Sotomayor and Ricci

Here is the Appellate Court decision regarding the Ricci case.

Interesting quote:

Insofar as the dissent suggests that the plaintiffs produced evidence of a racial classification or the imposition of a quota, I think it entirely mistaken. Although the City acted out of a concern that certifying the exam results would have an adverse impact on minority candidates-and although, as the panel noted in its decision, the result was understandably frustrating for applicants who passed the test-the City’s response, facially race-neutral. The City did not classify or confer any actual benefit on applicants on the basis of race.

The motivation for the city’s action, indicated in the paragraph, is out of concern for minority candidates. Even if one concedes that the act was race neutral (which I don’t), the motivation behind that action certainly was not.

With specific regards to the act itself, it sought to punish mostly white men and two hispanics because they passed a test. I will let you figure out how that is race-neutral.

Antonin Scalia says it best:

 

“It’s neutral because you throw it out for the losers as well as for the winners?” 

 “That’s neutrality?”

 

 

 

 

 

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Thoughts on Supply-Side Policy

I wanted to share some independent research that I have been doing on tax revenues following the Reagan tax cuts and Bush tax cuts.

tottaxrev
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This is a graph I created documenting the growth of total tax revenue from 1977 to 2008. I used 1977 as a starting point because it just pre-dates the Reagan era tax cuts and is also the first full year after a change to the start of the fiscal year.

Just by looking at this graph, we can see upswings in the growth of revenue following the tax legislation of 1981, 1986, and 2003. Notable declines are following the Bush tax cuts in 2001, and 1983, following the Tax Equity and Fiscal Responsibility Act of 1982, which raised tax rates.

Changetaxrev
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This graph provides a more complete picture of the stimulating effect of tax-cutting. After 1981, the rate of growth of tax revenue went down. This means one of two things: either the economy was on the downswing and tax revenue growth would have been lower without the effect of tax cuts, or the tax cuts reversed short term trends of increases in the rate of revenue growth.

Tax revenue actually decreased around the time of the tax hike passed by Congress in 1982, but it seems unlikely that this bill had an effect that quickly. The next big upswing in revenue came following the passage of the monumental Tax Reform Act of 1986, which sharply lowered tax rates while closing a significant amount of loopholes.

Interestingly, after 2001, tax revenue plummeted and experienced substantial negative growth. One cannot be certain from this data as to the effect of the Bush tax cuts, however, given the concurrent events of the dot-com bubble burst and the attacks of 9/11.

Miraculously, after 2003, the the rate of growth skyrocketed, and we experienced the fastest increase in tax revenues in our history. It is worth noting that this is around the same time as the passage of the Jobs and Growth Tax Relief Reconciliation Act of 2003, which accelerated many of the tax-cutting provisions in the Economic Growth and Tax Reconciliation Act of 2001.

This was of course followed by a sharp decline in growth as we approached 2008. Could this be a sign of the latent economic crisis at that time?

taxrevaspropgdp
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My next thought was that a productive way to examine tax revenues would be to look at them as a proportion of the GDP that year, especially since the supply-side claim is that there is an intimate relationship between taxes and GDP. Thus, I compiled GDP data for the same period 1977-2008 and produced this graph.

Tax revenues as a proportion of GDP fell sharply following the 1982 tax increases. Following the major tax bill passed in 1986, revenues increased as a proportion of GDP. This is really intriguing. What this graph is telling us is that following a tax increase, taxes grew at a rate slower than GDP, and that following a tax decrease, taxes grew at a rate faster than GDP.

Of course, following 2001, revenue  fell to a very low proportion of GDP. Again, however, one must take into account the significant internal and external economic shocks that were occurring at that time as well. The distinct ability of the 9/11 attacks to sow uncertainty in the market likely had unique effects undermining growth. This should be taken into account when evaluating how much tax policy influenced this decline in revenue growth relative to GDP.

In any event, taxes grew again relative to GDP finishing out the Bush era, which saw the maintenance of that administration’s tax-cutting provisions enshrined in the Tax Increase Prevention and Reconciliation Act of 2005.

delttaxrevoverdeltgdp
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This graph more clearly articulates the point I was making above. It shows the proportion between change in tax revenue and change in GDP growth.

One can clearly see sharp growth of revenue against the GDP growth following the 1986 tax bill. Other notable growth occurred around the time of the tax increases in 1993, and the acceleration of the 2001 tax decreased passed in 2003. 2001 remains a notable period of substantial decline in revenues.

Conclusion

With these graphs I am clearly not able and not trying to establish any causation between the tax legislation passed over the past 30 years and the growth in tax revenues and the GDP. I am merely examining a perceived relationship that my personal research and data compilation has yielded.

The years 1981 and 1993 seems to stand as counter-examples to the notion that cutting taxes stimulates revenue growth and that raising taxes lowers it, since in those years taxes were cut and raised, respectively, and the opposite effects of what the supply-siders would have predicted actually occurred.

However, it seems that the massive growth in revenues following the recovery of the post-9/11 economy, in spite or because of tax cuts, is significant. Certainly it cannot be ignored. Furthermore, the overall decrease in taxation from the 1986 tax reform bill and corresponding growth in revenues is also a point of interest that lends credence to supply-side theory.

I think it is a logical assumption to say that cutting taxes provides more money for investment and can raise the GDP. The real question is whether it increases growth in tax revenues. 

States vs. National Government

There is a great case to be made that supply-side effects are more pronounced in states, where people have greater mobility to move or at least purchase goods across borders. Ironically, the people with the greatest mobility are the rich, those that the state taxes the most. This only pronounces supply-side effects from tax increases and, also ironically, results in a shifting of the tax burden to the poor. I think it is no coincidence that migration over the past 30 years has been from high-tax states in the Northeast to Sunbelt low-tax states.

But at the national level, I am not sure that supply-side effects are so pronounced. As Milton Friedman said, “If I do not like what Washington imposes, I have few alternatives in this world of jealous nations.” Rich Americans will grin and bear higher taxes much more often than flee to another country, most of which have higher tax rates anyway.

My overall recommendation would be to decrease taxes while cutting spending as well. I am convinced enough by the data I have seen and the analyses I have read that spending cuts do not have to be as large as the tax cuts. I do, however, think that spending cuts have a lot of efficacy as a hedge against other externalities that can cancel out supply-side effects (i.e. a terrorist attack).

Let me know any critiques of the analysis that you have. I am interested in dialogue.

First Impressions of Sonia Sotomayor

A few hours before President Obama made the official announcement, we knew that Sonia Sotomayor would be his nominee to replace David Souter on the Supreme Court. And to no surprise – she has long been touted as a potential nominee for the bench.

With the official announcement made, there have already been attacks from the fringe of the American Right, and I think we can expect those attacks to drift toward the center as we get away from the festivity of the initial announcement and into the more serious mood of the confirmation process. 

I should start my evaluation by saying right off the bat that I have a pretty conservative judicial philosophy. A judge’s job is to interpret legality, not morality. And while we hope our legislatures will make those two one-and-the-same, it is imperative that we recognize that there is not a perfect overlap.

Looking at Ms. Sotomayor’s record – albeit a cursory look – I think there are a couple of blemishes on an otherwise distinguished legal career. And comparing my greatest qualms with the apparent issues raised by members of the Right, I think that the Conservatives are already making a significant mistake in their strategy to oppose this nomination. 

Some of the most vehement voices seem to be suggesting that Ms. Sotomayor is underqualified. I think trying to put this woman in the same camp as Harriet Miers is a *HUGE* mistake. Ms. Sotomayor rose from relative poverty in the Bronx to graduate at the top of her Princeton Class and to be a distinguished member of the Yale Law Journal and numerous intellectual societies. Questioning her outright intelligence and legal knowledge is beyond asinine. 

Ms. Sotomayor is also widely-considered relatively moderate, and has already gotten significant praise from Freedom Watch. While she is certainly a little left leaning, she is nowhere near as far left as Mr. Obama could have reached for. One should remember that George H.W. Bush, the same president who appointed David Souter, elevated Ms. Sotomayor to the Federal Bench with the support of several Republicans who are still in the Senate today. It will be interesting to see if they will vote for her a second time. 

Now that I have praised her merits:

There are a couple of questionable things that it will be the Republican’s job to exploit and to make Ms. Sotomayor sufficiently answer for during the nomination process.

One is this verbal faux pas in which Ms. Sotomayor states that policy is made in the Appellate Courts – something which she immediately realized was a mistake to say on video. Her following explanation, however,  is hardly a satisfactory one, and the Republicans need to give her a chance to roll that statement back and allay their fears of her possible judicial activism.

The other and more recent issue is the Ricci v. Destefano case, in which Ms. Sotomayor upheld the district court ruling in her capacity as an appellate judge and which now is going before the Supreme Court. The case is a travesty of civil rights in which New Haven firefighter Frank Ricci gave up a second job to devote his full time to studying for a promotion exam that was highly regarded as an objective measure of ability, and paid a friend $1,000 to have the study material read onto audiotape because he is dyslexic, only to have the test results thrown out because not enough minorities passed. Nevermind that Mr. Ricci placed 6th and sacrificed untold income and time to do so. Ms. Sotomayor will have to provide a sound explanation as to why she ruled against this man. 

The above issues I have discussed are intellectually and philosophically legitimate questions that Ms. Sotomayor should have to answer for Conservatives. By launching baseless attacks on Ms. Sotomayor’s stellar qualifications, the Conservative faction in this country is wasting valuable time and energy on erroneous arguments, while detracting from their ability to make Ms. Sotomayor accountable for the things in her past that are the most indicting. As the more moderate wing of the Republican party takes up skepticism this summer during the nomination proceedings, let us hope that they will pick more just battles than their radical counterparts have today.

Make no mistake – barring utter catastrophe, Ms. Sotomayor will be the next Supreme Court Justice of the United States. But that does not mean that there is no opportunity here for Republicans to articulate their philosophy and score some political points in the nomination process by putting forth the right challenges for Ms. Sotomayor to address, specifically with regards to her judicial philosophy and her view of civil rights.

With a minor course correction now, they can still do just that.

Robin Hood from the Supply-Side prospective

This is really too funny. It appears on p.39 of the 2009 ALEC-Laffer State Economic Competitiveness Index – titled “Rich States, Poor States.”

Case Study: The Supply-Side Version of Robin Hood

Don’t believe for a moment that highly progressive tax structures in California or New York help the poor, minorities, or the disenfranchised. They don’t. Just on an intuitive level, it should be self-evident that if a government taxes people who work to pay people who don’t work, there will be more people who don’t work and fewer people who do.

All of us understand the importance of helping those who have difficulty helping themselves. The question is not whether you want to help the poor. The question is, how can you make the poor better off.

If the rich are taxed and the money is given to the poor, do not be surprised if the number of poor people increases and the number of rich subsides. People respond to incentives; it is the way the world works. If you make an activity less attractive, people will do less of it. If you make an activity more attractive, people will do more of it. Taxes make an activity less attractive and subsidies make an activity more attractive.

Let’s retell the story of Robin Hood through the supply-side lens. Robin Hood and his band of merry men would start their days hiding among the trees in Sherwood Forest waiting for hapless travellers on the trans-forest throughway.

If a rich merchant came by, Robin Hood would strip him of all his belongings. Before you feel sorry for the guy, remember he is so rich that by the time he gets back to his castle there will be an abundance of jewels and wealth waiting for him. He’ll be just fine, none the worse for the wear.

If just a prosperous merchant came through the forest, Robin Hood would take almost everything the guy had, but not all. Of a normal, everyday businessman’s belongings, Robin Hood would seize just a moderate chunk. And if a poor merchant came through the forest, one who could barely make it, he would be deprived of a little token.

In the vernacular of our modern day society, Robin Hood had a progressive stealing structure. You recognize the model, don’t you? Doesn’t it sound like the California government to you or other tax systems used in this country?

At the end of the day, Robin Hood and his men would take their contraband back to Nottingham to “help” the poor. They would distribute their treasures to citizens, based on their destituteness.

Using today’s words, the more a person makes, the less Robin Hood gives him, and the less a person makes, the more he gives him. You follow the model: He stole from the rich and gave to the poor. The richer you were, the more he’d steal from you, the poorer you were the more he’d give to you. This is the story of Robin Hood.

Now, put on your supply-side economics hat and imagine for a moment you are a merchant back in the ancient days of Nottingham: How long would it take you to learn not to go through the forest?

Those merchants who couldn’t afford armed guards would have to go around the forest in order to trade with the neighboring villages. Of course the route around the forest is longer, more treacherous, and as a result, more costly.

Those merchants who could afford armed guards (and by the way, today we call these armed guards lawyers, accountants and lobbyists) would go through the forest and Robin Hood couldn’t rip them off. As a result, he had no contraband to give to the poor. All he had succeeded in doing was driving up the cost of doing business, which meant the poor had to pay higher prices and were literally worse off. By stealing from the rich and by giving to the poor, Robin Hood made the poor worse off.

And so it is in high-tax states. The poor who rely on the state for their sustenance are having their benefits cut to the bone. Because of some state’s business-unfriendly policies, unemployment rates rise. We could go on, but the point is simple enough and its significance cannot be overstated: progressive tax structures do not benefit the truly needy.

In its attempts to redistribute income, government never, ever succeeds. What it does accomplish is the destruction of the volume of income. Government cannot change the distribution of income with taxes, but it can – and does – lower the volume of income with taxes. As we look across the world at the progressive tax structure of California and other economies, it’s amazing to see how the distribution of income, if anything, is made worse.

Middle East Health Care

This was from an item in the May 15 edition of the “Best of the Web Today,” an email subscription from the Wall Street Journal and written by opinion editor James Taranto. 

According to the Middle East Media Research Institute, a library named after the Palestinian suicide bomber Wafa Idris was inaugurated at a children’s hospital in Yemen this week. Present at the inauguration, the individual who actually launched it, was Samir al-Kuntar, of the Palestinian Liberation Front. He was recently released from as Israeli prison.  

Taranto provided a riveting account from Smadar Haran Kaiser, a mother of two who saw her husband and children murdered by Samir al-Kuntar’s handiwork. It is absolutely horrifying. 

It had been a peaceful Sabbath day. My husband, Danny, and I had picnicked with our little girls, Einat, 4, and Yael, 2, on the beach not far from our home in Nahariya, a city on the northern coast of Israel, about six miles south of the Lebanese border.

Around midnight, we were asleep in our apartment when four terrorists, sent by Abu Abbas from Lebanon, landed in a rubber boat on the beach two blocks away. Gunfire and exploding grenades awakened us as the terrorists burst into our building. They had already killed a police officer.

As they charged up to the floor above ours, I opened the door to our apartment. In the moment before the hall light went off, they turned and saw me. As they moved on, our neighbor from the upper floor came running down the stairs. I grabbed her and pushed her inside our apartment and slammed the door.

Outside, we could hear the men storming about. Desperately, we sought to hide. Danny helped our neighbor climb into a crawl space above our bedroom; I went in behind her with Yael in my arms. Then Danny grabbed Einat and was dashing out the front door to take refuge in an underground shelter when the terrorists came crashing into our flat.

They held Danny and Einat while they searched for me and Yael, knowing there were more people in the apartment. I will never forget the joy and the hatred in their voices as they swaggered about hunting for us, firing their guns and throwing grenades. I knew that if Yael cried out, the terrorists would toss a grenade into the crawl space and we would be killed. So I kept my hand over her mouth, hoping she could breathe. As I lay there, I remembered my mother telling me how she had hidden from the Nazis during the Holocaust. “This is just like what happened to my mother,” I thought.

As police began to arrive, the terrorists took Danny and Einat down to the beach. There, according to eyewitnesses, one of them shot Danny in front of Einat so that his death would be the last sight she would ever see. Then he smashed my little girl’s skull in against a rock with his rifle butt. That terrorist was Samir Kuntar.

By the time we were rescued from the crawl space, hours later, Yael, too, was dead. In trying to save all our lives, I had smothered her.

How fitting that Samir should be at the opening of a library at a children’s hospital, or really any facility dedicated to the preservation of life.

Prophetic words on John Murtha

From the column in the Wall Street Journal today titled “Earmark Nation,” by Daniel Henninger.

John Murtha of Johnstown is the canary in the mine shaft. In politics, the canaries don’t die. They adapt and learn to live with the toxic fumes of public spending on scales beyond morality or understanding. We are just about there.

These words come very close to enshrining just how little I think of John Murtha.

Another great line concerning the bleak future:

Barack Obama isn’t a reformer. He’s the president of Earmark Nation. We are about to enact the Obama federal health-insurance entitlement, which on top of all the other entitlements and their limitless liabilities will require pulling trillions of dollars more into the federal budget. Whatever nominal public good this is supposed to achieve, it means that they, these 535 pols, most of them gerrymandered for life, will decide in perpetuity the details of how to dole it out.

Get ready for the rough ride to the bottom.

Year: Finished

As I write this I am sitting at Nick’s computer (that old piece of shit). He’s packing up for the summer, I am largely packed, and as of 8am this morning, I am officially done with the last final of the year. 

The weather here has turned South the past couple of days, as have I. I’m fighting a little bit of a cough and looking down to Georgia and home to cure me.

Posts have been slack this semester, but will increase over the summer.

New–>twitter updates.

Look out for the hard-hitting, crass, brutally honest libertarianism that should always be expected from the blog. Its going to be a great summer.