Question of the Week: What’s the Right Point on the Laffer Curve?
Daniel J. Mitchell
Back in 2010, I wrote a post entitled “What’s the Ideal Point on the Laffer Curve?”
Except I didn’t answer my own question. I simply pointed out that revenue maximization was not the ideal outcome.
I explained that policy makers instead should seek to maximize prosperity, and that this implied a much lower tax rate.
But what is that tax rate, several people have inquired?
The simple answer is that the tax rate should be set to finance the legitimate functions of government.
But that leads to an obvious follow-up question. What are those legitimate functions?
According to my anarcho-capitalist friends, there’s no need for any public sector. Even national defense and courts can be shifted to the private sector.
In that case, the “right” tax rate obviously is zero.
But what if you’re a squishy, middle-of-the-road moderate like me, and you’re willing to go along with the limited central government envisioned by America’s Founding Fathers?
That system operated very well for about 150 years and the federal government consumed, on average, only about 3 percent of economic output. And even if you include state and local governments, overall government spending was still less than 10 percent of GDP.
Moreover, for much of that time, America prospered with no income tax.
But this doesn’t mean there was no tax burden. There were federal excise taxes and import taxes, so if the horizontal axis of the Laffer Curve measured “Taxes as a Share of GDP,” then you would be above zero.
Or you could envision a world where those taxes were eliminated and replaced by a flat tax or national sales tax with a very low rate. Perhaps about 5 percent.
So I’m going to pick that number as my “ideal” tax rate, even though I know that 5 percent is just a rough guess.
For more information about the growth-maximizing size of government, watch this video on the Rahn Curve.
There are two key things to understand about my discussion of the Rahn Curve.
First, I assume in the video that the private sector can’t provide core public goods, so the discussion beginning about 0:33 will irk the anarcho-capitalists. I realize I’m making a blunt assumption, but I try to keep my videos from getting too long and I didn’t want to distract people by getting into issues such as whether things like national defense can be privatized.
Second, you’ll notice around 3:20 of the video that I explain why I think the academic research overstates the growth-maximizing size of government. Practically speaking, this seems irrelevant since the burden of government spending in almost all nations is well above 20 percent-25 percent of GDP.
But I hold out hope that we’ll be able to reform entitlements and take other steps to reduce the size and scope of government. And if that means total government spending drops to 20 percent-25 percent of GDP, I don’t want that to be the stopping point.
At the very least, we should shrink the size of the state back to 10 percent of economic output.
And if we ever get that low, then we can have a fun discussion with the anarcho-capitalists on what else we can privatize.
P.S. If a nation obeys Mitchell’s Golden Rule for a long enough period of time, government spending as a share of GDP asymptotically will approach zero. So perhaps there comes a time where my rule can be relaxed and replaced with something akin to the Swiss debt brake, which allows for the possibility of government growing at the same rate as GDP.
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This Week at Libertarianism.org
Aaron Ross Powell
It’s been a busy week over at Libertarianism.org, Cato’s website exploring the theory and history of liberty. George H. Smith published a new essay in his Excursions series. In this third part of an ongoing look at the history of political philosophy, Smith examines early thinking on political obligation, and how the problem of allegiance was the major concern of John Locke.
When philosophers discuss political obligation they sometimes ignore the crucial distinction between political obligation and political allegiance, despite the fact that many early political debates focused on the latter issue. Political obligation in some form was taken for granted, but this did not answer the crucial question: What makes a government legitimate in the first place?
We also released two new videos. In the first, Walter Williams, speaking at a 1984 Libertarian International conference, explains how the state’s occupational licensing restrictions and other discriminatory laws often prevent minorities from finding gainful employment.
Our second video is a 1986 lecture by economist Fred McChesney. McChesney discusses how private ownership incentivizes productivity in everything from transportation systems to fire departments to oyster beds. Public ownership, on the other hand, incentivizes waste, overuse of natural resources, and higher costs.
Free Thoughts, Libertarianism.org’s blog, had an active week as well. Philosopher Matt Zwolinski kicked things off on Monday with a post on “moralized freedom.”
For if one holds the moralized conception of liberty, then liberty is defined not as freedom from interference per se but merely as freedom from interference with what one has a right to do. If one then says that we have the right to self-ownership, and private property, etc., because those rights protect liberty, then one has argued oneself right into a circle.
As he’s been doing for the last few weeks, economist David D. Friedman pushed back against Zwolinski’s arguments about freedom and private property. In “Is All Freedom Equal?” Friedman accuses Zwolinski of “blur[ring] together the kind of property which does raise problems for libertarians, property in land, which is an uncreated resource, with the kind of property which does not raise such problems, property created by human action.”
The debate didn’t end there. Zwolinski responded a day later with a long post, “Conceptual Claims Aren’t Moral Claims: Why Not All Freedom Matters Equally.” In it, he clarified many of his prior arguments, as well as addressed the broader problem of precision in moral philosophy.
It would be nice if morality were easier. It would be nice if we had a formula that could tell us exactly when and how much each of these considerations matters, and to what conclusion they lead in any particular case. But as far as I can tell, we don’t. And so morality, like painting or architecture or any other skill of reasonable complexity, remains as Aristotle claimed it to be, a domain in which rules and formulas inevitably fall short, and in which ultimately there is no substitute for the experienced judgment of practical wisdom.
Finally, I published the second in my series of posts on the political thought of Robert Nozick. In the first, I gave an overview of Nozick’s theory of natural rights and explained what they say about the role of the state. In this week’s post, I moved on to his debate with libertarian anarchists, specifically his story of how a minimal state can—and, he claims, morally must—rise out of an initially anarchist society, and might do so without violating anyone’s rights.
We’re still living in anarchy, however. None of those agencies can compel people to accept and pay for its services and so the world still contains many “independents,” as Nozick calls them. These independents—either individuals or smaller, non-affiliated agencies—present a problem for the dominant protection agency. In the mind of that agency and its clients, independents take justice into their own hands. The dominant protection agency’s job is to protect the rights of its own clients, so it understandably gets concerned when an independent seeks to extract restitution from one of those clients. Not knowing for sure if the client is guilty, the dominant protection agency is obligated to prevent punishment until guilt is assured. And the only way for the dominant protection agency to be sure (or sure enough) of its client’s guilt is to subject that client to its own procedures.
Next week, we’ll have even more new essays, videos, and blog posts at Libertarianism.org. If you’d like to keep on top of it all, you can follows us on Facebook and Twitter, or sign up to get updates by email.
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International News • The Week That Changed Everything I Thought I Knew About Afgh
The Week That Changed Everything I Thought I Knew About Afghanistan
http://www.businessinsider.com/photos-l … an-2012-12
Geoffrey Ingersoll|Dec. 5, 2012, 12:15 PM|546,871|31
G. Ingersoll
People told me I was crazy for doing it.
I hadn’t even opened the package containing my shiny new NYU Master’s in Journalism and I was already heading to Afghanistan. It had been a couple of years since I ended my service as a U.S. Marines combat correspondent, and I wanted to get back to the war.
Traveling as a civilian, I paid my own way and had hardly any support, but I also had more freedom to travel than when I was in uniform.
Skip to the photos >
I took the following photos during the time between my arrival in Kabul and my official embed date (until which, no military unit will give you refuge, regardless of your citizenship). For these few days I played tourist; found a nice little guest house, contracted a driver and an interpreter, and headed on daily road trips around the area.
What I saw was a country hardened by decades of war and poverty — but also filled with sympathetic people whom you’ll rarely see in Western media. People who, in the midst of chaotic street life, insisted I take my shoes off and get comfortable, drink tea and eat candy prior to doing business. Kids living in squalor who still dreamed of becoming doctors and engineers — and were thrilled to pose for pictures and beat me in impromptu soccer matches.
I’ve already published an essay and put up photo spreads of the trip, but I saved these shots of Afghan life for last. Away from the war is where things get complicated. There is no moral and no ending, happy or otherwise. There are a lot of problems, and they’re only getting worse.
Read more: http://www.businessinsider.com/photos-l … z2EYLhdf2r
Click here to see the pictures >
http://www.businessinsider.com/photos-l … d-driver-1
Statistics: Posted by DIGGER DAN — Sun Dec 09, 2012 5:29 am
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American • CIA’s Petraeus, DNI Clapper to testify on Benghazi next week
CIA’s Petraeus, DNI Clapper to testify on Benghazi next week
By Olivier Knox, Yahoo! News White House Correspondent
http://news.yahoo.com/blogs/ticket/cia- … ction.html
A Libyan government militiaman guarding the entrance of the U.S. Consulate in Benghazi fixes a note written by …More than two months after the Sept. 11 attack on the American compound in Benghazi, Libya, key congressional committees will hear next week from CIA Director David Petraeus and Director of National Intelligence James Clapper about the assault, according to sources.
The Intelligence Committees of the Senate and House of Representatives will get testimony from those officials and others at a pair of hearings next Thursday. Both sessions will take place behind closed doors.
The Senate Intelligence Committee will also hear from FBI Deputy Director Sean Joyce, an expert on the agency’s counterterrorism and counterintelligence efforts. The FBI has been investigating the attack. Also testifying will be Undersecretary of State for Management Patrick Kennedy, who oversees all department personnel, facilities and operations, and National Counterterrorism Center Director Matt Olsen.
The House Intelligence Committee will also hear from Olsen.
Lawmakers and staff have been receiving briefings from the administration since the attack occurred.Republicans have sharply criticized the Obama administration’s response to the attack, which claimed the lives of U.S. Ambassador Chris Stevens and three other Americans. Republicans have suggested that the State Department ignored reasonable requests for tighter security at the compound in the face of attacks and threats on Western facilities in the eastern Libyan city. And they have accused the administration of trying to cover up the nature of the attack by initially pinning blame on Muslim anger at an Internet video ridiculing Islam, rather than acknowledge that the strike was the work of terrorists.
The White House counters that Obama linked the violence in Libya with the Sept. 11, 2001, attacks as "acts of terror" starting Sept. 12. (Intelligence officials, though, sometimes draw a distinction: Grocers with guns can carry out an "act of terror," they say; "terrorism" is the work of extremist groups.) Aides have denied any wrongdoing and denounced what they describe as Republicans "politicizing" the deaths of Americans overseas. White House officials say the public description of the assault changed as the intelligence changed. But intelligence officials branded the attack terrorism on "Day One."
Some Republicans complained about scheduling the Senate hearing after the November election, which saw President Barack Obama swept to a second term. The House of Representatives Intelligence Committee is run by Republicans.
Anonymous officials at the departments of State and Defense as well as inside the intelligence community have been defending their agencies’ roles through the media.
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Statistics: Posted by DIGGER DAN — Sun Nov 11, 2012 6:44 am
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The Fourth Amendment in the Supreme Court This Week
By Jim Harper
Prior to the development of trade and commerce, movable property was “not esteemed of so high a nature, nor paid so much regard to by the law,” Blackstone tells us in his commentaries on the laws of England. Such property in transit was routinely confiscated by authorities or tariffed at exorbitant rates.
When commercial relations expanded, the quantity and value of personal property increased, and the law “learned to conceive different ideas of it.” Legal protection for movable property increased.
In parallel to the growth of commerce in movables centuries ago, commerce in information is on the rise today. It may be time to “conceive different ideas of it” as well—different ideas that accord information similar protection. This is what a group of amici have encouraged the Supreme Court to do in a brief on an important privacy case being argued this week.
In Clapper v. Amnesty International, the Gun Owners Foundation, Gun Owners of America, Inc., the U.S. Justice Foundation, the Downsize D.C. Foundation, DownsizeDC.org, and the Conservative Legal Defense and Education Fund have argued that the Court should recognize a property interest in confidential communications. Doing so would more clearly establish the standing of the respondents in this case to challenge the global wiretapping program Congress established in the FISA Amendments Act of 2008.
William J. Olson, lead counsel on the brief, articulated the issues well in an email distributing it:
Our amicus brief in the Clapper case extrapolates from the court’s holding in Jones and identifies the property interests at stake in this case as confidential communications that are critical to the practice of law and of the enterprise of journalism. Using a property analysis, the citizens in Clapper have a protectable property interest in their electronic communications as they do in their written communications. Thus, even though plaintiffs are not “targeted” by the Government, the Government’s contention that their search and seizure of plaintiffs’ communications is only “incidental” is unavailing.
Jones v. United States, of course, is the case decided in January, in which government agents tracked a suspect’s car for four weeks using a GPS device without a valid warrant. The Supreme Court found unanimously that this violated the Fourth Amendment. My article in the most recent Cato Supreme Court Review (2011-12) analyzes the case, and you can get a taste of that analysis in the most recent Cato Policy Report (September/October 2012).
I also discussed the Fourth Amendment status of communications in the Cato Institute’s brief in Florida v. Jardines, which is also being argued in the Supreme Court this week. The Court found Fourth Amendment protection for postal mail in an 1877 case, but stumbled when faced with the next iteration of communications technology.
In the year this Court decided Ex Parte Jackson, both Western Union and the Bell Company began establishing voice telephone services. Gerald W. Brock, The Second Information Revolution 28 (Harvard University Press, 2003). Now, instead of written messages in the post, representations of the human voice itself began moving across distance, at light speed, in a way few people understood. This is the technology this Court confronted in Olmstead v. United States, 277 U.S. 438 (1928).
The Court handled this technological development poorly. Chief Justice William Taft fixed woodenly on the material things listed in the Fourth Amendment’s search and seizure clause. Wiretapping had not affected any of the defendants’ tangible possessions, he found, so it had not affected their Fourth Amendment rights. Olmstead, 277 U.S. at 464. In dissent Justice Butler noted how “contracts between telephone companies and users contemplate the private use” of telephone facilities. “The communications belong to the parties between whom they pass,” he said. Olmstead, 277 U.S. at 487 (Butler, J., dissenting). Cf. Ex Parte Jackson, 96 U.S. 727 (1877) (“Letters and sealed packages … are as fully guarded from examination and inspection … as if they were retained by the parties forwarding them in their own domiciles.”).
Florida v. Jardines is not a communications case. The issue is whether the sniff of a trained narcotics-detection dog at the front door of a house is a Fourth Amendment search requiring probable cause. Cato’s brief invites the Court to dispense with the unworkable “reasonable expectation of privacy” test, using the plain meaning of “search” instead.
Black’s law dictionary defines “search” as “looking for or seeking out that which is otherwise concealed from view.” Smells that only trained dogs can detect are indeed otherwise concealed from humans.
Familiar though ordinary pet dogs are, a trained dog is a chromatograph. The Court should follow the Fourth Amendment’s language and precedents like Kyllo v. United States to find that a drug-dog’s sniff is a search.
A companion to Jardines, Florida v. Harris, is being argued the same day. That case will examine the sufficiency of drug-dogs as evidence of wrongdoing, an issue that has not received careful examination in the past.
So it’s a big week for the Fourth Amendment in the Supreme Court. Stay tuned for developments.
The Fourth Amendment in the Supreme Court This Week is a post from Cato @ Liberty – Cato Institute Blog
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Free Speech Week, Day 5
By Tim Lynch
Today, we conclude Free Speech Week with Cato articles and blog posts about a variety of current events:
- “‘Teachable Moment’ Missed Lesson on Free Speech,” by Nat Hentoff. This article appeared in Metro West Daily News on August 6, 2009. Hentoff comments on the missed lesson on free speech in regard to the media frenzy over Sgt. James Crowley’s arrest of Harvard professor Henry Louis Gates Jr.
- Cato Daily Podcast: “Chick-Fil-A Fracas,” July 31, 2012. “Is the speech of a corporate CEO grounds for punishing the company with delayed or denied permits they otherwise would’ve gotten? Cato Institute’s Senior Fellow Tom Palmer says no; he argues that the politicians threatening Chic-Fil-A should retract what they’ve said and apologize for threatening the company.”
- “False Statements, Free Speech, and Sniper Fire,” posted by Tim Lynch, March 29, 2011.
- “When ‘Free Speech’ as a Concept Vanishes,” posted by Julian Sanchez, September 19, 2012.
- Cato Institute senior fellow Nat Hentoff has a few thoughts on disclosure and the jurisprudence of Clarence Thomas.
- “Knox v. SEIU: An Important Free Speech Victory,” posted by Trevor Burrus June 21, 2012.
- “ObamaCare’s Threat to Free Speech,” posted by Michael Cannon, September 13, 2010.
Free Speech Week, Day 5 is a post from Cato @ Liberty – Cato Institute Blog
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Free Speech Week, Day 4
By Tim Lynch
The New York Times has a column today about free speech on campus. Here is an excerpt:
Since the 1980s, in part because of “political correctness” concerns about racially insensitive speech and sexual harassment, and in part because of the dramatic expansion in the ranks of nonfaculty campus administrators, colleges have enacted stringent speech codes. These codes are sometimes well intended but, outside of the ivory tower, would violate the constitutional guarantee of freedom of speech. From protests and rallies to displays of posters and flags, students have been severely constrained in their ability to demonstrate their beliefs. The speech codes are at times intended to enforce civility, but they often backfire, suppressing free expression instead of allowing for open debate of controversial issues.
The author, Greg Lukianoff, is president of the Foundation for Individual Rights in Education (FIRE).
Since this is Free Speech Week, let me note that two Cato scholars, Nat Hentoff and Harvey Silverglate are also affiliated with FIRE because of their strong commitment to free speech on campus.
Free Speech Week, Day 4 is a post from Cato @ Liberty – Cato Institute Blog
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Free Speech Week, Day 2
By Tim Lynch
As I mentioned yesterday, this is Free Speech Week.
Today we are highlighting Cato’s work in the area of campaign finance reform.
- “Let’s Not Give Politicians the Power to Decide What We Can Say about Them,” by Douglas Johnson and Mike Beard
- John Samples offers thoughts on mandated disclosure and freedom of speech in his Cato Unbound article, “Speech for Me, But not for Thee,” November 18th, 2010
- “Campaign Finance Proposals That Deter Speech Are Bad,” Posted by Ilya Shapiro, July 25, 2012
- “Citizens United Redux: The First Amendment Vindicated?,” Policy Forum, Tuesday, September 8, 2009
Free Speech Week, Day 2 is a post from Cato @ Liberty – Cato Institute Blog
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Free Speech Week, Day 3
By Tim Lynch
Today, check out Cato work related to the defense of electronic speech:
- “Regulation of Electronic Speech and Commerce,” Chapter 30, Cato Handbook for Policymakers, 7th Edition (2009).
- “The Internet Is Not Government’s to Regulate” by Jim Harper–This article appeared in Orange County Register on January 19, 2012.
- The Cato Institute, TechFreedom, and the Competitive Enterprise Institute’s Capitol Hill Briefing: Unintended Consequences of the Rogue Website Crackdown: SOPA, PIPA and OPEN Legislation
- Included a panel of leading technology policy experts who will discuss the implications of proposed “rogue website” legislation for entrepreneurship, free speech, Internet governance, and holders of copyrights and trademarks.
- Julian Sanchez comments on how SOPA, Protect IP acts which could seriously censor or damage the internet and free speech.
- “We’re Not Censoring YOU—Just Your Computer!,” Posted by Julian Sanchez, June 20, 2012
Free Speech Week, Day 3 is a post from Cato @ Liberty – Cato Institute Blog
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