In the final push before Election Day, President Obama has been traveling the country criticizing Republicans for favoring tax breaks for U.S. companies that supposedly ship U.S. jobs overseas. It’s a bogus charge that I dismantle in an op-ed in this morning’s New York Post:

The charge sounds logical: Under the US corporate tax code, US-based companies aren’t taxed on profits that their affiliates abroad earn until those profits are returned here. Supposedly, this “tax break” gives firms an incentive to create jobs overseas rather than at home, so any candidate who doesn’t want to impose higher taxes on those foreign operations is guilty of “shipping jobs overseas.”

In fact, American companies have quite valid reasons beyond any tax advantage to establish overseas affiliates: That’s how they reach foreign customers with US-branded goods and services.

Those affiliates allow US companies to sell services that can only be delivered where the customer lives (such as fast food and retail) or to customize their products, such as automobiles, to better reflect the taste of customers in foreign markets.

I go on to point out that close to 90 percent of what U.S.-owned affiliates produce abroad is sold abroad; that those foreign affiliates are now the primary way U.S. companies reach global consumers with U.S.-branded goods and services; and that the more jobs they create in their affiliates abroad, the more they create in their parent operations in the United States. If Congress raises taxes on those foreign operations, it will only force U.S. companies to cede market share to their German and Japanese (and French and Korean) competitors.

I unpack the issue at greater length in a Free Trade Bulletin published last year, and on pages 99–104 of my recent Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization.

While everyone is focused on the battle to see which party will control the House and/​or Senate, there are several issues that voters will directly decide that deserve close attention. Here are nine initiatives that I’ll be watching next Tuesday.

1. Imposing an income tax in the state of Washington - This is the one I’ll be following very closely. I have a hard time thinking that voters would be dumb enough to impose an income tax, but the Pacific Northwest is a bit crazy on these issues. Oregon voters, for instance, approved higher tax rates earlier this year.

2. Stopping eminent domain abuse in Nevada - This initiative is very simple. It stops the state from seizing private property if the intent is to transfer it to a private party (thus shutting the door that was opened by the Supreme Court’s reprehensible Kelo decision).

3. Marijuana legalization in California - Proponents of a more sensible approach to victimless crimes will closely watch this initiative to see whether Golden State voters will say yes to pot legalization, subject to local regulation. (David Boaz and Juan Carlos Hidalgo already have commented on the implications of this vote)

4. Strengthen rights of gun owners in Kansas - If approved, this initiative would remove any ambiguity about whether individuals have the right to keep and bear arms.

5. Protecting health care freedom in Arizona - For all intents and purposes, this is a referendum on Obamacare. I’m hoping that it will pass overwhelmingly, thus giving a boost to the repeal campaign. There’s apparently a similar initiative in Oklahoma, but it hasn’t gotten as much attention.

6. Reducing benefits for bureaucrats in San Francisco - If one of the craziest, left-wing cities in America decides to require bureaucrats to make meaningful contributions to support their bloated pension and health benefits, that’s a sign that the gravy train may be in jeopardy for bureaucrats all across the nation.

7. Making it easier to increase government spending in California - The big spenders want to get rid of the two-thirds requirement in the state legislature to approve a budget. This would pave the way for even bigger government in a state that already is close to bankruptcy.

8. Reducing the sales tax in Massachusetts - The entire political establishment is fighting this proposal to roll back the sales tax from 6.25 percent to 3 percent, and pro-spending lobbies are pouring big money into a campaign against the initiative, so you know it must be a good idea.

9. Controlling benefits for bureaucrats in Louisiana - The initiative would require a two-thirds vote to approve any expansion of taxpayer-financed benefits for government employees.

Rep. Darrell Issa (R‑CA) has a terrific op-ed piece on Internet-age government transparency in the Washington Examiner today:

If agencies used consistent data formats for their financial information, their financial reports could be electronically reconciled. It would be possible to trace funds from Congressional appropriations through agencies’ budgets to final use. The same data could flow automatically into USASpend​ing​.gov, without the errors and inconsistencies that make it unreliable today.

The idea is simple, if not easy to implement. Put government data in uniform formats, accessible to the public, and let public oversight work its will. Whether you prioritize good government, small government, or both, expect improvement.

This, it seems to me, is a sign of a brittle, weak government that is fighting time and surviving exclusively on its nationalist credential:

TEHRAN (Reuters) — Iran will not allow its universities to begin teaching certain disciplines it deems too “Western,” and existing courses will be revised, a senior Education Ministry was quoted as saying Sunday.

“Expansion of 12 disciplines in the social sciences like law, women’s studies, human rights, management, sociology, philosophy.…psychology and political sciences will be reviewed,” Abolfazl Hassani was quoted as saying in the Arman newspaper.

“These sciences’ contents are based on Western culture. The review will be the intention of making them compatible with Islamic teachings.”

Hassani said Iranian universities will not be allowed to open new departments in these disciplines and the curricula for existing departments would be revised.

Link via John Sides.

As an economist, I should probably be most agitated about the economic consequences of TARP, such as moral hazard and capital malinvestment. But when I read stories about how political insiders (both in government and on Wall Street) manipulate the system for personal advantage, I get even more upset.

Yes, TARP was economically misguided. But the bailout also was fundamentally corrupt, featuring special favors for the well-heeled. I don’t like it when lower-income people use the political system to take money from upper-income people, but it is downright nauseating and disgusting when upper-income people use the coercive power of government to steal money from lower-income people.

Now, to add insult to injury, we’re being fed an unsavory gruel of deception as the political class tries to cover its tracks. Here’s a story from Bloomberg about the Treasury Department’s refusal to obey the law and comply with a FOIA request. A Bloomberg reporter wanted to know about an insider deal to put taxpayers on the line to guarantee a bunch of Citigroup-held securities, but the government thinks that people don’t have a right to know how their money is being funneled to politically-powerful and well-connected insiders.

The late Bloomberg News reporter Mark Pittman asked the U.S. Treasury in January 2009 to identify $301 billion of securities owned by Citigroup Inc. that the government had agreed to guarantee. He made the request on the grounds that taxpayers ought to know how their money was being used. More than 20 months later, after saying at least five times that a response was imminent, Treasury officials responded with 560 pages of printed-out e‑mails — none of which Pittman requested. They were so heavily redacted that most of what’s left are everyday messages such as “Did you just try to call me?” and “Monday will be a busy day!” None of the documents answers Pittman’s request for “records sufficient to show the names of the relevant securities” or the dates and terms of the guarantees.

Here’s another reprehensible example. The Treasury Department, for all intents and purposes, prevaricated when it recently claimed that the AIG bailout would cost “only” $5 billion. This has triggered some pushback from Capitol Hill GOPers, as reported by the New York Times, but it is highly unlikely that anyone will suffer any consequences for this deception. To paraphrase Glenn Reynolds, “laws, honesty, and integrity, like taxes, are for the little people.”

The United States Treasury concealed $40 billion in likely taxpayer losses on the bailout of the American International Group earlier this month, when it abandoned its usual method for valuing investments, according to a report by the special inspector general for the Troubled Asset Relief Program. …“The American people have a right for full and complete disclosure about their investment in A.I.G.,” Mr. Barofsky said, “and the U.S. government has an obligation, when they’re describing potential losses, to give complete information.” …“If a private company filed information with the government that was just as misleading and disingenuous as what Treasury has done here, you’d better believe there would be calls for an investigation from the S.E.C. and others,” said Representative Darrell Issa, the senior Republican on the House Committee on Oversight and Government Reform. He called the Treasury’s October report on A.I.G. “blatant manipulation.” Senator Charles E. Grassley of Iowa, the senior Republican on the Finance Committee, said he thought “administration officials are trying so hard to put a positive spin on program losses that they played fast and loose with the numbers.” He said it reminded him of “misleading” claims that General Motors had paid back its rescue loans with interest ahead of schedule.

P.S. Allow me to preempt some emails from people who will argue that TARP was a necessary evil. Even for those who think the financial system had to be recapitalized, there was no need to bail out specific companies. The government could have taken the approach used during the S&L bailout about 20 years ago, which was to shut down the insolvent institutions. Depositors were bailed out, often by using taxpayer money to bribe a solvent institution to take over the failed savings & loan, but management and shareholders were wiped out, thus preventing at least one form of moral hazard.

Colombian president Juan Manuel Santos has stated that if Proposition 19 passes next week in California and marijuana is legalized in the state, it could force his country to rethink its drug policy.

“Tell me if there is a way to explain to a Colombian peasant that if he produces marijuana we are going to put him in jail… [while] the same product is legal [in California]. That’s going to produce a comprehensive discussion on the approach we have taken on the fight against drug trafficking,” said Santos, who, a couple of months earlier, endorsed the call for a debate on drug legalization made by Mexican president Felipe Calderón. However, Santos has also said that he believes that legalization will increase drug consumption, a presumption that has been rebutted by evidence in countries with liberal drug policies such as Portugal.

Today, in his opening remarks at a Latin American presidential summit held in the Colombian city of Cartagena, Santos brought up [in Spanish] the subject again : “If we don’t act in a consistent way on this issue, if all we are doing is to send our fellow citizens to jail while in other latitudes the market is being legalized, then we have to ask ourselves: isn’t it time to review the global strategy against drugs?”

Santos’ statements have been backed by his Minister of Foreign Relations, who even said in an interview with El Tiempo, Colombia’s leading newspaper, that the country’s new seat on the UN Security Council could be “a good place” to start a “worldwide discussion” on the way that the war on drugs is being conducted.

It’s ironic–and gratifying–that the president of Washington’s closest ally in Latin America is the leading voice in the region questioning the wisdom of the war on drugs. It shouldn’t be a surprise, though. Back in 1998 Juan Manuel Santos signed a public letter to then Secretary General of the UN Kofi Annan denouncing the war on drugs as a “failed and futile” experiment, and calling for drug policies to be based on “common sense, science, public health and human rights.”

Even though the impact of Proposition 19 in California and the United States could be limited, Juan Manuel Santos’ statements show that its reverberations in Latin America could be significant.

Postmaster General John Potter has announced that he is stepping down. The Washington Post speculates on the reason for Potter’s departure:

It is not immediately clear why Potter decided to step down, though USPS staffers and others in the postal community — a wide fraternity including the shipping industry, labor unions and large retailers — signaled recently that he was likely to go after another record year of financial losses and failing to earn greater management flexibilities from Congress.

When Potter testified before a Senate Appropriations subcommittee hearing in March on the USPS’s desire to drop Saturday delivery, I noted that his comments indicated the need to privatize the U.S. Postal Service.

In his testimony, Potter stated:

If the Postal Service were provided with the flexibilities used by businesses in the marketplace to streamline their operations and reduce costs, we would become a more efficient and effective organization. Such a change would also allow us to more quickly adapt to meet the evolving needs, demands, and activities of our customers, now and in the future.

Of course, Congress has shown virtually no interest in giving the USPS, which is bleeding red ink, the greater flexibility it needs. This makes me wonder if Potter will reach the same conclusion that his predecessor, William Henderson, reached following his departure from the USPS.

Three short months after Henderson stepped down as postmaster general in June 2001, he penned an op-ed in the Washington Post that called for the USPS to be privatized.

Henderson wrote:

But for all the ways in which the Postal Service already resembles a private company, it lacks the advantages of any other corporation, such as being able to turn on a dime when it comes to rate changes, perhaps raising prices at times of high demand and lowering prices to entice customers during traditionally slow times, which for the Postal Service means summer. Today, a price change requires the permission of the Postal Rate Commission — a yearlong process.

And unlike a private company, the Postal Service has a universal service obligation, meaning it must deliver everywhere, six days a week, at a regularly scheduled time, making the delivery even for a single piece of mail, which is not cost-effective. And it means delivering in the Grand Canyon and in rural Alaska and in high-risk neighborhoods and lots of other places where delivery is not cost-effective.

The trade-off is that the Postal Service gets monopoly protection; no private company is allowed to compete with it head to head by carrying letter mail or using the mailbox. It should give up that protection for the greater benefits of privatization.

Henderson’s conclusion still rings true almost ten years later:

I can’t believe that 25 years from now the Postal Service will still be owned by the federal government. But the point is that, as with any government asset, this one needs to be maximized. And that means we need to free ourselves from the usual discussion about controlling costs or keeping rates stable or mailing more, all of which is simply a form of denial about the real issue. The model itself is not going to work for the long haul: It must be changed.

Unfortunately, Congress is still in denial. In commenting on Potter’s departure, Sen. Susan Collins (R‑ME) offered the vacuous statement that his successor “must strengthen the Postal Service by cutting costs, enticing more customers and putting this vital institution on a sound financial footing.” Instead, Sen. Collins and her colleagues need to recognize that the USPS model “is not going to work for the long haul” so long as politicians ultimately remain in charge.