- The Washington Times - Monday, March 24, 2003

Chavez's balancing act

I found your March 13 editorial, "Venezuela's severe contraction," to be a welcome contribution to the debate over the slowly rising level of good news coming from that country. Hitherto, I was a vocal critic of the main thrust of your articles, columns and letters to the editor, which tended to embrace the thesis that President Hugo Chavez was a dangerous avowed Marxist who was in a close conspiracy with Fidel Castro to join the league of rogue nations aligned with radical and terrorist groups across the globe. Your pages also condemned Mr. Chavez for dangerously polarizing the nation by alienating almost the entire middle class and many of the workers, while he was destroying Venezuela's economy through ineptitude and sinister design.
Clearly, although Mr. Chavez is not a man without vices, much of this was an exaggeration, the product of the heat of battle. To begin, there is some evidence to believe that Venezuela is currently producing 3 million barrels of oil per day, rather than the 1.8 million barrels that you cite. You say that it is time to end the fingerpointing. I say you are right, and this point is at the heart of the debate. Surely, the 62-day opposition-led strike, which cost its participants and the nation $4 to $5 billion in lost economic opportunities, production and sales, was a heavy blow for an economy that hardly has been robust for years.
Another handicap facing the nation is the deep psychological divide that in recent months all but approached class warfare. The country is now entering troubled but hopeful times. The split in the opposition over the degree to which its members will play a constructive role in the current negotiations on whether a referendum should be held over the continuation of the Chavez presidency deserves to be resolved in an amicable manner, reflecting the civic rectitude that has been a unique treasure of Venezuela.
If the referendum route wins out, one will expect the Venezuelan media to act in a professional and responsible manner and not egregiously tilt its coverage to distort the Chavez side, as was evident throughout the current crisis.
Similarly, Mr. Chavez must mute his harsh, divisive rhetoric and operate in a manner reflecting the serious import for Venezuela's democracy that the next few months will hold.

Council on Hemispheric Affairs

Like all taxes, cigarette taxes backfire

In two letters to the editor on Thursday under the headline "Butting heads with the tobacco industry" one from Edward L. Sweda Jr. and the other from Michael Eriksen columnist Bruce Bartlett is taken to task for noting the Small Business Survival Committee's (SBSC) recent study on the economic impact of New York City's massive tobacco tax increase last year.
Interestingly, Mr. Sweda and Mr. Eriksen merely mention that, as SBSC clearly noted, funding was received from Philip Morris USA to support this project. They also are unconcerned that these tax increases will hurt small-business owners and their employees, which is why SBSC undertook this study. In fact, the two letter writers fail to dispute the actual findings of SBSC's report. That is not surprising, because the study is built on scientific polling and solid economic analysis.
Basic economics informs us that such a large tax increase will result in stepped-up tax avoidance, lost sales, lost business and fewer tax dollars collected by government than originally projected.
For example, polling found that 72 percent of smokers living in New York said they were more likely in recent months than in the past to look for stores that sell cigarettes more cheaply; 53 percent declaring they more often made purchases outside of the city since the cigarette tax was increased.
As for the commuters to New York who smoke, 84 percent said they were less likely to buy cigarettes in the city due to the tax increase. Of course, this all spells economic trouble for many small businesses. Indeed, 88 percent of store owners and managers in the city said that the cigarette tax increase has been hurtful in terms of sales, with 85 percent noting decreased revenues and 83 percent lost profits.
Meanwhile, the econometric analysis estimated that the higher tax will decrease cigarette sales in the city by 53 percent, or 189 million packs annually, with 115 million lost to cross-border sales, Internet sales and smuggling. In turn, small city businesses will see an estimated $127 million fall in profits and more than 10,100 jobs will be lost.
Finally, this lost economic activity means that both the city and New York state, which are splitting new revenues from the tax increase, will not get anywhere near the amount of revenue they had expected. The SBSC study estimated that the city would get less than half the expected revenue and that the state actually will be a net revenue loser.
The economics of higher taxes cannot be disputed in any serious way. As a result, those who choose to support higher taxes simply ignore the economic facts.

Chief economist
Small Business Survival Committee

Full disclosure

In his letter to the editor Fridayfl "Qualifying per-pupil spending," Ronald S. Flagg cites and touts a study conducted for Parents United for the D.C. Public Schools and a special Advisory Committee of Civic Leaders. The study was performed by the Washington Lawyers' Committee for Civil Rights and volunteers at the firm of Sidley, Austin, Brown and Wood. What Mr. Flagg did not say is that he is a partner in Sidley, Austin, Brown and Wood, serves on the Advisory Committee of Civic Leaders and was personally thanked for his work by Parents United in the study.
While his work for D.C. schools is certainly commendable, he clearly has a dog in this budget fight and should have mentioned these connections.


'Doctrine of mutual suffering'

As legions of U.S. troops put themselves in harm's way to secure freedom for the rest of us, critics snipe that Americans have not been asked to make commensurate sacrifices at home ("Move afoot in Congress to slash Bush's tax cut," Nation, Wednesday). Instead, Democrats and some borderline Republicans are vowing to slash President Bush's proposed tax cuts. This is a typical application of the doctrine of mutual suffering, and it is wrong.
Forsaking a much-needed stimulus for a stagnant economy will aid neither the war effort nor our future well-being. America has the ability to draw on its enormous resources to make investments now for our military and economic security.
War on Iraq inevitably will invite reprisals, and in this sense we have already made sacrifices to our homeland security for our long-term safety. Rather than feel guilty, we should be grateful that our troops are defending us abroad and that we remain a beacon of freedom to the world.


Demolish Saddam's communication outlets

Lindsey Hilsum reports that Iraqi state television shows Saddam Hussein at meetings with senior government officials ("Saddam's image lingers despite relentless raids," Page 1, yesterday). From the beginning, why haven't America's smart bombs and communications-control technology been used to make all TV sets go dead in every living room in Iraq? And then, why not come back on with saturation coverage of free Iraqis exhorting everyone to revolt? Why weren't broadcasting centers and signals carefully analyzed in advance and targeted to be demolished or scrambled? Why hasn't it happened even yet? There's still time.

Cambridge, Mass.

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