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Cato Daily Dispatch for May 31, 2005

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New Cato Poll Shows Majority Support Personal Accounts
Fate of E.U. Constitution Passed on to Dutch
Khodorkovsky Verdict May Carry Economic Implications

New Cato Poll Shows Majority Support Personal Accounts

"Most likely voters continue to support President Bush's proposal to let younger workers invest some of their Social Security payroll taxes through personal accounts, a new survey finds," the Washington Times reports.

"The poll by independent pollster John Zogby for the Cato Institute, which is being released today, found that when voters understood the benefits of personal investment accounts, including a better financial rate of return than the current system, the Bush plan was supported by 52 percent of Americans and opposed by 40 percent."

In "The 6.2 Percent Solution: A Plan for Reforming Social Security," Michael Tanner, director of the Cato Institute's Project on Social Security Choice, writes: "Under this proposal individuals would be allowed to divert their half (6.2 percentage points) of the payroll tax to individually owned, privately invested accounts. Those who chose to do so would agree to forgo all future accrual of retirement benefits under the traditional Social Security system.

"We expect this plan to restore Social Security to long-term and sustainable solvency and to do so at a cost that is less than the cost of simply propping up the existing program."

Fate of E.U. Constitution Passed on to Dutch

"European leaders on Monday held out hope that they could move forward with their decades-long drive to unify the continent under a single economic and political banner, but braced for a potentially fatal setback as Dutch voters threatened to join France in rejecting a proposed European constitution," the Washington Post reports.

"After initially vowing to press ahead despite the French defeat on Sunday, leaders at the European Union headquarters in Brussels said they would wait for the results of a popular referendum Wednesday in the Netherlands, where opinion polls show the constitution is in trouble. Officials said they would decide what to do next during a previously scheduled summit in the Belgian capital on June 16-17."

In "A Hard Look at the European Constitution," William Niskanen, Chairman of the Cato Institute, and Marian Tupy, assistant director of Cato's Project on Global Economic Liberty, write: "The French and the Dutch will hold referenda on the proposed European constitution on May 29 and June 1 respectively. Regardless of the outcome, the constitution will have many hurdles to overcome before coming into force. While the Czech President Vaclav Klaus may be fighting a quixotic battle against the constitution in a country where the constitution enjoys considerable public support, the British public is very unlikely to be persuaded to say 'yes.'

"The Europeans have every reason to be concerned about a government in Brussels, the powers of which are not clearly defined. Consequently, a demonstrably imperfect Europe of national states, as it is at present, may be a better protection of European liberty than approving the proposed constitution in the hope for a more perfect European Union."

Khodorkovsky Verdict May Carry Economic Implications

"Former oil tycoon Mikhail Khodorkovsky, who was Russia's richest man before the government dismantled his empire, was convicted Tuesday of fraud and tax evasion and then sentenced to nine years in prison following a trial widely denounced as politically motivated," reports the Associated Press.

Concerns that the verdict demonstrates the absence of an independent court in Russia have spooked many foreign investors: "[The verdict] does make people concerned, leery about an environment they don't understand," U.S. Commerce Secretary Carlos Gutierrez told Russian and U.S. business representatives Tuesday in Moscow. "Any time the business community sees something that impacts business and doesn't really understand why, then that's a setback because then businesses will not want to invest."

In "Putin and the Reformers," Richard W. Rahn, an adjunct scholar of the Cato Institute, writes: "As one who has been to Russia many times and was involved with the early reform efforts, I am heartened to see the progress but also discouraged by the continuing corruption and missed opportunities. Mr. Putin and his economic advisers clearly know what they should do, but the open question is whether Mr. Putin will use his current high political standing to act quickly and boldly enough to make his country a real economic 'tiger' or will continue only incremental steps."

Kristen Kestner, editor, kkestner@cato.org