Fixing the Revenue-Estimating Process on Capitol Hill

The (hopefully) much anticipated final installment in the video series on the Laffer Curve has been released. This new video discusses the revenue-estimating process, and it builds upon the discussion of theory in Part I and evidence in Part II.

You will notice that the video clearly concludes that “dynamic scoring” is preferable to “static scoring,” but it also explains that there are significant challenges in properly estimating revenue feedback when tax rates are changed. That is why a key point is the need for transparency. If the Joint Committee on Taxation no longer operated in secrecy, it would be possible for experts to engage in a productive debate on how to best measure the revenue effects of various tax policies.

Please feel free to contact me if you have any questions or feedback. I also will be narrating the Center for Freedom and Prosperity’s next two videos, which will discuss the global flat tax revolution and the flat tax v. national sales tax debate. Stay tuned.

What Militia Theory?

Here is an excerpt from today’s Washington Post regarding the arguments at the Supreme Court yesterday:

A majority of the Supreme Court indicated a readiness yesterday to settle decades of constitutional debate over the meaning of the Second Amendment by declaring that it provides an individual right to own a gun for self-defense.

Such a finding could doom the District of Columbia’s ban on private handgun possession, the country’s toughest gun-control law, and significantly change the tone and direction of the nation’s political battles over gun control.

During oral arguments that drew spectators who had waited for days to be in the courtroom, there was far more skepticism among the justices about the constitutionality of the District’s ban on private handgun possession than defense of it.

Read the whole thing. Cato Senior Fellow Bob Levy, Alan Gura, and Clark Neily did a superb job of advocacy–with their legal brief, the oral argument, and in media interviews.

Only one problem. They have so thoroughly demolished the notion that the right to keep and bear arms only pertains to persons serving in the militia or National Guard that most people will not truly appreciate their achievement. In two years (less?) people will say “wasn’t it always so?”

I expect a favorable ruling in the Heller case but I also expect DC Mayor Adrian Fenty to obstruct the ruling as much as he possibly can. So, if I’m right, the way in which to view this case is as an important victory in an on-going struggle.

Striking Mortal Blow Against European Anti-Tax Competition Scheme, Luxembourg Rejects Calls to Eliminate Financial Privacy

Europe’s high-tax nations have launched another attack against low-tax jurisdictions. Using the recent German-Liechtenstein imbroglio as an excuse, they are arguing that all so-called tax havens should emasculate privacy laws so that tax collectors from countries such as France and Germany can track - and tax - flight capital. Politicians from uncompetitive welfare states are still bitter that a previous “savings tax directive” resulted in a watered-down scheme that failed to deliver big piles of additional tax revenue. But all their chest-beating may prove equally futile in 2008. Austria already has signalled that it has no interest in weakening its human-rights protections, and now Luxembourg has firmly stated that it rejects any proposals that would weaken its bank secrecy laws. This is a fatal blow since, as the UK-based Guardian explains, an expanded savings tax directive would require support from all 27 EU nations:

Luxembourg will not dilute its bank secrecy rules and is against hasty changes to European Union law that taxes foreign savings, the Grand Duchy’s Treasury Minister Luc Frieden said. …The 2005 rules only tax cash deposits while trusts, stocks and bonds are outside their scope, but Luxembourg won’t be rushed. “I’m amazed that some people want to change this directive even before having had any evaluation about how the current system works,” Frieden told the Reuters Funds Summit. The current directive took years to agree as unanimity among all the bloc’s members is needed in tax matters. …”I think we should not change things again that work well,” Frieden said. The Grand Duchy’s Central Bank Governor, Yves Mersch, said the privacy laws were widely supported in Luxembourg and the EU should focus instead on tackling cross-border abuses. …”Bank secrecy is for me part of our social consensus because confidentiality in a small country is extremely important for the maintenance of democratic rule. …”The Luxembourg government sees no need and will not come up with new proposals in this context and will not change the bank confidentiality rules as they have proven to be in the interest of a good working system in Europe,” Frieden. …Frieden was critical of how the Alpine state [Liechtenstein] has been treated. “I expect all countries to be treated with respect, independent of their size. I feel that is the case with Luxembourg and would like it to be the case vis-a-vis other countries even if they are smaller than Luxembourg,” he said.

RomneyCare: the Fun Continues

A central premise of RomneyCare, the smorgasbord of health care reforms that Gov. Mitt Romney (R) wrought in Massachusetts, is that the government could cover the uninsured by redirecting money from uncompensated care subsidies to subsidies for insurance. Because hey, if we give that money to the uninsured, they won’t show up at the hospital unable to pay, right? We could achieve universal coverage with no new government subsidies!

Unless, of course, all the king’s mandates and all the king’s subsidies fail to achieve universal coverage. In that case, the uninsured will continue to show up at hospitals and receive uncompensated care. According to the Boston Globe:

Before healthcare reform took effect last year, [chief executive Dennis D.] Keefe said, Cambridge Health Alliance was reimbursed by the state for the full cost of providing services to the uninsured. Under the new system, “we only get 60 to 70 percent,” he said. The reduction is particularly significant for the alliance because its hospitals serve a high percentage of uninsured patients. Despite the state’s efforts to enroll all low-income residents in free or subsidized insurance programs, many still do not have coverage.

Something similar occured under Maine’s Dirigo health care reforms. Supporters promised that broader coverage would reduce private insurance premiums because reduced uncompensated care would lead to less cost-shifting. Didn’t quite pan out that way.

What remains to be seen is whether, as I predict, the hospitals that demanded the original uncompensated care subsidies will force Massachusetts to restore them. If so, then the Massachusetts health plan will not have reallocated those government subsidies. It will have created new ones.

The Candidates and the Libertarian Vote

Nick Gillespie and Matt Welch of Reason have a great cover story in Politics, the new and livelier update of Campaigns and Elections magazine.  Titled “Tuned Out,” the article says that “politics is a lagging indicator of American society,” so this year’s presidential candidates are “channeling shopworn agendas and tired identities to a body politic desperate for a new political era.”

They predict that today’s individualist, consumer-driven culture will eventually produce a politics to match. “Much of this new activity will be explicitly libertarian, since the decentralization of control and individual empowerment is so deeply embedded in Internet technology and culture…. The Long Tail future of politics just as surely belongs to the president and party that figures out the secret to success is giving away power by letting the voter decide more of what matters.”

We can only hope. The cover illustration for the article, showing a Fountainhead-reading, South Park-watching young voter impervious to the appeals of the two old parties, reminded me of this recent “Zippy the Pinhead” cartoon, which also contrasted two big-government parties with leave-me-alone independents (click for larger version):

For more on libertarian voters, go here and here.

John McCain, Determined to Fight al Qaeda Wherever It Isn’t

Matt Yglesias links to this astonishing gaffe from the presumptive Republican nominee:

Speaking to reporters in Amman, the Jordanian capital, McCain said he and two Senate colleagues traveling with him continue to be concerned about Iranian operatives “taking al-Qaeda into Iran, training them and sending them back.”

Pressed to elaborate, McCain said it was “common knowledge and has been reported in the media that al-Qaeda is going back into Iran and receiving training and are coming back into Iraq from Iran, that’s well known. And it’s unfortunate.” A few moments later, Sen. Joseph Lieberman, standing just behind McCain, stepped forward and whispered in the presidential candidate’s ear. McCain then said: “I’m sorry, the Iranians are training extremists, not al-Qaeda.”

Yet another lesson that talk can be simultaneously straight and wrong. The persistence of this sort of unified field theory of terrorism is truly remarkable. Anyone who’s reading the newspapers knows that Iran is, of all countries in the region, most supportive of the Iraqi government. Don’t take my word for it: ask Iraqi President Jalal Talabani, who referred to President Ahmadinejad on his recent victory lap visit to Iraq as a “brother.” And then there’s al Qaeda in Iraq, which is not so supportive. It can be difficult to keep all this straight, but the man’s running for president on the basis of his *ahem* peculiar expertise in fighting terrorism, after all.

Tuesday Trade Links

A couple of interesting tidbits on trade:

  • Here’s a great video of our friend, Rep. Jeff Flake (R, AZ), speaking about the decades-long embargo on Cuba and restrictions on the freedom of Americans to travel there. Congressman Flake spoke at a Cato event (scroll to about half way down the page) on Capitol Hill last year along with Congressman Charlie Rangel (D, NY). Cato’s Center for Trade Policy Studies has long argued for an end to the failed embargo on Cuba.
  • The U.S. Department of Commerce yesterday released the 2007 trade deficit figure: $738.6 billion or 5.3 percent of GDP. It will no doubt come as a relief to the current account deficit (CAD) hawks to know that the CAD is down 9 percent on 2006, primarily due to higher export earnings (thanks, cheaper dollar) and an economic slowdown. More on the link between economic growth and the deficit here.