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Cato Daily Dispatch for August 1, 2003

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North Korea Says It Has Agreed to Multilateral Talks
Energy Bill Gives Way to Old One in the Senate
U.S. Senate Committee Approves Internet Tax Ban

North Korea Says It Has Agreed to Multilateral Talks

According to the Associated Press, "North Korea said Friday that it has agreed to multilateral talks on its suspected development of nuclear weapons but will push for one-on-one talks with the United States during the proposed negotiations."

In "Are We Headed for War with North Korea?", Cato's vice president for defense and foreign policy studies, Ted Galen Carpenter, writes that although the Bush administration has stressed that it wants to deal with the North Korean nuclear crisis through diplomacy, recent troop movements away from the Demilatarized Zone (DMZ) indicate that the administration may be "considering a preemptive military attack on North Korea's nuclear installations and wants to move American troops out of harm's way."

But, says Carpenter, "even if one takes the Bush administration at its word that it wants to settle the crisis through diplomacy, it begs a crucial question: What does the United States do if diplomacy (or diplomacy combined with economic pressure) fails to induce North Korea to abandon its nuclear program? Is the administration prepared to live with a North Korea armed with nuclear weapons? The statement issued by Bush and Japanese Prime Minister Junichiro Koizumi following their recent summit suggests otherwise. The two leaders stated bluntly that they 'would not tolerate' a nuclear armed North Korea.

"If diplomacy fails, it is not clear how that result can be prevented except through military force. The Bush administration may not be committed to such a course as yet, but in deciding to move U.S. forces away from the DMZ, it is creating a precondition for pursuing that option. South Koreans, who know how horribly their country would suffer if the United States launched preemptive strikes on the North, now have reason to be very, very nervous."

Energy Bill Gives Way to Old One in the Senate

"Bogged down in an effort to pass a new energy bill, the Senate tonight hit on a novel solution: It took its energy bill from last year off the shelf and passed it again, throwing a fight over the nation's energy policy into negotiations with the House," The New York Times reports.

Despite reverting to last year's energy bill, the Senate merely substitutes one panoply of pork-laden proposals for another. In "Fueled by Pork", Ed Crane, Cato Institute president, and Carl Pope, executive director of the Sierra Club, write of the 2002 energy bill:

"Whether you're a liberal or a conservative, one thing is clear: It's time to derail this legislative train.

"The Senate bill crafted by the Democrats, with a price tag of merely $14.5 billion ... has a hurricane of subsidies, tax breaks and regulatory preferences for every energy industry you can imagine.

"We would hope it's not too late for something better. Devotees of Adam Smith and Rachel Carson should join together to propose an alternative bill, one that would simply strip away all energy subsidies and preferences from the budget and the federal tax code.

"Environmentalists would be happy if renewable energy sources and energy-efficient technologies were just allowed to compete with the fossil fuels industry on a level playing field. The only way to level it is to end the ever-escalating arms race of corporate subsidies that guarantee green technologies will never win, no matter which party is in power. Likewise, many economic conservatives are more interested in freeing energy markets than in rigging them, but they've lacked the ability to fight the pork-barrel crowd in Washington.

"Not only would energy markets operate more fairly and efficiently but taxpayers could realize billions of dollars of savings by saying 'no' to this grotesque bipartisan avalanche of welfare for the well-connected. If it is too late for something better, then let's just kill these bills and call it a day."

U.S. Senate Committee Approves Internet Tax Ban

"The U.S. Senate Commerce Committee Thursday toughened an existing ban on Internet access taxes by voting to make it permanent and requiring nine states to repeal existing taxes on access fees," according to Reuters.

Cato Institute tax and telecommunications policy experts have written numerous articles on the subject of why not only a moratorium on access taxes, but also sales taxes, on interstate Internet vendors is good policy.

According to the Cato Institute's director of telecommunications studies, Adam Thierer, writing in the second in a series of three articles entitled, "Closing the Net Tax Debate: Identifying the Real Sales Tax Drain", the states have clamored for years to assess sales taxes on interstate transactions, but Supreme Court precedents have blocked their efforts for years. "Ever since those decisions were first handed down," he writes, "state and local tax officials have worked tirelessly to eliminate or at least water down their guidelines, largely in an effort to tax catalog or mail order sales. Luckily for companies and consumers, Congress has so far not allowed the states to set their own ground rules for the taxation of interstate commerce, which would upset the delicate constitutional balance by giving the states too much authority over the interstate marketplace.

"Congress would be wise to extend the existing [internet tax] moratorium on multiple and discriminatory taxes, as well as Internet access taxes, and let beneficial Supreme Court precedents continue to govern the interstate marketplace for electronic commerce transactions."

Christopher Kilmer, editor, ckilmer@cato.org