World Socialists Whine about Flat Tax Revolution

I almost feel sorry for hard-core leftists. First, they had to endure the agony of watching the Berlin Wall crumble and the Soviet Union break apart. As depressing as that must have been, they now must be horrified that former communist nations are leading the shift to pro-market flat tax systems. But their angst is my joy. I was greatly amused to read this account from the World Socialist Web Site:

The government of Albania has agreed on a standard tax rate (flat tax) of 10 percent aimed at outdoing its East European rivals and attracting international investors. The government in Tirana is determined to transform the impoverished Balkan state into a haven for multinational companies and western speculators. From the start of next year, corporate taxes will be reduced from 20 to just 10 percent. The basic rate of income tax, which amounted to 5 percent for average incomes and a maximum of 25 percent for top earners, had already been changed to a uniform rate of 10 percent for all incomes on August 1. … Measures aimed at massive tax relief for business and the rich are not specific to Albania. It is the result of a vicious competition between states in both the East and West of Europe aimed at creating the best possible conditions for foreign speculators and the wealthy. In the so-called “first round” in the 1990s, the Baltic states began to drastically lower company and income taxes, introducing tax rates of between 25 and 29 percent. These states—with the exception of some “Special Economic Zones”—suffered a loss of interest from foreign enterprises concerned that tax rates were still too high. The “second round” of cuts was initiated by Russia in 2001. Serbia followed in 2003 with the introduction of a flat tax of 14 percent. In 2005 Ukraine, Slovakia, Georgia, and Romania followed suit. The “new round” has now begun with tax reductions in the Czech Republic and Albania. Plans for further radical tax reductions are currently in discussion in Bulgaria, Croatia, and other states.

Time to Remember the Lessons of Katrina

The August 13 Time cover story on Katrina begins:

The most important thing to remember about the drowning of New Orleans is that it wasn’t a natural disaster. It was a man-made disaster, created by lousy engineering, misplaced priorities and pork-barrel politics.

The primary culprit was the Army Corps of Engineers, together with its congressional overlords. In the Time piece, reporter Michael Grunwald does an excellent job describing the misplaced priorities of the Corps, both pre-Katrina and post-Katrina.

As I’ve argued, the Corps ought to be privatized. Alas, the Bush administration bungled its Katrina response and has since missed a big opportunity to push for fundamental reforms of the Corps, FEMA, and other agencies.

Topics:

America’s “Public Squalor” Versus Europe’s “Social Justice”

A British member of the European Parliament urges approval of the new European Union constitution (now being called a reform treaty in an effort to preclude a referendum), arguing in the Guardian that it will promote European-style solidarity rather than the American-style squalor. Yet according to both the IMF and the World Bank, per capita GDP is $8,500 higher in the United States (nearly $13,000 higher according to the CIA and $9,800 higher according to the OECD) than it is in the United Kingdom. As for the less fortunate, a left-wing think tank published a report last year showing that poor people in America have more income than poor people in the U.K. (see Figure 8D). The international data suggests that the European social model does a good job preserving the self-interest of the political class and a crummy job helping people improve their lives:

The reform treaty will explicitly commit European governments to defend and strengthen the European social model. It will enshrine the values of social justice, full employment and solidarity in the EU’s “mission statement” and commit the EU to “a social market economy, aiming at full employment and social progress”. Similarly, the treaty emphasizes that the EU must work to “combat social exclusion and discrimination”, and will be legally required to promote social justice, gender equality and solidarity between generations. It is values such as these that clearly differentiate the EU from the American model of capitalism that allows private wealth and public squalor. …The overwhelming majority of our socialist colleagues across Europe support the reform treaty, despite some reservations, precisely because it will enshrine the European social model.

Hmm… You Should Have Someone Look at That

Americans usually criticize socialized health care systems for forcing patients to wait for care, so it’s a curious thing to find American patients waiting. It happens. I’ve weighed in on Americans waiting for care, as have Tyler Cowen, Matthew Yglesias, Ezra Klein, and others.

Today’s New York Times now informs us:

Patients seeking an appointment with a dermatologist to ask about a potentially cancerous mole have to wait substantially longer than those seeking Botox for wrinkles, says a study published online today by The Journal of the American Academy of Dermatology.

Researchers reported that dermatologists in 12 cities offered a typical wait of eight days for a cosmetic patient wanting Botox to smooth wrinkles, compared to a typical wait of 26 days for a patient requesting evaluation of a changing mole, a possible indicator of skin cancer.

The article also provides this interesting contrast:

Dr. Michael J. Franzblau, a dermatologist in San Francisco, said doctors typically charged $400 to $600 for a Botox antiwrinkle treatment, for which patients pay upfront because insurance does not cover it.

Meanwhile, doctors have to wait for health insurance to reimburse them for mole examinations, for which they receive an average of $50 to $75, Dr. Franzblau said.

This article reminds me of a 2005 study that called ambulatory clinics to see who is most likely to get an appointment for follow-up care after an ER visit. The study found, roughly:

  1. “Four hundred six (47.2%) of 860 total callers and 277 (64.4%) of 430 privately insured callers were offered appointments within a week.”
  2. People with private insurance and those who offer to pay cash up-front were more likely to get an appointment than Medicaid patients, who in turn were more likely to get an appointment than patients who offered to pay $20 up front and pay the balance later.
  3. Nevertheless, one-third of those with private insurance – and even those who offered to pay cash up-front – still couldn’t get an appointment.

When I discussed that study with my colleage Peter Van Doren, he described it (with precision) as “an out-of-equilibrium situation not resolved by the price mechanism.” With regard to Medicaid, it’s easy to see what’s interfering with the price mechanism: Medicaid prices are set by state governments, and so they don’t change to eliminate shortages (i.e., waits) the way market prices might. The same is largely true of private coverage: those prices are set by insurers, who mostly just track the prices that the federal government sets through the Medicare program [$].

But then why would there still be shortages for patients who come with cash in hand? The price mechanism seems to be working for cash-paying Botox patients, but not for cash-paying ambulatory clinic patients. One possibility is that there might be spillover effects that affect cash-payers in markets dominated by third-party payment and rigid prices. But then wouldn’t we see cash-only ambulatory clinics emerge to capture those customers? If not, that suggested supply constraints to Peter and me.

Tax Havens and Prosperity

The Central Intelligence Agency ranks 229 nations and territories based on per capita gross domestic product and a quick look at the list shows that tax havens dominate the top of the rankings. A majority of the top 20 jurisdictions are tax havens, based on the definition put forth in 2000 by the statists at the Organization for Economic Cooperation and Development. Luxembourg, Bermuda, and Jersey (the one in the Channel Islands) top the list, while places like the Cayman Islands, Andorra, Hong Kong, and Switzerland also rank among the world’s richest jurisdictions. In an ideal world, other nations would emulate the so-called tax havens. Instead, high-tax nations persecute these jurisdictions as part of an effort to create an OPEC for politicians.

SCHIP’s Bad Bargain

According to a cost estimate released by the Congressional Budget Office last Friday, the Senate-passed legislation expanding the State Children’s Health Insurance Program would enroll an additional 6.1 million children in SCHIP and Medicaid. However, 2.1 million would lose their private health insurance. So while the legislation would provide government-run health care to 6.1 million children, it would reduce the number of uninsured children by only 4 million.

That’s government efficiency for you: extending health insurance to two children for the price of three!

I’ll be discussing SCHIP at a Capitol Hill Briefing with Patrick Fleenor of the Tax Foundation on September 13 (register now) and in an upcoming Cato Briefing Paper to be released the same day.

Why Is the President Amplifying Enemy Propaganda?

The president’s speech yesterday was another surreal offering, but this time we got two shocking endorsements and amplifications of essential enemy propaganda points. According to George W. Bush, the reason we are in Iraq is ― in part ― to control its oil. Also, according to the president, there is a real danger that Osama bin Laden and his cohort could establish a caliphate over the swath of territory from Spain to the Phillipines. Here he is on oil, and what would happen to it if we left:

Extremists would control a key part of the world’s energy supply, could blackmail and sabotage the global economy. They could use billions of dollars of oil revenues to buy weapons and pursue their deadly ambitions.

Out of the 20-30,000 people we have in custody in Iraq, 130 of them are non-Iraqi. Can anyone imagine the gang of idiots currently slaughtering innocent Iraqis with car bombs trying to run the oil infrastructure of a country the size of Iraq? Monitoring extraction, handling the logistics of getting oil through southern Iraq out to port and then dealing with multinationals and the sophisticated financial instruments used to remunerate oil producers? Could anything be more ridiculous?

Then we went on to the other nightmare scenario: American defeat in Iraq will birth a caliphate!

These extremists hope to impose that same dark vision across the Middle East by raising up a violent and radical caliphate that spans from Spain to Indonesia… And that is why they plot to attack us again. And that is why we must stay in the fight until the fight is won.

Who is writing this stuff? Chris Preble and I have written why al Qaeda has no hope of taking over Iraq in the wake of a U.S. withdrawal, but their reestablishing the caliphate is an even more ridiculous notion. But don’t take it from me:

“I can see the whole Arab world falling into sectarian violence, so I can’t see this caliphate happening,” said London-based anthropologist Madawi al-Rasheed, referring to Sunni-Shi’ite tensions in Iraq and Lebanon.

“This is just part of (al Qaeda’s) war of slogans.”

[…]

Lebanese historian Kamal Salibi said the region had already failed to unite under the banner of Arab nationalism after World War Two.

“It didn’t work with Arab nationalism, and with pan-Islamism it is working less,” he said. “The likelihood that states would give up their sovereignty is now more remote than ever before.”

[…]

“For most of the mainstream and less mainstream political parties of political Islam, the borders of the contemporary state have been accepted,” said As’ad AbuKhalil from Lebanon, who teaches politics at the U.S. California State University.

“There is absolutely no credence to the notion that the quest for the caliphate is the overriding goal of the Islamist movement in the region.”

It’s disgraceful that the president is aping enemy propaganda, which no doubt gives people in the Islamic world the impression that we believe that al Qaeda is strong ― strong enough to have a shot at the caliphate that it gets mentioned in a presidential speech. The very idea is ridiculous. Al Qaeda is weak and should be destroyed, not revered as a world power.