There's Always a Better Way to Waste Money

The EU has managed to, once again, demonstrate its unrivaled prowess in exercises of governmental stupidity: it is handing out money to lobbying groups so that those groups are on an equal footing with corporations - in terms of lobbying. That's right, the EU is giving the lobbyists the money with which the lobbyists lobby the EU. Stunning.

One note - apparently, Greenpeace was the only group that refused the money.

EU vs US Revisited

In the past we have pointed to studies that rank EU nations against individual States in terms of Gross Domestic Product (GDP) adjusted for Purchasing Power Parity (PPP). Normally the EU nations come off poorly by comparison, ranking on average near Alabama or West Virginia.

Now Political Calculations has published an interactive, sortable, table of this data.

Fun Fact: Italy has about half the GDP per capita as Wyoming.

HT Carpe Diem

Even Socialists See the Flat Tax Revolution

The World Socialist Web Site has a column up about how eastern European countries are falling for the capitalist tricks of low taxes to attract "multinational companies and western speculators."

The government of Albania has agreed on a standard tax rate (flat tax) of 10 percent aimed at outdoing its East European rivals and attracting international investors. The government in Tirana is determined to transform the impoverished Balkan state into a haven for multinational companies and western speculators.

From the start of next year, corporate taxes will be reduced from 20 to just 10 percent. The basic rate of income tax, which amounted to 5 percent for average incomes and a maximum of 25 percent for top earners, had already been changed to a uniform rate of 10 percent for all incomes on August 1.

But even this is not enough. In August the head of government, Sali Berisha, announced that the state would make development land available to foreign investors for the symbolic price of one euro. Concessions for socially indispensable services such as health service, education, water and waste disposal, infrastructure, energy and raw material production - are also to be sold off bargain-basement style for one euro.

Should any potential investor be nevertheless deterred by any remaining tariffs, the Albanian government is also ready to step in. A law over foreign trade zones is in preparation and is due to be passed by parliament in October.

Of course, while I would consider these developments to be good things, the author disagrees.

Government representatives repeatedly emphasize that the reform of the tax system is beneficial for the country. The participation of foreign investors in Albania would increase tax revenues, increase transparency, and provide an alternative to businesses, which operate outside of the country’s legal framework and tax structure.

In fact, none of these claims are true. The halving of corporate taxes will inevitably lead to sizable deficits in the national budget, which is already chronically under-financed due to high unemployment and wide-spread tax evasion. The state has already withdrawn financial participation in almost all public services such as health care, education, or infrastructure. Any further decline in the national budget can only worsen the situation.

The main victims of this reform will be those surviving on low incomes. The increase in taxes on low-income earners from 5 to 10 percent means that these taxpayers will finance the tax cuts for companies and high income earners. At the same time those on low wages will be hit hardest by the social consequences of declining tax receipts.

Sixteen years after the introduction of capitalist free-market reforms, the country already resembles an economic and social wasteland. The country’s few profitable national industrial companies have been sold off to the highest bidder and any sort of welfare provision only exists on paper.

It is enough to make one long for the days of plenty everyone enjoyed under the USSR, isn't it?

HT Cato-at-Liberty

The EU and the UK

This is just absolutely amazing. Regarding the issue of a referendum in Britain regarding a new EU treaty, a top EU official admitted that the treaty would involve a transfer of sovereignty from the UK to the EU, then went on to say:

"'I am astonished at those who are afraid of the people: one can always explain that what is in the interest of Europe is in the interests of our countries,' he told Belgian newspaper Le Soir.

"'Britain is different. Of course there will be transfers of sovereignty. But would I be intelligent to draw the attention of public opinion to this fact?'"

HT: Fark Headline

Some Reading Material

Missouri has passed a castle law (HT: Fark Headline). a topic about which Freakonomics has a good post.

Reason has a good article entitled "Bogus Claims of Bigotry" in which is found this gem of a line: " Oh, please. This is like saying that Dan Quayle got ridiculed because he's a blond."

Reason also does a public service by giving proper attribution to South Park for discussing the "Green to be Seen" issue waaaaaaay before the New York Times.

The EU, in a stunning move apparently designed to reclaim its title as world's top agricultural subsidy machine, is considering plans to make "payments directly to farmers, encouraging them to diversify into other crops, rather than continue to overproduce sometimes poor-quality wine." Rather than, say, letting people make bad wine, not sell any, and thereby learn a valuable lesson about real life.

Apparently, police in Philadelphia feel that they are the law and that one or both of the following is illegal: (a) singing in a park [loudly enough to interfere with a police officer hearing his radio], (b) not asking "how high" when a police officer tells you to jump. Luckily, at least one judge disagrees (HT: Fark Headline).

In A Free Market, Money Is Free To Leave

From Richard Rahn's article on TCSDaily about the international trade connections between the US and Europe:

This past year more than one trillion dollars flowed between the U.S. and the EU. The EU now accounts for 21 percent of U.S. merchandise exports and 19 percent of U.S. merchandise imports, and about 34 percent of U.S. services exports and 37 percent of U.S. services imports.

The U.S. is not only the largest recipient of foreign direct investment, but far and away the world's largest investor elsewhere. Of the more than two trillion dollars the U.S. has invested directly abroad, a little more than half ($1.1 trillion) is invested in Europe. Europeans account for 70 percent ($1.2 trillion) of the direct investment in the U.S.

It is statistics like this that highlight the stupidity of protectionist trade policy. The US and Europe need each other, and any effort to "protect" the citizens of one at the expense of the other can only hurt both sides. Both sides of the Atlantic rely on trade, and need to realize that it is impossible to keep resources and capital locked up in a free economy. No law compatible with a free society can force local investment, or prevent those with the means from fleeing the country to someplace that offers them better opportunities. Such measure unfailingly do more harm than good, raising prices and unemployment for the benefit of politically connected industries.

Already, Europeans are fleeing their countries for the lower taxes and greater economic freedoms of the US. However, this is not a one way street. While US is a more attractive option for many individuals, the same can not be said for corporations. As Rahn notes, the EU has an average maximum corporate income tax rate of 25 percent (with some members as low as 10 percent) while the US average is 40 percent. When France and Germany both have lower taxes than the US, it is obvious something has changed. As the regulatory burden in the US rises (carbon credits, Boxly, etc.) the benefits of the lower taxes abroad become more significant.

This brings us to the flip-side of my earlier statement that laws can't force capital to stay. Though laws can't force it, they can be crafted to attract investment. If we want the US to continue to be competitive in a global market place, we should cut our corporate tax rates. I would advocate cutting them to zero. Corporations cannot pay taxes, since all costs are just passed on to the investors or consumers. If we cut corporate taxes, the money will still be taxed when it flows out to investors and employees, but not when used for reinvestment within the company. As Eastern Europe continues to cut taxes, the US cannot ignore the pressure being brought to bare as a result. If US taxes remain high, or are allowed to rise, the global markets will flow away from us, toward nations that offer a more hospitable environment.

To summarize, in a free market a nation cannot demand investment and growth, it must seduce it.

Universal Health Care

Interesting news regarding Scotland's National Health Service:

"POOR NHS treatment has led to almost half a million Scots dying in the last 30 years, a new study has revealed.

"Doctors at Glasgow University found that between 1974 and 2003, a total of 462,000 people died in Scotland as a result of health service failings

"It means Scotland has one of the highest avoidable death rates in western Europe.

"The study examined the number of deaths caused by a lack of 'timely and effective health care'.

"The vast majority of people - around 250,000 - who died due to inadequate or delayed treatment were heart or stroke patients.

"Another 7300 had cancer and slightly more than 2000 were pneumonia patients.

"The study revealed that avoidable deaths among men in Scotland over the time period was 176 for every 100,000 people.

"This compared with 159 in Portugal, 129 in Austria and 100 in Italy.

"Rates for women were 123 per 100,000, also higher than every other European country investigated."

Can someone remind me why we want universal health care again?

HT: American Thinker Blog

European Cars: Too Much Speed, Not Enough Ad Regulation

The BBC is reporting that there are calls within the EU to outlaw building cars that can go over 101 mph - the logic being that the unnecessary (unnecessary because it would be illegal under almost all circumstances to drive at that speed) power and weight increase the amount of carbon emissions produced by the cars.

I have a couple thoughts on this: First, simply because it is illegal to operate a vehicle in almost any circumstances in such a manner, there are still legitimate uses for such cars, e.g., at a private speedway or racetrack. Second, if the cars truly are more powerful and heavy than necessary (and, therefore, consume more fuel), why do people continue to buy them when doing so results in higher fuel expenses with no appreciable benefit? One guess is that this extra power is not only supplying the ability to exceed a certain speed, but also to provide more pick up at lower speeds. Third, even if speed limits are such that operating vehicles at higher speeds is illegal in most places now, that doesn't necessarily mean that that will always be the case. What happens if, in 10 years, someone decides that the optimum speed (in terms of carbon emissions, of course ;-)) is 105 mph. Will the EU then make it illegal to operate cars that can't go that fast?

All of this isn't really what I found most remarkable about the issue. The fact that part of the report which recommends these actions also recommends "that a fifth of car advertisements should be devoted to cars' fuel consumption and CO2 emissions." And you thought some FCC regulations were silly.

Europeans Flee Homes Because of Society and Money

Paul Belie has an article in the Washington Times about the exodus of young, educated, successful Europeans from their home countries to nations which offer a better future.

Last year more than 155,000 Germans emigrated from their native country. Since 2004 the number of ethnic Germans who leave each year is greater than the number of immigrants moving in. While the emigrants are highly motivated and well educated, "those coming in are mostly poor, untrained and hardly educated," says Stephanie Wahl of the German Institute for Economics.
In a survey conducted in 2005 among German university students, 52 percent said they would rather leave their native country than remain there. By "voting with their feet," young, educated Germans affirm that Germany has no future to offer them and their children. As one couple who moved to the United States told the newspaper Die Welt: "Here our children have a future in which they will not have to fear unemployment and social decline." . . .
Since 2003, emigration has exceeded immigration to the Netherlands. In 2006, the Dutch saw more than 130,000 compatriots leave. . . .
Elsewhere in Western Europe immigration currently still surpasses emigration, though emigration figures are rising fast. In Belgium the number of emigrants surged by 15 percent in the past years. In Sweden, 50,000 people packed their bags last year -- a rise of 18 percent compared to the previous year and the highest number of Swedes leaving since 1892. In the United Kingdom, almost 200,000 British citizens move out every year.

Why are so many people leaving? There are various reasons, of course, and the article points out two: economics and social change. "Some complain that the tax rates in Germany are so high that it is no longer worthwhile working for a living there. Others indicate they no longer feel at home in a country whose cultural appearance is changing dramatically." The rate of emigration from the Netherlands spiked after the murders of Pim Fortuyn and Theo van Gogh by Islamicists.

Unfortunately for the European Welfare States, those leaving are the same individuals they can least afford to loose: the young and the successful.

Gunnar Heinsohn, a German sociologist at the University of Bremen, warns European governments that they are mistaken if they assume that qualified young ethnic Europeans will stay in Europe. "The really qualified are leaving," Mr. Heinsohn says. "The only truly loyal towards France and Germany are those who are living off the welfare system, because there is no other place in the world that offers to pay for them... It is no wonder that young, hardworking people in France and Germany choose to emigrate," he explains. "It is not just that they have to support their own aging population. If we take 100 20-year-olds [in France or Germany], then the 70 [indigenous] Frenchmen and Germans also have to support 30 immigrants of their own age and their offspring. This creates dejection in the local population, particularly in France, Germany and the Netherlands. So they run away."

As the native populations flee Europe, they are being replaced by immigrants fleeing their own troubles. Many north Africans, Turks, and Arabs are settling in their new lands. Ironically, as the birth rates among native Europeans continues to fall, their governments are subsidizing the population explosion among the immigrant population.

A woman in Tunisia has on average 1.7 children. In France she has six because the French government pays her to have them. . . Of course, the money was never intended to benefit Tunisian women in particular, but French women will not touch this money, whereas the Tunisian women are only too happy to... For Danish and German women the welfare benefits are too low to be attractive. Not so for the immigrants.

It seems sometimes that Europeans have given up, that they view the world as sliding down hill, interpreting all news through that lens. Recent polls have shown that, on many levels, Americans are more optimistic about their lives than their continental counterparts. To me, it seems that most of their problems are a result of their outlook, rather than the other way around. When you expect your society to collapse at any time you don't try very hard to keep it up.

HT Cato at Liberty

Albania Lowers Taxes, Again

Albania has just implemented a 10% flat tax. The "Race To The Bottom" continues unabated.

Unemployment Compared

Carpe Diem has a nice post pointing out that at the worst point in the last 10 years, US unemployment has never risen above the lowest point EU unemployment has reached in the same period.

National Relative Wealth

I found a very interesting article about media bias in reporting on economic matters at Cato-at-Liberty. It points out the language choices made when talking about economic policies, and I highly recommend reading it. Far more interesting, however, is the study it links to.

EU vs. USA is a report comparing the wealth of EU countries to the 50 States. It shows that Sweden is poorer per capita that Alabama, and that most European countries would rank in the bottom 5 states. It is a large PDF, but an excellent read.

Another Bait & Switch - This Time With Alcohol

A British organization wants the government to prosecute parents who give children under 15 alcohol. Now, regardless of your stance on whether children of a certain age should be allowed to have alcohol and, if so, how much, and, if not, until what age, please notice the bait and switch used in the organization's justification for such a law: "Binge drinking by children can have serious consequences for brain function, significantly raises the risk of alcohol dependency in later life and diminishes their life chances."

So, the justification is that binge drinking is a problem. Even if the law were successful (which I doubt) in preventing binge drinking on the parts of minors, that does not justify outlawing all alcohol consumption by that demographic. That would be like outlawing driving because it would decrease the number of DUIs.

Oh, and for good measure, the organization, Alcohol Concern, "also wants a 16% rise in alcohol taxes, a ban on brewers selling to retailers at a loss, and a crackdown on under-age alcohol sales." I'm not sure if the first or the second one annoys me more. I generally do not like taxes, especially arbitrary ones that target a certain segment of the population or a certain activity just because some lobbying group has convinced the general population that there is something inherently evil going on. On the other hand, I really hate governments trying to dictate how a company can conduct its business.

Country that Dislikes France the Most: France

Admittedly, "hating" is a very strong word, but "disliking" just doesn't make for as good a title. Reuters is reporting that a recent survey polling more than 1,000 people in each of six western nations found that the country with the most respondents saying they had a negative view of France was France itself (the United States was a close second).

First Mexican Tortillas, Now German Beer

The China Post is reporting that beer pricing are on the rise in Germany due to 100% increase in the price of barley over the last year. The price of barley is on the rise for two reasons: (1) an "extremely poor" 2006 harvest, (2) government subsidies for biofuels that are making it more profitable to plant crops other than barley.

"The price of barley, which is used to make malt, an essential ingredient in brewing, has doubled in the space of a year from 200 to 400 euros per ton on the German market.

"Brewers and farmers say an extremely poor barley harvest in 2006 has exacerbated an emerging trend of converting barley fields to growing the plants used in biofuels, such as rape seed. The amount of land used for growing barley in Germany is receding by five percent a year.

"The march of biofuels is inexorable. Of the 12 million hectares farmed in Germany, two million are already being used for plants which can be turned into biofuel.

...

"The impact of the biofuels is not restricted to beer, with the price of bread likely to rise by 10 percent as a result of reduced grain production, the German bakers' federation has warned.

...

"But Jens Redemacher, the head of the cereals division of the federation of German farmers, said the brewers also had themselves to blame.

"'They have demanded lower and lower prices for barley which has caused farmers to abandon growing it because it was no longer profitable. So biofuels are not the only culprits,' he said.

"The food industry is 'just going to have to get used to having a competitor for the purchase of cereals, especially those used for biofuels,' Redemacher said."

This is not entirely unlike the Mexican tortilla situation.

HT: Fark Headline

Norway Making Commitments

USAToday is reporting that Norway plans on reducing its net greenhouse gas emissions to zero by 2050. Interesting tidbit: Norway is the world's fifth largest exporter of oil.

Yet More Tax Competition

Switzerland is now lowering its taxes to compete with the London Hedge Funds. The French will not be pleased.

More Flat Taxes

Macedonia is yet another country with a flat tax, and brags about it in advertisements. It seems that the pipe dream continues to look more reasonable. Maybe with in my lifetime it will be seen as possible for our country.

Even More Tax Competition

A year after the IMF published an analysis predicting that those countries that had a flat tax would transition back to "progressive" taxation, Montenegro is the latest to adopt truly fair taxation.
UPDATE: Russia just rejected a proposal to repeal their flat tax. So much for the IMF.

Estonia Lowers Taxes, Again

This is a bit old, but still good to know. Estonia has a flat tax. Originally imposed at 26 percent, it is now 22 percent and will shorty be cut again to 18 percent. If only the land of the free could muster that kind of reform.

Update: The Czech Government is now proposing a flat tax.