Archives: June, 2007

The DEA’s Campaign Against Pain Doctors

Yesterday, the cover story for the New York Times Magazine was about the Drug Enforcement Agency’s inane campaign against pain doctors.  We at Cato have been working on this aspect of the drug war for some time–so it’s great to see more attention to this issue. 

To read the Cato study, go here.  To view a Cato conference, go here.  For a quick article on the subject, read this Washington Post piece by Pat Michaels.

Government Spending Matters, not Deficits

Investor’s Business Daily correctly explains that government borrowing is not a problem. The deficit is small as a share of GDP, and is expected to stay low for several years. The real problem is government spending. Whether that spending is financed by taxes or borrowing, it causes a misallocation of labor and capital, particularly since most government outlays are for consumption and transfer expenditures rather than core public goods such as maintaining the rule-of-law. The editorial also warns that some deficit alarmists have a not-so-hidden agenda of higher taxes:

It’s fashionable these days, for Democrats and even some Republicans to style themselves as “fiscal conservative” to advocate the end of government red ink. Some of them mean well, to be sure. Certainly, no one wants to see a budget deficit forever — or one that expands to a point that it impairs our government’s ability to function. But we’re so far from that right now it’s easy to think those who push for the immediate elimination of the deficit have another agenda entirely. …Last year, the deficit hit $248 billion. Sounds like a lot, but in a $13.6 trillion economy, it’s not. It’s the equivalent of a $900 dollar credit card charge for someone with a $50,000 income. As a share of GDP, the budget deficit last year was 1.9%. That’s down from 3.6% in 2004 and below the long-term average of 2.5%. This year, says the CBO, the deficit will be about $177 billion, or 1.3% of GDP. …For those who argue the deficit is such a bad thing that we need to raise taxes to get rid of it, this too is wrong. As Nobel-winning economist Edward Prescott has noted, workers are highly sensitive to tax rates. They work and earn more when rates fall, less when they rise. It’s common sense.

Squelching Dissent

The New York Times has compiled a mammoth list of federal subsidies (or “earmarks”) to thousands of religious organizations.

Public discussions of such giveaways usually revolve around the First Amendment and also the possible damage that subsidies do to the strength, diversity, and integrity of  religious institutions themselves.

As a fiscal wonk, a bigger concern for me is that the flow of federal money to thousands of otherwise independent organizations squelches sources of dissent for government policies.

Let’s say you belong to the Jewish Council for Public Affairs, the Salvation Army, the Ebenezer Baptist Church in Atlanta, the Presbyterian Church in Louisville, Kentucky, or any of the other groups on the NYT list. Will you not be more hesitant to speak out about the War in Iraq, the immigration bill, civil liberties issues, or other policies because you don’t want to put your group’s federal funding put in jeopardy? Won’t you learn to take a more favorable view of big government over time as your group gets used to the steady stream of “free” money from Washington? 

I think earmarks such as ”$100,000 to the National Museum of American Jewish History, Philadelphia” are outrageous. Religious orders aren’t even responsible for their own history anymore? In my view, Jewish leaders ought to be ashamed of themselves for grabbing taxpayer money for such a project.

For more on earmarks, faith-based giveaways, and federalism, see http://www.cato.org/pub_display.php?pub_id=8246

Socialists in Bulgaria Pondering Flat Tax or Tax Rate Reductions

American politicians, even supposed conservatives, are timid about embracing tax reform, yet left-wing parties in Eastern Europe are slashing tax rates and adopting simple and fair flat taxes. The latest example comes from Bulgaria, where the Socialist Party is trying to decide between across-the-board tax cuts and a 10 percent flat tax:

Bulgarian socialists will discuss plans to impose a flat tax rate at the party congress that starts on Saturday, the event’s agenda shows. …The Socialists are the senior partner in the three-way ruling coalition and hold half of the 16 ministerial portfolios. The party has singled out lowering the individual tax burden as one of its main priorities and will consider two proposals to achieve that goal. The first option is to lower the tax brackets to 10%, 16% and 24%, respectively. The second is to impose the 10% flat tax for all income above a certain tax-exempt amount.

Seen and Not Seen

The Washington Post Magazine had a detailed profile of the daily activities of freshman House member Joe Courtney (D-CT).

We learn that he spends much of his time raising campaign money, even though the next election is still 17 months ago.

More interesting is how a single business in his district, Electric Boat Corp., seems to dominate his time on Capitol Hill. He meets with the company, he lobbies Democratic Party bosses on the firm’s behalf, and he makes sure to ask questions in congressional hearings related to the company.

Electric Boat makes vessels for the Pentagon and employs 6,000 in Courtney’s Connecticut district. That’s a lot of people, but there at 680,000 people in Courtney’s congressional district — what about all their interests? Does Courtney put any effort, for example, into keeping taxes low for the benefit of all the other thousands of businesses in his district?

The article reminded me of Frederic Bastiat’s “What is Seen and What Is Not Seen.” Unfortunately, most politicians focus only on the immediate, most simple, and most visible effects of government action, and don’t have the imagination or capacity for abstract thought to recognize the unseen but much larger effects of big government.

How do we fix this bias?