Senator Obama’s Tax Plan to Make America More Like France

The presumptive Democratic nominee is getting some negative attention for his plan to kill the 2003 tax rate reductions, which would boost the top tax rate by 4.6 percentage points. But a far more radical proposal is his scheme to extend Social Security payroll taxes so they apply to income above $250,000, a change that would increase the top marginal tax rate by about 12 percentage points. In a new video being distributed by the Center for Freedom and Prosperity, I explain why raising America’s top tax rate to French and German levels will undermine economic performance and reduce U.S. competitiveness.

As always, I look forward to feedback from Cato-at-Liberty readers. I already know that I mistakenly promoted Larry Lindsey by stating that he served as Vice Chairman of the Federal Reserve rather than “just” a member of the Board of Governors, and I’m also a bit disappointed with the sound quality, but I’m mostly looking for substantive comments. This topic was a bit of a challenge. I wanted to focus on the big increase in the top marginal tax rate, and the negative implications of European-style fiscal policy, but obviously needed to give some background on the workings of Social Security. So let me know whether I was too detailed or not detailed enough.

Censorship vs. Editorial Discretion

Via Ezra Klein, Tim Fernholz seems to be confused about the nature of censorship:

Conservatives argue (often with comparisons to communist states) that the doctrine, which hasn’t been in effect since 1987, forced the state to mandate speech. It really just provides for reasonable discussion of views, but the Right demagogues the issue to raise money and keep Rush Limbaugh on the air unopposed.

But now that McCain can’t get his stuff in the Times, it’s a terrible moment for American media! The FCC’s regulation wouldn’t affect a print newspaper, obviously, but it’s rank hypocrisy for McCain to complain that he’s not getting a fair shot, especially when he is co-sponsoring legislation to permanently ban the Fairness Doctrine. Apparently, equal time is only a bad idea when liberal views are being silenced.

This really isn’t complicated: The difference between advocates for bringing back the fairness doctrine and conservative critics of the New York Times is that the conservatives are not (as far as I know) advocating that the government force the New York Times to carry John McCain’s op-ed, or even to carry a certain quota of conservative columnists in order to ensure a “reasonable discussion of views.”

Fernholz dances around this issue, asserting that it’s not really censorship because the goal is simply to promote a “reasonable discussion of views.” And it’s true, I guess, that the Fairness Doctrine doesn’t involve giving the White House veto power over which stories get aired on NPR. But imagine if every five years the New York Times had to get its printing license renewed, and the Federal Press Commission reviewed the previous five year’s op-ed pages to ensure that they had represented a “reasonable discussion of views.” Fernholz can’t seriously claim that this would have no effect on the Times’s coverage—that it might not decide to scratch a few op-eds critical of the current administration or maybe hire an extra conservative (or liberal, depending on who was in power) columnist to make sure there weren’t any “reasonableness” problems during the license renewal process.

No, conservatives and liberals agree that the publishers of newspapers have a right to print whoever they please on their op-ed pages, “reasonable” or otherwise. The same principle applies to broadcast media, and for the same reasons.

Pickens’ Hot Air

The NYT editorial board is all aquiver over T. Boone Pickens’ plan to increase wind-generated electricity in the United States. A Times editorial gushes:

[Pickens would] develop wind power in states with steady, forceful winds (like Texas) and use it instead of natural gas to produce electricity (natural gas now generates about one-fifth of the power in the United States). He would then use the natural gas saved to fuel cars and trucks. He predicts that oil imports would drop by 40 percent and the country would save $300 billion a year.

Just one problem: Increased wind power may not free up that much natural gas.

Nat gas–fired generation has some important characteristics: Turbine generator nat gas plants are relatively cheap and quick to build, but they can be expensive to operate because the fuel is pricey. The plants can be put into service (“dispatched”) and taken out quickly with little start-up cost. Moreover, nat gas turbine plants can be very small (some are the size of a tractor-trailer) and emit little pollution relative to coal-fired plants, so they can be sited close to (and in) areas of heavy electricity demand.

Given its profile, nat gas generation is often used for “peak” production — that is, used for periods when demand is great and must be satisfied immediately (e.g., hot summer days when air conditioners are running full-blast, “work hours” when factories and offices are consuming a lot of juice) as well as to address localized power problems (e.g., areas that are at risk of brown-outs). This contrasts with coal-, nuclear-, and hydro-powered plants that are expensive to build but relatively cheap to run, that are difficult to idle and to site, and that are used, accordingly, to provide “baseline” power to large areas. (I should note, in charity to Pickens, that nat gas “co-gen” plants are also used as part of the baseline supply.)

Wind-powered generation is an intermittent source of electricity that may not be available during periods of peak demand. Its product, as envisioned by Pickens, would have to be transported over great distances on the nation’s overly-congested power grid — from the “wind-swept plains” to population and manufacturing centers — in order for it to satisfy much of the nation’s energy demand. Thus, it’s unclear how wind-powered electricity can effectively displace much of the 20 percent of U.S. electricity that is currently produced by natural gas. (In contrast, all renewables, combined, produce about 2.4 percent of U.S. electricity.)

If anything, wind-powered generation seems better suited to replace some coal-fired generation (especially in Texas where Pickens is building a $10 billion wind farm and where coal is often the marginal source of power). But since coal isn’t a transportation fuel, this displacement wouldn’t reduce the nation’s dependence on oil — unless there’s a breakthrough in battery technology that would make electric cars more practical. Moreover, if the nation does increase its dependence on wind power, then we would likely have to increase our dependence on nat gas peakers to cover those days when wind isn’t available (which often are those hot days when air conditioners are cranked up).

This is not to say that wind-powered generation should be ignored. The United States will likely overcome its current energy woes through a mixture of technology advances and conservation efforts, and wind may be part of that mix. But Pickens’ claim that wind power could be used to displace 40 percent of U.S. transportation fuel seems like little more than hot air.

Mandelson Does His Bit for Doha

Much has been made (including by me) of French President Nicolas Sarkozy’s feud-by-press-release with Peter Mandelson, European Commissioner for Trade, over the EU’s offers in the World Trade Organization’s Doha round of trade talks. And a statement delivered yesterday by Mr. Mandelson clarifies why President Sarkozy feels he can get political mileage out of criticising the EU’s negotiating tactics.

Speaking to the main negotiating group of the WTO at the start of a week of intense negotiations (in the hope of putting this seven-years-old and four-years-overdue round to bed), Mr. Mandelson delivered the EU’s opening statement. The trade press went a bit wild (by trade press standards) when Mr. Mandelson appeards to increase the EUs market access offer in agriculture from an average 54 percent tariff cut to an average 60 percent tariff cut. Other WTO members suggested, and Mr. Mandelson seemed to confirm, that the “improved offer” was really just a recalculation using the type of convoluted accounting tricks favoured by Social Security administration officials. But in amongst Mr. Mandelson’s statement was this gem:

“On agriculture, the EU will be the major net loser in any deal.” (italics in original)

With statements like that from the EU’s chief negotiator and major promoter of the WTO trade talks, is it no wonder that mercantalism is rife in the EU? Mr. Mandelson is (unwittingly?) playing right into the hands of President Sarkozy and other critics of open markets in agriculture.

Farm subsidies in Europe currently account for about 40% of the EU budget, and Europeans currently pay high prices for, among other goods, dairy, sugar, bananas and beef. They deserve a break. While the farmers may fume, the EU would be a net gainer from the Doha Round overall. That’s the message Mr. Mandelson should be delivering to the WTO members and the world at large.

The raison d’etre of the WTO (and the GATT before it) was to allow countries to take politically difficult steps away from serving special interests, like farmers, under cover of promoting exports for other sectors. While I may lament this mercantalist mindset, it has achieved liberalization and avoided a repeat of the tariff wars of the 1930s. But maybe this whole idea has served its purpose. Maybe Brink was on to something.