Misguided Tax Advice from National Review Editor

I have known Ramesh Ponnuru for years, and we have always had a friendly debate about tax policy. He generally thinks my ideas are economically sound, but politically misguided, a reasonable concern given the hybrid class-warfare/special-interest mentality in Washington. But Ramesh’s tax analysis certainly leaves something to be desired. His column in the New York Times asserts that America’s high corporate tax rate is not important for competitiveness – even though researchers have found that the corporate tax burden plays a key role in where jobs are created and how much workers are paid (see this video for more information). Ramesh also argues that present tax rates are not an impediment to “healthy long-term growth.”

Many of our trading partners have cut their corporate taxes, and more and more conservatives want the United States to follow suit. Apparently they haven’t been listening to their own speeches on free trade. Companies compete. Countries, however, are not engaged in a zero-sum contest where one nation’s gain is another’s loss. Cutting corporate tax rates may or may not be a good idea, but we don’t need to make it a priority to preserve our competitiveness. … The primary focus of the Romney and Giuliani tax plans remains high earners. What would be a serious middle-class tax cut? One answer is to expand the tax credit for children. But none of the candidates is proposing to do so, or any other big tax relief for regular folks. … True, an expanded tax credit for children wouldn’t increase economic growth. Growth is good, and more growth is better. But present tax rates are perfectly compatible with healthy long-term growth. There is no pressing need to bring them down to improve growth.

It is true that tax rates are much lower today than they were 30 years ago, and our economy is doing much better as a result, but that hardly is an argument for the status quo. Even if lower tax rates only boost annual growth by “just” two-tenths of one percent, the long-run impact is dramatic because of compounding. Last but not least, Ramesh thinks it is politically wise for Republicans to compete with Democrats by seeking targeted middle-class tax cuts. He admits that child credits and similar narrowly-focused tax cuts will not boost growth, but he argues they will be politically effective. But since when is it the job of Republicans do adopt suboptimal (or even bad) policies for short-term political reasons? And does Ramesh – or anyone else – think the Republicans can out-bid Democrats in offering favors to different constituencies? And if adopting Democratic ideas is the key to Republican political success, how can he explain the political success of Ronald Reagan and the political failure of Bush 41 and Bush 43?

Romney’s Selective Memory

In the Wall Street Journal ($)Mitt Romney seeks to distance himself from HillaryCare II:

The new plan is slated to cost $110 billion a year. And to pay for the new entitlement – a tax hike. That in turn will slow down the economy and make the cost of her system grow even higher. By contrast, both the reforms I led in Massachusetts and the federalist reform plan I recently proposed do not raise taxes or increase spending.

…I chose an individual mandate only after we had done our best to reform state insurance regulations – lowering premiums by as much as 50%.

Let’s be clear here: My plan in Massachusetts worked very differently than Sen. Clinton’s plan would. First, we worked to reduce the burdens of regulation. The legislature insisted on more coverage mandates and regulation than I would have liked, but even so, less regulation has resulted in much lower premiums.

Governor Romney believed at one point that he was going to do all these things–cover the uninsured, simplify regulations, lower costs, and avoid increased government spending.  And that is what he remembers having done.

Reality is a bit different.  Health insurance in Massachusetts is still highly regulated.  If anything, regulations are stiffer.  Some people who already had health insurance found that under the new law their health insurance policies do not meet the mandate!

Finally, the cost of the plan proved far higher than Romney projected.  This makes the claim about no increase in spending or taxes untenable.

Romney remembers a plan that was in his dreams.  What was actually feasible, enacted, and implemented is rather different.

The Mitt-Hillary “Connection,” Part IV

Mitt Romney devoted an entire article [$] in today’s Wall Street Journal to explaining how the law he signed as governor of Massachusetts is very different from Hillary Clinton’s new health plan

He’s right, you know.  Clinton proposes an individual mandate and an employer mandate.  Romney?  His Massachusetts law imposed … well, individual and employer mandates.  Clinton proposes subsidies for those who can’t afford insurance.  Romney?  Yeah, he had those too.  Clinton proposes expanding an existing government purchasing cooperative.  Aha!  Romney … um, created a new government purchasing cooperative.  Clinton wants to impose hidden taxes on the young and those who lead healthy lifestyles to subsidize older people and those who lead unhealthy lifestyles.  Romney?  Yeah, he did that too.  Clinton disingenously wraps her plan in free-market rhetoric.  Romney … umm …

The governor doth protest too much, methinks.

In related news … the Romney campaign plans to roll out a new TV ad that warns:

When Republicans act like Democrats, America loses.  It’s time for Republicans to start acting like Republicans.

Here’s a scary thought.  What if Republicans are acting like Republicans?

From the Why We Fight File

In Why We Fight: How Public Schools Cause Social Conflict, I explained that our public schooling system causes constant political and social battles because everyone, no matter what their values or educational goals, is forced to pay for the schools, but only the most politically powerful can control them. I also explained that the only viable way to defuse the situation is to give all parents school choice, so that they can take their children and the money intended to educate them to schools that share their values. Well, a story in this morning’s Chicago Tribune about a Windy City school engulfed in a battle over a required 7th grade reading book makes my point – and then some. Not only does it show the need to let parents choose their children’s schools because their values may differ, it also displays the arrogance that can come from school administrators who know that they have all the power:

Several dozen parents at a Southwest Side Chicago public school are calling for school officials to ban a controversial book they say is filled with references to sex and violence.

The book, “The Chocolate War,” which is required reading for 7th grade students, was blasted by parents at a Local School Council meeting Tuesday evening at the John H. Kinzie Elementary School in the Garfield Ridge neighborhood.

Nick Cortesi, who has a 2nd grader and a kindergartner at Kinzie, said school officials should remove the book because of its inappropriate content and adult themes.

“I’ll be dammed if they are going to be reading this filth,” Cortes said. “The issue is over whether it’s age-appropriate. What about the parents who are tax payers? Have we no say?”

At the meeting, Kinzie Principal Sean Egan told about 50 parents who showed up in the school’s cafeteria that he had informed public school administrators about their concerns and was told that officials thought the book was appropriate reading material.

“I don’t tell you how to run your family,” Egan told parents. “I support my teachers.”

After hearing from the district’s lawyers, the principal sent a letter to parents Monday informing them that the book would remain on the required reading list. He warned parents that if they directed their children not to read the book, it could “have a significant negative effect on the final course grade.”

“This book was selected for the very important, complex themes it covers, including conformity and the ethical implications of choices we make,” Egan wrote. “I want to assure you that the school has fully vetted this book. … A few parents have objected to the contents of the book, which addresses mature themes and contains some swearing. Decisions regarding the content of a school’s curriculum, however, lie with its educators and administrators.”

The True Leaders of Trade Liberalization

A great article today [subscription required] in the Financial Times reminds us that business deals, and not formally negotiated trade agreements, are driving globalization.

That’s not to say that a good outcome on the Doha round wouldn’t be welcomed (and things are looking up on that score). But preferential trade agreements are often not the historic breakthroughs that politicians make them out to be. They make great photo-ops, though.

Questions For And About Michael Mukasey

George Will has some terrific questions for the President’s nominee to be Attorney General, Michael Mukasey.  I’m glad that Will is drawing more attention to the administration’s startling claim that all of America is a “battlefield.”  In a recent article for Legal Times, I urged the next attorney general to disavow that claim.  (For more detail, go here, and read pp. 7-15).

Will also cites an important new book by the Boston Globe’s Charlie Savage, Takeover: The Return of the Imperial Presidency and the Subversion of American DemocracyHere is an excerpt from Will’s column:

The Constitution’s Framers, disliking the British sovereign’s “prerogative power” to set aside a law for a claimed public good, stipulated that the president shall “take care that the laws be faithfully executed.” But consider “signing statements,” whereby presidents, when signing legislation, attach statements sometimes directing the executive branch not to execute certain portions. This practice is, in effect, something the Constitution does not permit – a line-item veto. Savage, who won a Pulitzer Prize for his reporting on this president’s signing statements, writes that such statements were rare until the mid-1980s, when some conservatives urged frequent use of them as a means of maximizing presidential powers. Savage says: “If a president has the power to instruct the government not to enforce laws that he alone has declared to be unconstitutional, then he could free himself from the need to obey laws that restrict his own actions.” Is this a real danger?

Read the whole thing.

Also on the Washington Post editorial page is a piece by Bob Novak on the internal deliberations in the Bush White House regarding their pick for Attorney General.  Novak is very critical: “Mukasey is not well qualified to be attorney general by any rational standard.”