September 26, 2005

Don Luskin Nukes the “Repeal the Tax Cuts for Hurricance Victims” Argument

Filed under: Economy,Taxes & Government — Tom @ 4:15 pm

When he’s not running poorandstupid.com blog (which is neither), Don Luskin writes a mean (that is, “very good”) column for Smart Money.

His latest refutes the idea that money to pay for Katrina and expected Rita relief can come from repealing the tax cuts of 2003 (bolds are mine):

The S&P 500 today is more than 25% higher than it was when the tax cut on dividends and capital gains was enacted in May 2003.

And the same logic applies to income tax rates, which were also cut in 2003. When people get to keep more of the money they earn, they work more and they work harder. The result is the same: more productivity, innovation, employment and economic growth.

Want proof? Gross domestic product, after inflation, has risen 8.4% in the eight quarters since the tax cuts were enacted (in an economy with a Democrat president, this would be known as an “economic boom”–Ed.)

Now let me guess what some of you are thinking. What good does it do for stock prices to rise and economic growth to accelerate if government goes broke for lack of tax revenues? After all, if you cut taxes doesn’t that mean the government will collect less?

If that’s what’s worrying you, then consider a few numbers. According to Treasury Department statistics, the federal government collected tax revenues of $1.79 trillion in the 12 months leading up to the enactment of the 2003 tax cuts. In the next 12 months, despite lower tax rates, the government took in more: $1.82 trillion. Then in the next 12 months — still with lower tax rates — it took in even more, at $2.06 trillion (that’s a 13.2% increase in one year–Ed.).

Pretty simple, right? If the tax cuts are repealed, revenue growth will fall back for all of the reasons Luskin describes in the full piece. So repeal will create no new money for relief–NONE.

It’s completely logical and based on real-world experience. Logic not being their forte, some Republican congressmen who should know better don’t get it:

But some Republicans are questioning the extension of the tax cuts, too. They are concerned that the cost of federal disaster relief demands higher taxes to pay for it. For some reason they just don’t believe the evidence staring them right in the face — that faster economic growth means tax revenues expand even though tax rates are lower. They imagine that they can raise more revenues with higher taxes that will surely slow the economy. It’s like thinking you can get a cow to give more milk by beating it.

If today’s low tax rates on dividends and capital gains aren’t extended, they will still continue on for two more years. But the slowing effects will be felt immediately, because people make investment decisions based on their expectations for returns many years in the future. And the stock market will act accordingly — it will go down. Not in two years, but now.

Leave the tax cuts alone. In fact, the “cuts” have been in place for over 2 years, so I say turn the language around: No revenue-REDUCING tax increases that will take money AWAY from hurricane relief. Besides, Tom Delay notwithstanding, there’s plenty of pork to eliminate.

Quote of the Day: on Roth 401(k)s

The Quote of the Day also qualifies as the Money Tip of the Day. From Chuck Jaffe of Marketwatch (requires registration):

If your employer doesn’t offer the Roth-k, pushing for it makes sense. Feeling like you are missing out on a chance to get rich does not.

Plan sponsors (i.e., employers) can offer their employees a “Roth” option for employee 401(k) contributions beginning on January 1, 2006.

Traditional 401(k) arrangements allow you not to pay federal and state income tax on the money you contribute, but require you to pay income tax on distributions you take during retirement. Roth 401(k)s, on the other hand, do not let you exclude contributions from taxable income in the year you make contributions, but your retirement distributions are tax-free (as long as Congress doesn’t change the rules in the meantime).

Generally, the younger you are and the more likely you think it is that Congress WON’T tinker, the more advantageous Roth contributions to 401(k)s will be.

As noted previously, very few employers plan to offer the Roth 401(k) option starting in 2006, and are playing a wait-and-see attitude. Only concerted interest and/or pressure from employees will change attitudes at most companies.

New Jersey Passes ID Theft Law with Credit Freeze Availability for All

Filed under: Economy,Privacy/ID Theft,Taxes & Government — Tom @ 6:25 am

Good news for New Jersey consumers (via South Jersey Courier Post Online) and credit freeze advocates:

TRENTON — By January, New Jerseyans will gain more tools to protect themselves against identity thieves, and businesses will have to follow stricter rules to guard consumers’ personal data.

To combat a crime the FBI says is one of the fastest growing in the nation, acting Gov. Richard J. Codey signed the Identity Theft Prevention Act and two other laws at a public ceremony in his State House office Thursday.

“A good name is always worth protecting,” Codey said.

The law, which officials contend is the strongest in the country, allows identity theft victims to place on their credit reports a “security freeze,” which prevents the opening of new accounts unless a personal identity number is used to remove the freeze.

That provision takes effect in January.

Identity-theft victims will also be able to file police reports with local police even if another jurisdiction is responsible for investigating the complaint. This goes into effect immediately.

Come January, the use of Social Security numbers as identifiers will be limited.

The law also requires businesses to destroy records containing consumer personal information and notify consumers when personal data is breached.

The Philadelphia Inquirer (requires registration; link added by me) adds:

The San Diego-based Privacy Rights Clearinghouse considers New Jersey’s legislation one of the most progressive efforts to fight identity theft and assist victims, because it goes as far as federal law will allow.

The credit report freeze makes it more difficult for criminals to get additional lines of credit once they steal someone’s information. Consumers would initiate a freeze by writing directly to the three major credit reporting agencies or contacting them through a secure electronic process provided by the credit agencies.

Another aspect of the law bars the use of scanning and re-encoding devices, which identity thieves use to gain access to encoded information on ATM, credit and debit cards.

The law that the Governor signed on September 22 consists of what was passed by the NJ Assembly on June 15, plus a tiny amendment on June 16.

A quick look through the law indicates that placing a credit freeze will be free and that temporary freeze removals will be $5, and that any consumer can place a freeze on his or her own files (other states allow freezes only in cases of identity theft).

Except for the fee for freeze removal, this law is about the best one could hope for at the state level. The best feature of this law may not be in its text, but in the pressure it could place on Congress, where several bills are in the works, to pass a law at the federal level that is at least as strict as New Jersey’s. I think the case for uniform credit laws covering the entire nation is strong. The nationalization inherent in both the 1997 Fair Credit Reporting Act and 2003 Fair and Accurate Credit Transactions Act both streamlined many credit-granting and collection-related procedures thoughout the country, which has benefitted lenders, the credit bureaus, and consumers. It’s time to give everyone in the US at least the level of control over access to their credit files that the citizens of New Jersey will have on January 1. The one place where nationalization hasn’t taken hold, lender fees and rates, has been abused by lenders who have moved operations to states that allow usurious rates, and, combined with lapdog regulation at the US Comptroller of the Currency, has unfairly injured millions of consumer borrowers.

I would hope that legislation coming out of Congress would not permit the bureaus to charge a freeze removal fee (remember it’s YOUR data, they’re just storing it). I would also hope that Congress might give consumers a year or two to opt-in to unfrozen files, after which all consumers who did not state a preference would be put into a frozen position.

Positivity: A Perfect ACT Score, and He Didn’t Even “Study”?

Filed under: Positivity — Tom @ 6:05 am

The headline is shaky, because it makes you think he just showed up for the test and got by on talent alone. Far from it (HT HappyNews; bolds are mine):

(more…)

China Crackdown Continues: First Blogs, Now Internet News and Web Sites

China’s work on perfecting their police state, aided by American technology companies (noted at intro and in last half of post), at least one of which will even become an informant when pressed, continues (link is free for now):

China Sets New Media Restrictions, This Time for the Internet

BEIJING, Sept. 25 – China on Sunday imposed more restrictions on the news media, designed to limit the news and other information available to Internet users, and sharply restricted the scope of content permitted on Web sites.

The rules are part of a broader effort to roll back what the Communist Party views as a threatening trend toward liberalization in the news media. Taken together, the measures amount to a stepped-up effort to police the Internet, which has become a dominant source of news and information for millions of urban Chinese.

Major search engines and portals like Sina.com and Sohu.com, used by millions of Chinese each day, must stop posting their own commentary articles and instead make available only opinion pieces generated by government-controlled newspapers and news agencies, the regulations stipulate.

The rules also state that private individuals or groups must register as “news organizations” before they can operate e-mail distribution lists that spread news or views. Few individuals or private organizations are likely to be allowed to register as news organizations, meaning they can no longer legally distribute information by e-mail.

Existing online news sites, like those run by newspapers or magazines, must “give priority” to news and commentary pieces distributed by the leading national and provincial news organs. The restrictions would appear to make it harder for such sites to republish articles from popular news outlets that do not fall under the government’s direct control.

….. “The foremost responsibility of news sites on the Internet is to serve the people, serve socialism, guide public opinion in the right direction, and uphold the interests of the country and the public good,” the regulations state.

Although Chinese authorities already have effectively unlimited powers to control the gathering and publication of news, the Propaganda Department has sometimes struggled to censor information about sensitive developments before it circulates on the Internet.

About 100 million Chinese now have access to the Internet. Though the government closely monitors domestic content and blocks what officials consider to be subversive Web sites from overseas, savvy users can obtain domestic and overseas information that never appears in China’s traditional news media.

By the time officials have decided that a topic might prove harmful to the ruling party’s agenda, an item about it often has already been posted or discussed on hundreds of sites and viewed by many people, defeating some traditional censorship tools.

….. Experts who follow the Internet say one of the most significant changes is the ban on self-generated opinion articles and commentary pieces that accompany the standard state-issued news bulletins on major portal sites. The commentary pieces enliven the news pages of those sites. The sites can now only offer commentary and news from the same state-run sources.

The move to restrict the ability of Web sites to republish articles produced by the huge array of news organizations that do not fall under direct central government or provincial government control seems intended to ensure that the Propaganda Department has time to filter content generated by local publications before it can be widely disseminated on the Internet.

When will Microsoft, Sun, Google, Cisco, Yahoo, and others object to having their tools used for oppression? When will Congress and the Bush Administration step and stop the technology enablers of China’s oppression?

And while I’m at it, does anyone still think the thankfully-nixed acquisition of Unocal by Chinese government-owned CNOOC was a good idea?
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ADDENDUM 1: RConversation tells a happier story–how Time Warner’s AOL refused to participate in comprehensive Chinese censorship. It would be nice if other companies demonstrated similar interest in protecting and promoting freedom.

ADDENDUM 2: She also blogs on an op-ed piece in the International Herald Tribune (“The Great Firewall of China”), where author Tina Rosenberg notes:

…. America has a bipartisan human rights policy in China. It is called trade. The idea is that Western companies will bring Western values – especially when they develop the Internet, supposedly an unstoppable force for openness. But Shi’s fate is the latest piece of evidence that it’s not working out that way.

…. But let’s not pretend that foreign investment will make China a democracy. That argument was born out of self-interest. Because China is too lucrative a market to resist, Western businessmen have ended up endorsing the party line through their silence – or worse. They are not molding China; China is molding them.

ADDENDUM 3: An RConversation commenter goes further:

If we’re not careful, the Chinese will be exporting their political ideas to us, in the coming years. As China’s growth continues to run ahead of the U.S., I expect business leaders will begin to see the virtues of free-market authoritarianism. Especially when they return to the U.S. after being “molded” by the Chinese.

This is one reason I think it’s important to push for reforms in China, because if we aren’t moving in that direction, then flow of ideas will run the other way. When you don’t stand for the rights of all, you will eventually lose your own.

ADDENDUM 4: You don’t think there would be a receptive political reception for the idea of “controlling” the Internet? Don’t be so sure. Take a look at the woman who may be our next president said in February 1998 (HT Drudge):

WASHINGTON – Hillary Rodham Clinton said in a meeting with reporters Wednesday that “we are all going to have to rethink how we deal with” the Internet because of the handling of White House sex scandal stories on Web sites.

In an otherwise low-key question-and-answer session, Clinton was at her most intense when asked whether she favored curbs on the Internet, on which news services have serveral times made headlines themselves with their coverage of the president’s purported affair with a White House intern.

“We are all going to have to rethink how we deal with this, because there are all these competing values … Without any kind of editing function or gatekeeping function, what does it mean to have the right to defend your reputation?” she said.

“There used to be this old saying that the lie can be halfway around the world before the truth gets its boots on,” Mrs. Clinton added. “Well, today, the lie can be twice around the world before the truth gets out of bed to find its boots.”

Keep in mind that what Mrs. Clinton was calling “lies” in Febuary 1998 became better known as “the truth” in August of that same year.
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UPDATE, September 27: A Wall Street Journal editorial objects to China’s new restrictions, and demonstrates the paper’s usual naivete about users’ ability to work around restrictions:

China’s cyber police issued new rules Sunday limiting Internet postings to “healthy and civilized” news. In prose that the Chinese people could identify with George Orwell were his books not banned in China, the state news agency Xinhua said that only information “that is beneficial to the improvement of the quality of the nation, beneficial to its economic development and conducive to social progress will be allowed.” Companies that refuse to comply will be shut down.

It remains to be seen whether Big Brother in Beijing is a match for the power of the Internet. With 100 million cybernauts, China has the world’s second-largest Internet population, after the U.S. with 135 million. The ability of Chinese surfers to communicate with each other on a massive scale has already made a mockery of state censorship of information.