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January 2008
It’s surprising the degree to which technology issues have NOT been a part of the presidential race.
That was not the case in 2000. Remember Al Gore “invented the Internet”? And George Bush talked a great deal about broadband deployed across the country and the many benefits of the Internet.
It’s true that technology, particularly the Internet, is being used in campaigns like never before, especially to better facilitate more immediate feedback and fundraising.
But it turns out that the technology industry and the public policy issues most important to it have thus far been all but neglected in the presidential primaries.
This is odd, of course, because our economy increasingly relies on the technology industries for growth. And, right now, our economy could use some growth.
For instance, the tax credit provided for companies who invest in research and development done in the United States was al Read More...
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Were You Able to Find Some Good Christmas Sales?
Dr. Merrill Matthews of the Institute for Policy Innovation says Europeans aren’t so lucky.
Have you been enjoying those post-holiday sales? So have the Europeans, thanks to the government.
In the U.S., retail stores determine when they have a sale. But the Wall Street Journal points out that in Europe the government makes that decision.
For example, many U.S. merchants start marking down items shortly before Christmas to encourage last-minute spending. Until recently, European governments wouldn’t allow that.
Although the situation is improving, Europe is far from being consumer-friendly. In France, the government regulates retail prices. And some governments determine when a retail store can and can’t be open.
Read More...
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While we liked much of what President George Bush said last night in his seventh State of the Union Address, the best we can say is: too little, too late.
Yes, the president wants Congress to make permanent several of his tax cuts, many of which played a significant role in boosting economic growth. . . BUT there is something depressingly dissonant about having a president make supply-side arguments for tax cuts but yet make Keynesian arguments for economic stimulus. It gives one the impression that the president never really understood the reason why tax cuts stimulate economic growth. Perhaps this is why the president hasn’t succeeded in selling his tax cuts.
Yes, the president also made some excellent comments about the need for entitlement reform, especially Social Security and Medicare. . . Read More...
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The recently announced economic stimulus package includes an income tax rebate. So I raise the question should it be a rebate or should we adjust marginal rates? People tend to use rebates to pay off short term debt or buy piled up inventory of consumer goods. Sometimes they may even put it into savings. But none of these will have any significant or lasting effect on the economy. Reducing marginal rates on the other hand would result in capital formation and the corresponding jobs creation and retention. So why the rebate?
There are two reasons and neither of them is rooted in good economic theory. Congressional Democrats have become terrified that they'll be accused in this election year of not having done anything to help the economy. And the President is desperately trying to protect his legacy. Election year politics and a fading legacy do not make good economic policy. Read More...
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In a new oped published today in Business Day, “West Must Go Straight to the People of Zimbabwe,” IPI senior fellow George A. Pieler and International Affairs Forum editor-in-chief Jens Laurson discuss the benefits of sending foreign aid to the people, not the government, of economically devastated Zimbabwe.
An excerpt: Foreign aid seems like a diplomatic, benevolent, largely uncontroversial tool in international relations. Giving aid to developing countries (and also the threat to stop giving) means donors have some leverage against nations reluctant to modernize, democratize, and adopt "advanced" notions of "good governance". Read More...
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The Wireless Imaginarium of Michael Copps
In a speech earlier this week, FCC Commissioner Michael Copps outlined his vision for how the wireless phone market ought to work, as opposed to how it works today.
Of course, it's not the role of government regulators to be designing markets, in some measure because when they do typically their reach exceeds their grasp.
Commissioner Copps is decidedly unhappy that the current state of the wireless market doesn't live up to his imagined ideal of how it should work. But, in fact, a close look at Copps' address reveals that, his imagination is a government control -- FCC control -- his control, his dream. Copps simply thinks that the wireless market ought to work exactly like -- the Internet. But it ought to work like the wireless router business, too. Oh, and it also ought to work like the old monopoly wireline network used to work.
Read More...
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This week, Sen. Arlen Specter (R-Pa.) cited research conducted by the Institute for Policy Innovation (IPI) to introduce expensing legislation as part of the effort to sculpt a fiscal stimulus package.
For the dicussion, Specter submitted to the record a January 12 Wall Street Journal oped by Ernest S. Christian and Gary A. Robbins, “The JFK Stimulus Plan,” and quoted IPI’s 2001 analysis of first-year expensing:
“Each $1 of tax cut from first-year expensing produces about $9 of additional GDP growth.”
In his testimony, Specter agreed first-year expensing would help advance innovation and economic growth, saying:
“By allowing firms to deduct the cost of a new asset in year one, expensing spurs new investments quickly, which helps to drive immediate job creation.”
Read More...
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Is the Earth Getting Warmer?
The Institute for Policy Innovation’s Dr. Merrill Matthews says apparently not in the winter.
Americans living in the Midwest who have seen several waves of ice and snow this winter could be forgiven for wondering whether global warming is real.
And they might be right. University of Oklahoma geophysicist David Deming points out that in 2007:
- Snow fell in Buenos Aries for the first time since 1918;
- Johannesburg, South Africa, had its first significant snowfall in 26 years;
- Closer to home, an April freeze killed 95 percent of South Carolina’s peach crop;
- Denver, Charlotte, North Carolina, Meacham, Oregon, and St. Cloud, Minnesota, all set record lows;
- And the Canadian government is warning of the coldest winter in 15 years.
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Still Keynesian After All These Years
Talk of economic stimulus plans is afoot in Washington, but almost every idea being floated is wrongheaded, and tragic.
The central idea seems to be to “put money in people’s pockets” so that they can “spend it”—WRONG. The thought is that the economy needs some sort of short-term boost in demand (spending), and that the best way to do that is to borrow from the future and put some modest amount of money in the hands of middle-class and lower-income families through an immediate tax rebate so that they can go right out and spend it, thus rescuing Wall Street and the world economy—WRONG.
Upper income workers would not receive the tax rebate, because upper income workers tend to save and invest, rather than spend. And, of course, we need people to spend the money rather than save and invest it—WRONG. Read More...
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| If there was ever any doubt about it, Fed Chairman Ben Bernanke’s endorsement yesterday of George W. Bush’s idea that we need a “fiscal stimulus” package makes it clear that Keynesianism reigns supreme in Washington, DC.—still crazy after all these years. On the heels of Bernanke’s congressional appearance, Bush himself ran up the flagpole the idea of giving everyone a $1,600 “tax rebate,” a.k.a. a federal handout. How many times must we relearn the lesson that it is impossible for the government to increase real national income by borrowing, spending and printing money? Endlessly, it appears, since generation after generation of policy makers continues to fall prey to the same Keynesian fallacy. Read More...
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Yes, that’s how the media reported the USDA Household Food Security in the United States, 2006 report released back on November 14th.
A Reuters article stated that the number of Americans facing “food insecurity” (whatever THAT is) was held in check for 2006 at about 35 million or around 12%. The Reuters article goes on to state that
“Overall, 35.52 million people, including 12.63 million children, went hungry compared with 35.13 million in 2005.”
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Innovation Lost
The “innovation agenda,” a promised commitment to keep America globally competitive, was discussed ad naseum on Capitol Hill a year ago as various politicians tried to prove they were committed to innovation and the future of the country. It was an important discussion. However, while politicians were talking about doing something, one of our most important policy drivers of innovation was left to expire.
The research and development tax credit was allowed to expire in December . . . again. When the credit was first enacted in 1981, the United States had one of the best research tax incentive programs in the world. The credit allowed a company to receive a tax credit for a portion of its allowable expenses for research or product development performed in the U.S., with more than 75 percent of the credit dollars going toward wages for highly skilled, highly paid workers.
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Is the Middle Class Shrinking?
Dr. Merrill Matthews of the Institute for Policy Innovation says apparently, but that’s good news.
Some of the presidential candidates are bemoaning the decline of the American middle class. The common assumption behind the concern is that middle-classers are falling into the lower-income brackets.
But according to economist Stephen Rose in the Washington Post, the percentage of households making more than $100,000 has actually doubled over the past 30 years, from 12 to 24 percent.
By contrast, there was no change in the percentage of households making less than $30,000 a year.
Thus, he says that all of the “decline” in the middle class was due to people moving up the income ladder. That’s a success story, not a failure.
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The conservative website TownHall.com, of which IPI was once a member organization, has recently been aggressively promoting their young bloggers and columnists to the television talking head shows. This works for both parties: The shows have an insatiable appetite for new (as opposed to the same old) faces, and TownHall provides the TV shows an endless stream of especially young, attractive and mostly female faces. And since TownHall.com is in the business of selling advertising, attractive young females on TV is a great way to draw eyeballs to your website.
But this is a recipe for potential disaster to the conservative movement, if TownHall.com promotes spokespersons don’t really have much of an idea what they are talking about.
The latest example was this afternoon, when someone I’ve never heard of named Amanda Carpenter of TownHall.com appeared on Neil Cavuto’s show on the FoxNews Channel and proclaimed that John McCain was not a conservative. Read More...
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Hillary Clinton’s Other ‘Bill’
Finally, a Democratic presidential candidate has offered a plan to jolt the economy. Or is that “jilt” the economy?
Clinton says if elected president she’d:
- Send $30 billion to states and cities to “help” with the so-called crisis in foreclosures;
- Send $25 billion to low-income families to help them pay heating bills;
- Spend $10 billion on increased benefits for the unemployed; and
- Maybe, just maybe, refund $40 billion in tax payments.
So let’s take a look at the economic effect of these proposals. With regard to the foreclosure money, cities and states are going to divvy up the money among people who have defaulted on their mortgage.
Yes, it’s tragic that so many people are losing their homes to foreclosures. Read More...
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Townhall.com columnist Paul Weyrich cites IPI’s Peter Ferrara in a new column, “The Coming Crisis of Big Government.”
Discussing growing government and increasing entitlements, Weyrich reflects on IPI Director of Entitlement and Budget Policy Ferrara’s October article in Barron’s:
…In an article last October in BARRON’S Magazine, Peter J. Ferrara, of the new Supply Side Institute and the Institute for Policy Innovation, offers a better way. The solution, he argues, is to think outside the box of our current entitlement structures, and seek to reform these programs from the bottom up. By modernizing the programs to rely primarily on modern capital and labor markets, rather than old-fashioned, 19th Century, tax-and-spend redistribution, we actually can serve the beneficiaries of these programs far b Read More...
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Great advances in science occur when scientists working independently come up with apparently different solutions to the same problem, and those answers are discovered to be mathematically equivalent notwithstanding their different formulations, which look entirely different and may even have different interpretations. Such, for example, was the case with quantum mechanics.
In the 1920s, German physicist Erwin Schrödinger was giving a lecture on the problem presented by the vexing observation that light behaves both like a wave and like a particle—the so-called “wave-particle duality.” Someone in the audience suggested that what was needed to study quantum waves was a wave equation such as existed for sound and water waves. Schrödinger then proceeded to develop the wave equation to describe the wave nature of an electron, which provided a technique for calculating the probability of finding a particle at a given point in space.
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In a new oped, IPI President Tom Giovanetti tells the Providence Journal how sports leagues are putting the “squeeze” on video providers, and even lobbying some state governments to intervene between the private companies when it comes to sports programming.
An excerpt: “MILLIONS OF PATRIOTS fans looked forward to watching them take on the New York Giants on Dec. 29, when New England completed a perfect regular season, going 16-0 for the first time in National Football League history. But, thanks to the NFL’s greed, most New England fans were nearly unable to see the game. That’s because more than half of Americans don’t get the NFL Network, which — before the NFL relented and allowed broadcast networks to air this particular game — would have been the only channel that could carry the game. Read More...
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| In a new oped published in the Press-Enterprise newspaper, “Reckless Prescription,” Dr. Lawrence A. Hunter discusses the prescription drug re-importation debate, shedding light on price controls and the “consumer-savings myth.” An excerpt: “A growing number of lawmakers on Capitol Hill mistakenly believe prescription-drug prices would decline if U.S. pharmacies and drug wholesalers were allowed to re-import prescription medicines from abroad. With drugs, lawmakers see the obvious: that medicines retail for less in Canada, Australia, New Zealand and several European countries than they do here. But they don't see why. Consequently, they leap to the erroneous conclusion that pharmaceutical companies must be gouging American consumers. Read More...
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In a new oped published in Atlantic Community, "Germany's Fear of Liberalism," authors George A. Pieler and Jens F. Laurson analyze how the Germen fear of classical liberalism is reflected in the nation’s workplace laws, inhibiting economic freedom.
An excerpt:
"Daniel Goldhagen’s “Hitler’s Willing Executioners” is the most famous – though hardly the only – book that espouses the theory that the rise and establishment of the Third Reich was a distinctly German phenomenon. While that’s rather questionable, he hits upon a profound truth in claiming Germans were – and are – more vulnerable to self-inflicted totalitarian control than other nationalities.
That reason is an abiding fear and suspicion of liberalism among Germans.
Read More...
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In a new oped featured on Forbes.com, "A Torrent of Flood Destruction," IPI senior fellows Dr. Lawrence A. Hunter and George A. Pieler discuss climate change theorists’ estimates of the mounting costs for flood insurance over the next several years, and what that may especially cost taxpayers.
An excerpt:
"The Organization for Economic Cooperation and Development (OECD), in collaboration with U.K.-based research institutions, says that potential damage from worldwide flooding in coastal areas will increase in value from $3 trillion today to $35 trillion by 2070.
That sounds like a big increase, but how big is it, really, relative to expected growth in the global economy?
Read More...
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In a column in this past Saturday's Wall Street Journal, IPI friends Gary Robbins and Ernest Christian mentioned a 2001 study by IPI indicating "over time, each $1 of tax cut from first-year expensing produces about $9 of additional GDP growth."
We've gotten some inquiries about the study, so here is a link to the study on IPI's website.
The study, entitled "What's the Most Potent Way to Stimulate the Economy?", might be considered particularly timely today. Even though the study is 6 years old, the principles are still the same--you stimulate the economy by stimulating investment, not spending.
Here's a teaser:
Read More...
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Hillary Clinton proposed an economic stimulus package on Friday to deal with the increasingly troubled economy. The price tag is only $110 billion.
The plan includes a $30 billion housing crisis fund supposedly to address the subprime mortgage mess. But the money actually is not to bail out people threatened by foreclosure. That is accomplished by a moratorium on mortgage foreclosures until lenders renegotiate their loans to terms borrowers can afford. That in itself is an assault on such fundamental principals as freedom of contract and property rights. In more popular terms, that just means that most people will suffer extreme difficulty getting mortgages in the future as the mortgage market shrinks dramatically. (Not to worry, though, Hillary will likely then just propose that the government provide mortgages on easy terms).
Read More...
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It's hard to restrain my glee at the entirely predictable bad economic news that is coming out of Venezuela.
This time (as opposed to last time) the news is Venezuela's 2007 inflation rate of 22.5 percent--the highest rate in Latin America (which in itself is saying something, since Latin America holds all the records in all the major inflation categories of the Guinness Book of World Records.
Chavez, of course, thinks that the problem is the business community, and he thinks the solution to inflation is--get this--to further sabotage markets by appropriating private property.
President Hugo Chavez threatened again on Friday to seize property from businesses if they are caught hoarding products, as Venezuela struggles with shortages of some basic foods and high inflation. Read More...
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Am I the only one to see an interesting paradox in the New Hampshire primary? Political pundits have suggested that the tears Hillary Clinton shed on the Sunday before the primary had an impact on the results. Suddenly the emotion and tears demonstrated her softer side, her personal commitment and her sensitivity and vulnerability. They imply that voters saw that as a sympathetic moment that may have turned her campaign around. Well, perhaps that's true. But how soon we forget that in 1972 Edmund Muskie's campaign was derailed by his emotional reaction to an article in the Manchester Union-Leader that caused him to shed tears on the eve of the New Hampshire primary in a speech delivered in front of that newspaper's offices. That emotional reaction shattered his image and collapsed his presidential aspirations. So it's beneficial for a woman to shed tears but it's not okay for a man to have the save emotional reaction. Read More...
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Has political correctness gone too far?
In a new oped published on CNET News entitled, “Snuffing Out Goofy’s Cigarette,” George Pieler and Jens Laurson discuss the new mission of Disney to edit out “offensive” smoking scenes from classic Disney films.
An excerpt: In July 2007, when Disney promised a smoking ban for its "G" and "PG" products, the news was yawn-producing. What's a little revisionism if it satisfies today's sociopolitical climate? Stalin's helpers got rid of inconvenient Trotsky-photographs with the wave of an icepick (low tech works, too). Much easier for Disney to ensure that smoking won't be seen by impressionable audiences. Read More...
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Who Speaks for Consumers?
Recently, a number of news stories have been complaining about the wireless industry. We are told that consumers: - Don't want long-term contracts when they sign-up for wireless phone service;
- Don't like early termination fees when they want out of their contracts;
- Don't like the fact that the Apple iPhone is only available from AT&T; and
- Need the protection of new "net neutrality" government regulations.
We are further told that the main problem is that—brace yourself—there isn't enough competition in the wireless business.
Huh?
Consumers are, in fact, inundated with advertising by wireless companies, suggesting that there is VIBRANT competition in the wireless business. Read More...
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Rudy Giuliani didn't tear up and start crying over his dismal finishes in Iowa and New Hampshire; he stepped up to the plate and hit a homerun on taxes and got right back in the game. And by the way, kudos to Steve Forbes who obviously is having a big influence inside the Giuliani campaign, which is evident in Rudy's bold new tax proposal that fits the bill to a tee of what I was talking about in my blog yesterday ("'Clicking along' to economic despair").
The Giuliani plan would lower the corporate income tax rate to 25 percent, and it would reduce the tax rate on capital gains to 10 percent and index gains for inflation. Read More...
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Where Does Farm Subsidy Money Go?
Dr. Merrill Matthews of the Institute for Policy Innovation says to lots of rich non-farmers, of course.
Former basketball star Scottie Pippen, Late Show host David Letterman and CNN founder Ted Turner are all rich and famous—and on the public dole. Thanks to what’s called the Farm Bill.
And they aren’t alone, some of the richest people in the country get taxpayer money because they own farmland—land they may not even farm.
The farm subsidies can be in the thousands—David Letterman recently donated his $8,000 subsidy to charity—but they can be in the millions.
The Environmental Working Group has a map that shows 562 New Yorkers in Manhattan receiving some of your tax dollars. Read More...
Farm Subsidies |
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The concept of a “fair tax” and possible dissolution of the IRS as promoted by certain Presidential candidates has created great excitement. As stimulating, refreshing and sensible as both may be, I’m afraid there are about 700,000 reasons why neither will happen in the foreseeable (like, forever) future. Consider:
- The IRS has 91,717 employees (source: IRS 2006 Data Book) with the force and weight of law relieving us of the fruits of our labor at a cost of $10.882 billion (source: IRS 2006 Budget).
- We are paying $4.128 billion to 19,242 tax preparation services with 205,122 employees to help us relieve ourselves of the fruits of our labor (source: 2002 Economic Census*).
- Ditto for a substantial portion of the $48.497 billion we pay to the 56,705 Certified Public Accounting firms with 426,208 employees (source: 2002 Economic Census*), granted, CPA’s do other things besides taxes.
- Read More...
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Let me say at the outset, I am certainly in favor of Congress’ taking action to prevent expiration of the pro-growth tax rate reductions enacted in 2001 and 2003 but that is where I partially part company with IPI’s January 8, 2008 TaxByte, “When ‘Repeal’ Loses Its Appeal.”
This TaxByte concludes that allowing the “Bush tax cuts” to expire would be near calamitous. That is only partially correct, and casting the issue in terms of repealing or extending a particular president’s tax cuts clouds the real economic issues at stake, not to mention the political wisdom of urging candidates for the presidency to define their tax program for the future in terms of a few relatively limited provisions enacted by their predecessor.
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Frontline Wireless, a company we strongly criticized for padding its board with people politically-connected with the FCC in order to obtain favorable terms for an upcoming spectrum auction, is gone.
According to news reports,
Despite these connections, and a year spent lobbying to create a range of frequencies intended specifically for a combination of private service and public safety communications, Frontline failed in frenzied negotiations in recent weeks to find the financial backing it needed, according to a person who has been involved in the company. Read More...
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When ‘Repeal’ Loses its Appeal
The next president and Congress will face an important decision: Let the Bush tax cuts expire in 2010, keep them or make even further cuts.
If the Bush tax cuts are allowed to expire, taxpayers of all levels will face a massive tax increase. Just consider the changes identified by the Heritage Foundation: - Tax rates will rise substantially in each tax bracket, some by 450 basis points;
- Low-income taxpayers will see the 10 percent tax bracket disappear, and they will have to pay taxes at the 15 percent rate;
- Married taxpayers will see the marriage penalty return;
- Taxpayers with children will lose 50 percent of their child tax credits;
- Taxes on dividends will increase beginning on January 1, 2011;
- Taxes on capital gains will increase, also beginning on January 1, 2011; and
- Federal death taxes will come back to life in 2011, after fading do Read More...
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Does Congress Need Some New Year’s Resolutions?
The Institute for Policy Innovation’s Dr. Merrill Matthews says here’s a short list for starters.
It’s the New Year once again, and time for those New Year’s resolutions. This year, we hope Congress will make a few of its own, such as:
Controlling government spending. You’ve probably heard about the budget deficit. Some congressmen think that means a tax increase, but a spending cut would be a better solution.
Or, Making the budget process more transparent. Members of Congress claim they want transparency, but then do everything they can to hide their spending and earmarks.
And finally, Act like statesmen, not like henchmen. Read More...
Does Congress Need Some New Year’s Resolutions? |
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Author: TechBytes || Location: Lewisville, Texas, USA