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Cato Daily Dispatch for December 5, 2002

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Senator: Tax Cuts and Big Budgets Lead to Deficits
Antidumping Law is a 'Double Whammy'
Padilla Allowed to Consult Attorneys

Senator: Tax Cuts and Big Budgets Lead to Deficits

The Associated Press reports that Ohio Republican Sen. George Voinovich released projections yesterday indicating that annual budget deficits would eventually surpass $500 billion if Congress approves more spending and longer-lasting tax cuts than is assumed in current forecasts.

The nonpartisan Congressional Budget Office projected in August that last year's $159 billion deficit would turn into a surplus by 2006 and produce a cumulative $1 trillion surplus for the decade ending in 2012. But that assumed that Congress would let the 10-year, $1.35 trillion tax cut it enacted last year expire after 2010, as currently scheduled.

Cato Institute Executive Vice President David Boaz argues in favor of the tax cut in "Bush's Tiny Tax Cut". "The federal government is proposing to collect $28,600,000,000,000 from us over the next 10 years. That's $5.6 trillion more than the biggest-spending Congress in history proposes to spend," Boaz writes. "We're overtaxed. It's the people's money. Congress should give it back. President Bush's tiny tax cut is a down payment on the tax cut we need."

The Congressional Budget Office report also assumed that spending would grow at only the rate of inflation. In "The Spend and Spend Congress" Cato Senior Fellow Doug Bandow observes, "No Washington politician, whether Republican or Democrat, really wants to shrink government. Which means there's never likely to be much of a budget surplus."

Antidumping Law is a 'Double Whammy'

When making Fourth of July sparklers lost its shine, the Elkton Sparkler Co. in 1999 shut its factory in Maryland and became an importer of sparklers, according to The Wall Street Journal.

Yet this year, it rehired a skeleton crew, cranked up its old boiler and started making sparklers again. The reason: Elkton wanted to take advantage of an obscure new law that is showering money on certain U.S. manufacturers.

The law, the Continued Dumping and Subsidy Offset Act of 2000, works like this: Manufacturers that successfully petition the U.S. to impose tariffs on imports they claim are being "dumped"--or sold for less than fair-market value--are allowed to keep the proceeds of those tariffs. Elkton and its archrival, Diamond Sparkler Co., had successfully protested cheap Chinese imports in 1991; the U.S. then hit the Chinese makers with import duties.

To foreign companies and other critics the law amounts to a double whammy: The U.S. not only whacks foreign manufacturers with hefty tariffs, but it also rewards their U.S. competitors. So when Elkton started importing, the tariffs it paid helped Diamond get a government check for $1.6 million.

"The U.S. antidumping law enjoys broad political support in part because so few people understand how the law actually works," write Brink Lindsey, director or Cato's Center for Trade Policy Studies, and Trade Policy Analyst Dan Ikenson. "Its rhetoric of 'fairness' and 'level playing fields' sounds appealing, and its convoluted technical complexities prevent all but a few insiders and experts from understanding the reality that underlies that rhetoric."

In "Antidumping 101: The Devlish Details of 'Unfair Trade' Law" Lindsey and Ikenson "penetrate the fog of complexity that shields the antidumping law from the scrutiny it deserves" and "offer a detailed, step-by-step guide to how dumping is defined and measured."

Padilla Allowed to Consult Attorneys

A federal judge ruled Wednesday that "dirty bomb" suspect Jose Padilla has the right to consult with lawyers so he can challenge in court the facts that President Bush used to designate him as an "enemy combatant," reports USA Today.

In a 102-page ruling, U.S. District Judge Michael Mukasey in New York gave hope to both sides in the debate over what rights enemy combatants have, especially those who are U.S. citizens.

Mukasey said he will review the facts that Bush used to decide Padilla's status. By doing so, some legal experts said, Mukasey may be intruding on the executive branch. But the judge suggested he would be deferential to presidential powers.

In "Citizen Padilla: Dangerous Precedents", Robert A. Levy, senior fellow in constitutional studies, writes that "we cannot permit the executive branch to declare unilaterally that a U.S. citizen may be characterized as an enemy combatant, whisked away, detained indefinitely without charges, denied legal counsel, and prevented from arguing to a judge that he is wholly innocent."

Levy goes on to say, "When the executive, legislative, and judicial branches agree on the framework, the potential for abuse is significantly diminished. When only the executive has acted, the foundation of a free society can too easily erode."

Wyatt Dubois, editor, wdubois@cato.org