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I am in the process of moving, from my native Michigan to the western suburbs of Washington DC. When I closed on my current home in April 2000, I financed the loan at 7.75% apr for 30 years. I am currently qualified to borrow at 6.40% for 30 years. The yield on 30-year US treasury bonds has fallen by a similar amount.
Why do I bring this up? Remember, back in 2000, American politicians were talking up the surplus. Today, thanks to recession, a flat stock market and post-911 spending, the US will probably finish with a deficit in fiscal 2002. But according to a novel theory recently introduced by Senate Majority Leader Tom Daschle, federal deficits cause mortgage rates to rise! So see, tax cuts would increase the deficit, which would increase mortgage rates, which would make new home purchases more expensive, which would hurt working families. Well then, if that is true, why is my lending rate so much more favorable now than it was when the US budget was solidly in the black?
The US does not finance much of its debt with 30 year bonds. In fact, the duration of the national debt (a fancy way of saying the average time to maturity) is just under 5 years. The federal treasury does not contribute very much to the demand for long-term funds. So it should not be surprising to learn that there is essentially no historical relationship between federal borrowing and mortgage rates. In fact, the US did not start to aggressively work down the duration of the debt until the Democrats and Treasury Secretary Rubin came into power!
If Daschle wants to pay down the debt, why would he want to do it in a period in which yields on long-term debt were falling? As anyone who stayed awake in finance 101 knows, prices and yields move in opposite directions, so lower yields mean that it would cost more to retire long-term debt from bondholder’ hands. This would amount to little more than a subsidy paid by US taxpayers to bondholders, who increasingly are foreign investors.
Politicians used to be smart enough to know that they aren’t very smart about economics. Senator Daschle evidently does not feel constrained by his ignorance.
The USA will possibly face the most punitive trade sanctions in the history of the World Trade Organisation if the European Union is granted the right to act on a WTO ruling that US tax breaks for exporters are a violation of global trade rules.
This is entirely a self inflicted wound for the USA. Unlike the vast majority of the rest of the world, the USA claims tax from companies based on their global activities. Quite apart from the fact this is manifestly iniquitous, it is also pretty damn stupid economically. Although EU nations do not attempt to tax globally, the European states tend to subsidise their favoured companies in various ways (which is also stupid from a macro-economic perspective). This in turn has lead the US to deduce for the last 31 years that certain businesses operating in competition with subsidised EU companies should be given tax breaks to help them compete more evenly. There is just one problem with that: making special cases in that manner violates WTO treaty rules.
The solution for the US is of course simplicity itself: just abolish all US taxation at the water’s edge like the rest of the world does… no special cases therefore exist. Result? American businesses overseas flourish without the absurd and wildly expensive accounting gymnastics needed to avoid actually paying very much tax to the American IRS on corporate operations in Mongolia (or wherever).
The fact is, of the medium and small businesses I know of run by Americans overseas, the reality is that they successfully shelter the vast majority of their operations from the US tax man. So why not just recognize that there is no justification for this very hard to enforce ‘taking’ by the IRS… what reasonable pecuniary interest does the US state have on economic activity beyond its shores? Scrap this extraterritorial intrusion and not only is justice served, the WTO problem simply disappears with a loud ‘poof’!
There’s Pork in Their Horoscope, The Guv Replies
Reader Neil Eden contacted the Inspector General’s Office and received the following reply:
After careful review of your complaint, it appears that the appropriate office to contact within the U.S. Department of Education concerning this matter is the Office of Postsecondary Education. You may write to this office at the address listed below:
Accreditation and State Liaison
Office of Postsecondary Education
U.S. Department of Education
K Street, NW, Room 7106
Washington, D.C. 20006
Telephone # (202)219-7011
I trust that this information is helpful to you.
Keep us informed of the responses you get. The fun has only begun.
On Instapundit, Glenn Reynolds touches on a matter in which true justice does seem to have prevailed. But this is indeed an issue which has long made me of the view that of the many splendid and admirable things about the United States, the US system of justice is most certainly not one of them.
As a sheer matter of practical justice, it cannot be right that the winner of a legal action can nevertheless be reduced to penury by having to pay legal fees, particularly if they were not the party which brought the action. Unlike most of the rest of the western world, who operate upon the principle that the looser of an action pays the legal costs of the winner, in the United States both parties to an action are responsible for their own legal costs regardless of who wins or loses… thus a person can be unsuccessfully sued and still end up bankrupted by their own lawyers as they cannot always recover their costs.
I cannot help thinking that the overweening power of the Bar in American politics is the reason this has never been addressed. The ‘pay your own costs’ principle is a licence for speculative law suits of dubious merit, a veritable ambulance-chaser’s charter, removing the cost incentive to only litigate when the merits of the case make success highly likely. Surely introducing the ‘looser pays both sets of legal fees’ principle across the board in the USA would, at a stroke, reduce the flood of absurd ’emotional distress’ and ‘tripped on a mat’ litigation as well as making it less attractive for well funded individuals and corporations to use the threat of bankruptcy-through-legal-fees to intimidate those who are less well funded. Also, less wealthy defendants who nevertheless have solid cases can approach far more capable (and thus expensive) defence counsel as upon seeing off the accusations in court, they can recover costs from the other side.
Over on Inappropriate Responces, the every readable Moira Breen analyses…no, dissects…hmm, no… I’ve got it…Moira Breen mercilessly crucifies Roger Owen, who is the director of the Arab Contemporary Studies Program at Harvard University, in her article “B.S” SCREAMING FROM EVERY PIXEL.
The bulk of the article (paragraphs 6-11) is essentially an exercise in issue-avoiding gobbledegook – you can see man burrowing through a steamin’ heap o’ stats, trying to find a pellet for face-saving spin. Owen argues not only that the only meaningful comparisons are local (previously undefinable MENA country to MENA country), but that an economy must be measured outside the vagaries of the global market: that the only proper benchmark is some mythical economic “normal” point, unaffected by oil prices, multinational hiring, emerging markets, and, bizarrely, better or worse economic management. As far as I can tell, his idea is to factor out just about everything that could be used for objective measurement and practical application.
Splendid stuff. If you are into blood sports the way I am, you will enjoy the whole article. Highly recommended
This latest Don Feder column, advocating the continued embargo against Cuba, nearly chokes to death on its own contradictions. First, Feder contends:
Castro has nothing we want and nothing to pay for what he wants from us.
If Cuba had something we wanted, of course, they would have something with which to pay for what they want. And in his concluding paragraph, Feder, perhaps unintentionally, concedes that Cuba does indeed have something Americans want:
Besides supporting oppression of the Cuban people, unrestricted U.S. trade — and the tourist dollars to follow — would be invested in America’s destruction. As U.S. forces clean out the Tora Bora caves, we would be nuts to subsidize a branch office of the terrorist international 90 miles from our shores.
Hmmm … so Cubans do have something Americans want — tourism, for one thing. If they “had nothing we wanted,” they would not earn any income with which to pad the coffers of terrorists, now, would they?
The antiterrorist argument is a nonstarter. We do not trade with Cuba now, and they are already a bastion of terrorism. Terrorists could function anywhere, and they generally choose not to set up shop in open, free societies. They operate from repressive places like Afghanistan, Libya and Cuba, right? By keeping Cuba cordoned off from US markets, we are making the place more inviting to terrorists. Moreover, if we opened trade to them, we could at least threaten to shut them out of our markets again if they don’t vigorously prosecute terrorists.
Castro has plodded on in Cuba precisely because of the embargo. With no access to American products, Cubans do not see what they have been forcibly denied. Castro can blame America rather than his own kleptomania / thuggery for the nation’s woes. End the sanctions on Cuba, and watch Castro topple.
In an article in the New York Times, Maureen Dowd writes that after September 11, Americans were turning away from unimportant things like expensive clothes and luxury
But now we are supposed to be in the era of the real rather than the pretentious, the warm rather than the cool, the fundamental rather than the grandiose.
So we must ask: Is the vast new $40 million Prada store that has just opened not far from Ground Zero, trumpeted by the company as “the New York Epicenter” and designed by the hot architect Rem Koolhaas, a relic of our gluttonous ways or a resumption of them?
Of course I realise that Americans are going through a process of adapting and trying to understand new realities, but at the risk of sounding unkind, all they are really doing is waking up from a dream and finding themselves in the real world.
It broke my heart when I saw those terrible images on television on September 11 and oh how I wished a thousand deaths on the monsters who were responsible for it. But I felt nothing more, or less, than I felt when Sarajevo was besieged for 1400 days, during which 10,000 of its people died and 50,000 more were injured out of a population of just over 500,000.
During the war, everywhere in what used to be Yugoslavia experienced shortage and hardship and sudden horror. Americans watched this through the filtering eyes of CNN and the BBC for a few minutes each day before going back to their dinner or driving to the mall, yet it might as well have been occurring on another planet psychologically speaking.
People in Sarajevo would have to dash across roads to go to the markets, risking death from Cetnik snipers and artillery fire on a daily basis. But if you ever go back and look at the videos, look very carefully at the people. You will see women with clean hair, lipstick and makeup. Men wearing pressed jackets and even ties. People determined to retain their humanity as well as just survive another day.
I think Maureen Dowd does not understand, at least not yet, that if the monsters can make you live in their world of poverty and sorrow, then they have truly beaten you. That is why when I realised that Benetton was about to open a shop in Sarajevo in 1995, I wept because I realised that the nightmare was almost over at last. So Maureen, take it from me that there is nothing noble about ‘sweat suits and old clothes already in the closet’. Listen to me and go to that place in New York, only a few blocks from the World Trade Centre that those evil people destroyed. Wander through the wonderful opulence of Prada’s shop and gaze at the exquisite Italian style, treat yourself to a nice little black dress: then look around again and realise that you have won and they have lost.
[Original link to NYT article via Instapundit]
We have to fight the terrorists as if there were no rules, and preserve our open society as if there were no terrorists.
– Thomas L. Friedman, New York Times, September 13, 2001
Over on Cal Ulmann‘s blog Where HipHop and Libertarianism meet, he points out a simple truth
Bush says quitting drugs will stop terrorism. Well then why can’t marijuana that is grown on American soil be given to medical marijuana patients?
Quite so.
It is good to hear that Dmitry is finally free to return to Russia. What puzzles me about this case is how did a US court even feel they had the appropriate jurisdiction to try him?
The way I understand it, he wrote the decryption software in Russia, for a Russian company, ElcomSoft. The software is entirely legal in Russia and yet somehow because the program can crack codes in ways prohibited by the US Digital Millennium Copyright Act, Sklyarov was arrested when he visited a conference in the USA.
Imagine for a moment that a US citizen, living the USA, writes an article in the Wall Street Journal (a newspaper which is sold world wide). Say that in this article, the US journalist makes remarks that are illegal in Russia (a nation not known for its free press) but in the USA are protected by the First Amendment and hence entirely legal.
How would the USA react if, when that journalist makes the mistake of going to Russia to attend some conference, he gets arrested by the Russian police, thrown in jail and charged with a crime because the Wall Street Journal with the offending remarks was also available in Moscow hotels? Would some US lawyer care to explain how that works?
Samizdata reader Kate Redmond wrote in pointing out that view similar to mine regarding the dismal Taliban member John Walker are appearing beyond blogland. Kate writes
I have finally started to see some vaguely similar sentiments in the mainstream press. I don’t know if you saw this article by Mark Steyn this
week:
I’m not in favour of trying him for treason: Alan Dershowitz and the other high-rent lawyers are already salivating over the possibility of a two-year circus with attendant book deals and TV movies. But there is another way: on page four of John Walker’s US passport, it states that any American who enlists in a foreign army automatically loses his citizenship. Mr Walker wants to be Abdul Hamid: Mr Bush should honour his wishes. Let us leave him to the Northern Alliance and let his San Francisco fancypants lawyers petition to appear before the Kabul bar, if there is one. It would, surely, be grossly discriminatory to subject Mr Hamid to non-Islamic justice.
Actually, what it says in my U.S. passport is that, Under certain circumstances, you may lose your U.S. citizenship by performing, voluntarily and with the intention to relinquish U.S. citizenship, any of the following acts: […] (3) serving in the armed forces of a foreign state
So, I guess the crux of the matter for Steyn’s argument is whether Walker intended to renounce his citizenship. I’m not certain that it’s not possible to serve in a foreign army without losing one’s citizenship. I believe I’ve heard of American citizens who have served in the Israeli army and I know Swiss-U.S. dual citizens who almost certainly do their mandatory Swiss military service.
Similarly many US citizens served with the British military prior to America’s entry into WWII, notably the pilots who flew for the RAF during the Battle of Britain. There were also US ‘Internationals’ with the Croatian HV and HVO during the recent Balkan Wars and certainly the State Department never made any attempt to go after them. I think the ‘certain circumstances’ quoted above is intentional legal wiggle room, thus it very much depends on exactly whose military you have joined. Joining the French Legion Étranger is not likely to get people hopping up and down (though in reality most US members of the LÉ claim to be ‘Canadian’) but signing on for a jaunt with North Korea, toting a Kalashnokov with the Cubans or becoming Abdul Hamid and joining the Taliban is a rather different matter.
I must say the prospect of the likes of Alan Dershowitz turning John Walker into some cause célèbre is quite an unpleasant thought and I love Mark Steyn’s suggestion on that matter. On the contention that anything that thwarts Alan Dershowitz must surely be in the national interest, Walker should loose his citizenship on that basis alone.
Starved for intelligence?
There is a very interesting article by James Ostrowski at the Ludwig von Mises Institute, pertaining to spending by the US intelligence services. The bit that caught my eye was:
The Christian Science Monitor reports that the combined budget of these agencies is at least $30 billion annually. Officially and unofficially, the U.S. and its allies probably have more than 75,000 intelligence personnel. This army [is] larger than the Army of Northern Virginia, and spends twice as much as the entire Chinese defense budget…
Fascinating stuff, though I do wonder if we actually know what China spends on its defense budget in economically meaningful terms. The history of various Western intelligence agencies’ estimates of the Soviet defense budgets during the 1970’s and 1980’s does not exactly fill me with confidence.
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Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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