With So Many Countries Cutting Taxes One Has to Ask Why The Democrats Won't

Stephen Moore in a commentary piece in the Wall Street Journal entitled "Reagonomics 2.0" explains how so many nations have accepted the self-evident fact that lower taxes produces wealth (READ). Why don't we have a flat tax?

"French President Nicolas Sarkozy has plans to cut his country's business income tax by at least five percentage points as part of his economic rehabilitation plan. Spain and Italy are negotiating plans to lower their corporate tax rates, and the U.K. already did so earlier this year. Sweden and Russia last year eliminated their estate taxes because they said the tax was economically counterproductive. In Germany under Chancellor Angela Merkel, the corporate tax rate has been reduced to less than 30% from 39%.

"Some of this tax chopping in Old Europe is a response to the success of the U.S. tax rate reductions and the fast pace of job creation that ensued from economic growth -- though few European officials will acknowledge that reality. But a bigger factor more recently has been the impact of the flat-tax revolution in Eastern Europe. Dan Mitchell of the Cato Institute says there are now 14 nations with flat taxes, 10 of them in nations formerly behind the Iron Curtain. "The pace of tax reform in these nations is so frantic, that it's hard to keep up to date with the changes," he says. Poland hasn't yet established a flat tax, but recently cut its business tax to 19% from 27%.

"Austria cut its corporate tax rate to keep pace with its neighbor, Slovakia which recently adopted an 18% flat tax. Singapore is cutting taxes to compete with its 16% flat-tax rival Hong Kong. Northern Ireland wants to cut its tax rates so that it can compete with the economic gazelle of Europe, the Republic of Ireland. In 1988 Ireland was a high-unemployment stagnant economy with a 48% corporate tax rate, today that rate is 12.5% and the rest of the world is now desperate to match its economic results. Meanwhile German Finance Minister Peer Steinbrueck sold the latest tax cuts as "an investment in Germany as a business location."...

"...Alas, there's only about one place on the planet where politicians hold Reaganomics in outright disrepute today -- and that is here. The Democratic leadership in Congress believes that tax rates don't matter much if at all, and that the Bush tax cuts were a giveaway to the rich. Presidential candidate John Edwards has even suggested a near doubling of the U.S. capital gains tax rate as part of his economic program, and his rivals all have schemes to soak the wealthy as well.

"All of this threatens to move America from leader to laggard in the global race for job creation, capital investment and prosperity."

"You've betrayed Vietnam. Someday you're going to sell out Taiwan. And we're going to be around when you get tired of Israel."...

In his article "They Wait for Us to Run Again" in Jewish World Review of August 17, Mark Steyn focuses on several very important points about Vietnam.

"Contrary to what the The New York Times wrote: "In urging Americans to stay the course in Iraq, Mr. Bush is challenging the historical memory that the pullout from Vietnam had few negative repercussions for the United States and its allies"

"Well, it had a "few negative repercussions" for America's allies in South Vietnam, who were promptly overrun by the North. And it had a "negative repercussion" for former Cambodian Prime Minister Sirik Matak, to whom the U.S. ambassador sportingly offered asylum. "I cannot, alas, leave in such a cowardly fashion," Matak told him. "I never believed for a moment that you would have this sentiment of abandoning a people which has chosen liberty … . I have committed this mistake of believing in you, the Americans." So Sirik Matak stayed in Phnom Penh and a month later was killed by the Khmer Rouge, along with about 2 million other people. If it's hard for individual names to linger in the New York Times' "historical memory," you'd think the general mound of corpses would resonate.

"But perhaps these distant people of exotic hue are not what the panjandrums of the New York Times regard as real "allies." In the wake of Vietnam, the communists gobbled up real estate all over the map, and ever closer to America's back yard. In Grenada, Maurice Bishop toppled Prime Minister Sir Eric Gairy: It was the first-ever coup in the British West Indies, and in a faintly surreal touch led to Queen Elizabeth presiding over a People's Revolutionary Government. There were Cuban "advisers" all over Grenada, just as there were Cuban troops all over Africa.

"Because what was lost in Vietnam was not just a war but American credibility...

"American victory in the Cold War looks inevitable in hindsight. It didn't seem that way in the Seventies. And, as Iran reminds us, the enduring legacy of the retreat from Vietnam was the emboldening of other enemies. The forces loosed in the Middle East bedevil to this day, in Iran, and in Lebanon, which Syria invaded shortly after the fall of Saigon and after its dictator had sneeringly told Henry Kissinger, "You've betrayed Vietnam. Someday you're going to sell out Taiwan. And we're going to be around when you get tired of Israel."...

"But if you lived in Damascus and Moscow and Havana, the Vietnam war was about America: American credibility, American purpose, American will. For our enemies today, it still is. Osama bin Laden made a bet — that, notwithstanding the T-shirt slogan, "These Colors Do Run": They ran from Vietnam, and they ran from the helicopters in the desert, and from Lebanon and Somalia — and they will run from Iraq and Afghanistan, because that is the nature of a soft, plump ersatz-superpower that coils up in the fetal position if you prick its toe. Even Republicans like Sen. John Warner seem peculiarly anxious to confirm the bin Laden characterization...

"To do it all over again in the full knowledge of what followed would turn an aberration into a pattern of behavior. And as the Sirik Mataks of Baghdad face the choice between staying and dying or exile and embittered evenings in the new Iraqi émigré restaurants of London and Los Angeles, who will be America's allies in the years ahead?

"Professor Bernard Lewis' dictum would be self-evident: "America is harmless as an enemy and treacherous as a friend." "

Will America be again the treacherous friend and harmless enemy? If the democrats have their way Iraq will be another Vietnam indeed. Who will believe anymore that Americans believe and will act in the name of the ideals upon which this country was founded on?

President Bush - Similarity of Vietnam to Iraq

In a speech before the Veterans of Foreign Wars National Convention on August 22 President Bush delivered a remarkable speech (READ). I have excerpted quite a large portion of it pertaining to his discussion of our previous wars and relating them to todays war in Iraq. There is new analysis regarding the Vietnam war which I will link to in the next article on this blog.

This speech gives me hope that we will do the right thing in the Middle East - and that is to win this war (or we will suffer the consequences of a defeat as we did in Vietnam). The speech follows.

I stand before you as a wartime President. I wish I didn't have to say that, but an enemy that attacked us on September the 11th, 2001, declared war on the United States of America. And war is what we're engaged in. The struggle has been called a clash of civilizations. In truth, it's a struggle for civilization. We fight for a free way of life against a new barbarism -- an ideology whose followers have killed thousands on American soil, and seek to kill again on even a greater scale...

Now, I know some people doubt the universal appeal of liberty, or worry that the Middle East isn't ready for it. Others believe that America's presence is destabilizing, and that if the United States would just leave a place like Iraq those who kill our troops or target civilians would no longer threaten us. Today I'm going to address these arguments. I'm going to describe why helping the young democracies of the Middle East stand up to violent Islamic extremists is the only realistic path to a safer world for the American people. I'm going to try to provide some historical perspective to show there is a precedent for the hard and necessary work we're doing, and why I have such confidence in the fact we'll be successful...

The enemy who attacked us despises freedom, and harbors resentment at the slights he believes America and Western nations have inflicted on his people. He fights to establish his rule over an entire region. And over time, he turns to a strategy of suicide attacks destined to create so much carnage that the American people will tire of the violence and give up the fight.

If this story sounds familiar, it is -- except for one thing. The enemy I have just described is not al Qaeda, and the attack is not 9/11, and the empire is not the radical caliphate envisioned by Osama bin Laden. Instead, what I've described is the war machine of Imperial Japan in the 1940s, its surprise attack on Pearl Harbor, and its attempt to impose its empire throughout East Asia.

Ultimately, the United States prevailed in World War II, and we have fought two more land wars in Asia. And many in this hall were veterans of those campaigns. Yet even the most optimistic among you probably would not have foreseen that the Japanese would transform themselves into one of America's strongest and most steadfast allies, or that the South Koreans would recover from enemy invasion to raise up one of the world's most powerful economies, or that Asia would pull itself out of poverty and hopelessness as it embraced markets and freedom...

There are many differences between the wars we fought in the Far East and the war on terror we're fighting today. But one important similarity is at their core they're ideological struggles. The militarists of Japan and the communists in Korea and Vietnam were driven by a merciless vision for the proper ordering of humanity. They killed Americans because we stood in the way of their attempt to force their ideology on others. Today, the names and places have changed, but the fundamental character of the struggle has not changed. Like our enemies in the past, the terrorists who wage war in Iraq and Afghanistan and other places seek to spread a political vision of their own -- a harsh plan for life that crushes freedom, tolerance, and dissent.

Like our enemies in the past, they kill Americans because we stand in their way of imposing this ideology across a vital region of the world. This enemy is dangerous; this enemy is determined; and this enemy will be defeated...

There are other critics, believe it or not, that argue that democracy could not succeed in Japan because the national religion -- Shinto -- was too fanatical and rooted in the Emperor. Senator Richard Russell denounced the Japanese faith, and said that if we did not put the Emperor on trial, "any steps we may take to create democracy are doomed to failure." The State Department's man in Tokyo put it bluntly: "The Emperor system must disappear if Japan is ever really to be democratic."

Those who said Shinto was incompatible with democracy were mistaken, and fortunately, Americans and Japanese leaders recognized it at the time, because instead of suppressing the Shinto faith, American authorities worked with the Japanese to institute religious freedom for all faiths. Instead of abolishing the imperial throne, Americans and Japanese worked together to find a place for the Emperor in the democratic political system.

And the result of all these steps was that every Japanese citizen gained freedom of religion, and the Emperor remained on his throne and Japanese democracy grew stronger because it embraced a cherished part of Japanese culture. And today, in defiance of the critics and the doubters and the skeptics, Japan retains its religions and cultural traditions, and stands as one of the world's great free societies...

Critics also complained when America intervened to save South Korea from communist invasion. Then as now, the critics argued that the war was futile, that we should never have sent our troops in, or they argued that America's intervention was divisive here at home...

Today, we see the result of a sacrifice of people in this room in the stark contrast of life on the Korean Peninsula. Without Americans' intervention during the war and our willingness to stick with the South Koreans after the war, millions of South Koreans would now be living under a brutal and repressive regime. The Soviets and Chinese communists would have learned the lesson that aggression pays. The world would be facing a more dangerous situation. The world would be less peaceful.

Instead, South Korea is a strong, democratic ally of the United States of America. South Korean troops are serving side-by-side with American forces in Afghanistan and in Iraq. And America can count on the free people of South Korea to be lasting partners in the ideological struggle we're facing in the beginning of the 21st century...

Then President Bush talks about the Vietnam war which is startingly similar in it’s antiwar sentiments to the current Iraq war.

Finally, there's Vietnam. This is a complex and painful subject for many Americans. The tragedy of Vietnam is too large to be contained in one speech. So I'm going to limit myself to one argument that has particular significance today. Then as now, people argued the real problem was America's presence and that if we would just withdraw, the killing would end...

In 1972, one antiwar senator put it this way: "What earthly difference does it make to nomadic tribes or uneducated subsistence farmers in Vietnam or Cambodia or Laos, whether they have a military dictator, a royal prince or a socialist commissar in some distant capital that they've never seen and may never heard of?" A columnist for The New York Times wrote in a similar vein in 1975, just as Cambodia and Vietnam were falling to the communists: "It's difficult to imagine," he said, "how their lives could be anything but better with the Americans gone." A headline on that story, date Phnom Penh, summed up the argument: "Indochina without Americans: For Most a Better Life."

The world would learn just how costly these misimpressions would be. In Cambodia, the Khmer Rouge began a murderous rule in which hundreds of thousands of Cambodians died by starvation and torture and execution. In Vietnam, former allies of the United States and government workers and intellectuals and businessmen were sent off to prison camps, where tens of thousands perished. Hundreds of thousands more fled the country on rickety boats, many of them going to their graves in the South China Sea...

There was another price to our withdrawal from Vietnam, and we can hear it in the words of the enemy we face in today's struggle -- those who came to our soil and killed thousands of citizens on September the 11th, 2001. In an interview with a Pakistani newspaper after the 9/11 attacks, Osama bin Laden declared that "the American people had risen against their government's war in Vietnam. And they must do the same today."

His number two man, Zawahiri, has also invoked Vietnam. In a letter to al Qaeda's chief of operations in Iraq, Zawahiri pointed to "the aftermath of the collapse of the American power in Vietnam and how they ran and left their agents."

Zawahiri later returned to this theme, declaring that the Americans "know better than others that there is no hope in victory. The Vietnam specter is closing every outlet." Here at home, some can argue our withdrawal from Vietnam carried no price to American credibility -- but the terrorists see it differently.

We must remember the words of the enemy. We must listen to what they say. Bin Laden has declared that "the war [in Iraq] is for you or us to win. If we win it, it means your disgrace and defeat forever." Iraq is one of several fronts in the war on terror -- but it's the central front -- it's the central front for the enemy that attacked us and wants to attack us again. And it's the central front for the United States and to withdraw without getting the job done would be devastating.

If we were to abandon the Iraqi people, the terrorists would be emboldened, and use their victory to gain new recruits. As we saw on September the 11th, a terrorist safe haven on the other side of the world can bring death and destruction to the streets of our own cities. Unlike in Vietnam, if we withdraw before the job is done, this enemy will follow us home. And that is why, for the security of the United States of America, we must defeat them overseas so we do not face them in the United States of America.

Recently, two men who were on the opposite sides of the debate over the Vietnam War came together to write an article. One was a member of President Nixon's foreign policy team, and the other was a fierce critic of the Nixon administration's policies. Together they wrote that the consequences of an American defeat in Iraq would be disastrous.

Here's what they said: "Defeat would produce an explosion of euphoria among all the forces of Islamist extremism, throwing the entire Middle East into even greater upheaval. The likely human and strategic costs are appalling to contemplate. Perhaps that is why so much of the current debate seeks to ignore these consequences." I believe these men are right.

In Iraq, our moral obligations and our strategic interests are one. So we pursue the extremists wherever we find them and we stand with the Iraqis at this difficult hour -- because the shadow of terror will never be lifted from our world and the American people will never be safe until the people of the Middle East know the freedom that our Creator meant for all.

I recognize that history cannot predict the future with absolute certainty. I understand that. But history does remind us that there are lessons applicable to our time. And we can learn something from history. In Asia, we saw freedom triumph over violent ideologies after the sacrifice of tens of thousands of American lives -- and that freedom has yielded peace for generations.

The American military graveyards across Europe attest to the terrible human cost in the fight against Nazism. They also attest to the triumph of a continent that today is whole, free, and at peace. The advance of freedom in these lands should give us confidence that the hard work we are doing in the Middle East can have the same results we've seen in Asia and elsewhere -- if we show the same perseverance and the same sense of purpose.

In a world where the terrorists are willing to act on their twisted beliefs with sickening acts of barbarism, we must put faith in the timeless truths about human nature that have made us free.

Across the Middle East, millions of ordinary citizens are tired of war, they're tired of dictatorship and corruption, they're tired of despair. They want societies where they're treated with dignity and respect, where their children have the hope for a better life. They want nations where their faiths are honored and they can worship in freedom.

And that is why millions of Iraqis and Afghans turned out to the polls -- millions turned out to the polls. And that's why their leaders have stepped forward at the risk of assassination. And that's why tens of thousands are joining the security forces of their nations. These men and women are taking great risks to build a free and peaceful Middle East -- and for the sake of our own security, we must not abandon them.

There is one group of people who understand the stakes, understand as well as any expert, anybody in America -- those are the men and women in uniform. Through nearly six years of war, they have performed magnificently. (Applause.) Day after day, hour after hour, they keep the pressure on the enemy that would do our citizens harm. They've overthrown two of the most brutal tyrannies of the world, and liberated more than 50 million citizens.

In Iraq, our troops are taking the fight to the extremists and radicals and murderers all throughout the country. Our troops have killed or captured an average of more than 1,500 al Qaeda terrorists and other extremists every month since January of this year. We're in the fight. Today our troops are carrying out a surge that is helping bring former Sunni insurgents into the fight against the extremists and radicals, into the fight against al Qaeda, into the fight against the enemy that would do us harm. They're clearing out the terrorists out of population centers, they're giving families in liberated Iraqi cities a look at a decent and hopeful life.

Our troops are seeing this progress that is being made on the ground. And as they take the initiative from the enemy, they have a question: Will their elected leaders in Washington pull the rug out from under them just as they're gaining momentum and changing the dynamic on the ground in Iraq? Here's my answer is clear: We'll support our troops, we'll support our commanders, and we will give them everything they need to succeed.

Despite the mistakes that have been made, despite the problems we have encountered, seeing the Iraqis through as they build their democracy is critical to keeping the American people safe from the terrorists who want to attack us. It is critical work to lay the foundation for peace that veterans have done before you all...

A free Iraq is not going to transform the Middle East overnight. But a free Iraq will be a massive defeat for al Qaeda, it will be an example that provides hope for millions throughout the Middle East, it will be a friend of the United States, and it's going to be an important ally in the ideological struggle of the 21st century.
Prevailing in this struggle is essential to our future as a nation. And the question now that comes before us is this: Will today's generation of Americans resist the allure of retreat, and will we do in the Middle East what the veterans in this room did in Asia?

The journey is not going to be easy, as the veterans fully understand. At the outset of the war in the Pacific, there were those who argued that freedom had seen its day and that the future belonged to the hard men in Tokyo. A year and a half before the attack on Pearl Harbor, Japan's Foreign Minister gave a hint of things to come during an interview with a New York newspaper. He said, "In the battle between democracy and totalitarianism the latter adversary will without question win and will control the world. The era of democracy is finished, the democratic system bankrupt."

In fact, the war machines of Imperial Japan would be brought down -- brought down by good folks who only months before had been students and farmers and bank clerks and factory hands. Some are in the room today. Others here have been inspired by their fathers and grandfathers and uncles and cousins.

That generation of Americans taught the tyrants a telling lesson: There is no power like the power of freedom and no soldier as strong as a soldier who fights for a free future for his children. (Applause.) And when America's work on the battlefield was done, the victorious children of democracy would help our defeated enemies rebuild, and bring the taste of freedom to millions.

We can do the same for the Middle East. Today the violent Islamic extremists who fight us in Iraq are as certain of their cause as the Nazis, or the Imperial Japanese, or the Soviet communists were of theirs. They are destined for the same fate.

The greatest weapon in the arsenal of democracy is the desire for liberty written into the human heart by our Creator. So long as we remain true to our ideals, we will defeat the extremists in Iraq and Afghanistan. We will help those countries' peoples stand up functioning democracies in the heart of the broader Middle East. And when that hard work is done and the critics of today recede from memory, the cause of freedom will be stronger, a vital region will be brighter, and the American people will be safer.

Socialized Medicine, State by State by Robert Tracinski

Every Democratic presidential candidate is proposing some kind of scheme to move America toward socialized medicine, and the front runner, Hillary Clinton, is poised to pursue a new version of her infamous proposals for "Hillarycare."

But the greatest danger to a free market in medical care may not come from the federal level. It may come from the state level, as governors—following the lead of Republicans like Mitt Romney and Arnold Schwarzenegger—compete with one another to create government-controlled health-care systems, state by state.

The Ugly Truth About Canadian Health Care

Socialized medicine has meant rationed care and lack of innovation. Small wonder Canadians are looking to the market. David Gratzer (www.City-Journal.org READ)

Summer 2007 City Journal
Mountain-bike enthusiast Suzanne Aucoin had to fight more than her Stage IV colon cancer. Her doctor suggested Erbitux—a proven cancer drug that targets cancer cells exclusively, unlike conventional chemotherapies that more crudely kill all fast-growing cells in the body—and Aucoin went to a clinic to begin treatment. But if Erbitux offered hope, Aucoin’s insurance didn’t: she received one inscrutable form letter after another, rejecting her claim for reimbursement. Yet another example of the callous hand of managed care, depriving someone of needed medical help, right? Guess again. Erbitux is standard treatment, covered by insurance companies—in the United States. Aucoin lives in Ontario, Canada.

When Aucoin appealed to an official ombudsman, the Ontario government claimed that her treatment was unproven and that she had gone to an unaccredited clinic. But the FDA in the U.S. had approved Erbitux, and her clinic was a cancer center affiliated with a prominent Catholic hospital in Buffalo. This January, the ombudsman ruled in Aucoin’s favor, awarding her the cost of treatment. She represents a dramatic new trend in Canadian health-care advocacy: finding the treatment you need in another country, and then fighting Canadian bureaucrats (and often suing) to get them to pick up the tab.

But if Canadians are looking to the United States for the care they need, Americans, ironically, are increasingly looking north for a viable health-care model. There’s no question that American health care, a mixture of private insurance and public programs, is a mess. Over the last five years, health-insurance premiums have more than doubled, leaving firms like General Motors on the brink of bankruptcy. Expensive health care has also hit workers in the pocketbook: it’s one of the reasons that median family income fell between 2000 and 2005 (despite a rise in overall labor costs). Health spending has surged past 16 percent of GDP. The number of uninsured Americans has risen, and even the insured seem dissatisfied. So it’s not surprising that some Americans think that solving the nation’s health-care woes may require adopting a Canadian-style single-payer system, in which the government finances and provides the care. Canadians, the seductive single-payer tune goes, not only spend less on health care; their health outcomes are better, too—life expectancy is longer, infant mortality lower.

Thus, Paul Krugman in the New York Times: “Does this mean that the American way is wrong, and that we should switch to a Canadian-style single-payer system? Well, yes.” Politicians like Hillary Clinton are on board; Michael Moore’s new documentary Sicko celebrates the virtues of Canada’s socialized health care; the National Coalition on Health Care, which includes big businesses like AT&T, recently endorsed a scheme to centralize major health decisions to a government committee; and big unions are questioning the tenets of employer-sponsored health insurance. Some are tempted. Not me.

I was once a believer in socialized medicine. I don’t want to overstate my case: growing up in Canada, I didn’t spend much time contemplating the nuances of health economics. I wanted to get into medical school—my mind brimmed with statistics on MCAT scores and admissions rates, not health spending. But as a Canadian, I had soaked up three things from my environment: a love of ice hockey; an ability to convert Celsius into Fahrenheit in my head; and the belief that government-run health care was truly compassionate. What I knew about American health care was unappealing: high expenses and lots of uninsured people. When HillaryCare shook Washington, I remember thinking that the Clintonistas were right.

My health-care prejudices crumbled not in the classroom but on the way to one. On a subzero Winnipeg morning in 1997, I cut across the hospital emergency room to shave a few minutes off my frigid commute. Swinging open the door, I stepped into a nightmare: the ER overflowed with elderly people on stretchers, waiting for admission. Some, it turned out, had waited five days. The air stank with sweat and urine. Right then, I began to reconsider everything that I thought I knew about Canadian health care. I soon discovered that the problems went well beyond overcrowded ERs. Patients had to wait for practically any diagnostic test or procedure, such as the man with persistent pain from a hernia operation whom we referred to a pain clinic—with a three-year wait list; or the woman needing a sleep study to diagnose what seemed like sleep apnea, who faced a two-year delay; or the woman with breast cancer who needed to wait four months for radiation therapy, when the standard of care was four weeks.

I decided to write about what I saw. By day, I attended classes and visited patients; at night, I worked on a book. Unfortunately, statistics on Canadian health care’s weaknesses were hard to come by, and even finding people willing to criticize the system was difficult, such was the emotional support that it then enjoyed. One family friend, diagnosed with cancer, was told to wait for potentially lifesaving chemotherapy. I called to see if I could write about his plight. Worried about repercussions, he asked me to change his name. A bit later, he asked if I could change his sex in the story, and maybe his town. Finally, he asked if I could change the illness, too.

My book’s thesis was simple: to contain rising costs, government-run health-care systems invariably restrict the health-care supply. Thus, at a time when Canada’s population was aging and needed more care, not less, cost-crunching bureaucrats had reduced the size of medical school classes, shuttered hospitals, and capped physician fees, resulting in hundreds of thousands of patients waiting for needed treatment—patients who suffered and, in some cases, died from the delays. The only solution, I concluded, was to move away from government command-and-control structures and toward a more market-oriented system. To capture Canadian health care’s growing crisis, I called my book Code Blue, the term used when a patient’s heart stops and hospital staff must leap into action to save him. Though I had a hard time finding a Canadian publisher, the book eventually came out in 1999 from a small imprint; it struck a nerve, going through five printings.

Nor were the problems I identified unique to Canada—they characterized all government-run health-care systems. Consider the recent British controversy over a cancer patient who tried to get an appointment with a specialist, only to have it canceled—48 times. More than 1 million Britons must wait for some type of care, with 200,000 in line for longer than six months. A while back, I toured a public hospital in Washington, D.C., with Tim Evans, a senior fellow at the Centre for the New Europe. The hospital was dark and dingy, but Evans observed that it was cleaner than anything in his native England. In France, the supply of doctors is so limited that during an August 2003 heat wave—when many doctors were on vacation and hospitals were stretched beyond capacity—15,000 elderly citizens died. Across Europe, state-of-the-art drugs aren’t available. And so on.

But single-payer systems—confronting dirty hospitals, long waiting lists, and substandard treatment—are starting to crack. Today my book wouldn’t seem so provocative to Canadians, whose views on public health care are much less rosy than they were even a few years ago. Canadian newspapers are now filled with stories of people frustrated by long delays for care:

vow broken on cancer wait times: most hospitals across canada fail to meet ottawa’s four-week guideline for radiation
patients wait as p.e.t. scans used in animal experiments
back patients waiting years for treatment: study
the doctor is . . . out
As if a taboo had lifted, government statistics on the health-care system’s problems are suddenly available. In fact, government researchers have provided the best data on the doctor shortage, noting, for example, that more than 1.5 million Ontarians (or 12 percent of that province’s population) can’t find family physicians. Health officials in one Nova Scotia community actually resorted to a lottery to determine who’d get a doctor’s appointment.

Dr. Jacques Chaoulli is at the center of this changing health-care scene. Standing at about five and a half feet and soft-spoken, he doesn’t seem imposing. But this accidental revolutionary has turned Canadian health care on its head. In the 1990s, recognizing the growing crisis of socialized care, Chaoulli organized a private Quebec practice—patients called him, he made house calls, and then he directly billed his patients. The local health board cried foul and began fining him. The legal status of private practice in Canada remained murky, but billing patients, rather than the government, was certainly illegal, and so was private insurance.

Chaoulli gave up his private practice but not the fight for private medicine. Trying to draw attention to Canada’s need for an alternative to government care, he began a hunger strike but quit after a month, famished but not famous. He wrote a couple of books on the topic, which sold dismally. He then came up with the idea of challenging the government in court. Because the lawyers whom he consulted dismissed the idea, he decided to make the legal case himself and enrolled in law school. He flunked out after a term. Undeterred, he found a sponsor for his legal fight (his father-in-law, who lives in Japan) and a patient to represent. Chaoulli went to court and lost. He appealed and lost again. He appealed all the way to the Supreme Court. And there—amazingly—he won.

Chaoulli was representing George Zeliotis, an elderly Montrealer forced to wait almost a year for a hip replacement. Zeliotis was in agony and taking high doses of opiates. Chaoulli maintained that the patient should have the right to pay for private health insurance and get treatment sooner. He based his argument on the Canadian equivalent of the Bill of Rights, as well as on the equivalent Quebec charter. The court hedged on the national question, but a majority agreed that Quebec’s charter did implicitly recognize such a right.

It’s hard to overstate the shock of the ruling. It caught the government completely off guard—officials had considered Chaoulli’s case so weak that they hadn’t bothered to prepare briefing notes for the prime minister in the event of his victory. The ruling wasn’t just shocking, moreover; it was potentially monumental, opening the way to more private medicine in Quebec. Though the prohibition against private insurance holds in the rest of the country for now, at least two people outside Quebec, armed with Chaoulli’s case as precedent, are taking their demand for private insurance to court.

Rick Baker helps people, and sometimes even saves lives. He describes a man who had a seizure and received a diagnosis of epilepsy. Dissatisfied with the opinion—he had no family history of epilepsy, but he did have constant headaches and nausea, which aren’t usually seen in the disorder—the man requested an MRI. The government told him that the wait would be four and a half months. So he went to Baker, who arranged to have the MRI done within 24 hours—and who, after the test discovered a brain tumor, arranged surgery within a few weeks.

Baker isn’t a neurosurgeon or even a doctor. He’s a medical broker, one member of a private sector that is rushing in to address the inadequacies of Canada’s government care. Canadians pay him to set up surgical procedures, diagnostic tests, and specialist consultations, privately and quickly. “I don’t have a medical background. I just have some common sense,” he explains. “I don’t need to be a doctor for what I do. I’m just expediting care.”

He tells me stories of other people whom his British Columbia–based company, Timely Medical Alternatives, has helped—people like the elderly woman who needed vascular surgery for a major artery in her abdomen and was promised prompt care by one of the most senior bureaucrats in the government, who never called back. “Her doctor told her she’s going to die,” Baker remembers. So Timely got her surgery in a couple of days, in Washington State. Then there was the eight-year-old badly in need of a procedure to help correct her deafness. After watching her surgery get bumped three times, her parents called Timely. She’s now back at school, her hearing partly restored. “The father said, ‘Mr. Baker, my wife and I are in agreement that your star shines the brightest in our heaven,’ ” Baker recalls. “I told that story to a government official. He shrugged. He couldn’t fucking care less.”

Not everyone has kind words for Baker. A woman from a union-sponsored health coalition, writing in a local paper, denounced him for “profiting from people’s misery.” When I bring up the comment, he snaps: “I’m profiting from relieving misery.” Some of the services that Baker brokers almost certainly contravene Canadian law, but governments are loath to stop him. “What I am doing could be construed as civil disobedience,” he says. “There comes a time when people need to lead the government.”

Baker isn’t alone: other private-sector health options are blossoming across Canada, and the government is increasingly turning a blind eye to them, too, despite their often uncertain legal status. Private clinics are opening at a rate of about one a week. Companies like MedCan now offer “corporate medicals” that include an array of diagnostic tests and a referral to Johns Hopkins, if necessary. Insurance firms sell critical-illness insurance, giving policyholders a lump-sum payment in the event of a major diagnosis; since such policyholders could, in theory, spend the money on anything they wanted, medical or not, the system doesn’t count as health insurance and is therefore legal. Testifying to the changing nature of Canadian health care, Baker observes that securing prompt care used to mean a trip south. These days, he says, he’s able to get 80 percent of his clients care in Canada, via the private sector.

Another sign of transformation: Canadian doctors, long silent on the health-care system’s problems, are starting to speak up. Last August, they voted Brian Day president of their national association. A former socialist who counts Fidel Castro as a personal acquaintance, Day has nevertheless become perhaps the most vocal critic of Canadian public health care, having opened his own private surgery center as a remedy for long waiting lists and then challenged the government to shut him down. “This is a country in which dogs can get a hip replacement in under a week,” he fumed to the New York Times, “and in which humans can wait two to three years.”

And now even Canadian governments are looking to the private sector to shrink the waiting lists. Day’s clinic, for instance, handles workers’-compensation cases for employees of both public and private corporations. In British Columbia, private clinics perform roughly 80 percent of government-funded diagnostic testing. In Ontario, where fealty to socialized medicine has always been strong, the government recently hired a private firm to staff a rural hospital’s emergency room.

This privatizing trend is reaching Europe, too. Britain’s government-run health care dates back to the 1940s. Yet the Labour Party—which originally created the National Health Service and used to bristle at the suggestion of private medicine, dismissing it as “Americanization”—now openly favors privatization. Sir William Wells, a senior British health official, recently said: “The big trouble with a state monopoly is that it builds in massive inefficiencies and inward-looking culture.” Last year, the private sector provided about 5 percent of Britain’s nonemergency procedures; Labour aims to triple that percentage by 2008. The Labour government also works to voucherize certain surgeries, offering patients a choice of four providers, at least one private. And in a recent move, the government will contract out some primary care services, perhaps to American firms such as UnitedHealth Group and Kaiser Permanente.

Sweden’s government, after the completion of the latest round of privatizations, will be contracting out some 80 percent of Stockholm’s primary care and 40 percent of its total health services, including one of the city’s largest hospitals. Since the fall of Communism, Slovakia has looked to liberalize its state-run system, introducing co-payments and privatizations. And modest market reforms have begun in Germany: increasing co-pays, enhancing insurance competition, and turning state enterprises over to the private sector (within a decade, only a minority of German hospitals will remain under state control). It’s important to note that change in these countries is slow and gradual—market reforms remain controversial. But if the United States was once the exception for viewing a vibrant private sector in health care as essential, it is so no longer.

Yet even as Stockholm and Saskatoon are percolating with the ideas of Adam Smith, a growing number of prominent Americans are arguing that socialized health care still provides better results for less money. “Americans tend to believe that we have the best health care system in the world,” writes Krugman in the New York Times. “But it isn’t true. We spend far more per person on health care . . . yet rank near the bottom among industrial countries in indicators from life expectancy to infant mortality.”

One often hears variations on Krugman’s argument—that America lags behind other countries in crude health outcomes. But such outcomes reflect a mosaic of factors, such as diet, lifestyle, drug use, and cultural values. It pains me as a doctor to say this, but health care is just one factor in health. Americans live 75.3 years on average, fewer than Canadians (77.3) or the French (76.6) or the citizens of any Western European nation save Portugal. Health care influences life expectancy, of course. But a life can end because of a murder, a fall, or a car accident. Such factors aren’t academic—homicide rates in the United States are much higher than in other countries (eight times higher than in France, for instance). In The Business of Health, Robert Ohsfeldt and John Schneider factor out intentional and unintentional injuries from life-expectancy statistics and find that Americans who don’t die in car crashes or homicides outlive people in any other Western country.

And if we measure a health-care system by how well it serves its sick citizens, American medicine excels. Five-year cancer survival rates bear this out. For leukemia, the American survival rate is almost 50 percent; the European rate is just 35 percent. Esophageal carcinoma: 12 percent in the United States, 6 percent in Europe. The survival rate for prostate cancer is 81.2 percent here, yet 61.7 percent in France and down to 44.3 percent in England—a striking variation.

Like many critics of American health care, though, Krugman argues that the costs are just too high: “In 2002 . . . the United States spent $5,267 on health care for each man, woman, and child.” Health-care spending in Canada and Britain, he notes, is a small fraction of that. Again, the picture isn’t quite as clear as he suggests; because the U.S. is so much wealthier than other countries, it isn’t unreasonable for it to spend more on health care. Take America’s high spending on research and development. M. D. Anderson in Texas, a prominent cancer center, spends more on research than Canada does.

That said, American health care is expensive. And Americans aren’t always getting a good deal. In the coming years, with health expenses spiraling up, it will be easy for some—like the zealous legislators in California—to give in to the temptation of socialized medicine. In Washington, there are plenty of old pieces of legislation that like-minded politicians could take off the shelf, dust off, and promote: expanding Medicare to Americans 55 and older, say, or covering all children in Medicaid.

But such initiatives would push the United States further down the path to a government-run system and make things much, much worse. True, government bureaucrats would be able to cut costs—but only by shrinking access to health care, as in Canada, and engendering a Canadian-style nightmare of overflowing emergency rooms and yearlong waits for treatment. America is right to seek a model for delivering good health care at good prices, but we should be looking not to Canada, but close to home—in the other four-fifths or so of our economy. From telecommunications to retail, deregulation and market competition have driven prices down and quality and productivity up. Health care is long overdue for the same prescription.

The New Privatization by Steven Malanga

www.City-Journal.org

"I’ve got a bridge to sell you” sounds like a sleazy salesman’s pitch. But if Indiana governor Mitch Daniels offers you one, maybe you should believe him. Daniels has already auctioned the rights to operate the Indiana Toll Road—a 157-mile road linking the Chicago Skyway in the west to the Ohio Turnpike in the east—to a private group for $3.8 billion. He’s got other state assets he’d like to sell, too, if he can just get the Indiana legislature to go along. Meantime, Chicago mayor Richard Daley has harvested $1.8 billion auctioning the Skyway itself to a private group, and another half-billion or so turning city-owned garages over to private operators. Now he’s trying to sell Midway Airport; it could fetch $3 billion.

These deals are the leading edge of what could become the biggest injection of competition and private capital into American government in generations. Across the country, cash-strapped governors and mayors are discovering that their airports, bridges, toll roads, water systems, and other revenue-generating operations are worth far more than they thought, and are eyeing auctions that might produce windfalls similar to those in Chicago and Indiana. They’re also looking to recruit private investors to build and operate new toll roads, bridges, and other infrastructure.

If the deals can overcome resistance from anti-privatization groups and from politicians who benefit from keeping a stranglehold on government assets, they could help make up for decades of underinvestment in infrastructure—and thereby renew America’s landscape. “There’s probably $100 billion in domestic capital alone that’s being raised to invest in these transactions, and when that’s leveraged with debt, you’re probably looking at up to $400 billion in money that’s ready to go to work,” says Dana Levenson, Chicago’s former chief financial officer and now an investment banker at Royal Bank of Scotland. Add foreign investment to the mix, and the sums get even more impressive.

The trend proves the axiom that what’s old can be new again. Private investment in infrastructure, especially bridges and roads, was common in early United States history. Immediately after the Revolutionary War, for instance, investors put up $465,000 to build the Philadelphia-Lancaster Turnpike, a 66-mile toll road that proved so popular that it led to further waves of private investing in highways. During the first half of the nineteenth century, private funds provided the young republic with some 600 toll roads. And as the country spread westward during the second half of the century, infrastructure investors helped ease the way, with 100 toll roads in California alone. In fact, the private sector kept building roads until the automobile’s arrival prompted more extensive—and costly—government safety regulations, which at the time made toll roads a largely unprofitable venture. Government turned to new methods—especially municipal bonds, which investors like because they aren’t taxed—to finance infrastructure.

Privately financed infrastructure has made another appearance in post–World War II Europe. Starting with 1955 legislation, France began to tap private investors to build and operate what eventually amounted to 3,400 miles of autoroutes between cities. Margaret Thatcher’s energetic privatization drive in 1980s England sold existing government assets and spawned scores of public-private construction projects. The Soviet Union’s collapse led to extensive privatization in former Eastern bloc countries during the nineties. The U.S. Department of Transportation figures that worldwide, more than 1,100 public-private deals have taken place in the transportation field alone over the last two decades. Total value: approximately $360 billion.

Though the United States has applauded all this privatization, we’ve done little here at home by comparison. While politicians in both parties embraced a “reinventing government” ideal in the early nineties that sought to bring greater competition to the public sector by outsourcing government services, union opposition slowed—and, in many cases, derailed—these efforts. At the same time, tax-free financing, which doesn’t exist in most other countries, gave states and municipalities an incentive to build with lending instead of turning to the market.

But state and local governments, spending ever more on such items as Medicaid, education, and bloated public-employee pensions and benefits, have given infrastructure the short end of the stick—even as traditional financing sources, such as proceeds from gas taxes, haven’t kept pace with the growing need. Over the last 25 years, as the miles driven on U.S. roads have doubled, road spending has increased by less than 50 percent. Deterioration is the inevitable result. Nearly a fifth of America’s roads are in pitiable shape, according to the U.S. Department of Transportation, and nearly one out of every three bridges earns the department’s “structurally deficient” rating. Road congestion, a by-product of too little new building, costs the American economy about $65 billion annually, as trucks and cars snarled in traffic burn up time and fuel. The clogging is likely to get worse. “These costs have been growing at about 8 percent per year—almost triple the rate of growth of the economy,” Tyler Duval, assistant secretary of the Department of Transportation, informed Congress in February.

The bill for alleviating these woes will be gigantic. Texas, for example, estimates that it must spend some $100 billion extra on current and new roads to keep up with its anticipated growth over the next quarter-century. Oregon calculates that it needs an additional $1.3 billion a year just to keep its existing transportation network from crumbling. Most states face similar financing gaps—and that’s not including the billions of dollars necessary to update airport security and expand water ports.

Public funds aren’t about to solve this crisis. Rocketing gasoline prices have made it politically unpalatable to increase fuel taxes, and some state and local budgets are already buckling under big annual debt payments from decades of borrowing. “States are desperate,” says David Osborne, coauthor of Reinventing Government and, more recently, The Price of Government. He predicts a “perfect storm” of fiscal stress as the population ages and fewer taxpayers must support bigger government. “The situation isn’t going to be getting better; it’s going to get worse, which is what has suddenly made more politicians interested in privatization.” “Does no one notice the risk of inaction?” Indiana’s Daniels asked critics on Capitol Hill last year.

Confronting a $3 billion transportation-funding shortfall, Indiana decided to use an auction to extract the Toll Road’s long-term value. In effect, a private operator gave Indiana a fat up-front payment in exchange for the right to collect tolls on the road for 75 years. Like the Chicago deal, which hands over the Skyway for 99 years, the Indiana lease is basically a sale, since its term exceeds the road’s anticipated life. Each agreement requires the private operator to invest in rebuilding the road as it falls apart and to follow a lengthy list of operating standards, from how best to fill potholes to how quickly to clear roadkill.

The private operators readily agreed to these conditions and still bid higher than anyone expected—because they saw value in the roads that the local governments didn’t. Until now, the only way that local governments could wring value from these properties was to levy tolls or fees on them, and then use the proceeds to pay back money borrowed in the municipal bond market. Fiscal experts long assumed that because municipal financing is tax-free and therefore attractive to investors, this approach would get the best return on investment. But the Chicago and Indiana transactions have exploded that notion, demonstrating a basic principle that anyone who’s ever bought or sold on eBay readily understands: the true worth of something is what folks are willing to pay for it. Using tax-free financing, Chicago thought that it could extract at most about $900 million from the Skyway—half of what the auction eventually brought in. Indiana pegged the Toll Road’s value at just $1.8 billion, $2 billion less than it got from the private sector. “There’s no way that the state could have come up with nearly $4 billion for the tollway using traditional government financing,” says Matt Will, a finance professor at the University of Indianapolis.

The vast differences in valuations highlight essential differences between the private and public sectors. For starters, private financiers investing in these deals—mostly managers of international pension funds—often have a greater taste for risk than do investors in government bonds, who typically require governments to rely on the most conservative revenue projections. The winning consortium in the Chicago Skyway auction estimated that traffic would grow annually by about 3 percent; the city’s own study used a more conservative 1 percent growth rate. The variation of merely a few percentage points of growth, stretched out over decades, helped create the huge divergence in the Skyway’s perceived value.

Further, the Skyway sale transfers risk from the taxpayer to the private owner. If the road’s traffic doesn’t grow as anticipated, the investors must accept a lower rate of return; the taxpayers will already have their money. Of course, if traffic outpaces expectations, the investors get a windfall. The Skyway’s new owners—a partnership between Australia’s Macquarie Bank and a Spanish construction firm—have shown that they intend to make their property live up to the brighter projections. Within three months of closing the deal, they had installed an electronic toll-collection system to help zoom traffic along and assigned additional collectors during rush hour to gather cash more quickly. The result: reduced wait times, boosted Skyway use—and more money coming in. Chicago didn’t bother with any of these reforms when it managed the road, a Macquarie managing director testified before Congress last year. Unlike the city, he said, Macquarie was “heavily incentivized” to run the road efficiently.

For local politicians, shielding public jobs or maintaining jurisdiction over an asset is sometimes more important than improving results. Quasi-public authorities, for instance, now operate many toll roads, bridges, airports, and ports, and too often they serve as patronage mills. To take one example, a federal investigation of a powerful Pennsylvania state senator revealed that the state’s turnpike commission handed out lucrative consulting contracts, paying some $220,000, to one of the senator’s friends, who appeared to have spent most of his time running the pol’s private estate. The investigation has given a huge lift to Governor Ed Rendell’s proposal to lease the Pennsylvania Turnpike, and it is just the latest to uncover patronage and lousy management at the commission—which was supposed to have gone out of business after building the turnpike six decades ago, but today employs about 2,000 people, including 500 administrators, to operate the 537-mile road. “The turnpike commission has traditionally been a patronage cesspool,” says Matthew Brouillette, president of the Commonwealth Foundation, a Harrisburg-based think tank that supports the lease.

Even when outright patronage isn’t involved, civil-service pay scales and cushy union contracts rarely inspire public employees to maximize results. Chicago’s Levenson recommended selling the city’s parking garages, for instance, because they simply didn’t run at capacity, even though they charged less than most competing private garages. “Government is just not set up to give the person supervising those garages a $20,000 bonus if he raises capacity, or fire him if it fails,” says Levenson. In a study that Daniels commissioned after taking office, Indiana found that it spent 34 cents to collect every 15-cent toll. “We would be better off using the honor system,” Daniels quipped.

The Chicago and Indiana deals’ success now has political leaders scrambling to find other privatization options. Daley seeks federal approval to auction the rights to operate Midway, Chicago’s second-largest airport, as part of a federal project to demonstrate the benefits of privatization. Midway would be the second airport, and the first major hub, to enter the program. (The first was Stewart International Airport in Newburgh, New York, which the Pataki administration privatized in 2000.) In Colorado, the independent state authority that operates the Northwest Parkway, a Denver-area toll road, is evaluating bids for a 50-year lease to run it; the transaction could raise $500 million. New Jersey governor Jon Corzine is thinking of selling the New Jersey Turnpike, which could yield some $20 billion, though he’s also considering floating municipal bonds, backed by the turnpike’s tolls, which would raise less money but allow the state to continue operating it. Many smaller-scale deals are in the works, too. The Macquarie director said last fall that he anticipated as many as 25 toll-road privatizations in the U.S. over the next two years, potentially pouring $80 billion into government coffers.

Selling existing assets may turn out to be only a small part of this promising story. With far more money to deploy than there are public assets to sell, investors are now vying to help governments build and operate new infrastructure, and budget-squeezed states are taking them up on their offers.

Currently, 23 states have laws that permit such public-private deals, and several of them have already forged agreements. Texas, for instance, has made private capital a key ingredient in a vast road-building project known as the Trans-Texas Corridor. In California, a private company is constructing a nearly ten-mile, $800 million extension of Route 125, south of San Diego, in exchange for a 35-year lease to manage the road and collect tolls. Utah is contemplating private financing to build the Mountain View Corridor, a road connecting Salt Lake City Airport to towns in Salt Lake and Utah Counties, instead of raising its gas tax by up to 50 cents per gallon. Virginia has inked an agreement with Australian toll-road firm Transurban, which already leases the state’s nine-mile Pocahontas Parkway, to study expanding Interstate 95 with high-occupancy toll lanes. If approved, the project would cost nearly $1 billion. “These roads don’t exist and in many cases they won’t ever exist unless the private sector builds them,” says Mark Florian, a Goldman Sachs investment banker and an advisor on several such transactions in Texas.

Private contractors are much better than government at getting construction done on time and on budget. A 2002 government study in the United Kingdom, where public-private transactions are more common, found that 70 percent of public construction undertaken by the government ran late and that 73 percent of it finished over budget. But when government contracted projects to private firms, just 24 percent of them were late and only 20 percent were over budget. In the United States, the Dulles Greenway, one of the few roads built and run privately during the nineties, opened six months ahead of schedule. There’s no mystery here, since private contractors can’t start collecting revenues until properties are up and running.

The extraordinary breadth and scope of these deals places America on the verge of a financing revolution—that is, if it isn’t snuffed out by powerful politicians and anti-privatization advocates, who’re trying to turn a practical solution for governors and mayors into a partisan issue. There’s no reason that Democrats shouldn’t get behind privatization, as they did recently in big projects in Chicago and Virginia. Nevertheless, Democratic congressman Peter DeFazio of Oregon, head of the powerful House Subcommittee on Highways, Transit, and Pipelines, accused the Republican Daniels of selling the Indiana Toll Road to make “an ideological point” about downsizing government.

Opponents charge that these transactions fleece the public. DeFazio, for instance, accuses Indiana of “giving away” a valuable taxpayer asset, and populist CNN commentator Lou Dobbs grumbles that for government to sell infrastructure “boggles the mind,” since it auctions assets built with taxpayer money to the private sector. The commissioners of Harris County, Texas, declined to auction their lucrative roadway system because, as the county’s finance director said, “If anyone comes in and gives you a billion dollars, they certainly expect to make twice or three times that.”

But in state hands, many of these assets, dismally underperforming, have failed to attain their true value. For governors and mayors to liberate that potential without turning to the private sector, they would have to eliminate patronage in the government agencies that run the properties, incentivize public employees to produce better results, and pitch more aggressively to investors in municipal bond offerings. Such changes are possible, but they’re only likely if the public sector finds itself forced to compete. Merely claiming, as Harris County’s commissioners did, that they will adopt private-sector business practices and get better results hardly guarantees that the taxpayer will get his money’s worth.

In fact, it’s when government is insulated from private competition that the taxpayer really loses out. The Pennsylvania Turnpike Commission, for instance, has floated an alternative to Governor Rendell’s privatization that would raise billions for the state. But it includes placing new tolls on currently free Pennsylvania roads and raising the state’s debt, measures so odious, the Pittsburgh Post-Gazette editorialized, that they made “a leasing deal look good.”

Privatization foes also claim that profit-hungry private operators will squeeze taxpayers dry by raising tolls or fees precipitously and skimping on maintenance. This charge ignores the detailed operating requirements written into privatization contracts, which limit how much new operators can hike tolls over time and punish owners who fail to meet standards. “The agreement for the Indiana tollway lease is far more detailed than anything InDOT [the Indiana Department of Transportation] had to live up to when it was operating the road,” says Matt Will of the University of Indianapolis. “I don’t know if InDOT could have lived up to these standards.” Consumer choice also protects taxpayers. The majority of toll roads have opened as high-speed alternatives to already existing routes. Companies know that if their roads become too expensive or unpleasant, drivers will abandon them. The owners of the Dulles Greenway in Virginia initially didn’t meet their traffic projections, so they lowered tolls to lure more traffic.

One subtext in the resistance to privatization is that much of the money comes from foreign sources. Parroting a story in the far-left magazine Mother Jones, for instance, CNN commentators have accused Wall Street and the Bush administration of surrendering “our roads” to “foreign investors.” It’s true that, so far, foreign investors dominate the infrastructure marketplace. They’re mostly from places like Australia and Western Europe, where such investments are more common. Much of their money comes from pension funds seeking to invest capital in long-term ventures with a more predictable rate of return than the stock market offers—a profile that fits transactions like the Indiana and Chicago deals. But far from opposing such deals, taxpayers should welcome them. After all, they’re shifting billions of dollars in overseas capital to the United States. “I consider a significant part of my job to successfully compete for foreign investment,” says Daniels. “I consider it a victory for Indiana when those dollars come here and put Hoosiers to work, as opposed to go somewhere else.”

Such ventures are so attractive that American investors are now raising vast pools of domestic capital to participate in them. Goldman Sachs, Carlyle Group, and Morgan Stanley are all creating new funds for the purpose. “Ever since the tech boom ended in the stock market, lots of investors—especially insurance companies and pension funds—find themselves with big pots of money that they want to invest for the long term in stable, revenue-producing assets like toll roads,” says Goldman’s Florian.

Still, flimsy as the anti-privatization arguments are, they resonate with taxpayers, who wonder whether complex privatizing transactions will prove too good to be true. Tough opposition in Indiana has scuttled, at least for now, Daniels’s attempts to follow his toll-road deal with two build-to-operate highway projects. Opinion polls in New Jersey and Pennsylvania show heavy resistance to selling each state’s turnpike, though Governor Rendell’s strong advocacy of a Pennsylvania deal and the missteps of the state’s turnpike commission have begun to turn things around.

To fight public skepticism, local officials must spell out the benefits of these deals with crystalline clarity, hold buyers to exacting standards, and explain to taxpayers the steep cost of the alternatives: either allowing infrastructure to degrade or languish, or hiking taxes to pay for repairs and new building. An American Automobile Association survey found that 52 percent of respondents favored using tolls to pay for road construction, compared with 21 percent who favored higher fuel taxes. Similar surveys in places as different as Washington State, Minnesota, and the greater Washington, D.C., area have all found that Americans favor tolls over fuel taxes by a two-to-one margin.

Also, officials need to make a strong case to taxpayers that they will invest the revenues from privatization wisely. Indiana, for instance, has committed itself to putting all of its toll-road proceeds back into road building. Governor Rendell would deposit the proceeds from Pennsylvania’s turnpike sale into a fund that would produce nearly $1 billion a year in interest for spending on roads and mass transit.

Part of the opposition in New Jersey, on the other hand, arises from reports that the state would use the massive proceeds from a turnpike sale to make up for enormous shortfalls in its public-employee pension fund or to finance a property-tax rebate program. Similarly, Chicago’s administration has faced criticism for using some of its privatization money to finance short-term budget items, such as a program to help senior citizens pay heating bills. In those cases, the proceeds merely paper over fiscal problems, or buy short-term political gain—all at the expense of the future. Even some proponents will balk at privatization if the money winds up squandered in this fashion. “We only support the Pennsylvania Turnpike lease if the money is put back into transportation,” says the Commonwealth Foundation’s Brouillette. “Otherwise, we oppose it.”

The larger danger is that even as more private capital considers these transactions, state and local officials may come to believe that they can rely entirely on such deals to finance spending shortfalls. But not all roads can work as tollways, since they may lack the traffic to pay for themselves. And it’s unlikely that taxpayers will stomach taking currently free government properties and services and making people pay for them in order to finance necessary maintenance or rebuilding. So even as governors and mayors pursue deals with private investors that may bring them hundreds of billions of dollars, they still must find a way to channel tax revenues into infrastructure.

In short, the tough work of correcting a generation of overspending on Medicaid, education, and public-employee pensions and benefits isn’t over, and difficult political battles are ahead. But for the first time in over a generation, America’s mayors and governors are looking at a realistic way to start spending in places that they’ve neglected for too long.

When Will We Take Off The Blinders Regarding Islam?

Michael Ledeen has a very insightful article in the Wall Street Journal (Read) where he lays out how American negotiators have held talks with the the Iranians since 1979 after the Iranian revolution, through the administrations of Reagan, Clinton and now President Bush.

"For some time now, the chattering classes have debated whether the United States should negotiate with the Islamic Republic of Iran. Both sides have endowed the very act of negotiating with near-mythic power."

"The advocates suggest that "good relations" may emerge, while opponents warn it is somehow playing into the mullahs' hands. Both seem to believe that the three recent talks in Baghdad are historically significant, since they are said to be a departure from past practice.

"That claim is false. Every administration since Ayatollah Khomeini's seizure of power in 1979 has negotiated with the Iranians. Nothing positive has ever come of it, but most every president has come to believe that a "grand bargain" with Tehran can somehow be reached, if only we negotiate well enough.

"U.S. Ambassador to Iraq Ryan Crocker, first left, Iraqi Prime Minister Nouri al-Maliki, top center, and Iranian Ambassador Hassan Kazemi Qomi, first right, during security talks between U.S. and Iranian officials in Baghdad Monday, May 28, 2007.

"Washington diplomats have steadfastly refused to see the Iranian regime for what it is: a relentless enemy that seeks to dominate or destroy us. This blindness afflicted the first American negotiators shortly after the 1979 revolution, and has been chronic ever since, even though Iran declared war on us in that year and has waged it ever since." (Read).

When will our leaders learn? The Iranian mullahs are not interested in talk - they want to kill - annihilate us because we represent everything they are not. We represent the good, the modern and the rational. While we exist their utopia of a world wide caliphate cannot come to fruition. Let's take off the blinders and face reality as it is.

The Saudi Arms Deal and Our Addiction to American Sacrifice

The following is a press release from the Ayn Rand Institute on August 7, 2007

Irvine, CA--The Bush administration is asking Congress to approve a $20 billion arms sales package to Saudi Arabia, with the justification that a better-armed Saudi Arabia may serve as a "counterbalance" to the threat posed to us by Iran.

"This is absurd," said Alex Epstein, a junior fellow at the Ayn Rand Institute. "The administration has been telling us that we must forgo oil for more costly fuels because our 'addiction to oil' helps finance hostile Middle East regimes--among them Saudi Arabia, which has spent almost $100 billion spreading the terrorists' ideology of Islamic Totalitarianism. And yet at the same time that our leaders demand that we sacrifice oil-consumption for the sake of protection from the Saudis, they are arming the Saudis to the teeth.

"What explains this blatant contradiction? While one might attribute it to simple hypocrisy, the Bush Administration is in fact being consistent. In response to both the Saudi threat and the Iranian threat, our response is not self-assertion, but self-sacrifice. When Saudi Arabia spreads a terrorist ideology around the world, we do not punish that regime, we punish ourselves by rejecting the lifeblood of our civilization. And when Iran unleashes even more terrorist aggression, we do not destroy that regime, we imperil ourselves by arming our Saudi enemies and hoping it will somehow protect us. Indeed, the same pattern has been at work in the Iraq fiasco; to the extent the Hussein regime was a threat to us, we did not simply use our military to end it, but instead set out to sacrifice American money and lives to bring the good life to the hostile tribal Iraqis.

"The pattern here follows a definite principle; America has no right to use its unmatched military might for its own sake—it is duty-bound to sacrifice its soldiers, money, and self-defense. "America, the most moral and most powerful nation on earth, has both the right and the ability to end state sponsorship of terrorism. But we will not be able to do so until we abandon our addiction, not to oil, but to the morality of self-sacrifice."
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Copyright © 2007 Ayn Rand® Institute. All rights reserved.

"Income Inequality Is Good

Ayn Rand Institute Press Release August 1, 2007

Irvine, CA--Democratic and Republican candidates for President are debating one another on nearly every issue--but nearly all are united on one thing: America faces a crisis of "income inequality."

But, said Alex Epstein, a junior fellow at the Ayn Rand Institute, "there is no such crisis. Income inequality is a natural and desirable part of a free, prosperous society.

"Critics of income inequality act as if American wealth is a communal pie that belongs equally to all of us. But the vast wealth that exists in America has been created--through the productive activities and voluntary arrangements of individuals. And individuals do not necessarily create the same amount of wealth. Because all wealth is created, it rightly belongs to those who earn it (or their chosen beneficiaries)--and no one can rightly claim to deserve wealth earned by others.

"Critics of income inequality point to some legitimate problems, such as poor educational opportunities, growing healthcare costs, and stagnating wages--but these are the result, not of too much capitalism, but of government policies based on the same egalitarian mentality that denounces 'income inequality.' If business and wages were deregulated, we would see a dramatic rise in economic opportunity. If education and medicine were left free, with America's businessmen, doctors, and educators liberated to offer education and medicine at all different price points, we would see quality and price improvements like those for computers or flat-panel television sets. But these benefits of freedom require that we recognize the moral right of each individual to enjoy whatever he produces--and recognize that none of us has a right to something for nothing."