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Mamblog Section -
Politics
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Written by Alvaro Vargas Llosa
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Tuesday, 21 October 2008 |
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The Conservative Rebellion
October 21, 2008
Alvaro Vargas Llosa
WASHINGTON—A rebellion is beginning to take place among American conservatives, many of them influential commentators who are denouncing the takeover of the Republican Party by a mixture of anti-intellectual populists and political extremists. Novelist Christopher Buckley, the son of the founder of modern American conservatism, has endorsed Barack Obama for president. Columnists Kathleen Parker and Peggy Noonan have questioned John McCain’s judgment in picking Sarah Palin as his running mate. Another columnist, David Brooks, has offered a jeremiad against the Republican Party’s anti-intellectual bent. More poignantly, they all decry what they perceive as a betrayal of conservative principles. Buckley put it succinctly when he wrote that George Bush’s government has brought America “a doubled national debt, ruinous expansion of entitlement programs, bridges to nowhere, poster boy Jack Abramoff and an ill-premised, ill-waged war conducted by politicians of breathtaking arrogance.” Brooks thinks the problem goes beyond the Bush years, stating that “modern conservatism began as a movement of dissident intellectuals” against the liberal domination of the academic world, but “what had been a disdain for liberal intellectuals slipped into a disdain for the educated class as a whole.” Parker is even more forceful: “The well-fed right now cultivates ignorance as a political strategy. ... Years of pandering to the extreme wing ... have created a party no longer attentive to its principles.” We don’t know if these symptoms of dissent will develop into a full-blown rebellion against the Republican establishment. Much will depend on the result of the presidential election. If McCain and Palin lose, the chances of an insurgency taking root within the party itself are significant. The Republican Party has indeed deviated from conservatism as it is understood by those who consider Edmund Burke the founder of the conservative idea, William F. Buckley the intellectual midwife of modern-day American conservatism, and Barry Goldwater the flint that sparked a vast political movement in favor of small government in the United States. This deviation expresses itself in different ways. First, in the confusion between Jeffersonian populism—a salutary mistrust of economic power allied to political power—and class-based populism, which is what Republican leaders promote when they scorn America’s coastal and big-city culture. Second, in the contradiction between a low-tax, low-spend policy and an interventionist foreign policy that, by definition, is costly—as every empire in the history of mankind eventually and painfully found out. Last, in modern-day Puritanism, which started, perhaps understandably, as a reaction against the cultural excesses of the 1960s but ended up turning into what H.L. Mencken described decades earlier as “grounded upon the inferior man’s hatred of the man who is having a better time.” These fundamental deviations from conservatism crystallized in the Bush administration. The result was the biggest growth in government since the presidency of Lyndon Johnson, a loss of international prestige and, in purely political terms, the alienation of millions of people who could have been attracted to the Republican Party had its libertarian roots been preserved in dealing with social issues. Thus, the party that styles itself the champion of individual liberty has come to be seen by many in the United States and around the world as a special-interest group driven by factions and devoid of principle. That many conservatives have finally decided to speak out is encouraging. That they are being vilified is even more encouraging—it means that they may just have a point. After the elections, conservatives will have to do some serious soul-searching and ask themselves a few simple questions: How was it that they let their movement and their party be hijacked by people who were hellbent on disfiguring the face of American conservatism? How was it that the self-styled party of individual liberty became, in the eyes of many, the party of big government, intolerance and jingoism? The recent spats among the various strands of American conservatism are the harbinger of a transcendent fight for the soul of the movement. We don’t yet know who the leaders will be and much less who will emerge victorious. The search for a renewed Republican Party could, as in 1964 and 1980, produce a return to its roots. But this will not be a pretty picture. If the “root” conservatives are going to displace the faction that now controls the movement, they will need to displace some very unpleasant people.
Alvaro Vargas Llosa
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Alvaro Vargas Llosa is Senior Fellow and Director of The Center on Global Prosperity at The Independent Institute. He is a native of Peru and received his B.S.C. in international history from the London School of Economics. His weekly column is syndicated worldwide by the Washington Post Writers Group, and his Independent Institute books include Lessons From the Poor: Triumph of the Entrepreneurial Spirit, The Che Guevara Myth: And the Future of Liberty, and Liberty for Latin America.
Full Biography and Recent Publications
(c) 2008, The Washington Post Writers Group
New from Alvaro Vargas Llosa!
The Che Guevara Myth and the Future of Liberty
Nearly four decades after his death, the legend of Che Guevara has grown worldwide. In this new book, Alvaro Vargas Llosa separates myth from reality and shows that Che’s ideals re-hashed centralized power—long the major source of suffering and misery for the poor. Learn More »» |
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Mamblog Section -
Economics and Financial Services
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Written by Robert Higgs
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Monday, 20 October 2008 |
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A Gigantic Armed Robbery
October 20, 2008
Robert Higgs
Amid the astonishing details of the Fed’s fierce money pumping, the Treasury’s partial nationalization of the banking industry, and the madcap exchange of its legal tender for the banks’ rotten mortgage-backed securities, we may lose sight of the overall character of these actions: they are, in effect, nothing short of a gigantic armed robbery. Any armed robbery, of course, has two sides: on one side is the party who takes property by threatening violence against its legitimate possessor, and on the other side is the party who loses property by yielding to this threat. Such “redistribution of wealth” is bad enough on its face, but in the present case its related aspects render it even more obnoxious. What we have before us now is a systematic redistribution from the prudent and the responsible to the imprudent and the irresponsible. Did you make your mortgage payments in full when they were due? Were you careful to avoid investing in incomprehensible derivatives whose failure might lead to your bankruptcy? Very good, sir: you are therefore entitled to relinquish substantial amounts of your wealth, either directly through ordinary taxation or indirectly through the “inflation tax” and the diffuse effects of “crowding out” in the loanable-funds market, where the government must soon borrow hundreds of billions of dollars more than expected a few months ago. But not to worry, because your injuries are simultaneously the means by which those who failed to act with honesty and due diligence will be rewarded. You see, it all washes out, my dear Keynesians: we owe it to ourselves! (Full disclosure requires admission that the substantial gainers include not only undeserving Americans, but also, among others, Arab sheiks, the Bank of Japan, and the Bank of China, which own huge heaps of “agency debt,” especially the bonds of Fannie Mae and Freddie Mac. You may chalk these foreigners’ financial salvation up to the Bush administration’s own version of the Good Neighbor Policy.) Moralists have much grist for their mill in these events. Economists will worry more about their incentive effects. One thing is certain: the government’s recent actions herald the ascendancy of its commitment to a policy of “too cozy to fail.” Are you from Goldman Sachs? Yes, well, then, here: take these billions. Yes, yes, don’t worry; it’s okay. We’ve got everything covered. Bank of America, here, you take some, too. Citigroup, here’s yours. Wells Fargo, Morgan Stanley, the line forms right here. Come along, my friends, time’s awastin’. And don’t worry about taking something that doesn’t belong to you. The president says “these efforts are designed to directly benefit the American people by stabilizing our overall financial system and helping our economy recover.” How, exactly, will these dishonest enrichments give rise to those happy outcomes? What, as the pharmacologists say, is the mechanism of action? Well, the authorities haven’t spelled that out yet, but if you are a good American, you’ll happily trust them. After all, Henry Paulson and his friends have always proved themselves to be financial geniuses in the past, haven’t they? (Security, get that man out of here. Yes, that one, the one yelping about the parties responsible for this hideously tangled monkey business of mortgage-related securities, derivatives of derivatives, credit-default swaps, collateralized-debt obligations, and off-balance-sheet assets. And keep him out.) Don’t let that troublemaker’s questions disturb you, gentlemen. Those complications are all ancient history now, and this is no time for finger-pointing. It’s imperative that we move on, and we’re simply going to cut through the Gordian knot you tied. We must act decisively before the entire world economy melts down or freezes up. (The Minister of Metaphors will determine which hyperbolic term will be officially adopted for use in our G-7 and G-20 communiqués.) Now, Bank of New York Mellon, JP Morgan Chase, fall in line. You, too, State Street. Step lively, gentlemen, and hold those purses open wide while I pour in the taxpayers’ money. Although many details remain to be worked out, and the architects of the new financial order are drawing (and redrawing) their blueprint as the construction proceeds, the overall logic of the new structure has already become fairly clear. As best we can determine, the administration’s theory is that the economic well-being of Americans, and indeed of people around the world, cannot be achieved without resort to the grandissimo of all grand larcenies. Barbara Bush probably never dreamed what amazing things her rather dim-witted firstborn son would accomplish. By the time that all of these crimes have run their course, George Walker Bush may well have proved himself to be the greatest economic wrecker and looter in the history of the world. Of course, he does not lack for willing hands to pitch in as he rips and tears his way through the fabric of economic life. Hank Paulson, Goldman Sachs, Morgan Stanley, and the rest of the big bankers, like the fabled Tammany Hall boss George Washington Plunkitt, have seen their chances and they took ‘em. At the Fed, Ben Bernanke is snatching new powers for the central bank (and hence for himself) as if there were no tomorrow, and using them just as rashly. Is there a problem? Enormous effusions of new central-bank credit will cure it. Inflation? Don’t worry about that: it won’t show up in full force until the day after tomorrow. Members of Congress also love the new financial regime. Anything that puts more money and power at the government’s disposal means that the solons will have more promises to sell in their future backroom deals. So, in short, everybody who counts is deliriously pleased with the recent turn of events. If they say they’re not happy, it’s only a pose, and for these professional posers and fakers, nothing comes easier than lying, stealing, and cheating. In truth, they are now reveling in their very heaven, as the power elite always is during a crisis, even a crisis as bogus as the present one. The great mass of the people, of course, are somewhat less happy. Many are, as usual, simply bewildered by what’s going on, and frightened by the panic they see on display in the news media. Others, however, are actually angry, because this time they have seen through their rulers’ gossamer rationales, and they realize that they, as well as their children and their grandchildren, are being impoverished in order to pass hundreds of billions of dollars along to the incompetent, dishonest, undeserving, yet politically potent, masters of high finance.
 Robert Higgs
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Robert Higgs is Senior Fellow in Political Economy for The Independent Institute and Editor of the Institute’s quarterly journal The Independent Review. He received his Ph.D. in economics from Johns Hopkins University, and he has taught at the University of Washington, Lafayette College, Seattle University, and the University of Economics, Prague. He has been a visiting scholar at Oxford University and Stanford University, and a fellow for the Hoover Institution and the National Science Foundation. He is the author of many books, including Depression, War, and Cold War.
Full Biography and Recent Publications
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Mamblog Section -
Foreign Policy, Military and War
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Written by Ivan Eland
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Monday, 20 October 2008 |
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Will Transplanting the Strategy in Iraq to Afghanistan Save the Day?
October 20, 2008
Ivan Eland
Both candidates in the U.S. presidential election have bought the questionable argument that the war in Afghanistan needs to be salvaged for the “war on terror” to succeed. On top of that, to accomplish this rescue, they both have called for an Iraq-like surge of U.S. troops into Afghanistan beyond the 8,000 more that President Bush is planning to inject into the country next year. McCain then goes even farther and says, “Senator Obama calls for more troops, but what he doesn't understand, it's got to be a new strategy, the same strategy that he condemned in Iraq, that's going to have to be employed in Afghanistan.” Of course, Obama has never condemned the U.S strategy in Iraq, but has merely correctly stated that the surge was only one of many factors that lowered the violence there. In fact, during 2005, the U.S. had as many troops in Iraq as it did during the 2007/2008 surge and violence increased. So even Obama might be giving too much credit to the higher U.S. troop levels. The reality is that the violence was mainly reduced in Iraq by the separation of warring ethno-sectarian groups due to prior ethnic cleansing and the U.S. negotiating with and paying off its enemies not to fight. If this latter, somewhat embarrassing, strategy is what McCain has in mind for Afghanistan, it may not be as effective there. In Iraq, the U.S. paid off secular Sunni guerrillas, who were fighting mainly because the U.S. occupier had disbanded the Iraq military and threw them out of jobs. In Afghanistan, the Taliban and their Islamist fellow travelers are religious zealots who will not be so easily bribed. After all, in Iraq, the U.S. did not attempt to co-opt the similarly zealous al Qaeda in Iraq using bribery. Afghanistan is also a harder nut to crack than Iraq for other reasons. To succeed, guerrillas need a sanctuary and outside material and financial support. Although the Iranians were providing some support to the Shi’a militias in Iraq, the U.S. pressured Sunni neighbors of Iraq to cut off the provision of support and sanctuary for Iraq’s Sunni insurgents—for the most part the United States’ main adversary. In Afghanistan, the now well-equipped Taliban is likely being supported by the Pakistani intelligence service (ISI), a long-time ally of the group despite billions in U.S. assistance slathered on the Pakistani government. Furthermore, the untamed Pakistani tribal areas provide a sanctuary for the Taliban so that fighters from the group can cross into Afghanistan, attack, and then retreat to the sanctuary. U.S. air strikes and occasional incursions on the ground into Pakistan to target these Taliban sanctuaries have been limited because of their unpopularity with the Pakistani population, which puts pressure on the Pakistani government to protest to the U.S. loudly. The Taliban and other Islamist fighters also have better sanctuaries within Afghanistan than within Iraq. Afghanistan’s rough terrain has sheltered many guerrilla movements over the years. In contrast, Iraq is fairly flat, although the guerrillas do get some cover by blending into urban areas. Finally, the failed U.S. war on drugs back home does not undermine the war effort in Iraq the way it does in Afghanistan. The poppies for 90 percent of the world’s heroin come from Afghanistan, and the U.S. government feels, for domestic consumption, that it needs to do something about it. Unfortunately, Afghan farmers can make nowhere near the money off substitute crops the U.S. offers them to get them to give up poppy cultivation. Even worse, drug eradication programs have driven these farmers into the hands of the Taliban. The U.S. effort in Afghanistan has experienced mission creep from getting Osama bin Laden and other al Qaeda leaders to nation-building to drug interdiction. Yet bin Laden was never in Iraq and is probably no longer in Afghanistan. He is likely to be in Pakistan. So why is the U.S. engaged in futile and counterproductive nation-building operations in Iraq and Afghanistan? The Taliban is resurgent in Afghanistan and Pakistan precisely because Muslim populations hate non-Muslim occupation of Muslims lands. Paying off the Taliban not to fight probably won’t work, and the Afghan war likely cannot be salvaged. The U.S. should withdraw its forces from Afghanistan and concentrate on pressuring the Pakistani government into finding and turning over bin Laden.
 Ivan Eland
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Ivan Eland is Director of the Center on Peace & Liberty at The Independent Institute. Dr. Eland is a graduate of Iowa State University and received an M.B.A. in applied economics and Ph.D. in national security policy from George Washington University. He has been Director of Defense Policy Studies at the Cato Institute, and he spent 15 years working for Congress on national security issues, including stints as an investigator for the House Foreign Affairs Committee and Principal Defense Analyst at the Congressional Budget Office. He is author of the books, The Empire Has No Clothes: U.S. Foreign Policy Exposed, and Putting “Defense” Back into U.S. Defense Policy.
Full Biography and Recent Publications
 New from Ivan Eland!
THE EMPIRE HAS NO CLOTHES: U.S. Foreign Policy Exposed (Updated Edition)
Most Americans don’t think of their government as an empire, but in fact the United States has been steadily expanding its control of overseas territories since the turn of the twentieth century. In The Empire Has No Clothes, Ivan Eland, a leading expert on U.S. defense policy and national security, examines American military interventions around the world from the Spanish-American War to the invasion and occupation of Iraq. Learn More »» |
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Mamblog Section -
Economics and Financial Services
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Written by William F. Shughart II
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Sunday, 19 October 2008 |
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Correct Suggestions Made on Corporate Income Taxes
October 19, 2008
William F. Shughart II Part 5 of 5 | 1 2 3 4 5 “Don’t tax me, don’t tax thee, tax that fellow over by the tree.” Tax reform is contentious and despite inevitable special pleading, Mississippi’s Tax Study Commission did in the end recommend some changes to the tax code worth serious consideration. However, the list of good ideas does not include raising the state excise tax on cigarettes, expanding the state sales tax base, allowing local governments to impose sales taxes of their own, or working with other states to tax mail-order and Internet purchases. Nor does it include continuing in any way, shape or form so-called incentive programs designed to lure new businesses to the state by offering subsidies and special tax breaks to them. Insofar as such giveaways selectively benefit politically well-connected private companies, they represent improper uses of the public purse, which is supposed to finance programs that promote the general welfare. Taking money away from existing Mississippi companies and giving it to newcomers violates horizontal equity, a widely accepted principle of public finance; it also is grossly unfair. A far better recipe for economic growth would be to cut taxes on all businesses, including those already located here. The commission does in fact recommend reducing the tax burden on corporations in a number of ways. One is to reduce or eliminate the franchise tax, which requires businesses to pay $2.50 on every $1,000 of capital employed in the state. Another is to tax all tax capital gains at 3 percent, the lowest income tax rate. A third recommendation is to exempt the first $10,000 of corporate income from taxation entirely, drop the 3 percent and 4 percent tax brackets, and to tax any income in excess of that amount at 5 percent. Oddly, though, while the commission proposes modest increases in the standard deductions and exemptions allowed under Mississippi’s individual income tax, it says nothing about exempting the first $10,000 of personal income from taxation, meaning that the state will continue to tax the first dollar of taxable personal income at a rate of 3 percent. Taxes on corporate income now generate only about 7 percent of the taxes collected by the state. And there are sound reasons for doing away with the corporate income tax altogether, as at least some members of the commission recommend as a long-term goal. A corporate income tax exposes such income to double taxation—any income distributed to shareholders in the form of dividends also is taxed on their personal income tax returns. It is also true that some of the burden of the income tax paid by corporations is shifted forward to consumers in the form of higher prices; the remainder is shifted backward to employees in the form of lower wages, to suppliers in the form of lower prices received for raw materials and other factors of production, and to owners in the form of lower profits. Although what economists call the incidence of the corporate income tax differs from industry to industry, the bottom line is that corporations do not pay taxes, only people do. Abolishing the corporate income tax not only would lighten the tax burden on company owners, their customers, employees and suppliers, but also would send a clear signal that Mississippi truly is open for business. Whatever revenue is “lost” by doing away with the corporate income tax would be more than made up for by the gains in personal income tax receipts produced by stronger economic growth. Economic growth likewise would be promoted by exempting at least some interest and dividend income from the state personal income tax. One reason that the United States has a very low savings rate is that the first dollar of interest income earned is taxed at the saver’s combined state-federal marginal personal income tax rate. The first dollar of dividend income receives the same tax treatment. Mississippi could take the lead in encouraging savings and investment by doing away with these counterproductive tax provisions. Indexing capital gains for inflation would be another progressive step. Paying too much attention to other states’ tax codes prevented the commission from considering the bold measures needed to jumpstart the state’s economy. It should be sent back to the drawing board and asked to listen more closely to economic experts specializing in public finance than to the representatives of special-interest groups. That is, of course, assuming that the whole purpose of the commission’s work was not, as I suspect it may have been, to provide political cover for jacking up the excise tax on cigarettes.
William F. Shughart II is a Senior Fellow at The Independent Institute, Frederick A. P. Barnard Distinguished Professor of Economics at the University of Mississippi, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.
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Last Updated ( Tuesday, 28 October 2008 )
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Mamblog Section -
Economics and Financial Services
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Written by William F. Shughart II
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Saturday, 18 October 2008 |
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Targeting 'E-Tailers' May Not be Wise for State
October 18, 2008
William F. Shughart II Part 4 of 5 | 1 2 3 4 5 If the states participating in the Orwellian “Streamlined Sales Tax Project” were private companies, they already would have been prosecuted for engaging in an unlawful price-fixing conspiracy. The SSTP was formed in 2000 to lay the groundwork for an aggressive lobbying campaign to convince Congress that it should allow states to collect sales taxes on items residents purchase from retailers located beyond their borders. Consumers buying products online currently enjoy the same immunity from state and local sales taxes the Supreme Court granted to mail-order catalog sales in the early 1990s. The court ruled that requiring retailers located in one state to collect sales taxes from customers in another unconstitutionally burdens interstate commerce. Hence, sales taxes are due on mail-order and Internet purchases only if the retailer has a “physical presence” in the customer’s state of residence. Although buyers in every state with a sales tax are obliged to report and pay “use” taxes on items purchased elsewhere, that requirement is difficult to enforce and few consumers voluntarily comply. Gov. Haley Barbour’s Tax Study Commission recommends two long-term strategies for dealing with what it calls the “Internet sales problem.” One is to continue to work with other SSTP states to reduce the complexity of their sales tax codes and help mute “e-tailer” opposition. (There are not 50, but 30,000 separate sales tax jurisdictions in the United States.) The commission also recommends stricter enforcement of existing use tax laws. Mayors and other public officials have long lamented the billions in tax revenue lost because they cannot collect sales taxes from remote sellers. Local retailers complain of Internet and mail-order retailers’ unfair tax advantage, and say that including such purchases in the sales tax base would merely restore a level retail playing field. But intergovernmental tax-rate competition is just as important to consumer welfare as price competition between rival sellers. Access to the Internet allows everyone to live on a “virtual border.” There is no evidence that tax competition produces a “race to the bottom,” compromising the ability of revenue-strapped governments to supply essential public services. But policies that promote tax rate “harmony” make it easier for governments to ignore heterogeneous taxpayer preferences and to charge tax prices that are excessively high. Internet taxes break the link between taxes paid and benefits received. A Mississippi retailer sees some of the sales taxes he pays on items sold to Mississippians being spent on local public goods from which he himself benefits. But an e-tailer located in the State of Washington, required to collect Mississippi sales taxes on an item shipped to a customer here, receives nothing in return. Neither does he impose any burden on Mississippi’s public services. The Washington e-tailer also has no political voice in Mississippi and therefore no influence over how high his taxes will be or how prudently the revenue is spent. Protected somewhat from competitive market forces by requiring all retailers, wherever located, to collect Mississippi taxes on items shipped to Mississippi customers, local retailers, in turn, have less of an incentive to lobby against high local taxes. Facing less political opposition to higher levels of spending and higher taxes to finance it, Mississippi’s politicians predictably have a freer hand to expand the size and scope of state and local government. Placed at a competitive disadvantage by high local sales taxes, “brick-and-mortar” retailers do not have to stand idly by. They can get business lost to catalog sales or to the Internet back by providing services that their customers value—and are willing to pay for. The opportunity to see and touch items on display, to try them on, to take advantage of product demonstrations and other point-of-sale services, and to accept immediate delivery are options not available to online shoppers. Traditional retailers can also respond to Internet competition by becoming more efficient so that, inclusive of sales tax, the prices they charge are equal to or less than those charged by out-of-state retailers, which normally add hefty shipping and handling charges to their customers’ orders. That is how competition is supposed to work. When the playing field is instead leveled by forcing Internet retailers to raise their prices by collecting sales taxes and remitting them to the treasury of the state where the purchaser resides, the competitive market process is short-circuited. The Tax Study Commission apparently thinks that a tax-free Internet is harmful to Mississippi’s fiscal health, but Mississippians ought to worry more about the damage done to intergovernmental tax competition if the loophole is closed.
William F. Shughart II is a Senior Fellow at The Independent Institute, Frederick A. P. Barnard Distinguished Professor of Economics at the University of Mississippi, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.
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