Telecom Amnesty

Over at Slate, I wonder what ever happened to the Republican devotion to the rule of law:

Press reports suggest that the Bush administration has created at least two warrantless surveillance programs with the cooperation of major telecom companies. The first, reported by the New York Times in 2005, involved the warrantless interception of several hundred Americans’ international phone calls and e-mails. Under the second, first reported by USA Today in 2006, Verizon and AT&T (then called SBC) reportedly provided the government with access to the domestic calling records of its customers. Qwest CEO Joseph P. Nacchio declined to participate in the latter program, believing that doing so would be against the law. Nacchio now alleges that the NSA retaliated for his refusal by canceling an unrelated, lucrative government contract. (He faces unrelated charges of insider trading.) Last summer, the Heritage Foundation’s Matthew Spalding insisted that giving amnesty to illegal immigrants would be “deeply unfair to the millions who obey the law and abide by the rules.” By the same token, letting AT&T and Verizon off the hook would not only be unfair to the customers whose privacy they violated, it would also be unfair to Qwest, which was put at a competitive disadvantage for obeying the law.

Last year, when the Senate was debating immigration reform, Sen. Kay Bailey Hutchinson was arguing that “America is based on the rule of law, and that law must be enforced.” Many other Republican Senators expressed similar sentiments, opposing any leniency for illegal immigrants. But yesterday she voted with every one of her Republican colleagues to forgive telecom companies for their illegal activities. If migrant workers are obligated to obey our laws, surely our largest corporations have the same obligation.

Whaddaya Know? Pangloss Was Right after all!

All these years I was thinking that Voltaire’s Pangloss was a credulous ignoramus for claiming that “we live in the best of all possible worlds.” But then I turn on the TV while making coffee this morning to find the Congress of the United States of America spending its limited time chatting with grown men who play a game for a living….

Fantastic! If this is the most important issue for our elected representatives to be dealing with, our nation and the world must be in far far better shape than I imagined.


The first blogger to put up a list of every elected representative who participated in this foolishness, along with the districts they represent, gets a hotlink. Just e-mail me at ACoulson-at-cato-dot-org.


Iraq War Spending: 2001-present

The CBO has issued a report titled “Analysis of the Growth in Funding for Operations in Iraq, Afghanistan, and Elsewhere in the War on Terrorism.”

I ran the figures through the Net Present Value calculator I use at (The amount you’d have to put in the bank for future spending, or the amount you’d have in the bank but for past spending.)

The results? A little over $8,600 per U.S. family, or $2,700 per person.

Don’t Go Scaring the Geese Who Lay the Golden Eggs

Britain’s Labor leaders Tony Blair and Gordon Brown have long boasted how successful and sure-footed they have been in making London one of the World’s preeminent financial centers. Brown, who served as the Chancellor of the Exchequer until he succeeded Blair as Prime Minister, was more responsible than any politician in helping London leapfrog up the league tables in the financial market to challenge New York.

Financial regulation has been lighter in the UK than the US, especially since the post-Enron Sarbanes-Oxley reform, and the tax authorities have been welcoming of rich foreigners, helping to attract many of the world’s wealthiest entrepreneurs and investors to the UK, including Greek shipping magnates, American hedge-fund traders and Russian oligarchs.

But in a bid to outdo the British Conservatives, who have joined the bandwagon of economic populism, Brown has threatened London’s role as a global finance center with talk of a tax crackdown on rich foreigners.

He has provided – also inadvertently – a major object lesson on the importance of tax competition.

Unnerved by the Conservatives, who promised that in government they would impose a levy on rich foreigners, Brown and his Chancellor, Alistair Darling, announced just before Christmas that come spring, tax rules on foreigners resident in the UK would change. Under the previous regime, foreign residents could claim “non-domiciled” status and avoid paying tax on overseas earnings and offshore assets. Only money brought into the UK or generated there was liable to income tax or capital gains tax.

Brown’s new proposal would have all non-domiciled foreigners resident in the UK for more than 7 years paying an annual tax charge of 30,000 pounds ($60,000).

According to the government’s theory, hugely wealthy foreigners wouldn’t up and leave just because of a mere $60,000, although, of course, for families it could be a lot more than $60,000, if spouse and adult children are taken into account.

To make matters much worse, the British government also started to talk about introducing new residency rules and rules on taxing offshore trusts.

Government spokesmen, along with supporters of the tax crackdown, including rather strangely the editorial writers at the Financial Times, pooh-poohed the notion there would be an exodus of the wealthy and entrepreneurial just because of the tax changes. They have been arguing that London is too important, what with its deep pool of financial and international legal expertise. Low-tax cantons in Switzerland or non-tax Monaco or offers of generous tax treatment in, say Greece, would hardly compensate for what London has to offer.

Foreigners apparently have been thinking otherwise. Many of the country’s richest foreigners have already started to relocate to Geneva, Zurich, Barbados or Ireland. This week, Irish paper king Dermot Smurfit announced he was planning to move to Switzerland and there were reports that dozens of Greek shipping magnates were exploring the possibility of moving back to Athens – a transfer that would cost the British economy annually $10 billion alone, and in the long term maybe two or three times more. The $60,000 annual levy per non-domiciled foreigner would bring in annually $1.6 billion.

Belatedly, the alarm bells have started to ring. The British government is poised to announce, possibly tomorrow, an embarrassing back-down. Taxing offshore trusts is now likely not to happen, although the $60,000 levy per non-domiciled foreigner will remain.

The reversal highlights the importance of tax competition. But there still might be long-term consequences from Brown’s botched handling of the affair. Non-doms who have already moved overseas are unlikely to return and the London-based Greek shipping magnates, who control a quarter of the Greek shipping industry, are now being courted energetically by Athens, with offers of generous tax treatment and subsidies.

The Fear Factory

Via Hit and Run, the article from the February 7 Rolling Stone that Ben Friedman blogged about recently is now online. “The Fear Factory” discusses multiple cases where the FBI’s Joint Terrorism Task Forces have brought cases against defendants who “posed little if any demonstrable threat to anyone or anything.” Crucially, the story illustrates how information about the JTTFs’ activities are shrouded behind claims of secrecy.

This is no way to do law enforcement - or to secure a free country.

Bush’s Dismal Fiscal Record

Kevin Hassett of the American Enterprise Institute crunches a few numbers to estimate what would have happened to government spending if George Bush had simply maintained Bill Clinton’s non-defense budget. The sad answer is that the federal government would be about $400 billion smaller. The implications, particularly for tax policy, are staggering:

Bush has outspent Clinton by a mile. …If we now had the lower spending levels that Bush inherited, we could extend his tax cuts, repeal the alternative minimum tax, enact the current stimulus package, and still have a 10-year budget surplus of $1.9 trillion. And, remember, that allows spending to be adjusted up for the Iraq war and the war against terrorists. …It makes you sick to think about it. All that money wasted on ethanol and bridges to nowhere has accumulated into a pile that massive. Uncle Sam ate a whopping helping of apple pie every day for seven years, and now he is obese. This is important to bear in mind as we move forward to the general election. We don’t have a deficit because of Iraq, or the tax cuts, or the drug benefit. We have a deficit because the government grew fat. We can’t fix that with tax increases. Uncle Sam must go on a diet.

Nuclear Terror: How Big a Threat?

Steve Chapman has a typically smart piece describing John Mueller’s provocative “who’s afraid of nuclear terror?” argument. (.pdf)

The events required [for nuclear terror to] happen include a multitude of herculean tasks. First, a terrorist group has to get a bomb or fissile material, perhaps from Russia’s inventory of decommissioned warheads. If that were easy, one would have already gone missing.

Besides, those devices are probably no longer a danger, since weapons that are not scrupulously maintained (as those have not been) quickly become what one expert calls “radioactive scrap metal.” If terrorists were able to steal a Pakistani bomb, they would still have to defeat the arming codes and other safeguards designed to prevent unauthorized use. As for Iran, no nuclear state has ever given a bomb to an ally—for reasons even the Iranians can grasp. Stealing some 100 pounds of bomb fuel would require help from rogue individuals inside some government who are prepared to jeopardize their own lives. The terrorists, notes Mueller, would then have to spirit it “hundreds of miles out of the country over unfamiliar terrain, and probably while being pursued by security forces.”

Then comes the task of building a bomb. It’s not something you can gin up with spare parts and power tools in your garage. It requires millions of dollars, a safe haven and advanced equipment—plus people with specialized skills, lots of time and a willingness to die for the cause. And if Al Qaeda could make a prototype, another obstacle would emerge: There is no guarantee it would work, and there is no way to test it…

Chapman concludes:

None of this means we should stop trying to minimize the risk by securing nuclear stockpiles, monitoring terrorist communications and improving port screening. But it offers good reason to think that in this war, it appears, the worst eventuality is one that will never happen.

My eyebrows went up an inch or three the first time I heard this argument at the APSA convention last year, but as with so much of John Mueller’s work, when you stop to think about his arguments, it’s hard to find a genuinely weak link in his logic. In any event, it’s a discussion that deserves to be had.