Minor Thoughts from me to you

Red State updates an old MoveOn.org ad, questioning who will pay for the President's massive amount of deficit spending. Remember when the Democrats were against deficit spending? Boy do I miss those days.

Now, Social Security is projected to go into deficit as early as fiscal 2010. And the President's budget has increased the national debt by $6.5 trillion. That's pretty impressive for only four months of work. What will the debt look like by 2012?

I've read some good news on taxes today. At least, I think it's good news.

First, Senator Evan Bayh (D) wrote a Wall Street Journal op-ed critizing the omnibus spending bill that's currently working it's way through the Senate.

The Senate should reject this bill. If we do not, President Barack Obama should veto it.

The omnibus increases discretionary spending by 8% over last fiscal year's levels, dwarfing the rate of inflation across a broad swath of issues including agriculture, financial services, foreign relations, energy and water programs, and legislative branch operations. Such increases might be appropriate for a nation flush with cash or unconcerned with fiscal prudence, but America is neither.

Drafted last year, the bill did not pass due to Congress's long-standing budgetary dysfunction and the frustrating delays it yields in our appropriations work. Since then, economic and fiscal circumstances have changed dramatically, which is why the Senate should go back to the drawing board. The economic downturn requires new policies, not more of the same.

The solution going forward is to stop wasteful spending before it starts. Families and businesses are tightening their belts to make ends meet -- and Washington should too.

The omnibus debate is not merely a battle over last year's unfinished business, but the first indication of how we will shape our fiscal future. Spending should be held in check before taxes are raised, even on the wealthy. Most people are willing to do their duty by paying taxes, but they want to know that their money is going toward important priorities and won't be wasted.

Senator Bayh voted for the "stimulus" package, so I'm not sure how seriously to take these criticisms. Still, it is refreshing to see a Democrat criticizing a spending bill.

Secondly, Senators are starting to rebel over some of Obama's tax hikes.

The resistance from Mr. Obama's own party -- focusing on a single element of the president's tax plans -- could foreshadow broader troubles for the rest of his proposed tax increases.

Sen. Max Baucus (D., Mont.), the Senate's top tax writer as chairman of the Finance Committee, told Mr. Geithner he was especially concerned about paying for expanded health coverage with a deductions curb that "has nothing to do with health care." He added: "I'm wondering about the viability of that provision."

Charitable organizations are also worried. Indiana University's Center on Philanthropy said Wednesday that Mr. Obama's proposals to limit deductions and raise rates, if applied in 2006, would have reduced giving by nearly $4 billion, or 2.1%.

"I'd like to think that people give out of the goodness of their heart, but that tax deduction helps to loosen up the heartstrings," Nevada Democratic Rep. Shelley Berkley said Tuesday during a House Ways and Means Committee hearing.

And, let's give credit to Washington Senator Maria Cantwell (D). She makes a great point:

Another Democrat, Sen. Maria Cantwell of Washington, questioned why the administration wouldn't look for savings in the tax code through a comprehensive overhaul. "Why not look at a broader approach to tax policy, [rather] than coming in with this proposed change to marginal rates?" Ms. Cantwell said.

This is certainly an unusual post. When was the last time I praised two Democrat senators in one post? Maybe there is something to Obama's hope & change rhetoric after all.

Obama Delivers $3.6 Trillion Budget Blueprint - WSJ.com

The president blamed the nation's economic travails on the administration that preceded him and on a nation that lost its bearings. His budget plan projects a federal deficit of $1.75 trillion for 2009, or 12.3% of the gross domestic product, a level not seen since 1942 as the U.S. plunged into World War II.

"This crisis is neither the result of a normal turn of the business cycle nor an accident of history," the president states in an opening message of the 134-page document. "We arrived at this point as a result of an era of profound irresponsibility that engulfed both private and public institutions from some of our largest companies' executive suites to the seats of power in Washington, D.C."

By 2013, the deficit would drop to $533 billion but begin to climb from there again as the heart of the Baby Boom begins drawing Social Security and Medicare benefits.

Mr. Obama proposes large increases in education funding, including indexing Pell Grants for higher education to inflation and converting the popular scholarship to an automatic "entitlement" program. High-speed rail would gain a $1 billion-a-year grant program, part of a larger effort to boost infrastructure spending even beyond the funds in his $787 billion stimulus plan.

In one of the budget's most ambitious proposals, the president plans to cap the emissions of greenhouse gases, forcing polluters to purchase permits for emissions that would be slowly brought down to 14% below 2005 levels by 2020 and 83% below 2005 levels by 2050. The sale of those permits, beginning in 2012, would reap $646 billion through 2019. Of those revenues, $525.7 billion would be devoted to extending Mr. Obama's signature "Making Work Pay" $800 tax credit for working couples. Another $120 billion would go to clean energy technology.

Obama's 2% Illusion - WSJ.com

Even the most basic inspection of the IRS income tax statistics shows that raising taxes on the salaries, dividends and capital gains of those making more than $250,000 can't possibly raise enough revenue to fund Mr. Obama's new spending ambitions.

Consider the IRS data for 2006, the most recent year that such tax data are available and a good year for the economy and "the wealthiest 2%." Roughly 3.8 million filers had adjusted gross incomes above $200,000 in 2006. (That's about 7% of all returns; the data aren't broken down at the $250,000 point.) These people paid about $522 billion in income taxes, or roughly 62% of all federal individual income receipts. The richest 1% -- about 1.65 million filers making above $388,806 -- paid some $408 billion, or 39.9% of all income tax revenues, while earning about 22% of all reported U.S. income.

But let's not stop at a 42% top rate; as a thought experiment, let's go all the way. A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That's less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable "dime" of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.

As the journal points out, incomes are falling fast right now. Taking a bigger share of a smaller income isn't really going to give you any extra money.

The Obama Baseline - James C. Capretta - The Corner on National Review Online

Politicians like to say they are "cutting the budget." But budget cutting can only be understood in context. Compared to what?

In budget-speak, there is a "baseline" against which budget decisions are measured. Normally, the "baseline" assumes current law and policy. But if you want to look like you are cutting the budget without really doing so, the answer is to inflate the "baseline" so that the cut is measured against an artificially high target.

President Bill Clinton did exactly that in 1993. In 1990, President Bush 41 had negotiated hard caps on appropriations spending that lasted through 1995. The "baseline" Congress used in 1992 assumed these caps held because a breach would trigger across-the-board cuts. In the first year of his presidency, Clinton wanted to look like he was cutting one dollar in spending for every dollar of taxes he was increasing, even though he wasn't willing to take the heat for real cuts. The solution? He redefined the baseline to assume the caps were no longer operative, announced his support for keeping what was already the law of the land, and claimed a sizeable spending "cut" as his own.

Pres. Barack Obama may be about to do the same thing.

Hope, change, and transparency gives way to huge, bloated budgets and more of the same old Washington tricks.

Happy Thursday!

Democrats Affirm Support for Daschle

Senate Democrats rallied around Obama's Health nominee Tom Daschle, despite his failure to pay over $100,000 in taxes in a timely fashion.

And that, right there, is what's wrong with Washington. Last night, I heard political analysts on CNN saying that Daschle would likely be confirmed as Secretary of Health and Human Services because "he's really very embarrassed by this" and "it's hard to overstate just how much he's liked and respected in Washington".

Well, he's neither liked nor respected in my household. If I had "failed to pay over $100,000 in taxes in a timely manner" I'd be more than just embarrassed. I'd be on my way to prison after a high-profile prosecution by the IRS. The IRS, you may remember, is headed by tax cheat Tim Geithner.

I have two questions: 1) why do President Obama's appointees get to ignore the rule of law and escape the consequences of their inaction? 2) What happened to the change that President Obama was supposed to bring to Washington? At least President Bush's appointees set the example by paying their taxes. And, if they didn't, their nominations were withdrawn.

This is certainly change, but it isn't the change I expected.

Barack Obama and the Democrats have been hammering the Bush tax cuts ever since they were signed into law. Over the last 6 years we've heard an endless litany of complaints about the tax cuts. Most complaints center around the claim that Bush cut taxes for the wealthy, gave away huge amounts of money to the rich, and left the rest of the country to rot.

How well is that claim holding up? Not so well [Warning: PDF.].

Congressional Budget Office (CBO) data show that the total effective federal tax rate of the middle fifth of households declined after 2001 to its lowest levels since at least 1979, Congressman Jim Saxton, ranking member of the Joint Economic Committee, said today. Under the 2001 and 2003 tax relief legislation, the income tax as a share of income for the middle fifth also has fallen to its lowest levels in decades.

Huh. Boy, I'm sure glad that we'll finally be rid of President Bush's failed economic policies.

Life is full of risk. No matter how hard we try, we can't eliminate that risk. Nor should we. Risk leads directly to rewards. Not all of the time. Sometimes risk leads to failure. But those failures teach us what we need to know in order to reach the rewards. More than that, it's impossible to reach a reward without taking a risk along the way.

Each crisis that comes along gives us a chance to learn a lesson and reach for a bigger reward. But we have another option. Instead of striving forward, we can cower in fear of what's around the bend. Instead of striving forward, we can attempt to stay exactly where we are, praying that things don't get worse.

That's where we are with this election. Michael Barone wrote today about Obama's vision for the country. It's a vision of fear. It's a vision that says we need to freeze things where they are, before they get any worse. It's a vision that seeks to remove all risk by franctically holding tight to what we have. It's a vision that just may prevent us from getting poorer. But it's also a vision that we'll ensure that we don't get richer.

Is this the vision you want?

The purpose of New Deal legislation was not, as commonly thought, to restore economic growth but rather to freeze the economy in place at a time when it seemed locked in a downward spiral. Its central program, the National Recovery Administration (NRA), created 700 industry councils for firms and unions to set minimum prices and wages. The Agricultural Adjustment Act (AAA), the ancestor of our farm bills, limited production to hold up prices. Unionization, encouraged by NRA and the 1935 Wagner Act, was meant to keep workers in jobs that the unemployed would have taken at lower pay.

These policies did break the downward spiral. But, as Amity Shlaes points out in The Forgotten Man, they failed to restore growth. Double-digit unemployment continued throughout the 1930s; despite population growth, the economy failed to rebound to 1920s production levels. High taxes on high earners (a Herbert Hoover as well as Franklin Roosevelt policy) financed welfare payments ("spread the wealth around") but reduced investment and growth.

Obama seems determined to follow policies better suited to freezing the economy in place than to promoting economic growth. Higher taxes on high earners, for one. He told Charlie Gibson he would raise capital-gains taxes even if that reduced revenue: less wealth to spread around, but at least the rich wouldn't have it -- reminiscent of the Puritan sumptuary laws that prohibited the wearing of silk. Moves toward protectionism like Hoover's (Roosevelt had the good sense to promote free trade). National health insurance that threatens to lead to rationing and to stifle innovation. Promoting unionization by abolishing secret ballot union elections.

Roosevelt in the 1930s had some extremely competent social engineers, like Harry Hopkins, Harold Ickes and Fiorello LaGuardia, who could enroll 750,000 people on welfare in three weeks and build an airport in less than a year. But even they could not spur the economic growth produced by utterly unknown and unconnected people, as Warren Buffett and Bill Gates were in 1970.

Reject social engineering. Reject the temptation to believe that somewhere out there is some One that can lead us into a brighter tomorrow. No One person can understand the American economy well enough to plan a brighter tomorrow. We only have one hope. And I won't lie: it entails risk.

We must place our hope in the thousands of inventors and entrepreneurs that will create the world of tomorrow. We don't know who they are. We don't know what they'll create. We don't know where they'll come from or where they'll take us. But if American history teaches us one thing, it teaches us this. The American entreprenurial spirit will take us somewhere we never expected, somewhere we never could have imagined, but somewhere far better than we dared dream. Just contrast the world of 1908 with the world of 2008. Wasn't it worth a little risk? Even with a Great Depression in the middle, didn't it turn out far better than our great-grandparents would have ever dreamed?

Reject fear and embrace hope. Reject those who would tie our economy down with new rules, with new regulations, with new concepts of "fairness". Embrace change, embrace risk, and look forward to the future with confidence. Looking back, I see no reason to fear looking forward.

I've said before that McCain's healthcare plan is one of the few proposals he's made that I actually like. Robert Carroll explained some of the benefits in the Wall Street Journal.

The McCain health-care insurance tax credit may well be one of the most misunderstood proposals of this presidential election. Barack Obama has been ruthless in his attacks. But the tax credit is highly progressive and will provide a powerful incentive for people to purchase health insurance. These features under normal circumstances should endear Democrats to the proposal.

There has been a lot of rhetoric and misstatements, but what exactly does Sen. McCain have in mind? He would replace the current income tax exclusion for employer-sponsored health insurance with a refundable tax credit -- $5,000 for those who purchase family coverage and $2,500 for individual coverage. Mr. McCain would also reform insurance markets to stem the growth in health insurance premiums.

What many may not realize is that the federal government already "spends" roughly $300 billion to $400 billion through the tax code to encourage people to pay for their health care through employer-sponsored health insurance. This subsidy takes the form of the exclusion for employer-sponsored health insurance from both income and payroll taxes.

Consider the current exclusion. Its value rises with how much someone spends on health care, and how much of this spending is funneled through employer-sponsored health-care coverage. This creates an incentive for people to purchase policies with low deductibles, or which cover routine spending. These policies look a lot less like insurance and more like prefunded spending accounts purchased through employers and managed by insurance companies. Consider homeowners and auto insurance policies. Do these cover routine spending on cleaning the gutters or tuning up a car?

The subsidy encourages people to buy bigger policies that cover more, and leads to greater health-care spending. Moreover, lower deductibles and coverage of routine spending dulls consumers' sensitivity to price. Reducing the tax bias should result in insurance that is more focused on catastrophic coverage and less on routine spending.

By replacing the income tax exclusion with a fixed, refundable credit, the McCain proposal reduces the tax bias for large insurance policies. Because the credit is for a fixed amount, regardless of how much you spend on health care, it helps break the link between the existing tax subsidy and how much is spent on health care. This improves incentives in the health-care market by reducing the bias that has contributed to such a high level of health-care spending.

Moreover, the credit provides a powerful incentive for people to purchase insurance. The two tax provisions -- the new credit and the repeal of the income tax exclusion -- on net provide a substantial tax cut of $1.4 trillion over 10 years. Not only do most Americans receive a tax cut under the McCain proposal, but the tax cut is directed toward low and moderate income taxpayers.

What is striking about this picture -- and contradicts Mr. Obama's public comments -- is that the McCain tax credit for the purchase of health insurance exceeds the value of the current exclusion for all income levels shown. Indeed, it generally provides more resources to purchase health insurance than the existing exclusion. The total subsidy for health care would rise from about $3.6 trillion over 10 years today to roughly $5 trillion under his proposal.

Will the insurance that is purchased be a generous plan with first dollar coverage or low deductibles? It is much more likely to be a plan with higher deductibles that is more focused on providing true insurance against catastrophic losses rather than a more generous plan that includes a lot of prepayment for routine and predictable medical expenses. But this is precisely one of the objectives of the policy: to reduce the current tax bias that encourages people to funnel routine health expenses through insurance policies.

The elimination of the income-tax exclusion should reduce private health-care spending; to the extent this reduces the cost of health care, it should also put downward pressure on the growth of Medicare and Medicaid costs. Thus, by removing the tax bias for more generous health coverage, the McCain health credit also has the potential to provide important dividends to the entitlement problem down the road.

To be clear, I'm not wild about the subsidy that McCain's plan excludes. But I love the way it changes the current health insurance incentives. It not only gives people the motiviation to spend less on healthcare -- it also gives them the means to do so.

Too bad it has no chance of being passed into law. Even if McCain wins the presidency, the Democrat House and Senate would never pass this plan.

Sometimes the federal government is unusually annoying. This is one of those times.

Efforts to create new tax breaks to encourage home purchases are gaining attention on Capitol Hill, as lawmakers gird for a major debate this spring on how best to shore up the nation's troubled mortgage markets.

Some Democrats, among them Michigan Sen. Debbie Stabenow, have signaled support for expanded tax benefits. And the idea is proving especially popular among Senate Republicans, who are hoping to carve a distinct role as Congress takes up housing issues and often find tax cuts an appealing option. The discussions reflect a growing sense that the housing, mortgage and credit mess may require more expansive federal government action.

"The momentum on this thing has been good," said Sen. Johnny Isakson, a Georgia Republican. Sen. Isakson, a former realtor, is pushing a proposal that would provide a temporary tax credit to any individual purchasing a newly constructed house or a foreclosed home.

First, it's little surprise that a "former realtor" would want to help his friends in the biz by giving people more incentive to buy and sell houses. After all, realtors get a 6% cut nearly every time a house moves. Way to look out for #1 there, Senator. (This blog supported his primary opponent, Herman Cain, for the Senate. It's gratifying to see how right we were.)

Second, when have the feds ever seen a crisis that didn't "require more expansive federal government action"?

Thirdly, this proposal is flat out discriminatory. It prefers new homes to existing homes. It benefits banks stunk with foreclosed homes over homeowners who simply want to sell their house. It's a giveaway to home builders and banks. It's a slap in the face to responsible home owners. It stinks to the high heavens.

I was planning on visiting Chicago and doing some exploring with my wife and daughter this summer. Then I read about the cost of visiting Chicago.

Starting July 1, a shopping trip to Chicago's Magnificent Mile will cost more. That's when the sales tax in the city hits an astronomical 10.25%, which may be the highest in the U.S.

We may still visit. But with taxes that high, I don't think we'll be doing much shopping or eating while we're there. Mainly looking. And we'll fill make sure our gas tax is full before we leave home.

The economy seems to be staggering around and politicians everywhere are eager to stimulate it back into coherence. But nothing paralyzes a business more than uncertainty about whether it its investments will earn a tidy profit or a large tax bill. Nothing frees a business more than certainty and predictability. With the Bush tax cuts set to expire soon, there's a large amount of uncertainty in the air.

Until they know who won the election, businesses may not be willing to invest in new equipment or jobs. The Independent Institute makes this point particularly well:

Even so, there is another reason that any economic benefits ultimately generated by the stimulus plan will be fleeting at best. The federal government has no means of its own, so the $168 billion needed to finance the package can come from just three sources: taxing, borrowing, or printing money. For obvious political reasons, raising taxes is not an option during the run-up to an election. The economic stimulus plan thus will be paid for through a combination of new deficit spending and currency creation. The former implies higher future taxes to pay interest to bondholders and to retire the debt when it matures; the latter adds to the inflationary pressures already evident in the economy. Both impose a heavier burden on the private sector, and auger slower rates of economic growth in the years to come.

If our elected representatives truly were interested in jumpstarting a sluggish economy, they would have acted to reduce uncertainty about future tax bills by cutting marginal income tax rates now and forevermore. Predictably, they chose political grandstanding instead.

Are we slaves to the state or are we entitled to the fruits of our own labor? Wisconsin state Senator Jon Erpenbach thinks that we're slaves to the state:

Sen. Jon Erpenbach has proposed a bill that at first glance appears to have nothing to do with video games: It would raise the age at which a person in Wisconsin is considered an adult in criminal court from 17 to 18.

Erpenbach's measure would pay for the added expense by creating a power pill for the counties: a 1 percent surcharge on video games and video game consoles such as Wii systems, Xboxes and PlayStations.

The fee would translate to about 60 cents more on the $60 "Halo 3 " or $2.50 more on a $250 Wii.

Erpenbach, a Middleton Democrat, said he doesn't believe video games cause crime. He was simply searching for a revenue stream to cover his bill, he said.

"Here 's one idea to pay for it," he said. "If you have another one, fine. "

Apparently, my purchases and my income are simply a "revenue stream" for Senator Erpenbach's bright ideas. If his bill is such a great idea, maybe the state could find a less worthwhile idea and shift some money from one to the other.

Wendy Henderson, a policy analyst for the Wisconsin Council on Children and Families, thinks that the state should tax video games, for the good of the children:

"Video games are perhaps not the best use of the kids' time, so if we can use some of the money from the video games and turn it into something positive, that's a really good use of that money."

What a vacuous argument. A lot of gamers are adults, not children. Given that the gaming industry makes more money than Hollywood right now, it's possible that far more adults than children play video games. Is Ms. Henderson going to dictate how my wife and I spend are time? Will she tax us if she disapproves?

Finally, 20-year old Nathan Bakken,

said the surcharge wouldn't change his game-buying habits.

"I 'm not going to boycott it or anything, " he said. "It's not that much money. And it's helping people."

Nathan, I support your right to spend your money on anything you want. If you want to give your money to help people, I suggest you buy the gift cards in the checkout lane of the grocery store. You could make a lot of friends by handing them out at local food shelters. But, please, don't pick my pocket when you want to be generous.

Wisconsin Congressman David Obey wants to pass a war tax. I realize it's more of a political stunt, but I discovered that I'm not entirely opposed to the idea.

Noting that "we need to stop pretending that this war doesn't cost anything," Obey also announced that Murtha, McGovern and he will be introducing a bill to create a war surtax to pay for operations in Iraq instead of passing those costs on to future generations as the President has requested.

"I'm tired of seeing that only military families are asked to sacrifice in this war; and they are asked to sacrifice again, and again, and again, so we are putting together this bill in the hope that people will stop ignoring what this war is costing American taxpayers and call the President's bluff on fiscal responsibility," Obey said. "The President is threatening to veto our efforts to provide one-tenth the amount of money that he is spending in Iraq for investments in education, health, medical research, science, law enforcement, and other areas that are crucial to creating a stronger country and more prosperous families. If the President is really serious about combating deficit spending then we'd be happy to help him avoid shoving the costs of the war in Iraq on to our kids by providing for a war surtax."

I want the bill to guarantee that the tax would be gradually phased out as the war is phased out, but I do support paying for the war instead of continually increasing the deficit.

Local Oregon homeowners were flooded out last month. Six properties, worth about $1 million total, were significantly damaged. Now the homeowners want the village government to buy their properties -- at their pre-flood value -- so they can start over in a new house.

What?

Johnson said he'll be happy if the village makes him an offer that comes close to what he could get if he sold his house under normal circumstances.

"We know that's a problem area," Staton said of the low-lying section where the homes were built in the mid-1960s. "If I lived there, or if my kids lived there, I'd want to be bought out and be able to live someplace else, " he said.

Mark Below, Oregon 's director of public works, said the developers who put up the homes evidently felt the area was dry enough to build on. "There was no floodplain mapping done at that time, " he said.

Village Trustee Jon Lourigan said if federal and state funding falls through, the village should use taxpayer dollars to buy the homes.

...buying the properties without outside assistance would be an enormous purchase for a village whose operating budget this year is $4.8 million.

This is what flood insurance is supposed to cover. Apparently, none of these homeowners had flood insurance. They gambled that their homes would never flood. They lost that bet. Now they want someone else to cover their losses.

These homeowners want to potentially increase the village budget by 25%, so that they can get out of their existing homes and into new ones with zero financial loss? What selfishness! Taxes would have to go up for the entire rest of the village in order to accomplish this.

At least have the guts to walk through the village door by door demanding $125 from each person in the house. Because that's what you're doing here, Mr. Johnson. And if you'd be too ashamed, embarrassed, or scared to that, you should be too embarrassed and ashamed to ask for tax handouts.

Bad news from Madison. First of all, we're suffering from lots of hungry mosquitos. Secondly, the Madison City Council is in session. Hold on to your wallets.

City Council backs RTA

The Regional Transportation Authority endorsement that the Madison City Council passed 18-2 at 2 a.m. today opens the door to an enhanced regional bus system and using some of the potential sales tax revenue for property tax relief.

Falk and Cieslewicz have said the RTA would not be created unless approved by voters in a referendum. Also, the new panel would have to have its taxing authority approved by the Legislature. If approved, it is expected to raise the county sales tax by 0.5 percent and use the revenue for transportation improvements.

I have little faith that Madison and Dane County will actually lower my overall tax burden. No, the blood sucking mosquitos of local government are hungry for more. I think I prefer nature's own on this one.

Giuliani on Taxes and a Homeowner Bailout - Capital Commerce (usnews.com)

I had a chance to chat with Rudy Giuliani this weekend, on Saturday morning, just after he finished with his "tax summit" campaign event in Manchester, N.H. There, Giuliani offered his case for making the Bush cuts permanent, killing the estate tax (or "death tax," as he puts it), indexing the alternative minimum tax to inflation, and lowering corporate taxes. The easy-reading, truncated version of the interview can be found here. But lucky CapCom readers get to peruse the longer "director's cut." No Iraq, no abortion, no immigration"”just hardcore economic policy. Giuliani speaks at length about taxes, Social Security, and the mortgage crisis.

Guiliani continues to intrigue me from an economic, fiscal-policy perspective. This interview shows some of the reasons.

If you're interested in Guiliani's economic record as Mayor of New York City, the Club for Growth has a breakdown.

Should we raise taxes to pay for road and bridge repair? In the wake of the Minnesota bridge collaspse, many politicians are certainly saying that we should. But what have they done with the road money that they already have?

Of Bridges and Taxes

James Oberstar, the Minnesota Democrat who runs the House Transportation and Infrastructure Committee, recently stood beside the wreckage and recommended an increase in the 18.4-cent-a-gallon federal gas tax, as a way to prevent future bridge collapses. His wing man, Alaska Republican and former Transportation Chairman Don Young, agrees wholeheartedly.

As it happens, these are the same men who played the lead role in the $286 billion 2005 federal highway bill. That's the bill that diverted billions of dollars of gas tax money away from urgent road and bridge projects toward Member earmarks for bike paths, nature trails and inefficient urban transit systems.

As recently as July 25, Mr. Oberstar sent out a press release boasting that he had "secured more than $12 million in funding" for his state in a recent federal transportation and housing bill. But $10 million of that was dedicated to a commuter rail line, $250,000 for the "Isanti Bike/Walk Trail," $200,000 to bus services in Duluth, and $150,000 for the Mesabi Academy of Kidspeace in Buhl. None of it went for bridge repair.

Even transportation dollars aren't scarce. Minnesota spends $1.6 billion a year on transportation--enough to build a new bridge over the Mississippi River every four months. But nearly $1 billion of that has been diverted from road and bridge repair to the state's light rail network that has a negligible impact on traffic congestion. Last year part of a sales tax revenue stream that is supposed to be dedicated for road and bridge construction was re-routed to mass transit. The Minnesota Department of Economic Development reports that only 2.8% of the state's commuters ride buses or rail to get to work, but these projects get up to 25% of the funding.

Even President Bush realizes that spending has to be prioritized. Sadly, Congress has yet to learn the lesson. Bush Rejects Gas Tax as Way to Shore Up Bridges - New York Times

Asked about the gasoline proposal, which could amount to an increase of 5 cents a gallon under schemes floating around Congress, Mr. Bush said, "Before we raise taxes, which could affect economic growth, I would strongly urge the Congress to examine how they set priorities."

In a nod to using earmarks to pay for transportation projects like the one supposed to pay for the "bridge to nowhere" in Alaska, Mr. Bush said:

"From my perspective, the way it seems to have worked is that each member on that committee gets to set his or her own priority first, and then whatever is left over is spent through a funding formula. That's not the right way to prioritize the people's money."

Why is Congress talking about raising the gas tax?

Representative James L. Oberstar, Democrat of Minnesota and chairman of the House Transportation and Infrastructure Committee, suggested this week that a tax increase might be needed to finance a proposed trust fund to repair bridges in the Federal Highway System, A large percentage of the bridges have been identified as having structural problems.

Mr. Oberstar raised the possibility of a temporary 5-cent-a-gallon tax. The idea has some bipartisan support.

Representative Don Young, Republican of Alaska and former chairman of the transportation panel, said he could possibly support such a tax. Mr. Young has previously voiced support for increasing the gasoline tax.

Oh, well, if Don Young supports it, it must be a good idea. This is, after all, the same man under Federal investigation for taking bribes. He's also infamous for treating tax money as his own personal slush fund. Obviously, we should follow Rep. Young's advice on tax policy.

No, wait. I've reconsidered. Let's prioritize our spending instead. Let Congress actually decide to fund what matters instead of what personally enriches them. Then we could repair the nation's bridges without needing to raise a dollar of additional taxes.

That would demonstrate true political courage.

Every politician has a pet charity. Unfortunately, politicians fund their pet charities through my income. In case you've wondered, this is why I love politicians so much.

State Rep. Gary Bies is just the latest politician to make my "dead to me" list. Dentists urge 2-cent tax on soda.

When state Rep. Garey Bies was growing up poor in a large family, he was thankful for a program in Oshkosh that made it financially possible for him to see a dentist.

That is why the Sister Bay Republican has authored AB 237, a bill that would impose a tax on soft drinks -- which dentists say increase risk of tooth decay -- to subsidize dental access for low-income people and to pay for dental education.

Come on. If Rep Bies really wanted to do something useful, he could travel the state talking about the value of dentistry and asking private donors to contribute. Trying to force Wisconsin's taxpayers to contribute is just tacky.

For once, however, an industry trade group actually offers robust opposition to a stupid idea.

"No one will argue that people need dental care and education. They also need vision care and obesity care. Should we tax certain products to pay for that type of help?" asked Brandon Scholz, president and chief executive of the Grocers Association.

"Say people need reading glasses, should we impose a tax of 10 cents on each newspaper? How would your publisher like that? You would say that's not fair to us or our customers, and we view the soda tax the same way."

Scholz added that if sugar causes tooth decay, why just pick on soda? How about ice cream or a bag of sugar?

"Once they go down that road, they will tax everything else," he warned. "And all that money won't go for the program. It would be diverted elsewhere."

So very true.

If you're in the capitol today, and you see Rep. Bies, grab his wallet and pull $10 out of it. I have a few charities I'd like to help. He should approve.

While I'm on the subject of trade-offs, I'd like to mention a recent article from the Wisconsin State Journal. Bridge repairs could cost Wisconsin over $2 billion

Wisconsin's bridges are considered safer than the national average, but the state still has more than 2,100 bridges that fall short of federal standards for carrying loads and providing wide lanes for cars, according to a Wisconsin State Journal review of state and federal records.

The civil engineers report noted Wisconsin needs some $1.75 billion for state and local bridge projects between 2000 and 2020 as outlined in a state plan. That doesn't include another $2.8 billion in road and bridge projects planned for the Milwaukee area and the southeastern part of the state.

I'm glad the Wisconsin section of the American Society of Civil Engineers is looking into this. With the collapse of the bridge of the Minnesota, every politician in America is focused on bridge maintenance and repair. If that money needs to be spent on bridge repair, then spend it.

But first, take it out of another section of the budget. Delay spending increases on other projects. Cut spending on redundant areas of the budget. Prioritize spending in all areas of the budget.

I know what Wisconsin's politicians would like to do: raise taxes by $2 billion to cover this spending. I'd like to do that to -- I'd like to just increase my own income whenever I have something new I want to spend money. Unfortunately, I can't. And neither can Wisconsin's politicians. Every time they raise taxes, I get a pay cut. It's impossible to tax and spend a state into prosperity and safety.

By all means, maintain the bridges. But focus on the trade-offs inherent in doing that and make tough decisions about the budget.

One of life's primary lessons is that you shouldn't just think about the immediate effects of a decision or policy, but the long-term secondary consequences as well. Here are a few examples.

Be careful about trying to soak the rich through taxes. It may backfire. Asymmetrical Information: Loser..er...Labor Pays

Recent research has cast an eye in a somewhat different direction, showing that the tax may be borne not entirely (or even principally) by owners of capital, but by workers. ... A recent paper by Kevin Hassett and Aparna Mathur of the American Enterprise Institute analyzes data across countries and over time, concluding that for countries that are part of the Organization for Economic Cooperation and Development (OECD), a 1% increase in corporate tax rates results in a 0.8% decrease in manufacturing wage rates. (Economic intuition suggests significant negative effects of the corporate tax on manufacturing wages because of the complementarity of capital and labor for skilled workers.)

Wage effects of this size suggest labor bears much of the burden of the corporate tax. In fact, workers collectively would be better off if they voted for higher taxes on labor with corresponding cuts in the corporate tax.

That's for tax policy. How about trying to reduce state healthcare costs by requiring state employees to pay a larger portion of their own healthcare costs? Agency: GOP benefit cuts problematic

A plan by Assembly Republicans to require most state employees to pay 10 percent of their health insurance premiums could actually end up costing taxpayers more money, the state Department of Employment Trust Funds warns.

Stella warned that by requiring workers to pay a flat 10 percent premium, it would undercut the state's three-tiered premium system. Under the current system, employees who enroll in more cost-effective plans pay a lower percentage of the premium than those in higher-cost plans.

"We believe the 10 percent mandate will end the tiering structure and will eliminate our ability to effectively control cost increases," Stella wrote. "In fact, if we are correct premium costs for the state will increase rapidly and, if significant enough, render any savings from this proposal illusory."

Finally, how about changing the way doctors are compensated? Doctors - Wages and Salaries - New York Times

In the United States, nearly all doctors are paid piecemeal, for each test or procedure they perform, rather than a flat salary. As a result, physicians have financial incentives to perform procedures that further drive up overall health care spending.

Doctors are also paid whether the procedures they perform go well or badly, Dr. Bach said, and whether they are crucial to a patient's health or not..

"Almost all expenditures pass through the pen of a doctor," he said. So a doctor may decide to perform a test that costs a total of $4,000 in order to make $800 for himself -- when a cheaper test might work equally well. "This is a highly inefficient way to pay doctors," Dr. Bach said.

This article doesn't list any unexpected consequences of changing the way doctors are paid, but I can take a few guesses. Doctors might start to work fewer hours if they're salaried instead of being paid by the procedure. If doctors are paid based on performance rather than procedure, they may start to avoid sicker patients in favor of healthy, easy to treat patients. It's not a guarantee, of course, but is a possibility.

When considering any policy changes, it's best to at least think through the possible secondary effects of the change.