Welfare-Warfare Conservatism

The New Republic runs an article on the New York Times’ decision to hire Bill Kristol, and provides the short list of candidates for the spot:

[L]ast fall, [Times publisher Arthur] Sulzberger and Times editorial-page editor Andrew Rosenthal prepared a list of some 25 conservative writers. According to a person with knowledge of the search, the names included Washington Post columnist Charles Krauthammer, The Atlantic’s Ross Douthat, senior fellow at the Council on Foreign Relations Max Boot and three Weekly Standard staffers: senior editor Christopher Caldwell, associate editor Matthew Continetti, and the magazine’s editor and founder, Bill Kristol. On December 30, Sulzberger selected Kristol, who gave up his column at Time magazine for the Times appointment.

This is really pretty striking. Every author mentioned is an ardent supporter of the welfare-warfare state, with admittedly varying emphases. Douthat’s focus, for example, has been on attempting to craft a European Christian Democrat-style conservatism that fuses political sops to social conservatives to economic populism (read: “expanding the welfare state”) in an attempt to buy middle class votes. Max Boot and Charles Krauthammer, by contrast, have focused more on urging the United States into pointless and massively destructive foreign wars, the first of which has already killed more Americans than 9/11 and sucked half a trillion dollars from taxpayers’ pockets.

I’m loath to predict political outcomes. Maybe as a political matter this sort of thing will sell. But abandoning conservative economic principles in the pursuit of political success and simultaneously indulging the worst jingoist excesses of neoconservatism is a positively revolting platform. Looking at the slate of candidates for the Republican presidential nomination, maybe this new welfare-warfare fusionism has legs. But it certainly doesn’t offer very much to libertarians.

Bull’s Blood and Revolution

The scene is Central Europe. It’s 1990-something. After a bicycle tour of the Czech Republic’s Bohemian countryside, Jim Harper and his girlfriend have traveled into Hungary and a town called Eger, two hours by train northeast of the capital.

In a small valley not far out of town, there are dozens of underground wine cellars where vintners store and sell the local wine, Egri Bikaver, also known as “Bull’s Blood.” As the evening winds on and the cellars close, visitors concentrate themselves more and more tightly into the remaining open cellars. The wine and proximity make for good conversation and new friendships.

Late on, this particular evening, as our table edged toward overstaying, one of our group stood up and sang his country’s national anthem. He was Estonian.

It was a very long song. I’d like to say otherwise, but his singing wasn’t all that good. And he was quite overly serious about it. With the song going on so long, and the wine having its full effects, the scene edged toward the comical.

Since that evening, the Bull’s Blood wine and our Estonian friend have provided touches of mirth and memory that interesting travel will. The Estonian singer has been the subject of some affectionate joking, I’ll admit.

That’s a little bit regrettable, because I now know that there’s more to the story. Watch the trailer here.

Estonia’s Mart Laar was the winner of Cato’s Friedman Prize for Advancing Liberty in 2006.

Real Growth or Fake Stimulus

Don Boudreaux’s column in the Christian Science Monitor is an excellent analysis of the stimulus debate in Washington. He starts by explaining why the bipartisan support for rebate checks is grossly misguided. And his point about consumer spending being a consequence of growth rather than a cause of growth is superb:

Government cannot create genuine spending power; the most it can do is to transfer it from Smith to Jones. If the Treasury sends a stimulus check to Jones, the money comes from taxes, from borrowing, or is newly created. If it comes from taxes, the value of Jones’s stimulus check is offset by the greater taxes paid by Smith, who will then have fewer dollars to spend or invest. If Uncle Sam borrows to pay for the stimulus checks, this borrowing takes money out of the private sector. Any dollars borrowed – whether from foreigners or fellow Americans – for purposes of stimulus would have been spent or invested in other ways were they not loaned to the government. The only other means of paying for such stimulus is for the Federal Reserve to create new money. Unfortunately, this option leads inevitably to inflation. …Spending power is not so much the fuel for economic growth as it is its reward. And the key to economic growth is investment that raises worker productivity.

Professor Boudreaux then explains the types of policies that will boost growth, both in the short run and long run. Smaller government on both the tax side and spending side of the fiscal equation would be very helpful, he explains, and he also makes the critically important point that an easy-money policy from the Fed is the wrong approach:

Mr. Bush should call for a substantial and permanent cut in both capital-gains and personal-income tax rates. …Cutting taxes is, of course, a good thing, but it’s important to know why. The goal would not be to increase consumer spending. Instead, it would be to raise the returns on investment and work. By letting investors and workers keep more of the fruits of their risk-taking, creativity, and efforts, the economy will enjoy more risk-taking, creativity, and effort. Businesses that would otherwise not be started would be created. …Cutting government spending would result in more of the economy’s resources being used by wealth-creating businesses rather than being siphoned away to special-interest groups and boondoggles such as bridges-to-nowhere and Woodstock museums. …Finally, Bush should assure the Board of Governors of the Federal Reserve that he neither expects nor wants them to use monetary policy politically. Reminding them of the wisdom of Milton Friedman, he should strongly urge them to keep a tight rein on the money supply.

Mon Dieu! Smaller Government in France

In a step that could have a damaging effect on the jokes I tell when giving speeches, the Prime Minster of France has announced a plan to freeze government spending for five years. Some of the details are a bit unclear. As the Financial Times notes, Minister Fillon did not state whether spending would be frozen at current levels, or frozen after adjusting for inflation. A hard freeze would be the best option, but either choice would shrink the aggregate burden of government in France. To their credit, policy makers in Paris seem to understand the problem:

France is planning to freeze public spending for five years under its biggest programme of social and economic reform since the late 1960s, according to François Fillon, the prime minister. …The government has said it wants to eliminate its deficit and reduce spending as a share of national output – the highest in the EU at 53.5 per cent – during Mr Sarkozy’s first five-year term… Mr Fillon did not say whether he was planning a real-terms or nominal freeze, nor whether it would encompass France’s indebted social insurance system. He admitted that France would only eliminate its deficit “if we do the underlying structural reforms, which would allow us to reduce in a much more significant way public-sector employment and public spending”. …Mr Fillon has been credited with keeping Mr Sarkozy’s government focused on repairing France’s precarious public finances and cutting welfare and pension costs.

Assuming Sarkozy’s government fulfills this pledge, France will take a big step in the right direction. With any luck, maybe American politicians then would do something similar. The same policy, if adopted in America, would reduce the burden of federal government spending from more than 20 percent of GDP today to 15.9 percent of GDP (with a hard freeze) or 17.8 percent of GDP (with an inflation-adjusted freeze) after five years.

The Anti-Universal Coverage Club: One Big Tent

A new poll by the Kaiser Family Foundation and the Harvard School of Public Health asked likely Republican and Democratic primary voters their views on health care reform.  In particular, the poll asked whether respondents would prefer that a presidential candidate propose:

  1. “A new health plan that would make a major effort to provide health insurance for all or nearly all of the uninsured BUT would involve a substantial increase in spending
  2. “A new health plan that is more limited and would cover only some of the uninsured BUT would involve less new spending [or]
  3. “Keeping things basically as they are”

(“Don’t know” and “Refused” were also options.)

Nearly 70 percent of likely Republican primary voters rejected the universal coverage option (#1).  Forty-two percent said they preferred the more moderate, less universal option (#2), while 27 percent said they preferred to keep things as they are (#3).

Interestingly, nearly one-third of likely Democratic primary voters also rejected the universal coverage option: 22 percent said they would prefer the more moderate option, while 8 percent preferred the status quo.

Looks like there are candidates for the Anti-Universal Coverage Club on both sides of the political aisle.

A Core 9/11 Commission Afterthought

The Department of Homeland Security often invokes the 9/11 Commission when it discusses REAL ID. A recent DHS press release called REAL ID a “core 9/11 Commission finding.”

In fact, the 9/11 Commission dedicated about three-quarters of a page to identification security – out of 400+ pages of substance. See for yourself. Page 390.

Europeans Want Asian Financial Centers to Join Savings Tax Cartel

Politicians from Europe’s high-tax governments recognize that saving and investment are escaping to jurisdictions with less-punitive tax regimes. But rather than lower their oppressive tax rates, they are trying to gain the ability to track – and tax – flight capital.

A couple of years ago, they implemented the so-called savings tax directive, but this system is ineffective (from the perspective of politicians) since many financial centers are not part of the cartel and many types of investment vehicles are not covered. Not surprisingly, politicians from nations such as France and Germany want to expand the tax cartel to cover more nations and to capture more forms of saving and investment.

Fortunately, as Tax-news.com reports, the Asian financial centers are not favorably disposed to serving as tax collectors for Europe’s inefficient welfare states. As such, high-tax nations may feel compelled to reduce tax rates to keep capital from fleeing:

Senior EU tax officials, including European Tax Commissioner Laszlo Kovacs, are preparing to make a fresh approach to Asian financial centres, in a bid to have them included within the ambit of the European Savings Tax Directive. According to a report from Reuters, Kovacs is scheduled to visit Hong Kong later this month, while other senior officials will launch a new charm offensive in the territory of Macau and the city-state of Singapore. The directive, which extends to a number of ‘third countries’ such as Switzerland, the Channel Islands and Caribbean offshore territories, facilitates the exchange of information between EU tax authorities on certain types of savings and investments held by EU residents in their territory, so that interest earned can be taxed in the resident investor’s home state. …

[W]hile the EU was effectively able to bully smaller territories such as those in the Caribbean with colonial links to member states like the UK and the Netherlands, the Asian territories have no such ties binding them to Europe. Unsurprisingly, EU officials have already received frosty responses from Hong Kong and Singapore regarding the issue, and little is expected to have changed. In the case of Hong Kong, signing up to the savings tax directive could mean altering the Basic Law which safeguards the future of its financial centre under Chinese rule.

Singapore on the other hand, is known to be staunchly opposed to the idea of sharing bank account information with the EU, and has rejected European overtures to include information exchange provisions within a broader economic agreement. The European Commission is currently reviewing the operation of the savings tax directive and is likely to make several recommendations for tightening up the legislation that would make it harder for EU-based investors to legitimately side-step the law - for example by moving assets from bank accounts to vehicles such as companies and trusts - which weren’t included in the legislation - or by shifting money to accounts based in territories out of the reach of the directive’s information sharing provisions.