Wednesday, July 20, 2005


Laffer must be laughing: "So the deficit-the federal budget deficit-is declining sharply, more sharply than just about anyone in mainstream media anticipated. According to figures from the Office of Management and Budget, the deficit is projected to decline from $412 billion in 2004 to $333 billion in 2005, a 19 percent decline. OMB further projects, obviously with less certitude, that it will decline to $162 billion in 2008. If so, that will mean that George W. Bush will have more than kept his promise to cut the deficit in half in his second term. Back in February, OMB projected a 2005 deficit of $427 billion".

The primitive roots of Leftism: "Two years ago, economist Paul Rubin published a paper called Folk Economics. As this description points out, Rubin suggests that in a hunter-gatherer tribe, goods are exchanged mostly through sharing and reciprocal altruism. There were no visible gains from impersonal trade or economic growth. In this zero-sum environment, people evolved an instinct to resent and punish those who took too much. Rubin's thesis is that the instincts that evolved in prehistoric tribes account for the misguided "folk economics" that many people believe today. Anti-globalization and opposition to free trade reflect the fear of strangers that was inherent in tribal society. Resentment of the rich and a belief in redistribution reflect the hunter-gatherer's zero-sum thinking."

The tax-eaters are powerful: "Steven Malanga shows how coalitions of public employee unions, workers at government-funded social service organizations, and recipients of government benefits have seized control of the politics of the big cities that make up the heart of Blue America. In New York City, this coalition has helped roll back some of the reforms of the Giuliani years. In California cities and towns, it is thwarting the expansion of private businesses. In nearly 100 municipalities, it has imposed higher costs on tens of thousands of firms by passing "living-wage" laws. Whereas the New Left of the 1960s believed-idealistically, if somewhat naively-that government could solve the biggest problems of our times, this New New Left is much more narrowly and cynically focused on expanding government programs to increase its own power, pay, and perks. And, as Malanga shows, the New New Left is emerging as the most powerful element of the national Democratic Party coalition."

Egypt gives the GOP a lesson in tax cuts: "Egypt is introducing sharply lower rates of corporate and personal taxation from 1st July. Under the new code, which has been working its way through the debate and drafting process since September, most companies will pay 20% tax on their profits. Under the previous tax system, industrial and export firms paid 22%, while most other companies paid 40%. The new tax code preserves tax exemptions for profits from stock exchange investments, on dividends paid to shareholders and on interest payments from banks and bonds. Current exemptions given to companies in free trade zones and industrial zones will be abolished, however, at least for new entrants. For individuals, the maximum tax rate is now 20% instead of 40% and the thresholds for each tax bracket have been raised. Individuals will pay 10% tax on income between 5,000 and 20,000 Egyptian pounds ($862 and $3,448) a year, 15% on income between 20,000 and 40,000 pounds a year and 20% on any income above 40,000 pounds. Under the previous system, the maximum rate of 40% kicked in at a threshold of 16,000 pounds."

Realism about child labour creeping in: "When he started working on child labor issues six years ago, Professor Edmonds said in an interview, "the conventional view was that child labor really wasn't about poverty." Children's work, many policy makers believed, "reflected perhaps parental callousness or a lack of education for parents about the benefits of educating your child." So policies to curb child labor focused on educating parents about why their children should not work and banning children's employment to remove the temptation. Recent research, however, casts doubt on the cultural explanation. "In every context that I've looked at things, child labor seems to be almost entirely about poverty. I wouldn't say it's only about poverty, but it's got a lot to do with poverty," Professor Edmonds said. As families' incomes increase, children tend to stop working and, where schools are available, they go to school. If family incomes drop, children are more likely to return to work... "Child labor does not appear to vary with per capita expenditure until households can meet their food needs, and it then declines dramatically," Professor Edmonds wrote"


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