Blog Review 975

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It's hardly a surprise that unions attempt to use the law to make life easier for their members now, is it?

Is California broke because it doesn't raise enough in taxes? Or because it spends too much money?

Best comment so far on the upcoming elections.

At last! An economic explanation for why modern art sucks.

Although it has to be said, some economists can have some odd thoughts at times.

Zimbabwe's problems: no, not caused by colonialism, drought or anything else except appalling policy.

And finally, did we domesticate cats or did they domesticate us?

A good time to die

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altThe US state of New Hampshire has as its motto, “Live Free or Die." The US taxpayer may soon adopt a similar “Live Tax-free or Die" mantra when a provision in US tax laws causes a massive jump in the federal estate tax rate.

During his first election campaign, George W. Bush railed against the so-called “death tax." Soon after taking office, Bush and a Republican-led Congress introduced sweeping tax reforms, including a programme that would gradually reduce, and ultimately eliminate, the estate tax.

The American estate tax system sets a flat rate at which estates in excess of a specified value will be taxed upon the death of the estate holder. That rate has decreased for each of the last nine years, and in the 2010, the estate tax will be eliminated altogether. The estate tax reprieve is only temporary, however. In 2011, the reduction expires, and the estate tax rate returns to the original fifty-five percent level.

Many cynical observers speculate that 2010 will bring there will be a spike in the deaths among wealthy estate holders who hope to avoid the estate tax. Perhaps not wanting to see a sudden depletion of the nation’s wealthiest citizens (and most capable campaign fund contributors), the US Senate recently voted to reduce the 2011 estate tax rate to thirty-five percent. Notwithstanding the Senate’s willingness to compromise, estate holders who die in 2010 will be able to pass on one-third more of their estate to their heirs than those who die in 2011.

Americans are renowned for their tax aversion, but in 2010, the world will find out just how far wealthy US taxpayers are willing to go to remain estate tax-free.

REG: Regulation and NEDs

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Our Regulation Evaluation Group (REG) kicked off its new series of lunchtime roundtable discussions this week at the headquarters of the British Venture Capital Association in Central London. The speaker was Mark Austen, former head of PwC's global banking and finance practice, and he focused on the role of non-executive directors (NEDs) on company boards, particularly within the banking and finance sectors.

Much of the discussion, however, centred on the problems that NEDs – and other directors too – have in dealing with the Financial Services Authority (FSA). Directors claimed that even a small financial enterprise can face a levy of £750,000 or more for the FSA – that's on top of even costlier insurance requirements – and be required to fill in hundreds of forms each year. But little seems to happen to the data that is connected, and directors are given no indication of whether the FSA considers them acting sensibly or not. The regular meetings with FSA personnel seem to focus principally on how institutions treat their customers, rather than whether they might be taking too large risks and going bust. Which might explain something of our recent troubles.

In other words, we already have plenty of regulation – though most of it is misdirected. That's not preventing the EU from proposing even more extensive regulation, of course, to the point where even the company that makes Kettle Chips would have to be regulated by the FSA – which sounds pretty daft – and the UK economy will be saddled with yet another £1bn burden.

So we have more than enough regulation. What we don't have enough of is supervision of the sort that the Bank of England used to do reasonably well. The box-ticking FSA might have a role in the protection of retail financial-services customers; but the supervision of the banking sector, with a view to keeping them out of the systemic risk that precipitated the current crisis, needs to be done by a central bank.

Older gamers saved... from what exactly?

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altP2P is reporting that the EU is funding the development of game tables that allow older people to play video games:

According to Amparo Ruiz, an occupational therapist in Galicia, Spain who helped supervise some of the trials, “The elderly people like it when they play and feel integrated into the new technologies. “It’s also very important that I can get information about their attention, memory and other functions while they are playing, and then choose games that emphasis the areas where they have problems.

Surely we are old enough to remember ATARI game tables that ended up in bars and nerdy pubs? They are probably pretty cheap to pick up these days. I know a few people who have then at home. Why bother with a new "system" when one already exists? Is there something that the EU finds offensive about Pac-Man, Defender and other ATARI classics?

Scott Paul joins the ASI

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Scott is finishing a Juris Doctor degree at Brigham Young University’s School of Law. His research emphases include fiduciary duty law, religious freedom, and charitable giving instruments.

During law school, Scott served as president of the BYU student chapter of the J. Reuben Clark Law Society and on the board of the law school’s Government & Politics Legal Society. He also helped organize and run several international policy conferences hosted by the law school. Prior to law school, Scott received a BS in Psychology from BYU and then worked in Washington DC for the Nasdaq Stock Market.

Scott is an avid sports fan, a musician, and a budding social entrepreneur.

Blog Review 974

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There's more than a whiff of, well, something decidedly wrong, when some 20 MPs all pay the same company 20 times the market rate for their website.

If the Chancellor cannot do his tax return and has to use accountants: well, why not use the accountants to do the budget as well? Couldn't be any worse, could it?

Hoover made the Depression by cutting spending, didn't he? But if Hoover increased spending then that argument rather fails, doesn't it?

A reminder of what this free market thing is all about: the consumer surplus!

On the globalisation of crime.

It's true, this is a very difficult argument to sustain.

And finally, an unfortunate juxtaposition.

The UK’s AAA Credit Rating – Downgrade to Come?

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Over the last two weeks, Westminster attention has focused almost exclusively on the great expenses debate - where relatively small sums of money have been involved in buying quixotic items, such as duck houses.

More importantly, though, financial markets were spooked last week by confirmation from Standard & Poors, a leading credit rating agency, that it had moved the UK’s AAA credit rating to ‘outlook negative’ – the first time that the UK’s top-tier rating has been questioned since 1978.

Given the prodigious debt figures outlined in last April’s Budget, this response is hardly surprising. Indeed, the Budget numbers are truly alarming.

Net public sector borrowing this year is forecast to soar to £175 billion, whilst public sector net debt is projected to reach a staggering £1,370 billion by 2013/14, compared with £527 billion in 2007/08.

To fund this burgeoning deficit, the Government plans to issue £220 billion of gilts during this financial year.

Whilst last Thursday’s gilts auction was successful in selling £5 billion of short-term debt, it is long odds-on that some gilt auctions over the next 18 months will fail - especially if the UK’s prized AAA credit rating is removed.

In short, UK spending and borrowing is veering out of control; hence, the deep concerns of credit rating agencies inter alia.

What is needed, above all, is a sustained effort to cut back public expenditure, where so much money is wasted. Imposing substantial across-the-board cuts - in real terms - would be a good starting point.

Otherwise, the UK’s ability to fund its massive deficits will be seriously compromised.

The alternative, of course, is to call in the IMF, which also stated last week that the UK needed to cut its debt more quickly than proposed in April’s Budget.