More on Spam
Clyde Wayne Crews responds to Christopher Caldwell's essay in The Weekly Standard calling for a tax on email to address the problem of spam.
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"Government agencies did not have to earn their money."
On the passing of journalist David Brinkley, The American Spectator today reprints a review of Brinkley's book, Washington Goes to War, Brinkley's recollection of life in the nation's capital city during World War II. Even then, Brinkley writes,

The single fact most clearly differentiating government employers from private employers was, always, that government agencies did not have to earn their money. Congress simply handed it over every year and almost always more than the year before, so it was there to be spent and it was unthinkable not to spend it. Nobody in government ever benefited in any way from saving money. Whatever was not spent had to be handed back to the Treasury and if an agency had money left over at the end of one year, how could it ask Congress for more money the next year?"

As reviewer Brit Hume asks, "Sound familiar?"
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Save the Teachers
The Dearborn (Michigan) schools anticipates a $4 to $ 7 million deficit, and plan to lay off 160 teachers as a result. Mackinac Center scholars Robert P. Hunter and Michael LaFaive suggest that before this happens, the schools ought to enter into contracts with private for non-teaching functions such as student transportation, food service, and security, to save costs and perhaps improve service as well. You'd think the teachers union would favor anything that would save the jobs of teachers. You would also be wrong.
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Say No to Spam--and Government Action
Arnold Kling issues the first (that I've seen, at least) salvo against Christopher Caldwell's argument that the pervasive presence of spam calls for an email tax, and more generally, increased government regulation of the Internet. "All such bills are misguided. The cost of creating the mechanisms on the Internet to track down spammers in order to tax or regulate spam is greater than the cost of spam itself."

The problem, he says, is that the standard protocol for internet mail, SMTP, is "fast but stupid." It relays emails without looking inside them. It is impractical for email to be inspected enroute, he says. Instead, ISPs can take technical measures (as Yahoo! has done recently) to make spamming difficult. He also holds out hope for filters as a solution to the problem of spam.

"I wish that spam would go away. I am against spam. But all solutions to the spam problem are costly. The least costly solution is self-reliance."
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Corn in the Gas Tank
It's summertime driving season, which usually means higher gasoline prices. The culprit, to a large extent, is the array of government regulations covering gasoline. But the fuel in your tank is going to get more expensive, due to legislation working its way through Congress. Over at The Knowledge Problem, economist Lynne Kiesling has been raging against ethanol mandates.
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Save us from Cheese
During the Iraq war, the French were often derided as "cheese-eating surrender monkeys." As it turns out, the FDA is vigiliant, trying its best to keep Americans from consuming cheese, at least cheese preferred by the French. In "Hey, Buddy, Wanna Score Some Cheese?" (online only to subscribers), the Wall Street Journal says that "the Food and Drug Administration bans the sale of all cheeses made with raw milk that haven't been aged for at least 60 days." This includes camembert and brie. The FDA is thinking of even banning the importation of parmesan and cheddar cheeses made with raw milk, no matter how long it has been aged. (Aging, apparently, does a lot to reduce the risk of food poisoning.) All this busy-bodiness comes out of a listeria outbreak nearly 20 years ago. You'd think our over-active legal system would be a sufficient safeguard.

At least the agricultural official at the French embassy had a sense of humor about it all: "We don't feel that our cheeses are that much of a weapon of mass destruction."
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Republicans: The Party of Tax Increases?
Democrats are the party of tax-and-spend, while Republicans advocate smaller government and a lighter tax bill. Right? Well, not exactly. David Hogberg, writing in The American Spectator, provides a quick rundown of Republican governors who are raising taxes.. They include usual suspects, such as yet another Republican governor in Ohio, to the unexpected, such as the governor of Idaho. Hogberg lays out the challenge for the Republicans:

Republicans are unlikely to ever get a handle on spending if some of their leaders are willing, if not eager, to raise taxes to close budget gaps. For in the long run, new taxes unleash eras of new spending. Then, when the good times end, it becomes time to make "the hard choices" and raise taxes again. Wash, rinse, repeat.

Fortunately for the Republicans, some governors, such as Pawlenty of Minnesota, are holding the line. Some Democrats are making sensible choices as well, such as Jennifer Granholm, Michigan's new governor, who has crafted a budget free from major tax increases.
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Bigotry based On Ideology
Affirmative action, by its nature, takes race into account when making decisions about hiring, firing, and promotions. Sometimes it is a quota, sometimes it takes softer measures. But is it racism?

No, say its defenders. It's meant to improve the lot of minorities. One cannot be racist without having power. Minorities do not have power. Therefore, anything that promotes minorities cannot be racist.

A similar logic is at work (and invoked) in the scorn that some leftists have for conservatives, and in terms of political parties, for Republicans. At best, the conservative who outs himself is met with stares: "And you seem intelligent. Why?" At worst, well, the nasty names fly. Willy Stern describes a blind date that turned out badly after he defended Republicans, and identified himself as one

She dropped her chopsticks and stared at me as if I had just announced that I was a convicted child rapist.

"Well, look," she said as she pulled her purse out from under her seat. "I'm sorry but I can't deal with this. Please don't think me rude, but I really think it would be best if I just left."

"Sadly," he writes, "this is not an extreme case." He labels such attitude bigotry, and finds an official of the Anti-Defamation League to back him up. Stern then lays out the logic of leftist-based bigotry:

In short, the justification for bigoted comments directed at those with whom the educated Left disagrees politically is based on two foundations: 1) We're a lot smarter than they are; and 2) We're better people than they are. That logic leads to three inescapable conclusions: We're right. They're wrong. QED: All Republicans are assholes"

Of course, a parallel charge can be made against some conservatives, which only goes to show, again, the bigotry knows no boundaries. [Courtesy of Real Clear Politics.]
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Welfare for Artists
Here's a constituency that needs welfare reform: artists. Writing in OpinionJournal, Daniel Grant describes how artists and arts organizations are finding creative ways to dip into the pockets of John Q. and Jane Public: excise taxes. San Francisco's Grants for the Arts program, for example, gets its $14.5 million budget from the city's bed tax--on the theory that (a) tourists come to San Fran for art; and (b) the Grants program produces the art, and therefore, (c) tourists ought to fund the Grants program. There are other assumptions in there, of course, but it's all part of the same story: an organized group, intensely interested in its own betterment, lives off the tax dollars of a dispersed group of people who pay only a little bit each for the privilege of subsidizing someone else.

The Bay area is not the only transgressor, of course: Denver, and Tempe, AZ are among the cities that have bought into the logic of "If you tax them, they will come (back)." Broward County, Florida, however, doesn't follow the "tax the to tourist" route; rather, it taxes plebian art (video rentals) to support (allegedly) more high-minded art institutions.
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Work Promotes Welfare
Welfare reform is back in the news thanks to a new report from a social policy research organization called MDRC. Stateline.org has a brief review of the study. Here's the thumbnail version: work promotes the welfare of children and parents. Not only do households where with a wage earner have higher incomes than one without (that should be obvious), but both children and adults are better off on a number of non-economic measurements.

Under the New Hope program in Wisconsin, members of the experimental group received, on average $100 a month in supplemental income and subsidized health care and child care. A control group did not, and received welfare benefits under the standard terms (which does include a work requirement). The group that received the supplements were more likely to have higher incomes and were otherwise better off.

This shouldn't be surprising. One, the experimental group had, effectively, a higher income, and when you're at the level of welfare recipients, every extra dollar helps, a lot. Members of the experimental group worked longer than those in the control group, lifting their incomes. A WSJ article on the study interprets the report as contradciting "most state's welfare-to-work policies that make dollar-for-dollar reductions to benefits as recpients earn more money." That's a 100 percent marginal tax. Lifting that tax (part of the experiment) will naturally encourage people to work more.

But as Heritage Foundation scholars Robert Rector and Patrick F. Fagan point out, "the most effective way to reduce child poverty and increase child well-being is to increase the number of stable, healthy marriages." That was something beyond the scope of the New Hope project, and perhaps of government officials as well.
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Jesus and Tax Cuts
An an op-ed that ran in the yesterday's NYT, Adam Cohen asks the vogue phrase "What Would Jesus Do?" and gives his answer: "Sock It to Alabama's Corporate Landowners."

Here are the facts:
- Families with incomes as little as $4,600 are subject to the state income tax (in neighboring Mississippi, it's over $19,000)
- Sales taxes (thought to hurt the poor the most) run as high as 11 percent (apparently there are local plus state levies)
- People can deduct from their state income tax obligations all money paid in federal income taxes. [It's not as if they are getting away with paying no taxes--they do pay federal taxes, plus property, sales, and other state taxes.]

Cohen notes that "The upshot is wildly regressive: Alabamians with incomes under $13,000 pay 10.9 percent of their incomes in state and local taxes, while those who make over $229,000 pay just 4.1 percent." As George F. Will would say, Well. Everything in life is regressive, isn't it? A Kia automobile will represent a bigger portion of annual income for a $10,000 household than it will for a $100,000 income. Same for a new TV, a 2,000 square foot house, or three pounds of hamburger. The fact that each purchase represents a smaller portion of one's income is one of those benefits of being wealthy rather than poor.

There are two reasons why issues of tax fairness even come to a head:
- Resentment of wealth, resulting in calls to take some of it away. (The socialist impulse)
- A perceived need to tax the wealthy much more, simply to fund government. (The result of too-big government)

And one reason that government has grown so much is that many people pay no income taxes at all--roughly half pay no federal income tax. Sounds odd? Sure, governments don't have income from those folks, but non-payers, not, well, paying taxes, may be less concerned about the burden of taxes, and thus overpurchase (with other people's money) government services. But government is not free, and knowing that is a matter of good citizenship. One way to teach that lesson is to require everyone to pay income taxes of some sort. It can be set at a token amount--say, $10, even--for those with the lowest of incomes. This would, of course, be "unprofitable" in an economic sense, in that the cost of processing such a return would swamp the income gain to the government. But it would benefit the political culture as a whole.

Since we're bringing religion into the discussion, one critical point that Cohen never makes--and probably would not make, if my inferences are correct--is that in many ways, the state has replaced God. Have a problem? Get a government program! Whereas in the past people might live in contentment (as St. Paul admonished) or hang together as a family (believers, Paul wrote, had a special obligation to support their families) or help those around them (again, referring to the apostle, do good to all men), today, we expect things to be done through the state. This is an unfortunate application of the specialization principle of economics, as laid out by Adam Smith. The production of nails is much greater if one man mines the iron, another transports it, another makes the nail, and another one sells it. But the production of human welfare is not necessarily improved by a bevy of economic develoment experts, education consultants, or professional social case workers that are the face of the modern state.

Should Alabama's tax system be reformed? Probably. How, I don't know.
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Pass the Buck, Shift the Blame
Writing in the New York Times magazine, Matt Bai blames tax cuts for the budget woes in the states, as well as apathy from Washington. To his credit, he does mention the state's spending sprees of the 90s, though the end result is the same-old, same-old: "I can't control myself, you bail me out." The result, Bai predicts, is a tax-shift, with many people paying less in federal income tax and more in state taxes. The WSJ in an article blogged on 6/9/03 (See "Federal Tax Rates Down, State Tax Rates Up," below) says much the same. Despite the complaining about mandates from on high, much of the trouble that states face comes from their own spending booms.

Bai says that because of their dire fiiscal condition, states are cutting spending on highways and universities--and some are. But then, the claim that Washington and the sluggish economy are the culprits stands in sharp contrast with foolish state spending that goes on even now. As the Journal mentions in an editorial take Louisiana,

where a committee of the state house has released a $16 billion-plus budget that includes $264 million of the bailout. While the committee restored budget cuts, it also included money for such priorities as a rodeo, a hot air balloon championship, the National Baptist Convention, and a tutoring program.

Ramesh Ponnuru, writing over at The Corner, writes of the author of the Times' piece: while he quotes conservatives to illustrate his points, he never allows the possibility of competing analyses of the state budget crunch to get in his way. Even if I were predisposed to accept Bai’s conclusion, I don’t think his article would be at all persuasive.
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Managing Health Care Expectations
The Wall Street Journal (subscription required) conducted a national telephone survey on the subject of prescription drugs, and the results aren't pretty. Nearly or more than half of all respondents favored government price controls over physican fees (43 percent), hospital bills (48 percent) and presscription drugs (56 percent). Nearly one third (30 percent) blame the "cost of advertising and marketing" while another 42 percent (a figure which probably overlaps the first group) choose "profit margin," while only one quarter (23 percent) chose "cost of medical research."

Compared with the costs of research, advertising and marketing are minor players. Blaming profit is more problematic; it reveals that a lot of people don't believe that the pursuit of profit and the advancement of human welfare go hand-in-hand, at least as far as medicine goes. I suspect this is part of a belief that the more important something is for life, the stronger the case for government intervention. Hence, over half of those surveyed support price controls on prescription drugs.

Looks like the need for education on basic economics isn't going away anytime soon.
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Fight Spam by Taxing Email
Will the flood of spam--MAKE MONEY NOW--lead to taxes on email and federal regulation of the Internet. Christopher Caldwell of the Weekly Standard, thinks so--and applauds the idea.

He recites the dreary statistics: AOL blocks 2.3 billion pieces of spam a day (though more get through); between January of last year and March of this year, the amount of all email that was spam went from 16 to 45 percent; and a million email addresses can be bought for only $500.

Caldwell does not hold out much hope for technology to solve the problem; in an arms race-like scenario, each anti-spam advance is followed by improvements in spamming techniques. The economics are unchanged: the costs of spam are negligible to the spammer, and high to the spamee.

Arguing that tax and internet-free policies of the Net have ruined the email experience for many people, Caldwell (writing for a conservative magazine, by the way), calls for government regulation, as well as taxes. Here's the, uhm, money paragraph:

The Internet economy, as spam shows, turns out to be like a garden: Leave it alone and you will not get (as you might assume in theory) a profusion of wild and interesting growth. No--you'll get the entire space choked off by the most noxious and aggressive weed. And spam has reached the point where it calls for a mighty pesticide. An entire range of federal regulations is going to be necessary if the Internet is to be kept usable; and enacting such regulations responsibly will take legislative prudence and care. A do-not-spam list is a first imperative. But it is also a social necessity that the principle of taxing the Internet be established soon. This will mean retiring the (in retrospect) absurdly named Internet Tax Freedom Act of 1998, which placed a moratorium on certain Internet taxes, and was extended in 2001 until November of this year.

It's hard to resist the logic--changing the economic calculus of sending "200 million emails a day" (as Caldwell reports one man doing)--seems to be the best, sure way of reducing spam. Here's how Caldwell sees it going forth:

A penny-per-e-mail charge would drive most spammers out of business, subject them to jail time for tax evasion if they hid their operations, and cost the average three-letter-a-day Internet user just ten bucks a year. If even that seems too hard on the small user, then an exemption could be made for up to 5,000 e-mails per annum.

"Three letters a day" seems terribly low to me. And actually forcing spammers into compliance is a challenge itself, one that may kill the patient to cure the disease.
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Federal Tax Rates Down, State Tax Rates Up
The Wall Street Journal today has a report (to subscribers only) on the ways that states are raising taxes even as Congress recently passed and President Bush just signed a tax-cutting package.

Citing the left-leaning Center on Budget and Policy Priorities, the Journal notes that 31 states have either raised taxes this year or are yet considering doing so. Among those who "can't say no" are states with Republican governors: Connecticut, Georgia, Idaho, Nevada, Ohio. Having lived in Ohio for several years, I can't say that I'm surprised by the tax increase there--even though the putatively anti-tax Republican party controls both the legislature and the governor's house. Ohio Republicans haven't had a reputation as the party of small government for a long time. Ohio jumped up on the list of taxing states during the 1990s, and one of the major obstacles to George Bush's tax cut proposal was Ohio senator--and former governor--George Voinovich. Nebraska, a reliably Republican state in presidential elections, is making permanent "temporary" sales and income-tax increases, demonstrating once again that there's nothing more permanent than a temporary government program--unless it's a temporary tax increase.

Economically, the cost of these tax rate increases is decreased economic growth. Mark Zandi of the consulting firm Economy.Com estimates that half of the federal stimulus will be cancelled out by state hikes.

From a policy standpoint, there's a more important cost of these tax rate increases. If there was ever a time to trim back the excesses of government spending, it's now; when tax dollars are scarce, it is imperative to focus government efforts on what is essential (just like businesses do) and discard what is not. To the extent that this does not happen, we see the power of entrenched interests at work. It also demonstrates the fact that civil society has to some extent withered, as we have come to expect more and more on governments of various levels. Lynn Rex, executive director of the Nebraska League of Municipalities, told the Journal that if the state budget was balanced not through tax increases but through cuts, "there's be a revolt." A long time ago, Americans revolted when taxes were raised.
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