Archive for May, 2007
A Rising Tide Lifts all Boats
Kennedy was right. Not Teddy Kennedy, of course, but his brother. President John F. Kennedy stated that a rising tide of economic growth generated benefits for all. A new study from the Congressional Budget Office looks at income trends for families with children and confirms JFK’s wisdom. The Wall Street Journal reviews the key findings:
A new study by the Congressional Budget Office says the poor have been getting less poor. On average, CBO found that low-wage households with children had incomes after inflation that were more than one-third higher in 2005 than in 1991. The CBO results don’t fit the prevailing media stereotype of the U.S. economy as a richer take all affair — which may explain why you haven’t read about them. … The poorest even had higher earnings growth than the richest 20%. The earnings of these poor households are about 80% higher today than in the early 1990s. … CBO says … earnings from work climbed sharply as the 1996 welfare reform pushed at least one family breadwinner into the job market. … earnings for low-income families have still nearly doubled in the years since welfare reform became law. Some two million welfare mothers have left the dole for jobs since the mid-1990s. Far from being a disaster for the poor, as most on the left claimed when it was debated, welfare reform has proven to be a boon. … The report also rebuts the claim, fashionable in some precincts on CNN, that the middle class is losing ground. … every class saw significant gains in income. … the CBO study found that, with the exception of chronically poor families who have no breadwinner, low-income job holders are climbing the income ladder. When CBO examined surveys of the same poor families over a two year period, 2001-2003, it found that “the average income for those households increased by nearly 45%.” That’s especially impressive considering that those were two of the weakest years for economic growth across the 15 years of the larger study.
Even Swiss Politicians Concoct Bad Tax Ideas
Proposals for global tax schemes normally emanate from places like Paris and Brussels. Swiss officials, by contrast, generally have a more sensible attitude — especially since they often are in a position of having to defend Switzerland’s fiscal sovereignty. But as Tax-news.com reports, one Swiss Minister wants a “tax on information” to fund global redistribution:
Swiss Communications Minister Moritz Leuenberger has suggested a ‘tax on information’ to help bridge the digital divide between wealthy countries with good communication infrastructure and poor countries where most of the population have no access to modern communications. Leuenberger revealed his proposal to a United Nations meeting convened to follow up on the World Summit on the Information Society (WSIS), held jointly in Geneva and Tunis in 2003 and 2005. … Leuenberger surmised that such a tax could be raised on information content which is paid for and computers.
Abortion Restrictions, Desperate Women, and Children Without Smiles
Moebius syndrome is a neurological disorder that causes facial paralysis, impaired speech, limb deformities such as club foot, difficulties eating, autism and an inability to smile. Moebius syndrome may have genetic roots but is also caused by misoprostol, a drug commonly used to induce abortions. In Brazil, where elective abortions are illegal, misoprostol is cheap and readily available. Moebius syndrome appears in 20% of children born after failed misoprostol abortions. Unfortunately, misoprostol abortions are also not very effective and 80% result in the pregnancy going to term. “Since the mid-1990s, dozens of cases of Moebius syndrome have been linked to misoprostol.” See the May 11, 2007 issue of Science [pdf].
Filed under: General; Government and Politics; Health Care; Law and Civil Liberties
A Positive Health Care Agenda for Free-Market Advocates
If you know any limited-government types who are looking for a positive health care agenda (off-hand, I can think of ten), be sure to let them know about a forum Cato is hosting on Thursday titled, “Health Savings Accounts: Not Entirely Consumer-Directed (Yet).”
HSAs are the most important step Congress has taken toward liberalizing America’s health care sector. At this forum, I’ll be introducing a proposal that would let workers own every one of their health care dollars — not just the few thousand dollars that HSAs let them control. Tentatively titled “large HSAs,” this proposal would:
- Allow workers to control 100 percent of their health benefits dollars
- Allow HSA holders to choose any type of health plan
- Eliminate the tax code’s biases toward employer-sponsored insurance and excessive coverage
- Cap the tax exclusion for employer-sponsored insurance and
- Provide tax relief to those without employer-sponsored insurance, including the uninsurable.
Joining me to comment on the proposal will be the CEA’s Katherine Baicker and Jason Furman of the Brookings Institution’s Hamilton Project.
The forum will be held just two days from today, on Thursday, May 24, at 4pm EDT at the Cato Institute. Click here to register or watch the event online. Click here for directions and parking information.
Filed under: Cato Publications; General; Health Care; Tax and Budget Policy
Patent Rent-Seeking
When I worked in Cato’s DC offices a couple of years ago, I always found it kind of depressing to go to lunch on K Street and see thousands of smart, attractive young men and women crowded around me, the vast majority of whom worked as lobbyists. They were people who otherwise might have been entrepreneurs, journalists, accountants, or doctors, creating wealth and improving society. But instead, they were enticed by the fat paychecks to come to Washington, where their talents are devoted to finding clever ways to enrich their clients at the expense of taxpayers and consumers.
I had a similar sinking feeling when i read this article (via Techdirt) about the flood of young scientists and engineers who are leaving the lab for careers as patent lawyers:
Demand for these specialists is being driven by an explosion in patent applications in recent years and a growing need for lawyers to protect old patents or challenge new ones. The U.S. Patent Office estimates 450,000 patent applications will be filed this year, up from about 350,000 five years ago.
Law professors say they’re seeing more students with strong science backgrounds make the leap to law, where recruiters are snapping them up.
For at least some students who might otherwise gravitate toward a science career, the promise of much bigger paydays is a powerful lure. Others say the opportunities in academia are not as certain as they once were.
“It’s an exciting area of legal practice right now,” said University of Pennsylvania law professor R. Polk Wagner. “Every year I see more and more people coming into law school with technical backgrounds.”
“It almost scares me,” said Wagner, whose proteges include Weathers. “Who’s left in the lab?”
Who indeed?
New Study: School Districts Spend As Much as They Can
The Mackinac Center for Public Policy has just released a study I conducted for them on the relationship between school district size and spending. But a funny thing happened on the way to the findings – I discovered something vastly more intriguing than what I set out to investigate.
When trying to statistically isolate the effects of district size on per-pupil spending, you have to control for other factors that might affect expenditures. One thing that economists like to control for is the public’s demand for educational services. If local residents expect more (or less), then district officials may choose to spend more (or less) to meet their demands. This is the traditional “selfless public servant” view of bureaucratic behavior.
But there is an alternative theory of bureaucratic behavior, called “public choice.” Public choice theory says that everyone, including bureaucrats, voters, and elected public officials, is motivated significantly by self-interest. We try to do what is best for ourselves and our families. According to this view, public officials generally endeavor to spend as much as they can, because that is the route to professional growth in the public sector.
As a “Pepsi Challenge” of economic theory, I included control variables for both views of bureaucratic behavior in my model. The result? Public choice theory explains about 15 times as much of the variation in spending between districts as does the selfless public official theory. In other words, public school districts spend as much as they can, regardless of local public demand for their services.
That means the incentive structure of our state-run school monopolies is broken. It encourages profligacy. Is it any wonder that real public school per pupil spending has doubled in the past 30 odd years, without any commensurate improvement in the skills of high-school seniors?
State legislatures wanting to rein in spending thus have only one real hope: introduce new incentives for educators to maximize quality while controlling costs. How do you do that? Competition, parental choice, private ownership of schools, deregulation, and, as much as possible, direct parental funding of schools. The same market structure that has driven rising quality and efficiency in almost every other field for centuries. Throw in a good education tax credit policy and you’ve got universal access to a free education marketplace.
More Special-Interest Favors for Fannie and Freddie
Created by politicians and bolstered by aggressive lobbying, Fannie Mae and Freddie Mac are quasi-private companies with special access to funds and special regulatory exemptions. With the playing field dramatically tilted in their direction, these morgage-industry behemoths are accumulating ever-larger portfolios. In a genuinely unfettered market, this would be just fine, but this is not the case. Because of their special access to the Treasury, Fannie and Freddie create a heads-they-win-tails-we-lose situation for taxpayers. If Fannie and Freddie prosper, it is the consequence of government favoritism that results in the economy’s capital being misallocated. If they fail, there almost surely would be a bailout reminiscent of the S&L fiasco. There has been an effort to slightly curtail the risks caused by the Fannie and Freddie subsidies, but the Wall Street Journal notes that the one decent provision of the bill was removed. Not surprisingly, there is widespread expectation that the White House will approve a bill that actually makes a bad situation even worse:
Their amendment to Mr. Frank’s bill, which passed by voice vote Thursday night, guts the one provision that made it worth the effort. What’s left is a regulator who would lack the authority to limit the risk that Fannie and Freddie’s $1.4 trillion mortgage-backed securities portfolios pose to the financial system, plus a $500 million a year boondoggle that goes by the euphemism “affordable housing fund.” …That leaves the White House and Treasury with some decisions. Administration officials were cautious about the Bean-Neugebauer amendment when first proposed, but Fannie and Freddie’s friends are betting the Administration wants a deal enough to accept even a bad one. However, a “reform” that does nothing to reduce the problem of putting so much housing risk into two companies, and which also includes an annual $500 million donation to “housing” activists such as Acorn is worse than the status quo.
Defining Misconduct Down
When the police search an innocent person, there will be no criminal case. So no criminal court judge will review the legality of the search. Even putting aside the airport searches, there must be tens of thousands of such ’innocent searches’ each year. In this category of cases, the only real “check” on unlawful police conduct is a civil lawsuit. As a practical matter, in most cases, the party aggrieved is not going to bother to hire a lawyer to sue the police because he was roughed up or whatever. In a small percentage of cases, the party aggrieved will incur legal expenses and pursue the case. But the Supreme Court is increasingly hostile to such lawsuits. Excerpt from today’s LA Times:
In December 2001, Los Angeles County sheriffs were looking for four black suspects in an identity-theft scheme. One of them was known to have a gun. When the deputies set out to raid a home in Lancaster, they did not know the suspects had moved three months earlier. Rettele had bought the home in September and lived there with Sadler and her 17-year-old son.
At 7 a.m., seven deputies with guns drawn came to the door and were let in by the teenager. He was ordered to lie face down.
The deputies then entered the bedroom and ordered Rettele and Sadler to get up and to show their hands. They protested they were not wearing clothes, but the officers insisted they stand naked next to the bed for a minute or two.
After a few minutes, the deputies admitted they had made a mistake, apologized and left. …
Without bothering to hear arguments in the case, the Supreme Court agreed and ruled for the deputies. …
John Burton, a Pasadena lawyer who represented the plaintiffs, said his clients had left California and were living in Kansas.
“I think this means we are in a dark period for the Supreme Court,” Burton said. “This was a case of incompetent officers finding themselves in the home of completely innocent people, and knowing they are not suspects, orders them out of bed stark naked. This is bullying, and it needs to be reined in.”
I agree. The government lawyers say the deputies “didn’t know” the suspects had moved three months earlier. Well, they should have. This is the distressing trend–too often the police are skipping the investigative work and raiding homes. Conservatives usually say, “well, if the police run amok, people can sue.” Here, the Supreme Court said the couple’s claim is so weak that it should not even be argued before a jury. And the high court did not even bother to have attorneys fully brief and argue this matter before them. This action sets the tone for future lawsuits.
As I said, most innocent people will let police misconduct (non-severe) go. They will not even consult an attorney. After this ruling, the subset of aggrieved individuals who do meet with an attorney may be told that they would just be wasting their time and money … that their case will very likely just get tossed out of court.
Bottom line: if police misconduct goes unchecked, we will get more of it.
REAL ID Update
Lots of interesting things continue to happen with the REAL ID Act, America’s faltering national ID law. Passed in May 2005, it would have states issue drivers’ licenses and IDs to federal standards by May of next year.
The count of states rejecting implementation of this federal surveillance mandate has now reached 11, with Missouri, Georgia, and Nevada most recently joining the list of states opposed.
Interestingly, Department of Motor Vehicle bureaucrats in Nevada continue to move forward with REAL ID planning, despite the opinions of the state’s legislature. According to a Federal Computer Week article posted today, “Nevada’s Department of Motor Vehicles . . . is investigating facial recognition and various methods for sharing driver’s license information with other states and the federal government.” This, despite the legislature consistently cutting funding for implementation and passing legislation urging Congress to repeal REAL ID. But what’s a legislature to stand in the way of bureaucrats doing what they want to do?
Activity in other states continues. In Michigan, Rep. Paul Opsommer (R-DeWitt) has introduced a resolution urging Congress to repeal REAL ID. This has earned him plaudits from Lansing State Journal columnist Derek Melot, whose recent blog post about Opsommer’s bill was called “Somebody gets it.” Indeed Opsommer does. (Be sure to read the comments. Someone with behind-the-scenes knowledge has offered his take.)
At the federal level, Title III of the ballyhooed immigration reform bill might as well be called REAL ID II. It would spend $300 million trying to get states to implement the REAL ID Act. (This is both too much and too little. Too much, because REAL ID shouldn’t be implemented. Too little because implementation will cost the states and people over $17 billion dollars.) Most importantly, possession of a REAL ID-compliant license or ID card will be a condition of getting federal permission for working if Title III passes as written. The Department of Homeland Security is using immigration reform to try to resurrect its failed national ID plan, described by Senate Homeland Security Chairman Lieberman as “unworkable” when it originally passed.
Senator McCain’s Domestic Agenda
Sen. John McCain today laid out his domestic agenda in a speech before the Oklahoma State legislature.
The speech is noteworthy for two topics not mentioned by the Senator. First, he makes no promises about additional restrictions on campaign finance. Of course, he also does not promise any liberalizing reforms of government oversight of campaign spending, reforms that might appeal to Republican primary voters.
Senator McCain also omits any concrete proposals about cutting back the federal government. To be sure, he promises a government that is smaller and more efficient. He just does not say specifically what spending will be cut and which programs will be eliminated. He does promise to spend more on the federal workforce. That does not seem likely to lead to a smaller federal government.
McCain praises business and suggests the federal government can become more like successful firms. He does not mention, however, how the burden of taxation might be eased on individuals and the businesses they create and manage.
“Reform” appears to be the theme of Sen. McCain’s domestic agenda. This brings to mind his hero, Teddy Roosevelt, hardly a exemplar of limited constitutional government. Perhaps we should be thankful that Sen. McCain has forsaken for now “reforms” like McCain-Feingold.
But it is hard to avoid the conclusion that McCain has given up on the idea of cutting back government in favor of individual liberty. He wants instead a government run by people animated by “higher aspirations” and “dedication to the national interest.” In other words, Sen. McCain is a big government conservative without qualifications.
Ashcroft: Closet Civil Libertarian?
A piece in yesterday’s Post points out that, contrary to John Ashcroft’s reputation as a lockstep defender of the administration’s war-on-terror policies, as attorney general, Ashcroft “at times resisted what he saw as radical overreaching”:
In addition to rejecting to the most expansive version of the warrantless eavesdropping program, the officials said, Ashcroft also opposed holding detainees indefinitely at the U.S. military base at Guantanamo Bay, Cuba, without some form of due process. He fought to guarantee some rights for those to be tried by newly created military commissions. And he insisted that Zacarias Moussaoui, accused of conspiring with the Sept. 11 hijackers, be prosecuted in a civilian court.
All true, but the article leaves out one of the most important occasions on which Ashcroft pushed back. In 2002, the adminstration seriously contemplated extending the Jose Padilla treatment–that is, indefinite confinement at the will of the president, without charges or access to counsel–to all Americans suspected of terrorist activity. As Michael Isikoff and Daniel Klaidman reported in Newsweek three years ago, in addition to Padilla, “officials privately debated whether to name more Americans as enemy combatants—including a truck driver from Ohio and a group of men from Portland, Ore.,” as well as the Lackawanna Six:
For Dick Cheney and his ally, Donald Rumsfeld, the answer was simple: the accused men should be locked up indefinitely as “enemy combatants,” and thrown into a military brig with no right to trial or even to see a lawyer. That’s what authorities had done with two other Americans, Yaser Hamdi and Jose Padilla. “They are the enemy, and they’re right here in the country,” Cheney argued, according to a participant. But others were hesitant to take the extraordinary step of stripping the men of their rights, especially because there was no evidence that they had actually carried out any terrorist acts. Instead, John Ashcroft insisted he could bring a tough criminal case against them for providing “material support” to Al Qaeda.
Indeed, though Ashcroft seemed to have been on board with the transfer of Padilla out of civilian custody, he apparently helped prevent a much broader assault on the rule of law.
Now I think calling John Ashcroft a civil libertarian for this would be setting the bar pretty low. But after nearly six years of radical overreaching, it’s hard not to fall victim to the “soft bigotry of low expectations.”
European Unions Want to Impoverish Workers
Even socialist and Marxist economists acknowledge that capital formation is the key to long-run growth and higher living standards. To be sure, they mistakenly think government should do the saving and investing, but at least they understand one of the prerequisites for future growth. Unfortunately, the same can be said for today’s European unions. According to a story in the EU Observer, trade unions are trying to discourage hedge funds and private equity from investing in Europe. This self-destructive effort – presumably motivated by a desire to prop up industries with inefficient union workforces – ensures that Europe will become even less competitive. In the long run, this means lower pay for workers:
Trade unions across the EU are preparing themselves to go on the offensive against the “big beasts” of private equity and hedge funds, believing their profit-oriented drive is undermining the bloc’s social fabric. “No one wants just a single market, they want something else out of Europe – some security against the big beasts that are in the single market like private equity and hedge funds,” the head of the European Trade Union Confederation John Monks (ETUC) told EU Observer.…Referring to “casino capitalism,” he said venture capitalists were only interested in buying a company, boosting the share price and selling, “leaving companies weakened by big debt.” …Critics say they often operate beyond normal regulations and are not transparent. The issue first generally entered the public consciousness in 2005 when Franz Muntefering, now German vice-chancellor, referred to hedge funds – which borrow large sums to bet in financial markets – as “locusts” waiting to swoop in and strip German companies of their assets, causing major job losses.
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