Eleutherian

I'm a little behind in responding to this story, but as long as Americans continue to smoke cigarettes, calls to increase taxes on the purchase of cigarettes will also continue. Reuters reported in a one-sided story that a $1 per pack tax increase on cigarettes would "reap" over $9 billion in increased tax collections.

The story quotes John Seffrin, chief executive of the American Cancer Society Cancer Action Network:

An increase in tobacco tax rates is not only sound public health policy but a smart and predictable way to help boost the economy and generate long-term health savings for states facing deepening budget deficits.

The American Cancer Society, in conjunction with the Campaign for Tobacco-Free Kids and various other advocacy groups, have long touted increased taxes as a means to deter smoking, often under the guise of increasing tax collections. These are two separate motives, and I will address each separately.

First, and most importantly, why do nonsmokers feel the need to FORCE smokers to quit? You should not be proud of making an activity too expensive for a person if they truly enjoy partaking in it. Some people truly enjoy smoking and do not want to quit. By making cigarettes more expensive, you will do one of two things to this type of smoker: 1. force them to spend more on cigarettes and less on other goods and services, or 2. force them to quit an activity they love. This should not be a proud moment for anyone.

The second motive is to supposedly increase tax collections for states. This, of course, assumes this is a state tax increase as opposed to a federal tax increase, as a federal tax increase will only serve to decrease states tax collections from cigarettes.

John Seffrin's quote states that cigarette taxes are a "smart and predictable way to help boost the economy." In one way, he is correct. Increasing cigarette taxes will surely boost the sales of black market cigarettes. A recent study found:

...hiking taxes $1 per pack will lead to a leap in the total smuggling rate in Washington from 39.3 percent to 51.5 percent. That is, 51.5 percent of the cigarettes smoked in the state of Washington will be contraband.

Commercial smuggling involves large-scale organizations that ship semi-tractor trailers and vans long distances and maintain complex distribution systems.

Our estimates indicate that nearly 30 percent of the smuggling will come from these commercial haulers. It’s worth noting that some of the trailers are actually hijacked from underneath legitimate truckers themselves.

In researching this post, I came across a report by the aforementioned Campaign for Tobacco-Free Kids entitled, "Raising State Cigarette Taxes Always Increases State Revenues." I have a general rule that when the title of an article contains a lie, there is not much need to read the rest of it.

For example, according to a Commonwealth Foundation study, in Pennsylvania:

After a 35 cent per pack increase in 2004, revenue fell by $72 million, and tax revenues remained below 2004 levels since then.

Of course, the more damning evidence against the projection that a $1 per pack tax increase would raise over $9 billion in new tax collections is that these projections have consistently been overestimated. The same Commonwealth Foundation study stated:

Of 57 state excise taxes imposed from 2003 through 2007, only 16 were found to raise as much revenue as projected. Thirty-nine state tax increases fell short of estimate by a range of 2% to 181%.

This doesn't exactly strike me as "smart and predictable."

• Government interferes in private market by passing regulations that discourage new entries into the industry.
• Two private companies in this industry want to merge.
• Government prevents merger due to lack of competition.

The above summary tells the tale of the voting machine industry since the 2000 presidential election. Like many economic problems, it all started with unwarranted government intervention in the private market.

The Associated Press reports that the Justice Department is attempting to undo a merger that occurred six months ago between the country's two largest voting machine companies. Since the new, merged company now operates machines in 70 percent of the nation's voting districts:

Critics say the merger could cause foul-ups at the polls on Election Day, and some even characterize it as a national security risk.

If a merger that occurred six months ago (more than one year before the mid-term elections) runs the risk of causing "foul-ups," then how would undoing a merger just nine months before mid-term elections reduce this risk? It doesn't.

Surprisingly, the AP prominently reported on the real cause behind the lack of competition in the industry:

The emergence of one megaplayer in the electronic voting machine industry may be an unintended consequence of reforms enacted after the presidential election debacle in Florida a decade ago. Few companies can afford to get into the business due to the expense of developing the electronic voting safeguards that reformers insisted on.

Instead of admitting their previous mistakes and introducing regulatory reforms, the government has decided to cause further damage to the voting machine industry by breaking up an economically viable business contract.

I apologize for the long hiatus since my last post. I've had this story on my desk for weeks, but the sheer brilliance of it finally brought me back to this blog.

New York City's first completely non-smoking apartment building will soon open at 1510 Lexington Avenue. Residents will be prohibited from smoking both inside and within the immediate outside perimeter of the building.

This story might upset a lot of people - after all, the building is banning a legal activity. However, allow me to explain my positive excitement over this news.

The government did not have a finger in this decision. This is not a public housing project. Rather, this is a private, family-owned apartment building that saw unmet market demand for smoke-free housing. CBS New York reported:

And even with a surplus of apartments on the market, Kenbar [Management] feels theirs will be in demand. Backing that up was a Zogby poll in July, which found that 58 percent of New Yorkers would be willing to pay more for a smoke-free home.

If you want to be free to smoke in your apartment - fine, live someplace else.

All levels of government can learn a valuable lesson from this story. There is no need to force private businesses to ban smoking in their establishments. If a market for smoke-free establishments exist, the private sector will respond to it. The government will cause more harm than good by intervening in these matters that lie outside its proper scope.

For example, Ireland's smoking ban in pubs has been highly lauded around the world. However, it is not as widely known that in the first year of the smoking ban, over 100 pubs went out of business. According to Stephen Kelly, chief executive of the Federation of Retail Licensed Trade:

The much-promoted view that non-smokers would be rushing to premises has not materialised. We expect another 100 to close next year.

If non-smokers want to spend their money only at smoke-free establishments, the private market will react far more appropriately than the government in taking actions to accept their money. Government intervention is tailored to only meet the needs of the majority (or, more specifically, the majority of the electorate). The private market, on the other hand, meets the needs of every individual - an incomprehensible concept to supporters of big government.

Child labor is a sensitive subject for many people around the world. However, this must not discourage objective analysis of the practice. A simple search for "benefits of child labor" turns up very little relevant information. Due to the sensitive nature, I recognize that not everyone will appreciate this post, but I hope you can appreciate the spirit in which it is written - the spirit of reason over emotion.

I want to remove your cultural blinders with regard to child labor. In most of the more developed countries of the world, child labor is seen as a dark memory from the past, virtually inexistent in these countries today. However, stating the obvious, not all countries developed at the same rate. Many countries are significantly less developed, and as such, child labor practices are still common.

Before going further, I feel obligated to draw a distinction between forced and unforced child labor. Forced child labor includes any form or slavery or indentured servitude, including prostitution. While adult prostitution is a legitimate enterprise, children are not mindful beings with regard to sex.

Unforced child labor includes agricultural and factory work, barring the previously stated distinctions. These children are free to work or not to work. No one is forcing them to hold these jobs. This is unforced child labor, and it should not be condemned by people not living in the given country.

Growing up in the United States, I was only eligible for one kind of job at the age of thirteen - agricultural work (with strict limitations on the number of hours and the times of day I could work). No one forced me to work. I wanted to work. However, the International Labour Organization would still have classified me as a child laborer - and therefore, someone needing rescued. I did not need rescuing and neither do many of these children who want to earn a little extra money to help their families - or simply to stay alive.

In some countries, there are more orphans than orphanage capacity. These children must not only sustain themselves but also any siblings they may have. Why should they not be allowed to earn income? Why do foreign governments pressure these countries to prevent these children from earning an honest living?

Before factory jobs were available in these countries, many children simply died. These "sweatshops" pay wages significantly lower than the wages in more developed countries, and sometimes significantly lower than wages after you factor for purchasing power parity. However, they are still better than other job alternatives.

I have seen the jobs and working conditions of children in non-factory jobs in several lesser developed countries. Instead of hauling large amounts of recyclables or firewood over long distances, these children could be sitting in a factory making textiles, AND earning higher wages. Why should we deny them this luxury?

I am stating the obvious to say that child labor creates a trade-off between labor and education. However, if your choices are death and education, would you really choose education? Education is a goal many families in lesser developed countries hope to attain for their children. Studies show, and I have seen with my own eyes, that when these families receive any surplus income at all (after paying for their basic necessities), any children who were working are sent back to school instead.

Child labor is an unfortunate practice that prevents children from receiving a proper education. However, it is also a godsend to many children and families who would otherwise not earn enough money to survive. Allow these lesser developed countries the chance to improve their situations themselves rather than pressuring them to adopt our customs, which evolved only after achieving a more advanced state of development.

Dwight Filley begins Risk Homeostasis and the Futility of Protecting People from Themselves by stating:

There is a growing body of evidence...that points to the surprising conclusion that most coercive measures intended to increase safety either have no effect or an opposite effect. Thus for example, when the government mandates the use of automobile seat belts, fatality rates do not decrease as expected. This counter-intuitive result is consistent across a broad range of governmental attempts to protect people from themselves.

I firmly support the risk homeostasis theory, and in reading on it lately, I just as strongly believe it applies to the environment. Particularly, environmental homeostasis applies to government mandated fuel economy standards.

Here's a story that may sound familiar. An environmentally conscious person who normally takes mass transportation to work every day buys a Prius (or another highly fuel efficient vehicle). The government may have even influenced the decision by providing an economic subsidy. Now, this person feels better about driving to work over taking mass transit.

Yes, the vehicle travels many miles for every gallon of fuel. However, the mass transportation system is still running. Every efficient gallon of literal fuel adds figurative fuel to the problem. This environmentally conscious person became comfortable in the thought of driving a vehicle with admirably-high fuel efficiency, forgetting the reason why mass transportation was the favored option all those previous years.

When the government manipulates the market, more harm occurs to the environment than would otherwise result from individuals making decisions according to their own free will (i.e. free from coercion). Forcing the automobile industry to increase fuel efficiency standards or providing economic subsidies to individuals who purchase more fuel efficient vehicles distorts the market and changes behavior. Ironically, the government's fuel efficient mandates and market manipulations will lead to increased subsidies for government-run public transportation systems, further hurting taxpayers, the economy, and the environment.

The Local, an English-language Swedish news site, reported that the Swedish Film Institute gave 500,000 kronor ($69,000) in taxpayer money to fund a feminist pornographic movie:

Engberg has also tried to make feminist porn before, which has resulted in a lesbian porn film and a film of women's' [sic] facial expressions at the point of orgasm. Her vision is to get make [sic] the porn industry more appealing to women, all in the name of feminism. She also claims that women's sexuality is more multi-faceted than men's.

But to argue that girls having sex with girls and women masturbating is somehow a good alternative to mainstream porn feels like a completely alien concept to me, and to many other women. Furthermore, most people would agree that the state should not fund pornography. And when it does, should it really only benefit women, all in the name of equality? If a man had sought and received similar funding for ‘regular’ porn, it wouldn’t have taken long before there was an outcry from supporters of equality between the sexes.

I am glad the author of this article acknowledges that the government should not fund pornography and should not fund initiatives that only benefit certain groups in the name of equality. These are positive developments that demonstrate why Sweden is shifting away from its socialist tendencies at a time when other countries (e.g. the United States) are regressing.

However, the author passed on the opportunity to take this line of thought a step further by stating that the government should not be in the business of funding movies in general (pornographic or not). After all, the classic Swedish Film The Seventh Seal didn't receive public funds.

I was at the US Postal Service website (www.usps.com) the other day when I realized - the address is www.usps.com. Wouldn't it be more accurate if the address was www.usps.gov? After all, the US Postal Service is a government-run monopoly (and not a "natural" monopoly, either).

However, the US Postal Service also owns the .gov domain (www.usps.gov - opens in a new tab/window). Perhaps a more suitable domain would be www.usps.monopoly.gov.

The European Union has plans to privatize the postal services of its member countries in the next two years. When will America try to catch-up? I'll have more on privatizing the US postal service in a later post.

A recent article by Daniel Griswold stresses the tangible, positive benefits of globalization in our lives. The main problem with promoting economic freedom is that its benefits are not easily visible. Griswold stresses in his article:

The consumer benefits of variety can be harder to quantify than a simple drop in price, but they are just as real. A 2004 study by the National Bureau of Economic Research found that the real incomes of American families are about 3 percent higher because of the greater variety that imports bring. That translates to a real gain of $1,300 per person or more than $5,000 for a family of four just from the expanding varieties that trade has brought to the marketplace.

As I have stressed to environmentalists, you must stress the economic benefits before you can influence people to change their own behavior/beliefs. You cannot (or, at least, should not) force them to change. In this case, proponents of free trade must stress the benefits in as tangible and easy-to-understand manner as possible to win over the minds of economic isolationists.

This Reuters article on Google made me feel all warm inside (Eleutherian warming). Basically, Google has decided to invest money in alternative energy technologies. Yet another private company displays that the government has no business spending taxpayer dollars on research by politically connected researchers.

Bill Weihl, a leading Google energy researcher, stated:

Typically what we're seeing is $2.50 to $4 a watt (for) capital cost. So a 250 megawatt installation would be $600 million to a $1 billion. It's a lot of money.

Weihl's team is attempting to cut the costs of producing key components to as much as one-fourth their current cost. Instead of taxpayer-funded government subsidies for otherwise uncompetitive technology, Google plans to use innovation to allow the technology to complete on its own economic merits. This is libertarian environmentalism that everyone can embrace.

I'm still upset that UBS caved to the U.S. government's demands to break Switzerland's secrecy laws by providing the names of 4,450 UBS clients. However, I'm not nearly as upset as the Swiss. RealClearWorld reports, "The Swiss public is critical of UBS but resentful of outside meddling with its secrecy laws." Great, more people that are upset with the United States over invading privacy.

The author, Alvaro Vargas Llosa, makes a solid point:

Blaming bank secrecy for the illegal origin of funds that find their way to Swiss banks is like advocating press censorship because deceitful politicians give TV interviews to win votes. Governments that blame foreign banks for tax evasion and money laundering are whitewashing their own incompetence. Incidentally, not a few dictators -- Robert Mugabe comes to mind -- with Swiss bank accounts obtained their cash from foreign aid provided by the very governments that accuse those banks of harboring illegal funds.

The United States needs to stop looking to other countries to solve U.S. problems. Most problems involving money held overseas are a result of the cumbersome U.S. tax code. More on this in a future post.

John Stossel has set himself apart from the majority of the U.S. press corp - by raising the standards by which he performs his job. In analyzing the government's cash-for-clunkers plan, Stossel states:

It wasn't. As usual, the program has been judged only by its first and most visible consequences, violating Henry Hazlitt's teaching in his classic, "Economics in One Lesson":

"The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."

If you weren't struck with an intense bolt of joy upon reading this, perhaps you should peruse more of this blog (or check out books in the Libertarian Reading List). The article is so good, it deserves to be quoted a little more:

Let's start at the beginning. The government paid car owners to trade in their old cars, which will be destroyed. But the government is running a deficit. So it doesn't have $3 billion to hand out. It must borrow the money, which reduces the amount of money for other investments. Moreover, the government must raise taxes in the future to pay back the principal and interest -- or the Federal Reserve will monetize the debt through inflation. Either way, we pay.

That isn't all. Those car buyers were either going to trade in their used cars soon or they weren't. If they were, Cash for Clunkers simply moved up the schedule. The stimulation of the auto industry occurred earlier. Big deal. But if buyers planned to keep their cars longer, the program imposed costs that are less visible. Without the government incentive to buy cars, consumers would have bought other things -- computers, washing machines, televisions. The manufacturers and sellers of those products didn't get to make those sales. Why should the auto industry get privileges at the expense of others?

Then there are the mechanics who would have serviced those used cars. They've lost business. Some will be laid off. Nor should we forget low-income people who depend on the used-car market for their transportation. The cheap cars they would have bought were destroyed.

Of course, politics is all about the immediate and the visible, so not only will politicians completely ignore this legitimate analysis (except for a few Republicans - but they also support plans with immediate and visible effects when they're in the majority), but they are expanding the program to appliances.

That's right, and just in case you thought purchasing a new microwave and selling the old one at a yard sale, the federal government is cracking down on yard sales!

The campaign is called "Resale Roundup," and it targets any product that has been recalled by its manufacturer. According to the Kansas City Star:

The commission's Internet surveillance unit is monitoring Craigslist and other "top auction and reselling sites" for recalled goods.

If this commission has no better use for its resources, then it does not have a legitimate reason to exist.

I read the following headline on The Hill, AFL-CIO, Dems Push New Wall Street Tax, and my first reaction was...why? First, why would anyone propose this tax (during a recession no less!)? Second, why does the AFL-CIO care?

The bill's supporters answer the first question - in their way. Thea Lee, policy director at the AFL-CIO, stated:

It would have two benefits, raise a lot of revenue and discourage speculative financial activity. The big disadvantage of most taxes is that they discourage some really productive activity. This would discourage numerous financial transactions.

At least she recognizes that it will discourage financial transactions, but why does she actually view this as a positive development?

Grover Norquist (say what you will about him, but he really does have some great insights) once said the biggest mistake Democrats have made in recent history was passing legislation to create tax-exempt individual retirement accounts. This reduced the financial dependency of U.S. citizens on not only government welfare programs but also labor union pensions. Realizing their "mistake," this tax is an attempt to regain some lost ground in their control over Americans' lives.

Supporters of this tax are hoping that the average American is too stupid to realize that if an investment firm is making money, the average Americans investing in their funds are making money.

From a previous post:

In 2005, 50.3% of U.S. households owned financial equities such as stock and mutual funds. This is up from 49.5% in 2002 (which may not seem like much but represents an increase of more than 4 million households). As such, taxing these large companies constitutes taxing roughly half of American households.

It is a natural process for modernization to reduce the influence of traditional belief systems. Such a tradition hinders progress by favoring traditional practices over developing a system based on the rule of law, sacrificing individual freedom and self-interest. These points are supported by the thorough analysis by Ronald Inglehart and Christian Welzel in their book Modernization, Cultural Change, and Democracy:

The shift from traditional to secular-rational values becomes slower and stagnates, while another change becomes more powerful – the shift from survival to self-expression values, through which people place increasing emphasis on human choice, autonomy, and creativity.

The Confucian tradition fit China well for its stage of development when it was largely an agrarian society. Before agrarian societies reach proper levels of industrialization, farmers are at the mercy of nature (or in many societies, gods of the earth) for their existential security. Farmers in China found this sense of security in the Confucian tradition and trust in a strong central government.

Every society begins to shift away from traditional beliefs and practices once a certain point of industrialization is reached. Yes, it is a good thing that China has moved away from such a traditional system that hindered its growth and development. However, history has consistently shown that top-down reform movements orchestrated by the central government are not necessary to produce such a change. As a result of the infamous Cultural Revolution, economic growth stagnated or declined, the education system halted (with illiteracy reaching as high as 40% in some areas), priceless cultural artifacts were destroyed, and an estimated 400,000 to 3,000,000 people lost their lives. These atrocities could have been avoided had the natural course of modernization been followed.

The only beneficiaries of the Cultural Revolution were the Communist Party. According to Friedrich von Hayek, in The Road to Serfdom:

The most important change which extensive government control produces is a psychological change, an alteration in the character of the people.

As a result of the revolution, the Confucian tradition, which already valued a strong central government, was replaced by a more secular belief structure through the use of extensive government propaganda, reprogramming, and occasionally violence. It was risky to destroy a system that already favored authoritarian rule to institute a new, secular system. Inglehart and Welzel have stated:

But these secular beliefs are no less dogmatic than religious ones. Secular beliefs and doctrines do not necessarily challenge unlimited political authority; they usually legitimize it, as did fascist and communist ideologies.

The Cultural Revolution was only necessary as means for the Communist Party, specifically Mao Zedong, to further consolidate power over the people.

Of course, perhaps even Confucius would agree with this quote on the virtues of self-interest by the American environmental essayist Ralph Waldo Emerson:

It is one of the most beautiful compensations of life, that no man can sincerely try to help another without helping himself.

If not Confucius, then perhaps the leaders of the Han dynasty would agree with this statement, as is implied by the historical records of Sima Qian:

When all work willingly at their trade, just as water flows ceaselessly downhill day and night. Things will appear unsought and people will produce them without being asked. For clearly this accords with 'the Way' and is in keeping with nature.

I believe Emerson, who greatly appreciated environmental symbolism, would agree with this statement, as would the great free market economists of our times. This appears to be the Chinese historical equivalent of Adam Smith’s “invisible hand”.

However, I do wonder if perhaps Sima Qian, in writing “the Way” (note the capitalization), was not referring to market forces but rather to Daoism, which began during the Han dynasty. In fact, this passage from his historical account seems to conform to the Daoist concept of wuwei (无为). The forces of nature, like a river, work harmoniously with the world. Problems only arise when outside forces (such as government) exert its will against it, disrupting the harmony.

Venture capitalists are the backbone of private investment. However, the Obama administration wants to increase regulations, making their job more costly and less efficient. According to Steve Forbes:

Even though most venture capital outfits are relatively small and rarely, if ever, use debt, the Treasury wants to apply a bewildering array of rules similar to those for investment advisors and banks. Thus, instead of focusing on funding the next potential Apple, Microsoft, or Oracle, VCs will have to devote considerable time and resources to filling out disclosure and compliance forms. Treasury Chief Timothy Geithner's lame excuse is that since reform should cover the entire financial industry, leaving out venture capitalists would be a form of discrimination. Alas, there's more at work here than pigheaded logic.

This Administration truly believes that the private sector is a destructive, unguided missile that needs the constant and close supervision of Washington politicians. Without it we'd be subject to more disasters like the current financial crisis. In other words, Washington doesn't like the idea of venture capitalism because VCs and the entrepreneurs they fund create and do things without anyone's permission.

While Forbes may or may not be paranoid about the administration's intentions, the regulations will truly have a chilling effect on private investment. If the private sector cannot provide the investment in technology necessary to stimulate the economy or protect the environment, then the government will be forced to spend yet more taxpayer money.

The idea for this post came from a video by the Motorhome Diaries crew interviewing Steve Horwitz, blogger and professor of economics at St. Lawrence University. I recommend checking it out (under five minutes).

As recently as one hundred years ago, in many more developed societies, husbands had nearly total control over the family. Going back another hundred years, families were essentially enterprises. Today, it's difficult to think in such callous terms, but each family member was essentially a unit of production. Families had many children, not out of love, but out of necessity. At the time, many children increased economic security through additional units of production and to ensure that parents had a safety net if they reached old age.

Economic freedom allowed families to hire workers outside the family (by extension, allowing children to find work outside the family). Previously, the only work found outside the family was through an apprenticeship with a tradesman, guild, or clergy. However, they required family connections. This is a similar process found in labor unions today. In postmaterialist societies, unions are backward (i.e. reactionary), antiquated entities, continuing a practice that is no longer necessary in more developed countries.

Additionally, increased economic freedom reduced the average family size (so carbon Malthusians should give credit where credit is due). Children are no longer viewed as a necessity (except in Russia, which speaks volumes as to the country's level of economic freedom). Rather, children are born out of a loving couple's honest desire for children. Instead of forcing them to work, parents are now able to invest in their children, demonstrating societies' changing views with regard to children.

Increased economic freedom changed families for the better. In today's society (at least in more developed countries), arranged marriages are a rare and antiquated practice. Families no longer require the political and/or economic benefits of marriage. Marriage has become about love over finances (for the most part).

This same process (one might call it the human development process) has increased homosexual rights, particularly with regard to same-sex marriage. As marriages are no longer about economic/political partnerships and families no longer need to rely on children as units of production or to provide a future safety net, it is financially realistic for gay and lesbian couples to marry.

At the end of the video, Dr. Horwitz makes the following statement:

You have people on the right, conservatives, who love (or they say they love) free markets but don't like these sort of changes [e.g. homosexual rights] that capitalism has brought forward....If you're going to really have markets, you can't stop this kind of ongoing cultural change.

On the other hand, people on the left have the opposite problem. They like the cultural change but refuse to give credit where credit's due, which is to recognize the role that capitalism has played in bringing those about. To the extent that they're stifling capitalism, they're stifling the very dynamism that produces those social changes they like so much.

The hypocrisy by both major political parties is rather amusing (and sad). Katherine Mangu-Ward with Reason Magazine touched on a related issue regarding homosexuals and the major political parties, stating:

But you know who your real friends are, LGBTers. And we're going to help you get through this. Besides, who knows better than libertarians what it's like to be in a long-standing lopsided love affair with a mainstream political party?

She's right, LGBTers. Given that the libertarian platform has formed the basis for your rights, it's in your self-interest to support the continuation of this platform - libertarianism.

Pennsylvania plans to build four new prisons in coming years. Associated Builders and Contractors (ABC) were originally assured that the prisons contracts would not utilize project labor agreements (PLAs), effectively prohibiting nonunion contractors form working on the projects. However, strong lobbying by labor unions influenced the Pennsylvania Department of General Services to reverse their promise.

Even without a PLA, Pennsylvania's outdated prevailing wage law makes it difficult for nonunion contractors to receive large, government contracts. The Keystone Research Center (a union-funded think tank) supports the use of project labor agreements. According to its labor economist, Mark Price:

The work requires a broader range of training. The union sector succeeds in tracking people into the industry and training them.

This statement flies in the face of evidence in Ohio and Kentucky where prevailing wage laws were overturned for school projects, and over 95% of school districts found improvements or no change in construction quality for nonunion contractors. Additionally, studies have found that construction workers in market wage states are 6.3% more productive than workers in prevailing wage states. Since wages are directly related to productivity, prevailing wage laws are counterproductive.

For example, the International Brotherhood of Electrical Workers Local 102 is picketing the construction site of a Giant food store because their nonunion contractor is not paying prevailing wages (i.e. union wages). However, only projects receiving state government funding are required to pay prevailing wages. In Monroe County, the prevailing wage for electricians is 127.04% higher than the market wage. It is no wonder a nonunion contractor won the contract.

Returning to the prison contracts, the total estimated cost to taxpayers for the four prisons comes to $800 million. If Pennsylvania repealed the state prevailing wage law, taxpayers would save a significant amount of money on the contracts. For the two prisons in Montgomery County, the estimated cost comes to $400 million. Market wages would reduce the cost by 15.58% or $62,320,000.

The Forest and Centre County prisons are expected to each cost $200 million. Prevailing wages inflate the cost of the Forest County prison by 14.29% ($28,580,000) and the Centre County prison by 17.78% ($35,560,000).

Pennsylvania's prevailing wage law inflates the total cost for the four prisons by 15.81% or $126,460,000.

After the bankruptcy of the Post-Intelligencer, Seattle became a one daily newspaper city. As a result, the private owners of the Seattle Times announced that the paper has been turning a profit in recent months. (Yes, Bill Maher...profit).

The Times has experienced a 30 percent increase in daily circulation - great news for any company in a dying industry during a recession. The lesson here is quite obvious. Companies, especially those in dying industries, must be allowed to fail. The shifting demand of Seattle's residents could no longer support two daily newspapers. One paper's failure allowed the other to succeed.

Additionally, naysayers have no grounds on which to call "monopoly" as multiple substitute channels for news still exist, including (but not limited to) non-daily newspapers, radio, television, and the Internet. In fact, the Post-Intelligencer, while ceasing production of the print paper, have retained a small staff, supported by 200 unpaid bloggers, to continue the online news site. Amazingly, traffic to the site has stayed the same, and revenue is ahead of projections.

Several former Post-Intelligencer reporters now maintain their own Seattle area news sites, further increasing the options available to consumers. This is another benefit of bankruptcy - the opportunity for entrepreneurship and innovation.

Instead of propping up a failing company in a dying industry through a taxpayer-funded bailout, the Post-Intelligencer was allowed to fail. Out of its ashes, a new, more vibrant news industry arose in Seattle.

The AP reports federal tax returns are plummeting. Returns are expected to decrease 18 percent - a substantial drop, exacerbating the Greek fire that is the federal budget deficit.

Unsurprisingly, the AP article immediately tangents to meaningless politics, passing on a valuable opportunity to touch on the fundamentals of the Laffer curve. The term was popularized by Jude Wanniski, partly through is book The Way the World Works (I highly recommend it).

(Source)

According to Arthur Laffer, "There are two tax rates that yield the same revenues." This is depicted in the above image. It is important to note that while the end points are zero and 100 percent, the equilibrium point is not necessarily 50 percent. Rather, "It is the point at which the electorate desires to be taxed."

In the image, tax returns at point A and A* are equal. A* falls in the prohibitive range because the same amount of tax returns are received but at a higher cost to the economy.

Here's an excerpt from page 100 of The Way the World Works:

Most judgments of tax rates and expenditures by government are made by individual politicians, and it has been the exception rather than the rule throughout history that politicians, by accident or design, have sough to increase revenues by lowering rates. Andrew Mellon, who designed the Harding-Coolidge tax rate reductions of the 1920s, became a national hero as a result and was called the greatest Treasury Secretary since Alexander Hamilton. Ludwig Erhard achieved heroic stature in Germany after his financial policies produced German "economic miracle," as it was commonly described. The Mellon/Erhard "miracles" were simply confirmation of their opinions that tax rates were in the prohibitive range and could be reduced with beneficial effects on both output and revenue.

The idea behind the Laffer Curve is no doubt as old as civilization, but politicians have always had trouble grasping it.

I will write further on the Laffer Curve in a later post.

Here's a sign that the U.S. government is over-regulating the nuclear power industry. Bob Metcalfe, with Polaris Venture Partners, recently wrote an op-ed in the Wall Street Journal, stating that his firm (like many others) passed on funding promising private enterprises seeking to build new nuclear power generation plants. According to Metcalfe, five of these start-ups seek to utilize nuclear fission energy (as in traditional nuclear power plants) and two additional start-up enterprises are tapping the power of the sun: nuclear fusion energy.

Polaris and other sources of private funding chose not to invest in this new breed of nuclear power plants despite the following highly appealing characteristics:

These new small reactors meet important criteria for nuclear power plants. With no control rods to jam, they are far safer than the old models -- you might well call them nuclear batteries. By not using weapons-grade enriched fuels, they are nonproliferating. They minimize nuclear waste. And they're economical.

Those are just new nuclear fission plants. Nuclear fusion plants use no radioactive materials for fuel with not risk of catastrophic events. There is only one reason why the private market is not investing in these start-up enterprises: government regulation.

The start-ups estimate that it will cost each of them roughly $100 million and five years to get their small reactor designs certified by the Nuclear Regulatory Commission. About $50 million of each $100 million would go to the commission itself. That's a lot of risk capital for any venture-backed start-up, especially considering that not one new commercial nuclear reactor design has been approved and built in the United States for 30 years [emphasis added].

The private market is producing technology that will reduce the country's carbon emissions, and the government is making it more difficult for them. Instead, U.S. Representative Zoe Lofgren of California has introduced H.R. 3177 to increase government funding for nuclear fusion energy research and development.

The government's excessive regulations of the nuclear power industry has prevented the private sector from investing in its development. As a result, the government has felt the need to spend taxpayer money where the private sector would like to invest.

The government is trying to fund health care reform. They are desperately reaching, ignoring the hypocrisy of their actions, and it will hurt America.

Taxing food and soda has been touted for months as a means to fund a government-controlled health care plan that is supposed to save taxpayers money. The hypocrisy does not end there.

The LA Times reported on the Urban Institutes's proposal to tax "fattening" foods to handle the "uncontrolled obesity epidemic." Take note of the word "uncontrolled." It is not the government's responsibility to control the eating habits of American citizens.

If you happen to be the 1-in-3 Americans who is neither obese nor overweight (and, thus, considered at risk of becoming obese), you might well conclude that the habits of the remaining two-thirds of Americans are costing you, big time.

If eating habits of other people are costing you, imagine how much taxing the food you eat will cost you. Most states exempt food for home consumption from sales tax. The federal government will take the opposite approach. This may cause states to follow suit, exacerbating the problem.

The Center for Disease Control (CDC) supports taxing both food and soda. CDC chief Dr. Thomas Freiden testified that taxing fattening foods "would be effective" at reducing obesity. Freiden and others compare the proposed 3-cent soda tax to the excise tax on cigarettes. Let's talk cigarettes.

The Urban Institute reports:

Facing the serious consequences of an uncontrolled obesity epidemic, America's state and federal policy makers may need to consider interventions every bit as forceful as those that succeeded in cutting adult tobacco use by more than 50%

The federal tax on cigarettes now stands at $1.01 per pack or about $10.10 per carton. On top of this incredibly high tax, individual states apply their own tax on cigarettes, ranging from $.07 in South Carolina to a high of $3.46 per 20-pack in Rhode Island. With such excessive taxation, it is very understandable that people were financially forced by the government to quit smoking.

However, a 3-cent tax on soda will not cause people to change their drinking habits. If anything, it will cause soda prices to go up by at least 5 cents at vending machines to compensate for the tax and exclude the need for pennies. The government will fail at reducing obesity (a task with which it should not be worried) and increase the profit of vending companies and perhaps even soda companies.

Additionally, the Urban Institute ignores the changing social attitude toward cigarettes that greatly contributed to their tobacco use reduction statistic. There is no need to financially force U.S. citizens who want to engage in a certain activity to cease doing so. The social attitude toward healthy eating and drinking is changing now much as it has changed toward cigarettes. The government has no role in legislating morality (or eating habits).

The proposed taxation does not end there. The Senate Finance Committee has touted the idea of a 10% tax on plastic surgery. The tax would apply to procedures such a liposuction, which not only improve a person's appearance but also improves the body's health through reduced stress on joints.