School Choice? But Everyone Would Leave!

Here’s a classic reaction to school choice from an article in today’s Hartford Courant:

“What troubles me about this voucher stuff,” said former Hartford Councilman Steven Harris, “if parents are given the option, they’re going to leap at that, but what does that do for the rest of the kids left behind?”

I have a solution for the former Councilman: Give all parents choice and there won’t be any kids left behind.

Switzerland Provides Refuge for Victims of Fiscal Oppression

Tax-news.com reports on the influx of wealthy foreigners seeking to benefit from Switzerland’s attractive tax laws for non-citizens. Driven in large part by competition among cantons, this system enables highly productive people to escape excessive taxation in other nations. High-tax European welfare states despise this policy, not surprisingly, but Swiss lawmakers understandably ignore these complaints. Indeed, as reported by the International Herald Tribune, one Swiss official even explained that there is no such thing as a “just” tax:

“It’s not a question of justice or injustice; there’s no just tax,” said Jean- Daniel Gerber, head of the Swiss State Secretariat for Economic Affairs.

Legendary French music and film superstar Johnny Hallyday and English pop star James Blunt are not unique in their desire to escape the high-tax regimes of their home countries. Switzerland has become a popular haunt for a variety of sports starts, rock stars and tycoons, notably Michael Schumacher, the former Formula One world champion, and Boris Becker, the Grand Slam tennis champion, rock star Phil Collins and Ingvar Kamprad, founder of the furniture chain Ikea.

Well over 3,500 wealthy foreigners have taken advantage of fiscal deals offered by Swiss cantons, paying an average of CHF75,000 each in tax on earnings of CHF300 million annually, according to Swissinfo. While individual deals vary, a typical agreement will see the individual pay tax on a multiple of the the value of their property or living expenses.

Swiss cantons are permitted an unusual amount of freedom from central government to set their own tax rates under the 2001 Tax Harmonisation Act, which has established a direct link between voters and tax policy and has helped to encourage tax competition within Switzerland for wealthy individuals and holding companies.

At least eighteen out of Switzerland’s 24 cantons planned to cut rates of taxation in 2006, led by Obwalden, which cut the corporate tax to 6.6% in January 2006, the lowest rate in Switzerland. Obwalden also cut tax for individuals earning over CHF300,000 by 1% to 2.35% and reduced property tax.

The system has also attracted criticism from the European Union. While Switzerland is not a member of the EU, it is party to a free trade agreement with Brussels dating back to 1972 and the European Commission has told Berne that it thinks certain aspects of Switzerland’s tax system are “incompatible” with this agreement and distort trade within the EU. To date, EC pressure on Switzerland to change its tax system has been firmly resisted by the Swiss government, with President Micheline Calmy-Rey telling the press whilst still Foreign Minister in December that there is “absolutely no room for negotiation,” regarding Swiss tax laws.

Bush’s Energy Pablum

Last night, President Bush unveiled what he calls his “20-by-10” plan, a program that he claims would reduce America’s gasoline consumption by 20 percent within 10 years. You can find my critique of the alternative fuels madness that he proposed last night here, a more thorough critique of ethanol subsidies in general here, my complaint with his $60 billion plan to massively expand the Strategic Petroleum Reserve here and here, and a call to dismantle – not revise – federal automobile fuel efficiency standards here.

By the way, you know that a plan was dreamed up by politicians and pollsters – and not by, oh, anyone who knows what they are talking about – when the numbers are nice and round with a catchy ring to them when put together.

Even Leftists Recognize that Over-Regulation Is Hindering U.S. Competitiveness

A report commissioned by New York Senator Charles Schumer and New York City Mayor Michael Bloomberg concludes that over-regulation is harming American competitiveness, with New York City being disproportionately impacted.

The most intriguing proposal in the report is the call for an optional federal charter for insurance companies. These companies currently are chartered by states, and state politicians abuse this process with mandates and other forms of regulation. An optional federal charter (similar to what exists in the banking sector) would force competition among regulators and create incentives for a more sensible system. That’s the good news.

The bad news is that the report also expresses sympathy for global regulations, which almost surely would mean politicians and bureaucrats insisting that all nations accept excessive regulation. Indeed, the International Organization of Securities Commissions (IOSCO) already is trying to impose a one-size-fits-all system on the world – an approach that would penalize jurisdictions with dynamic financial service industries, such as Hong Kong, Bermuda, and Cayman Islands (see here and here for more information). Tax-news.com reports on the new study:

United States Senator Charles E. Schumer and New York City Mayor Michael R. Bloomberg have released a report which warns that New York could lose its status as a global financial market within a decade without a major shift in public policy. Schumer, a New York Democrat, and Bloomberg, together with New York Governor Eliot Spitzer, warned that New York’s financial markets, stifled by stringent regulations, and high litigation risks, are in danger of losing businesses and high-skilled workers to overseas competitors, relegating New York to regional market status and adversely impacting the US economy. …Senator Schumer and Mayor Bloomberg commissioned the joint report, “Sustaining New York’s and the US’s Global Financial Services Leadership,” which sets out a series of recommendations to counter emerging threats to the United States’ position as the world’s financial leader, with a two-tiered package of national and local measures aimed at removing impediments to financial services competitiveness both domestically and internationally. The report warned that the United States would miss out on between $15 billion and $30 billion in financial services revenues annually by 2011 if the current situation goes unchanged. According to the joint report, while many of the causes are due to improved markets abroad and sophisticated technology that has virtually eliminated barriers to the flow of capital, a significant number of the causes for America’s declining competitiveness are self-imposed. …The report also noted that a complex and sometimes unresponsive regulatory framework has not only prompted many foreign firms to stay out of the US markets, but also is forcing more business overseas because of the complexity and cost of doing business in US financial markets regardless of where they are located.

Hear That? It’s the Sound of a Nation Constricting

Beginning today, citizens of the United States, Canada, Mexico, and Bermuda are required to present a passport to enter the United States when arriving by air from any part of the Western Hemisphere.

This new restriction on local international travel is part of the “Western Hemisphere Travel Initiative.” Tightening up on travel documentation was a recommendation of the 9/11 Commission that Congress passed into law in the Intelligence Reform and Terrorism Prevention Act of 2004.

To downplay the consequences of this new travel restriction, a Department of Homeland Security press release points out that over 90 percent of U.S. citizens, 97 percent of Canadians, and just about all Mexicans and Bermudans flying to the United States over the past week arrived with passports. But this means that fully 10 percent of Americans who currently travel overseas this way are going to be at least inconvenienced, and at most dissuaded, from doing so.

It’s hard to quantify what a marginal restriction on travel like this means, but let’s try:

As early as January 1, 2008, the new restriction may apply to citizens entering the U.S. from the Western Hemisphere by land or sea. Air travelers are probably more likely than land or border crossers to have passports so let’s assume that 10 percent of all American border crossers lack passports.

To get a rough idea of what this means, in 1999, there were approximately 300 million roundtrips between the United States and Mexico and the United States and Canada, the vast majority of them same-day trips. Let’s assume 250 million of them were U.S. citizens. If 1% of these trips don’t happen (10% of current non-passport holders) because of the new Western Hemisphere travel restrictions, that’s 2.5 million cross-border trips forgone each year, along with the commerce, goodwill, and freedom those trips would have entalied.

What price freedom? Well, let’s make it 10 bucks. At that price, using these strictly back-of-envelope estimates, WHTI costs $25 million per year (not counting the cost of administration). The net present value of a $25 million annual expenditure is $500 million (at a 5% interest rate). In other words, more than half-a-billion dollars (a low estimate) worth of freedom and commerce goes down the drain starting today.

It would be worth every penny if it improved our national security by a similar margin. Alas, it does not.

The reason why requiring passports at borders provides so very little security boils down to the fact that identity does not reveal intention.

In our daily lives, we use identity to assure ourselves of the bona fides of others - neighbors, coworkers, stores, and restaurants, for example. But terrorists and hardened criminals are not similarly constrained by the social and legal pressures we can bring to bear on our law-abiding neighbors.

You could have perfect knowledge of who everyone is - lock down everyone’s identity with a mandatory cradle-to-grave biometric tracking system - and you would still not prevent crime and terrorism. I have carefully analyzed the utility of identity for security in my book, Identity Crisis.

Terrorists can defeat an identity-based security system either physically or logically. They can enter the country someplace other than a border crossing for example - and the half-billion expendture on WHTI is 100% wasted. A logical evasion of identity-based border security is to enter the country legally, not having participated in terrorism planning or acts before. This was the technique used by al Qaeda with most of the 9/11 terrorists.

Checking passports at the border of the country is what security expert Bruce Schneier correctly calls “security theater.” It may make you feel safer, but it doesn’t make you safer. It does corral law-abiding citizens into the habit of showing ID as they go about their business, and it puts information about law-abiding travelers into government data stores for who-knows-what future use.

With the travel restrictions going into effect today, America does not get safer, just smaller.

Facts and Logic Pertaining to the Enemy

I was preparing to write a lengthy blog post responding point by point to the many erroneous assertions and flawed arguments contained within the president’s State of the Union address, but then I discovered that I didn’t have to. Veteran Washington Post reporter Glenn Kessler did it for me.

Among the gems contained within Kessler’s article:

– “The Shia and Sunni extremists are different faces of the same totalitarian threat,” the president said. In other words, Kessler writes: “Under Bush’s rubric, a country such as Iran … is lumped together with al-Qaeda, the terrorist group responsible for the Sept. 11, 2001, attacks.”

– With respect to Hezbollah, which President Bush singled out as a terrorist group “second only to al-Qaeda in the American lives it has taken,” Kessler points out that those attacks on the U.S. embassy and a Marine barracks in Lebanon occurred “nearly a quarter-century ago…when the United States intervened in Lebanon’s civil war by shelling Hezbollah strongholds.”  

– In the president’s cataloguing of the actions of “the enemy” since 2005, he “tried to tie together a series of diplomatic and military setbacks that had virtually no connection to one another, from an attack on a Sunni mosque in Iraq to the assassination of Maronite Lebanese political figure [sic].”

– The so-called freedom agenda also takes a few hits. In a familiar refrain, the president argued that “free people are not drawn to violent and malignant ideologies – and most will choose a better way when they are given a chance.”

– However, as Kessler reminds us, “In the two of the most liberal and diverse societies in the Middle East – Lebanon and the Palestinian territories – events have undercut Bush’s argument… Hezbollah has gained power and strength in Lebanon, partly at the ballot box. Meanwhile, Palestinians ousted the Fatah party – which wants to pursue peace with Israel – from the legislature in favor of Hamas, which is committed to Israel’s destruction and is considered a terrorist organization by the State Department.”

– As for the “moderate” governments that the terrorists wish to overthrow, ”Many of the countries that Bush considers ‘moderate’ – such as Egypt and Saudi Arabia – are autocratic dictatorships” whose “Freedom House ratings are virtually indistinguishable from Cuba, Belarus and Burma, which Bush last night listed as nations in desperate need of freedom.”

– Finally, with respect to the president’s assertion that “we have a diplomatic strategy that is rallying the world to join in the fight against extremism,” Kessler notes that “global opinion of U.S. foreign policy has sharply deteriorated in the past two years.” A recent poll found that nearly three-quarters of those surveyed “disapprove of U.S. policies toward Iraq, and nearly half said the United States is playing a mainly negative role in the world.”

Notably, Kessler’s article was not identified as a “News Analysis” – the typical flag that reporters employ when they wish to call attention to the fact that an article in the news portion of the paper (as opposed to the Opinion page) contains opinions. Kessler’s piece did not require such a designation because it was based not on opinion, but rather on a fair and accurate reading of the facts.

Which is more than can be said for the president’s speech.