Our Tax System Explained: Bar Stool Economics

In no way am I attempting to pass this off as my own. Rather, this is something that I have read and enjoyed in the past and thought it might be timely to share with those who might be thinking: “So what if we raise taxes, rich people have too much money as it is anyway” as the current economic downturn worsens.  The following is an everyman explanation of our tax system and the dangers of trying to make things a little more “fair”. 

Our Tax System Explained: Bar Stool Economics

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this: The first four men (the poorest) would pay nothing. The fifth would pay $1. The sixth would pay $3. The seventh would pay $7. The eighth would pay $12. The ninth would pay $18. The tenth man (the richest) would pay $59. So, that’s what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. ‘Since you are all such good customers,’ he said, ‘I’m going to reduce the cost of your daily beer by $20.’ Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’ They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so: The fifth man, like the first four, now paid nothing (100% savings). The sixth now paid $2 instead of $3 (33%savings). The seventh now pay $5 instead of $7 (28%savings). The eighth now paid $9 instead of $12 (25% savings). The ninth now paid $14 instead of $18 (22% savings). The tenth now paid $49 instead of $59 (16% savings). Each of the six was better off than before. And the first four continued to drink for free.

But once outside the restaurant, the men began to compare their savings. ‘I only got a dollar out of the $20,’declared the sixth man. He pointed to the tenth man,’ but he got $10!’ ‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too. It’s unfair that he got ten times more than I got’ ‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’ ‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’ The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill! And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore.

Waxman Takeover, Obama Selections Should Send Thrill Running up GOP’s Leg

Waxman Takeover, Obama Selections Should Send Thrill Running up GOP’s Leg

 

While an Obama-induced thrill running up Chris Matthews’ leg advanced into one great and unremitting orgasm, Republicans from across the country began to assess the Election Day damage and tried to comprehend exactly how Democrats handily won the White House, expanded their majorities in Congress and largely duped a center-right electorate into voting for a gang of ultra-liberal candidates.  

 

Promising tax cuts for nearly all Americans, supporting market-based education reform and championing other long-held conservative principles, Mr. Obama and his cohorts successfully reached-out to disaffected Republicans, moderates and independents by speaking their language and promising an end to hyper-partisanship in Washington, D.C.

 

At the same time, a captivated media painted the junior Senator from Illinois as a pre-made American icon with the charm and charisma of Reagan and the personal fortitude and character of Lincoln. To combat liberal leanings, voters were assured that Democrats had learned their lesson from the 1994 Republican Revolution and were intent on delivering authentic reform while governing from the center.

 

Despite close personal relationships with a number of questionable characters and a solidly liberal voting record, Democrats and the media successfully branded Obama as a centrist candidate while ignoring divisive issues. On the campaign trail, Obama rarely mentioned his support for abortion and was allowed to do so despite his championing of abortion rights during his tenure in Illinois and in the U.S. Senate.

 

While Democrats have enjoyed large electoral success, there is still hope for the GOP going forward. The recent appointment of a plethora of former Clinton Administration officials to the Obama White House and the ousting of Rep. John Dingell (D-Mich.) from the powerful House Energy and Commerce Committee signals a radical shift left and a White House filled with Washington insiders: the two things that Obama was able to successfully convince voters he would not do.

 

With nearly two full months until the 111^th Congress convenes, the gavel of the powerful House Energy and Commerce Committee was handed over to Rep. Henry Waxman (D-Calif.) with a 137-122 vote. The move dealt a serious challenge to the Democrats’ seniority system and put key aspects of President-elect Obama’s agenda in the hands of a liberal, aggressive and activist chairman, reports The Hill newspaper. In addition, it signals a radical shift that will likely pit the environmental wing of the Democratic Party against the labor unions.

 

Relying heavily on former Clinton Administration officials, President-elect Obama has gone forward with staffing his Administration. Despite promises of brining reform to Washington, D.C., Obama has appointed a number of former Clinton Administration officials, with the choice of Hillary Clinton for Secretary of State still undecided as of this writing. So much for change.

 

 

 

 

The Audacity of Arrogance: Pelosi and Revisionism of Catholic Dogma

On July 20, during an interview with CBS News correspondent Lara Logan in Kabul, Afghanistan, Democrat presidential hopeful Barack Obama was asked if he ever had any doubts about his foreign policy experience. In a show of what has become his signature arrogance and defiance of reality, Obama gave a one word answer that should frighten every single voter: “Never.”

 

Not to be out-arroganced, Speaker of the House and self-appointed theologian and Catholic dogmatic scholar Nancy Pelosi recently opined on NBC’s “Meet the Press” that “doctors of the church have not been able to define when life begins”. The Pelosi back-and–forth began when moderator Tom Brokaw asked the Democratic Speaker of the House about the implications of the “above my pay grade” comments Mr. Obama made in an interview with Pastor Rick Warren of the Saddleback Church.

 

In the following days, Pelosi came under fire from U.S. Catholic bishops, in a rare show of involvement in things political. Her comments prompted swift rebukes from Washington Archbishop Donald Wuerl and Denver Bishop Charles Chaput, who both said that Pelosi was incorrect and that Catholic teaching has consistently condemned abortion and defined life as beginning with conception.

 

According to the Association Press, Cardinal Edward Eagan of New York voiced similar sentiment on Tuesday. Cardinal Justin Rigali, chairman of the U.S. Bishops’ Committee on Pro-Life Activities and Bishop William Lori, chairman of the Bishops’ Committee on Doctrine, also issued a statement correcting Pelosi.

 

Despite clear and direct guidance from Catholic Church scholars to the contrary, Pelosi continued with her attempts to re-write Catholic doctrine. In a statement from a Pelosi spokesman, the self-anointed ‘Speaker of the Church’ “fully appreciates the sanctity of family” and based upon her own views on conception on the “views of Saint Augustine, who said: ‘…the law does not provide that the act (abortion) pertains to homicide, for there cannot yet be said to be a live soul in a body that lacks sensation…’”

 

Bishop Lori and cardinal Regali responded by stating “uniformed and inadequate theories about embryology”  in the Middle Ages led “some theologians to speculate that specifically human life capable of receiving an immortal soul may not exist until a few weeks into pregnancy. While in cannon law these theories led to a distraction in penalties between very early and later abortions, the Church’s moral teaching never justified or permitted abortion at any stage of development.”

 

It is beyond arrogance that Nancy Pelosi continues to defy Catholic theologians and cannon as she continues her effort to re-write dogma. In much the same vain as Barack Obama declaring that he has “never” questioned his own experience on issues of foreign policy, Nancy Pelosi is showing an enormous amount of conceit in her ongoing effort to reshape and rewrite the Catholic position on when life begins.

 

Speaker Pelosi should be mindful of another quote attributed to St. Augustine: “God is not what you imagine or what you think you understand. If you understand you have failed.”

 

Denver Archbishop Advises Pro-abortion Biden to Forgo Communion

After highlighting his Catholicism more than 10 times in his Springfield, Ill. acceptance speech given alongside presumptive presidential nominee Barack Obama, Senator Joe Biden was scolded by Denver Archbishop Charles Chaput on Monday and urged to forgo Communion due to his pro-abortion stance, reports the Washington Times.  

 

Archbishop Chaput, who led a pro-life candlelight vigil Monday night in front of a Denver Planned Parenthood, said that Senator Biden’s support for abortion rights was “seriously wrong” and said that Biden should “avoid taking Communion as a result of his pro-choice stand on abortion.”

 

Biden’s pro-abortion stance combines with recent deceptive statements made by self-appointed ‘Speaker of the Church’ Nancy Pelosi, to fuel growing concerns about the success of the Democratic Party’s renewed out-reach to religious voters while still embracing its long-standing support for unfettered access to abortion.

 

The Archbishop, who was not invited to speak at any convention events in what appeared to be a deliberate snub, told the Associated Press that he would like to speak with Biden privately, reports the Washington Times.

 

Catholics, the nation’s largest religious voting bloc, represents 26 percent of the electorate. Alexia Kelly, executive director of Catholics in Alliance for the Common Good, said that 11 percent of those this year are considered “swing voters,” more than in any recent election year.

 

 

 

 

Archbishop Blasts ‘Speaker of the Church’ Pelosi

The Hill newspaper reports that Speaker of the House and self-appointed ‘Speaker of the Church’ Nancy Pelosi was blasted by Washington Archbishop Donald W. Wuerl for the comments she made on “Meet the Press” on Sunday.

 

While it is rare for American Catholic leaders to publicly rebuke top politicians, Wuerl noted in an Archdiocese of Washington official press release that “[w]e respect the right of elected officials such as Speaker Pelosi to address matters of public policy that are before them, but the interpretation of Catholic faith has rightfully been entrusted to the Catholic bishops”   

 

On Sunday morning, the self-professed ‘ardent and practicing Catholic’, answered a question asked by moderator Tom Brokaw on when life begins by saying that the Church has not been able to come up with a definition of when life begins.

 

After Mr. Brokaw, pointed out that the Catholic Church feels strongly that life begins at conception, Pelosi replied, “I understand. And this is, like, maybe 50 years or something like that. So, again, over the history of the Church, this is an issue of controversy”, the release said

 

In the Archdiocese press release, Wuerl notes, “[t]he Catechism of the Catholic Church is clear: the current teaching of the Catholic Church on human life and abortion is the same teaching as it was 2,000 years ago. The Catechism reads:

 

“Human life must be respected and protected absolutely from the moment of conception…Since the first century the Church has affirmed the moral evil of every procured abortion. (Catechism, 2270-2271) The Catechism goes on to quote the Didache, a treatise that dates back to the first century: “You shall not kill the embryo by abortion and shall not cause the newborn to perish.”

 

Unfortunately, The Hill newspaper also reports that Speaker Pelosi recently said that she, unlike other Catholic politicians who support abortion rights, has not clashed with her church about receiving communion.

 

“I think some of it is regional”, said Pelosi. “It depends on the bishop of a certain region, and, fortunately for me, communion has not been withheld and I’m a regular communicant, so that would be a severe blow to me if that were the case.”   

 

With pro-abortion politicos Nancy Pelosi and Joe Biden trying to hijack Catholic doctrine for their own political expediency and to advance the candidacy of Barack Obama, the Church is certainly going to need a few more Bishops with a spine, like Archbishop Wuerl, if the Catholic Faith is going to endure this season of pandering and electioneering.

 

The Church will need to deny those looking to define the Faith as one of moral relativism and Pelosi and others will need to be held for their direct conflict of Church doctrine and God’s Law.   

‘Speaker of the Church’ Pelosi Dead Wrong on Catholic-Life Stance

On Meet the Press this Sunday morning, Speaker of the House and self-appointed ‘Speaker of the Church’, Nancy Pelosi, when prompted by moderator Tom Brokaw, declared “[a]nd what I know is, over the centuries, the doctors of the Church have not been able to make that definition.”

 

The unresolved definition Nancy Pelosi was referring to was the Catholic Church’s position on ‘at what point life begins’. A self-described “ardent and practicing Catholic”, Speaker Pelosi claims to have “studied this for a long time” and arrived at the conclusion that “I don’t think anybody could tell you where life begins”, apparently including the Catholic Church.

 

Here are excerpts from the transcript from Sunday’s Meet the Press:  

 

MR. BROKAW: Senator Obama saying the question of when life begins is above his pay grade, whether you’re looking at it scientifically or theologically. If he were to come to you and say, “Help me out here, Madame Speaker. When does life begin?” what would you tell him?

 

REP. PELOSI: I would say that as an ardent, practicing Catholic, this is an issue that I have studied for a long time. And what I know is, over the centuries, the doctors of the church have not been able to make that definition. And Senator–St. Augustine said at three months. We don’t know. The point is, is that it shouldn’t have an impact on the woman’s right to choose. Roe v. Wade talks about very clear definitions of when the child–first trimester, certain considerations; second trimester; not so third trimester. There’s very clear distinctions. This isn’t about abortion on demand, it’s about a careful, careful consideration of all factors and–to–that a woman has to make with her doctor and her god. And so I don’t think anybody can tell you when life begins, human life begins. As I say, the Catholic Church for centuries has been discussing this, and there are those who’ve decided…

 

 

While Catholics know that faith is something that Sen. Obama feels that Americans simply ‘cling to’ during hard times, Pelosi’s assertions came as a real shock to many Catholics who know that the Church has consistently stood-up for the rights of the unborn. For many, it is especially destructive when it comes from a person who attempts to describes herself as a good Catholic and one who has a firm knowledge of Church doctrine. However, Mrs. Pelosi is dead-wrong on her assertions.

 

Beggining with the Bible, there are a number of direct references to abortion and to life starting at the point of conception (James 2:26). Throughout history the Church has maintained that the God-given soul is found in all humans from the point of conception until mortal death. As recent as 1995, Pope John Paul II declared in Evangelium Vitae 62:

 

“[T]he Church’s teaching on abortion “is unchanged and unchangeable. Therefore, by the authority which Christ conferred upon Peter and his successors . . . I declare that direct abortion, that is, abortion willed as an end or as a means, always constitutes a grave moral disorder, since it is the deliberate killing of an innocent human being. This doctrine is based upon the natural law and upon the written word of God, is transmitted by the Church’s tradition and taught by the ordinary and universal magisterium. No circumstance, no purpose, no law whatsoever can ever make licit an act which is intrinsically illicit, since it is contrary to the law of God which is written in every human heart, knowable by reason itself, and proclaimed by the Church”

 

As a surrogate for Barack Obama — in what can only be described as move of squalid political expediency — Nancy Pelosi appears to have purposefully misstated the position of the Church in an attempt to allay Catholic fears about the flawless pro-abortion voting record of Barack Obama.

 

Making-up a large number of the undecided voters this election cycle, Mr. Obama knows that he will likely need Catholic support to win on November 4. And he is doing his best to both satisfy his pro-abortion base and court disaffected Catholics. However, Catholics doubts about a man who has a clear and consistent liberal voting record and professed pro-abortion ideological stance will not simply be assuaged by a Pelosi or Joe Biden, no matter how many times they remind us that they too are Catholic. Mr. Obama’s words speak volumes about what kind of Presidency he would bring to the White House.

 

During the recent Saddleback forum with Pastor Rick Warren, Mr. Obama was asked to answer a question about when he though that an infant starts to have human rights. This was his answer: “whether you are looking at it from a theological perspective or a scientific perspective, answering that question with specificity is, you know, above my pay grade.”  

 

It has also been reported that Mr. Obama voted against a bill in the Illinois State Legislature which would have mandated that doctors try and save the life of an infant that had just survived a botched abortion. Called the Illinois Born Alive Infants Protection Act, Obama cited in particular his concerns about the constitutionality of the definition of a “born alive infant” and the inclusion of potential civil and criminal penalties for doctors in these situations.  

 

And he might also be trying to make people forget about his 2007 speech to Planned Parenthood where he assured the pro-abortion crowd that his first act as President would be to sign the Freedom of Choice Act, which would overturn hundreds of state laws which current place limits on abortion such as parental notification or waiting periods.

 

But, having spinsters such as Nancy Pelosi flat-out lie about the Catholic position on abortion certainly will not entice church-going Catholics to take a second look at Obama and will only serve to shed an amazing amount of light on his radically liberal views on abortion.

 

Chavez to Dump Big $$$ into Military while Shortages Worsen

It appears that the world is about to witness another Hugo Chavez temper tantrum…seemingly sparked by whenever he feels like he isn’t getting enough attention from the U.S.  So, According to Al Jazeera, Hugo Chavez has announced details of an arms build-up which he says will make the South American nation “invulnerable” to any attack.   

The new program is described as a defensive system that could shoot down enemy aircraft and rockets.  According to Chavez: “We’re going to have a tremendous air-defense system, and with with missiles capable of reaching 200 kilometers,” Chavez said during a televised speech on Friday at a military academy in Caracas.

At the same time Chavez announced that Venezuela would also spend more than $561 million for factories to build AK-103 assault rifles as well as other munitions and detonators.  This is on top of the 2.7 billion that Chavez spent last year to purchase 24 Sukhoi fighters and 53 helicopters as well as 100,000 Kalashnikov rifles from Russia.  Chavez has also his expressed desire to collaborate with and purchase arms from Iran.

Mr. Chavez does this at a time when his nation has been experiencing South America’s highest inflation rate (17%) and he has been dealing with this looming disaster not by reducing his spending…which is evidenced by his new plan to dump large sums of money into the Venezuelan “defenses”…or by raising interest rates… his answer is inducing price controls.  These artificial prices are having a devastating effect on the Venezuelan economy and most importantly heavily affecting the poorest amongst them.

Since 2003, Chavez has used price controls as an attempt to tame the rising inflation.  He has frozen prices on food stuffs like rice and meat and has recently capped the prices of telephone and electricity rates as well as put controls on some 45 different construction materials.  His efforts have had devastating effects on the economy as shortages of all types are being found around the country…staples like rice and milk are rarely found on grocerystore shelves and a number of construction projects have screeched to a halt because of a shortage of materials. 

Another unwanted effect of the price controls is that they are creating and expanding the ”informal” sector in Venezuela where staples can be found for many times their worth at unregulated street markets.  Many farmers are avoiding selling their products to legitimate stores and are selling meats and crops on the streets becuase with the controls on the prices they end up losing money on what they produce…so, in effect, Mr. Chavez has created a black market in his nation where only the rich are nourished.

Also, Manufacturers, concerned that Chavez will deepen state involvement in the economy, have reduced spending on new plant and equipment to the point that central bank figures show that nongovernment investment equals no more than 4 percent of gross domestic product, the lowest among the 10 biggest economies in Latin America.

Many businesses are reluctant to expand production because of a lack of guarantees from the government on the protection of private property. Chavez has seized rural estates and factories that the government deems to be unproductive, including some assets of Lorenzo Mendoza, one of the wealthiest men in Venezuela, and of the food maker H.J. Heinz. (I wonder how Ted Kennedy will explain working with Chavez to his Comrades Teresa Heinz and her wife John Kerry?)

Foreign investors sold $778 million more in Venezuelan assets than they bought in the first nine months of 2006, according to the central bank. A decade ago, in the same period, they added $5.9 billion more than they disposed of.

Hugo Chavez, much like his hero and comrade Fidel Castro did for over half a decade in Cuba, is perpetually beating the war drum in preparation for an enemy that doesn’t exist while his fellow countrymen go hungry.  Chavez has been masterful at focusing Venezuela’s attention on national pride and world importance while he is actively stripping his country of its democratic legacy and its citizens of the most basic rights and liberties.  The only thing that kept the aspirations of Fidel Castro… to transform his self from a national to an international despot…was his hands were tied economically…the same is not true for Mr. Chavez…he is sitting on top of the world’s fifth largest reserve of oil.

Stay tuned…

Written by Matthew Willette

Fission of the Latin American Left « Sound Policy

Fission of the Latin American Left « Sound Policy  The old rules of the Cold War no longer apply in Latin America.  The new-age caudillos have taken traditional Latin American populism to a whole new level by splicing it with authoritarianism through strong-man tactics and a heavily Marxist policy.  At the same time, a new left has emerged…a new moderate left that has arisen out of the populist traditions and embraces freer trade and values the liberty of the individual.  Washington should wake up to these changes and realize that ‘leftist” in Latin america is no longer synonimous with “badguy”.    

Fission of the Latin American Left

According to a recent report released by the UN Commission on Latin America and the Caribbean (ECLAC) Latin America has just completed it best period, in terms of poverty reduction, in over 25 years. The number of poor shrank from 44 percent in 2002 to 39.8 percent in 2005; however, despite improving economic circumstances, about 205 million people still live in abject poverty in the region. Naturally, as one might suspect, with such a large percentage of the electorate living in squalor while increasingly participating in the electoral process, the contemporary political climate has been dominated by left-leaning populists who promise wealth redistribution, land-reform and new, large-scale welfare programs. Throughout 2006, Latin America experienced 12 elections in one of the regions most active cycles in recent memory. Amidst all the speculation and predictions by the punditry as to what this historic cycle foretells for Latin America, one major divergence from the traditional Latin American pattern should be noted by pundits and policy makers alike: the fissure of Latin America’s Left into two distinct and seemingly diametrically opposed camps.

The Old Left Pulls a Crazy Ivan

In countries like Venezuela, Bolivia and, recently, Ecuador the old left has made quite a noticeable and dangerous transformation. These governing regimes are now primarily authoritarian and appear to have evolved out of traditional Latin American populism; however, their agendas and actions suggest they have fused tradition with cherry-picked elements of nationalism, socialism and fascism. These regimes aim to consolidate political power through open defiance of democratic principles and institutions; they call for state control of natural resources, the nationalization of major industries and aim to mobilize nationalist sentiment by decrying the evils of the US and the neo-liberal economic model. They aim to repress political and economic freedom, further stifle dissent and actively work to tear down the remaining vestiges of liberty. This new left, born out of the legacy of the old, represents a radical neo-fascist shift in Latin American governance. They grasp for ever more power through a style of personalism based on figures like Hugo Chavez, Evo Morales and Rafael Correa: the radical populists and new-age caudillos.

Venezuela

Hugo Chavez has recently called for, and has been given, the ability to rule by decree for the next 18 months. One of his actions will likely be to abolish Presidential term limits which will make way for him to become “President” for life.

Chavez has undermined and destroyed the legitimacy and independence of the Venezuelan Supreme Court by forcing those not loyal to him to resign, expanding the number of Justices to diminish their influence while packing the court with his own appointees.

He has already nationalized most of the electrical, telecommunications and petroleum industrial infrastructure, expropriated “unused” land and has announced an end to the autonomy of the Venezuelan Central Bank.

Mr. Chavez has repeatedly denounced US policy while openly courting relationships with both Syria and Iran. He aims to create military alliances with those that oppose US influence throughout the world. Ultimately, he aspires to unite Latin America, through his “Bolivarian Revolution”, in an effort to oppose US hegemony.

Bolivia

President Evo Morales and his party, Movimeiento al Socialismo (MAS), have been actively working to create an Indigenous government and society through imposing an Andean culture throughout Bolivia. It is their aim to institute governmental culturalism within an entirely racist vision for the future.

Morales has already signed legislation that would expropriate large swaths of “unproductive” lands from wealthy families as well as, in effect, nationalize the tin and natural gas industries through a new framework of corporate taxes and royalties paid to the state.

Mr. Morales and MAS have pressured the Constituent Assembly to pass a law that would require only a simple majority to amend the Constitution and has announced plans to replace the Bolivian Senate with a “popular” form of assembly. He has also spoken of his aspirations to rule by decree.

MAS and Morales are already using “citizen militias” to oust recently elected opposition governors in the wealthier and whiter southern Departments as well as to stifle political dissent and cultural tolerance. These groups use Gestapo-style tactics similar to those used in Germany under the Nazis, and more recently, under Castro in Cuba and, now, Chavez in Venezuela.

Ecuador

Recently elected President Rafael Correa announced that he would call for a Constituent Assembly in order to change the Ecuadorian Constitution.  After firing over half of the elected Congress and replacing them with loyalists…Mr. Correa got his wish. Now, he will choose those to fill the seats of the Assembly that will rewrite the Constitiuon.  Mr. Correa is likely to include sweeping new powers allowing him to fulfill his authoritarian desires.  He is following the lead of his comrades Hugo Chavez and Evo Morales.

Mr. Correa has said that he is leading a “citizen’s revolution” against neo-liberalism and that Ecuador’s foreign debt is illegitimate. Many believe that Correa is planning to use the Argentine default model as an example of how to turn his economy around. He has vowed to cut ties with the IMF and the World Bank unless his debt load is lowered by half.  Suprisingly after announcing that Ecuador would not make its first installment on an IMF loan…it was paid…in cash.  It seems that Mr. Chavez is doing more than partnering with Correa and is buying allies much like he has done with Kirchner in Argentina.

Correa has rejected a free trade deal with the US and has said that he will not renew the lease with the US for Manta Air Base when it comes up for renewal in 2009. This base is reported to be responsible for 60 percent of all U.S. drug interdiction in the eastern Pacific.

 

The Other Left Hangs a Right

While this past election cycle has produced, or in some cases reaffirmed, figures like Chavez and Correa, it has also signaled the emergence of another type or style of leftist in Latin America: the neo-moderate left. This new left appears to be much more pragmatic in its policies than previous Latin American leftists as they have shifted to the right on certain issues while social spending and poverty reduction remain near the top of their national agendas. These regimes, like those of Chile and Peru, are, on the whole, supporters of free markets, free trade policy and are committed to consolidating and preserving democratic institutions. They might, at times, denounce US actions or partner with those who have chosen an adversarial relationship with the US; however, their commitment to democratic and, mostly, neo-liberal market practices and principles make them more of an ally than an adversary.

Chile

The recent election of Michelle Bachelet, part of the governing Concertation coalition, has signaled that Chile will follow, more or less, the policies that have made it Latin America’s most successful economy for the past 16 years. Chile has also been known as having the most solid and consolidated democratic institutions in the Region.

In 2003, The US and Chile signed a free trade agreement and, as a result, trade has doubled between the two nations since its signing.

President Bachelet, despite being the leader of the Socialist Party in Chile, has committed herself and her nation to protecting private industry and property while strengthening international trade ties. Chile has recently signed trade deals with China and Colombia.

Bachelet has increased attention to the needs of the poor by promising further spending on welfare programs; however, the Bachelet Administration has committed itself to continue the practice of a structurally built-in fiscal surplus of 1% (of GDP) into the national budget.

 

Peru

Alan Garcia, recently elected President, has welcomed the signing of a US-Peru Free Trade Agreement (FTA) and is currently seeking deals with Canada, the EU and China.

Garcia has committed Peru to cooperate with the US on the eradication of coca growing and has promised action aimed at limiting his nation’s growing, production and exportation of coca and cocaine.

Mr. Garcia has promised new and innovative social programs to help his countries’ poor while a commitment to neo-liberal fiscal policy and increases in export commodity prices produced 6.6% growth in 2006.

He has railed against Hugo Chavez and his petro-diplomacy as Chavez funneled huge sums of money into Garcia’s hard-left opponent (Ollanta Humala) in the recent Peruvian election. Since the election, tensions have cooled; however, Chavez is no friend of Garcia.

It is imperative that U.S. policy-makers understand the fundamental differences between these two leftist camps and approach them accordingly. The old Cold War labels of simply left and right no longer apply in Latin America and are applied to ones peril. One type of leftist the US can, and should, work with. The other has placed itself in an adversarial position. To pressure and challenge the ideals of the neo-caudillo left and to encourage and support the new moderate left, the President and Congress should:

Put pressure on the Organization of American States (OAS) to enforce the 2001 Inter-American Democratic Charter. The President and Congress should urge the OAS to intervene where democratic institutions are being threatened in the Region. This should be an effort to sustain the development and consolidation of democratic institutions and to prevent the further erosion of liberties and democratic foundations.Article 3 of the Charter states: “…Essential elements of representative democracy include…the pluralistic system of political parties and organizations, and the separation of powers and independence of the branches of government.”Article 4 states: “…freedom of expression and of the press are essential components of the exercise of democracy.” Events unfolding in OAS member nations such as Venezuela and Bolivia run contrary to the language and intent of the Charter.

Develop further cooperative efforts with right-of-center and moderate leftists in the Region. To counter authoritarian movements and the rhetoric from nations like Venezuela and Bolivia, US policy makers should continue to welcome and strengthen cooperative initiatives. Counter-narcotics collaboration and Free Trade Agreements (FTA) are examples of working relationships that stress rule of law, free market principles and the support for and the consolidation of democratic institutions. The US should continue collaborative efforts such as:Brazil is working closely with US officials to attempt to revive the stalled Doha round and it is expected that the U.S. and Brazil will sign an accord, within a year, which would promote technology-sharing and encourage more Latin American neighbors to become bio-fuel producers and consumers.The US and Colombia have worked closely, for years, on an initiative called Plan Colombia. This collaborative effort aims to achieve peace, strengthen democracy, and deal with the drug problem in Colombia.

Congress should renew the President’s Trade Promotion Authority (TPA). The President’s ability to negotiate trade deals is set to expire on June 30^th, 2007. Congress should swiftly renew the President’s ability to negotiate trade deals as they are one of the most effective tools we have to encourage the development of democratic institutions and the commitment to free market practices. Negotiating free trade agreements without TPA sets them up for failure before they even begin as TPA forces an up or down vote on the language without amendment.Congress Should Swiftly Approve Pending FTA’s with Colombia, Peru and Ecaudor.  These three Latin american nations have chosen to ally themselves with Washington in at least they are embracing freer trade and free markets.  Democrats in congress should not further block these agreements based on domestic political maneuvering and pandering to the protectionist base.  Failing to approve these FTA’s will only send a dangerous message that the U.S. cannot be trusted as a partner even on the one thing that it has been pressing for in latin america and around the world: free trade.

Conclusion

Leaders like Hugo Chavez, Evo Morales and Rafael Correa are actively orchestrating the ongoing erosion of democratic institutions, the wanton expropriation of private lands, the extreme divergence from free market principles and the quenching of their thirst for totalitarian power. If left to their own devices, these men, once gone from power, will leave in their wake a wide swath of poverty and repression on a scale that will have created numerous deficient and backward nations throughout the region. It is imperative that a proactive stance toward these regimes be formed into a cohesive foreign and economic policy that will limit their influence and destructive ability. It is equally important that the US continue to build lasting working-relationships with those nations that share a commitment to democratic institutions, respect for the rule of law and belief in the liberating nature of the free market. Realizing that the old rules of left and right no longer apply is crucial to an informed and successful foreign policy toward Latin America.

Written by Matthew Willette

The Implications of Democrats Playing Politics with Free Trade

As President Bush toured Latin America a little over a month ago he assured the region that this trip (the most extensive his Administration has taken to Latin America as of yet) signaled a new phase in the relationship between the U.S. and our neighbors to the South.  The President spoke of working with Brazil to develop new technologies aimed at making ethanol a viable fuel alternative…potentially reducing our dependence on foreign oil, further partnering with Colombia to battle the ongoing plague of narco-terrorism and the wider drug trade and collaborating with the new conservative government in Mexico to offer ways to break-up the corporatist and monopolistic structures…potentially enabling more Mexicans to envision an authentic and prosperous future in their native land.  

Even the most optimistic observer remains highly skeptical of this call for a renewed engagement as Washington tends to have the attention span of a 3 year old.  The U.S. has traditionally tended to limit involvement in the region to democracy promotion, drug eradication and free trade; but, now with a Democrat controlled Congress it appears that Latin America will not only not see renewed engagement as the rise of radical populists like Hugo Chavez threatens to plunge the region into a new “lost decade” but will now see a protectionist trade policy arise out of the U.S. based simply on domestic political pandering.  For months, Peru, Panama and Colombia have been begging the U.S. Congress to approve their repective free trade agreeements but Congress has balked and threatens to permanently stall based on what has been described as “labor and environmental concerns”. In reality, Democrats are posturing and pandering to the populists and protectionists (both domestic and international) that are demanding action to combat the effects of free trade.  In fact, here is what free trade has done for the U.S.-Latin American relationship so far.

According to the Oppenheimer Report in The Miami Herald:

The newly released U.S. Commerce Department trade figures for 2006 show that Latin American countries that have free-trade agreements with Washington have substantially increased their exports to the U.S. market. The United States, in turn, has increased its exports to most of its regional trade partners at a somewhat slower but respectable pace.

Consider the latest figure

–Since the United States signed a free-trade deal with Mexico, Mexican exports to the United States have risen from $40 billion in 1993 to $198 billion in 2006, a nearly 400 percent increase. Conversely, U.S. exports to Mexico over the same period have risen from $41.5 billion to $134.1 billion, a 223 percent increase.

–Since the United States signed a free-trade deal with Chile, Chile’s exports to the United States went up from $4.7 billion in 2004 to $9.5 billion in 2006, a 104 percent increase. Conversely, U.S. exports to Chile went up from $3.6 billion to $6.8 billion, an 88 percent increase.

–Since the United States signed a free-trade deal with five Central American countries and the Dominican Republic, overall exports from the so-called CAFTA-DR countries to the United States went up from $18.1 billion in 2005 to $18.6 billion in 2006, a 2.8 percent increase. Conversely, U.S. exports to CAFTA-DR countries went up from $16.9 billion to $19.6 billion, a 16.1 percent increase.  While it is too early to completely judge the effects of the newly signed free trade deal and that only 4 countries have ratified it…growth is still growth. 

The current threats and attempts to stall negotiated and agreed-upon free trade agreements with Peru, Colombia and Panama by Democrats Charlie Rangel (Chairman House Ways and Means) and Sander Levin ( Head of Ways and means Subcommittee on Trade) smacks of protectionism, domestic political maneuvering and pandering to the unions and the environmentalists. They want trade pacts to guarantee enforcement standards set by the U.N’s International labor Organization (ILO) which are currently in conflict with U.S. labor regulations.  Through attempting to enforce these ILO provisions Democrats are demanding that Latin Americans enforce laws that the U.S. will not agree to and appear to punishing these countries for the fact that U.S. law does not “live-up-to” the standards they call for. Thankfully these regulations would never fly here at home…even with a Democrat controlled House and Congress because many realize that it is the flexible U.S. labor laws that have kept the U.S. economy prosperous, innovative and with half the unemployment rate of the European Union for years.

Another miscalculation that Democrats have made by demanding that Latin American nations should be forced to follow ILO labor standards is the fact that much of Latin America’s economy is informal.  Large chunks of the economy produce and survive by evading governmental rules and taxes. According to Alvaro Vagas Llosa at the Independent Institute : 

One way to help Latin Americans transit from the informal to the formal economy is to create incentives for legalization through free trade.  Numerous Peruvian companies have become formal in recent years because export opportunities to the United States have made it profitable for them to legalize their activities.  Opening trade is one way to ensure that the enforcement of rules one day becomes a reality.  Making universal enforcement of ethereal laws a precondition for free trade in Latin America amounts to putting the cart before the horse. 

The recent rise of radical populist figures like the authoritarian Marxist Hugo Chavez and his proteges Evo Morales in Bolivia and Rafael Correa in Ecuador show that Latin America is once again on the political and economic roller coaster ride that it seems to have been on for decades.  The extreme oscillation from left to right has left the region largely passed over by the gradual prosperity of most of the world and has failed to bring the regions 200 million-plus destitute out of the ranks of the poor. 

Peru, Panama and Colombia are attempting to reach out to the U.S. to get off the roller coaster and begin the process of building stable and lasting institutions.  They are attempting to stand up to Chavez and his ilk and are putting their faith in the knowledge that freedom will provide the greatest results.  If Congress attempts to include language about new labor standards or environmental protection–or worse yet– fails to ratify the pending free trade agreements with Colombia, Peru and Panama they threaten to send a dangerous message to the region:  That the U.S cannot be trusted as a reliable partner even in the one issue that it has been pressing in Latin America and around the world for years: free trade.   

Written by Matthew Willette