McCain Flip-flops on Taxes. So Far So Good

Good. John McCain has voted to extend the president’s key investment tax cuts, the 15 percent rate on dividends and long-term capital gains. So he’s started a veer back towards the Republican base, back from the comical position he took in 2000 when he was campaigning for the Republican presidential nomination by running against the Republican base.

Will it be enough? Has he really converted and seen the light on supply-side economics? Donald Lambro assembles the quotes of Republican activists who aren’t too impressed.

"It's a big flip-flop, but I'm happy he's flopped," said Grover Norquist, president of Americans for Tax Reform.

"It looks like a further morphing of McCain into George W. Bush. He's mailing to his list of campaign contributors, and now he's supporting the tax cuts," said economist Larry Hunter, a longtime Republican tax-cut strategist.

The trouble with Senator John McCain is not just his opposition to rax cuts, or his tone-deaf run for the presidency in 2000. The trouble is everything else as well.

Let us forgive his for his role in the Keating Five scandal. Bill Muller’s report in the Arizona Republic suggests that McCain was pulled into intervening with federal regulators to help S&L crook Charles Keating against his will, and when he had only been a United States Senator for three months.

The problem with McCain seems to be a much bigger question about his judgment. How could a Republican push through the monstrous McCain-Finegold campaign finance bill, an incumbent protection act that clearly narrows the public space afforded by the First Amendment? What kind of a First Amendment is left when you have to check with your lawyer before posting on the Internet?

How could McCain spend most of the Bush administration clearly working to embarrass the president?

And, returning to the 2000 election, how can McCain not understand about the fundamental cleavage in the electorate between the Republicans, the party of religion, marriage, work, and babies, and the Democrats, the party of secularism, sex, creativity, and fetuses?

That is what is worrying about McCain—a vast echoing tone-deafness that calls into question his fundamental judgement.

That is why, for this Republican, Rudy Giuliani, for all his New York social liberalism, rings true while John McCain rings false.

Babies, Houses, and Babies

On Saturday I went to a fringe theater on the last day of the run of DOB, a play by John Kaufmann about birthing. Yes, he went down to California just as his sister was having a baby, and the whole thing turned into a play.

Most of the play takes place in the hospital operating room during his sister’s labor.

The play was a delight, and a real shock.

Here were your young starving actors and your avant-garde types dressed in artistical black and they were putting on a light-hearted, nicely crafted play about having babies. Whatever will they come up with next?

This matter of babies is important, particularly as the voters of the United States are dividing up between the party of babies and the party of, er, fetuses.

In Britain, columnist Minette Marrin is also thinking about babies, or rather the British baby problem.

[T]here is a shortage of babies in respectable, middle-class, middle-income families. The rich and the poor are having plenty of babies. In upper-middle-class circles it is now a status symbol to have four or more children. Among the poor it is perfectly possible to have babies with or without a man or a job; the state will pay. Although it won’t pay much, it will offer as good a life as any other that seems available.


The women who are not having children are what would have been called in the 19th century the deserving mothers; they are hard working, competent and responsible but have come to recognise that they cannot, as feminism once promised, have it all. They either need to work or want to work, or both, but for those on middling incomes it is not possible to have lots of babies as well. It is too expensive and too risky — expensive in childcare and risky in job prospects.

And what with modern divorce, a woman can’t get too far away from the job market. The problem is that houses are so expensive in Britain that it is hard for a middle-class family to afford both a house and a baby.

In the United States, an interesting trend is developing. Although divorce is dropping a little, it is much lower than normal among college-educated women. Their divorce rate is 25 percent. That makes it much easier to afford children. There’s nothing like divorce to take that last child out of a woman’s life.

Is there something happening here, fellow trend-spotters? Should we be advising up-and-coming young men that babies is the coming thing?

By the way, a word to Minette Marrin. The best thing for you Brits to do about the baby problem is to forget “what everyone knows:” that there is no space left in Britain to build houses. Anyone who has sat in a Boeing 747 early in the morning looking blearily down at England’s green and pleasant land as the airplane circled in a holding pattern waiting to land at Heathrow will know that Britain has plenty of open space for houses.

Those new houses would get the price down, and then those middle-class women could fill the houses with babies. Beautiful bouncing babies.

Supply Side Economics Drives Brazilians into Formal Sector

A big problem in emerging economies is the informal employment sector, the people camping out in the city working as peddlers and running illegal roadside stalls that don’t pay taxes. In Brazil, according to William W. Lewis in The Power of Productivity, the huge informal sector has severely damaged the economy.

To understand how bad things have been in Brazil, get this. Taxes have been so high on the formal sector that large, efficient supermarkets couldn’t compete on price with informal food vendors and corner stores.

In the 1990s formal employment actually declined by almost 15 percent.

But there is good news, according to the Wall Street Journal’s Mary Anastasia O’Grady. In recent years the Brazilian government has

significantly reduced federal payroll taxes and the overall tax burden for small and medium sized companies and simplified the tax system.

The result? Formal employment in Brazil is up 28 percent in the last seven years, and up 13 percent in the last two years alone.

This is supply-side economics at work and it is huge. It is pure economic hygiene, cleaning up the business environment and tax system so that ordinary people can come into the formal system and thrive.

The costs of doing business in the informal sector are pretty significant. You don’t have access to credit, you don’t have the protection of the legal system, and you are probably paying protection money to criminal gangs and bribes to government officials to look the other way.

So you have to screw up pretty bad to get yourself an informal sector like Brazil’s that amounts to about 50 percent of the labor force.

But when the economy is set up so that the costs of doing business in the formal sector are less than the benefits of doing so, then everyone wins.

And that is what is happening in Brazil.

Is This Iraq's Tipping Point?

Let us assume, for a moment, that the bombing of the Shiite shrine in Samarra was the work of terrorist leader Zarqawi. Let us assume that the purpose of the attack was to ignite a general civil/religious war between Sunni and Shiite.

That is the US line, as reported by The Washington Post.

The U.S. ambassador to Iraq, Zalmay Khalizad, speaking at a news conference held on the telephone because of the driving ban, said it was "a moment of danger, but it is also a moment of opportunity" in Iraq. "In crises such as the one caused by this attack, there is an opportunity to bring people together and defeat goals of those who want to promote civil war in this country."

We are at a crucial tipping point. For the question is, does the government recently elected have the “soft” power, and do the security forces trained up by the United States have the “hard” power to hold the nascent Iraqi polity, the fragile modern government of laws, together. Or will they fail and surrender Iraq from civilized government (using the word in its strict sense of citified)
to the pre-civilized rule of local warlords and their militias.

You can complain all you like about the mistakes of the Bush administration, but that is the bottom line. The Bush policy has always been to erect in Iraq some sort of political structure based on the rule of law, which we know is the way, the good way, the only way yet known to mankind, that people get to live and prosper in the city.

Naturally, into the power vacuum created by the deposition of Saddam Hussein stepped the forces of pre-civilized culture, the culture we experienced in Europe as feudalism, the bygone era in which the barons of the land were more powerful than the merchant princes of the city.

So our policy was to build up a new political and power structure that would have a chance of introducing civilized governance into Iraq.

As some point the forces of pre-civilized power would make their supreme effort to defeat the forces of civilized power.

We will doubtless find out, in the next few days, whether the new power structure will hold. Let us pray, for the sake of the Iraqi people, that it does.

Happiness is a Serious Business

Conservative columnist George Will recently resported on the latest Pew Research Center study on happiness. But he failed to give us a link to the report Are We Happy Yet? So I just did.

Yes, the main finding of the report is that Republicans are happier than Democrats, and have been every year without exception since 1972 when Pew started the report. You can imagine that on KTTH 770 The Truth here in Seattle, they were chuckling this morning about what misery-guts their liberal friends were.

One listener called in about the neighbor woman who had given him the bird every morning for about two months before the 2004 election as she passed his window. Then the day came when she couldn’t get her car started, and he went out and offered to help. She couldn’t bear to look at him, or even thank him, as he hauled his car alongside hers and gave her a jump start.

The main finding of the Pew report is that wealthy people are more happy, conservatives are more happy, married people are more happy, and people who go to church frequently are more happy.

So it would make sense that Republicans—in the party of conservatism, marriage, and religion—would be happier than Democrats—from the party of liberalism, singlehood, and secularism. The happiest years for Republicans were 1974, 1980, 1990, and 2004. The happiest years for Democrats were 1974, 1977, 1989, and 2004.

Good to know that things weren’t so bad after all for Democrats in 2004.

Dueling Marriage Quizzes

In Sunday’s The New York Times non-traditional relationships advocate Stephanie Coontz ran a pop quiz on relationships that, not surprisingly for the author of The Way We Never Were, repeated the argument of her book that the 50’s ideal of Father Knows Best has never been the norm in human families. And anyway, “Born-again Christians are just as likely to divorce as more secular Americans.”

So National Review Online rolled out conservative marriage advocate Maggie Gallagher with her pop quiz. Not surprisingly for the author of The Case for Marriage, her pop quiz shows that traditional marriage of the kind celebrated in Father Knows Best and Leave It to Beaver is best.

The statement “Divorce has always been a disaster for women and children” Coontz says is false because while divorce does cause a “sharp drop in
the economic standard of living for women and children” it also reduces women’s suicide rates and only marginally damages children’s emotional wellbeing by 55 percent to 45 percent.

On the question “Divorce impoverishes women and children” Gallagher writes:

True. The majority of children raised outside of marriage experience poverty. As many as one-third of divorced women slip below the poverty level after divorce.

Take your pick. And read the whole thing.

Harriet Miers Goes to Sea

Some months ago Peggy Noonan warned that, at this stage of an administration, the White House staff are suffering from extreme exhaustion. That’s why they produce boners like the Harriet Miers nomination and the east coast port deal. So this morning we get the report from the Associated Press that the president didn’t even know about the decision by an administration committee to allow operation of six US east coast ports by Dubai Ports, a state-owned company.

Well, at least the Bush haters are happy about that.

OK. Let’s admit that there could be a security risk if Middle East owned companies own US ports. They might permit someone to smuggle in a nuclear device in a container.

But the port deal merely shows the natural vulnerability of an open society to a sneak attack. A modern democratic capitalist economy runs on trust, a network of trust. That is what makes it different from the tribal, mistrustful world of Islam.

But the world of trust is not as vulnerable as it might seem. It is worth billions, trillions, to be included in the circle of trust. That is why people bring their money to the United States to invest.

Centuries ago, at the battle of Lepanto in 1571, the Holy League fleet defeated the Ottoman Turks. As the victors looted the galleys of the defeated Turks they were shocked to find fortunes in precious metals and jewels aboard the ships of the Ottoman admirals. These men had to keep their fortunes close by because their monies could be seized at any time by the Sultan. But in the trust economy of the west, rich merchants could already enjoy security of property from expropriation. They could keep their money in a bank.

Things have not really changed that much in the last 400 years. That is why the West is a lot more powerful than we think. And that is why, even though it is sensible to protect the trust relationships in our trading system, the folks from Dubai need us more than we need them.