From the DNC 2008 Party Platform:

Social entrepreneurs and leading nonprofit organizations are assisting schools, lifting families out of poverty, filling health care gaps, and inspiring others to lead change in their own communities. To support these results-oriented innovators, we will create a Social Investment Fund Network that invests in ideas that work, tests their impact, and expands the most successful programs. We will create an office to coordinate government and nonprofit efforts.

Sounds like a great idea! Where do I sign up to get Federal funding to “inspire others to lead change”? Sounds like a great use of tax dollars.

In the last few weeks stark differences have emerged between Dems and the GOP on energy policy. With gasoline >$4/gal politicians on all sides feel compelled to say/do something. A recap of what each side is offering:

Democrats:

Sue OPEC 

On May 22nd the House passed the “Gas Price Relief for Consumers Act of 2008.” The act does three things: 1) amend the Sherman Anti-Trust Act (written in 1890)  “…to make oil producing and export cartels illegal…”; 2) Creates a Petroleum Industry Antitrust Task Force inside the DOJ to study cartels; 3) Orders a GAO study on the effects of mergers in the petroleum industry. The bill was co-sponsored by 20 Dems, with Dems voting for the bill by a margin of 219 to 2. Venezuela, Iran, Saudi Arabia, and the rest of the cartel’s members have not yet responded to what efforts they will make to ensure their own national activities comply with this new US law.

“Windfall Tax” on US Oil Producers

Obama has called for a reprise of Carter’s “windfall taxes” on domestic oil producers. (Even the NYT editorial board eventually agreed that Carter’s version was a bad idea, although it took them almost a decade to figure it out.) The idea is that somehow the folks who produce oil for us will do a better job if we penalize them, or something.

“Compel” US Oil Producers to Produce More

On June 12 eighteen Dem Congressmen introduced the “Responsible Ownership of Public Lands Act.” The co-sponsors suggest oil companies leasing public lands might be secretly under-producing, a situation that they will remedy by imposing new fees on any acre leased that has not been drilled within one year. Never mind that it usually takes several years to determine whether newly leased land is worth drilling. After paying for the lease (usually 10 years) and the cost of exploration, the majority of these lands are returned to the government un-drilled. Not good enough for the Dems.

Increase Regulation of Energy Capital Markets

Just this weekend Obama outlined legislation directing the Commodity Futures Trading Commission to “investigate proposals” for increasing regulation over the way oil futures are trades. New Jersey Governor Jon Corzine added, “I think everyone believes there’s too much speculation in the oil markets. A lot of the price of oil, I think, people put at the doorstep of speculators bidding up and holding supplies off the market.” Corzine thus neatly justifies this attempted power-grab by his estimate of what “people” think - note Corzine (a former bond trader and Goldman Sachs CEO) never says what he actually believes.

“Nationalize” US Refineries

Video of Maurice Hinchey (D-NY): “We (the government) should own the refineries. Then we can control how much gets out into the market.”

“Socialize” Domestic Oil Companies

Video of Maxine Waters (D-CA) tells the President of Shell Oil she wants to “socialize” his company.

Republicans:

Increase Production 

In his radio address on June 21 Bush made 4 proposals: 1) Drill ANWR; 2) Lift the 25 year ban on drilling on the outer continental shelf (OCS); 3) Lift the ban on exploiting shale oil reserves in the American West; 4) Increase refining capacity by allowing new refineries to be built in the US for the first time in 30 years.

On the second point its worth noting that Brazil has recently announced two massive oil discoveries on its own OCS, possibly turning that country into one of the largest oil exporters within the next 10 years. Its also worth noting that Canada, Mexico, Cuba, and even China (in Cuban waters less that 100 miles from Florida) are all already exploring the North American OCS.

Although McCain is still only “considering” ANWR, he largely agrees with everything Bush proposes. The American people apparently do too - according to Rasmussen only 18% of Americans oppose OCS drilling (including only 37% of self identified “liberals”). McCain is also calling for the construction of 45 new commercial nuclear reactors. The last commercial nuclear reactor in the US to come online started construction in 1973.

The GOP proposals are straightforward. They acknowledge the reality of increased oil demand from emerging economies like China and India. The solution is removing regulatory obsticles that make the US the only major oil producer in the world where new production is effectively illegal.

Some Dem proposals are laughably stupid (i.e. declare OPEC illegal so we can sue them). The rest seek to turn public concern about oil prices into yet another opportunity to expand regulation, expand government power, and grind down and demonize the private economy.

From Rasmussen (via Powerline):

[A] new nationwide telephone survey show[s] that 48% of voters say the best thing the government can do is get out of the way by reducing taxes and regulations. The Rasmussen Reports poll found that 36% disagree with that approach while 16% are not sure.

Republicans agree that government should get out of the way by a 64% to 24% margin. Democrats disagree by a 48% to 35% margin. Forty-nine percent (49%) of unaffiliated voters agree that the best thing the government can do is get out of the way. Thirty-four percent (34%) disagree. ***

Fifty-nine percent (59%) of all voters believe it is more important to create economic growth than to reduce the income gap between rich and poor. Thirty-five percent (35%) hold the opposite view and believe that reducing the income gap should be a higher priority. Democrats are evenly divided while Republicans and unaffiliated voters place a higher priority on economic growth.

While economists and politicians talk of economic stimulus in terms of new government spending or tax cuts, 49% of voters now say the best policy approach would be for the government to cut spending. Twenty-four percent (24%) say that tax cuts are the best policy prescription while 12% prefer interest rate cuts. Only 5% favor an increase in government spending.

John Strossel on Influence-Peddling:

…“Good government” types like Nader love to decry the cozy environment in which members of Congress and corporate lobbyists work closely together and even socialize. They warn that this gives an unfair advantage to special interests. They have a point.Major economic interests can afford to pay for lobbying operations that provide congressional staffers reams of information about their industries and their “need” for legislative favors…

…In a real free market, a company succeeds only by making things consumers want to buy and keeping costs low enough that the market price yields a profit. Sadly, in our mixed economy, success can be achieved another way: by lobbying the government for advantages over one’s competitors. The prospect of favorable government intervention creates incentives for producers and their lobbyists to strive to satisfy legislators and bureaucrats instead of consumers. The resulting competition for privileges sets the stage for the improper relationships that reformers fret about. The irony is that the “good government” types favor big government, so they undermine their own efforts to eliminate corruption.It is naive to think that government can hold the power to grant privileges without also setting off a mad scramble by special interests to get a piece of it. All the good-government legislation in the world cannot prevent unsavory dealings between the wielders of power and those who seek to profit by it. To think otherwise is to ignore human nature. There is one way to rid the political system of this sort of corruption: severely restrict government power as the founders intended. Only when we eliminate the state’s ability to meddle in business will business will stop meddling in government.A genuine free market, unburdened by government interference, is the route to cleaner politics.

Water flows downhill. If you want to get corporate interests out of government, get the government out of corporate interest.

From United Van Lines:

…United has tracked shipment patterns annually on a state-by-state basis since 1977. For 2007, the accounting is based on the 212,917 interstate household moves handled by United among the 48 contiguous states, as well as Washington, D.C. In its study, United classifies each state in one of three categories — “high inbound” (55% or more of moves going into a state); “high outbound” (55% or more of moves coming out of a state); or “balanced.” Although the majority of states were in the “balanced” category last year, several showed more substantial population shifts…

The map:

Hmmmm, looks familiar. Here’s the 2004 electoral college map:

But what about heavily Dem states in New England? The United Van Lines map shows just “high” in/outbound states, but they provide more detailed info here. CT, RI, MA and ME (all of New England except VT and NH) saw net migration out. Same goes for WI and CA.

Well, lets just go to a regression. The graph below shows % of 2007 United Van Lines Customers Moving to the State (x) versus % of popular vote for Bush in 2004 (y).

β = 0.43 - not a bad correlation for social science. We haven’t weighted the regression for population, but the outliers are mostly small population states. That point outlined in red in the upper left is ND (49th biggest). The one outlined in red to bottom right is VT (50th). (Take VT and ND out and β goes to 0.66.)

Speaking of ND, its worth noting that while it was the 2nd biggest net departure state its neighbor SD was a top 10 destination. ND has a state income tax, SD doesn’t.  In fact, all 8 of the states without a state income tax were net destination states in 2007. (AK also has no state income tax, but UVL provides no migration data for that state.)

Who can say where the cause/effect, correlation/causation is? But we can make one confident observation based on these data: if you moved from one state to another in 2007, its very likely you were moving away from a state populated by DNC voters and to a state populated by people who vote GOP.

This all makes perfect sense if you believe people prefer freer economic jurisdictions - as illustrated by ongoing mass migrations out of the socialist EU, “long vacations” and “free healthcare” notwithstanding.

From a great op-ed in the Sunday NYT by the Federal Reserve Bank of Dallas’ Chief Economist:

…Income statistics…don’t tell the whole story of Americans’ living standards. Looking at a far more direct measure of American families’ economic status — household consumption — indicates that the gap between rich and poor is far less than most assume, and that the abstract, income-based way in which we measure the so-called poverty rate no longer applies to our society.

The top fifth of American households earned an average of $149,963 a year in 2006….(T)hey spent $69,863 on food, clothing, shelter, utilities, transportation, health care and other categories of consumption. The rest of their income went largely to taxes and savings.

The bottom fifth earned just $9,974, but spent nearly twice that — an average of $18,153 a year. How is that possible? A look at the far right-hand column of the consumption chart, labeled “financial flows,” shows why: those lower-income families have access to various sources of spending money that doesn’t fall under taxable income. These sources include portions of sales of property like homes and cars and securities that are not subject to capital gains taxes, insurance policies redeemed, or the drawing down of bank accounts. While some of these families are mired in poverty, many (the exact proportion is unclear) are headed by retirees and those temporarily between jobs, and thus their low income total doesn’t accurately reflect their long-term financial status.

So, bearing this in mind, if we compare the incomes of the top and bottom fifths, we see a ratio of 15 to 1. If we turn to consumption, the gap declines to around 4 to 1…

…Richer households are larger — an average of 3.1 people in the top fifth, compared with 2.5 people in the middle fifth and 1.7 in the bottom fifth. If we look at consumption per person, the difference between the richest and poorest households falls to just 2.1 to 1.

We’ve written before about how income statistics usually cited to demonstrate gross inequality are distorted by not including transfer payments. Specifically, they do not count taxes or Social Security, Welfare, or Medicare.

Income levels for defining poverty are based on the same data. Not surprisingly, the poverty rates stopped their precipitous decline right around the time many transfer payment programs were ramping up under Johnson’s War on Poverty and Great Society. Increasing someone’s welfare payments has no impact on their measured income - unless, of course, they decide welfare pays enough and stop working.

The distortion is especially pernicious when these data are used to compare income equality in the US to that of other nations (e.g. via a Gini Index or somesuch). For many countries, like France where half of working adults are employed by the government, most of their economy is a big transfer payment. How can you count the wages paid to unskilled French civil servants in make-work jobs, but not count welfare payments to Americans?

Update 2/18/08:

A relevant quote from Andy Warhol:

What’s great about this country is that America started the tradition where the richest consumers buy essentially the same things as the poorest. You can be watching TV and see Coca-Cola, and you know that the President drinks Coke, Liz Taylor drinks Coke, and just think, you can drink Coke, too. A Coke is a Coke and no amount of money can get you a better Coke than the one the bum on the corner is drinking. All the Cokes are the same and all the Cokes are good. Liz Taylor knows it, the President knows it, the bum knows it, and you know it.

A nice 8min video from Cato on tax competition.

We wrote on the same subject last February, when the EU was trying to force Switzerland to change its 500 year old system of government by federalizing its tax policy.

The Mexican border state of Sonora, that is. From the Tuscon Sun:

A delegation of nine state legislators from Sonora was in Tucson on Tuesday to say Arizona’s new employer sanctions law will have a devastating effect on the Mexican state.

At a news conference, the legislators said Sonora - Arizona’s southern neighbor, made up of mostly small towns - cannot handle the demand for housing, jobs and schools it will face as illegal Mexican workers here return to their hometowns without jobs or money.

The law, which took effect Jan.1, punishes employers who knowingly hire individuals who don’t have valid legal documents to work in the United States. Penalties include suspension or loss of a business license…

…”How can they pass a law like this?” asked Mexican Rep. Leticia Amparano Gamez, who represents Nogales.

“There is not one person living in Sonora who does not have a friend or relative working in Arizona,” she said in Spanish.

“Mexico is not prepared for this, for the tremendous problems” it will face as more and more Mexicans working in Arizona and sending money to their families return to hometowns in Sonora without jobs, she said.

“We are one family, socially and economically,” she said of the people of Sonora and Arizona…

Family or not, Mexico has a problem. It could be called collectivism or socialism, but in Mexico’s case its most accurately called statism. The Mexican government consumes nearly half of the country’s economy (in the US its about 35.4%).

The Mexican economy should benefit from enormous structural advantages. 90% of its exports are to the US and Canada with almost no trade barriers. It is blessed with abundant natural resources - its the world’s 5th largest oil producer (right behind Iran). Their proximity to the US means they can get by with almost no military (the US spends 20% more on the Coast Guard than Mexico spends on its entire military).

A couple straightforward changes to Mexican law would help a lot. First, they need to dump their Expropiación Petrolera law. In 1932 Mexico nationalized (aka socialized) all foreign assets involved in oil exploration and extraction. It was good politics (domestically), but it has had a devastating impact on their petroleum industry. Pemex is run through a system of patronage and graft. There is no competition for natural resources, so the company is wasteful and inefficient - with side effects including environmental destruction and long term damage to reserves (by, for example, excessive injection of sea water). Opening the industry to foreign capital and competition would mean more exploration, more modern methods, more oil exports, and more domestic jobs for Mexicans.

The other thing they need to dump is Article 27 of their constitution. The Article stipulates that all land is property of the Mexican government, and that private property is a un privilegio creado por la nación. (”a privilege created by the nation” - ie not a right). This is a serious problem that reflects the country’s Continental legal heritage (as opposed to one derived from British common law). A more specific problem with Article 27 is the last sentence of Section I:

En una faja de cien kilómetros a lo largo de las fronteras y de cincuenta en las playas, por ningún motivo podrán los extranjeros adquirir el dominio directo sobre tierras y aguas.

Roughly, foreigners cannot under any circumstances own land within 100km of the border and 50km of the ocean.

One immediate impact of this law is obvious in this satellite photo of the area around Imperial Valley.

Click to enlarge:

Can you guess where the border is?

What’s going on here - is the difference in agricultural development an issue of labor or capital? Well, since a good portion of the laborers on the north side of the border are Mexicans, its probably not a labor problem. Why the capital problem? Because the people owning and developing the land north of the border are legally barred from doing so on the other side. They look pretty crammed in to the valley up there - no doubt some would look south if they could. And with NAFTA their produce could easily be sold in the same markets.

Same thing goes for coastal development. How many thousands of Mexicans are employed building vacation homes for American baby boomers just a few hundred miles inside the US in places like Tuscon, or on the CA or FL coasts? Why don’t more Americans build retirement homes in places like Ensanada, or Playa del Amor, or Cancun? Because they effectively cannot.

Changing property ownership laws and privatizing (including international capital) Pemex would go a long way toward helping Mexico create more domestic jobs. Fewer of their hardest working, most ambitious citizens would working illegally inside the US and would instead be helping grow their own economy. Win-win.

But I think Hillary Clinton has probably the best solution for illegal immigration.

She’s already promised $800B in new annual federal spending (will take our government spending to >40% of GDP), she wants to nationalize parts of our petroleum industry, and she wants to slow our economic growth with increased taxes. She will simply make the US more like Mexico.

From IBD:

…(A) panel at the IPCC conference titled “A Global CO2 Tax” took a step that will have a more lasting impact than an empty agreement. It urged the U.N. to adopt taxes on carbon dioxide emissions that would be “legally binding to all nations.”

And guess who would be hit the hardest? That’s right, the tax, if levied, would put an especially high burden on the U.S.

“Finally, someone will pay for these costs” related to global warming, Othmar Schwank, a global warming busybody from Switzerland, told Sen. James Inhofe’s office. We imagine Schwank, a panel participant, took great glee in saying the U.S. and other developed nations should “contribute significantly more to this global fund.”

Schwank estimates the CO2 tax would generate “at least” $10 billion to $40 billion a year in revenues; but anyone who believes that has not paid attention. Even in nations that have a legitimate and more-or-less-limited government, such as ours, bureaucratic programs and taxes always grow bigger than first expected…

…The driving force of the environmental movement is not a cleaner planet — or a world that doesn’t get too hot, in the case of the global warming issue — but a leftist, egalitarian urge to redistribute wealth. A CO2 tax does this and more, choking economic growth in the U.S. and punishing Americans for being the voracious consumers that we are.

Eco-activists have been so successful in distracting the public from their real intentions that they’re becoming less guarded in discussing their ultimate goal.

“A climate change response must have at its heart a redistribution of wealth and resources,” Emma Brindal, a “climate justice campaign coordinator” for Friends of the Earth Australia, wrote Wednesday on the Climate Action Network’s blog…

In 2006 the UN’s operating budget was $4.19B (of which the US contributed 82%).  Now they’re talking about a “tax” that would send $10-40B sloshing through their coffers. Which side of the climate change debate is supposed to be hopelessly tainted by financial interests?

In the US all federal tax bills must originate in the House of Representatives, the institution most directly elected by the people. Yet the UN, where voting is done by sovereign states, most of which are not even democracies, can apparently conjure up for itself a new tax to increase its revenues 2-10x.

On a related note, a choice quote from last week’s Bali conference:

“When the chips are down I think democracy is a less important goal than is the protection of the planet from the death of life, the end of life on it. This has got to be imposed on people whether they like it or not.”

Mayer Hillman, Senior Fellow Emeritus, UK Policy Studies Institute

Great article in New Jersey’s The Record.

No politician would ever run on a platform that increased unemployment, caused parents to have fewer children or made Americans sicker and poorer. Yet, that is exactly what will result if New Jersey passes paid family leave, yet another government-sponsored benefit program…

…But the experience of Europe tells us otherwise. According to various sources, Europe’s unemployment rate, at 8.5 percent, is almost twice that of the United States. Moreover, Europeans are simply poorer than we are, with the European gross domestic product per capita at $29,400, versus $43,500 in the United States…

…A recent Wall Street Journal article on the Swedish disability program noted that Swedes are the healthiest people in the world – and yet the country has the world’s highest rate of disability. Assar Lindbeck, one of Sweden’s best-known economists, notes that the social programs have made it acceptable to live off others and not to work…

…The experience of Europe tells us mandated programs result in fewer jobs, declining families and eroding work ethics. The free market approach may not satisfy politicians’ need to say they solved a problem. Rather, it works quietly, over time, creating multiple solutions, with some working better than others. Over time, the bad ones are rejected and the good ones are free to further evolve.

Read the whole thing.