What could Rosh Hashanah have to do with environmental activism? My colleague Sam Kazman found out last year, listening to a sermon with a surprise twist. You can read about the incident in the book High Holiday Stories by Nancy Rips.
January 2012
Obama’s plan for $50 billion more in stimulus spending is getting a skeptical response even from some Democratic lawmakers. (We explained earlier why this proposal is a bad idea.)
The newfound skepticism may be because of Obama’s lost credibility. Unemployment rose to 10 percent soon after passage of his earlier $800 billion stimulus package, despite claims that it would keep unemployment under 8 percent. Obama falsely claimed that the stimulus package was needed to prevent “irreversible decline,” but the Congressional Budget Office admitted that it would actually shrink the economy “in the long run.” (The CBO thought it would help the economy in the short run, but parts of the stimulus ended up destroying jobs even in the short run.)
The Obama administration’s bailout and stimulus spending is harming the economy, even while adding trillions to the national debt. Economists say the real estate market was harmed by one of its mortgage bailout programs, which cost $75 billion. The Washington Examiner today notes that a foreclosure relief program called “First Look” is impeding the sale of homes in depressed neighborhoods, at taxpayer expense:
The Portuguese Constitution guarantees the provision of many social services, including free health care. The students at the Porto Language of Liberty camp remind us of this several times.
“My party is working on a plan to reform the constitution,” one young man offers when the issue comes up. The other students roll their eyes and say it’s very complicated.
And many of them don’t want to cut social services. Even the more libertarian-minded of them say society would suffer too much without high unemployment benefits, socialized medicine, and a healthy welfare state. The Portuguese people have learned to depend on it. “You try to take these things away, there will be a revolution,” says one economics student. He’s very serious.
Between lectures, two of the students take us on a drive though Porto and Vila Nova de Gaia, the town across the river. The driver, a lawyer and an elected representative in his town, gives us a brief history of Portugal. He says the North, where we are, is far more open to libertarian ideas than the South, where Lisbon is. Lisbon has the money and the political power; yet they’re influenced by “all things Red.”
“When the communists first came to the South,” the lawyer explains, “the communists killed the farmers. But in the North, the farmers killed the communists. There they still have communists. Here? Not so much.”
In the afternoon at the planetarium, we watch The Call of the Entrepreneur. One of the vignettes spotlights a successful dairy farmer who makes high-quality compost from cow manure. Afterwards, in the discussion, a teacher asks the students why the farmer worked so hard to develop a good product.
“To make the world better?” one student guesses.
The others remind him that the farmer said he worked hard not to create a better world, but to create a better life for himself and his family. Some of the students are laughing, remembering the footage of the farmer’s sons and daughter standing next to long piles of cow manure.
“It’s the American dream,” a guy at the back of the room jokes. The others laugh.
Much later we’re having a post-midnight meal with a couple students and a businessman in his 30s who’s involved in the Republican Youth group. The businessman is speaking somberly about Portugal’s future. This generation will suffer for the nation’s economic problems; yet many in Portugal are reluctant to change their way of life. “The thing is that in America, you have the American dream,” the businessman says. “But here, we don’t have a Portuguese dream.”
President Obama’s new economic recovery plan, coming more than a year-and-a-half after an infusion of $1 trillion in big-government spending failed to “stimulate” the moribund economy, deserves one qualified cheer.
The president’s plan, unveiled in a partisan speech Wednesday in Cleveland that mostly consisted blaming economic woes on his predecessors, did contain at least one specific break from the administration’s previous policies. His call for 100 percent first-year expensing for plants and equipment and making permanent the research and development tax credits, with some important tweaks, would positively affect incentives for growth. Would that he had proposed these across-the-board tax cuts in early 2009 rather than the government-directed stimulus spending.
Unfortunately, the other elements in the recovery plan are more of the same big-government spending and meddling. The $50 billion ”infrastructure bank,” as initially described, appears to contain few mechanisms to control wasteful spending, and the body”s members would be shielded from accountability to Congress or the next administration. A White House fact sheet also lists nannyist “smart-growth” priorities for the infrastructure spending such as “environmental sustainability” and “livability,” which are code words for controlling where people live and work.
The small business lending bill before that the president touted in his speech also is a boondoggle with destructive effects. Called the “Son of TARP” by National Review writer Stephen Spruiell, the bill would subsidize community banks to make loans to businesses the government approves. This reeks of the kind of “industrial policy” of picking if winners and losers that brought Japan down.
By contrast, the virtue of the President’s proposals for expensing and the R&D tax credit is that they apply across the board, not just to politically-favored businesses. Expensing, or accelerated depreciation, allows firm to write off the cost of purchasing equipment in the first year of purchase, not according to an arbitrary depreciation schedule created by the IRS. Supply side economists such as Gary Robbins, Stephen Entin, and Ernest Christian have proposed expensing for years as a supply-side tax reform that would boost productivity.
As FedEx CEO Frederick Smith (whom we at CEI, in reference to our esteemed founder and president Fred L. Smith Jr., call “the other Fred Smith”) has put it: “If we buy a 777 airplane from Boeing, under the current tax code, we generally write that asset off over seven years for tax purposes. But buying a $150 million airplane is a big risk because you don’t know what the market’s going to be like when that plane is delivered some four years after the initial order. So the best way to mitigate the risk of making that capital purchase, which provides jobs for pilots, mechanics, ground support, hub workers, and couriers, is to allow the company to get that money back quicker. It reduces risk and encourages investment more quickly in new equipment, facilities and jobs.”
The R&D tax credit is actually redundant to this tax proposal, because expensing could apply to equipment for research and development. But the expensing proposal in the Obama plan, as currently proposed, would unfortunately have limited effect because it only lasts one year.
Temporary tax cuts, including the ones offered in past Bush and Obama stimulus packages, have been shown not to work because individuals and businesses don’t change their spending habits without permanent changes in income expectations. Nobel laureate Milton Friedman described this as the “permanent income hypothesis.” Beyond that, however, there is the practical problem that a factory, for instance, can’t be built in one year. So a company like won’t start making a large multi-year investment now, if it know it can’t expense the costs in the second and third years.
And then there are the tax hikes the president proposes to “pay for” the taxes and spending. The White House hasn’t specified what so-called loopholes it would eliminate, but it had earlier proposed closing off foreign tax credits for multinational firms. But those tax credits exist because the U.S. is one of the few countries that taxes worldwide income at all, and U.S. firms would be put at a huge disadvantage to their foreign competitors if they had to pay both U.S. and foreign taxes on the income they earned.
In truth, the expensing provision don’t need to be “paid for” with any offsets. As the White House fact sheet points out, “most of this relief would be recouped by the Treasury as businesses regain their strength. Specifically, businesses would get the upfront deduction for their investment—now when they most need it—but would give up their future annual depreciation allowances in future years when the economy is stronger.” And the dynamic effect that supply siders identify could actually increase tax revenues.
So while rejecting the infrastructure spending and small business lending subsidies, Republicans should meet the president halfway on the business expensing provisions. On this section alone, the GOP should offer to waive the pay-go rules that require offsets if Obama forgoes his proposed tax hikes (putting aside for the moment the tax hike of letting the Bush tax cuts expire) and extends the expensing provisions for a few more years.
Free marketeers in the Commonwealth of Virginia waited with high hopes after Governor Bob McDonnell made the announcement that he planned to privatize state-run liquor stores in the state.
In the beginning, McDonnell’s rhetoric sounded good:
[I]t’s getting the government out of the business of alcohol distribution, which I don’t think it needs to be in. We’ve [sold] beer and wine [privately] for 70 years; we can certainly do distilled spirits” in the same way.
Unfortunately, it proved to be just that: rhetoric. It was pretty clear from the start that his ultimate motivation was the state budget’s bottom line. That fact was reinforced with the news that McDonnell’s privatization plan includes a bevy of new taxes on businesses:
4 percent tax on restaurants and bars… Included in the 4 percent is a 2.5 percent tax imposed solely on restaurants’ annual liquor receipts and a 1.5 percent tax imposed on restaurants and all stores that sell alcohol, including grocery stores…McDonnell’s proposal also includes other fees, including a $17.50-per-gallon excise tax and a 1 percent tax on gross receipts, both charged to wholesalers
While this increase in taxes speaks negatively toward McDonnell’s convictions, just as bad are his plans to limit the number of licenses available. Initially, Bob’s plan is to auction 1000 licenses to the highest bidders, but there’s no indication that more licenses will be available once those are all sold.
Licenses will be divided into three categories: big-box stores, such as grocery stores and Wal-Mart (600 licenses), package stores (150 licenses), and convenience stores and drug stores (250 licenses)
Though the committee was set to vote on the measure today, plans were postponed due to the fact that a completed proposal wasn’t made available to committee members. It seems we’ll have to wait until November to see how far McDonnell strays from his supposed free market ideals.
President Obama has proposed $50 billion more in deficit spending after his original $800 billion stimulus package failed. Federal domestic spending already increased by a record 16 percent this year due to the stimulus package.
By contrast, “Germany has cut government spending and its economy is growing smartly.” It experienced a healthy 9 percent growth rate in the second quarter of 2010.
The $50 billion Obama proposes is supposedly for infrastructure spending, but his administration defines “infrastructure” so broadly that the money could be used for all sorts of boondoggles that do not improve transportation. The Obama administration’s real goal seems to be to subsidize wasteful union-controlled construction projects, thanks to Obama’s executive order mandating unionized Project Labor Agreements in construction.
Some commentators claim the original stimulus package had a lot of infrastructure spending in it. But it didn’t. To most people, infrastructure means things like roads and bridges. The stimulus package classified things like $10 billion in spending on housing as “infrastructure.” It spent only about $48 billion — or 6 percent of its total spending — on transportation, and that included rail boondoggles that will do little improve transportation. Money was also wasted on things like an abandoned railroad bridge. More than 79 percent of the stimulus package’s green-jobs funding went to foreign firms.
Economists who drafted Obama’s original stimulus proposal did try to include substantial infrastructure spending in it. But much of that spending was removed from the stimulus package by the Obama administration after feminist leaders complained that such spending would result in jobs for men, rather than women (they derided transportation spending as a “macho stimulus“). The stimulus package was then revised by the Obama administration to focus on subsidizing state-government welfare and social-service agencies, whose employees are heavily female, rather than transportation and construction, where employees are mostly male. (Nearly 80 percent of those who lost their jobs in the recession were male.) As wasteful as federal transportation spending often is (like the Bridge to Nowhere), it is still far better for the economy than the welfare paid for by the stimulus package.
The Environmental Protection Agency’s effort to regulate carbon dioxide as an air pollutant is currently garnering most of the attention from the agency’s critics, but it is far from the only problematic EPA regulation in the works. Another proposal that also deserves strong opposition is the agency’s attempt to label coal combustion byproducts (CCBs) as hazardous waste. Doing so is not only environmentally unnecessary but downright counterproductive, and would raise energy costs and kill jobs to boot.
Like several other Obama administration regulations, this extreme proposal goes well beyond anything contemplated under Bush or under Clinton. In fact, it was the Clinton administration EPA that concluded in 2000 that CCBs, chiefly the fly ash from burning coal to produce electricity, should be categorized as non-hazardous and handled in a manner not unlike municipal solid waste. The Obama administration has offered no convincing evidence that this determination was wrong and that CCBs pose a public health threat. Nonetheless, it is moving forward with the hazardous proposal.
A hazardous designation would not only raise CCB handling and disposal costs, but would put an end to their beneficial uses. Large volumes of fly ash are added to concrete, both stretching the supply of this ubiquitous construction material as well as improving its quality. Another kind of CCBs can be used in wallboard, taking the place of mined gypsum. Fully 44 percent of the 136 million tons of CCBs produced annually are put to good use, and the percentage has been growing. No actual problems have emerged with the use of recycled CCBs in these materials.
However, if EPA slaps the hazardous label — and attached stigma — on CCBs, such uses would very likely come to an end due to liability concerns — imagine the field day tort lawyers would have over supposedly toxic sidewalks and poisonous walls.
Thus, a hazardous designation would almost certainly preclude any productive uses of CCBs. As a consequence, more virgin concrete would have to be made, and more gypsum mined. All the attendant energy and other resource inputs as well as emissions associated with these processes would increase — a clear negative for the environment.
From the coal-fired utility standpoint, a hazardous listing would transform CCBs from a valuable byproduct to a costly liability. Many new disposal sites would have to be created and maintained. Half the nation’s electricity is generated from coal, thus the higher electricity generation costs would impact tens of millions of homeowners and businesses. Some coal-fired power plants would have to shut down completely – indeed, a hazardous designation for CCBs fits in perfectly with the Obama administration’s larger anti-coal agenda.
Employment would face a painful double whammy from a hazardous designation. The National Association of Manufacturers estimates that 2,000 of its member manufacturing companies may be involved in using CCBs in the products they make. For the rest, the resultant higher energy costs would further hamper competitiveness and growth. Either way, the rule would reduce manufacturing jobs.
Back in 2000, the EPA wisely concluded that it did “not wish to place any unnecessary barriers on the beneficial uses of these wastes, because they conserve natural resources, reduce disposal costs, and reduce the total amount of waste destined for disposal.” Too bad this kind of common sense has all but disappeared at the Obama EPA.
On the plane to Lisbon—on our way to our first Language of Liberty camp—I watched the first half of the unwatchable Prince of Persia. Alfred Molina has a small role as an outlaw who runs an ancient gambling house/bar/brothel. As usual, Molina is too clever for the film he’s in. In one scene, he explains that he’s crafted his reputation as a cold-blooded killer in order to escape “the most insidious evil lurking in this forsaken country of ours—taxes.”
Half a day and a train ride later, Drew Tidwell and I sit in a planetarium in seaside Porto as Glenn Cripe—the founder of Language of Liberty—explains Ayn Rand’s argument against taxation to a group of young Portuguese men and women. Glenn has been running programs like this for five years. He works with local organizations around the world to host week-long seminars for students and young professionals interested in learning about classical liberal ideas. He’s recently held seminars in Slovakia, Ghana, and Kyrgyzstan. This trip, he’s going to Portugal and Poland.
Here in Porto, the students are mostly active members of Portugal’s Republican Youth group. They are politically ambitious and curious. Some are lawyers, a few are studying economics, and one is an urban planner.
Many of them are having trouble accepting the libertarian and Objectivist arguments put forth by the teachers. Today is the first day of the camp. Before the Ayn Rand lecture, we had a welcome speech by the deputy mayor of Porto; an introduction to political philosophy taught by a young American; a lecture on the history of classical liberalism by a businessman from Luxembourg; and a viewing of John Stossel’s “Is There Anything Government Can’t Do?,” which provoked an animated discussion among the students about the value of social programs in Portugal.
After Glenn’s lecture, Drew and I step outside to have a cigarette with one of the students, a young lawyer from Porto who speaks in near-perfect English. He says we and the other teachers are far too libertarian for Portugal.
“It’s our tradition,” he explains. He says the Portuguese government has long provided goods and services for the people, ever since the government first started sending tall ships around the world and bringing back foreign goods for the Portuguese market. “For us, the government is like a father,” he says with an apologetic shrug.
But he recognizes some of the faults of a paternalistic government system. Public universities are crowding out private universities in Portugal. All of the medical schools are public. Many Portuguese students go to Spain or elsewhere to study medicine at private universities.
“I think it makes sense that if the government invests in your education, you work for the public health system,” the lawyer says. “But it’s not right that you don’t have a choice.”
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