Quotulatiousness

July 18, 2011

It won’t hurt just the “rich”

Filed under: Economics, Government, USA — Tags: , , , , — Nicholas @ 11:00

Michael Boskin illustrates just what the current levels of US government spending will mean when translated into personal tax rates:

Many Democrats demand no changes to Social Security and Medicare spending. But these programs are projected to run ever-growing deficits totaling tens of trillions of dollars in coming decades, primarily from rising real benefits per beneficiary. To cover these projected deficits would require continually higher income and payroll taxes for Social Security and Medicare on all taxpayers that would drive the combined marginal tax rate on labor income to more than 70% by 2035 and 80% by 2050. And that’s before accounting for the Laffer effect, likely future interest costs, state deficits and the rising ratio of voters receiving government payments to those paying income taxes.

It would be a huge mistake to imagine that the cumulative, cascading burden of many tax rates on the same income will leave the middle class untouched. Take a teacher in California earning $60,000. A current federal rate of 25%, a 9.5% California rate, and 15.3% payroll tax yield a combined income tax rate of 45%. The income tax increases to cover the CBO’s projected federal deficit in 2016 raises that to 52%. Covering future Social Security and Medicare deficits brings the combined marginal tax rate on that middle-income taxpayer to an astounding 71%. That teacher working a summer job would keep just 29% of her wages. At the margin, virtually everyone would be working primarily for the government, reduced to a minority partner in their own labor.

Nobody — rich, middle-income or poor — can afford to have the economy so burdened. Higher tax rates are the major reason why European per-capita income, according to the Organization for Economic Cooperation and Development, is about 30% lower than in the United States — a permanent difference many times the temporary decline in the recent recession and anemic recovery.

While policy makers may shrug off the impact of higher tax rates, it has a significant effect on individual choices when it comes to part-time jobs, overtime, and even raises. Even if in reality working a few hours of overtime won’t make a difference, psychologically, the higher tax burden can act as a deterrent: “why put in the effort if the government gets more out of my effort than I do?”

Moral outrage is a bad source of legislative impetus

Filed under: Law, Media, USA — Tags: , , — Nicholas @ 09:53

Steve Chapman attempts to explain why the multiple “Caylee’s Law” proposals in many state legislatures are uniformly bad ideas that will become bad laws:

It was once suggested, as a general rule of staying alive, never to fly on an airline named after a state or the owner. As a general rule of sound government, it’s also a good idea never to enact a law named after a person. Personalizing criminal law usually stems from fruitless outrage at a freakish event.

Plenty of legislators are ignoring that risk. Their proposals, all going by the name “Caylee’s Law,” are an understandable response to the acquittal of Casey Anthony of killing her 2-year-old daughter. Swearing when you stub your toe is also understandable, which doesn’t mean it will do your toe the slightest good.

[. . .]

Targeting parents who fail to report missing kids on a government-approved schedule will probably accomplish nothing useful. Conscientious adults with grounds for concern already call the cops. But the change would burden police with trivial cases that would soon resolve themselves.

Already kids are reported missing at the rate of more than half a million a year, usually because they run away or neglect to tell parents where they are. A 2002 Justice Department study noted that “all but a very small percentage are recovered fairly quickly.”

But a mother whose son has a habit of absconding and reappearing could go to prison for exercising sensible patience. A divorced dad whose ex-wife gets angry when he’s tardy returning the kids from a weekend outing could give new meaning to “custodial parent.”

July 17, 2011

Nick Gillespie and Matt Welch on a libertarian foreign policy

Filed under: Government, Military, Politics, USA — Tags: , , , , , — Nicholas @ 12:31

The third part of an interview with Gillespie and Welch, covering libertarian foreign policy ideas:

In the aftermath of Georgia’s “victory” over illegal farm workers

Filed under: Americas, Food, Law, USA — Tags: , , — Nicholas @ 11:54

Last month, I linked to a story about Georgia’s attempt to crack down on illegal agricultural workers. It was, in terms of achieving its stated goals, a big success: illegal workers left in droves for other jurisdictions. It wasn’t quite as successful from the point of view of farmers:

To combat the shortage, Governor Nathan Deal has authorized using criminal offenders out on probation to replace the mostly Latino migrant workers. It’s not working out so well:

    The first batch of probationers started work last week at a farm owned by Dick Minor…So far, the experiment at Minor’s farm is yielding mixed results. On the first two days, all the probationers quit by mid-afternoon, said Mendez, one of two crew leaders at Minor’s farm.

    “Those guys out here weren’t out there 30 minutes and they got the bucket and just threw them in the air and say, ‘Bonk this, I ain’t with this, I can’t do this,’” said Jermond Powell, a 33-year-old probationer. “They just left, took off across the field walking.”…

H/T to John Henke for the link.

July 16, 2011

Reason.tv: The debt ceiling debate is full of malarkey

Filed under: Economics, Government, USA — Tags: , , , — Nicholas @ 10:47

July 15, 2011

The US government’s plight, as a poker technique

Filed under: Economics, Government, Politics, USA — Tags: , , , , — Nicholas @ 11:05

Jagadeesh Gokhale points out that President Obama is not only bluffing, but that it’s transparently obvious what this tactic is intended to achieve:

The president’s Wednesday night warning to House Majority Leader Cantor to not “call his bluff” suggests that… well, he’s bluffing. But the president has already been playing some transparently thin cards in this game of poker, including his melodramatic — but highly questionable — hint that Social Security checks would be interrupted on August 2.

The go-to strategy in a literal train wreck is to jump off a nanosecond just before the collision. The debt-limit debate is more complicated, however, because no one really knows what the effect would be if the deadlock on budget negotiations continues through August 2nd.

Debt-rating agencies may soon downgrade U.S. debt. But does the debt of a country on a fiscal path to borrow and spend 45 percent more than its revenues — at a time when its debt already equals its annual output — really warrant a AAA rating? Won’t House Republicans really be doing investors a service by revealing a more honest debt rating?

[. . .]

Regarding a potential “bluff” by the president and high officials of the Treasury and the Federal Reserve: It’s only natural that they would sound the most dire of alarms. There is no guarantee that the government would default on its existing contractual debt and that financial markets would tank even if such a temporary technical default were to occur. But the risk of such events is not zero and no high government officials would wish to risk it on their watch.

A hint about whether and how much President Obama might be “bluffing” is his unwarranted warning that Social Security payments could not be guaranteed if the debt limit is not increased. There is every reason to believe that those payments could and would be made in full in August — and for many more months — no matter whether the budget deadlock is resolved by August 2nd.

Why a budget deal won’t work

Filed under: Economics, Government, USA — Tags: , , , — Nicholas @ 08:11

Sheldon Richman provides a few reasons to doubt that any deal worked out between congress and the President will actually solve anything:

Whether President Obama and congressional Republicans can work out a deal to let the government to borrow even more (!) money seems to hang on whether the latter will go for increased in tax revenues.

Following the zigzagging negotiations isn’t easy. First the aim was a short-term deal. Then both sides decided to go for a big package: $4 trillion in deficit reduction over ten years. That broke down when Obama said a quarter or a third of that amount should come from new revenues.

When I hear about ten-year budget deals, I first divide the aggregate number by ten so I see how little is at stake each year. I also want to know if the spending reduction is real or phony. Chris Edwards of the Cato Institute says most cuts are likely to be accounting tricks. For example, Edwards shows how the rulers could easily “reduce” the Afghanistan/Iraq war budget by $1 trillion without really cutting a penny. (Hint: pretend the wars will go on forever.)

I also remind myself that no Congress can bind a future Congress. Would you bet a substantial sum on a congressional promise to reduce the deficit over ten years? I didn’t think so. Even if Obama is reelected, he wouldn’t be in office for the last four years of the period.

Skepticism is justified. In the 1980s another deal was struck that supposedly would deliver $3 in spending cuts for every $1 in new revenue. Know what happened? That’s right.

Oh, and the various polls showing that either a majority or a significant minority of voters are willing to see increased taxes in order to get a budget deal? Remember that nearly 50% of Americans do not pay income tax — it’d literally be no skin off their noses if the other half have their taxes raised.

The continuing problems of the F-35 Joint Strike Fighter

Filed under: Military, Technology, USA — Tags: , , — Nicholas @ 07:57

The Economist titles this piece “The last manned fighter”:

The latest cost estimates from the Government Accountability Office (GAO), published in May to coincide with a Senate Armed Services Committee hearing on the F-35 programme, were shocking. The average price of each plane in “then-year” dollars had risen from $69m in 2001 to $133m today. Adding in $56.4 billion of development costs, the price rises from $81m to $156m. The GAO report concluded that since 2007 development costs had risen by 26% and the timetable had slipped by five years. Mr Gates’s 2010 restructuring helped. But still, “after more than nine years in development and four in production, the JSF programme has not fully demonstrated that the aircraft design is stable, manufacturing processes are mature and the system is reliable”. Apart from the STOVL version’s problems, the biggest issue was integrating and testing the software that runs the aircraft’s electronics and sensors. At the hearing, Senator John McCain described it as “a train wreck” and accused Lockheed Martin of doing “an abysmal job”.

What horrified the senators most was not the cost of buying F-35s but the cost of operating and supporting them: $1 trillion over the plane’s lifetime. Mr McCain described that estimate as “jaw-dropping”. The Pentagon guesses that it will cost a third more to run the F-35 than the aircraft it is replacing. Ashton Carter, the defence-acquisition chief, calls this “unacceptable and unaffordable”, and vows to trim it. A sceptical Mr McCain says he wants the Pentagon to examine alternatives to the F-35, should Mr Carter not succeed.

How worried should Lockheed Martin be? The F-35 is the biggest biscuit in its barrel, by far. And it is not only Mr McCain who is seeking to knock a few chocolate chips out of it. The bipartisan fiscal responsibility and reform commission appointed by Mr Obama last year said that not all military aircraft need to be stealthy. It suggested cancelling the STOVL version of the F-35 and cutting the rest of its order by half, while buying cheaper F-16s and F-18s to keep numbers up. If America decided it could live with such a “high-low” mix, foreign customers might follow suit.

July 14, 2011

Confused by all this “debt ceiling” talk? Here’s an analogy you’ll understand

Filed under: Humour, Politics, USA — Tags: , — Nicholas @ 11:32

Don’t we all understand the debt ceiling situation so much better now?

July 13, 2011

Expanding government-provided flood insurance?

Filed under: Economics, Environment, Government, USA — Tags: , , , , , — Nicholas @ 12:42

It has always amazed me that the US government is the primary insurer for flood damage, but the idea of putting the few remaining private insurace companies out of business is insane:

The House of Representatives is scheduled this week, as early as today, to consider an extension and “reform” of the National Flood Insurance Program (NFIP), administered by FEMA. Since Hurricane Katrina in 2005, the NFIP has been about $18 billion in the hole. And this is from a program that only collects around $2 billion a year in premiums, which barely covers losses and expenses in a normal year. So make no mistake, the NFIP is still on course to cost the taxpayer billions more in the future.

Even before Katrina, the Congressional Budget Office estimated that the NFIP was receiving a subsidy of close to a billion dollars a year. Under CBO’s optimistic projections, the House’s reform bill would increase NFIP revenues by about $4 billion over the next ten years, making only a small dent in the program’s current deficit.

If private insurers aren’t willing to offer insurance to people and businesses located on flood plains, isn’t that a strong indication that building a house or a plant on that location is a bad idea? Why should people who chose not to locate in risky locations be forced to subsidize the risk-taking of those who do?

July 12, 2011

Another end-run around privacy expectations

Filed under: Law, Liberty, Technology, USA — Tags: , , — Nicholas @ 13:44

Julian Sanchez thinks the government has stopped caring whether you are innocent or guilty online:

Thanks to an unwise Supreme Court decision dating from the 70s, information about your private activites loses its Fourth Amendment protection when its held by a “third party” corporation, like a phone company or Internet provider. As many legal scholars have noted, however, this allows constitutional privacy safeguards to be circumvented via a clever two-step process. Step one: The government forces private businesses (ideally the kind a citizen in the modern world can’t easily avoid dealing with) to collect and store certain kinds of information about everyone — anyone might turn out to be a criminal, after all. No Fourth Amendment issue there, because it’s not the government gathering it! Step two: The government gets a subpoena or court order to obtain that information, quite possibly without your knowledge. No Fourth Amendment problem here either, according to the Supreme Court, because now they’re just getting a corporation’s business records, not your private records. It makes no difference that they’re only keeping those records because the government said they had to.

Current law already allows law enforcement to require retention of data about specific suspects — including e-mails and other information as well as IP addresses — to ensure that evidence isn’t erased while they build up enough evidence for a court order. But why spearfish when you can lower a dragnet? Blanket data requirements ensure easy access to a year-and-a-half snapshot of the online activities of millions of Americans — every one a potential criminal.

Have the markets already “priced in” the risk of a US government default?

Filed under: Economics, Government, USA — Tags: , , , , — Nicholas @ 11:48

Along with everyone else, I’ve been watching the US government’s fiscal game of “chicken” with some alarm. What is puzzling is that the opposition in congress doesn’t seem to be all that scared by the risk of default:

The facts, in fact, are plain enough. In the unlikely event that the U.S. government would hit the real ceiling on August 2 as advertised, the federal government would still be on track to collect about $2.2 trillion in the fiscal year. That wouldn’t change. And net interest for the year would still be about $205 billion, or less than a tenth of incoming revenues. And in light of the consequences, there is no doubt that President Obama and his Treasury Secretary would ensure that the interest payments are made on time and in full.

Thus it should not be surprising, as Fox Business News senior correspondent Charlie Gasparino wrote in a New York Post piece some days ago that “just about every private-sector economist I speak to says that Treasury could simply use its ample cash on hand to pay off our creditors first—then begin to prioritize payments for the military and various social programs.”

This view appears to be shared in spades by the credit markets, which so far have reacted to the Obama-media scare tactics with a big yawn. When the markets fear real default, they respond by jacking up interest rates, as we’ve seen in Greece, Italy, Portugal, etc. It’s happening right now in those countries.

In sharp contrast, U.S. long-term rates are actually falling. The 10-year Treasury bond rate, which only a few days ago was around 3.15 percent, has dropped 20 basis points to 2.95 percent. Maybe the markets just aren’t paying attention. Or maybe they know Obama and Company are blowing smoke. Whether the debt ceiling is raised on time or not, markets are confident that the interest will be paid.

July 11, 2011

US economic slowdown and the impact on Canadian exports

Filed under: Cancon, Economics, USA — Tags: — Nicholas @ 10:04

Over at the Globe and Mail, Stephen Gordon debunks the old saw “When the U.S. sneezes, Canada catches cold”:

About 30 per cent of Canadian output is exported, and roughly 75 per cent of exports go to the U.S., which means that some 20-25 per cent of Canadian GDP is exported to the United States. If U.S. demand for Canadian exports were proportional to U.S. income, a 1 per cent decline in U.S. GDP would show up as a 0.2-0.25 per cent decline in Canadian output. (See also here, where I estimate that everything else held constant, a 1 per cent decline in U.S. GDP produces a 0.3 per cent decline in Canadian GDP).

But of course, everything else isn’t held constant when the U.S. goes into recession. For reasons that are not immediately obvious to me, the forex market’s response to a U.S. recession is to produce an appreciation in the U.S. dollar against ours. The resulting depreciation in the Canadian dollar has the effect of increasing net exports. In each of the last three recessions, net exports have provided a positive contribution to Canadian GDP growth.

Can the government force you to provide your password?

Filed under: Government, Law, Liberty, Technology, USA — Tags: , , , , — Nicholas @ 09:37

Declan McCullagh discusses a potentially precedent-setting case in Colorado that may determine whether the 5th amendment applies to your personal passwords:

The Colorado prosecution of a woman accused of a mortgage scam will test whether the government can punish you for refusing to disclose your encryption passphrase.

The Obama administration has asked a federal judge to order the defendant, Ramona Fricosu, to decrypt an encrypted laptop that police found in her bedroom during a raid of her home.

Because Fricosu has opposed the proposal, this could turn into a precedent-setting case. No U.S. appeals court appears to have ruled on whether such an order would be legal or not under the U.S. Constitution’s Fifth Amendment, which broadly protects Americans’ right to remain silent.

I’d hope that the protections against self-incrimination would apply in this case, but government power has been expended so far in the last ten years that it would not surprise me if the courts gut this right in their deference to the executive (just like every other time, it seems).

A need for speed in 1955 still has lingering influence

Filed under: History, Science, Technology, USA — Tags: , — Nicholas @ 09:01

Richard Black discusses the start of commercial nuclear power:

An experimental US reactor called EBR-1 generated the first nuclear electricity at its home in Argonne National Laboratory, sending current through a series of lightbulbs in 1951.

But the US did not open the world’s first civilian nuclear power station; that honour went to the USSR, whose tiny Obninsk reactor opened in 1953.

And the world’s first commercial-scale nuclear station was the UK’s Calder Hall, opened the following year.

The race for nuclear power — and with it, political influence — was underway.

“[Soviet President Nikita] Khrushchev… recognised that achievements in nuclear power made it possible to compete with the United States in the world arena — to say ‘our system, the socialist system, is the best — look who is first in areas of science and technology’,” relates Soviet historian Paul Josephson.

“You see a rebirth of hope that there will be a glorious communist future, perhaps a nuclear-powered future.”

All of these early reactors used different designs, with everyone except US scientists forced to work with natural uranium rather than the enriched variety developed during the Manhattan Project.

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