Topic: Government and Politics

IBD Argues Against Back-Door Capital Gains Tax Hike

With the support of some Republicans, revenue-hungry politicians are contemplating a tax hike on the “private equity” industry. These firms help ensure the efficient allocation of capital. And as Investor’s Business Daily explains, part of their reward for successful investing is a share of the capital gain. In an ideal tax system, there is no capital gains tax. Investments, after all, are made with after-tax dollars. It certainly would be a mistake, therefore, to move in the other direction by more than doubling the rate:

With the Sarbanes-Oxley regulatory regime making life miserable for many public companies, a number of troubled firms have innovatively turned to private equity to better their fortunes — or even save themselves. …So why do prominent members of both parties in Congress, and even the Bush administration’s Justice Department, seem poised to declare war on private equity? …It’s not surprising that Democrat Barney Frank, chairman of the House Financial Services Committee, plans hearings on private equity. More alarming, Charles Grassley, ranking Republican on the Senate Finance Committee, is considering joining that panel’s Democratic chairman, Max Baucus of Montana, in pounding the PE industry with a massive tax increase. Private equity firms usually take a 20% profit share, or “carry,” on their complex deals. Under current law, the carry is subject to the 15% long-term capital gains tax. Grassley wants it taxed at the 35% rate for ordinary income. The New York Times has hailed this “Grassley Tax” on jobs and capital as the first step toward a general capital gains tax hike — a surefire means of pulling the rug out from under the vibrant economy. …Congress will get just $5 billion to $7 billion in annual revenues from the Grassley Tax — hardly worth its ruinous economic costs. …Does the senior senator from Iowa, who likes to tout himself as a tax cutter, really want his epitaph to end up being: “Sen. Chuck Grassley, R-France”?

Enemy of the People!

Prof. Walter F. Murphy’s Letter, originally published on Mark Graber’s blog, 3/7/07:

On 1 March 07, I was scheduled to fly on American Airlines to Newark, NJ, to attend an academic conference at Princeton University, designed to focus on my latest scholarly book, Constitutional Democracy, published by Johns Hopkins University Press this past Thanksgiving.

When I tried to use the curb-side check in at the Sunport, I was denied a boarding pass because I was on the Terrorist Watch list. I was instructed to go inside and talk to a clerk. At this point, I should note that I am not only the McCormick Professor of Jurisprudence (emeritus) but also a retired Marine colonel. I fought in the Korean War as a young lieutenant, was wounded, and decorated for heroism. I remained a professional soldier for more than five years and then accepted a commission as a reserve office, serving for an additional 19 years.

I presented my credentials from the Marine Corps to a very polite clerk for American Airlines. One of the two people to whom I talked asked a question and offered a frightening comment: “Have you been in any peace marches? We ban a lot of people from flying because of that.” I explained that I had not so marched but had, in September, 2006, given a lecture at Princeton, televised and put on the Web, highly critical of George Bush for his many violations of the Constitution. “That’ll do it,” the man said.

After carefully examining my credentials, the clerk asked if he could take them to TSA officials. I agreed. He returned about ten minutes later and said I could have a boarding pass, but added: “I must warn you, they’re going to ransack your luggage.” On my return flight, I had no problem with obtaining a boarding pass, but my luggage was “lost.” Airlines do lose a lot of luggage and this “loss” could have been a mere coincidence. In light of previous events, however, I’m a tad skeptical.

I confess to having been furious that any American citizen would be singled out for governmental harassment because he or she criticized any elected official, Democrat or Republican. That harassment is, in and of itself, a flagrant violation not only of the First Amendment but also of our entire scheme of constitutional government. This effort to punish a critic states my lecture’s argument far more eloquently and forcefully than I ever could. Further, that an administration headed by two men who had “had other priorities” than to risk their own lives when their turn to fight for their country came up, should brand as a threat to the United States a person who did not run away but stood up and fought for his country and was wounded in battle, goes beyond the outrageous. Although less lethal, it is of the same evil ilk as punishing Ambassador Joseph Wilson for criticizing Bush’s false claims by “outing” his wife, Valerie Plaime, thereby putting at risk her life as well as the lives of many people with whom she had had contact as an agent of the CIA. …

I have a personal stake here, but so do all Americans who take their political system seriously. Thus I hope you and your colleagues will take some positive action to bring the Administration’s conduct to the attention of a far larger, and more influential, audience than I could hope to reach.

Politics and the English Language

Over at the Corner, Ramesh Ponnuru notes that a post of his,  reporting from a recent Club for Growth summit, occasioned much outrage on the left side of the blogosphere (as in this entry from Glenn Greenwald, who’s my kind of liberaltarian).  Ponnuru explains:

What happened is that Ed Crane, the head of the libertarian Cato Institute, asked Romney and Giuliani on separate occasions a polemically-phrased question about the president’s authority to designate detainees as enemy combatants—or, as Crane put it, arrest citizens without review.

Giuliani said he’d only want to use the power ”infrequently,” where Romney said he’d like to hear from some smart lawyers before deciding whether to eviscerate what Justice Scalia has, somewhat “polemically,” called “The very core of liberty secured by our Anglo-Saxon system of separated powers.”

I believe that the basis for Ed’s question was the Jose Padilla case, in which the Bush administration asserted the right to seize an American citizen on American soil and hold him without charges or access to counsel for the duration of the war on terror–in other words, perhaps forever.  (Padilla has since been charged in civilian court, but the administration has never renounced the power it asserted). 

I wasn’t there, so I didn’t hear the exact phrasing of the question, but from the account above, Ponnuru seems to think that asking whether the president should have the power to “arrest citizens without review” is an example of polemical phrasing.   Yet that was the very power asserted in the Padilla case.   You can defend that constitutional theory or oppose it, but the description is neutral and accurate.  In contrast, “designate detainees as enemy combatants” is a euphemistic word-cloud, obscuring what’s really at issue. 

Democrats and Civil Liberties

Back during a blogosphere brouhaha about “libertarian Democrats,” Jesse Walker of Reason offered this advice to Democratic candidates who wanted to attract libertarian votes:

The short answer – and this applies to Republican candidates too – is: (a) Don’t be as bad as the other guy, and (b) Be actively good on at least one important issue.

He went on to urge Democrats to “Be good on the issues where the left is supposed to be good.” Like, you know, peace and civil liberties. And the problem for libertarians who are tired of being yoked to an increasingly less libertarian Republican party is that the Democrats aren’t following this advice. Not only have they seized on their narrow 2006 victory to start pushing for national health insurance, more regulation, public housing, and a budget that implicitly requires a massive tax increase, they have dithered about the war in Iraq and completely ignored real civil liberties reforms. Democrats are far more concerned about the firings of eight U.S. attorneys than about the authority the president claims to arrest American citizens and hold them without access to a lawyer or a judge.

Now two leading lefty pundits have called the Democrats out on these issues. Arianna Huffington wants to know when the Democratic presidential candidates are going to say something about the war on drugs. She’s embarrassed to have to admit that a conservative Republican senator from Alabama, Jeff Sessions, thinks the penalties for crack cocaine use are excessive, while liberal Democrats look the other way.

And John Nichols of the Nation thinks Democratic candidates ought to be able to endorse a package of constitutional reforms being supported by the chairman of the American Conservative Union. The American Freedom Agenda, endorsed by several prominent conservatives, envisions such reforms as

  • Restore habeas corpus to prevent the illegal imprisonment of American citizens;
  • Prohibit torture and extraordinary rendition;
  • Prohibit unconstitutional wiretaps, email and mail openings via warrantless searches.

Nichols thinks Hillary Clinton, Barack Obama and John Edwards don’t endorse such goals because they’re cautious politicians. Maybe. Or maybe it’s because they want to be president, and they want to exercise just as much power as President Bush exercises.

So far it’s hard to find the issue(s) on which Democrats are “actively good.” Maybe their 2008 strategy for attracting moderates, centrists, and libertarian-leaning voters is to hope the Republicans keep on spending, centralizing, preaching, incarcerating, and struggling in Iraq.

Hollywood For the Stylish

I loved this. It seems that there is a push (led by a fashion lawyer and a fashion show consultant, no less) for Washington, D.C. to get its own version of Chicago’s Magnificent Mile. According to today’s Yeas and Nays column in the Examiner (second item), a few D.C. council members are pushing to create a “Commission on Fashion Arts and Events.” It will “recognize the achievements of D.C.’s burgeoning fashion community” (really) and dedicate a section of the “city’s landscape” for fashion retail.

Howard Dean Overwhelmingly Wrong Again

In the Democratic party’s weekly radio response to President Bush, Democratic National Chair Howard Dean said, “It’s time for the President to show respect to the American people, who voted overwhelmingly to leave Iraq.”

One can support withdrawal from the floundering war with Iraq without getting carried away.  The Democrats indeed took control of Congress in the last election, but the results were hardly overwhelming, nor is it clear that the vote was primarily about Iraq. In the House elections, Democrats carried the total popular vote by almost 5 million, or 52.0 to 45.6 percent. In the previous election, the Republicans had a margin of almost 3 million, but then about 37 million more people voted that year, so to some extent the shift in 2006 was a result of more Republicans than Democrats staying home.

As for Iraq, Democrats did best in 2006 among voters who said Iraq was “extremely important” or “not at all important” to them. A Democratic polling firm found that Iraq was the most important issue in the election, especially among people who voted for Democrats, though it was still only cited as most important by 37 percent. And in the exit polls corruption, terrorism, and the economy were all named as “extremely important” by slightly larger numbers of voters than Iraq.

Republican over-spending, corruption, the religious right, health care, perceptions of a weak economy, immigration, Iraq – lots of issues pushed voters toward the Democrats in 2006. We should be careful not to over-interpret the results of any election, as elections inevitably involve many factors. In any case, a swing of 3 or 4 percent toward the Democrats in a low-turnout election is hardly evidence of any “overwhelming” vote, much less an overwhelming referendum on any issue.

Federal Stem Cell Funding in the Future?

On Thursday, April 12, two bills dealing with embryonic stem cell funding will come up for votes by the U.S. Senate. The president has promised to veto one of the bills should it come to his desk, but he supports the other. Ironically, the vague language of one of the bills and subsequent confusion in the press regarding the provisions of both bills have made passage of a funding bill more likely.

Here is my summary of what the bills would do: S. 5, which is essentially the same bill as the one passed by the House in January, allows federal funding of a wide range of embryonic stem cell research. S. 30, a “compromise” bill negotiated with the White House, allows federal funding of embryonic stem cell research but of a kind that is essentially worthless.

But that is not how the bills have been described in the press. Two examples follow:

The Washington Times reported this morning:

The White House yesterday signaled support for legislation that provides federal funding for stem-cell research using embryonic cells that have no chance of surviving.

The legislation, authored by Sen. Johnny Isakson, Georgia Republican, seeks a middle ground in the highly charged debate over stem-cell research. His bill skirts moral concerns over using embryonic stem cells while ensuring federal funding for the breakthrough science.

Mr. Isakson’s bill would allow scientists to conduct research on embryos they determine are incapable of surviving in the womb but whose stem cells are still viable for research. The bill would also allow funding for research on stem cells from embryos that have died during fertility treatments.

The Kaiser Family Foundation’s Kaisernetwork.org reported something similar:

The White House on Thursday announced its support for a bill (S 30), co-sponsored by Sens. Norm Coleman (R-Minn.) and Johnny Isakson (R-Ga.), that would allow federal funding for stem cell research using embryos with no chance of survival, the Washington Times reports (Lopes, Washington Times, 4/6).

Currently, federal funding for human embryonic stem cell research is allowed only for research using embryonic stem cell lines created on or before Aug. 9, 2001, under a policy announced by President Bush on that date.

Coleman and Isakson’s measure would fund research on stem cells taken from “dead” human embryos or extracted from living embryos without destroying them. In addition, it would allow federal funding for research on stem cell lines derived from embryos that are not likely to survive during the freezing process or in the womb.

I’m sure the reporters who wrote those articles had access to some interpretations by members of Congress or the White House to which I’m not privy. But I don’t see much similarity between what they describe and the actual language of the two pieces of legislation. Here is what the two bills, in relevant part, actually say:

S 30: It is the purpose of this Act to—

(1) intensify research that may result in improved understanding of or treatments for diseases and other adverse health conditions; and

(2) promote the derivation of pluripotent stem cell lines without the creation of human embryos for research purposes and without the destruction or discarding of, or risk of injury to, a human embryo or embryos other than those that are naturally dead.

By contrast, 

S 5: (b) Ethical Requirements— Human embryonic stem cells shall be eligible for use in any research conducted or supported by the Secretary if the cells meet each of the following:

(1) The stem cells were derived from human embryos that have been donated from in vitro fertilization clinics, were created for the purposes of fertility treatment, and were in excess of the clinical need of the individuals seeking such treatment.

(2) Prior to the consideration of embryo donation and through consultation with the individuals seeking fertility treatment, it was determined that the embryos would never be implanted in a woman and would otherwise be discarded.

(3) The individuals seeking fertility treatment donated the embryos with written informed consent and without receiving any financial or other inducements to make the donation.

The appeal of S. 30 to both sides of the debate may be that “without risk of injury” is open to interpretation. Those in favor of embryonic stem cell research can claim that funding for research done without the intent of injuring embryos, even if it in fact might injure some embryos, is acceptable. Those who worry about the well-being of embryos are likely to interpret the phrase very narrowly, as not allowing the funding of any research with even a potential for harming embryos.

The result will be the same whether both, neither, or one of the bills is passed. The nonsensical waste of time debating federal funding will continue, while researchers who truly care about making progress will do so with private funding.