A Timely Reminder on Trade

From the Wall Street Journal’s ‘The Informed Reader’ blog today is a timely reminder that the stalled Doha round does not necessarily mean the end of trade liberalization efforts. According to the article, only 25 percent of tariff cuts between 1983 and 2003 were as a result of negotiated multilateral trade agreements. About 66 percent of tariff reductions came about from unilateral policy changes: from a recognition of the damage that tariffs do to one’s own economy through higher prices and lower productivity growth.

Unfortunately, there does not seem to be much political appetite for unilateral reductions in tariffs in the United States today (see here and here, for example) so a Doha agreement would have been welcome, to say the least. For one thing, subsidies (which are particularly prevalent in agricultural markets) are pretty much impossible to reduce on a bilateral or regional basis. But the expiration of trade promotion authority does not necessarily mean the end if lawmakers could get off the mercantalist bandwagon.

Get Rid of the National Weather Service

Because of technological advances, there is very little reason for taxpayers to shell out nearly $1 billion annually to finance a national weather service. As John Lott explains at Foxnews.com, private forecasters exist and (gee, what a surprise) they do a better job than government bureaucrats:

Despite dire predictions from the National Hurricane Center, no hurricanes hit the U.S. last year. …private weather forecasting companies predicted the threat to New Orleans well before the National Weather Service. In fact, AccuWeather issued a forecast that the hurricane would hit New Orleans 12 hours earlier than the government service. …It is not just for hurricanes that private forecasting comes out on top. A new study by Forecast Watch, a company that keeps track of past forecasts, found that from Oct. 1, 2006, through June 30, 2007, the government’s National Weather Service did very poorly in predicting the probability of rain or snow. Comparing the National Weather Service to The Weather Channel, CustomWeather, and DTN Meteorlogix, Forecast Watch found that the government’s next-day forecast had a 21 percent greater error rate between predicted probability of precipitation and the rate that precipitation actually occurred. In looking at predicting snow fall from December 2006 through February 2007, the National Weather Service’s average error was 24 percent greater. “All private forecasting companies did much better than the National Weather Service,” the report concludes.

The State Lives up to its Name

There’s a new report out arguing that even a modest school choice program in South Carolina that improved access to private schools would reduce the dropout rate and lead to significant savings for taxpayers. In covering that study, SC’s State newspaper tells us that

The dominant public education policy debate in the Legislature since 2004 has been whether the state can afford to provide incentives to parents who want to send children to private schools….

Two obvious implications of this sentence are that a school choice program would provide a net fiscal incentive for parents to choose private schools, and that it would add to the net cost of education in SC. Both are false.

At the moment, SC provides an enormous incentive for parents to choose public schooling over private schooling. It spends roughly $10,000 of compulsory tax dollars per pupil per year on families who choose public schools, and nothing on families who choose private schools. The tax credit programs that have been suggested in SC would only moderately reduce that existing incentive to choose public schools. The net financial incentive under such programs would STILL be to choose a public school, because the funding available per pupil would remain larger. 

And, as Clemson professor Cotton Lindsay’s fiscal analyses of the SC tax credit proposals showed (see here and here), the programs would actually have saved taxpayers money. Those reported savings, by the way, did not count the fiscal benefit of reducing the dropout rate, which was the subject of the recent State story. So, in fact, the total savings would likely be larger than Lindsay estimated.

Too much to ask that a newspaper called The State would correctly inform readers of these points?

Tax Code Industrial Policy

Millionaire football fans are among the beneficiaries of supposed emergency hurricane tax relief according to an AP report. The only positive aspect of this story is that the special tax breaks deprive politicians of extra money to waste (though they will continue to borrow and waste, so don’t get too excited). Actually, this corrupt form of tax-code industrial policy also has another positive attribute – it is an excellent example of why the internal revenue code should be junked and replaced with a simple and fair flat tax:

…federal tax breaks designed to spur rebuilding are flowing hundreds of miles inland to investors who are buying up luxury condos near the University of Alabama’s football stadium. About 10 condominium projects are going up in and around Tuscaloosa, and builders are asking up to $1 million for units with granite countertops, king-size bathtubs and ‘Bama decor, including crimson couches and Bear Bryant wall art. …And they intend to take full advantage of the generous tax benefits available to investors under the Gulf Opportunity Zone Act of 2005, or GO Zone, according to Associated Press interviews with buyers and real estate officials. …The GO Zone was drawn to include the Tuscaloosa area even though it is about 200 miles from the coast and got only heavy rain and scattered wind damage from Katrina. …The GO Zone investor tax breaks are credited with contributing to the condo boom in Tuscaloosa.

Now Who Looks Stupid?

People who argue that patients are too dumb to make their own health care decisions rarely consider how dumb government is.  According to yesterday’s New York Times:

In a significant policy change, Bush administration officials say that Medicare will no longer pay the extra costs of treating preventable errors, injuries and infections that occur in hospitals, a move they say could save lives and millions of dollars.

That’s right.  For the past 42 years, the federal government has paid hospitals to give grandma an infection, drop her on the floor, or leave a sponge inside her – and then paid the hospital more to put her back together again.  That is, if the infection didn’t kill her.

Does anyone really believe that if each patient controlled the health care dollars that employers and the government now control, that it would take patients 42 years to stop rewarding hospitals for medical errors?  In other areas of your life, how often do you give more money to a business that screwed you over?

British Tories Bungle Tax Cut Message

The Conservatives in the United Kingdom have been lost in the wilderness ever since the Thatcher years, and recent efforts to recapture the tax issue illustrate the Party’s incompetence. As reported by the BBC, a working group has proposed some decent tax reforms, including an attack on Britain’s death tax. The head of the group even made a pro-growth argument for the reform, but the Party’s Shadow Chancellor then confuses the message by stating that any tax cuts must be financed by tax increases (the Tories, like American Republicans, are unwilling to control the size of government):

A Conservative government should abolish inheritance tax because it penalises too many middle-income families, a policy group recommends. …Led by former Cabinet minister John Redwood, the Competitive Challenge working group says the government has introduced many “stealth taxes” since Labour came to power 10 years ago. …Mr Redwood told BBC Radio 4’s Today programme his proposals would not require cuts in public services because they would help the economy grow. …”Any reductions in specific taxes will have to be balanced by tax increases elsewhere, most notably green taxes,” [Shadow Chancellor George Osborne] added.

The Labour Party instantly seized on the mistake. As noted in the Guardian, the Tories are now being criticized for supporting “crippling” tax hikes:

A bitter war of words has broken out over Tory proposals for £21 billion in targeted tax cuts. Labour warned that the plans, put forward by former Cabinet minister John Redwood, would require “crippling” increases in fuel duty and other charges for homeowners, businesses, holidaymakers and motorists.

Making $600 Toilet Seats Seem Like a Bargain

Like other parts of government, the Pentagon is famous for wasting money, but a recent Bloomberg report makes $600 toilet seats seem like a good deal from the discount bin at Wal-Mart:

A small South Carolina parts supplier collected about $20.5 million over six years from the Pentagon for fraudulent shipping costs, including $998,798 for sending two 19-cent washers to an Army base in Texas, U.S. officials said. The company also billed and was paid $455,009 to ship three machine screws costing $1.31 each to Marines in Habbaniyah, Iraq, and $293,451 to ship an 89-cent split washer to Patrick Air Force Base in Cape Canaveral, Florida, Pentagon records show. …The scheme unraveled in September after a purchasing agent noticed a bill for shipping two more 19-cent washers: $969,000. That order was rejected and a review turned up the $998,798 payment earlier that month for shipping two 19-cent washers to
Fort Bliss, Texas, Stroot said.