Monday, June 26, 2006

Grover's trover

Grover Norquist appears to be - lying? defying credulity? forgetful? you be the judge - in his latest attempt to explain his up-to-the-elbows entanglement in the sleazy Abramoff-Indian tribes scam.

What a surprise.

Tuesday, June 20, 2006

The "war on terror"

I'm including fewer Bush items when I have nothing distinctive to add, but I couldn't resist this bit from Matt Yglesias:

According to Bart Gellman's review of Ron Suskind's new book the following things are true:

** Al-Qaedist Abu Zubaydah was captured in March 2002.

** Zubaydah's captors discovered he was mentally ill and charged with minor logistical matters, such as arranging travel for wives and children.

** The President was informed of that judgment by the CIA.

** Two weeks later, the President described Zubaydah as "one of the top operatives plotting and planning death and destruction on the United States."

** Later, Bush told George Tenet, "I said he was important. You're not going to let me lose face on this, are you?" and asked Tenet if "some of these harsh methods really work?"

** The methods -- torture -- were applied.

** Then, according to Gellman, "Under that duress, he began to speak of plots of every variety -- against shopping malls, banks, supermarkets, water systems, nuclear plants, apartment buildings, the Brooklyn Bridge, the Statue of Liberty."

** At which point, according to Suskind, "thousands of uniformed men and women raced in a panic to each . . . target."

Line item veto

House and Senate Republicans are advancing legislation that would establish some sort of quasi-line item veto, empowering the President to identify targeted tax and spending provisions and propose their rescission. Congress would vote yes or no on the package as a whole.

The motivation appears to be providing a fig leaf for the Republicans because they are rejecting Democratic calls to restore the pay-as-you-go rules that, for a while, were actually fairly effective. (They ceased being so when Congress started playing ridiculous games with them, such as calling the need to pay for the 2000 census an unanticipated "emergency" that was outside of the rules.) Pay as you go they denounce as a secret plot to prevent extension of the tax cuts. Well, if you want to add trillions to the fiscal gap, it figures that a rule impeding fiscal irresponsibility would get in the way.

It's unclear that the line item veto being proposed makes any difference. The up or down vote on the whole package means that Congress can easily reject it if the stench of bad publicity isn't too strong. Indeed, one obvious game to play is to have Bush posture by pretending to strike down a bunch of items, knowing that Congress will restore them anyway. Also, while the Senate bill would have the Joint Committee on Taxation decide which items are "targeted tax benefits" subject to the rules, based on an objective definition, the House bill would include only the items that were identified by the House Ways & Means and Senate Finance chairs, making it entirely a silly exercise as they could exclude whatever they liked. Even if they tried to include everything that meets the definition (and why should they if they are cutting deals), the definition is still absurdly narrow. "Targeted tax benefits" are those with only one beneficiary. So far as I can tell from my source (the June 19 Tax Notes), the Senate bill may have the same absurdly narrow definition of a targeted tax benefit.

Even a more genuine line item veto has ambiguous effects on deficits and fiscal gaps. What it basically does to the legislative process is shift a bit more power to the President. So, if the President wants to use it to attack earmarks and targeted tax rules, it gives him an extra tool. But if the President wants to use it as a bludgeon, to trade for votes in favor of his own tax cut and spending proposals, he can do that as well. Gee, I wonder which way the current President would be more likely to use it.

The House bill has a provision expressing the sense of Congress that the President should not use his rescission authority as a bargaining tool to secure votes on other legislation. Yeah, right.

Monday, June 19, 2006

Public service message

I thought I had seen a lot of different scams from incoming e-mail, but here is apparently a new one.

Last Friday I got a message from "Internal Revenue Service!" with the enticing subject line: "refund of $63.80."

The message, ostensibly from, was as follows:

[IRS Logo]

"After the last annual calculations of your fiscal activity we have determined that you are eligible to receive a tax refund of $63.80. Please submit the tax refund request and allow us 6-9 days in order to process it.

A refund can be delayed for a variety of reasons. For example submitting invalid records or applying after the deadline.

To access the form for your tax refund, please click here.

Internal Revenue Service."

Hoping that I wouldn't pay the price for my curiosity, I clicked on the link, and saw that it asked me for full credit card information, which I am not going to provide.

This one is better than the usual Nigerian scam about the million dollars a stranger wants to split with you. Indeed, it's better than the phantom messages, ostensibly from Chase Manhattan or eBay, that I still occasionally get.

Has anyone else out there gotten this one?

Thursday, June 08, 2006

Non-death of the non-death tax

By now, most interested readers may already know that efforts to have the Senate approve permanent repeal of the estate ax failed today. (I refuse to call it the "death tax" for two reasons: the renaming is Orwellian language manipulation, and it is less accurate than the old name. The tax really is levied on estates. No one owes the tax solely by reason of dying. For that matter, the gift tax, which has nothing to do with death, is part of the same instrument.)

Under current budgetary circumstances, repealing the estate tax would have been utterly insane. The U.S. fiscal gap makes such a move preposterously bad policy absent offsets to make the change at least revenue-neutral. I also would object to the repeal distributionally if one rules out compensating changes to replace the lost progressivity. And doing it while Medicaid is being cut for supposed deficit reduction reasons is obscenely hypocritical.

Nonetheless, in a sane political and budgetary environment the merits of keeping the estate tax would be a much closer call than many on the left believe. Suppose the fiscal system's overall progressivity would be about the same either way. This assumption could be reasonable, under the right circumstances, for several different reasons. There might be an express political trade-off at some point. The long-term political equilibrium might be such that less progressivity in one way means more in another. And simply as a guide to clear thinking, one should separate the question of how progressive the fiscal system should be from that of this particular instrument's merits.

Suppose we are thinking about efficiency, also known as reducing deadweight loss (i.e., instances where someone is made worse off and no one is made better off). The great virtue of the estate tax as an efficient device for accomplishing redistribution is that some bequests are accidental. People without strong bequest motives may die before they have fully used up their wealth. Since they are not thinking about a tax levied after they die, work and saving are not deterred by the estate tax to the extent that this is the true story.

The great vice of the estate tax, relative to other means of accomplishing comparable overall progressivity, is that deliberate bequests have positive externalities. Suppose you are choosing between blowing all your wealth before you die on conspicuous consumption or leaving it to your kids. The former means that the money is paid out once for market consumption. The latter involves your getting some consumption value out of making the bequest (since we are positing altruism or other warm feelings towards your kids), and then they get to use it in market consumption. So in effect consumption occurs twice rather than once. This point is often put moralistically, as in: Why should we favor the Malcolm Forbes types who throw huge parties before they die over those who scrupulously leave more to their kids. But it is a straight welfare economics point as well.

Anyway, this tradeoff makes the merits of the estate tax an interesting issue for tax policy debate. But in Washington, things go forward or not on a much cruder and more basic level.

Friday, June 02, 2006

Must reading

I don't know how to assess this, but no one who is intellectually honest can dismiss it out of hand. Luckily for all of the major media, this is no constraint on them.