I’m getting tired of media commentators arguing over which Democratic presidential candidate is the most “electable”. Not that I think the underlying conceptual debate is invalid, but the term “electable” itself is highly misleading. For example, the conventional wisdom is that John Kerry beat Howard Dean in New Hampshire because the former was considered more “electable”, i.e. that he’s more likely to defeat President Bush. But that’s not electability. Dean is perfectly capable of winning elections—he’s done so numerous times in Vermont. The only people that aren’t “electable” are those ineligible or unwilling to hold office. Richard Nixon, for example, is not electable because he’s dead.
When people say a candidate’s “electable”, they mean to say he’s marketable. The Democrats are trying to nominate a candidate to defeat Bush. Since most voters aren’t Democrats to begin with, the party must select a candidate that can appeal to these non-Democratic voters. Democrats will vote for anyone with a (D) next to their name. But convincing other people they need to vote Democratic—well that’s the classic definition of marketing.
Ten years ago, New York Republicans nominated unknown state senator George Pataki to run against three-term incumbent governor Mario Cuomo. Pataki had neither the resume nor the intellect of Cuomo. Yet Pataki, now himself a third-term governor, was a marketable politician: I’ve always said Pataki’s greatest asset was that he looked like the governor. For voters who can’t discern a great ideological difference between the major parties, that can be enough to close the deal.
John Kerry has that Pataki-like quality of looking like a president. Kerry’s lack of substance relative to other Democrats is almost an afterthought. Dean became unmarketable in the eyes of many after his Iowa concession screed. For Dean, it was a Dukakis-in-the-tank moment. If Kerry doesn’t have a similar visual moment in the next few weeks, many Democrats will stick with him despite the obvious flaws.
Remember the first rule of antitrust: Anything can be an antitrust violation. Even the mind-numbingly awful Fox series “American Idol”, according to a report in Thursday’s Wall Street Journal:
European regulators assessing the proposed merger of Sony Corp.’s Sony Music Entertainment and Bertelsmann AG’s BMG appear to be grappling with a basic issue: Should the combined company be considered just a developer and marketer of artists? Or should it instead be considered an integral part of the broader media-and-entertainment empires of both parents? . . . A questionnaire sent by EU officials to other players in the music industry last week provides some insight into the EU’s lines of inquiry . . . [t]he document  asks how the recorded-music market is affected by such television formats as Britain’s “Pop Idol.” A production company owned by Bertelsmann produces “Pop Idol” and its cousins, including “American Idol” on News Corp.’s Fox network in the U.S. Winners of those shows record on BMG, and their albums have been big sellers.
“The argument by opponents of the merger is that these TV shows take unknown artists and make them household names at very low cost, and that gives them an unfair advantage” over other music companies, says Lorna Tilbian, a media analyst at Numis Securities in London.
This is yet another good example of the European antitrust mentality. In the U.S., even our antitrust regulators would applaud a company that produces a popular (albeit annoying) product at low cost. Traditional “artist and repertoire” costs are the source of much of the music industry’s recent decline. The old business model for developing artists simply isn’t profitable. That’s why there are a declining number of major record producers.
But in the EU’s collective mind, there is nothing that justifies one competitor in a market acting to propel himself over other competitors. Success is an “unfair advantage” to Europe’s socialist bureaucrats. And keep in mind, this is a conservative mentality, since the regulatory objective is to keep the market where it is, free of any innovation that might disrupt the balance of power.
On January 19, the Wall Street Journal’s lead editorial discussed Oracle’s ongoing hostile takeover bid for PeopleSoft. By their very name, hostile takeovers create animosity among rival management factions. But as the Journal’s editorial, “The Oracle of Antitrust”, noted, the real hostility towards the takeover is coming from a party with no direct financial interest in the outcome—the Department of Justice:
Oracle has been laboring to conclude its $7.3 billion hostile takeover bid for software competitor PeopleSoft for about seven months. PeopleSoft hasn’t made things easy, with its lawsuit and its refusal to allow its shareholders to vote on the offer. But the real headache has come courtesy of the Justice Department Antitrust Division, which has been probing the deal with its usual largo tempo and seems to be searching for a reason to say no.
Perhaps [Oracle CEO Larry] Ellison should ask [Microsoft chairman Bill] Gates for advice. Oracle was, after all, one of the leaders of the high-tech tong that invited Justice to make itself at home in Silicon Valley. It didn’t like competing against Microsoft, so it called in the Clinton Administration’s legal hobblers to help. But instead of leaving town after they pounded Microsoft, the lawyers and bureaucrats have settled in and are now looking for new markets to deconstruct.
Antitrust is like any other industry: It must expand into new markets or perish for lack of business. The technology revolution of the 1990s caused an antitrust counter-reformation during the second Clinton and current Bush administration. This is not a partisan product. Republicans and Democrats both support antitrust as a core regulatory principle. President Bush’s FTC has actually been more aggressive in inventing new antitrust markets to control, to the point where a company may be accused of monopolizing the market for its own product.
Technology is particularly vulnerable to antitrust expansion because of its dynamic nature. Antitrust relies on static market analyses; a regulator looks at the current situation and presumes he can predict the future with near-certainty. But technology almost always defies static prognostication. But antitrust regulators need only fool you long enough to get their foot in the door, and once they’re in, they can’t be expelled.
The Journal editorial correctly argues, “No slow-moving regulator can hope to keep up with a technology industry whose definition of long term is 10 minutes.” Many people would dispute that statement, however. Among them is PeopleSoft’s current CEO, Craig Conway, who is trying to thwart the Oracle takeover to save his own job. In a letter to the Journal published January 26, Conway insists “[t]he antitrust issues here are significant”, and that the Journal’s “observation that the Justice Department is simply not capable of understanding the technology industry is also wrong—not to mention patronizing”.
The problem is not that the DOJ is incapable of understanding the market; it’s that they choose not to. In case after case, the DOJ (and FTC) willfully ignores existing market definitions created by businessmen in favor of arbitrary, irrational market definitions created by government lawyers. And what is truly “patronizing” is the notion the DOJ knows how to run the marketplace in any industry, when many government lawyers haven’t spent a day of their lives earning a living in the private sector.
None of this is to say the Oracle-PeopleSoft deal makes good business sense. I don’t consider Oracle’s Ellison to be a virtuous or honest businessman. But it’s hard to support a man like PeopleSoft’s Conway, who went running to the government the minute the market got too unpleasant for him.
In my Initium for this week, I call for a "War on Altruism", led by the nation's business leaders. I suggest enlisting two particular candidates to lead the fight—Microsoft's Bill Gates and Hewlett Packard's Carly Fiorina.
The Culture: A Noble Subsidy Embiggens the Smallest Artist
This doesn't particularly enrage me, but I have a feeling this may throw some conservative activists into a Dean-like frenzy:
President Bush will seek a big increase in the budget of the National Endowment for the Arts, the largest single source of support for the arts in the United States, administration officials said on Wednesday.
The proposal is part of a turnaround for the agency, which was once fighting for its life, attacked by some Republicans as a threat to the nation's moral standards.
Laura Bush plans to announce the request on Thursday, in remarks intended to show the administration's commitment to the arts, aides said.
Administration officials, including White House budget experts, said that Mr. Bush would propose an increase of $15 million to $20 million for the coming fiscal year, which begins Oct. 1. That would be the largest rise in two decades and far more than the most recent increases, about $500,000 for 2003 and $5 million for this year.
Just after the State of the Union, the White House promised critics they would hold the line on federal spending. We knew that was a lie, and the NEA increase proves it. The president just can't say no to any "charitable" cause, meaning any government program that spends money.
To be fair, many congressional Republicans already slobber over the NEA. My favorite is Iowa Rep. Jim Leach, who argued, "Government involvement is designed to take the arts from the grand citadel of the privileged and bring them to the public at large. This democratization of the arts ennobles the American experience." That's funny, because I would think leaving the support of the arts to the free market would make things more democratic, since consumers could decide for themselves which artists and disciplines to support. But maybe capitalism doesn't "ennoble the American experience".
Politics: Bush/Giuliani (or maybe Bush/Allen or Bush/Owens)
MSNBC gossip columnist Jeannette Walls claims “[a] well-placed source says that the president will ‘most likely’ drop Dick Cheney from his reelection ticket and his first choice for a replacement is former New York City mayor Rudolph Giuliani”. The source said “Cheney’s health” will be given as the official reason.
It was only a matter of time before someone brought the “dump Cheney” rumor out. It’s actually not a bad idea. Not because of anything Cheney has done, but because a second-term president needs to groom a successor. Cheney is an odd vice president in that there’s virtually no chance he’ll run for the top job himself. The first-term justification for Cheney was that he provided an experienced foreign and military policy hand for a domestic policy president. But now Bush has that experience, and his opponents have virtually none. Cheney is no longer really needed.
But Giuliani is a lousy replacement. Although the former mayor deserved praise for his post-9/11 management of New York, let’s not forget Giuliani was also a power-abusing U.S. attorney and a largely anti-individual rights mayor. Many of Mayor Michael Bloomberg’s excesses can be traced to Giuliani-era policies. Beyond that, Giuliani’s political profile—a liberal Northeast Republican—completely contradicts Bush’s conservative reelection profile. True, political marriages often meld contradicting philosophies, but given the State of the Union’s heavy emphasis on conservative appeasement, I don’t see the campaign leadership pushing for Giuliani.
I suspect Walls’s “well-placed source” is a pollster within the campaign or the Republican National Committee. This is exactly the kind of question an overeager pollster asks: Would you vote for President Bush if Rudy Giuliani replaced Dick Cheney as vice president? This reminds me of a story Mary Matalin told about the brief “dump Quayle” movement in Bush the Elder’s reelection campaign:
Dump Quayle rumors popped up at the drop of a hat . . . In the middle of our defense of our Veep, the campaign received a bombshell. All previous data had shown that the vice-presidential candidate had no statistical impact on an election, one way or another. Now, for the first time in modern polling, data indicated that a vice president—Quayle—was a drag on the ticket. . . .
Though this secret memo included several modifying caveats (e.g., press and party reaction, which might mitigate the positive effects of removing him), its findings were so unique and unsettling that they reopened the debate among Bush’s closest friends. It took several forms: Move Quayle to Defense, Defense Secretary Dick Cheney to State, Secretary of State Jim Baker to chief of staff; or, get Quayle off, put Colin Powell on.
Personally, I can’t imagine how making Dan Quayle secretary of defense would have improved Bush I’s polling numbers, but that’s just me.
Back to my earlier argument: Replacing Cheney makes sense if Bush is looking to elevate a potential successor. Tom Ridge is the obvious candidate in this regard, though my short list would also include Senator George Allen of Virginia and Colorado Governor Bill Owens. (When I say “my short list”, I mean these are the candidates that make the most logical successors from Bush’s view; I’m personally skeptical about any of these men as president).
"He's really been a disaster, possibly the worst commissioner I've seen," said Dr. Sydney Wolfe, director of health research at consumer group Public Citizen in Washington. "He is more well-liked by the pharmaceutical industry than any other commissioner I can remember."
Postrel notes that “Wolfe doesn’t point to any bad policy outcomes. But McClellan doesn’t share his reflexive hatred of the pharmaceutical industry, so he must be bad.”
In one sense, however, Wolfe’s statement is logically consistent. Regulation itself is a preemptive condemnation of a business or industry. It is the opposite of objective law. Regulation assumes a business’s activities are illegal unless the business can show otherwise. Objective law, by contrast, protects the right of individuals to act unless the state can show that action violates the rights of others. Regulation does not protect individual rights, but the “public interest”, which simply means the arbitrary whims of the regulators.
The FDA presumes pharmaceutical companies will produce unsafe and worthless products unless the government regulates drug development. Thus, it’s consistent for Wolfe to argue an FDA commissioner should view the pharmaceutical companies with suspicion, even hatred. They are the enemy of the “public interest”, and the FDA is its guardian.
Under the big anti-spam bill passed by Congress last year, the FTC is required to "establish a mark or notice" that must be included with any unsolicited e-mail advertising "adult" content. After much thoughtful consideration by well-paid FTC attorneys and staff, the Commission issued a proposed rule today prescribing the required mark:
The FTC proposes to adopt a rule prescribing the phrase “SEXUALLY-EXPLICIT-CONTENT: ” as the mark or notice mandated by the CAN-SPAM Act. The proposed rule also would follow the intention of the CAN-SPAM Act to protect consumers from unwitting exposure to pornographic images in spam, by requiring this mark to be included both in the subject line of any e-mail message that contains sexually oriented material, and in the electronic equivalent of a “brown paper wrapper” in the body of the message. This “brown paper wrapper” would be what a recipient would initially see when opening a message containing sexually oriented material. It would include the prescribed mark or notice, certain other specified information, and no other information or images.
Since Congress made the FTC do this, I won't blame the commission for this fairly obvious waste of government resources. Still, you have to wonder what transpired at the meetings to decide "SEXUALLY-EXPLICIT-CONTENT" was the best notice to use. Apparently "GIRLS-GIRLS-GIRLS" wasn't enough warning.
Andrew Sullivan writes in Time Magazine about the descent of the Bush administration into what he describes as "Big Government moralism."
Once upon a time, Republicans believed in leaving it to the private and voluntary sectors to do the important work of building citizenship and values. Remember the "thousand points of light?" These days those lightbulbs need government subsidies. One of the key beliefs of this President is that federal money should be funneled to religious groups that blend proselytizing with important social work. His faith-based initiative largely withered on the vine, but he has done what he can. In last year's State of the Union message, he proposed almost half a billion dollars to pay for mentors for disadvantaged high school students or the children of prisoners. This year he proposed an extensive government program to coach newly released ex-cons into better lives. Ever wonder who these government-backed mentors are? And what exactly they're preaching? Maybe you should, because you're paying for them.
But can it really be said that Republicans have ever consistently stood for limited government? Ayn Rand made the following observations in her essay "Conservatism: An Obituary":
It is generally understood that those who support the "conservatives," expect them to uphold the system which has been camouflaged by the loose term of "the American way of life." The moral treason of the "conservative" leaders lies in the fact that they are hiding behind that camouflage: they do not have the courage to admit that the American way of life was capitalism, that that was the politico-economic system born and established in the United States, the system which, in one brief century, achieved a level of freedom, of progress, of prosperity, of human happiness, unmatched in all the other systems and centuries combined--and that that is the system which they are now allowing to perish by silent default.
If the "conservatives" do not stand for capitalism, they stand for and are nothing; they have no goal, no direction, no political principles, no social ideals, no intellectual values, no leadership to offer anyone.
Yet capitalism is what the "conservatives" dare not advocate or defend. They are paralyzed by the profound conflict between capitalism and the moral code which dominates our culture: the morality of altruism. Altruism holds that man has no right to exist for his own sake, that service to others is the only justification of his existence, and that self-sacrifice is his highest moral duty, virtue, and value. Capitalism and altruism are incompatible; they are philosophical opposites; they cannot co-exist in the same man or in the same society. The conflict between capitalism and altruism has been undercutting America from her start and, today, has reached its climax.
That was in 1966. The conservatives since then have hardly changed. As Sullivan observes:
There has always been a tension in conservatism between those who favor more liberty and those who want more morality. But what's indisputable is that Bush's "compassionate conservatism" is a move toward the latter--the use of the government to impose and subsidize certain morals over others. He is fusing Big Government liberalism with religious-right moralism. It's the nanny state with more cash. Your cash, that is. And their morals.
The trouble is there are few voices that are willing to address the real problem. Many on the right question Bush's spending, but few, if any will challenge Bush on his religious faith. When a mistaken moral premise remains unchallenged, nothing positive can come from it.
::: posted by Nicholas Provenzo at 10:58 AM |donate | link
Tuesday, January 27, 2004::
Rights & Reason: Blair Stumbles on Education
Tony Blair’s government barely survived a key vote in the House of Commons taken just a few minutes ago. Blair and his education secretary, Charles Clarke, have been pushing a package to reform the fee structure for English universities, all of whom fall under government control. This afternoon’s vote was on a preliminary motion to allow the reform bill to proceed to committee. Blair normally enjoys a Labour Party majority of 161 votes in the Commons; today’s vote went 316-311 for the government, a majority of just five votes. A defeat would have probably led to an official vote of confidence in the government.
The British have traditionally subsidized undergraduate education. In 1998, the Labour government instituted a fixed-fee rate for universities. Under this system, students paid an upfront fee of £1,125 per year (the fee was reduced or waived for lower income families). Students take out loans to pay these fees and their living expenses, and pay them back after they graduate when they earn more than £10,000 annually. Keep in mind, the £1,125 covers only a small fraction of the university’s expenses—the taxpayers still foot more than 90% of the bill.
Under the new Labour proposal, the upfront fee will be replaced in 2006 with an annual fee set by the individual university—no more than £3,000—which students will repay after they graduate and earn more than £15,000 annually. This means the government will basically loan students the money to attend school. But unlike a traditional loan, there will be no interest charged, and the amount to be repaid will be based on a student’s post-graduation income, not the amount borrowed. In practice, a student earning £18,000 after graduation will only “repay” £5.30 per week—or about £265 annually. The debt will be entirely written off after 25 years, a protection for those who don’t work in profitable fields or remain unemployed.
By American standards, both the existing British system and the proposed reforms are socialist nonsense. But even Labour’s modest reforms caused a major backlash. Many Labour parliamentarians want fees abolished altogether; they would increase taxes (on the wealthy, of course) to fully subsidize all undergraduate education. Labour opposes any effort to “marketise” the university system. They want education to remain a socialist program immune from market competition. This is why allowing the universities any discretion in setting charges is politically unpopular. To guard against opposition, Blair insists the £3,000 annual price cap may not be raised until at least 2009, and only then by a direct vote of both houses of Parliament. Blair may be a reformer, but he is not a capitalist.
This is what happens when you classify education, or any service, as a “right”. You’re left with arbitrary price controls set by politicians, persistently under-funded universities, and a system that cannot respond to changing demands. Opponents of Blair’s plan don’t want to see Britain go down the American road of having people choose a university based on ability to pay. But our system, imperfect as it is, offers not only a larger, more dynamic market for higher education; it also avoids the trap of being a constant drain on taxpayer revenue. We have the government-run elementary and secondary schools for that.
(And yes, there are many state government-run colleges in the U.S., but these schools still must compete in the market against private-sector schools. American politicians are also not as committed to socialism as their British counterparts, since almost all state universities here charge tuition that far exceeds the modest amounts being protested in England.)
An issue like this exemplifies the widening philosophical chasm between Europe and America. In this country, the movement towards free markets is growing, despite the opposition of establishment leaders. But across the pond, socialism maintains its death grip on the population. For this reason, I give Tony Blair credit for even trying to address the tuition issue. His reforms won’t produce much substantively if enacted, but his willingness to stake his government’s survival just to move the rock a few inches shows a level of character this country’s president would never demonstrate.
The burden now falls to Britain’s conservatives to develop a more substantial plan for reforming university financing, because Tony Blair cannot go any further without committing political suicide. Michael Howard, the new Tory leader, has suggested the idea of partially privatizing Britain’s universities, meaning they would subsidize undergraduate education from institutionally-controlled endowments rather than taxpayer coffers. Howard’s specific plan is still unknown, but he must act quickly to seize control of this issue.
I've seen the Dean scream from last week's Iowa caucus. I don't get how it reveals Howard Dean to be unbalanced.
There are a multitude of reasons to oppose the Dean candidacy. Dean's strident opposition to the war in Iraq, his desire to raise the taxes of the productive, his willingness to expand the size of government far beyond even the recklessness of the worst Republican, all disqualify him for the presidency. The Dean scream does not. All the man did was deliver an impassioned speech to rally disheartened supporters after a disappointing defeat.
Yes, there was a certain pro-wrestling flair to the speech. But the scream alone is not a disqualification for anything, except perhaps the job of librarian.
I want to see Dean defeated for the right reasons. To see him defeated because of a triviality, when he represents a host of vicious views, in my mind, is what is really unglued about this campaign cycle.
::: posted by Nicholas Provenzo at 1:10 PM |donate | link
Capitalism & Law: Muzzling Martha's Defense
The next time you hear President Bush or Attorney General Ashcroft argue they need more powers, under the Patriot Act or what-not, to make America safe from its enemies, consider what's transpired in the Martha Stewart trial:
Among the limitations placed by Judge Miriam Goldman Cederbaum [on Martha Stewart's defense team] were the inability to say that the home decorating expert was being prosecuted for proclaiming her innocence in the case or for asserting her First Amendment right to free speech.
The defense also is barred from saying that the securities fraud charge Stewart faces is a novel application of securities laws, and from making statements that would tend to show the government's motives in investigating or prosecuting Stewart were improper. The defense also can't say that the fact Stewart and former broker Peter Bacanovic aren't facing criminal insider trading charges means the government doesn't believe they committed such a crime.
In other words, Stewart is being denied her right to present a defense theory consistent with the facts of the case. And for all of the president's bemoaning "judicial activism" in last week's State of the Union, the judge in Stewart's case appears set to gift wrap a conviction for the prosecutors. Funny how the president never considers prosecutors "activist," only the judges who put individual rights ahead of government power.
The Oscar nominations are out. The only thing I find interesting about that is Sofia Coppola's nomination for best director for "Lost in Translation." I haven't seen the film, but what's noteworthy is that Coppola is only the third woman ever to be nominated for best director. That's interesting given the Hollywood establishment's strident, often militant leftism. They never tire of lecturing the rest of America on its alleged homophobia, sexism, racism, etc., yet the establishment itself remains dominated by white males. This is similar to how colleges promote affirmative action as a necessity, yet there are only four black head coaches among the 117 Division I-A football schools. It's a curious double standard with no obvious explanation.
Then again, maybe Ms. Coppola was a "legacy nomination," given her father is the Oscar-winning director Francis Ford Coppola.
If John Kerry wins the Democratic presidential nomination, history strongly suggests he’ll lose to President Bush in November. Here’s the telling statistic: In the past 21 elections, only five serving senators received their party’s presidential nomination, and only two of those—Warren Harding and John Kennedy—won the general election. Harding and Kennedy both ran in elections where there was no incumbent president standing for reelection. The other three senators that were nominated lost to sitting presidents: Barry Goldwater to Lyndon Johnson, George McGovern to Richard Nixon, and Bob Dole to Bill Clinton.
In the last 14 elections where the Democrats did not run an incumbent president, the party nominated a governor eight times, a vice president three times, a senator twice, and a former ambassador once (the anomalous 1924 nominee, John W. Davis, chosen on the 103rd ballot). The strong preference for governors in non-incumbent elections exposes the shallowness of the 2004 Democratic field. The only governor to run is Vermont’s Howard Dean, hardly a national leader before his campaign staff discovered blogging and Meetups.
The lack of a more prominent governor or governors is due to the fact the Democrats have no such figures. Before the 2002 elections, Democrats held the governorships of just two of the ten largest states, and one of those governors was California’s recalled Gray Davis. While Democrats did capture and hold five of these ten governorships in 2002, contemporary politics eschews new governors running for president. This gives Democrats a decent bench for 2008, but left them practically barren for this year. The result is a trio of mediocre senators, an unusually angry ex-Vermont governor, a retired general fired for incompetence, and Al Sharpton seeking the nomination.
A senator’s career consists largely of pandering to narrow interest groups and contradicting oneself on important issues. This is why senators tend to make poor national candidates. They lack the executive experience of a governor or a vice president, and they generally have a body of contradictory positions littering the Congressional Record. One reason Kennedy and Harding succeeded, I suspect, is that neither man compiled much of a record to speak of while serving in the Senate. By contrast, John Kerry has spent years trying to be all things to all people, and even a mild examination of his record will expose him as a fraud.
According to presidential candidate Al Sharpton, "The top one percent in this country pays very much less than ten percent, very much less than five percent."
Sharpton said he thinks the wealthy should pay "somewhere around 15 percent."
But that's so silly because — and I bet most of you don't know this — the IRS says the richest 1 percent of taxpayers already pay 34 percent of all income taxes. Twice what Sharpton wanted them to pay.
Still you may feel the rich should pay even more. It's a tempting thought, since they have so much.
But let's remember the facts: the top 1 percent of Americans — those who earn more than about $300,000 a year — pay 34 percent, more than a third of all income taxes, and the top 5 percent, those making over $125,000, pay more than half.
The purpose of taxation is to finance government operations. But the purpose of the "progressive" income tax is to forcibly redistribute wealth from those who earn it to those who demand it. It's a remarkably simple principle that most politicians are incapable of acknowledging.
But ignoring reality has consequences. When politicians raise taxes on the rich and pass other laws designed to prevent wealth creation—i.e. regulation—the result is massive budget instability. The California budget crisis that swallowed former Gov. Gray Davis was due to this "soak the rich" mentality, as Sacramento Bee columnist Daniel Weintraub explains:
California's skewed income distribution, combined with progressive tax rates, means that the people at the very top of the income heap pay a very high percentage of the personal income tax collected in this state.
Their extraordinary, onetime income surge at the end of the last century provided most of the new tax revenue that legislators and former Gov. Gray Davis used to raise teacher salaries, increase welfare benefits and expand eligibility to state-provided health care. But the decline that followed also accounted for most of the revenue drop that contributed to the state's fiscal crisis. And as of the most recent tax year, they hadn't hit bottom yet.
The million-dollar earners peaked in 2000, when 44,000 of them -- about enough to fill your average baseball stadium -- reported incomes totaling $172 billion and paid more than $15 billion in taxes. The tax take from that relative handful of returns accounted for more than one-third of all income tax paid in the state.
The next year, the number of returns reporting incomes that high slumped to 29,000. Their combined income also declined, by nearly half, to $95 billion. And here was the killer: Their tax liability dropped from $15 billion to just under $8 billion.
Any wealth redistribution scheme will ultimately collapse under its own weight: Social security will fail because eventually the present workforce won't earn enough to support the growing beneficiary population; Medicare will fail when the government cuts reimbursements to the point where doctors stop participating; government schools will crack under pressure from private competitors and home educators. The only defense mechanism the government has is to raise taxes and prevent competition. But these alternatives only prolong the inevitable.
The ongoing civil war in open-wheel motorsports took an interesting turn last Thursday when the Indy Racing League offered to buy the assets of their bankrupt rival, Championship Auto Racing Teams. The IRL split from CART in 1996 over philosophical differences, with the newer circuit running exclusively on oval tracks mostly in the U.S., while CART maintained an international series on various forms of racetracks.
IRL’s growth has been steady but hardly NASCAR-like. CART has declined in popularity and had already lost $78 million in the first nine months of 2003, which led to the bankruptcy filing. Unlike the IRL and NASCAR, which are privately owned, CART is a publicly trade corporation. This has traditionally been a bad model for professional sports, which is why you don’t see many leagues incorporate. And even though CART is the older of the two open-wheel series, IRL is owned by the family that owns the Indianapolis Motor Speedway, which not coincidentally runs the Indy 500. That race has lost some of its luster since the CART split, but it’s still the most profitable and publicized open-wheel race of the year.
The IRL is the second bidder for CART’s assets. The first bidder, Open Wheel Racing Series LLC, plans to run a full race series in 2004. The IRL’s plans for CART remain sketchy, though it’s unlikely they would run a competing series. I won’t comment on which bid is stronger, but I can already see a potential antitrust complication: If the bankruptcy judge goes with the IRL bid, then Open Wheel group could turn around and file an antitrust suit, claiming the IRL is attempting to eliminate competition in the “open wheel motorsports” market. The fact that neither circuit can hold a candle to NASCAR or other sports leagues won’t matter to an antitrust case. Nor will CART’s financial insolvency be considered relevant, since failure isn’t an antitrust defense.
It also wouldn’t matter that a CART-IRL merger would be the best thing for the industry right now. Even under private ownership, CART will never be profitable because it lacks substantial base support in the United States and it doesn’t have the Indy 500. ESPN’s Robin Miller explains how the two series could be reunited:
The assets purchased by OWRS include seven profitable events at Long Beach, Calif., Toronto, Montreal, Vancouver, Mexico City, Monterrey, Mexico and Surfer's Paradise, Australia, that draw big crowds. Cleveland made a bit of a comeback this season and Elkhart Lake remains the truest test of road racing in North America. St. Petersburg showed great potential in its debut. They're all worth saving, plus Milwaukee, which the IRL is already going to for the first time in 2004.
Putting those 10 with the IRL's best tracks (Texas, Kentucky, Kansas City, Chicago, Phoenix, Fontana, Motegi and Indy) might be the kind of mix that would reinvigorate fans, manufacturers, drivers and sponsors.
"Let's go by the theory that open wheel racing will be unified again," said [Paul] Gentilozzi, who does most of the talking for OWRS. "We need a 20-race season with 10 great road courses or street circuits and 10 great ovals.
IRL remains committed to a principally oval series, and this philosophical divide is the greatest roadblock to unifying open-wheel racing. But this is a situation that calls for compromise in the name of pursuing business success and greater profits. Whatever the bankruptcy judge decides, let’s hope CART’s downfall doesn’t become another excuse to enrich antitrust lawyers.
The Supreme Court punted on the Andrx case today, delaying a decision on accepting the case until the Solicitor General files a brief “expressing the views of the United States”. This is the second antitrust case this term where the Court has done this: Last fall, the Court delayed a decision on 3M’s appeal of a $68 million antitrust judgment until the Solicitor General could, er, tell Justice O’Connor what to do.
I know there is some appellate law justification for the practice of delaying consideration of a petition and inviting the Solicitor General to file a brief. But there was nothing stopping the Solicitor General from filing a brief during the same time everyone else—including, in this case, CAC—had to file. The fact the Justice Department chose not to file should be sufficient for the justices. After all, if the Court grants Andrx’s petition, the Solicitor General can still file a brief at the merits stage.
The reliance on these so-called “invitation” briefs demonstrates, to me, the increasing institutional paralysis of the current Court. Justice O’Connor is a major culprit in this. She does everything in her power to avoid making a decision on the merits of important cases. But the rest of the Court must share the blame. In the Andrx case, there are no rational grounds for refusing to hear the case: There is a clear circuit split on an issue of major importance. We’re talking about billions of dollars in potential liability—in this and future cases—if Andrx loses. If the Court can’t accept this case without asking for Ted Olson’s permission, then they’re completely worthless as a judicial institution.
On one hand, it's amazing that at 34, I've seen so much of America. On the other hand, since there is simply so much to see, I wonder if I could ever truly clam to have seen all that makes up the soul of America.
Yet what I think is most incredible is when one considers when America was founded, years ago, our forefathers feared that there would be insufficient communication between the states to bind the union together. In his will, Washington left a portion of his estate to what later became George Washington University for the sole purpose of creating an institution where students from all across America could leave their regional prejudices behind and study together under a common banner.
Now, 200 years later, a young man can visit almost two-thirds the nation and do so on a meager budget. In many ways, America is an amazing nation.
::: posted by Nicholas Provenzo at 9:47 PM |donate | link