Archives: June, 2007

Chocolate Chutzpah

Americans love their chocolate. So it’s no surprise that one of the most-read pages currently on the New York Times’ website is Monday’s op-ed decrying a proposal to change federal regulations on what can be legally labeled “chocolate.”

Under Food and Drug Administration regulations, “chocolate” must contain crushed cacao beans and may contain a short list of other ingredients, including spices, nuts, sweeteners, and dairy products. Confections that do not comply with those regulations cannot carry the “chocolate” label.

Some candymakers have petitioned the FDA to expand the list of allowable additives to include various fats. If that happens, chocolatiers could substitute cheaper vegetable oils for expensive cocoa butter — the fat in cacao beans that provides chocolate’s melt-in-your-mouth texture. By substituting away from cocoa butter, confectioners would lower their production costs,  which would lead to greater profit margins or, if the candymakers compete on price, lower chocolate’s price to consumers.

To be clear, chocolatiers can already make this substitution, but the resulting product cannot legally be called “chocolate.” A rose by any other name may smell as sweet, but “chocolate-like candy” apparently doesn’t sell as well as “chocolate.”

That brings us to the NYT op-ed, penned by Mort Rosenblum. He laments:

The proposal would widen the gap between good and awful. Industrial food companies could sell their waxy [confections] for less. But purveyors of the real thing have no corners to cut. While discerning chocoholics will fork over whatever it takes, those who can’t pay will never know chocolate.

As a chocophile, I sympathize with Rosenblum’s opinion of the would-be chocolates. But his lament is difficult to square with chocolate’s history, its current market trend, and basic economics.

When edible chocolate first appeared in the mid-19th century, the high price of cacao made it an endulgence for only the wealthy. Fortunately, the confection became more affordable a few decades later when chocolate makers started mixing in cheaper additives. The most important of those was milk, first popularized by the Swiss entrepreneur Daniel Peter (with help from a powdered milk maker named Henri Nestlé). In the United States, Milton Hershey experimented with the same idea, resulting in his affordable and popular ”great American chocolate bar.” Some Rosenblum predecessor likely complained that the added milk and sugar meant that consumers “will never know chocolate,” but it’s difficult to see Peter’s and Hershey’s creations as anything but a benefit to the consumer.

Nor did milk chocolate lead consumers to turn away from “real” chocolate. Until Monday’s NYT op-ed, recent news coverage on the chocolate industry has trumpeted the strong market trend toward premium chocolate. With plenty of Hershey’s, Whitman’s, and Russell Stover’s on the market, Americans nonetheless are buying more See’s, Godiva, and Lindt’s, and are searching for chocolate bars with higher and higher cacao content. And the large chocolate manufacturers are responding to the demand for premium chocolate.

From an economic perspective, this makes perfect sense. Consumers shift from a product to its substitute because they find the substitute preferable. In the case of the would-be chocolates, consumers would shift away from “real” chocolates because they prefer either the price or the taste of the new confections. Rosenblum makes clear his opinion that “real” chocolate is far better tasting, so only consumers with a strong concern about price would make the switch. Those consumers would not fail to “know chocolate” — they just would be unwilling to pay its price. Meanwhile, people who do prefer “real” chocolate — people who happily pay chocolate’s current price — will go on paying that price to enjoy the food of the gods.

A concern that Rosenblum’s op-ed could have raised is that consumers may be misled as to the nature of the candy bar they are purchasing if the “chocolate” regulation is amended as proposed. But even that concern seems hollow. As noted above, premium chocolates are currently en vogue, and the chocolate bars in the checkout lines at my Trader Joe’s boldly advertise their cacao content (some topping 85%). If the federal government were to change the chocolate regulations, quality chocolatiers would quickly respond with labels telling consumers that their chocolates contain no “foreign fats.”

Rosenblum’s op-ed is a fun and informative read, but the alarm it raises is, well, hard to swallow.

And now, I think I’ll head across the street to the CVS and grab a Ritter Sport bar.

Andrew Sullivan Joins the Anti-Universal Coverage Club

…in this post, where he also critiques Michael Moore’s SiCKO.  Sullivan writes:

[A]llowing individuals to own their own health insurance and carry it from job to job would be a more meaningful reform [than the Romney healthcare initiative] - and univeralism can be over-rated. On this, I’m in agreement with this National Review editorial.

Read the entire post.

Politics and Pricing

There are two ways to price products:

The market way, used for thousands of products for hundreds of years, and

the government way, used for certain politically favored products, such as milk, since the 1930s.

This is 2007. Don’t policymakers have enough experience yet to understand that one of these methods is simple, effective, and efficient, while the other is unfair, wasteful, and bureaucratic?

Liberals, Conservatives, and Free Speech

Libertarians sometimes say that they are “liberal on free speech but conservative on economic freedom,” or that “liberals believe in free speech and personal freedom, while conservatives believe in economic freedom.” That proposition got another test in the Supreme Court yesterday. Conservatives and liberals split sharply on two free-speech cases.

And let’s see … in two 5-4 decisions, the Court’s conservative majority struck down some of the McCain-Feingold law’s restrictions on campaign speech and upheld a high-school principal’s right to suspend a student for displaying a “Bong Hits 4 Jesus” banner. Liberals disagreed in both cases.

So the liberals strongly defend a student’s right to engage in nonsensical speech that might be perceived as pro-drug, but they approve a ban on speech criticizing political candidates in the 60 days before an election.

Now I’m for free speech in both these cases. But if you had to choose, which is more important–the right of a high-school student to display silly signs at school-sponsored events, or the right of citizen groups to criticize politicians at the time voters are paying attention? Political speech is at the core of the First Amendment, and conservatives are more inclined to protect it than are liberals. That’s a sad reflection on today’s liberals.

The liberal attitude toward speech is also on display on the front pages of our leading liberal newspapers. A banner headline in the Washington Post reads “5-4 Supreme Court Weakens Curbs on Pre-Election TV Ads/Ruling on McCain-Feingold Law Opens Door for Interest Groups in ‘o8.” This long headline mentions “TV Ads” and “Interest Groups” but never uses the words “speech” or “First Amendment.” But the sidebar on the high-school case is headed “Restrictions on Student Speech Upheld.” For that issue, a straightforward understanding that speech is involved. And the New York Times website leads with “Justices Loosen Ad Restrictions in Campaign Finance Law,” while the sidebar on the school case reads, “Vote against Banner Shows Divide on Speech in Schools.” Though I should note that the old-fashioned, tree-destroying version of the Times does have a subhead reading “Political Speech Rights.”

Maybe libertarians should try to describe their philosophy by saying “libertarians believe in the free speech that liberals used to believe in, and the economic freedom that conservatives used to believe in.”

Mauritius Accelerates Move to Flat Tax

With the world’s list of flat tax nations growing every year, the pressure to adopt good tax policy is becoming more powerful. The latest example comes from the Indian Ocean. Mauritius already had adopted a flat tax, with the new system scheduled to go into effect in 2009. But tax competition is leading the government to implement the pro-growth system even sooner. Tax-news.com reports:

Deputy Prime Minister and Minister of Finance and Economic Development Rama Sithanen has announced the introduction of a flat corporate income tax, as the government strives to create conditions for “robust, sustained and inclusive growth” whilst opening the economy, facilitating business, and accelerating the transition to global competitiveness. …Central to attaining this goal is the reduction of corporate tax to a flat rate of 15%, a measure which has been brought forward by two years to July 1, 2007. This flat rate will also apply for personal income tax. Initially, the government had planned to reduce corporate tax in stages, starting with a cut in the top rate to 22.5% last year, to 20% this year and to 15% by 2009. …the Finance Minister stated….”We…have a system that is now geared towards rewarding effort and entrepreneurship.”

The Great Writ of Habeas Corpus

A few weeks ago, when I introduced ACLU executive director Anthony Romero at a Cato Book Forum, I began by asking

which right the American Founders considered most basic, that is, indispensable to securing all the others. Is it the right to property, which Arthur Lee described as “the guardian of every other right,” because without it we are all at the mercy of whoever controls all the resources? Is it the right to keep and bear arms, without which resistance to the state is rendered toothless? Is it, as Thomas Jefferson said, the right to trial by jury that protects citizens from the arbitrary power of the state? Is it the case that, as Winston Churchill said – not an American Founder, of course, but always good for a quote – “A free press is the unsleeping guardian of every other right that free men prize”? Or could it be the writ of habeas corpus, known as the Great Writ, which in 1969 the Supreme Court called “the fundamental instrument for safeguarding individual freedom against arbitrary and lawless state action”?

Afterward, my smarter colleague said, “It’s habeas.”

So that’s why it’s good that the ACLU has declared today a “Day of Action to Restore Law and Justice.”  ACLU members and others are rallying on Capitol Hill and visiting congressional offices asking Congress to restore the right of habeas corpus.

One of the most frightening elements of the powers asserted by the Bush administration in the war on terror is the power it claims to arrest American citizens and hold them without access to a lawyer or a judge. The conservatives of the American Freedom Agenda have joined the ACLU in calling for repeal of the Military Commissions Act and restoration of the right of habeas corpus. Cato adjunct scholar Richard Epstein petitioned Congress not to curtail habeas corpus as it considered the Military Commissions Act last fall, to no avail. This issue will provide a good test of the proposition that divided government is a good thing. Will the Democratic Congress do the right thing and restore our constitutional rights?

Justice Department’s Unethical Tax Evasion Case against KPMG Is Falling Apart

Thanks in large part to a punitive corporate tax rate and mind-numbing complexity in the tax code, a lot of accountants and lawyers get rich by figuring out ways to protect shareholder money. This irritates politicians and bureaucrats, who constantly tinker with the law in an attempt to grab more tax revenue (though this effort is offset by politicians looking for campaign cash, which leads to the endless creation of new loopholes). This is business-as-usual in Washington, but the Justice Department added a bizarre twist to the game by launching a legal attack on some partners from an accounting firm, even though the tax shelters they were peddling were not illegal. The Justice Department’s actions were reprehensible, rather akin to the totalitarian tactics of the tax authorities in Russia. If tax lawyers at the Department of Justice think that some people are taking advantage of tax loopholes, they certainly have every right to inform lawmakers and to ask them to change the law. In an ideal world, they would even recommend lower tax rates to remove the incentive to seek out new shelters. But they should never have the right or the ability to arbitrarily declare – by bureaucratic fiat – that tax planning is a criminal act. The Wall Street Journal condemns the Justice Department for its unethical behavior:

The Justice Department’s case against 16 former KPMG partners for tax evasion continues to unravel, with prosecutors themselves conceding late last week that federal Judge Lewis Kaplan has little choice but to dismiss the charges against most of the defendants. Judge Kaplan ruled last year that Justice had violated the defendants’ Constitutional rights by pressuring KPMG not to pay their legal fees. He is now considering a defense motion to dismiss. Prosecutors continue to protest the judge’s ruling but on Friday they admitted in a court filing that dismissal is the only remedy for the rights violations. The more honorable route would have been for prosecutors to acknowledge their mistakes and dismiss the charges themselves. The truth is that this tax shelter case should never have been brought. Both KPMG and its partners believed the shelters they marketed were legal, and no tax court had ruled against the shelters before Justice brought its criminal charges. Then prosecutors used the threat of criminal indictment against all of KPMG to extort an admission of guilt from the firm and force it to stop paying the legal bills of individual partners.