December 28, 2005

“They all lied. They did it for the cause.”

Filed under: Economy,Taxes & Government — Tom @ 4:29 pm

The Left has a long and sordid history of lying for “the cause.”

It goes back at least as far as Upton Sinclair (link requires registration; HT Attack Machine via Betsy’s Page), who might argue from the grave, in typical leftist fashion, that he was merely “deferring the truth.”

Give credit where due: The LA Times piece should be saved to the hard drive for posterity. In a nutshell, the truth is this: Despite supporting the radical chic of that era that declared their innocence, Sinclair knew that 1920s revolutionary anarchists Sacco and Vanzetti, who were convicted of murder and executed for their crimes, were guilty, but covered up that knowledge in the interest of the marketability of a book he was writing, and in the interest of not hurting “the (socialist revolutionary) cause.”

What ever happened to “I was wrong. I am sorry”?

Sinclair’s most famous work is “The Jungle,” an expose with fictionalized characters of slaughterhouse conditions in the early 20th century. Sinclair is credited with helping to bring about labor and agricultural reforms and, ultimately, the creation of the Food and Drug Administration. A favorable review of the book and Sinclair’s general body of work is here. A Cafe Hayek post suggests some perspective on what Sinclair found in the slaughterhouses. I believe that the conditions Sinclair found had to be corrected, but that his prescribed solution (“The proletariat was the one who deserved control of the plants in which they worked, not the rich bosses”) was, and has been proven by history to be, fatally flawed.

WSJ Editorial: Reduce and Simplify the Corporate Income Tax

Filed under: Economy,Taxes & Government — Tom @ 2:46 pm

Our corporate income tax rate is the highest in the world, and it is hurting us (requirest subscription):

Let’s Make a Deal

When Ronald Reagan started his revolution in tax policy almost 25 years ago, he set off a benign chain reaction as tax rates fell around the world. OECD data show that the industrialized nations followed the U.S. lead and have cut their most punitive tax rates by about 30% on average since 1985.

We mention this history because two reports — by the Congressional Budget Office and the nonpartisan Tax Foundation — have sobering news about America’s current tax standing in the world. Bluntly: Many countries not only have caught up with the U.S. in lowering taxes, in some areas they are beating us at our own game. America now imposes the highest corporate income tax rate among the 30 wealthiest countries. Once the Michael Jordan of tax cutting, we’re now the Chris Rock, a joke. ….. the U.S. combined state and federal corporate tax rate of 39.3% is 10 percentage points higher than the OECD average.

Most of these nations also impose high value-added, payroll, capital gains and gas taxes, so the U.S. still ranks well below average on total tax burden — which partially explains our much faster growth rate of late. Still, for those who don’t think corporate tax rates matter in attracting jobs and capital, consider that Ireland, the nation with the lowest corporate tax rate (12.5%), has become the Hong Kong of the West with the fastest pace of economic growth and jobs in the Eurozone.

The two new reports also suggest that the high U.S. corporate income tax rates are economically self-defeating. As the CBO says in its usual academic jargon: “The distortions that the corporate income tax induces are large compared with the revenues that the tax generates . . . Those distortions bring about reductions in economic efficiency.”

CBO finds that these deadweight economic losses combined with high compliance expenses often cost businesses more than the corporate tax actually raises — the very definition of an inefficient levy. The Tax Foundation found that even though the U.S. has the highest corporate tax rate, we collect a smaller percentage of our tax revenue (about 10%) from this tax than do most other nations with lower rates.

Partly that is because high U.S. corporate tax rates encourage companies to seek, and politicians to grant, loopholes and carve-outs that have turned the business tax system into Swiss cheese. Groups on the political left complain, and with cause, that many Fortune 500 companies have hired tax accountants who find clever schemes to avoid paying virtually any corporate income tax.

We wonder if there isn’t a left-right deal to be made here: Broaden the base by eliminating special-interest preferences, but lower the rate to make America’s companies that do pay the tax more competitive. This was partially achieved in 1986 with the passage of President Reagan’s Tax Reform Act, which closed hundreds of loopholes, many of which have reappeared. Another is a plan by Senator Jim DeMint (R., S.C.) to scrap the corporate income tax altogether and replace it with an 8.5% business transfer tax on receipts minus expenses.

A fix is needed.

….. Ironically, those in Congress who moan about offshore investing and “out-sourcing jobs” are the biggest defenders of America’s highest-in-the-world corporate tax rates. Instead, Congress should be doing more corporate tax cutting. The clear beneficiaries would be U.S. firms and their American workforce.

If you think filling out your own tax return is bad, you should see what major corporations have to go through. In the pre-computer days with the tax laws that were in place during the late 1970s, one Fortune 500 company’s return could easily take up an entire file drawer, and sometimes a file cabinet. All the simplification that occurred in 1986 has been washed away in a wave of complexity that would make those 1970s returns, if today’s returns based on today’s laws still had to be printed, look like paper midgets.

When you think about all the barriers we place in the way of economic progress (corporate taxes, Sarbanes Oxley, insane regulations), I sometime think it’s amazing that we get any growth at all.

Kaus, Cook, and “JPo” Credit Murtha for Turning the War Debate Around

Filed under: OH-02 US House,Taxes & Government — Tom @ 1:08 pm

or, “Yes, This Horse Deserves Just One More Beating Before It’s Laid to Rest”

Charlie Cook of National Journal (link not available) via Kaus (HT Instapundit, whose characterizes what has occurred as “John Murtha Saved George Bush’s Presidency”):

Prior to Murtha’s well-publicized speech advocating an early withdrawal, the spotlight had been on the Bush administration’s use of intelligence that led to the decision to go to war, with some questioning whether the administration either lied, fabricated or exaggerated evidence used to justify the United States’ action.

Murtha’s speech changed the debate, away from whether we should have invaded Iraq and whether the use of intelligence to make that decision was flawed toward the more problematic issue of “what do we do now?”

This echoes John Podhoretz (“JPo”) of the New York Post at the beginning of the month (registration required). JPo goes further, and credits Murtha with forcing George Bush to state his case, something his supporters have been begging for since (it seems) his reelection:

GOD bless Jack Murtha. Yesterday we saw how this old patriot, ex-Marine and current Democratic congressman once again came to the aid of his country as he did 40 years ago in Vietnam. Thanks to Jack, President Bush — in a speech at the Naval Academy (link added-Ed.) yesterday morning — spent 40 minutes explaining to the American people that our goal in Iraq is nothing less than “unconditional victory” against the forces of reaction, rejection and Islamic fascism.

“To achieve victory over such enemies,” he said, “we are pursuing a comprehensive strategy in Iraq. Americans should have a clear understanding of this strategy — how we look at the war, how we see the enemy, how we define victory and what we’re doing to achieve it.” And in painstaking detail, he explained it all.

….. These were words this country and the world desperately needed to hear, and chances are they would never have been spoken were it not for Jack Murtha. And so what if that isn’t what Jack Murtha wanted? So what if the Bush speech propounds an approach and a vision exactly the opposite of what Murtha wants?

Life is just chock full of delicious little ironies like this.

….. Murtha took his party’s anti-war position and codified it. He was instantly greeted as a prophet, a savior, a noble man, a hero and a visionary. To speak a critical word of Jack Murtha was the moral equivalent of spitting on Mother Teresa. He was beyond reproach, his critics beneath contempt.

And so, in what may stand as the most important legislative act of the last three years, Republicans in the House decided they would stand together, hold hands and sing, “All We Are Saying Is Give Murtha a Chance.”

After a year in which Democrats grew progressively more aggressive, nasty and hysterical about the war in Iraq and how it began, House Republicans decided their colleagues across the aisle should put their money where their mouths were. Just 36 hours after Murtha became an instant national icon, House Republicans put forward a resolution for an immediate withdrawal from Iraq.

“Immediate withdrawal” was the essence of the Murtha position, though Democrats screamed and yelled and hollered bitterly that Murtha’s own proposal was just so much more nuanced than that.

The House GOP gambit was a pivotal moment because, in the end, Democrats just couldn’t do it. They couldn’t bring themselves to embrace the logic of their own position. Only three of them — out of 202 — voted for immediate withdrawal.

Almost instantly, you could feel the nature of the debate shift, and the political crisis over Iraq start to quiet a bit. Presented with the irresponsible and defeatist option advocated by Murtha, even Murtha himself couldn’t cast a vote for it.

Suddenly, withdrawal was off the table.

Someone else we know is associated with this turnaround. Her clumsy delivery, and all the ridicule in the world, won’t change that.
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UPDATE, Jan. 3, 2006: More Murtha off-the-rails remarks (including that he wouldn’t join today’s military) are noted by S.O.B. Alliance member Project Logic.

Passage of the Day: John Stossel on the Cost of Sarbanes Oxley

Filed under: Economy,Taxes & Government — Tom @ 11:31 am

I missed this piece from before the holidays, the ABC consumer reporter and recently-converted free market advocate lays out just some of the costs, and skewers the flawed assumptions behind the law:

Sarbanes-Overkill
Dec 21, 2005

Suppose you’ve got a growing business. You’ve just opened your 100th restaurant, and your company is making just over a million dollars in annual profits. You want to expand further — spend a million dollars to rent a new building and hire more cooks and waiters. An accounting firm offers you new services that will cost nearly half that, money you might otherwise spend continuing to expand the business.

Do you hire more cooks, or do you hire more accountants?

Under the Sarbanes-Oxley Act, you hire the accountants. The restaurant chain in question is Max & Erma’s; its CFO told researchers at the Competitive Enterprise Institute the company will have to pay $500,000 to $600,000 every year to meet the demands of the new anti-fraud law, Congress’ attempt to avoid more Enron-like fiascos by making businesses pay accounting firms to keep them in check.

If spending half a million dollars on accounting instead of growth isn’t depressing enough, what do you say to $100 million a year? That’s what oil giant BP, a British company whose U.S. business generates less than half its income, is paying, according to its CEO. And that figure is just “external costs”; it doesn’t include the time the company’s own employees spend complying with the new law.

Or how about 96 percent? That, a study by the law firm of Foley & Lardner found, was the increase last year in the average audit fees of smaller public companies — from $532,000 in 2003 to $1 million in 2004.

The law’s defenders claim its good consequences outweigh its costs. But if that’s so, why not let investors figure it out? If certain accounting practices make companies better investments, investors will put their money in companies that use those methods. If having your accountant grill you for not having a written policy on hiring and firing will make your business sounder, you don’t need the federal government to force you to do it.

Even the regulators may be realizing this law has gone too far …..

We don’t need the government to force businesses to spend half their profits on accountants, because free markets police themselves. Those that serve customers well are rewarded with more customers; those that do well for investors attract them. Bad guys who cheat get a reputation for cheating. They lose customers, lose investors and go out of business. Think of how eBay works. The selling price of each item is determined by auction, so buyers and sellers both get the best possible deal. Sellers are rated by their customers, so the “community” quickly identifies cheaters.

The competition of the market protects us better than the ever-mounting pile of rules legislators pass. And it keeps the costs reasonable, because the private sector has to bear its own burdens, while government forces its costs on others.

The market doesn’t catch everything — there will always be fraud on eBay, and, on a larger scale, scams like Enron. But Sarbanes-Oxley won’t catch all the fraud either.

Competition will catch more of it. The more I’ve watched the markets work, the more impressed I’ve become with how competition solves problems with speed and flexibility rarely seen in government-imposed solutions.

There are two reasons I have been advocating that noncorporate and especially government entities to be brought under Sarbanes Oxley. First, THEY are the ones that are out of control (see previous posts below), not for the most part (and despite the headlines) the corporate world they criticize. Second, if these government and other entities have to experience what businesses have had to endure with Sarbox, they will be first in line calling for repeal or a major rethink of the entire law.
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Previous related posts:

French “The Rioting Is Over” Update

Filed under: MSM Biz/Other Ignorance,Taxes & Government — Tom @ 10:05 am

“Normalcy” continues: There were 100 car burnings on Christmas Eve in France, “which was equivalent to ”an ordinary weekend” and the number of vehicles burned last Christmas.”

This post was brought to you so you can refute the inevitable “we should be more like them” arguments that will come after the WORMs (Worn-Out Reactionary Media, know to most as The Mainstream Media) spend a few more months ignoring France’s “normalcy.”
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January 3, 2006 Update: Only in France could this be considered good news — “Police recorded a one-third rise in the number of car-burnings compared to last New Year’s Eve, with 425 cars torched nationwide.” The news is so “good” that “French President Jacques Chirac plans to lift as of January 4 a state of emergency imposed after urban riots two months ago, which had been originally set to run until late February, his office said on Monday.”

Bizzy’s AM Coffee Biz-Econ Link: Good News on Hiring Plans and Pay Raises

Filed under: Economy — Tom @ 7:58 am

Really, there are things to worry about. They are mostly of the long-term variety, and I’ll get to them in January 2006.

But it’s the end of the year, and it’s not hard to find economic reasons to be cheerful.

Here’s yet another one (HT EU Rota; bolds are mine):

Survey: Most Employees Can Expect Pay Raise

CHICAGO — Do you plan on finding a new job or just do a little better in your current job in 2006?

A new survey from CareerBuilder.com finds the employment outlook is bright.

Most of the 1,300 hiring managers surveyed said they plan to increase salaries on initial offers for prospective employees.

More than three-quarters of them look to boost paychecks for existing employees and more than half plan to boost pay by 3 percent or more.

“Fifty-four percent of hiring managers surveyed by CareerBuilder.com say they will increase their staffs in the coming year while only 9 percent will decrease them,” said Matt Ferguson, CEO of CareerBuilder.com. “After creating over 2 million jobs in 2005, the U.S. is expected to add 2 million more in 2006, according to economist estimates.”

Hiring managers said customer service is the No.1 position they’ll be recruiting for in 2006.

Other popular positions include sales, retail, information technology, accounting/finance and healthcare.

Although solid hiring is expected across all regions, employers in the South and West are slightly more optimistic about their 2006 hiring plans.

The survey found that 55 percent of hiring managers in the South and West expect to increase their workforce, followed by 53 percent in the Midwest and 50 percent in the Northeast.

About a-third of the managers said they’re concerned about a shortage of skilled workers.

Nearly half said they plan to recruit from other companies or offer incentives for workers near retirement age to extend their employment.

“Job satisfaction levels have improved significantly compared to this time last year as employers step up employee retention efforts in the face of an increasingly competitive labor market,” said Ferguson.

It’s not like I’ve kept track, but that 54%-9% ratio of employers planning to increase vs. decrease staff strikes me as extraordinary. Of course, there are very visible exceptions, which is why it’s good to see a broad-based report like this with so much optimism. It’s also the first time in a few years that I’ve heard, both in this article and from Human Resources people I know, that (as was the case in the late 1990s) most companies are finding that hiring and retaining good people is their biggest challenge.

Happy New Year indeed.
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UPDATE: The Conference Board’s version of Consumer Confidence released today has it back at pre-Katrina levels (story at money.cnn.com). And of course its reading of 103.6 “beat expectations” of 102.5.

Positivity: Mother Gives Up Her Life So Baby Can Live

Filed under: Positivity — Tom @ 6:13 am

The story was published over two weeks ago, but heroics like this never get old:

(more…)

Whose Economy Is It Anyway? Apparently Reggie Bush’s, and Not George’s

Filed under: Economy,MSM Biz/Other Bias — Tom @ 12:16 am

As the economy has improved, President Bush’s association with its results has decreased, and now has virtually disappeared.

Good economic news has poured out as if from a geyser during the past couple of weeks: consumer confidence, GDP growth, Christmas retail sales, unemployment, durable goods, the boom in online sales, just to scratch the surface.

Not coincidentally, in my opinion, the term “Bush Economy,” which had been fairly prevalent in 2002 and 2003, has gone AWOL, especially in the three weeks since the President’s December 5 North Carolina speech praising the economy’s performance.

A Google News search on “Bush Economy” (in quotes) for the past 30 days done just before midnight Eastern Time on December 27 yielded a grand total of thirty results.

Click on the link to see the latest results. When I did the search, only five of them were dated after December 8, and one of them (from CNN) referred to a “Reggie Bush Economy” (after college football’s Heisman Trophy winner). None of the remaining four results were from a major media outlet.

Of the 25 results from November 28 – December 8, none are from the NY Times, Washington Post, or LA Times (though one Birmingham newspaper entry from December 6 carries an LA Time byline). Two CNN entries from December 5 are entitled “Bush Out to Dispel Economic Pessimism.” Two Reuters entries from the same date are similarly titled. Four entries from Scripps Howard two days later report carry a “Bush is perplexed that the public isn’t giving it more credit for the economy” theme. Two other entries are DNC press releases, with House Minority Leader Nancy Pelosi telling us that we shouldn’t believe our lying eyes–the economy is still bad, the rich are getting all the benefits, blah blah.

The decrease in “Bush economy” Google News hits, especially in the past 19 days, tells me that we can expect Mainstream Media coverage of the economy to continue to avoid mentioning Mr. Bush as much as possible–at least while the news remains good.

Cross-posted at NewsBusters.org.