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Center for Freedom and Prosperity (CF&P)

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Updated: 2 hours 18 min ago

FCC Must Unleash Innovation to Solve Digital Divide

Fri, 06/30/2017 - 5:41pm

The Center for Freedom and Prosperity today submitted comments to the FCC urging the agency to move ahead with a reform agenda designed to unleash the power of market innovation to solve one of the nation’s most pressing digital problems–namely, the digital divide that has left much of rural America without access to reliable, affordable, high-speed internet.

CF&P calls on the FCC to, at long last, finalize proposed rules regarding the usage of TV white spaces that would allow for the private sector to meet the internet access needs of underserved rural areas. TV white space has proven capable of bringing internet access to poorer parts of the world, and can do the same in America if the government allows it to.

The letter explains:

…The unused radio frequencies between TV channels provide tremendous promise because they can carry large amounts of data for long distances. Making use of TV white space also doesn’t require costly new infrastructure investments.

Unfortunately, government licensing requirements stand in the way of expanding the use of white space to bring high-speed internet access to rural America. The FCC has already begun the process of reevaluating the rules and regulations governing use of TV white spaces by partial deregulation in 2010 and 2015, expanding unlicensed use.

When the commission meets in July, it should finish this process by preserving three 6MHz white space channels in every market for use by the private sector to supply broadband to undeserved regions, thus finally unleashing the power of commercial innovation to tackle America’s digital divide. To do this, the FCC should finalize its pending proposal to preserve one already vacant TV channel in the TV band in each market and finalize the other white space rulemakings…

The full letter is available here.

 

Free Markets, Rule of Law, and Limited Government: A Recipe for Singapore’s Amazing Prosperity

Thu, 06/29/2017 - 12:02pm

Singapore is one of my favorite nations for the simple reason that it consistently gets very high scores from Economic Freedom of the World and the Index of Economic Freedom (as well as from Doing Business, Global Competitiveness Report, and World Competitiveness Yearbook).

I also greatly admire Singapore’s strict adherence to my Golden Rule for a 10-year period beginning in the late 1990s. Government spending actually shrank by a bit more than 1 percent per year, on average, over that decade.

This reduced the burden of government spending to just 12 percent of economic output, almost as low as it was in North America and Western Europe in the 1800s.

Unfortunately, the public sector has since crept back up to 20 percent of GDP, but that’s still very low compared to the rest of the developed world.

What’s especially attractive is that the welfare state is very small in Singapore. According to the IMF (see page 44), expenditures on “social development” are only about 8 percent of GDP, and that category includes education and health care. If you peruse Singapore budget documents, spending on “transfers” is well under 5 percent of economic output.

Either figure is far below levels of redistribution in other developed nations.

One of the reasons the welfare state is so small is that individuals are required to set aside their own money for health and retirement.

And since the burden of spending is modest, that enables Singapore to have a non-oppressive tax regime.

That’s the good news. The bad news is that a value-added tax was imposed back in the 1990s. Though the rate has stayed low (so far) and hasn’t (yet) become a money machine for big government.

Singapore is also very good in areas other than fiscal policy. It is a shining example of the benefits of open trade. It ranks very highly for rule of law. And there’s very little regulation.

Indeed, Singapore has consistently ranked #2 for economic freedom in recent decades, trailing only Hong Kong (the U.S. briefly edged out Singapore for second place after all the market-friendly reforms of the Reagan and Clinton years, but now we trail by a wide margin thanks to the statism of the Bush-Obama years).

Here’s a graph from Economic Freedom of the World showing how Singapore started at a decent point in 1970 and then had a 20-year period of improvement (most because of deregulation and better monetary policy).

As I repeatedly argue, if you want good economic results, you need good policy.

And that’s exactly the story of Singapore.

I’m currently in the country because I spoke earlier today at a conference on global investment (the audience got quite excited when I explained the effort to defund the OECD).

Walking the streets, it’s hard not to be impressed by the widespread prosperity of the jurisdiction. Sleek buildings. Fancy shops. Lots of professionals.

And ordinary people are the biggest winners. Here’s a remarkable chart from Human Progress showing per capita GDP (in $2015 inflation-adjusted dollars) in Singapore and the United States, along with the world average.

As you can see, Singapore used to be far below the United States and somewhat below the world average. Now it is one of the wealthiest places on the planet.

Singapore’s jump from poverty to prosperity is astounding.

What’s really remarkable is that the country was as poor as Jamaica back in the 1960s. But thanks to rapid economic growth, the people of Singapore enjoy very high living standards today.

The moral of the story is that ordinary people in Singapore enjoy prosperity because the government was smart enough to focus on growth and didn’t worry about inequality.

Here’s what Marian Tupy, one of my colleagues at the Cato Institute, wrote about the country’s incredible growth.

The incredible transformation of Singapore from a sleepy outpost of the British Empire to a global commercial and technological hub was partly facilitated by a very high degree of economic freedom. …As late as 1970, per person income in Singapore was 54 percent of the global average. Today it is 321 percent of the global average.

Now for the bad news.

Singapore is very pro-market, but it’s not very pro-liberty. In an article for the Foundation for Economic Education, Donovan Choy highlights some of the nation’s shortcomings.

Within libertarian circles, Singapore generally enjoys a good reputation for its economic freedom.

But it’s not Nirvana.

The Housing Development Board (HDB), the public housing arm of the state, houses more than 80% of the population in high-rise apartment homes. …Education is largely monopolized by the state from the primary school level up until the university level… Singapore suffers from a severe lack of press freedom, ranking at an alarming 151 in the World Press Freedom Index… The state also controls public broadcasting from television to radio. …Singapore is perhaps most well-known for its non-tolerance of drugs. Drug users can be jailed or housed in rehabilitation centers for up to three years and drug traffickers face the death penalty. …Singaporean males are also subject to mandatory conscription of up to two years by the age of 18, a law that has been in effect since 1967. Civil ownership of guns are outlawed in Singapore.

These are reasons why Singapore does not earn a high score in the Human Freedom Index.

But I’m an economist, so I’m still as positively impressed as I was back in 2009.

P.S. The bureaucrats at the OECD produced a report on Asian economies and argued that taxes should consume at least 25 percent of GDP to achieve prosperity, which was a remarkable assertion since the report showed that Singapore was the richest nation in the region and has a tax burden barely half that level. That’s an example of what soccer fans call an “own goal.” The OECD wasn’t just being statist, it was being incompetently statist.

Advertising Tax Would Jeopardize 20 Million American Jobs

Wed, 06/28/2017 - 7:29pm

Originally published by Investor’s Business Daily on June 26, 2017.

Republicans have struggled to put together a tax reform plan with enough support to pass Congress. The major hang-up is their self-imposed need to find revenue offsets to “pay for” the pro-growth rate cuts and reforms. However, that challenge shouldn’t mean that every bad idea to raise money, like an advertising tax, should now be on the table.

Talks of a federal ad tax had been dead since the 1950s until former Rep. Dave Camp, R-Mich., gave the idea new life in his 2014 tax reform proposal. Camp wanted to convert advertising from being a fully deductible business expense — as it has been for over a century — to just half deductible, with the rest being amortized over the course of a decade.

While Camp’s proposal went nowhere, current Ways and Means Committee Chairman Kevin Brady recently acknowledged that there “may be a need” to look at some of the revenue raisers in the old plan to complete his 2017 tax reform proposal.

Let’s hope that the advertising tax is not one of the ones being looked at. There’s no good reason to treat advertising costs differently than other business expenses. To do so would be to make the tax code more complicated, instead of less. Even more importantly, it would have drastic negative consequences for the economy.

In 2014, IHS Global conducted a study on advertising’s impact on the American economy, and the results were astounding. IHS found that in just that year alone, the country’s $297 billion in advertising spending generated $5.5 trillion in sales, or 16% of the nation’s total economic activity. It also helped create 20 million jobs, which in 2014 amounted to 14% of total U.S. employment.

Clearly, ad spending is a significant driver of economic growth, providing tremendous return on investment for the American economy (approximately $19 worth of sales activity for every $1 spent on advertising). The labor force participation rate is still sitting at the lowest level it’s been at since the Carter presidency, while higher-paying job sectors continue to struggle. Republicans should be careful not to make these concerning numbers plummet even more out of desperation to score a political “win.”

The dangers of the advertising tax cannot be overstated. In fact, it already has a history of wreaking havoc on the economy.

In the 1980s, Florida briefly imposed one, and it led to the immediate loss of 50,000 jobs and $2.5 billion in personal income. Even worse is the fact that the tax’s administrative costs ended up exceeding the tax revenue. The Florida ad tax was wildly unpopular — so much so that the legislature was forced to repeal it after just 6 months. The New York Times reported that then-Gov. Robert Martinez “suffered political embarrassment in his first year in office by having to shift from ardent support of the tax to advocating its repeal.”

Similarly, a study from the University of Oxford found that Austria’s advertising tax had a noticeable impact on the price of goods. In the case of consumer necessities like food and education, this mandate often led to costs shifting upward. This is to be expected — the less information consumers are exposed to about competing products, the easier it is for market leaders to maintain artificially higher market share.

On the campaign trail, President Donald Trump promised to simplify the tax code for American families and businesses, creating more jobs and economic mobility by leaving more money in the hands of the people who’ve earned it. The advertising tax would undoubtedly fail on these fronts; it will do nothing but worsen the sorry state of the economy.

Kevin Brady and the rest of the Ways and Means Committee should take note of the facts of the matter at hand and learn from history so that the ad tax can be put to bed once and for all.

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