Archive for September, 2008
Nihilists!
Dieter: “Ve are Nihilists, Lebowski. Ve believe in nothing! Nothing!”
–Joel and Ethan Coen, “The Big Lebowski”
“And let us recognize above all the 228 who voted no — the authors of this revolt of the nihilists. They showed the world how much they detest their own leaders and the collected expertise of the Treasury and Fed.”
–David Brooks, “The Revolt of the Nihilists,” September 29, 2008
That’s David Brooks tearing his hair out yesterday over the failure of the bailout bill. It’s interesting that Brooks characterizes people who resist the idea of privatized profits and socialized loss as “nihilists.” If you’re not willing to let Brooks’ “new establishment” play with up to $700 billion in tax dollars, if you don’t offer up your wallet the moment an expert cries “crisis!”–why then, you must believe in nothing! Nothing at all!
Interesting, but maybe not all that surprising. Brooks is, after all, the architect of National Greatness Conservatism, the philosophy that says “American purpose can only find its voice in Washington.” Inside Washington: purpose, meaning, fulfillment–glory. Outside Washington: a vast and pitiless void. “All within the state, nothing outside the state, nothing against the state,” as a prominent theorist of national greatness once put it.
Filed under: Finance, Banking & Monetary Policy; General; Political Philosophy
No Bailout Will Silence This!
Other than partying pirates holding thirty-some Russian tanks captive against an international armada of warships, the Big Abortive Bailout of Aught-Eight seems to have pushed every other news story out of the headlines. That’s almost certainly the case for education, where few stories are attracting much attention, and the edublogosphere has been eerily quiet.
Unfortunately for both the country and education-policy peeps, there’s a good chance our economic problems, and political efforts to make them worse, will continue to dominate our news for the foreseeable future. Thankfully, we here at Cato will be giving education a chance to get back on your mind, even if for just a few hours, bringing in a man whose ability to rile is not bound by anything as inconsequential as mere news! He is Charles Murray, and his new book, Real Education: Four Simple Truths for Bringing America’s Schools Back to Reality, has been getting lots of people’s goats and just not letting go.
On Wednesday, October 8, Murray will be at Cato defending his book’s thesis that we all have different intellectual endowments, and only a relative few of us are well-served by a school system that shoves everyone into ivy-covered walls. Responding will be Christopher B. Nelson, president of St. John’s College in Annapolis, MD, a school that features about as pure a liberal arts education—the kind of schooling Murray argues must of us don’t need—as you’ll find.
Bailouts, frankly, get pretty boring after awhile; Paulson this, $700 billion of your hard-earned tax dollars that, blah, blah, blah, blah, blah. But one thing that never gets dull is debating how best to educate our children. So register to hear Charles Murray today, and get ready to cogitate over something other than our economic mess—well, at least the immediate mess—come October 8.
Subsidies Beget Subsidies
Sorry, this blog has nothing to do with the Wall Street mess, despite the title.
Instead, consider this tiny story in the WaPo that reveals the general inanity of our subsidized nation. The article, “Federal Grant to Provide Help To Low-Income Students” reports on a $1 million federal grant to the state of Virginia.
Will the grant money be used to buy books for poor kids, or to help pay their tuition? Nope. It will go to hire bureaucrats to train kids on how to grab more education subsidies: “The agency plans … to help educate students about college, with a sizable focus on how to obtain financial aid.”
For more about the follies of federal granting, see Federal Aid to the States.
Filed under: General; Government and Politics; Tax and Budget Policy
Intellectual Property Laws and Government Security Threaten Science and Knowledge
If you find the title of this post provocative, you’ll be interested in a Cato book forum on Friday, October 10th.
In The Crime of Reason, Nobel laureate in physics Robert Laughlin argues that intellectual property laws and government security demands threaten the development of new knowledge. Without change, we risk bequeathing our heirs a world where knowledge is criminalized and our intellectual tradition of unfettered inquiry is lost.
Join us for a fascinating inquiry into the role of information and information rules in our society, featuring comment from Thomas Syndor of the Progress & Freedom Foundation, at noon on Friday, October 10th. Luncheon to follow.
You can register for the event here.
Filed under: General; Telecom, Internet & Information Policy
A Constitutional Law Lesson From the Bailout Debate
The Framers of the Constitution knew that jealousies among the branches of the federal government would slow the federal decision-making process, redounding to the benefit of the people and their liberty. As important as the Bill of Rights is, the structure of government is just as important for its bias against hasty government action.
Put aside what you think of the substance of the bailout issue as you see an example of the constitutional structure at work:
Filed under: Finance, Banking & Monetary Policy; Law and Civil Liberties
The EU: A Climate Leader Headed in the Wrong Direction
I have an article at the International Affairs Forum which notes:
[The EU}, like the lead lemming, [is] headed in the wrong direction. It has emphasized the wrong policies to address climate change. True leadership requires that not only one head the procession and convince others to follow, but that one also take the correct path. For that, the EU needs to develop policies based on rational analysis rather than feel-good gestures that might backfire.
For details, read the article.
Not All Banks Are Doing Badly
The Washington Post had a story on Friday pointing out that not all banks are on the verge of collapse:
Many smaller banks said they were actually benefiting from the problems on Wall Street. Deposits are flowing in as customers flee riskier investments, and well-qualified borrowers are lining up for loans.
“We collect money from local savers, and we lend it in the local community,” said William Dunkelberg, chairman of Liberty Bell Bank in Cherry Hill, N.J. “We’re doing fine. There are 9,000 financial institutions out there, and most of them are small and most of them are doing fine.”
Dunkelberg, a professor of economics at Temple University and chief economist for the National Federation of Independent Business, added that a recent survey of that group’s members found that only 2 percent said getting a bank loan was the great challenge facing their businesses.
It’s important to remember that “the financial industry” is sprawling and diverse. Some banks are on the verge of collapse. Others appear to be doing just fine. It would be unfair to these more prudent banks (not to mention taxpayers) to bail out their irresponsible competitors. And it’s a mistake to assume that, simply because a few reckless Manhattan firms have fallen, the entire financial industry is on the verge of collapse. It may be that these are simply firms that made too many bad investments, in which case their bankruptcy is precisely what is supposed to happen in a free market. Any Congressional action should be focused on preserving the health of the financial system as a whole, not at preventing the bankruptcy of individual firms that made bad investments.
Filed under: Finance, Banking & Monetary Policy; General
Statism 101
Kentucky Governor Steve Beshear is trying to seize some online casinos. Unlike casinos that are on the land, online casinos are difficult for the government to tax. According to Mr. Beshear, if the tax collectors can’t get their paws on a business, then that business is a “leech” on the community. This type of thinking comes from Statism 101 and will require reading works not listed on the syllabus. Go here and here (pdf).
Filed under: General; Government and Politics; Tax and Budget Policy
Intervention Is Not the Answer
The current turmoil in financial markets is the result of bad government policy, particularly easy-money policy by the Federal Reserve and unsustainable subsidies to housing by Fannie and Freddie.
The bailout did not address these problems. Instead, it sought to compound the problem by increasing government intervention.
Ideally, politicians now will shift gears and seek to reduce government barriers to economic revitalization. Unfortunately, the political insiders from both parties almost surely will close ranks and seek cosmetic changes in hopes of ramming the bailout through Congress.
Filed under: Finance, Banking & Monetary Policy; Government and Politics
It’s Not a Pretty Picture
The failure of the bailout plan essentially shows the huge lack of confidence among the public that it would achieve its objectives. It also registers doubt about the government’s ability to implement it successfully.
The impasse shows how blunt fiscal policy is and how inept politicians are in managing the economy. The current set of problems did not arise overnight — they festered in the form of government favoritism toward housing finance companies which overextended their operations and ultimately toppled over. Now, those policies have come full circle to rest at Congress’s doorstep. Problem is, they will soon visit our doorsteps too in the form of a weaker economy.
Now that the bailout proposal has failed, Congress may seek a new approach. More likely, the existing plan will be tweaked to enable passage in a re-vote. But delay and political drama will further sap public confidence in Congress and weaken consumer confidence in the economy.
That may mean a deeper recession and trigger calls for still larger bailouts to salvage the financial sector in the future. But a larger bailout package will also be more dangerous. Larger short-term increases in federal borrowing may destabilize international capital inflows and reduce confidence in the dollar.
Overall, it’s not a pretty picture — but score one for supporters of the free market who insist on allowing market reorganization of the financial sector to continue unimpeded…albeit at high risk to the economy over the next few months.
Filed under: Finance, Banking & Monetary Policy; Government and Politics
Repeal the Income Tax?
The New York Times takes note of the brewing tax revolt in Massachusetts, where a grassroots group has put an initiative on the ballot to repeal the state income tax. The Times headline (on paper) reads, “On Massachusetts Ballot, a Tax Repeal That Worries Leaders.” Why does a newspaper that purports to be a check on government so often present questions from the government’s point of view? Did they once publish headlines like “On Washington Mall, a Peace March That Worries Leaders” or “In Massachusetts, a Civil Rights Crusade That Worries Leaders”? I doubt it.
And I should in fact congratulate reporter Pam Belluck for writing
It would save the average taxpayer about $3,600 a year. Annual revenue from the tax is about $12.5 billion, roughly 45 percent of the state’s budget of about $28 billion.
Too often, as we’ve noted before here on Cato@Liberty, the mainstream media use the formulation “the proposed cut would cost the government millions of dollars.” At least this time Belluck started with the taxpayer.
In 2002 a ballot measure to repeal the income tax got very little attention and still won 45 percent of the vote. This year, with a perception of hard economic times, it might do better. But this time the Establishment is on the alert. The advocates of repeal have raised some $270,000, and after their signature-gathering have only $25,000 left to spend. The special interest groups that thrive on taxpayer money have raised $1.3 million to oppose the initiative.
Let’s hear it for Carla Howell and the Committee for Small Government, who are at least forcing the government–and its beneficiaries–to explain why they need more than the $16 billion of citizens’ money that they would still have after repeal of the income tax. And let’s hear it for pizza shop owner Lakis Theoharis, who tells the Times, “I’m for the repeal of the tax. To me, the smaller the government, the better for the citizens.”
Filed under: Finance, Banking & Monetary Policy; General; Government and Politics
Munich All over Again (and Again, and Again)
Although it is likely to get lost amidst the brouhaha over the proposed bailout, Geoffrey Wheatcroft’s article ”‘Munich’ Shouldn’t Be Such a Dirty Word,” in the Washington Post’s Sunday Outlook section is worth reading now, and storing away for future reference. (And, in case you missed it, also revisit Justin Logan’s article on the overuse of the Munich analogy.)
Advocates for preventive war and pledges of military support to would-be client states routinely invoke the Hitler/Chamberlain/Munich analogy, and heap scorn upon those who favor negotiations as naive appeasers. When every potential adversary who we might engage, from Mahmoud Ahmadinejad to Hugo Chavez, can be cast as the second coming of Adolf Hitler, what point can there possibly be in talking with such men?
Uber-hawk (and John McCain adviser) Robert Kagan offered the latest exhibit in the prosecution’s case against diplomacy by claiming that Russia’s attack on Georgia was comparable to the “Sudeten Crisis that led to Nazi Germany’s invasion of Czechoslovakia,” even though “the precise details” of the Russian-Georgian clash were not known.
I have long been skeptical of such claims, in part because they are cast about so often, and also because it is so easy to misconstrue historical analogies. Kagan’s certitude notwithstanding, the details do matter, but are usually papered over by those making the case for forceful action. The great diplomatic historian Ernest R. May made this point eloquently in his book “Lessons” of the Past, and later with Richard Neustadt in Thinking in Time. With respect to that most-overused analogy, Wheatcroft has provided still more ammunition for those of us willing to dissent when the people around us seem hell-bent on war.
Filed under: Foreign Policy and National Security; General
Analysis of McCain Health Plan Tries Too Hard
In a letter to the editor of the journal Health Affairs, I respond to a recent critique of John McCain’s health-care reform plan by Thomas Buchmueller, Sherry A. Glied, Anne Royalty, and Katherine Swartz. An excerpt:
The McCain plan would eliminate forced subsidies: of the sick by the healthy (via employer-sponsored insurance and community rating) and of particular providers by unwilling consumers (mandates for chiropractic coverage, etc.). Buchmueller et al. would have us believe that if we stop robbing Peter to pay Paul, not even Peter would benefit. A more balanced critique might have been more persuasive.
Read the entire letter here.
Filed under: General; Health, Welfare & Entitlements
Let Palin Be Palin
Some commentators are suggesting that the McCain campaign has panicked about Sarah Palin’s appeal, trying to cram her head with policy-wonkery and then hiding her in a closet when that didn’t work. Let Palin be Palin, they say — let her show her authentic self, the gun-totin’, family-raisin’, reformist governor that Alaskans love.
Good idea. Let’s start with the bailout. Surely a rugged individualist reformer from way outside the Beltway is champing at the bit to denounce this $700 billion bailout for Wall Street insiders cooked up by Washington insiders behind closed doors, without public hearings, with the unanimous support of the mainstream media. Let ‘er rip, Governor Palin. Tell the Wall Street bankers that when a small business makes bad decisions in Wasilla, it goes out of business, and the same rules should apply to large businesses in Manhattan. That’s the Sarah Palin conservatives say America would love.
Filed under: Finance, Banking & Monetary Policy; General; Government and Politics
Harvey Silverglate’s Libertarian Ire
Cato’s new adjunct scholar, Harvey Silverglate, is in the news again for combating political correctness on campus. From the New York Times: “Silverglate’s column described events at Harvard Law School, where a sexual harassment speech code was adopted after a student parody of a woman law professor sparked a huge outcry. The code prohibits speech that creates ‘an intimidating, demeaning, degrading, hostile or otherwise seriously offensive working or educational environment.’ In other words, parodists beware!”
For a related Cato work, check out David Bernstein’s book, You Can’t Say That!
I Stand Corrected
In a blog last week, I suggested that after years of carrying water for the Bush administration’s big-government agenda, House Minority Leader John Boehner (R-Oh) had “suddenly found a spine” and learned to say no. Apparently not. Accepting little more than a fig-leaf of change, Boehner now has endorsed the president’s $700 billion bail-out of Wall Street.
Filed under: Finance, Banking & Monetary Policy; General; Government and Politics
Our Intellectual President
Last week, a group of 192 economists signed a letter expressing concern over the Treasury Department’s proposed bailout of the financial industry. They write:
The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise…
If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards…
If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America’s dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.
For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.
At a meeting with congressional leadership on Thursday, President Bush shared his thoughts on those 192 economists’ concerns:
I don’t care what somebody on some college campus says.
Obviously.
Filed under: Finance, Banking & Monetary Policy; General
A $700-Billion-Dollar “TARP” Won’t Cover Over Economic Realities
I’ve posted a copy of the proposed bailout legislation online in html format, which is easier to read, copy, and paste. Considering its size and significance, I urge you to review it and share it with others.
We have several experts on the bailout at Cato, and our media producer Caleb Brown has ably drawn them out. Give a listen to his podcasts with Bill Niskanen, Jagadeesh Gokhale, Jim Dorn, Arnold Kling, Gerald P. O’Driscoll, and John Samples. [all mp3 format]
There are a couple of elements of the legislation where I might add some insight, so here goes.
Only When Necessary
In his speech on the financial crisis, President Bush remarked:
Our system of free enterprise rests on the conviction that the federal government should interfere in the marketplace only when necessary.
Hmm. I wonder what happens if I substitute other words for “free enterprise” and “in the marketplace.”
Our system of free speech rests on the conviction that the federal government should interfere in the marketplace of ideas only when necessary.
Eeew. I don’t like the sound of that. But I guess it’s consistent with the Bush administration’s policy of paying columnists for sympathetic opeds. Let’s venture on.
Our system of a free press rests on the conviction that the federal government should interfere in the media only when necessary.
Well . . . The New York Times might object . . . but I guess if George W. Bush says it’s necessary . . .
Our system of freedom of religion rests on the conviction that the federal government should interfere in your church only when necessary.
Holy smokes.
Our system of freedom from unreasonable search rests on the conviction that the federal government should interfere in your phone calls only when necessary.
It isn’t interfering if they’re just listening in . . . is it?
Of course, I’m being snarky and completely unfair to the president. After all, economic freedom — the right to control what you produce — isn’t nearly as important as the rights to think, write, or worship. (Or so say those who want to control what you produce, without being told what to think, write, or worship.)
Filed under: Finance, Banking & Monetary Policy; General; Government and Politics; Law and Civil Liberties
Obama’s Free Ride on Fannie Mae
A page one Washington Post headline reports, “Credit Crisis Has Given Obama a Distinct Edge.” Which must be really frustrating for McCain, because McCain did try to reform Fannie Mae and Freddie Mac back in 2006. Obama, meanwhile, as I reported at the American Spectator, received more donations from Fannie Mae in four years than any other senator (except Banking Committee chairman Chris Dodd) received in twenty years. That’s quite an accomplishment–more money from a primary creator of the financial meltdown in just four years than senior members of Congress like Nancy Pelosi, Barney Frank, Richard Shelby, Spencer, Bachus, John Kerry, and Roy Blunt got in entire 20 years that the Center for Responsive Politics tallied. And of course, Obama chose former Fannie Mae CEO James Johnson, who was found to have jiggered the books, to head his search for a vice president.
Shouldn’t somebody in the media ask Obama why he was Fannie Mae’s favorite senator?
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