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Archive for September, 2009

In this CNBC debate, I argue that more regulatory power for government is a bad idea. I need to learn to interrupt, though, since Christian is very effective using that tactic to get more air time.

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You’re walking down a deserted street with your wife and two small children. Suddenly, a dangerous looking man with a huge knife comes around the corner, locks eyes with you, screams obscenities, raises the knife, and charges. You are carrying a Glock 40 and you are an expert shot. You have mere seconds before he reaches you and your family. What do you do?
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Liberal’s Answer:

Well, that’s not enough information to answer the question!

+ Does the man look poor or oppressed?
+ Have I ever done anything to him that would inspire him to attack?
+ Could we run away?
+ What does my wife think? What about the kids?
+ Could I possibly swing the gun like a club and knock the knife out of his hand?
+ What does the law say about this situation?
+ Does the Glock have an appropriate safety built into it?
+ Why am I carrying a loaded gun and what kind of message does this send to society and my children? Is it possible he’d be happy with just killing me?
+ Does he definitely want to kill me or would he just be content to wound me?
+ If I were to grab his knees and hold on, could my family get away while he was stabbing me?

This is all so confusing! I need to debate this with some friends for a few days to try to come to a conclusion.
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Conservative’s Answer:

BANG!
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Texan’s Answer:

BANG! BANG! BANG! BANG! BANG! BANG! BANG! BANG! BANG! click (sounds of reloading).

Wife: “Sweetheart, he looks like he’s still moving. What do you kids think?”
Son:  “Mom’s right Dad, I saw it too…”

BANG! BANG! BANG! BANG! BANG! BANG! BANG! BANG! BANG! click.

Daughter: “Nice grouping, Daddy! Were those the Winchester Silver Tips?”

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The French are upset that Roman Polanski, the fugitive child rapist, has been detained by Swiss authorities at the request of the U.S. government. The Justice Department wants Polanski extradited because he fled America for France to avoid jail time. Other people have properly condemned the French government for wanting to defend this sleazeball, who anally raped a 13-year old girl, but I have a different complaint. French politicians are the leading agitators for the OECD campaign against so-called tax havens. According to Sarkozy and company, low-tax jurisdictions should be obliged to enforce the punitive tax laws of OECD member nations. Yet France refused to send Polanski back to America because it did not feel any need to help enforce America’s laws against molesting and raping children. I’m glad Polanski was dumb enough to travel to Switzerland. I’m glad the Swiss authorities had the moral decency to detain Polanski. And I’m overjoyed the French are getting a taste of the medicine their trying to impose on others.

P.S. The last sentence is a horribly flawed comparison on my part. It is a good thing when nations cooperate to investigate and prosecute criminals who violate the rules of all civilized societies. It is not a good thing, however, for high-tax nations to try to impose their tax laws on economic activity that takes place in low-tax jurisdictions. In other words, France is trying to coerce international cooperation where it is not appropriate, but is fighting international cooperation to protect child rape. Amazing.

P.P.S. The French also give protection to murderers who escape America. The French government position (shared by all European Union nations!) is that it will not extradite murderers to the United States if they might face the death penalty.

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Politicians in Washington have a nasty habit of assuming that they should control every aspect of life, and education is a good example. Bush thought he could demonstrate “compassion” by spendinng a lot of money to centralize education policy in Washington, so we got saddled with the No-Bureaucrat-Left-Behind education bill. Now Obama is trying to be Bush on steroids, increasing spending even more and proposing to micro-manage local school districts by dictating school calendars. It may very well be the case that summer vacations should be shortened, but that is none of Obama’s business. Moreover, the AP story on the issue notes that other nations get much better performance with less time in school – which is why decentralization and choice are the right ways of discovering the right way(s) of providing better education:

Students beware: The summer vacation you just enjoyed could be sharply curtailed if President Barack Obama gets his way. …The president, who has a sixth-grader and a third-grader, wants schools to add time to classes, to stay open late and to let kids in on weekends so they have a safe place to go. …While it is true that kids in many other countries have more school days, it’s not true they all spend more time in school. Kids in the U.S. spend more hours in school (1,146 instructional hours per year) than do kids in the Asian countries that persistently outscore the U.S. on math and science tests — Singapore (903), Taiwan (1,050), Japan (1,005) and Hong Kong (1,013). That is despite the fact that Taiwan, Japan and Hong Kong have longer school years (190 to 201 days) than does the U.S. (180 days).

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A previous post poked fun at state bureaucrats in Michigan for threatening a woman for the ostensible crime of keeping an eye on her neighbors’ kids without a government permit. English bureaucrats are equally clueless, badgering two women who take turns caring for each other’s kids. The common theme, of course, is that bureaucracts lack common sense – but the real lesson is that this is the inevitable consequence of government intervention (especially when politicians say they are “doing it for the children). The BBC reports:

England’s Children’s Minister wants a review of the case of two police officers told they were breaking the law, caring for each other’s children. Ofsted said the arrangement contravened the Childcare Act because it lasted for longer than two hours a day, and constituted receiving “a reward”. It said the women would have to be registered as childminders. …The two detective constables, Leanne Shepherd, from Milton Keynes, and Lucy Jarrett, from Buckingham, told the BBC how Ofsted insisted they end their arrangement. …Ms Shepherd, who serves with Thames Valley Police, recalled: “A lady came to the front door and she identified herself as being from Ofsted. She said a complaint had been made that I was illegally childminding. I was just shocked – I thought they were a bit confused about the arrangement between us. So I invited her in and told her situation – the arrangement between Lucy and I – and I was shocked when she told me I was breaking the law.” …”To think that they would waste their time and effort on innocent people who are trying to provide for their families by returning to the workplace… Surely their time and effort would be better placed elsewhere.” …Minister for Children, Schools and Families Vernon Coaker insisted the Childcare Act 2006 was in place “to ensure the safety and wellbeing of all children”.

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A grandmother in Indiana has been arrested for purchasing cold medicine. We can all sleep more safely now that this hardened criminal has been taught a lesson. The Terre Haute News reports:

When Sally Harpold bought cold medicine for her family back in March, she never dreamed that four months later she would end up in handcuffs. Now, Harpold is trying to clear her name of criminal charges, and she is speaking out in hopes that a law will change so others won’t endure the same embarrassment she still is facing. …Harpold is a grandmother of triplets who bought one box of Zyrtec-D cold medicine for her husband at a Rockville pharmacy. Less than seven days later, she bought a box of Mucinex-D cold medicine for her adult daughter at a Clinton pharmacy, thereby purchasing 3.6 grams total of pseudoephedrine in a week’s time. Those two purchases put her in violation of Indiana law 35-48-4-14.7, which restricts the sale of ephedrine and pseudoephedrine, or PSE, products to no more than 3.0 grams within any seven-day period. When the police came knocking at the door of Harpold’s Parke County residence on July 30, she was arrested on a Vermillion County warrant for a class-C misdemeanor, which carries a sentence of up to 60 days in jail and up to a $500 fine.

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This simple little chart shows the steps needed to keep your doctor if the health care plan put forth by Senator Baucus becomes law. For a closer look, click this link.

Choose your doctor

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While the federal bureaucracy is more dangerous because it generates misguided regulations that are imposed on the entire nation, state and local governments certainly are capable of equally foolish actions. Here’s a report about state bureaucrats in Michigan threatening a women for watching her neighbors’ kids while they wait for a bus:

A West Michigan woman says the state is threatening her with fines and possibly jail time for babysitting her neighbors’ children. Lisa Snyder of Middleville says her neighborhood school bus stop is right in front of her home. It arrives after her neighbors need to be at work, so she watches three of their children for 15-40 minutes until the bus comes. The Department of Human Services received a complaint that Snyder was operating an illegal child care home. DHS contacted Snyder and told her to get licensed, stop watching her neighbors’ kids, or face the consequences. “It’s ridiculous.” says Snyder. “We are friends helping friends!” She added that she accepts no money for babysitting. …State Representative Brian Calley is drafting legislation that would exempt people who agree to care for non-dependent children from daycare rules as long as they’re not engaged in a business. “We have babysitting police running around this state violating people, threatening to put them in jail or fine them $1,000 for helping their neighbor (that) is truly outrageous” says Rep. Calley.

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…Good! From the Atlanta Journal-Constitution, here’s a photo of Blair Walsh celebrating his kick. This was the first game that I watched on TV, so I missed a rainstorm. But it would have been nice to be there for yet another tense game. Next week, LSU.

uga.0927

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 Penn and Teller analyze our wonderful and delightful federal income tax.

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Government did not help us in the 1930s, and it is not helping us today.

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One reason America is more competitive than Europe is that politicians only have access to one big source of money. But if they can add a value-added tax (a European-style national sales tax) on top of the income tax, that will allow them to finance a big expansion in the burden of government. Unfortunately, that’s exactly what they want, according to the co-chairman of President Obama’s transition team. Bloomberg reports:

“There’s going to have to be revenue in this budget,” said Podesta, Clinton’s former chief of staff and co-chairman of President Barack Obama’s transition team, said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing today. A so-called consumption tax would “create a balance” with European and Japanese economies and “could potentially have a substantial effect on competitiveness,” said Podesta. Value-added taxes in Europe and Japan encourage savings by taxing consumption. Podesta said such a tax may be regressive, but can be balanced by exempting some products and using “the money to support low-wage workers.”

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I am in Vaduz, Liechtenstein, where I will be giving a speech shortly on tax competition issues, at a conference entitled, “Can Capitalism Survive.”

Regular readers already know my views on tax competition, so allow me to make a few observations instead about Liechtenstein.

It has a progressive income tax, which sounds bad, but the top tax rate is only 18 percent. The low rates, combined with a very simple system that generally does not penalize saving and investment, means that there is very little disincentive for people who want to make the economy more productive.

Government spending in Liechtenstein is far too high, consuming about 21 percent of GDP. But compared to the United States, where government outlays are approaching 40 percent of GDP (and Western Europe, where they someteimes exceed 50 percent of economic output), Liechtenstein is a small-government jurisdiction.

There are 36,000 people living in Liechtenstein and 32,000 jobs. Is this a sign of rampant child labor? No, there are 32,000 jobs because more than 15,000 foreigners come to Liechtenstein every day to work. Having low tax rates and small government is a good recipe for economic prosperity, and this is good news for workers in neighboring nations.

It goes without saying, of course, that the people and leaders of Liechtenstein correctly understand that financial privacy is a fundamental human right, one that respects the sanctity of the individual and recognizes the threat of government.

Last but not least, the seven villages that comprise Liechtenstein have an explicit right of secession. So if the Royal Family and/or Parliament ever get too greedy, all it takes to escape is a two-thirds vote.

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The White House is trying to claim that health care “reform” does not mean higher taxes. This is a two-pronged issue. First, there is a mandate to purchase health insurance. Second, there is a tax (the White House calls it a fee) on people who fail to purchase a policy.

The White House claims this mandate is akin to state-level requirements for the purchase of health insurance, and that the newly-insured people will be getting some value (a health insurance policy) in exchange for their money. These assertions are defensible, but that does not change the fact that a tax is being imposed.

It might be plausible to argue that the mandate is not a tax if the value of the insurance policy to the individual was equal to the cost. But since these are people who are not buying policies, their behavior reveals that this obviously cannot be true. So this means that they will be worse off under Obama’s plan and that at least some of the cost should be considered a tax.

The Social Security payroll tax allows a good analogy. Labor economists correctly argue that the payroll tax functions, in part, as a “premium” for what can be considered a government-provided annuity. As such, when we try to measure the disincentive effect of the payroll tax, it is appropriate to include the perceived value of future Social Security benefits (for most Americans, especially with average or above-average incomes, the “rate of return” is very low or negative, so a substantial share of the payroll tax is a tax both in the legal sense and economic-distortion sense). The same is true of a mandatory health insurance policy (even if the money does not go through the government’s hands).

On the broader issue of paying money and getting something of value in return, another analogy is helpful. A share of the gasoline excise tax is used for road construction and maintenance. We all benefit from roads, even if we don’t drive (let’s set aside issues such as whether the benefits equal the costs, whether the federal government should be involved, etc). Does that somehow mean the gasoline excise tax is not a tax? Of course not.

Turning now to the excise tax, the Administration’s argument that this is a fee is even less defensible. The Baucus legislation in the Senate Finance Committee explicitly references an excise tax. Equally revealing (and even more ominous), the IRS is charged with collecting the fee. The White House can argue that the tax – in the economic sense – is lower than the fee if something of value is exchanged. But the tax is still there.

Rather than play games, the White House should make an open argument for bigger government. The fact that the Administration prefers to be deceptive says a lot about the underlying merits of their proposal.

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Teaching Math in 1950:

A logger sells a truckload of lumber for $100. His cost of production is 4/5 of the price. What is his profit?

Teaching Math in 1960:

A logger sells a truckload of lumber for $100. His cost of production is 4/5 of the price, or $80. What is his profit?

Teaching Math in 1970:

A logger exchanges a set “L” of lumber for a set “M” of money. The cardinality of set “M” is 100. Each element is worth one dollar. Make 100 dots representing the elements of the set “M.” The set ‘C”, the cost of production contains 20 fewer points than set “M.” Represent the set “C” as a subset of set “M” and answer the following question: What is the cardinality of the set “P” of profits?

Teaching Math in 1980: 

A logger sells a truckload of lumber for $100. His cost of production is $80 and his profit is $20. Your assignment: Underline the number 20.

Teaching Math in 1990:

By cutting down beautiful forest trees, the logger makes $20. What do you think of this way of making a living? Topic for class participation after answering the question: How did the forest birds and squirrels feel as the logger cut down the trees?

Teaching Math in 2000:

A logger sells a truckload of lumber for $100. His cost of production is $120. How does Arthur Andersen determine that his profit is $60

Teaching Math in 2010:

 El hachero vende un camion carga por $100. La cuesta de production es………….

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Politicians and senior government officials routinely try to hide their backroom dealing from the public, but people have the right to know how their money is being (mis)used. A good example is the Federal Reserve, which has veered away from its proper job of protecting the dollar and now behaves as if should be able to secretly pick winners and losers in the financial system without appropriate oversight and public discussion. A column in the Wall Street Journal discusses the legal effort to force transparency on the Fed:

Facing a banking collapse that was unlike anything it had seen since the Great Depression, the Federal Reserve created $2 trillion of assets and debts during the past year to rescue the nation’s financial institutions. But it did not make clear to taxpayers just where all of this money went. Taxpayers—involuntary investors in this case—have a right to know who received loans, in what amounts, for which collateral, and why specific loans were made. The Fed says taxpayers don’t have the right to know these things. What’s more, it went to court to resist giving an accounting of its actions under the Freedom of Information Act. …Chief U.S. District Judge Loretta A. Preska in Manhattan disagreed with the Fed. In a 47-page ruling, she found that the facts and the law require the central bank to release its lending records. The Fed is now considering whether to appeal her ruling. …Since its creation in 1913, the Fed has been the watchdog over our money. Now it is running interference for banks that borrowed our money, and went so far as to insist to a federal judge that the public shouldn’t worry about what it does with our money. The law doesn’t allow the government to get away with secrecy based on a mere claim that some sort of damage would result if it released the information in question. …So far, there has been far too little accountability at the Fed for how it used taxpayer money to save banks that failed their shareholders and creditors by making bets that didn’t pay off.

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The Obama Administration is trying to make the absurd argument that higher taxes on companies are not paid for by workers, consumers, and shareholders. I discuss this issue on CNBC, though I’m a bit disgruntled that I was largely left out of the conversation after my opening explanation.

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Art Laffer has a compelling column in the today’s Wall Street Journal discussing how higher tax rates under Presidents Hoover and Roosevelt played an important role in driving the economy into a ditch during the 1930s. The interesting question, of course, is the degree to which President Obama is going to repeat these mistakes. We already see that some of the mistakes that happened during the Great Depression are being replicated, including higher government spending (with a big help from Bush), more government regulation, and protectionism. The good news, so to speak, is that Obama is moving policy in the wrong direction in small steps, whereas Hoover and Roosevelt took giant leaps. So while it is likely that our long-term growth rate will be dampened, hopefully there will not be a lengthy period of economic stagnation:

While Fed policy was undoubtedly important, it was not the primary cause of the Great Depression or the economy’s relapse in 1937. The Smoot-Hawley tariff of June 1930 was the catalyst that got the whole process going. It was the largest single increase in taxes on trade during peacetime and precipitated massive retaliation by foreign governments on U.S. products. Huge federal and state tax increases in 1932 followed the initial decline in the economy thus doubling down on the impact of Smoot-Hawley. There were additional large tax increases in 1936 and 1937 that were the proximate cause of the economy’s relapse in 1937. In 1930-31, during the Hoover administration and in the midst of an economic collapse, there was a very slight increase in tax rates on personal income at both the lowest and highest brackets. The corporate tax rate was also slightly increased to 12% from 11%. But beginning in 1932 the lowest personal income tax rate was raised to 4% from less than one-half of 1% while the highest rate was raised to 63% from 25%. (That’s not a misprint!) The corporate rate was raised to 13.75% from 12%. All sorts of Federal excise taxes too numerous to list were raised as well. The highest inheritance tax rate was also raised in 1932 to 45% from 20% and the gift tax was reinstituted with the highest rate set at 33.5%. But the tax hikes didn’t stop there. In 1934, during the Roosevelt administration, the highest estate tax rate was raised to 60% from 45% and raised again to 70% in 1935. The highest gift tax rate was raised to 45% in 1934 from 33.5% in 1933 and raised again to 52.5% in 1935. The highest corporate tax rate was raised to 15% in 1936 with a surtax on undistributed profits up to 27%. In 1936 the highest personal income tax rate was raised yet again to 79% from 63%—a stifling 216% increase in four years. Finally, in 1937 a 1% employer and a 1% employee tax was placed on all wages up to $3,000. …The damage caused by high taxation during the Great Depression is the real lesson we should learn. A government simply cannot tax a country into prosperity. If there were one warning I’d give to all who will listen, it is that U.S. federal and state tax policies are on an economic crash trajectory today just as they were in the 1930s. Net legislated state-tax increases as a percentage of previous year tax receipts are at 3.1%, their highest level since 1991; the Bush tax cuts are set to expire in 2011; and additional taxes to pay for health-care and the proposed cap-and-trade scheme are on the horizon.

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While there is considerable disagreement regarding the value of low-skilled immigrants (especially with regards to whether illegals deserve amnesty), almost everybody agrees that the United States is a big beneficiary when highly skilled workers, investors, and entrepreneurs from around the world come to America. So it is a bit troubling that USA Today is reporting that many Indians and Chinese are deciding that they can achieve more by going back home. It is too soon to make sweeping pronouncements about the public policy implications of this demographic shift, but this preliminary evidence of a reverse “brain drain” certainly suggests that the big-government policies of Bush and Obama have made the American economy less vibrant and less dynamic:

More skilled immigrants are giving up their American dreams to pursue careers back home, raising concerns that the U.S. may lose its competitive edge in science, technology and other fields. “What was a trickle has become a flood,” says Duke University’s Vivek Wadhwa, who studies reverse immigration. …”For the first time in American history, we are experiencing the brain drain that other countries experienced,” he says. Suren Dutia, CEO of TiE Global, a worldwide network of professionals who promote entrepreneurship, says the U.S. economy will suffer without these skilled workers. “If the country is going to maintain the kind of economic well-being that we’ve enjoyed for many years, that requires having these incredibly gifted individuals who have been educated and trained by us,” he says. …Multinational companies that belong to the American Council on International Personnel tell Executive Director Lynn Shotwell that skilled immigrants are discouraged by the immigration process, she says. Some can wait up to a decade for permanent residency, she says. “They’re frustrated with having an uncertain immigration status,” she says. “They’re giving up.”

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With many Republicans having decided that the cesspool of Washington is actually a hot tub, it would be nice if Democrats seized the high ground and became the party of limited government. So it was very encouraging to see a column in the Wall Street Journal by Evan Bayh, a Democratic from Indiana. Senator Bayh makes a strong case for fiscal restraint:

America is on an unsustainable fiscal path that threatens our future. Changing course is imperative, and Democrats should lead the way. Last month the Office of Management and Budget predicted that the national debt will increase by $9 trillion over the next decade—$2 trillion more than forecast just four months earlier. Government net interest payments exceed $1 trillion in 2019, up from $382 billion this year. …Congress’s initial reaction to our fiscal peril has not been encouraging. The $410 billion omnibus spending bill passed in March increased domestic discretionary spending by 8% and included more than 8,000 earmarks. This year’s budget contemplates domestic discretionary increases of nearly 9%, three times the rate of inflation. If the past is any guide, it will include thousands of new earmarks. Any serious effort to control the deficit must begin with spending restraint. Efficiency and frugality, common virtues in the private sector, must be incorporated into government. …For the next fiscal year, assuming the economy has gathered sufficient momentum, we should freeze domestic discretionary spending, limit increases in defense spending to the rate of inflation, forgo pay raises for federal workers, and institute a federal hiring freeze.

Sounds great, right? The only problem is that Senator Bayh (like many of his Republican colleagues) is a fiscal fraud. When it doesn’t matter, he beats his chest about fiscal responsibility. But when he is on the Senate floor, he votes for big government. According to the National Taxpayers Union, he voted to protect taxpayers only 15 percent of the time last year, earning an “F” for his profligacy (and his highest grade since getting elected is a “D”). I realize that there is a problem with grade inflation in America, but there is no way that a politician who votes for big government more than 80 pecent of the time should be allowed to get away with blatantly false rhetoric about fiscal responsibility.

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Greetings from Arkansas. My Bulldogs won, 52-41, but we gave up almost 500 yards. I would say that former Coach Vince Dooley is spinning in his grave about that defensive performance, but he’s still alive.

However, a win is a win is a win. Next week, back to Athens to face Arizona State.

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Business Week reports on how low taxes are helping to attract jobs and investment – a lesson that increasingly seems too complex for politicians in the United States and United Kingdom:

As governments around the globe struggle to contain huge deficits, companies and executives are bracing for higher taxes. And increasingly they are turning to Switzerland for relief. …Swiss cantons are openly and legally urging multinationals to relocate. This fall, U.S. fast-food giant McDonald’s (MCD) will move its European headquarters to Geneva from London, joining Kraft Foods (KFT), Yahoo! (YHOO), and Nissan. They’ve all relocated their main Europe offices to Switzerland in the last two years to take advantage of low corporate taxes. …”There is a lot of interest from companies looking to shift their taxable profit to countries with lower rates,” says Andreas Müller, an international corporate tax partner at KPMG in Zurich. Meanwhile, Britain and Ireland are increasing personal income tax rates for top earners. In the U.S., tax hikes seem inevitable. Switzerland has no such plans, says Stéphane Garelli, professor of competitiveness at IMD Business School in Lausanne. The 26 Swiss cantons are free to set their own rates, so Swiss-based companies’ effective average tax rates range from 10.8% to 24% of net income (those effective rates include federal taxes, which are the same throughout the country). Ten cantons even cut rates in 2008 to lure investment. After slashing its corporate rate to 6.6% in 2006, the canton of Obwalden lowered rates to 6% last year, just after the nearby canton of Appenzell Ausserrhoden did the same. “A company might pay 50% less tax just by moving 30 miles down the road,” says Martin Naville, CEO of the Swiss-American Chamber of Commerce in Zurich. …While the Swiss court companies, the British unwittingly help the Swiss out. As of last year, foreigners living in the U.K. for seven years or more must pay tax on income and capital gains earned outside Britain or fork over an annual $49,000 on top of what they ordinarily owe the government. And starting next April, the top income tax rate will jump to 51.5%, including social security payments. That’s up from 40% for anyone, citizen or foreign resident, earning more than $245,000. The hikes have prompted some hedge funds and private equity firms to head to Switzerland, analysts say. Krom River, a commodities fund with $750 million under management, moved to the canton of Zug last year. The lure: Swiss stability. “Companies can be sure that once they invest, there won’t be any surprises,” says Naville.

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The left has now resorted to the sleazy tactic of asserting that critics of the President’s policies are racists. So one can only wonder how they will respond to the latest column by Walter Williams, the famous black economist. Professor Williams savages the White House for killing a school choice program in Washington, which was helping students escape the city’s utterly awful government schools. Williams concludes that Obama’s actions are a betrayal of fellow African-Americans – especially since the President sends his own kids to an expensive private school. But this has nothing to do with race. White Democrats also fight against school choice for poor blacks while sending their own kids to private school:

The American Legislative Exchange Council recently came out with their 15th edition of “Report Card on American Education: A State-by-State Analysis.” Academic achievement in no state is much to write home about but in Washington, D.C., by any measure, it approaches criminal fraud. Let’s look at the numbers. Only 14 percent of Washington’s fourth-graders score at or above proficiency in the reading and math portions of the National Assessment of Educational Progress (NAEP) test. Their national rank of 51 makes them the nation’s worst. Eighth-graders are even further behind with only 12 percent scoring at or above proficiency in reading and 8 percent in math and again the worst performance in the nation. …They have an average composite SAT score of 925 and ACT score of 19.1, compared to the national average respectively of 1017 and 21.1. In terms of national ranking, their SAT and ACT rankings are identical to their fourth- and eighth-grade rankings — dead last. Washington’s political and education establishment might excuse these outcomes by arguing that because most students are black, the schools are underfunded and overcrowded. Let’s look at such a claim. During the 2006-07 academic year, expenditures per pupil averaged $13,848 compared to a national average of $9,389. That made Washington’s per pupil expenditures the third highest in the nation coming in behind New Jersey ($14,998) and New York ($14,747). Washington’s teacher-student ratio is 13.9 compared with the national average of 15.3 students per teacher, ranking 18th in the nation. What about teacher salaries? Washington’s teachers are the highest paid in the nation, having an average annual salary of $61,195 compared with the nation’s average $46,593. …Currently, Washington, D.C. has an Opportunity Scholarship Program, which allows qualified low-income families to claim up to $7,500 per student toward a private education of their choice. Obama’s Democratic Congress, acting on the behalf of the education establishment, has killed the program and there’s the possibility that the 1,700 students currently enrolled will have to return to D.C. public schools. The staunchest opponents of school choice are hypocrites. They want, demand and can afford school choice for themselves but for others not so affluent school choice it is a different matter. President and Mrs. Barack Obama enrolled their two daughters in Washington’s most prestigious Sidwell Friends School, forking over $28,000 a year for each girl. Whilst senator from Illinois, the Obama’s enrolled their girls in the University of Chicago’s Laboratory School, a private school in Chicago charging almost $20,000 for each girl. …For people in power to tolerate the Washington, D.C. school system is despicable. For a black president to do so might qualify as betrayal.

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One of the (many) frustrations of my job is dealing with the confusion about economic growth. It should go without saying that economic growth occurs when there is an inflation-adjusted increase in national income. Many policy makers (and journalists) presumably understand this elementary observation. Yet those same people usually attach great importance to monthly data on consumer spending. There is nothing wrong with that data, to be sure, but there is something wrong with how it is analyzed. Many people assume that consumer spending drives growth because it is roughly two thirds of the economy. But this puts the cart before the horse. Higher levels of consumer spending do not cause prosperity. Instead, more consumer spending is best understood as a symptom of prosperity.

Consider an example: Would it be a positive sign if national income fell by 1 percent (and assume that this translated into a 1 percent fall in disposable income), but people increased consumer spending by 2 percent by borrowing lots of money and utilizing their credit cards? Retails stores might be happy, but clearly this pattern would not be sustainable.

This is why “Keynesian” policies are misguided. The goal of Keynesianism is to have the government borrow money and then to distribute that money to consumers. Yes, that may bolster consumer spending, but only at the expense of investment spending. After all, the government had to borrow the money out of private credit markets.

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If Noah Had to Build an Ark Today

…..And the Lord spoke to Noah and said:

“ In one year, I am going to make it rain and cover the whole earth with water until all flesh is destroyed, but I want you to save the righteous people and two of every kind of living thing on earth. Therefore, I am commanding you to build an Ark.”

In a flash of lightning God delivered the specifications for an Ark. In fear and trembling, Noah took the plans and agreed to build the ark.

Remember,” said the Lord: “You must complete the Ark and bring everything aboard in one year”.

Exactly one year later, fierce storm clouds covered the earth and all the seas of the earth went into a tumult. The Lord saw that Noah was sitting in his front yard weeping

“Noah,” He shouted

“Where is the Ark?”

“Lord, please forgive me,” cried Noah. “I did my best, but there were big problems: First, I had to get a permit for construction, and your plans did not meet the codes. I had to hire an engineering firm and redraw the plans.

Then I got into a fight with OSHA over whether or not the Ark needed a sprinkler system and approved floatation devices. Then, my neighbor objected, claiming I was violating zoning ordinances by building the Ark in my front yard, so I had to get a variance from the city planning commission. Then, I had problems getting enough wood for the Ark because there was a ban on cutting trees to protect the Spotted Owl…and finally convinced the U. S. Forest Service that I really needed the wood to save the owls. However, the Fish and Wildlife Service won’t let me catch any owls, so, no owls.” The carpenters formed a union and went on strike. I had to negotiate a settlement with the National Labor Relations Board before anyone would pick up a saw or hammer. Now, I have 16 carpenters on the Ark, but still no owls. When I started rounding up the other animals, an animal rights group sued me. They objected to me taking only two of each kind aboard.

Just when I got the suit dismissed, the EPA notified me that I could not complete the Ark without filing an environmental impact statement on your proposed flood. They didn’t take very kindly to the idea that they had no jurisdiction over the conduct of the Creator of the Universe. Then, the Army Corps of Engineers demanded a map of the proposed new flood plain…. I sent them a globe.

Right now, I am trying to resolve a complaint filed with the Equal Employment Opportunity Commission that I am practicing discrimination by not taking godless, unbelieving people aboard. The IRS has seized my assets, claiming that I’m building the Ark in preparation to flee the country and not pay taxes. I just got a notice from the state that I owe them some kind of user tax and failed to register the Ark as a “recreational water craft.” And finally, the ACLU got the courts to issue an injunction against further construction of the Ark, saying that since God is flooding the earth, it’s a religious event, and, therefore, UNCONSTITUTIONAL. I really don’t think I can finish the Ark for another five or six years.

Noah waited…

The sky began to clear, the sun began to shine, and the seas began to calm. A rainbow arched across the sky. Noah looked up hopefully.

“You mean you’re not going to destroy the earth, Lord?”

“No,” He said sadly.”

“I don’t have to. The government already has.”

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The burden of government spending has skyrocketed during the Bush-Obama years. Many politicians claim that all this new spending represents necessary “investments” to boost economic growth. But as this new video explains, both cross-country comparisons and empirical analysis suggest government is far too big – not only in Europe, but also in America.

This is the second of a two-part series. The first installment, which focuses on eight theoretical reasons why excessive government undermines growth, can be viewed here.

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Republicans made many big mistakes when they controlled Washington earlier this decade, so picking the most egregious error would be a challenge. But continued American involvement with the Organization for Economic Cooperation and Development would be high on the list. Instead of withdrawing from the OECD, Republicans actually increased the subsidy from American taxpayers to the Paris-based bureaucracy. So what do taxpayers get in return for shipping $100 million to the bureaucrats in Paris? Another international organization advocating for big government. The OECD, for example, is infamous for trying to undermine tax competition. It also has recommended higher taxes in America on countless occasions. And now it is suggesting that Iceland impose big tax increases – even though Iceland’s economy is in big trouble and the burden of government spending already is about 50 percent of GDP:

 
Both tax increases and spending cuts will be needed, although the former are easier to introduce immediately. The starting point for the tax increases should be to reverse tax cuts implemented over the boom years, which Iceland can no longer afford. This would involve increases in the personal income tax… Just undoing the past tax cuts is unlikely to yield enough revenue. In choosing other measures, priority should be given to those that are less harmful to economic growth, such as broadening tax bases, or that promote sustainable development, such as introducing a carbon tax.

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Congratulations to FreedomWorks and other organizers of this past Saturday’s protest in Washington. The establishment media did its best to ignore the huge crowd, but it is a remarkable achievement when so many Americans come together to defend their nation. The U.K.’s Daily Mail almost certainly overstated the numbers, but they had a very good summary:

As many as one million people flooded into Washington for a massive rally organised by conservatives claiming that President Obama is driving America towards socialism. The size of the crowd – by far the biggest protest since the president took office in January – shocked the White House. …protester Richard Brigle, 57, a Vietnam veteran, said: ‘It’s going to cost too much money we don’t have.’ Another marcher shouted: ‘You want socialism? Go to Russia!’ Terri Hall, 45, of Florida, said she felt compelled to become political for the first time this year because she was upset by government spending.

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After a disappointing outing in Stillwater, Oklahoma, that perhaps could be attributed to a horrible (but game changing) blown call by the refs, my beloved Bulldogs bounced back to beat South Carolina in a wild game.

I give a speech this Friday in Corpus Christi, Texas, but I’m doing that event primarily so I can return to DC via Arkansas and see the Dawgs (hopefully) climb to 2-1 on the season.

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For those who followed my adventures at the OECD conference in Mexico, you have some idea of the dangers posed by bureaucrats trying to create a global tax cartel. For further information, I have an article in the latest issue of Offshore Investment. The whole article is worth reading, but the concluding paragraph is a good summary:

Politicians from high-tax nations – and the international bureaucracies that represent those governments – will continuously push schemes to restrict tax competition, and they have the advantages of time and (other people’s) money on their side. Although tax competition has been a liberalising force throughout the world, encouraging governments to lower tax rates, even leading a number of jurisdictions to adopt simple and fair flat tax systems, this liberalising process is being threatened by a number of policies mostly stemming from Europe. This is bad for low-tax jurisdictions and bad for taxpayers (especially those from high-tax nations). Tax harmonisation means higher tax rates and a more onerous burden of government. This inevitably translates into slower economic growth and stagnating living standards.

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