Archive for July, 2009

The International Monetary Fund does not always give bad advice, but the bureaucrats (who get very generous tax-free salaries) are infamous for advising economically-troubled nations to raise tax rates. The latest example if from Latvia, which got itself in trouble by overspending during the boom years and taking on too much debt. The IMF, to its credit, has asked for long-overdue reductions in a bloated public sector, but Latvia’s economy also needs investment to get back on the right path – and that will be less likely if the nation’s politicians acquiesce to IMF demands to replace the flat tax with a system that discriminates against those that contribute more to growth. Bloomberg reports on how the IMF is using American tax dollars to push bad tax policy:

Latvia and the International Monetary Fund reached a preliminary agreement yesterday paving the way for the first loan payment from the Washington-based fund since December. …The process of reaching an agreement has “been tumultuous,” Christensen said. The IMF and the Commission have made loan payments to the Baltic state conditional on budget standards being met, with the government pushing through pension, wage and other spending cuts to meet targets. The budget deficit may reach 10 percent of gross domestic product this year after the economy contracted 18 percent in the first quarter. …The country has cut spending by lowering pensions, state pay and maternity benefits, and raised value added tax since signing the agreement. It plans to introduce taxes on real estate, capital gains and earned interest income in next year’s budget, and may close some schools and hospitals. …“The idea of moving away from the flat tax to a progressive tax is very much one of the measures that we’re looking at,” Anne-Marie Gulde, senior advisor in the IMF’s European Department, said in a conference call. “It could help to increase revenues while putting more of the burden on higher- income groups.” The country’s parliament on June 16 passed 500 million lati ($1 billion) in spending cuts and revenue gains for this year, to unlock the loan from the European Commission.

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A sportswriter at NBA.com explains how higher tax rates will make it even more attractive for professional athletes to sign with teams from zero-income tax states such as Florida and Texas. This is good news if you cheer for the Miami Dolphins or Texas Rangners. But if you support teams from high-tax states, you should be very upset that greedy politicians are making it more likely that your favorite franchise will be at a competitive disadvantage:

With increasing taxes geared to the wealthy and the Bush tax cuts also coming off the books, it may be that the low tax states like Florida and Texas begin to have a big advantage over higher tax states when it comes to NBA free agents. …Could, in the end, the biggest barrier to the Bulls attracting a major free agent next summer like Dwyane Wade be the health care legislation now being debated in Washington? …The answer is taxes. The closest anyone seems to a plan now to pay for the changes is to tax the so-called rich. That would include just about every player in the NBA. I know we’re not supposed to feel sorry for rich people and assume they have so much that giving up more doesn’t matter. It does, just as comfortable people in the middle class with two cars and a nice health club membership don’t want to pay more taxes, either, even though they can afford to. So I contacted a tax expert in Chicago, Noel Wilner, president of CBIZ MHM, an accounting and tax advisory company, and asked him to do some calculations. The assumption was single tax payer, the 2011 tax rates when the presumed five percent health care surtax would go into effect with the higher rates that year, salaries of $5.5 million, which is about the NBA average, and $17 million, which would be a high earner like Wade and no deductions. …The total tax for a $5,500,000 salary and an Illinois resident is $2,568,412. This is made up of $2,142,412 of federal income tax, $261,000 of health care tax and $165,000 of Illinois tax. A Florida resident will have the same federal and health care tax but no state income tax ($165,000). The total tax for a salary of $17,000,000 will be $8,088,412. That is made up of $6,696,412 of federal income tax, $882,000 of health care tax and $510,000 of Illinois tax. A Florida resident will have all the same tax except no state tax ($510,000). In addition, Wilner notes, there is typically an allocation to other states where the games are actually played. But there should be at least a savings of 50% of the state tax for being a Florida resident as 50% of the games are home games. I know almost $9 million after taxes is a lot of money. But with the government adding on another half million dollars penalty to pay for health care and who knows how much more down the road as the rich seem to be set up as the villains in this health care debate, suddenly hanging onto more than $500,000 in state tax may sound appealing. So perhaps someone like Wade sees he can resign with his own team for an extra year under NBA rules and then get that much more in tax benefit, and maybe the money starts becoming too big to decide to leave? With increasing taxes geared to the wealthy and the Bush tax cuts also coming off the books, it may be that the low tax states like Florida and Texas begin to have a big advantage over higher tax states. And then seemingly making it even less appealing to go to a ridiculously high tax state like New York.

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The IRS sends their auditor to audit a synagogue. 

The auditor is doing all the checks, and then turns to the Rabbi and says, “I noticed that you buy a lot of candles.”

“Yes,” answered the Rabbi.

“Well, Rabbi, what do you do with the candle drippings?” he asked.

“A good question,” noted the Rabbi. “We actually save them up. When we have enough, we send them back to the candle maker and every now and then, they send us a free box of candles.”

“Oh,” replied the auditor somewhat disappointed that his question actually had a practical answer.  So he thought he’d try another question, in his obnoxious way. “Rabbi, what about all these matzo purchases?  What do you do with the crumbs from the matzo?

“Ah, yes,” replied the Rabbi calmly, “we actually collect up the crumbs, we send them in a box back to the manufacturer and every now and then, they send a box of matzo balls.”

“Oh,” replied the auditor, thinking hard how to fluster the Rabbi.

“Well, Rabbi,” he went on, “what do you do with all the foreskins from the circumcisions?”

“Yes, here too, we do not waste,” answered the Rabbi.  “What we do is save up all the foreskins, and when we have enough we actually send them to the IRS.”

“To the IRS ?” questioned the auditor in disbelief.

“Ah, yes,” replied the Rabbi, “directly to The IRS …And about once a year, they send us a little prick like you.”

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A report at CBSnews.com highlights the growing interest among politicians and bureaucrats in new taxes on sugary drinks, including sports drinks such as Gatorade. This is a reprehensible example of nanny-state intervention, of course, but it shows the risk of having government involved in health care since politicians then assert the right to tell us how to live:

…one of the proposals put before the committee received a nod of approval from health officials today: taxing soda. The [Senate Finance] committee — the last congressional panel expected to produce its own recommendations for health care reform – listened to arguments earlier this year both for and against imposing a three-cent tax on sodas as well as other sugary drinks, including energy and sports drinks like Gatorade. The Congressional Budget Office estimates that a three-cent tax would generate $24 billion over the next four years, and proponents of the tax argued before the committee that it would lower consumption of sugary drinks and improve Americans’ overall health. …CDC chief Dr. Thomas Freiden said increasing the price of unhealthy foods “would be effective” at combating the nation’s obesity problem… The American Beverage Association, which strongly opposes the tax, told the Wall Street Journal the tax would hit poor Americans the hardest.  

The Los Angeles Times, meanwhile, has a similar report about politicians wanting a tax on foods that supposedly lead to obesity. The reason for their interest, not surprisingly, is that a 10 percent tax on such foods may lead to more than $500 billion, which doubtlessly is leading to lots of salivating on Capitol Hill:

Key among the “interventions” the report weighs is that of imposing an excise or sales tax on fattening foods. That, says the report, could be expected to lower consumption of those foods. But it would also generate revenues that could be used to extend health insurance coverage to the uninsured and under-insured, and perhaps to fund campaigns intended to make healthy foods more widely available to, say, low-income Americans and to encourage exercise and healthy eating habits. …a 2004 report prepared for the Department of Agriculture suggested that, for “sinful-food” taxes to change the way people eat, they may need to equal at least 10% to 30% of the cost of the food. And although 40 U.S. states now impose modest extra sales taxes on soft drinks and a few snack items, the Urban Institute report suggests that a truly forceful “intervention” — one that would drive down the consumption of fattening foods and, presumably, prevent or reverse obesity — would have to target pretty much all the fattening and nutritionally empty stuff we eat: “With a more narrowly targeted tax, consumers could simply substitute one fattening food or beverage for another,” the reports says. …Conservatively estimated, a 10% tax levied on foods that would be defined as “less healthy” by a national standard adopted recently in Great Britain could yield $240 billion in its first five years and $522 billion over 10 years of implementation — if it were to begin in October 2010. If lawmakers instituted a program of tax subsidies to encourage the purchase of fresh and processed fruits and vegetables, the added revenue would still be $356 billion over 10 years.

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The politicians in Washington are looking at a huge laundry list of new taxes to finance government-run health care and one of the items on the list is a 10 percent tax on cosmetic surgery. While I’m tempted to make a joke about this being the “Pelosi tax,” there is a much more serious point to be made. Cosmetic surgery is a very good example of how free markets work in the health sector – when they are given a chance. As Mark Perry and Don Boudreuxhave noted, there are some instances where markets are allowed to work, and they do an excellent job of providing valuable goods at affordable prices. Cosmetic surgery is one of those examples. So should we be surprised, as this National Journal story indicates, that politicians wants to tax the approach that works – a genuine free market exchange between buyers and sellers – to expand the approach – government intervention that expands the third-party payer problem – that doesn’t work?

Face-lifts, tummy tucks and hair transplants could be hit with a new tax to help finance the trillion-dollar healthcare overhaul plan, according to sources familiar with the Senate talks. The Senate Finance Committee has discussed imposing a 10 percent excise tax on cosmetic surgery deemed unnecessary for medical purposes. The idea was broached in a meeting with OMB Director Orszag in mid-July, after which Senate Finance Chairman Max Baucus told reporters he had heard some “interesting,” “creative,” and “kind of fun” ideas. The tax, which has not been officially scored, would plug some of the revenue gap senators are seeking to fill to keep on schedule for a markup the week of Aug. 3. It would target procedures prohibited under Section 213 of the tax code, which deals with itemized deductions for medical expenses not covered by health insurance. The 1990 deficit-reduction law prohibited taxpayers from taking deductions for cosmetic surgery “unless the surgery or procedure is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease.” The law defines cosmetic surgery as “any procedure which is directed at improving the patient’s appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease.” According to the IRS, deductions for procedures such as reconstructive surgery due to cancer or laser eye surgery would be allowed. But nose jobs, liposuction, teeth-whitening procedures and Botox injections to smooth wrinkles would be prohibited under Sec. 213 and subject to the new tax.


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A new study reveals the unseemly degree to which the government has spent tens of billions of dollars to co-opt scientists into parroting global-warming alarmism. This has resulted in “models” that supposedly show the need to take drastic action to prevent slight warming in the next 50-100 years, yet those same models cannot predict today’s weather based on past data. The politicians are getting the “results” they want, but the end result may be a new power grab by government to control and direct our lives. Transworldnews.com has a report:

The Science and Public Policy Institute announces the publication of Climate Money, a study by Joanne Nova revealing that the federal Government has a near-monopsony on climate science funding. This distorts the science towards self-serving alarmism. …The US Government has spent more than $79 billion of taxpayers’ money since 1989 on policies related to climate change, including science and technology research, administration, propaganda campaigns, foreign aid, and tax breaks. Most of this spending was unnecessary. Despite the billions wasted, audits of the science are left to unpaid volunteers. A dedicated but largely uncoordinated grassroots movement of scientists has sprung up around the globe to test the integrity of “global warming” theory and to compete with a lavishly-funded, highly-organized climate monopsony. Major errors have been exposed again and again. …Meanwhile, in a distracting sideshow, Exxon-Mobil Corp is repeatedly attacked for paying just $23 million to skeptics—less than a thousandth of what the US government spends on alarmists… The large expenditure designed to prove the non-existent connection between carbon and climate has created a powerful alliance of self-serving vested interests. …Robert Ferguson, SPPI’s president, says: “This study counts the cost of years of wasted Federal spending on the ‘global warming’ non-problem. Government bodies, big businesses and environmental NGOs have behaved like big tobacco: recruiting, controlling and rewarding their own “group-think” scientists who bend climate modeling to justify the State’s near-maniacal quest for power, control, wealth and forced population reduction. “Joanne Nova, who wrote our study, speaks for thousands of scientists in questioning whether a clique of taxpayer-funded climate modelers are getting the data right, or just getting the “right” data. Are politicians paying out billions of our dollars for evidence-driven policy-making, or policy-driven evidence-making?  The truth is more crucial than ever, because American lives, property and constitutional liberties are at risk.”

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I’ve heard that “Cato U” is the most popular Cato Institute public program, so I’m looking forward to my first visit. I’ll be speaking on “Leviathan on a Diet: Tax Competition and Restraints on State Power.”

For those of you who won’t be there, this eight-minute video is a condensed version of my remarks. And if you’re too lazy to watch the video, my message is that forcing governments to compete with each other is the world’s most powerful force for freedom.

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President Obama’s pork-filled spending bill certainly has not done much to help the economy (not a surprise since bigger government means a smaller private sector), but it has done a great job of lining the pockets of politicial insiders. The Denver Post has a story about Colorado’s governor using a no-bid contract to funnel a pile of money to his former law partners:

Gov. Bill Ritter turned down a $75-an-hour offer from the Colorado attorney general’s office to handle legal matters regarding the disbursement of federal stimulus funds, instead hiring his former law partners for up to six times that cost. …Ritter hired Hogan & Hartson through a no-bid contract. So far, the firm has been paid $40,000 from federal funds. Although Colorado has laws governing the circumstances under which the state can contract, the governor and other elected officials are exempt. In 1941, the state legislature buried a sentence in an unrelated section of the law that essentially permits elected officials to disregard procurement rules — including a requirement to seek multiple bids — when entering into contracts. …The March contract between the firm and the governor’s office is vague. A letter attached to the contract says Hogan & Hartson will represent the governor’s office in analyzing the recovery act and help ensure that the state “receive and distribute its full share” of the funds. Other documents that may shed more light on the work the firm is doing for taxpayers were withheld by the governor’s office on the grounds of “attorney-client privilege.”

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Back in the 1980s, the irreplaceable Walter Williams produced a documentary based on one of his more controversial books, The State Against Blacks. Someone has done a great service and posted the documentary on Youtube.com. Everything Walter said back then is true today – and just as applicable. The only discordant note is that when Walter refers to “welfare reform,” it is important to understand that he is talking about the expansion of handouts and centralization in the 1960s and 1970s, not the pro-market welfare reform of the 1990s.

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Ann Coulter is a lawyer by training and a provocateur by profession, but her Townhall column on health care shows she has a very good grasp of economics. She does an excellent job of identifying how politicians have created the “third-party payer” problem that has so seriously undermined market forces:

All the problems with the American health care system come from government intervention, so naturally the Democrats’ idea for fixing it is more government intervention. This is like trying to sober up by having another drink. …We already have near-universal health coverage in the form of Medicare, Medicaid, veterans’ hospitals, emergency rooms and tax-deductible employer-provided health care — all government creations. So now, everyone expects doctors to be free. People who pay $200 for a haircut are indignant if it costs more than a $20 co-pay to see a doctor. The government also “helped” us by mandating that insurance companies cover all sorts of medical services, both ordinary — which you ought to pay for yourself — and exotic, such as shrinks, in vitro fertilization and child-development assessments — which no normal person would voluntarily pay to insure against. This would be like requiring all car insurance to cover the cost of gasoline, oil and tire changes — as well as professional car detailing, …As a result, a young, healthy person has a choice of buying artificially expensive health insurance that, by law, covers a smorgasbord of medical services of no interest to him … or going uninsured. People who aren’t planning on giving birth to a slew of children with restless leg syndrome in the near future forgo insurance — and then politicians tell us we have a national emergency because some people don’t have health insurance. The whole idea of insurance is to insure against catastrophes: You buy insurance in case your house burns down — not so you can force other people in your plan to pay for your maid. You buy car insurance in case you’re in a major accident, not so everyone in the plan shares the cost of gas. …Even two decades after the collapse of liberals’ beloved Soviet Union, they can’t grasp that it’s easier and cheaper to obtain any service provided by capitalism than any service provided under socialism. You don’t have to conjure up fantastic visions of how health care would be delivered in this country if we bought it ourselves. Just go to a grocery store or get a manicure. Or think back to when you bought your last muffler, personal trainer, computer and every other product and service available in inexpensive abundance in this capitalist paradise. Third-party payer schemes are always a disaster — less service for twice the price! If you want good service at a good price, be sure to be the one holding the credit card. Under “universal health care,” no one but government bureaucrats will be allowed to hold the credit card. Isn’t food important? Why not “universal food coverage”? If politicians and employers had guaranteed us “free” food 50 years ago, today Democrats would be wailing about the “food crisis” in America, and you’d be on the phone with your food care provider arguing about whether or not a Reuben sandwich with fries was covered under your plan. Instead of making health care more like the DMV, how about we make it more like grocery stores?

Too bad Republicans can’t be this articulate. But I guess that would require them to stop making the problem worse, as they did with their profligate Medicare expansion earlier this decade.

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The First Amendment guarantees our freedom to petition the government, which is one of the reasons why the statists who wants to restrict or even ban lobbying hopefully will not succeed. But that does not mean all lobbying is created equal. If a bunch of small business owners get together to lobby against higher taxes, that is a noble endeavor. If the same group of people get together and lobby for special handouts, by contrast, they are being despicable. And if they get a bailout from the government and use that money to mooch for more handouts, they deserve a reserved seat in a very hot place. This is not just a hypothetical exercise. The Hill reports on the combined $20 million lobbying budget of some of the companies that stuck their snouts in the public trough:

Auto companies and eight of the country’s biggest banks that received tens of billions of dollars in federal bailout money spent more than $20 million on lobbying Washington lawmakers in the first half of this year. General Motors, Chrysler and GMAC, the finance arm of GM, cut back significantly on lobbying expenses in the period, spending about one-third less in total than they had in the first half of 2008. But the eight banks, the earliest recipients of billions of dollars from the federal government, continued to rely heavily on their Washington lobbying arms, spending more than $12.4 million in the first half of 2009. That is slightly more than they spent during the same period a year ago, according to a review of congressional records. …big banks traditionally are among the most active Washington lobbying interests in the financial industry, and the recession has done little to dent their spending. …Since last fall, companies receiving government funds have argued that none of the taxpayer money they were receiving was being spent on lobbying. …Six of the eight banks spent more to try to sway lawmakers in the first half of 2009 than over the same period in 2008, before the worst of the financial crisis took hold. The eight banks include: Citigroup, JPMorgan Chase & Co, Bank of America, Goldman Sachs, Morgan Stanley, Wells Fargo, State Street and Bank of New York Mellon. JPMorgan was the top spender, at $1.76 million in the second quarter and $3.07 million in first half of the year. That is roughly 20 percent more than the bank spent on lobbying in the first half of 2008. Citigroup, which has yet to repay any of the $50 billion in bailout money it has received, was the second highest, at $1.67 million in the quarter and $2.92 million in the first half. A spokesman for Citigroup declined to comment. …American International Group, the insurance firm crippled by trades in financial derivatives that received roughly $180 billion in bailout commitments, closed its Washington lobbying shop earlier this year. AIG continues to spend money on counsel to answer requests for information from the federal government, but the firm said it does not lobby on federal legislation.
The most absurd part of the story was the companies claiming that they did not use tax dollar for lobbying. I guess the corporate bureaucrats skipped the classes where their teachers explained that money is fungible. The best part of the story was learning that AIG closed its lobbying operation, thought that does not mean much since AIG basically now exists as a subsidiary of the federal government. The most important message (which is absent from the story, of course) is that the real problem is that government is too big and that it intervenes in private markets. Companies would not need to lobby if government left them alone and/or did not offer them special favors. Indeed, that was the key point of my video entitled, “Want Less Corruption: Shrink the Size of Government.”

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It has been a while since I got to call someone a “limousine liberal,” so I enjoyed this debate. On a more serious note, my key point was that high tax rates don’t really hurt the rich. After all, they have access to good lawyers, lobbyists, and accountants. The real victims are entrepreneurs and investors who are striving to get rich. That is why Obama’s plans are so pernicious.

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Politicians exaggerate as a routine matter and have well-deserved reputations for stretching the truth. But when they repeatedly make assertions that they (or their aides) know to be false, they surely deserve to be criticized. That is the purpose of my new video. Entitled “President Obama’s Dishonest Demagoguery on So-Called Tax Havens,” the four-minute presentation looks at the two sound bites that the President uses to demonize low-tax jurisdictions.

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After almost 25 years in Washington, I thought I had reached the point where I was incapable of being shocked by how government wastes our money, but promiscuous profligacy in Washington is causing even my jaw to drop. The latest example comes from the Department of Treasury, which wants to use taxpayer funds to conduct a “Humor in the Workplace” program. The seminar supposedly will help particpants “alleviate stress” and “improve work-place relationships.” Gee, isn’t that wonderful. Maybe some IRS folks will go through this program so they can share some good jokes next time their applying the thumbscrews. Just in case you think this is a much-delayed April Fool’s joke, here is a link to the official government notice and a brief description of how they want to waste our taxes:

The purpose of this announcement is to seek qualified contractors with the capability to provide presentations for The Department of Treasury, Bureau of the Public Debt (BPD), Management Meeting with experience in meeting the objectives as described herein. The Contractor shall conduct two, 3-hour, Humor in the Workplace programs that will discuss the power of humor in the workplace, the close relationship between humor and stress, and why humor is one of the most important ways that we communicate in business and office life. Participants shall experience demonstrations of cartoons being created on the spot. The contractor shall have the ability to create cartoons on the spot about BPD jobs. The presenter shall refrain from using any foul language during the presentation. This is a business environment and we need the presenter to address a business audience.

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As a good libertarian, I believe in the right of contract, including the right to insist on stupid employment conditions. After all, neither employers nor employers are obliged to enter into any particular agreement. But that certainly does not prevent me from commenting on the inane practices of government – including the recent decision to fire a high school softball coach because a few parents drank modest amounts of alcohol at a team pool part. A DC-area radio station has a report on local government run amok:

The man who guided his varsity softball team to a 2A Western Region title this spring was terminated last week for violating a school alcohol policy. In a phone interview Monday, Walkersville High School coach Brad Young acknowledged that a couple of parents brought beer to the annual post-season team cookout and pool party at his home in June — a violation of Frederick County Public School rules prohibiting alcohol at any school function. Young, in his fifth year as head softball coach, does not work for the school system and said he was unaware that parents drinking at his home during a post-season team party constituted a violation of the alcohol-free, drug-free, tobacco-free school system rules. …Young and team parents said none of the students at the party drank or had access to alcohol. The letter Young received from the school system does not allege that any students drank or had access to alcohol at the party. None of the adults at the party were intoxicated, the parents and coach said. …Bob McNally, father of two players on this year’s team, said he brought beer to the team function at Young’s home, unaware it would be a school system policy violation for the coach to permit it at a team party. “None of the students had access to alcohol or were drinking,” McNally said in a phone interview Monday. “The girls simply had a lot of fun. And Brad (Young) did not drink. In no way shape or form did any parents or school employee put any of the students in jeopardy or do anything illegal or immoral.” McNally described Young as a “great role model for those kids,” and “a mentor who gives 150 percent” for the students-athletes in his charge.

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A surprising number of people enjoyed the CNBC tax haven debate, so I managed to dig up a debate from last year on French TV (thanks to yadranko). The format was less than ideal since I had to single-handedly debate three opponents. But I think I gave an adequate performance (and hopefully presented a pro-market viewpoint to an audience that rarely hears anything beyond statist blather).

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The Washington Post has a “feel-good” story about how the huge expansion in the federal government has created a relatively strong job market in the D.C.area. The story mentions that the federal workforce will expand by another 200,000 during the Obama years, yet at no point does the author bother to mention (or perhaps does not even understand) that all these new bureaucrats are financed by draining resources from the productive sector of the economy:

They came in droves wearing dark suits and carrying résumés yesterday — some lined up for a block in the hot sun waiting for the doors to open — to the only employer in this dismal economy hiring by the thousands: the federal government. More than 6,000 people jammed into the National Building Museum in Washington to apply for openings at 75 agencies, including the departments of Treasury, Homeland Security, Justice, Veterans Affairs and Energy. …in the government, added Shipp of Silver Spring, “you get stability, you get great benefits and [an opportunity] to move up and progress in your job.” The federal government represents about one-third of the Washington region’s $401 billion economy. Some analysts said they think the ramp-up in federal hiring and spending will help the area emerge from the recession before most other metropolitan regions. From May 2008 to May 2009, the region lost 55,000 jobs. But during that same period, nearly 20,000 jobs were created, mainly in the federal government and federal contracting sector. …The Partnership for Public Service, a nonprofit that sponsored the job fair and is surveying federal agencies to determine their staffing needs, estimates that the government will hire about 600,000 people over the next four years, as many as 120,000 of whom would work in the Washington region. The federal workforce, currently at 1.9 million, is expected to grow to about 2.1 million during the Obama administration, according to the Partnership for Public Service. That is comparable to the staffing level during the Johnson administration’s Great Society programs of the 1960s.

One of the most shockingly inaccurate parts of the story is the assertion that pay for bureaucrats does not match the private sector. Actually, that statement is technically true, but in the opposite sense of what the reporter writes. As Cato’s Chris Edwards has noted, compensation for bureaucrats is far above levels in the productive sector of the economy:

While the government currently cannot always match private-sector salaries, job seekers say it can offer something else: stability in an unsteady economy, a sense of mission and, in some cases, student loan forgiveness and tuition reimbursement programs.

Last but not least, the story inadvertently concludes with a perfect example of how bloated government hurts growth. It quotes a student who is angling for a job in government rather than doing something productive. We have no idea what Mr. Moore would wind up doing in the absence of a federal sinecure, but even a job at McDonald’s would mean contributing to national income rather than diverting it to unproductive uses:

Alexander Moore, 22, who recently graduated with an economics degree from the College of William and Mary, said he hopes the Bureau of Economic Analysis will hire him and help pay for a master’s degree. “If you would have asked me six to eight months ago [about his employment preference], it would have been the private sector,” Moore said. “Now it’s the public sector, because it’s becoming a bigger part of our society.”

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With so much money being squandered in Washington, $700,000 does not even rise to the level of an asterisk. But when that much money is being wasted so that senior bureaucrats from the Social Security Administration can enjoy a party (oops, a training session) at a four-star resort in Arizona, it becomes a symbol of Washington profligacy. As referenced in an earlier post, conservatives already have been complaining about this waste of taxpayer funds, but kudos to ABC news for running a story on this travesty. Make sure to watch the embedded video of bureaucrats “reducing stress” at your expense:

…nearly 700 executives from the Social Security Administration (SSA) gathered for a lavish three-day conference in Phoenix, AZ last week, costing taxpayers about $700,000. …The conference, which included a performance by a motivational dance company that was captured on tape by Phoenix affiliate ABC15, was held at the Arizona Biltmore, a hotel described as the “Jewel of the Desert” with an oasis of 39 acres of lush gardens, swimming pools and a golf course. SSA executives were invited to join in the dancing.

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Did I win the debate?

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While politicians and bureaucrats generally are on the same side, there are occasional conflicts. For instance, if politicians want to limit the growth of an agency’s budget (an infrequent impulse, to be sure), the bureaucrats get upset and sometimes they fight back. A common tactic is to try and generate public opposition by leaking to the press that they will have to curtail something that taxpayers actually value. This is known as the Washington Monument Syndrome, which is a reference to the National Park Service’s petulant decision about 40 years ago to close national monuments two days per week because of a very small budget reduction. A very perverse example of the Washington Monument Syndrome just took place in Massachusetts, where officials at the New England Zoo threatened to kill some of the animals if their subsidy was reduced. This was so over the top that even the state’s collectivist governor felt compelled to condemn the bureaucrats for using dishonest scare tactics. The Boston Globe reports:

Governor Deval Patrick yesterday accused Zoo New England officials of creating a false and inflammatory scare with their warning that state budget cuts may force them to close two Greater Boston zoos and euthanize some animals. “As a supporter of the zoo and a parent who has visited often, the governor is disappointed to learn that Zoo New England has responded to this difficult but unavoidable budget cut by spreading inaccurate and incendiary information,’’ Kyle Sullivan, a spokesman for the governor, said in a statement. And a second Patrick aide emphatically ruled out the killing of any animals. …Zoo officials declined to comment on Patrick’s remarks yesterday. They also canceled a public event to welcome two French Poitou donkeys to the Franklin Park facility in honor of Bastille Day tomorrow. John Linehan, Zoo New England chief executive, was scheduled to attend the event. …On Friday zoo officials released a statement saying the funding reduction might require them to shutter both zoos. Then on Saturday, they issued a statement that said state bureaucrats – and not animal-care professionals – would be responsible for deciding whether some animals would have to be killed if the zoos closed. …At least one visitor to the Franklin Park Zoo yesterday suggested the operator solve the budget crisis on its own. “I wonder why the Franklin Park Zoo doesn’t raise their prices so they can support themselves,’’ said Emanuel Achidiev, 28. “They shouldn’t have to rely on the state.’’

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The moochers and special interests who live off government presumably do not (or at least should not) want to kill off the private sector. That is one of the observations I make in an interview with Stuart Varney of Fox News. I also comment on the Laffer Curve, explaining why “taxing the rich” will backfire.

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In a previous post, I commented about how Oregon’s government-run health system gives people advice on how to kill themselves. The statist system in the United Kingdom has a different approach, relying instead on people dying as they languish on waiting lists. But the bureaucrats across the pond are not a bunch of joyless robots. They managed to divert some of their budget to produce leaflets telling kids about the cardiovascular benefits of orgasms. The Telegraph reports on this innovative use of taxpayer funds:

NHS guidance is advising school pupils that they have a “right” to an enjoyable sex life and that regular sex can be good for their cardiovascular health. The advice appears in leaflets circulated to parents, teachers and youth workers and is meant to update sex education by telling students about the benefits of enjoyable sex. The authors of the guidance say that for too long, experts have concentrated on the need for “safe sex” and committed relationships while ignoring the principle reason that many people have sex. …The leaflet carries the slogan “an orgasm a day keeps the doctor away”. It also says: “Health promotion experts advocate five portions of fruit and veg a day and 30 minutes’ physical activity three times a week. What about sex or masturbation twice a week?”

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While perusing Instapundit, I came across a post suggesting that President Obama thinks investment will suffer if government takes 20 percent of a company’s income. At first I thought this was a form of satire, but there is a real link to a speech that the President gave to the Parliament of Ghana. Indeed, the speech has several good comments:

Development depends on good governance. …Repression can take many forms, and too many nations, even those that have elections, are plagued by problems that condemn their people to poverty. No country is going to create wealth if its leaders exploit the economy to enrich themselves… No business wants to invest in a place where the government skims 20 percent off the top… No person wants to live in a society where the rule of law gives way to the rule of brutality and bribery. That is not democracy, that is tyranny, even if occasionally you sprinkle an election in there. And now is the time for that style of governance to end. 

My initial reaction, focusing on the passage about 20 percent being too much for government, is to ask why Obama wants higher tax rates in America? After all, he wants American small businesses to pay 40 percent, which is twice the burden he thinks is excessive for Ghanians. Upon further reflection, though, I wonder if the President is referring to corrupt bureaucrats asking for bribes. But, even if that is the case, why does that matter? Investors and entrepreneurs care about the amount of disposable income that is generated by an investment. Losing 20 percent to the tax collector has a negative impact on incentives, regardless of whether the money winds up in Treasury coffers or a bureaucrat’s pocket. In any event, it is good to see that the President recognizes that the economy suffers when government becomes too much of a burden. We just need to figure out how to convince him that the laws of economics work the same way in America as they do in Ghana.

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Remember the much-deserved outrage when AIG executives partied at five-star resorts after getting bailed out with taxpayer funds? So why is the establishment media so quiet about an equally outrageous story involving Social Security Administration bureaucrats partying at an Arizona resort? Austin Hill’s Townhall.com column exposes the story others are ignoring:

Last week the Social Security Administration flew approximately 700 of its managers from across the U.S. and Guam to Phoenix, Arizona’s posh Arizona Biltmore Hotel and Resort, for “organizational training.” The event, which included musical entertainment and dancing, skits, catered food, cocktails, and a “casino night” featuring “door prizes,” cost us lowly taxpayers approximately $750,000. …Ignore the fact that SSA is estimated to waste hundreds of millions of taxpayer dollars each year in faulty overpayments.” …forget all that stuff. Pay no attention to the fact that our overnment is bankrupt. The managers of our Social Security Administration needed to get out of the office, come together face-to-face, let their hair down and have some fun together, do some “team building,” and get trained on how to “reduce workplace stress.” And when William La Jeunesse of the Fox News Channel showed up at the resort asking to speak to the SSA, the childish incompetence of our public servants was put on display for all the nation to see. …So La Jeunesse wanted to know why the SSA’s taxpayer funded retreat was okay, when the AIG Corporation’s retreat was not. “There’s a clear distinction between the two” SSA Spokesperson Peter Spencer explained. “They (the AIG Corporation) received specific bailout funds, we did not…” Mr. Spencer was, of course, playing the American people for fools. Whether you call it “bailout funds” or an operating budget, government money is our money, the people’s money. All the money that government possess comes from our tax payments. And while American workers in the “real world” face layoffs, pay-cuts, the elimination of expense accounts, and moratoriums on corporate travel and entertainment ( wasn’t the annual “holiday party” eliminated at your place of employment a year or two ago?), it is disgraceful that government employees think its okay to sit in the lap of luxury at our expense.

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The Washington Examiner has an encouraging story about how citizens are using high-tech to thwart the speed cameras used by greedy politicians to generate more tax revenue. The bureaucrats assert the cameras are about saving lives, but allow a personal observation to illustrate the gross dishonesty of the government. I have been nailed twice by speed cameras in DC, once on an interstate highway where the speed limit mysteriously dropped to 45 miles-per-hour, and the other time on a major artery with three lanes each direction that inexplicably had a 25 miles-per-hour limit. Needless to say (but I’ll say it anyhow), these speed traps had nothing to do with promoting safety and everything to do with steering more cash to the political class:

Area drivers looking to outwit police speed traps and traffic cameras are using an iPhone application and other global positioning system devices that pinpoint the location of the cameras. That has irked D.C. police chief Cathy Lanier, who promised her officers would pick up their game to counteract the devices… Lanier said the technology is a “cowardly tactic” and “people who overly rely on those and break the law anyway are going to get caught” in one way or another. The greater D.C. area has 290 red-light and speed cameras — comprising nearly 10 percent of all traffic cameras in the U.S., according to estimates by a camera-tracking database called the POI Factory. …Photo radar tickets generated nearly $1 billion in revenues for D.C. during fiscal years 2005 to 2008.

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Switzerland has better tax policy than America and a far stronger human-rights policy regarding personal privacy. This makes the IRS unhappy, since the tax police would like to find out if some Americans have overseas bank accounts. In an odious display of fiscal imperialism, the Department of Justice is demanding that one of the Swiss banks divulge any information about American clients – even though this would mean imposing America’s bad law on a foreign institution operating on foreign soil. Thankfully, the Swiss government has stepped in to ensure that the bank cannot be extorted. Bloomberg reports:

Switzerland said it would seize UBS AG data to prevent the U.S. Justice Department from pursuing a U.S. court order seeking the identities of 52,000 American account holders in a crackdown on tax evaders. The assertion came in court papers yesterday in federal court in Miami, where the Justice Department sued UBS on Feb. 19, a day after the bank avoided U.S. prosecution for helping wealthy Americans evade taxes. The U.S. effort to enforce a summons seeking the names would force UBS to violate Swiss laws barring disclosure of such data, the filing said. The Swiss government “will use its legal authority to ensure that the bank cannot be pressured to transmit the information illegally, including if necessary by issuing an order taking effective control of the data at UBS that is the subject of the summons,” according to the filing. …“It is hoped that it will be unnecessary for the Government of Switzerland to take the extraordinary action of issuing an order to seize the information at issue, but such an action should be expected if the IRS continues to pressure UBS to violate Swiss law,” according to the filing.

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There has been considerable publicity in recent years about U.S. firms re-domilciling in the Cayman Islands and Bermuda to escape America’s punitive corporate tax regime. The combination of a high tax rate and the self-destructive practice of worldwide taxation (imposing American tax on U.S. companies competing abroad, even though foreign governments already get to tax the income) has made America the least attractive place in the world to operate a multinational according to a former Chairman of the President’s Council of Economic Advisers. Re-chartering abroad does not enable a company to escape taxes to the IRS on its U.S.-source income, but it does enable it to effectively compete in other nations without being saddled by the internal revenue code. Now the situation has become so bad in America that some companies are escaping to – I kid you not –  Canada. Bloomberg reports:

Tim Hortons Inc, the largest fast- food chain in Canada, filed to reorganize as a Canadian company to lower its tax rate. Tim Hortons, which presently operates out of Oakville, Ontario, will become a unit of a Canadian-based parent with the same name, the company said today in a statement. Its current parent is based in Delaware. The coffee and doughnut seller began looking at moving its registration in the fourth quarter of 2008 as a way to cut its tax rate.

This may be the beginning of a trend. Reuters reports that Canadian lawamkers are advertising the fact that they have a more market-friendly system, and they hope to lure more firms north of the border:

Other companies are likely to follow Tim Hortons Inc in moving their corporate structures to Canada to take advantage of a falling corporate tax rate, Finance Minister Jim Flaherty said on Friday. The coffee shop chain said last month it applied with U.S. regulators to return to its Canadian corporate roots through a reorganization to benefit from lower taxes. Flaherty told reporters on a conference call from Chile, that he hoped the provinces would follow in the footsteps of the Conservative federal government and commit to reducing their tax rates to 10 percent by 2012. The federal government has pledged to reduce its corporate tax rate to 15 percent by that year, for a combined rate of 25 percent. “I’m optimistic that we’re going to get to that 25 percent (corporate) tax rate, federal and provincial, by 2013 or so,” he said. “That gives us an opportunity to brand Canada at a corporate tax rate of 25 percent globally. So that’s the goal.”

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The Wall Street Journal has some of the grimy details about politicians vacationing (oops, I mean taking junkets) at taxpayer expense. Pelosi and Reid must be running a tight ship, since junkets have “only” climbed by 50 percent since the Democrats took over:

Spending by lawmakers on taxpayer-financed trips abroad has risen sharply in recent years, a Wall Street Journal analysis of travel records shows… The spending on overseas travel is up almost tenfold since 1995, and has nearly tripled since 2001, according to the Journal analysis of 60,000 travel records. Hundreds of lawmakers traveled overseas in 2008 at a cost of about $13 million. That’s a 50% jump since Democrats took control of Congress two years ago. …The Journal analysis, based on information published in the Congressional Record, also shows that taxpayer-funded travel is a big and growing perk for lawmakers and their families. …Although complete travel records aren’t yet available for 2009, it appears that such costs continue to rise. The Journal analysis shows that the government has picked up the tab for travel to destinations such as Jamaica, the Virgin Islands and Australia’s Great Barrier Reef. Lawmakers frequently bring along spouses on congressional trips. If they take commercial flights, they have to buy tickets for spouses. If they fly on government planes — as they usually do — their spouses can fly free. …In mid-June, Sen. Daniel Inouye (D., Hawaii) led a group of a half-dozen senators and their spouses on a four-day trip to France for the biennial Paris Air Show. An itinerary for the event shows that lawmakers flew on the Air Force’s version of the Boeing 737, which costs $5,700 an hour to operate. They stayed at the Intercontinental Paris Le Grand Hotel, which advertises rooms from $460 a night. …Often, lawmakers combine trips to war zones with visits to more tranquil spots. In February, House Speaker Nancy Pelosi led a delegation of Democratic lawmakers to visit U.S. troops in Afghanistan for a day. Before landing in Kabul, the eight lawmakers and their entourage of spouses and aides spent eight days in Italy, spending $57,697 on hotels and meals. …The Air Force maintains a fleet of 16 passenger planes for use by lawmakers.

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Blogging may be light in the next few days. I am in Georgia, but not the state of my beloved Bulldogs. Instead, I am looking at snow-capped peaks two hours north of Tbilisi in the nation of Georgia. I’m here to present a series of seminars for the New Economic School, the excellent free-market think tank that has helped transform Georgia into a free-market success strory (notwithstanding bumps in the road such as a Russian invasion last year).

The bus trip from Tbilisi to the mountains was interesting, featuring stops for cows, goats, and people, all of whom viewed the road as a convenient path. We also took our bathroom break at the site of a 12th Century fortress. Impressive, to say the least. I should be able to post something each day.

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That’s the argument I make in this CNBC debate.

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