Warren Buffett supports a proposal by Democrats in Congress that "would apply a tax of 0.25 percent or 25 basis points to stock transactions in excess of $100,000, and a levy of 0.02 percent or 2 basis points on derivatives including futures, options, swaps and credit default swaps," Bloomberg reports (link via TaxProf). Since the tax applies to transactions in stock or derivatives, but not government bonds, it will just make it easier for governments to issue bonds to borrow money to spend on subsidizing Mr. Buffett's railroads and windfarms. Government bonds are already tax advantaged through their tax-free interest; this transaction tax would make them even more tax-advantaged than they already are. Bloomberg also notes high in its story that Vanguard mutual fund group founder John Bogle supports the tax, while waiting till lower down in the article to report that the tax will be refunded for mutual funds. Backing the bill in the Senate are Tom Harkin of Iowa and Bernie Sanders of Vermont. Neither Iowa nor Vermont are exactly what you'd call financial centers.

Bloomberg's David Reilly has a provocative column on how Goldman is the target of all the public attention and outrage from the bank bailouts, while JPMorgan has been shielded "from questions about its own size, profits and payouts even as it reaps many of the same rewards as Goldman." The column is terrific as far as it goes, but it leaves mostly unexplored the question of why Goldman has gotten such a bad rap while doing a lot of the same things JPMorgan is doing -- making a lot of money while benefiting from taxpayer guarantees and money. One factor is the presence of former Goldman officials in posts such as Treasury secretary (Henry Paulson), White House chief of staff (Joshua Bolten) and chairman of the Federal Reserve Bank of New York (Stephen Friedman). That personnel overlap tends to support the Goldman conspiracy theories (for my general take on Goldman Sachs, see the long Goldman article). But if JPMorgan got essentially the same treatment without the personnel overlap, it tends to undermine those conspiracy theories. Not that one can't spin similar theories about JPMorgan -- Timothy Geithner used to work for Henry Kissinger at Kissinger Associates, and biographies of Mr. Kissinger disclose that he is a member of JPMorgan's "international council." The other factor worth thinking about is whether, or how, anti-Semitism plays a role in the public perception and treatment of the historically Jewish Goldman and the historically not Jewish JPMorgan. I don't have answers on that; I just find it worth raising in response to the Reilly column.

The Hudson Institute's New York Web site, which has some excellent commentary on Middle East geopolitics, has an anonymous article on what it calls the "dark side" of the United Arab Emirates: "Although a signatory to free trade agreements, the UAE does not, for instance, allow American companies to legally operate within its billion dollar VOIP sector and allow users to make computer-to-mobile-phone calls. This is done to protect the state-owned monopoly, Etisalat [Emirates Telecommunications Corporation], although recently Dubai started a similar company, DU... Moreover, the UAE, which illegally shuts out American companies the right to participate in its lucrative VOIP sector, has, either directly or through its front-companies, delved into a buying spree of its own in the US. Their assets include: A tower and adjacent plot of land at 1466 Broadway, owned by the UAE company, Istithmar, which also owns Dubai World. Jumeirah Essex House New York, on Central Park South, Jumeirah being a district in Dubai. Barney's Department Store, New York City. Mandarin Oriental Hotel, New York City. W Union Square Hotel, New York City." See also the classic New York Sun editorial "What the UAE Bought."

An editorial in the Wall Street Journal makes the point that, in paying for domestic spending, President Obama has a third budget option besides the commonly mentioned ones of inflate/print money and raise taxes: cut defense spending to bring it more in line with European levels. "Over time, the welfare state will defeat the Pentagon here, as it has in Europe," the Journal editorial declares, a touch fatalistically. It's interesting to think about, if you agree with that conclusion, how to invest in it. Short defense contractors? The problem is that all it takes is one big 9/11-style terrorist attack on American soil to send defense spending headed in the other direction. Or a transformative politician like Ronald Reagan.

The Wall Street Journal takes a look at what went wrong in Dubai and comes to the conclusion that it was "a poorly regulated market overrun by speculators." "Speculator" often seems to be just a word the press and politicians use after the fact to describe, derisively, investors whose bets went badly. When you see the word used that way it is often a good reason to give extra scrutiny to whatever comes along with it. Likewise, "poorly regulated" often suggests that there should have been more regulation, or more strict regulation, with the unspoken assumption that if the regulations were drafted correctly and regulators did their jobs well it would be possible to protect everyone from ever losing any money. But the reason the regulation described in the Journal article is poor is that it seemed arbitrary and non-transparent in a way that violates the rule of law and property rights.

Maybe you missed the posts from the last couple days explaining that, as the end of the first quarter of FutureOfCapitalism.com's public existence draws to a close, we are asking readers who enjoy the site's content to help support it by becoming paying subscribers by visiting our How To Help Page. Thank you to those readers who have already joined up. For the rest of you, if you missed the earlier solicitations, it's a simple pitch: If you subscribe in the next week you will receive a copy of our very first quarterly report, which is sent only to paying readers. The $49 entry level subscription to FutureOfCapitalism.com is less than $1 a week, or half of what a single weekday copy of the New York Times costs at the newsstand. If you subscribe or join at higher levels, you become eligible for access to such much-coveted FutureOfCapitalism.com items as the t-shirt, tote-bag, coffee mug, umbrella, bow tie, or regular neck-tie, which make terrific gifts for Christmas or whatever other holiday you might celebrate. If the last few notices reached you when you were away from your credit card, or on a mobile device you don't use for e-commerce, or you thought you would do it later; now is the moment. Please click on over and pay the money that will enable FutureOfCapitalism.com to keep its aggregation and analysis flowing and to make it even better in the months ahead.

The senior senator from New York, Charles "The Deerslayer" Schumer, has introduced a bill that would "provide tax incentives for the donation of wild game meat." What's really going on here? Mr. Schumer's press release makes it sound like the senator has something against deer. "Every year, overpopulation of deer leads to damaged crops, landscape, and vehicles. Deer contribute to an estimated $250 million worth of damage annually and deer-car accidents consistently outnumber accidents caused by drunken driving," the press release says. But the tax deduction for processing costs in the Schumer Bambi Bill isn't limited to venison; the language in the bill could apply just as easily to elk, ducks, or alligators. So if deer-demonization doesn't explain Mr. Schumer's action, what does? The answer is in the press release: "Up until 2 years ago the Venison Donation Coalition was funded by the state at $100,000 per year, last year it was funded at $75,000, and this year it was funded at $21,000." Since New York State is cutting back, Mr. Schumer wants the federal government, through the tax code, to seize the responsibility for subsidizing venison processing for the hungry.

At least some hunters are unimpressed; one commenter on an upstate New York newspaper site said, "They increase your hunters license fees and then offset it on the back end with a tax credit for your processing fees." The broader point, beyond the absurdity of a senator from Brooklyn long known as a vocal opponent of gun rights emerging to pose as a friend of the hunter, is that the federal government expands to fill responsibilities once left to the states. More broadly, it's an example of the way the tax code is used not solely as a way to raise funds for necessary government activities but, over and over again, as a way to encourage and subsidize various activities. On its own, each activity, like reducing the deer population or feeding the hungry with venison, may seem worthy, but together the result is a sprawling and overly complex tax code. Finally, there's a temptation to do things through the tax code rather than though spending. If Mr. Schumer wanted to hire federal officials to cull the deer herd or purchase more food for meals programs that serve the hungry, that would obviously be spending. The approach he is taking instead allows him to look like a tax cutter. The final observation is that it takes a government program to undo the effects of another government program. Government imposition of limits on deer hunting (hunting seasons, licenses) and government creation of wilderness areas such as the Adirondack and Catskill parks have contributed to growth in the deer population. Now, at least in Mr. Schumer's view, another government initiative is needed to undo the growth.

The National Republican Senatorial Committee, whose job it is to raise money to get more Republicans elected to the Senate, has sent two direct mail letters to my house in the past few weeks. The first, from Senator Hatch of Utah, said that Senator Hatch hoped I would "join the NRSC in its urgent mission: Fighting the Democrats' liberal agenda and supporting Republicans who will work to cut taxes, save Social Security and Medicare, and protect our nation from terrorist attacks." (Emphasis mine.) The Hatch letter went on to say that by supporting the NRSC today, "You will play a key role in stopping the Democrats' obstruction and saving Social Security so that current and soon-to-be retirees will get the benefits they've been promised." (Emphasis mine.) [The Hatch letter also included a line warning of the influence of "the Hollywood elites," but I couldn't figure out whether the senator meant Ronald Reagan or Arnold Schwarzenegger, so didn't pay much attention.] The second letter, from Senator Cornyn, said, "you can help us focus our battle against the Obama Democrats' aggressive push to expand the federal government into every area of our lives and businesses that will create a bloated welfare-state with sky-high taxes, limited freedoms, and a culture of dependence." (Emphasis mine.) It's quite a trick for the Senate Republicans to fundraise as the protectors of Social Security and Medicare while at the same time accuse the Obama Democrats of being the ones creating a bloated welfare state and a culture of dependence. This isn't an argument here for repealing either Social Security or Medicare, just an observation on the mixed messages and lack of clear principles being displayed by the Senate Republicans.

Somehow I get the sense that General Motors is in the same position with Saab as Condé Nast was in with Gourmet. The company doesn't actually want to find a buyer that will take over and turn around the money-losing property, because if such a buyer and turned-around company do emerge, they will just be a competitor for General Motors and its brands, the same way that a sold and turned around Gourmet would have been a competitor for Condé Nast's Bon Appetit. If GM were to sell Saab, it might actually make business sense for GM to accept a lower bid for the asset from an investment group that GM thinks is more likely to eventually fail. I tend to think that the property right of owning a business includes the right to shut it down, but it's surprising, given the government role at General Motors, that we aren't hearing more from anti-trust enforcement types about the need to make sure that GM acts in the interest of a competitive market overall for consumers rather than in its own narrow corporate self-interest. It may be because a lot of the jobs at stake are in Sweden rather than in America. But it may also be because the Obama administration is both the owner of General Motors and the antitrust enforcer. The same reasoning applies, by the way, to why GM closed Oldsmobile, Saturn, and Pontiac rather than selling them to a buyer who might succeed with them. If a potential buyer could get the right political and legal juice behind him, he might be able to force GM to sell the assets at a bargain price, or even to assume a share of the legacy costs going forward.

The Financial Times has an article making the same point that George Melloan made the other day in the Wall Street Journal: when regulators force banks to hold more government bonds, it ends up making it easier for the government to borrow and spend. Writes José Maria Brandão de Brito: "this amounts to a private subsidy to the state. Since any subsidy distorts decisions towards greater profligacy, government debt will probably swell, possibly to unsustainable levels. Politicians – like everyone else – are prone to moral hazard, meaning that – given the opportunity – they stand ready to engage in excessive spending. This is especially so in situations such as the present one, when the prospect of a sluggish recovery or protracted stagnation exerts great pressure on governments to revive economic growth. How relevant is this subsidisation effect? Recent reports suggest banks would have to tie-up about 10 per cent of total assets in government bonds to comply with the FSA standard. If the US were to adhere to this yardstick, its banks would be forced to take up about 20 per cent of the overall federal debt stock. That would generate a large and persistent downward pressure on US federal debt yields – big enough to preclude the discipline otherwise imposed by the market to rein in excessive government expenditure...The risk is that the new rules end up inflating a sovereign debt bubble."

"Less than two years after announcing that it would waive tuition for third-year students who pledge to spend five years working for nonprofit organizations or for the government, Harvard Law School is suspending the program — in part because almost twice as many students as expected signed up," the New York Times reports. The cultural and attitudinal shift on university campuses toward non-profit or government employment and away from the private, for-profit sector is one of the biggest stories around these days. We noted it earlier, and we will have more to say about it in the days ahead.

A new video from Reason.tv titled "How To Fix Health Care: Lasik Surgery for the Medical Debate" is getting a lot of attention on the Internet, including links at Instapundit and Carpe Diem. "Lasik as a model for health care reform" is the headline of the Carpe Diem post by economics professor Mark Perry, who notes that because consumers pay for laser eye surgery to correct their vision themselves rather than having it covered by insurance, prices for the procedure have dropped. As Mr. Perry puts it, "In one of the few truly market-based areas of health care that is actually consumer-driven (since it's not covered by insurance and patients make direct cash payments) - LASIK eye surgery - there have been market-driven improvements in quality and dramatic reductions in cost, which could be a model for health care reform for other procedures." Or as Dr. Robert Maloney, the laser eye surgeon featured in the Reason video, puts it, "I think Lasik can act as a model for health reform." While there's something to the argument about declining costs, the quality levels leave something to be desired, as the Web sites devoted to Lasik horror stories attest. Even Dr. Maloney, who comes off as a free market medical hero in the Reason video, has at least one seriously dissatisfied patient, as this Web site attests. Granted that some of the anti-Lasik sentiment is driven by trial lawyers who hope to profit by suing doctors, and granted that doctors who work at non-profit hospitals, or in government-run health care systems, and who perform procedures that are covered by health insurance, also sometimes have dissatisfied or even dead patients, or bad outcomes. Even conceding those points, though, it seems to me that the center-right or libertarian or free market forces are making a tactical error by portraying Lasik as a desirable model for the rest of the health care system to emulate. It may be a model for cost reduction, but not for quality improvement. In part that may be because, for all the disdain that ideologues of the left and right direct at health insurers (the left thinks the insurance executives make too much money and their shareholders too much profit, the right thinks that consumers should be paying most of their health care costs directly out of pocket rather than pre-paying it through insurers), the insurance companies actually can play a useful role in quality control. An insurance company paying for 1,000 eye surgeries a year can get a pretty decent idea of who the best surgeons are, while a consumer paying to have his own two eyes fixed doesn't have that kind of experience to go on. The consumer has a better incentive (they are his or her own eyes), but the insurance company has better information.

Henry Stern of New York Civic summarizes a series of articles in a small New York paper called City Hall about a network of groups surrounding New York's hard left Working Families Party, the gist of which is that "Some of the Fund's financial supporters were the same as those for the Working Families Organization, including the biggest single named donation from 2006 (visible on a 'Donations by Deposit' form filed with the state attorney general's office): $200,000 from the Open Society Institute of billionaire philanthropist George Soros, who also wrote a $150,000 personal check to the Working Families Organization that year. Those donations are far larger than the $94,200 limit that the Working Families Party is bound to hold to under state law."

The Economist nails super-lawyer Martin Lipton for a paper in which Mr. Lipton warns against changes that would reduce the competitiveness of American firms against "companies that have the advantages of state corporatism, like those in China." Writes the Economist: "Well, maybe. Most directors and executives that your columnist has met would rather work for an American company than a Chinese one, and are far less convinced than Mr Lipton of the advantages of state corporatism." Just ask the managing editor of Automotive News China.

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