India Reveals Its Preference

My favorite concept in economics (it should tell you something about my dorkiness that I even have a favorite economics concept) is the theory of revealed preference. Basically, this theory (one of Samuelson’s) says that if you want to know the preferences of a rational economic actor, you just need to observe their behavior. It is basically the economists’ way of saying (and showing, using the ubiquitous diagrams) that actions speak louder than words.

India has treated us to a beautiful display of the theory by announcing yesterday that it will unilaterally reduce its tariffs on some goods and reduce its maximum tariff on non-agricultural goods to 10 percent (from a previous cap of 12.5 percent) in an effort to control inflation (more here).

This is the same India that is one of the main hold-outs in the Doha Round of multilateral trade talks. The same India that, in the poisoned atmosphere of the failed talks in Cancun, formed the G-20 in an attempt to assert developing countries “rights,” and to generally disrupt talks. Particularly in the agriculture negotiations, India has been frustratingly adamant that developed countries do more to open markets than developing countries and has been a strong proponent of mechanisms by which developing countries can shield a certain (20 percent, insists India) share of their “sensitive” agricultural products from tariff reductions.

Why, one is then tempted to ask, are India’s trade negotiators still clinging to the same tired mercantilist position in the Doha round, while the treasury goes ahead with (albeit limited) trade liberalization? Bureaucratic inconsistency, perhaps. Or maybe India enjoys, in the theater of the WTO, stickin’ it to the man. It’s a pity that the man they’re stickin’ it to is the man on the Indian street.

Senator Susan Collins Supports National ID

I wrote here previously about Senator Susan Collins’ odd move to protect the REAL ID Act from a nationwide rebellion that began in her own state of Maine.  She had introduced a bill to extend the deadline for implementation of the REAL ID Act by two years.

Followers of REAL ID know that delaying implementation helps a national ID go forward by giving the companies and organizations that sustain themselves on these kinds of projects time to shake the federal money tree and get this $11 billion surveillance mandate funded.

It is now clear that the bill is intended to provide a key piece of support to proponents of a national ID, as shown by a press release on her Web site this morning touting a statement from the National Governors Association.  Collins has gone native, attending more carefully to the interests of national political organizations than to the interests of her constituents in Maine.

Representative Tom Allen (D-ME) has introduced legislation to repeal REAL ID and restore the identification provisions in the 9/11-Commission inspired Intelligence Reform and Terrorism Prevention Act.  Unlike Collins, he seems to be paying attention to his home state.  Politicians’ stances on REAL ID have affected their electability in the past.

Senator Collins should be well aware that delay can’t make the REAL ID Act work.  The real problem is the law itself, and it should be repealed.

Update: A DHS press release issued today announces that it will grant states an extension of the compliance deadline, and it will allocate funds from the Homeland Security Grant Program.  The money tree has already begun shaking.  Secretary Chertoff is quoted saying, “We are also pleased to have been able to work with Senator Susan Collins, and I believe that the proposed regulations reflect her approach.” 

Gore the Glutton

After learning of Al Gore’s huge appetite for electricity at his Nashville home, I dug out my past electricity bills for comparison. 

Gore has a huge mansion to power, but he also consumes four times more electricity per square foot than my family. Is the inventor of the Internet running a computer server farm out of his home?

According to news accounts, Gore’s home is 10,000 square feet and he consumes 221,000 kwh of electricity per year.

My family’s home is 3,200 square feet and we consume 18,000 kwh per year.

Gore’s home is about three times larger than ours, but he consumes 12 times more power. Thus, adjusting for home size, Gore is plowing through four times the electricity. 

Our house has drafty doors and cathedral ceilings causing our electric heat pump to work overtime–it is not a model green home by a long shot. Thus, how Mr. Gore and family manage to vastly out-consume us per square foot is a big mystery. 

China and France May Copy America’s Punitive Tax Penalty on Non-Resident Citizens

America is the world’s only developed nation to impose tax on its citizens that live and work abroad – even though they already are subject to taxation by the foreign country where they reside. As the Wall Street Journal notes, China has decided to adopt this foolish policy:

The U.S. is the only developed nation to tax its citizens abroad. Now China has picked up on Mr. Grassley’s grand idea. From March 31, all mainland citizens working abroad will be taxed on their world-wide income. That might give some comfort to U.S. protectionists worried about China’s labor competitiveness, even though mainland employees aren’t so far a huge force abroad. But as America is now discovering, punitive taxation is an export that comes with a high price.

Not surprisingly, French socialists are intrigued by this self-destructive form of double-taxation. A column in The American comments on Segolene Royal’s interest in extending bad French tax laws to those who have escaped to friendlier jurisdictions:

…a report recently prepared for Royal’s camp floated a creative proposal—a “citizen contribution” (read: tax) for all French citizens residing abroad. The “contribution” would be designed to collect revenues from all French people residing abroad, irrespective of their reasons for leaving France: businessmen, families, retired workers, successful artists, etc. would all be affected. Former finance Minister Dominique Strauss-Kahn laid out the rationale: “It is no longer acceptable that French citizens be able to escape taxes by installing themselves outside of France. We propose to define a citizen contribution that will be paid in accordance with contributive capacities by each Frenchman residing abroad who does not pay taxes in France.” … If she implements her Socialist rhetoric, like Mitterrand in the early 1980s, financial forces beyond her control will quickly force her to change. For France’s sake, it is a situation she would do well to avoid.

Resistance Grows to State Tax Cartel

Idaho’s legislature has rejected the so-called streamlined sales tax proposal (or streamlined sales and use tax agreement). As reported by Euro2day.gr, lawmakers correctly viewed the scheme as an attack on sovereignty and a means of insulating governments from competitive pressure:

Anti-tax hawks in the state House have put a halt to Idaho’s plan to join a nationwide push aimed at eventually forcing Internet and catalog companies to collect sales taxes when they sell to out-of-state customers. Wednesday’s vote was 37-to-32 against the plan, with foes arguing it was unconstitutional and would lead to tax increases on Internet businesses that sell elsewhere. …So far, 18 states, including Wyoming, have signed agreements to simplify their tax systems in this push. Idaho won’t be the next one, after conservatives including Rep. Lenore Barrett, R-Challis, likened the Streamlined Sales Tax Project to “crawling into bed with other states.” “It’s a backdoor tax-increase waiting to happen,” Barrett said during House debate. “It would allow member states to collude and destroy tax competition.”

A similar battle is taking place in Hawaii, and Grover Norquist of Americans for Tax Reform has an article asking legislators in that state to resist this proposed cartel that will hurt consumers and enrich politicians:

The real motivation of SSUTA is to target businesses that are not physically located in the state and to export a state’s tax burden. SSUTA is a back-door tax increase. The implications of SSUTA go beyond the direct tax increase in coming years. Like any cartel, SSUTA would allow states to collude to destroy tax competition.  The incentive to keep tax rates moderate or foster competitiveness would be gone, and the pressures to raise taxes would lose their counter-balance.

Hubris Today

USA Today writes in an editorial:

That’s one reason the proposed XM-Sirius combination, announced this week, may be the rare merger that is good for consumers.

The rare merger that’s good for consumers? That’s rich coming from the flagship newspaper of Gannett, the rapacious media conglomerate that has swallowed up the major independent papers in Iowa, Mississippi, Kentucky, Tennessee, Arizona, Vermont, and other states.

Now, to be sure, USA Today did endorse the radio merger. And I don’t question the right of newspaper owners to sell their papers to Gannett. But USA Today ought to acknowledge that its parent company has been built on mergers (or takeovers) that in the eyes of critics reduced competition.

The rare merger that’s good for consumers? Mergers often benefit consumers; they can generate efficiencies and reduce costs. And the market is the best test [.pdf] of which mergers work and which don’t.

FBI Scandal

The FBI looked the other way when it knew that several people were being framed for a crime they did not commit.  Some might say, “Well, we all know there were certain abuses when Hoover was running the bureau in the ol’ days.”  But behold the argument advanced by the attorney representing the United States government:

Yesterday, a Justice Department lawyer argued that the FBI had no duty to share internal documents with state prosecutors and insisted the state was responsible for convicting the men in the slaying of Edward “Teddy” Deegan in Chelsea.

“The United States is not liable to plaintiffs because they were convicted as a result of a state prosecution,” Bridget Bailey Lipscomb said. “The FBI did not initiate this prosecution, and there is no duty of the FBI to submit to state or local governments any of its internal files.”

The government is not denying the fact that it knew what was happening. Nor is it saying the plaintiffs were wronged but are asking for too much money.  The government is instead arguing that it had no duty to come forward. 

At a minimum, one might ask what the FBI means when it says that one of its “core values” is “Accountability [by] accepting responsibility for its actions and decisions and the consequences of its actions and decisions.”  Maybe the director means that his agents will not arrest people who bring lawsuits against the bureau alleging illegal conduct.  Maybe he means something else. 

At worst, criminal laws were broken here.  An ordinary citizen can go to jail for suborning perjury.  It is also a crime to stand by and let a crime take place without notifying the authorities (misprision of felony).  The feds evidently believe they are not bound by these rules.  Pretty shocking.  Even if the judge rules against the Department of Justice, we should not forget what it argued in this case.

To listen to a Cato event on the FBI’s informer scandal, go here.