Michael D. Tanner
A New York Times editorial yesterday brought attention to the severe shortage in the number of kidneys available for transplant. There are over 100,000 Americans on the waiting list for a kidney transplant, and the average wait time is almost five years. Last year there were only 4,715 transplants from living donors. The vast majority of these donations were from relatives, only 463 kidney donations were from unrelated individuals. Relative to the pool of people waiting, this is little more than a drop in the bucket. Clearly, demand for kidneys is far outpacing the supply and our system for supplying viable organs to those who need them is failing, and these failures have serious consequences. The National Kidney Foundation estimates that almost 3,381 patients died while waiting for a kidney transplant last year. Absent change, this problem will only get worse in the future.
It is commendable that the editorial board raises this issue, but they then devote the rest of the post to trying to find ways to remedy the problem without having to “resor[t] to paying for kidneys.” The primary reasons for dismissing any kind of market for organs are that such a market is prohibited by law and is not supported by the World Health Organization. There are ethical concerns and fears of exploitation, and these should not be summarily dismissed. However, given how badly our current system is failing, could it be time to rethink our policy? Could a free-market better address the needs of thousands of organ transplant patients? Because organ sales are currently illegal in most industrialized countries, there is almost no empirical data and no sense of what to expect if we were to make this shift. However, at a Cato event in March, Sigrid Fry-Revere shared what she learned from observing one of the only countries with a free-market for organ donations.“The Kidney Sellers: A Journey of Discovery in Iran” (featuring the author, Sigrid Fry-Revere)
The Sunlight Foundation reports that the Federal Communications Commission has received more than 800,000 public comments on the topic of “net neutrality,” more than 60 percent of them form letters written by organized campaigns and more than 200 from law firms on behalf of themselves or their clients. That’s an impressive outpouring of public comments.
But Berin Szoka, a long-ago Cato intern who now runs TechFreedom, argues, “This debate is no longer about net neutrality. A radical fringe has hijacked the conversation in an attempt to undo two decades of bipartisan consensus against heavy-handed government control of the Internet.” TechFreedom has just launched DontBreakThe.Net, a web-based campaign to expose the danger facing the internet from well-meaning demands for something called “net neutrality.” In an open letter to FCC chairman Tom Wheeler, Szoka says:
Subjecting broadband to Title II of the 1996 Telecom Act would trigger endless litigation, cripple investment, slow broadband deployment and upgrades, and thus harm underserved communities. Al Gore may not have exactly ‘invented the Internet,’ but President Clinton’s FCC chairman Bill Kennard deserves much credit for choosing not to embroil the Internet in what he called the ‘morass’ of Title II. Kennard’s approach of ‘vigilant restraint’ unleashed over $1 trillion in private investment, which built the broadband networks everyone takes for granted today. Abandoning that approach would truly break the Internet.
Net Neutrality supporters such as Google, Facebook, and the NAACP haven’t jumped on the Title II bandwagon because they understand that Title II would threaten the entire Internet. Title II proponents claim the FCC can simply ‘reclassify’ broadband, but in truth, there’s no such thing as reclassification, only re-interpretation of the key definitions of the 1996 Telecom Act. If the FCC re-opens that Pandora’s Box, the bright line Chairman Kennard drew between Title II and the Internet will disappear forever. Startups and edge/content providers will inevitably be caught in the fray. And besides, the FCC has a long history of overstepping its bounds.
Invoking Title II would trigger years of litigation. It’s not clear the FCC could ultimately ‘reclassify’ broadband at all, and even less clear the FCC could, or actually would, follow through on talk of paring back Title II’s most burdensome rules, like retail price controls. Even if ‘reclassification’ stood up in court, the FCC still couldn’t do what net neutrality hardliners want: banning prioritization. The FCC would succeed only in creating a dark cloud of legal uncertainty. That would slow broadband upgrades and discourage new entrants, such as Google Fiber, from entering the market at all.
The best policy would be to maintain the ‘Hands off the Net’ approach that has otherwise prevailed for 20 years. Innovation could thrive, and regulators could still keep a watchful eye, intervening only where there is clear evidence of actual harm, not just abstract fears. As former FCC Chairman Bill Kennard put it, ‘I don’t want to dump the whole morass of Title II regulation on the cable pipe.’ If we want to maintain a free and open Internet, and encourage broadband competition, the FCC would do well to heed his advice.
TechFreedom created this catchy graphic for its campaign to encourage more people to understand what’s at stake in the so-called “net neutrality” fight.
We’ve gotten used to American dominance in the internet/software industries. That may not last forever:
Over the weekend, China announced that it was planning to launch a homegrown operating system to replace Windows and Android for running the nation’s desktop and mobile devices. The first iteration of this “Made in China” OS could roll out as early as October
There is some good and bad with this. The good is that more competition in these industries would be great. While there is already a fair amount of disruption and innovation here, there are also some key products/services where a couple firms are pretty dominant. Consumers would benefit tremendously from more competition.
At the same time, this may not play out exactly like we free market supporters would like. For example:
- “This new Chinese OS, almost certainly, would be much more of a top-down initiative from the Chinese government (via the Ministry of Industry and Information Technology) that may be more about meeting the needs of the government rather than meeting the needs of consumers.”
- “China’s government could build in backdoors and trapdoors to make it easier to monitor, control and censor users.”
- The basis of this new entrant into the OS market may in part be due to the fact that “Microsoft Windows 8 has been banned in China for use on new government computers since May.”
Americans have gained a lot from Chinese exports of products over the years. It would be great if the same thing could happen in the internet and software worlds.
CAIRO—Egypt’s capital is crowded, busy, confused, and messy. Security isn’t obvious, until you get close to a sensitive site, such as the Interior Ministry.
The military has taken firm control, elevating its leader, Abdel Fata al-Sisi, to the presidency. The army permitted dictator Hosni al-Mubarak’s ouster by street protests in 2011 because he planned to turn military rule into a family dynasty.
If ousted president Mohamed al-Morsi and the Muslim Brotherhood been defeated in a future election, they would have been discredited peacefully. However, the coup turned the movement’s members into angry victims. In Cairo they took over Rab’a al-Adawiya and al-Nahda Squares, just as the anti-Mubarak and anti-Morsi crowds had done in Tahir Square.
The military government responded with a campaign of premeditated murder.
In a new report Human Rights Watch detailed the junta’s crimes. From the beginning the military used deadly force with no concern for casualties. In fact, the army began using live ammunition against protestors just two days after the coup.
The most horrific episode occurred when the regime deployed soldiers, APCs, bulldozers, police, and snipers to destroy a vast tent village in Rab’a Square. Explained HRW: “security forces used lethal force indiscriminately, with snipers and gunmen inside and alongside APCs firing their weaponry on large crowds of protestors. Dozens of witnesses also said they saw snipers fire from helicopters over Rab’a Square.”
In roughly 12 hours HRW figured that at least 817 and likely more than 1000 people were slaughtered. Since then, said HRW: “Security forces have continued to use excessive lethal force against demonstrators.”
Moreover, the regime moved against liberals and other critics, including youthful leaders of the revolution against Mubarak. Bahey al-Din Hassan, head of the Cairo Institute for Human Rights Studies, argued that military control “is more horrible than the old regime.”
In fact, by its own count the government has arrested 22,000 people, many of whom have been tortured. When meeting a visiting delegation organized by the International Coalition for Freedoms and Rights of which I was part, Ayaalaa Hosni, spokeswoman for a women’s anti-coup group, complained that you can’t demonstrate without a warrant but if you “go to ask for a warrant you get arrested.”
Outside assessments are uniformly negative. David Kramer, president of the group Freedom House, declared in June: “the human rights situation has worsened compared to what it was at any point under Hosni Mubarak.” His organization reported that Egypt had gone from “Partly Free” to “Not Free” after the coup, with significant deterioration across the board.
In a separate study Freedom House rated Egypt’s media “not free.” An organizer for press freedom told our delegation that ten journalists had been killed. Scores had been shot and injured, more than 100 had been assaulted, and scores more had been arrested. Another reporter said simply: “Journalism has become a crime.”
Yet repression is unlikely to deliver stability. Terrorism may be seen by more than jihadists as the only way to challenge a regime which bars peaceful dissent. Mubarak’s jails helped turn Brotherhood member Ayman al-Zawahiri into al-Qaeda’s leader.
There isn’t much the U.S. can do to change Cairo. But the Obama administration could stop intervening constantly and maladroitly. In fact, Washington’s influence is extremely limited.
As I wrote in Forbes online: “The U.S. should work with Cairo on issues of shared interest but otherwise maintain substantial distance. In particular, the administration should stop using foreign aid to bribe Egypt’s generals. They don’t have to be paid to keep the peace and shouldn’t be paid for anything else.”
Egypt appears likely to end up without liberty or stability. Instead of pretending to be in control, Washington should step back from a crisis which it cannot resolve.
It’s bad enough that a Florida teachers union, the Florida School Boards Association, and the PTA filed a lawsuit to deprive low-income students of scholarships citing the state constitution’s historically anti-Catholic, Know-Nothing inspired “Blaine amendment.” But now anti-school choice activists are demanding that a judge recuse herself from another lawsuit against the state’s choice laws because she’s Catholic.
Kathleen Oropeza, president of the ironically-named Fund Education Now (given that they want to deny tax-credit scholarship funds to low-income students), filed a motion demanding that the circuit court judge recuse herself for the following reasons:
2. On August 26 and 27, 2014, I discovered facts concerning Judge Angela C. Dempsey that cause me to believe that she is biased against the Plaintiff’s position that the Florida Tax Credit Program and the McKay Scholarship Programs are violations of Article IX of the Florida Constitution.
3. The facts are as follows:
a. Judge Dempsey is a member of the Board of Directors of Catholic Charities, and a contributor to same.
b. Judge Dempsey has been a speaker at Trinity Catholic School in Leon County, which is a recipient of funds from the Florida Tax Credit Scholarship Program and the McKay Scholarship Program as well as Step Up for Students which provides vouchers to Trinity Catholic School. (See Ex. A.)
c. The Florida Catholic Conference was an amicus curiae in Bush v. Holmes, 919 So. 2d 392, 404 (Fla. 2006), and supported Opportunity Scholarship vouchers which were struck down by the Florida Supreme Court.
d. Plaintiff’s research has led her to discover a Catholic strategy for saving Catholic education through Florida-style Opportunity Scholarships. A 2011 report, From Aspirations to Action, provides the strategy for this Catholic position complete with “Opportunity Scholarship” model legislation and with getting rid of the Blaine/No Child language through-out the nation, which Plaintiff believes has made Judge Dempsey unable to be impartial in this case. Also, Rev. Larry Snyder, president of Catholic Charities USA, is listed as a Council Member of the National Leadership Roundtable on Church Management, the organization which produced the position statement. (Ex. B, at 77.)
e. On April 20, 2014, Face the Nation reported that Cardinals and Bishops of the Catholic Church are pushing vouchers as a solution to a public school report. […]
4. These facts make me believe there is a continuing association between Judge Dempsey and the interests in my case through her relationship with the Catholic doctrine and position on vouchers for Catholic schools; Catholic Charities; Trinity Catholic School; and as a contributor to Catholic causes. Had I been aware of this relationship, I would have moved to disqualify her before she ruled in my case.
The judge belongs to a Catholic charity and has spoken at a Catholic school, the local Catholic Conference took a position in the original lawsuit, and a cardinal in another state said nice things about school choice on TV, therefore the anti-school choice activists want her to recuse herself. In other words, they want her to recuse herself because she’s Catholic.
The defendants’ response to the motion of recusal firmly rejects Oropeza’s arguments as “legally insufficient” and not “objectively reasonable”:
10. Plaintiffs’ claim, as articulated in Ms. Oropeza’s affidavit, is legally insufficient. Of the five reasons articulated by Ms. Oropeza, only two—Judge Dempsey’s membership in and board service for Catholic Charities of Northwest Florida, and her role as a speaker at a Leon County parochial school—actually relate to the judge’s own activities. But neither of these affiliations indicate that Judge Dempsey is biased on the question of so-called voucher programs. According to its website, Catholic Charities of Northwest Florida focuses its charitable efforts on immigration, crisis pregnancy and adoption, and emergency assistance—not vouchers or other education issues. And a speaking engagement by Judge Dempsey at a parochial school that receives voucher funds—at an unspecified time, on an unspecified topic and in an unspecified capacity—provides no basis to impute any bias to Judge Dempsey on the question of vouchers or any other topic at issue in this lawsuit.
11. The remaining three “facts” alleged in Ms. Oropeza’s affidavit show nothing more than some individuals and organizations, with some degree of affiliation to the Catholic Church, support the enrollment of students at parochial schools through voucher programs. Unless Plaintiffs were to assert that all Catholics, by reason of their faith, support voucher programs to such a degree that they are unable to render an unbiased opinion on the issue—a position that Ms. Oropeza expressly disclaims—there is nothing about these third party positions that could shed any light on Judge Dempsey’s own ability to fairly and impartially preside over this case.
The defendants also note that there “are no judges in this state who have no involvement with the schools of this state,” since they “either have or had children in school, studied in Florida schools themselves, or have close relatives involved in Florida’s schools,” yet it would be ludicrous to demand that a judge recuse herself for such reasons. It would be equally absurd to demand that female judges not preside over cases involving abortion or sexual harassment or that black judges recuse themselves from cases involving racial discrimination.
Hilariously, Oropeza claimed in her motion, “I do not base this motion on Judge Dempsey’s religious beliefs, but rather on the positions of the organizations with which she is affiliated.” Yes of course, organizations like… the Catholic church and affiliated Catholic charities. But this has nothing to do with the judge’s religious beliefs, she claims, it’s just an attempt to protect citizens from the nefarious “Catholic strategy” that she “discovered” in her “research.” That sounds awfully familiar…
Image: Thomas Nast’s infamous 1875 “American River Ganges” cartoon depicts a noble white Protestant male protecting his family from the bishops’ “Catholic strategy.”
Last year, plaintiffs demanded that a federal judge recuse himself from a case involving the Catholic church because he is Catholic. Sadly, the demand that Catholic judges recuse themselves from certain cases is increasingly common, even from seemingly respectable sources. The imposition of a religious test for judges should be vigorously resisted.
K. William Watson
Many Americans view the dissemination and enforcement of food safety standards as a basic function of government, and it’s difficult for them to imagine a world where food is both safe and unregulated. Libertarians can point out that the safety of a product is, just like quality and price, something that consumers directly care about and as such will be most effectively preserved in a competitive free market. But it’s one thing to make abstract economic arguments and quite another to have real life examples.
Well, here’s an interesting story from China, as reported by Reuters last week:
A Chinese retailer is offering insurance to customers who buy infant milk powder, highlighting the lengths to which companies are going to address concerns about food safety in China.
Suning Commerce Group Ltd, which owns the Redbaby chain of stores, told Reuters it had launched the policy this week, backed by China’s second largest insurer, Ping An Insurance Group.
The policy stipulates that if a brand of milk powder is recalled, customers who bought cans from any Redbaby store or its e-commerce website would be paid up to 2,000 yuan ($325) per can, with payments capped at 100,000 yuan.
“In recent years, the milk powder market in China has been in a mess,” Suning said in an email.
“We realized that parents pay a great deal of attention to their children’s health and safety, and in particular, the safety of their infants’ foods,” it added. Insurer Ping An said Suning’s policy is the first of its kind in China.
Concerns about the safety of baby milk powder came to the fore in 2008 when thousands of infants fell sick and six died after an industrial chemical was added to raise the apparent protein content of certain products.
Personally, I doubt consumers actually want recall insurance. Parents don’t want to be compensated for buying a product that might injure their babies; they want safe products. But Suning’s providing the insurance signals to consumers that the retailer is willing to vouch for the safety of its product.
Now that the retailer is on the hook financially, it will predictably put pressure on its suppliers and manufacturers. All of this is done simply to get more business from anxious customers and make more money.
Retailers have always played an important role in bridging the gap between mysterious supply chains and consumer confidence. Even in a highly regulated market, they reliably step in when regulators fail, and they do a better job of meeting the diverse demands of consumers in a pluralistic society.
Yesterday, on the same day that the New Hampshire Supreme Court rejected a challenge to the state’s scholarship tax credit law, a district court judge struck down Oklahoma’s special-needs voucher law.
Both vouchers and scholarship tax credit laws are constitutional under the U.S. Constitution, but vouchers laws have often run afoul of states’ historically anti-Catholic Blaine Amendments, which prohibit public funds from being expended at religiously affiliated schools. By contrast, scholarship tax credit laws have a perfect record at both the federal and state courts because they rely on voluntary, private donations. Donors to nonprofit scholarship organizations receive tax credits worth 50 percent to 100 percent of their donation, depending on the state. In ACSTO v. Winn, the U.S. Supreme Court held tax credit funds did not constitute public money because they had not “come into the tax collector’s hands.” These credits are constitutionally no different than tax deductions for charitable donations to nonprofits (including religious organizations) or the 100 percent property tax exemption granted to houses of worship. In none of those cases do we say that the nonprofit or religious institution is “publicly funded.”
Yesterday’s decision is heartbreaking for the hundreds of Okie children with special needs who use the vouchers to attend the schools of their parents’ choice. If Oklahoma policymakers want to help those children, they will follow the legal advice of the Institute for Justice and enact a special-needs scholarship tax credit or expand their existing tax credit law.
For generations of Americans, “Jefferson Smith” was the archetype of the honest, hard-working man of the people who gets into politics to serve the public interest and stands up to powerful interests. Mr. Smith Goes to Washington is the quintessential movie about a corrupt system that can be toppled by a single man of integrity. So maybe it’s no surprise that there seem to be a lot of Jeff Smiths getting into politics. What better name to inspire confidence?
Unfortunately, Sen. Jeff Smith of some unnamed Western state would be mighty embarrassed by some of the Jeff Smiths who have come along in his wake.
Today in Washington, D.C., former city council candidate Jeff Smith was sentenced to 60 days in jail for accepting illegal campaign funds and making false reports to the city’s campaign finance office. Like D.C. mayor Vincent Gray, Smith was essentially accused of benefiting from an illegal shadow campaign run by a major donor who makes his money from city contracts.
Today’s Jeff Smith story reminded me of one from a few years ago. As Jason Zengerle reported in the New Republic, Missouri state senator Jeff Smith “was the brightest young star in the Missouri Democratic Party. Thanks to an award-winning documentary about him, he was also a national political figure—a crusading reformer whose combination of charisma, idealism, and intelligence prompted comparisons to Howard Dean, Paul Wellstone, and even Barack Obama. Although he was only in his first term, no one (least of all of Smith himself) doubted he was destined for greatness.”
Jefferson Smith was the leader of the Boy Rangers. Jeff Smith of Missouri taught political science at Washington University and had equally devoted young supporters. Indeed, that Jeff Smith was so Capra-esque – at least to liberal eyes – that filmmaker Frank Popper made a film about him. Zengerle writes that the film, “Can Mr. Smith Get to Washington Anymore?, is a minor masterpiece of the political documentary genre. After its release in 2006, it broadcast nationally on PBS’s prestigious ‘Independent Lens’ series and earned Popper, a first-time feature director, numerous festival accolades.”
But then it all went wrong. Right from the beginning, actually. In his first campaign, afraid of losing, Smith turned to some sketchy operatives who put together – whattaya know? – an illegal shadow campaign to attack his opponent. Eventually the FEC came calling, and then the FBI. Things spiraled out of control. One of the operatives ratted him out. His campaign manager committed suicide. Smith was sentenced to a year in jail.
I remember hearing back in Kentucky about a woman who refused to vote for a friend for public office because “if a man’s not ruint when he gets in there, he’s ruint when he comes out. And there’s no sense in ruining a good time.” Frank Capra’s fictional Jeff Smith could resist the temptations of power, but it seems that a lot of regular folks named Jeff Smith – or anything else – can’t.
Andrew J. Coulson
In ACSTO v. Winn (2011), the U.S. Supreme Court upheld Arizona’s scholarship donation tax credit program on the grounds that plaintiffs did not have standing to sue in the first place, because they could not show any specific injury to themselves caused by the voluntary program. Today, the New Hampshire Supreme Court reached the same conclusion in a case involving that state’s new scholarship program. Importantly, this preserves the perfect legal record of modern education tax credit school choice programs.
Under these programs, individuals or businesses can donate money to a non-profit Scholarship Granting Organization that then uses the money to make private education affordable to lower income families. The donor’s taxes are cut in proportion to the size of the donation they make (100% in AZ, 85% in NH). No one is compelled to make a donation, and those who do not donate have their taxes collected as they always were. Those who choose to make donations can pick the organization that receives their money, just as they would pick any other charitable organization.
To have standing to sue over the constitutionality of a law, it is generally required to show that the law has personally and concretely harmed you in some way. Though this may seem arbitrary, it has a very important purpose, which the NH ruling explains in detail: without the harm requirement, courts would have sweeping power to override the will of voters and their elected representatives. If anyone could sue to overturn any law for any reason, innumerable cases would be filed and courts could simply agree to hear the ones pertaining to whatever laws they happened not to like.
But there is another reason why it is important that both the U.S. and NH Supreme Courts rejected challenges to education tax credits due to lack of standing: freedom of conscience. The plaintiffs lacked standing in these cases because the programs are voluntary. No one has to donate to a scholarship organization. Those who do not donate see their taxes collected as they’d always been. As a result, no one is compelled to pay for religious instruction, which would violate many state constitutions.
In fact, education tax credits offer a meaningful improvement for freedom of conscience over the public schooling status quo. Under the current system, everyone is forced to pay for a single official system of education that cannot possibly reflect the values of such a diverse nation. The result, as my colleague Neal McCluskey has shown, is an endless battle over the content of public schooling. Education tax credits avoid that compulsion, allowing people to choose the organization that receives their education donations. In a mature program like the one in Pennsylvania, there are over a hundred different scholarship organizations to choose from. It is thus possible to ensure funding to a diverse range of educational choices without forcing any taxpayer to support a particular sort of instruction that might violate his or her most deeply held convictions.
As I wrote three years ago, in the wake of the U.S. Supreme Court ruling, education tax credits are A “Winn” for Education and Freedom of Conscience.
Low- and middle-income children in New Hampshire will now be able to use tax-credit scholarships at any school they choose, whether secular or religious.
This morning, the New Hampshire Supreme Court (NHSC) followed the precedent of the U.S. Supreme Court in unanimously ruling that the petitioners challenging the “Live Free or Die” state’s scholarship tax credit law lack standing because they could not demonstrate any harm. The law grants tax credits to corporations worth 85 percent of their donations to nonprofit scholarship organizations that help low- and middle-income families send their children to the schools of their choice.
When two anti-school choice organizations challenged the law, the Institute for Justice intervened, representing several low-income families who had applied for the scholarships. The Cato Institute filed an amicus brief defending the law’s constitutionality.
The NHSC overturned a lower court’s flawed and unprecedented decision, which had forbidden scholarship recipients from using the funds at religiously-affiliated private schools. The lower court held that the scholarship funds constituted “money raised by taxation” and therefore violated the state’s historically anti-Catholic Blaine Amendment, which states:
[No] money raised by taxation shall ever be granted or applied for the use of the schools of institutions of any religious sect or denomination. (New Hampshire Constitution, Part II, Article 83)
The NHSC did not address the merits of the lower court’s decision because it held that petitioners were unable to demonstrate that “their personal rights have been impaired or prejudiced.” The U.S. Supreme Court, in rejecting the petitioners’ standing in ACSTO v. Winn, held that the tax-credit funds did not constitute public money because they had not “come into the tax collector’s hands.”
This is great news for the tens of thousands of students who qualify for tax-credit scholarships. Last year, nearly 97 percent of scholarship families reported being satisfied with the schools they chose for their children.
The decision’s import reaches far beyond New Hampshire’s borders. The NHSC’s ruling today takes some wind out of the sails of the Florida School Boards Association (FSBA), which is inexplicably suing the Sunshine State over its more-than-decade-old scholarship tax credit law, in a complaint that mirrors the legal reasoning of the NH petitioners. It is likely that the Florida Supreme Court’s reasoning will mirror that of the NHSC and U.S. Supreme Court.
Earlier this week, Illinois Gov. Pat Quinn (D) vetoed HB 4075, a ridesharing bill backed by Illinois’ taxi industry that was overwhelmingly passed by the state House and Senate earlier this year. If the bill had been signed into law, Illinois drivers using ridesharing services for more than 18 hours a week would have had to adhere to burdensome regulations such as a requirement for a chauffeur’s license. The bill would also have created a new legal category (“commercial ridesharing agreements”) and required rideshare companies to provide its drivers with the commercial liability insurance used for taxis. Quinn should be praised for vetoing the bill. However, given the bill’s popularity among state legislators, there is a chance of an override of the veto.
The Illinois House passed HB 4075 in April by 80 votes to 26. In May, the Illinois Senate passed the bill by 46 to 8. In order to override a veto, 36 votes are needed in the Senate and 71 are needed in the House.
A few weeks after the Illinois Senate passed HB 4075, the Chicago City Council approved a rideshare ordinance, which goes into effect next week. The ordinance is far from perfect. For instance, it requires that all drivers using a rideshare company’s technology to have a chauffeur’s license if the driver workforce of that company averages more than 20 hours per week per driver. The ordinance also requires that rideshare companies whose drivers operate fewer than 20 hours per week on average have their vehicle inspections and background checks approved by the city. However, the ordinance is less restrictive than HB 4075 and its trailer bill HB 5331, which Quinn also vetoed.
In his veto letter, Quinn rightly points out that it would be “premature—and perhaps counterproductive” to impose a statewide ridesharing regulatory structure on Illinois when the Chicago ordinance has yet to come into effect and that there is not enough evidence to judge the effectiveness of ridesharing ordinances.
However, it should be remembered that the ordinance in Chicago increases the number of regulations. While free marketers may be tempted to welcome legislation that allows ridesharing companies to operate, it is worth keeping in mind that as local lawmakers across the country try to regulate rideshare companies, there is a risk of regulatory capture and, as the Competitive Enterprise Institute’s Marc Scribner has warned, a risk of ridesharing companies eventually using legislation to their advantage to stifle competition as technology continues to advance.
Marian L. Tupy
So, here is a story to make your blood boil. According to National Review, “the federal government acted with a bias, giving renewable-energy companies a pass on unlawful bird deaths while rigorously prosecuting traditional energy companies for the same infractions.” The NR article follows a string of recent stories complaining about tens of thousands of birds cut up to pieces or fried in the sky by windmills and solar plants.
Speaking of birds…
Five decades ago, Rachel Carson, of Silent Spring infamy, helped to ban a pesticide called DDT. Back then, DDT was widely used not only in agriculture, but also in malaria control. Carson argued, among other things, that the use of DDT endangered bird populations. The political left jumped on Carson’s arguments. After a massive campaign, DDT was withdrawn from agriculture and its use in malaria control was greatly restricted. Most countries followed the American example and banned DDT for use in agriculture.
Although developing countries could technically use DDT for disease control, no donor agencies (dominated by western leftists) would support its use. This amounted to a de facto ban of DDT in malaria control. Nobody knows for sure, but thousands of Africans, perhaps millions, have died of malaria since the use of DDT was prematurely discontinued, all because of a hysterical drive to save the birds in the West.
Today, tens of thousands of birds are dying to satisfy the newest progressive fetish: the drive for renewable energy. At least they are dying in an environmentally friendly way.
As the left likes to say, you cannot make an omelet without breaking some eggs!
This morning, the Congressional Budget Office (CBO) released its updated Budget and Economic Outlook report, known in Washington, D.C. parlance as the “baseline.” This report details CBO’s projections on federal spending and revenue for this year and into the future.
Below are a few key points from the new report.
- The deficit for 2014, the difference between federal spending and revenue, will be $506 billion, up from the $492 billion forecasted in April. This is driven by lower-than-expected corporate income tax revenue.
- According to CBO, Medicaid spending jumped 15 percent year-over-year. Adding millions of new individuals under ObamaCare to Medicaid comes at a steep price. Social Security spending jumped 4.6 percent.
- The entitlement programs continue to drive spending projections and put enormous weight on the budget. CBO estimates that Social Security, the major health care programs, and interest account for 85 percent of projected spending increases over next ten years.
- Mandatory spending–which includes the big entitlement programs–will increase 5.5 percent annually over next ten years. ObamaCare leads the way. The newly created subsidies for health insurance will cost taxpayers $1 trillion over ten years, growing from $17 billion in 2014 to $450 billion in 2024.
- The one bright spot continues to the Budget Control Act of 2011 which is controlling the growth of discretionary spending. Fiscal Year 2015 spending will be $1.016 trillion compared to $1.014 trillion in FY14.
Reports are out this morning that Louisiana will be challenging in court federal coercion behind the Common Core standards. If so, it will open a new front in the war against the Core, a standardization effort that has been listing badly in public opinion, but nonetheless survives in the vast majority of states. That could very well change should the force of Race to the Top funding or, more importantly today, waivers from the No Child Left Behind Act, be eliminated by the courts, as Core supporters likely knew when they asked for federal pressure.
Does this suit have a chance of success? I’m not a lawyer – though I’ll be consulting a few! – so this is not the best-informed legal analysis. From what I do know, though, the chances of prevailing are middling, at best. The courts in the past have been pretty lenient in cases in which Washington gets states to do its bidding in exchange for funding when the feds don’t have authority in the Constitution to do something. And the Louisiana suit hinges largely on federal action that seems very intentionally to push the Core – standards “common to a majority of states” under RTTT, and only one other standards option to get a waiver – but that doesn’t state outright that the Core must be adopted. That way the feds can say they aren’t prescribing a specific “program of instruction,” which would clearly violate the letter of several education laws, while in reality very much requiring such a program.
Sadly, one major diversion likely to be employed by Core opponents to battle this suit is impugning Governor Bobby Jindal’s motives. Since Jindal first reversed course on the Core, supporters of the standards have said his stance is all about presidential aspirations and not about what’s best for kids. Those may well be his motives, I don’t know. But as with all aspects of the Core debate, we should focus on the merits of the arguments being employed, not the motives for offering them. (This goes for opponents who attack people like Bill Gates, too.) We should look at the merits of the lawsuit, which requires an honest assessment of both the Constitution and federal education statutes, just as we should look at the research on national standards, the content of the Core, and the reality of how so many states adopted standards that are now heavily disliked.
Do those things, and I think the Core loses hands down. Ignore them completely, and everyone loses.
BEIJING—Today China’s big cities look much like urban areas anywhere in the world. There are lots of cars. What I didn’t expect was to see a Christian “fish” on an auto.
Religion is “on the rise,” one U.S. diplomat told me.
It also is under attack by the Chinese government. As I wrote in the American Spectator online: “When it comes to religious liberty in the People’s Republic of China, there’s the (surprisingly frequent) good, (not so constant) bad, and (still too often) ugly.”
China turned hostile to Christianity after the 1949 revolution. The PRC has routinely been ranked among the worst religious persecutors.
In its latest report on religious liberty, the State Department observed: “The government exercised state control over religion and restricted the activities and personal freedom of religious adherents when these were perceived, even potentially, to threaten state or Chinese Communist Party (CCP) interests, including social stability. The government harassed, assaulted, detained, arrested, or sentenced to prison a number of religious adherents.”
Nevertheless, the experience varied geographically: “In some parts of the country, however, local authorities tacitly approved of or did not interfere with the activities of unregistered groups.”
The group China Aid, headed by Bob Fu, a former house church pastor, compiled a list of incidents. The authorities in Zhejiang Province have been particularly repressive, destroying churches and crosses.
Provincial officials pointed to the zoning laws to justify this and similar actions elsewhere, but Renee Zia, of Chinese Human Rights Defenders, argued that it was just “an excuse for the current wave of clamping down on Christian churches.” The government’s real concern is Christianity’s growth. Provincial party chief Xia Baolong reportedly complained that Christian symbols were too “conspicuous.”
Still, the situation in the PRC is far better than it was even a decade or two ago. The majority of persecution cases, wrote blogger Renee Riley, involved Christians who “were either engaged in activity which the government perceived as a threat, or they ran afoul of the economic or political interests of corrupt local leaders.” Open Doors reported that the government has “chosen not to strictly control Christian activities in most regions in China,” and that the majority of churches “are not registered, but tolerated.”
The number of Christians was estimated in 2011 by Pew Research at 67 million and likely is much higher today. There already may be more Christians than Chinese Communist Party members. Yang figured there could be 247 million Christians by 2030.
The PRC hopes to constrain Christianity by forcing it into a “patriotic” channel. Nevertheless, the PRC may not find it easy to create a Sinicized Christianity. I attended the 800-member Beijing Chaoyang Church. There were 70 baptisms on the day I attended. The church is state-sanctioned, but the sermon seemed orthodox theologically (simultaneous translation was provided for foreigners).
My friend Phil Sheldon, who regularly attends the church with his Chinese wife, spoke positively of his experience. He earlier wrote: “I have seen and heard Christianity expressed in public. I have been in restaurants with Christian music playing.” And then there’s that car sporting a “fish”!
Even some CCP members recognize the challenge. Admitted Wang: “If we rush to try to push for results and want to immediately ‘liberate’ people from the influence of religion, then it will have the opposite effect.”
In the PRC today, people are ever less willing to worship the false god of communism.
Gabriela Calderon de Burgos
A new “monetary and finance” law that was approved by Ecuador’s National Assembly in July, is expected to be signed into law any day now. Many suspect that this marks the beginning of the end for dollarization in Ecuador, which began in January of 2000. But the underlying threat to dollarization is the incessant growth of public spending. Losing dollarization would be a sad development, considering it is what has protected Ecuadorians from one of the worst evils of populism: high inflation.
The remarkable contribution dollarization has made to the Ecuadorian economy is worth noting. A 2010 study published by Ecuador’s central bank (BCE) analyzed the first decade of the absence of independent monetary policy and found that average GDP growth increased from -6.3 percent during the 1990s to 4.4 percent during the 2000s; annual inflation decreased from a high of 90 percent in September of 2000 to single digits within a year, and has averaged 3 percent since 2004. Additionally, interest rates went down immediately, thereby reducing the cost of capital. According to the World Bank, the percentage of Ecuadorians living on less than $2 a day (PPP) decreased from 37.7 percent in 2000 to 10.6 percent in 2009.
Of course, there are many problems dollarization cannot solve and the positive outcomes above are not solely due to it. But it probably has been one of the main factors contributing to Ecuadorian growth prior to and during our current “revolutionary” government. In fact, Ecuador owes its superior economic performance today–compared the two most prominent populist nations in the region, Argentina and Venezuela–mostly to dollarization.
Ecuadorians love getting paid and saving in American dollars–and the government knows this. So why would de-dollarization be more likely today than seven years ago when Rafael Correa became president? Mainly because public spending has increased to unsustainable levels and will most likely continue its breakneck growth as Correa seeks to stay in power indefinitely or, at least, beyond 2017. Additionally, Ecuador’s 2008 Constitution made the BCE explicitly part of the executive branch (Article No. 303) and retained its power to issue currency of legal tender. Moreover, the new monetary and finance law contains several provisions that are only applicable if the BCE were to issue a national currency again. These include, for example, a whole chapter on the “exchange rate regime,” the ability to perform open market operations, and to use the rediscount window to ensure liquidity within the economy.
Most of the discussion has revolved around the provisions of the new monetary and finance law and how it might be the first step towards a return to a national currency. But laws and constitutions come and go fairly easily in Ecuador and are frequently violated if politics make it convenient to do so.
As F.A. Hayek explained in his book Denationalization of Money, national state monopolies over the issuing of money arose out of the discovery by kings that they could finance their uncontrolled spending by reducing the metallic content of the currency and forcing people to accept the devalued coins. Likewise, the main threat to dollarization is the incessant growth of public spending. More public spending increases the temptation to go back to the days when Ecuadorian politicians could monetize debt via the BCE. Public spending has grown from 24.6 percent of GDP in 2007 to 44.4 percent in 2013. Just so that you get an idea of the incredible growth of spending, this year’s projected fiscal deficit of $9.2 billion is almost equivalent to the total government spending in 2006 ($9.927 billion).
The government is already showing signs of a fiscal squeeze and making adjustments might be a difficult pill to swallow. For instance, expected government spending in the bureaucracy ($8.433 billion) and in subsidies ($6.213 billion) for 2014 would no longer be covered by expected tax revenue ($13.965 billion). These expenditures, like most other budget items, are politically costly to reduce. Public investment, however, is one of the few areas of the budget that could be easily trimmed. But the development model of Correa’s so called “citizen’s revolution” has crowded out so much private investment that the economy has become very dependent on public investment for growth.
If the government continues down this path of fiscal irresponsibility, the temptation to use the printing press at the BCE might become irresistible. The cherry on top of all of this is that the new penal code that went into effect this month makes it a crime—punishable with up to seven years in jail—to “publish, broadcast or spread” economic or financial information that, according to the authorities, is false and might cause economic or financial “panic.”
Patrick J. Michaels and Paul C. "Chip" Knappenberger
Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”
Climate alarmism is like one of those pop-up Bozos. No matter how many times you bop it, up it springs. In fact, the only way to stop it, as most kids learn, is to deflate it. In this case, the air inside Bozo is your and my tax money.
Two scientific papers released last week combine for a powerful 1-2 haymaker, but, rest assured, Bozo springs eternal. The first says that human aerosol emissions are not that responsible for offsetting the warming influence of greenhouse gas emissions, while the second finds that the observed warming from human greenhouse gases is less than a lot of people think.
We aren’t at all surprised by the first result. The cooling effect of sulphate particulates, which go into the air along with carbon dioxide when fossil fuels (mainly coal) are combusted, was only invoked in the mid-1980s, when the lack of warming predicted by computer models was embarrassingly obvious.
This is the kind of thing that the iconic historian of science, Thomas Kuhn, predicted in his classic book, The Structure of Scientific Revolutions. When a scientific “paradigm” is assaulted by reality, increasingly ornate and bizarre explanations are put forth to keep it alive. Sulfates smelled like one of those to us back in the 1980s, and now it looks like the excuses are finally getting comeuppance.
The second result also comes as little news to us, as we have been saying for years that the human carbon dioxide emissions are not the only player in the climate change game.
The two new papers, in combination, mean that the human influence on the climate from the burning of fossil fuels is far less than what the IPCC’s ensemble of climate models says it is. This also goes for the U.S. Global Change Research Program, the EPA ,and the White House.
Rest assured, though, Bozo will rise again—despite a near-continuous barrage of blows supporting the idea that the climate’s sensitivity to human greenhouse gas emissions is far too low to justify any of the expensive and futile actions emanating from Washington and Brussels.
The aerosol paper describes research by a team of Israeli scientists led by Gerald Stanhill (from the ARO Volcani Center) who examined the causes of “solar dimming” and “solar brightening” that have taken place over the past half-century or so. Solar brightening (dimming) refers to multidecadal periods when more (less) solar radiation is reaching the surface of the earth. All else being equal (dangerous words in Science), the earth’s surface would warm during periods of brightening and cool during dimming. Solar dimming has been reported to have taken place from the 1950s through the 1980s and since then there has been a period of recovery (i.e., brightening). These patterns have been linked by many to human aerosol emissions caused by pernicious economic activity, with heavy emissions leading to global cooling from the 1950s (witness the opaque air of Pittsburgh and London) through the late 1970s and then, as air quality was cleaned up and aerosol emissions declined, an unmasking of the warming impact from greenhouse gas emissions.
This is an essential storyline that might as well have been written by Kuhn. Without invoking the previously undiscovered masking impact of human aerosols, climate models predict that far more global warming should have happened as a result of human greenhouse gas emissions than has been observed, even by the 1980s. Behaving more predictably than the climate, federal climatologists, led by Tom Wigley of the University Corporation for Atmospheric Research (hey, we couldn’t make up the name of that exclusively taxpayer-funded monster), relied on the aerosol “knob” to try to keep climate models from overheating.
Stanhill et al. have bad news for the feds. In their new paper, they examine the records of sunshine duration as recorded at five observation sites with long-term observations. When comparing these sunshine histories with fossil fuel use histories (a proxy for aerosol emissions) from nearby areas, they find very little correspondence. In other words, human aerosol emissions aren’t to blame for much of the solar dimming and brightening.
What may be the cause? Variations in cloud cover.
According to Stanhill and colleagues:
It is concluded that at the sites studied changes in cloud cover rather than anthropogenic aerosols emissions played the major role in determining solar dimming and brightening during the last half century and that there are reasons to suppose that these findings may have wider relevance.
Admittedly, there are only a small number of stations that were being analyzed, but Stanhill et al. have this to say:
This conclusion may be of wider significance than the very small number of sites examined in this study would suggest as the sites sampled Temperate - Maritime, Mediterranean, Continental and Tropical climates,… and covered a wide range of rates of anthropogenic aerosol emission.
The implications are that human aerosols have played a lot smaller role in the global temperature variability of the past 50 years than is generally taken to be the case. And if human aerosols are not responsible for muting the expected temperature rise from greenhouse gas emissions, then it seems that the expected rise is too much. That is, the earth’s temperature is less sensitive to rising greenhouse gas concentrations than forecasted by governmental climate models, and therefore we should expect less warming in the future.
The second paper, published last week in Science, is yet another study trying to explain the “pause” in the rise of global average surface temperatures. Using annual data from the University of East Anglia temperature history—the one that scientists consult the most, we are now in our 18th year without a warming trend.
(For a revealing exposé on how even this data is being jimmied to fit the paradigm, see what just showed up in the most recent Weekend Australian.)
University of Washington’s Xianyao Chen and Ka-Kit Tung found that a naturally occurring change in ocean circulation features in the Atlantic Ocean can act to enhance or suppress the magnitude of heat that is transferred from the surface into the ocean depths. The authors find that this natural cycling was responsible for burying additional heat since the late 1990s while maintaining surface heating during the previous three decades. Coupled with earlier research (Tung and Zhou, 2013), they figure that a substantial portion (~40%) of the rise in the global surface temperatures that has occurred since the mid-20th century was caused by natural variability in the circulation of the Atlantic Ocean.
The implication here is pretty clear—the role that human greenhouse gas emissions play in the observed warming isn’t what it was cracked up to be. And, with a little nudge from other variables—like the sun—the quaint myth that “all scientists agree that the majority of warming since 1950 has been caused by human activity” does look more and more like another pop-up Bozo.
Taken together, the two paper combination strikes a haymaker to the alarmist mantra—that dangerous climate change will result from greenhouse gas emissions. The Stanhill paper suggests that the projected warming wasn’t so masked by sulfate aerosols, and the Chen and Tung paper argues that less of the warming is due to a human influence anyway. This combination—greater warming pressure and less temperature change—means that the IPCC and federal climate models are just way off.
Going forward, we should expect much less human-induced global warming than government-fueled climate models project.
If this refrain sounds familiar, it is because we find ourselves frequently reporting on the subject of the earth’s climate sensitivity (how much warming results for a given input of carbon dioxide). This issue is the biggest key to understanding anthropogenic climate change, and, because evidence continues to mount that the climate sensitivity is much less than advertised, there will be much more where this came from.
But Bozo, inflated by public monies, will spring eternal.
Chen, X., and K-K Tung, 2014. Varying planetary heat sink led to global-warming slowdown and acceleration. Science, 345, 897-903.
Kuhn, T. S., 1962 (and reprints). The Structure of Scientific Revolutions. University of Chicago Press„ 174pp.
Stanhill, G., et al., 2014. The cause of solar dimming and brightening at the Earth’s surface during the last half century: evidence from measurements of sunshine duration. Journal of Geophysical Research, doi: 10.1002/2013JD021308
Tung, K-K., and J. Zhou, 2013. Using data to attribute episodes of warming and cooling in instrumental records. Proceedings of the National Academy of Sciences, 110, 2058-2063.
New Census data shows that the number of households receiving welfare benefits hit a record high of almost 33.5 million in the fourth quarter of 2012. While part of the surge was due to the recession, the proportion receiving benefits has increased from 25.2 percent to 27.4 percent since the recession officially ended in June 2009. These inflated welfare rolls are not just a temporary response to an economic downturn, and could instead become the new normal. This poses a problem not only for the country as a whole, but for the individuals beneficiaries as well. These welfare programs could eventually become unaffordable as programs for the elderly take up an increasing share of our budget. At the same time, for a record number of beneficiaries the structure of our current system could actually make it less likely they escape poverty for good.
Of particular concern are the households participating in three or more means-tested non-cash programs, which has also increased significantly, rising from 7.3 percent of all households at the end of the recession to 8.6 percent by the end of 2012. Participation in multiple programs is even more commonplace among families headed by a single mother, similar to the case family we used in The Work versus Welfare Trade-off 2013. In that paper, we found that in some states, the welfare benefits package available could be so generous that it could disincentivize work in some cases. One critique of the paper was that not every low-income household qualified for the programs in our benefit package. This is true, and we acknowledged as much in the paper. We even included a scenario where the family only received benefits from a more limited package. However, this Census data shows that cases like the one we examinedare becoming increasingly common. Almost 44 percent of households headed by a single mother participated in three or more means-tested non-cash programs in 2012, compared to only 38.7 percent when the recession ended. While the point remains that not every low-income household participates in every welfare program, many do participate in multiple programs, and the proportion has continued to increase years after the recession ended.
These are the people most at risk of becoming caught in a “poverty trap,” in which the very programs intended to help them can actually make if more difficult for them to escape poverty. In these cases, people could find that it is not worth it to enter the workforce or increase their earnings because they face very high effective marginal tax rates. For each additional dollar they earned, they would lose almost as much through the loss of benefits and taxes. A study in the National Tax Journal found that a single parent with two children trying to move from the poverty level to 150 percent of the poverty line faced an average effective marginal tax rate of almost 77 percent. Over that range, these people are keeping less than a quarter of each dollar earned. Through these significant work disincentives, our current system inhibits recipients’ ability to eventually earn enough to transition out of these programs and escape poverty for good.
Some of the recent surge in welfare recipients was due to the economic downturn, but the number of beneficiaries has continued to grow years after the recession ended. More families today are participating in multiple programs, and they are more likely to face a poverty trap. These trends reinforce the need to reform our current welfare system because the status quo is clearly not working. Welfare programs do relieve some of the worst forms of material deprivation, but they have proven costly and ineffective. In some cases they actually make it harder for people to lift themselves out of poverty. Clearly, it is time for a change.
Administration officials proclaim the Islamic State’s isolated experiment in 7th Century Islam to pose a dire threat to America. After promising to strictly limit the military mission in Iraq, the president is preparing to expand the war to Syria, where the administration is working to overthrow the Assad government—which now blocks Islamic control over the entire country. Instead, the administration should encourage other nations, starting with Syria, to kill ISIL radicals.
Iraq is a catastrophic failure. Yet the Obama administration risks falling into war there again.
Gen. Martin E. Dempsey, chairman of the Joint Chiefs of Staff, wants to address the Islamic State “on both sides of what is essentially at this point a nonexistent border” between Iraq and Syria.
However, Washington’s intelligence capabilities in Syria remain limited. More important, the Obama administration has spent three years attempting to overthrow Syria’s Assad regime, which possesses an air defense system and warned that it would treat any attacks as “aggression.”
The administration should reconsider its policy in Syria. As I point out in Forbes online, “The Assad government is even more committed than Washington to eliminating the Islamic State as a geopolitical force.”
Yet America’s support for the opposition has weakened the Assad government’s ability to fight ISIL. Washington’s preference for less radical groups also has discouraged Damascus from targeting the Islamic State, whose existence inhibits U.S. involvement.
Reaching a modus vivendi with Damascus would encourage Assad to focus on ISIL. Assad is no friend of liberty, but Washington must set priorities.
The administration also should emphasize the responsibility of surrounding states to combat the group. For instance, Baghdad pursued a narrow sectarian course, crippling politics and the military. Iraq must reach a broader understanding with Sunnis and Kurds to strengthen internal forces against ISIL.
Ankara, which claims a position of regional leadership, has much at stake as well. The group considers Turkish lands to be part of the “caliphate.” The Islamic State’s attacks on Kurdistan could spur Kurdish refugees into Turkey.
Jordan is far more vulnerable. The Gulf States are more distant, but Sunni radicals are unlikely to leave the corrupt and licentious Sunni royals in peace.
These countries might continue their campaign to oust Assad, but they should support groups not dedicated to destabilizing the entire region. Washington should insist that the Syrian civil war is no excuse for measures which strengthen the Islamic State.
Equally important, Jordan and Turkey, both on the Islamic State’s hit list, should deploy their air forces and ground forces, if necessary, against ISIL fighters. Kurdish forces need better and more weapons, which Turkey could provide. Ankara has improved its ties with Kurdistan in recent years.
Saudi Arabia and the Gulf States have a different role to play. As Sunni states they might most usefully delegitimize ISIL’s claim of a new “caliphate.”
Even Iran can assist, though that might discomfit Washington. Tehran will support Baghdad’s Shia government irrespective of America’s preferences.
Finally, the Europeans could help provide weapons and training to the Kurds and others.
The Islamic State is evil. But its capabilities remain limited.
Rather than turn ISIL into a military priority and take America into war against the group, Washington should organize an Islamic coalition against the Islamic State. Even Gen. Dempsey called for a regional effort to “squeeze ISIS from multiple directions,” but that actually requires Washington to do less militarily.
ISIL’s rise has set in motion the very forces necessary for its defeat. Rather than hinder creation of a coalition by taking charge militarily, Washington should encourage it by stepping back. The U.S. already has gone to war twice in Iraq. There’s no reason to believe that the third time will be the charm.
Daniel J. IkensonSo Burger King plans to purchase Canadian doughnut icon Tim Hortons and move company headquarters north of the border, where corporate tax rates are as much as 15 percentage points lower than in the United States. Expect politicians at both ends of Pennsylvania Avenue to accuse Burger King of treachery, while spewing campaign-season pledges to penalize these greedy, “Benedict Arnold” companies. If the acquisition comes to fruition and ultimately involves a corporate “inversion,” consider it not a problem, but a symptom of a problem. The real problem is that U.S. policymakers inadequately grasp that we live in a globalized economy, where capital is mobile and products and services can be produced and delivered almost anywhere in the world, and where value is created by efficiently combining inputs and processes from multiple countries. Globalization means that public policies are on trial and that policymakers have to get off their duffs and compete with most every other country in the world to attract investment, which flows to the jurisdictions where it is most productive and, crucially, most welcome to be put to productive use. Too many policymakers still believe that since the United States is the world’s largest market, U.S.-headquartered companies are tethered to the U.S. economy and committed to investing, hiring, and producing in the United States, regardless of the quality of the business and policy environments. They fail to appreciate how quickly the demographics are changing or that a growing number of currently U.S.-based companies do not share their view. Perhaps too many are unaware of how the United States continues to slide in the various global rankings of attributes that attract business and investment. The leverage politicians have over America’s corporate wealth creators has diminished. Like most U.S.-based multinational corporations that face tax rates of 35 percent on profits repatriated from abroad, Apple devotes resources to navigating the maze of rules to minimize its tax burdens. Last year, Senators Carl Levin (D-MI) and John McCain (R-AZ) ripped into Apple CEO Tim Cook for his company’s efforts to reduce its taxes. Levin said: Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere. We intend to highlight that gimmick and other Apple offshore tax avoidance tactics so that American working families who pay their share of taxes understand how offshore tax loopholes raise their tax burden, add to the federal deficit and ought to be closed. Unlike foreign-based multinationals whose governments don’t tax their profits earned abroad (or do so very lightly), U.S. multinationals are subject to double taxation—first at local tax rates in the foreign countries where they operate and then by the IRS, at up to 35 percent, when profits are brought home. Is it a surprise that such a system discourages profit repatriation? Who’s to blame for depriving the U.S. economy of working capital and encouraging elaborate – but legal – tax avoidance schemes? Sen. McCain at least acknowledges the faults and disincentives of the system, but then blames Apple for pursuing the interests of its shareholders anyway: I have long advocated for modernizing our broken and uncompetitive tax code, but that cannot and must not be an excuse for turning a blind eye to the highly questionable tax strategies that corporations like Apple use to avoid paying taxes in America. The proper place for the bulk of Apple’s creative energy ought to go into its innovative products and services, not in its tax department. Senators Levin, McCain, and others who prefer to strong-arm U.S. wealth creators should consider carrots instead of sticks. The United States is competing with the rest of the world to attract investment in domestic value-added activities. Companies looking to build or buy production facilities, research centers, biotechnology laboratories, hotels, or burger and doughnut joints consider a multitude of factors, including size of the market, access to appropriately skilled workers and essential material inputs, ease of customs procedures, the reliability of transportation infrastructure, legal and business transparency, and the burdens of regulatory compliance and taxes, to name a few. The capacity of the United States to continue to be a magnet for both foreign and domestic investment is largely a function of its advantages with respect to these considerations. As I noted in a paper on this subject last year: Unlike ever before, the world’s producers have a wealth of options when it comes to where and how they organize product development, production, assembly, distribution, and other functions on the continuum from product conception to consumption. As businesses look to the most productive combinations of labor and capital, to the most efficient production processes, and to the best ways of getting products and services to market, perceptions about the business environment can be determinative. In a global economy, “offshoring” is an inevitable consequence of competition. And policy improvement should be the broad, beneficial result. Combine the current tax incentive structure with stifling and redundant environmental, financial, and health and safety regulations, an out-of-control tort system that often starts with a presumption of corporate malfeasance, exploding health care costs, and costly worker’s compensation rules, the reasons more and more businesses would consider moving operations abroad permanently become obvious. Thanks to the progressive trends of globalization, liberalization, transportation, and communication, societies’ producers are no longer quite as captive to confiscatory or otherwise suffocating domestic policies. They have choices. Of course, many choose to stay, and for good reason. We are fortunate to still have the institutions, the rule of law, deep and diversified capital markets, excellent research universities, a highly skilled workforce, cultural diversity, and a society that not only tolerates but encourages dissent, and the world’s largest consumer market. Success is more likely to be achieved in an environment with those advantages. They are the ingredients of our ingenuity, our innovativeness, our willingness to take risks as entrepreneurs, and our economic success. But those advantages are eroding. According to several reputable business-perception indices, the United States has slipped considerably over the past decade in a variety of areas that directly impact investment decisions. (See “What Really Drives the Investment Decision” begininng on page 15.) Out of 142 countries assessed in the World Economic Forum’s Global Competitiveness Index, the United States ranks 24th on the quality of total infrastructure; 50th on perceptions that crony capitalism is a problem; 58th on the burden of government regulations; 58th on customs procedures; and 63rd on the extent and effect of taxation. Meanwhile, uncertainty over energy, immigration, trade, tax, and regulatory policies continues to deter investment and even encourages companies to offshore operations that might otherwise be performed in the United States. Rather than begrudge Burger King or Apple or any other profit-maximizing company for its rational business decisions, policymakers should repair the incentives that drive capital away from the United States.