2 December 2009

2 December 2009

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Libertarian Candidate May Force a Runoff in Costa Rica [Cato at Liberty]

Workers Should Direct Anger at Pension Managers, Not Students [Americans for Tax Reform]

DEC 01, 2009 05:09P.M. A new poll published today by Costa Rica’s daily La Nación shows that Libertarian presidential candidate Otto Guevara has 30% of support among likely voters, trailing the candidate of the incumbent social democrat party Laura Chinchilla, who has 43% support. The news here is that in just two months, Guevara has increased his share of the vote by 18 percentage points, while Chinchilla’s share has collapsed by 20 percentage points during the same period.

DEC 01, 2009 04:46P.M.

The elections are scheduled for February 7th, and if neither of the candidates reaches the 40% threshold, there would be a runoff on April 4th. Given the trend, it is very likely that Guevara might force a runoff with Chinchilla in April. However, if Chinchilla’s rapid decline continues and Guevara captures more independent and undecided voters, he could still pull a surprising victory in February.

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Guevara is a capital “L” Libertarian. His main issue during the campaign has been to get tough on crime (Costa Ricans’ main concern, according to polls). His economic platform is consistently free market: he proposes to abandon the colón and adopt the U.S. dollar as the official currency, he wants to unilaterally liberalize trade, he is calling for the implementation of a flat tax, and promotes an aggressive deregulation agenda. Moreover, he wants to introduce more competition in health care (currently a government single payer system) and education. On the international front, he has said that he would use international pulpits such as the UN and the Organization of American States to criticize Washington’s War on Drugs and propose sensible alternatives to international drug policy.

DEC 01, 2009 04:32P.M.

The following was originally posted at www.workerfreedom.org With many defined benefit plans drifting towards insolvency, governments will be increasingly pressured to bailout pensions in the red. ...

Volcker on Financial Reform and Economic Stimulus [Cato at Liberty] In a recent edition of The Region magazine, published by the Federal Reserve Bank of Minneapolis, retiring Minn. Fed President Gary Stern interviews Paul Volcker on a variety of topics. It’s an interview well worth reading, and reminds one why Volcker is one of the more thoughtful voices on economics and finance, even if he isn’t always right. Some highlights. On the Obama financial reform plan: I do not share one part of the general philosophy which seemed to emerge from this, particularly the proposal that the Federal Reserve supervise directly all “systemically important” institutions. I don’t know what “systemically important” institutions are, incidentally, but I’m sure that if you picked them out, people will assume they’re going to be saved, that they’re too big to fail. At the same time, there’d be some that you don’t pick out in advance that you’d want to save under particular circumstances. So I think that is a mistake.

It’s still too early to call this election. Two months is also an eternity in Costa Rican politics. But things are certainly getting interesting in my home country.

Volcker also express concern that those institutions at the center of the crisis are left out of the reform. Specifically he mentions that Obama Administration officials “haven’t said anything about Fannie Mae or

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Freddie Mac.”

2 December 2009

corporate tax is uniquely subject to evasion and avoidance. It isn’t. Corporate income taxes around the globe are subject to large avoidance and evasion pressures because of globalization and technological advance.

Volcker also takes issue with the Administration’s proposal to regulate non-banks, including hedge funds and private equity. “I wouldn’t regulate so strictly the nonbanks. I’d like to create the impression…that there’s no automatic bailout of those institutions.”

That is one of the main reasons why virtually every other industrial nation has dramatically cut its corporate tax rate over the last decade or so. But the United States has not followed suit, and that’s why U.S. corporations are having to put large efforts into avoidance.

Volcker also raises important questions about the Administration’s Keynesian stimulus actions. As the stimulus was meant to replace a reduction in private sector demand, Volcker asks “are we really dealing with the underlying pressures in the economy without permitting a relative decline in consumption to proceed?” Those are just a few of his comments. Here’s to hoping the rest of the Obama Administration is listening. They could do a lot worse than Volcker’s advice.

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Explaining the Death Tax Mess [Americans for Tax Reform] DEC 01, 2009 04:11P.M. This Article originally appeared at www.americanshareholders.org With the health care debate raging in the Senate, another fight has been lost in

The latest data from KPMG shows that the U.S. federal/state rate is 40 percent–tied with Libya for the third-highest rate among 116 countries surveyed. The chart shows the average rate for the 30 OECD nations.

the background: the death tax. It can be conf...

Summers may be right that U.S. corporate taxes are “low” when measured as a share of profits, although that calculation is more complex than you might think (For example, is he talking about domestic taxes divided by domestic profits, domestic taxes divided by worldwide profits, or something else?)

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Summers’ Corporate Tax Confusion [Cato at Liberty]

Anyway, Larry is referring to a measure of the average tax rate. But, generally, it is statutory rates that drive avoidance, and so it is the very high U.S. statutory rate that is helping to shrink federal taxes paid and thus drive down the average rate that Larry is worried about.

DEC 01, 2009 03:45P.M. At a conference yesterday, White House National Economic Council Director Larry Summers repeated a superficial critique of the U.S. corporate income tax that we’ve heard often from the Obama administration.

Note that lower statutory corporate rates over the last two decades have been associated with higher corporate tax revenues, as Figure 1 illustrates here. Thus, if Larry wants a higher average rate, he should propose cutting the U.S. statutory rate.

Politico notes that Summers suggested “that U.S. corporate tax rates are relatively low, despite complaints from U.S. corporations.” And they quote him: “If you look at taxes paid by corporations as a fraction of profits, they’re actually very low” because the U.S. tax code is replete with “evasion and avoidance.”

Summers apparently wants corporations to “help the country” by paying more taxes. But Larry must know that it is individual workers, consumers, and savers who actually bear the burden of the corporate tax. These people are “the country” and they would be helped by dramatically

The Obama team’s solution to the supposed problem is to pile more complex IRS rules and regulations on U.S. corporations and to increase taxes on their foreign earnings.

cutting the corporate tax rate and boosting the economy.

There are lots of problems here. One is the implication that the U.S.

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2 December 2009

since the end of the Great Depression. Once again we see that when the line of responsibility between federal and state government is blurred,

Oregon Voters can Stop Their Tax Increases [Americans for Tax Reform]

the result is more of both and poor policies compounded.

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DEC 01, 2009 03:34P.M.

On CNBC’s Kudlow Report Tonight [Larry Kudlow’s Money Politic$]

Early next year, Oregon voters have the chance to overturn a harmful new tax policy that was signed into law this summer. Ballot Measures 66 and 67 both gained more than enough citizen petition s...

DEC 01, 2009 12:41P.M. FISCALLY CONSERVATIVE BLOG FEEDS

California Illustrates Need to Revive Federalism [Cato at Liberty] DEC 01, 2009 02:03P.M. This evening at 7pm ET:

The state of California recently received $60 million in U.S. Department of Labor stimulus funds to upgrade its 23 year-old unemployment benefits system. But according to the Associated Press, California is yet to spend $66 million it received from Labor in 2002 to upgrade its system. The price tag isn’t whopping by federal standards, but it is another reminder of the need to return to fiscal federalism.

THE COST OF OBAMA’S AFGHANISTAN PROPOSAL Taxing rich people to fund the war? Panel: *Christopher Hitchens, Vanity Fair columnist *Gen. Barry McCaffrey, Fmr. US Drug Czar; U.S. Army (RET.); NBC News Military Analyst *Peter Beinart, Prof of Journalism & Political Science, City Univ of NY; New America Foundation; Sr Pol. Writer, Daily Beast

Apparently, the Department of Labor couldn’t care less: The federal government has no plans to sanction or fine California for not completing the original technology upgrade. The Labor Department said it was more concerned that new stimulus funding is used in a way that will allow more workers to qualify for unemployment assistance.

GM NEWS: FRITZ HENDERSON IS OUT CNBC’s Phil LeBeau reports.

At the same time, California’s unemployment insurance fund is $7.4 billion in the red, which has forced it to “borrow” $4.7 billion from the federal government. According to an editorial in the Oakland Tribune, California increased the generosity of its unemployment benefits when the economy was healthy, but now that the economy is stagnant spendthrift policies are creating a fiscal crisis.

MARKETS, ECONOMY, DOLLAR & GOLD *Alison Deans; Fmr. CIO Neuberger Berman Private Asset Management *Kevin Kerr Editor, Kerr Trading International President & Chief Trading Officer GE/COMCAST DEAL- INTERNET VS. CABLE - CAN THIS WORK?

Alan Reynolds reminds that the federal stimulus package “bribed states to extend benefits — which have now been stretched to an unprecedented 79 weeks in 28 states and to 46 to 72 weeks in the rest.” When you subsidize something you get more of it—federal subsidies prompt more state subsidies to the unemployed, which generates more unemployment. Alan concludes that “the February stimulus bill has added at least two percentage points to the unemployment rate.”

*Michael Wolff, CNBC Contributor; Vanity Fair Media Critic; “The Man Who Owns The News: Inside the Secret World Of Rupert Murdoch” Author *Jon Fine, Media Columnist; BusinessWeek Magazine OBAMA’S AFGHANISTAN DECISION

California’s unemployment rate of 12.5 percent is the state’s highest

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Col. Jack Jacobs will join us.

2 December 2009

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The Convergence of “Health Care” and “Climate Change” [Americans for Tax Reform]

Please join us. The Kudlow Report. 7pm ET. CNBC.

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Capitalism: It Works [Americans for Tax Reform]

DEC 01, 2009 11:37A.M.

DEC 01, 2009 11:57A.M.

giant, useless force - was in effect yet again ye...

Stephen Horwitz, Professor of Economics at St. Lawrence University, recently discussed how rising real wages, along with a dramatic reduction in costs, have considerably cut the work time needed to bu...

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The phenomenon identified as as Blair’s Law™ – the ongoing process by which the world’s multiple idiocies are becoming converging into one

Illinois Policy Institute Report: Pelosicare Bends Cost Curve…Up [Americans for Tax Reform…Up]

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Tuesday Links [Cato at Liberty] DEC 01, 2009 11:54A.M. • A glimmer of hope for libertarian public policy in the age of Obama: The War on Drugs may be slowly winding down. “The prospects for reform are better than they’ve been in decades.”

DEC 01, 2009 11:35A.M.

• An overview of religious liberty around the world. Doug Bandow: “Martyrdom did not disappear with imperial Rome.”

years. 169,000 of those jobs will be lost ...

According to a new policy report by the Illinois Policy Institute, the health care bill before Congress will kill 3.9 million jobs over the next 10

• All eyes on India: Party crashers aside, Indian Prime Minister Manmohan Singh’s visit to the U.S. was an important event.

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President Obama to Announce Troop Increase in Afghanistan [Cato at Liberty]

• Patrick J. Michaels on “ClimateGate.” More, here. • The insanity of housing subsidies: “If you’re thinking to yourself that this is the sort of government-induced behavior that helped create the housing bubble, go to the head of the class.”

DEC 01, 2009 10:55A.M. • Podcast: “Judicial Takings at SCOTUS“

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Today’s Tabbloid PERSONAL NEWS FOR [email protected]

2 December 2009

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Comparing Vietnam and Afghanistan [Cato at Liberty] DEC 01, 2009 10:54A.M. Reports have leaked out over the past week that President Obama will announce that he is sending additional troops into Afghanistan. The only question seems to be whether he will send 30,000, 40,000 or some number in between. That is, frankly, not a very important issue. And for all of his talk about “off ramps” for the United States if the Afghan government does not meet certain policy targets or “benchmarks,” the reality is that he is escalating our commitment. Since Obama has repeatedly asserted that the war in Afghanistan is a war of necessity, not a war of choice, his talk of off ramps is largely a bluff—and the Afghans probably know it.

There are two things that President Obama’s plan won’t do: win the war, or end the war. While all Americans hope that the mission in Afghanistan will turn out well, the U.S. military’s counterinsurgency doctrine says that stabilizing a country the size of Afghanistan would require far more troops than the most wild-eyed hawk has proposed: about 600,000 troops. An additional 30 to 40,000 troops isn’t just a case of too little, too late; it holds almost no prospect of winning the war. Accordingly, this likely won’t be the last prime-time address in which the president proposes sending many more troops to Afghanistan; my greatest fear is that this is only the first of many.

There are obvious hazards in equating one historical event with a development in a different setting and time period, but there are a couple of very disturbing similarities between Vietnam and Afghanistan. In both cases, U.S. leaders opted to try to rescue a failing war by sending in more troops. And in both cases, Washington found itself desperately searching for a “credible” leader who could serve as an effective partner in the war effort. The United States never found such a leader in Vietnam, and was frustrated by a parade of repressive, corrupt, and ineffectual political figures. That experience sounds more than a little like the problem the Bush and Obama administrations have encountered with Afghan President Hamid Karzai and his government. That fact alone suggests

But we shouldn’t just commit still more troops. President Obama should have recognized that the goals he set forth in March went too far. A better strategic review would have revisited our core objectives and assumptions. It would have focused on a narrower set of achievable objectives that are directly connected to vital U.S. security interests—chiefly disrupting al Qaeda’s ability to do harm—and that would have left the rebuilding of Afghanistan to Afghans, not Americans. President Obama’s national security team seems not to have even considered this course. Instead, the administration focused on repackaging the same grandiose strategy.

that our Afghanistan mission is not likely to turn out well.

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LA Times Hastens Toward the Light [Cato at Liberty]

Secretary of Defense Gates fixed on the dilemma several weeks ago when he pondered aloud: “How do we signal resolve and at the same time signal to the Afghans and the American people that this is not openended?”

DEC 01, 2009 08:46A.M. With print media players disappearing faster than mosasaurs in the late Cretaceous, one would expect the last papers standing to be extra careful with their fact checking for fear of being blogged into extinction. One’s expectations would be mistaken.

It turns out you can’t. The president’s decision to deepen our commitment to Afghanistan while simultaneously promising an exit is ultimately absurd on its face.

Yesterday’s LA Times editorial on charter schools combined errors of fact and omission with a misrepresentation of the economic research on public school spending. First, the Times claims that KIPP charter public schools spend “significantly more per student than the public school system.” Not so, says the KIPP website. But why rely on KIPP’s testimony, when we can look at the raw data? LA’s KIPP Academy of Opportunity, for instance, spent just over $3 million in 2007-08, for 345

I’d be surprised if any foreign policy analyst would bet his or her next paycheck that this is going to work. I wouldn’t.

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2 December 2009

students, for a total per pupil expenditure of $8,917. The most recent Dept. of Ed. data for LAUSD(2006-07) put that district’s comparable figure at $13,481 (which, as Cato’s Adam Schaeffer will show in a forthcoming paper, is far below what it currently spends). Nationwide, the median school district spends 24 percent more than the median charter school, according to the National Center for Education Statistics.

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Next, in summarizing the charter research, the Times’ editors omitted the most recent and sophisticated study, by Stanford professor Caroline Hoxby. It finds a significant academic advantage to charters using a randomized assignment experimental model that blows the methodological doors off most of the earlier charter research. The Times also neglects to mention Hoxby’s damning critique of the CREDO study it does cite.

Comments Regarding Proposed Amendment to Definition of Candy

Let Them Eat Rice Crispy Treats! [Tax Foundation] DEC 01, 2009 12:00A.M.

The Streamline Sale Tax (SST) has already had trouble defining candy and soda. The SST seems to be doing no better with cereal. Question: Are breakfast cereals and breakfast bars, whose ingredient labeling does not contain a specific listing for flour, “candy” as the term is defined in the Streamlined Sales and Use Tax Agreement?

Finally, the Times’ editors are mistaken in claiming that district operating costs “do not necessarily go down” as large numbers of students migrate to charters. Economists find that districts reap significant cost savings as students leave — e.g., by cutting staff and consolidating buildings. The Times is claiming that the marginal cost of public schooling is essentially zero — that it neither costs more to educate one additional student nor less to educate one fewer student. In reality, the marginal cost of public schooling is generally found in the empirical literature to be near or above 80 percent of the total cost.

Proposed Answer: (1) Breakfast cereals are not candy because they are not sold in the form of bars, drops or pieces. (2) Natural or artificially sweetened breakfast bars, Carmel Corn, Rice Cakes, and Rice Krispie Treats that do not have ingredient labeling specifying flour and do not require refrigeration are candy. These products are sold in the form of bars and meet the objective test in the definition of candy.

There are certainly reasons to lament the performance of the charter sector, and the Times’ editors even came close to citing one of them: its inability to scale up excellence as rapidly and routinely as is the case in virtually every field outside of education. Before getting into such policy issues, however, the Times should make a greater effort to

(3) Lightly Salted Rice Cakes that do not contain natural or artificial sweeteners according to the ingredient labeling are food, and food ingredients and are not classified as candy.

marshal the basic facts. My question for the SST is what about Rice Krispy Treats Cereal? The SST was established with the noble goal of bringing simplicity and uniformity to states’ sales tax codes. Greater uniformity would lower the compliance costs of multi-state organizations. Unfortunately, the SST has drifted from this mission. The only reason for making such definitions is to allow states to engage in discriminatory sales tax practices. Facilitating specific excises taxes is not a viable way to

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This Won’t Put Al Gore in the Christmas Spirit [Cato at Liberty]

improve any state’s sales tax structure.

DEC 01, 2009 08:43A.M. This has not been a good week for the global warming alarmists. They’ve been caught with their pants down on the Climate-gate email scandal, and they are terrorized by my colleague Pat Michaels. So this is the time to add some insult to injury with a very amusing video. On the topic of amusing videos, here’s one on health care put together by Ladies4Liberty, featuring Cato’s Nena Bartlett.

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2 December 2009

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But I Don’t Want My Tax Dollars Going to That [Tax Foundation’t Want My Tax Dollars Going to That]

Report: Gasoline Taxes Cover Only Half of Highway Expenses [Tax Foundation]

DEC 01, 2009 12:00A.M.

SubsidyScope, a Pew initiative, is producing a series of reports looking at transportation funding. In October, they scrutinized Amtrak and estimate that the railroad loses about $24 for each passenger carried. Pew’s numbers show that Amtrak recovers about 68.5% of its costs from fares.

DEC 01, 2009 12:00A.M.

A lot of health care legislation news has been about the opposition conservatives and some pro-life liberals have toward federal tax dollars being uses to fund abortions. The Stupak Amendment of course passed the House and there will be likely be debate in the Senate for something similar. No matter if one is pro-life or pro-choice, there is some logic behind legislation resembling the Hyde Amendment (a similar spending limitation on the annual appropriations bill for the HHS) on a health care bill. Some are very much opposed to an act, and if they can’t stop others from performing it, they at least don’t want to fund it. It is a variant of the benefit principle of taxation (like an anti-benefit principal).

At the end of November, Pew took on highways: Subsidyscope has calculated that in 2007, 51 percent of the nation’s $193 billion set aside for highway construction and maintenance was generated through user fees-down from 10 years earlier when user fees made up 61 percent of total spending on roads. The rest came from other sources, including revenue generated by income, sales and property taxes, as well as bond issues.

But with health care legislation it’s complicated. If government insurance crowds out private options, as some rightly fear, and the public insurance that is left must exclude abortion, now one has pro-life values thrust upon others. (Notice the scarcity of private insurance available without one needing a subsidy is implicit in some arguments against things like the Stupak Amendment.)

Of course, some highway “user taxes” (a more accurate description than “user fees,” since gasoline taxes are taxes not fees) are diverted to nonroad uses. Even throwing them in leaves roads as more subsidized than Amtrak: Of the 18.4 cent per gallon federal tax on gasoline, 2.86 cents are allocated specifically for mass transit projects. Another 0.1 cent per gallon is used to pay for environmental cleanup resulting from leaking fuel storage tanks. From 1990 to 1997, the federal government also set aside a portion of taxes on gasoline, diesel and other fuels to reduce budget deficits.

It is a problem when individual’s tax dollars are spent on other people’s goods, like with health care. Spending represents an individual’s values. And individuals have an array of values that cannot be properly represented by government spending. If it could, then 100% tax rates might not be too bad. If a major good, now becomes public, or heavily subsidized, who decides what that good looks like? It must be a political decision if not a market decision. And whatever that decision is, it now affects a large mass of the population.

However, even if those funds were fully devoted to highways, total user fee revenue accounted for only 65 percent of all funds set aside for highways in 2007, according to Subsidyscope calculations. This is down from 84 percent in 1997 and 77 percent in 1967.

Drinking soda, smoking cigarettes, having an abortion-these things before mainly had an affect on the person taking part. But if I am sharing costs with all of America, those externality arguments for obesity

Pew’s data and charts, as well as the full report, are here.

start to at least make sense (though they are still wrong).

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2 December 2009

FISCALLY CONSERVATIVE BLOG FEEDS This case seeks to vindicate the right of all Virginians to speak and earn an honest living. That is why, on December 1, 2009, yoga-teacher trainers Julia Kalish, Suzanne Leitner-Wise, and Beverly Brown teamed up with the Institute for Justice to challenge the constitutionality of

Maryland Officials Balk at Toll, Prefer General Funding [Tax Foundation]

Virginias vocational-school law as applied to yoga-teacher trainers.

DEC 01, 2009 12:00A.M. Speaking of highways, Maryland officials are balking at proposed $6 tolls for the expensive Intercounty Connector (ICC) in suburban Washington, D.C. They’re now discussing capping the tolls at $3, relying on general revenues to build the rest of the $2.4 billion 14-mile road. If officials are worried that the beneficiaries won’t pay the toll for what it costs to build the road, then why build it?

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Challenging Virginia’s Unconstitutional Regulation of Yoga Teacher Training [Reason TV] DEC 01, 2009 12:00A.M. In Virginia, you can teach anyone anything—except how to earn an honest living. http://www.ij.org/vayoga Anyone in Virginia can do yoga, and anyone can teach yoga. But, incredibly, it is illegal to teach people to teach yoga. Yoga-teacher training is just the latest target of vocational school licensing laws that require countless entrepreneurs to ask the governments permission before opening their mouths. Vocational-school licensing burdens both economic liberty and freedom of speech. The cost of compliance is typically thousands of dollars and over a week of full-time administrative work. For owners of small schools, these costs can make the difference between viability and closing down. Vocational-school laws arent just bad policy—theyre unconstitutional. The First Amendment protects the right of individuals to decide for themselves what is worth saying and who is worth listening to. States cant require writers to get permission before publishing a book, nor can they force filmmakers to seek permission before making and selling a movie. Similarly, it is unconstitutional for state governments to demand that speakers ask the governments permission before lecturing to a room of willing listeners, regardless of whether the subject is how to do something useful.

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