Among the many festering problems in our criminal justice system is the state of the crime labs. Scandal in Seattle reported here. (HT: Arbitrary and Capricious).

Radley Balko exposes some shocking practices in Mississippi here. 

Iceland is known as the Nordic Tiger because of rapid economic growth. Much of the nation’s prosperity is the result of free-market policies, including a 36 percent flat tax on labor income, a 10 percent flat tax on capital income, and a corporate tax rate of just 18 percent (down from 50 percent at the end of the 1980s). But Iceland is not resting on its laurels. The government has just announced a reduction in the corporate tax rate:

The corporate income tax will be cut from 18 per cent to 15 per cent, effective for the 2008 income year and come into force in the 2009 assessment year.

Meanwhile, even though the 25 percent corporate tax rate in Taiwan is already substantially lower than the 39 percent-plus rate in the United States, Taiwanese politicians apparently recognize that globalization and tax competition are powerful arguments for even lower rates. Tax​-news​.com is reporting that the government therefore plans to slash the corporate rate to 17.5 percent — and also make unspecified reductions to personal income tax rates: 

It emerged this week that the Taiwanese cabinet has approved plans to reduce corporate and personal income tax rates, although the proposed changes must still secure parliamentary approval. The cuts would see the business tax rate reduced to 17.5% (from 25%), and the personal income tax rate slashed, according to reports. No timetable has yet been announced for the introduction of the new lower rates, but according to the International Herald Tribune, ministries likely to be affected by the changes have been asked to revise legislation to accommodate the new rates as soon as possible.

When will American politicians hop on the tax-cutting bandwagon?

In a remarkable display of fiscal imperialism, the German government sent spies into Liechtenstein and bribed a bank employee to provide confidential records about German account holders. Unfortunately, this sleazy act of aggression was successful, leading to a series of high-profile raids by German authorities. This has created quite a kerfuffle in Europe, and it should come as no surprise that the bureaucrats at the OECD are using the controversy to push their anti-tax competition agenda. According to a story in the Financial Times:

Pressure grew on Liechtenstein on Tuesday to ease its bank secrecy rules in the wake of a German tax ­scandal centered on the Alpine tax haven. …Angel Gurria, the secretary general of the OECD, said Liechtenstein’s secrecy rules were a “relic of a different time”. …Liechtenstein’s Crown Prince Alois on Tuesday accused Germany of mounting an “attack” on the principality. He condemned as “unacceptable” Berlin’s decision to allow its BND intelligence agency to pay more than €4m ($5.9m, £3.7m) for bank client data allegedly stolen by a former Liechtenstein bank employee. …Jeffrey Owens, the OECD’s chief tax havens expert, said the changes would only make a difference if ­Liechtenstein “were now ready to sign tax information exchange agreements with Germany and other countries.”

This story is troubling on many levels, particularly given Germany’s ugly history of oppression. In the 1930s, Germany had draconian laws to deter citizens from having money outside the country and – like today – it trampled on the sovereignty of its neighbors to get information (see here for more information). Indeed, snooping by the Nazis was the main reason that Switzerland substantially strengthened its privacy laws in the 1930s.

Today’s controversy is motivated by greed for tax revenue rather than anti-Semitism, but the issues are similar. To what extent do nations have the right to compel other jurisdictions to act as deputy enforcers? Most reasonable people understand that there are limits on cooperation between governments. European Union nations, for instance, refuse to cooperate in extradition cases where an American might face the death penalty. Likewise, most nations would never consider helping a totalitarian regime like Saudi Arabia or Iran if it tried to persecute escaped homosexuals.

The tax issue is a bit more challenging because it is easy to demagogue against wealthy people who utilize so-called tax havens (though even OECD officials get a bit squeamish when asked whether financial privacy laws should be totally abolished, since even they recognize that billions of people live in nations that practice some form of religious, political, ethnic, racial, and/​or sexual discrimination – not to mention all the people who live in nations that suffer from economic mismanagement, kidnapping, and/​or monetary instability).

The head of the OECD considers privacy to be a “relic of a different time.” But why should there be a one-size-fits-all policy? Is there really no room in the world for nations that treat people with dignity and respect their privacy? If politicians from high-tax nations and bureaucracies such as the OECD get to decide, the answer is no. But hopefully Liechtenstein will stand firm against Germany’s vicious bullying. After all, so long as over-burdened taxpayers have safe havens, governments face pressure to improve their tax law. And even the Financial Times was forced to acknowledge, in a schizophrenic editorial that endorsed sending spies into low-tax jurisdictions, that bad tax policy bears part of the blame:

Germany’s problem with evasion is partly the fault of its tax system. Although the abolition of wealth tax has improved matters, marginal income and inheritance tax rates for high earners approach 50 per cent. Tough enforcement will never stop evasion if taxes are punitive.

The cover story of this week’s Washington Post Magazine offers a fantastic look at how lobbyists make a living by helping some people take from others. Every citizen should read it. Casual observers of government may be surprised (and nauseated) to see how elaborate, expensive, and disingenuous such efforts have become. (Students of public choice economics will not be.) As author Jeffrey H. Birnbaum notes, it’s usually the wealthy who are trying to do the taking.

The article is about the travel industry trying to force taxpayers to fund the industry’s advertising campaigns. (Birnbaum includes such gems as: “One thing everyone agreed on: The travel industry did not want to pay for the ads itself.”) But the story could have been written about nearly any of the countless lobbying shops littering the D.C. landscape:

The explosion in the size of K Street, the locus of the lobbying industry, is an extension of the growth and reach of government. The ballooning federal budget has its tentacles in every aspect of American life and commerce. No serious industry or interest can function without monitoring, and at least trying to manipulate, Washington’s decision makers. The penalty for ignoring the federal government can run into the billions of dollars. Just ask Microsoft. The software giant was hit with an antitrust lawsuit by the Justice Department in the late 1990s and, in 2001, agreed to alter the way it packaged its computer operating system. Before then, it had mostly ignored the nation’s capital.

Bad mistake. Chastened by its defeat, Microsoft has built a powerhouse presence in Washington, as have scores of other companies and industries. Lobbyists argue that it’s a relatively cheap investment. The Carmen Group, a mid-size lobbying firm, regularly compares its clients’ costs with the benefits it says they receive from lobbying. In its latest internal assessment, Carmen said it collected $15 million in fees from about 70 clients and delivered $1.5 billion in assistance — measured both in benefits received and in burdens avoided — a return ratio of roughly 1 to 100. Most clients still part with their lobbying dollars grudgingly. But they do part with them, which is why new buildings are going up all the time to accommodate the industry’s growth. Want a former senator to guarantee a meeting with a current senator? No problem. Half the senators who leave Congress for the private sector register to lobby. Need to know the history of a tax law and whom best to ask to change it? Easy. At least half a dozen consulting firms are composed of nothing but former congressional tax aides and Treasury Department officials who know as much as, and probably more than, the current people inside.

And why wouldn’t ex-lawmakers and aides gravitate to K Street? Lobbying jobs pay at least twice and sometimes three times government salaries. Serving in government is now viewed by many on Capitol Hill as a steppingstone to a lucrative career in bending government to the whims of paying clients. In many ways, lobbying now mimics the government it targets. It has become a bureaucracy, with its own language, its own peculiar ways of doing business and, most important, its own instinct to survive.

Indeed, the last thing any lobbyist wants is to win everything his or her client is seeking. That would mean an end to a retainer, the closing of the feedbag. Success for a lobbyist is not outright victory but, rather, just enough progress to justify the creation of an elaborate and well-funded lobbying apparatus. Even outright failure can underscore the need to lobby harder.

Lobbying is Washington’s version of a perpetual motion machine. Once it gets revved up, it rarely stops running. In fact, it tends to grow. 

All of which raises this question: why don’t we see more such stories? Whatever the reason, Birnbaum deserves kudos for inspecting this small corner of the sausage factory.

Of course, the solution is not to restrict the people’s ability to lobby Congress. All that sleazy lobbying is nothing more than “petition[ing] the government for a redress of grievances” — a constitutionally protected activity. The solution, conveniently enough, is to respect the rest of the Constitution too. Were the People to do that, those sleazy lobbyists wouldn’t get anywhere.

“I am sick of everyone blaming the breakdown in the credit and housing markets on subprime loans,” says D.C.-area homebuilder Michael Hill in the Washington Post. Subprime mortgages were only a symptom of the real problem, which is unaffordable housing.

But what made American housing unaffordable? Hill is silent on that question, but University of Washington economist Theo Eicher knows the answer: land-use regulation. As reported in the Seattle Times, Eicher has just completed a study showing that land-use planning is adding hundreds of thousands of dollars to the cost of homes in many states.

Eicher’s research confirms my recent Cato policy analysis, The Planning Tax, which shows that growth-management planning has made housing unaffordable in a dozen or so states, particularly Hawaii, California, Florida, Maryland, Oregon, Washington, and most of the New England states. Meanwhile, housing remains pretty affordable in most other states, including the fast-growing states of Georgia, North Carolina, and Texas, because land-use planners have not yet seized power in those states.

In many cities, Eicher’s estimates of the cost of planning are very close to mine. For example, he estimates planning added $200,000 to the cost of a home in Seattle; my estimate was $180,000. For a detailed discussion of the differences between our two studies, see my blog, The Antiplanner.

Research by Harvard economist Edward Glaeser has shown that land-use regulation not only drives up housing prices, it makes them more volatile too — more prone to crashes. It was just such a bubble and subsequent crash in property markets that has laid the Japanese economy low for more than a decade.

Sadly, planning advocates are trying to convince legislatures and city councils in most states that don’t have growth-management planning to pass such legislation and write such plans. Those plans not only deny the American dream of homeownership to low- and moderate-income families, they put the U.S. economy increasingly at risk of a Japanese-style crash.

Sen. Hillary Clinton promises to “reduce the geographic variation in care” provided to Medicare beneficiaries. That’s code for government rationing — i.e., giving seniors in high-spending regions less medical care. That may or may not be a bad thing. For one, it may not affect seniors’ health. But the Congressional Budget Office today released a report that may take the wind out of the sails of many variation-reducers.

Some argue that the driving force behind this variation in medical spending is Medicare’s fee-for-service payment system, which gives doctors an incentive to do more stuff. Some doctors just appear to get carried away by that incentive.

Opponents of fee-for-service payment argue that global budgets and capitation — such as exist in the Veterans’ Health Administration — would reduce unwarranted variation in medical spending by eliminating the financial incentive to over-treat patients.

Enter the CBO report, which states:

It appears … that the centrally budgeted VA system does not display much less geographic variation in spending than is exhibited in the unbudgeted Medicare program .… In addition to exhibiting geographic variation in spending, the VA system shows substantial variation in patterns of clinical practice despite the fact that VA’s management tracks providers’ compliance with national guidelines for the treatment of many medical conditions .… The implication is that local norms can influence practice patterns, even in a relatively centralized system that places a strong institutional emphasis on adherence to clinical guidelines for care.

Egad, could this mean that unwarranted variation would persist even under a single-payer system? Or that government planners can’t control doctors as much as proponents of planning claim?

Perhaps. But it also means that the less-stringent payment reforms that Sen. Clinton proposes — “pay-for-performance” financial incentives that work within Medicare’s fee-for-service payment system — aren’t likely to make a dent in unwarranted variation.

In a previous post, I reported on an article in this week’s New England Journal of Medicine that dispells the myth that, ahem, investing in additional preventive care would save money. I titled the post, “An Ounce of Prevention Is Worth … What?” A snarky colleague emailed to say, essentially, “Duh, it’s worth a pound of cure …”

But that’s just the point: an ounce of prevention is not worth a pound of cure. The authors of that article included this graph, which shows that prevention and cure match up fairly evenly when it comes to cost-effectiveness: 

In other words, it appears that Mr. Franklin over-valued prevention by a factor of 16, and if we want to improve health we would do as well to invest in cure as in prevention.