Archive for April, 2009
New Study: How President Obama Can Help Restore the Pro-Trade Consensus
Since taking office, President Obama seems to have discovered that anti-trade rhetoric, while popular on the campaign trail, isn’t so useful to a sitting president whose policies will have lasting consequences, says trade analyst Daniel J. Ikenson in a new Cato study.
In “Audaciously Hopeful: How President Obama Can Help Restore the Pro-Trade Consensus,” Ikenson and international trade attorney Scott Lincicome argue that the time has come “to arrest and reverse America’s misguided and metastasizing aversion to trade,” which has “been shaped overwhelmingly by relentless political rhetoric.”
The authors’ suggestions for President Obama include:
- Establish a “trade transparency initiative,” with the goal of publishing independent findings about the effects of trade and trade barriers on the U.S. economy, without political interference.
- Reinforce for Congress the fact that a unilateralist trade policy undermines multilateral foreign policy, as well as President Obama’s personal efforts toward repairing America’s damaged image abroad.
- Craft a pragmatic, principled approach to enforcement of standing trade agreements.
- Adopt a China policy of carrots and sticks, including a continued push for China to open more of its markets while resorting to the WTO dispute settlement system only when the situation and facts support doing so.
- Craft a proactive agenda now for implementation when trade consensus re-emerges.
The Government Shouldn’t Tilt The Speech Playing Field in Its Own Favor
New Hampshire passed a law prohibiting the transfer of doctors’ prescription history to facilitate drug companies’ one-on-one marketing — a practice known as “detailing” — because it believes detailing drives up brand-name drug sales and, in turn, health care costs. The state knew that the First Amendment prevented it from banning detailing itself, so it made the practice more difficult indirectly.
Yet data collection and transfer is protected speech — think academic research, or the phone book — and government efforts to regulate this type of speech also runs afoul of the First Amendment. See, e.g., Solveig Singleton, “Privacy as Censorship: A Skeptical View of Proposals to Regulate Privacy in the Private Sector” (Cato Institute Policy Analysis No. 295). New Hampshire also engages in gross viewpoint discrimination: it exempts insurers’ efforts to persuade doctors to use generic drugs, and runs an “academic detailing” program to discourage brand-name drug use.
Remarkably, the First Circuit reversed a district court ruling that had invalidated the statute as unconstitutional, somehow finding that the statute regulates conduct rather than speech and that, in any event, the judiciary should defer to the legislative branch’s judgment. Two companies that collect and sell health information and analysis filed a petition asking the Supreme Court to review the case. Cato, joining Washington Legal Foundation, Reason Foundation, and a group of current and former state officials, has filed a brief supporting that petition.
Our brief argues that the Supreme Court should grant review because: 1) the speech at issue is worthy of First Amendment protection; 2) this case is a good vehicle for examining First Amendment issues attending state attempts to control health care costs (other states have passed similar laws); and 3) the lower court’s holding that a state may restrict speech to “level the playing field” conflicts with the Court’s precedent regarding both commercial speech and campaign finance regulation.
The Supreme Court will be deciding over the summer whether to grant review, with a decision expected after the “Long Conference,” which precedes the beginning of the new term in October.
Educational Productivity Has Collapsed — NAEP
The latest Long Term Trends results of the National Assessment of Educational Progress are out. They reveal a productivity collapse unparalleled in any other sector of the economy.
At the end of high school, students perform no better today than they did nearly 40 years ago, and yet we spend more than twice as much per pupil in real, inflation-adjusted terms. I can’t think of any other service that has gotten worse during my lifetime. Our school system has failed alone.
While the stagnation in overall achievement masks a 3 to 5 percent gain in the achievement of African American 17-year-olds since 1970, the scores for whites at the end of high school are virtually unchanged.
Anyone who points to the slightly higher scores in the early grades as cause for celebration is missing the point. What parents care about is that their children are well prepared for higher education and future careers at the end of their secondary education. The fact that scores have risen somewhat in the early grades means little since those gains evaporate for the vast majority of students by the time they graduate.
Update: The Associated Press story is now out on the Long Term Trends NAEP results… and it doesn’t mention the long term trends. The story only reports changes in achievement over the most recent 4 year interval of a test whose raison d’être is to reach back to the early 1970s. I wonder why…. Fortunately, the Detroit Free Press does a better job.
More on Swine Flu
Beyond how communications about swine flu are handled, consider also the merits of this “public health emergency.” Hamilton Nolan at Gawker has a pithy retrospective.
Galling Security Ignorance
In a post on Saturday at NRO’s the Corner blog, former Bush speech writer Marc Theissen exhibits ignorance of basic security concepts too galling to let pass without comment.
Attempting to refute the idea that hijacking planes and flying them into buildings was “off the table” as a terrorist tactic after 9/11, Theissen says:
Really? Planes were off the table after 9/11? That would come as a surprise to every passenger in the past three years who had their liquids confiscated in an airport security line. Those security measures were instituted because in 2006 we foiled an al-Qaeda plot to hijack airplanes leaving London’s Heathrow airport and blow them up over the Atlantic (a plot our intelligence community says was just weeks from execution).
(First, put aside some issues – “what the government says about its security measures must be true” and both the immediacy and viability of the liquid bomb plot in London.)
The difference between “hijacking” and “bombing” shouldn’t need explaining. The former is taking over the controls of a thing, enabling an attacker to direct it into other things. The latter is exploding something in it or on it so as to render it inoperable.
Americans ritually donate their toothpaste to sanitation departments in the cities they visit not because a liquid bomb could enable the commandeering of a plane, but because the alleged liquid bomb could take a plane out of the sky.
The bombing of a plane is a serious concern, but not as serious or potentially damaging as the commandeering of an aircraft. And commandeering is essentially off the table. The hardening of cockpit doors, new procedures at the fronts of planes, and newfound resolve of passengers and crews against commandeering have reduced the likelihood of future commandeerings to near zero. That was what the plane going down in Pennsylvania was all about.
If it weren’t made in debate about such serious issues, Theissen’s error would be quite comical. In his jumbled version of events, the liquid bomb plotters were going to go to the trouble of capturing the controls of an airplane, then fly it around for a while, and finally blow it up over the Atlantic. It’s reminiscent of the Seinfeld episode in which Elaine attacks the theory that an elderly couple running a nearby cobbler shop had shut it down just to abscond with Jerry’s shoes:
ELAINE (amused): So. Mom and Pop’s plan was to move into the neighborhood…establish trust…for 48 years. And then, run off with Jerry’s sneakers.
KRAMER: Apparently.
ELAINE: Alright, that’s enough of this.
New at Cato
Here are a few highlights from Cato Today, a daily email from the Cato Institute. You can subscribe, here.
- Marian Tupy discusses African aid in his new Development Policy Analysis, “The False Promise of Gleneagles: Misguided Priorities at the Heart of the New Push for African Development,” and an op-ed in the Washington Times.
- Swaminathan Aiyar argues against a global currency in The Guardian.
- Daniel J. Mitchell calls for abolishing the death tax in USA Today.
- Will Wilkinson argues for more liberal immigration policies in The Week magazine.
- In the Christian Science Monitor, Benjamin Friedman says the United States should cut military spending in half.
- In Monday’s Cato Daily Podcast, Jim Harper explains why Obama’s record on following through with his campaign promise to post bills online for five days before signing is worse than the Washington Nationals’.
Robert H. Frank, A 200% Tax Even Socialists Will Hate
In the latest issue of Forbes, Cornell University economist Robert H. Frank is pushing “A Tax Even Libertarians Can Love.” I hope he wasn’t counting on this libertarian’s support.
What he advocates is “replacing the income tax with a progressive tax on spending. …A family’s income minus its savings is its consumption, and that amount minus a large standard deduction — say, $30,000 a year for a family of four — would be its taxable consumption. …Rates would start low, perhaps 20%, then rise gradually with total consumption. …With savings tax-exempt, top marginal tax rates on consumption would have to be significantly higher than current top rates on income.”
His concept of “significantly higher” includes tax rates of 100-200% on marginal income that isn’t saved. This is about minimizing affluence, not maximizing revenues. There is ample evidence from Emmanuel Saez and others that the amount of reported income drops sharply as marginal tax rates rise above 25-30% (and even less on capital gains).
In his 2007 book, Falling Behind: How Rising Inequality Harms the Middle Class, Frank suggests marginal tax rates of 50% above $220,000 and rising to 200%. Since seniors (like me) commonly finance retirement from past savings, Frank’s tax scheme amounts to rapid confiscation of past savings.
For young people, Frank’s tax can’t possibly encourage savings because it discourages earning any income in the first place. Consumption is, after all, the motive for both earning and saving. The prospect of facing future consumption taxes of 50-200% would surely discourage saving much, because the rewards from invested savings (namely, future consumption) would be subjected to such prohibitive tax brackets. Under this steeply progressive tax on unsaved income, any income exempt from taxes today would be subject to brutal taxes whenever folks wanted to buy anything of value, like a car or house, or to retire on their accumulated savings.
Fourth Amendment Up for a Vote?
New Jerseyans may get a chance to vote their Fourth Amendment preferences in the upcoming gubernatorial elections. Among the candidates is Chris Christie, who as U.S. Attorney for New Jersey authorized the tracking of suspects’ cell phones without getting a warrant.
America Alone on Punitive Corporate Taxes
In Tax Notes International today, two Ernst and Young experts describe how corporate tax reforms in Japan have made America an even bigger outlier in its punitive treatment of multinational corporations:
Japan’s recent adoption of a territorial tax system as part of a broader tax reform reduces the tax burden on the foreign-source income of Japanese multinational corporations.
Before the Japanese reform, the two largest economies had both high corporate income tax rates and worldwide tax systems. Now the United States not only has the second-highest corporate income tax rate of the OECD countries, it is also one of the few that still have a general worldwide tax system.
The Japanese corporate tax reform is part of a global trend toward reduced taxation of corporate income, which often takes the form of a significantly reduced corporate tax rate but also is reflected through reduced taxation of foreign-source income.
The details of the president’s budget proposal to reform deferral are expected in the coming weeks. As we await the specifics, it is clear that the direction of the proposal runs counter to this strong current of global corporate tax reform with lower overall corporate tax rates and reductions in domestic taxation of foreign-source income.
In simple terms, Japan’s reforms may give firms such as Toyota or Hitachi an advantage over firms such as Ford or General Electric in international markets.
Alas, U.S. policymakers don’t seem to understand that in a globalized world of free-flowing capital we need to change our uncompetitive tax policies. At Cato, we will keep trying to educate them, but it is sad that our economy loses jobs and investment because our elected leaders are such slow learners compared to leaders in Japan, Jordan, Canada, and elsewhere.
Globalization and Tax Reform
Despite the recession, globalization continues to exert pressure for beneficial tax reforms. From Tax Notes International today:
Jordanian Finance Minister Bassem al-Salem on April 20 confirmed that the government is working on draft legislation that would cut corporate tax rates drastically, reducing them in some cases by more than half.
Al-Salem said the government will seek to introduce a single 12 percent tax rate for most corporate entities, although companies in the banking, insurance, and mining sectors would pay tax at a rate of 25 percent. The current corporate tax rates range from 15 percent to 35 percent for different profit levels and also differ by business sector.
The draft legislation would also rationalize individual income tax, custom duties, and other taxes to increase efficiency, al-Salem said. Jordan has about 100 different taxes.
Al-Salem said the tax cuts are needed because many countries in the region either don’t have taxes at all or have much lower tax rates than Jordan’s, making them more attractive jurisdictions for investment.
The full story on taxation and globalization is here.
More on South Carolina School Choice Hearing
State Senator Robert Ford is an African-American, Democratic champion of education tax credits to fund school choice and sponsor of the bill under consideration at this hearing. He has a tendency for quotable lines, and delivered one of my favorite last week.
“For 37 years I lied to myself [about education reform],” Sen. Ford admitted. He’s now determined to shine a light on all of those lies that he swallowed . . . that the public schools are the only way to help the poor, that we just need one more public school reform and all will be right and good.
Sen. Ford has the courage to admit that he was wrong and face the vicious attacks of his one-time allies for choosing children over public school special interests. And he’s not the type to let go on a matter of justice. I look forward to hearing a lot more from him . . .
Check in here for updates on school choice in SC and videos from the hearing, and in the meantime, here’s my testimony (speakers were limited to 3 minutes . . .).
Obama’s Transparency Average Drops
On the campaign trail, President Obama promised to post bills online for five days before signing them.
Last week, President Obama signed three new bills into law. None of them received the promised “Sunlight Before Signing” treatment – at least, not as far as our research reveals. (The White House has yet to establish a uniform place on its Web site where the public can look for bills that the President has received from Congress.)
The new bills put today’s podcast on Obama’s five-day pledge slightly out of date. He is not batting .091 on his transparency pledge. He’s batting .071. The substance of the podcast remains true, however: This is still a worse record than the Nationals.
President Obama waited more than five days to sign two of the three bills he passed into law last week. The simple matter of posting them on Whitehouse.gov would have fulfilled the promise as to those bills – and would have brought his average up to .214.
The current list of new laws, with presentment date and signing date, is after the break.
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