January 2003 Archives

Rumsfeld has dismissed Germany and France as the "old Europe." For more on the divergance between the US and "old Europe" see this essay from Robert Kagan. For a look on the economic side, see this piece by Norman Barry in the FT. Below is a summary provided by NCPA:

SOCIAL MARKET THINKERS HAVE RUINED THE GERMAN ECONOMY

Although Germany has the third largest economy in the world, it suffers from rising unemployment, massive capital flight and a growth rate approaching zero.
These problems can be traced to the beginnings of the Federal Republic, writes Norman Barry, a professor of social and political theory.

Following World War II, Germany's economy was resurrected by Ludwig Erhard, an obscure economics professor in a minor government post. Erhard's revolution contained two conflicting strains of thought that began harmoniously: liberalism and the social market. Ultimately, though, one triumphed -- and it was the wrong one. ...

Bjorn Lomborg can not and will not be silenced. When the Left is confronted with something they reflexively don't like (e.g., possible war in Iraq to unseat the dictator Sadam), instead of engaging in intellectually honest debate and pressing their point, they call names like frightened bullies.

The Left is intellectually bankrupt. Hoping they will snap out of it as a lively, honest debate is good for us all.

Tell them, Bjorn:

I am Danish, liberal, vegetarian, a former member of Greenpeace; and I used to believe in the litany of our ever-deteriorating environment. You know, the doomsday message repeated by the media, as when Time magazine tells us that "everyone knows the planet is in bad shape." We're defiling our Earth, we're told. Our resources are running out. Our air and water are more and more polluted. The planet's species are becoming extinct, we're paving over nature, decimating the biosphere.

The problem is that this litany doesn't seem to be backed up by facts. When I set out to check it against the data from reliable sources -- the U.N., the World Bank, the OECD, etc. -- a different picture emerged. We're not running out of energy or natural resources. There is ever more food, and fewer people are starving. In 1900, the average life expectancy was 30 years; today it is 67. We have reduced poverty more in the past 50 years than we did in the preceding 500. Air pollution in the industrialized world has declined -- in London the air has never been cleaner since medieval times.

The Democrats have howled that the latest proposed Bush tax cut is a "tax cut for the rich"--this before many of them even saw the plan. Notably, very few Democrats have come out in support of cutting taxes in general, but claim that their beef is with the way the tax cut is distributed. But where's the beef? Democrats have been using specious and dishonest tactics to win political favor. Turns out that the Bush tax cut, as with his first one, INCREASES the progressivity of the tax code. That is to say that the rich will end up paying a BIGGER share of the taxes in this country (even when you include the payroll tax), not a smaller one. So the chief Democratic objection--that the distribution of the tax cut is unfair--is simply untrue.

Well actually it is true, but in the opposite sense. It is a bad idea to have a system that is so steeply progressive as it bifurcates our society. But no Democrat will ever address this issue. Instead they choose to try and fool Americans that this is a tax cut for the rich, ignoring the fact that when the top 5% of income earners pay well over 50% of the taxes, and the top 24% pay well over 80%, while the bottom 50% pay less than 5%, with many paying nothing at all or evening getting credits, there is no other possible choice when cutting taxes that the wealthy will get a bigger tax cut on an absolute dollars basis--they are the ones paying the taxes! (For more on this see this editorial in the WSJ. Excerpt:

Even the barest of glances at tax data reveal a system that is steeply progressive. Tax revenue has been increasingly squeezed out of top earners. According to the most recent data, from 1999, the richest -- with income above half a million dollars -- constituted 0.5% of taxpayers but accounted for 28% of total tax revenue. Simply put, a tiny group of people (553,380) were responsible for more than one-quarter of the income tax take of $877 billion.

Well, maybe you're saying -- so what? They can afford it. Then take a look at those who aren't Richie Rich. The most recent data from the IRS, in 2000, show that the top 5% coughed up more than half of total tax revenue. Specifically, we are talking about folks with adjusted gross incomes of $128,336 and higher being responsible for 56% of the tax take. Eyebrows raised? There's more. The top 50% of taxpayers accounted for almost all income tax revenue -- 96% of the total take.

These numbers are more arresting when compared with the situation 14 years earlier. In 1986, the top 1% paid 26% of revenue, the top 5% was responsible for 42% and the top half contributed 93%. And what about the bottom half of taxpayers? They accounted for 7% of the total in 1986 but only 4% in 2000.

It's one thing to oppose a tax cut because you have been seduced by Rubinomics (the disproven idea that deficits leads to higher interest rates) or you believe the federal government just isn't big enough, but to those who are preaching that this is a tax cut for the rich, get the facts straight.

One such preacher, Tom Daschle, was confronted with this fact on Fox News this weekend, and after stammering a bit ultimately chose to simply deny the truth, saying his "inclination" was to disagree with the facts.

The truth is that the Democrats have demagogued this issue so effectively that our tax system is becoming ever the more dysfunctional. Regardless of how progressive the tax system is, it seems to be a third rail to suggest that it should be less progressive in any way. This will therefore continue until it reaches a point of absurdity. For more information, read this WSJ editorial:

Lucky Duckies Again

As you may have noticed, the critics of President Bush's new tax cut package claim it is a sop to the rich. This charge makes us wonder if they've even read the plan. The truth is that the Bush proposals would make the tax code more progressive, not less. And this isn't altogether a good thing.

The soak-the-rich facts, if any journalists cared to look, are contained in the income distribution tables on the plan compiled by the Treasury Department. Looking at the impact for 2003, Treasury finds that the average reduction in income taxes is a touch more than 12%. But for those who make less than $30,000 the average reduction is about 17%, while for those who earn more than $100,000 it is 11.4% or less. (See the nearby table.)

Income	Percentage reduction
0-$30,000	17.0%
30-40,000	20.1
40-50,000	14.5
50-75,000	11.4
75-100,000	13
100-200,000	11.4
200,000-plus	11.2
Total	12.3

Did you march for peace over the weekend? Is so, read this post on tacitus. Then read this:

Peace is a wonderful idea--but it is an idea for those who have better options than war. Sadly not everyone does. It's clear who people were marching AGAINST this weekend--George Bush and the US--but who were you marching FOR? The Iraqi people? Their lives can only be improved. American soldiers? How many casualties do you expect?

The same people who will march for the sake of education, health care, civil liberties, racial equality, etc. only seem concerned about these issues when it effects Americans. What about the human condition of the Iraqi people? Did you support the American Revolution or are Americans the only ones allowed to break the peace for the sake of liberty? Why free Tibet but not Iraq? Where are the liberal core values when it comes to Iraq?

And here is my prediction: Iraq will be liberated without a shot. Saddam is a survivor and the administration's "march to war" that has prompted these protests will have proven to be the only way to apply enough pressure to oust Saddam. If there is a shot fired, it will be quick and to the point--that is to Saddam--and a coup will soon follow. Even though Bush’s tough stance—as with Reagan and the cold war—will turn out to be what was needed, no one on the left will give him credit. They will claim he was lucky. They will claim that he finally listened to reason. And they will congratulate themselves for their part, even though their role was simply to convince Saddam Hussien that Bush may not have had the support to take him out.

Should we be going to war with Iraq? It is a difficult issue but I have been unimpressed with the intellectual vacuousness of the anti-war movement. I have heard not even a whimper of the value of liberating a country from those who seem intent only on criticizing a Republican president and a proud country. This is intellectually dishonest. I have heard no honest admission of the threat that a nuclear armed Saddam would present. No admission from the left that North Korea provides a chilling example. The Democratic leadership seems to have satisfied itself with nit picking and whimpering--desperately trying to agree with a popular president while establishing their own campaign positions in 2004.

The brilliant insight of the left is that this isn’t about disarming a madman and liberating a country but about oil. If that were true we would be cutting deals with Iraqis like the French and the Russians for their oil, not invading them. Does it make sense to spend billions of dollars to invade a country when we could use that money to simply buy the oil?

And let’s get real about oil. Arrianna Huffington and the “Detroit Project” seem to think poverty is the solution to the middle east problem. Poverty will solve our little terrorist problem. If only the Middle East didn’t have as much money they would be much happier and love Americans. And apparently the fraction of money that ends up in the Middle East from the fraction of gas used by SUVs (the money from gas used in other cars doesn’t seem to count) is the money that is enabling this terrorism. (As an aside, there is merit to the idea that oil money has kept corrupt regimes in power and removed the incentive of authoritarian governments to reform, but you won’t change this by driving a Honda—not even one little bit.) More wealth is needed in that region, not less, and more freedom to go along with it. Sadly, freedom may only come with force.

Oil independence—in the short term—is a fantasy and it certainly won’t be accomplished by fuel efficiency or even drilling in Alaska. It won’t be accomplished at all by any short-term move because oil is a global commodity. We can tax foreign oil at the border, but that won’t reduce our dependency—only increase our costs. Oil independency in the long term is a certainty—clean technologies will prevail and it will be a better day when they do—but that is decades away. Meanwhile, the call for independence from foreign oil is used cynically and shamefully by a group that wants to exploit our fear of terrorism to advance a completely separate agenda (such as the fight to reduce carbon dioxide emissions.) I’d love for us not to be dependant on foreign oil, but that means not being dependant on oil, and that ain’t happening any time soon, I’m sorry to say.

Let’s hear a rich debate about America’s proper role in the world, the best way to improve life in the middle east, the best way to conquer to roots of terrorism—but most of all lets hear alternative solutions from the left, not just hatred for a President they don’t like.

Tom Daschle appears on TV and spares Saddam Hussien his wrath—saving it all for George Bush. That’s Tom’s job, of course, but his job is also to be a leader of the country, not just the opposition. He has a political agenda to imbalance him: what’s your excuse?

Immanuel Kant wrote "The possession of power unavoidably spoils the free use of reason." For more, read this transcript of Uncommon Knowledge with Timothy Garton Ash and Christopher Hitchens.

For those of you not out marching today, read this: "Bomb Texas: The psychological roots of anti-Americanism."

Excerpt:

Among some of our new aristocrats, the realization has dawned that their own good fortune is not shared world-wide, and must therefore exist at the expense of others, if not of the planet itself.

This hurts terribly, at least in theory. It sends some of them to their fax machines, from where they dispatch anguished letters to the New York Times about the plight of distant populations. It prompts others, more principled and more honorable, to work in soup kitchens, give money to impoverished school districts, and help out less fortunate friends and family. But local charity is unheralded and also expensive, in terms of both time and money. Far easier for most to exhibit concern by signing an ostentatious petition against Israel or to assemble in Central Park: public demonstrations that cost nothing but seemingly meet the need to show to peers that one is generous, fair, caring and compassionate.

As if that were not hypocrisy enough, those who protest against global warming, against shedding blood for oil, or against the logging of the world's forests are no less likely than the rest of us to drive SUVs, walk on hardwood floors and lounge on redwood decks. Try asking someone awash in a sea of materialism to match word with deed and actually disconnect from the opulence that is purportedly killing the world and its inhabitants. Celebrity critics of corporate capitalism neither redistribute their wealth nor separate themselves from their multinational recording companies, film studios, and publication houses--or even insist on lower fees so that the oppressed might enjoy cheaper tickets at the multiplex. Jessica Lange and Alec Baldwin so hate George W. Bush that they threaten to leave our shores--promises, promises.

Full text:

Accepted as an article of faith in recent debate about the University of Michigan's racially biased admissions policy is that diversity promote learning. Ethnic diversity among a student body may be a worthwhile objective for institutions of higher learning to pursue, but where is the proof that it promotes better learning? If this were really true, as many on the left hold as indisputable doctrine, then were is the left's opposition to all black colleges and universities? Where is the proof that the educational benefits of diversity outweigh the benefits of a well-prepared and qualified student body? My experience at an Ivy League college was that I benefited from peers who were smart and driven and while many had different ethnic background than I--something which may have enriched be culturally--I fail to see how that ethnic diversity helped me grasp physics, poetry, or history in a more profound matter.

The other, very sad truth was that my college was heavily segregated by the administration--far more so than Strom Thurmond or Trent Lott could ever have dreamed of. This was done in the name sensitivity, but it was profoundly divisive. Black students had their own fraternities and even their own institution, the African-American house, to which they could belong and isolate themselves from the rest of the student body in. Being black was a special and privileged class. Few whites were allowed in those circles--but this was not true going the other way. However, those black students who did cross the lines and had white friends risked ostracism from the black community. Several of my friends struggled deeply with this issue.

The diversity rationale has little to do with actually achieving racial harmony and much more about achieving a political agenda by those that advocate it. Rich Lowry tackles the diversity lie on campus.

In this recent WSJ editorial, Milton Friedman turns the popular debate about taxes and deficits on its head. As he says below: "Many discussions of the economic effect of tax cuts and deficits implicitly assume that government spending is predetermined and independent of whether there is a tax cut or a deficit. ... As I see the world, the situation is very different. What is predetermined is not spending but the politically tolerable deficit. Raise taxes by enough to eliminate the existing deficit and spending will go up to restore the tolerable deficit. Tax cuts may initially raise the deficit above the politically tolerable deficit, but their longer term effect will be to restrain spending."

What Every American Wants

By MILTON FRIEDMAN

I have long said, "I never met a tax cut I didn't like" -- though I would go on to say that I like some better than others. The reason for my flat unhedged statement is neither the Keynesian attribution of an economic stimulus to a tax cut, which I believe is generally wrong, nor the supply-side attribution of favorable incentive effects to a tax cut, which I believe is generally correct. It is, rather, the effect of tax cuts on government spending.

I believe that government is too large and intrusive, that we do not get our money's worth for the roughly 40% of our income that is spent by government -- federal, state and local -- supposedly on our behalf, or the additional 10% or so of income that residents or businesses spend in response to government mandates and regulation. History suggests that Washington spends whatever it receives in taxes plus as much more as it can get away with. Deficits have been the norm. The few exceptions -- such as the Clinton surpluses -- are an accident of divided government; in President Clinton's case, a Democrat in the White House, a Republican House and/or Senate. And as we are already seeing, such surpluses are not here to stay. I conjecture that they would have faded away even if there had been no 9/11, and no Iraq war danger.

Under those circumstances, how can we ever cut government down to size? I believe there is one and only one way: the way parents control spendthrift children, cutting their allowance. For government, that means cutting taxes. Resulting deficits will be an effective -- I would go so far as to say, the only effective -- restraint on the spending propensities of the executive branch and the legislature. The public reaction will make that restraint effective.

Many discussions of the economic effect of tax cuts and deficits implicitly assume that government spending is predetermined and independent of whether there is a tax cut or a deficit. In that world, deficits are produced entirely by a shortage of tax receipts. Raising taxes can eliminate the deficit without affecting spending. As I see the world, the situation is very different. What is predetermined is not spending but the politically tolerable deficit. Raise taxes by enough to eliminate the existing deficit and spending will go up to restore the tolerable deficit. Tax cuts may initially raise the deficit above the politically tolerable deficit, but their longer term effect will be to restrain spending.

Can Any Good Come Of Radical Islam?
A modernizing force? Maybe.

BY FRANCIS FUKUYAMA AND NADAV SAMIN
Thursday, September 12, 2002 12:01 a.m.

What is going on in the Muslim world? Why does it produce suicide hijackers on the one hand and, on the other, lethargic and haphazardly capitalist societies that have delivered neither economic development nor democracy? A good if partial answer to these questions--partial because it is limited to the Arab region of that world--can be found in a United Nations "development report" issued in July. As the U.N. assessment concludes, the entire Arab sector, with all its oil wealth, is "richer than it is developed." Its economies are stagnant, illiteracy is widespread, political freedom is hardly to be found, and its inhabitants, especially its women, are denied the basic "capabilities" and "opportunities" of the modern world.

Matt Ridley in the WSJ on the unfortunate impact Eve the clone, if she is real, will have on public attitudes towards therepeutic cloning.

Thanks to Auren Hoffman: Interesting article about young Republicans fighting in NYC.

From the New York Times Magazine, a portrait of America as an empire by Michael Ignatieff entitled "Burden." Excerpt:

In a speech to graduating cadets at West Point in June, President Bush declared, ''America has no empire to extend or utopia to establish.'' When he spoke to veterans assembled at the White House in November, he said: America has ''no territorial ambitions. We don't seek an empire. Our nation is committed to freedom for ourselves and for others.''

Ever since George Washington warned his countrymen against foreign entanglements, empire abroad has been seen as the republic's permanent temptation and its potential nemesis. Yet what word but ''empire'' describes the awesome thing that America is becoming? It is the only nation that polices the world through five global military commands; maintains more than a million men and women at arms on four continents; deploys carrier battle groups on watch in every ocean; guarantees the survival of countries from Israel to South Korea; drives the wheels of global trade and commerce; and fills the hearts and minds of an entire planet with its dreams and desires.

I have been tremendously impressed with the words and deeds of Hernando De Soto. Although it's early, he gets my vote for the most influential economist of the 21st Century. Read this trascript of his appearance on Hoover's "Uncommon Knowledge" for a glimpse of the man, his ideas, and his actions. For more, read his book "The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else."