Milton Friedman Day

Milton FriedmanDr. Milton Friedman, who passed away last November at the age of 94, was perhaps the most influential economist of the 20th Century and a champion of liberty. To honor Dr. Friedman, today has been declared Milton Friedman Day – “a celebration of the economist’s positive impact on American life and business, and the spread of the benefits of free markets to nations around the globe.” At 10pm EST tonight, PBS will premiere “The Power of Choice: The Life and Ideas of Milton Friedman,” an exclusive documentary on the remarkable life and free market vision of Milton Friedman. The special, produced for PBS by Free to Choose Media, gives viewers a new understanding of the magnitude of this legendary economist’s influence on the modern world.

Lower Tax Rates Yielding More Tax Revenue

The capital gains tax should not be reduced to give more money to the government. Instead, the tax should be abolished since it is a punitive form of double-taxation on income that is invested. Nonetheless, it is worth noting that the government is collecting more money at a lower tax rate. Because there are many factors that influence economic performance, this does not necessarily mean that the lower rate is “paying for itself,” but it certainly indicates that there is a supply-side effect. As the Wall Street Journal explains, the bean-counters at the Joint Committee on Taxation failed to predict this result: 

Data released last week from the Congressional Budget Office confirm that the tax cuts of 2003 keep soaking the rich, especially on their capital gains. CBO and Congress’s Joint Tax Committee originally estimated that reducing the capital gains rate to 15% from 20% would cost the Treasury $5.4 billion from 2003-2006. Whoops. Actual revenues exceeded expectations by 68%, creating a $133 billion revenue bonanza for the feds. CBO’s original forecast for 2006 was for $57 billion in capital gains revenues, but actual receipts were $110 billion. This surprise windfall is one reason the budget deficit is also far lower than CBO predicted. The lower capital gains tax has raised stock values by raising the after-tax return on capital investment. It has also given stock owners a greater incentive to sell their shares, and then reinvest the proceeds, because the tax penalty on these transactions is lower. …The 2003 rate cut liberated hundreds of billions of dollars of capital for new investment. By the way, the National Venture Capital Association reports that venture capitalists invested $25.5 billion in 2006, the biggest burst of dealmaking since the stock market bubble burst in 2000. This is seed money for new companies and new jobs that will lift future tax revenues.

Jeb vs. W

Reading the Washington Post write-up of Gov. Jeb Bush’s speech to the National Review Conservative Summit, you have to wonder just what he’s saying. The Post reports:

Jeb Bush delivered yesterday in Washington a resounding endorsement of conservative principles, bringing his audience repeatedly to its feet.

In his lunchtime remarks to the Conservative Summit, Bush struck every conservative chord, blaming Republicans’ defeat in November on the party’s abandonment of tenets including limited government and fiscal restraint….

He added, “If the promise of pork and more programs is the way Republicans think they’ll regain the majority, then they’ve got a problem.”

Jeb said he was talking about the Republican Congress, and Kathryn Jean Lopez of National Review noted that he offered

a vigorous defense of his brother. Bush, at the beginning of his lunch speech, directed comments to the press gathered, noting emphatically: “I’m not going to criticize the president of the United States.” Among other accomplishments, Bush noted, “I like Justice Roberts. I like Justice Alito…” and tax cuts. He would also go on to defend the president’s immigration policy.

But who’s he kidding? President Bush sponsored most of those “more programs,” and in six years he hasn’t vetoed a single piece of pork or a bloated entitlement bill or a new spending program. And if Jeb thinks “we lost…because we rejected the conservative philosophy in this country,” he must realize that his brother has set the agenda for Republicans over the past six years almost as firmly as Putin has set Russia’s agenda. If Republicans turned their back on limited-government conservatism, it’s because the White House told them to. Not that congressional leaders were blameless — and on Social Security reform, they did decide to resist Bush’s one good idea — but it was President Bush and his White House staff who inspired, enticed, threatened, bullied, and bully-pulpited Republicans into passing the No Child Left Behind Act, the biggest expansion of entitlements in 40 years, and other big-government schemes.

This isn’t a dynastic country, and we shouldn’t elect a president whose brother (or husband) just served in the same office. But maybe Jeb could do like royals and nobles in the Old World sometimes do — give up their title or family name and enter politics as just plain Tony. (Believe me, once voters hear Jeb discuss public policy with facts and complete sentences, they’ll quickly forget that he’s supposed to be the president’s brother.) As John Ellis, the successful two-term governor of Florida, Jeb would instantly be the mainstream-conservative candidate for president.

But actual supporters of limited government should limit their enthusiasm. Although Jeb seems to have convinced conservatives that he’s much more committed to spending restraint than W — and he did veto some $2 billion in spending over eight years — his real record is much more like his brother’s. According to the Cato Institute’s Fiscal Policy Report Card on America’s Governors (pdf), he presided over “explosive growth in state spending.” Indeed, in the latest report card, only 10 governors had worse ratings on spending restraint, though — again like his brother — Jeb scored much higher on tax cutting. Federal spending is up 50 percent in six years; Florida’s spending was up 52 percent in eight years, and Jeb wasn’t fighting two foreign wars.

But at least he gives a good speech.

Bush’s Alternative-fuel Boondoggle

A CBSnews.com column explains how huge ethanol subsidies enrich special interests like Archer Daniels Midland:

Ironically, the president’s call echoes a more severe proposal by his 2004 campaign opponent John Kerry — a recommendation that a National Center for Policy Analysis study found would not “reduce future U.S. dependence on foreign oil.” The president’s plan also proposes an expansion of the so-called Renewable Fuels Standard (RFS), which currently mandates that refineries produce 7.5 billion gallons of ethanol per year by 2012.

But, as Heritage Foundation energy analyst Ben Lieberman points out, “if ethanol were a viable fuel, you wouldn’t have to mandate it in the first place.” Indeed, ethanol — whether made from corn or trendy cellulosic sources like switchgrass — is simply not viable as an alternative for the fundamental reason that a gallon of ethanol only goes 75 percent as far as a gallon of gas.

…For the farm lobby, the renewable mandate is easier to understand. It means money. Lots of money. To make ethanol price-competitive, the federal government subsidizes its production to the tune of 51 cents a gallon, costing U.S. taxpayers $4.1 billion a year.

Fueled by the RFS, Big Ethanol producer Archer Daniels Midland rang up record 2006 profits that would make Big Oil blush. Now Bush is proposing to increase the mandate to a fanciful 35 billion gallons by 2017 (whether consumers buy it or not). And as the federal honey pot grows, it is naturally attracting more flies.

Meanwhile, a Wall Street Journal column notes how the ethanol subsidy has a big negative impact on other users of corn, and even causes harm in other nations:

What we have here is a classic political stampede rooted more in hope and self-interest than science or logic.

…[F]ederal and state subsidies for ethanol ran to about $6 billion last year, equivalent to roughly half its wholesale market price. Ethanol gets a 51-cent a gallon domestic subsidy, and there’s another 54-cent a gallon tariff applied at the border against imported ethanol. Without those subsidies, hardly anyone would make the stuff, much less buy it — despite recent high oil prices.

That’s also why the percentage of the U.S. corn crop devoted to ethanol has risen to 20% from 3% in just five years, or about 8.6 million acres of farmland. Reaching the President’s target of 35 billion gallons of renewable and alternative fuels by 2017 would, at present corn yields, require the entire U.S. corn harvest.

No wonder, then, that the price of corn rose nearly 80% in 2006 alone. Corn growers and their Congressmen love this, and naturally they are planting as much as they can.

…[F]or those of us who like our corn flakes in the morning, the higher price isn’t such good news. It’s even worse for cattle, poultry and hog farmers trying to adjust to suddenly exorbitant prices for feed corn — to pick just one industry example.

The price of corn is making America’s meat-packing industries, which are major exporters, less competitive. In Mexico, the price of corn tortillas — the dietary staple of the country’s poorest — has risen by about 30% in recent months, leading to widespread protests and price controls. …Thus is a Beltway fad translated into Third World woes.

…The scientific literature is also divided about whether the energy inputs required to produce ethanol actually exceed its energy output. It takes fertilizer to grow the corn, and fuel to ship and process it, and so forth. Even the most optimistic estimate says ethanol’s net energy output is a marginal improvement of only 1.3 to one. For purposes of comparison, energy outputs from gasoline exceed inputs by an estimated 10 to one.

And because corn-based ethanol is less efficient than ordinary gasoline, using it to fuel cars means you need more [fuel] to drive the same number of miles. This is not exactly a route to “independence” from Mideast, Venezuelan or any other tainted source of oil.

…If cellulose is going to be an energy miracle — an agricultural cold fusion — far better to let the market figure that out. Not that any of these facts are likely to make much difference in the current Washington debate. The corn and sugar lobbies have their roots deep in both parties, and now they have the mantra of “energy independence” to invoke, however illusory it is. If anything, Congress may add to Mr. Bush’s ethanol mandate requests.

NZ’s Richest Woman Escapes High Taxes

Tax competition is a marvelous liberalizing force. Every time a taxpayer leaves a high-tax jurisdiction for a low-tax jurisdiction, bad policy is punished and good policy is rewarded.

New Zealand’s richest woman is the latest tax expatriate, as reported by The Press:

Reclusive Kathmandu founder Jan Cameron has moved to Tasmania after spending more than 30 years in Christchurch, where she built a $275 million business fortune. Starting with a small shop in Linwood, Cameron turned her outdoor-clothing and equipment venture into one of the country’s best-known brands, with outlets in New Zealand, Australia and Britain.

The Press understands Cameron had looked at staying in New Zealand after selling Kathmandu last year and planned to donate a portion of her annual income from her investments to charities. But under the New Zealand tax regime, all the money she gave away over an $1800 threshold would be taxed, so she opted to move to Australia, where there is no limit.

…PricewaterhouseCoopers tax specialist John Shewan said he was not surprised by Cameron’s decision. “It does underline how careful we need to be if we want to retain high-net-worth individuals,” he said. “We need to have a tax-friendly environment. Sadly, we don’t have that at the moment.”

Shewan said Cameron would pay no tax on her overseas investments under new Australian tax rules. ”Australia has stolen a march on us in terms of attracting high-net-worth individuals,” he said.

Czech Tax Reform

Because of the tenuous nature of the current government, plans for a flat tax may be postponed. But as the Prague Post explains, the government’s fall-back position is big, pro-growth tax cuts and expenditure limitations — so taxpayers will win regardless of the outcome:

Prime Minister Mirek Topolánek’s Cabinet, which won a slim vote of confidence Jan. 19, was voted into office thanks to an ambitious plan centered on economic reforms. …[T]he government plans to pursue canceling taxes on dividends and capital gains, as well as inheritance and gift taxes and the property transfer tax. …The Cabinet plans to reduce the share of mandatory expenditures on the overall state budget from its current 70 percent to below 50 percent by 2010. …The Cabinet’s weak support in the Parliament also makes it unlikely that the flat tax will be put in effect anytime soon.

Why Fight Educational Freedom?

As reactions to Why We Fight: How Public Schools Cause Social Conflict have started coming in, a few recurring objections have emerged to letting parents choose schools that comport with their values. Andrew Coulson, in an excellent post, responds to the arguments of one group in particular: defenders of evolution-only biology instruction. I won’t focus on that camp since Andrew handles them so deftly, and because many of their objections are really just specific examples of the more general complaints I’m going to tackle.

Unfortunately, many of the broadsides launched against Why We Fight employ what I’ll call the “boogeyman gambit”: attacking the entire notion of school choice on the grounds that some parents might choose fringe schools. As Red State Rabble contends:

Cato’s solution to Balkanization? Balkanize the schools. A Christian fundamentalists school here, a Muslim Madrassa there. Hey, there might even be enough money left for a school with a science department somewhere. 

These kinds of attacks are easy, and all too often effective, frighteningly suggesting without any support that somehow the nation will explode with maniacal kooks if we stop forcing people to fund public schools and let them go to institutions of their choice. Give people educational freedom, we’re supposed fear, and the name “Bob Jones” will replace “Horace Mann” on schools across the country.

Right.

Were such fringe groups truly the great threat Red State Rabble makes them out to be, then their schools would already swamp the nation. Parents are, after all, allowed to send their children to private schools as things stand now. Yet with very few exceptions, we hear little or nothing about a threat from private education. Which leaves two possibilities: either the malevolent hordes that Red State Rabble envisions going wild with school choice don’t actually exist, or they’re not so zealous that they’d be willing to part with private school tuition to indoctrinate their kids. Sure, we’re supposed to believe, they’re single-minded fanatics about their causes, but not so much that they’d sacrifice money for them!

Another frequent objection to letting parents choose their kids’ schools is that American children need to be steeped in a shared worldview, lest they be in constant combat as adults. This arose as a major line of argument in a Free Republic discussion about Why We Fight, and is very similar to the “Americanization” mission given to industrial-era public schools, where immigrant students were taught to reject the customs and values of their parents’ lands — and often their parents themselves — and adopt the values political elites deemed proper.

Now, if one were willing to accept a system that would, by definition, quash any thoughts not officially sanctioned, then in theory one would be okay with a public schooling system intended to force uniform thought. In the context of an otherwise free society, however, getting such a system to work is impossible, because it would require that incredibly diverse and constantly combative adults create and run an education system that somehow produces uniform and placid graduates. It’s no more realistic than hoping a tornado will drop houses in a more perfect line than it found them.

The practical result of our trying to make uniformity out of diversity has, of course, been constant conflict, as Why We Fight makes clear. Moreover, there is another by-product of this process that no one mentions when they weave scenarios about choice producing schools steeped in ignorance: our schools right now teach very little, especially in the most contentious areas like evolution and history, because they want to avoid conflict.

When it comes to teaching the origins of life, for instance, while evolution stalwarts might think they have the upper-hand because courts have regularly ruled in their favor, the reality on the ground is often that, courts or no courts, teachers dodge evolution. As the New York Times reported in February 2005:

Dr. Eugenie Scott, executive director of the National Center for Science Education, said she heard “all the time” from teachers who did not teach evolution “because it’s just too much trouble.”

“Or their principals tell them, ‘We just don’t have time to teach everything so let’s leave out the things that will cause us problems,’ ” she said.

So here’s what happens when evolution supporters fight to the political death to keep dissenters’ tax dollars in the public schools: Neither evolutionists nor creationists get what they want. It ends like a dispute between children, with someone taking their ball home and no one getting to play.

As one can imagine, because it potentially involves the stories of every group ever on Earth, history instruction often ends up even more denuded than science, thanks to the controversy-avoidance instinct. As Diane Ravitch explains in great detail in The Language Police, history textbooks — and, as a result, history classes — have been rendered utterly barren by the need to pass muster in highly contentious, politicized textbook adoption processes. The result is that nothing very critical ever gets said about any group, and students do not learn anything interesting or meaningful about history. The entire subject, it seems, has taken its ball and gone home.

Which brings us to the fundamental problems with the anti-choice arguments thrown at Why We Fight: they ignore the utter failure of the system we have now, and rest on baseless scare tactics. Choice opponents, however, can only ignore the very real consequences of not having choice for so long. Pretty soon, parents on all sides of the public school wars will unite around just two things: exhaustion with the all the fighting, and demands for school choice.