All it takes are a few warnings for the benefit of visitors who might not otherwise realize watery surfaces are wet — not to mention helping you fend off the lawsuit if they slip anyway. [Chevy Chase, Maryland; courtesy Carter Wood; cross-posted from Overlawyered]
Cato at Liberty
Cato at Liberty
Email Signup
Sign up to have blog posts delivered straight to your inbox!
Topics
Turning New York City into Detroit?
I recently speculated whether Detroit’s fiscal problems should be a warning sign for the crowd in Washington.
The answer, of course, is yes, though it’s not a perfect analogy. The federal government is in deep trouble because of unsustainable entitlement programs while Detroit got in trouble because of a combination of too much compensation for bureaucrats and too many taxpayers escaping the city.
A better analogy might be to compare Detroit to other local governments. Some large cities in California already have declared bankruptcy, for instance, and you can find the same pattern of overcompensated bureaucrats and escaping taxpayers.
And the same thing may happen to New York City if the next mayor is successful in pushing for more class-warfare tax policy. Here are some excerpts from an excellent New York Post column by Nicole Gelinas:
Mayoral candidate Bill de Blasio…thinks New York can hike taxes on the rich and not suffer… De Blasio’s scheme is this: Hike income taxes by 13.8 percent on New Yorkers making above half a million dollars annually.…After five years, de Blasio would let this tax surcharge lapse, and — he says — find another way to pay.
But there’s a big problem with de Blasio’s plan. Rich people are not fatted calves meekly awaiting slaughter.
In 2009, the top 1 percent of taxpayers (the 34,598 households making above $493,439 annually) paid 43.2 percent of city income taxes (they made 33.9 percent of income), according to the city’s Independent Budget Office. Each of these families paid an average $75,477. No, most people won’t up and leave (though if 20 percent did, they’d leave New York with less money than before the tax hike). But they can rearrange their incomes. Unlike most of us, folks making, say, $10 million have considerable control over how and when they get paid. That’s because much of their money comes from cashing out a partnership, or selling stock or a house or a painting. To avoid a tax hike, it’s easy enough for them to pay themselves earlier by selling their stuff earlier — before the tax hike. The city made $800 million in extra taxes last year because rich people sold their stuff before President Obama increased investment taxes in December. Or, people can pay themselves later — after the five years’ worth of higher taxes are up.
Gelinas makes some very important points. She warns that the city would have less money if just 20 percent of rich people escaped. She doesn’t think that will happen, but she does explain that rich people can stay but take some simple steps to reduce their taxable income.
Related Tags
Customers Don’t Need Protection from Low Prices
Some things seem obvious: Puppies are cute. Freedom is good. Paying less for something is better than paying more.
Unless you live in the Tampa area and work for the Hillsborough County Public Transportation Commission (PTC). The PTC was created, ironically, to protect Tampa’s transportation customers. Apparently, that means protecting those customers from low prices.
This is not one of those stories about unintended consequences or safety regulations that, in the long run, result in higher prices and therefore unsafe practices. The PTC left the agencies that impose those sorts of economics-challenged agencies in its dust. Instead, the PTC actually passed a rule requiring Tampa’s sedan and limo drivers to overcharge their customers. The rule mandates that all drivers must charge at least $50 per ride — no matter how short the ride, and even when the driver is willing to charge much less.
Let me repeat: The PTC is expressly protecting customers from low prices. What’s next for the PTC? Protecting us from pillows that are too soft or food that’s too tasty? (Don’t give Michael Bloomberg any ideas.) There are many good things in this world that undoubtedly must be stopped, so the PTC is going to be quite busy.
Time for Congress to Decide on War in Syria
On Saturday, President Barack Obama made the right decision and asked Congress for authority to go to war in Syria. Now Congress should make the right decision and vote no. Conflicts and crises abound around the globe, but few significantly impact U.S. security. So it is with Syria.
The bitter civil war obviously is a human tragedy. However, the conflict is beyond repair by Washington. Ronald Reagan’s greatest mistake was getting involved in the Lebanese civil war. The U.S. invasion of Iraq sparked civil conflict which killed tens or even hundreds of thousands of civilians. Civil wars are particularly resistant to outside solution.
The fighting is unlikely to end even if the U.S. ousted the Assad regime. Insurgent factions, including increasingly influential jihadists, would fight for dominance in that power vacuum. For many rebels, revenge would become a top priority.
Even if nation-building in Syria wasn’t such a daunting task, the U.S. government should not risk the lives of its citizens in conflicts where Americans have no substantial stake. Protecting this nation’s, territory, people, liberty, and prosperity remains the highest duty for Washington.
Related Tags
Accurately Predicting the Potential Costs of War in Syria
On July 19, 2013, General Martin E. Dempsey, Chairman of the Joint Chiefs of Staff, wrote a letter to Sen. Carl Levin detailing the costs of various military options in Syria. Dempsey also explained the purpose of the cost-estimating exercise. “The decision over whether to introduce military force is a political one that our Nation entrusts to its civilian leaders,” the general wrote to the Chair of the Senate Armed Serves Committee. “I also understand that you deserve my best military advice on how military force could be used in order to decide whether it should be used.” (emphasis in original)
To train and assist the Syrian rebels would cost U.S. taxpayers $500 million, and the costs only increase from there. Gen. Dempsey estimated a no-fly zone will cost “$500 million initially, averaging as much as a billion dollars per month.” Establishing a buffer zone where opposition forces could organize and train would require a limited no-fly zone, which, when “coupled with U.S. ground forces would push the costs over one billion per month.”
A mission to control chemical weapons in Syria would involve “thousands of special operations forces and other ground forces…Costs could also average well over one billion dollars per month.”
Even if the U.S. limits the mission to missile strikes against Syrian targets, the costs would “be in the billions.”
But the real unknown is the costs that could accumulate if the civil war deepens, including possibly after Assad’s ouster. Dempsey didn’t attempt to estimate the costs to U.S. taxpayers if the U.S. military becomes involved in such circumstances. He did recommend, however, that “we must anticipate and be prepared for the unintended consequences of our actions,” and he warned that “we could inadvertently empower extremists or unleash the very chemical weapons we seek to control.”
Related Tags
S&P’s Dilemma: Rating your Regulator
In a court filing today, the rating agency Standard & Poor’s (S&P) claims that the federal case against them is motivated by retaliation for its 2011 decision to strip the United States of its “AAA” credit rating.
It might be easy to dismiss this claim, but they aren’t the only ones in this situation. Before S&P’s U.S. downgrade, the smaller firm Egan-Jones, which relies on a subscriber model also downgraded the United States. Not long after, Egan-Jones was investigated by the SEC and ultimately barred for a time from rating U.S. debt. Let’s remember that Egan-Jones was ahead of the curve in spotting both the subprime bubble and the failures of WorldCom and Enron.
If you didn’t downgrade the United States, what happened? Basically nothing. We see what starts to look like a pattern here: downgrade the United States and expect some abuse. Don’t and you will be largely left alone. And as the recent IRS treatment of Tea Party groups has shown: this administration isn’t above targeting its enemies.
There are, as expected, several twisted ironies to the case. First, the Department of Justice is claiming to act on behalf of banks that suffered losses from holding rated securities. But who was it that imbedded ratings into the bank regulatory process? The bank regulators. If the DOJ wants to punish someone for bank losses on rated securities it should start with the Basel Committee. And then there’s the DOJ itself, which uses a flawed theory of disparate impact to pressure banks to make bad loans in the first place. The DOJ doesn’t have to go far to find the guilty: just try looking in a mirror.
The solution here is ultimately to get the federal government out of regulating the rating agencies. Our entire financial system is built on sovereign debt. The crisis in Europe shows what happens when you get the treatment of sovereign debt wrong (for a good summary of sovereign risk in bank regulation, see this BIS speech). The conflicts of interest between raters and regulators are ultimately a far greater threat to our system than any conflict between corporate issuers and raters.
Re: Did Global Warming Reduce the Impacts of Sandy?
And people thought I was being impertinent when I wondered in these pages whether or not global warming actually reduced the impacts of Superstorm Sandy.
Now comes this abstract from a paper by Elizabeth Barnes and colleagues just published in the Proceedings of the National Academy of Sciences:
Superstorm Sandy ravaged the eastern seaboard of the United States, costing a great number of lives and billions of dollars in damage. Whether events like Sandy will become more frequent as anthropogenic greenhouse gases continue to increase remains an open and complex question. Here we consider whether the persistent large-scale atmospheric patterns that steered Sandy onto the coast will become more frequent in the coming decades. Using the Coupled Model Intercomparison Project, phase 5 multimodel ensemble, we demonstrate that climate models consistently project a decrease in the frequency and persistence of the westward flow that led to Sandy’s unprecedented track, implying that future atmospheric conditions are less likely than at present to propel storms westward into the coast.
Just because global warming enthusiasts are quick to link all weather disasters to climate changes from human greenhouse gas emissions, doesn’t mean they really are. In fact, just the opposite may be the case—global warming may be acting to avert some weather disasters. I know, I know, I am being impertinent again.