Real Pressure on North Korea

This is an article I wrote for The Virginia Advocate which was recently published in the September/October edition:

In light of North Korea’s military cooperation with Myanmar, the US must take action to strengthen its ties with allies in the Pacific theater. Putting pressure on North Korea isn’t accomplished only through sanctions. The U.S.-Korea Free Trade Agreement (KORUS FTA) strengthens political and economic ties. Free Trade with South Korea is a double-edged sword dealing effectively with enemies of freedom and recession. A free trade agreement that is passed by Congress and the President sends a simple, but vital message to South Korea: “We are still allies.” U.S. commitment to mutual economic development with South Korea declares victory over Communism through economics.

Continued condemnation against the North Korea with little or no action is not satisfactory. The US’ hardest line of action thus far has been to shadow a North Korean ship and strengthen economic bans on North Korean. However, how has the US sought to strengthen their allies in the Pacific theater? Short of a June White House visit from South Korean President President Lee Myung-Bak, the Obama administration has taken little legislative action to reinforce ties with South Korea. Much to President Lee Myung-Bak’s chagrin, Obama did not commit the US to KORUS FTA. Instead of taking innovative action to strengthen allies in the Pacific area, the Obama administration has engaged in the politics as usual: condemning enemies. Bilateral economic liberalization strengthens alliances while avoiding senseless and repetitive verbal confrontation with North Korea or its Russian or Chinese allies.

Were Obama to break the confines of politics-as-usual, the US and South Korea would discover a wealth of economic and political ties. The International Trade Commission estimates that ratification of the FTA would increase U.S. GDP annually by $10-12 billion. As the Obama administration continues to seize additional revenues from an ever-shrinking tax base, trade liberalization offers an opportunity to expand the tax base. Trade liberalization allows the US to find its comparative advantage within the South Korean economy and create more jobs.

Increasing U.S. interdependence with South Korea reminds proponents of terror that the U.S. is committed to defending peaceful democracies. FTAs are not mere economic documents, they are political commitments. They reaffirm common ties of love for democracy, sound human rights, and a belief in the right to achieve an ever higher quality of life. When ratifying past FTAs, the U.S. often promoted labor environment reform or the improvement of human rights by dangling the carrot of economic benefits before the nose of developing countries. Like those prior FTAs, KORUS FTA sends a political message, but this time to a non-trading nation: “The U.S. is committed to defending South Korea.”

If North Korea is to be defeated, it will be not be by the sword but by the fields, factories, and miniature silicon valleys. North Korea needs to see South Korea as a nation with a strong military funded by prosperity. Ultimately, the Soviet Union was not defeated by military force but by the US economy. The Soviet Union simply could not keep up with US productivity. South Korea is North Korea’s United States. There are two likely ways for North Korea to fall: Economic collapse or military overthrow.

In the midst of the Korean Cold War, KORUS FTA provides South Korea with additional productivity to fund a strong defense force. KORUS FTA will increase GDP growth in South Korea by 0.6% for the next 10 years. The alternative to economic defeat of North Korea is grim. Recent Pentagon estimates put the costs of the first ninety days of conflict with North Korea at 300,000-500,000 US and South Korean troops in addition to hundreds of thousands of civilian mortalities. By developing an overwhelming South Korean economy and defense force, KORUS FTA brings the Korean Cold War one step closer to ending without military conflict. As an ally of South Korea, the US should reinforce the economic vitality of its democratic ally and ensure Pacific stability through trade.

In the face of terror, reaffirming U.S. commitment to defending Democracy and freedom in South Korea has never been presented a more ideal opportunity. To readers who ascribe to the school of US economic protectionism, the political significance of ratifying KORUS FTA goes beyond mere statistics. Free-trade becomes a commitment to uphold human life.

Lebanon

"Lebanon," created by celebrated Israeli director Samuel Baoz recently won best picture at the Venice Film Festival, the world's oldest award ceremony for film. After creating two beautiful works, exploring the highly controversial 1982 Lebanon-Israeli war, Baoz has created another masterpiece that views the Lebanese war almost completely through a tank. Beaufort and Waltz with Bashir were both nominated at the Academy Awards for best foreign film and from the looks of it, Lebanon is sure to be nominated as well. In Israel, the film has been nominated in 10 different categories including best picture, cinematography, director, screenplay, actor, supporting actor, & supporting actress.

A Real Health Care Fix

I have often appealed for improving the American health care system by offering tax incentives to enroll more Americans in a defined contribution plan for either health care or retirement. The reasoning is simple. Offer financial incentives to Americans to save, and more of them will. Health care represents a significant cost of a retiree's expenses. Today, I've decided to graph the microeconomics of how increased savings (for either retirement or health care) improves Americans' standards of wellbeing.

First, to briefly clarify the x-axis and y-axis. The x-axis represents the 60-year-old's decision to work or retire (leisure). Let us also assume the 60-year-old will live until he is 80. If the possibility retiree chooses to retire, he is able to consume T hours of leisure (20 yrs) until his death. The y-axis represents consumption (in $) of how much the retiree would like to consume over the next 20 years. This includes food, shelter, spoiling grandchildren, and most importantly paying for health care. If the hopeful retiree discovers that he does not have enough money to satisfy his desired level of consumption, he will forgo leisure in order to consume. If the retiree chooses to work for the rest of his life, he could choose not to retire at all and consume at total of wT goods, where w is the retiree's current wage and T represents 20 yrs.

So what's up with V*? First, let me explain V and W. V represents the amount of money that the retiree has saved without a tax incentive program. W represents the increase in savings over the status quo that the retiree has because of the tax incentive program. The two convex black lines represent the retiree's preferences under two different savings possibility scenarios. The blue represents the retirement opportunities for a 60-year-old with no tax incentives. Under a world without tax incentives, this worker has saved less over time because the opportunity cost of consumption was too high. To rephrase, this means that the worker chose to consume rather than save. The red line represents the consumption and leisure possibilities for a worker that has been encouraged to save. Notice that whether one theoretically expands consumption and/or leisure (up and/or right), the red line represents an increase in at least one of the two. Because the individual received an incentive to save, his standard of well being is superior to status quo.

So I've given you a graph. What should be read from it? Very simply, increasing tax incentives for savings leads to higher levels of consumption and/or higher levels of leisure time. Even more simply, workers are better off under tax incentives. Consumption and leisure increase from V* to (V+W)*. People desire more leisure and consumption as real income increases.

Senator DeMint has led the reform for sustainable long-term health care by introducing legislation that would encourage Americans to save. Despite the long-term benefits of DeMint's plan (would cover 22.4 million uninsured Americans currently uninsured Americans in the next 5 years), Democrats have denied market-based solutions a lasting role in the health care process. Cultivating personal responsibility for retirement and health care is how to shrink the size of government in a meaningful way and stop contributing to the national debt. Offering tax incentives is just one small step in the right direction.

Let the Death Tax Rest in Peace

In a June 24 Opinion Research Corporation and American Family Business Foundation poll, 58% of all Americans and nearly 50% of registered Democrats expressed their support for the repeal of the Death Tax. Why? The Death Tax kills family owned businesses, many of whom depend on intergenerational transfer of wealth. In 2010, the Death Tax expires allowing family's just one year of tax relief for those who are unfortunate enough to have a death in the family. According to the Joint Economic Committee, the Death Tax destroys $847 billion of capital in the US. Permanently ending the Death Tax would also create jobs for America. Dr. Douglas Holtz-Eakin, former Director of the Congressional Budget Office, found that "Eliminating the estate tax would raise the probability of hiring by 8.6 percent, increase payrolls by 2.6 percent and expand investment by 3 percent." In short, according to Dr. Holtz-Eain, repealing the Death Tax will create 1.5 million jobs! That's an economic recovery plan everyone should support.

If Obama does nothing, the 45% Death Tax will expire in the 2010, but then increase to 55% in 2011 and onward. Obama will decrease the tax exemption and increase the rate on American family business. The 50% of Democrats who want to keep the Death Tax will probably say so because they want to maintain tax revenues. Truth is, tax revenues will increase by eliminating the Death Tax. According to Economist Steve Entin, who recently ran numbers for the American Family Business Foundation in a behavioral model, found that letting the Death Tax die would lead to higher economic growth and increased government revenues.

The United States has the third highest Death Tax rate in the world, and it will be the highest in 2011 if Obama does nothing. Senate Republicans Kyl and Lincoln are planning to submit a bill to lower the Death Tax to 35%. Though not ideal, economics impacts would include an added $27 billion to GDP and job-creation. When the international average is at 24%, it's high time that the US got on board by LOWERING rates. As the Laffer Associates correctly identify,

"The Death Tax fight is a fight for America's future. It is a fight for the permanence of the free society. It is a fight we cannot afford to lose."

Cost of Government Day

According to the Center for Fiscal Accountability, Cost of Government Day (COGD) is date of the calendar year on which the average American worker has earned enough gross income to pay off his or her share of the spending and regulatory burden imposed by government at the federal, state and local levels.

Recently, national COGD was on August 12. Virginians finished paying off their cost burden of the government yesterday, August 17. This year's government burden occurred 23 days later than last year, going from July 16 to August 12. This year's record late COGD is driven by the following policies: The Emergency Economic Stabilization Act (EESA) that created the Troubled Asset Relief Program (TARP) and the American Recovery and Reinvestment Act of 2009 (ARRA).

As regulatory burden and tax burden continues to increase under the Obama administration, be sure to witness decreasing productivity across the board. As the marginal tax rate increases, American productivity is sure to outsource. Unfortunately, the American worker still isn't safe from additional government taxation of gross income. If Waxman-Markey, Cap-and-tax, is signed into law, COGD will pushed back an additional three days. Obama's desire to reform international taxation would push back COGD three more days. Lastly, if health care reform is implemented using a value added tax (VAT), COGD would be pushed back another 9 days.

Americans are experiencing a record-high regulatory and taxation burden. As more Obama administration policies are implemented, Americans will continue to see those costs increase. Call your congressman today and tell him/her that you oppose additional government regulation/taxation.

For statistics on COGD in your state, click here.

Rep. Sheila Jackson: Democratic Apathy to Republican Concerns

Here is a video of Sheila Jackson talking on her cell phone while a cancer survivor voices her concerns at a health care town hall:



News update: the father whose son has cerebral palsy has been harrassed by Obama supporters.

Nancy Pelosi called citizens protesting against ObamaCare "unamerican." At this point, I can't decide what's worse: ObamaCare or how concerned Americans have been treated by Democratic leadership.

Hillary Clinton: One Step Behind Bill

Hillary's recent breakdown in Africa demonstrates the pressure she is under as Secretary of State. We know that Bill has suddenly swooped down into N. Korea and rescued two journalists. But what has Hilldog done? So far, not much. Bill is putting her to shame. Hillary's body language in this video can't help scream frustration about how her husband is one step ahead of her, as always.

More significantly, it points to the foreign political difficulties the Obama administration faces. Despite Obama's political rhetoric of apologizing to every country the US comes into contact with, the Secretary of State simply hasn't gotten much done. Dialog in the Middle East with Israel and Palestine has been led by Obama. Perhaps Hillary would have had a role should she not have broken her arm, but I don't see how that affects her tongue. In Israel, Obama's approval ratings are falling fast as he continues to demands action from Israel with little from Palestine. If Hillary wants to compete with her husband on the news circuits, she can begin by befriending Israelis.