Archive for April, 2008
Re: John L. Chapman — The Fed Should Tighten to Slow the Growth of MZM?
In The Wall Street Journal on April 29, another AEI economist, John L. Chapman, took the exact opposite position from John Makin. Chapman suggested the Fed “should soon begin a series of rate increases.” The title was “The Fed Must Strengthen the Dollar,” but that is not what he wrote. Chapman just advocated “a stable dollar.”
The dollar was stable in March and April. The Fed’s index of the dollar’s value against a broad basket of currencies (Jan. 1997=100) was 95.84 on March 6 and 95.81 on April 29. The index against major currencies (1973=100) remained close to 70. That was just two months, of course. But those were the months when we were deluged by editorials blaming rising prices of food and oil on “the falling dollar.” In any case, if the goal is being achieved with current Fed policy, then changing that policy would mean deviating from that goal.
Chapman, like some other economists, sees “inflation warnings” in rapid growth of a measure of money supply (or demand) known as MZM (money with zero maturity), which is largely driven by institutional money market funds. These short-term investments tend to expand when corporations and financial fiduciaries are nervous about investing longer-term, and therefore park more cash in money market funds for security.
The trouble with using MZM as an omen of inflation is that it has never worked.
MZM grew rapidly in 2001, during a recession, but MZM was nearly flat in 1973 when inflation began to explode. MZM fell from $854.3 billion in September 1978 to $827.3 billion in April 1980, yet this was a period of rapidly escalating inflation. Core inflation, excluding food and energy, reached 8.5% in the year ending December 1978, then 11.3% and 12.2% in the following years.
There may be an argument for raising the fed funds rate whenever oil and food prices rise, but MZM is not it.
Filed under: Finance, Banking & Monetary Policy; International Economics and Development; Tax and Budget Policy
Re: Ronald McKinnon — The Fed Should Tighten to Push the Euro Down?
In The Wall Street Journal of April 25, Ronald McKinnon of Stanford proposed “raising the fed funds rate as much as necessary to strengthen the dollar.” McKinnon’s argument had little to do with inflation, so he could just as well have asked the European Central Bank to lower interest rates as much as necessary. Yet he just asked the U.S. to “cooperate with foreign governments to halt and reverse the appreciation of their currencies against the dollar.”
McKinnon’s main argument for raising the fed funds rate is because he imagines that “foreigners are disinvesting from private U.S. assets.”
Net foreign purchases of U.S. stocks in the fourth quarter were $55.6 billion. Net foreign purchases of U.S. corporate bonds were $39.1 billion. Foreign direct investment in the United States increased by $39.9 billion in the fourth quarter, following an increase of $101.3 billion in the third.
There will surely be a good argument for raising the fed funds rate, sooner or later, but an exodus of foreign investment is not it.
Re: John Makin — The Fed Should Ease to Inflate House Prices?
The Wall Street Journal has been extremely ecumenical about airing a variety of critics of the Federal Reserve on its editorial page. In a series of posts, I will suggest reasons for remaining skeptical about the logic and evidence behind all of this policy advice.
On April 14, John Makin of the American Enterprise Institute proposed, “The Inflation Solution to the Housing Mess.” He thinks, “The Fed should announce its intention to add to its holding of Treasury securities in order to provide additional liquidity.” Makin knows “there is a substantial risk that inflation may rise for a time – this would be the policy goal.”
To establish higher inflation as a “policy goal” gives a small part of the economy (the existing inventory of new and used homes) priority over the rest (he does not and could not claim inflation would be confined to housing). He thinks easy money could halt declines in the Case-Shiller index of homes prices, although I have shown that index is not representative of nationwide housing prices
Makin argues that
the Fed’s lending programs have not provided adequate liquidity to financial markets: Reserves supplied to the banking system have grown at a tiny 0.6% annual rate since December. That’s because the reserves the Fed is injecting by lending are effectively pulled out or “sterilized” by its sales of Treasury securities. The Fed has been selling these securities to keep the fed funds rate at the level targeted by its Federal Open Market Committee directives.
But it doesn’t matter whether the Fed increases the monetary base (reserves and currency) by buying Treasury bills, gold bars, or Bear Stearns’ securities. In each case the Fed pays for new assets by writing a check on the Fed which ends up being added to bank reserves at the Federal Reserve banks.
The biweekly bank reserve data bounces around too much to speak of an annual rate of change between two dates. Reserves were $91.8 billion in the two weeks ended October 24 and $97.1 billion by March 26, but converting that into an annual rate of change would be just as misleading as Makin’s selective comparison.
Bank loans have been growing at a 10% annual rate this year, with Commercial and Industrial loans growing at a 20% pace. This does not look at though the banks are starved for reserves or that the Fed is “pushing on a string.”
Makin’s inference that monetary policy is too tight is dubious but also redundant. He clearly wants inflation to be higher, as a policy goal.
Filed under: Finance, Banking & Monetary Policy; General; Tax and Budget Policy
Planet Napolitano
Writing in The Wall Street Journal, Arizona Gov. Janet Napolitano (D) recently complained that the Bush administration is abandoning federal spending commitments, “cost-shifting to the states,” and creating budget deficits in states like Arizona.
In companion letters to the editor of today’s The Wall Street Journal, the Goldwater Institute’s Darcy Olsen and I inquire as to the color of the sky on planet Napolitano.
Olsen writes, in part:
Like most of the southwest, Arizona has been rolling in cash thanks to historic economic expansion. Three of the past five years saw double-digit percentage budget growth. But instead of reducing the tax burden or saving for a rainy day, state government ballooned 40% in real terms. Arizona now finds its per capita state spending on a par with Massachusetts.
Only 21 states went into the red this year, and Arizona led the way with the largest budget deficit of any state on a per-capita basis.
States can unilaterally opt out of some federal programs, like No Child Left Behind. Most governors can also reduce agency spending through executive action. Arizona did none of these things.
Meanwhile, I tackle Napolitano’s argument that restraining federal Medicaid and SCHIP spending amounts to “cost-shifting”:
Medicaid and SCHIP allow Arizona politicians to subsidize Arizona residents (and Arizona health-care providers), while shifting most of the cost to taxpayers in other states.
Gov. Napolitano opposes the administration’s policy not because it would increase cost-shifting, but because it would reduce her ability to shift those costs to other states.
Medicaid and SCHIP: socialism for state politicians.
Filed under: Cato Publications; General; Health, Welfare & Entitlements; Trade and Immigration
‘The Amazing Hillary’
Hurry, hurry, hurry! Step right up, ladies and gentlemen, and see the Diva of Deception, the Impresario of Illusion — THE AMAZING HILLARY!! Watch her make the federal gas tax SEEM TO DISAPPEAR!! But in fact, you’ll still be paying the same price for gas! Even the media can’t figure out this trick!! She’s remarkable! She’s astounding! So hurry right in and see the First Lady of Legerdemain, the Mistress of Magic!
That’s what Hillary Clinton’s campaign managers should be barking about her joining John McCain in proposing to suspend the federal gasoline tax for the 2008 summer driving season. Says Candidate Clinton, the move would “immediately lower gas prices.”
What makes her proposal a true work of wizardry is that, she claims, it would not reduce government tax revenues. Whereas McCain says he would reduce government spending to make up for the lost tax money (an example of magical thinking?), Clinton would implement “a windfall profits tax on the big oil companies” to close the revenue gap.
Did you catch The Amazing Hillary’s trick? Did you see why consumers would still pay the same price for gasoline? No? OK, let’s watch the sleight of hand in slow motion:
Filed under: Energy and Environment; Government and Politics; Tax and Budget Policy
Bureaucracy at Work
Have you ever wondered why people marvel at the stupidity of bureaucracy? Read this if you have, and then ask yourself, is there no rainy-day fund from which the 4th largest school district in the country could pull a single dollar? Or couldn’t the district just budget the money and save it for the next year if it goes unused? Aren’t either of these almost-no-cost options worth the chance of saving $119,999?
Expected by Whom?
A new report by the Georgetown Public Policy Institute finds that DC public schools did not respond to rising competition from charter schools “as expected”?
Expected by whom?
No one who has studied the behavior of monopolies, or simply stood in line at the DMV, would expect the public school bureaucracy to react with vigor and dispatch to the loss of its customers. It gets paid anyway.
The Census Bureau recently reported (.xls) that DC public schools spent $1.079 billion for 59,616 students in 2005-2006. As I reported earlier this month in the Washington Post (and in greater detail in this blog), the District is spending $1.216 billion for 49,422 students during the current 2007-2008 school year. The District lost one fifth of its students but its budget grew by 13 percent.
Where is the incentive for it to improve?
And, even if it had a strong systemic incentive to improve, how on earth could it do so? Because of the system’s design, it must hire teachers who have pedagogically worthless degrees in education; the curriculum is centrally planned district-wide, denying teachers any real professional autonomy; students are rigidly grouped by their age instead of by what they know and can do, making it much harder to teach them, etc. Even if this system had all the incentives in the world, it likely could only muster modest improvements.
Want a system that is truly responsive, efficient, diverse and constantly seeking to better serve families? Look at what sorts of school systems – and more broadly, what sorts of economic systems — already behave that way: free markets. It wouldn’t be hard to give all families access to a free educational marketplace.
The EU Sides with the Thugs in Bolivia
This Sunday, the department of Santa Cruz, the richest region of Bolivia, will hold a referendum on regional autonomy. Other departments in the eastern half of the country will likely follow suit in the upcoming months. The central government in La Paz opposes the project and calls it “separatist.” Despite that, polls show that an overwhelming majority of “cruceños” will vote in favor of autonomy.
As a consequence, the ruling party has threatened to use violence against the citizens of Santa Cruz who show up to vote on Sunday. It wouldn’t be the first time. Last December, the government forced the approval of a new constitution in a Constituent Assembly while a pro-government mob outside the building prevented opposition assemblymen from attending the session. This year, something similar happened when the national Congress declared these referenda on regional autonomy illegal in a rigged session while mobs outside Parliament prevented opposition Congressmen from entering the building.
This time around, the party of president, Evo Morales, has warned about the possibility of taking thousands of its supporters to Santa Cruz to prevent the vote from taking place. The only way to accomplish this is by force.
So it’s kind of surprising that the European Union is taking sides with those who, over and over again, have used violence to suppress democratic institutions. The French ambassador in Bolivia and representative of the EU in that country has stated that the leaders of Santa Cruz who are pushing for autonomy will have to “assume the consequences” if violence erupts on Sunday. That is, the EU will blame the victims if they get beaten up by government thugs for exercising their democratic rights.
Shame on the EU.
Filed under: Foreign Policy and National Security; General; Law and Civil Liberties
How Free are America’s Private Schools?
The Milton and Rose D. Friedman Foundation has a useful new report out that assesses regulation of private schools in all fifty states, assigning letter grades according to market freedom.
Many of the criteria used are similar to those considered in the private schools section of the Cato Education Market Index (an overall ranking of educational freedom and incentives across all school types in the 50 states and 2 nations), but they’ve added a few extras (e.g., regulations on class sizes and libraries) and lent additional detail to others (e.g., a breakdown of different types of curriculum regulation). Kudos to the Foundation and author Christopher Hammons for an illuminating report.
The Global Warming Hysteria that Isn’t, Part II
Last week, a Gallup poll was released revealing that about one-third of Americans worry “a great deal” about global warming, a number that hasn’t changed much since 1989. Less than half of the respondents believed that climate change would pose a serious threat to them in their lifetimes. The trade publication ClimateWire (subscription required) quotes a Gallup official as noting that “there has been no consistent upward trend on worry about global warming going back for decades.”
Today, ClimateWire reports that a new study from the Pew Research Center for the People & the Press has even worse news for environmentalists: climate change is at the absolute bottom of the public’s list of priorities for the federal government (oddly enough, there’s no trace of the report on Pew’s website). When given a list of issues and asked to state whether the issue should be a “top priority” for President Bush and the Congress, those surveyed responded as follows:
Strengthening the nation’s economy: 75%
Defending the country against terrorism: 74%
Reducing health care costs: 69%
Improving the educational system: 66%
Securing social security: 64%
Improving the job situation: 61%
Securing Medicare: 60%
Dealing with energy problems: 59%
Reducing the budget deficit: 58%
Protecting the environment: 56%
Reducing crime: 54%
Providing insurance to the uninsured: 54%
Dealing with the problems of the poor: 51%
Dealing with illegal immigration: 51%
Reducing middle class taxes: 49%
Dealing with moral breakdown: 43%
Strengthening the military: 42%
Reducing the influence of lobbyists: 39%
Dealing with global trade: 37%
Making tax cuts permanent: 35%
Dealing with global warming: 35%
Surprised? You shouldn’t be. The political strength of the environmental lobby is almost entirely based on the proposition that they represent a large number of well organized swing voters who will reward and/or punish politicians for their position on environmental issues in general and climate change in particular. Hence, a great deal of hard work and effort goes into the Green campaign to scare hell out of politicians regarding the political risks associated with saying no to things like a cap & trade program to reduce greenhouse gas emissions. To be fair, all special interest groups have the same incentive to talk-up their alleged public support. Regardless, this particular political Green emporer has no clothes.
Anonymous Earmark Manifesto
Appropriations lobbyists have weathered a rough few years of media scrutiny, and a series of earmarking outrages has put pressure on Congress to pass minor reforms. Luckily there may be fewer vehicles for earmarks this year as Congress will probably pass only one or two appropriations bills for Fiscal Year 2009 and leave the budget mess for a new president to sort out.
Congressional appropriators have well-rehearsed defenses of the earmarking process, and an anonymous appropriations lobbyist has joined the fray to strike back at earmark critics. I obtained a copy of a six-page document defending the earmark system called “Fairness of Congressional Earmarking Report,” which is circulating around Capitol Hill.
Earmark enthusiasts argue that the Congressional system of doling out money to local governments, businesses and special interest groups is better than giving “faceless bureaucrats” the ability to allocate federal funds. The anonymous white paper expands on this argument and tries to make the case that earmarking is a much fairer process than letting federal agencies allocate the money.
The author of the paper is a member of an exclusive clique of former appropriations staffers called the 302(b) Group, according to Washington Post lobbying columnist Jeffrey Birnbaum.
Whether earmarks are useful depends on one’s perspective. To appropriations lobbyists and groups that have difficulty obtaining federal funding through merit-based, competitive grants, earmarks are a welcome bonanza. To taxpayers and advocates of spending restraint, transparent government and federalism, they’re woefully inefficient and pit parochial interests against the national interest.
Let’s look at the debate from the perspective of an appropriations lobbyist, to whom all federal spending is good federal spending:
The most democratic way to distribute these federal dollars is to spread funding across to numerous, meritorious local government projects rather than to concentrate resources to a select few.
Ah, democracy. The implication is that if someone is against earmarking, they must be some sort of dictator-loving democracy hater. The Chronicle of Higher Education published an investigative piece in March showing that the top recipient of educational earmarks for research in FY 2008 was Mississippi State University (Number two? The University of Mississippi). The Bulldogs are not known for a world-class research program, but they happen to have influential representatives and senators on the appropriations committees to steer funds their way. Never mind that educational earmarks receive little to no scrutiny to determine merit by scientists or that millions of dollars winds up at universities with no graduate or research programs in the research areas for which they receive funds. That’s earmark “democracy” in action.
The paper also analyzes the appropriations process during FY 2006 (when Congress used earmarks) and FY 2007 (when Congress did not use earmarks because the appropriations process fell apart and Congress fell back on a series of continuing resolutions that just increased spending across the board).
Generally speaking, federal agencies awarded substantially fewer grants when compared to when Congress earmarked these funds. A few local governments did better; the vast majority did not.
There’s a debate over whether earmarks increase overall spending or if they only divert it. Assuming that overall spending doesn’t change in a given year, earmarks just redirect spending to narrow interests; removing earmarks does not decrease spending. However, the paper seems to argue spending was reduced without considering the money was likely spent on other priorities.
In the bizarro lobbying world, the federal government spending less money on special interest projects is automatically a bad thing. To taxpayers, the notion that the government isn’t indiscriminately spending money because a representative or senator inserts an earmark in an appropriations bill is usually a good thing.
Communities across the nationwide are faced with increased traffic congestion and transportation needs. These local governments must address broken sidewalks, antiquated infrastructure, congested roads, and inadequate bicycle and pedestrian trails.
Setting aside this excerpt’s grammar issues, it’s comically ludicrous to suggest that the federal government needs to bail out local governments so that they can fix broken sidewalks and bike trails. Local governments are more accountable to residents’ spending wants and needs. It’s also more efficient to tax local and state residents to provide local and state infrastructure and services instead of routing the money through the maze of federal bureaucracy.
Reasonable people can disagree about the solution to the earmark problem. An effective argument for appropriators is that until the system is reformed, it’s their duty to get as much money for their district as possible — even if it’s wasteful and inefficient. This anonymous paper, though, is a silly defense of the system. It’s understandable why the author wants to remain anonymous.
An Elephant Never Forgets?
Over at Ars Technica, I’ve got an in-depth write-up of the White House’s problems with email archiving. Federal law has required executive branch officers’ official emails to be preserved for legal and historical purposes. Unfortunately, the Bush administration has had some difficulties with this:
In 1994, the Clinton administration reacted to the previous year’s court decision by rolling out an automated e-mail-archiving system to work with the Lotus-Notes-based e-mail software that was in use at the time. The system automatically categorized e-mails based on the requirements of the FRA and PRA, and it included safeguards to ensure that e-mails were not deliberately or unintentionally altered or deleted.
When the Bush administration took office, it decided to replace the Lotus Notes-based e-mail system used under the Clinton Administration with Microsoft Outlook and Exchange. The transition broke compatibility with the old archiving system, and the White House IT shop did not immediately have a new one to put in its place.
Instead, the White House has instituted a comically primitive system called “journaling,” in which (to quote from a recent Congressional report) “a White House staffer or contractor would collect from a ‘journal’ e-mail folder in the Microsoft Exchange system copies of e-mails sent and received by White House employees.” These would be manually named and saved as “.pst” files on White House servers.
As you can imagine hijinks ensue. The White House developed a new archiving system that was ready to go in 2006, but the White House CIO reportedly canceled the system just before it was due to go live. They’re supposedly working on yet another archiving system, but it’s looking increasingly likely that it won’t be ready before the Bush administration leaves office.
Transparency is an important tool for limited government. Senior administration officials are more likely to behave themselves if they know their correspondence is subject to subpoena and will be available for the scrutiny of future historians. It’s therefore troubling that for most of the last 8 years, the Bush administration has failed to have an automated system in place for complying with the law as his predecessor did. More pressure needs to be placed on the next administration to ensure that the law is followed.
The New York Times Should Take Credit Where It’s Due
In a piece by Jad Mouawad, Tuesday’s NY Times reports that Oil Price Rise Fails to Open Tap.
He identifies a number of reasons for the lack of responsiveness on the supply side:
- OPEC countries’ “explicit goal is to regulate the supply of oil to keep prices up”. Iran and Iraq’s productive capacity has been crippled by war and civil unrest. In non-OPEC countries, problems are due to “sharply higher drilling costs and a rise of nationalistic policies that restrict foreign investment.”
- Some regions are simply running out of reserves, e.g., Norway, Britain, Prudhoe Bay.
- “In many other places, the problems are not below ground, as energy executives like to put it, but above ground. Higher petroleum taxes and more costly licensing agreements, a scarcity of workers and swelling costs, as well as political wrangling and violence, are making it harder to raise production…”
- “Foreign investment could help Mexico produce oil from deeper waters, but that is a controversial proposition in a country where oil has long been seen as part of the national patrimony.”
- “The Russian government has been muscling Western companies to gain more control over its energy resources. That rise in energy nationalism could freeze new investment and slow any meaningful growth in supplies there for years.”
Surprisingly, in an otherwise decent article, absent from this report is the credit that is due to the New York Times itself (and like-minded entities) in their long-standing efforts decrying the search for oil and gas within the US. A search of the Times site for the words “editorial drilling oil gas”(sans quotes) over the past few years reveals a constant stream of editorials in the Times decrying efforts to drill for oil and gas. Examples include:
Leave Bristol Bay Alone, December 6, 2006: “President Bush is thinking about rescinding a longstanding presidential order that specifically prohibits oil and gas drilling in Alaska’s pristine Bristol Bay… Mr. Bush has been speaking out lately about the importance of making America more energy independent. Few things are more important for the new Democratic Congress than developing an energy policy more heavily weighted toward conservation, efficiency and development of alternatives to traditional fossil fuels. This might be a rare area in which both sides can work together, but opening Bristol Bay to drilling would be exactly the wrong way to begin the conversation.”
Regulatory Games and the Polar Bear, January 15, 2008. Interior Secretary Dirk Kempthorne could do the polar bear … a favor by ordering a timeout and halting the [oil] lease sales for at least a year… There is no urgency to lease Alaskan waters. President Bush’s suggestion that new oil production will bring short-term relief at the pump is nonsense, since oil fields take years to develop. It is urgent to help the bears.
Losing Patience, August 21, 2007. Dirk Kempthorne’s arrival … raised hope among conservationists that he would moderate the Bush administration’s aggressive search for oil and gas in some of the country’s most environmentally sensitive lands. This has not happened.
Protecting a Monumental Sculpture, February 18, 2008. “There is every good reason to call this plan to a halt on aesthetic grounds. But there are other reasons too. This stretch of the lake is also a critical breeding ground for many species of shorebirds.”
Drain America First, July 25, 2006. “The Senate measure is narrower and less mischievous than the House bill. Yet it, too, is aimed exclusively at increasing production. … This is mind-boggling. The bill’s stated purpose is to reduce fuel prices. But while the gulf may hold enough natural gas to affect the price of that commodity, the same cannot be said of oil.”
And of course the NY Times has been in the forefront of opposition to any drilling in the Arctic National Wildlife Refuge based on the logic that it would supply only six months of US oil consumption while forever sullying the Wildlife Refuge (an arguable claim).
Using this logic we could shut down every farm in the U.S. — and the world — since no single farm provides more than a few hours’ worth of food, and food production is the single greatest threat to terrestrial and freshwater biodiversity worldwide.
This is not to say that drilling – or farming, for that matter — is acceptable everywhere, but reflexive opposition to energy production is not.
Maybe a Less Checkered Future?
Yesterday, Andrew Coulson wrote a detailed response to an attack on libertarian education reformers by Chester E. “Checker” Finn, Jr., President of the Thomas B. Fordham Foundation. Finn declared, among other things, that libertarian support of universal school choice, unfettered by government-imposed standards, typified how libertarians “never let their vision of how the world ought to work be distorted by any realities about how it actually works.”
As Andrew made clear, we have often explained, based on empirical research and political reality, why universal school choice is the key to powerful standards and accountability—not to mention efficiency and innovation—while government-controlled education is routinely corrupted by accountability-loathing special interests like teachers, administrators, and bureaucrats. We’ve shown, using historical and political analyses, how increasingly centralized control over education has frozen out parents and good pedagogy, and have explained why proposals for national standards, including Fordham’s, would be educational suicide. Yet we have been dismissed by Fordham folks as naïve and heartless.
Fortunately, not everyone at Fordham seems to have tuned us out. Today, after reading a Washington Post article on how good education research fails to translate into good policy, Coby Loup, a Fordham policy analyst, declares that government education is essentially doomed to failure. Why? Because of the very political realities that we at Cato have been lamenting for years:
What’s surprising is that so many people continue to believe that these embarrassments stem from a failure of political will, rather than the inherent obstacles posed by, as the Post puts it, the “turbulent forces of politics, policy and public opinion.” We always think we’ll do better next time around, when our guys or gals are in office.
We couldn’t have said it better ourselves.
Neocon All-Star Team Unsuccessfully Gropes at Reality
In its infinite wisdom, C-SPAN chose to commit this Hudson Institute panel to celluloid. Of course, I can’t get the dang video to work right, but I had the fortune to catch most of the panel last night on the teevee. Douglas Feith, Paul Wolfowitz, Dan Senor, and Peter Rodman got the old gang back together in an effort to pretend-examine What Went Wrong in Iraq.
The line that Feith advances is that we shouldn’t have done a, y’know, occupation. Wolfowitz supports this position, expressing amazement that “the term ‘occupation’ sticks with us today, even though the occupation ended in June 2004.” These are cute semantic games, but they’re an affront to reality. So Wolfowitz turns to this move, as reported by Eli Lake:
And I do think a real failure — I assign responsibility all over the place — was not having enough reliable Iraqi troops early enough and fast enough, because I think a sensible counterinsurgency strategy would not be to flood the country with 300,000 Americans, but rather to build up Iraqi forces among the population.
This sends Abu Muqawama, the pseudonymous U.S. military veteran and proprietor of a popular counterinsurgency blog, into apoplexy. What’s a real shame is that Lake’s own question, which was excellent, didn’t elicit a serious response. Lake observed that even under close tutelage from the Americans, galling depredations had been committed by the ISF, such as torture conducted by the Ministry of Interior, etc. Why, then, if we had handed more control over sooner, wouldn’t we have expected much more of this kind of thing to have happened?
Feith’s response? I’m paraphrasing here, but it was along the lines of “I just don’t think it would have.” So presumably under the Feith-Wolfowitz plan, we invade, grab Saddam, and then just turn the reins over to “external” Iraqi leader/charlatan Ahmed Chalabi and his band of 700 supporters? Or perhaps Wolfowitz meant his remark as an “assume a can-opener” joke? Wolfowitz’s claim that “a real failure…was not having enough reliable Iraqi troops early enough and fast enough” begs the question How on Earth could we have just had enough committed Iraqi troops “early enough and fast enough”???
Wolfowitz then ups the ante with his claim that “nobody could have foreseen the insurgency,” an insurgency which he attributes almost entirely to Saddam Hussein. Reading from Feith’s new book, Wolfowitz agrees with Feith that neither of them saw “a CIA assessment stating that after their ouster, the Ba’athists would be able to organize, recruit for, finance, supply, and command and control an insurgency, let alone an alliance with foreign jihadists.” This is an absurd over-attribution of responsibility for the insurgency to that Most Unitary of Evils, Saddam Hussein. As for who could have predicted that the intractable confessional disputes may have caused problems, Feith and Wolfowitz may want to look up Paul Pillar.
These points represent just the tip of the iceberg. Of course, if Hudson had had somebody on the panel who did not fundamentally agree on the basic justice, prudence, and strategic genius behind the war, all of this could have been exposed as nonsense in front of the cameras. But that’s not how the game is played, I guess.
New Study: Public School Students Benefit from Vouchers
Jay Greene and Marcus Winters have just authored a new Manhattan Institute study on Florida’s McKay voucher program for disabled students. According to Greene and Winters, the academic performance of mildly disabled students (the vast majority of all special needs students) who remain in public schools was positively affected by the proximity of their schools to private schools participating in the McKay program.
Haven’t had a chance to read it all yet, but looks interesting.
Shiny, Happy SSA Employees
I recently had the opportunity to conduct a pair of briefings for congressional staff regarding electronic employment eligibility verification. A pair of bills are vying for the attention of Congress these days. I suggested in my recent paper, “Electronic Employment Eligibility Verification: Franz Kafka’s Solution to Illegal Immigration,” that Congress should ignore both. Indeed, it should eliminate “internal enforcement” of immigration law entirely.
One of my co-briefers provided staffers with some interesting information pertaining to the idea of building a regulatory contraption for automatic nationwide verification of workers’ identity and immigration status. He was a representative of SSA workers from the American Federation of Government Employees, National Council of SSA Field Operations Locals.
The programs slated to go national under these proposals would compare data about new workers (and in some cases, existing workers) with databases at the Social Security Administration and the Department of Homeland Security. When the data didn’t match, workers would receive what is called a “tentative nonconformation.” With the 4.1% error rate in SSA files (as found by its Inspector General), that’s a lot of tentative nonconfirmations going even to law-abiding American citizens. A higher percentage of the time, naturalized citizens would get them, too, as government data about them is even more error-prone. Bad government data is just one source of error.
Anyway, when a tentative nonconfirmation is issued, employers are supposed to communicate this to the employee (not all do) and the worker is supposed to report to a Social Security Administration office or the Department of Homeland Security to clear the problem up. This is where the interesting new information comes in.
What would the process be like? Well, try calling your local SSA field office to find out. The SSA worker rep reported that 50% of those calls aren’t answered because field offices are too busy. Calls to the SSA’s national 800-number don’t go through 25% of the time.
It’s not just a phone problem. The agency currently has a backlog of 752,000 on disability rulings. That’s three quarters of a million people who aren’t getting an answer from SSA. It takes 530 days – a little under a year and a half – to get a disability ruling out of SSA.
In my paper, I wrote about the experience American workers would get at the Social Security offices when they went to clear up their tentative nonconfirmations:
Disputes of tentative nonconfirmations would not happen in lushly carpeted offices with marble columns, hot coffee, and friendly, attentive staff. The experience of American workers when they sought permission to work would be much more like their trips to the nation’s departments of motor vehicles, post offices, and dentists—long lines, unfriendly service, and painful procedures.
The SSA union rep assures me that SSA workers are friendly. Any perception of unfriendliness is due to overwork. Fair enough; I may have been slapdash in my writing about SSA employees. But a national electronic employment eligibility verification system would result in 3.6 million new visits to these folks, overworking them and eroding their courtesy even more. These visits, and administering tentative nonconfirmations at SSA, would cost $1 billion, according to the union rep.
Of course, an SSA employee union rep would happily take the money and add workforce to do whatever Congress wants. My preference is to save the money. Enforcement of our abnormally restrictive immigration law causes us to spend taxpayer money on undermining the productive economy. That shouldn’t make sense to anyone.
Filed under: Cato Publications; International Economics and Development; Law and Civil Liberties; Telecom, Internet & Information Policy; Trade and Immigration
A Checkered Present
The Fordham Foundation’s Checker Finn recently responded to Neal McCluskey’s review of his new book. Let’s compare what Finn has to say with reality:
Finn: “You gotta give it to purebred libertarians, they never let their vision of how the world ought to work be distorted by any realities about how it actually works.”
Reality: Cato’s Center for Educational Freedom publishes and summarizes an extensive body of empirical research from the U.S. and abroad (.pdf). We also eschew animal breeding terms when describing those with whom we disagree.
Finn: “the CATO crowd [is] indistinguishable nowadays from the ’separation of school and state crowd’”
Reality: Cato’s Center for Educational freedom recently published the Public Education Tax Credit model legislation. The Alliance for Separation of School and State opposes all state involvement in education.
Finn: “the CATO crowd… basically doesn’t believe in any form of public education”
Reality: As explained in Adam Schaeffer’s Public Education Tax Credit paper, we distinguish between the institution of state-run public schooling and the ideals of public education (universal access to good schools, preparation for both participation in public life and success in private life, that schools should encourage harmonious relations among different ethnic and religious groups). We are ardent critics of “public schooling” precisely because it has proven itself so disastrously incapable of delivering public education.
Finn: “They believe in…”
Reality: We are not in the belief business. Our policy recommendations are grounded in domestic, international, and historical evidence regarding the best ways of meeting the public’s educational needs and aspirations.
Finn: “… private education, purchased in the marketplace by parents who want and can afford it for their kids from schools that are not accountable to anybody for anything except keeping those tuition payments rolling in the door.”
Reality: If Finn were familiar with the international evidence on the operation of education markets, he would know that fee-paying parents hold schools more effectively accountable for the quality of educational services than do government bureaucrats.
Finn: “They believe… [t]he heck with everybody else’s kids. The heck with an educated polity or transmitted common culture. Check out Neil [sic] McCluskey’s review of my book.”
Reality: Our model Public Education Tax Credit legislation would ensure universal access to the education marketplace while delivering a far higher quality and far more individually personalized education. And as I pointed out in my book Market Education, education markets have proven themselves perfectly capable of transmitting common culture. The classical Athenians, who not only transmitted but invented much of the Western culture Mr. Finn values, had no government education standards or government schools. Surely Mr. Finn’s alma mater, Phillips Exeter Academy, taught him something of classical Greece? And even if Mr. Finn was absent during such lessons, surely he has come across a few of the 120 million McGuffey’s Readers printed during the 19th century while browsing New England’s used bookstores? Long before the rise of vast state school bureaucracies, the private sector was busily transmitting common culture all by itself. More than that, we have documented how state-run schooling Balkanizes American communities by forcing everyone to support a single official education system — a problem that Finn’s national standards would worsen.
And, finally, it is precisely because we do care about everyone’s kids that we recommend real market reform in education, and urge Americans to move past the calcified school monopoly that has so cruelly shortchanged so many children.
Any time that Mr. Finn would care to publicly debate these issues, either in person or in print, we will be happy to dispel his misapprehensions more thoroughly. Given that he recently declined just such an invitation from us, his acceptance of this one would be a pleasant surprise.
Signs of Free Speech
George Will has another great column on threats to political speech in modern America. He reports the story of some people in Parker North, Colo., who didn’t want to be annexed to the larger town of Parker. When some residents proposed annexation, others
began trying to persuade the rest to oppose annexation. They printed lawn signs and fliers, started an online discussion group and canvassed neighbors, little knowing that they were provoking Colorado’s speech police.
One proponent of annexation sued them. This tactic — wielding campaign finance regulations to suppress opponents’ speech — is common in the America of the McCain-Feingold campaign finance law. The complaint did not just threaten the Parker Six for any “illegal activities.” It also said that anyone who had contacted them or received a lawn sign might be subjected to “investigation, scrutinization and sanctions for campaign finance violations.”
Quite a chilling effect on the speech of a few local residents. Fortunately, Will notes, the Parker Six (why not the Parker North Six? After all, Parker is what they don’t want to be part of. But who am I to question George Will?) are represented in their defense of their First Amendment rights by the Institute for Justice.
Meanwhile, in another section of the same Washington Post, a similar story is playing out in Virginia. A Democratic candidate for the U.S. House of Representatives began placing campaign signs in supporters’ yards a full year before the election. Botetourt County officials reminded people of a longstanding ordinance about how long political signs can be displayed. In this case it’s the ACLU of Virginia threatening to sue. But Botetourt (pronounced BAHT-uh-tott) officials are not deterred in their determination to protect law, order, and the Botetourt way:
“If we don’t have some semblance of order, we’d just have a libertarian society where anything goes,” said Jim Crosby, a longtime resident and former chairman of the Botetourt Republican Party.
Yep. First political signs in someone’s yard, then a bunch of competing churches, school choice, deregulation, women working outside the home, and pretty soon you’d have a libertarian society where anything goes.
Voter ID Case Decided
The Supreme Court has rendered its decision in Crawford v. Marion County Election Board. This is the case challenging Indiana’s voter ID requirement.
Briefly, the plaintiffs in the case did not establish sufficient proof of the burden on voting that the ID requirement would have. This was a facial challenge to the statute, and there was no plaintiff who had actually been dissuaded or prevented from voting. Sayeth the court:
[O]n the basis of the record that has been made in this litigation, we cannot conclude that the statute imposes “excessively burdensome requirements” on any class of voters.
There was also no evidence that Indiana has ever been victimized by impersonation at the polling place, which a voter ID requirement would help thwart, but in a facial challenge to a law like this, courts will defer to the state’s interests in deterring and detecting voter fraud, and in safeguarding voter confidence.
Advocates of voter ID will interpret this as a ringing endorsement, but it’s an unsurprising result. Hopefully, they won’t pursue a national voter identification requirement. In a recent TechKnowledge column inspired by the case, “Voter ID: A Tempest in a Teapot that Could Burn Us All,” I wrote:
A national registration system for voting would quickly be repurposed and used for many other kinds of regulatory control. There is no shortage of proposals for national registration and control of citizens. Should the voter ID tempest in a teapot boil over, the tiny specter of voter fraud could thrust a mandatory national ID into the hands of law-abiding citizens.
The Constitution gives Congress power to regulate the elections that select its members and, to a lesser degree, the president. But Congress does not have to use that power to its fullest extent. States recognize their own interests in fair elections, and they should experiment among themselves with ways to secure elections while making sure the vote is available to all qualified people.
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