Gordon Brown’s Dismal Fiscal Legacy

What developed nation has taken the biggest steps in the wrong direction since the turn of the century? The answer is not France, Germany, or Sweden. The United Kingdom has that dubious honor. Government spending has jumped from less than 38 percent of GDP in 2000 to more than 45 percent of economic output today. That is the largest increase among OECD nations, and the United Kingdom now has a bigger burden of government than Germany. Higher taxes are an obvious consequence, and Tax-news.com reports on the grim developments:

The average Briton is effectively paying ten pence more on the pound in income tax as a result of Gordon Brown’s ten years in charge of the nation’s purse strings, according to a new report. The study by business advisers Grant Thornton attributes about 70% of this increase in the tax burden to so-called ‘fiscal drag’, also known as ‘bracket creep’ whereby the government fails to adjust marginal income tax brackets in line with wage inflation, meaning more taxpayers have been dragged into the higher income tax bands during Brown’s tenure at the Treasury. This effect also applies in other areas of taxation, such as inheritance tax, where house prices have rocketed during the last ten years, but the threshold at which IHT becomes payable has, comparatively, barely moved. The government’s own figures show that 3.5 million taxpayers now pay tax at the higher rate of 40% - a 58% rise since the Labour government came to power in 1997. …And despite Brown’s decision to decrease the rates of corporate and personal income tax by 2% in his last budget before succeeding Tony Blair as Prime Minister, tax advisers say that lost revenue will be clawed back and more through less-publicised tax changes elsewhere. Francesca Lagerberg, head of Grant Thornton’s national tax office, noted: “Despite headline announcements in this year’s Budget of dropping the basic rate of income tax, aligning national insurance contributions and reducing mainstream corporation tax, the reality is that other increases will lead to a maintenance of the status quo.” “Aligning national insurance to a higher tax threshold will in total eat away most, if not all of the savings generated from cutting the basic rate of income tax by 2 pence to 20 pence from April 2008,” she added.

Albanian Government Approves 10 Percent Flat Tax

According to a regional news report, another nation has joined the flat tax club, meaning that as of July 1 there will be 18 countries with income tax systems that treat taxpayers equally. With a low rate of 10 percent, Albania will have – at least temporarily – the world’s lowest flat tax rate. The corporate rate also will drop to 10 percent, and other tax rates have also been reduced:

In a move aimed at creating a friendlier investment climate and making the economy more competitive, the Albanian government approved a fiscal package last week that includes implementing a 10% flat tax – the lowest level in Southeast Europe. Corporate taxes will also be slashed to 10%. …Advocates of the move say it will bring many benefits. In addition to attracting Foreign Direct Investment, they say, it will encourage the legalisation of the shadow economy and simplify tax collection. Economic activity increases, and so does honest reporting of income, while tax evasion drops. …The government hopes to implement the legislation by July 1st, with the exception of the corporate tax reduction, which will be implemented January 1st, 2008. The Democratic Party-led government has already instituted various tax reductions during the past two years. The most important of these was the reduction of social security contributions from businesses, from 29% to 20%, and a lowering of taxes on small businesses.

Bee Sensible

The Quick and the Ed’s Sara Mead responds to my post on the dramatic showing of homeschoolers at the 2007 Scripps National Spelling Bee. She writes:

But here’s an interesting thing: Evan O’Dorney, the Bee’s top finisher, who [sic] Coulson refers to as a “home schooler,” is actually a student of Venture School, a public alternative school run by the San Ramon Valley Unified School District. While most of students’ learning is independent and/or home-based, they attend the school in person and meet with the public school’s teachers weekly, and also take state accountability assessments like other California public school students.

And the fallacy for today is: false dichotomy.

While Mead attempts to create an either/or distinction between homeschooling and the home study program of Venture school, she is mistaken. There are four legal avenues for homeschooling in the state of California. One of them is to be associated with a public school home study program. Evan is not a “public school student” in the normal sense of that term. He is, as a local paper points out: “homeschooled by his mother Jennifer through Venture School.”

I had a nice conversation with Jim O’Brien, the Venture School official who liaises with the O’Dorneys. They meet about once every other week (not every week, as Mead asserts). He is available to consult with the family, but is not Evan’s teacher in the conventional sense of that word. Evan’s mother is his teacher. Mr. O’Brien himself describes Evan as homeschooled.

Mead also misrepresents the significance of homeschoolers’ showings in academic competitions. These showings are not based on “a few outliers” as she claims. In competition after competition, year after year, homeschoolers are overrepresented in the top spots. As I noted, public school students outnumber homeschoolers 40 to 1, but, in the 2007 Scripps Spelling Bee, U.S. public school students captured only 5 of the top slots – the same number as homeschoolers.

Perhaps public schools are teeming with brilliant spellers who mysteriously decided to stay away from the competition in droves. Again. Or maybe it has something to do with the educational freedom homeschoolers enjoy….

Homeschoolers certainly “enjoy” far less of the vaunted ”public accountability” Mead touts than do conventional public school children. Though Evan O’Dorney is registered through a public school, a great many homeschoolers are not. And yet, somehow, they manage to get by pretty well. Why, it’s almost as if this “public accountability” thing isn’t all it’s cracked up to be!

More on the Mitt-Hillary “Connection”

As promised, here’s more on the Mitt-Hillary connection, from my National Review Online article:

The fact that a prominent Republican such as Mitt Romney has now embraced Hillary-style government planning strikes [The New Republic’s Jonathan] Cohn as confirmation that Sen. Clinton was on the right track.

By bundling the tax dollars of six million Massachusetts residents, Mitt Romney may have made the largest contribution yet to Hillary Clinton’s presidential campaign.

Cohn is not even referring to some obscure aspect of RomneyCare that was forced down Romney’s throat by a left-wing legislature — which is how Romney’s defenders have tried to explain away parts of the plan, such as the individual mandate, that are unpopular with conservatives. According to Cohn, the aspect of RomneyCare that most resembles HillaryCare is its very centerpiece, which Romney borrowed from the conservative Heritage Foundation: the health insurance “Connector.”

Cohn is essentially correct. The objective of the “Connector” bureaucracy, as described by Heritage Foundation scholars, reads like an exercise in government planning. The “Connector” is supposed to “reorganize[e]…a large part of the state’s private insurance system into a ‘single market’ structure with uniform rules and a central ‘clearinghouse’ for administering coverage.”

Here’s a question I’d like to hear Mitt Romney answer in tonight’s debate:

Governor, observers are noting that the centerpiece of the health care reform you enacted in Massachusetts is strikingly similar to the plan that Hillary Clinton championed in 1993-1994.  They say that your plan is evidence that Ms. Clinton was on the right track.  How do you respond?

The Myth of the Rational Voter

Cato adjunct scholar Bryan Caplan has a fantastic new book out from Princeton University Press called The Myth of the Rational Voter: Why Democracies Choose Bad Policies. In it he argues that misguided policies can’t just be blamed on special interests and the “concentrated benefits/dispersed costs” dynamics explored by public choice economics. According to Caplan, voter irrationality – systematic erroneous biases in public opinion – is a major culprit as well.

Which is to say, Caplan confirms the wisdom of H. L. Mencken’s observation: “Democracy is the theory that the people know what they want and deserve to get it good and hard.”

In my opinion, Caplan’s book makes a major contribution to our understanding of the sausage grinder of democratic policymaking. So buy it and read it!

But if you’re short on time, here are some shortcuts for getting up to speed on what Caplan has to say. First, Cato released last week a new Policy Analysis that is an excerpt from the book. In particular, I’d heartily recommend this paper to all those who fancy themselves members of the “reality-based community” yet blithely cling to social-scientific illiteracy when it comes to basic principles of economics. The “assault on reason,” it turns out, is a pincer movement involving both sides of the political spectrum.

Also, you might want to check out this “diavlog” between Caplan and Cato policy analyst Will Wilkinson on bloggingheads.tv.

Ahead of the curve as always, Cato Unbound devoted its November issue last year to an in-depth discussion of Caplan’s thesis.

And just to whet your appetite, take a look at this profile of Caplan from the New York Times magazine.

Rhetoric

Thomas Sowell has some interesting thoughts about political rhetoric:

An issue can be enormously important and well within most people’s understanding. Yet the way words are used can determine whether people are aroused or bored.

One of those issues is what legal scholars call “takings.” There is a masterful book with that title by Professor Richard Epstein of the University of Chicago Law School.

But if you are in a bookstore and see a book with the title “Takings” on its cover, are you more likely to stop in your tracks and eagerly snatch it off the shelf or to yawn and keep walking?

Read the whole thing.  For more about how the pols use and abuse language, go here.

American Politicians Lagging in Global Race to Squander Tax Dollars

While U.S. lawmakers do their best to waste money, Europeans politicians inevitably seem to have more expertise when it comes to squandering other people’s money. A good example comes from Finland, where the city of Tampere is using European Union funds (it is easier to finance absurd ideas when other people are paying the bills) so that clowns can entertain city bureaucrats. Indeed, the title of the story on the English-language Finnish website is “Clowns enlisted to raise spirits of Tampere municipal workers.” Sure, American politicians have concocted some crazy ideas, such as building an indoor rainforest in Iowa, but even that bit of pork cannot beat the absurdity of paying clowns to boost the morale of bureaucrats:

The idea for the city clowns came from comedian Mona Ratalahti, occupational well-being trainer Riita Harilo, and its godmother was Kirsi Koski, head of the Mayor’s office. Koski has worked as the city’s head of personnel for three years. ”I have thought about what would be the core of well-being. Yes, it is laughter”, Koski says. “It is all right to laugh at craziness - at what is not said out loud in business discussions.” Ratalahti feels that a clown nose “changes us and the viewer in such a way that forces people to look at things differently”. …Tampere’s city clowns are the 41st idea that the “Creative Tampere” programme has decided to support. The programme has a budget of EUR 12 million to back corporate ideas worthy of development. The EUR 25,000 earmarked for the clowns makes it possible for four artists, who have mostly worked alone, can concentrate on joint projects.