not have his military decisions “second-guessed” by the judiciary. A pivotal moment in the Padilla oral argument came when Clement was asked about torture (pdf)(pp. 20-23). Testing the limits of Clement’s logic, the Supreme Court justices wanted to know if there was any legal check on the executive power to coerce prisoners to obtain military intelligence. Clement tried to talk around the question, but then a member of the Court asked this blunt question, “Suppose the executive says mild torture we think will help get this information. It’s not a soldier who does something against the Code of Military Justice, but it’s an executive command. Some [foreign governments] do that to get information.”
This was supposed to be the moment of truth, but the White House representative faltered by saying, “Well, our executive doesn’t.”
That was doubletalk. Four years later, the White House is telling a different story, albeit in dribs and drabs. Waterboarding is not the same as water torture. Only the CIA does it. Only a few prisoners.
Blinded by Ideology
Given the outspoken, anti-trade views of thrice-elected Senator Byron Dorgan (D-ND), you might think that North Dakotans have no stake in the global economy. After all, if you’re comfortable voting for a candidate who disparages NAFTA and other trade agreements, certainly your livelihood wouldn’t depend on, say, exports to Canada.
Carter Wood over at the National Association of Manufacturers posted this gem (“Leading the Nation in Exports…and Protectionism?”) earlier today.
North Dakota’s exports grew faster than any other state’s in 2007, and the primary destination for its mostly agricultural output was Canada. If I were a North Dakota farmer, I’d be a bit wary of my senator, whose rationale for endorsing Barack Obama is that he (Obama) “has always opposed Nafta.”
Good grief.
Filed under: International Economics and Development; Trade and Immigration
RIP WFB
We knew it had to happen but still it’s a shock. A classical liberal — and libertarian enabler — in so many ways, William F. Buckley, Jr. was the quintessential public intellectual without whom public intellectual life is now hard to fathom.
Though not a great philosophical influence on me personally — I came around to his writing later even than I started reading National Review (originally finding it, to use both Buckleyesque language and irony, sesquipedalian) — the institution he created and movement he fostered certainly affect my life daily. Before think tanks emerged to counter the left-wing takeover of the academy and public discourse, before cable channels provided alternatives to network news, long before the Reagan Revolution, Buckley famously began standing athwart history yelling stop.
All this while embodying the prolific, polymathic, bon vivant style that appeals to those of us who ever dreamed of inhabiting that realm of ideas between academia and the real world and having great fun doing it. Well played, Mr. Buckley, well played.
Obama and Clinton Threaten to Bully Our Neighbors over Trade
When they weren’t jabbing at each other over health care and Iraq, Barack Obama and Hillary Clinton spent a good chunk of their debate last night arguing over which of them is the strongest critic of the North American Free Trade Agreement. Both declared that they would withdraw the United States from the agreement if Canada and Mexico did not agree to inserting “enforceable” labor and environmental standards into the agreement.
Talk about a non-starter. It is unlikely that our two neighbors would agree to reopen a 14-year-old agreement that has worked well for all three nations. [You can read my assessment of NAFTA here.] In effect, Obama and Clinton will be asking our two neighbors to bend their national labor and environmental standards to the demands of the U.S. Congress under threat of trade sanctions. Where exactly is the upside for Canada and Mexico in such a request?
Of course, there is no upside. So the only motivation will be the threat that the United States will unilaterally withdraw from NAFTA. That, of course, would result in the re-imposition of tariffs on trade with our two most important trading partners. And because Mexican tariffs on imports from the rest of the world are significantly higher than U.S. tariffs, U.S. exporters to Mexico would face a much steeper tariff increase than Mexican exporters to the United States. By withdrawing us from NAFTA, the Democrats would transform what has truly become a “level playing field” of zero tariffs into one tilted against U.S. exporters.
And even if the U.S. government were able to demand that Mexico impose new and tougher environmental and labor restrictions on its producers, there is little reason to believe that goods now made in Mexico would be soon be produced in Youngstown, Ohio, and elsewhere in the United States. The far more likely scenario is that producers in Mexico would shift production to China, Vietnam, and other lower-cost producers.
Finally, consider the foreign policy implications of threatening to withdraw from NAFTA. The Democratic candidates have been critical of the Bush administration for its checkered record of winning friends abroad. But have the Clinton and Obama campaigns considered how our friends in Canada and Mexico will react to the heavy-handed demand that they re-write their domestic labor and environmental laws under threat of face tariff retaliation from Uncle Sam?
This would confirm the worst fears of our closest neighbors.
Filed under: General; Government and Politics; International Economics and Development; Trade and Immigration
Cato Scholar Comments on Breakup between Bush, U.S.
A lot of my colleagues here were really excited when The Onion, to my mind America’s premier fake news source, cited the work of our colleague Dr. Adam Stogsdill recently. But now Brian Whitaker has also made it onto The Onion’s pages to comment on another important story.
WASHINGTON—Amid allegations that his thoughtless and insensitive decisions have damaged his relationship with the nation, President George W. Bush vowed Monday that he would, starting now, “make everything better.”
“This time I’m serious,” Bush said. “I am ready to make a fresh start if we can just put the past behind us. I promise.”
[...]
Despite Bush’s seemingly conciliatory stance, public response to Bush’s promises has been frosty at best. Cato Institute policy scholar Brian Whitaker echoed the sentiments of many Americans, calling Bush’s recent overtures “too little, too late.”
“We want to believe that he’s finally going to be the president we always wanted, but we’ve given him so many chances,” Whitaker said. “I don’t think we can handle another disappointment. Maybe it’s time to realize that President Bush will never be the head of state we need him to be.”
“Then again, maybe our expectations are unfair,” Whitaker added. “He seemed so sincere this time. He wouldn’t abuse his executive powers if he didn’t care about us, right?”
Whitaker predicted that the nation will likely move forward and try to forget Bush, though it may be difficult for Americans to ever trust a president again. He said the current crop of presidential contenders offers little in the way of an alternative to Bush, but maintained that “at least Barack Obama listens to us.”
Wow, congrats, Brian. A lot of folks in the building are bound to be pretty jealous today.
Donnelly on the Surge
AEI’s Thomas Donnelly writes for the Weekly Standard blog:
More moderate Democrats are increasingly adjusting to the reality that the Iraq surge has been a military success, and that it is starting to create conditions for workable political compromise in Baghdad as well as Iraq’s provinces–see, for example, the air of desperation that has seized the hard-core anti-war crowd. Yet today’s Washington Post carries an op-ed by former Clinton chief of staff John Podesta clearly intended to intimidate Democratic candidates into sticking to their withdrawal pledges no matter what happens in Iraq. The article’s headline, “A War We Must End,” is a hint of the pay-no-attention-to-the-facts nature of the argument.
Donnelly’s readers might be interested in this shocking nugget buried in a smart op-ed by Andrew Bacevich a few weeks back:
In only one respect has the surge achieved undeniable success: It has ensured that U.S. troops won’t be coming home anytime soon. This was one of the main points of the exercise in the first place. As AEI military analyst Thomas Donnelly has acknowledged with admirable candor, “part of the purpose of the surge was to redefine the Washington narrative,” thereby deflecting calls for a complete withdrawal of U.S. combat forces. Hawks who had pooh-poohed the risks of invasion now portrayed the risks of withdrawal as too awful to contemplate. But a prerequisite to perpetuating the war — and leaving it to the next president — was to get Iraq off the front pages and out of the nightly news. At least in this context, the surge qualifies as a masterstroke. From his new perch as a New York Times columnist, William Kristol has worried that feckless politicians just might “snatch defeat out of the jaws of victory.” Not to worry: The “victory” gained in recent months all but guarantees that the United States will remain caught in the jaws of Iraq for the foreseeable future.
Something to keep in mind when Donnelly and his fellow-travelers comment on the surge’s impact on the Washington narrative.
My boss Chris Preble was beating this drum weeks ago in the American Prospect.
What It Says, What It Will Say
Yesterday, the School Choice Demonstration Project (SCDP) released several reports kicking off their five-year longitudinal study of the Milwaukee Parental Choice Program (MPCP), arguably the nation’s best-known school voucher initiative.
Throughout the most important of the reports—the one establishing achievement levels for voucher students and socio-economically similar Milwaukee public school kids—the authors warn readers not to use the scores to judge schools’ effectiveness. Because it is “snapshot,” baseline data, the scores alone say nothing about how much a school teaches over time, only where students sit at a single moment.
Sadly, some in the media didn’t listen, reporting that private and public schools perform equally poorly. As education reporter Alan Borsuk wrote in the Milwaukee Journal Sentinel, “the first full-force examination since 1995 of Milwaukee’s groundbreaking school voucher program has found that students attending private schools through the program aren’t doing much better or worse than students in Milwaukee Public Schools.”
It seems some reporters just don’t read research, don’t understand it, or want to push their agenda regardless of what the research tells them.
Unfortunately, as bad as reporting on school choice is, in the end Milwaukee-style choice probably won’t have a huge effect. Sure, the voucher kids will probably learn more than comparable students in traditional public schools, as research has found over and over again, but the research has never found large advantages, and there’s nothing in current school choice programs to suggest that that will soon change. The simple fact is that even with slowly growing school choice the amount of market freedom in American education is far too small to foster real competition and innovation. The public schools are still the 800-pound guerilla and what choice we have is seriously hamstrung.
Just look at Milwaukee. It has more choice than almost any other district in the United States, but has only about 17,000 students in its voucher program and 16,000 in its charter schools, constituting just about 28 percent of the city’s roughly 120,000 school-aged kids. Making matters worse, within those systems freedom is heavily curtailed. Charter schools are only given their right to exist by public authorities, their enrollments must be racially balanced, and they can’t deny admission for academic reasons. Similarly, the MPCP forbids parents from supplementing vouchers with their own funds, is open only to low-income children, and requires participating schools to admit all choice students for whom they have seats.
School choice in Milwaukee is light-years from the free-market at work, and though it’s better than no choice at all, it will likely make some news stories today come close to fitting the facts tomorrow.
The Politics of Freedom: Libertarianism with Sizzle
Brian Doherty, the author of the magisterial Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement, has some generous things to say about my new book The Politics of Freedom in Sunday’s New York Post. I especially like the subtitle in the reason.com version: “sells the libertarian message with sizzle.”
Brian discusses my claims about the extent of libertarianism among American voters and writes:
Whatever the near-term prospects for libertarian political victories, The Politics of Freedom reminds you of the service libertarians provide to public discourse: They can point out the hypocrisy, power grabs, hubris and counterproductive folly issuing from Washington under either political brand name since they are beholden to neither. …
No major political party has fully embraced the implications of the proper role of government that follow from Boaz’s simple limited-government vision. But when expressed that plainly, it’s a moral vision many Americans can cheer.
The Politics of Freedom is available at all fine bookstores, at Amazon, and from the Cato Institute.
Filed under: Cato Publications; Government and Politics; Political Philosophy
The Laffer Curve: Reviewing the Evidence
I’ve been pleasantly surprised by the number of views and the positive feedback for the free-market tax videos I’ve been narrating. Part I of the Laffer Curve video series already has been seen more that 14,000 times – and nearly 15,000 times if the Capital Hill Broadcast Network is added to the count.
Part II of the Laffer Curve video series is now available for your viewing pleasure. Building on the theoretical discussion in Part I, this new video reviews some of the real-world evidence on the Laffer Curve.
As always, I’m interested in feedback. And feel free to circulate any of these videos to friends and colleagues. It seems that success begets success on youtube. More people watch a video if they see other people have watched it. And since, as of this morning, the Part II video is #49 for today’s most-watched list in the News & Politics category, it’s encouraging that it is getting some attention.
Demander-in-Chief
Bill Kristol’s column in yesterday’s New York Times contained an interesting, if disconcerting, quote from Michelle Obama:
Barack Obama … is going to demand that you shed your cynicism… That you push yourselves to be better. And that you engage. Barack will never allow you to go back to your lives as usual, uninvolved, uninformed.
The President of the United States is the employee of the American people. He is not there to make demands of people. If I want to sit on my couch for the rest of my life eating Doritos and watching trashy television — unengaged, uninformed and uninvolved — that’s my prerogative.
(Hat tip: our beloved founder, Ed Crane).
Filed under: General; Government and Politics; Trade and Immigration
Reviving Interservice Competition
I recently complained that the US defense budget fails to adhere to a strategy; that it avoids choice between means. This lack of choice is manifest in the preservation of service shares. Each military service has gotten about the same relative share of the defense budget each year under Bush, despite the war on terror. In fact, the shares have basically held since the Kennedy administration.
In recent decades, the Navy got about 26 percent of the defense budget; 31 percent including the Marines. The Air Force also got around 31 percent, and the Army 25 percent. The rest went to defense-wide programs like missile defense. Annual deviations are rarely ever above two percent. This year brings a slight uptick in the Army share; the numbers are 29 percent Navy and Marines, 28 percent Air Force, and 27 percent Army. Current budget shares deviate more from the historical norm if you include the supplemental war appropriations, which favor the ground forces. But the point of a supplemental is that it does not affect the future baseline.
In today’s Christian Science Monitor, Gordon Lubold writes that a Congressional “Roles and Missions” panel, formed under the auspices of the House Armed Services Committee, is set to release a report that questions this arrangement. That’s good news.
Congressman Jim Cooper (D-Tennessee), who chaired the panel, calls the continuity of service shares “a statistical indictment” of the Pentagon planning process. The current US national security strategy – as seen in official documents, rhetoric, and our two wars – is counter-terrorism via counter-insurgency. That is, counter-terrorism is our primary security task, and to accomplish it we aim to deny terrorists haven with wars of occupation meant to resurrect government in anarchic states like Iraq and Afghanistan. We have other objectives – contain rising powers, stem weapons proliferation, etc, but these are secondary.
This strategy favors the Army. Ground forces take center-stage in counter-insurgency and state-building, with contributing performances from aircraft and other government agencies. It follows that our defense budget would flood money into the Army and Marines and cut the Air Force and Navy’s budget to pay for it. Instead, we have given each service the same bump in funds – roughly 35% percent under Bush.
Filed under: Foreign Policy and National Security; Tax and Budget Policy
Blame German Tax Law, Not Liechtenstein Privacy Law
While European politicians are ganging up in an effort to bully Liechtenstein into surrendering its fiscal sovereignty, a couple of reporters for Bloomberg point out that Germany’s tax laws are the real problem. Tax rates are too high and the tax code is senselessly complicated. As a result, almost everyone in the country seeks to evade tax:
When Andreas bought a new hard drive at a Munich computer shop the clerk offered it for 127 euros with a receipt or 80 euros without. He took the lower price. Most Germans make similar deals to avoid high taxes, the film production manager said. …Chancellor Angela Merkel has failed to fulfill a campaign promise to simplify the tax code and reduce tax avoidance. Germans evade about 30 billion euros in taxes every year, estimated Dieter Ondracek, head of the German tax collectors’ union DStG. …”Unfortunately, tax evasion has become a popular sport in Germany,” Ondracek said Feb. 19 in an interview with Bloomberg Television in Berlin. Germany last year increased its top income tax rate to 45 percent, ranking it eighth among the 27 European Union nations. Capital gains taxes of as much as 50 percent are also among the highest in Europe. …People of more modest means can find loopholes in books such as “1,000 Legal Tax Tricks” by Franz Konz, who’s helped Germans cut their tax bills for 20 years. His book, published last year by Droener/Knaur, is the bestselling tax volume on Amazon.com’s German language site. Part of the issue is that German tax laws have become increasingly complicated as politicians added more and more exemptions. Since German reunification in 1990, the number of tax advisers in the country has jumped 60 percent to 72,669, according to the latest statistics from the BStBK tax advisers’ federation. …”People feel they don’t know all the loopholes so they’re constantly uneasy about paying too much tax, which prompts them to do things that are sometimes illegal,” [Andracek] said. “A tax burden that’s generally seen as too high and wasteful government spending” contribute to discontent. Andreas agrees. “It’s not about greed, it’s about getting by,” he said. “It’s not a crime if everybody does it.”
This story deserves a personal anecdote. On my first trip to Germany, for a tax reform conference in the mid-1990s, a couple of us decided to take a 30-minute cab ride from our conference center to downtown Cologne. We hailed a cab and the first thing the driver did was ask whether we needed a receipt. Not aware of Germany’s national pastime of tax evasion, we must have looked confused, so the driver helpfully explained that we could save 30 percent if he got his fare “off the books.” What did we decide? Well, I’ll leave that to your imagination.
Filed under: International Economics and Development; Tax and Budget Policy
Saber-Rattling Academic Urges Aggression, Bullying, Sanctions, and Annexation
Writing for the Financial Times, a professor from the London School of Economics identifies a number of enemy jurisdictions that pose a grave threat to the world. Some of these jurisdictions should be subject to sanctions, he writes, but in other cases he urges much more aggressive tactics, including annexation. What makes his article so interesting is his choice of targets. He is not targeting Iran. Presumably he does not worry about nuclear weapons in the hands of Islamic fundamentalists. Nor is he targeting North Korea, a rogue state that lets its own people starve. Other despotic regimes such as Cuba, Saudi Arabia, Turkmenistan, and Venezuela also get a free pass. Instead, Professor Buiter’s Axis-of-Evil is comprised of places such as Liechtenstein, Jersey, Luxembourg, Andorra, Guernsey, Switzerland, and Monaco. These jurisdictions, because of their low tax rates and respect for human rights, attract capital from high-tax nations and therefore make it a bit more difficult for politicians in places such as France and Germany to buy votes with other people’s money. Interestingly, Buiter’s penchant for aggression varies depending on the expected level of resistance. He wants little countries such as Monaco and Liechtenstein to be forcibly annexed as part of a tax-motivated Anschluss. But he is much less bellicose in the case of Switzerland, perhaps because every able-bodied male is a member of the militia and possesses a fully-automatic machine gun. And he doesn’t even mention the United States, even though Delaware and Nevada companies are excellent tax havens for non-Americans. Perhaps it is just a matter of time before he bravely adds America to his hit list. If nothing else, his article makes for amusing reading:
The list of countries that make a living out of tax evasion and related activities (essentially the same countries that consciously created, and in some cases continue to offer, facilities, laws, regulations and institutions to facilitate money laundering) is long. The OECD lists 35 microstates with the tax haven designation, but this excludes larger countries with strong bank secrecy laws whom the shoe fits just as well (e.g. Austria, Switzerland, Luxembourg). …The vast majority of European countries – all those that lose out because of the existence of these tax havens – should unite in a determined effort to end these countries’ ability to offer safety to tax evaders by granting anonymity, confidentiality and secrecy. The exact modalities may differ from case to case. Jersey, Guernsey and the Isle of Man should simply be absorbed lock, stock and barrel into the UK, with English laws, rules and regulations applying across the board. The special status of these strange entities is not cute; it’s an enabler and facilitator of unethical and illegal behaviour. The EU should adopt a directive on bank secrecy that would end the nefarious practices of Luxembourg and Austria. Belgian dentists will just have to get used to paying taxes. Andorra, Monaco and Liechtenstein should be given the choice of ending bank secrecy or facing annexation (by France and (once it abandons its bank secrecy laws) Austria respectively). Switzerland is the big prize, as unlike the other tax havens, it is a country rather than a dwarf-state and postage-stamp curiosity, and it is outside the EU. It should be subject to sufficiently stringent economic sanctions from its neighbours (after all, it is landlocked!) to induce it to abandon the laws, rules and regulations, including its extreme version of bank secrecy, that make it the one of the countries of choice for parking illegal or extra-legal money.
Filed under: International Economics and Development; Tax and Budget Policy
Fleecing Europe’s Taxpayers
Congress certainly has its share of crooks, but Members of the European Parliament make American lawmakers look like amateurs when it comes to pilfering tax monies for private gain. The U.K.-based Sun reports on the latest scandal:
Crooked MEPs are trousering cash meant for workers’ wages, it was revealed yesterday. Some hire “ghost” staff — then claim thousands of pounds from the £100million annual allowance. Others recycle the handout by employing unqualified relatives, a bombshell report on MEPs’ expenses found. In many cases the whole £125,000 allowance is paid to just one person on the staff. One assistant received a “Christmas bonus” worth 19 times their monthly salary. Taxpayers’ money is also being diverted to party funds, with the internal probe describing the corruption as “massive and widespread”.
Brussels had wanted to cover up the abuse — but EU fraudbusters have demanded a copy of the report. Last night Lib Dem MEP Chris Davies — one of a handful of people who have seen the audit — called it “dynamite”. He said: “The allegations should lead to the imprisonment of a number of MEPs. It’s embezzlement and fraud on a massive, massive scale.”
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