Chronicle of the Conspiracy
Friday, November 16, 2007KUDLOW REPLAY Here's the YouTube video, in which I am forced to remind Michael Metz that it's not "generosity" or "compassion" if you force me to give my money to charity at the point of your gun.
Posted by Donald L. Luskin at 10:47 AM | link
FAILURE IS AN OPTION The Wall Street Journal editorial page savors the humbling of Eliot Spitzer, now with a Bush-league approval rating among his voters, no longer the "crusading" attorney general, but an unpopular governor dogged by failed initiatives and a widening ethics scandal:
The only real difference between Mr. Spitzer now and then is that as Governor he is obliged to govern, as opposed to merely bringing charges amid a PR offensive and then settling before having to prove anything in court. His heavy-handed approach to the drivers license plan shows the limits of such behavior in a job where he actually has to persuade people.
Posted by Donald L. Luskin at 9:22 AM | link
Thursday, November 15, 2007GIVE ONE GET ONE This is just so cool. Our old friend Nicholas Negroponte does it again!
Posted by Donald L. Luskin at 2:23 PM | link
THE MYSTERIOUS EAST And don't expect macroeconomic statistics to make it any less mysterious. Here are some massive downward revisions to previous estimates of the size of China's economy. This should make the US protectionists happy, to learn that the world's most populous nation is poorer than was previously thought.
In a little-noticed mid-summer announcement, the Asian Development Bank presented official survey results indicating China's economy is smaller and poorer than established estimates say. The announcement cited the first authoritative measure of China's size using purchasing power parity methods. The results tell us that when the World Bank announces its expected PPP data revisions later this year, China's economy will turn out to be 40 per cent smaller than previously stated...Hmmmm. Kind of shakes your faith in macroeconomic stats, doesn't it? And in the IMF, too. Thanks to our monetary affairs correspondent "Irrational Exuberance" for the link.
Posted by Donald L. Luskin at 12:06 PM | link
WHOSE PAYING WHOM FOR WHAT IN THE BATTLE OF THE AMT? My DC-insider pal "Mick Danger" has another despatch from the AMT wars:
Gotta read this to believe it. Congressman Peter Welch (D-VT), who is pushing for big and immediate tax increases on private equity and hedge funds, asserts that opponents among his colleagues are swayed by campaign contributions. From Congress Daily [no link available]:...Welch said opposition to the proposal shows the industry is spreading campaign contributions around.Oh, my! But, if that’s so, why do the principals at the leading private equity and hedge funds send 70% of their campaign contributions to Democrats even as nearly all of them support the tax increases? The more truthful but still distressing answer is that a) those private equity and hedge funds guys are Democrats and B) most political money goes to those in power, motivated by the need to build relationships, hold down animosity, and gain access. Not to “buy votes” as is so often alleged. Mr. Welch must think his fingers only point to Republicans or that private equity and hedge funds have made themselves invulnerable.
Posted by Donald L. Luskin at 11:36 AM | link
Wednesday, November 14, 2007OUR "VOLUNTARY" TAX CODE My op-ed from the Wall Street Journal this morning, with links to sources:
Should we stop worrying and learn to love the "mother of all tax reform plans" put forward by House Ways and Means Committee Chairman Charles Rangel of New York?
The bill would raise taxes by $3.5 trillion over the coming decade, according to Louisiana Republican Rep. James McCrery, a committee colleague of Mr. Rangel's, making it the largest tax increase in history. There has been so much concern that such a tax increase would hurt financial incentives that drive economic growth that House Speaker Nancy Pelosi distanced herself from Mr. Rangel's plan almost as soon as he announced it.
But fear not. As Mr. Rangel wrote on this page two weeks ago, his bill would "restore a sense of equity and fairness that is critical to the success of our voluntary tax system." That's right, he called our tax system "voluntary." That means we don't have to worry about the incentive effects, since we won't actually have to pay any of that $3.5 trillion -- unless we want to.
So when April 15 comes around, I encourage you to be like Herman Melville's Bartleby and say: "I prefer not to." But wait. By April 15 you'll already have paid, since taxes are involuntarily withheld from your paycheck. Nothing can be done about that, even if you don't volunteer to file a tax return. And if you don't file a return, you'll find yourself involuntarily in jail.
You'll then have to yield to the opinion that Mr. Rangel wasn't being entirely straightforward in writing that our tax system is voluntary. But then, he wasn't being entirely straightforward in writing that his bill, which would further raise taxes on the "rich" who already pay the great majority of federal taxes, has anything to do with equity and fairness.
Perhaps from Mr. Rangel's perspective, our tax system is indeed voluntary. After all, he chooses who pays taxes, how much they pay and how their money gets spent. If he wants to raise our taxes to support a $2 million earmark to create a Charles B. Rangel Center for Public Service at the City College of New York, he can volunteer to do that -- but the rest of us have no such choice.
To be fair, our tax system is indeed voluntary in certain respects. For example, wealthy liberals like Warren Buffett, who call publicly for higher taxes on the rich in the name of fairness, can volunteer to pay more themselves any time they wish to do so. All Mr. Buffett has to do is send a check to Department G -- that's G for "gift" -- at the Bureau of the Public Debt in Parkersburg, W.Va.
Why not try an experiment in which the tax system is made truly voluntary? Already 42 states (as well as the District of Columbia and Puerto Rico) raise revenues with lotteries, through which citizens voluntarily paid $57 billion last year. It's a long and noble tradition. Before the birth of Christ, the Han Dynasty ran lotteries to raise the revenues used to build the Great Wall of China.
Government could be entirely financed by voluntary taxation. Yes, the government would have to be small enough to make do, and citizens would have to be sufficiently public-minded about it. But all 13 original American colonies ran lotteries, and playing them was considered a civic duty. Proceeds from lotteries established Harvard, Yale, Columbia, Dartmouth, Princeton, and William and Mary -- and paid for the cannons that defeated England in the Revolutionary War.
But today, Mr. Rangel might find that the volunteerism in today's tax system is a dangerous thing. His bill would raise the tax rate on capital gains income, but the cap-gains tax is voluntary to the extent that one doesn't have to pay it until one chooses to sell an appreciated asset. That fact is not lost on Mr. Buffett, who believes the rich should pay more taxes, but who has never volunteered to sell even one share of his vast holdings in Berkshire Hathaway -- and thus has never volunteered to pay any cap-gains taxes.
What if every investor did that? It's nice to imagine a nation of long-term investors just like Mr. Buffett. But if stockholders never sold any of their investments, the economy, incomes and job creation would slow to a crawl because a growing economy depends on capital moving freely and continuously to its perceived highest and best use.
Mr. Rangel should also bear in mind that taxes on labor income are voluntary in the sense that one can choose not to pay them by choosing not to earn any labor income -- that is, by not working. All the rich need to do in order to make true Mr. Rangel's characterization of our tax system is to retire to their yachts, rather than continue to contribute to the economy by running hedge funds or doing private equity deals.
When that happens, Mr. Rangel will get a lesson in supply-side economics he'll never forget. Some say that the Laffer Curve is wrong, and that tax cuts don't result in higher tax revenues. But when America's most productive workers stop working -- even a little bit -- in reaction to the incentive effects of the "mother of all tax reform plans," they'll see that the Laffer Curve was right after all, and that it can cut both ways. Involuntary tax hikes result in voluntarily lower tax revenues.
Update... Reader John Grosberg tells us,
Your last point, that "Mr. Rangel will get a lesson in supply-side economics he'll never forget" is, as you know, the theme of Atlas Shrugged. I interpret Ayn Rand's idea of a "strike of the men of the mind" led by John Galt as a dramatization of the "automatic" effects of increasing interventionism. In other words, in the real world, "John Galt" is a personalization the "invisible hand" of negative incentives that, wholly without any mastermind, leads the men of the mind to withdraw their contributions from society. There need be no actual John Galt to lead the strike. If the strike needed an instigator, it would be Charlie Rangel, since he's the one pushing for the negative incentives.Update 2... Our old partner-in-crime Chris Hynes takes it one step further:
Right on, and lots of fun. An interesting point--with the top 1% of Americans paying 40% of the taxes, we actually do have more power than we think.
Posted by Donald L. Luskin at 1:33 AM | link
Tuesday, November 13, 2007THE ONCE AND FUTURE RENT-SEEKER Al Gore wins a prize bigger than the Nobel -- a partnership with Kleiner Perkins, the pre-eminent Silicon Valley venture capital firm. This is payola, pure and simple. Kleiner principals used Gore, when he was vice president, to promote the Clinton administration's antitrust campaign against Microsoft -- the key rival of several Kleiner-backed companies. And it's more of the same rent-seeking, too. Now Gore can help Kleiner lobby the Democratic congress to subsidize the useless "green" technologies of its portfolio companies.
Update... What still really rankles, though, is that Nobel Peace Prize. Here's Gregg Easterbrook:
Gore spent eight years in the White House, and in that time took no meaningful action regarding greenhouse gases. The Clinton-Gore administration did not raise fuel economy standards for cars and trucks or propose domestic carbon trading. Though Clinton and Gore made a great show of praising the Kyoto Protocol, they refused even to submit the treaty to the Senate for consideration, let alone push for ratification. During his 2000 run for the presidency, Gore said little about climate change or binding global-warming reforms. In the White House and during his presidential campaign, Gore advocated no consequential action regarding greenhouse gases; then, there was a political cost attached. Once Gore was out of power and global-warming proposals no longer carried a political cost -- indeed, could be used for self-promotion -- suddenly Gore discovered his intense desire to demand that other leaders do what he had not! It is a triumph of postmodernism that Gore won the Nobel Peace Prize for no specific accomplishment other than making a movie of self-praise. Gore caused no peace nor led any reconciliation of belligerent parties nor performed any service to the dispossessed, the achievements the Peace Prize was created to honor.Thanks to Richard Strype for the link.
Update 2 [11/14/2007]...An anonymous reader "Buddy" notes the New York Times' less than fully honest coverage of the Kleiner partnership:Here's another update on the Gore/Kleiner Perkins news.
The Times article on the Gore/Kleiner news included this line (right up front, paragraph 5):Mr. Gore said he would donate his salary from the venture to the Alliance for Climate Protection, a nonprofit policy foundation.Sounds altruistic, right? But the information is based on this line from the Kleiner press release:Mr. Gore also announced that as part of the agreement between the two firms, 100 percent of his salary as a Partner at KPCB will be donated directly to the Alliance for Climate Protection—the non-partisan foundation he chairs that focuses on accelerating policy solutions to the climate crisis.His salary isn't going to some unrelated non-profit -- it's going to his own organization. Now why do you think the Times would choose to leave out that piece of information?
Posted by Donald L. Luskin at 11:15 PM | link
NO WONDER No wonder American manufacturers want to move their plants overseas. No wonder the American unions spend so much time on politics. Does anyone in this country want to work anymore?
Starting Jan. 1, a simple doctor's note won't get an absence excused. Instead, workers will need more detailed proof they couldn't make it to work, such as a prescription slip or test results from the doctor. Workers face punishments ranging from a verbal warning to getting fired if they rack up too many unexcused absences.Thanks to Chris Janutol for the link.
Posted by Donald L. Luskin at 12:08 PM | link
OKAY, HERE'S WHAT I'D CUT Now wouldn't this fellow make a good House majority leader? My DC-insider pal "Mick Danger" points to this letter to the editor of the Washington Post from John Boehner:
The Nov. 8 editorial “No Pay, No Patch” asked what I would cut from the federal budget in place of an irresponsible tax increase to finance an alternative minimum tax (AMT) “patch.” Here are some examples to start, all of which were recently approved by Congress:
Posted by Donald L. Luskin at 8:59 AM | link
REFORM THE AMT WITH A LITTLE OIL ARB This is one reason why I don't worry about the national debt -- because I know that we have so many national assets underlying it. Here's an idea for cashing in on one of them:
...the U.S. government is sitting on a large reserve of oil, the Strategic Petroleum Reserve (SPR), which now holds about 700 million barrels of oil. This is enough oil to provide about 10% of daily U.S. oil consumption for a year. And if the U.S. government got smart about selling the oil -- a big if -- it would make money for the Treasury and help consumers by bringing oil prices down. Moreover, the government could make even more money, with minimal risk to the economy, by selling the SPR oil altogether.but it would allow the feds to cut some tax that yields $5.6 billion.
Posted by Donald L. Luskin at 8:54 AM | link
THE MYSTERIOUS EAST And those mysterious reporters, like the author of this Bloomberg story, to whom it is more mysterious than it actually is:
TOKYO (Thomson Financial) - Bank of Japan (BoJ) governor Toshihiko Fukui said Tuesday that global and financial markets remain unstable as evident in the volatility in equity and foreign exchange markets as investors continue the process of repricing risk.
Posted by Donald L. Luskin at 8:46 AM | link
Monday, November 12, 2007IMAGINE HOW GOOD IT WOULD BE IF WE WEREN'T IN A RECESSION It's true. Even though America has been in a recession since January 2001 (according to the liberal media), discretionary income is booming. Mike Lion at BizzyBlog has this story:
...from the Conference Board earlier this week -- “Between 2002 and 2006, the percentage of U.S. households with discretionary income increased from 52.1 percent (57 million households) to 63.5 percent (73 million households).”
Posted by Donald L. Luskin at 11:12 AM | link
SIZE MATTERS For all the talk about the supposedly shrinking US economy (the last two quarters actually showed excellent growth), sometimes it's hard to get a perspective on just how vast our economy actually is. This map should help.
Standing alone as a country, California would be the eighth-largest economy in the world and approximately the size of France. Texas' economy is half the size of California's and its GSP compares to that of Canada. Florida's GSP is approximately the size of Asian tiger South Korea. Illinois' economy is approximately the size of Mexico. Ohio's economy is roughly the size of Australia's. Tennessee's GSP is the size of Saudi Arabia; Nevada, the size of Ireland; Alabama's economy is the size of Iran. Bill Clinton's home state of Arkansas, one of the poorest states in the United States, is approximately the size of Pakistan's economy.Thanks to Grover Norquist for the link.
Posted by Donald L. Luskin at 9:11 AM | link
"THE GREATEST SCAM IN HISTORY" Never mind that John Coleman is the founder of The Weather Channel. There mere fact that he opposes belief in global warming means he's not fit to hold an opinion. But here it is anyway:
It is the greatest scam in history. I am amazed, appalled and highly offended by it...Thanks to Dave Duval.
Posted by Donald L. Luskin at 12:26 AM | link
KRUGMAN UNDERMINES RUBINOMICS There was a time when Paul Krugman would not say a bad word about Democrats. Any Democrat. Ever. Now Krugman is so confident -- over-confident, I hope -- in the ascendancy of the Democratic party that he feels free to disagree regularly. Here he attacks Barack Obama. And here he takes on no less a personage than Robert Rubin, whom he formerly always described as the "legendary Treasury secretary." In essence, he is challenging the very underpinnings of "Rubinomics," saying it is based on a "fallacy." He's right, for a change.
...it is naive to imagine that changes in the government’s financial balance can translate directly into changes in physical trade flows, without working through a mechanism such as the exchange rate.
Posted by Donald L. Luskin at 12:26 AM | link