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InsiderOnline Blog: February 2008

Of Course There Are Winners and Losers

Opponents of free trade like to observe that trade deals create “winners and losers.” Don Boudreaux comments on the relevance of this observation:

Trade is just one manifestation of consumer sovereignty. Just as there are … winners and losers from consumers shifting their expenditures from goods made in America to goods made abroad, there are winners and losers from consumers shifting their expenditures from goods made in Illinois to goods made in Arizona – and from consumers shifting their expenditures from donuts, beef, cigarettes, whiskey, and train travel to bagels, fish, yoga lessons, wine, and air travel. Trade plays no unique, or uniquely important, role as an avenue of economic change spurred in part by consumer sovereignty. The only practical way to rid the economy of such “loses” is to try to freeze it, a futile step that will in the long-run only make losers of everyone.

Posted on 02/29/08 04:22 PM by Alex Adrianson

The Coming Week – Monday, March 3, 2008

Sunday – Tuesday: Hear the rest of the story on global warming at the 2008 International Conference on Climate Change, sponsored by the Heartland Institute.

Monday: Find out who Raul Castro is. The Heritage Foundation hosts Brian Latell, Senior Research Associate at the Institute for Cuban and Cuban-American Studies, The University of Miami.

Tuesday: Assess the compatibility of free market reforms with political success. The Cato Institute hosts Johnny Munkhammar, Senior Fellow at the European Enterprise Institute and author of The Guide to Reform.

Tuesday:  Hear the state of the right, with Donald Critchlow, Jacob Heilbrunn, Mark A. Smith, John Samples, and Steven Hayward at the American Enterprise Institute.

Wednesday: Learn how the group FreeSpeechNow.org is challenging the constitutionality of campaign finance laws. The Cato Institute hosts Steve Simpson of the Institute for Justice, David Keating of SpeechNow.org, and Michael Malbin of the Campaign Finance Institute.

Thursday: Find out what the economic consequences of Minnesota’s Climate Mitigation Action Plan will be. The Center of the American Experiment hosts economist Margo Thorning.

Friday: Learn about the role of immigrants in high-tech enterprise. The Hudson Institute hosts Amar Bhidé, author and professor of business at Columbia University.

Posted on 02/29/08 03:03 PM by Alex Adrianson

Heritage on Video

At Heritage: Failure to extend the Protect America Act has greatly complicated the task of collecting intelligence on America’s enemies.

Also: Though he is not running, Vladimir Putin is the projected winner of Sunday’s elections in Russia … Transatlantic cooperation will be an important part of security policies for both the United States and European countries …. … Global jihadism is a serious threat.

Posted on 02/29/08 02:56 PM by Alex Adrianson

Atlanta’s First Charter School Doing Well

At Creative Loafing, John Sugg has a profile of Atlanta’s Tech High School, a charter school that specializes in preparing students for technical schools and vocations. The school, which the Georgia Public Policy Foundation helped create in 2004, was Atlanta’s first charter school.

Sugg notes:

Tech's students are mostly minorities from poor and working-class families. All but 3 percent are black, and three-quarters of the students qualify for free or reduced-price lunches. When the school opened four years ago, its first class, ninth-graders at the time, was woefully unprepared – only 10 percent met minimum math standards and only about one in four met reading requirements.

The charter school is performing very well:

Compared with schools of similar poverty demographics across Georgia, Tech is at the top in test scores. Even compared with all state high schools, Tech's end-of-course test scores range from solidly in the middle to pretty darn good. Falco proudly waves an analysis showing Tech's overall end-of-course scores are the highest in the Atlanta Public Schools system in almost every subject – and equal to or better than average scores throughout Georgia (except for geometry, where the state average was a slight 0.4 percent higher).

Tech High achieves these results in spite of the fact that it gets only 71 percent of the per-pupil funding that Atlanta’s public schools get. A new law mandates parity in funding of charter and traditional public schools. The Atlanta Public School system is awaiting state guidance on how to implement the law. Meanwhile, reports Sugg, a new bill would give the state authority to charter public schools, effectively bypassing opposition to charter schools by local school officials.

Mary Katharine Ham profiled Tech High for The Insider, Spring 2005 (see page 24).

Charter schools are just one part of a bigger movement to create alternatives to failing traditional public schools. Dan Lips reviewed how far that movement has come in a recent paper for The Heritage Foundation. Forty states now have charter schools, and 13 have private school choice programs.

Hat tip: Friday Facts, February 29, 2008, Georgia Public Policy Foundation.

Posted on 02/29/08 12:29 PM by Alex Adrianson

Learn About Liberty at the Institute for Humane Studies

Students and recent graduates who are interested in learning about libertarian ideas should consider attending one of the seminars offered by the Institute for Humane Studies this summer. IHS offers a broad introduction to classical (market) liberal ideas, as well as seminars focusing on environmentalism, globalization, civil liberties, and the connections between art, music, and liberty.

The application deadline is March 31.

Posted on 02/29/08 10:33 AM by Alex Adrianson

Trade, Not Aid

More spending is not the best way for Congress to stimulate the economy, says James Roberts. Instead, he says, Congress should focus on approving the free trade agreements the United States has already negotiated with Colombia, Panama, and South Korea. Those countries have a combined GDP of $1.1 trillion and 126 billion consumers. Gaining access to those markets would stimulate the U.S. economy, but unlike new government spending, it would not require increasing taxes or government debt.

See Want More Economic Stimulus? Pass the Pending Free Trade Agreements! by James Roberts, The Heritage Foundation, February 27, 2008.

Posted on 02/28/08 04:50 PM by Alex Adrianson

Where the Middle Class Really Is

Washington Post’s Michael Fletcher reports the good news on the state of the middle class:

Items once considered luxuries – dishwashers, central air conditioning, video cameras – are now common. The average size of new homes has increased 40 percent in the past generation. And as many consumer items cost less, Americans are shopping more. In 1991 the average American bought 33.7 pieces of apparel; by 2002 he or she bought 48 items, according to Boston College sociologist Juliet Schor. In 2005, she said, Americans were projected to discard more than 63 million computers.

Americans are twice as likely to travel overseas than they were in 1980, and overall they spend more than ever for other recreation, including sporting events, movies and plays – the mark of an ever-improving quality of life, some researchers say.

Hat tip: Dan Griswold at Cato@Liberty.

Posted on 02/28/08 04:36 PM by Alex Adrianson

Should the Food and Drug Administration Slow Down?

Ever since Merck voluntarily withdrew the pain reliever Vioxx from the market in 2004, the FDA has weathered criticism that its procedures for approving drugs are broken. Yesterday, the House Appropriations Committee held a hearing on that very theme. In written testimony, John Calfee of the American Enterprise Institute made the following important point:

There are compelling reasons to think that in balancing safety against the benefits of new drugs, the FDA tends to give too much weight to safety and not enough to benefits. The reasons lie in the biased incentive structure facing the FDA staff. The unrelenting criticism visited on the FDA since the Vioxx withdrawal illustrates a profound disparity how the public penalizes two different kinds of regulatory error. When FDA staff members decide whether the benefits of a proposed new drug exceed its risks, they know that if they commit what is often called a Type I error (the approval of a drug that turns out to be insufficiently safe once marketing begins) their error will usually become known (a “public error”). This can and often does lead to impassioned criticism of the agency and to correction of the error (although more often than not, critics fix upon something that was probably not an error at all). On the other hand, a Type II error (the failure to permit marketing of a drug that would in fact provide benefits in excess of harms) is typically detected by relatively few people (a “private error”), and its deleterious effects can persist more or less indefinitely.

The problem Calfee identifies can be summed up this way: The FDA will rarely face criticism for exercising too much caution in approving a drug, because in order to know that the FDA exercised too much caution, the public would have to notice the missing benefits of a drug that has never been approved. As long as this is the basic structure of incentives faced by the FDA, we should view with skepticism claims that the FDA goes too fast in approving new drugs.

Posted on 02/28/08 04:35 PM by Alex Adrianson

Stupid Government Update

Eli Lehrer’s new paper for the Competitive Enterprise Institute identifies the five dumbest product bans in the United States:

Sangria (Virginia). The Commonwealth of Virginia bans most preparations of the popular fortified wine drink (typically red wine with brandy and fruit) even though the state not only allows drinking of substances with the same alcoholic composition as Sangria and actually operates stores that sell all of the alcoholic ingredients needed to make Sangria.

Playing Online Poker in a Legal Casino (U. S.). Although 48 states have legal gambling in some form (and several run casinos), the federal government has made it illegal to place bets online—even in jurisdictions that allow almost all other types of gambling.

The Cardio-Pump (U. S.). No one has ever contended that anybody could do harm using this American-designed device intended to help resuscitate heart attack victims, which may actually help save lives. Although it has found wide use in other countries, the Food and Drug Administration bans its use in the United States.

Wildflower Bouquets (Louisiana). Louisiana’s unique-in-the nation florist licensing statute makes it illegal for anybody to arrange two or more types of flowers without passing a largely subjective state licensing exam. In theory, a child could face a fine for picking a bouquet of flowers and selling it at a roadside stand.

Feathers in provocative packaging (Texas, Louisiana, and Georgia). Ridiculously broad laws banning sexual toys in these states could serve to ban the sale of simple feathers if packaged with suggestions that they might be used for sexual purposes.

Posted on 02/28/08 04:34 PM by Alex Adrianson

British Columbia Keeps Its Citizens Ignorant of Hospital Quality

The safest hospital in British Columbia, according to the Fraser Institute’s hospital mortality index, is anonymous hospital number 11, with a score of 83.5 out of 100. Anonymous hospital 11 has been the safest hospital in British Columbia since 2001. The staff at anonymous hospital 11 must be so proud of their accomplishment!

The hospital mortality index is just one part of Fraser’s Hospital Report Card: British Columbia 2008, which reports on all 95 hospitals in British Columbia. The idea was to give British Columbia patients a reference that they could use easily to assess each hospital’s performance, both overall and for specific procedures and conditions. Fraser even spent two years developing a method for adjusting the raw data to account for differences in risk. Without that adjustment, hospitals that treated sicker or older patients would appear to perform worse than hospitals whose patients were healthier.  

Alas, Fraser’s efforts are for naught—at least for now, for British Columbia. The authorities there wouldn’t name hospital names, so Fraser can only identify the hospitals as anonymous 1 through anonymous 95. Patients needing a hospital in British Columbia are left in the dark about hospital quality. Fortunately, hospitals in Ontario did agree to be named by name for Fraser’s forthcoming report card on Ontario hospitals.

Critics of patient-centered health care claim that it is naïve to expect patients to be able to make intelligent decisions about their own care. There are information asymmetries, so the argument goes, that make consumer choice unworkable. Medical professionals (hemmed in by government rules and regulations) must make decisions about treatments, they claim. What the critics forget is that markets for goods and services are often complemented by markets for information. But those markets don’t develop fully when governments or employers or insurers act as the buyer of health care instead of patients. In Canada’s single-payer system, hospitals can afford to ignore the patient interest in more information, because hospitals don’t get paid by the patients. They get paid by the government.

Posted on 02/27/08 05:08 PM by Alex Adrianson

Buckley’s Program

I will not cede more power to the state. I will not willingly cede more power to anyone, not to the state, not to General Motors, not to the CIO. I will hoard my power like a miser, resisting every effort to drain it away from me. I will then use my power, as I see fit. I mean to live my life an obedient man, but obedient to God, subservient to the wisdom of my ancestors; never to the authority of political truths arrived at yesterday at the voting booth. That is a program of sorts, is it not? It is certainly program enough to keep conservatives busy, and Liberals at bay. And the nation free.
 
William F. Buckley Jr. in Up from Liberalism, 1959.

William F. Buckley Jr., founder of National Review, host of the groundbreaking show “Firing Line,” and conservative journalist par excellence died last night at the age of 82.

Some tributes: The Corner, The Heritage Foundation, Americans for Prosperity. Myron Magnet, Intercollegiate Studies Institute, Robert A. Sirico, Mitch Pearlstein, Wall Street Journal, Newt Gingrich, Henry Payne, Lee Edwards, Center for Vision and Values

Update: National Review Online, of course, is the place to check for a compendium of tributes to Buckley. Some of our allies abroad have sent along nice comments, including Panos Evangelopoulos, a professor of economics at the University of Athens, who writes:

Conservatively speaking, the life of William F. Buckley Jr. seems wildly improbable. One man is rarely granted his range of gifts: He was at once an essayist, editor, impresario, controversialist, critic, novelist, sportsman and bon vivant.

In 1951, Bill Buckley made his name with "God and Man at Yale," which critiqued his alma mater for its hostilities to capitalism and religion. Four years later, Buckley founded National Review. He was 29.

National Review helped introduce a modern conservatism into American political life. Buckley and his talented stable of editors and contributors gave coherence and shape to what he called "a fusion" of traditionalism, anti-Communist internationalism and free-market economics.

Buckley himself never lost his faith—in God, his country, the obligation to engage in the controversies of the age, and the wonders of the mind. His half-century at the center of the American scene was a model of thoughtfulness and political creativity that remains as relevant today, perhaps more so. Ave atque vale.

The Telegraph has very good review of Buckley’s life today.

Posted on 02/27/08 01:35 PM by Alex Adrianson

Laffer Curve: The Evidence

There is indeed such a thing as a Laffer Curve effect. Dan Mitchell of the Cato Institute and the Center for Freedom and Prosperity tracks down the evidence.

Milton Friedman: If a tax cut increases government revenues, you haven’t cut taxes enough.

Posted on 02/26/08 03:47 PM by Alex Adrianson

Are Control Freaks a Greater Threat to Liberty Than Terrorists?

In New Zealand, publishers have imposed an unofficial ban on mentioning fish and chips in children’s stories, according to a New Zealand author, who said that publishers have overreacted to sensitivity about children’s diets.

That seems like a pretty big overreaction. Of course, there are people who think that the fate of nations depends on what their citizens stuff in their mouths. Yesterday, at the Oxford Health Alliance Summit, a U.S. law professor declared that obesity is a greater danger than terrorism and that governments should devote far greater resources to fighting this epidemic.

The professor might have added that since automobile accidents kill far more people than terrorism, we should spend more money on traffic safety, too. But such comparisons are meaningless. Obesity is not waging a war against free societies. Terrorists are, and fighting them is a public good—i.e., a good that individuals cannot produce for themselves on their own. Personal safety and health, on the other hand, are largely matters of individual behavior. In a free society, some individuals are going to make choices that are not good for them. Government can’t do anything about that, unless we decide that we no longer want to live in a free society. Some people want to move in precisely that direction.

Posted on 02/26/08 11:55 AM by Alex Adrianson

The Next Castroism

Roger Noreiga explains why Raúl Castro is not likely to follow the Chinese model of free market reforms:

Sorry to say, Raúl is no repressed reformer. He has been an orthodox communist and Fidel’s ideological disciplinarian from the outset of the armed struggle over fifty years ago. Raúl engineered the infamous crackdown on state-sponsored “independent” economists in the late 1990s. And as for the hyped economic opening the regime indulged in after losing its $5-7 billion annual Soviet subsidy, Raúl’s role was to restrict it, co-opt it, and, recently, reverse it.

First, nothing approaching the entrepreneurial experiment that Vietnam or the People’s Republic of China are enjoying has ever been tolerated in Cuba. Foreign investors doing business in Cuba today have accepted the Cuban state as their majority partner, which hires, fires, and even collects the meager salary of every Cuban worker.

Second, the Cuban military that Raúl leads has engaged in dozens of moneymaking joint ventures with foreign companies. Raúl’s task was to control the outsider’s influence and capture any of the profits to put them at the service of the police state which he directs. Today, the military manages most of Cuba’s tourist hotel rooms, and foreign investors have been rendered less important than ever as Venezuelan president Hugo Chávez provides $2 billion annually to his Cuban partners in the form of oil subsidies—almost half of the $4-6 billion that the USSR previously supplied. …

Third, Raúl has used these ventures to generate employment and economic security for his cronies and the rank-and-file military. It is naïve to expect him to ask these comrades to share their largesse by opening the economy in the midst of a precarious transition in which he is desperate to secure their loyalty.

For more debunking of myths about Castro and Cuba, see Let Cuba Be Cuban Again by Roger Noreiga, American Enterprise Institute, February 7, 2007.

Posted on 02/26/08 09:58 AM by Alex Adrianson

This Week in Washington – Monday, February 25, 2008

Posted on 02/25/08 03:18 PM by Alex Adrianson

Legal Graft

Should private lawyers be able to collect huge contingency fees for providing legal services to state governments? The Wall Street Journal editorializes today that such contingency-fee arrangements produce the wrong incentives. The Journal dug into the doings of Jim Hood, Mississippi Attorney General, who is fighting a bill that would limit the use of contingency-fee arrangements by the state. The Journal found that Hood had “retained 27 firms as outside counsel to pursue at least 20 state lawsuits over five years.” Those “firms – or partners in those firms – made $543,000 in itemized campaign contributions to Mr. Hood over the past two election cycles.” The Journal also found that in 2007 law firms given state business by Hood gave $572,000 to a group called the Democratic Attorneys General Association, which in turn wrote campaign checks worth $550,000 to Hood. The Journal concludes:

A decision to prosecute is an awesome power, and it ought to be motivated by evidence and the law, not by the profit motives of private tort lawyers and the campaign needs of an ambitious Attorney General. Government is supposed to act on behalf of the public interest, not for the personal profit of trial lawyers. The tort bar-AG cabal deserves to be exposed nationwide.

Last year, President Bush barred the use of contingency-fee arrangements by federal agencies. Maybe it’s time for the governors to follow suit.

Hat tip: Committee for Justice.

Posted on 02/25/08 12:06 PM by Alex Adrianson

The Coming Week – Monday, February 25, 2008

Monday: Find out if sovereign wealth funds pose a risk to the United States. A panel at the American Enterprise Institute examines whether sovereign wealth funds are a tool of political leverage or merely another source of capital for troubled U.S. banks.

Monday: Speculate on Russia’s future after Putin. The Hudson Institute hosts a panel asking whether Russia’s next President, Dmitry Medvedev, will liberalize the country.

Tuesday: See Shoot Down. The Heritage Foundation offers a screening of a documentary about the Cuban government shooting down two, unarmed civilian aircraft flying in international airspace on February 24, 1996.

Wednesday: Learn which government policies really do help minorities. The Cato Institute hosts economist/columnist Bruce Bartlett and former radio talk show hosts Casey Lartigue.

Thursday: Find out how to meet the challenges of foundation management. The Hudson Institute hosts Joel Orosz, author of Effective Foundation Management.

Thursday: Take a course in online government transparency, taught by Jerry Brito of the Mercatus Center.

Friday: Review the rise of the knowledge economy, with Bruce Yandle, hosted by PERC and the Big Sky Institute.

Peeking Ahead
On March 2-4 the Heartland Institute will host The 2008 International Conference on Climate Change in New York City. Hundreds of scientists, economists, and public policy experts from around the world will gather to discuss the questions left unanswered by the alleged “consensus” on man-made, catastrophic global warming.

Posted on 02/22/08 03:07 PM by Alex Adrianson

Heritage on Video – Cuba’s Future

Heritage in Focus: The United States should open up to Cuba only if Raul Castro extends political freedom to his countrymen.

Also: Extremist parties are the losers of Pakistan’s elections. … The U.S. defense budget is not large compared to previous periods of armed conflict. … Congress should refuse to fund activities related to the Law of the Sea Treaty, a bad treaty that the United States has not even ratified.

At Heritage: Export control rules on dual-use technology have far reaching implications for both U.S. trade and security. 

Posted on 02/22/08 03:05 PM by Alex Adrianson

Happy Birthday George Washington!

Monday was what has come to be known as Presidents’ Day, although officially the holiday is still George Washington’s birthday. The idea behind calling it Presidents’ Day, apparently, is that Millard Fillmore, Franklin Pierce, Richard Nixon, Jimmy Carter, and 39 others who at some point served as President (the list keeps getting bigger) need their due, too. The actual date of George Washington’s birthday is today, so those who think our nation’s first President worthy of his own day can still celebrate the accomplishments of a great man, instead of merely the possessors of an office. Washington wasn’t just a President. He commanded the revolutionary army that defeated the British army—at that time the greatest military force in the world—and allowed a free nation to be born. Without Washington, the American experiment in self-government would never have started.

After the war, Washington retired his commission, and refused offers to become a King. Washington also started the American tradition of peaceful transition of power. Washington understood that government is not something to celebrate. He said: “Government is not reason; it is not eloquence; it is force. Like fire, it is a dangerous servant and a fearful master.”

Posted on 02/22/08 12:53 PM by Alex Adrianson

Cato Tallies Trade Votes

The Cato Institute has launched a new Web site that lets users see how any member of Congress has voted on trade issues. Check out Free Trade, Free Markets: Rating Congress.

Posted on 02/21/08 05:50 PM by Alex Adrianson

Investigations of U.N. Corruption Posted to the Web

Transparency has come to the United Nations—sort of. Mark D. Wallace, U.S. representative for U.N. management and reform, has begun posting U.N. audits and reports on the Web site of the U.S. Mission to the United Nations. So far, he has posted 477 reports. The Washington Post reports that the documents reveal “allegations of bribes paid for tsunami relief projects in Indonesia, of sexual harassment in Gaza and a revelation that a U.N. anti-drug official ran a presidential campaign while receiving a U.N. paycheck” as well as “a bribery scheme at the airport in Pristina, Kosovo, gold trading by U.N. peacekeepers in Congo, and the theft and resale of food rations by Ukrainian pilots serving the United Nations in Liberia.” The United States, which pays 22 percent of the U.N. budget, can still get outvoted by any two countries that contribute next to nothing. But at least now, when U.N. bureaucrats read internal reports about corruption and waste, they will know that 200 million U.S. taxpayers can read those reports, too.

Posted on 02/21/08 05:17 PM by Alex Adrianson

U.S. Trade Barriers Hurt Poor Countries the Most

The United States has low trade barriers compared to most other countries in the world, but its tariffs fall most heavily on the poorest countries. The Progressive Policy Institute calculates that goods from Cambodia face an average tariff of 17 percent. Meanwhile, goods from Britain are hit with an average tariff of only 0.7 percent. As a result, importers from Cambodia paid Uncle Sam $419 million in 2007; importers from Britain paid $412 million in 2007. Cambodia has a per capita income of $430 per year. Britain has a per capita income of $37,760 per year.

The reason for the discrepancy is that cheap, simple, household goods face the highest tariffs and Cambodia and other poor Asian and Middle Eastern countries specialize in those products. So even though the United States has a relatively open economy, reducing barriers even further would help the world’s poor the most.

American consumers wouldn’t mind, either!

Posted on 02/20/08 04:41 PM by Alex Adrianson

Porker of the Year

Rep. John Murtha (D-Pa.) has been voted Porker of the Year for 2007 in an online poll conducted by Citizens Against Government Waste. Murtha won in a landslide with 63.4 percent of the vote. The next highest vote getter was Rep. Don Young (R-Alaska) with 10.6 percent.

Murtha, chairman of the defense subcommittee of the Committee on Appropriation, has been a successful porker for many years. He gained the attention of pork-busting activists last year when he threatened to retaliate against Rep. Mike Rogers (R-Mich.) for introducing an motion to kill one of Murtha’s pet projects. Murtha was heard telling Rogers: “I hope you don’t have any earmarks in the defense appropriations bills because they are gone and you will not get any earmarks now and forever. … That’s the way I do it!” Murtha escaped a formal reprimand over the incident on a party-line vote.

Posted on 02/20/08 03:25 PM by Alex Adrianson

Capital Flees New York

A growing number of American companies, writes Peter Wallison, are offering their stock in initial public offerings outside the United States: “The number has grown from an annual average of one-tenth of 1 percent between 1996 and 2005, to 1.1 percent in 2006 and 4.3 percent in 2007.” Wallison says this and other data from the most recent report of the Committee on Capital Markets Regulation suggests that Sarbanes-Oxley regulations and the high risk of litigation are driving capital to foreign exchanges.

Posted on 02/20/08 02:43 PM by Alex Adrianson

Terrorists Lose in Pakistan

In Pakistan’s recent elections, the rejection of hard-line religious parties extended even to the North-West Frontier Province. The New York Sun points out the significance of this province:

That is the area in which Al Qaeda and the Taliban have regrouped and from which they launch attacks against forces of the North Atlantic Treaty Organization and the democratic government in Afghanistan. In 2002, a coalition of hard-line religious parties, the MMA, took power. Now the voters in the area have thrown the MMA out, putting in its place a secular Pashtun alignment, the Awami National Party.

The marginalization of the MMA, at a time of mounting tensions, is the Pakistani version of the Anbar province experience in Iraq: the Pakistani Pashtun, like Sunni Arab tribes, have chosen sides against the terrorists and with democratic forces. The MMA’s sharply reduced vote in its heartland was a bellwether; the alliance was almost swept off the field, winning only a handful of seats in the new Congress.

Posted on 02/20/08 02:42 PM by Alex Adrianson

Pakistan’s Elections an Opportunity

Pakistan’s voters have chosen a new direction for their country, one that does not include Pervez Musharraf heading the government. It’s time for U.S. policy to get beyond Musharraf, too, says Lisa Curtis:

The U.S. image in Pakistan has been tarnished not only by a perception that Washington has relied too heavily on military operations in its war on terrorism but also by U.S. unwillingness to criticize Musharraf for undermining civil society and the democratic process over the past year. According to a recent poll by the U.S. International Republican Institute, 73 percent of Pakistanis believe religious extremism is a serious problem in their country, but only 9 percent believe that Pakistan should cooperate with the U.S. in the global war against terrorism.

Pakistan has undergone dramatic changes in the past year, with civil society raising its voice and Musharraf relying increasingly on repressive measures to maintain his grip on power. The anger toward Musharraf has fused with a visceral anti-American sentiment, which has lowered Pakistani support for fighting terrorists, particularly in the Tribal Areas. U.S. officials may view Musharraf as the glue that holds Pakistan together, but a growing number of Pakistanis view him as a source of instability. This disconnect between U.S. policymakers and the broader Pakistani public threatens to further erode Pakistani support for ties with the U.S., especially if Washington is seen as clinging to Musharraf when his party has been largely rejected at the polls.

It is therefore critical that the U.S. is seen as taking an objective and impartial view of the elections based on its assessment of the fairness of the process as reported by election observers—from the U.S., Pakistan, Europe, and elsewhere—and a thorough survey of Pakistani public opinion. The U.S. position on these historic elections will reverberate for some time to come on the overall quality of the U.S.-Pakistan relationship. The U.S. must begin to view Musharraf as a transitional figure and be ready to deal with a more broad-based civilian government in Pakistan.

Posted on 02/20/08 02:41 PM by Alex Adrianson

Kosovo and International Order

The salons are now pondering whether the West’s support of Kosovo’s declaration of independence will encourage unwanted separatist movements elsewhere. James Dobbins, at National Review Online, has some sensible thoughts:

I hope the Albanian majority will have the integrity to allow their Serb minority to split off itself and rejoin Serbia. This is not only consistent with Kosovar rhetoric of national self-determination, but removes a potential future pretext for intervention by Serbia, Russia, and others. It surely helps Kosovo that they have an international armed force guaranteeing their border. … Not every nation needs a state of course — but neither does every country have to be a multicultural wonderland. Let the people who live there decide. The default fealty to international order has itself created numerous wars, in cases where separatists saw no other way to achieve their ends.

If the Kosovars decide not to allow the Serb minority an opportunity to make its preference known, such as by referendum, then they will have missed an opportunity to seize the moral high ground. It will be an enduring bone of contention, and future cause for conflict and conquest. Putin will see to that.

Posted on 02/20/08 02:39 PM by Alex Adrianson

This Week in Washington – Monday, February 19, 2008

Posted on 02/19/08 05:37 PM by Alex Adrianson

Consumption Data Provides Better Picture of Economic Progress

When the Left talks about inequality, they usually point to statistics showing that the share of national income going to the top earning households has increased over the past 30 years while the proportion going to the bottom households has declined. But how much a person consumes is a better measure of his material well being. Economists W. Michael Cox and Richard Alm of the Dallas Federal Reserve have calculated that the top-earning 20 percent of households consume only 2.1 times as much per person as the bottom 20 percent of households. That gap is a lot less than the 15-to-1 ratio in income between the top and the bottom quartiles. Whereas high-income households devote a larger share of their incomes to savings and taxes, low-income households actually consume more then they earn. Cox and Alm write:

The bottom fifth earned just $9,974, but spent nearly twice that — an average of $18,153 a year. How is that possible? … [T]hose lower-income families have access to various sources of spending money that doesn’t fall under taxable income. These sources include portions of sales of property like homes and cars and securities that are not subject to capital gains taxes, insurance policies redeemed, or the drawing down of bank accounts. While some of these families are mired in poverty, many (the exact proportion is unclear) are headed by retirees and those temporarily between jobs, and thus their low income total doesn’t accurately reflect their long-term financial status.

Looking at consumption instead of income, say Cox and Alm, gives a better picture of how our standards of living have risen steadily over the decades—in part because of policies supportive of free trade. They conclude:

… there is a certain perversity to suggestions that the proper reaction to a potential recession is to enact protectionist measures. While foreign competition may have eroded some American workers’ incomes, looking at consumption broadens our perspective. Simply put, the poor are less poor. Globalization extends and deepens a capitalist system that has for generations been lifting American living standards — for high-income households, of course, but for low-income ones as well.

See You Are What You Spend by W. Michael Cox and Richard Alm, New York Times, February 10, 2008. See also reason.tv’s new video Living Large: America’s Middle Class, hosted by Drew Carey.

Posted on 02/19/08 03:11 PM by Alex Adrianson

The Coming Week – Monday, February 18, 2008

Wednesday: Find out how “old Europe” is generating new ideas for policy reform. The American Enterprise Institute hosts a day-long seminar on the rise of free market reforms in Europe.

Wednesday: Hear Alfred S. Regnery, publisher of The American Spectator, discuss his new book Upstream: The Ascendance of American Conservatism at The Heritage Foundation.

Thursday: Learn how a weak dollar impacts the U.S. economy. The Mercatus Center hosts Anne Krueger, professor of international economics at Johns Hopkins School of Advanced International Studies.

Thursday: Examine the pros and cons of lifting the legal prohibition against selling human organs. Cato hosts a panel on the idea of creating a regulated market for human organs in order to reduce the waiting lists for organ transplants.

Thursday: Discover the secret of turning poor nations into rich ones. The Independent Institute hosts authors Benjamin Powell, Alvaro Vargas Llosa, and George Ayittey.

Posted on 02/15/08 11:34 AM by Alex Adrianson

Heritage on Video

Heritage in Focus: Congress is considering cutting Medicare Advantage, a move that would be bad news for seniors.

Also: Raising taxes on oil companies will make gasoline more expensive. … Religious involvement and a shared commitment to marriage have positive influences on relationship quality Poland has agreed to host a U.S. missile defense base, increasing the security of both countries. … Millions of children of benefiting from school choice programs around the country.

At Heritage: Sen. Jim DeMint (R-S.C.) has a conservative agenda to secure America’s future. … Two-year budgeting can help Congress fix its budget mess. … Updates to the Visa Waiver program will improve America’s relations with its friends. … The United States needs an integrated public diplomacy strategy. … Many countries face serious demographic challenges in the years ahead. … Has Black History Month become a tool of identity politics? … Work remains on the task of denuclearizing North Korea.

Posted on 02/15/08 11:31 AM by Alex Adrianson

Food for Thought on Valentines Day

Posted on 02/14/08 05:41 PM by Alex Adrianson

Who Protects the Consumer?

Until recently, New Yorkers could easily get information on the caloric content of meals at Wendy’s. But then New York City government decided it was competent in the area of menu board typesetting. As the following notice from Wendy’s nutritional Web site shows, it’s a classic case of government making those it intends to help worse off:

Special notice to inquiries originating from New York City:

We regret that Wendy’s cannot provide product calorie information to residents or customers in New York City. The New York City Department of Health passed a regulation requiring restaurants that already provide calorie information to post product calories on their menu boards — using the same type size as the product listing.

We fully support the intent of this regulation; however, since most of our food is made-to-order, there isn’t enough room on our existing menu boards to comply with the regulation. We have for years provided complete nutritional information on posters inside the restaurant and on our website. To continue to provide caloric information to residents and customers of our New York City restaurants on our website and on our nutritional posters would subject us to this regulation. As a result, we will no longer provide caloric information to residents and customers of our New York City restaurants.

We regret this inconvenience. If you have questions about this regulation, please contact the New York City Department of Health and Mental Hygiene and refer to Health Code Section 81.50.

Hat tip: David Boaz at Cato@Liberty.

Posted on 02/14/08 04:39 PM by Alex Adrianson

Taxpayers for Common Sense Releases Earmark Database

Taxpayers for Common Sense has released a comprehensive database of congressional earmarks in the 2008 spending bills. According to TCS calculations: “Congress inserted 12,881 earmarks worth $18.3 billion into this year’s spending bills, $14.8 billion of which were disclosed by lawmakers. This represents a 23 percent cut in total earmarks from the high water mark of 2005, but a smaller cut than the 50 percent reduction House leadership initially set as its goal.”

Posted on 02/14/08 03:43 PM by Alex Adrianson

Ethanol Switch Yields Net Carbon Emissions

If you believe carbon emissions are a significant problem, then you should be outraged by the U.S. policy of mandating the use of ethanol and subsidizing its production. In a new study, David Tilman, a professor of ecology at the University of Minnesota, calculates the amount of carbon-dioxide that is released into the atmosphere by the production of grain for ethanol use. He calculates that “it will take 93 years for the carbon losses from plowing one acre of healthy grassland to equal the carbon savings from corn-based ethanol produced on that land.” In other words, don’t expect ethanol to have any positive impact before the theorized global warming catastrophe has already happened.

Source: Katherine Kersten, Ethanol: Is It a Miracle Cure or Another Dose of Snake Oil? (Minneapolis) StarTribune, February 12, 2008

Posted on 02/14/08 02:12 PM by Alex Adrianson

Putin’s Bizarre Threat

Popular historian Barbara Tuchman wrote in The March of Folly about how governments often pursue policies contrary to their own interests. Russian President Vladimir Putin is virtually writing a new chapter to that book by repeating his bizarre threat to target Russian missiles at the Czech Republic and Poland if those countries go ahead with plans to host components of a U.S. missile defense system. Putin claims that this defensive shield threatens Russia. In threatening to target Poland and the Czech Republic with missiles, might Putin be giving those countries a reason to feel the need for a defensive shield against missiles?

Posted on 02/14/08 01:20 PM by Alex Adrianson

Friedman Foundation: Florida’s Has Best School Voucher Program

Florida’s McKay school voucher program is tops among the 21 school choice program in the United States, according to the Friedman Foundation for Educational Choice. The Friedman Foundation, which educates the public about school choice issues, ranked programs according to three criteria: how much purchasing power the program provides to students in choice programs relative to resources available in the public school system; how open the program is to students of all backgrounds; and how free the program is from unreasonable restrictions on school participation.

Florida’s program would have scored even higher had it not been limited to disabled students only. Even so, writes Friedman President Robert Enlow, Florida’s program “has the largest potential number of participants of any voucher or tax-credit scholarship program in the nation, both absolutely and as a percentage of students in the state.”

Here is the complete ranking:

  1. Florida McKay
  2. Georgia Special Needs Vouchers
  3. Arizona Personal Tax-Credit Scholarships
  4. Vermont Town Tuitioning
  5. Arizona Foster Child Vouchers
  6. Ohio Autism Vouchers
  7. Maine Town Tuitioning
  8. Ohio EdChoice Vouchers
  9. Illinois Personal Tax Credit
  10. Florida Tax-Credit Scholarships
  11. Utah Carson Smith Vouchers
  12. Washington D.C. Vouchers
  13. Iowa Personal Tax Credit
  14. Arizona Corporate Tax-Credit Scholarships
  15. Arizona Disabled Student Vouchers
  16. Pennsylvania Tax-Credit Scholarships
  17. Cleveland Vouchers
  18. Iowa Tax-Credit Scholarships
  19. Milwaukee Vouchers
  20. Rhode Island Tax-Credit Scholarships
  21. Minnesota Personal Tax Deduction & Credit

Posted on 02/13/08 03:54 PM by Alex Adrianson

Limiting Competition Is Not a Solution to Bad Lending

The National Association of Mortgage Brokers says that the way to prevent future problems in subprime lending is to tighten licensing requirements. Of course they would say that. Tougher licensing requirements limits the supply of brokers, shielding those already in the industry from competition.

How does that help borrowers? It doesn’t. Suzanne Hoppough reports for Forbes:

A National Bureau of Economic Research paper in December by Kleiner and Richard Todd of the Federal Reserve Bank of Minneapolis showed that there is no relationship between tough education requirements for mortgage brokers and better outcomes for borrowers. But financial hurdles (a requirement for bonding or a minimum net worth for brokerage firms) appear to have an impact. The result, the economists found, is fewer brokers, fewer subprime mortgages, higher foreclosure rates and more high-interest-rate mortgages.

Occupational licensure, reports Hoppough, has surpassed unions “as the main vehicle for workers seeking to shield themselves from competition.”

As the economy has switched from manufacturing to services, some 28% of U.S. workers—or 43 million people—now belong to a licensed profession, according to a Princeton University/Gallup survey last year. That’s up from 4.5% 50 years ago. Over the same period union membership has fallen from 35% to 12%.

Posted on 02/13/08 02:42 PM by Alex Adrianson

Sharia Law Row Raises Important Question for Constitutional Government

Last week, the Archbishop of Canterbury, Rowan Williams, said that incorporating parts of Sharia Law into British law would help create social cohesion in Britain. Legal scholars Lee Casey and David Rivkin point out the fundamental problem with setting up competing legal regimes:

One thing is certain. A constitutional and legal system that does define rights based upon community identification, rather than individual citizenship, will not be democracy as we have known it. The direct and equal status of each individual citizen before the law was arguably the 18th century’s greatest constitutional innovation, both in the U.S. and in Europe. The French Revolution, for example, took place when the Estates General – representing the clergy, nobility and commonality as corporate bodies – transformed itself into a “National Assembly,” self-consciously claiming to represent directly the citizens at large.

Permitting any portion of the body politic to have its legal rights defined by community, rather than citizenship, would be a giant step backward. It is by no means clear how Western societies could practice such accommodation, even on a limited basis, without undercutting their social compact.

In recent months, the United States Congress has considered a bill that would carve out a separate race-based sovereign entity for native Hawaiians. That entity would be able to opt out of parts of the United States Constitution with which it didn’t agree. Though the Sharia law issue is slightly different than the native Hawaiian sovereignty issue, the same underlying principle is at stake: Equality under the law is threatened whenever rights are afforded to groups instead of to citizens.

Posted on 02/12/08 05:59 PM by Alex Adrianson

Migration Patterns Reveal a Preference for Small Government

Difference in tax rates, says the Wall Street Journal, are probably a key factor in explaining why data from United Van Lines rentals shows some states to be more popular destinations than others.

… one reason to conclude that taxes are also a motivator is because the eight states without an income tax are stealing talent from other states. They are Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming, and each one gained in net domestic migrants. Each one except Florida – which has sky-high property taxes on new homesteaders – also ranked in the top 12 of destination states. ...

Politicians who think taxes don’t matter might want to explain the Dakotas. North Dakota ranked second worst in out-migration last year, while South Dakota ranked in the top 10 as a destination. The two are similar in most regards, with one large difference: North Dakota has an income tax and South Dakota doesn’t.

Posted on 02/12/08 04:27 PM by Alex Adrianson

Europe’s State-Run Schools Teach Bad Economics

One argument often deployed by defenders of public school monopolies is that only government-run schools can be counted on to inculcate the civic-mindedness necessary for a free society to flourish. But is it civic mindedness or a collectivist ethos they aim for? In the latest issue of Foreign Policy, Stefan Theil observes that in Europe government-approved economics courses are oriented toward diminishing free enterprise and validating a flourishing government sector. He sums up the curricula:

Students learn that private companies destroy jobs while government policy creates them. Employers exploit while the state protects. Free markets offer chaos while government regulation brings order. Globalization is destructive, if not catastrophic. Business is a zero-sum game, the source of a litany of modern social problems. Some enterprising teachers and parents may try to teach an alternative view, and some books are less ideological than others. But given the biases inherent in the curricula, this background is unavoidable. It is the context within which most students develop intellectually. And it’s a belief system that must eventually appear to be the truth.

Given the lessons taught to Europe’s students, it shouldn’t be surprising that European governments continue to opt for policies that give the state a large role in the economy. Nor should it be surprising that, as Theil notes, Europe lags the United States in entrepreneurial activity.

Theil’s report raises a troubling issue: If reform in Europe ultimately requires that schools teach better economics, and European governments control the curricula, then reform depends on European governments choosing a curricula that teaches that many of the things European governments do is bad policy. That’s a problem.

Posted on 02/12/08 02:02 PM by Alex Adrianson

Keeping Score in Maine

The Maine Heritage Policy Center has made it easier for citizens to keep track of what their government is doing. Yesterday, the group launched MaineVotes.org, which provides both a searchable database of bills introduced in the legislature and a searchable database of the voting records of Maine lawmakers.

Posted on 02/12/08 10:24 AM by Alex Adrianson

The President’s FY 2009 Budget

Congress will hold hearings starting this week on President Bush’s FY 2009 budget. Here are some notes on that budget:

Some unreal numbers. The President’s budget projects a balanced budget by 2012, but it doesn’t include the costs of the war on terrorism. It also includes the unrealistic assumption that Congress will allow the Alternative Minimum Tax to ensnare tens of millions of additional taxpayers in 2009. Last year, Congress passed a one-year patch that prevents 23 million additional taxpayers from having to pay higher taxes under the AMT. See President’s Budget Would Restrain Entitlement and Domestic Discretionary Spending by Brian M. Reidl, The Heritage Foundation.

Who cares about 2012? Even if the budget were balanced by 2012, it would be only a short-term achievement without entitlement reform. Brian Reidl: “[W]hether the federal government runs a deficit of $100 billion, $50 billion, or zero dollars in 2012 is not particularly important. Even if Washington enacts the necessary short-term budgetary tweaks, spending on Social Security, Medicare, and Medicaid would quickly push the budget back into a deficit shortly thereafter. If lawmakers put entitlement spending on a sustainable path, the short-term budget picture will take care of itself.” See President’s Budget Would Restrain Entitlement and Domestic Discretionary Spending by Brian M. Reidl, The Heritage Foundation.

Time to try something besides socialism? On the plus side, the President’s budget reduces the growth in Medicare spending by $178 billion over five years and achieves a one-third reduction in the program’s unfunded liabilities. Unfortunately, it does so by adjusting payment formulas—i.e. by increasing price controls on doctors and hospitals—which will make it harder for Medicare enrollees to find the services they want. Instead of more onerous price controls, a better approach to controlling costs would be to incorporate free market mechanisms into the program so that insurers and providers have incentives to compete on price and value. Such reforms would entail a transformation of Medicare from a defined benefit to a defined contribution plan and greater incentives for health care consumers to shop for value. See The President’s Medicare Budget: A First Step Toward Entitlement Reform and Make Medicare Budget Options Compatible with Comprehensive Reforms both by Robert E. Moffit, The Heritage Foundation.

Tax burden rising even with cuts. Also on the plus side, the President’s budget makes the 2001 and 2003 tax cuts permanent. Even with those cuts, however, federal tax revenues as a percentage of GDP are above the historical average and will rise to a record 22.8 percent of GDP by 2050. See President’s Budget Would Restrain Entitlement and Domestic Discretionary Spending by Brian M. Reidl, The Heritage Foundation.

Surrender the SCHIP? After proposing only a $5 billion five-year increase in last fall’s reauthorization battle over SCHIP, the President’s new budget includes a $20 billion increase over five years for the program. Giving SCHIP more money will result in higher enrollment in this government-run plan. Policies that expand enrollment in private insurance would be better. See The President’s Proposals on Medicaid and SCHIP: One Step Forward, One Step Back by Nina Owcharenko, The Heritage Foundation.

A presumptuous request. The President requests nearly $5 million to fund activities related to the Law of the Sea Treaty, even though the United States has never ratified the treaty. The Law of the Sea Treaty creates a socialist system of governance over the world’s ocean resources, and subjects U.S. companies to the judgments of an international tribunal. See Congress Should Ignore Budget Requests Relating to the Law of the Sea Treaty by Steven Groves, The Heritage Foundation.

What might been. Kevin Hassett of the American Enterprise Institute writes: “If we now had the lower spending levels that Bush inherited, we could extend his tax cuts, repeal the alternative minimum tax, enact the current stimulus package, and still have a 10-year budget surplus of $1.9 trillion. And, remember, that allows spending to be adjusted up for the Iraq war and the war against terrorists.”

Posted on 02/11/08 07:10 PM by Alex Adrianson

This Week in Washington – Monday, February 11, 2008

Posted on 02/11/08 03:43 PM by Alex Adrianson

E. Victor Milione, R.I.P.

E. Victor Milione, long-time President of the Intercollegiate Studies Institute, died yesterday. Milione directed ISI from 1953 to 1988, expanding the organization from a mailing-list operation into one that offered a wide range of resources for students who wanted to learn the foundational principles of a free society. In 2002, the Philadelphia Society honored Milione for his work. Conservative historian George Nash credited Milione with widening ISI—originally called the Intercollegiate Society of Individualists—beyond its libertarian roots to embrace traditional conservative ideas. Also in 2002, T. Kenneth Cribb Jr., current president of ISI paid Milione the following tribute:

When ISI’s bricks and mortars are a rubble, when all of us here tonight have resolved ourselves into a dew, the legacy of Vic Milione will live on—because one day in 1953, he picked up the gauntlet and became a champion of the unseen things that do not die.  In introducing countless thousands of young people to those great unthreatened truths, he has written upon eternity.

Posted on 02/11/08 03:04 PM by Alex Adrianson

The Coming Week – Monday, February 11, 2008

Tuesday: Find out whether unions are destroying American education. The Intercollegiate Studies Institute hosts a debate between Peter Brimelow and Richard Kahlenberg.

Tuesday: See the documentary Demographic Winter: The Decline of the Human Family at The Heritage Foundation.

Tuesday: Discover the best family-friendly movies of the past year at Movieguide’s 16th Annual Faith and Values Awards Gala.

Wednesday: Learn whether politicians can hold to principle without brutalizing each other. The Center of the American Experiment hosts a discussion with long-time Minnesota pols Roger Moe and Steve Sviggum.

Wednesday: Get an update on school reform in the nation’s capital, from D.C. Schools Chancellor Michelle Rhee, hosted by the American Enterprise Institute.

Thursday: Hear Stuart Epperson, co-founder and chairman of Salem Communications, give his views on the Fairness Doctrine at Pepperdine University.

Thursday: Learn how letting people fail spurs greater innovation in the long run. The Hudson Institute hosts Prof. Gustavo Manso who discusses how debtor-friendly bankruptcy laws can spur greater entrepreneurial activity.

Thursday: Find out how shifting the federal budget to a two-year process could give Congress a better chance of rooting out wasteful programs. The Heritage Foundation hosts Sen. Johnny Isakson (R-Ga.)

Friday: Assess the prospects for the February 2009 transition to digital television. The Progress & Freedom Foundation hosts a Capitol Hill seminar addressing such questions as Is the public prepared? Have all technical hurdles been spanned? Will the converter box program ease concerns about over-the-air viewers? How much political pressure will come to bear as the cutoff date approaches?

Posted on 02/08/08 12:11 PM by Alex Adrianson

Heritage on Video

Heritage in Focus: Tax increases of $11,500 per household are looming if nothing is done to reform entitlements.

At Heritage: What needs to be done in Iraq to consolidate the gains in the military situation and encourage further political progress and national reconciliation? … The Second Amendment created an individual, not a collective, right.

Posted on 02/08/08 12:08 PM by Alex Adrianson

A Needed Lesson on the Laffer Curve

In debates on tax policy, a common trope among liberals is that supply-siders have engaged in a big con through asserting that all tax cuts pay for themselves. Here and there, unfortunately, a few supply-side advocates may bear some resemblance to straw men. Even so, Arthur Laffer had a valid point with his eponymously named curve, and that point shouldn’t be forgotten simply because liberals are occasionally disappointed that tax cuts don’t actually give the government more revenue to spend. Laffer’s point was that changes in marginal tax rates change the behavior of taxpayers. Higher marginal tax rates are a disincentive to wealth-creating activity. The presence of a behavioral response to changes in tax rates means that there is a dynamic, not a linear, relationship between tax rates and tax revenue. Sometimes the behavioral response to a tax cut yields the counterintuitive result of greater revenue for the government, but sometimes it doesn’t. It all depends on where you are on the Laffer Curve. The larger lesson of the Laffer Curve is simply that marginal tax rates impact the size of the economy. Politicians who claim to care about the economy as much as they care about the size of government should note this impact. Tax policy expert Dan Mitchell has a good video explaining all this in greater detail. Take a look:

Posted on 02/08/08 10:33 AM by Alex Adrianson

Zombie Economics

Stephen Entin, of the Institute for Research on the Economics of Taxation, has some good thoughts on the stimulus proposal currently being considered by Congress:

There is no such thing as a quick, temporary fiscal stimulus for the economy that does not lead to offsetting damage down the road. The only worthwhile tax changes that are beneficial in the short run are those that are also beneficial in the long run, ones that lead to a tax system with fewer obstacles to production.

The Keynesian theory that is spawning the rebate idea was never valid. It was killed and buried over thirty years ago. That it has been exhumed and brought back from the dead in the 21st century is disturbing. This walking-dead rationale for rebates is moldy, rotting, and mindless. It is “zombie economics.” One hopes that the Senate will adopt a different package entirely, one involving permanent tax relief of a truly pro-growth nature.

Posted on 02/07/08 01:41 PM by Alex Adrianson

Subprime Lending—the Government Did It

Government regulation—not capitalist stupidity—caused the subprime lending crisis, says Stan Liebowitz. In yesterday’s New York Post, Liebowitz argues that the lower lending standards everyone is now decrying were simply the industry’s response to a law designed to promote more lending to minorities. The problem is, says Liebowitz, that lower lending rates to minorities reflected minorities’ weaker finances. That means that the only way to get more lending to minorities was to make more loans to people who were more likely to default. Liebowitz writes:

Ironically, an enthusiastic Fannie Mae Foundation report singled out one paragon of nondiscriminatory lending, which worked with community activists and followed “the most flexible underwriting criteria permitted.” That lender’s $1 billion commitment to low-income loans in 1992 had grown to $80 billion by 1999 and $600 billion by early 2003.

Who was that virtuous lender? Why – Countrywide, the nation’s largest mortgage lender, recently in the headlines as it hurtled toward bankruptcy.

In an earlier newspaper story extolling the virtues of relaxed underwriting standards, Countrywide’s chief executive bragged that, to approve minority applications that would otherwise be rejected “lenders have had to stretch the rules a bit.” He’s not bragging now.

So let’s recap: Congress told mortgage lenders to make more loans to people who are more likely to default, mortgage lenders made more loans to people who were more likely to default, defaults rose, and now some members of Congress are surprised and outraged that mortgage lenders extended loans to people who ended up defaulting. Those people who defaulted are surely now in worse shape than if the banks had not extended the loans in the first place—as is the rest of the financial system. Somebody should be outraged.

Hat tip: Open Market.org.

Posted on 02/06/08 05:09 PM by Alex Adrianson

Happy Birthday Ronald Reagan!

Today is Ronald Reagan’s 97th birthday. Reagan’s birthday is worth remembering every year because he was a brilliant champion of individual liberty, and he was one of the few presidents in the past century who made promoting liberty the central mission of his presidency.

In his first inaugural address, Reagan declared: “It is my intention to curb the size and influence of the federal establishment and to demand recognition of the distinction between the powers granted to the federal government and those reserved to the states or to the people.”

Obviously, there is still work to do. The federal government is bigger than ever, and will get bigger still without reforms. Reagan’s ideas are still relevant today. Just listen to his 1964 speech, “A Time for Choosing.” It’s a speech that never gets old. It’s amazing how many points from that speech are still relevant today: Reagan discussed the pathologies of our farm policy, the rising tax burden, government induced unemployment, expanding dependency on government, the obfuscation of Social Security accounting, the corruption of the United Nations, the waste of foreign aid, and, of course, the false choice of peace through accommodation with the enemies of liberty.

And speaking of Reagan’s relevance, now is a good time to mention that The Heritage Foundation has partnered with radio hosts Sean Hannity and Laura Ingraham to bring Americans a weekly reminder of the lessons Reagan taught. Check out the What Would Reagan Do homepage, and page of resources.  

Also, in Oklahoma today is now officially Ronald Reagan Day, thanks to a resolution passed yesterday by the Oklahoma Senate.

Posted on 02/06/08 12:32 PM by Alex Adrianson

Gov. Rendell Wants Pennsylvania Stimulus On Top of Federal Stimulus

Pennsylvania Governor Ed Rendell wants to give his state’s economy an extra jolt. Not satisfied to leave the business of pump-priming to federal lawmakers, Rendell today proposed a state budget for 2008-2009 that would provide rebate checks of up to $400 to 475,000 low-income Pennsylvania taxpayers. The U.S. Congress has proposed giving $600 rebate checks to U.S. taxpayers.

Rendell’s budget also calls for an overall increase in spending of 5.7 percent, according to The Commonwealth Foundation, Pennsylvania’s free market think tank. Commonwealth says the governor erred in claiming that his budget proposed only a 4.2 percent increase.

Commonwealth is working hard to convince lawmakers that the state’s budget can be moved in the other direction. Commonwealth has just released a report that identifies $6.7 billion in potential savings.

Other states looking for ideas on how to cut spending might want to check out their report. See Government on a Diet: Spending Tips 2008 by Nathan A. Benefield, Jessica K. Runk, and Matthew J. Brouillette.

Posted on 02/05/08 06:08 PM by Alex Adrianson

This Week in Washington – Monday, February 4, 2008

Posted on 02/04/08 07:55 PM by Alex Adrianson

Fat People Got No Rights!

On Friday, three Mississippi law makers proposed a law making it illegal for restaurants to serve those who are obese. My how times have changed! Forty-three years ago, the United States Congress made it illegal for public accommodations such as restaurants to refuse service to patrons on the basis of race. But now Mississippi restaurant-goers who run to the heavy side of the scale may wonder if their eating proclivities have put their civil liberties in jeopardy. The bill instructs the state’s department of health to establish criteria for determining when a restaurant must refuse service to a consumer.

Conservatives used to worry about lawmakers who think they know how to spend your money better than you do. Today we have to worry about lawmakers who think they know how to live your life better than you do.

Hat tip: Center for Consumer Freedom.

Posted on 02/04/08 07:52 PM by Alex Adrianson

Oil at $100 Per Barrel Is No Big Deal

Last week, the price of oil hit $100 per barrel. Is that something to worry about? No more than any other transition in our economy.

Pete Geddes points out that higher prices for oil always induce a variety of responses that eventually increase the availability of energy. First of all, notes Geddes, most of the world’s oil regions remain relatively unexplored. As prices rise, the incentive to adopt new extraction technologies rise.

Second, high prices induce consumers to adopt more energy efficient alternatives:

Over the last century, we've been steadily de-carbonizing our economy. It takes about half as many barrels of oil to produce each $1 of economic output today as it did 30 years ago. Since our Bicentennial, the U.S. economy has grown by 126 percent, while energy use has increased by only 30 percent. These gains come from a combination of advances in technology and an evolution in our economy. We've moved from energy-intensive manufacturing to services and information technology.

And in the long-run, says Geddes, higher oil prices will increase investment in bringing alternatives sources of energy to the market.

Hat Tip: Friday Facts, February 1, 2008, Georgia Public Policy Foundation.

Posted on 02/04/08 07:22 PM by Alex Adrianson

Paying for Health Care

Liberals have a lot of bad ideas on health care reform, but mostly they involve increasing the role of government in deciding how resources shall be allocated. Aside from the fact that government involvement in the health care sector distorts incentives for everyone involved—patients, doctors, and insurers—to the detriment of the health care system, there is another, more basic, problem with grandiose plans to extend government-financed health care to everyone: The money has to come from somewhere. Where?

John Goodman argues that increasing taxes won’t solve that problem:

For the past 30 years, there has been no lasting tax cut for the rich. And far from being deprived of revenue, the federal government’s share of national income today is exactly where it has been, on the average, for the past 60 years.

The penultimate sentence in the preceding paragraph deserves repetition and emphasis:

There has been no lasting tax cut for the rich.

What we have done, beginning in the Reagan administration 25 years ago, is cut tax rates for the rich. But every time we cut rates, total taxes paid by the rich went up, not down. As Art Laffer explained in The Wall Street Journal the other day, the top 1% of taxpayers are on the wrong side of the Laffer curve, and they have been there for almost the entire sorry history of the income tax.

Every Republican tax rate reduction for the wealthiest taxpayers as well as every Democratic one (both Kennedy and Clinton) has led to more revenue for the Treasury. In Clinton’s case, approving a Republican capital gains rate reduction (from 28% to 20%) in 1996 is what produced surpluses at the end of his presidency – surpluses that Clinton’s own Treasury Department never predicted!

Unlike ordinary mortals, the rich have enormous discretion over how they receive their income – as wages, as dividends, as realized capital gains or even as unrealized (untaxed) capital gains. So the way to get the most money out of them is not to push rates up to 70% or 90% (where they once were), but to lower them in order to coax the wealthy into realizing more taxable income.

Furthermore, almost every time tax rates for the wealthiest have been reduced, millions of low-income taxpayers have been removed from the tax rolls. So that today almost half the population pays no income tax. The upshot is that virtually every tax change in recent history – whether Democrat or Republican – has made the tax code more progressive. Since noneconomists often wonder whether they are being statistically hoodwinked in these discussions, let us be clear:

Over the past two decades the income tax system has become increasing more progressive, no matter how progressivity is measured.

So here are the takeaways: (1) government revenues today as a fraction of national income are equal to their historic average, (2) we are collecting more income taxes – both in total dollars and as a percent of the total – from the wealthy than ever, (3) the tax system today is more progressive by far than at any time in modern history and (4) repealing the Bush rate reductions for high-income taxpayers is unlikely to produce any extra revenue for health reform.

Posted on 02/04/08 06:57 PM by Alex Adrianson

Lev Dobriansky, R.I.P.

Dr. Lev Dobriansky passed away yesterday at the age of 89. Dobriansky played a key role in advancing a number of conservative causes and organizations, including Captive Nations Week, the Victims of Communism Memorial, and the Fund for American Studies.

Dobriansky taught at Georgetown University from 1948 until 1982, when he became Ambassador to the Bahamas. In 1959, Dobriansky wrote the first Captive Nations Week proclamation, issued at that time by President Dwight D. Eisenhower and every president since. On July 20, 2005, Dobriansky was honored with the Lifetime Achievement Award from the National Captive Nations Committee and the Ukrainian Congress Committee of America for “his inspiring leadership and unwavering commitment to the Liberation of all Captive Nations and the National Independence of all Peoples.” Lee Edwards dubbed Dobriansky “Mr. Captive Nations” for his long efforts on behalf of those trapped behind the Iron Curtain.  

Dobriansky helped the Fund for American Studies establish an academic partnership with Georgetown University in 1970, and served as the academic director of The Fund’s summer institute programs from 1970 to 1982. The Fund recognized Lev’s many contributions to the organization and his country with the establishment in 1996 of the Lev Dobriansky Lecture in Political Economy. Among the distinguished speakers to have delivered the annual lecture are Nobel Laureate James M. Buchanan, the late Mancur Olson, economist Walter Williams, and then-president of the Federal Reserve Bank of Dallas Robert McTeer.

Dobriansky was also a key figure in bringing about the Victims of Communism Memorial that was unveiled last year near the U.S. Capitol.

Posted on 02/01/08 05:45 PM by Alex Adrianson

The Coming Week – Monday, February 4, 2008

Monday: Find out whether and how fiscal policy can help improve the economy. Cato scholars Dan Mitchell and Alan Reynolds discuss economic stimulus proposals on Capitol Hill.

Monday: Discover how blogs are challenging the staid state-run media of autocratic Middle East countries. The American Enterprise Institute hosts a panel assessing the impact of blogs in pushing change in the Middle East.

Tuesday: Get a perspective from the White House. The Ashbrook Center hosts a talk with Tim Goeglein, Deputy Director of the White House Office of Public Liaison.

Thursday: Learn some best practices on how to deal with state budget crises. Mercatus Center hosts a seminar featuring Scott Pattison, Executive Director of the National Association of State Budget Officers 

Thursday: Hear Newt Gingrich discuss his vision of a transformed American government. The American Enterprise Institute hosts the former Speaker of the House discussing his new book, Real Change: From the World That Fails to the World that Works.

Thursday: Assess the situation in Iraq—with a view from Iraq. The Heritage Foundation hosts Iraq’s ambassador to the United States, Samir Shakir Mahmood Sumaida’ie.

Posted on 02/01/08 01:46 PM by Alex Adrianson

Heritage on Video

At Heritage: Vice President Richard Cheney says Congress should not extend privacy rights to terrorist suspects overseas. … Sen. Jeff Sessions (R-Ala.) has a roadmap for fixing our immigration system. … Can Zimbabwe find a new path with its upcoming elections? … The rise of rogue states, civil strife, and militant Islam has forced the United States to adopt a new grand strategy since the end of the Cold War.

Posted on 02/01/08 01:44 PM by Alex Adrianson

Ethanol Yields Food Inflation

Food prices are on the rise: Last year saw a 4.9 percent increase, against an overall rise in consumer prices of just 4.1 percent. Over the last seven years, food prices have increased an average of just 2.5 percent per year.

There are numerous causes of the food inflation we are seeing now. One of them is government mandates requiring the use of biofuels. Sallie James reviews the impact of the artificially induced demand for ethanol:

Primarily derived from corn in the United States, ethanol affects the price of corn directly by adding to demand, and other commodities indirectly by drawing cropland away from their production. Indeed, in the last year the supply of corn has increased 24 percent in the northern United States during 2007, primarily because of higher corn acreage (the highest since 1933). Ethanol capacity has risen by around 40 percent in the last year because of government incentives. As farmers shifted production to meet surging demand for ethanol, the acreage devoted to rice, cotton and soybeans has decreased by 3 percent, 18 percent, and 16 percent respectively. …

The ethanol boom has knock-on effects in the rest of the rural economy. The growing use of cereals, sugar, oilseed and vegetable oils to produce ethanol and biodiesel is supporting crop prices and, indirectly through higher animal feed costs, raising costs for livestock production. … [T]he prices for poultry, beef, and eggs have all increased by more than 5 percent this year.

Unfortunately, notes James, the trend is likely to worsen. The new energy bill signed into law by President Bush requires a near-doubling of corn-based ethanol use in 2008. Further, the European Union’s new commitment to renewable sources means that canola oil will now be diverted to energy uses instead of food.

See Food Fight by Sallie James, Cato Institute, January 31, 2008

Posted on 02/01/08 11:42 AM by Alex Adrianson

Pell Grants for Kids

In his State of the Union address, President Bush told Congress:

I ask you to support a new $300 million program called Pell Grants for Kids. We have seen how Pell Grants help low-income college students realize their full potential. Together, we have expanded the size and reach of these grants. Now let's apply that same spirit to help liberate poor children trapped in failing public schools.

K-12 education is primarily a state and local responsibility. School choice is a great idea that should be implemented by the states. Still, kids who attend failing schools should be given other options, and Bush’s proposal would do that. Implicit in the idea is the realization that the current system isn’t working. No Child Left Behind tried to improve public schools by making them accountable to federal oversight. Making schools accountable to students and families is a much better approach.

And, as the Wall Street Journal observes, calling the plan “Pell Grants for Kids” is a good way of making the point that school vouchers are widely regarded as a success story—for college students. Why not for K-12 students as well?

For the latest on the state of school choice in the states, see Dan Lips new paper for The Heritage Foundation, School Choice: Policy Developments and National Participation Estimates in 2007-2008.

Posted on 02/01/08 11:13 AM by Alex Adrianson

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