There are two looming policies, in particular, that are threatening foreign investment in the US. One of those is the Foreign Account Tax Compliance Act (FATCA), passed in 2010 in an effort to raise revenue for the HIRE Act through greater tax enforcement. The other is an IRS proposed regulation which would require reporting of interest payment information on foreign depositor accounts, despite the fact that the US has no use for the information. Both policies are misguided, counterproductive, and will drive investment out of the US.

FATCA is designed to compel foreign financial institutions to become deputy tax collectors for the IRS. By 2014, these institutions will be expected to have implemented expensive new data collection and reporting systems, and those that have not complied will face a 30% withholding tax on US source payments to the institution. As if those costs aren’t enough, FATCA also conflicts with local privacy laws in many countries, placing FFIs in an impossible position. Already, institutions are deciding that it makes more sense to simply drop their US clients and disinvest in US markets than to continue jumping through IRS hoops. The result is billions in lost foreign investment, and there is only more to come.

As I recently co-wrote in a piece with Dan Mitchell:

The FATCA legislation is the product of a misguided school of thought within the US political class which believes that there are vast sums of unpaid taxes which the IRS would be able to collect if only the rest of the world would stop hiding it from them.

…The rationale behind FATCA is simple in its destructiveness. Even though the US has a very high compliance rate for tax laws compared to the rest of the world, US politicians decided that more enforcement was needed to get more money to fund more spending and bigger budgets in Washington. Throwing aside any semblance of cost-benefit analysis, they then decided to spare no expense to capture every last dollar of potential tax revenue. Unfortunately, FATCA was not a wise approach. Ordinary Americans will suffer from the ensuing damage to the economy. Foreign financial institutions will endure higher regulatory burdens and compliance costs. And the FATCA law creates a powerful disincentive for foreign investment in the US. FATCA thus has the net impact of potentially reducing both economic prosperity and government tax revenues.

The other policy disaster on the horizon is a regulation proposed by the IRS which would require domestic banks to collect information and report on the interest payments made to foreign depositor accounts. The IRS would then share this information with foreign regimes. They assure us that sharing would only take place with countries that have tax treaties with the US, but that list is not only capable of changing at any time, but already includes the dictatorship in Venezuela,  and crime and corruption plagued Mexico. What’s more, these payments are not taxable under the US tax code – a policy which Congress has explicitly chosen in order to foster foreign investment in the US – and so the rule serves no direct domestic interest.

A recent Congressional hearing I attended on the issue covered a variety of arguments against the regulation. Members were concerned about the human rights implications for foreigner depositors, particularly from Latin America, who face kidnapping and extortion threats back home, but most importantly the capital flight this concern would cause should the rule pass. Years ago, the Mercatus Center did a study estimating $88 billion in lost foreign investment. That was on rule more limited in scope, so today’s proposal would be even more destructive.

The tax bureaucrats seem intent on plowing forward, even as Congress is mobilizing against the IRS on the issue (bills to prevent the rule from being implemented have been introduced in both the House and Senate – thanks to the leadership of Florida Rep. Bill Posey and Sen. Rubio, as well as Texas Senators Hutchison and Cornyn – and have a combined 28 co-sponsors). The IRS’s objective quite likely is to please foreign tax collectors who are complaining loudly about the burdens we are demanding their institutions take on with regard to FATCA.

President Obama thinks we have been lazy in selling America. But his administration has been anything but lazy in making America a harder sell to foreign investors. Rather than compound the mistake of FATCA with another one, while simultaneously driving out much needed foreign investment, we should revisit the initial legislation and look instead at making the tax code less complex and more economically competitive. Then we should tell the IRS that their job is only to enforce US tax laws, not to take it upon themselves to decide that America’s interests are outweighed by the tax information demands of the likes of Hugo Chavez.

Under no coherent, rational interpretation of “market efficiency” should the Chevy Volt even be a production consideration for a private firm. Not only does sticker shock prevent most people from buying the Volt, but for those misguided few who do, costs to fix them are more than those of a less expensive Chevy Malibu.

Curious onlookers must be all the more flummoxed, then, after the recent announcement that GM and electronics manufacturing giant LG have teamed up to continue development of the Volt:

Under the agreement signed on Wednesday by GM Chief Executive Daniel Akerson and LG President Juno Cho, the two companies said they would design a range of electric vehicles that would be sold in markets around the world… “This is a strategic development for LG and we fully support GM’s goal to lead the industry in the electrification of the automobile,” LG’s Cho said in a statement.

Supporting GM’s goal to bend to the will of progressive environmentalists in the Obama administration shouldn’t be surprising, since LG is itself a healthy recipient of so-called “stimulus” funding:

President Obama visited Holland Michigan on Thursday to participate in the groundbreaking ceremony of the new LG Chem battery plant. This plant was funded in part by a DOE stimulus grant of $151 million with a matching $151 million provided by LG Chem. Once fully operational in 2012, the plant will be capable of producing enough cells for 200,000 hybrids and electric cars, and will specifically be making the cells both for the Chevrolet Volt and the upcoming Ford Focus Electric, expected to go on sale in 2011.

“This is about more than just building a new factory,” said Obama. “It’s about building a better future for this city, for this state, and for this country.”

The Obama administration has pledged a goal of putting 1 million electric cars on US roads by 2015. So far the Recovery Act has contributed $2.5 billion towards United States electric car battery and component plants, 26 of which are already in some stage of construction. Nine of these are battery plants, including ones from A123 Systems and Johnson Controls. These facilities can collectively expect to produce 500,000 electric cars annually, and are expected to help transform Michigan into the electric car battery capital of the country.

The 650,000 square foot LG Chem plant is expected to produce 300 jobs.

Wow – a $151 million win-the-future “investment” will create a whopping 300 jobs? At $500k per job, I’m clearly in the wrong business.

The Sunlight Foundation reports that LG has a K Street presence, too. They are represented by the Law Offices of Kevin G. Curtin, who handles influence peddling on behalf of LG in tax, energy, and manufacturing policies. Just this year alone, Curtin has lobbied for a number of green energy initiatives on behalf of LG.

Curtin’s influence shouldn’t go unnoticed, as his trip through the revolving door took him from his post as Chief Counsel and Staff Director on the prestigious Senate Commerce, Science, and Transportation Committee right out to a partnership at the Washington-based lobbying law practice Bryan Cave LLP – a firm that unsurprisingly handles a number of rail, air, and commercial transportation issues, along with securities firms, the telecom industry, and healthcare provider organizations that will no doubt benefit from the carve-outs and mandates in Obamacare.

But more than that, Kevin Curtin has contributed over $55,000 to members of Congress – 91% of which went to Democrats – since 1997, according to data from Sunlight’s Influence Explorer project, with over $22,000 in contributions coming in the last four years alone.

Bloomberg reported that GM CEO Dan Akerson isn’t a car guy. With nearly a one-third U.S. Treasury ownership in General Motors common stock remaining, Dan Akerson should be doing whatever it takes to make the company succeed. If the Treasury sold its stock today, taxpayers would lose approximately $14 billion. Still, Akerson continues to show with this new partnership that he’s nothing more than a crony capitalist and pawn of the Obama administration, and that he’s willing to bend to the will of radical environmentalists hell-bent on driving the country off a cliff.

The public response was one of outrage. Facing the potential wrath of voters,  politicians across the country moved to add new protections against such abusive seizures. But that wasn’t enough to save the homes of the folks in New London, whose property never would be developed. Pfizer, the intended beneficiary of the land theft, walked away years ago from their development plans.

Now, to add new insult to injury, the vacant lot is a dump. Literally.

Following hurricane Irene, the city designated the site as a place to dump storm debris, and citizens can be seen doing just that in this video on the local paper’s website.

Doesn’t that make you feel all warm inside? The Supreme Court reassured us in Kelo that the government orchestrated theft “would be executed pursuant to a “carefully considered” development plan.” What they forgot to mention is that careful consideration from politicians is worth about as much as the city’s new debris dump, which is to say: diddly squat.

The fact of the matter is that the development of the property was already being “carefully considered” by the folks that owned it, as is the case for all privately held property, and in their careful consideration they wanted to keep living on it. The lesson of Kelo is not merely on the illusory nature of our property rights. It’s also about the abject failure that is central planning, and the inability of political forces to better plan economic activity than the private sector.

The Washington Examiner’s Lachlan Markay broke news this week about the appointment of a major liberal donor, Judith Faulkner, CEO of Epic Systems Corporation, to the Health & Human Services Health Information Technology Policy Committee. Markay reports that Judy Faulkner was appointed to a stimulus-created board that is charged with disbursing billions of taxpayer dollars for health information technology adoption despite her opposition to the administration’s interoperability goals, which require that health records be shareable across platforms.

Faulkner and her company oppose the president’s vision for health IT, but Epic employees are massive Democratic donors. They’ve given nearly $300,000 to Democrats since 2006, according to the Center for Responsive Politics.

Faulkner is also the sole representative for the health IT industry on the committee, which has the power to set industry standards. Does anyone doubt that any adopted standards will work to the benefit of Epic Systems? This is a serious conflict of interest for Epic Systems and the Department of Health and Human Services. It is, however, a fairly predictable conflict of interest, highlighting one of the myriad objections to central planning known as regulatory capture. Simply put, regulatory capture is when government agencies work in the interest of specific commercial interests instead of their original charter, and is extremely common due to the fact that industry has the strongest incentive to assume control of the regulatory process. Given this, why should Americans trust any decision made by HHS on Health IT policy?

Sadly, that’s not all there is to the story.

It’s not surprising that the Obama administration is handing out patronage to big left wing donors. What is surprising is that the five Wisconsin legislators – including House Budget Committee Chairman Paul Ryan and new Republican Senator Ron Johnson – co-signed a letter that implicitly endorsed Faulkner’s Epic Systems. As reported by Fred Dooley:

While the letter does not name a system, it urges the departments to consult with three “leading health care organizations that use [commercial off the shelf electronic health records] today…” Those three groups were: Kaiser Permanete, Cleveland Clinic, and Cedars Sinai.

What do those three clinics have in common? They all use the Wisconsin-based company Epic Systems.

… In other words, 5 members of the Wisconsin delegation sent a letter to the VA and Defense urging them to “consult” with the clients of ONE specific vendor.  A vendor whose executives happen to be major political donors.

Did Paul Ryan and Ron Johnson know that they were signing an implicit endorsement of a far-left company who donates heavily to Democrats and other left wing organizations? One can only hope not. It might be smart politics to bring the bacon home to Wisconsin – but government interference in the burgeoning, innovation-driven market for health IT is a danger to patients, care providers, and ultimately taxpayers.

Sen. Johnson and Rep. Ryan should disavow this letter.

It’s also worth asking how a company like Epic, that has no registered lobbyists on its payroll, even got access to an entire state delegation at the federal level. The Washington Post reported this week that Epic provided members of the Wisconsin delegation with “technical information” to ostensibly give them cover for signing the letter. However, oddly, Epic refused to respond to further inquiries.

Between the administration and the Wisconsin delegations constantly citing Epic installations, it certainly appears as if Epic Systems has been doing some lobbying.

This seems like fertile ground for the House Oversight Committee, don’t you think?

Republicans MUST investigate how this liberal CEO – who backs not just the President and prominent Congressional Democrats with campaign contributions, but also a number of progressive causes in America’s newest political hotbed (Wisconsin) – came to receive an appointment to such a powerful committee. As the Examiner reported, GAO will not disclose how she came to be appointed.

Perhaps a Congressional subpoena or two would get everyone’s attention.

The Nation magazine is prominently featuring the attack on ALEC in its August 1-8 issue, including a cover that describes ALEC as “the right-wing group subverting our democracy.” The left-wing magazine is putting on a full court press, publishing half a dozen separate attacks on ALEC and their efforts. These attacks are not only baseless, they are a dishonest attempt to pass off what amounts to ideological objections from a far-left viewpoint under the guise of concern for democratic legitimacy.

In the interests of full disclosure, I interned at ALEC in the fall of 2009. I am not currently affiliated with the organization in any way, but I know from first-hand experience what ALEC is all about, and it has nothing to do with the nonsense being generated by CMD and disseminated by The Nation and other liberal outlets.

ALEC is a membership organization that brings the public and private sectors together in the common cause of limited government. Both public and private sector members work together to draft state level model legislation tackling common issues with solutions based upon organizational principles of “free markets, limited government, federalism, and individual liberty,” which members can then introduce in their states if they so choose.

According to a hit piece by Mary Bottari of the Center for Media and Democracy published at the Huffington Post, this amounts to “corporations hand[ing] legislators the law changes they desire that directly benefit their bottom line.” Never mind that all legislation must go through the same, public legislative process as any other bill, and can only make it into law if lawmakers, who are held accountable by the public through the election process, first introduce and then pass the legislation. The same piece then recounts a list of “horrors” pushed by ALEC, including efforts to lower taxes or make it harder on politicians to raise tax rates, reforming the failed government monopoly on education, addressing policies that promote unemployment such as minimum wage laws, and cutting off the gravy train to unions and other beneficiaries of Democratic Party largess. Congratulations, Mary, you’ve successfully convicted ALEC of being conservative.

That is, ultimately, what the left is trying to do here. If they can convince people that advancing conservative positions is beyond the pale simply on its face, then they are conveniently free to dismiss conservatives without addressing the merits of any arguments. Common Cause, another participant in the anti-ALEC crusade, has even demanded a baseless IRS investigation into their 501(c)3 status. So while they are trying to shut down the marketplace of ideas, we are supposed to believe that is ALEC which is subverting democracy?

The left has largely succeeded in getting government involved in all matter of private affairs. It only makes sense then to include in the discussion those affected by government action. In doing so ALEC is promoting both good government and the very essence of democracy.

Do we not want our state legislators communicating and sharing best practices across borders? If an idea has already been tried somewhere else, don’t you want your own legislators to know whether it has failed or succeeded before attempting to address the same issue? The left certainly thinks so when it comes to their own ALEC-like organization, Progressive States Network (PSN), which they have not similarly attempted to discredit. In fact, according to their website, PSN has their own “Task Forces” just like ALEC, which include groups such as the AFL-CIO, SEIU, ACORN, and the Sierra Club. I guess it’s perfectly fine for these special interest groups to work with state lawmakers and have influence over the legislative process, but not the businesses that create jobs and understand how regulations will actually impact the economy.

Left-wing “good government” groups are clearly not about good government per se. They are about left-wing government. Their attacks are coming not because ALEC is doing anything wrong, as the left engages in the same tactics without drawing the ire of these so-called watchdogs, but because the ideas ALEC advances are “wrong” in the eyes of the left. In so doing, they reveal that they don’t really believe in the actual principles of democratic society, like the free flow of ideas. Those of us who do hold such principles have an obligation to push back against the self-serving bullying and intimidation of the left. Their attacks on ALEC are an attack on all of us.

Hogwash, obviously. But what came later in the interview was perhaps even more disturbing (the transcript at the link wasn’t completely accurate so I cleaned it up):

[T]here are some structural issues with our economy, where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM; You don’t go to a bank teller. Or you go to the airport and you’re using a kiosk instead of checking in at the gate. So all these things have created changes in the economy and what we have to do now, and that’s what this job counsel is all about, is identifying where the jobs of the future are going to be, how do we make sure that there’s a match between what people are getting trained for and the jobs that exist, how do we make sure that capital is flowing into those places with the greatest opportunity.

Obama’s fundamental problem – his fatal conceit, if you will – is that he thinks we need him and his jobs counsel to figure out what the jobs of the future are going to be. We no more need this today than it was necessary for past leaders to identify the jobs of today. This is a task for the private sector, and one which only its vast network of dispersed information and decentralized decision-making is capable of determining.

What does Barack Obama know about the technologies of today, much less the future? Why does he imagine he can direct capital and resources to the right place better than investors? When has history ever shown politicians capable of doing so?

As F.A. Hayek wrote in The Fatal Conceit: The Errors of Socialism, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” Barack Obama is clearly too enamored with his own intelligence to recognize how little he knows – or that any one individual or group of individuals could possibly know – about where the next economic breakthroughs will emerge, or where future resources will need to be deployed. Who even 20 years ago possibly could have imagined the range of technological innovation from which we benefit today, and the subsequent new jobs and roles it has created in the economy? There is no such person, which proves the impossibility of Obama’s desired model of central planning.

But such is not the case with a regulation currently under consideration which would require that American banks put foreign tax law above U.S. tax law. The regulation deals with the obscure issue of reporting requirements for bank deposit interest paid to foreigners, but the economic impact would be significant. Worst of all, the IRS is seeking to overturn existing law. In some ways, this is the tax equivalent of the EPA’s notorious power grab scheme to impose cap-and-trade with regulatory edicts.

A bit of background. On January 7th, the IRS proposed this regulation (REG-146097-09) to force American financial institutions to report any interest payed to foreigners. Typically, U.S. tax authorities only require information used for U.S. tax purposes. And since Congress wants to attract this investment to the American economy, the law has clearly stated for 90 years that foreigners won’t get taxed, leaving no need to collect any information about this income. But now, as part of global efforts to undermine tax competition and usurp fiscal sovereignty, the IRS is unilaterally asserting the right to demand this information. Only it’s not to enforce American law, but in order to hand the information over to foreign governments so that they can tax this U.S.-source income.

There is good reason why investors would want to protect their personal information.

In many places corruption runs rampant. If you know that any information acquired by your government may be sold to criminal gangs who look to kidnap children of business owners, then financial privacy also becomes a matter of human rights, or even life and death. Or if you live in Venezuela, you need to protect your assets from a thuggish dictator who might expropriate them on a whim. If foreign investors can no longer count on the U.S. as an attractive destination for their investment, one which protects their human rights, they will look elsewhere.

Despite the likely economic impact of the regulation, the IRS amazingly concluded that it was not a “significant regulatory action,” and thus did not conduct a cost-benefit analysis as required by Executive Order 12866. The order quite clearly defines a “significant regulatory action” as one having “an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.” With trillions in foreign investment at stake, the IRS would have us believe that this regulation does not have an annual impact of $100 million or more, or would not “adversely affect in a material way the economy.” This disregard of legal requirements is something to expect from a banana republic, but it’s becoming disturbingly common as government gets more power in America.

Not only is the IRS dishonestly ducking Executive Order 12866, it is also blatantly flouting the expressed will of Congress. The last time the IRS tried to impose this reporting requirement, over 100 members of Congress voiced their objection, and it was eventually allowed to die without implementation. This time around, and lead by Congressman Posey, the entire bi-partisan Florida delegation in the House has already objected. Many more are expected to do so in the near future. Senator Marco Rubio, for instance, has just recently joined his Florida colleagues to condemn the regulation, noting that it “violates the long-standing intent of Congress not to require the reporting of interest earned by nonresident aliens,” and would “put our financial system at a fundamental competitive disadvantage.” Every time that Congress has addressed this issue, it has specifically chosen to keep America an attractive destination for foreign investment by not taxing interest paid to non-resident foreigners.