Political Ramblings of a Madman

2013-05-29

Cato: The Laffer Curve Shows that Tax Increases Are a Very Bad Idea – even if They Generate More Tax Revenue

The Laffer Curve is a graphical representation of the relationship between tax rates, tax revenue, and taxable income. It is frequently cited by people who want to explain the common-sense notion that punitive tax rates may not generate much additional revenue if people respond in ways that result in less taxable income.

Unfortunately, some people misinterpret the insights of the Laffer Curve. Politicians, for instance, tend to either pretend it doesn’t exist, or they embrace it with excessive zeal and assume all tax cuts “pay for themselves.”

Another problem is that people assume that tax rates should be set at the revenue-maximizing level. I explained back in 2010 that this was wrong. Policy makers should strive to set tax rates at the growth-maximizing level. But since a growth-generating tax is about as common as a unicorn, what this really means is that tax rates should be set to produce enough revenue to finance the growth-maximizing level of government - as illustrated by the Rahn Curve.

That’s the theory of the Laffer Curve. What about the evidence? Where are the revenue-maximizing and growth-maximizing points on the Laffer Curve?

Well, ask five economists and you’ll get nine answers. In part, this is because the answers vary depending on the type of tax, the country, and the time frame. In other words, there is more than one Laffer Curve.

Cato: Why Inflation Isn’t a Moral Issue

One of the recurring themes you see in debates over monetary policy is the idea that inflation is a moral issue. People will often point out indignantly that today’s dollar is worth only five percent of what dollars were worth a century ago. Inflation hawks sometimes describe inflation as a kind of theft.

Clearly, really high levels of inflation have devastating economic consequences, as Weimar Germany and modern-day Zimbabwe have discovered. But so long as inflation is kept at the moderate, largely single-digit levels Western democracies have seen in recent decades, moralizing about inflation simply doesn’t make sense. There’s no particular reason to prefer an inflation rate of 0 to a 2 percent or 4 percent inflation rate, and indeed, the latter may have important advantages.

Economists like to say that money serves two primary purposes: it serves as a medium of exchange and a store of value (many also describe it as a unit of account, but this is largely a consequence of the other two functions). Inflation—even in the single digits—prevents money from working effectively as a long-term store of value. If you were born in 1920 and your retirement plan was to put $100 bills under your mattress, the inflation of the 1970s would have destroyed the majority of the value of your savings.

The problem with this line of argument is that even stable money is a bad long-term store of value. That’s because modern capital markets offer you the opportunity to not just preserve the value of your money but dramatically increase it by investing in productive assets. You can buy stocks, bonds, or real estate, all of which generate a stream of income that increases the value of your investment.

Cato: ‘May Cause Drowsiness, Use Caution Around Machinery’

Frank Harty of the Iowa law firm Nyemaster Goode describes a new kind of employer headache arising from the Obama administration’s hardline enforcement efforts on the Americans with Disabilities Act (ADA) front:

…Common sense dictates that any medication that carries with it a warning that it “may cause drowsiness” or that the patient should “use caution” if operating machinery may pose a risk in the workplace. It is for this reason that many employers adopt a policy requiring employees to self report the use of prescription pain killers. This is especially important in potentially dangerous workplaces such as manufacturing and construction.

In a recent action that defies common sense, the Equal Employment Opportunity Commission has taken the position that such policies are unlawful under the Americans With Disabilities Act. The ADA prohibits an employer from conducting “medical inquiries” without a business reason to do so. In EEOC v. Product Fabricators, Inc., an action in federal court in Minnesota, the EEOC required a manufacturing employer to abandon its policy of encouraging employees to inform supervisors if they are under the influence of narcotic pain killers such as Vicodin. The EEOC took the position that an employer cannot ask about prescription pain killer usage unless it has “objective” evidence that an employee is impaired on the job.

This places employers in a very difficult position….

Cato: Let Student Loan Interest Rates Rise

It seems simple: College is expensive and interest rates are at historic lows, so rates on federal student loans shouldn’t suddenly double. But this isn’t simple at all.

Despite constant talk about the huge value of education, and the need to get many more people into college, aid is driving massive overconsumption of higher education and squandering billions of student and taxpayer dollars.

The Associated Press just published a story brilliantly illustrating reality. Of graduates ages 25 and younger, the AP reports, roughly 50 percent are either unemployed or in jobs that don’t require a degree. In addition, despite what we hear about the economy’s imminent voracious appetite for highly educated workers, the U.S. Department of Labor estimates that just three of the 30 jobs expected to have the greatest growth by 2020 will require a bachelor’s degree or higher. Finally, right now a third of bachelor’s holders of all ages are in jobs which don’t require their credentials.

And that’s just bad news for people with degrees. Below the surface is the even more massive problem of people who enroll in college, often take on debt, but don’t get the credentials they need to increase their earnings and comfortably pay back what they owe.

Cato :Time for Me to Defend My Work on Tax Havens

A few days ago, I explained why I’m a big fan of tax competition. Simply stated, we need to subject governments to competitive pressure to at least partially offset the tendency of politicians to over-tax and over-spend.

Tax havens play an important role in this liberalizing process, largely because they do not put themselves under any obligation to enforce the bad tax laws of other jurisdictions. They also use privacy laws to protect their sovereign control of what gets taxed inside their borders (this is what separates a “tax haven” from a more conventional low-tax jurisdiction). This means they are fiscal safe zones, particularly for people who want to protect their assets from the pervasive double taxation that exists in so many nations.

Cato: The New York Times Gets Serious about Limited Government

Can one confidently predict the editorial view of The New York Times on a “momentous” issue of the day, like ObamaCare in the Supreme Court? Does the sun rise in the east?

Speaking breathlessly from the steps of the Court just after oral argument concluded yesterday, CNN legal analyst Jeffrey Toobin, who like so many others had assured us that the Court would uphold ObamaCare’s linchpin, the individual mandate, called the government’s oral arguments on the issue “a train wreck for the Obama administration.” Risky as it is to predict how the Court will eventually rule, that’s how most other Court-watchers saw it yesterday, too, which meant that the Times had damage to control.

And so today we find the Gray Lady warning sternly that “the Supreme Court faces a central test: whether it will recognize limits on its own authority to overturn well-founded acts of Congress.” At least the good folks on the Times editorial board have some sense of limited government.

The problem, of course, is that it’s misplaced. The question is not whether Congress’s acts are well-founded but whether they’re constitutional. And on that score, the view of theTimes is little different than that of then-Speaker Nancy Pelosi, who responded famously, when asked in October 2009 where specifically in the Constitution she found congressional authority to enact an individual mandate, “Are you serious?” which she repeated for emphasis.

Cato: Argentina Bans Book Imports due to ‘Human Health Concerns’

The Argentine government has severely restricted the importation of books due to “human health concerns” [in Spanish]. That’s right. According to the government, it can be dangerous to “page through” a book that has high lead quantities in its ink. “If you put you finger in your mouth after paging through a book, that can be dangerous,” said Juan Carlos Sacco, the vice-president of an industrialist organization that supports the measure.

The government claims that this is not a ban. However, since each buyer has to demonstrate at the airport’s customs office that the ink in the purchased book has lead quantities no higher than 0.006% in its chemical composition, the result is that all book imports into the country are stalled.

Cato: The Trayvon Martin Shooting: Just the Facts

Americans use guns to thwart a lot of crime, very often without having to fire the weapon. When citizens do use deadly force, the legal system will adjudicate whether that force was lawful or unlawful. With respect to the Trayvon Martin case, our focus thus far has been on Florida’s Stand Your Ground law and what role, if any, it has played in that case. I have concluded that there is no connection between that law and the Martin shooting at all. The Stand Your Ground law simply does not apply—so other legal principles will govern the legality of George Zimmerman’s conduct. My legal analysis will be published in an article next week. Walter Olson has related thoughts here.

Read more at http://www.cato.org/blog/trayvon-martin-shooting-just-facts

Cato: EMTALA and the Good Samaritan

A final thought in this “Obamacare-at-the-Court” week: Does the Emergency Medical Treatment and Active Labor Act (EMTALA) make something like Obamacare’s mandate not only inevitable but legitimate? Enacted in 1986, EMTALA requires hospitals to provide care to anyone needing emergency treatment regardless of citizenship, legal status, or ability to pay. It’s often cited as the very reason we have to have Obamacare’s individual mandate, to cover the costs of providing for the uninsured indigent. As the Washington Post editorializedthis morning, “If you end up in the emergency room, you will be cared for, as federal law demands. The government, already deeply involved in regulating the health-care market, has a legitimate interest in encouraging you to prepare for such an eventuality.”

Fair enough, but it must do so by constitutional means, and that’s just the problem here. Not every means that would solve a problem is authorized by our Constitution for limitedgovernment. In truth, however, the constitutional problem begins with EMTALA itself: neither the taxing nor the commerce power, if understood as the pre-New Deal Court understood it, authorizes Congress to compel hospitals to be Good Samaritans. In a free society, health care is no different than any other product or service: If you need or want it, you pay for it, failing which you don’t get it.

Cato: The Truth about Paul Ryan’s Tax Plan

When House Budget chairman Paul Ryan (R-WI) released his tax reform plan recently, liberals pounced on it as an unfair giveaway to the rich. In TheWashington Post, E.J. Dionne claimed that Ryan’s tax plan would increase the deficit and “expand benefits for the wealthy,” while Dana Milbank said that the plan would “disproportionately help the rich.” A New York Times editorial said that under the Ryan plan, “the rich pay less in taxes than the unfairly low rates they pay now.”

What hogwash! Personally, I favor cutting taxes on the rich and everyone else, but that’s not the goal of the Ryan plan. The goal is to simplify the tax code and spur economic growth, and you can do that without changing the total revenue raised or who it is raised from. Ryan’s strategy is to eliminate tax deductions and credits while replacing the current six-rate income tax structure with two rates of 10 and 25 percent. The result would be less tax paperwork, more jobs and more investment, which would be good for everybody.

Liberals rail against the idea of cutting the top income tax rate from the current 35 percent, but Ryan’s lower 25 percent rate was not picked out of thin air. IRS data show that taxpayers with the highest incomes currently pay an average of about 25 percent of their income in income taxes. At the same time, middle-income taxpayers pay an average of roughly 10 percent. That is why Ryan’s two-rate tax structure of 10 and 25 percent would collect about the same amount of money from the same income groups as the current code if we got rid of the deductions and credits.

Cato: The Census’ Broken Privacy Promise

When the 1940 census was collected, the public was reassured that the information it gathered would be kept private. “No one has access to your census record except you,” the public was told. President Franklin Roosevelt said: “There need be no fear that any disclosure will be made regarding any individual or his affairs.”

Apparently the limits of what the government can do with census information have their limits. Today the 1940 census goes online.

When the Census Bureau transferred the data to the National Archives, it agreed to release of the data 72 years after its collection. So much for those privacy promises.

Adam Marcus of Tech Freedom writes on C|Net:

Eighty-seven percent of Americans can find a direct family link to one or more of the 132+ million people listed on those rolls. The 1940 census included 65 questions, with an additional 16 questions asked of a random 5 percent sample of people. You can find out what your father did, how much he made, or if he was on the dole. You may be able to find out if your mother had an illegitimate child before she married your father.

Cato: Given Our Big Debt And Weak Enemies, We Need Some Cuts

The military budget should be substantially cut, but sequestration isn’t the way to do it. Congress should pass legislation to let the Pentagon avoid sequester, but only if the Pentagon offers a new defense plan that saves as much in a more sensible way.

The Budget Control Act told a joint congressional committee to forge a plan to reduce the deficit by $1.2 trillion. To encourage compromise, the law offered an alternative unpalatable to all: the taking—sequestration—of that amount over nine years, with half coming from the military. To maximize pain, the law applies sequestration equally to all non-exempt agency accounts, including the Pentagon’s. The president can exclude only personnel costs, so that salaries are fully paid.

The super committee’s failure compels the president to take about $54 billion (the Pentagon’s annualized share adjusted for lowered interest payments) from the Pentagon next January, whatever its size. From 2014-2021, the law imposes spending caps for each discretionary spending category, including defense, and sequesters any excess.

Cato: Minimum Wage, Including in N.J., Could Mean Maximum Damage

President George W. Bush signed a bill in May 2007 that would eventually increase the federal minimum wage substantially but gradually, with the last hike in the summer of 2009 after he left office. National unemployment then was only 4.4 percent, and 22 states already had a higher minimum. So, the damage was not felt until later — particularly in New Jersey.

The federal minimum wage rose 12 percent on July 24, 2008, and by another 10.7 percent to $7.25 an hour a year later. By 2010, this had become a serious problem, made even more serious in suicidal states with even higher minimums such as California, Nevada, Florida, Illinois, Rhode Island and Michigan. As it turns out, however, the higher federal minimum wage had a uniquely vicious impact on New Jersey.

Out of nearly 3.8 million people working in New Jersey in 2010, more than 57 percent were salaried and, therefore, unaffected by the minimum wage. Among the remaining 1.6 million who did work for an hourly wage, only 31,000 (1.9 percent) were earning the minimum wage, according to a Bureau of Labor Statistics report.

But the small number of workers earning the minimum wage greatly understates the impact. Why? Because New Jersey had 82,000 people earning less than the minimum wage in 2010 — up from just 25,000 in 2007. In other words, after the last hike in the minimum wage, an astonishing 5.2 percent of all New Jersey workers supposedly affected by the law ended up earning less than the minimum wage, sometimes much less. That 5.2 percent figure was the second-highest in the nation, behind only Louisiana (5.9 percent). Jobs that pay less than the minimum far outnumber those that pay the minimum, particularly in New Jersey.

How could so many people be earning less than the minimum wage? The reason is that there all sorts of exemptions in federal and state minimum wage laws that act as a safety valve to minimize job losses that could otherwise prove politically embarrassing.

Cato: Supreme Court Invalidates Patent on Human Thought

On Tuesday, the Supreme Court invalidated a patent that effectively claimed ownership of a fact about the human body. A joint brief by the Cato Institute, Competitive Enterprise Institute, and the Reason Foundation had urged the high court to reject the patent, arguing that it posed a threat to freedom of thought and innovation.

The patent focused on a class of drugs called thiopurines, which are used to treat autoimmune diseases. When a patient takes a thiopurine drug, it is processed by the body into chemicals known as “metabolites.” Doctors measure metabolite levels in order to properly adjust the dosage of thiopurine drugs.

A company called Prometheus Labs filed a patent on a thiopurine drug testing process. The patent didn’t cover the drugs themselves or any particular method for measuring metabolite levels—these had already been invented years ago by other companies. Rather, Prometheus patented the idea that particular metabolite levels “indicate a need” to raise or lower the drug dosage. In effect, Prometheus was claiming ownership of a basic fact about the human body.

When the Mayo Clinic created its own thiopurine testing product, Prometheus sued. It argued that when a doctor used Mayo’s test, she could infringe Prometheus’s patent by thinking about the scientific correlation is disclosed. And that, in turn, made Mayo an accessory to the doctor’s infringing thoughts.

But Mayo argued that the patent was invalid because it claimed a law of nature, something the Supreme Court has said repeatedly isn’t eligible for patent protection. Mayo’s argument was supported not only by the Cato Institute, but also by the American Civil Liberties Union, the American Medical Association, the American Association of Retired Persons, and many other groups. They warned that it was dangerous to grant patents that can be infringed by mere thoughts, and that such patents would harm the quality of medical care by restricting doctors’ access to information.

Cato: Plea Bargaining in the Supreme Court

The Supreme Court issued two rulings today related to plea bargaining. What if a defense attorney fails to pass along a prosecutor’s offer to his client? And what if a defense attorney gives a client really bad advice so an offer is rejected and, after a trial, the client gets a lengthy prison sentence? The Supreme Court grappled with what should be the appropriate remedy, if any, in such circumstances.

Lurking in the background of these cases is the practice of plea bargaining itself. Most Americans mistakenly think that we have a system of jury trials because they tend to hear about such cases on the news. Well, yes, some people have jury trials and some people win the lottery–most do not. According to the figures cited by the Court, “ninety-seven percent of federal convictions and ninety-four percent of state convictions are the result of guilty pleas.” Of the nine justices on the Court, seven did not perceive any problem with this situation.

Cato: In Defense of ‘Stand Your Ground’ Laws

Amid the ongoing furor over “Stand Your Ground” laws, adopted in Florida and about half the other states, the New York Times invited me to take part in a “Room for Debate” round-table on the subject. An excerpt from my contribution:

Under any criminal law, injustice can result if cops get the facts wrong. The Sanford, Fla., police, accused of buying a dubious self-defense tale after the Trayvon Martin shooting, will now come under searching scrutiny for that decision. Sanford’s mayor says his town is eager to stand corrected by the evidence as a fuller story emerges.

So who’s left to disagree? Not the authors of Florida’s Stand Your Ground law, who told The Miami Herald that the law they sponsored applies only to cases of genuine self defense and won’t protect neighborhood-watcher George Zimmerman if critics of the Martin shooting are right about what he did that night. …

I go on to point out ways in which a robust right of self-defense has historically proved to protect the interests of victims of domestic violence and racial minorities. (On the latter, see, for example, cases from Ossian Sweet’s in the 1920s to the present day; more here and here, and from my Cato colleague Jonathan Blanks here.)

Cato: Feds Spin Yarn About ‘Significant Threat’

Federal prosecutors told a federal judge that they’re prosecuting an elderly man because his actions constitute a “ significant threat” to the legal system.

Guess what he did?

(a) He smuggled stolen FBI documents to a suspected Al-qaeda prisoner in the NY jail.

(b) He attended court hearings and made belligerent outbursts.

Cato: The Supreme ObamaCare Question

Next week, the Supreme Court will devote six hours over three days to hearing challenges to the Patient Protection and Affordable Care Act, a k a ObamaCare.

The last time the court spent this much time hearing arguments in a case was in 1966, when it devoted six hours to the case establishing a defendant’s Miranda rights and seven hours to the case that upheld the Voting Rights Act. This decision is likely to be just as momentous.

That’s because this case isn’t really about health-care reform. Rather, it’s about government power and the fundamental relationship between government and the people.

The court will hear four separate but related arguments, but all the issues boil down to a simple but important question: Do we have a government of limited, enumerated powers or a government of unbridled power, with the authority to control and direct every aspect of our lives?

In defending the health-care law, the Obama administration relies on two constitutional provisions to justify its claim of federal power. The first is the Commerce Clause, which grants Congress the power to “to regulate commerce… among the several states.” This is supposed to justify ObamaCare’s mandating that each of us buy insurance (the “individual mandate”).

Cato: Stop Ignoring Higher Ed Reality

Like most political discussions, the student aid debate is driven far more by sentiment than reasoned analysis. If we used the latter, we’d be demanding big aid cuts for the sake of students and taxpayers alike.

As I testified to a Senate panel earlier this week, the evidence is powerful that there is massive overconsumption of higher education, and cheap federal aid ultimately fuels the college price skyrocket while encouraging students to tackle programs and debt they often can’t handle.

I won’t go into all the evidence here—you can get much of it in my testimony, and even more in this report—but here are a few of the big points that plead for us to stop the rhetoric and attack the waste:

Aid and prices have both increased at breakneck speeds over the last several decades. Growing empirical research shows that this is not an accident—colleges raise their prices to capture the aid—though there is a limit to what research can prove. Fortunately, logic can fill in the rest: People who work at colleges are normal human beings and will take every dollar they can get their hands on. They always have something good—either personally or professionally—they think they can do with it.

Cato: Why ObamaCare Must Go, in Ten Short Minutes

Last week, I appeared on NPR’s Tell Me More program. My discussion with host Michel Martin gives a good synopsis of why ObamaCare is both harmful to consumers and unconstitutional. Listen to the segment here.

For a contrary perspective, listen to former Obama administration acting solicitor general Neal Katyal, who appeared on the program the next day. If you do listen to both programs, let me know what you think about Katyal’s comments, specifically this part:

MARTIN: First, I want to play a short clip from Michael Cannon of the Cato Institute who spoke to us yesterday as we said. This is a little of what he told us. Here it is.

MICHAEL CANNON: If the Supreme Court were to uphold this unprecedented and really breathtaking assertion of government power, there would be nothing to stop the Congress from forcing Americans to purchase any private product that Congress chose to favor. That could be a gym membership. That could be stock in Exxon Mobil. That could be broccoli if Congress decided that any of these products move in interstate commerce and that forcing you to buy it was essential to the regulatory scheme they wanted to enact.

Cato: Trayvon Martin: Confronting the Problem of Enduring Racism

America is a land of liberty and opportunity, and has admirably served as “a city upon a hill” in the words of Puritan John Winthrop, who led the Massachusetts Bay Colony in the New World. The U.S. continues to attract freedom-seekers from around the world.

Yet America’s greatness has come at a cost. Indeed, the nation founded on the principle of individual liberty enshrined slavery in its founding document. Although the U.S. has come far in the 150 years since the great civil war which destroyed that system, racism lives on.

It is a legacy which white Americans like me can never truly understand.

The point is not that America is pervasively racist or uniquely flawed. Nor does the existence of racism justify creating a political spoils system which creates new injustices. However, those who love America the most, and who are most determined to preserve a free society which protects individual liberty, must address America’s flaws.

Cato: Busybodies of the World, Unite!

A smoke, a drink, and maybe a bag of chips in the privacy of your own home — they’re the guilty pleasures of life for many of us. But it’s increasingly hard to escape those who want to deny them to you — for your own good.

To take one small but irritating example, this Wednesday, the city council of Elk Grove, California, will consider a bill to ban smoking in all apartment buildings, publicly or privately owned.

You might see this as an effort to “harass the people and eat out their substance.” Others prefer to call it “public health policy.”

Earlier this year, Ronda Storms, a Republican state senator in Florida, introduced legislation to bar the use of food stamps to purchase “salty snack foods” and sugary treats. She’s nicknamed the legislation the “No Twinkie Left Behind Act.”

New York Times’ food columnist Mark Bittman praises Storms for raising the important question: “How do we regulate the consumption of dangerous foods?… The government isn’t doing its job,” he argues.

Bittman quotes Storms approvingly, “It’s just bad public policy to allow unfettered access to all kinds of food.”

True enough, as Storms argues, the long-suffering taxpayer is on the hook for food-stamp purchases — as well as treatments for Type 2 diabetes — and he who pays the piper gets to call the tune.

Cato: Santorum’s Tunnel and Federal Transportation Policy

If, like me, you’re a Pennsylvanian who wants a smaller federal government, you’ve probably been scratching your head at Rick Santorum’s success in the Republican primaries. An article in today’s Washington Times on the former Pennsylvania senator’s lack of popularity in the Keystone State is instructive.

The Times singles out Santorum’s leading role in getting federal taxpayers to foot 80 percent of the bill for a tunnel project in Pittsburgh that even former Democratic Gov. Ed Rendell called “a tragic mistake.” (When “Fast Eddie” dings a government project, you know it’s bad.) Indeed, the North Shore Connector was originally projected to cost $350 million but the final price tag will be closer to $528 million. (The Obama administration kindly kicked in $63 million in stimulus funds to help get the over-budget project finished.) As one local critic notes, that’s a lot of money to provide “cheap public transportation” for “Steeler and Pirates fans too lazy to walk across one of four bridges that already connect downtown and the ballparks.”

Cato: Iranian Rhetoric: Heard and Unheard

Commentators who believe that Iran would nuke another nation unprovoked tend to infer the clerical regime’s future intentions from its hyper-inflated rhetoric. The problem with this logic is that statements from its leadership often get cherry-picked.

Anti-Israeli diatribes made by Iran’s fiery-tongued President Mahmoud Ahmadinejad are typically taken at their word, while statements made by Ayatollah Ali Khamenei, Iran’s top leader, go virtually unnoticed. For example, last month Khamenei repeated his country’s vow not to seek nuclear weapons. He called their possession a “sin,” “useless,” and “dangerous.”Last Thursday, Khamenei reportedly praised President Obama’s recent comment that he saw a “window of opportunity” to use diplomacy to resolve the nuclear dispute.

Cato: Americans for Permanent War: Target Syria

Syrian President Bashar al-Assad and his family have turned his government into an essentially criminal enterprise. For more than a year Syrians have been attempting to overthrow the system.

By some estimates 7,500 people have died. Defections from the military have led to creation of a small “Free Syrian Army.” Regime opponents also have turned to terrorism. With no resolution is in sight, the country is sliding toward civil war. Like King Louis XIV President Assad might say, “Après moi, le déluge.”

In America the usual suspects have begun beating the war drums. Senators John McCain and Lindsey Graham urged arming the Syrian opposition. More recently McCain called for air strikes against Syria and berated the military for its caution in “standing on the sidelines.” Similarly, theWall Street Journal editorial page urged establishment of a no-fly zone in Syria, waving aside all opposition.

Others have taken up the cry. For example, Matthew Brodsky of the Jewish Policy Center urged military intervention in order to bring about “an end to the violence, the fall of the Assad regime and the creation of conditions for a stable democratic system.” Roger Cohen of the New York Timescalled for arming the Syrian opposition and establishing “a rough equality of forces.” Steven A. Cook of the Council on Foreign Relations endorsed military action so as not to leave “Syrians to their fate.” Former Obama aide Anne-Marie Slaughter suggested protecting “civilians through buffer zones and humanitarian cordons around specific cities, perhaps accompanied by airstrikes against Syrian army tanks moving against those cities.”

Cato: Canada’s Corporate Tax Cuts

President Obama and most members of Congress agree that the U.S. corporate tax rate should be cut. Thankfully, it is finally sinking in that having a 40 percent corporate tax rate when the world average is just 23 percent is suicide in a globalized economy.

The sticking point on slashing the corporate tax rate has been the fear that the federal government might lose revenues under such a reform. To prevent an expected revenue loss, policymakers have searched for tax loopholes to close in order to “pay for” a corporate rate cut. The problem is that members never find any loophole closings that they can agree on.

I’ve concluded that the effort to close corporate loopholes is a big waste of time. It is simply blocking desperately needed reforms to the tax rate. If I was drafting a corporate tax reform bill, I’d match a tax rate cut with federal spending cuts, but that idea hasn’t caught on either.

The good news is that a corporate tax rate cut without any changes to the tax base probably wouldn’t lose the government any money over the long term. Good evidence comes from Canada’s corporate tax cuts of the 1980s and 2000s.

The chart shows Canada’s federal corporate tax revenues as a share of gross domestic product (GDP) and the federal corporate tax rate. The tax rate plunged from 38 percent in 1980 to just 15 percent by 2012. Amazingly, there has been no obvious drop in tax revenues over the period.

Cato: What to Do about Inequality? Free Market Education

David Grusky assumes that income inequality is necessarily a bad thing, and lays it at the feet of “market failure.” I’ll not address the overall contention because it is not my area of expertise, but in education, while Grusky is correct in perceiving many problems, they cannot be ascribed to markets. They are government failures.

On schooling, Grusky fingers two “bottlenecks” as primary inequality producers: first, artificially low supply of disadvantaged college students due to poor academic preparation and, second, constrained demand for students by slot-rationing elite universities.

Few would likely argue with these major concerns. The poor generally aren’t well prepared for college work, and elite schools do not expand their available seats to meet demand. To blame market failure for these realities, however, is impossible because American education is dominated by government.

The vast majority—86 percent—of students in elementary and secondary education attend public schools, while 11 percent go to private institutions, and 3 percent are homeschooled. This is largely a result of the requirement that all taxpayers pay for government education and expend additional funds if they want private options. Moreover, in education profit-seeking—a staple of free markets that drives investment and expansion—is highly discouraged because tax benefits accrue only to nonprofit schools.

Problems in education can’t be blamed on market failure, because American education is dominated by government.