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Friday, January 27, 2006

POLITICIAN, HEAL THYSELF   A Senate staffer friend (who has asked for anonymity), remarks on the reaction to yesterday's CBO Budget and Economic Outlook:
The Congressional Budget Office estimated today that the real federal budget deficit this year – including money stolen from Social Security – will rise to $518 billion, or more than $1,700 per person in America. Some lawmakers are using the new data to justify continued excesses in earmarking. They make the argument that we should not focus on earmarks or pork projects because unfunded entitlements are bigger. But that is a fallacious argument (oddly enough, opponents of Social Security reform used the same type of argument: since Social Security is smaller than Medicare, we shouldn’t worry about Social Security right now).

The complete inability to control earmarking is symptomatic of a larger problem: an inability to make the hard choices necessary to fix our country’s finances. If a doctor was incapable of treating a broken bone, would you trust that doctor to save you from a heart attack?

If Congress doesn’t have the courage to eliminate a bridge to nowhere that affects all of 50 people on an island in Alaska, how can it be expected to reform entitlement programs like Medicare and Social Security that directly impact the lives of tens of millions of people?


Posted by Donald L. Luskin at 1:07 PM | link   

ALWAYS HYPOCRISY, ALWAYS   Why is this story about Hillary Clinton not evidence of the revolving-door corruption of influence peddlars who alternate between the corporate and governmental spheres? From Newsday:
Sen. Hillary Rodham Clinton wants Wal-Mart to contribute to health insurance for its employees - but can't recall if she pushed for worker benefits during six years as a paid board member for the nation's largest retailer.

"Cities and states are saying we can't keep holding the bag here," Clinton said yesterday, praising a new Maryland law requiring Wal-Mart to spend at least 8 percent of payroll on health benefits or contribute to insurance plans for the poor...

Asked if she had advocated better benefits while serving as a board member with Arkansas-based Wal-Mart from 1986 to 1991, Clinton replied, "Well, you know, I, that was a long time ago ... have to remember," adding that "obviously I believe every company should" contribute to benefit plans.

Thanks to reader Jill Olson for the link.

Posted by Donald L. Luskin at 12:57 PM | link   

"I'VE HAD SOME STUDIES CARRIED OUT ON THIS BY THE BLAND CORPORATION..."   It's been a while since we've heard from our old ally David Hogberg. Here he is on the American Spectator with a nice little column refuting some of Paul Krugman's lies about health care. A choice bit:
Health savings accounts (HSAs) would seem to be the ideal vehicle for doing this. They enable the individual to decide whether to pay for the podiatrist. Since the individual is spending his own money, he has an incentive to be careful with what his doctor prescribes.

However, according to Krugman, individuals just can't be trusted with such decisions:

...it's neither fair not realistic to expect ordinary citizens to have enough medical expertise to make life-or-death decisions about their own treatment. A well-known experiment with alternative health schemes, carried out by the RAND Corporation, found that when individuals pay a higher share of medical costs out of pocket, they cut back on necessary as well as unnecessary health spending.
Few reports on health care are more exaggerated than the RAND experiment. What the RAND report actually found was that cost sharing only had adverse affects on managing blood pressure, dental care, and eye care. Other than that, it found no "deleterious health effects." That's hardly evidence that ordinary citizens cannot make "life-or-death decisions about their own treatment."

Posted by Donald L. Luskin at 12:52 PM | link   

WOW... MAYBE WE SHOULD INVADE FRANCE   Check this out -- Iraq currently has the fastest GDP growth in the world. Thanks to reader Alan Scanio for the link.

Posted by Donald L. Luskin at 12:49 PM | link   

IT REALLY MUST BE A CONSPIRACY   The mainstream media has conveniently suppressed the fact that a major new poll shows that "a majority of Americans (51%) said that they 'definitely won’t' vote for Hillary Clinton for President in 2008." Thanks to reader Jameson Campaigne for the link.

Posted by Donald L. Luskin at 11:57 AM | link   

JOKE OF THE DAY  

Posted by Donald L. Luskin at 10:29 AM | link   

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CBO'S REPORT CARD ON SUPPLY-SIDE THEORY  
Yesterday the Congressional Budget Office released its annual Budget and Economic Outlook, and buried in one of its nearly impenetrable tables of numbers is a remarkable story that has gone entirely unreported by the mainstream media -- the 2003 tax cut on capital gains has entirely paid for itself. More than paid for itself. Way more.

To appreciate this story, we have to go back in time to January 2003, before the tax cut was enacted. Table 3-5 on page 60 in CBO's Budget and Economic Outlook published then estimated that capital gains tax liabilities would be $60 billion in 2004 and $65 billion in 2005, for a two-year total of $125 billion.

Now let's move forward a year, to January 2004, after the capital gains tax cut had been enacted. Table 4-4 on page 82 in CBO's Budget and Economic Outlook published then shows that the estimates for capital gains tax liabilities had been lowered to $46 billion in 2004 and $52 billion in 2005, for a two-year total of $98 billion. Compare the original $125 billion total to the new $98 billion total, and we can infer that CBO was forecasting that the tax cut would cost the government $27 billion in revenues.

Those are the estimates. Now let's see how things really turned out. Take a look at table 4-4 on page 92 of the Budget and Economic Outlook released yesterday. You'll see that actual liabilities from capital gains taxes were $71 billion in 2004, and $80 billion in 2005, for a two-year total of $151 billion. Instead of costing the government $27 billion in revenues, the tax cuts earned the government $26 billion extra.

CBO's estimate of the "cost" of the tax cut was virtually 180 degrees wrong. The Laffer Curve lives!

This straight-A report card on supply-side tax-cutting was noted yesterday by Daniel Clifton of the American Shareholders Association -- who predicted that exactly this would happen when the tax cuts were first enacted. Clifton wrote on his blog,

...a capital gains tax cut spurs the growth of new businesses, increases the wage of workers, enhances consumer purchasing power, and grows the economy at large, resulting in more overall gains to be taxed. When capital is taxed at a lower rate, any revenue losses are offset because there is more overall capital being produced, and thus more total revenue being generated.

Using the same kind of analysis, we can see that attempts to raise tax revenues by raising tax rates simply doesn't work. Consider the massive increase in personal income tax rates imposed by President Clinton and a Democratic congress in 1993. Compare actual total tax revenues for the four years from 1993 to 1996 to what had been estimated by CBO in 1992 before the tax hikes took effect. Despite increasing the top tax rate on incomes by 16 to 28 per cent, actual revenues only beat the 1992 estimate by less than 1 per cent.

So what led to the gusher of tax revenues in the late 1990s that helped to put the federal budget into surplus? Simple -- it was the capital gains tax cut engineered by a Republican congress in 1997. Compare actual total tax revenues for the three years from 1997 to 1999 to what had been previously estimated by CBO in January 1997. Despite cutting the capital gains tax rate by 28 per cent, actual total revenues beat the 1997 estimate by more than 11 per cent.

These are the numbers. They don't lie. It's the Left that lies --as former Clinton Treasury Secretary Robert Rubin did this week in an op-ed in the Wall Street Journal, when he said:

The proponents of supply-side theory who assert that tax cuts will wholly -- or even significantly -- pay for themselves (through increased growth and federal tax revenues), appear to be no more accurate now than they were in the '90s.

The numbers show that supply-side theory is accurate now, and it was accurate in the '90s. With yesterday's evidence from the CBO, as Daniel Clifton says, "It's time to make the capital gains and dividend tax cuts permanent. Congress has no excuse at this point."

Posted by Donald L. Luskin at 5:03 AM | link   


Wednesday, January 25, 2006

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RUBIN'S REVISIONOMICS  
You really have to hand it to the Wall Street Journal editorial page for being fair and balanced, having given Clinton Treasury Secretary Robert Rubin more than 2000 words yesteday to expound on the liberal economic agenda (one simply cannot imagine such a gesture coming from the New York Times). It's all dressed up in dramatic language about America's "sense of mission," but it's just the same old stuff -- higher taxes and more government control of the economy. And, of course, it's supported by the usual revisionist history. Here's a passage about the purported fallacy of supply-side economics, and the virtues of higher taxes:
The proponents of supply-side theory who assert that tax cuts will wholly -- or even significantly -- pay for themselves (through increased growth and federal tax revenues), appear to be no more accurate now than they were in the '90s. Then, they argued that tax increases included in our plan to address fiscal deficits were likely to lead to massive job loss, but what followed instead was the longest economic expansion in our history.
It's a lie to say that the expansion "followed" the Clinton tax increases. The expansion began in March 1991 -- and Clinton didn't even take office until almost two years later (and his tax hikes weren't implemented until several months after that). And let's set aside Rubin's straw-man about what supply-siders supposedly said about jobs. Let's look at tax revenues, which is what supply-side theory is really about. You'll see the supply-siders were dead right about the revenue effects of those tax hikes. As supply-side theory would predict, they resulted in virtually no greater tax revenues than had been expected before the hikes were conceived and enacted -- they were thus a deadweight loss to the economy. The chart below shows the difference in actual revenues versus Congressional Budget Office forecasts in 1992. As you can see, from 1993 (the first year of the Clinton tax hike) to 1996 the increase in revenue is somewhere between negative and negligable -- the increased revenues Clinton hoped for from his tax hike simply did not materialize. The positive surprise versus expectations started in 1997 and the years after. What happened in 1997? A Republican congress cut the capital gains tax. So it all went just perfectly according to supply-side theory.

And no, the unexpected revenues in the late 1990s weren't just the product of long-term forecast error. The chart below shows the difference between actual revenues and those expected by the CBO in 1996 -- when the 1993 tax hike was already known and in force, but the coming 1997 capital gains tax cut still wasn't anticipated. The variances are even greater -- in favor of supply-side theory.

Update... Here's a take on Rubin from our friends at Pundit Review.

Posted by Donald L. Luskin at 10:43 AM | link   

ONE WAY TO SOLVE THE PROBLEM OF OVERCROWDED SCHOOLS   Mark Steyn continues to show how "the population bomb" is exploding in reverse, as the Western world faces a sharp deceleration in the generation of its most important asset -- people.
...consider the following headline from the Scotsman the other week: "Teaching jobs in doubt as pensioners set to outnumber pupils by 2009."

This was a story by Peter MacMahon, the paper's "Scottish Government Editor", and it begins thus: "Scotland's demographic time bomb will explode in three years, when the number of pensioners north of the Border overtakes the number of children in school, the Executive has been warned."

Seems straightforward enough: the country's demographic death spiral is accelerating faster than expected. And, as far as the Scotsman is concerned, the alarming thing about this development is that it could put cushy state teaching jobs "in doubt".

For crying out loud, man, get a grip. It puts every job "in doubt". It puts the continued existence of your country "in doubt".

Thanks to friend James Crystal for the link.

Posted by Donald L. Luskin at 9:12 AM | link   


Tuesday, January 24, 2006

ECONOMICS TERM OF THE DAY   From reader Josh Hendrickson:
In November the New York Times announced that it had attracted approximately 135,000 subscribers to its TimesSelect service. Now, two months later it is proud to announce that it has a total of 156,000 subscribers:
Times spokeswoman Diane McNulty called the latest data a positive sign. "It is a little bit ahead of what we thought [would happen by now]."
So TimesSeleect has gained 10,000 subscribers per month after attracting over 100,000 in the first two? What is there to be proud of? We economists call these results "diminishing returns."

Ah, wait, she continues:

"People who try it seem to like it."
Obviously liberals are the only people trying it.

Posted by Donald L. Luskin at 11:15 PM | link   

SPAM FROM THE LEFT   An e-mail come-on from The New Republic in my inbox today:
You may want clear opinions from The New Republic or from any magazine of political commentary. But you certainly don't want predictable opinions or simple opinions, which, alas, is what you get from The Nation and the National Review, The Weekly Standard or The American Prospect. Why, I bet that you could write their articles in advance. No challenge, no mystery, no surprise, no puzzling through of argument. Not like The New Republic. Subscribe today for as little as $9.97 to read all of our unconventional wisdom.

In this week's issue, we say "NO" to Samuel Alito--in two articles actually.

And what, exactly is "unpredictable" about that? That there weren't three articles?

Posted by Donald L. Luskin at 6:19 PM | link   

HERE'S ONE WAY TO AVOID CENSORSHIP: BECOME A POLITICIAN!   From the Wall Street Journal Politcal Diary email service:
Canada's election featured one big surprise in Quebec. In a move akin to a U.S. Congressional district electing Rush Limbaugh or even a toned-down version of Howard Stern, voters in the Quebec City area elected shock-talk radio host Andre Arthur to parliament yesterday as an independent.

Mr. Arthur, 62, is despised by Quebec politicians for the coarse language and insults he directs towards them. But his huge ratings over the years demonstrate that he strikes a chord with many an average Jacques in the province. His campaign for parliament continued his tradition of blunt talk. "The voters of this country know they are run by crooks in both parties," he would say. He called members of the separatist Bloc Quebecois "dynamiters" for trying to blow up the country.

Mr. Arthur believes he will have a strong voice in parliament as the lone independent because reporters will know he is speaking his mind rather than from talking points put out by a party leadership. One of his crusades is likely to be Canada's broadcasting laws, which are far more restrictive than in the U.S. A few years ago, Mr. Arthur was working at Quebec City's CHOI-FM when the national government actually yanked the station's license because of the blistering way he and other hosts criticized politicians and Canada's diversity policies. At least whatever Mr. Arthur chooses to say now in parliament will be protected speech.


Posted by Donald L. Luskin at 1:49 PM | link   

HERE'S A NEW TWIST   The Ace of Spades has identified what must surely be the height of anti-Wal-Mart hysteria.
They've tried everything else, why not this one?:
Concerns also have been raised about noise and light pollution [from a proposed and challenged new Wal-Mart Super Store], including a much-discussed claim by Washington State University Professor James Krueger on Jan. 13 that light pollution could cause Pullman men to become impotent. He based the claim on research involving deer.
Well, there's your problem with this study right there. The research involved deer. Of course this research showed male impotency. Who the hell wants to [****] a deer? I mean, yeah, okay, I'll admit it, I had a crush on Bambi's girlfriend Felina as a kid (almost as big as a crush as I had on the Zsa Zsa Gabor mouse from The Rescuers), but I'm older now, and I just don't find animals arousing anymore.
Thanks to reader Jill Olson for the link.

Posted by Donald L. Luskin at 11:27 AM | link   

BYE BYE BAYOSPHERE   Bayosphere -- an attempt at so called "citizen journalism" on the web in Northern California -- is about to fold its doors, and here's a farewell letter from its founder, Dan Gillmor. There's much soul-searching here about why the venture failed. But there doesn't seem to be any mention of how pointless it is to try to charge money for a site that does little more than link to liberal hate-blogs like the Daily Kos and Brad DeLong. Isn't the whole point of "citizen journalism" to have an honest and diverse exchange of views? Thanks to Chris Masse for the link.

Posted by Donald L. Luskin at 11:20 AM | link   

PROTECT US FROM LOW PRICES!   What do you know. Maryland's Democratic legislature has been so busy passing protectionist laws that it has ended up harming the consumers it intended to protect. One state legislator (a Republican, as chance would have it) is now pointing out that gasoline prices in Maryland would be lower if there weren't a law preventing competition:
As international oil prices flirted with the $70 mark, one Maryland delegate said he has a temporary fix to relieve motorists throughout the state: Allow gas stations to compete.

Del. Warren Miller, R-Howard County, is promoting a measure that would repeal a 2001 laws that ban gasoline price wars in the state.

The law was enacted when gas cost $1.15 a gallon and meant to prevent relative newcomers like Costco Wholesale, Wawa and Safeway from selling gas below cost, undercutting franchise gas stations.

Thanks to reader Alan Scanio for the link.

Posted by Donald L. Luskin at 11:14 AM | link   


Monday, January 23, 2006

A "STANDARD" OF CONVENIENCE   From today's edition of Wall Street Journal Political Diary (no link available):
An analysis by David Boaz of the Cato Institute found that major newspapers used the phrase "shift the court" 36 times in covering the Alito nomination. They referred to changes in the "balance" of the court another 31 times and used the phrase "shift to the right" 18 times.

By way of contrast, not a single major newspaper used any of those phrases when the Senate considered the Ginsburg nomination, though her appointment would clearly change the ideological makeup of the Court. Ms. Ginsburg was a noted liberal, while Justice White had voted in the minority in such key liberal decisions as Roe v. Wade and the Miranda ruling. He also wrote the majority opinion in Bowers v. Hardwick, the 1986 case that upheld the constitutionality of laws against homosexuality in some states. That decision was later overturned in the Lawrence case by a Supreme Court that included Justice Ginsburg. Indeed, the libertarian Institute for Justice has concluded that Justice Ginsburg is the most consistently liberal justice sitting on the Supreme Court today.


Posted by Donald L. Luskin at 1:43 PM | link   

STEELE ON HILLARY'S "PLANTATION"   On matters of race politics, no one ever says it better than Shelby Steele. From this morning's Journal, concerning Hillary Clinton's use of the word "plantation" before a black audience last week:
And even Mrs. Clinton's "offense" would have amounted to very little had it come from nothing more than an awkward metaphor. But, in fact, it came from a corruption in post-'60s liberalism and Democratic politics that profoundly insults blacks. Mrs. Clinton came to Al Sharpton's MLK celebration looking for an easy harvest of black votes. And she knew the drill -- white liberals and Dems whistle for the black vote by pandering to the black sense of grievance. Once positioned as the white champions of this grievance, they actually turn black resentment into white liberal power. Today, Democrats cannot be competitive without this alchemy. So Mrs. Clinton's real insult to blacks -- one far uglier than her plantation metaphor -- is to value them only for their sense of grievance... here, now, is Mrs. Clinton sidling up to the trough of black grievance, eyes wide in expectation, but also a tad contemptuous. It is hard to fully respect one's suckers...

because Republicans cannot easily pander to black grievance, they have no need to value blacks only for their sense of grievance. Unlike Democrats, they can celebrate what is positive and constructive in minority life without losing power. The dilemma for Democrats, liberals and the civil rights establishment is that they become redundant and lose power the instant blacks move beyond grievance and begin to succeed by dint of their own hard work. So they persecute such blacks, attack their credibility as blacks, just as they pander to blacks who define their political relationship to America through grievance. Republicans are generally freer of the political bigotry by which the left either panders to or persecutes black Americans. No one on the current political scene better embodies this Republican advantage than the current secretary of state, Condoleezza Rice.

Thanks to reader Ashby Foote for the link.

Posted by Donald L. Luskin at 1:12 PM | link   

EPSTEIN ON NEWSPAPERS   So much has been written about the demise of print newspapers, the rise of cable news and blogs, and all that jazz. But here the incomparable Joseph Epstein sums it all up with wit, scholarship, humor, context and restraint. Here he talks about the futility of newspaper editorials:
As for the power of the press to shape and even change my mind, I am in the condition of George Santayana, who wrote to his sister in 1915 that he was too old to “be influenced by newspaper argument. When I read them I form perhaps a new opinion of the newspaper but seldom a new opinion on the subject discussed.”

I do subscribe to the New York Times, which I read without a scintilla of glee. I feel I need it, chiefly to discover who in my cultural world has died, or been honored (probably unjustly), or has turned out some new piece of work that I ought to be aware of. I rarely give the daily Times more than a half-hour, if that. I begin with the obituaries. Next, I check the op-ed page, mostly to see if anyone has hit upon a novel way of denigrating President Bush; the answer is invariably no, though they seem never to tire of trying. I glimpse the letters to the editor in hopes of finding someone after my own heart. I almost never read the editorials, following the advice of the journalist Jack Germond who once compared the writing of a newspaper editorial to wetting oneself in a dark-blue serge suit: “It gives you a nice warm feeling, but nobody notices.”


Posted by Donald L. Luskin at 11:52 AM | link   

COMING: THE SARBOX OF LOBBYING   My Washington lawyer/lobbyist friend (who, as always, insist on anonymity) is aghast at the "reform" jihad brewing in the nation's capital:
Today in the Washington Post we have former SEC Chairman Arthur Levitt writing a new revisionist chapter is his book (he should call it: “I am So Pious, You are a Bastard”) holding up Sarbanes-Oxley as a model for reform of how government interacts with business, i.e., lobbying.

Just peachy, except that Sarbanes-Oxley began as an effort to correct certain abuses by a limited number of accountants, but ended up criminalizing internal corporate financial reports to the exclusive benefit of….the accountants (plus, of course, the regulators, the trial lawyers and the anti-capitalist crowd.)

Most of the congressional mail Levitt received was -- as he says -- generated by some special interest. Duh. Those worried about imperial regulators go to petition their grievances before their legislators. The SEC Chairman could, and often did, ignore most of the in-coming mail.

The letters are made public. The Congressman sending it knows that (or should) and factors the sunshine of disclosure into the decision to send it, or not. The underlying problem exposed by Levitt is that “independent” regulatory agencies lust to become independent of the only branch of government, Congress, which was established to represent the people and which created each and every such agency. What if the SEC or the FCC or the FTC could ignore Congress? Think that’s a good idea, then go to Europe where nearly everything is decided by bureaucrats.

Which brings us to the New York Times’s Anne Kornblut’s campaign against golf, and the Post's Jeff Birnbaum’s campaign against fundraising: OK, no more fun for white people in silly pants. And all funds for political offices must come from either George Soros or the public treasury.

This is getting weirder and weirder. All these “reforms” will only enhance my business -- lobbying -- by walling off competitors and raising prices. But such hyper-regulatory rules may make our federal government less knowledgeable and less responsive, as if Members of Congress or regulators left on their own, would be superior. Yes, but only at the cost of making all of us inferior.

Remember, all this is happening because one criminal, Jack Abramoff, got caught and his cronies are next. So…why arrest the innocent?


Posted by Donald L. Luskin at 11:39 AM | link   

ALITO SQUEAKER, NO FILIBUSTER   The Tradesports.com political futures markets are now saying that Sam Alito will be confimed by more than 50 votes in the Senate, but by less than 60. That means that the Democrats will dare to pull a unanimous blockade, but not dare to filibuster. Thanks to Chriss Masse for the link.

In other news, the Tradesports contract on Republican control of the House in the 2006 elections fell into the 60's on Friday, having been in the 70's for many weeks. Hmmm... wonder if that had anything to do with the stock market's big drop?

Posted by Donald L. Luskin at 9:56 AM | link   


Sunday, January 22, 2006

IS THIS BIAS, OR WHAT?   Why wasn't the animal in this image on the cover of the New York Times Magazine today an elephant? Is the message that Democrats have "character" and Republicans don't?


Posted by Donald L. Luskin at 10:13 PM | link   


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