Topic: Tax and Budget Policy

Conservative Big Spending Goes Global

By now it’s old hat that President Bush, who remains inexplicably popular with conservatives, is the biggest spender since LBJ. Now it turns out that the Conservative government elected two years ago in Canada is trying to match him.

John Williamson of the Canadian Taxpayers Federation notes in the National Post that “the Conservatives’ two budgets boosted spending by $24.4 billion over two years.” OK, it’s not Bush’s trillion dollars. But Canada is a smaller country, and “as a result the size of the federal government has grown by 14%.”

It looks like Patrick Basham was all too prescient when he predicted, to much consternation in Canada, that Harper would become “Bush’s new best friend.” 

A Snub for the Dying

On Tuesday, the U.S. Court of Appeals for the D.C. Circuit ruled 8-2 that terminally ill patients who have exhausted all available treatments have no constitutionally protected right to access experimental treatments not yet approved by the federal Food and Drug Administration.  A panel of the D.C. Circuit previously had ruled 2–1 in favor of the terminally ill patients who brought the case, Abigail Alliance for Better Access to Developmental Drugs v. Eschenbach

The Abigail Alliance is named for Abigail Burroughs, who died of head and neck cancer in 2001 after failed attempts to access Erbitux (cetuximab) through the FDA’s existing channels.  (In 2006, the FDA approved Erbitux for treatment of head and neck cancer.)  The Abigail Alliance now represents similarly situated, terminally ill patients who only want one last shot at life.  Eschenbach is commissioner of the FDA.

In an op-ed [$] in today’s Wall Street Journal, my colleague Roger Pilon discusses the tortured legal reasoning that led to the perverse conclusion that terminally ill patients do not have a fundamental right to save their own lives. 

The scientific and economic argument supporting the FDA’s case is that we would get far less information about drug safety and efficacy if terminally ill patients could access unapproved drugs, because there would then be no incentive for patients to participate in the clinical trials that generate such information.  There are a number of problems with this argument, the greatest being that it reduces Abigail Burroughs to a cog in some bureaucrat’s grand machine.

On September 25 from noon to 2pm, the Cato Institute will host a forum on Abigail Alliance for Better Access to Developmental Drugs v. Eschenbach.  Speakers will include Scott Ballenger, lead counsel for the Abigail Alliance; Ezekiel Emanuel, chair of the Department of Bioethics at the National Institutes of Health; and yours truly.  Keep watching Cato@Liberty or the Cato website for further details.

This week’s ruling brought to mind a quote from Mark Twain that appeared in the New York Times on February 28, 1901, and that Mike Tanner and I included in our book Healthy Competition:

The State stands a Gibraltar between me and anybody who insists upon prescribing for my soul what I don’t want to take… . Why shouldn’t I have equal liberty with regard to my body, which is of so much less concern? … Now what I contend is that my body is my own, at least I have always so regarded it. If I do harm through my experimenting with it, it is I who suffer, not the State.

Bureaucrats Run Up $13 Billion Travel Tab

Federal bureaucrats spend as much as $13 billion each year on travel, though that number is just a rough guess since the government is too incompetent to keep track of expenses. It also is no surprise to learn, as reported by the Federal Times, that the federal government has no ability to monitor how the money is being spent.

Gee, one would almost think that there is a lesson to be learned about the likelihood of waste when bureaucrats get to spend other people’s money:

The government knows what it spends on travel but not how. The General Services Administration estimates agencies spend $11 billion to $13 billion a year on business trips, but lacks the ability to say exactly where the money goes.

I Got Hooked on the White Stuff Back in the ’70s

disco-stu.bmpNo, not that white stuff. And not the white stuff that Disco Stu bought from Garth Motherloving. The white stuff I got hooked on (growing up on the family dairy farm) is raw milk — milk that has not been pasteurized or homogenized. Today’s NYT has an article on the growing black and gray markets in raw milk, which the Food and Drug Administration and 15 state legislatures want to shut down.

Yes, that’s right — Uncle Sam and 15 state governments prohibit consumers from buying milk fresh from the cow. And in the nannies’ defense, milk was responsible for much food-borne illness in the era before universal pasteurization. Most consumers likely prefer protection from nasty bugs like E. coli and salmonella.

But others are willing to risk exposure to those illnesses. Some raw milk enthusiasts claim the white stuff is more healthful than processed milk. Others (I count myself among these) say simply that it tastes better that the milk you buy at the store — people who try raw milk for the first time often comment that it tastes more like melted ice cream than the stuff that comes in cartons.

So why should raw milk fans be prohibited from buying the product they want?

That question also underlies Tim’s post, yesterday, about another FDA prohibition — keeping terminally ill patients from accessing experimental medicines. There is no public health issue with these products (my drinking raw milk might make me sick, but it’s not going to make sick the people I interact with on the street). And there is no fraud and abuse issue — these consumers know that they’re buying raw milk; indeed, they want raw milk. Consumers of raw milk (or experimental drugs to fight their cancers or HIV) realize that there is risk to these products but, given their medical conditions and their preferences, they’re willing to bear that risk in exchange for the products’ (possible) benefits.

Government prohibition of the sale of these products is nothing more than bureaucracy’s blanket imposition of its own risk preference on a large, heterogenous population that includes many people with differing preferences. One of the chief virtues of a free market is that it does a far better job of satisfying the heterogenous preferences of a population of consumers than a central planner ever could. Unfortunately, government often intervenes in markets and diminishes that virtue.

As Tim writes in his post, the FDA and its state-level imitators put a happy face on that intervention, claiming they are looking out for the public’s health. But in these cases, why aren’t members of the public permitted to look out after their own health?

Sub-Optimal Tax Cuts in France

Supporters of limited government often say that there is no such thing as a bad tax cut, but it also is true that some tax cuts are better than others (for instance, see here for a comparison of the sub-par 2001 tax cuts and the supply-side 2003 rate reductions). If policy makers want to boost economic performance, they should concentrate on reducing marginal tax rates on additional economic activity. By this standard, the tax cuts advocated by the new French President generally are not well designed. He is seeking to cap the total income tax burden at 50 percent rather than 60 percent, but this change affects the total tax bill and may not have much impact on the decision to engage in additional productive behavior. A better approach would be to lower the top tax rate. Likewise, Sarkozy wants to increase wealth tax exemptions, but this approach is inferior to a rate reduction (or, better yet, repeal of the tax). He also has a gimmicky plan for tax cuts on overtime and a scheme for mortgage payments. The good news is that there will be tax cuts in France. The bad news is that they could have been better designed. Tax-news.com reports

Chief among Sarkozy’s reforms are measures creating more exemptions to France’s wealth tax, which has often been cited as a key reason why France lags behind its competitors in terms of investment and economic growth, and a 50% cap on individual income tax, down from 60%. The reforms would also cut tax on overtime - encouraging more French workers to work beyond the previously politically sacred 35 hour week, part of plans to make the domestic labour market more flexible and business-friendly - and tax cuts on mortgage interest payments. …It is hoped that Sarkozy’s tax and economic reforms will tempt back the hundreds of thousands of French citizens who have left the country seeking less punitive tax regimes. Popular destinations for the estimated 500,000 French tax exiles include Belgium, Switzerland, the UK and the US. …studies show that it is not just the rich and famous who have seemingly grown weary with France’s high taxes, with families and investors fleeing in increasing numbers. Research by French Senator Philippe Marini, cited by Bloomberg, claims that households fleeing the fortune tax have climbed to a record 649 in 2005 from 370 in 1997. Another study by the Economic Analysis Council concluded that approximately 10,000 business directors have fled France in the past 15 years, taking as much as US$137 billion in capital to invest elsewhere.

New at Cato Unbound: Peter Leeson on Practical Anarchy

Everybody seems to know we need government … But pirates didn’t! How did they manage without the state? In this month’s thought-provoking Cato Unbound lead essay, Peter T. Leeson, the BB&T Professor for the Study of Capitalism at George Mason University, explores what pirate “constitutions,” credit institutions among 19th century African bandit traders, and the well-being of Somalians after the collapse of the Somalian state have to tell us about the possibility of practical anarchy. It works better than you think, Leeson concludes. “As long as there are unrealized gains to realize, people will find ways to realize them” — state or no state.

Can organizations really solve complex problems of coordination without government coercion? Can voluntary bands provide public goods? Are there conditions under which groups are better off stateless? Leeson will be joined in tackling these question by three eminent commentators: Florida State economics professor Bruce Benson, author of the seminal The Enterprise of the Law: Justice without the State; Dani Rodrik, professor of international political economy at Harvard’s Kennedy School of Government; and Randall Holcombe, another distinguished Seminole economist and current president of the Public Choice Society. Benson is on deck to reply this Wednesday. Stay tuned!  

Time for a (Most of) Government Shutdown

President Bush and congressional Democrats are fighting over many of the annual spending bills, leading some to predict a government shutdown when the new fiscal year starts October 1. This prospect horrifies the political class, but Investor’s Business Daily explains why it would be a good idea to close many government departments:

Here’s a suggestion: Many government departments, agencies and offices should be closed for good. …In 1800, the government needed a mere 3,000 employees and $1 million a year to do its job. In those days, lawmakers knew well the meaning of “limited.” Today, federal civilian employees number nearly 2 million. Another 10 million or more are federal contractors or grant recipients. The yearly budget of this runaway train is soaring toward $3 trillion. …Start with the Education Department, created in 1979 by the Carter administration despite the fact there is no constitutional authorization for its existence. In addition to its meddling, the department is spending nearly $70 billion a year in taxpayers’ dollars. By all accounts, public education in this country is worse off than it was when the Education Department opened. It’s hard to make an argument that those 5,000 employees are contributing anything. Next on the block should be the Energy Department, another monster wrought by Jimmy Carter, this one in 1977. There’s no real job this department… Like food, shelter and clothing, energy is a commodity that can and should be traded on an open market. There is no need to make a federal case out of it, particularly one that employees 17,000 people. All Cabinet-level departments — even Defense, which could cut waste — should at least have their budgets drained of excess. On a smaller scale, the National Endowment for the Arts and the National Endowment for the Humanities should go. Funding for the Corporation for Public Broadcasting should be zeroed out.