Archive for June 15th, 2010

The competition to be the Greece of America has a lot of contestants. California and Illinois certainly are strong candidates. New Jersey was an early favorite, though Gov. Christie is actually doing some good things and pulling the state back from the precipice. But let’s not forget New York. Here’s an excerpt from a Wall Street Journal column about how bureaucrats are gaming this system to get absurd salaries:

Will there be a run on New York’s debt, much like we saw in Greece this spring, causing interest rates to soar in Athens? With a $135 billion budget, New York State faces a shortfall of around $9 billion, which might be manageable if politicians had the courage to go “where the money is,” says E.J. McMahon, a state budget expert at the Manhattan Institute. “The big problem,” he adds, “is that no one will take on the unions and especially their gigantic pensions.” A new Manhattan Institute report shows that it’s been business-as-usual in the state’s dealings with Big Labor, despite the fiscal crisis. Last year, 74,000 workers at the Metropolitan Transit Authority got a 2.4% raise even as their agency was teetering on bankruptcy. Some 8,000 MTA employees now earn $100,000 or more in annual salary, and 44 earn more than $200,000 a year, putting them in the top 3% of income in America. The latest plan, Mr. McMahon says, is for Gov. Paterson and the Democrats in the legislature to “cap rising pension bills by ‘amortizing’ them, which essentially means borrowing $2.5 billion from the pension fund in the next four years alone. Of course, this won’t reduce costs — it will merely push them into the future.”

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Anne Applebaum is completely correct in stating that President Obama should not be blamed for the BP oil spill – either that it happened or that the leak hasn’t been stopped. I think Republicans look stupid when they attack Obama for what is happening, though I can sympathize with the “payback” impulse since Democrats attacked Bush for Hurricane Katrina – a debacle that occurred largely because of the incompetence and corruption of the state government of Louisiana and the city government of New Orleans (though I also blame Bush for acting as if the federal government somehow was responsible for hurricane response and relief – and thus added federal government bungling to the mix). Applebaum also echoes the point I made about BP having the greatest expertise and incentive to solve the problem:

Here is the hard truth: The U.S. government does not possess a secret method for capping oil leaks. Even the combined wisdom of the Obama inner circle — all of those Harvard economists, silver-tongued spin doctors and hardened politicos — cannot prevent tens of thousands of tons of oil from pouring out of hole a mile beneath the ocean surface. …In truth, the organization most likely to have the phone numbers of the “experts” is BP. The organization that will get them to Louisiana fastest is BP. I am writing this not because I like, admire or even have an opinion about the company formerly known as British Petroleum but because BP’s shareholders have already lost billions of dollars and BP’s executives are motivated to find solutions faster than anyone in the White House ever could. Bashing BP or seeking to punish BP is pointless.

While Obama is not to blame for the oil spill, there are four things worth adding to the discussion. First, the leftists in the Administration and elsewhere are demonizing BP and claiming that this is evidence that more regulation is needed of evil companies, but perhaps this demagoguery is a way of distracting people from paying attention to the fact that Obama was a top recipient of largesse from the company and that BP institutionally is very left-wing. Second, the White House, because it has refused to waive a protectionist piece of legislation known as the Jones Act, actually does bear a bit of blame for the slow reaction and clean-up efforts. Not surprisingly, the reason for his failure to act is that the unions have him on a very short leash. Third, everyone should take a deep breath and not make a bad situation worse by overreacting and passing misguided legislation. Last but not least, the White House moratorium on drilling was an example of pointless overreaction.

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The United States has a very anti-competitive corporate tax regime. The federal tax rates is 35 percent and the average of state corporate tax systems brings the rate to nearly 40 percent. In Europe, by contrast, the average corporate tax rate is about 25 percent. Depending on which measure is used, the United States and Japan have been rivals for the dubious prize of having the highest corporate tax rate in the developed world. But that’s about to change. According to a story that I saw linked on the Tax Foundation blog, the new Japanese government intends to lower its corporate tax rate by 10 to 15 percentage points. This means America will have no rivals in the contest for having the most anti-growth business tax system in the world. This is something to keep in mind the next time you hear a politician complaining about jobs going to China and India.

Japan’s new government plans to cut corporate tax closer to international norms as it tries to haul Asia’s biggest economy out of a long slump, the economy minister said in a report Friday. The government is aiming to cut tax on company earnings by five percentage points next fiscal year, from an effective 40 percent now, the Nikkei business daily quoted Economy, Trade and Industry Minister Masayuki¬†Naoshima¬†as saying. “It’s a fact that international corporate tax rates are 10 to 15 points lower than Japan’s,” said Naoshima, who is part of Prime Minister Naoto Kan’s new cabinet sworn in this week. “Over the medium term, the government will aim to bring the rate down to around the global standard,” he said. …”It is now the time to decide (on cutting corporate tax) for the sake of future economic vitality, employment and securing increased tax revenues,” the minister said. “Japan’s economy has basically been in a slump for the past 20 years and people have been overwhelmed by a sense of stagnation.”

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