In reducing the role of government in the economy, the U.S. is a laggard. Oct 14, 2013, Vol. 19, No. 06 • By IKE BRANNON
For much of the last century the United States was the world’s beacon for capitalism, but these days we’re far from such a lofty perch. Since the end of the Cold War, countries on both sides of the Iron Curtain have moved to reduce the role of government in the economy by changing the tax code as well as by privatizing government activities.
Neither has happened in the United States. The tax code’s complexity has metastasized to give the government more levers with which to influence the economy, and neither party has seen fit to push any significant government activity into the private sector.
The problem with the tax code is well documented: Since 1993 every single country in the Organization for Economic Cooperation and Development (OECD) has reduced its corporate tax rate, save the United States. Most have cut their rate multiple times. Today, the United States has the highest corporate tax rate in the OECD.
Naysayers respond that this is misleading because myriad deductions, credits, and the like mean the corporate tax raises much less money here than elsewhere, despite the high statutory rate. But this retort nicely illustrates the problem—namely, that Congress uses the tax code to prod and shape behavior in hundreds of ways rather than trust taxpayers to do what’s best for them.
The personal side of the tax code has even more nudges, fewer of which can be rationalized, along with high top marginal rates. While liberals point to our 39.6 percent statutory top tax rate—compared to European rates that breach 50 percent—to argue that our wealthy remain undertaxed, this is a misleading comparison. A more accurate picture of the marginal tax rate facing upper-income households would add the Medicare tax of 3.8 percent, the phaseout of various deductions for upper-income workers, and state and local taxes. In places like California or New York City such a calculus arrives at an effective federal/state/local tax rate over 55 percent—not terribly conducive to investment and risk taking and certainly nothing to brag about.
Transforming public pensions into personal retirement accounts has been occurring elsewhere as well: For instance, Sweden and the U.K. recently reformed their social security systems so that workers have a portion of their earnings put into an investment vehicle that they own and can invest, with certain restrictions. In an environment where declining birth rates and growing longevity make government pension promises less than certain, giving workers ownership over their retirement income provides a level of security Americans may soon come to envy.
Of course, nothing like that will occur in the United States anytime soon: The biggest opponents of the Bush administration’s 2005 Social Security reform plan were the boosters of personal accounts who felt it didn’t go far enough and decided to hold out for a better political and economic environment that would allow for a more radical reform. They’re still waiting, while demographics and longevity gains inexorably push the system towards bankruptcy, precluding such radical reforms.
More egregious—and less noticed—than the problematic tax code and bankrupt Social Security system is the reluctance of the federal government to privatize economic activities the federal government has no business doing anymore (if it ever did). It is here where the United States truly lags our European counterparts.
For instance, a number of ostensibly left-leaning EU countries, such as Sweden, Finland, and the Netherlands, have completely privatized their post offices. The U.K.’s recent announcement of the forthcoming sale of the Royal Mail actually makes them a laggard in this regard. The EU will soon end mail monopolies in its member countries, which will force the rest of its members to get serious about reforming or selling their postal services. Of course, neither political party in the United States would countenance such a thing despite U.S. Postal Service losses of $22 billion over the past two years. Congressional pushback was intense when the Postal Service tried to eliminate Saturday delivery and close little-used offices.
12:00 AM, Sep 21, 2013 • By IRWIN M. STELZER
Given that mine is the dismal science, it is my role to cool the exuberance of investors at the news that the Fed will continue to print money rather than taper, with a bit of news that should worry them--the possible revival of the trade unions, long a fading force in the private sector.
10:05 AM, Sep 20, 2013 • By GEOFFREY NORMAN
It is no secret that Washington generally prospers even as the rest of the country struggles. In a rough fashion, prosperity in the capital and economic hardship in the rest of the country are inversely related. An economic crisis means lots of new government pump priming--remember the stimulus?--which means new departments and programs in Washington. More opportunities for the tribe of lawyers and lobbyists.
The stagnation president.Sep 30, 2013, Vol. 19, No. 04 • By FRED BARNES
It's amazing how little President Obama has learned about economics in his four and a half years in the White House. Growth, incentives, tax reform, tax increases, private investment, the middle class, a second great depression, the sequester—all these issues have one thing in common: Obama doesn’t understand their role in our economy.
Starting over in North Dakota.Sep 30, 2013, Vol. 19, No. 04 • By MICHAEL WARREN
In O. E. Rølvaag’s Giants in the Earth, homesteader Per Hansa and his family depart from the safety of their Norwegian immigrant community in Minnesota for the open land of the Dakota Territory. This is something Americans have done for hundreds of years—leave home for the chance to start anew. Today, the frontier isn’t far from where the homesteaders of the 19th century settled. North Dakota (unemployment rate 3.2 percent and falling) is a place where plenty of Americans are finding their second chance.
10:53 AM, Sep 19, 2013 • By GEOFFREY NORMAN
Yesterday, the Fed decided that the economy was not yet sufficiently robust for it to "taper." Wall Street celebrated.
Today, the consumer put in his two cents, which is about what he thinks this "recovery" is worth. As Ben Schenkel at Bloomberg writes:
Consumers views of the U.S. economic outlook deteriorated in September to the weakest level in a year as higher borrowing rates started to chip away at progress in the housing market.
A different cure for economic stagnation.Aug 19, 2013, Vol. 18, No. 46 • By CHARLES WOLF JR.
Whether by design or inadvertence, Prime Minister Shinzo Abe’s plans for reviving Japan’s economy after two decades of stagnation differ sharply from the stimulus and austerity policies pursued by the United States and the European Union to recover from the deep recession of 2008-2009. These differences augur well for Japan’s prospects.
Notes toward a new economicsAug 5, 2013, Vol. 18, No. 44 • By GEORGE GILDER
Why in the world do we need yet another “new” economics? Jamming the libraries and the bookstores of the world are avatars of what must be every variation on the great themes of market and managerial economics. Scores of Nobel Prizes have been awarded for various nugatory refinements of the prevailing ideas.
Jul 29, 2013, Vol. 18, No. 43 • By THE SCRAPBOOK
"Something terrible has happened to the soul of the Republican Party. We’ve gone beyond bad economic doctrine. We’ve even gone beyond selfishness and special interests. At this point we’re talking about a state of mind that takes positive glee in inflicting further suffering on the already miserable.
A fatal case of hubris. Jul 8, 2013, Vol. 18, No. 41 • By DAVID M. SMICK
Recently a Japanese economist visited Washington to explain his government’s “five year economic outlook.” A five month outlook might have been more credible. Yet with surprising hubris, the economist forecast inflation and GDP five years out.
The European Union’s coming attack on the Anglo-Saxon financial sector Jul 1, 2013, Vol. 18, No. 40 • By ANDREW STUTTAFORD
Take a visit to the cyber-belly of the beast, to a website run by the European Commission, the EU’s bureaucratic core, and you will be told that “the financial sector was a major cause of the [economic] crisis and received substantial government support.” Soon it will be payback time, in the form of Europe’s new Financial Transaction Tax (FTT), set to be levied at a rate of 0.1 percent on equity and debt transactions, and 0.01 percent on trades in derivatives. It will ensure that the financial sector “makes a fair and substantial contribution to public finances.”
With Gov. Rick Perry in New York.Jul 1, 2013, Vol. 18, No. 40 • By FRED BARNES
New York City
"Look up the definition of poaching,” Rick Perry told his press secretary Josh Havens. Perry was annoyed at being accused, in headlines and news stories and by Democratic governors, of trying to “poach” companies from blue states and carry them off to Texas, where he is governor.
8:04 AM, Jun 14, 2013 • By MICHAEL WARREN
Former Pennsylvania senator Rick Santorum spoke Thursday at the Faith and Freedom Conference in Washington about the failure of the Republican party and its presidential nominee to speak to the concerns of middle class and working people. Politico's James Hohmann reports:
To understand ourselves, this is one place to start. Jun 10, 2013, Vol. 18, No. 37 • By ELI LEHRER
The Walt Disney World Resort, located outside of Orlando, has more than twice Manhattan’s land area and about the same number of hotel rooms as Philadelphia. It’s America’s largest single-site employer—over 60,000 people work there—and for many of the 17 million or so who visit each year, it is a place of near-religious significance. (At least one book and more than a dozen peer-reviewed academic articles have considered various aspects of Disney’s status as a secular pilgrimage site.)