Goliath vs. Goliath?

A further development in the cross-border supply of gambling and betting services broke today when the European Union announced they would launch a formal investigation into the selective (and retroactive) prosecution of European gaming interests by US authorities.

This is yet another twist in the saga first brought to light by Antigua’s case against the United States in the WTO. That case (summarized here and updated here, here, here, and here) sparked a slew of indirectly related skirmishes, a plethora of “David vs. Goliath” headlines, and an unprecedented reaction from the United States to pick up their ball and go home. The various twists and turns of the dispute have provided ample fodder for trade junkies in the form of commercial and systemic issues: Does the WTO dispute settlement mechanism provide effective recourse for big as well as small members? How should WTO members respond when one of their cohorts wants to change the nature of the contracts between the parties? How do members balance their rights and obligations in the context of issues of public morals?

The questions look far from answered because if the EUs investigation proceeds, a new WTO case could be on the horizon. Although the EU and the United States came to a settlement in December over the United States’ wish to withdraw its commitment to open its market to the cross-border supply of gambling and betting services, the details of that settlement are sketchy. And the December deal pertains to compensation for the withdrawal of market access going forward: unless and until that deal is ratified by all WTO members (including those who are asking for compensation of their own), the U.S. obligations stand and so does the ruling that found the United States was in breach of those obligations.

In other words, while the United States might eventually be able to get away with changing its obligations to provide WTO members access to the lucrative U.S. gambling market, in the meantime their (discriminatory?) prosecution of offshore interests leaves them vulnerable.

State Politicians Want Rich People to Leave New York

In a rather self-destructive move, Democrats in the New York State Assembly are proposing a huge increase in the income tax rate on the state’s most productive and valuable people. A column in the New York Post correctly warns that this will drive entrepreneurs and investors to other states.

The State Assembly Majority announced yesterday that it’s considering a dramatic increase in state personal-income taxes that will come down hardest on New York City residents and the key industries that are the engine for economic growth across the state. …the measure would hike personal-income taxes 1 percent on households earning more than $250,000, 2 percent for those over $500,000 and 3 percent for those over $1 million. This translates into a combined city-state income tax of 11.5 percent to 13.5 percent. Add in federal taxes, and the burden approaches 50 percent. Taxes in New York City already are nearly 50 percent more than in any other US city. …This approach is also a money-loser for the state. Gov. Arnold Schwarzenegger last week said that half of California’s $14 billion deficit is due to people and business leaving the Golden State because of high taxes. If the Assembly measure passes, many of the city’s highest earners and biggest taxpayers – who all enjoy global mobility – are likely to pack up and leave. It’s a great economic development strategy – for New Jersey, Connecticut, Florida and London.

States such as Maryland and California already have demonstrated the damage caused by high state tax rates, but New York politicians apparently are oblivious to the real-world impact of such policies or they put class-warfare politics above every other relevant consideration.

Pennsylvania Proposes to Defraud Non-Pennsylvanians

From an article in the Pittsburgh Post-Gazette:

Pennsylvania hospitals and other medical providers often seek higher state reimbursements for treating low-income, elderly and disabled people under the state’s Medical Assistance program.  Now the state Department of Public Welfare has come up with a new tax idea that would make higher payments possible by placing an “assessment” on the profits of general hospitals in two counties, Allegheny and Philadelphia…

Public Welfare Secretary Estelle Richman … said that such a levy on net patient revenues at acute care hospitals in the state’s two largest counties would have two benefits: it would increase state Medical Assistance payments for services to the elderly and poor, and would also enable health providers to get higher federal Medicaid reimbursements, which rise as state payments rise…

DPW spokeswoman Stacey Witalec … said the proposed hospital assessment “is similar to other assessments we already have in place,” such as ones on nursing homes.  “The basic model is to increase the amount of federal match [funds] that we receive to support our Medical Assistance program,” she said. Other states have such hospital assessments in place, she added.

In other words, Pennsylvania pretends to give its hospitals higher Medicaid payments.  Based on those “higher” payments, the Commonwealth pulls down additional “matching” federal Medicaid dollars – which is a fancy way of saying it takes money from taxpayers in other states.  Then, Pennsylvania taxes back the money it pretended to give its hospitals.  Thus the federal Medicaid program allows Pennsylvania to siphon money away from other states.

That sound you hear is your pocket being picked.

Obama Appeals for Libertarian Voters

Sen. Barack Obama resumed his winning streak by beating Sen. Hillary Clinton in the Wyoming caucuses after a brief full-court press by both sides. The Wall Street Journal noted one of Obama’s themes in the rugged-individualist Cowboy State:

Tailoring his message to the state’s antigovernment streak, Sen. Obama put new emphasis on his criticisms of the Bush administration’s warrantless wiretaps and other heightened law-enforcement activities implemented as antiterror measures. “You can be liberal and a libertarian, or a conservative libertarian,” Sen. Obama told a crowd of about 1,200 at a recreation center here. But “there’s nothing conservative” about President Bush’s antiterror policies. “There’s nothing Republican about that. Everybody should be outraged by that,” he added. 

He may have been reading some of the articles David Kirby and I wrote about the libertarian vote and the Mountain West:

In the Goldwateresque, “leave us alone” Mountain West, Republicans not only lost the Montana Senate seat; they also lost the governorship of Colorado, two House seats in Arizona, and one in Colorado. They had close calls in the Arizona Senate race and House races in Idaho, New Mexico, Colorado, Nevada, and Dick Cheney’s Wyoming. In libertarian Nevada, the Republican candidate for governor won less than a majority against a Democrat who promised to keep the government out of guns, abortion, and gay marriage. Arizona also became the first state to vote down a state constitutional amendment to define marriage as between one man and one woman….

If Republicans can’t win New Hampshire and the Mountain West, they can’t win a national majority. And they can’t win those states without libertarian votes.

Jeffrey Rosen has praised Obama’s civil libertarian record. Lest we get too excited about Obama’s new libertarian appeal, though, we should note that in his speech he also said he would undermine trade agreements and promised enough goodies from the Treasury to make Ted Kennedy happy.

Chastened Much?

Philip Weiss attends an event sponsored by the Middle East Forum in New York with former Cheney aide David Wurmser and reports back. Here’s a snip from the Q and A:

What are the 3 things he would tell John McCain if he were his adviser?

“Let me just bluntly answer that. One, abandon the two-state solution statement that we have right now vis a vis the Palestinians. Two—Well, let me start with number one. Number one is an open, publicly expressed regime-change strategy in Iran. Two, an open expressed regime-change strategy in Syria. 3, abandoning the two-state solution policy we’ve had frankly since the 9/11 attacks…”

One honestly has to wonder, what would it take these folks to learn from the disaster that their bizarre theories begot in Iraq? Meanwhile, today’s Washington Post lets us know (via Eric Martin) that we should keep an eye out for a new NIE on Iraq — except, despite its no doubt being chock-full of great news about how terrific things are over there, the administration apparently doesn’t want to release a version publicly.

As terrifying as each of the presidential candidates is in various ways, it’s going to be a relief when this long national nightmare is over. We deserve, at the very least, a new nightmare.

‘Wise’ Isn’t the Right Word

NRO’s Carol Iannone calls Checker Finn “wise” because his confidence in free market education has been chastened by his observation of charter schools in Ohio. To draw conclusions about free markets from a system that does not resemble them isn’t wisdom; it’s a non sequitur. As I have written elsewhere over the past month, U.S. charter schools and voucher programs deviate from free markets in crucial ways, and so tell us very little about the merits of real market reform.

The recent spate of neo-conservatives expressing disappointment that tiny, hobbled “school choice” programs haven’t produced free market results calls to mind the Cargo Cultists of the South Pacific. When American military forces left the Melanesian Islands after WW II taking their supplies and equipment with them, some islanders came to believe they could summon forth their own precious “cargo” by mimicking what U.S. forces had done — complete with air traffic control towers and radio headsets made of bamboo. Not surprisingly, this superficial mimicry failed to deliver the goods. To date, U.S. “school choice” programs are to free market education as bamboo headsets are to radio communication — insubstantial imitations of the real thing. They may well be improved in the future, but should not be expected to act like markets until they are.

Finn’s belief that the risible hand of the state is necessary to make markets drive up standards is conspicuously detached from reality. As I pointed out in a piece last year, standards advocates mistakenly assume that high government standards produce excellence, but in fact it is the competitive pursuit of excellence that raises standards:

We didn’t progress from four-inch black-and-white cathode ray tubes to four-foot flat panels because the federal government raised television standards. Apple did not increase the capacity of its iPod from 5 to 80 gigabytes in five years because of some bureaucratic mandate. And the Soviet Union did not collapse because the targets for its five-year plans were insufficiently ambitious.

Progress and innovation in these and almost all other human endeavors have been driven by market incentives: consumer choice, competition among providers, the profit motive. The absence of these incentives — as in the Soviet Union — has led to economic decline and collapse.

Charter schools haven’t produced market-like results because they aren’t markets. We will enjoy market-like results in education when we have real education markets, not before. The dirigisme now so in vogue among neo-cons will produce the same results for them that it did for the central planners who came before them.