Repeal the Income Tax? by David Boaz

The New York Times takes note of the brewing tax revolt in Massachusetts, where a grassroots group has put an initiative on the ballot to repeal the state income tax. The Times headline (on paper) reads, "On Massachusetts Ballot, a Tax Repeal That Worries Leaders." Why does a newspaper that purports to be a check on government so often present questions from the government's point of view? Did they once publish headlines like "On Washington Mall, a Peace March That Worries Leaders" or "In Massachusetts, a Civil Rights Crusade That Worries Leaders"? I doubt it. And I should in fact congratulate reporter Pam Belluck for writing
It would save the average taxpayer about $3,600 a year. Annual revenue from the tax is about $12.5 billion, roughly 45 percent of the state’s budget of about $28 billion.
Too often, as we've noted before here on Cato@Liberty, the mainstream media use the formulation "the proposed cut would cost the government millions of dollars." At least this time Belluck started with the taxpayer. In 2002 a ballot measure to repeal the income tax got very little attention and still won 45 percent of the vote. This year, with a perception of hard economic times, it might do better. But this time the Establishment is on the alert. The advocates of repeal have raised some $270,000, and after their signature-gathering have only $25,000 left to spend. The special interest groups that thrive on taxpayer money have raised $1.3 million to oppose the initiative. Let's hear it for Carla Howell and the Committee for Small Government, who are at least forcing the government--and its beneficiaries--to explain why they need more than the $16 billion of citizens' money that they would still have after repeal of the income tax. And let's hear it for pizza shop owner Lakis Theoharis, who tells the Times, “I’m for the repeal of the tax. To me, the smaller the government, the better for the citizens.”

Posted on September 29, 2008  Posted to Cato@Liberty

Let Palin Be Palin by David Boaz

Some commentators are suggesting that the McCain campaign has panicked about Sarah Palin's appeal, trying to cram her head with policy-wonkery and then hiding her in a closet when that didn't work. Let Palin be Palin, they say -- let her show her authentic self, the gun-totin', family-raisin', reformist governor that Alaskans love. Good idea. Let's start with the bailout. Surely a rugged individualist reformer from way outside the Beltway is champing at the bit to denounce this $700 billion bailout for Wall Street insiders cooked up by Washington insiders behind closed doors, without public hearings, with the unanimous support of the mainstream media. Let 'er rip, Governor Palin. Tell the Wall Street bankers that when a small business makes bad decisions in Wasilla, it goes out of business, and the same rules should apply to large businesses in Manhattan. That's the Sarah Palin conservatives say America would love.

Posted on September 29, 2008  Posted to Cato@Liberty

Obama’s Free Ride on Fannie Mae by David Boaz

A page one Washington Post headline reports, "Credit Crisis Has Given Obama a Distinct Edge." Which must be really frustrating for McCain, because McCain did try to reform Fannie Mae and Freddie Mac back in 2006. Obama, meanwhile, as I reported at the American Spectator, received more donations from Fannie Mae in four years than any other senator (except Banking Committee chairman Chris Dodd) received in twenty years. That's quite an accomplishment--more money from a primary creator of the financial meltdown in just four years than senior members of Congress like Nancy Pelosi, Barney Frank, Richard Shelby, Spencer, Bachus, John Kerry, and Roy Blunt got in entire 20 years that the Center for Responsive Politics tallied. And of course, Obama chose former Fannie Mae CEO James Johnson, who was found to have jiggered the books, to head his search for a vice president. Shouldn't somebody in the media ask Obama why he was Fannie Mae's favorite senator?

Posted on September 29, 2008  Posted to Cato@Liberty

Mark Sanford on Bailouts by David Boaz

South Carolina governor Mark Sanford, who spoke last Saturday night to our Cato Club 200 retreat, has a great column in the Washington Post today on the federal government's accelerating tendency to respond to every crisis with an expansion of its powers. He writes:
An ever-expanding scope of federal commitment and power is not what made this country great. Expanded power in one place comes at a cost in other places. American cornerstones such as individual initiative and an entrepreneurial spirit — born in free and open societies with private property rights and the rule of law — have never fit particularly well within the context of an ever-growing federal government. For 200 years, the "business model" in our country has rested on a simple fact: that while one may reap rewards from taking risks, one should also be prepared to face the consequences of those risks. Some of the proposed actions with regard to the credit market turn that business model on its head — absolving those who took too much risk, or bought too much house, from the weight of their own choices. If Congress passes the proposed bailout, we will be destined to have far greater problems in time, leaving those who are prudent in their finances to foot the bill for those who are not.
He goes on to appeal to the wisdom of Milton Friedman, Ronald Reagan, and Edward Gibbon in cautioning Congress not to put us on the path to "decline and fall." Bonus: Mark Sanford on Real ID here (podcast audio), here (speech video) and here (speech PDF).

Posted on September 26, 2008  Posted to Cato@Liberty

Slow Learner by David Boaz

Newt Gingrich tells the Washington Post, "We have now launched big-government Republicanism." Referring to the Bush administration's bailout-and-takeover plan for the financial sector, he said, "If we saw France do this, Italy do this, we would have thought it was crazy." He has a point. But some of us identified "big-government conservatism" as the operating system of the current Republican party a long time ago. I wrote about it in the Australian in early 2003 and in the Washington Post in late 2003. Or check out Bill Niskanen's comments in this 2004 Los Angeles Times article. Of course, Ed Crane saw it coming in 1999. And Mike Tanner wrote a whole book about it -- Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution -- in 2007. Or you could read Mike Tanner's critique of "Gingrich's Big Government Manifesto" back in 2006.

Posted on September 23, 2008  Posted to Cato@Liberty

Space Privatization–from Cato to the BBC by David Boaz

In the premier issue of BBC Knowledge, the Cambridge University astrophysicist Martin Rees makes several provocative arguments about manned space flight. They are:

  • The completion of the International Space Station (ISS) comes with a price tag of $50 billion, with the only profit being the cooperation with foreign partners.
  • There is no scientific, commercial, or military value in sending people to space.
  • Future expeditions to the Moon and beyond will only be politically and financially feasible if they are cut-price ventures.

He concludes that fostering good relations with other countries is insufficient justification for the expenditures, and that NASA should move aside and allow the private sector to play a role in manned space flight. The cost of these activities must lessen if they are to continue, and that will only happen with a decrease or removal of government involvement. Rees observes that only NASA deals with science, planetary exploration, and astronauts, while the private sector is allowed to exploit space commercially for things such as telecommunications. However, there is no shortage of interest in space entrepreneurship: wealthy people with a track record of commercial achievement are yearning to get involved. Rees sees space probes plastered with commercial logos in the future, just as Formula One racers are now.

Those ideas may sound radical, but not if you've been following the work of the Cato Institute. As long ago as 1986, Alan Pell Crawford wrote hopefully that “space commercialization … is a reality,” and looked forward to the country making progress toward a free market in space. The elimination of NASA was a recommendation in the Cato Handbook for Congress in 1999.

Edward L. Hudgins, former editor of Regulation magazine, wrote a great deal about private options in space. In 1995, he testified before the House Committee on Appropriations that the government should move out of non-defense related space activities, noting the high costs and wastefulness incurred by NASA. In 2001, Hudgins wrote “A Plea for Private Cosmonauts,” in which he  urged the United States to follow the Russians (!) in rediscovering the benefits of free markets after NASA refused to honor Dennis Tito’s request for a trip to the ISS. Hudgins testified again before the House in 2001, this time before the Subcommittee on Space and Aeronautics. He noted that since the beginning of the Space Age, NASA has actively discouraged and barred many private space endeavors. This effectively works against the advancement and expansion of technology, while pushing out talent to foreign countries who court American scientists and researches to launch from their less-regulated facilities. In “Move Aside NASA,” Hudgins reported that neither the station nor the shuttle does much important science. This makes the price tag of $100 billion for the ISS, far above its original projected cost, unjustifiable.

Michael Gough in 1997 argued that the space “shuttle is a bust scientifically and commercially" and that both successful and unsuccessful NASA programs have crowded out private explorers, eliminating the possibility of lessening those problems. Molly K. Macauley of Resources for the Future argued in the Summer 2003 issue of Regulation that legislators and regulators had failed to take into account "the ills of price regulation, government competition, or command-and-control management" in making laws for space exploration.

We welcome the BBC and the Astronomer Royal to the cause of private, entrepreneurial exploration of the cosmos.

Hat tip to Michael Gough and Diana Lopez.

Posted on September 15, 2008  Posted to Cato@Liberty

Bailout Nation by David Boaz

"If only we had a Republican administration in office, none of this would have happened," my friend Deroy Murdock emailed me this morning. He meant the nationalization of two large companies, of course, though he could have been talking about a trillion-dollar spending increase, the expansion of entitlements, the federalization of education, or indeed the great leap forward to the imperial presidency. But the bailout of Fannie Mae and Freddie Mac is another giant step toward government control of the economy. NPR reported this morning that the government takeover "could turn out to be a smart one." Yes, if you think nationalization of the means of production just might work. The government is writing a blank check on the taxpayers. It might cost nothing, it might cost $25 billion, it might end up costing trillions of dollars, given the size of Fannie Mae and Freddie Mac's portfolios and the risk of further large declines in housing prices. And speaking of the imperial presidency--all these huge new powers and expenditures are being conducted without any sanction from Congress and with little public debate. This isn't Venezuela, but the executive branch is certainly expanding its powers on its own authority. If only President Bush would put his new powers to a public referendum, maybe a Yon Goicoechea could arise to block them. Certainly no Friedman Prize candidate has stood up in Congress. But the Fannie-Freddie takeover is not the only bailout in the works these days. There was the Bear Stearns bailout back in March. Which might not be considered a real bailout, as Bear Stearns shareholders lost most of their investment, though it was certainly a then-unprecedented assertion of federal power. Arnold Kling noted in April that the housing bill, at least, was a pure bailout for homebuilders. Now the Big Two and a Half automobile makers are asking for $50 billion of federal help. (Didn't we already bail out Chrysler once? How many bailouts does one company get?) And now Congress is talking about "a second economic stimulus package, totaling $50 billion in the form of money for infrastructure projects, relief for state governments struggling with rising Medicaid costs, home heating assistance for the Northeast and upper Midwest, and disaster relief for the Gulf Coast and the Midwestern flood zone." And Transportation Secretary Mary Peters wants "an $8 billion infusion" for the federal highway trust fund. It's a good thing that the federal government is so flush with money these days, or we might be risking a large deficit. Capitalism is a system of profit and loss. It works because each person and each company, in seeking its own interest, is led "as if by an invisible hand" to supply goods and services that others want. Companies that satisfy consumers prosper. Companies that can't produce goods that consumers want--like Chrysler, repeatedly--suffer and sometimes go out of business. The failures are often painful. But as Dwight Lee and Richard McKenzie wrote in their book Failure and Progress (or at least in this column based on the book), "Economic failure is to the economy what physical pain is to the body. No one enjoys pain, but without it the body would lack the information needed to maintain its health." Government subsidies to prevent business failure simply keep pouring money into businesses that are relatively unsuccessful at satisfying consumer desires. They are, among other things, censorship of vitally needed information. Employees, entrepreneurs, and investors need to know where their money and talent are most valuable. Profits and losses are key indicators of that. When businesses make bad decisions, they should suffer economic losses. That's how we keep the system honest and productive. Caroline Baum of Bloomberg points out that the bailout for subprime borrowers involved helping people to stay in homes that they couldn't afford, in many cases because they misled lenders or connived with lenders who knew they could package and resell bad mortgages. When governments make bad decisions, they should not pour good money after bad. Instead, they should try to repeal burdensome regulations, privatize functions that ought to be private, and be willing to sell purchases they shouldn't have made, even at a loss. Plenty of people had warned about the problems of Fannie Mae and Freddie Mac. As Arnold Kling notes in a new Cato Briefing Paper, the current crisis " may have been the most avoidable financial crisis in history." Treasury Secretary Larry Summers was one of those Cassandras back in 1999. So was Lawrence J. White in a 2004 Cato Policy Analysis calling for privatization, or failing that, a clear removal of the federal guarantee for the two companies. Instead, Congress and successive administrations continued to push Fannie and Freddie to get bigger and to buy mortgages that were in clear jeopardy of default. And now, having created this crisis, the federal government proposes not to wind down the overextended companies but to take them over so they can get all the benefits of crack federal financial management. Kling proposes a better exit strategy.

Posted on September 8, 2008  Posted to Cato@Liberty

What Do TV Ratings for Speeches Mean? by David Boaz

Last week it was reported that Barack Obama's acceptance speech was the most-watched convention speech ever, with 38.4 million viewers. Then, six days later, the Republican vice presidential nominee came within an inch of his record total. And then Nielsen reported that John McCain's speech edged out Obama's, making him the most-watched presidential nominee ever. But there's a footnote to this victory. Nielsen rates the audiences on commercial networks. But PBS says that 3.5 million people watched its broadcast of Obama's speech, while only 2.7 million watched McCain on PBS. Why? Need you ask? PBS is a government-funded network for liberals. More people watched McCain on the conservative Fox News Channel, more people watched Obama on the liberal PBS. So if you add in the PBS figures, Obama probably has a very slight edge in total viewers. (Nielsen also doesn't rate C-SPAN, which doesn't release viewing figures.) But does any of this matter? Dudley Clendinen reported in the New York Times [$] on August 26, 1984, that more people watched Walter Mondale's acceptance speech than President Reagan's. Reagan went on to win the election by 59 to 41 percent. And Jesse Jackson's convention speech drew more viewers than either Reagan or Mondale. And that wasn't the only time, Clendinen reported: "Mr. Humphrey outdrew Mr. Nixon on television [in 1968], but not in the polls. The same thing happened with Gerald R. Ford and Jimmy Carter [in 1976]. And it happened again four years ago, when President Carter lost to Ronald Reagan." So enjoy your Nielsen victory, Republicans. But don't assume that a victory at the boob tube presages a victory a the ballot box. (Footnote: I wondered if today's candidates were really drawing more viewers than earlier nominees, in the days of three networks and no cable competition. As far as I can tell, yes they are. Reagan and Mondale in 1984 drew 19 million viewers each. Cable was already taking big bites out of the networks by then. Nielsen says that 35 million watched Jimmy Carter's speech in 1976. He got a much larger percentage of a smaller population.)

Posted on September 6, 2008  Posted to Cato@Liberty

You’re No Reagan–or Lincoln by David Boaz

Last night John McCain proclaimed himself the candidate of "the party of Lincoln, Roosevelt and Reagan." One of Abraham Lincoln's most famous speeches was his 1852 eulogy for Henry Clay. "He loved his country partly because it was his own country," Lincoln declared, "but mostly because it was a free country." John McCain managed to give a lengthy tribute to America's virtues without mentioning that it was a free country:
I fell in love with my country when I was a prisoner in someone else's. I loved it not just for the many comforts of life here. I loved it for its decency; for its faith in the wisdom, justice and goodness of its people. I loved it because it was not just a place, but an idea, a cause worth fighting for. I was never the same again. I wasn't my own man anymore. I was my country's.
Fine sentiments, and he did mention that America is "an idea, a cause worth fighting for." But what is that idea or that cause? He didn't say. He never mentioned the Constitution, or the Declaration, or the freedom that has made America a beacon to the world. Indeed, his message seemed less like Lincoln's and more like John F. Kennedy's "Ask not what your country can do for you — ask what you can do for your country."

Posted on September 5, 2008  Posted to Cato@Liberty

Johan Norberg vs. Naomi Klein, Round 3 by David Boaz

Last May Johan Norberg wrote a devastating critique of Naomi Klein's book The Shock Doctrine: The Rise of Disaster Capitalism. (Watch him talk about it here.) In his paper, "The Klein Doctrine: The Rise of Disaster Polemics," he took her book apart:
The Shock Doctrine purports to be an exposé of the ruthless nature of free-market capitalism and its chief recent exponent, Milton Friedman. Klein argues that capitalism goes hand in hand with dictatorship and brutality and that dictators and other unscrupulous political figures take advantage of "shocks"—catastrophes real or manufactured—to consolidate their power and implement unpopular market reforms. ... Klein's analysis is hopelessly flawed at virtually every level. Friedman's own words reveal him to be an advocate of peace, democracy, and individual rights. He argued that gradual economic reforms were often preferable to swift ones and that the public should be fully informed about them, the better to prepare themselves in advance. Further, Friedman condemned the Pinochet regime and opposed the war in Iraq. Klein's historical examples also fall apart under scrutiny. For example, Klein alleges that the Tiananmen Square crackdown was intended to crush opposition to pro-market reforms, when in fact it caused liberalization to stall for years. She also argues that Thatcher used the Falklands War as cover for her unpopular economic policies, when actually those economic policies and their results enjoyed strong public support. Klein's broader empirical claims fare no better. Surveys of political and economic freedom reveal that the less politically free regimes tend to resist market liberalization, while those states with greater political freedom tend to pursue economic freedom as well.
Now Naomi Klein has responded to Norberg's critique. (Though she can't bring herself to name him. No point in giving your critic free advertising, calculates the author of No Logo. Norberg muses, "I think it’s because it sounds more David-and-Goliath if she is not criticised by a young Swede, but by 'The Cato Institute.'") And Norberg has fired back with another refutation. This time, he finds,

Her response is selective, includes new mistakes, and backs away from some of the claims that she has made without acknowledging it. ...she also has nothing to say about the fact that all of her central claims are under attack

From describing Friedman--and Cato!--as neoconservatives, to slyly implying that Friedman supported land theft in Sri Lanka, to juggling statistics and years, Klein is once again revealed to be building a shocking indictment on a foundation of sand. For a book on globalization that makes sense, skip Naomi Klein and read Johan Norberg's In Defense of Global Capitalism.

Posted on September 5, 2008  Posted to Cato@Liberty

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