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InsiderOnline Blog: May 2008

The Coming Week – Monday, June 2, 2008

Some events that caught our eye:

LEARN how strong identities enrich our lives and enable us to defend the values we most deeply cherish. The Heritage Foundation hosts Natan Sharansky.

FIND OUT whether geoengineering can halt global warming. Host: American Enterprise Institute.

EXCHANGE ideas with free market advocates from both sides of the Pacific Ocean at the Pacific Rim Policy Exchange, held in Hong Kong on Wednesday and Thursday. Organizers: Americans for Tax Reform, International Policy Network, Lion Rock Institute, and the Property Rights Alliance.
RECOGNIZE the outstanding contributions of four individuals to furthering and defending free representative government and private enterprise. The 2008 Bradley Prizes honors Gary Becker, Victor Davis Hanson, Alan Charles Kors, Robert Woodson, Sr.

DISCOVER what Ronald Reagan can teach the next President. Young America’s Foundation hosts a Capitol Hill discussion with Frank Donatelli and Rep. John Shadegg.

EXAMINE whether for-profit providers of higher education offers lessons to their non-profit peers on how to control costs and improve productivity. American Enterprise Institute hosts a panel examining whether for-profit higher education is a viable alternative to the dominant non-profit model.
LEARN why conservatives are not the mean-spirited, greedy, selfish malcontents with authoritarian tendencies that liberals think they are. The Heritage Foundation hosts author Peter Schweizer.

For more events, visit InsiderOnline’s Conservative Calendar.

Posted on 05/30/08 12:35 PM by Alex Adrianson

‘I’m a Salesman. I Sell Jail Time to People.’

Much has been written—though not enough has been read—about the economic consequences of the regulatory state that has been built in the past three or four decades. A parallel and at least equally important set of consequences lies in the field of law.

The Washington Legal Foundation has just published a major report called “Federal Erosion of Business Civil Liberties,” and reading through it makes one wonder whether business people today feel like they inhabit a novel written by Franz Kafka.

The WLF report observes that, given the sheer volume and complexity of environmental and other regulations, it is very easy today for a business to end up crosswise with a regulatory agency.

… most corporate officials candidly admit that it is simply impossible to comply with all [regulations]. For example, if certain solvents are poured onto a surface to be cleaned, the rag used to wipe the surface becomes a hazardous waste, which is then subject to strict storage and disposal rules. However, if the solvent is first poured onto the rag, then the rag is not a hazardous waste.

At the same time, the statutes creating regulatory authorities afford agencies enormous discretion in how to address regulatory violations. Increasingly, says WLF, agencies are pursuing criminal prosecutions, even though administrative and civil actions are often more appropriate. And the problem has been compounded through the lowering of the bar for a criminal conviction.

When the government chooses the criminal option, corporate officers or employees can be easily branded as felons and sent to prison for many years because the level of mens rea or intent required to be proven has been greatly watered down by the courts and Congress over the years. The level of criminal intent necessary to prosecute an individual depends to a great extent upon the level of intent specified in the statute being enforced. Unfortunately, there are now over 100 states of mens rea specified in federal criminal statutes that have been given different interpretations by federal judges, causing confusion in this area of the law. … Over the last few decades, the case law has devolved to allow criminal prosecutions and convictions of “public welfare offenses” to stand without a showing of criminal intent or actual knowledge, which is tantamount to imposing strict liability.

It’s a legal set-up that puts business people engaged in non-criminal activity at risk of being thrown in jail. And, as the WLF report demonstrates, government regulators have been all too eager to leverage that threat. One EPA special agent is quoted saying: “I’m a salesman. I sell jail time to people.” Citizens who care about liberty should note that not all government thugs wear jackboots; and they should take a look at the Washington Legal Foundation’s report.

Posted on 05/29/08 06:53 PM by Alex Adrianson

Laffering All the Way to the Treasury

The New York Sun pokes fun at the Treasury Department, which this week released two reports assessing the impact of the 2003 tax cuts:  

We confess we stumbled a few times in making our way through the language, which seems at times to buy into left-wing assumptions. “Capital gains income, which is not captured in GDP, more than quadrupled between 1994 and 2000,” says one of the papers. “Tax receipts from capital gains realizations more than tripled during this period, even though the tax rate on capital gains was reduced beginning in 1997.”

Charlie Gibson, call your office. “Even though”? The tax receipts from capital gains didn’t rise “even though” the capital gains tax was reduced, they rose because the capital gains tax was reduced. As the Laffer Curve graphically depicts, there is a point at which if you tax something less, you get more of it, and if you tax something more, you get less of it.

The paper makes the same rhetorical error later on, saying, “After 2004, tax revenues again grew faster than the economy. Despite the tax relief enacted earlier in the decade, the ratio of receipts to GDP was 18.8 percent in 2007, above the 40 year average.”

“Despite” is the wrong word. Tax revenues did not rise “despite” the rate cuts; they rose because of the tax cuts.

Well said, and here is some other important data from that report, as identified by the Sun:

In 2005, most recent year for which data are available, the top 5 percent of taxpayers earned 35.7 percent of the income, but paid 59.7 percent of the income taxes. The top 1 percent of taxpayers earned 21.2 percent of the income, but paid 39.4 percent of the income taxes.  If the persons paying for the government start to be a substantially different body than the overall population, a country begins to run the risk of serious political strains.

We think “begins” is the wrong word, but otherwise, a good point.

Posted on 05/29/08 04:13 PM by Alex Adrianson

Congratulations, Clint!

In its 30th anniversary edition, Legal Times has placed Clint Bolick on its list of the “90 Greatest Washington Lawyers of the Last 30 Years.” The newspaper named Bolick a “champion” for his work “fighting to expand liberties and protect human rights.”

Bolick was a co-founder of the Institute for Justice, and is currently the director of the Goldwater Institute’s Scharf-Norton Center for Constitutional Litigation. In a press release, the Goldwater Institute described Bolick’s accomplishments:

Mr. Bolick was selected based on his work to create the legal precedents that support school choice programs. This decade-long battle culminated in Zelman v. Simmons-Harris, decided by the U.S. Supreme Court in 2002, which Mr. Bolick won. Mr. Bolick has also been active in efforts to increase judicial scrutiny of racial preferences and restore judicial recognition of economic liberty as a civil right, an area which has resulted in several landmark rulings overturning regulatory barriers to enterprise.

“We are proud to have Clint’s extraordinary legal acumen recognized by the prestigious Legal Times,” said Darcy Olsen, president and CEO of the Institute. “We believe in championing liberty, and when necessary, using the courts to protect constitutional government. The government is Goliath, and Clint is our David, armed not with stones, but with the power of the law.”

Posted on 05/29/08 03:27 PM by Alex Adrianson

Flat Tax Revolution Still Going Strong

A couple of years ago, an International Monetary Fund study speculated that the flat tax might be headed for the ash heap of history. “Looking forward,” said the study, “the question is not so much whether more countries will adopt a flat tax as whether those that have will move away from it.”

Within a couple of months, four more countries adopted flat tax systems, and another three did likewise in 2007. Though no country today has a perfect flat tax system, 24 have come close enough to be considered the flat tax club. Why has the idea of a flat tax spread to so many countries? Probably because many have realized that using the tax code to penalize productivity—as systems of progressive taxation do—is bad for the economy—and sometimes bad for government revenues, too.

Dan Mitchell explains it all in his latest video below:

Posted on 05/29/08 02:23 PM by Alex Adrianson

A Rigged Game

When conservatives and liberals debate whether the 2001 and 2003 tax cuts should be extended, most people can easily understand what’s at stake: Failing to extend a tax cut is the same as increasing taxes. The fact that such tax increases are part of current law doesn’t make taxpayers’ wallets any less light come 2011.

Congress sees it differently, and hopes that taxpayers see it their way, too: In Congress’s upside-down frame of reference, tax cuts are considered a cost that must be paid with spending cuts—else the federal deficit gets bigger. Imagine that: Congress considers not taking your money a cost.

Meanwhile, Congress judges spending by a different standard entirely. In projecting the size of the federal deficit, the Congressional Budget Office assumes that Congress will continue all mandatory spending programs, even those scheduled to expire.  

But shouldn’t those programs be considered a cost to taxpayers? Kevin Hassett notes the double standard in his recent column:

… according to the [Congressional Budget Office], there is approximately $1.3 trillion worth of mandatory spending that is also set to expire. If you add the discretionary spending that is also built into the CBO baseline, then there are spending extensions that cost about as much as the tax-cut extensions. But since the spending is in the baseline, Democrats get to pretend that its extension costs nothing extra.

Here’s how bad it is: Even the Bridge to Nowhere is now in the baseline.

In the 1980s and 1990s, the federal deficit was an issue fiscal conservatives talked about to warn of the increasing size of government. Via statist scorekeeping, liberals have figured out how to make the deficit an issue that works for them. It’s time to recognize that the deficit per se isn’t the problem. The problem is the size of government.

Posted on 05/29/08 11:50 AM by Alex Adrianson

Make the Students Accountable

Students in Tucson-area schools are frequently promoted to the next grade in spite of failing core courses, according to a recently concluded 10-month investigation by the Arizona Star. The Star found that nearly one-third (18,389 out of 57,865) of students enrolled in eight Tuscon-area school districts failed at least one core class in 2007. Yet 90 percent of the students in those districts were promoted to the next grade level. (Hat tip: Goldwater Institute Daily E-mail.)

This practice of social promotion is often justified on the grounds that promoting marginal students so that they remain at the same grade level as their age peers will help them in the long run. In 2006, Jay Greene and Marcus Winters of the Manhattan Institute looked at Florida’s efforts to curtail social promotion, and found that students who are not ready for the next grade benefit from repeating the grade:

… after two years of the policy, retained Florida students made significant reading gains relative to the control group of socially promoted students. These academic benefits grew substantially from the first to the second year after retention. That is, students lacking in basic skills who are socially promoted appear to fall farther behind over time, whereas retained students appear to be able to catch up on the skills they are lacking.

Perhaps Arizona should examine Florida’s successful policy of requiring students to pass a test to show they are ready for the next grade level.

Posted on 05/28/08 02:54 PM by Alex Adrianson

Housing ‘Fix’ Rewards Activists Who Screwed Up the Housing Market

Somewhere in the process of figuring out how to make it seem as if government refinancing of bad mortgages could be achieved at no cost to the taxpayer, Congress decided that a proposed mortgage market “rescue” should also include an affordable housing fund. Such funds are not new. If history is any guide, the proposed funds would end up being used to finance Left wing political activism.

The House and the Senate have each passed bills instructing the Federal Housing Administration to offer to refinance mortgages in danger of defaulting in exchange for lenders agreeing to write down a portion of the principal of those loans. The new loans would be insured by the government, giving the shaky borrowers a break on interest rates.

Under the Senate plan, when the period for converting bad mortgages into government-backed bad mortgages ends, the funding stream for financing the conversions—a surcharge on Fannie Mae and Freddie Mac’s loans—will be converted to a fund that distributes money to the states for grants to nonprofit groups promoting affordable housing. The House plan includes a separate $230 million fund that would be funneled through HUD to the nonprofits.

In the past, the radical Left wing activist group ACORN (Association of Community Organizations for Reform Now) has been a significant recipient of both federal and state housing grants.  In 2006, the Employment Policies Institute published an extensive report on ACORN, including a fairly comprehensive rundown of government funding received by the group since 1977. The EPI report cites tax records showing that the ACORN Housing Corporation has received $11 million in federal grants between 1997 and 2003. Also, the Department of Housing and Urban Development has awarded millions of dollars in grants to ACORN in each of 2004, 2005, and 2006. Other ACORN affiliates receive federal money as well.

By law, government grants cannot be spent on politics. Housing grants also come with the stipulation that such funds must be spent on efforts to promote affordable housing. But money is fungible; donor money that doesn’t have to be spent on services to the community is freed up for political activism. Beyond that problem, however, ACORN has routinely ignored legal restrictions on the use of federal grants. In the late 1970s, ACORN directed employees funded through the federal government’s VISTA program to engage in union organizing. As a result, ACORN’s VISTA grant was revoked. ACORN also had a 1994 AmeriCorps grant revoked for, among other things, using the funds to solicit membership in ACORN.

ACORN’s political activities are decidedly anti-capitalist. They include funding Web sites that specialize in Wal-Mart bashing, corporate shakedown campaigns, agitating for more unionizing, and lobbying for minimum wage laws and ordinances against big box retailers. ACORN has also organized “get out the vote” efforts that have resulted in voter registration fraud in numerous states. In just the past few years, ACORN workers have been convicted of federal election fraud in Colorado, Missouri, Washington state, and Wisconsin.

But the most egregious part of using the housing bill to fund ACORN and other Left wing activists is that these folks have contributed directly to the problems besetting the mortgage market. Most people understand that the loosening of lending standards in the 1990s was an important factor in creating the subprime mess. What is less widely understood is that banks didn’t just do it on their own, with regulators asleep at the wheel. The government encouraged the loosening of lending standards via rules meant to appease the politically correct crowd arguing that banks were discriminating against minorities by not lending to them often enough. ACORN was a major voice in that politically correct crowd.

In 1995, Congress amended the Community Reinvestment Act to require lenders to find new ways to increase lending to minority communities. The problem was that lower lending rates to minorities reflected not racism, but the fact that credit risks tended to be higher for minorities. So in order to increase lending to minorities, lenders were forced to lower standards.

Further, the CRA gives community activist groups like ACORN the ability to hold up bank mergers and other actions requiring regulatory approval by challenging the bank’s compliance with the CRA’s command to lend more to minorities. ACORN has used this leverage to shake down some of the biggest banks for millions in donations. According to EPI’s report, in 2o00 alone, ACORN received donations from Bank of America, Fleet Services Corporation, Fannie Mae Foundation, Chase Manhattan Foundation, and Wells Fargo Foundation totaling over $4.7 million.

Members of Congress should ask themselves if giving taxpayer money to groups complicit in the mortgage market meltdown is really the best way of fixing the mortgage market.

Posted on 05/28/08 11:48 AM by Alex Adrianson

Snubbing Home-Schooled Children

As a number of conservative bloggers have noted, the sandwich retailer Subway won’t allow home-schooled children to compete in its “Every Sandwich Tells a Story Contest.” The contest asks kids to write a story based on one of four food-themed beginnings, such as “Turkey Doesn’t Live Here Anymore: There was a loud knock on the door, but when Salami Sam opened it…” or “The Mysterious Meatball: When the invitation to the Meatball came in the mail …”

The contests rules state: “Contest is open to legal US residents, over the age of 18 with children in either elementary, private or parochial schools that serve grades PreK-6. No home schools will be accepted.”

One possible explanation for the snub is that the prizes are equipment for schools that wouldn’t make sense for homes to receive. The grand prize is athletic equipment. But as Red State’s Erick Erickson notes, Subway could have been flexible: “The prizes could just as easily have had appropriate alternatives for home-schooled children.”

And in any case, parents who home-school their children already save taxpayers between $4.4 billion and $9.9 billion in instructional costs each year, according to estimates by Dan Lips and Evan Feinberg. So why begrudge them a tackling sled or a pitching machine in their backyard?

Home-schooled children, by the way, perform very well on achievements tests. In 1998 Dr. Lawrence Rudner of the University of Maryland conducted the largest evaluation of home-schooled stu­dents’ academic achievement. He administered academic achievements tests to 20,760 home-schooled students, and found that the median score was in the 70th to 80th percentile. Maybe Subway is afraid that the contest will expose the inferiority of the teaching in public schools.

For more information on homeschooling, see Homeschooling: A Growing Option in American Education, by Dan Lips and Evan Feinberg, The Heritage Foundation, April 3, 2008.

Posted on 05/27/08 04:14 PM by Alex Adrianson

The Coming Week – Monday, May 26, 2008

Some events that caught our eye:

REMEMBER the sacrifices made by those who have kept our country free.

LEARN about alternatives to federal control of transportation funding. Host: Cato Institute.

EXAMINE how international trade impacts American workers. Host: Hudson Institute.
FIND OUT how radical Islamism will impact Europe. The Pacific Research Institute hosts a lunch with Daniel Pipes.
HEAR Václav Klaus, President of the Czech Republic and author of Blue Planet in Green Shackles—What Is Endangered: Climate or Freedom?, speak at the Competitive Enterprise Institute’s Annual Dinner.

MAKE MERRY with fellow freedom-loving young professionals at the 2008 AFF Gala.

FIND OUT what we should have learned about tax policy since 2000. The American Enterprise Institute hosts a conference offering lessons on tax policy for a new President and Congress.

For more events, visit InsiderOnline’s Conservative Calendar.

Posted on 05/23/08 09:52 AM by Alex Adrianson

This Week at Heritage

Thwarting terrorist cells can be as simple as thinking offensively rather than defensively. … There is a real “happiness gap” in America today, and it lies disconcertingly close to America’s cultural and political fault lines. 

Posted on 05/23/08 09:51 AM by Alex Adrianson

Thank You, American Soldiers

Our friends at the Evergreen Freedom Foundation have produced an excellent video tribute to the men and women of the U.S. military who have sacrificed so much to preserve freedom in this country.

Posted on 05/23/08 09:44 AM by Alex Adrianson

On Our Reading List

Roger Helmer, British Member of the European Parliament, has alerted us to a new book written by Nigel Lawson called An Appeal to Reason: A Cool Look at Global Warming.

Helmer describes one of Lawson’s key points that everyone who cares about the issue of global warming should understand:

OK, even if you accept the alarmist scenario, what is the best thing to do about it? He concludes that current efforts at mitigation (that is, at reducing carbon emissions in order to prevent further warming) are doomed to failure, and will be cripplingly expensive. And in any case, even if you take the very worst IPCC/Stern projections, the estimated costs of doing nothing would mean that our descendants in 100 years would be “only” 2.6 times as well off as we are today, rather than 2.7 times (if we could stop the projected warming). He rightly questions whether it is worth vast expenditure on an uncertain and hypothetical project to make so small a difference.

Posted on 05/23/08 09:42 AM by Alex Adrianson

Court: Paper Money Is Illegal

We’re not lawyers, but can’t help thinking this is absurd:

A divided D.C. Circuit Court of Appeals has ruled 2-to-1 that paper money discriminates against the blind in violation of the Rehabilitation Act, in American Council of the Blind v. Paulson.  The ruling upheld a controversial trial court ruling in November 2006 that paper money discriminates because it lacks features that the blind can use to easily distinguish between different denominations, such as bumps or different sizes or shapes. 

According to Hans Bader of the Competitive Enterprise Institute, the ruling is an overreach because the court failed to consider the undue burden on third parties that would be created by requiring that paper money be redesigned:

As Judge Randolph noted in dissent, “There are approximately 7,000,000 food and beverage vending machines in the United States; by one estimate, it would cost $3.5 billion to retool or replace these machines.”

Posted on 05/21/08 06:43 PM by Alex Adrianson

The Government that Liberals Love Creates the Carbon Dioxide that Liberals Hate

Climatologist Patrick Michaels calculates:

The Climate Security Act, sponsored by Joe Lieberman and John Warner, would cut emissions of carbon dioxide — the main “global warming” gas — by 66 percent over the next 42 years. With expected population growth, this means about a 90 percent drop in emissions per capita, to 19th-century levels.

If you think a 90 percent cut is merely daunting, consider this: Students at MIT recently estimated that the average person in the United States emits 20 metric tons of carbon dioxide per year. A 90 percent reduction, then, leaves the average person emitting just 2 metric tons of carbon dioxide per year. But the same MIT class also estimated that a homeless person today emits 8.5 metric tons of carbon dioxide. So if you reduce your lifestyle to that of a homeless person, you’re still emitting 300 percent more carbon dioxide than the level prescribed for the year 2050.

Amazingly, homeless people in the United States have twice the per person emissions as the world as a whole. How’s that possible? Science magazine reports on the MIT findings:

“Regardless of income, there is a certain floor below which the individual carbon footprint of a person in the U.S. will not drop,” says Timothy Gutowski, professor of mechanical engineering, who taught the class that calculated the rates of carbon emissions. …

While it may seem surprising that even people whose lifestyles don’t appear extravagant—the homeless, monks, children—are responsible for significant greenhouse gas emissions, one major factor is the array of government services that are available to everyone in the United States. These basic services—including police, roads, libraries, the court system and the military—were allocated equally to everyone in the country in this study. Other services that are more specific, such as education or Medicare, were allocated only to those who actually make use of them.

In other words, in order to cut carbon dioxide emissions significantly, we would need to cut government significantly.

Conn Carroll wrote on this theme recently at The Foundry, suggesting that the Polar Bear should be the new libertarian mascot:

Virtually every federal government action anywhere in the country can be connected to increased greenhouse gas emissions, which after all, are the cause of the destruction of the polar bear’s habitat according to the Interior Department. So you wanna stop the Agriculture Department from sending subsidy checks to millionaire farmers? Claim the increased emissions from transporting the crops to market will harm the polar bears and sue to stop them. Wanna stop a new high way from being funded? Just point out the new traffic will increase emissions and ‘presto’ … no more high way. Wanna end increases in Medicare spending? All you need to do is show that increased health care spending prolongs peoples lives who inevitably emit more carbon.

Conn was (we think) writing in jest. But a serious point remains: As in so many cases, the government will not be able to abide by rules it sets for everybody else.

Posted on 05/21/08 06:16 PM by Alex Adrianson

Protectionism Kills

How protectionism in Africa is driving up food prices, per Thompson Ayodele of the Nigerian think tank Initiative for Public Policy Analysis:

Averaging 33.6 per cent, agricultural trade barriers within Sub-Saharan Africa are the highest compared with other regions of the world. Given that the poorer people are, the more of their income is spent on food, this spells disaster.

Customs duty on rice imports in Nigeria, is at 55 per cent including a 5 per cent levy for increasing local production. In neighboring Benin, rice merely attracts a huge 35 per cent duty. In monetary terms this represents a whopping US$200 per ton price advantage over imports through Nigerian ports.

To make things worse, import tariffs have put fertilizer out of many people’s reach—leading to low yields and hard manual labour. The removal of tariffs on fertilizers and other agricultural inputs is crucial for increased productivity. In turn this would help reduce the costs of other foodstuffs.

Fertilizers that could have helped farmers increase yields have instead become a political weapon. Fertilizer use in poorer countries averaged 107kg per hectare worldwide but in Africa it is only 8kg per hectare. The present mode of fertilizer distribution is cumbersome and manipulatable, as sizeable amounts of fertilizers end up in the hands of politicians and their cronies who rake in profits at the expense of farmers.

Meanwhile, efforts to embrace biotechnology to improve yields have been thwarted by well-fed groups of, largely western, activists. Whether others are hungry seems to be of no importance to them.

Posted on 05/21/08 04:17 PM by Alex Adrianson

All Parents Should Be Able to Fire Their Kids’ Principals

The recent firing of 24 principals in Washington, D.C., illustrates perfectly a point that school choice proponents have made time and time again. One of the principals dismissed was the principal at the school attended by the children of D.C. Schools Chancellor Michelle Rhee.

Before the firing, Rhee had promised to recuse herself from the process—to avoid a “conflict of interest,” naturally. There was concern that this didn’t actually happen. The Washington Post reports that at a meeting of concerned parents, Rhee had to deflect allegations that the firing “stemmed from back-channel lobbying by a small group” and one “parent characterized the move as ‘conspiratorial’ in nature.”

But since Rhee no doubt wants her children to attend a good school just like every parent wants for their own children, why should her alleged involvement be seen as a conflict of interest? Why not consider it a coincidence of interest?

True, different parents have different ideas about what makes a school good. But that is just the point: A system of school choice gives all parents an equal chance to “fire” their children’s teachers and principals.

Government-run schools face political contention over their decisions because political contention is the only means by which parents can influence those decisions. In a system of school choice, however, parents have no reason to worry about politics; they only have to figure out which school is best for their children.

Posted on 05/20/08 04:04 PM by Alex Adrianson

Environmental Stewardship that Helps the Poor

One argument you hear from time to time is that fighting global warming is an imperative for Christians because God made mankind the stewards of his creation. This view has gained some traction among evangelical conservatives. However, there is a coalition that embraces the idea of Christian stewardship, while rejecting the global warming hype of the Left. That group is the Cornwall Alliance for the Stewardship of Creation. The Cornwall Alliance says Christians need to take a balanced view of the issue—one that is guided by Biblical principles and takes note of both the uncertain science of global warming and the value of economic growth in fighting poverty.

If these ideas appeal to you, then you should consider signing the “We Get It” declaration. The Cornwall Alliance has just kicked off a campaign to enlist 1 million signers of this landmark statement on Christian stewardship.

Posted on 05/20/08 10:15 AM by Alex Adrianson

A Good Day to Think About Government Spending

Today is the day you stop paying for government. Nope, it’s not Tax Freedom day—a very fine “holiday” indeed, calculated every year by our good friends at the Tax Foundation. Rather, today is the day of the year on which Americans have earned enough to finance the government’s annual spending.

The American Institute of Economic Research calls the occasion Friedman Day—after Milton Friedman. The distinction is helpful because it points out some common sense that is often forgotten: The fiscal burden of government is what it spends, not what it taxes. Borrowing to finance spending is just as much a claim on society’s resources as are taxes. So if you, taxpayer, really want a tax cut—or want Congress to extend tax cuts that are scheduled to expire—then you, taxpayer, should be in favor of cutting spending, too.

How’s that working out? According to AIER, Friedman Day this year falls two days later than it did in 2007. Even as Tax Freedom Day has gotten earlier, the movement of Friedman Day tells us that we are losing the battle against Big Government.

Deroy Murdock reminds us that both political parties are to blame for Friedman Day falling farther and farther behind Tax Freedom Day:

Between fiscal year 2001 and FY 2009, the federal budget has soared 66.8 percent, from $1.86 trillion to $3.1 trillion. These 8.35 percent average annual spending increases have cascaded from a Republican presidency and a mainly GOP Congress.

Today’s Democrat-controlled House of Representatives continues this fiasco. It approved a $307-billion farm bill on May 14, by a vote of 318 to 106. The Senate endorsed this largesse the following day, 81 to 15. Among other damage, this legislative monster gives $3.8 billion in disaster assistance to those who already have received $5.2 billion in direct payments for their “historical planting average,” even if they have stopped farming. While typical GIs in Iraq and Afghanistan (unmarried E-4s with four years’ service) dodge and, too often, catch bullets for just $41,591 annually, couples with yearly incomes up to $1.5 million still can receive agricultural subsidies. …

Meanwhile, calamitous ethanol assistance survives, dreadful sugar supports expand, and those who cultivate lentils, chick peas, salmon, and even race horses join the dole. Want a new tractor? Uncle Sam will help you buy one.

Posted on 05/19/08 03:40 PM by Alex Adrianson

This Week in Washington – May 19, 2008

Time to Repeal the Ethanol Mandate, by Ben Lieberman and Nick Loris, The Heritage Foundation, May 15, 2008
The Economic Costs of the Lieberman-Warner Climate Change Legislation, by William W. Beach, David Kreutzer, Ben Lieberman, and Nick Loris, The Heritage Foundation, May 12, 2008

Posted on 05/19/08 12:23 PM by Alex Adrianson

Coming Soon: Milton Friedman Institute

The University of Chicago has announced plans to create a Milton Friedman Institute. University President Robert Zimmer said the goal is for the Milton Friedman Institute to be the “primary intellectual destination for economics.”

Hat tip: Club for Growth Blog.

Posted on 05/19/08 09:36 AM by Alex Adrianson

The Coming Week – Monday, May 19, 2008

Some events that caught our eye:

FIGURE OUT Iran. The American Enterprise Institute hosts a series of panels looking at how Iranian political institutions have impacted Iranian civil society and foreign policy making toward the West.

HEAR Ed Gresser of the Progressive Policy Institute make the liberal internationalist case for expanding free trade around the world. Host: Mercatus Center.
EXAMINE the sources of contemporary Muslim anti-Semitism. Host: Hudson Institute.

LEARN how Botswana and Mauritius freed their economies and achieved two of the three highest per capita incomes in Africa. Host: Cato Institute.

For more events, see our Conservative Calendar.

Posted on 05/16/08 02:10 PM by Alex Adrianson

Heritage on Video

Heritage in Focus: The plan that Congress is considering to limit greenhouse gas emissions would be worse for the economy than if another Hurricane Katrina hit us once a year—every year.

At Heritage: U.S. international broadcasting has an important role to play in American public diplomacy. … In its dealings with Europe, the United States must establish a comprehensive alliance-building strategy that reinforces rather than undermines the sovereignty of nation states. … Environmentalists place nature above human rights. … The limit on H-1B visas should be raised so that employers can hire the skilled workers they need.

Posted on 05/16/08 01:56 PM by Alex Adrianson

Catholic Schools a Better Option than Public Schools

In his Friday Facts, Rogers Wade of the Georgia Public Policy Foundation writes:

Reinforcing the case for education vouchers: While 62 percent of minority students at urban public high schools graduate, 88 percent of students from the same background complete high school when enrolled in Catholic schools, according to “The Effects of Catholic Secondary School on Educational Achievement,” a study in the Journal of Labor Economics. The same study found that compared with their public-school counterparts, more than twice as many minority Catholic-school graduates from urban areas finish college: 27 percent of the Catholic-school minority graduates finish college, while only 11 percent of minority public-school graduates receive their degrees. 

Posted on 05/16/08 12:59 PM by Alex Adrianson

Cigarette Taxes and Terrorism

Politicians aren’t the only ones who see high cigarette taxes as a cash cow. Terrorists are taking advantage of the opportunities for smuggling created by large differentials in cigarette taxes rates, according to a recent report from New York state law enforcement officials. Jim Watters of Kentucky’s Bluegrass Institute writes about the report:

“In total, law enforcement officials in New York State estimate that well-organized cigarette smuggling networks generate between $200,000 (and) $300,000 per week,” the report stated. “A large percentage of the money is believed to be sent back to the Middle East, where it directly or indirectly finances groups such as Hezbollah, Hamas and al Qaeda.”

Two primary strategies used by these smugglers of terror involve either smuggling cigarettes from other states with much-lower taxes. Or they make peace with Indian reservations, where cigarettes aren’t taxed.

Since North Carolina has relatively low cigarette taxes, outgoing Governor Mike Easley could argue plausibly that raising cigarette taxes there, as he proposed to do earlier this week, will help reduce the incentives for smuggling. A better plan, however, would be for higher-tax states to realize that they are inviting the terrorists to make a profit in their states. Such a move would also make tax codes simpler and fairer.

Posted on 05/16/08 12:29 PM by Alex Adrianson

Insider A.M.: Let the Market Decide How the News Business Should Be Organized

Today’s news consumer has more choices than ever. The United States Senate must not have gotten that news.

Persisting in the belief that big media moguls want nothing more than to put a chokehold on the flow of information to the public, the Senate yesterday voted against loosening limits on the ownership of news outlets. The Senate voted to overturn new rules passed by the Federal Communications Commissions that would have allowed media companies in some markets, under some conditions, to own both a local TV station and a local newspaper.

While the Internet has helped feed an explosion of news choices for consumers, the market could be even better—if the government would allow news outlets to combine. Newspapers in particular are in trouble. Ad revenue declined 9.4 percent last year, the biggest one-year declined since they started keeping track in 1950. Consolidation may sound like a conspiracy to those who populate the political realm, but in business it’s often nothing more than a strategy to improve a company’s offerings to its customers. In a recent Heritage Foundation paper, James Gattuso explained how consolidation can help improve local coverage:

The new rule, however, does promise significant benefits for newspapers, broadcasters, and—most important—consumers. This is not just a matter of cutting costs: Joint ownership promises the ability to share news resources and expertise between print and over-the-air outlets. Reporting for a newspaper could be used, for instance, to provide information for news broadcasts, with video and audio footage supplementing print stories. Such cross-platform synergies are nothing new in the news business. Few news organizations today, for example, are without an online presence.

Joint ownership also can give the combined operation the resources to improve its offerings to consumers. This could benefit even local news, a particular area of concern for proponents of regula­tion. Three separate academic studies commis­sioned by the FCC found that television stations cross-owned with newspapers provided between 3 percent and 11 percent more local coverage than was provided by stand-alone TV stations.

Allowing cross-ownership can preserve competition in situations where a newspaper could not survive without access to new resources. Those who want diversity of news outlets should take heed of the fact that the old rules are preventing the declining newspaper industry from grabbing a lifeline. Hopefully, the House of Representatives figures this out before it takes a vote on the issue.

News to Note

THE CALIFORNIA SUPREME COURT, ruling that gays and lesbians have a constitutional right to get married, overturned California’s ban on gay marriage. On November 4, voters will have a chance to “overturn” the Supreme Court by approving the “California Marriage Protection Act.”

FORENSIC EXPERTS from Interpol said computer files implicating the Venezuelan government in trying to overthrow the Colombian government are authentic. The files, seized by Colombia in a March 1 raid on FARC rebels hiding in Ecuador, show extensive cooperation between the Venezuelan government and the Leftist insurgents.

THE WEIGHT OF THE WORLD … Obesity is no longer just a problem of individual health, said a team of authors from the London School of Hygiene and Tropical Medicine. Writing in the journal Lancet, they argued obesity is now a global problem because it contributes to global warming. Obese people, they noted, need 18 percent more calories than everyone else, and food production and distribution accounts for 20 percent of greenhouse gas emissions. So remember: When you leave food on your plate, you’re starving someone else, but when you eat it you’re changing their climate.  

SUPPLY AND DEMAND: High food prices are spurring a renewed interest in home gardening. That raises a question: If food prices fall again, will the government help the struggling home gardener by paying him not to garden?

SATURDAY IS ARMED FORCES DAY. If you live in the Washington, D.C. area, you might consider celebrating by catching some of the GI Film Festival, which runs through Sunday.

Posted on 05/16/08 11:29 AM by Alex Adrianson

Farm Bill Aids Government Land Grab

Dana Joel Gattuso reports that a problem with the farm bill—in addition to perpetuating corporate welfare—is that it also extends the federal government’s ability to acquire private land through less than transparent means.

The bill extends the tax deductions currently provided to farmers and others for donating land to a private land trust for conservation purposes. That may seem innocuous, but the private trusts have increasingly been reselling these conservation easements to federal agencies.

Government agencies like the arrangements because they enable government to restrict activity on private property absent public approval, which distinguishes them from land purchases, zoning laws, and other land-use regulations that can draw heated opposition and great angst. As a report on easements by the Department of Agriculture notes, conservation easements provide “opportunities for public agencies to influence resource use without incurring the political costs of regulation or the full financial costs of outright land acquisition.”

And in some cases the practice allows the federal government to get around state laws that would otherwise limit the terms of a private easement. Thus, an easement that might have been limited to 99 years under state law, becomes forever when it is transferred to a federal agency.

As Gattuso notes, forever is a long time to wall off land from any use whatsoever. He suggests:

… rather than shower landowners with complicated tax deductions, a far more effective way to deter land sales to developers would be to do away with burdensome estate taxes, which tend to push owners to sell their land to developers in the first place.

Posted on 05/15/08 06:00 PM by Alex Adrianson

Insider A.M.: More Global Warming Hype

A new report published today by Nature will surely provide more ammunition for proponents of the view that human beings are causing the world to warm up with significant negative consequences for life on the planet. A headline by Agence-France Press is an apt example: “New study amplifies warning on climate change.”

But those who doubt that global warming is a significant problem will find little in the new report to convince them. Nor should they. The report, produced by numerous researchers from 10 different scientific institutions, is merely a cataloging and mapping of the findings of 30,000 studies dating back to the 1970s showing how global warming impacts various natural eco-systems. As reported by the Telegraph, the impacts found include:

the earlier appearance of leaves on trees and plants; the movement of animals and birds to more northerly latitudes and to higher altitudes in the northern hemisphere; rapid advances in flowering time and earlier egg-laying in Britain; and changes in bird migrations in Europe, North America and Australia.

All this horror supposedly warrants the headline: “Mankind is the ‘Earth’s Biggest Threat’.”  

Lead author Cynthia Rosenzweig of the NASA Goddard Institute for Space Studies is quoted: “Humans are influencing climate through increasing greenhouse gas emissions. … The warming world is causing impacts on physical and biological systems attributable at the global scale.”

OK, so what? It is relatively uncontroversial—even among so-called climate change skeptics—that there has been a 1 degree Fahrenheit rise in average surface temperatures over the past century. And it shouldn’t be surprising that an increase in temperature causes other changes in natural systems. This report still doesn’t answer the most basic criticisms that various scientists have leveled at the alarmist view of global warming. Problems remain:

Scientists don’t know whether greenhouse gas emissions are the primary cause of recent warming. Earth’s temperatures have fluctuated significantly in the past. We know, for example, that today’s melting glaciers are revealing traces of past forests. If greenhouse gases cause global warming, then why did the earth actually cool between 1940 and 1970 as the world industrialized? Why has the warming trend halted in recent years? Other explanations for the warming have not been ruled out. Christopher Horner describes the problem:

The climate is always changing. Different parts of the planet are always getting colder or warmer, wetter or drier. Many things can cause this climate change. The sun has cycles, sometimes producing more energy, and sometimes producing less. The Earth’s wobble and eccentric orbit mean that different parts of the planet will be exposed to varying amounts of heat over different periods. If more snow or land is exposed, more heat might be reflected. If more water is exposed, more heat will be absorbed. If the sky gets darkened by dust—caused by a volcano, a meteor, or pollution—it can make the planet colder. Land-use changes, Manmade or otherwise, greatly impact local climate.

If greenhouse gases are the culprit, will reducing the human contribution really make a difference? Burning fossil fuels is responsible for only 2 percent of the greenhouse gases in the atmosphere, and the amount of greenhouse gases in the atmosphere varies naturally.

We don’t know whether global warming is on balance bad or good for life on the planet. But, we do know that human beings generally prefer a warmer climate.

Science cannot tell us what we should do about global warming. Given current technologies, most plans to curb greenhouse gas emissions will cause significant economic sacrifice. The Heritage Foundation recently studied a “cap and trade” plan that reduces carbon-dioxide emissions to 33 percent below the 2005 level by 2030. Heritage found that the cost of the plan to the U.S. economy would be at least $1.7 trillion (2006 dollars) cumulatively by 2030. Losses may be as high as $4.8 trillion, and annual job losses could approach 1 million. That’s just the impact in the United States.

One other point: We are not scientists here at InsiderOnline, but we understand a little bit about science. We know, for example, that looking for evidence to support a conclusion is not science. In setting out to catalog all the research showing that a warming climate has impacted natural ecosystems, it sure seems like the research team is doing little more than selecting data.

For more information, see Global Warming: A Guide to the Hype by Christopher Horner, The Insider, Spring 2007; and Nature, not Human Activity, Rules the Climate, by S. Fred Singer, © 2008 by the Science and Environmental Policy Project.

News to Note

IN SPITE OF THE FACT that the Polar Bear is not particularly threatened, the Department of the Interior has listed the polar bear as threatened under the Endangered Species Act—all on the theory that Polar Bears can’t live without sea ice that is melting because of global warming. The justification for the lower designation of “threatened” as opposed to “endangered” is that the Department isn’t actually sure that Polar Bears need sea ice.

CONGRESS OVERWHELMINGLY PASSED a farm bill that does little to reform or limit subsidy programs at a time when food prices are soaring.

THE CALIFORNIA SUPREME COURT is expected to deliver a decision today on whether gays and lesbians have a constitutional right to get married.

CHICAGO HAS LIFTED its two-year-old ban on serving foie gras in restarants.

CHOICES IN GEORGIA: Georgia Gov. Sonny Perdue signed a law allowing guns to be carried in restaurants, parks, and public transportation. Meanwhile, about 10,000 low-income Georgia children will be able to choose their own private school, thanks to another law signed by Gov. Perdue. The law gives tax credits for individuals and corporations to donate to organizations providing scholarships to childen.

Posted on 05/15/08 12:20 PM by Alex Adrianson

A Vast Neoliberal Conspiracy?

Judging from Johan Norberg’s lengthy debunking, Naomi Klein’s Shock Therapy is just about the looniest attack on free market ideas you will read this millennium.  

Klein argues that free market reformers, led chiefly by Milton Friedman, have routinely concocted political crises around the world in order to foist their ideas on distracted publics. They do this, says Klein, because their ideas are unpopular and could not win support through democratic means. According to Klein, Chile in the 1970s, Argentina in the 1980s, China in the 1990s, and the current Iraq war are all episodes in this vast neo-liberal conspiracy to free the economies of the world through intimidation, violence, and deception.

To sum up Norberg’s lengthy review: Klein falsely asserts that Friedman’s various offerings of policy advice to authoritarian governments—such as that of Chilean dictator Augusto Pinochet—amounted to support for those governments; she doesn’t actually know what Milton Friedman believed, identifying him variously as libertarian and neoconservative; she equates free market ideas with unconditional support for big business, and thus nonsensically interprets corporate welfare and no-bid government contracts as examples of Friedman-inspired free market reforms; she ignores the many democratic and open societies that have chosen free market reforms—not to mention the success of those reforms; and she ignores evidence that free market reforms actually have a salutary effect on democracy and human rights, something that Friedman was hoping for when he occasionally offered economic policy advice to dictators.

One gets an idea of the silliness of Klein’s book by noting some of her supposed evidence, aptly identified by Norberg:

… she presents a graphic connection: A posh shopping mall in Buenos Aires has been built where there was once a torture center. Klein’s conclusion: “The Chicago School Project in Latin America was quite literally built on the secret torture camps.” … So if they had built a Social Security office there instead, would it have been a graphic proof of the close connection between the welfare state and torture?

Even worse is Klein’s use of the following Friedman quote:

Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.

This quote supposedly shows that Milton Friedman wanted to induce political crises in order to create opportunities to push his ideas. Anybody who has spent any time at all thinking about public affairs can see this quote for what it really is: the commonsense observation that publics need evidence that a policy has failed before they willy-nilly change horses and crises are often evidence that a policy has failed. Hence, crisis and opportunity go hand in hand.

Klein’s use of the quote is an astounding exercise in bad faith, as noted by Norberg:

In the not very subtle short film that accompanies the book, Klein shows this quote over images of prisoners being tortured and given electrical shocks, to give the impression that this is the kind of crisis Friedman would welcome.

From Norberg’s account then, Klein’s Shock Therapy comes across as nothing more than an exercise in starting with a conclusion and arriving at some evidence.

Posted on 05/14/08 08:03 PM by Alex Adrianson

Insider A.M.: Congress Set to Continue Welfare for Farmers

In tough economic times, when governments face many pressures to do “something” to help people, the fact is usually forgotten or ignored that in order to give people help, government must first take something from people. William F. Buckley stated the formula: “Government can’t do anything for you except in proportion as it can do something to you.”

Food and gas prices soar, a mortgage crisis still converts homeowners into renters, a credit crunch threatens students who seek loans for college, and Congress today begins debate on a bill that gives billions per year of taxpayer money to a sector of the economy whose profits are surging. That bill is the farm bill.

Farm programs were originally created during the Great Depression, when many farmers were struggling. Today, farmers on average earn more than the typical American. And farm subsidies go to the wealthier farmers in particular.

According to a recent Heritage Foundation paper by Brian Riedl, “the majority of subsidies go to commercial farms, which report an average income of $200,000 and a net worth of nearly $2 million.”

And, notes Riedl, any financial problems that farmer do face can be addressed with market mechanisms:

In the 21st century, the challenge for farmers is not persistent poverty, but year-to-year income fluctuations brought on by weather- and pest-induced crop unpredictability. The proper response to yearly income fluctuations is not a permanent, massive program of subsidies that farmers receive even in good years. Crop insur­ance and farmer savings accounts can smooth out the boom and bust years in ways that keep farmers closer to their healthy annual average incomes, all at minimal taxpayer cost. Canada and Australia have already implemented these types of programs.

Reforming and phasing out farm subsidies would surely help consumers and taxpayers who pay an extra $320 per year because of farm support programs.  

News to Note

IN A BID TO LOWER GAS PRICES, Congress voted to end shipments to the Strategic Petroleum Reserve. President Bush said he opposes the move, but won’t veto the bill. The Heritage Foundation supports the SPR on national security grounds.

CRACKING DOWN: The North Carolina community college system announced it will no longer enroll illegal immigrants.

INSULATED FROM PRICES: As the United States and other Western countries consider plans to limit greenhouse gas emissions, the governments of China and India have no plans to stop subsidizing the consumption of fuel in their countries. Analysts say low budget deficits allow these countries to keep gas and diesel prices low. This unchecked consumption, however, increases the prices faced by consumers in countries that do not control prices.

STILL AN ALLY: Colombia handed over 14 paramilitary leaders to the United States. The United States was seeking extradition of the leaders on drug charges. Last month, House Speaker Nancy Pelosi cited Colombia’s lack of progress in fighting paramilitary violence against unions as a reason to table the Colombia-U.S. free trade agreement. In addition to paramilitary violence on the right, Colombia also faces Leftist terrorism in the form of the Venezuelan-supported FARC rebels.

MORE SPENDING: Congress finished work on a budget resolution for fiscal year 2009 that spends $20 billion more than President Bush requested.

STILL FEEDING A BUBBLE? Freddie Mac announced losses of $151 million in the first quarter of 2008, which was lower than expected. As a result of this “good news,” Moody’s downgraded the firm’s financial strength rating, projecting losses of $7.5 billion over the next two years, and the Office of Federal Housing Enterprise Oversight lowered Freddie’s capital requirements. Investors happily responded and Freddie’s shares gained 7.7 percent. With new capital Freddie plans to play a bigger role in helping to shore up the mortgage market. That capital cushion that just got lowered, by the way, is what protects the taxpayers from having to bailout Freddie’s bad loans.

SUDDENLY INNOVATION MATTERS: Officials at the 2008 European Patent Forum cited global warming as an important reason for focusing on the role the patent system in fostering innovation. Innovation, they noted, will be critical to finding new solutions for global warming. Some people think that feeding people and finding cures for diseases are also important reasons to care about innovation.

THE STATE OF ISRAEL turns 60 today. Iranian President Mahmoud Ahmadinejad said the celebrations are an attempt to hide the fact that the Israeli regime is dying.

NOT THE RIGHT RIDE: Sir Paul McCartney is very angry that a hybrid car given to him as a gift was delivered by plane instead of by boat. The carbon footprint of the plane ride was 100 times bigger than if the car had come by boat.

Posted on 05/14/08 12:23 PM by Alex Adrianson

Insider A.M.: Robbing the Cigarette Smoker to Pay the Teacher

Tobacco state Governor Mike Easley yesterday unveiled a state budget that pays for higher teacher salaries with a 57 percent increase in cigarette taxes. Easley’s plan increases the per-pack cigarette tax by 20 cents to 55 cents, which he expects will pay for a 7 percent increase in teacher salaries. Easley’s budget also proposes a $68 million expansion of mental health services, to be paid for with increases in taxes on beer, wine, and liquor.

Easley dismissed the notion that new excise taxes is bad policy while consumers are tightening their belts, telling reporters: “My thought is, if four cents a can, if that causes somebody economic hardship, then they’re probably drinking too much and going to be customers of mental health, substance abuse sooner or later anyway.”

Two problems:

First, the burden of sin taxes falls most heavily on the poor (see Taxing the Poor: A Report on Tobacco, Alcohol, Gambling, and Other Taxes and Fees That Disproportionately Burden Lower-Income Families, National Center for Policy Analysis, June 2007).

Second, Easley’s thinking illustrates a major problem with tax laws in the United States—both at the state and the federal level: Lawmakers want to use the tax code to change people’s behavior and reward political supporters. But, as the Tax Foundation has stated so well so many times, the sole purpose of the tax code should be to raise revenue for government operations. Using the tax code for social engineering increases the complexity of tax laws, reduces compliance, and creates opportunities and incentives for interest groups to ask for special favors. If teacher raises and more spending on mental health services are worthwhile, then the Governor should ask all of the state’s taxpayers to share the cost.

Other News to Note:

LABOR OFFICIALS at a Group of Eight meeting announced support for new government programs to help vulnerable workers who have been impacted by globalization. The group stated that workers displaced as a result of global warming should also receive assistance. Workers at ski lodges, for example, might need retraining.

AS GAS PRICES SOAR, some members of Congress want President Bush to stop stockpiling fuel in the nation’s Strategic Petroleum Reserve. The Heritage Foundation’s Ariel Cohen writes: “Shutting down the oil supply to the SPR would jeopardize the security of the United States, and infringe upon the executive authority of the President to ensure the nation's defense, while having no appreciate effect on gas prices.”

TODAY’S IMMIGRANTS assimilate more quickly than did previous generations, according to a new report by the Manhattan Institute.

INTEGRATE THE CURRICULUM! Colorado University at Boulder wants to balance its Left-leaning faculty by hiring a new Professor of Conservative Thought and Policy.

REDUCING GREENHOUSE EMISSIONS via the Warner-Liebermann “Cap and Trade” plan may cost the U.S. economy as much as $4.8 trillion (in 2006 dollars) cumulatively by 2030, according to a new study by The Heritage Foundation. Annual job losses under the bill could reach 1 million.

WAL-MART IN FRANCE? The French finance minister announced plans to deregulate the French retail sector by eliminating laws designed to protect small shops from competition from large discounters.

WE CAN’T AFFORD IT EITHER! About 8,500 gas stations around the country are stuck with gas pumps that can’t register prices higher that $3.99 per gallon. Many of the stations, located mostly in rural areas, can’t afford to replace their pumps.

Posted on 05/13/08 12:09 PM by Alex Adrianson

This Week in Washington: Race-Based Government, Environmentalism Run Amok, and Media Regulation

The Native Hawaiian Reorganization Act, The Heritage Foundation, May 2, 2007
Green Gone Wild: Elevating Nature Above Human Rights, Heritage event, May 13, 2008
The FCC’s Cross-Ownership Rule: Turning the Page on Media by James Gattuso, The Heritage Foundation, May 6, 2008

Posted on 05/12/08 03:23 PM by Alex Adrianson

Morning Brief

THE BALLOT BOX SECURITY BATTLE is heating up. Two weeks ago, the Supreme Court ruled that an Indiana law requiring voters to present a photo ID before voting was upheld. This week, Missouri lawmakers are expected to approve a state constitutional amendment that, if also approved by voters, will require voters to show proof of citizenship when they register to vote. Critics say the measure would disenfranchise too many voters who would be unable to locate the necessary documentation. In order to show proof of citizenship, voters would have to show an original birth certificate, naturalization papers, or a passport.

TAX INCREASES in the past decade of Labour rule are costing British taxpayers an extra £10 billion per year, according to a report released today by Britain’s Taxpayer’s Alliance. The main culprits, says the report, are “sneaky” increases in fees for local services—which have more than doubled—and increases in National Health Service charges—which have nearly tripled.

THE FARM BILL, which fiscal conservatives have criticized for failing to reform costly subsidy programs, contains a tax break for the horse racing industry worth $126 million over 10 years. The provision allows racehorses to be depreciated over three years, even though horses typically race longer than that. McClatchy reports that the provision was inserted to secure the support of Senate Republic Leader Mitch McConnell.

GOOD NEWS ON THE ENVIRONMENT: The overall level of pesticides and industrial chemicals in U.S. coastal waters has decreased in the past 20 years, according to a new report by the National Oceanic and Atmospheric Administration.

WHO’S MEDDLING? On his Sunday Radio Talk show, Venezuelan President Hugo Chavez said the Colombian government is planning to provoke a war with Venezuela in order to justify U.S. intervention in Venezuela.

FOOD FIGHT: Today, UK Chancellor Alistair Darling will call for the dismantling of Europe’s Common Agricultural Policy, arguing that it forces European consumers to pay more for food and hurts farmers in developing nations. Meanwhile, France and Germany are pushing in the opposite direction. Michel Barnier, French agriculture minister, says the EU should errect new tariffs on food in order to promote European self-sufficiency in food. The German farm minister, Horst Seehofer, says that the EU should keep products from the United States, India, and China out unless the countries agree to adopt the EU’s higher environmental and food safety standards.

VOTE FOR YOUR FAVORITE PUBLIC INTELLECTUAL: Foreign Policy has published its list of the top 100 public intellectuals. Readers can vote for their top five, and, based on those votes, the magazine plans to publish another list of the top 20 in its July/August issue. Among our favorites on the list are Anne Applebaum, George Ayittey, William Easterly, Vaclav Havel, Ayaan Hirsi Ali, Bjorn Lomborg, Richard Posner, Mario Vargas Llosa, and Muhammad Yunus.

THE PRICE OF A FIRST-CLASS STAMP rises one penny to 42 cents today. This increase is the first under a new law that allows the Post Office to raise its rates without approval from the Postal Rate Commission. The law limits such annual increases to no more than the rate of inflation.

Posted on 05/12/08 11:28 AM by Alex Adrianson

Add Your Events to Our Calendar

We are happy to consider submissions to InsiderOnline’s Conservative Calendar. We intend the calendar as a service to the conservative public policy community. We are looking for events that seek to educate about public policy issues—especially about the value of policies that limit government, expand individual freedom, advance a strong national defense, and promote traditional values—as well as events for conservatives to meet, network, and socialize.

Submitting events is easy to do. You’ll need to subscribe to, a free Web-based application that anyone can use. Check our instructions page for details. Thanks.  

Posted on 05/09/08 02:48 PM by Alex Adrianson

The Coming Week – Monday, May 12, 2008

Some events that caught our eye:

FIND OUT which federal agencies do the best job of giving citizens and elected leaders the information they need to make informed funding and policy decisions. A panel at the Mercatus Center assesses the latest agency reports under the Government Performance and Results Act.
LEARN how the environmental movement cares more about plants and animals than human beings. The Heritage Foundation hosts M. David Stirling, author of Green Gone Wild: Elevating Nature Above Human Rights.

SEE films celebrating the American military’s fight for liberty and freedom. Beginning Wednesday, the GI Film Festival offers five days of films telling the heroic stories of the men and women who served in America’s armed forces.
SUSS OUT the 21st century national security landscape. The Manhattan Institute hosts Michael Sheehan, author of Crush the Cell: How to Defeat Terrorism Without Terrorizing Ourselves.
EXAMINE the sometimes fitful, and still only partially successful, conservative (and libertarian) challenge to liberal domination of the law. The Cato Institute hosts Steven Teles, author of The Rise of the Conservative Legal Movement.
EXPLORE the many challenges to advancing liberty around the world. The International Leaders Summit hosts its Strategic Roundtable – Washington, D.C. Other sponsors include the Adriatic Institute for Public Policy, Americans for Tax Reform, Atlas Economic Research Foundation, European Enterprise Institute, Cato Institute, The Heritage Foundation.

UNCOVER the truth about who is happy, who is not, and—most importantly—what makes them so. The American Enterprise Institute’s Arthur C. Brooks discusses his new book Gross National Happiness.
CELEBRATE student leader Yon Goicoechea and his successful organizing of opposition to defeat Venezuelan President Hugo Chavez’s bid for dictatorial powers. The Cato Institute awards Goicoechea the 2008 Milton Friedman Prize for Advancing Liberty.

DISCOVER how American cities can give their residents greater freedom, mobility, and livability through less regulation. The American Dream Conference brings together experts and activists to Houston, Texas, one of the least-regulated, most-affordable cities in America.

Check InsiderOnline’s Conservative Calendar for more events.

Posted on 05/09/08 02:36 PM by Alex Adrianson

Heritage on Video

Heritage in Focus: Congress should expand H-1B visas so that businesses can hire the skilled workers they need.

At Heritage: The Supreme Allied Commander Europe delivered a special address. … Hate crimes laws raise significant constitutional questions. … Nuclear power is emerging as a realistic option for nations throughout the world. … The link between China’s economics and its politics needs examination. … The Secure Freight Initiative offers lessons for the challenge of inspecting cargo containers coming into the United States.

Posted on 05/09/08 02:07 PM by Alex Adrianson

Thank Goodness Global Warming Came Along—Just in Time to Help Us Fix the Economy!

Can we tax, spend, and regulate our way to prosperity? Some say we can—if the taxing, spending, and regulating help fight global warming.

North Carolina’s legislators are considering a package of 56 proposals to reduce greenhouse gas emissions. The proposals include such things as mandates on consumer appliances, energy-efficiency requirements for government buildings, subsidies for buying energy from renewable sources, subsidies for investment in renewable-energy technologies, mandating pay-as-you drive insurance, restricting the hours of operation of heavy trucks and buses, mandates for recycling electricity, rationing energy use by businesses (via a cap-and-trade system), new vehicle taxes based on emissions.

Mandate, regulate, tax, ration, subsidize, restrict … If that doesn’t seem like a formula for economic growth, then you must be unfamiliar with the work of Appalachian State University’s Energy Center. According to the Energy Center, the proposed global warming policies will add 32,000 new jobs and $2.2 billion to the North Carolina economy by the year 2020.

Of course, those estimates are a far cry from estimates released six months ago of 325,000 new jobs and $20 billion in value to the economy by the year 2020. Only off by a factor of nine.

ASU’s modelers produced the new, more modest estimates after the earlier ones were criticized by North Carolina’s John Locke Foundation as well as the Beacon Hill Institute in Massachusetts. The Beacon Hill Institute has produced its own estimate: the global warming proposals will cost North Carolina 33,000 jobs, and subtract $4.5 billion from the Gross State Product by 2020.  

As the Beacon Hill Institute study points out, the problem with the ASU estimates is that they are based on an input/output model, which assumes that any resources used in the implementation of the policies would not otherwise be used by the economy. (We have written previously in a different context about the problems with input/output models. See Government’s Magic Job Machine.) In other words, the model assumes that anybody employed as a result of these policies would otherwise be unemployed.

As most sensible people know, there’s no such thing as a free lunch. The question now is: Are North Carolina’s legislators sensible people?

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

Where Is the Party for Liberty?

Writing in National Review today, The Heritage Foundation’s Michael Franc observes that Democrats have captured constituencies that might have been more disposed to favor limited government policies, while Republicans are now doing better among constituencies suspicious of free trade and globalization.

Through May 1, the Democratic presidential field has suctioned up a cool $5.7 million from the more than 4,000 donors who list their occupation as “CEO.” The Republicans’ take was only $2.3 million. Chief financial officers, general counsels, directors, and chief information officers also break the Democrats’ way by more than two-to-one margins. The Democrats’ advantage among “presidents” is a less dramatic but still significant $7.2 million to $6.1 million. And this isn’t new: In 2004 all but one of these categories of top corporate officers broke just as dramatically for the Democrats, the “presidents” being the exception.


The white-shirt/red-tie brigade of Republican presidential aspirants holds a nearly three-to-one edge among janitors, custodians, cleaners, sanitation workers, factory workers, truckers, bus drivers, barbers, security guards, and secretaries. While Democrats command the financial loyalty of architects, Republicans successfully woo contributions from the skilled craftsmen who turn their blueprints into reality — specifically, contractors, hardhats, plumbers, stonemasons, electricians, carpenters mechanics, and roofers. This trend extends to the saloons, where the Democrats carry the bartenders and the Republicans the waitresses. The GOP field even secures more financial support from teamsters, steelworkers, bricklayers, and autoworkers.

Washington Democrats have already adapted their Big Government instincts to this new reality. They have designed government guarantees, subsidies or handouts to address the insecurities of middle- and upper-income American families. Think of the new subsidies proposed on Capitol Hill for higher education, more generous flood insurance for vacation homes, bailouts for homeowners with mortgages as high as $730,000 and welfare-style health coverage for kids in middle-income families, and you get the idea.

Their Republican counterparts, meanwhile, have struggled over how best to sell the benefits of limited government, lower taxes, and free markets to the elites who used to love them or their new, more populist constituent base. Addressing this new reality may be the most important challenge both major parties face in the months and years ahead.

The new political reality is also a challenge that advocates of limited-government, free market policies need to face. Where will be their opportunities for influence?

Posted on 05/07/08 02:00 PM by Alex Adrianson

What’s Missing from the Education Equation

By David Talbot

The federal No Child Left Behind program is six years into its allotted 12 for bringing all children to “at a minimum, proficiency on challenging State academic standards and academic assessments.” According to NCLB’s schedule, over 60 percent of students should have reached proficiency by now; but no grade or subject category of students has topped 40 percent. Writing in The New Criterion, Charles Murray argues the problem is that the law’s architects are blinded by Progressive principles that glorify opportunity and ignore innate intellectual capability.

Astonishingly few reformers acknowledge the fact that kids aren’t cut like cookies and shouldn’t be treated like they are. Yet, notes Murray, the evidence has long been in that differences in innate capabilities matter much more than differences in schools. Four decades ago, an ambitious study led by sociologist James Coleman examined whether there was a link between educational opportunity and student achievement.

The Coleman Report … found that the quality of schools explains almost nothing about differences in academic achievement. Family background was by far the most important factor in determining student achievement. The Coleman Report came under intense fire, but re-analyses of the Coleman data and the collection of new data in the decades since it appeared support its finding that the quality of public schools doesn’t make much difference in student achievement.

NCLB’s unrealistic goal of making all kids proficient leads to situations in which a “fourth-grader who has trouble sounding out simple words and his classmate who is reading A Tale of Two Cities for fun sit in the same classroom day after miserable day, the one so frustrated by tasks he cannot do and the other so bored that both are near tears.”

If innate intellectual ability were made a critical factor in education policy, it would reframe how we think about opportunity. We could set realistic goals for reform. Currently, concludes Murray, NCLB “asks too much from students at the bottom of the intellectual pile, asks the wrong things from those in the middle, and asks too little from those at the top.”

Posted on 05/07/08 01:27 PM by Alex Adrianson

Problems with the Polar Bear/Global Warming Link

The Department of the Interior is expected to announce soon that polar bears have been designated a threatened species under the Endangered Species Act. The justification for such a move will not be that polar bears are actually declining. Rather, the justification will be based on speculation that they may decline in the future as a result of global warming. Global warming, so the argument goes, is causing Arctic sea ice to melt, and, unless that process is arrested, polar bears will be unable to survive because they need Arctic sea ice to reach their primary source of food: seals.

As might be expected with a speculative scenario, there is uncertainty about whether it is actually true. However, there is certainty that if Interior goes through with the designation, it will give the department enormous power to regulate economic activity under a polar bear mitigation plan. Hopefully, before the government puts shackles on the economy, it weighs very carefully the significant uncertainties about whether the polar bear is actually threatened.

Ken Green of the American Enterprise Institute has a new paper detailing the many problems with the supposed global warming/sea ice/polar bear link. Green notes in particular that while there has been some evidence of sea ice loss in the Arctic, there is not enough evidence to conclude global warming is the culprit.

• An October 2007 NASA study concluded that changing wind patterns are responsible for sea ice loss. New wind patterns have compressed sea ice and moved it into the Transpolar Drift Stream which has taken the ice to lower latitudes where it has melted.

• A study reported in Nature in January 2008 reported that Artic heating has been happening higher in the atmosphere than predicted by global warming models. Meanwhile, the predicted warming at the earth’s surface has not been detected. Green comments: “What the data seem to indicate is that heat from the tropics is being transported to the Arctic by wind patterns that are not well understood.”

If global warming isn’t the cause of recent sea ice loss, then there is no reason to assume that the loss of sea ice is a long-term trend.

There are also significant uncertainties about how the loss of sea ice will impact polar bear populations. Analysts use a tool called population viability analysis (PVA), which is fraught with problems. Green writes:

Like various statistical models, PVA can be a useful tool in policy cost-benefit analysis, but its results are only as accurate as the data and the model assumptions that go into it. Polar bear populations are difficult to measure, in part because they travel so much, are sparsely populated, and live far from people. The highest-quality data on polar bears come from aerial studies and mark/recapture studies, in which scientists “mark” polar bears and estimate how many are in a population based on sightings of marked and unmarked animals. There are other methods of estimating polar bears, but the report describes those methods as having “unknown and in most cases inestimable errors.”

Of the nineteen subpopulations of polar bears, the IUCN reports estimates based on aerial or mark/recapture data for fourteen, but of these, only five are based on data collected after 1998. Twelve had sufficient data for the report to predict population trends, and of the five marked as declining, only two of these estimates were based on aerial or mark/recapture data from after 1998. Scientists have collected more recent data on polar bear populations, but from studies with more “inestimable errors.”

But, says Green, we do know that polar bears “have survived past periods of extensive deglaciation.”

Polar bear fossils have been dated to over one hundred thousand years, which means that polar bears have already survived an interglacial period when temperatures were considerably warmer than they are at present and when, quite probably, levels of summertime Arctic sea ice were correspondingly low.

Listing the polar bear as threatened would give government incredible power to control economic development. The government, therefore, should feel an obligation to demonstrate that the polar bear actually is threatened before it lists the polar bear as threatened. Congress, meanwhile, should revisit the whole concept of delegating power that is essentially a legislative power to an unelected government agency. If global warming is a problem justifying economic sacrifice, then Congress should feel an obligation to actually vote for such sacrifice.

Posted on 05/07/08 11:37 AM by Alex Adrianson

Fact of the Day: Ethanol and Food Inflation

According to researchers at Purdue University, increasing food prices cost U.S. consumers an extra $22 billion in 2007. Of those costs, $15 billion are attributable to increasing demand for growing crops for ethanol.

(Cited in Ethanol and Other Biofuels: A Global Warming Solution Worse Than the Problem, by Ben Lieberman, Heritage Foundation, May 2, 2008.)

Posted on 05/06/08 10:42 AM by Alex Adrianson

Muslim Law Professor: Muslims Need Secular States

While Archbishop of Canterbury Rowan Williams and other multiculturalists want to incorporate Islamic law into the legal code of Western societies, one prominent Muslim law professor wants the constitutions of Islamic countries to be more like those of the West. Abdullah Ahmed An-Na’im, a professor of law at Emory University, and formerly a prominent voice in the Islamic reform movement in his native Sudan, has authored a new book arguing that Shari’a law should not be the basis for the constitutions of Muslim nations. An-Na’im’s book is titled Islam and the Secular State: Negotiating the Future of Shari’a. Reviewer Jay Tolson writes:

An-Na’im makes the case that ... [an Islamic] state will ultimately weaken the ability of Muslims to live their lives in accordance with sharia, precisely because a constitutional arrangement based in whole or in part on sharia will be grounded in one and only one interpretation of sharia. And because interpretations are not divine but human and also because they are subject to changing cultural and historical conditions, that one interpretation, if ratified and enforced by the state, would invalidate all other human interpretations of divine will. It would effectively kill the reality of faithful Muslims’ spiritual lives: their ongoing efforts to understand and apply the eternal principles of their religion to the problems and decisions that arise in an ever changing world.

Posted on 05/06/08 10:13 AM by Alex Adrianson

National Charter Schools Week!

This is National Charter Schools Week! According to the Center for Education Reform, 4,100 charter schools serve 1.2 million children across 40 states and the District of Columbia.

The Center has just released a number of great resources for parents, lawmakers, and others who follow charter school issues.

1. CER has published a review of the charter school laws in the 40 states and the District of Columbia. According to CER the main factors that make for strong charter school laws are the degree of funding equity (Does per pupil funding follow the student to the charter school?); few operating restrictions (e.g., exemption from collective bargaining agreements); multiple authorizers of charter schools (in order to bypass local school boards that are sometimes uninterested in reform); and a variety of applicants for charters.

According to CER, the best charter school laws are found in (1) Minnesota; (2) District of Columbia; (3) Michigan; (4) Arizona; (5) California; (6) Florida; (7) Delaware; and (8) Indiana. Iowa (40) and Mississippi (41) have the worst charter school laws. Ten states have no charter school laws at all: Alabama, Kentucky, Maine, Montana, Nebraska, North Dakota, South Dakota, Vermont, Washington, and West Virginia.

2. CER has released both a map and a chart showing which states do the best job of equalizing the per-pupil funding received by charter schools and traditional public schools.

3. CER has published a new survey of public attitudes toward charter schools. Some highlights:

More than 78 percent supported “allowing communities to create new public schools – called charter schools – that would be held accountable for student results and would be required to meet the same academic standards/testing requirements as other public schools but not cost taxpayers additional money.”

Sixty-nine percent agree that “allowing the parent to choose from a number of public schools” as a superior option compared to “assigning children to one public school based solely on where they live.”

4. CER has just released a database of charter schools around the country. Powered by Google Maps, the database allows parents anywhere to search for a charter school in their area.

Posted on 05/05/08 05:34 PM by Alex Adrianson

Don’t Forget the Other Reasons Ethanol Is a Bad Idea

Government policy encouraging the production of ethanol as a substitute for petroleum-based fuel has been identified as a major source of food inflation. As the United Nations appeals for an immediate $755 million to address food shortages around the world, it’s worth pointing out, as Ross Kaminsky writes today at Human Events, that ethanol was a bad idea even before food riots began. Kaminsky points out the following problems with ethanol:

Ethanol does not, as advertised, release fewer greenhouse gases than gasoline. Studies have shown that ethanol from corn grown in Iowa may produce fewer greenhouse gas emissions than gasoline, but meeting expanded ethanol mandates will require more corn grown in regions that are not as efficient at growing corn. Growing corn in those regions will produce more greenhouse gases emissions than the gasoline that would have been replaced by the ethanol. Recent estimates of ethanol’s impact on greenhouse gas emissions now account for a factor missed earlier: the clearcutting of forests and grasslands to prepare new fields for corn production. According to Science magazine, this land conversion releases carbon equal to between 17 and 420 times the amount of carbon that is saved by substituting ethanol for gas.

The renewable portion of ethanol’s energy is only between 5 percent and 26 percent. “Ethanol is essentially a way to fuel our cars with coal, and not a particularly efficient way at that.”

Historically, crop failure represents a greater risk than any instability in petroleum supplies. Thus, switching to ethanol would increase the volatility of fuel prices.

Consumers pay more at the pump because ethanol is more expensive per BTU than gasoline. The BTU-adjusted price for a blend of 85 percent ethanol and 15 percent gasoline is about 10 percent higher. Taxpayers spend between $3 billion and $4 billion extra to fuel the government’s fleet of 6 million flex-fuel vehicles.

Ethanol is not competitive in the market with gasoline. That’s why it is subsidized at taxpayer expense to the tune of between $6.3 billion and $8.7 billion.

Posted on 05/05/08 03:01 PM by Alex Adrianson

This Week in Washington: Global Warming Bill an Anti-Stimulus

An International Perspective on Making the Nuclear Renaissance a Reality, Heritage event, May 7, 2008
The U.S. Should Reject the U.N. ‘Responsibility to Protect’ Doctrine, by Stephen Groves, Heritage Foundation, May 1, 2008

Posted on 05/05/08 12:30 PM by Alex Adrianson

The Coming Week – Monday, May 5, 2008

Some upcoming events that caught our eye:  

FIND OUT how free today’s American is. Host: Freedom House.
LEARN what other countries’ experiences with national health care can teach the United States about health care reform. Host: Cato Institute.
EXAMINE the question: Does World War II still have a meaning? Host: American Enterprise Institute.

MARVEL at the talents of young entrepreneurs. The National Foundation for Teaching Entrepreneurship hosts the 2008 Dare2Dream Gala.

PARTAKE of the wisdom of Arthur Laffer. The Texas Public Policy Foundation hosts the godfather of supply-side economics as he gives a talk on thinking economically.

ASSESS whether hate crimes legislation unnecessarily federalizes law enforcement. Host: The Heritage Foundation.

See InsiderOnline’s Conservative Calendar for more events. (Groups that want to submit events to our calendar will be able to do so soon. Stay tuned for instructions.)

Posted on 05/02/08 01:57 PM by Alex Adrianson

Heritage on Video

Heritage in Focus: Government policies contribute to high gas prices.

At Heritage: Government has placed numerous legal and economic roadblocks to the creation of new businesses. … The United Nation’s new Commission on Human Rights likes to criticize Israel more than actual human rights abusers. … The limit on H-1B visas hurts the U.S. economy and damages U.S. public diplomacy. … Human rights in Cuba is at a crossroads. … There is much the United States can learn from Israel about how to protect both its citizens’ safety and their freedoms. … Environmentalists have caused environmental catastrophes. … Immigration, border security, economic development, and transnational crime are among the major issues requiring cooperation between Mexico and the United States.

Posted on 05/02/08 01:14 PM by Alex Adrianson

IPCC Researchers: Greenhouse Gases Help Earth Avoid New Ice Age

In the latest issue of Nature magazine, researchers from the UN Intergovernmental Panel on Climate Change predict that “global surface temperature may not increase over the next decade, as natural climate variations … temporarily offset the projected anthropogenic warming.”

Steven Milloy comments:  

Although there is no evidence that manmade CO2 emissions play any detectable role in climate change, the very idea that Mother Nature may cool the planet despite humanity’s furious output of greenhouse gases should be even worse for the climate alarmists’ way of thinking. It would mean that greenhouse gas emissions are actually beneficial since without them, Mother Nature’s cooling could be quite damaging.

The last time the Earth significantly cooled was during the 14th to 19th centuries – a period known as the Little Ice Age. Among other things during that period, the Vikings were forced to withdraw from a freezing Greenland and cooler Northern Hemisphere temperatures were responsible for, and or contributed to, numerous famines and much-related social upheaval.

Posted on 05/01/08 06:22 PM by Alex Adrianson

Our Silly Civil Justice System

The Port Authority of New York and New Jersey is 68 percent responsible for the 1993 bombing of the World Trade Center, according to a jury judgment that was affirmed earlier this week by the Appellate Division of the New York State Supreme Court. The people who actually planted the bomb were only 32 percent responsible. Might there be something wrong with our tort system? Ted Frank explains what happened:

Contingent-fee attorneys rarely have the incentive to go after the most culpable party, who all too often does not have the financial assets to account for the damage he has done. It is far more profitable to manufacture a storyline that makes the deep-pocketed bystander look responsible.

… To construct their billion-dollar storyline where the victim is the bad guy, trial lawyers found a 1985 report with dozens of recommendations, one of which was to close 400 of the 2,000 parking spaces in case terrorists used the public parking for a car bomb. The Port Authority chose not to close the public parking. Terrorists bombed the public parking. QED: the authority foresaw the risk and failed to act, and must be responsible.

The hindsight bias is obvious. The jury isn’t shown the hundreds of other warnings or suggestions that the Port Authority decided against following without incident. Rather, the Port Authority was supposed to pick this particular warning out of the report and implement it, even though closing public parking would have cost millions without much benefit, since it is not much more problematic for terrorists to rent space in the building and obtain tenant parking if they were set upon using a car bomb. And to note that terrorists could find some other diabolical means to attack the World Trade Center is more than a hypothetical objection. This saga has nothing to do with safety, and everything to do with enriching trial lawyers. The Port Authority has every incentive to keep car bombs out of their buildings. If discretionary decisions over detailed safety reports can result in liability because of second-guessing by lawyers, that deters detailed safety reports more than anything else.

Posted on 05/01/08 05:43 PM by Alex Adrianson

Housing Bailout Bill Moves to Full House

Today the House Financial Services Committee approved a bill authorizing the Federal Housing Administration to refinance up $300 billion worth of mortgages for homeowners who are at risk of defaulting. The bill, introduced by Rep. Barney Frank (D-Mass.), is expected to reach the House floor sometime next week.

Some problems:

• HERITAGE’S DAVID JOHN has noted how this bailout sends the wrong signals and rewards bad behavior:

It is an extremely bad precedent, as lenders will quickly request that this guarantee be made available to all loans to borrowers with poor credit histories or lower incomes. Until now, the mortgage market has operated under free-market principles with a moderate level of government regulation, but this program would be a step toward government micromanagement. As a significant number of the loans now facing problems were made by irresponsible mortgage brokers using inaccurate and even false data, it would also signal that there are no real consequences for poor lending practices. …

The plan would reward two different groups of homeowners: those who took out a speculative loan they never had a chance of repaying in hopes of flipping the house in a rising market; and those who fell into trouble through no fault of their own. In doing so, it sends a message that it is acceptable to renege on an obligation because a government buyout will cut your losses.

See Frank-Dodd Approach Won’t Fix the Mortgage Mess, by David C. John, The Heritage Foundation, March 24, 2008.

AS THE FOUNDRY has observed, the bill also attempts to cut the wealthy into the subsidy game by raising the limit on the size of mortgages that Fannie Mae and Freddie Mac may purchase. Under the Frank bill, the conforming loan limit would be raised from $417,000 to $729,750. Given that Fannie Mae and Freddie Mac have a limited pool of capital from which to purchase loans, any shift toward larger loans is a shift away from helping poor borrowers for the benefit of wealthier borrowers. The bill thus subsidizes wealthy borrowers with taxpayers on the hook for any defaults. But even with the government implicitly backing these larger loans, the securities industry has decided not to play ball; the Securities Industry and Financial Markets Association recently decided that loans above $417,000 would not be allowed to be traded freely as interchangeable commodities.

Posted on 05/01/08 05:09 PM by Alex Adrianson

A Primer on Taxes

In today’s Washington Times, Richard Rahn observes that unfortunately some people do not understand that high taxes are bad for an economy—in particular, the editorial writers at the New York Times:

On April 24, the paper produced one of its classic inane editorials in favor of higher taxes on labor and capital, which contained this gem of a sentence: “Memo to McCain: 401(k) savers get no benefit from a low capital-gains [tax] rate.”

Everyone who has ever taken basic economics should know a lower tax rate on an investment (i.e., the capital-gains tax) will lead a higher rate of return, and hence the investment will be worth more. Other things being equal, lower capital gains tax rates will lead to higher stock prices, and all who hold stocks will benefit, whether or not they pay a particular tax on that stock. Though this concept is not difficult for most people to understand, it seems beyond the knowledge and reasoning ability of those who write editorials for the New York Times.

Rahn’s column provides a good primer on things everyone should understand about taxes.

Posted on 05/01/08 03:32 PM by Alex Adrianson

Tariffs Ticking

Five-hundred and twenty-seven days have now passed since the U.S.-Colombia Free Trade agreement was signed—527 days that Congress has refused to give the agreement an up or down vote. In that time, U.S. exporters have paid an estimated $993.5 million in tariffs to sell their goods in Colombia.

All this information is easily found by checking the Commerce Department’s Colombia Tariff Ticker.

Colombia, on the other hand, doesn’t really need a ticker, because most of their exports face no tariffs at all to enter the United States.

Colombian exporters and American consumers surely appreciate the benefits of trade. Colombian consumers and American exporters would too, if Congress would let them.

Posted on 05/01/08 10:13 AM by Alex Adrianson

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