The Ludwig von Mises Institute
(The LVMI is a research and educational center devoted to classical liberalism -- often known as libertarianism -- and the Austrian School of economics. Grounded in the work of economists Ludwig von Mises and Murray N. Rothbard, LVMI seeks a radical shift in the intellectual climate by promoting the market economy, private property, sound money and peaceful international relations, while opposing government intervention.)
AUBURN, Ala.-- U.S. Hypocrisy on Trade
by Tibor R. Machan
Do you remember when America was called the leader of the Free World? It seems like so long ago. Now the United States is the leader of the protectionist world, the very opposite of free, at least where international commerce is concerned.
This is the unavoidable conclusion of having closely watched the role of the U.N. World Summit 2002, held in Johannesburg, South Africa, Aug. 26-Sept. 4. The result of the international conference (the biggest ever held) was the adoption of a new statement on "sustainable development," a phrase that can mean just about anything but usually has something to do with government control of markets.
However, if there is one area of commerce where nearly all concerned agree that free trade will do the most for those in underdeveloped countries -- for the poor, that is -- it is farming.
That is what the poor do abroad most of all, and for them to have even the slightest chance at improving their economic circumstances, they need customers. If the market prevailed, they would sell what they produce, much of it to the US, the world's biggest consumer of farm products.
At these summits, representatives from the Third World usually come hoping for more foreign aid, which the United States should not grant, but also more trade liberalization, which it should do everything possible to bring about.
So what did the government officials, the U.S. delegates to the U.N. World Summit, of the former "leader of the free world" do in response to this?
Aside from demanding open markets for U.S. exports, the U.S. delegates insisted on yielding to the American farm lobby and keeping in place barriers, in the form of high tariffs and subsidies, to prevent the poor from abroad from selling what they produce to consumers in the United States. How can the U.S. insist that the Third World needs to take down barriers while also insisting on U.S. rights to keep barriers as high as politically possible?
U.S. officials offered one of the most vicious, most insidious hurdles to people seeking to make headway toward prosperity, namely, the erection of trade barriers by means of politics.
They do not want to compete by producing better stuff, at lower prices, no. They want to get ahead by bribing the referees and getting special favors from them at the clear expense of others, indeed, those in most desperate straits.
Suppose you opened a cafe and some who owned others in the neighborhood noticed that you are selling your wares at a lower price than they do. Maybe you are willing to gain lower profits, maybe you are willing to work harder, and maybe you can afford to do this for some other reason. But you are not stealing from anyone, only asking fewer dollars from your costumers for what you do for them.
Would it be the right thing for those with whom you are competing to place a huge rock in front of your shop so people couldn't enter it? Would it be OK for them to lobby city hall so they put various official or physical obstacles in front of your place so people cannot approach your shop?
Would it be OK for these "competitors" to break your legs so you couldn't get to work?
American farmers who insist on stopping overseas competitors from selling their produce in the United States are no better than those who would try to stop the cafe owner from doing business. They are hoods, no better than the Mafia, even if it is perfectly legal for them to do this.
It was, after all, perfectly legal for people to turn in their competitors in the Third Reich for being Jewish, thus running them out of business by getting them killed and gaining customers for themselves in the process. And placing barriers before farmers from Africa or anywhere else is really no different from such immoral, albeit formerly legal, tactics.
Here, sadly, is another sign of how perverse the United States has become over the last several decades. And it is especially bizarre that these policies are flourishing under the watch of George W. Bush, who was supposed to be different from Al Gore in favoring the principles of the free market. By now, however, Gore and former President Bill Clinton are beginning to look like champions of at least international free trade, of, indeed, capitalism itself! What irony.
What we now have is a bunch of right-wing mercantilists and protectionists, no better than Pat Buchanan would be if he were elected. And in this case, the stakes are not just about preserving human liberty in the economic realm but also about making some effort to do right by the struggling poor of the globe.
Here is an instance where freedom's value is clear to nearly everyone: free trade helps alleviate misery and poverty. But where does the Bush team come down on the issue?
In favor of helping, through rank coercion, the people who want to remain solvent by violating the rules of free trade, by insisting on remaining in business via extortion and bribery. It is difficult these days to remain a loyal American.
(Tibor Machan is an adjunct scholar at the Mises Institute and teaches at the Argyros School of Business and Economics at Chapman University.)
The Institute for Public Accuracy
(The IPA is a nationwide consortium of policy researchers that seeks to broaden public discourse by gaining media access for experts whose perspectives are often overshadowed by major think tanks and other influential institutions.)
WASHINGTON -- Live, From Iraq
The following IPA analysts are currently in Iraq.
-- James Jennings, president of the humanitarian aid organization Conscience International and a long-time professor of Middle East and Islamic Studies. He has worked extensively in Iraq. He last traveled to Iraq with Congressman Nick Rahall and former Senator James Abourezk in a trip sponsored by the Institute for Public Accuracy in mid-September. He is in Baghdad until Nov. 22.
"On his arrival here, chief (U.N.) weapons inspector Hans Blix raised two important points. First, Blix talked about the importance of the sanctions as an issue and how lifting them would move Iraq forward and that we should move toward that.
"Secondly, he raised the idea from one of the earlier U.N. resolutions, that in the Mideast there should be a zone free of weapons of mass destruction." Jennings also noted: "A war now would destroy the limited progress that Iraq has been able to make in the wake of the war and sanctions, and so the issue is not just about arsenals, but is also about the ordinary people of Iraq and their welfare. Over the last three years, you can see an improvement here in Baghdad. Simply put, there are more cars and fewer beggars."
-- Kathy Kelly, co-coordinator of Voices in the Wilderness, a group opposed to the sanctions on Iraq. The organization has initiated the Iraq Peace Team, a group of activists working to prevent war. The team includes a farmer from Indiana and a retired librarian from New York State.
"Yesterday, CNN offered a 3-D rendition of a street in Baghdad to illustrate how fighting in Baghdad might go. I realized that the street they were showing was the street I'm on -- Abi Nawas Street. There's the detail and the assurance of the war planning; but here in Baghdad, there's the terrifying uncertainty of Iraqis not knowing what's going to happen though it affects them greatly. There's even a reluctance to follow the news as many Iraqis feel they owe it to their children to maintain some equilibrium."
Diaries of team members are available at iraqpeaceteam.org.
The National Center for Policy Analysis
(The NCPA is a non-profit, non-partisan public policy research institute that seeks innovative private sector solutions to public policy problems.)
WASHINGTON -- Will Gephardt Revive His Tax Reform Plan?
by Bruce Bartlett
I don't normally have an interest in giving Democrats useful advice on anything. I disagree with almost everything they stand for. Nevertheless, I recognize that some major policies that I favor simply cannot be accomplished without meaningful bipartisanship. One of these is tax reform. For this reason, I am going to explain how Democrats can reclaim credibility on this issue in way that might be mutually beneficial.
The stimulus for this advice column is Rep. Dick Gephardt's, D-Mo., decision to step down as Minority Leader in the House of Representatives, presumably to run for president. I've always viewed him as a truly moderate Democrat who got pushed farther and farther to the left by the necessity of his position. As the center of gravity in the House Democratic Caucus has moved continuously leftward since 1974, Gephardt, as their leader, had little choice but to move left himself.
In the past, however, Gephardt has shown a willingness to chart his own course. In this respect, one of his most important achievements in Congress was to co-author the Bradley-Gephardt tax reform plan in the early '80s. The Bradley in this legislation was former New Jersey Democratic Senator Bill Bradley.
The Bradley-Gephardt plan was important because historically, Democrats had used the idea of "tax reform" as nothing but a code word for soaking the rich.
In the tax reform acts of 1969 and 1976, Democrats were only interested in taking away supposed "tax loopholes" used by the "rich." There was no quid pro quo. The rich got screwed, but there was no benefit to anyone else.
To their credit, Bradley and Gephardt recognized that this approach was no longer viable in the Reagan era. So they combined loophole closing with a reduction in marginal tax rates. This effort was central to building political support for the Tax Reform Act of 1986, which lowered the top income tax rate to just 28 percent -- if only briefly.
Without the Bradley-Gephardt bill, I doubt that President Ronald Reagan's tax reform effort would have ever gotten off the ground. Consequently, the top rate would have been 50 percent when Bill Clinton took office. The 1993 tax increase might well have put the top rate back to 70 percent, where it was when Reagan took office, rather than the 40 percent level Clinton imposed.
Unfortunately, since Bradley and Gephardt's legislation, Democrats have been AWOL on the issue of tax reform. They seem to be happy with the status quo and prefer attacking Republican initiatives to coming up with anything of their own. But this is an untenable position politically.
The Tax Code is a total mess that desperately needs to be cleaned up and simplified. Defending this monstrosity, even in a de facto sense, is the equivalent of defending Saddam Hussein.
Fortunately for the Democrats, Republicans haven't pressed them very hard on the issue. The latter were too busy enjoying the perks of majority status in the House by adding new provisions to the Tax Code to benefit their constituency. But the result has been further tax complexity, unfairness and misallocation of investment.
Democrats should take a lesson from Republicans when they were in the minority. The latter found tax reform to be a very popular message. This led to the development of many comprehensive reform plans that were supported almost exclusively by Republicans.
Interestingly, the only Democratic tax reform plan to come forward in the last 15 years was authored by Gephardt. His plan would have put the vast majority of Americans into a 10 percent tax bracket, with the rich paying more, paid for with further loophole closings.
This plan would have to be radically rethought in light of the 1997 and 2001 tax bills. Nevertheless, an opportunity exists today to do almost exactly the same thing Reagan did in 1986. He mostly closed corporate tax loopholes and raised taxes on corporations to pay for individual tax rate reductions.
The same thing could be done today. Corporations have been getting away with murder by creating and expanding their use of tax shelters. Sooner or later, there will have to be a legislative fix. Therefore, why not take the opportunity to just redo the 1986 tax reform? Raise revenue from corporations and lower tax rates again.
With Treasury Secretary Paul O'Neill talking about politically unpopular ideas such as imposing a value-added tax in order to abolish the corporate income tax, there is the opportunity for a Democrat like Gephardt to outflank him. All he has to do is talk about lowering marginal tax rates and many Republicans will follow him, rather than support an obnoxious new VAT.
The tax reform issue is there for a sharp Democrat to pick up and run with, as Jimmy Carter did in 1976. It could jump-start the now-moribund "New Democrat" message that elected Clinton twice. If Gephardt is smart, he will make it his key domestic policy initiative.
(Bruce Bartlett is a senior fellow at the National Center for Policy Analysis.)
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