Topic: Tax and Budget Policy

Another Government Shakedown

Politicians are agitating for a big tax hike on the private equity industry, but the motive for this talk may involve more than just a desire to have more money to spend. Holman Jenkins of the Wall Street Journal explains that politicians threaten an industry in order to extract campaign contributions. The column suggests this is what spurred the attack on the so-called junk-bond industry in the 1980s. Another good example would be the assaults on Microsoft and Intel. This does not mean politicians are like mobsters. Mobsters, after all, don’t add insult to injury by trying to rationalize their protection rackets as being for the public good:

Being a shrewd bunch, the private equity industry presumably has gotten the message: When vast new fountains of wealth open up in the economy, Congress must receive its ransom in campaign donations. Delivering the wagged finger were none other than Max Baucus and Charles Grassley, chairman and ranking member of the Senate Finance Committee, who’ve taken to musing aloud about how the tax code’s treatment of private equity’s lately fabulous profits might be revised. The bipartisan nature of the initiative should reassure readers that there’s no philosophical issue here. It’s purely bidness. You, private equity, have been remiss in your patriotic duty. Cough up. Anyone who recalls the junk bond wars of the 1980s will notice a pattern. Then too, Congress was awash in proposals for taxing the takeover industry: by eliminating the interest deduction for junk bond interest, by imposing an excise tax on assets acquired in a hostile takeover, etc. These ideas came to naught, not least because of the fright the proposals put into the stock market. But the endless debate unlimbered a delicious flow of campaign dollars from all concerned. …the message has been received. Private equity has now set up a Washington trade group and has opened its pockets to politicians, with Barack Obama being a special heartthrob. Oh, happy day for members of the House and Senate tax committees, who lived for years off the junk bond wars and now will live for years off the private equity plutocrats.

Canadian Journalists Can’t Swallow SiCKO

Michael Moore’s new film SiCKO praises the government-run health care systems of such countries as Canada.  Moore claims the film was warmly received at Cannes by Americans from both sides of the political aisle. 

Canadian journalists, however, were a little more skeptical.  Here’s how Peter Howell, a film critic for the Toronto Star, described their response to SiCKO:

Michael Moore is handing out fake bandages to promote his new film Sicko, an exposé of the failings of the U.S. health care system.  But he may feel like applying a couple to himself after the mauling he received yesterday from several Canadian journalists – present company included – following the film’s first viewing at the Cannes Film Festival.

“You Canadians! You used to be so funny!” an exasperated Moore said at a press conference in the Palais des Festivals.  “You gave us all our best comedians. When did you turn so dark?”

We Canucks were taking issue with the large liberties Sicko takes with the facts, with its lavish praise for Canada’s government-funded medicare system compared with America’s for-profit alternative.

While justifiably demonstrating the evils of an American system where dollars are the major determinant of the quality of medicare care a person receives, and where restoring a severed finger could cost an American $60,000 compared to nothing at all for a Canadian, Sicko makes it seem as if Canada’s socialized medicine is flawless and that Canadians are satisfied with the status quo…

Other Canadian journalists spoke of the long wait times Canadians face for health care, much longer than the few minutes Moore suggests in Sicko. Moore, who has come under considerable fire for factual inaccuracies in his films, parried back with more questionable claims…

Sicko, to be released in North America on June 29, is by turns enlightening and manipulative, humorous and maudlin. It makes many valid and urgent points about the crisis of U.S. health care, but they are blunted by Moore’s habit of playing fast and loose with the facts. Whether it’s a case of the end justifying the means will ultimately be for individual viewers to decide.

On June 21 – the day after the D.C. premiere of SiCKO – the Cato Institute will help viewers decide when it hosts a screening of clips from SiCKO and short films by independent filmmakers who are more critical of Canada’s Medicare system.  Click here to pre-register.  And arrive early: seating is limited. 

Live Free Or Not

NH sealIn this age of galloping leviathan, one cause for joy is New Hampshire’s continued willingness to thumb its nose at various dictates from Washington, D.C. In some cases, the state’s federalism obstinacy prohibits it from receiving Uncle Sam’s largess — a penalty that many Granite Staters consider a sign of honor.

But the joy of New Hampshire was muted a bit this spring when the state’s General Court (the legislature) flirted with giving up one of its most celebrated examples of recalcitrance— the refusal to adopt mandatory seat belt laws for adults. A bill mandating the wearing of seat belts made it through the state’s House of Representatives before stalling in a Senate committee. What’s more, proponents scored a victory by placing a “seat belt policy exploratory committee” rider on a completely unrelated piece of legislation.

The standard justification for seat belt laws — that government is looking out for your well-being — would have little truck in “Live Free or Die” New Hampshire. So bill proponents tried a different tack; as noted in an AP story, they claimed that they’re simply looking out for the taxpayer:

“Live Free or Die would be great but you expect everyone to pay for you,” said Rep. Jennifer Brown, the bill’s prime sponsor. “The state has to pick up the medical bills and it could be for the rest of your life.”

State. Sen. Maggie Hassan said mandating seat belt usage is just as much about her rights as those who don’t like the idea.

“People like me who use my seat belt will wind up paying for people who don’t,” she said. “This is about my rights.”

Notice the strange conception of “rights” assumed by this argument: Because government offers a benefit, government — acting on behalf of “taxpayer rights” — can dictate people’s behavior because of the possibility that some people who engage in that behavior might use that benefit. (This is different than, say, work requirements for welfare — in that case, people choose to accept a benefit, and government is placing a condition on the receipt of that benefit.)

The slippery slope problem of such thinking is obvious. Because government provides an education benefit to children, can it mandate certain behaviors for adults of child-bearing age? Because government provides some health benefits, can it regulate everyone’s risk-taking behavior? Because government provides retirement benefits, can it dictate people’s employment decisions?

This should prompt good civil libertarians to look skeptically at any proposal to create or expand government benefits. Laocoon’s warning can be updated: Beware of politicians bearing benefits.

Does Globalization Undermine Redistribution?

An article in the UK-based Guardian notes that wealthier regions within nations and wealthier nations within Europe are increasingly unhappy with the amount of money being used to subsidize less productive areas. The article suggests the growing unease is a function of globalization, though it is more plausible to argue that the high tax rates associated with redistributionist policies are becoming more untenable because of globalization:

…disputes over public money and how to spread it fairly are rife across large tracts of Europe, eroding national solidarity, feeding separatism, encouraging populism, and generating friction between Europe’s wealthy centres of excellence and their less fortunate national hinterlands. The rich bits of Europe are revolting. And it is some of the most successful and attractive cities on the continent that are in the revolutionary vanguard. From the fashion and finance mecca of Milan to the hi-tech centre of Munich, from the world’s diamond capital, Antwerp, to the vibrant coastal hub of Barcelona, Europe’s most dynamic cities and regions are increasingly rebelling against “subsidising” the poorer parts of their countries, demanding to keep their home-grown wealth, and causing headaches for central governments. … In Italy, the centre-left government of Romano Prodi has just received a drubbing in local elections, particularly in the north, not least because the north perceives Rome as the agent pilfering its hard-earned cash only to hand it over to the “spongeing” south where the Mafia and Camorra soak up the subsidies. …In Belgium, Flemish nationalists complain that the public sector payrolls in Wallonia are twice the size of those in Flanders. “It’s majority socialist in the south, the last Soviet republic in Europe,” says Filip Dewinter, the Vlaams Belang leader. “They’re stealing our money with the collaboration of the government in Brussels. We’re a hard-working people, very prosperous, low unemployment, and we’re giving them €12bn (£8bn) every year to finance their social security. We can stand alone.” In Germany, the wealthy southern states of Bavaria and Baden-Württemberg balked at the Berlin government’s health service reforms last year because they had to pay more into the national kitty than poorer parts of Germany. In Britain, in the debate over Scottish devolution or independence, the wealthy south-east appears increasingly aggrieved over the Barnett formula that ordains higher per capita public spending in Scotland than in England.

How I Learned to Read the New York Times While Simultaneously Scratching My Head

From a column on tax reform by Floyd Norris in today’s Times:

“Senator Ron Wyden, Democrat of Oregon, has traveled around to promote what he calls a Fair Flat Tax Act, which is basically an attempt to go back to what Mr. Reagan enacted. It would get rid of many deductions — but save some of the more popular ones, like retirement savings accounts and mortgage interest — and have three tax brackets, of 15, 25 and 35 percent.” [emphasis mine]

Scandlen on “The Grand Poobahs of Massachusetts”

In the most recent newsletter from Consumers for Health Care Choices, Greg Scandlen has some fun with the Massachusetts “Connector Authority” created by then-Governor Mitt Romney:

It must be fun to be a Grand Poobah of health insurance in Massachusetts. Here you sit on your Grand Poobah cushion while the peasants come before you to plead their cases. One begs you to limit copays for visits and drugs because they add up pretty quickly. A doctor asks you to disallow deductibles of $2,000 because it provides “inadequate coverage.” Yet a business owner says that is the only kind of coverage they can afford. A self-employed artist requests that you consider net income, not gross income because she spends so much of her gross on art supplies. A consumer advocate asks you to disallow Health Savings Accounts, while an AIDS activist wants you to provide unlimited lifetime benefits. And it is up to you - the All Powerful and Mighty Grand Poobah of the Connector - to grant these wishes or deny them on behalf of the entire fiefdom. All must obey or be severely penalized.

And yet the deadline for obedience (July 1) approaches and a mere 100 people a week (out of the 160,000 required) are signing up for coverage. In the Olden Days we could send Paul Revere to “every Middlesex village and farm” to alert the peasants to their new “responsibility,” but today we’ll have to settle for spending $3 million in taxpayer money on advertising and delay the deadline until November. Surely by then, they will humble themselves before the Poobahs and do as they have been told. There will be no Tea Parties this time around.

Hurray for a Bigger Welfare State!

The Bush administration is deeply infused with a pro-spending, welfare state mentality. It may contain a few conservative officials scattered here and there, but the vast machinery of the Republican executive branch churns out spending proposals, regulations, and big government propaganda just as prior Democratic ones did.

Consider this June 5 press release from the USDA , wherein higher spending and more recipients of government welfare is always a good thing.

Agriculture Secretary Mike Johanns says proudly: “We have increased our nutrition assistance budget by 70 percent since 2001 and we proposed that the 2007 Farm Bill do even more to increase access and participation in USDA programs to help those in need.”

Here’s one particularly silly statement: ”Today’s report highlights the recent growth in the Food Stamp Program — the largest Federal nutrition assistance program, and the nation’s first line of defense against hunger.”

Of course, free markets are the real “first line of defense against hunger.” Has no one in the administration read Adam Smith? It is the self-interest of the butcher, brewer, and baker that we can thank for providing our dinner.