Florida cops have made a practice of ticketing drivers who warn others about speed traps by flashing their lights, despite uncertainty as to whether state law actually does prohibit such flashing. Now a judge in Sanford, Fla. has ruled that Ryan Kintner of Lake Mary not only was within his rights under state law when he flashed his headlights, but was engaging in speech protected by the First Amendment. [Orlando Sentinel; cross-posted from Overlawyered]

The lead article in the new Cato Policy Report is entitled “We Can Cut Government: Canada Did.” The article reviews Canada’s economic reforms since the 1980s, which have included free trade, privatization, spending cuts, sound money, large corporate tax cuts, personal tax reforms, balanced federal budgets, block grants, and decentralizing power by cutting the central government.

Those all sound like things we ought to pursue in America. The political systems of the two countries are different, but Canada’s pro-market reform lessons are universally applicable.

Canada’s reforms, for example, refute the Keynesian notion that cutting government spending harms economic growth. Canadian federal spending was cut from 23.3 percent of GDP in 1993 to 16.5 percent by 2000. Keynesians and their macro models would predict a crushing economic blow from such a spending reduction. They would argue that the “austerity” would slash “aggregate demand” and “take money out of the economy.”

Yet Canada’s spending cuts of the 1990s were coincident with the beginning of a 15-year economic boom that only ended when the United States dragged its neighbor into recession in 2009. As the government shrank in size during the 1990s, the Canadian unemployment rate plunged from more than 11 percent to less than 7 percent.

Canada still has a large welfare state, and its provincial governments are prone to overspending. However, its experience shows that even a modest dose of public sector austerity combined with pro-market reforms can lead to substantial gains in private-sector prosperity. American and European leaders still under the Keynesian spell should take note.

For more, see here and here.

I sometimes wonder whether journalists have the slightest idea of how capitalism works.

In recent weeks, we’ve seen breathless reporting on the $2 billion loss at JP Morgan Chase, and now there’s a big kerfuffle about the falling value of Facebook stock.

In response to these supposed scandals, there are all sorts of articles being written (see here, here, here, and here, for just a few examples) about the need for more regulation to protect the economy.

Underlying these stories seems to be a Lake Wobegon view of financial markets. But instead of Garrison Keillor’s imaginary town where “all children are above average,” we have a fantasy economy where “all investments make money.”

I don’t want to burst anyone’s bubble or shatter any childhood illusions, but losses are an inherent part of the free market movement. As the saying goes, “capitalism without bankruptcy is like religion without hell.”

Moreover, losses (just like gains) play an important role in that they signal to investors and entrepreneurs that resources should be reallocated in ways that are more productive for the economy.

Legend tells us that King Canute commanded the tides not to advance and learned there are limits to the power of a king when his orders had no effect.

Sadly, modern journalists, regulators, and politicians lack the same wisdom and think that government somehow can prevent losses.

But perhaps that’s unfair. They probably understand that losses sometimes happen, but they want to provide bailouts so that nobody ever learns a lesson about what happens when you touch a hot stove.

Government-subsidized risk, though, is just as foolish as government-subsidized success.

In a speech today, presumptive GOP presidential nominee Mitt Romney will lay out the foundations of his education platform. Based on an outline of his proposals released by Education Week this morning, Gov. Romney seems just a little less disinterested in the Constitution — and the 40-plus years of proven federal education failure — than the man he seeks to replace. And no, calling what you want federal “incentives” neither absolves them of being unacceptable federal intrusions, nor makes them any less coercive.

The heart of what Mr. Romney wants in elementary and secondary education is federal enticements to get states to implement everything from “open-enrollment” policies for schools, to individual school “report cards,” to encouraging “talented individuals to become teachers.”

As I wrote last week, while “incentive” sounds kinda harmless, an incentive program is really all that No Child Left Behind is. No state has to do anything in NCLB. It only has to follow the law if it wants the federal money attached to it. The funding is only an incentive, but it is so big an incentive it is irresistible, even with the law being a huge millstone around the neck of American education. And, of course, taxpayers had no choice about furnishing the ducats to begin with. (Well, I suppose they were incentivized by a trip to prison…)

Where Romney’s K‑12 offering is most enticing is his proposal that federal money be attached to low-income and special-needs children and made portable even to private schools. (Portable, that is, “in accordance with state guidelines,” a proviso the outline doesn’t flesh out.) But the very real threat, as with all federal funding , is federal control. What Washington funds it will regulate — though usually for political show, not efficiency or effectiveness — and that is something we should strenuously avoid for private schools when states can implement more varied — and less regulation prone — choice mechanisms such as education tax credits. And, of course, the Constitution gives the federal government no more authority to deliver school choice than to dictate curricula. That is, except in Washington itself, and to his credit Mr. Romney is proposing to save the D.C. voucher program that Mr. Obama, for whatever shoddy reason, seems determined to suffocate.

The good news about Gov. Romney’s outline is that it directly addresses the primary problem in higher education, and one of its primary causes: insane tuition inflation fueled by massive federal student aid. Indeed, though he will no doubt get flayed for it by the higher ed establishment, who will publically deny it like so many naked emperors, Mr. Romney’s outline is refreshingly straightforward in identifying the root problem:

Governor Romney realizes that more spending will not solve the problem of tuition increases – to the contrary, it has helped fuel the problem. When Washington puts more money into student aid programs to help families and individuals pay for higher education, colleges and universities raise tuition rates.

So what grade does Mr. Romney get on education, at least from this initial outline? About a 30 percent for K‑12, and a 90 percent for higher ed. That works out to 60 percent — a woeful D‑minus — but that’s probably a tad bit better than most presidents would have gotten since the 1960s.

Over the years, I’ve strenuously objected to schemes that would enable international bureaucracies to levy taxes. That’s why I’ve criticized “direct funding” proposals, most of which seem to emanate from the United Nations.

• A scheme to let the United Nations tax services such as air travel.
• A proposal, pushed by George Soros and other statists, for U.N. taxes on things such as energy use.
• And, of course, the favorite of the big-government crowd, a global tax on financial transactions.

Interestingly, the American left is somewhat divided on these schemes. House Democrats have expressed sympathy for global taxes, but the Obama administration has come out against at least certain worldwide tax proposals.

Unfortunately, proponents of global taxes are like the Energizer Bunny of big government, relentlessly pushing a statist agenda. If the world economy is growing, it’s time for a global tax. If the world economy is stagnant, it’s time for a global tax. If it’s hot outside or cold outside, it’s time for a global tax (since “global warming” is one of the justifications for global taxation, I’m not joking).

Given this ongoing threat, I’m glad that Brian Garst of the Center for Freedom and Prosperity has put together a two-page Libertas explaining why international bureaucracies should not get taxing powers or direct funding.

…it would be imprudent to give international bureaucracies an independent source of revenue. Not only would this augment the already considerable risk of imprudent budgetary practices, it would exacerbate the pro-statism bias in these organizations. …The issue of taxing powers and direct funding has become an important issue because international organizations are challenging the contribution model and pushing for independent sources of revenue. The United Nations has been particularly aggressive in pushing for global taxes, seeking to expand its budget with levies on everything from carbon to financial transactions.

He then highlights one of the most dangerous proposals, a scheme by the World Health Organization to impose a “Solidarity Tobacco Contribution.”

Another subsidiary of the United Nations, the World Health Organization (WHO), is also looking to self-fund through global taxes. The WHO in 2010 publicly considered asking for global consumer taxes on internet activity, online bill paying, or the always popular financial transaction tax. Currently the WHO is pushing for increased excise taxes on cigarettes, but with an important condition that they get a slice of the added revenue. The so-called Solidarity Tobacco Contribution would provide billions of dollars to the WHO, but with no ability for taxpayers or national governments to monitor how the money is spent.

I have to give the left credit. They understand that few people are willing to defend tobacco, so proposing a global tax on cigarettes sounds noble, even though the real goal is to give the WHO a permanent stream of revenue.

Brian explains, though, why any global tax would be a mistake.

What all of these proposals have in common – in addition to their obvious intended use in promoting statist policies – is that they would erode the influence of national governments, reduce international accountability, promote waste, and undermine individual sovereignty and liberty. …Before long, international organizations will begin proposing – no doubt in the name of efficiency or reducing the burden on nation states – that affected taxpayers withhold and transfer taxes directly to the international body. This would effectively mean the end of the Westphalian system of sovereign nation states, and would result in a slew of new statist policies, and increased waste and corruption, as bureaucrats make use of their greater freedom to act without political constraint.

He concludes by noting that a global tobacco tax would be the proverbial camel’s nose under the tent. Once the statists succeed in imposing the first global tax, it will simply be a matter of time before additional levies are imposed.

National governments should not be fooled. Any sort of taxing power or direct funding for international bureaucracies would undermine national sovereignty. More importantly, it will further weaken the ability of people to influence and control the policies to which they are subjected. Moreover, once the first global tax is imposed, the floodgates will be opened for similar proposals.

The point about fiscal sovereignty is also important. Not because national governments are keen to adopt good policy, but because nations at least have to compete against each other.

Over the years, tax competition among governments has led to lower tax rates on personal and corporate income, as well as reductions in the double taxation of income that is saved and invested.

Politicians don’t like being pressured to lower tax rates, which is why international bureaucracies such as the Organization for Economic Cooperation and Development, acting on behalf of Europe’s welfare states, are pushing to undermine tax competition. But so long as there’s fiscal sovereignty, governments will have a hard time imposing confiscatory tax burdens.

Any form of global taxation, however, cripples this liberalizing process since taxpayers would have no safe havens.

Susan Stamberg reports on Martha Gellhorn, “one of the first great female war correspondents,” whose marriage to Ernest Hemingway is being dramatized by HBO next week. Gellhorn had a healthy skepticism toward power:

In 1983, a British TV interviewer posed this loaded question to Gellhorn, then 75 and still gorgeous: “I.F. Stone once described governments as comprised entirely of liars and nothing they say should ever be believed.”

The response was a typical no-holds-barred Gellhorn opinion: “Quite right. And Tolstoy once said governments are a collection of men who do violence to the rest of us. Between Izzy Stone and Tolstoy, you’ve got it about right.”

The title of this post is of course a chapter title from Hayek’s The Road to Serfdom.

Here’s a poor, unsuccessful letter I sent to the editor of the Washington Post:

“GOP stalls on insurance marketplaces” [May 12] reports that “the conservative firm Leavitt Partners…is working with a number of states on their plans” to create the government bureaucracies that the new health care law calls insurance “exchanges.”

The article should have informed readers that this “conservative firm” (whatever that means) is a for-profit government contractor that makes money by helping states create those exchanges, and is acting against the advice of the nation’s leading conservative think tank. The Heritage Foundation counsels states not to create exchanges, and to send all related funds back to Washington.

Finally, the article claims states can avoid a “federal takeover” by creating an exchange. On the contrary, the law requires state-run exchanges to obey all federal edicts, just as a federal exchange would. The federal takeover has already happened. States that create their own exchanges merely pay for the privilege of losing their sovereignty.