The Pin Factory Blog

The US is in recession – it's official. Well, maybe not quite official, but according to quite a few people like former US Treasury Secretary Larry Summers it is, while folk like Lehman Brothers are predicting negative growth for the first two quarters of this year – which would indeed be a recession on the standard definitions. Some think that as people lose their jobs and fail to meet their mortgage payments, that could just deepen the banks' problems even further.

I suppose – unfortunately – that is good news for Hillary Clinton. She's been doing well in the industrial states where workers have seen their jobs undermined by global competition and the (to them and Hillary) hated NAFTA. Southern states may well have large black populations who would like to see one of their own make it: but they also have large populations of all sorts who have lost their jobs and think that Clinton's more protectionist stance would help them.

It wouldn't. And in the longer term, more US protectionism would be bad not just for America – but for everyone else too. The UK is highly dependent on US trade, and there is less of that already. Even mighty China has seen its steel exports suffer a big fall as American housebuilding slows. Greater US protectionism – even the threat of it – would rein in trade even more. Sorry, Hillary, but that's not a
welcome prospect.

Do read this (newspaper, not blog) piece from David Mamet. How a liberal (American style) became a real liberal. And, as you might expect from a writer of such stature, it's beautifully written. The penultimate paragraph of this contains similar wisdom from Tom Stoppard.

Might being fined $1,000 for dying one's poodle pink be a decent example of Stoppard's point? 

More spotting of Laffer effects in the wild. Here and here. Even the Treasury seems to agree that the rise in spirits taxation of yesterday will have no effect upon revenues.

It's probably not wise to trust the Treasury estimates of future borrowing requirements. 

We don't know quite as much, empirically, about economics as we might hope.

The basic logical structure seems sound. Just how do we decide which things we really do need government to do? 

And finally, achieving excellence, finally learning how to play "Eruption".

The UK's Tax Freedom Day 2008 will fall on 2 June. That means that average Brits are spending more than five months of the year working for the Chancellor, rather than working for themselves. Last year's date turned out to be 4 June – later than forecast due to the slowing economy. But in fact Tax Freedom Day 2008 is only one day earlier, since this is a leap year. And the date assumes that the Chancellor is right about his growth forecasts – with less growth, the taxes take a larger share of our income.

While the tax burden is bad enough for average families, the tax paid by poor families has been doubled. Next month, the starting rate of income tax goes up from 10 percent to 20 percent. This means that people on the minimum wage will pay a tax rate of 31 percent (20 percent plus 11 percent National Insurance) on over half their income. Under the Adam Smith Institute's flat tax proposals, people on the minimum wage would pay no tax at all.

As usual, the Budget speech was significant for what the Chancellor did not say. He did not mention that government spending will soar to £600 billion this year – that's £10,000 for every man,woman and child, twice as much as in 1997. Is the average family of four really getting good value for the £40,000 it pays out? Is the state catching twice as many criminals, doubling educational achievement, or treating twice as many NHS patients? If the government sector had grown only in line with inflation, rather than far above it, taxpayers would be £200 billion better off – enough to abolish income tax, corporation tax, capital gains tax and inheritance tax.
Just think what that would do for our international competitiveness.

Now we have high taxes which make the UK uncompetitive. It used to be a very attractive place to locate, but now we have the seventh highest corporation tax in Europe. Our taxes on middle-class families are the OECD's highest. Combined with the increase in capital gains tax on entrepreneurs, and the assault on non-doms, Britain is now a much less attractive place in which to start and run a business. The Chancellor's growth forecasts overlook that. Tax Freedom Day may come later than he thinks.

What rights do parents have over the embryos that they have created, or in conjunction with science via IVF? This issue has been raised recently in light of a proposal within the Human Fertilisation and Embryology Bill that:

Persons or embryos that are known to have a gene, chromosome or mitochondrion abnormality involving a significant risk that a person with the abnormality will have or develop a serious physical or mental disability, a serious illness or any other serious medical condition must not be preferred to those that are not known to have such an abnormality.

The government is worried that parents would seemingly choose to disable their offspring. They live in fear of such cases as Sharon Duchesneau and her partner who deliberately chose a deaf man to be the sperm provider to their act of artificial insemination. This was done to increase the likelihood of producing a deaf child, something they ultimately did, with their son being deaf in one ear and severely hard of hearing in the other. These actions do raise legitimate questions, most importantly why should people not be able to have children that bear a likeness to themselves?

After all you may freely choose your partner, so why can’t you freely choose your embryo, fully aware of the consequences of that choice. Some will find it shocking that potential parents would wish to disadvantage (in a conventional interpretation of societal norms) a child in such a way, but that disadvantage should only be borne by the parents and the child. Within a free society the wider community would require the parents and offspring to take full advantage of modern advances in technology and medicine to integrate and in no way burden others.

The proposed legislaton represents a dictat that would not be out of place within the NHS. But the current government has never fully understood the difference between public and private spheres; it has no respect for private choice, private spheres or individual liberty. We are thus left in a situation where the unborn child belongs to the state.

Panmure House in Edinburgh, Adam Smith's last home where he lived from 1778-1790, is on sale. Agents Rettie & Co. are asking for offers over £700,000, though it could go for a lot more.

The agents describe it as an "opportunity to purchase a 17th century grade 'A' listed building. The property is set over three floors and retains many period features. The property is currently classed as non-residential but may be suitable for other use classes including residential, office or restaurant, subject to obtaining the necessary consents."

Panmure House is in Edinburgh's historic Old Town, just by the Canongate cemetery, where Smith is buried. Over the years, many people have suggested to us that the Adam Smith Institute should buy it and turn it into a Smith museum. Unfortunately that is probably not a very practical proposal, either in terms of raising the money needed in a short time, or that needed to run such an enterprise.

But let's hope that whoever buys this imposing house – his teaching and writing had made Smith quite wealthy by the time he bought it – finds a use that is in keeping with the Smith connection, and allows the public to go in to it and be inspired.

Anyone know where Netsmith can get hold of a quick £700,000? Adam Smith's old gaff, Panmure House, is up for sale...

The Budget Speech that should have been given this afternoon but, sadly, was not. Further, some lines that weren't in it.

If you would like to know why Wall Street is dancing with glee at the fall of Eliot Spitzer, try this from Alan Reynolds. 

His old college classmates are more than amused as well. 

Although, to be fair, not everything is so rosy on Wall Street. 

One very important thing wrong with public services in the UK. Too few people understand about diseconomies of scale. 

And finally, the Scottish reaction to a British oath of allegiance. 

It's Budget day in Britain. We've a new Chancellor, but one under the shadow of his predecessor, Gordon Brown, who is now Prime Minister. That's a pity, because the public finances need repair. Spending and debt have both soared, to levels that the current economic climate makes unsustainable. It's not a problem that you can solve in one day – particularly with the markets so jittery. It needs maybe a five-year programme of reconstruction, at a pace that taxpayers and investors can afford. A new start. But we won't get it.

Ten years ago, UK public spending was lower than the (roughly) 40 percent of GDP that the OECD averages. Now it is much higher, at 45 percent. And as spending has grown, the government has consistently been on the over-optimistic side of prudence. Receipts have been overestimated, and spending underestimated, in almost every Budget.

And what has the extra money bought us? The NHS budget has almost doubled. Education spending is up by around 50 percent, as is policing. But our health, education, and crime figures just aren't keeping pace.

Many economists believe that countries prosper more when their public spending is less. And they certainly prosper more when business is not facing the constant assault of regulation and taxation – and of the uncertainty that goes with both. That's why we need a long-term programme to reduce the burdens, not fickle, headling-grabbing stunts like the assault on non-doms.

We need policies such as an annual phasing down of corporation tax, right down to the Irish level of 12.5 percent – which would create more investment, employment, and wealth. And getting a year-by-year better grip on spending by not replacing civil servants who retire. And a genuine strategy to reduce the cost of regulations – not just talking about it.

In the private sector, many people are now struggling to pay off the debts they accumulated in the good times. In the public sector, the government now faces exactly the same problem. Over the boom, when it should have been building up a cash chest that would help us all through the bust, it has carried on spending and borrowing. Like those private borrowers, it needs to take a long, hard look at its future finances and produce a long-term plan to get itself out of the hole. We need a new beginning. How sad it is that the political realities make that impossible.

59. "We need a Human Rights Bill to protect our liberties."

A Human Rights Bill is something which looks plausible on the surface, but disastrous when you look deeper into it. Such a bill would be a written codification of the liberties which Parliament thinks should be enshrined into a written law. In fact most of our liberties come from conventions and assumptions added to over the centuries. Some were acquired from individual laws passed by Parliament, some arose from celebrated legal judgements which enshrined an important principle.

Any attempt to write them all down will be forced to simplify them into a manageable text. Many of them have the nuances of precedents which arose in practice and are difficult to codify. Inevitably, such a text would be given priority over the history, losing subtle threads of association in the process.

Furthermore, once the principle of a Human Rights Bill were established, every pressure group in the country would try to get their particular hobby horse through its door and admitted as a 'human right.'  People would campaign to get the rights of children not to be chastised by their parents, and the right of unborn foetuses to be protected from abortion, or from mothers who drink or smoke. The right to free and equal education would be inserted to have independent schools closed down. The Bill would be an instrument to get the force of law to do things which elected Parliaments have thus far declined to do. In its drafting it would be near impossible to keep the contentious 'positive rights' separate from the negative rights which have constituted our liberties.

Parliaments have been scant respecters of those liberties in recent years, but a Human Rights Bill, far from protecting them, would open the floodgates to even more abuse and erosion of them, taking away our freedom in order to give others what some think should be their 'rights.'