Vacation

Sorry to my regular readers, I've been on vacation for the last week and neglected putting up any posts while away. I'm back now refreshed and ready for regular posting.

School Closings

Some are worried about No Child Left Behind school closings. With the closings, they believe, students will struggle trying to find new schools and class sizes will increase. However, that's not the case, charter and private schools can pick up the slack, espescially with vouchers for children who have been cheated in a failing school.

A problem many charter schools have, though, is finding space to hold classes. The school from "Our School" had that problem. Well, public school closings help fill that need as well.

"If we could get the building this year, it would be awesome," said Murdock, whose plan is to open the Nia Community Public Charter School in a Baptist church annex that she expects to outgrow in three years. "I would hate to see [the school system] close down facilities and let them sit vacant when charter schools could use them."

For charter school officials, who are marking the 10th anniversary of the launch of their movement with festivities this weekend, the downsizing of the regular school system is a golden opportunity to relieve a longstanding space crunch. The District's pricey real estate market has forced many of the independently run schools to hold classes in less-than-ideal places -- community centers, church basements, warehouses, even spaces above or beneath convenience stores.

Now they are eyeing the six schools that Superintendent Clifford B. Janey wants to close, as well as space in nine other school system facilities that would be available for leasing under his plan. The school board plans a final vote June 28 on the proposal, which would eliminate 1 million square feet of space. The board has promised to shed another 2 million square feet by August 2008.

"This is the best opportunity we've had to solve the facilities problem," said Robert Cane, executive director of the advocacy organization Friends of Choice in Urban Schools (FOCUS), which is sponsoring a gathering in Anacostia Park and open houses at most city charter schools tomorrow to celebrate the anniversary of the law allowing such schools to be established in the District.

There are currently 51 D.C. charter schools, with more than 17,400 students, while the school system's enrollment has dropped from 80,000 to 58,000 over the last decade. Members of the D.C. Council and Congress have pressed the school board to lease the unneeded space to charter schools, which are spending $16 million a year on leases in the commercial real estate market.

Charter school officials have long complained about difficulties they've faced in getting hold of former public school buildings, and the closings plan could increase those tensions. A dispute already has broken out over whether federal law gives charter schools a right of first refusal on the buildings to be vacated this summer.

Political Posturing

Radley's Fox column this week is about political posturing in the face of high gas prices. Politicians, typically, are pretty free market until the laws of supply and demand produce results that make their constituents jumpy. The best thing to do, of course, is let the market play out, alternative energy sources will become profitable and energy prices will go down.

The really perverse thing about all of this is that at the same time they're carrying on about high gas prices, the same politicians are talking about the importance of alternative energy and our "oil dependence." But alternative energy sources will emerge the day they become more efficient and profitable than gasoline.

So long as gas is cheap, gas will continue to be our preferred source of energy. Once gas grows scarce, and consequently more expensive, other fuel sources will become lucrative -- at which point someone will develop them, sell them, and get rich from them.

But politicians can't just sit back and let the market take its course. They need to control things. So even as they're bending over backward to keep gas artificially inexpensive (staving off market incentives to develop alternative fuels), they're giving billions of taxpayer dollars to research and development boondoggles (read: corporate welfare) to find replacements for gas. It's waste stacked on waste stacked on waste.

Brewing Up a Business

I read Brewing Up a Business: Adventures in Enrepreneurship From the Founder of Dogfish Head Craft Brewery by Sam Calagione. If you live in the midwest it's doubtful you've ever heard of Dogfish Head, actually if you live on the east coast you're probably just as likely to have never heard of Dogfish Head brewery. Sam Calagione founded Dogfish Head because of his love of craft brewing and experimenting with different beer styles. Calagione likes to use nontraditional ingredients and infuse them into traditional beer styles making them his own. His brews are the premium of the premium, costing, in many cases $10/6-pack. Beers such as Immort Ale and Raison D'Etre are not really accessible to Joe Six-Pack swilling Budweiser sixers, but to beer geeks these are great flavors and interesting brews.

Anyway, Calagione tells of his experiences, failures and successes in opening his microbrewery and brewpub. It's an interesting story, expecially for someone who enjoys entrepreneurial stories, small business and most of all beer. It's like the perfect storm of stories for me. Dogfish Head Brewery would fit perfectly in the "Small Giants" book. Calagione is seeking to make the most creative brew, not necessarily the beer for the average beer drinker. Dogfish Head beer is for the beer geek and is pushing the bar for breweries nationwide.

Calagione tells a compelling and entertaining story. His management and leadership insights are fun and well reasoned, citing real situation examples that really cement ideas in your head better than many management books. "Brewing Up a Business" is a real accessible management book, much more accessible than their beer, which I've never tried. Sam if you read this send me a sixer, I'd love to try it. If you really want I'd like to have it on tap at the house. At the very least, I'll look for it on my next trip east.

Willis Shocker

Bruce Willis apparently digs the Shockers.

In answer to Clark's question, I'll bet he's a fan of Blueberry Tofu.

Sutcliffe Drunk

Great audio of a drunk Rick Sutcliffe (one of my favorite ex-Cubs) joining the Padres broadcast booth for an inning. Apparently Sut had hoisted a few with buddy Bill Murray before and during the game.

Liberal Litmus Test

Jane Galt joins Dan Drezner in taking Atrios' liberal litmus test. When I first read this list (paraphrased here by Kevin Drum), I was opposed to most of the items immediately but was most blown away by the triviality of most of the items, they were basically feel good items for liberals with no real effects. So here goes my feelings on the items:

Undo the bankruptcy bill - No, it does help creditors and I don't see it as a huge impediment to those who really need to file for bankruptcy.
Repeal the estate tax repeal - No, basically inconsequential and I can't think of a reason why the government would feel entitled to this money, it's already been taxed once.
Increase the minimum wage and index it to the CPI - No, doesn't have the intended effects and will worsen recessions
Universal health care - Never in a million years
Increase CAFE standards - Market will increase MPG in autos
Pro-reproductive rights, getting rid of abstinence-only education, improving education about and access to contraception including the morning after pill, and supporting choice. On the last one there's probably some disagreement around the edges (parental notification, for example), but otherwise. - Kind of a broad topic, but, I wouldn't limit access to contraception, wouldn't want the government involved in sexual education in any case, and can support 'pro-reproductive rights', so NO.
Simplify and increase the progressivity of the tax code - Simplify yes, but progressivity would not be a deciding factor, flat tax is the way to go.
Kill faith-based funding. Certainly kill federal funding of anything that engages in religious discrimination. - I'd be all for getting rid of a lot of funding, so yes.
Reduce corporate giveaways. - Pretty generic, but, any subsidies and tariffs should be looked at and probably eliminated so Yes.
Have Medicare run the Medicare drug plan - Get rid of Medicare and the Medicare drug plan, No.
Force companies to stop underfunding their pensions. Change corporate bankruptcy law to put workers and retirees at the head of the line with respect to their pensions. - Worst idea ever!
Leave the states alone on issues like medical marijuana. Generally move towards "more decriminalization" of drugs, though the details complicated there too. - Yes, legalize, tax and regulate.
Paper ballots - Inconsequential, Luddite and No
Improve access to daycare and other pro-family policies. Obviously details matter. - No, no government intervention needed.
Raise the cap on wages covered by FICA taxes. - Only if that money is used to fund a private account system, otherwise no.
Marriage rights for all, which includes "gay marriage" and quicker transition to citizenship for the foreign spouses of citizens. - I'll go with a yes, but overall pretty inconsequential.

So I have 11 No's on 16 questions. I am decidedly not a liberal in Atrios' eyes. However, I received a questionnaire from Chairman Ken Mehlman of the Republican Party. I disagreed with much of the questions on that questionnaire, so I'm probably not a Republican (at least in good standing). I sure do wish there was a viable 3rd party.

The Postaffluent Society

I think George Will took a wrong tack last week when he wrote about John Kenneth Galbraith's ideas and writings.

Galbraith brought to the anti-conformity chorus a special verve in depicting Americans as pathetic, passive lumps, as manipulable as clay. Americans were what modern liberalism relishes -- victims , to be treated as wards of a government run by liberals. It never seemed to occur to Galbraith and like-minded liberals that ordinary Americans might resent that depiction and might express their resentment with their votes.

Advertising, Galbraith argued, was a leading cause of America's "private affluence and public squalor." By that he meant Americans' consumerism, which produced their deplorable reluctance to surrender more of their income to taxation, trusting government to spend it wisely.

If advertising were as potent as Galbraith thought, the advent of television -- a large dose of advertising, delivered to every living room -- should have caused a sharp increase in consumption relative to savings. No such increase coincided with the arrival of television, but Galbraith, reluctant to allow empiricism to slow the flow of theory, was never a martyr to Moynihan's axiom that everyone is entitled to his own opinion but not to his own facts.

A better strategy would be to just quote Galbraith and let the reader come to their own conclusion that those ideas are bankrupt, as Robert Samuelson did today.

"Automobiles have an importance greater than the roads on which they are driven," he wrote scornfully. "Alcohol, comic books and mouthwash all bask under the superior reputation of the [private] market. Schools, judges and municipal swimming pools lie under the evil reputation of bad kings [government]." The book argued for more government spending and less private spending.

The World Is Flat

Over the weekend I finished reading "The World Is Flat" by the mustache of understanding, Thomas Friedman. All jokes aside about how Friedman doesn't really understand metaphors and the fact that he's an egomaniacal starf***er, I typically enjoy Friedman's writing. I think he gets a lot of criticism because he doesn't fit neatly into the liberal/conservative worldview of the United States. Instead he has his own ideas (which I don't agree often) but he's able to present them and his support for them without denigrating others' ideas, which is increasingly rare.

In "The World is Flat", Friedman explores the triple convergence of events that has, in his words, flattened the world. The factors of production can be almost anywhere and work on almost anything. The increased use of the internet, workflow tools and standardized software packages has flattened the world because of increased collaboration between citizens of different countries. Of course, this is a giant "well, duh" but Friedman explores the causes and the effects of these changes that have occurred since he wrote "The Lexus and the Olive Tree", another good book.

I did like "The World is Flat", Friedman consolidated some thoughts I had had. But, while reading, the thing that struck me the most was the hopefulness of Friedman. There was a palpable sense of optimism in the book and that made even more enjoyable for me. Friedman explored a favorite topic of mine, how easy it is for the world's poor to plug into the global marketplace. All it takes, in many parts of the world, is an internet connection and an ebay account and you can have your own marketplace. The problem lies in government regulations and red tape that hinder an individual's ability to start their business.

I think Friedman did an excellent job at presenting the world as he sees it. And, in turn, it was fun to read. I don't think there were too many great insights from Friedman, but he did get me thinking about several ideas. If a book can get me to think, I will typically enjoy it, "The World is Flat" got me thinking and I did enjoy it.

Costa Rican Flat Tax

The Costa Rican President-elect, Oscar Arias, is poised to introduce a flat tax on corporate and individual earnings. Taking a cue from the successful Eastern European countries, Arias hopes it will increase Costa Rica's competitiveness. Mary Ansastasia O'Grady had a nice editorial in yesterday's WSJ about Arias' plans.

Yet the flat tax has already proved an effective way to fight poverty in a host of developing countries. (See nearby table.) For individuals, tax evasion goes down and tax collection goes up because of better compliance. Low corporate rates attract capital, spurring economic growth and job creation. That means there is more money in government coffers to help the needy. Without a laundry list of tax exemptions and loopholes, corruption is thwarted.

Emphasis mine, this thought of reducing corruption brings to mind John McCain saying recently he would rather have a clean government than free speech, he could adopt a flat tax proposal and significantly reduce tax complexity, thereby reducing corruption. Instead he seems focused on reducing free speech.

Another benefit of a flat tax and a good way to sell it would be as an offset of runaway gas prices. From Cafe Hayek:

The average price of unleaded 87-octane gasoline in 2004 was $1.88 per gallon. Today it's about $2.93 -- so, $1.05 per gallon more today than in 2004. Thus, at $2.93 per gallon, we Americans are spending $68.3 billon more per year for gasoline than we spent in 2004. (I'm crudely assuming that this higher price of gasoline doesn't cause the quantity demanded of gasoline to fall. Of course, to the extent that this higher price does cause quantity demanded to fall, the extra amount of money we spend on gasoline per year will be lower than $68.3 billion.)

Let's put this figure in perspective: According to this just-released paper from the Cato Institute, Chris Edwards reports that the annual cost in 1995 of complying with federal-income-tax requirements was $112 billion. In 2005, this compliance cost was up to $265 billion -- $153 billion more in 2005 than in 1995. Adjusted for inflation, this compliance-cost increase is $122 billion (in 2005 dollars).

Note that in 2005 our cost of complying with federal-income-tax regulations was $53.7 billion more, in real 2005 dollars, than the extra amount we're now spending compared to 2004, on an annual basis, for gasoline.

And Congress has the gall to pontificate about the alleged unacceptability of the higher prices now charged by oil companies.

To me, it's clear that a simplified tax code with a flat rate would benefit nearly everyone, clean up some corruption and make the United States even more competitive.

Back to Costa Rica:

The traditional Latin American method of curing the condition known as scarce resources is to raise taxes. But one reason the budget is already strained is that Costa Rica's steeply progressive income tax rates for individuals have provoked skyrocketing evasion. Government estimates say 70% of taxes owed are not paid.

On the corporate side, the current rate of 30% already discourages investment. And Costa Rica's special tax-free zones for exporters need to be phased out by 2009 if the country is to remain compliant with World Trade Organization rules. Thus there are strong incentives to create a new flat tax for both individuals, to boost compliance, and for corporations, to regain competitiveness.

Introducing a flat tax is analogous to hanging out a sign that says: Open for business. Just ask Slovakia, which in 2004 adopted a flat tax for corporations and individuals of 19%. Since then it has been drawing in large amounts of capital from Western Europe and its economy is growing rapidly. After Russia implemented a 13% flat rate for individuals, evasion went down and revenues rose sharply.

Mr. Arias already understands the connection between lower corporate taxes, investment and rising living standards. He has mentioned Ireland, with its 12.5% corporate rate, as a model for Costa Rica. The Costa Rican daily La Nación reported last month that he was considering special corporate tax zones with rates below 10%. Referring to a 15% rate under discussion in Congress, La Nación reported that "Dr. Arias asserted that one cannot fool himself thinking that anyone can compete at that high tax."

That's a promising start for the debate but to be competitive Costa Rica will have to avoid a policy of limiting low flat rates to special economic zones since other flat-tax countries don't attach strings. Moreover, as Chris Edwards of the Cato Institute points out, "Carving out special tax rates and incentives for particular industries and regions is not only inefficient, it is an open invitation for corruption."

There is growing support for a flat tax from some of Costa Rica's opinion makers. An April 10 editorial in La Nación supported the idea and an important former central bank president has come out in favor of it. If Costa Rica introduces a flat tax now, it could get a jump on its Cafta neighbors in attracting investment. With its highly literate population, a flat-tax Costa Rica could easily become a prime destination for multinational investment.

A recent KPMG survey reported that the average corporate rate for the Latin American region is over 28%. That means that any Latin country that adopts a simple, low rate for the entire nation will instantaneously grant itself a vast comparative advantage. Over to you, Mr. Arias.

At this point in Latin America, any country that is pro-business is welcome. Incorporating a flat tax with competitive rates really sends the message, as O'Grady puts it, that you're open for business.

Optical Inch

Hilarious ad campaign about a sensitive male issue.

Click all the links, the music video is priceless.

The longer you wait the longer your pubes get.

Denkinger

Last night, while watching the Sox-Yankee game I realized that the ESPN show "Top 5 Reasons You Can't Blame.." was on and it was about Deckinger's blown call in the '85 World Series. It's clear that Orta was out at first, but that play had very little real effect in the game or should have. The Cardinals virtually self destructed after that call. I maintain that champions can overcome the adversity that comes from a bad call. The fact that the Cardinals didn't even compete after the call is evidence of the fact that the Cardinals did not deserve to win that series.

Anyway, the show was fabulous (I've seen it several times and enjoy it every time) and really brings back to my memory those great days of that World Series. And it's always good to remember that the Royals not only won that championship, but they completely demoralized the Cardinals. Also, I learned from the show of the Keith Hernandez curse. How great is that!

Bolivian Nationalization

I've been thinking about Bolivia's seizure of the country's natural gas industry since I wrote about it yesterday. I didn't really give it any attention in that post because my natural reaction to nationalizing a previously private enterprise is entirely negative.

Since a country taking over a private company's assets is seen in the business world as completely negative and would affect investment in capital assets by private enterprise because without property rights that investment is basically at risk of becoming an expense. However, Ricardo's theory of comparative advantage dictates that a country should focus it's power on those industries it does best, would effectively turning off the spigot for foreign direct investment in your country and running an economy based on natural gas extraction be an advantage for Bolivia?

53% of FDI projects are extraction projects. If the state takes over those projects and lose all the rest (they haven't had any significant FDI projects in 2 years), and they trade natural gas for other products to sustain their economy, aren't they taking full advantage of their comparative advantage?

I would think my initial reaction that state control of the industry would not be beneficial for Bolivia, but I'm interested in if it could get Bolivia to (I don't know what the opposite of autarky is) complete specialization and if that would outweigh the state control (assuming, of course, a stable government).

Shocker Escort

How important are Shockers to baseball? The Red Sox traded for Doug Mirabelli yesterday morning. They then chartered a jet and arranged for a police escort to get Dougie to the game on time. Not too many times has a player received a police escort to a game in May. It must be because he's a Wichita State alum.

Curse of Natural Resources

Unfortunately Bolivia is going to experience the curse.