June 28, 2012 2:04PM

NATO and Turkey: Moribund Alliances, Military Snares, and Unnecessary Wars

NATO fulfilled its Cold War role by deterring rather than sparking conflict. Yet if Turkey and Syria come to blows, the transatlantic alliance could turn into a transmission belt of war for America.


Syria’s developing civil war has spilled over into Turkey. Moreover, Ankara has begun to meddle in the conflict next door. Despite Turkey’s denials, the Erdogan government appears to be channeling arms shipments to rebels and sheltering Syrian opposition activists.


Thus, tension between the two governments was rising even before the Syrian military destroyed a Turkish RF-4E reconnaissance plane. Damascus claimed the aircraft was in Syrian airspace; Ankara said the jet had strayed over Syrian territory but was over international waters when downed. The plane may have been on a surveillance mission: the Erdogan government has been pressing for NATO military action against Syria.


After the shoot‐​down, Prime Minister Recep Tayyip Erdogan said “any military approach to the Turkish border from the Syrian side will be perceived as a threat and will be dealt with accordingly.” Ankara also sought backing from NATO’s members: “We consider this act to be unacceptable and condemn it in the strongest terms,” explained Alliance chief Anders Fogh Rasmussen.


Rasmussen said that Article 5, regarding use of military force in defense, had not been discussed. And he stated “It is my clear expectation that the situation won’t continue to escalate.” Wars have a way of happening unexpectedly, however. If Turkey attacks Syrian military units in their own territory, sparking retaliation by Damascus followed by a call from Ankara to NATO for support, the United States could find itself, however reluctantly, at war.


Alliances make sense when directed against an overwhelming outside threat. The Soviet Union constituted one. Syria does not. NATO has turned into an association which drags members into everyone else’s wars, actually reducing collective security.


The United States pulls Europe into Afghanistan, a mission widely opposed by the European people. Europe pulls America into Libya, a mission widely opposed by the American people. Turkey could pull both America and Europe into Syria, a mission generally opposed by both the American and European people.


The security argument for Washington’s defense of Europe disappeared years ago. The worsening confrontation between Turkey and Syria offers a sharp reminder that NATO is not only unnecessary but dangerous. The U.S. should drop this outmoded security commitment before it draws America into yet another war in the Middle East.


Cross‐​posted from the Skeptics at the National Interest.

June 22, 2012 11:57AM

Europe’s Self‐​Inflicted Decline: French Taxing, Italian Regulating, Greek Mooching, and IMF Economic Illiteracy

Every day brings more and more evidence that Obamanomics is failing in Europe. I wrote some “Observations on the European Farce” last week, but the news this morning is even more surreal.


Media Name: hollande-telling-time.jpg

Let’s start with France, where I endorsed the explicit socialist over the implicit socialist precisely because of a morbid desire to see a nation commit faster economic suicide. Well, Monsieur Hollande isn’t disappointing me. Let’s look at some of his new initiatives, as reported by Tax​-News​.com.

The French Minister responsible for Parliamentary Relations, Alain Vidalies, has recently conceded that EUR10bn (USD12.7bn) is needed to balance the country’s budget this year, to be achieved notably by means of implementing a number of emergency tax measures. …The government plans to abolish the exemption from social contributions applicable to overtime hours, expected to yield a gain for the state of around EUR3.2bn, and to subject overtime hours to taxation, predicted to realize approximately EUR1.4bn in additional revenues. Other proposed measures include plans to reform the country’s solidarity tax on wealth (ISF), to cap tax breaks at EUR10,000, to impose a 3% tax on dividends and to increase the inheritance tax as well as the tax on donations. …French President Hollande announced plans during his election campaign to reform ISF. Holland intends to restore the wealth tax scale of between 0.55% and 1.8%, in place before the former government’s 2011 reform, to be applied on wealth in excess of EUR1.3m. Currently a 0.25% rate is imposed on net taxable wealth in excess of EUR1.3m and 0.5% on net taxable assets above EUR3m.

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May 14, 2012 1:59PM

Revolt of the Italian Tax Slaves

I wrote last year about a tax protest in Ireland, and I wrote earlier this year about a tax revolt in Greece.


But Irish and Greek taxpayers are wimps compared to their Italian compatriots. When Italians decide to have a tax revolt, they don’t kid around. Here are some remarkable details from the UK‐​based Telegraph.

In the last six months there has been a wave of countrywide attacks on offices of Equitalia, the agency which handles tax collection, with the most recent on Saturday night when a branch was hit with two petrol bombs.Staff have also expressed fears over their personal safety with increasing numbers calling in sick and with one unidentified employee telling Italian TV: “I have told my son not to say where I work or tell anyone what I do for a living.”

As much as I despise high taxes, I don’t think petrol bombs are the answer. But I am glad that at least some of the bureaucrats feels shame about their jobs.


Not surprisingly, the political elite wants people to be deferential to predatory government.

Annamaria Cancellieri, the interior minister, said she was considering calling in the army in a bid to quell the rising social tensions.“There have been several attacks on the offices of Equitalia in recent weeks. I want to remind people that attacking Equitalia is the equivalent of attacking the State,” she said in an interview with La Repubblica newspaper.

Here’s some advice for Ms. Cancellieri: Maybe people will be less likely to attack “the State” if “the State” stops attacking the people.


But don’t expect that to happen. The Prime Minister also demands obedience to “the State” and there’s rhetoric about “paying taxes is a duty” from other high‐​level government officials.

Saturday night’s attack took place on the Equitalia office in Livorno and the front of the building was left severely damaged by fire after the bombs exploded. The phrases “Thieves” and “Death to Equitalia” were sprayed onto outside walls. It came just 24 hours after more than 200 people had been involved in running battles with police outside a branch in Naples which left a dozen protesters and officers hurt. …There has also been a striking increase in suicides with people leaving notes directly blaming Equitalia and tax demands. Paola Severino, the Justice minister, said: “The economic situation has produced unease but paying taxes is a duty. On one side there is anger and the problem of paying when the resources are scare but on the other side is the fact that they must be paid.” …Mr Monti has vowed to press on even harder this year to recover the lost money. He is due to have a meeting with Equitalia chief Attilio Befera to discuss the situation and he has already said: “We are not going to take a step back, there will be no giving in to those who have declared was against the revenue and therefore the State. We will not be intimidated.”

Keep in mind, by the way, that this is the government that supposedly is being run by brilliant technocrats, yet they are so incompetent that they appoint the wrong people to posts. But the real problem is that government is far too big, consuming one‐​half of Italy’s economic output.


If Italy’s political class wants to improve tax compliance, they should listen to the IMF and academic economists, both of whom point out that lower tax rates reduce incentives for evasion and avoidance.


It also would help to shrink the burden of the public sector. Unfortunately, as is the case with most other European nations, “austerity” in Italy mostly means higher taxes, not less spending.

May 8, 2012 11:19AM

Paul Krugman and the European Austerity Myth

With both France and Greece deciding to jump out of the left-wing frying pan into the even-more-left-wing fire, European fiscal policy has become quite a controversial topic.

But I find this debate and discussion rather tedious and unrewarding, largely because it pits advocates of Keynesian spending (the so-called "growth" camp) against supporters of higher taxes (the "austerity" camp).

Since I'm a big fan of nations lowering taxes and reducing the burden of government spending, I would like to see the pro-tax hike and the pro-spending sides both lose (wasn't that Kissinger's attitude about the Iran-Iraq war?). Indeed, this is why I put together this matrix, to show that there is an alternative approach.

One of my many frustrations with this debate (Veronique de Rugy is similarly irritated) is that many observers make the absurd claim that Europe has implemented "spending cuts" and that this approach hasn't worked.

Here is what Prof. Krugman just wrote about France.

The French are revolting. ...Mr. Hollande’s victory means the end of “Merkozy,” the Franco-German axis that has enforced the austerity regime of the past two years. This would be a “dangerous” development if that strategy were working, or even had a reasonable chance of working. But it isn’t and doesn’t; it’s time to move on. ...What’s wrong with the prescription of spending cuts as the remedy for Europe’s ills? One answer is that the confidence fairy doesn’t exist — that is, claims that slashing government spending would somehow encourage consumers and businesses to spend more have been overwhelmingly refuted by the experience of the past two years. So spending cuts in a depressed economy just make the depression deeper.

And he's made similar assertions about the United Kingdom, complaining that, "the government of Prime Minister David Cameron chose instead to move to immediate, unforced austerity, in the belief that private spending would more than make up for the government’s pullback."

So let's take a look at the actual data and see how much "slashing" has been implemented in France and the United Kingdom. Here's a chart with the latest data from the European Union.

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April 26, 2012 2:16PM

NATO: An Alliance Past Its Prime

On May 20, the 2012 NATO Chicago summit will bring together the heads of state from the alliance. The agenda reads like a rundown of major world events in the past two years: the Arab Spring, the Libyan civil war, the global financial crisis, and the war in Afghanistan. It seems no problem is too big for NATO.


Of these topics, the most pressing and headline‐​grabbing will be the plan NATO and the United States establish to gradually turn responsibility for security in Afghanistan over to the Afghan national forces. But also of note are the topics — “lessons learned from Libya,” and the “Smart Defense Initiative,” — that display the reliance of Europe on the United States for advanced military capabilities. Libya in particular showcased Europe’s inability to act without the U.S.


The lessons from Libya are two‐​fold, and it is important to keep them in mind as policymakers and pundits in Washington call for the next U.S. intervention, possibly in Syria or Iran. First, the results so far have been disappointing for America’s latest stab at coercive democratization.


Libya also was a disappointment as a supposed new model for U.S. intervention. In fact, that conflict reinforces the fact that NATO really stands for North America and The Others. Without the U.S., the Europeans would be essentially helpless.


A new alliance study underscores Europe’s relative ineffectiveness. Reports the New York Times:

Despite widespread praise in Western capitals for NATO’s leadership of the air campaign in Libya, a confidential NATO assessment paints a sobering portrait of the alliance’s ability to carry out such campaigns without significant support from the United States.


The report concluded that the allies struggled to share crucial target information, lacked specialized planners and analysts, and overly relied on the United States for reconnaissance and refueling aircraft.

This should surprise no one. After all, during the war against Serbia — another nation which had not threatened America or any American ally — Europe was estimated to have a combat effectiveness less than 15 percent that of the U.S. The Europeans had large conscript armies, but outside of Britain and France had very little ability to project power. Later European participation in Afghanistan has been marred by the dozens of national “caveats” limiting participation in combat.


Yet alliance expansion is also on the agenda for the May NATO summit in Chicago. The list of alliance‐​wannabes includes such powerhouses as Macedonia, Montenegro, and Bosnia. Former Soviet republics notable mostly for their tangled and/​or troubled relations with Russia — Georgia and Ukraine — are also on the list. All of these nations would be security liabilities, not assets, for America.


As the NATO study demonstrates, should the alliance’s Article 5 commitment get invoked, America would do most of the fighting. It would be one thing to take that risk where vital interests were at stake. But they are not in the Balkans, let alone in the Caucasus, which was part of Imperial Russia even before the Soviet Union.


Alliances should reflect the security environment. The Cold War is over. The Europeans have developed, the Soviet Union is kaput, and the potential European conflicts of the future — distant and unlikely — are linked to no hegemonic threat against America.


Instead of talking about NATO expansion, the U.S. should set down the burden of defending Europe. Let the Europeans take over NATO or create their own European defense organization, as they have discussed for years. The latest reminder of Europe’s relative military ineffectiveness reinforces the case for ending the continent’s cheap ride. It is time to turn North America and The Others into simply The Others.


Cross‐​posted from the Skeptics at the National Interest.

February 9, 2012 1:59PM

Data in New World Bank Report Shows that Large Public Sectors Reduce Economic Growth

When Ronald Reagan said that big government undermined the economy, some people dismissed his comments because of his philosophical belief in liberty.

And when I discuss my work on the economic impact of government spending, I often get the same reaction.

This is why it's important that a growing number of establishment outfits are slowly but surely coming around to the same point of view.

This is remarkable. It's beginning to look like the entire world has figured out that there's an inverse relationship between big government and economic performance.

That's an exaggeration, of course. There are still holdouts pushing for more statism in Pyongyang, Paris, Havana, and parts of Washington, DC.

But maybe they'll be convinced by new research from the World Bank, which just produced a major report on the outlook for Europe. In chapter 7, the authors explain some of the ways that big government can undermine prosperity.

There are good reasons to suspect that big government is bad for growth. Taxation is perhaps the most obvious (Bergh and Henrekson 2010). Governments have to tax the private sector in order to spend, but taxes distort the allocation of resources in the economy. Producers and consumers change their behavior to reduce their tax payments. Hence certain activities that would have taken place without taxes, do not. Workers may work fewer hours, moderate their career plans, or show less interest in acquiring new skills. Enterprises may scale down production, reduce investments, or turn down opportunities to innovate. ...Over time, big governments can also create sclerotic bureaucracies that crowd out private sector employment and lead to a dependency on public transfers and public wages. The larger the group of people reliant on public wages or benefits, the stronger the political demand for public programs and the higher the excess burden of taxes. Slowing the economy, such a trend could increase the share of the population relying on government transfers, leading to a vicious cycle (Alesina and Wacziarg 1998). Large public administrations can also give rise to organized interest groups keener on exploiting their powers for their own benefit rather than facilitating a prosperous private sector (Olson 1982).

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January 20, 2012 11:08AM

Illinois Downgrade: More Evidence that Higher Taxes Make Fiscal Problems Worse

I don't blame Democrats for wanting to seduce Republicans into a tax-increase trap. Indeed, I completely understand why some Democrats said their top political goal was getting the GOP to surrender the no-tax-hike position.

I'm mystified, though, why some Republicans are willing to walk into such a trap. If you were playing chess against someone, and that person kept pleading with you to make a certain move, wouldn't you be a tad bit suspicious that your opponent really wasn't trying to help you win?

When I talk to the Republicans who are open to tax hikes, they sometimes admit that their party will suffer at the polls for agreeing to the hikes, but they say it's the right thing to do because of all the government red ink.

I suppose that's a noble sentiment, though I find that most GOPers who are open to tax hikes also tend to be big spenders, so I question their sincerity (with Senator Coburn being an obvious exception).

But even if we assume that all of them are genuinely motivated by a desire to control deficits and debt, shouldn't they be asked to provide some evidence that higher taxes are an effective way of fixing the fiscal policy mess?

I'm not trying to score debating points. This is a serious question.

European nations, for instance, have been raising taxes for decades, almost always saying the higher taxes were necessary to balance budgets and control red ink. Yet that obviously hasn't worked. Europe's now in the middle of a fiscal crisis.

So why do some people think we should mimic the French and the Greeks?

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