In his State of the Union address, President Obama emphatically declared, “Anyone who tells you that America is in decline or that our influence has waned, doesn’t know what they’re talking about.” Obama sought to put to rest the notion that he is embracing American decline, as GOP candidates Romney, Gingrich and Santorum have accused him of doing. He likewise affirmed his belief in the country’s exceptional place in history.

In particular, this president believes, as his predecessor did, in the necessity of the U.S. military to act beyond its constitutionally mandated function, put out any fires that flare across the globe, and underwrite world security. I examine this in an op-ed published today on CNN.com:

The president sounded like a neoconservative when he declared during his recent State of the Union address that the United States was, and would remain, the world’s “indispensable nation.” Obama’s proposed Pentagon budget, released last week, affirmed his intention to retain most of the U.S. military’s current missions, even when they aren’t needed to safeguard the United States’ vital security interests.

Meanwhile, the Pentagon’s latest strategy document was carefully designed to convince allies and adversaries alike that the United States can continue to prosecute multiple armed conflicts in far-flung corners of the globe. Taken together, Obama’s strategy document, budget and State of the Union remarks articulate a coherent philosophy on military spending and global engagement that ought to hold a lot of appeal for the neoconservatives in the GOP.

But … our foreign policy leaders have consistently ignored … an argument that should have strong sway at a time of economic uncertainty: this country’s tax dollars can be better spent than on defending wealthy allies who are more than capable of protecting themselves.

This talk of the United States as the “indispensable nation” is straight out of the neoconservative playbook. They should have no quarrel with President Obama’s policies. And it is interesting that while Mitt Romney criticizes the president in this arena, Romney foreign-policy advisor, neoconservative stalwart Robert Kagan, has gotten the president’s attention.

Like Kagan and Romney, President Obama believes the world is better off with the United States doing for wealthy allies what they should be doing for themselves: securing their interests. President Obama talked of “fairness” in his State of the Union and a “shared sacrifice” among citizens in these trying economic times. But this sacrifice apparently does not extend beyond the borders of the United States. Under President Obama, as under a Romney presidency, the American taxpayer will continue to pay for the security of Europe and East Asia, and our troops will be saddled with a nearly endless list of missions. That isn’t fair, nor is it wise.

Obama’s Neocon Moment is a post from Cato @ Liberty - Cato Institute Blog

In this podcast, I discuss the flap between Mitt Romney and Rick Santorum over RomneyCare‘s effect on free riding. I also talk about how some fact checkers misfired when looking into the issue.

Podcast: RomneyCare Free Riding and Fact Checking is a post from Cato @ Liberty - Cato Institute Blog

During last night’s GOP presidential debate, Rick Santorum and Mitt Romney had a polite disagreement over Romneycare’s impact on free-ridership in Massachusetts. The short version: Santorum was right. Romney and even FactCheck.org disputed Santorum’s claim, but they misunderstood it.

The exchange comes 2:15 into this video from Kaiser Health News:

Here’s the Kaiser Health News transcript:

SANTORUM: Just so I understand this, in Massachusetts, everybody is mandated as a condition of breathing in Massachusetts, to buy health insurance, and if you don’t, and if you don’t, you have to pay a fine.

What has happened in Massachusetts is that people are now paying the fine because health insurance is so expensive. And you have a pre-existing condition clause in yours, just like Barack Obama.

So what is happening in Massachusetts, the people that Governor Romney said he wanted to go after, the people that were free-riding, free ridership has gone up five-fold in Massachusetts. Five times the rate it was before. Why? Because…

ROMNEY: That’s total, complete…

SANTORUM: I’ll be happy to give you the study. Five times the rate it has gone up. Why? Because people are ready to pay a cheaper fine and then be able to sign up to insurance, which are now guaranteed under “Romney-care,” than pay high cost insurance, which is what has happened as a result of “Romney-care.”

ROMNEY: First of all, it’s not worth getting angry about. Secondly, the…

(APPLAUSE)

ROMNEY: Secondly, 98 percent of the people have insurance. And so the idea that more people are free-riding the system is simply impossible. Half of those people got insurance on their own. Others got help in buying the insurance.

FactCheck.org writes:

Romney is right. The percentage of insured residents in the state went up from 93.6 percent in 2006, the year the law was enacted, to 98.1 percent in 2010. And data from the state Division of Health Care Finance and Policy show a 46 percent decline in the number of free care medical visits paid for by the state’s Health Care Safety Net. The number of inpatient discharges and outpatient visits under the program went from 2.1 million in 2006 to 1.1 million in 2010 (see page 12)…

A Santorum campaign spokesman pointed us to a Wall Street Journal column by Michael F. Cannon of the libertarian Cato Institute, who stated that “Massachusetts reported a nearly fivefold increase in such free riding after its mandate took effect.” But that doesn’t square with official data just cited. Cannon didn’t specify the time period and so may have referred to some temporary or transitory bump in free riders. We will update this item if we are able to get more information from Cannon.

Speaking of facts, here’s a fun one: both Kaiser Health News and FactCheck.org unnecessarily flank “Romneycare” with quotation marks when it appears within a quote from Santorum. As if Santorum had used quotation fingers. Adorable. But I digress.

Romney and FactCheck.org failed to consider that there are different types of free riding. One type happens when government guarantees access to emergency-room care: people show up to get care, and they don’t pay. Another type happens when government guarantees people the ability to purchase health insurance at standard rates no matter how sick they are: people wait until they are sick to purchase health insurance and drop it right after they get the care they needed. These free riders pay far less than they would in a free market, which would not allow such behavior. Romney and FactCheck.org assumed Santorum meant the former type of government-induced free riding, when he was clearly talking about the latter.

The data that Santorum and I cite come from a report by the Massachusetts Division of Insurance. See this June 2010 blog post, where I quote the Boston Globe:

The number of people who appear to be gaming the state’s health insurance system by purchasing coverage only when they are sick quadrupled from 2006 to 2008, according to a long-awaited report released yesterday from the Massachusetts Division of Insurance.

The result is that insured residents of Massachusetts wind up paying more for health care, according to the report.

“The active members subsidize some of the costs tied to those individuals who terminate within one year,” the report says…

The number of people engaging in this phenomenon — dumping their coverage within six months — jumped from 3,508 in 2006, when the law was passed, to 17,177 in 2008, the most recent year for which data are available.

Actually, it more than quadrupled: 17,177/3,508≈4.9. But whatever. Santorum was right.

One might object that these numbers seem like small potatoes compared to the apparent drop in visits paid from the Commonwealth’s Health Care Safety Net program. Fair point. But the type of free riding Santorum identified is incomparably worse than the kind that happens in hospital emergency rooms. When people can wait until they are sick to purchase insurance, overall premiums rise so high that the health insurance market collapses in an “adverse selection death spiral.” That’s how Obamacare destroyed (and is destroying) the market for child-only coverage in dozens of states. It’s why Obamacare’s CLASS Act collapsed years before it collected a single premium. It’s happening very slowly in Massachusetts, but it is happening. And it will happen to all private health insurance under Obamacare. In contrast, as I mention in my Wall Street Journal piece, the ER-type of free riding increases health insurance premiums by “at most 1.7 percent,” according to the Urban Institute. That’s not ideal, but it’s not catastrophic.

One might also object that this latter type of free riding can’t be a problem since Romneycare has increased the number of Massachusetts residents with health insurance coverage. Also a fair point. But not only can adverse selection occur at the same time that coverage is expanding, it has the potential to completely undo those coverage gains over time. Moreover, some of Romneycare’s supposed coverage gains might be people who are actually uninsured but conceal that fact from government surveys rather than admit to unlawful behavior. These are the ultimate free riders: they’re not even paying the fine. In this Cato Institute study, Aaron Yelowitz and I found evidence consistent with such concealment behavior in the Census Bureau’s Current Population Survey.

Romneycare & Free Riders is a post from Cato @ Liberty - Cato Institute Blog

Yuval Levin and Ramesh Ponnuru have a fantastic article on health care [subscription required] in the February 6 issue of National Review that, while not excusing RomneyCare, offers probably the best way that a compromised Mitt Romney could run against ObamaCare. If you don’t have a subscription, find a copy.

‘Romney vs. Obamacare: What the Presumptive Nominee Should Say’ is a post from Cato @ Liberty - Cato Institute Blog

I’m not a big fan of Mitt Romney. I hammered him the day before Christmas for being open to a value-added tax, and criticized him in previous posts for his less-than-stellar record on healthcare, his weakness on Social Security reform, his anemic list of proposed budget savings, and his reprehensible support for ethanol subsidies.

But I also believe in being intellectually honest, so I’ll defend a politician I don’t like (even Obama) when they do the right thing or when they get attacked for the wrong reason.

In the case of Romney, some of his GOP opponents are criticizing him for job losses and/or bankruptcies at some of the companies in which he invested while in charge of Bain Capital. But I don’t need to focus on that issue, because James Pethokoukis of AEI already has done a great job of debunking that bit of anti-Romney demagoguery.

In this post, I want to focus on the issue of tax havens.

Regular readers know that I’m a big defender of these low-tax jurisdictions, for both moral and economic reasons, and I guess that reporters must know that as well because I’ve received a couple of calls from the press in recent weeks. But I suspect I”m not being called because reporters want to understand international tax policy. Instead, based on the questions, it appears that the establishment media wants to hit Romney for utilizing tax havens as part of his work at Bain Capital.

As far as I can tell, none of these reporters have come out with a story. And I’m also not aware that any of Romney’s political rivals have tried to exploit the issue.

But I think it’s just a matter of time, so I want to preemptively address this issue. So let’s go back to 2007 and look at some excerpts from a story in the Los Angeles Times about the use of so-called tax havens by Romney and Bain Capital.

While in private business, Mitt Romney utilized shell companies in two offshore tax havens to help eligible investors avoid paying U.S. taxes, federal and state records show. Romney gained no personal tax benefit from the legal operations in Bermuda and the Cayman Islands. But aides to the Republican presidential hopeful and former colleagues acknowledged that the tax-friendly jurisdictions helped attract billions of additional investment dollars to Romney’s former company, Bain Capital, and thus boosted profits for Romney and his partners. …Romney was listed as a general partner and personally invested in BCIP Associates III Cayman, a private equity fund that is registered at a post office box on Grand Cayman Island and that indirectly buys equity in U.S. companies. The arrangement shields foreign investors from U.S. taxes they would pay for investing in U.S. companies. …In Bermuda, Romney served as president and sole shareholder for four years of Sankaty High Yield Asset Investors Ltd. It funneled money into Bain Capital’s Sankaty family of hedge funds, which invest in bonds and other debt issued by corporations, as well as bank loans. Like thousands of similar financial entities, Sankaty maintains no office or staff in Bermuda. Its only presence consists of a nameplate at a lawyer’s office in downtown Hamilton, capital of the British island territory. … Investing through what’s known as a blocker corporation in Bermuda protects tax-exempt American institutions, such as pension plans, hospitals and university endowments, from paying a 35% tax on what the Internal Revenue Service calls “unrelated business income” from domestic hedge funds that invest in debt, experts say. …Brad Malt, who controls Romney’s financial trust, said Bain Capital organized the Cayman fund to attract money from foreign institutional investors. “This is not Mitt trying to do something strange,” he said. “This is Bain trying to raise some number of billions from investors around the world.”

There are a couple of things worth noting about these excerpts.

1. Nobody has hinted that Romney did anything illegal for the simple reason that using low-tax jurisdictions is normal, appropriate, and intelligent for any business or investor. Criticizing Romney for using tax havens would be akin to attacking me for living in Virginia, which has lower taxes than Maryland.

2. Jurisdictions such as Bermuda and the Cayman Islands are good platforms for business activity, which is no different than a state like Delaware being a good platform for business activity. Indeed, Delaware has been ranked as the world’s top tax haven by one group (though American citizens unfortunately aren’t able to benefit).

3. America’s corporate tax system is hopelessly anti-competitive, so it is quite fortunate that both investors and companies can use tax havens as vehicles to profitably invest in the United States. This helps protect the economy and American workers by attracting trillions of dollars of investment to the U.S.

These three points are just the tip of the iceberg. Watch this video for more information about the economic benefit of tax havens.

Last but not least, here’s a prediction. I think it’s just a matter of time until Romney gets attacked for utilizing tax havens, though the press may wait until after he gets the GOP nomination.

But when those attacks occur, I’m extremely confident that the stories will fail to mention that prominent Democrats routinely utilize tax havens for business and investment purposes, including as Bill Clinton, John Kerry, John Edwards, Robert Rubin, Peter Orszag, and Richard Blumenthal.

It’s almost enough to make you think this cartoon is correct and that the establishment press is biased.

Mitt Romney and Bain Capital Were Right to Utilitize So-Called Tax Havens is a post from Cato @ Liberty - Cato Institute Blog

My Iowa caucus predictions from yesterday were hopelessly wrong, probably because I was picking with my heart rather than my head. As I noted a couple of weeks ago, Mitt Romney’s openness to a value-added tax makes him a dangerously flawed candidate, and I hoped Iowa voters shared my concern.

In a column for today’s Wall Street Journal, I elaborated on those concerns, explaining why a VAT is bad fiscal policy. I had three main points. First, I noted that the big spenders need a VAT in order to achieve a European-sized welfare state in America.

… the left needs a VAT. It is the only realistic way to collect the huge amount of revenue that will be necessary to finance the mountainous benefits promised by our entitlement programs. Which is exactly what happened in Europe, where welfare-state policies only became feasible after VATs were adopted, beginning in the late 1960s.

Second, I explained that the left favors this giant tax on the middle class because they want more money and soak-the-rich taxes don’t generate much revenue.

First, there aren’t enough wealthy people to finance big government. According to IRS data from before the recession, when we had the most rich people with the most income, there were about 321,000 households with income greater than $1 million, and they had aggregate taxable income of about $1 trillion. That’s a lot of money, but it wouldn’t balance the budget even if the government confiscated every penny—and if it did, how much income do you suppose would be available in year two? Second, higher tax rates don’t raise as much revenue as expected. Upper-income individuals are far more likely to rely on interest, dividends and capital gains—and it is much easier to control the timing, level and composition of capital income, so as to avoid exposing it to the tax man.

Third, I debunked the foolish notion that a VAT creates a “level playing field” for American exporters.

…some manufacturers are willing to overlook the VAT’s flaws because the tax is “border adjusted.” This means that there is no VAT on exports, while the tax is imposed on imports. For mercantilists worried about trade deficits, this is a positive feature that they claim will put America on a “level playing field.” But that misunderstands how a VAT works. Under our current tax system, American goods sold in America don’t pay a VAT—but neither do German-produced goods or Japanese-produced goods that are sold in America because their VAT tax is rebated on exports. Meanwhile, any American-produced goods sold in Germany or Japan are hit by a VAT, as are all other goods. In other words, there already is a level playing field. To be sure, there will also be a level playing field if America adopts a VAT. But it won’t make any difference to international trade. All that will happen is that the politicians in Washington will get more money whenever any products are sold.

But I didn’t limit myself to economic analysis. I also warned that Mitt Romney might be an even greater threat on this issue than Barack Obama.

Unsurprisingly, President Obama is favorably inclined toward a VAT, having recently claimed that it is “something that has worked for other countries.” And yet it’s unlikely that the president would propose a VAT, in large part because he is fixated on class-warfare tax hikes. If he did, almost every Republican in Congress would be opposed, even if only for partisan reasons. But what if a VAT sympathizer like Mr. Romney wins next November and decides that his plan for a lower corporate tax rate is only possible if accompanied by a VAT? There will be quite a few Republicans who like that idea because they want to do something nice for their lobbyist friends in the business community. And there will be many Democrats drawn to the plan because they realize that they need this new source of revenue to enable bigger government. That’s a win-win deal for politicians and a terrible deal for taxpayers.

This point deserves some elaboration. Why is the VAT a do-or-die issue?

Simply stated, the United States is in grave danger of becoming a European-style welfare state. Indeed, that will automatically happen in the next few decades because of demographic changes and poorly designed entitlement programs.

This is why there is a desperate need to reform programs such as Medicare and Medicaid. But politicians almost certainly won’t adopt the needed reforms if they have the ability to instead confiscate more money from taxpayers – especially if they have a new tax like the VAT, which is a money machine for bigger government.

P.S. For a humorous – but accurate – perspective on the VAT, take a look at these clever cartoons (here, here, and here).

Mitt Romney, the Value-Added Tax, and America’s European Future is a post from Cato @ Liberty - Cato Institute Blog

To Mitt Romney, $10,000 is no big deal.

No Wonder Romney Didn’t Mind Forcing People to Purchase Health Insurance is a post from Cato @ Liberty - Cato Institute Blog

Speaking at a town hall meeting at Morningside College in Sioux City, Iowa yesterday, Republican presidential candidate Mitt Romney backed a national ID system and government pre-approval of all new hires in the country. It’s a stunning amount of power he wants the federal government to have.

Addressing a question about illegal immigration (starting at 30:40 in this video) he said:

You’ve got to crack down on employers that hire people that are illegal, and that means you have to have a system that identifies who’s here legally, with a biometric card that has: this is the person, they’re allowed to work here. You say to an employer, you look at that card, you swipe it in your computer, you type in the number, it instantly tells you whether they’re legal or not.

He’s describing an expanded E-Verify system, and the biometric national identity system that has been proposed for it. That system would not only be used for controlling employment, of course. Like the Social Security number did when it caught mission creep, the national ID Romney talks about would come to be used to control access to housing, to financial services and credit, gun ownership, health care and medicine, the list goes on and on.

It’s technically possible to have a biometric card that solely indicates one’s qualification to work under federal law, but as I wrote in my paper, “Franz Kafka’s Solution to Illegal Immigration,” there is almost no chance that the government would limit itself this way. E-Verify requires a national identity system, and Mitt Romney wants that national identity system.

Romney Supports National ID, Government Pre-Approval of Working is a post from Cato @ Liberty - Cato Institute Blog

Just days after the other Republican presidential candidates finally started holding Mitt Romney’s feet to the fire for the ObamaCare 1.0 health care law he signed while governor of Massachusetts, the Wall Street Journal slams his health care record in not one but two opinion pieces.

See also this pertinent Cato video:

Finally, Some Scrutiny of Romney’s Culpability for ObamaCare is a post from Cato @ Liberty - Cato Institute Blog

The video below shows former Massachusetts governor Mitt Romney (R) relaying a quip that former U.S. senator from Massachusetts Ted Kennedy (D) made at the 2006 signing ceremony for RomneyCare, a law that both men labored to make a reality.  Cato adjunct scholar David Hyman quotes Kennedy’s quip in this paper on RomneyCare:

When you come to a celebration of a signing and Mitt Romney and Ted Kennedy and the Heritage Foundation are all together, it’s clear one of us didn’t read the bill.

Romney paraphrases Kennedy’s quip at 1:12 into the video, to the amusement of the conservatives attending the National Review Institute’s Conservative Summit:

RomneyCare later served as the model for ObamaCare.  Guess who didn’t read the bill.

Who Understood RomneyCare Better: Mitt Romney or Ted Kennedy? is a post from Cato @ Liberty - Cato Institute Blog

Governor Rick Perry of Texas is being attacked by two rivals in the GOP presidential race. His sin, if you can believe it, is that he told the truth (as acknowledged by everyone from Paul Krugman to Milton Friedman) about Social Security being a Ponzi scheme.

Here’s an excerpt from Philip Klein’s column in the Examiner, looking at how Mitt Romney is criticizing Perry.

Mitt Romney doubled down on his attack against Texas Gov. Rick Perry this afternoon, warning in an interview with Sean Hannity that his critique of Social Security amounted to “terrible politics” that would cost Republicans the election. Romney’s decision to pile on suggests that he’s willing to play the “granny card” against Perry if it will help him get elected, a tactic more becoming of the likes of DNC chairwoman Debbie Wasserman Schultz than a potential Republican nominee.

And here’s a Byron York column from the Examiner looking at how Michele Bachmann is taking the same approach.

…another Republican rival, Michele Bachmann, is preparing to hit Perry on the same issue. “Bernie Madoff deals with Ponzi schemes, not the grandparents of America,” says a Bachmann adviser.  “Clearly she feels differently about the value of Social Security than Gov. Perry does.  She believes Social Security needs to be saved, that it’s an important safety net for Americans who have paid into it all their lives.” … “She strongly disagrees with his position on that…”

Shame on Romney and Bachmann. With an inflation-adjusted long-run shortfall of about $28 trillion, Social Security is a Ponzi scheme on steroids.

But as I explain in this video, that’s just part of the problem. The program also is a terrible deal for workers, particularly young people and minorities.

Here’s what’s so frustrating. Romney and Bachmann almost certainly understand that Social Security is actuarially bankrupt. And they probably realize that personal retirement accounts are the only long-run answer.

But they’re letting political ambition lure them into saying things that they know are not true. Why? Because they think Perry will lose votes and they can improve their respective chances of getting the GOP nomination.

Sounds like a smart approach, assuming truth and morality don’t matter.

But here’s what’s so ironic. The Romney and Bachmann strategy is only astute if Social Security is sacrosanct and personal accounts are political poison.

But as I noted last year, the American public supports personal accounts by a hefty margin. And former President Bush won two elections while supporting Social Security reform. And election-day polls confirmed that voters supported personal accounts.

I’m not a political scientist, so maybe something has changed, but I wouldn’t be surprised if Perry benefited from the left-wing demagoguery being utilized by Romney and Bachmann.

P.S. This does not mean Perry has the right answer. As far as I know, he hasn’t endorsed personal accounts. But at least he’s telling the truth about Social Security being unsustainable.

Social Security Demagoguery from Mitt Romney and Michele Bachmann: Economically Wrong, Politically Wrong is a post from Cato @ Liberty - Cato Institute Blog

Presidential Candidate Ron Paul has a decidedly mixed record on trade policy. He often votes against trade agreements because he sees them as “managed trade” and  an interference with true free trade. Well, ok, but that’ s like voting against income tax cuts because you think the IRS shouldn’t exist. I get the point, but c’mon…

In any event, he was the only participant in Thursday night’s debate between the Republican presidential candidates who spoke about trade with any sense at all. As Inside US Trade [subscription required] points out, trade policy was not a prominent theme of the debate, but that didn’t stop Mitt Romney from (again) spouting nonsense about balanced trade:

Former Massachusetts governor Mitt Romney late last week took a swipe at the trade policies of the Obama administration in a debate of the Republican presidential candidates by implying they are unbalanced in favor of other nations.

As part of a seven-point list of actions to turn around the economy, Romney said the U.S. should “have trade policies that work for us, not just for our opponents,” as the third point…

(I’ll just interject here to say that by “opponents” I believe Mr Romney is referring to our trade partners. You know, the folks who sell us stuff and buy stuff from us. But I digress…)

Trade was only raised one other time during the debate. Prompted by a moderator, Rep. Ron Paul (R-TX) defended his earlier criticism of Obama’s sanctions against Iran for its nuclear program.

Saying it was “natural” that Iran would pursue nuclear weapons—given that India, Pakistan, China, and Israel also possess them—Paul attacked the sanctions policy as steering the U.S. toward conflict.

“Countries that you put sanctions on, you are more likely to fight them,” he said. “I say a policy of peace is free trade. Stay out of their internal business.”

Paul also suggested it was time for the U.S. to engage in a trading relationship with Cuba and “stop fighting these wars that are about 30 or 40 years old,” an apparent reference to the Cold War. [emphasis added]

(My friend Scott Lincicome has more on the economic illiteracy flowing from the debate here)

Mr Paul is right on this one. He and I no doubt disagree on a few issues, and on trade I have more tolerance than he does for multilateral (and, albeit to a lesser extent, bilateral and regional) trade agreements as the only likely avenues for trade liberalization in the foreseeable future. But the link between trade and peace is an important one, and often overlooked.

Speaking of Ron Paul, the following clip shows Jon Stewart at his devastating best, calling out the mainstream media—and particularly Fox News—for ignoring and/or outright mocking Ron Paul’s candidacy. Watch to the very end, you won’t regret it. (HT: RadleyBalko)

Ron Paul Talks Sense on Trade is a post from Cato @ Liberty - Cato Institute Blog

Mitt Romney’s explanation of why he’s against raising taxes on corporations — indeed, America already has some of the highest corporate tax rates in the developed world — at the Iowa State Fair was a bit awkward but not wholly incorrect.  Reason‘s Katherine Mangu-Ward has a good post with video and transcript, but here’s the salient bit:

ROMNEY: We have to make sure that the promises we make — and Social Security, Medicaid, and Medicare — are promises we can keep. And there are various ways of doing that. One is, we could raise taxes on people.

AUDIENCE MEMBER: Corporations!

ROMNEY: Corporations are people, my friend. We can raise taxes on—

AUDIENCE MEMBER: No, they’re not!

ROMNEY: Of course they are. Everything corporations earn also goes to people.

AUDIENCE: [LAUGHTER]

ROMNEY: Where do you think it goes?

AUDIENCE MEMBER: It goes into their pockets!

ROMNEY: Whose pockets? Whose pockets? People’s pockets! Human beings, my friend. So number one, you can raise taxes. That’s not the approach that I would take.

Now, obviously, Romney is not saying that corporations are living, breathing beings with rights to abortion (or not, or depending on the stage of development of the fetal/baby corporations) and marriage, who are subject to Obamacare’s individual mandate (or even Romneycare’s for Massachusetts corporations), can be put to death if they murder someone, and so forth.  He means that corporate money always comes from, flows through, and ends up in human hands.  It cannot be otherwise: we are the only beings/entities/”things” on the planet that deal in money.  Not even the honey badger does that.

I probably would’ve phrased it differently — Democrats and left-wing activists are already having a field day (for example, mixing Romney’s speech with Barbra Streisand’s singing “People”) — but there’s really nothing wrong with Romney’s point.  Indeed, it’s the tax-policy corollary to the legal point I’ve been making ever since Citizens United came down: corporations don’t have constitutional rights because they’re corporations, but because they’re made up of individuals, who don’t lose their rights when they associate (in corporate form or otherwise).

As I said in a previous blogpost, “it really doesn’t matter that ‘corporations aren’t people.’  Of course they’re not living, breathing human beings, and their ’personhood’ for legal purposes is just that: a convenient legal fiction.”  I even wrote a law review article (co-authored with Caitlyn Walsh McCarthy) to explain this fairly simple argument.  From the abstract:

When individuals pool their resources and speak under the legal fiction of a corporation, they do not lose their rights. It cannot be any other way; in a world where corporations are not entitled to constitutional protections, the police would be free to storm office buildings and seize computers or documents. The mayor of New York City could exercise eminent domain over Rockefeller Center by fiat and without compensation if he decides he’d like to move his office there. Moreover, the government would be able to censor all corporate speech, including that of so-called media corporations. In short, rights-bearing individuals do not forfeit those rights when they associate in groups.

Similarly, when you tax corporations, you’re taxing the people who ultimately profit from corporate activity: officers, directors, and, most directly, shareholders.  Of course, all these people also pay individual income taxes so, in effect, that income is being taxed twice.   I’ll leave it to my colleague Dan Mitchell to explain why that might be bad and how otherwise to reform our tax code, but the fact of the matter is that raising corporate taxes does in fact constitute raising taxes on people — which you have to be against if you want to become the Republican presidential nominee.  That’s why Romney said what he said.

Anyhow, the title of my article is “So What If Corporations Aren’t People?” but perhaps I should retitle it “So What If Corporations Are People?” and offer it as a press release to the Romney campaign.

‘Corporations Are [Made of] People’ is a post from Cato @ Liberty - Cato Institute Blog

• Next up for marriage equality: Perry v. Schwarzenegger. Please join us at 12:00 p.m. Eastern today as co-counsels for the plaintiffs Theodore Olson and John Boies join Center for American Progress president John Podesta and Cato chairman Robert A. Levy for a panel discussion on marriage equality, exploring legal and moral questions dating back to the landmark 1967 Loving v. Virginia decision that ended state bans on interracial marriage. If you cannot join us here at Cato, please tune in to watch a live stream of the event.
• “Republicans have an opportunity for a much more important debate, which will frame the election campaign next year.”
• In President Obama’s next speech, Cato director of foreign policy studies Christopher Preble hopes “that the president reaffirms the importance of peaceful regime change from within, not American-sponsored regime change from without.”
• What will former Massachusetts governor Mitt Romney’s next position on health care be?
• Like cleanliness next to godliness, so is democracy next to tyranny.
• The U.S. hit the debt limit–what’s next?

Wednesday Links is a post from Cato @ Liberty - Cato Institute Blog

In 1995, shortly after becoming Speaker of the House, Newt Gingrich mulled a radical overhaul of the U.S. Food and Drug Administration.  As he put it to a room full of health insurers, “Maybe we’ll take out FDA.”

What made Newt likable to advocates of freedom is sadly no longer part of his schtick.  Here’s how Andrew Stiles reports on Newt’s appearance on Meet the Press yesterday:

“I don’t think right-wing social engineering is any more desirable than left-wing social engineering,” he said when asked about [House Budget Committee chairman Paul] Ryan’s [R-WI] plan to transition to a “premium support” model for Medicare. “I don’t think imposing radical change from the right or the left is a very good way for a free society to operate.”

As far as an alternative, Gingrich trotted out the same appeal employed by Obama/Reid/Pelosi — for a “national conversation” on how to “improve” Medicare, and promised to eliminate ‘waste, fraud and abuse,’ etc.

“I think what you want to have is a system where people voluntarily migrate to better outcomes, better solutions, better options,” Gingrich said. Ryan’s plan was simply “too big a jump.”

He even went so far as to compare it the Obama health-care plan. “I’m against Obamacare, which is imposing radical change, and I would be against a conservative imposing radical change.”

If you close your eyes, it’s like listening to The Princess Bride. Medicare and Medicaid are nothing if not social engineering.  So by Newt’s logic, we should get rid of them.  But Newt also says that radical change is bad, which means we can’t.  That leaves incremental changes.  But incremental changes to massive social-engineering experiments are themselves social engineering, so we clearly cannot make incremental changes, either.  ObamaCare is both social engineering and radical change.  Again by Newt’s logic, ObamaCare is bad, and we must get rid of it, but we can’t.  Truly, he has a dizzying intellect.

Newt’s objection to Paul Ryan’s Medicare reforms is no less incoherent.  It appears to be that the reforms approved by the House would eliminate the traditional Medicare program as an option for Americans who enroll after 2021.   So far as I can tell, Newt’s opposition to this feature is consistent with his past positions on Medicare reform.  He wants to let people stay in traditional Medicare if that’s what they prefer, and would have traditional Medicare compete against private insurance companies for Medicare enrollees.

But it is completely inconsistent with Newt’s opposition to President Obama’s call for a so-called “public option” to compete with private insurance companies. In 2009, Newt told Good Morning America:

I guarantee you the language they draft for the public plan will give it huge advantages over the private sector or it won’t work…what they will do is rig the game…I mean, anybody who’s watched this Congress who believes that this Congress is going to design a fair, neutral playing field I think would be totally out of touch with reality.

Newt may not realize this, but he was actually explaining why his preferred Medicare reforms would fail: Congress would rig the game to protect the “public option” that Congress offers to seniors — i.e., traditional Medicare.  House Republicans, led by Paul Ryan, rather bravely stuck to their guns when they kept a “public option” out of their proposed Medicare reforms.  Ryan is offering Republicans credibility and success.  By his own admission, Newt is offering them failure.

What’s up with Mitt Romney and Newt Gingrich?  Does the Republican presidential nomination race have some sort of prize for insincerity or incoherence that I don’t know about?

Finally, Newt endorsed a “variation of the individual mandate” (tell me again why he opposes ObamaCare?) and said there is “a way to do it that make most libertarians relatively happy.” He must have meant to say leftists rather than libertarians. Regardless, I invite Newt to come to the Cato Institute so he can explain to people who actually care about freedom just how happy he’s going to make us.

Newt Tries to Out-Romney Romney, Endorses ‘Public Option’ in Medicare is a post from Cato @ Liberty - Cato Institute Blog

In a column for Kaiser Health News, Michael L. Millenson, President of Health Quality Advisors LLC, laments that conservatives in the U.S. House are approaching ObamaCare like, well, conservatives.  He cites comments by unnamed House GOP staffers at a recent conference:

The Innovation Center at the Centers for Medicare & Medicaid Services? “An innovation center at CMS is an oxymoron,” responded a  Republican aide…”Though it’s great for PhDs who come to Washington on the government tab.”

There was also no reason the government should pay for “so-called comparative effectiveness research,” another said.

“Everything’s on the chopping block,” said yet another.

No government-funded comparative-effectiveness research?  The horror!  For my money, those staffers (and whoever hired them) should get a medal.

Millenson thinks conservative Republicans have just become a bunch of cynics and longs for the days when Republicans would go along with the left-wing impulse to have the federal government micromanage health care:

After all, the McCain-Palin health policy platform in the 2008 presidential election called for coordinated care, greater use of health information technology and a focus on Medicare payment for value, not volume. Once-and-future Republican presidential candidates such as former governors Mike Huckabee (Ark.), Mitt Romney (Mass.) and Tim Pawlenty (Minn.), as well as ex-Speaker of the House Newt Gingrich, have long promoted disease prevention, a more innovative federal government and increased use of information technology. Indeed, federal health IT “meaningful use” requirements can even be seen as a direct consequence of Gingrich’s popularization of the phrase, “Paper kills.”

He even invokes the father of modern conservatism, William F. Buckley, as if Buckley would disapprove of conservatives standing athwart ObamaCare yelling, Stop!

Millenson’s tell comes toward the end of the column, when he writes:

traditional GOP conservatives… [have] eschewed ideas in favor of ideological declarations.

Eschewed ideas in favor of…ideas?  My guess is that what’s really troubling Millenson is that congressional Republicans are eschewing left-wing health care ideas in favor of freedom.

Better late than never.  Now if only GOP governors would do the same.

How Dare Conservatives Stand athwart ObamaCare Yelling, Stop! is a post from Cato @ Liberty - Cato Institute Blog

That’s the title of my latest column at National Review Online.  An excerpt:

Mitt Romney isn’t the only Republican presidential hopeful with an Obamacare problem: Indiana governor Mitch Daniels, were he to become the GOP’s nominee, could also undermine the repeal campaign that has united the party’s base and independent voters.

Among his liabilities:

Daniels’s decision to accept Obamacare funds and move forward with implementation is further undermining the repeal effort. Yesterday, federal judge Roger Vinson reversed his initial order forbidding the Obama administration to implement the law. He did so in part because plaintiff states such as Indiana are implementing it, which he said “undercut” their own argument that he should block it.

But all is not lost for Daniels.

Daniels can spare himself and the repeal movement such setbacks by following the lead of Florida governor Rick Scott (R.) and Alaska governor Sean Parnell (R.) and flatly refusing to implement any aspect of Obamacare. Daniels could even organize another letter in which his fellow governors all make the same announcement.

A move like that could separate him from the pack.

Mitch Daniels’s ObamaCare Problem is a post from Cato @ Liberty - Cato Institute Blog

You know you’re really wrong when Mike Huckabee can call you out. But that’s the situation Mitt Romney finds himself in, as Michael Cannon points out below.  Huckabee says Romney’s government-run health care plan with an individual mandate is a bad idea, Romney says he’s still proud of his plan, which is totally different from President Obama’s government-run health care plan with an individual mandate. But really, what can he do? In 17 years of seeking high political office, he is known for two things: changing his position on a surprisingly large number of issues, and his Massachusetts health care program. Which was of course the forerunner of Obamacare, as Michael Cannon and I pointed out in the video that Michael linked. So Romney is still defending a position I think we’ve already refuted.

Meanwhile, in speeches and interviews this week, Mike Huckabee continues to make the untenable connection between gay marriage and family breakdown that I discussed two weeks ago in the Los Angeles Times. Huckabee told reporters:

Huckabee opposes gay marriage on the grounds that, according to him, it destroys traditional families.

“There is a quantified impact of broken families,” Huckabee said. “[There is a] $300 billion dad deficit in America every year…that’s the amount of money that we spend as taxpayers to pick up the pieces because dads are derelict in their duties.”

But what’s the connection? As I wrote:

One thing gay couples are not doing is filling the world with fatherless children. Indeed, it’s hard to imagine that allowing more people to make the emotional and financial commitments of marriage could cause family breakdown or welfare spending….

Social conservatives point to a real problem and then offer phony solutions.

But you won’t find your keys on the thoroughfare if you dropped them in the alley, and you won’t reduce the costs of social breakdown by keeping gays unmarried and preventing them from adopting orphans.

One might add that, as Huckabee knows very well, rates of divorce and unwed motherhood soared decades before anyone started agitating for gay marriage.

If Huckabee and Romney are the Republican frontrunners, President Obama must be sleeping well these days.

Romney and Huckabee, What a Choice is a post from Cato @ Liberty - Cato Institute Blog

In 2006, then-Massachusetts governor Mitt Romney (R) fought for and enacted a health care law now known as RomneyCare – though the law is so nearly identical to ObamaCare that one could call it ObamaCare 1.0.  Romney is seeking the GOP nomination for president in 2012.  But since 84 percent of Republicans want ObamaCare repealed, the fact that he paved the way for ObamaCare is causing problems for Romney among the party faithful.  The most recent manifestation came in the form of a tongue-lashing from former Arkansas governor Mike Huckabee (R), whose book criticizes Romney both for enacting RomneyCare and for refusing to admit it was mistake.  In a recent interview, Huckabee said:

The position he should take is to say: “Look, the reason Obamacare won’t work is because we’ve tried it at the state level and we know it won’t work.”

Through a spokesman, Romney has — once again! – defended ObamaCare 1.0:

“Mitt Romney is proud of what he accomplished for Massachusetts in getting everyone covered,” Romney’s spokesman, Eric Fehrnstrom, told the Boston Globe, in the first direct response Team Mitt made to Huckabee’s criticism of the health plan in his new book.

Fehrnstrom added the usual stuff about how, even though Romney is proud of what RomneyCare/ObamaCare has done for Massachusetts, RomneyCare/ObamaCare may not be right for the entire nation.  As David Boaz and I explain in this Cato video, to which Romney has lent enduring relevance, Romney can’t have it both ways:

It’s as if the guy has just awakened from a 20-year nap and doesn’t realize the world has changed.

Romney Van Winkle is a post from Cato @ Liberty - Cato Institute Blog

The following exchange took place yesterday on the Christian Broadcasting Network between host David Brody and Tea Party Express Chairwoman Amy Kremer.

Brody: Mitt Romney…on the Massachusetts health care situation, you’re going to tell me that’s going to fly in the Tea Party movement?

Kremer: Absolutely not…I’m being honest here…You can’t get away from that.  And that’s the thing is, the days of people being able to do one thing in their state in front of a microphone, and then going to Washington and doing something else. I mean, the Internet, and 24-hour news cycles changed it all, and these people don’t have short memories, they’re digging up everything from the past, and they’re not going to let go of the health care.

Hmm.  I wonder why…

Video of the CBN exchange is available here.  For more on RomneyCare, read “The Massachusetts Health Plan: Much Pain, Little Gain.”

Tea Party Not Keen on RomneyCare is a post from Cato @ Liberty - Cato Institute Blog