I’m on Rangel’s Side…Sort Of

Poor Charlie Rangel. The chairman of the House Ways & Means Committee got some bad press in July when the sweetheart deal giving him four rent-controlled apartments became public knowledge. Now he’s getting another dose of bad publicity because he somehow forgot to report $75,000 on rental income for his luxury villa at the Punta Cana resort in the Dominican Republic. The New York Times reports:

A lawyer for Mr. Rangel, Lanny Davis, …said the congressman did not realize he had to declare the money as income, and was unaware of the semiannual payments from the resort because his wife, Alma, handled the family finances and conferred with their accountant, John Viardi, on tax matters. …New York State law classifies filing a false city or state tax return a felony punishable by up to four years in prison, but Kathleen M. Pakenham, a tax lawyer at the law firm of White & Case, said criminal prosecutions are rare and in most cases, the taxpayer is simply fined 20 percent of the back taxes owed.

I’m sure plenty of commentators will be dragging out a petards (whatever that is) and hoisting Rangel on it, but I want to express some sympathy. In a good tax system, governments only tax income earned inside national borders – the common-sense practice of “territorial” taxation. As such, the only government that should be concerned about Rangel’s Domincan Republic income is the Dominican Republic. The Ways & Means chairman is only in trouble with American tax authorities because the United States has a very imperialistic system of “worldwide” taxation.

But before you feel sorry for Mr. Rangel and start organizing a petition drive on his behalf, it’s worth noting that the chairman has not tried to fix this policy. Indeed, he wants the make the IRS bigger and the tax code more onerous. Let’s hope, though, that this experience will push him in the right direction.

Bipartisan Nonsense on “Energy Independence” and Trade

Sen. John McCain reinforced his bipartisan credentials Thursday evening by sounding as confused as the Democrats on the nation’s assumed need for “energy independence.”

In his acceptance speech at the GOP convention in St. Paul, McCain pledged federal support for alternative energy so the United States can reduce the amount of energy it imports from abroad. “When I’m president,” McCain told cheering delegates, “we’re going to embark on the most ambitious national project in decades. We are going to stop sending $700 billion a year to countries that don’t like us very much. We will attack the problem on every front.”

He then pledged his support for more offshore drilling, nuclear power plants, wind, tide, solar and natural gas.

Whoa! Before we embark on a project that could cost tens or hundreds of billions of dollars, let’s get the facts straight. Specifically, where did that $700 billion number come from?

That is far more than what we pay for imported energy. In 2007, Americans spent less than half that amount—$319 billion—for imported energy of all kinds, including oil and natural gas. Even with higher energy prices in 2008, our total bill for imported energy this year will be nowhere near $700 billion.

Contrary to popular perception, most of our oil imports come such friendly countries as Canada, Mexico, Colombia, Brazil, and the United Kingdom, or from more neutral suppliers such as Iraq, Kuwait, Nigeria, Angola, Chad and Congo (Brazzaville).  Only a third of our imported oil comes from the major problem countries of Saudi Arabia, Venezuela, Algeria, Ecuador and Russia. We don’t import any oil directly from Iran. [You can check out the latest Commerce Department figures here.]

The $700 billion that Sen. McCain probably had in mind is America’s total trade balance, known as the current account. Last year, Americans rolled up a $731 billion current account deficit with the rest of the world. That account includes not just energy but also manufactured goods, farm products, services, and income from foreign investments.

The current account deficit is not driven by energy imports but by the underlying level of savings and investment in the U.S. economy. We run a current account deficit because, year after year, more is invested in the American economy than Americans save to finance that investment. Foreign capital fills the gap, and the resulting net inflow of foreign investment more or less directly offsets the gap between what we import and what we export.

If the federal government dramatically increases spending on alternative energy, as Sen. McCain and his Democratic opponent both seem to want, the result will be a bigger federal budget deficit, a smaller pool of domestic savings, more foreign capital flowing into the United States, and an even larger current account deficit.

Calvo Raid Justified?

The police have now reviewed and justified the violent break-in of Berwyn Heights, Md., mayor Cheye Calvo’s home a few weeks back. The police kicked in his front door without announcing themselves, and shot his two pet dogs dead. The police later cleared Calvo of any wrongdoing but insisted that their raid tactics were appropriate. A separate FBI investigation is under way.

We’re hosting a forum on no-knock raids here next week.  Mayor Calvo will be here to tell his story and we’ll also hear from Radley Balko, author of the Cato study Overkill, and Peter Christ, co-founder of Law Enforcement Against Prohibition.  Details here.

You’re No Reagan—or Lincoln

Last night John McCain proclaimed himself the candidate of “the party of Lincoln, Roosevelt and Reagan.”

One of Abraham Lincoln’s most famous speeches was his 1852 eulogy for Henry Clay. “He loved his country partly because it was his own country,” Lincoln declared, ”but mostly because it was a free country.”

John McCain managed to give a lengthy tribute to America’s virtues without mentioning that it was a free country:

I fell in love with my country when I was a prisoner in someone else’s. I loved it not just for the many comforts of life here. I loved it for its decency; for its faith in the wisdom, justice and goodness of its people. I loved it because it was not just a place, but an idea, a cause worth fighting for. I was never the same again. I wasn’t my own man anymore. I was my country’s.

Fine sentiments, and he did mention that America is “an idea, a cause worth fighting for.” But what is that idea or that cause? He didn’t say. He never mentioned the Constitution, or the Declaration, or the freedom that has made America a beacon to the world. Indeed, his message seemed less like Lincoln’s and more like John F. Kennedy’s “Ask not what your country can do for you — ask what you can do for your country.”

Johan Norberg vs. Naomi Klein, Round 3

Last May Johan Norberg wrote a devastating critique of Naomi Klein’s book The Shock Doctrine: The Rise of Disaster Capitalism. (Watch him talk about it here.) In his paper, “The Klein Doctrine: The Rise of Disaster Polemics,” he took her book apart:

The Shock Doctrine purports to be an exposé of the ruthless nature of free-market capitalism and its chief recent exponent, Milton Friedman. Klein argues that capitalism goes hand in hand with dictatorship and brutality and that dictators and other unscrupulous political figures take advantage of “shocks”—catastrophes real or manufactured—to consolidate their power and implement unpopular market reforms. …

Klein’s analysis is hopelessly flawed at virtually every level. Friedman’s own words reveal him to be an advocate of peace, democracy, and individual rights. He argued that gradual economic reforms were often preferable to swift ones and that the public should be fully informed about them, the better to prepare themselves in advance. Further, Friedman condemned the Pinochet regime and opposed the war in Iraq.

Klein’s historical examples also fall apart under scrutiny. For example, Klein alleges that the Tiananmen Square crackdown was intended to crush opposition to pro-market reforms, when in fact it caused liberalization to stall for years. She also argues that Thatcher used the Falklands War as cover for her unpopular economic policies, when actually those economic policies and their results enjoyed strong public support.

Klein’s broader empirical claims fare no better. Surveys of political and economic freedom reveal that the less politically free regimes tend to resist market liberalization, while those states with greater political freedom tend to pursue economic freedom as well.

Now Naomi Klein has responded to Norberg’s critique. (Though she can’t bring herself to name him. No point in giving your critic free advertising, calculates the author of No Logo. Norberg muses, “I think it’s because it sounds more David-and-Goliath if she is not criticised by a young Swede, but by ‘The Cato Institute.’”) And Norberg has fired back with another refutation. This time, he finds,

Her response is selective, includes new mistakes, and backs away from some of the claims that she has made without acknowledging it. …she also has nothing to say about the fact that all of her central claims are under attack

From describing Friedman–and Cato!–as neoconservatives, to slyly implying that Friedman supported land theft in Sri Lanka, to juggling statistics and years, Klein is once again revealed to be building a shocking indictment on a foundation of sand.

For a book on globalization that makes sense, skip Naomi Klein and read Johan Norberg’s In Defense of Global Capitalism.

Convention Speeches So Far: Only a Little Terror Hype

I’m proud to report being almost perfectly indifferent to the goings-on at the two political conventions. I don’t care one way or the other about Sarah Palin, though she’s obviously an interesting pick. Here’s what interests me: the rhetoric around terrorism.

Over-the-top speechifying that stokes terrorism fears at the conventions would be bad for the country because it would help perpetuate various costly overreactions and misdirected responses to terrorism. It would encourage would-be terrorists and terrorist groups by granting them more power than their capabilities merit.

I’m pleased to report that the speeches so far have been fairly muted, including Palin’s last night, for the most part. (I’ve only reviewed the presidential and vice presidential candidates’ speeches. I’m sure plenty of speakers have said unfortunate things, but they draw far less attention than the candidates.)

Senators Obama and Biden both referred to keeping nuclear weapons out of terrorists’ hands - an appropriate aim, but perhaps not a significant enough threat to merit mention in a speech of this type. The consequences of a nuclear detonation on U.S. soil (or anywhere) would be significant, of course, but the chance of it happening is vanishingly small.

Governor Palin indulged in a little excess as she criticized Barack Obama’s putative approach to terrorism: “Al Qaeda terrorists still plot to inflict catastrophic harm on America … he’s worried that someone won’t read them their rights?”

It’s almost certainly true that Al Qaeda terrorists (and others) plot to inflict catastrophic harm on America, but what matters more is their capability to do so. The vigilance of various agencies and people almost certainly has their capabilities in check.

I suspect that the man accused of plotting to attack the Republican convention with Molotov cocktails was a more proximate danger to “the homeland,” and he undoubtedly was read his rights.

Reading terrorists their rights, and treating them with scrupulous fairness, would help start to make them boring, and it would keep the focus on their wrongdoing. This would enervate terrorism and deprive terrorist groups of recruits and support. On these grounds alone, we should all be for reading terrorists their rights.

I’ll be watching - scratch that - I’ll check the transcript tomorrow to see if Senator McCain repeats any of his terror-hyping lines. I noted here a few weeks ago when he declared himself a follower of Osama bin Laden.

It’s an exciting line - “I will follow Osama bin Laden to the gates of hell” - but it is a singularly foolish thing to say. It suggests that, as president, McCain would be owned by bin Laden.

I hope Senator McCain charts his own rhetorical course, rather than the one terrorists might like him to follow.

Gerson to McCain: Move Left Fast

Bush speechwriter Michael Gerson, one of the big-government-conservative columnists who are all the rage with the Establishment Media, denounces Barack Obama for having “the ideology of Walter Mondale” and then calls on John McCain to adopt the ideology of Walter Mondale. Here’s his prescription for a winning acceptance speech:

McCain needs to announce new and unexpected reform proposals. Perhaps he should courageously follow the logic of his health plan and promise health coverage as a universal right guaranteed by subsidies for the purchase of private health insurance. Perhaps he should embrace the goal of getting all American electricity from renewable and non-carbon sources by some ambitious but realistic date. Perhaps he should offer guaranteed funding of higher education in exchange for national service.

With Republicans like that, who would need Democrats? If you want the big government of Walter Mondale, you might as well elect Walter Mondale, or his contemporary successor.

And of course it’s not at all clear that such a program would distinguish McCain from the Bush-Hastert-Frist Republicans who have become so unpopular. Ever since Gerson wrote for Bush the words “There is another destructive mindset: the idea that if government would only get out of the way, all our problems would be solved. An approach with no higher goal, no nobler purpose than ‘Leave us alone,’” the Republican party has been eagerly embracing openhanded government. Taxpayer funding for prescription drugs. Subsidies for every form of energy. Huge increases in federal education funding. How would Gerson’s proposed agenda for McCain be “the right address for a rebel?” It would in fact confirm the Bush-McCain alliance to destroy the remnants of Goldwater-Reagan conservatism.