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InsiderOnline Blog: July 2010

Milton Friedman’s Legacy

Among other interesting things in this video is Phil Donahue explaining how Milton Friedman influenced his beliefs:

Posted on 07/30/10 01:00 PM by Alex Adrianson

Is Science Becoming Authoritarian?

Some very telling results of a Lexis/Nexus search:

Kenneth P. Green and Hiwa Alaghebandian explain:  

In the past, scientists were generally neutral on questions of what to do. Instead, they just told people what they found, such as “we have discovered that smoking vastly increases your risk of lung cancer” or “we have discovered that some people will have adverse health effects from consuming high levels of salt.” Or “we have found that obesity increases your risk of coronary heart disease.” Those were simply neutral observations that people could find empowering, useful, interesting, etc., but did not place demands on them. In fact, this kind of objectivity was the entire basis for trusting scientific claims.

But along the way, an assortment of publicity-seeking, and often socially activist, scientists stopped saying, “Here are our findings. Read it and believe.” Instead, activist scientists such as NASA’s James Hansen, heads of quasi-scientific governmental organizations such as the UN Intergovernmental Panel on Climate Change, editors of major scientific journals, and heads of the various national scientific academies are more inclined to say, “Here are our findings, and those findings say that you must change your life in this way, that way, or the other way.” [“Science Turns Authoritarian,” The American, July 27, 2010.]

Posted on 07/30/10 12:53 PM by Alex Adrianson

Adding to the Pain

Continuing the moratorium on off-shore oil drilling for six months will come at a cost of $2.8 billion in economic activity nationwide ($2.1 billion of which will be borne by Gulf Coast communities) according to a new study by economist Joseph Mason for the Institute of Energy Research. Mason also estimates that over 12,000 jobs will be lost if the moratorium is continued. 

Posted on 07/30/10 12:40 PM by Alex Adrianson

Happy Birthday, Milton Friedman

Tomorrow is Milton Friedman’s 98th birthday. Friedman died in 2006, but his body of work both as an academic and as a defender of the free enterprise system against government interventions will remain with us for quite a long time. With government now running auto companies, designing health insurance plans for everyone, and otherwise busy making trillion the new billion, Friedman’s insights are just as valuable as ever. The best way to remember Friedman is to read his work. If you haven’t yet, sample a few chapters of Capitalism and Freedom. The whole book can be read in a day, but you’ll find it valuable for the rest of your life. You could also take in one of the many public events that free market think tanks are sponsoring today around the country. (See our earlier post for links to those events.) Or you could watch some of the many televised Friedman interviews, discussions, and lectures. Many of those are available on YouTube, or you can check the “Free to Choose” blog for a collection of links to Friedman videos (including the Free to Choose series).

Friedman was a brilliant academic who won the 1976 Nobel Prize in Economics. His research challenged the Keynesian orthodoxy on using fiscal policy to manage the ups and downs of an economy. He developed the permanent income hypothesis, showing that temporary tax cuts do not encourage consumer spending. His A Monetary History of the United States (co-written with Anna Schwartz) revealed that the Great Depression was actually a Great Contraction in the money supply for which the Federal Reserve (i.e., the government) was culpable. He debunked the supposed inflation-employment tradeoff by explaining that monetary expansions worked only when people were not expecting them. His work thus predicted the stagflation of the 1970s and anticipated the development of the rational expectations school of thought (for which Robert Lucas won a Nobel Prize).

Friedman was also a great communicator of free market reform ideas to the general public. It’s easy to forget there was a time when the majority of people believed—even more so than now—that a large interventionist welfare state was needed to correct the deficiencies of the free market and secure prosperity. Friedman changed a lot of minds (though there is still much policy to change). He had a real knack for engaging statists in debate and exposing where their arguments jumped the rails of reason and logic. This ability was on great display in his ten-part PBS television series Free to Choose (later developed into a book, co-authored with his wife Rose), a groundbreaking project that for many people was their first exposure to free market thinking.

A recurring theme of his commentary was that those running a government are likely to have the very same vices (and perhaps a few additional ones) as the capitalists they are supposed to rein in. But while failure in a free enterprise system means going out of business, failed public policies do not carry any kind of automatic sanction against their authors. Friedman, in one of his most cited quotes, summed up the problem: “Governments never learn. Only people learn.” Friedman never let a statist get away with assuming that government planners have nothing but virtuous motives. Talk show host Phil Donahue had Friedman on his show once, and complained that the free market rewarded the ability to manipulate the system. Friedman replied: “And what does reward virtue? You think that the Communist commissar rewards virtue? You think a Hitler rewards virtue? … Do you think American presidents reward virtue? Do they choose their appointees on the basis of the virtue of the people appointed or on the basis of their political clout? Is it really true that political self-interest is nobler somehow than economic self-interest? You know, I think you are taking a lot of things for granted. Just tell me where in the world you find these angels who are going to organize society for us. I don’t even trust you to do that.” 

Friedman’s influence extended to many public policy issues. He was especially outspoken on the problem of professional licensure, which he explained was simply an attempt by those in a particular field to limit competition and keep prices high to the detriment of consumers. Friedman, in another frequently repeated quote, explained: “Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.” One of the things for which Friedman was most proud was his role in ending the draft and creating the all-volunteer army we have today. It’s a policy that has not only improved the military, but is more befitting of a free country that has generally been at peace. But the issue for which Friedman is most well-known is school choice, the movement for which can be traced to his 1955 article, “The Role of Government in Education.” In that article, he proposed a voucher system that would allow each student to attend the school of his or her choice. Friedman argued that this system would not only improve education, but would cost the taxpayers less, since government does nothing as efficiently as it could be done under a system of competition. In 1996, Friedman, along with his wife Rose, founded the Foundation for Educational Choice to educate the public on the value of school choice policies. Today, there are 18 publicly funded school choice programs operating in 11 states, serving nearly 180,000 students.

The world is a much better place today because Milton Friedman wrote and spoke so effectively for the philosophy of individual liberty. We remember him today, but we would be better off to remember him even more in the future.

Posted on 07/30/10 11:44 AM by Alex Adrianson

Want $3,000 to Buy Video-Making Equipment?

The Atlas Economic Research Foundation is giving $3,000 grants to U.S. and Canadian think tanks that want to upgrade their video production capabilities. To have your group considered for a grant, just fill out a questionnaire at the Atlas Web site.

Posted on 07/29/10 02:39 PM by Alex Adrianson

Celebrate Milton Friedman on His 98th Birthday

Saturday is the 98th birthday of Milton Friedman, one of the past century’s greatest exponents of individual liberty and free markets. Friedman, who passed away in 2006, won the 1976 Nobel Prize in Economics for a body of work that challenged the Keynesian orthodoxy on fiscal policy. In particular, Friedman’s research showed that temporary tax cuts do not spur consumer spending, that the Great Depression was a Great Contraction in the money supply caused by the Federal Reserve, and that inflation cannot be a long-run solution to unemployment.

Friedman also had a knack for popularizing free market ideas on public policy. In 1955, Friedman wrote an article called “The Role of Government in Education,” in which he argued that government could provide funding for primary education without directly running the schools. Friedman proposed a system of vouchers that would allow each student to attend the school of his or her choice. That article began the school choice movement in the United States. Friedman, along with his wife Rose, later started the Foundation for Educational Choice to educate the public on the value of school choice policies. Today, according to the Alliance for School Choice, there are 18 publicly funding school choice programs operating in 11 states, serving nearly 180,000 students.

Numerous think tanks will hold special events on Friday to honor Milton Friedman. Those organizations include the Arkansas Policy Foundation, the Bluegrass Institute for Public Policy (Kentucky), the Cascade Policy Institute (Oregon), the Ethan Allen Institute (Vermont), the Foundation for Educational Choice, the Heartland Institute, the Illinois Policy Institute, the James Madison Institute (Florida), the John Locke Foundation (North Carolina), the Maine Heritage Policy Center, the Pelican Institute for Public Policy (Louisiana), the Platte Institute for Economic Research (Nebraska), the Rio Grande Foundation (New Mexico), the Tennessee Center for Policy Research, the Texas Public Policy Foundation, and the Yankee Institute for Public Policy (Connecticut).

Posted on 07/28/10 04:44 PM by Alex Adrianson

A History of Fiscal Policy in Two Sentences

“In 1916, in Woodrow Wilson’s first term, the richest man in America, John D. Rockefeller, could have written a personal check and retired the national debt. Today, the richest man in America, Bill Gates, could write a personal check for all his worth and not pay two months interest on the national debt.” [From George F. Will’s remarks at the Cato Institute’s biennial Milton Friedman Prize for Advancing Liberty Dinner, May 13, 2010.]

Posted on 07/28/10 11:45 AM by Alex Adrianson

Has the Americans with Disabilities Act Hurt the Disabled?

Yesterday was the 20th anniversary of the passing of the Americans with Disabilities Act, an occasion that ought to call for some skepticism rather than reflexive cheerleading. Thus, at Cato-at-Liberty, Walter Olson catalogues some recent surprising consequences of the law:

… a New Jersey jury ordered a rheumatologist to pay $400,000 for not providing a deaf patient with a sign language interpreter at his own expense; the Ninth Circuit ruled that the law may require movie theaters to provide captions and descriptions for blind or deaf viewers; a federal appeals court ruled that the nation’s paper currency unfairly discriminates against the disabled and must be redesigned (thus taking a different view from the National Federation of the Blind, which doesn’t think there’s a problem); a police dispatcher won a settlement in her lawsuit saying she was unfairly discriminated against because of her narcolepsy (tendency to fall asleep at inappropriate times); a large online tutoring service agreed to provide interpreters; miniature golf courses learned they will have to make 50 percent of their holes accessible to wheelchair users; and so forth. On Friday the Department of Justice announced that it would revisit the high-stakes question of whether and to what extent website operators must make their designs and services “accessible” to disabled computer users, perhaps in onerous and expensive ways.

As Olson notes, the employment of the disabled has declined since the passage of the act, possibly because the prospect of having to make expensive accommodations or face a lawsuit discourages companies from hiring the disabled.

Posted on 07/27/10 05:38 PM by Alex Adrianson

Commissioner Kirsanow: Justice Department Not Color-Blind

The U.S. Commission on Civil Rights has been looking into the Department of Justice’s decision to drop voter intimidation charges against the New Black Panthers and into whether the Department of Justice is enforcing civil rights laws in a color-blind manner. At the Corner, Commission member Peter Kirsanow summarizes the evidence so far, and he doesn’t paint a pretty picture of the goings on at DOJ. Here’s a taste of Kirsanow’s brief:

Uncontroverted evidence adduced before the Commission shows that a culture exists within the Civil Rights Division that is hostile to bringing claims against minority defendants or on behalf of white victims. The evidence shows, inter alia, that a black Department of Justice employee who worked on a case involving black defendants was racially harassed by Voting Rights Section staff; that a Department of Justice attorney who brought a case against black defendants had his authority gradually removed; that repeated statements were made by Department of Justice personnel that the DOJ should not bring cases against minority defendants on behalf of white victims; that attorneys within the Voting Rights Section flatly refused to work on U.S. v. Ike Brown, a case involving a black defendant and both white and black victims; that Voting Rights personnel objected to use of department resources to bring cases against minority defendants; that the department refuses to enforce Section 5 of the Voting Rights Act on behalf of white victims; and that case-justification documents were altered in a manner that would reduce or eliminate the probability that a case would be filed against black defendants.

The Commission, says Kirsanow, will issue its final report in a few months.

Posted on 07/27/10 11:52 AM by Alex Adrianson

RightOnline: How to Build a Community Online

The RightOnline conference, held Friday and Saturday in Las Vegas, featured a good panel on building an online community. We were there and took notes.

Kristan Hawkins talked about some strategies that have helped the group Students for Life build its online outreach:

• You should create a fan page for your organization. Do not confuse Facebook’s fan page feature with its group page feature. Fan pages let you do more things than group pages do.
• Go with a “soft launch” before a “hard launch.” Tell your friends and family about your Facebook fan page, and solicit feedback from them. This step will let you fine-tune your page before you market it to the public.
• Content is king. Mastering Facebook (or Twitter) won’t matter if you don’t have content that is interesting.
• Make your content interactive. Polls and questions work better than just plain news articles.
• Ask yourself: What is my niche? What do I have to offer that no one else does?
• Offering free stuff is a good way to entice people to engage in discussion on your page.
• Find potential Facebook followers. Helpful strategies include: searching with keywords, mining the followers of like-minded organizations, posting comments at conservative sites and including a reference back to your own Facebook page.

Notes for Hawkins’s presentation are also available at

Mike Brownfield, Senior Digital Communications Associate at The Heritage Foundation, shared some of the social media strategies that have helped Heritage increase its Facebook fans from 65,000 to over 200,000 in a less than a year:  

• Talk the Talk. Each social media platform (Facebook, Twitter) has its own vernacular. Learn the language of the platform in order to communicate effectively. For example, if you don’t know what a hash tag is, then you need to learn the language of Twitter. Above all, turn off any automatic feed and devote a live human being to writing the posts.
• Know the Rules of the Game. Understand how the platform works. For example, Facebook rates the quality of each post based on user response, and that rating helps determine how often your posts actually show up in other people’s news feeds. So if you post too often, you can actually hurt your chances of other people seeing your posts.
• Show Some Love. Social media is a two-way street, so make sure you are interacting with your followers/fans. Make sure you answer messages, respond to notes, and thank them for reposting/retweeting.
• Let Them Eat Cake. There are things that people like: photos, videos, polls, charts, graphics, and quizzes. Use them.
• Ask and Ye Shall Receive. People like to be asked to do things: to follow a link, to click the like button, to answer a question.
• Beg, Borrow, and Steal. Facebook evolves. What works now might not work next year, so take note of what others have done well on Facebook. And don’t be afraid to ask others to share the secrets of their successes.

Posted on 07/26/10 03:14 PM by Alex Adrianson

The Founders Make a Comeback

Liberals are confounded that their policy proposals, which they see as an extension of Roosevelt’s New Deal, have run in to so much resistance from the public. They should read Michael Barone’s article at The American explaining why more New Deal is a tough sell. For one thing, we can now look back at the Great Depression and appreciate capitalism’s resilience, even in the face of bad economic policies. Voters who think economic growth will return are less likely to favor policies that seek to lock an economy in place. Contrary to the progressive vision, capitalism isn’t dead, and fears of a Marxist revolution no longer compel automatic acceptance of more social welfare statism. These factors are compounded, argues Barone, by the reality that many more Americans today are property owners and expect to be able to accumulate wealth in the future, given the chance to do so in a free economy. Barone concludes:

It is fascinating to me that the tea partiers have adopted the language and in some cases even the costumes of the Founders. While the Progressives’ descriptions of a “horse and buggy” Constitution and their sense that giant auto factories and steel mills were the harbinger of the future seem tinny and out of date, the language of the Founders continues to resonate with the clear timbre of a silver spoon tapping a crystal glass. The majority of the American people seem to firmly agree with the Founders’ insistence that no one should be deprived of life, liberty, or property without due process of law. And so we can take satisfaction that most of our fellow citizens in our freeholders’ republic still hold these truths to be self-evident.

Posted on 07/22/10 10:04 PM by Alex Adrianson

How Do Views on Public Policy Change?

Facts and logic, though important, aren’t enough. Joe Lehman of the Mackinac Center explains it in a recent appearance on Glenn Beck. For the background, see the Mackinac Center’s page on The Overton Window.

Posted on 07/22/10 08:56 PM by Alex Adrianson

Up With Western Civ.

Two Australian think tanks have just launched a research program and Web site on The Foundations of Western Civilisation. It’s a project of the Institute of Public Affairs and Mannkal Economic Education Foundation, and promises lots of content on history, philosophy, religion, and culture.

One recent article at the site observes that the Australian government is pushing a slight redefinition of religious freedom. Apparently, religious freedom now means the freedom not to be offended by other religions. The article reports that in a paper titled “Freedom of Religion and Belief in a Multicultural Democracy: an inherent contradiction or an achievable human right?” the Australian Social Justice Commissioner claims “there needs to be a ‘greater role for government in managing religious freedom,’ that relations between religions need to be managed by government, and the public sphere should be ‘moderated’ by the ‘gentle and gloved hand’ of the law.”

Indeed, Western Civilization needs to be defended, and sometimes government itself is the threat.

Posted on 07/22/10 08:34 PM by Alex Adrianson

In Vegas for RightOnline

We just landed in Las Vegas for the 2010 RightOnline conference which is going on Friday and Saturday. Every year this conference provides a lot of great insight on how conservatives can best make use of the Internet to get their messages out. We’ll report on the interesting stuff we learn, so stay tuned.

Posted on 07/22/10 07:39 PM by Alex Adrianson

Fusionism at the Values Voter Conference

The Values Voter Conference is coming up. It will be held on September 17 - 19. Of particular interest to InsiderOnline readers will be a panel on how economic conservatives and social conservatives share more common ground than is typically understood.

While it is true that there are different stripes of conservatives, such distinctions should not be confused with the artificial classification of some issues as economic and other issues as moral or social. At least as far back as Adam Smith—who wrote both of the virtues needed for a free market to work and about how free markets can provide a kind of moral education through conditioning self-interested individuals to consider how they are perceived by others—conservatives and classical liberals have recognized the interdependence of morality and economics.

How these considerations apply to contemporary circumstances—in particular to the enormous growth of government over the last 18 months—is explored in Indivisible: Social and Economic Foundations of American Liberty, a Heritage Foundation monograph published earlier this year. The project brought together leading economic conservatives and social conservatives to share their perspectives on policy issues.

The aforementioned panel at the Values Voter Conference is composed of three of the contributors to Indivisible: Jennifer Marshall of The Heritage Foundation, Ken Blackwell of the Family Research Council, and Steve Moore of the Wall Street Journal.

Posted on 07/21/10 08:27 PM by Alex Adrianson

Beware of Proposals for High-Speed Rail

says Examiner Columnist Barbara Hollingsworth, for they have a tendency to cost taxpayers more than advertised:  

Danish researcher Brent Flyvbjerg, author of “Megaprojects and Risk,” studied 258 major transportation projects in Europe and North America over the past 80 years and found that the actual costs were 45 percent higher, on average, than original estimates. He concluded that such huge discrepancies could only be the result of deliberate low-balling in an attempt to secure public support. Lying to the public, in other words.

Posted on 07/20/10 05:26 PM by Alex Adrianson

Cancel the Pep Talk

Robert Reilly’s recent book The Closing of the Muslim Mind: How Intellectual Suicide Created the Modern Islamist Crisis deserves a mention in light of the recent controversy over Charles Bolden’s comments to Al Jazeera. Bolden, the head of the National Aeronautics and Space Administration, told Al Jazeera that the President had tasked him to “find a way to reach out to the Muslim world and engage much more with dominantly Muslim nations to help them feel good about their historic contributions to science and math and engineering.”

Bolden’s comments were criticized as an example of weird mission creep and pandering to Muslim opinion. But they also raised the question of why dominantly Muslim nations would need self-esteem therapy when it comes to scientific achievement. Reilly’s book provides an answer. He traces many of the problems in Sunni Muslim societies, including a general disregard for science, to the triumph of Ash’arite theology over Mu’tazalite theology in the Muslim world of the 11th century.

The Ash’arites, Reilly explains, held that God is pure will and power unbounded by anything even including his own word. This conception of a limitless God is supported by a metaphysics holding that things of themselves have no nature, that there is no intrinsic order in the world, and that everything is constituted at any particular moment by God’s will. Everything that happens must therefore be a miracle. Man cannot reason his way to knowledge of God. He knows him only through revelation. One can see the problem for science in a society that believes God’s will is the one and only explanation possible. As Reilly explained in our interview with him last month:

These societies are profoundly dysfunctional because their access to reality has been cut off. Fouad Ajami exclaimed, “Wherever I go in the Islamic world, it is the same problem: cause and effect, cause and effect.” He was witnessing the effects of the denial of causality in the natural world that this theology asserts to protect its notion of God as radically transcendent and omnipotent. In its terms, God can only be omnipotent if no one else is so much as potent. This means that there are no secondary causes, as in natural laws—like gravity or fire burning cotton—just the first and only cause, God. He does everything directly. (The explicit denial of causality helps to explain the demise of science in the Islamic world. If there are no natural laws to discover, why go searching for them?)

The important conclusion from all this is that a sending majority-Sunni Muslim nations a bunch of warm fuzzies isn’t going to make them better at science, because it’s not going to undo a millennium’s worth of theological deformation. If we really want to change Muslim societies, we should, as Reilly notes, be more supportive of those voices in the Muslim world who are challenging their own cultures to reengage with the West and its ideas about reason.

Reilly gave a talk about his book at Heritage back on May 26.

Posted on 07/19/10 07:51 PM by Alex Adrianson

The Neutrality Petard Goes Around

Google has been a strong advocate of network neutrality, a policy that aims to prevent Internet service providers from favoring some types of content over others. The idea is to prevent any one company becoming a gatekeeper to the Internet.

The New York Times now wants to adapt that idea to ensure fairness in search-engine results. In an editorial on Thursday, the Times suggested a government commission might be needed to approve changes that Google makes to its search algorithm. The Times claims that because “Google handles nearly two-thirds of Internet search queries worldwide” the tweaks to its algorithm “can break the business of a Web site that is pushed down the rankings.”

OK, why not a government commission to approve the tweaks in the supersecret algorithm that the New York Times uses to decide which stories are important enough to cover? That’s the premise of Danny Sullivan’s creative rewriting of the Times editorial in a post at search engine land.

If that strikes the Times as an affront to its First Amendment rights, then perhaps the Times should rethink its fetish for fairness. Sullivan points out, by the way, that the U.S. Western District Court of Oklahoma ruled in 2003 that Internet page rankings constitute opinions deserving full First Amendment protection. Google was the defendant arguing the free speech side in that case. Maybe it’s time for Google to consider that Internet service providers have free speech rights, too.

Information consumers, of course, don’t care about fairness; they just want accurate information. As long as they are free to choose a different search engine, Google will have an incentive to make its algorithm serve its customers. A search-engine fairness commission, on the other hand, will be another arena for special interest lobbying that will surely short-circuit competition.

Posted on 07/19/10 04:10 PM by Alex Adrianson

On Vacation

We’re off this week. Please check back on Monday for more content. Thanks.

Posted on 07/13/10 01:04 PM by Alex Adrianson

How the Feds Can Help the States

The difference between Greece and financially troubled California, says Josh Barro, is that California does not have a solvency problem; hence default would be entirely optional. California still has options:

If lenders became unwilling to lend money to the state at an affordable rate (or at all), California could simply respond by retiring debt as it matures and issuing no new debt. This would require running a primary surplus (revenues minus non-interest spending) of just 0.2% of GSP.

That’s the good news. The bad news, say Barro is that the prospect of a federal bailout may be encouraging California and other states to avoid making tough decisions now:

If the federal government will bail out a state that defaults on its bonds, then default may be a good fiscal strategy: it allows the state to engage in spending that will ultimately be paid for by taxpayers elsewhere.

The oddest part of this is that states are not legally allowed to go bankrupt. If states stop paying their bondholders, they will be sued in federal court and lose – which should serve as a significant disincentive to default (and provide reassurance to lenders). However, a state default without bankruptcy would have unacceptable political and financial ramifications that could lead the feds to step in and make bondholders whole.

To stamp out this moral hazard, the federal government should act now to foster the expectation that it will not bail out failed states. One option would be to pass a law stating that the federal government will not assume state debts or lend money to states directly. This would include barring the Federal Reserve from buying state bonds.

Another, potentially more potent option would be to enact a law that would deprive any state that is in arrears on its bond payments of all federal grant funds – including the federal components of Medicaid, welfare, highway and education funding. This would take bond default away from states as an option to conserve cash, as all states receive federal grants far in excess of their debt service costs.

See Barro’s article: “States: The New Strategic Defaulters,” published by Real Clear Markets, July 6, 2010.

Posted on 07/09/10 11:05 AM by Alex Adrianson

How to Create 1 Million Jobs outlines the plan:

Posted on 07/09/10 10:21 AM by Alex Adrianson

Why the VAT Would Be a Tax Increase Machine

In Europe, the Value Added Tax was supposed to replace other taxes so that its adoption would not amount to a tax increase. But, as Randall Holcombe points out, in most of the countries that implemented a VAT, the VAT rates went up over time. In the United States, on the other hand, VAT proponents say explicitly that their goal is to increase tax collections by the government.

Holcombe, in his new paper for the Mercatus Center, points out another reason to think a VAT in the United States will lead to a ratcheting up of rates over time:

The United States has a much more decentralized system of government than most other nations that use the VAT, and the tax base that would be taxed under a VAT—consumption—is a major source of revenue for state governments. … [E]ven if the initial VAT rate is modest, once imposed, both state governments, with their sales tax rates, and the federal government, with its VAT, will have the tendency to raise rates so that the combined sales tax plus VAT rate will be larger than would be optimal. The reason for this is that when taxing that tax base to raise revenues, neither level of government has an incentive to consider the effect of its taxes on the revenues raised by the other level of government. The federal government, for example, would set its VAT rate without considering that it would reduce state sales tax collections. Some evidence that this is the case is that even as a federal VAT is now being discussed, its impact on state sales tax collections is rarely considered, and even more rarely viewed as an argument against the VAT.

See Holcombe’s paper, “The Value Added Tax: Too Costly for the United States,” for a discussion of other problems with the VAT.

Posted on 07/09/10 10:05 AM by Alex Adrianson

Now It’s a Party!

The celebration of American’s unalienable rights continues: On July 17, the Independence Institute holds its eighth annual Alcohol, Tobacco, and Firearms Party. It’s the one event we know of that let’s you smoke, drink, and shoot stuff all at the same time and place. But keep in mind there’s a good cause behind it all: Saying “shove it” to the folks who want government to be your parent. The event takes place at the Kiowa Creek Sporting Club in Bennett, Colorado. Nick Gillespie, editor of, will be the featured speaker.

Posted on 07/08/10 07:03 PM by Alex Adrianson

Cut Here

“Bringing federal compensation in line with private-sector compensation would save taxpayers approximately $47 billion in 2011,” says Heritage Foundation fellow James Sherk.

Sherk’s new study, “Inflated Federal Pay: How Americans Are Overtaxed to Overpay the Civil Service,” finds that “federal employees earn approximately 30 percent to 40 percent more in total compensation (wages and benefits) than comparable private-sector workers.”

Posted on 07/08/10 06:23 PM by Alex Adrianson

Hiring Quotas to Be Foisted on Finance

Gender and race quotas are coming to the financial industry if the current version of the Dodd-Frank financial regulation bill becomes law, reports Diana Furchtgott-Roth. That would probably lead to a less efficient financial sector, since firms’ hiring decisions would be aimed at avoiding regulatory trouble rather than hiring the most qualified workers.

Section 342 of the bill sets up some 20 different Offices of Minority and Women Inclusion that would be charged with assuring “to the maximum extent possible the fair inclusion” of women and minorities in the activities of the agencies, including in contracting. Among the agencies roped into the new requirements would be the Treasury, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the 12 Federal Reserve regional banks, the Board of Governors of the Fed, the National Credit Union Administration, the Comptroller of the Currency, the Securities and Exchange Commission, and the new Consumer Financial Protection Bureau.

Furchtgott-Roth says that this pursuit of fairness will likely devolve into a quota system, because that’s just what happened with enforcement of fairness requirements in college sports. Title IX of the Civil Rights Act “specifically prohibited arbitrary leveling of student numbers by gender.” Yet the Department of Education and the courts have interpreted the law in such a way that “[i]f 55% of the students are female, then 55% of the varsity sports slots have to go to women.”

Furchtgott-Roth’s article is “Gender Quotas in the Financial Sector?” at Real Clear Markets, July 8, 2010.

Posted on 07/08/10 03:48 PM by Alex Adrianson

Coming Up: European Resource Bank

Dozens of think tanks from across Europe will gather in London on September 8-10 to hash out strategies for promoting civil society, free markets, and individual liberty. The Seventh Annual European Resource Bank, hosted this year by The TaxPayers’ Alliance of Britain, will focus on health care, global warming, privacy issues, and how to promote free markets during a recession. Speakers include: Pierre Garello of the Institute for Economic Studies, Alberto Mingardi of the Instituto Bruno Leoni, Douglas Murray of the Centre for Social Cohesion, Grover Norquist of Americans for Tax Reform, Eamonn Butler of the Adam Smith Institute, Julian Morris of the International Policy Network, and Tom Palmer of the Atlas Economic Research Foundation. Arthur Laffer will provide his view of the state of the world economy. Two other regular events will be held in conjunction with European Resource Bank: The Taxpayers’ Conference and the Hayek Institute’s Free Market Road Show. Registering by July 16 will get you a 10 percent discount.

Posted on 07/07/10 10:46 AM by Alex Adrianson

Good START or Bad START?

The Obama administration wants the Senate to approve a new Strategic Arms Reduction Treaty that it recently concluded with Russia. A panel of experts at a recent Heritage event, however, notes some problems with the treaty:

Posted on 07/06/10 06:19 PM by Alex Adrianson

What Makes America Exceptional?

For the conclusion of our series highlighting the thoughts of conservative and libertarian leaders on American Independence and the Founding, we asked: What do you think makes America exceptional?

Lawrence W. Reed, President of the Foundation for Economic Education: America is exceptional because Americans after the Founding showed that they really did take their new freedoms seriously. They did not expect much from their new government, other than to protect the peace and otherwise leave them alone. They didn’t wait for government to show them how to build a vibrant civil society; they just did it, and to a greater extent than any people before or since. In the 19th Century, they settled the continent; they formed endless and powerful problem-solving, private entities; they cultivated the virtues necessary for freedom to survive; and they welcomed millions to their shores to share the freedom experience with them.

Matthew Spalding, Director of the B. Kenneth Simon Center for American Studies at The Heritage Foundation: America indeed is an exceptional nation, but not because of what it has achieved or accomplished. American is exceptional because it is fundamentally dedicated to the principles of human liberty, grounded on the truths that all men are created equal and endowed with equal rights—permanent truths “applicable to all men and all times,” as Abraham Lincoln once said. It was because of these principles that rather than ending in tyranny the American Revolution culminated in a constitutional government that has long endured.

America’s principles are responsible for a prosperous and just nation unlike any in the world. They explain why Americans strongly defend their country, look fondly to their nation’s origins, vigilantly assert their political rights and civic responsibilities, and remain convinced of the special meaning of their country and its role of the world. It is because of these principles, not despite them, that America has achieved its greatness.

To this day, so many years after the American Revolution, these principles—proclaimed in the Declaration of Independence and promulgated by the United States Constitution—still define America as a nation and a people. Which is why the friends of freedom the world over look to the United States not only as an ally against tyrants and despots everywhere but also as a powerful beacon to all those who strive for liberty and seek democratic self-government.

Posted on 07/04/10 10:28 AM by Alex Adrianson

Favorite Founders

In this sixth installment of our series highlighting the thoughts of conservative and libertarian leaders on American Independence and the Founding, we asked: What Founder is either your favorite or one who you think deserves more credit for his or her contributions to America? (This series will conclude with one more post tomorrow morning.)

John J. Miller, National Political Reporter for National Review: John Adams. He was colorful and cantankerous, had the best wife, and lived through the entire arc of America’s founding period. He started out as an anti-tax activist in Boston in the 1760s, threw himself into the radical politics of independence in the 1770s, and influenced the drafting of the Constitution in the 1780s. His presidency in the 1790s is not widely hailed as a success, but how many other presidents can say they whipped the French in a naval war? During a quarter century of retirement, he watched the growth of the early republic with a measure of well-deserved pride and died, almost providentially, on July 4, 1826—exactly half a century after he signed the Declaration of Independence. It can be a mistake to project the politics of the 21st century onto those of the Founding era, and Adams could be a complicated man. Yet it’s also possible to claim him as the Founding generation’s great conservative thinker. “Should I let loose my imagination into futurity, I could imagine that I foresee changes and revolutions such as eye hath not seen nor ear heard,” he once wrote. “I cannot see any better principle at present than to make as little innovation as possible; keep things going as well as we can in the present train.”

Sally Pipes, President of the Pacific Research Institute: While I have only been in this great nation since 1991, I am proud to say that I became a citizen almost four years ago. My favorite Founder is an immigrant like myself, Alexander Hamilton.

Hamilton most closely represents the ideals that I hold so dear to my heart—the spirit of entrepreneurship, risk-taking, the betterment of one’s condition, the rule of law, and individual freedom, and responsibility. Hamilton stood, in particular, for a dynamic commercial economy and a strong but limited government.

I believe that if Alexander Hamilton were alive today, he would be very upset about the abandonment of those Founding principles under President Obama and his move to put a nannying government in charge of our lives. Specifically, the recently passed $1 trillion, 2,500-page Patient Protection and Affordable Care Act, the largest entitlement program since the Great Society, would be very distressing for Hamilton. This new legislation gives government increasing control over our health care along with increased taxes and deficits. It will not lead to universal coverage or reduce costs. Instead it will ultimately lead to rationed care for all Americans and will contribute hugely to the undermining of our “public credit,” which Hamilton understood as both an economic and a moral good.

America today appears to be on the “road to serfdom” and the American people need to stand up and make it clear that this movement must be stopped. Alexander Hamilton would deny that we have a “right” to health care. We have the freedom to acquire the health care that each of us wants as individuals.

Let’s return to the principles of our Founders and reverse the current path down the road to democratic socialism. Happy Birthday America. I am proud to be part of this nation of entrepreneurs and want us to continue on the Hamiltonian road to greatness.

Jamie Radtke, President of the Virginia Tea Party Patriot Federation. As a Virginian, one of my favorite Founding Fathers is Patrick Henry, a man who is often not given enough credit for his many accomplishments. Patrick Henry is famously known for his quote: “Give me liberty or give me death.” It was a powerful speech that gave men the courage to confront the king and fight for their natural rights as free men. But another one of his important contributions was the enactment of the Virginia Resolves.

In response to the Stamp Act, the House of Burgesses, with Henry’s sponsorship and at his urging, passed the Virginia Resolves on May 29, 1765, which adopted the position of “no taxation without representation.” Henry’s skillful passage of this act in the Virginia House of Burgesses would ultimately prove to be one of the first actions of the War for Independence.

The Virginia House of Burgesses was the first colonial assembly to make this declaration (and possibly the first colonial legislature to openly defy Parliament), but it soon spread throughout the colonies and gave way to the War for Independence. This idea of “no taxation without representation” has been a part of the ideological fabric of our society for the last 200-plus years, and we can thank Patrick Henry for his ardent advocacy of this fundamental truth.

Another action that endears me to Patrick Henry was his insistence that a Bill of Rights be included in the U.S. Constitution to protect against a tyrannical government. When we look at the constant assaults on our rights to free speech, freedom of religion, and the right to bear arms by the progressives, it is scary to imagine where we would be without a defined Bill of Rights in our Constitution.

Patrick Henry was a great man because he was continually vigilant to ensure that the government (whether Parliament or the U.S. federal government) would not lapse into tyranny. He was one of the greatest protectors of our individual liberties. That is a man to be revered.

Paul Jacob, President of Citizens in Charge: The Declaration of Independence is the most inspiring statement for individual freedom in all of hoistory. I reread it with pleasure and awe every July 4th. But no matter how eloquent and true, our freedom wasn’t won by words, but by deeds. It took the courage and blood of thousands of soldiers on the battlefield and the leadership of General George Washington to secure the new nation.

If George Washington had been Napoleon or Fidel Castro, our noble revolution would likely have been diverted to just another in a long line of violent power grabs, the revolving only of who is in power over ‘We the People’ without any regard to our right to self-government. Thank goodness Mr. Washington was a principled patriot and not a power-lusting politician. Twice he took critical steps to place the Republic above any personal ambition.

At war’s end in 1783, England’s King George reportedly asked what Washington would do. When told that Washington would return to his farm, he scoffed, “If he does that, he will be the greatest man in the world.” But that’s precisely what Washington did!

There had been talk about Washington becoming the next king. By returning his commission as Commander of the army to the Continental Congress, he both bolstered the civilian government and squashed any suggestion of a military takeover. This act furthered Washington’s esteem throughout the young nation, which in turn was crucial because it allowed Washington by presiding over the convention in Philadelphia to add to the public’s confidence in the drafting of our Constitution.

As president, Washington would again set an example for a free country by stepping down after two terms. Thus, he established a tradition of rotation in office that was followed until FDR, whose election to four presidential terms led to the passage of the 22d amendment limiting the president to two terms.

George Washington will always be known as “The Father of Our Country.” So it isn’t as if he deserves “more credit” than he has received. But he truly behaved as a father does, putting the greater good above his own immediate interests and desires. America has prospered, in no small part, because we had a great Father.

Tony Perkins, President of the Family Research Council: Without question it is Samuel Adams. No less a luminary than Thomas Jefferson called Adams “truly the man of the Revolution.” Ira Stoll, in his book, Samuel Adams: A Life, paints a bleak picture of the end of September, 1777. The situation was desperate. Over a year had passed since Samuel Adams and 55 others signed the Declaration of Independence, and now British Troops controlled New York. General Washington recently suffered a stinging defeat at Brandywine on September 11 with 200 killed, 500 wounded, and 400 captured. Another 300 were killed by the British in the Paoli Massacre on September 21. The Continental Army was in retreat, and the enemy was closing in.

The good people of Philadelphia lowered the 2,080-pound Liberty Bell from the spire of Independence Hall and carted it to the basement of the Zion Reformed Church of Allentown. Members of the Continental Congress fled to Lancaster, then westward to York. Some narrowly escaped with just the clothes on their backs. It was just in time because the British captured Philadelphia, America’s largest city, on September 26.

John Adams wrote these sad words in his diary: “The prospect is chilling, on every Side: Gloomy, dark, melancholly, and dispiriting.” Only 20 of the 56 signers of the Declaration were present in York to discuss their grim prospects. Yet on that last day of September, 1777, Samuel Adams rose to address the discouraged delegates:

If we despond, public confidence is destroyed, the people will no longer yield their support to a hopeless contest, and American liberty is no more… Through the darkness which shrouds our prospects the ark of safety is visible. Despondency becomes not the dignity of our cause, nor the character of those who are its supporters.

Let us awaken then, and evince a different spirit,—a spirit that shall inspire the people with confidence in themselves and in us,—a spirit that will encourage them to persevere in this glorious struggle, until their rights and liberties shall be established on a rock.

We have proclaimed to the world our determination “to die as freemen, rather than live as slaves.” We have appealed to Heaven for the justice of our cause, and in Heaven we have placed our trust.

Numerous have been the manifestations of God’s providence in sustaining us. In the gloomy period of adversity, we have had “our cloud by day and pillar of fire by night.” We have been reduced to distress, but the arm of Omnipotence has raised us up. Let us still rely in humble confidence on Him who is mighty to save. Good tidings will soon arrive. We shall never be abandoned by Heaven while we act worthy of its aid and protection.

Samuel Adams’s rallying cry, delivered at a crucial moment when Congress was losing hope, not only strengthened their resolve to continue the fight for freedom, it also turned out to be prophetic. On October 17, we won the battle of Saratoga, and General Gates accepted the surrender of 5,800 British troops. It was the turning point in the War for Independence, and defeats began to turn into victories.

Adam’s words still ring with encouragement for our times. Yes, America is struggling economically, politically, and morally. Yes, the odds seem to be against those who hold dear the values of faith, family, and freedom. But those who love the America that Adams helped to found must not despair. As the Apostle Paul said in 2 Cor. 4:8-9, “We are hard pressed, but not crushed; perplexed, but not in despair; persecuted, but not abandoned; knocked down, but not knocked out.” Like Adams, let us appeal to Heaven for the justice of our cause, in Heaven place our trust, and act worthy of Its aid and protection. As we celebrate the 234th birthday of our nation, may the God of Samuel Adams guide and strengthen us to prevail in this our day of trial.

Posted on 07/03/10 01:29 PM by Alex Adrianson

What Should We Learn about the Founding?

In this fifth installment of our series highlighting the thoughts of conservative and libertarian leaders on American Independence and the Founding, we asked: What do Americans today most need to learn about the Founding of their country? (The sixth and seventh parts of this series will be published over the July 4th weekend, so be sure to keep checking this space.)

Ginni Thomas, President of Americans too easily dismiss the obstacles our Founders faced. By signing their names to the Declaration of Independence, they knew that if the bid for independence was unsuccessful, they were signing their death warrants. Freedom and liberty for future generations was worth fighting for and Americans might reflect on the resolve, strength and courage of our Founders who put so much on the line for us. Would we do the same for future generations?

Lawrence W. Reed, President of the Foundation for Economic Education: From the Founders and their generation, Americans must relearn that liberty is not possible in a moral vacuum. Defending it means practicing (not just preaching) the character traits requisite to its preservation—honesty, humility, patience, self-reliance, courage, self-discipline, enterprise and honor. A moral people, who respect the lives and property of others and focus on improving their personal character, can sustain the infrastructure of liberty. But as the Founders often warned, a serious erosion of that character will play straight into the hands of demagogues and tyrants. That’s happening, shamefully, right before our eyes and too many Americans are oblivious to its corrosive and far-reaching implications.

Posted on 07/02/10 08:52 AM by Alex Adrianson

The Public-Sector Pension Crisis

Public-sector pensions nationwide are underfunded by more than $3 trillion, and one of the worst pension-fund crises is in New Jersey. There, public-sector plans are underfunded by $174 billion—a whopping 44 percent of the state’s gross domestic product. Some projections say New Jersey’s pension system will run out of assets beginning in 2013. How to fix the situation? According to retirement policy experts Andrew Biggs and Eileen Norcross, it’s time for New Jersey to switch from defined-benefit pensions to defined-contribution pensions for new state employees. That would put New Jersey in line with private sector practices (and also Michigan and Alaska). A major advantage of defined contribution plans over defined benefit plans is that they don’t become unsustainable whenever politicians make unrealistic promises to public employee unions or unrealistic assumptions about the growth of plan assets when writing budgets. You can read about Biggs’s and Norcross’s recommendations in their new Mercatus Center report, “The Crisis in Public Sector Pension Plans: A Blueprint for Reform in New Jersey.”

Posted on 07/02/10 08:51 AM by Alex Adrianson

Covering the Races

Over the past couple of years, the Franklin Center for Government and Public Integrity has helped build a strong network of non-profit news organizations to make up for the shutting of local and state newspapers around the country. These outlets, some in partnership with state-based think tanks, have helped fill the void in local reporting and they’ve broken some important stories. Remember the “made up” congressional districts receiving stimulus funding?

Now the Franklin Center is teaming up with National Review Online for election coverage, and they are looking for reporters to cover local and state races in five states: Florida, Ohio, Colorado, Nevada, and Pennsylvania. If you or anyone you know lives in these states, has journalism experience, and wants to write about the elections, then check out this opportunity.

Posted on 07/02/10 08:10 AM by Alex Adrianson

National Conservative Fourth of July Soirée

If you want to celebrate America’s Independence with lots of lovers of liberty, you can’t do better than stopping by the Leadership Institute’s National Conservative Fourth of July Soirée. The gathering will take place from noon to 4:30 p.m. at Bull Run Regional Park in Centreville, Va. In addition to free barbecue and a petting zoo, there will be a keynote address from Jenny Beth Martin, co-founder and national coordinator of Tea Party Patriots.

Posted on 07/01/10 04:34 PM by Alex Adrianson

What Level of Government Maximizes Growth?

Government is needed for some things, like protecting property rights, enforcing contracts, and protecting citizens against violence. But how much government is the right amount? A variety of studies have found that economic performance is maximized when the size of government is somewhere between 15 percent and 25 percent of gross domestic product. Right now, the U.S. government consumes about 40 percent of GDP—which could be twice the level that maximizes growth. The relationship between the size of government and economic growth is called the Rhan Curve, and is discussed further in the video below from Dan Mitchell at the Center for Freedom and Prosperity.

Posted on 07/01/10 03:41 PM by Alex Adrianson

Thoughts for the Fourth

In this fourth installment of our series highlighting the thoughts of conservative and libertarian leaders on American Independence and the Founding, we asked: On July 4, what thoughts do you share with your own family about America? (This series will continue until July 4.)

Eric O’Keefe, Chairman of the Sam Adams Alliance: America was created by ordinary people who worked and prospered on the edge of the North American wilderness. When the British government began taxing the colonists and claiming unlimited authority to rule them, the patriots organized to defend their existing liberties. Thomas Jefferson wrote this about the Declaration of Independence: “[I]t was intended to be an expression of the American mind …” Today’s tea party leaders are following in the footsteps of the early patriots, and demanding the government return to its proper role of protecting liberty.

Joseph G. Lehman, President of the Mackinac Center for Public Policy: Independence Day is the year’s greatest opportunity to help my family understand the work we do in the freedom movement and why it is important. Unlike life on the farm where I grew up, my work day typically produces a less tangible harvest. A farmer can tell if he’s plowed the ground on any given day, but it’s harder for a think tank guy to tell if he gained any ground for freedom.

So I’ve explained to perplexed parents, brother and sisters, extended family, and especially my wife and children how think tanks and their ideas shift public policy that affects us all. In so doing I’ve explained the linkage between intangible ideas and the very tangible blessings of liberty that are so easy to take for granted.

Independence Day brings to the fore the ideas of liberty, the fruits of liberty, and the sacrifices necessary to secure liberty. My favorite way to capture my organization’s devotion to the lofty ideals embodied in The Founding is something penned by my late friend and colleague, Joe Overton.

Joe wanted his staff to commemorate Independence Day the way he did, so he added this to our employee policy on holidays: “All staff are encouraged to celebrate Independence Day with passion and verve, remembering it as the signatory day of a document embodying the most sublime of political ideals, an apogee in mankind’s quest for liberty of thought and action, the restoration of which is the vision of our organization.”

Joe’s words have grown ever more sweet and meaningful since his passing seven years ago this week. Many of my colleagues and I share his words with our families every July 4th to enliven our spirits, remember the fallen, and arouse our gratitude for God’s good gifts.

Lawrence W. Reed, President of the Foundation for Economic Education: Patriotism is not blind trust in anything our leaders tell us. Patriotism is not picnics, fireworks, or a day off work. Patriotism is not simply waving the flag or showing up to vote. The patriotism that we should feel every day of the year, not just on the 4th of July, is a love of what our Founders gave us at great sacrifice and a firm resolve to restore and protect it at all costs.

Paul Jacob, President of Citizens in Charge: The most important thing to remember about the Founding and the Founders is that they didn’t get everything right, they weren’t perfect, and they would be the first to admit it. Their goal in drafting the Constitution was not to create a document that would never be changed, but one that would grow and adapt. Jefferson spoke of the absurdity of blocking change by suggesting how silly it would look for a man to have to wear the same small coat he wore as a boy.

What conservatives and libertarians rightly object to is not changes to the Constitution, but government acting outside and against the very clear parameters of our fundamental law, without bothering to amend it. It seems today that many of the changes we would like to make—term limits come to mind—are ruled to require a constitutional change, while a massive expansion of government commences without any constitutional basis.

I once gave my kids and nieces and nephews a copy of the Constitution with a note that said, “If you want to make any changes, just let me know.” First, I figured they’d be more interested in a document that was alive and could be changed, and second, I wanted them to know that this was their personal contract with government.

Some say they Constitution is alive when judges dream up wording that isn’t found in the document. I think it is alive when people read it and work to make it a true and binding contract between ‘We the People’ and our government.

Posted on 07/01/10 02:28 PM by Alex Adrianson

What Could States Possibly Cut to Balance Their Budgets?

Here is an idea for Ohio from the Buckeye Institute: “Simply realigning state government worker compensation packages to match those of their private-sector peers would save taxpayers over $2.1 billion in the next two years, which is nearly 28 percent of the $8 billion budget deficit we need to eliminate.”

The lifetime cost of a typical Ohio government employee is about 85 percent higher than the lifetime cost of a typical private-sector employee, according to Buckeye’s recent paper, “The Grand Bargain Is Dead: The Compensation of State Government Workers Far Exceeds Their Private-Sector Neighbors.”

Posted on 07/01/10 01:50 PM by Alex Adrianson

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