Richard Rahn

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Primitive Party Animals

Since the 1976 presidential election, the Democrats have not received more than 50 percent of the popular vote. Most organisms, except for very primitive ones, usually modify their behavior after repeated failure in order to survive. Much has been written about why the Democrats continue to fail in the polls. But as an economist, I have been particularly struck by how they have failed to learn sound economics, despite all the empirical economic and political evidence of what works and what doesn’t. Let’s start with taxes. There is overwhelming evidence our present maximum tax rates on both labor and capital are so high they reduce economic growth, job creation and the general level of well-being for Americans. Despite this, Democrat candidates from Walter Mondale to

Good News From Europe

Back in 1984, if you had bet Bulgaria would in 2004 host a convention of European free market think tanks including many from what were then communist countries, you probably would have been given very good odds. Yet during the last days of October, a remarkable conference — the First European Resource Bank — was held in the pleasant ski resort of Borovets, Bulgaria. This “Resource Bank” essentially was a convention of European free market think tanks. Representatives from organizations in 20 countries came together for mutual support, communication and cooperation. This European Resource Bank was modeled after the almost three-decade-old annual Resource Bank run by the Heritage Foundation, in conjunction with the Atlas Economic Research Foundation and the

Halting French Economic Thrust

Are you aware of the ongoing world war between a French-led high tax alliance and the United States and its free market allies? France and its statist allies have been losing the war for economic supremacy to the lower-tax developing and developed countries, like the United States. The French are well aware that their economy and those of other statist European countries perform relatively poorly because they are noncompetitive with lower-tax-burden countries. Rather than correctly cut their own taxes and government spending, they actively try to force others to raise taxes so they might also have stagnant economies. (It appears the French never have learned that envy is a sin.) The French try to disguise their real agenda by calling for “tax harmonization” so all

Tax Hypocrisy

Sen. John Kerry keeps telling us that “the rich” need to pay more in taxes. The senator and his wife are among the 400 richest Americans. He says that he has “a plan to tax the rich.” Under the senator’s tax plan, what percentage of the Kerrys’ income do you think they would pay the IRS? (a) 50 percent, (b) 40 percent, (c) 30 percent, (d)15 percent. The correct answer is (d) 15 percent. According to an analysis by the Argus Group, a well respected tax law and economics firm, the Kerrys’ average tax rate would only increase by 1.8 percentage points to 15.2 percent under the senator’s plan, while many small business people would see their average rate rise by 4.0 percentage points, resulting in effective rates as high as 35 to 40 percent,

How To Deal With Evil

Assume you were on a ship that sank in the middle of the ocean. You, your family and 200 fellow passengers manage to reach a small isolated island where you think you can survive. Assume this happened before the advent of satellites, aircraft, and modern communications. This made it a rescue unlikely for many months, or perhaps years. A fellow passenger turns out to be a thug who has recruited several other thugs to work with him. The thugs kill five of your fellow passengers without provocation. The rest of you try to decide what to do. Several passengers advocate getting together and killing the thugs. Several others argue killing is wrong and that you should do nothing because you cannot be sure the thugs will kill any of the rest of you. Others want to reason with and thereby

Taxing Questions . . . and Misfires

Have you noticed the press tends to ask the candidates the same old tired questions, whether at a press conference, interview or debate? Yet there are many basic questions on tax policy (and other topics) Americans should have answers to before they vote. Here are some of those questions, which I am urging reporters with access to Mr. Bush and Mr. Kerry, including the debate moderators, to ask. To Mr. Bush and Mr. Kerry: (1) What is the maximum federal income tax rate you think any American should pay? (2) On what basis did you select that number? (Note: The average federal tax rate for all Americans is now about 15 percent, and surveys over the years indicate most Americans do not believe it is fair for anyone to pay more than 20 percent.) To Mr. Kerry: Even though you have

TV News: Blind to Market?

If you managed a business and noticed one of your five major competitors had changed its product design and was gaining market share against your firm and other competitors, what would you do? A decade ago, the world’s automobile manufacturers noticed firms with SUVs in their product line were gaining market share. Companies that produced no SUVs quickly added them — a normal and rational market response. The major TV news companies — ABC, CBS, NBC, CNN — have all been losing market share to Fox News but so far have failed to respond in a rational market way. Recent surveys by the Pew Research Center (and other organizations) clearly show Republicans watch Fox News more than its competitors, and Democrats watch ABC, CBS, NBC and CNN more than Fox News. Fox News had

Consent of the Governed

If I told you the world is becoming both more and less democratic at the same time, you might reply, “how can that be?”. Follow along and you shall see. Do you believe “Governments are instituted among Men, deriving their just Powers from the Consent of the Governed?” It is not just the overwhelming majority of Americans who believe in this statement from the Declaration of Independence, but as evidenced by the global rise in democracy, a majority of the world’s population now subscribe to this statement. According to Freedom House, 65 percent of the world’s people now live in at least limited democracies, where they are free or partially free, and their laws and rules are established by consent of the governed. Yet, at the same time,

Taxes, Truth and CBS

How do you think the sanctimonious people at TV’s “60 Minutes” would portray a company charged by the FCC with “serious indecency violations,” that made expensive settlements with employees and others because of injuries related to asbestos and other hazardous material exposures, underfunded its employee pension, is legally accused of securities violations, employs those who widely distributed forged documents in an effort to destroy political opponents, failed to dismiss or discipline employees who violated the company code of conduct, owned offshore enterprises that paid little or no U.S. corporate tax, and operated in and/or dealt with countries harboring terrorists? The company that engaged in all of these practices is Viacom, parent company of CBS,

Out to Lunch at Treasury?

If the major departments of government were baseball teams, the Treasury Department would be the New York Yankees. Historically, from the time of Alexander Hamilton, most of the best and brightest in government were in Treasury. Treasury was viewed as the class act. Treasury officials were treated with the respect that officials of HUD (Housing and Urban Development) could only dream of. At times of war, Defense would eclipse Treasury, and occasionally State or Justice would have their moments of glory; but over the decades, Treasury was the shining prince. During the first Reagan administration, Treasury Secretary Don Regan assembled a team of world-class economists and lawyers who took the lead in devising and selling a revolutionary tax and economic plan that not only

Wealth Creators vs. Protectors

A major reason the liberal elites so hate President Bush is the policies he pushes will reduce their power and influence. Sens. John Kerry and Edward Kennedy, Massachusetts Democrats, claim they are the protectors of the little guy and the middle class. Yet their proposals are designed to protect the elite like themselves who inherited rather than created wealth. Much of the evidence comes from institutional financial consultant, Criton Zoakos, head of Leto Research. Mr. Zoakos reviewed opinion polls of voting behavior and noticed a most interesting relationship between voting preference and share of wealth. Starting with the basics, Mr. Zoakos noted: “Opinion polls suggest that Sen. John Kerry enjoys the overwhelming support of voters self-designated as ‘upper

How to Find Osama

Having just finished reading the report of the September 11 commission, I was shocked; shocked to learn major U.S. government bureaucracies are incompetent. Washington being Washington, most of the solutions proposed revolved around reorganizing and creating more bureaucracies. It seems not to have occurred to anyone there are market solutions for many information problems the intelligence community faces. Two examples follow. The first is the general problem of economic intelligence, and the second is using the market to find a particular someone — Osama bin Laden. A couple of decades ago, I became aware the CIA was systematically overstating the size of the Soviet and Eastern European economies, An article I wrote about it was published in 1984. My critique, and those of others

The Growth Agenda

Would you expand your stock market holdings if you knew taxes would be increased on businesses’ most valuable employees? Business depreciation allowances would be reduced? Tax disadvantages of U.S. multinational corporations would increase relative to their foreign competitors? And the tax rate on capital gains and dividends would rise? Well, this is exactly what John Kerry proposes, and that is the major reason the stock market has been floundering. A rational person understands the Democrats propose many anti-economic growth policies and there appears roughly a 50 percent chance the Democrat will be elected. Therefore, one’s stock market holdings are likely to have less value if Mr. Kerry is elected. Every good economist understands higher taxes on labor and capital

Making the World Better

There are a lady barber and a finance minister, both of whom, in very different ways, are making their homelands better, in part, because of their American experience. It has long been recognized the remittances foreign workers send to their homelands dwarf official foreign aid in both size and effectiveness. What is often not recognized is how foreign visitors and immigrants use the skills and knowledge they acquire in America to improve their native countries. No government foreign aid program could ever approach the cost-effectiveness of what Zahira Zahir and Milen Veltchev are doing as individuals. Zahira Zahir is a barber. She started life in Afghanistan. Eventually, she married an Afghan diplomat and had three children. In the 1970s, they were stationed in New York when

The Ideal

Is it possible, within our children’s lifetimes, to have a world where war and state sponsored terrorism is very remote? The answer is not only yes, but we are much closer to that ideal than most people think. A truly peaceful world can only be and will be a world where virtually everyone lives under a regime reasonably close to being a free market capitalist democracy. Utopian, you say? I say not. Look at the evidence. First, we know democratic nations virtually never wage war on each other, particularly if their people have a middle income or higher standard of living. President Bush has been ridiculed and criticized by many on the left and the right for saying he wants to help bring democracy to the Middle East and the rest of the world. Many libertarians as well as

Tallying Presidential Economic Success

In the last half-century, under which president did the economy perform the best? Most Americans would answer Ronald Reagan, while some Democratic commentators have argued it was Bill Clinton or John F. Kennedy. What is the truth? A president has a major influence on tax, spending, regulatory and trade policies that largely determine the rate of economic growth, but he is constrained by Congress, particularly when one or both houses are controlled by the opposition party. A president has much less influence on inflation and interest rates in that they are largely determined by the independent Federal Reserve. However, a president can influence the Fed through his selection of the chairman and members of the board, as well as through “moral suasion.” Increasing the

Marketing Failure

Did you know that the U.S. has the fastest-growing economy among all of the rich nations? During the past year, the U.S. has been growing threefold the rate of the average of the European Union countries and about 50 percent faster than Japan, and is now experiencing the fastest rate of GDP growth in 20 years. The unemployment rate is now lower than the average of the 1970s, 1980s and 1990s. In addition, productivity growth has been soaring, interest rates are the lowest in decades, and real disposable income is up an annual 3.9 percent. With all this good economic news, you would expect President Bush to be far ahead of Sen. John Kerry, Massachusetts Democrat, when it comes to the question of “which candidate would be best for the economy.” But in fact, several

Europe’s New Oppressors

Imagine a club where members of the volleyball teams enjoy drinking and eating more than exercising and, as a result, are very fat and out of shape. The club decides to expand its membership to include a group of men who only recently gained their independence from abusive parents and now are working hard on bettering themselves. The newcomers wish to join the volleyball teams. The existing players say to the new guys, “This is ‘not fair’ because you are slimmer and more energetic than we, thus you must put on weight belts so you are as slow as we are.” In the above, substitute France and Germany for the fat guys, and the 10 new entrants to the European Union as the hard-working thinner guys, and you begin to understand the new European

What is Evidence?

Have you seen any of the photos of Jane Fonda and John Kerry together back when he was a war protester? Do you know which of the photos are real and which are phony? Digital technology has made it easy to create pictures that purport to show something that never was. The late-night television comedians and many Internet pranksters create pictures showing the famous in funny situations, most often in good fun. The fun ends for both the accused and law enforcement officials when what is presented is said to be photographic evidence of a crime. We remember the famous pictures of Josef Stalin with his colleagues who, as they were physically liquidated, were also airbrushed out of the pictures. However, a competent expert could examine an original negative or photo and tell if it had

Reality Denial

If you ask anyone with the most casual knowledge of baseball which team won the most World Series games in the last 80 years, the Chicago Cubs or the New York Yankees, you would expect to get the right answer at least 90 percent of the time. Even diehard Cubs fans would tell you it was the Yankees because they would not want to appear ignorant. As with baseball, knowledgeable people normally give correct answers to questions even though they might prefer a different answer. The exception to this rule is political history and public policy, where all too many knowledgeable people feel free to say things contrary to empirical evidence — and often do so without embarrassment. Current examples are many political commentators, as well as elected politicians, who frequently say the