December 17, 2001

Europe's Left Does U-Turn on War

The onset of the war on terrorism had the European Left - and its supporters in the America-hating Left in the U.S. - predicting a new Vietnam and decrying heavy civilian casualties. Weeks later, civilian casualties in Afghanistan have been remarkably low, the Taliban has collapsed, Afghanis are celebrating their liberation - and the Left is doing an about face.

The San Francisco Chronicle reports on the Left's amazing change of heart, now that the U.S. they love to loathe is clearly triumphing in the first phase of a clearly righteous war against Osama bin Laden's al Qaeda terrorist network. The latest poll published by the French newsweekly Le Nouvel Observateur found that 65 percent of the French public describe themselves as pro-American, "almost twice the figure registered in a 1996 survey." Broadcast of the video tape of bin Laden confirming his role in planning and executing the Sept. 11 attacks has caused a surge in support for America on the European continent.

"America is far from perfect," says Dominique Moisi, adjunct director of the French Institute for International Relations in Paris. "But without America, the history of humanity in the 20th century would have been infinitely more tragic."

Amen.

December 12, 2001

Why Politicians Shouldn't Rush to Tax the Internet

Use of the Internet has yielded cost savings of $155 billion for U.S. businesses so far, and will produce another $373 billion in cost savings through 2010 - with much of those savings being realized by 2005 - says a new research study sponsored by Cisco Systems. The Net Impact study was conducted by Hal Varian of the University of California-Berkeley, Robert E. Litan of the centrist Washington DC think tank The Brookings Institution, and Austin-based Momentum Research Group.

Researchers looked at how Internet business solutions - initiatives that combine the Internet with networking, software and computing hardware technologies to enhance or improve existing business processes or create new business opportunities - would save companies money and enhance economic growth this decade.

The survey projects that increased adoption of Internet business solutions "could account for 40 percent of the U.S. productivity increase over 10 years, possibly making it the single largest private sector contribution to productivity growth over the next decade."

Why is that important? For nearly three decades after World War II, labor productivity grew at roughly 2.5 percent annually, a pace that enabled the standard of living of the average American to double about every 30 years. Productivity growth slowed to a 1.4 annual average rate from 1973 to 1995 but after that soarded to average growth of about 3 percent a year since 1995. "Virtually no one anticipated that outcome, either inside or outside the government," writes Litan of the Brookings Institution.

In a report, The Economy and the Internet: What Lies Ahead?, Litan and former Clinton Administration economic adviser Alice Rivlin write that "Clearly, heavy investment in computer and telecommunications technology in the 1990s - accounting for as much as a half of all plant and equipment investment in recent years - played a significant role in the recent productivity surge.

"Although the computer and telecommunications revolutions began earlier, they apparently did not have enough impact on business processes, practices and organization to show up in aggregate productivity growth until the second half of the l990s. The macroeconomic conditions of the late l990s - tight labor markets, low inflation, and fierce global competition - also encouraged firms to use new technologies as a way of economizing on labor while surviving in a fiercely competitive marketplace.

But how does the Internet drive productivity growth? Ecommerce - estimated between $100 and $200 billion annually including consumer and business transactions, "is too small in relation to the overall size of the economy to have had much impact on productivity growth," say Litan and Rivlin. "But, all that could and, we believe, likely will change, especially as Internet use becomes more prevalent. Given the recent demise of many of the 'dot coms' that symbolized the Internet revolution, it is tempting to think otherwise. But the real power of the Internet will be felt in the existing, or 'old,' economy,", which Litan and Rivlin expect will "make increasing use of the Internet to deliver benefits to consumers."

"Isolating the potential impact of the Internet on productivity is important because even a few tenths of a percent impact on the growth rate could represent a significant portion of any permanent surge in productivity that is maintained in the future."

Litan and Rivlin identify several ways the Internet will transform the economy and increase productivity growth. It will:

Of course, a lot of politicians want to raise taxes on the Internet. Even Van Hilleary, the leading Republican contender for governor in Tennessee, talks warmly about big new taxes on ecommerce. But he and others would be wise to hold off on hobbling the coming Internet boom with new taxes. Jobs and a rising standard of living are at stake.

What A Special Election Means

Former Williamson County commissioner Glen Casada, the Republican, beat musician Gene Cotton, the Democrat, in a special election to fill a vacant seat in the state House of Representatives. Both candidates claimed to be opposed to the income tax. Casada won, as expected, in heavily Republican Williamson County. Unexpectedly, he also won big in Democrat-leaning Cheatham County. The election drew light turnout. What does it mean? The answer lies in the Cheatham County portion of the results. Voters there also rejected a proposed half-cent increase in the local-option sales tax. Casada won Cheatham County because anti-tax voters outnumber those who favor higher taxes. ...

Meanwhile, over in Arkansas, the "Tax Me More Fund" established by Gov. Mike Huckabee has exposed the pure hypocrisy of the pro-higher-taxes lobby. Given the chance to put their money where their mouths are, they've donated a mere $260.

December 7, 2001

Budget in Bondage to TDOT

A Nashville City Paper editorial warning against raiding the Tennessee Department of Transportation's budget to balance the state budget is both right and wrong. The editorial is right when it says the Legislature should not raid TDOT's funds for a temporary budget Band-Aid. But viewing TDOT's funding as sacred is shortsighted.

Tennessee currently pays cash for its roads. We're one of only eight states to do so. Most states issue bonds to finance roads. Tennessee should join the other 42 states that use bond financing to build roads. If we do, we can have good roads and a balanced budget.