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Analysts expect this fall's election to turn on the economy. President of the American Enterprise Institute Arthur C. Brooks wants to deepen the debate on the economy by discussing which economic policies are morally right. Brooks talks to Steve Inskeep about his book, The Road to Freedom: How to Win the Fight for Free Enterprise.

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STEVE INSKEEP, HOST:

Economic issues are shaping this year's presidential campaign, as we're hearing in this morning's news. Arthur C. Brooks, of the American Enterprise Institute, says that debate involves more than money. It's a question of which economic policies are morally right.

ARTHUR C. BROOKS: This is one of the greatest weaknesses of people on the political right and free enterprise advocates in America today; is this inability or unwillingness to make moral arguments. People who are not especially sympathetic to the free enterprise system have very successfully been making moral arguments. The leitmotif of the 2012 campaign, it turns out, is going to be fairness, and that's a moral argument.

INSKEEP: Brooks tries to counter that with a moral argument for free enterprise. His new book, "The Road to Freedom," contends that people are happier with less government, which leads to another big question of 2012 - how much less government?

Help me define, as you see it, the responsibility of government - because as people who read this book will know, you're not an advocate of no government. You see a place, it seems, for a social safety net and so forth. So what are the limits?

BROOKS: The government should be doing two things, basically. The first is providing a minimum basic safety net for the truly indigent. That means enough food, enough housing, enough medical care. Today, the safety net we have in this country reaches all the way up into the middle class.

People who retire, middle-class people who retire, take three times as much out of the Social Security system they ever paid in. That's completely unsustainable, and it's not fair. And that's a really important thing to keep in mind.

We also have a social safety net that's trying to take the risks out of life, that's trying to achieve greater income equality. That's the wrong basis for a social safety net. Social safety net should be relieving the worst suffering.

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'Road To Freedom': Moral Debate For Free Enterprise

A proposed housing complex in Kerrville for senior and disabled veterans has been dealt a major setback denial by the state of its application for federal tax credits to help fund the $8.2 million project.

It's devastating, Communities for Veterans LLC principal Craig Taylor said Thursday of the 4-2 vote last week by the Department of Housing and Community Affairs board.

He plans to resubmit an application to the agency next year for the 100-unit complex, called Freedom's Path in Kerrville, that is slated for construction on the campus of the Veterans Affairs Department hospital in Kerrville.

Although supported by Kerr County commissioners and Hill Country veterans groups, Taylor won the necessary backing of the Kerrville City Council for the project only two days before the March 1 deadline to apply to the state for tax credits.

He made the deadline, seeking $750,000 in tax credits annually for 10 years for the 49-unit phase one.

But key elements were missing, rendering the application materially deficient and prompting the agency staff to terminate it, said Department of Housing and Community Affairs spokesman Gordon Anderson.

Taylor's appeal of the termination, heard May 10, faced opposition from Granger McDonald, a Kerrville developer who is among those seeking $550,000 in tax credits for an apartment complex in Comfort.

Anderson said Comfort Place and the VA project were the only applicants this spring for tax credits in the multicounty rural region that includes Kerr County.

McDonald also was affiliated with River Vista LP, the preferred contractor for a prior VA plan to build an 80-unit housing complex for homeless veterans in Kerrville.

Citing local opposition to hosting a homeless facility whose tenants potentially would include non-veterans, McDonald withdrew from that project in 2010.

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Tax credits denied for Kerrville VA housing

Rich people are starting to flee America and especially California for tax havens elsewhere. It's not as bad as refugees getting out of North Korea. But it's not good.

The most publicized recent example has been Eduardo Saverin, a co-founder of Facebook, worth approximately $3.8 billion. Thats because Facebooks initial public stock offering hauled in $104 billion Friday.

It recently came out that Mr. Saverin renounced his U.S. citizenship in September and now lives in Singapore. Reported Bloomberg, Besides helping cut tax bills stemming from the Facebook IPO, the move may also help him avoid capital-gains taxes on future investments since Singapore doesnt have a capital-gains tax.

The top U.S. capital-gains tax currently is 15 percent, and could rise to 20 percent next year if President Barack Obama is re-elected and current tax cuts expire. The top California capital-gains tax is 9.3 percent. So, assuming Mr. Saverin lived in California, potentially hes avoiding a 29.3 percent capital-gains tax.

As to income tax, Singapores top rate is 20 percent. By contrast, the top U.S. rate is 35 percent, but could become 39.6 percent if Mr. Obama has his way. Californias top incometax rate is 10.3 percent, but could become 13.3 percent should Gov. Jerry Browns tax increase initiative be passed by voters in November. The possible combined top U.S. and California income tax rate for next year: 52.9 percent. Thats compared with Singapores 20 percent.

And its not exactly like Mr. Saverin or any of us is getting high-quality return on taxes. Especially in California, many roads are crumbling, many schools are poor, the publicemployee pensions are unsustainable, and state and local governments face potential Greecestyle bankruptcies.

People move in and out of countries for reasons other than taxation, Esmael Adibi told us; hes the director of the A. Gary Anderson Center for Economic Research at Chapman University. But there still are two problems, he said. In California especially, the state isnt business-friendly. And its become difficult for people to make a living here.

Unfortunately, Gov. Brown in his tax-increase pitch and Mr. Obama in his campaign of envy of the rich, both are making targets of people like Mr. Saverin.

Sen. Chuck Schumer, D-N.Y., for example, said Thursday that he would push to bar people who give up citizenship to avoid taxes from reentering the U.S.

Contrast that with countries that are flourishing such as Singapore and formerly communist China are more welcoming to those who innovate and invest. If the goose leaves, you dont get the golden eggs.

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Ahead of the tax man

It has been quite a ride for a fund composed of the market's tamest stocks.

But now, just as imitators are proliferating, some experts think this popular exchanged-traded fund could be sinking back to earth.

The ETF, PowerShares S&P 500 Low Volatility, is loaded with stocks any grandparent could love: Kellogg, Coca-Cola (KO) and Procter & Gamble (PG), among others. And this stodgy-seeming play is the hottest ETF to hit the market in the past year.

Since its inception last May, investors have added $1.6 billion to the fund, more than any of the roughly 400 ETFs that debuted since the start of 2011.

The fund is supported by a growing body of academic and industry research that indicates a classic Wall Street paradigm -- that buying safe, well-established companies means sacrificing long-term gains -- is false.

Advocates say the research shows that investors in the least volatile stocks would have fared as well or better than those who put their faith in riskier names, suggesting that many of the market's most gut-wrenching ups and downs are unnecessary punishment.

"You get a win-win" by sticking with safer companies, says Ben Fulton, head of ETFs at Invesco (IVZ)'s PowerShares unit.

There now are 14 different funds that bill themselves as low-volatility or low-beta, an industry term that indicates volatility.

During its short life, the PowerShares fund has handily beaten market benchmarks, returning about 9.5%, versus a 0.7% loss for the Standard & Poor's 500 over the same period.

But there already are signs its luck has turned. Amid this year's rally, the fund's lead over the broader market has shrunk in three of the past four months. That bolsters critics, who worry that although the strategy seems appealing over the last tumultuous decade, the market winds may have shifted already.

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The Case for Stodgy Stocks

By Rick Aristotle Munarriz | More Articles May 21, 2012 |

Last week was a lousy one for tech investors, and things didn't get any prettier in China.

However, several of China's publicly traded Internet companies did come through with better-than-expected results.

Sure, a lot of them are still losing money. Investors are also naturally hesitant about buying into a country where the government has made it clear that it doesn't trust cyberspace. No one said that buying into new media in China was going to be a risk-free proposition. However, it's always encouraging to see a niche landing well ahead of the prognosticators.

Let's take a quick look at the five market thumpers.

Company

EPS (Estimated)

EPS (Actual)

My Watchlist

Source: Thomson Reuters.

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5 Stocks Earning Their Keep in China