Archive for February, 2009
The Federalist Society’s ‘War on Terror’
I have been a proud member of the Federalist Society and have long appreciated the institution as a a valuable resource for libertarians and conservatives. It has none of the sinister shadowiness that the left sometimes tries to stick it with.
But an event invitation I received today suggests that the organization is a little bit stuck – in reactive, undisciplined thinking about counterterrorism.
The War on Terror: Litigation Update is an event happening tomorrow at the National Press Club. The title and introduction six times use the term “war” with reference to terrorism-related cases and legal issues, and it asks, “Will the new administration’s policies remain grounded in the laws of war, or will they switch to a pre-September 11 law enforcement paradigm?”
Stating the alternatives this way is too slanted to go without comment. It implies that the lone alternative to a war footing is hapless dawdling.
Dawdling is not the only alternative to “war,” of course, and the Federalist Society’s tradition of thoughtful intellectual discourse is demeaned by the suggestion that it is.
At our counterterrorism conference in January, we explored how excessive reactions to terrorism and terrorist acts can be self-defeating. Among other things, trying terrorists in military tribunals and specially designed national security courts will tend to exalt terrorists and tell the world that they are a force we struggle to reckon with. This wins them support and recruits.
The better approach is to treat terrorists as criminals, with transparent fairness, which will drain the romanticism from their deeds and stories. Terrorists hate to be treated like criminals. The first of the “five demands” in the 1981 IRA hunger strike was the right not to wear a prison uniform. Treating them as ordinary criminals saps their legitimacy and the strength of their challenge to incumbent power in the eyes of key audiences.
By using an unfair characterization of the alternatives and binding its inquiry so tightly to the “war” metaphor, the Federalist Society is being intellectually dishonest and unhelpful in the effort to defeat terrorism. Hopefully, it will correct this error in the future.
This Week at Cato: ‘Obama and Presidential Power: Change or Continuity?’
Will President Obama follow through on his campaign promises about executive power and oversee a more modest presidency that recognizes constitutional limitations? Or will the new administration end up expanding the powers of the presidential office?
Please join us Wednesday, February 25th at 12:00 PM to discuss the prospects and possibilities for the presidency in the Obama era.
The forum will feature Louis Fisher, Specialist on the Constitution, Law Library of Congress; and Jeffrey Rosen, Professor, The George Washington University School of Law. It will be moderated by Gene Healy, Vice President, Cato Institute.
Reserve your seat for this free event today. Lunch will be served after the event. For those who cannot attend, the forum will be simulcast live online.
New on YouTube: Roosevelt v. Reagan
Cato Executive Vice President David Boaz debates Heather Boushey, senior economist at the Center for American Progress, over the legacies of Presidents Franklin Roosevelt and Ronald Reagan.
In light of the current economic crisis, who serves as the better role model for President Obama?
For more videos, subscribe to Cato’s YouTube channel.
Obama Retreats from Third Rail
President Obama has stared the need for entitlement reform in the face — and immediately blinked.
For a brief moment it appeared that Obama was willing to take on one of his party’s most prized shibboleths: the idea that there is nothing wrong with Social Security and Medicare that repealing the Bush tax cuts won’t fix. But faced with a rebellion by House Speaker Nancy Pelosi and the net-roots left, it is clear the president now plans to put off any serious effort to reform those programs.
But facts are stubborn things. The combined unfunded liabilities of Social Security and Medicare top $100 trillion. Indeed, without reform, Social Security will begin running a deficit within eight years, by 2017. And Medicare faces a deficit even sooner. If current trends continue, Medicare and social Security, along with Medicaid, will consume 28 percent of GDP by mid-century.
Obama has the opportunity to show that he truly represents a change from Washington politics as usual. If he retreats from obvious challenges so easily, he will fail.
How European Governments Hate Low Taxes
The European Union held a summit over the weekend at which the assembled politicoes announced a variety of steps to increase regulation of European financial markets. But that isn’t all.
The EU communique also called for punitive action against tax havens. “A list of uncooperative jurisdictions and a toolbox of sanctions must be devised as soon as possible,” it said.
Ah, so now we see what is really important to European governments: squeezing more money out of their peoples.
As Cato’s Dan Mitchell has oft pointed out, competition among taxing jurisdictions is good for everyone other than governments. Tax havens, so-called, are an important tool for promoting such competition. Similar efforts are underway in the U.S. with efforts to tax the internet, for instance.
The “Last Word on Fiscal Stimulus” Explained
Back in 1977 I gave a talk at the Tax Foundation which was quickly added to Campbell McConnell’s best selling Economics textbook. At the back of each chapter, McConnell added just one select reading, called “The Last Word.” He gave me the last word on fiscal policy.
I found out about it many years later when my daughter Melissa found her dad inside her college textbook (a much newer edition). Apparently my old words had been confusing or enlightening the youth of America for well over a decade.
Because I failed to explain all that, my blog was edited in a way that makes it look as though I was inserting my old remarks to argue with McConnell.
On the contrary, that excerpt of mine was quoted directly from his book. It still holds up fairly well, I imagine, as heresies go.
And now you know the rest of the story.
Are Higher Taxes the Solution to Bloated Government?
I normally enjoy reading Jonathan Rauch and Bruce Bartlett. Rauch has written extensively about the failure of govenrment, and Republicans might not be in such terrible shape if they had paid more attention to Bruce’s book exposing Bush’s fiscal profligacy. Yet even though both of them seem to understand that excessive government is bad, they want to throw in the towel. Rather than redouble efforts to reduce – or at least restrain – bloated government, they argue that conservatives (and presumably libertarians) now should focus on how best to raise taxes to finance the welfare state. Here are excerpts from Rauch’s article, which seems almost entirely based on an interview with Bartlett:
For decades, everyone pretended to have a profound ideological disagreement about the size of government, but the reality was a comfortable standoff between 21 percent liberalism and 18 percent conservatism. In the end, both sides got what they most wanted: 21 percent spending for liberals, 18 percent revenues for conservatives — at the politically tolerable cost of a deficit averaging 2 to 3 percent of GDP. This result was handy for politicians and acceptable to the public. …Conservatives…face a doctrinal crisis. …Many conservatives insist that structural reforms of entitlement programs — benefit cuts, means-testing, privatization, and so on — could keep spending at or even below 21 percent of GDP going forward. Dream on, Bartlett says. …The only really workable option, Bartlett argues, is a value-added tax or its equivalent: a broad-based tax on consumption. “It’s the only way of preserving incentives and keeping the economy alive.” Because it taxes spending rather than saving or investment and is inhospitable to market-distorting loopholes, this kind of tax raises a lot of money at relatively low economic cost. Reaganites hate the value-added tax precisely because it is such an efficient cash cow. But Reagan, Bartlett contends, would have known better. Reagan was a conservative who admired FDR, and what he conserved was FDR’s welfare state. He understood that the most practical way to make government less economically burdensome was to grow the economy. …as Bartlett wrote recently in Politico, “Conservatives would better spend their diminished political capital figuring out how to finance the welfare state at the least cost to the economy and individual liberty.”
In effect, Rauch and Bartlett assert that the American right should copy the European right: Make peace with big government and raise taxes in order to keep the budget balanced. In the real world, though, that is a recipe for ever-growing government. What inevitably happens is that the left increases the burden of government, which leads the supposed right to acquiesce to higher taxes. But, as Milton Friedman famously warned, governments will always spend whatever they collect in taxes plus whatever amount of borrowing they think is politically and economically feasible. So every time the right capitulates to a tax increase, the left has more leeway to increase spending – which is one reason why the burden of government in Europe is significantly higher than it is in the United States. If the American right listens to Rauch and Bartlett, they will be like Charlie Brown in this youtube clip. Last but not least, I must quibble with this line from the article about Bartlett’s book:
Conservatives mistrust him because in the 2000s he broke publicly with President Bush, in a book called Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy.
That’s not true. Republicans distrust Bruce because of this book. Conservatives distrust Bruce because he wants to be the tax collector for the welfare state. I’ve been buddies with Bruce for years, so I will not give up trying to help him see the truth. Fighting excessive spending with higher taxes is akin to pouring gasoline on a fire.
The U.S. Didn’t Cause the World Recession
In the Washington Post, Ricardo Caballero of MIT has a novel and promising idea about “How to Lift a Falling Economy.” Unfortunately, he echoes the mantra that all the world’s economic problems can be traced to the U.S. in general, and to big U.S. banks in particular. “Already,” he says, “this illness has spread to the global economy.”
Already? Industrial production in Japan began collapsing in November 2007, two months ahead of the U.S., and the Japanese industrial decline has been twice as fast.
Unlike the U.S., real GDP began falling in the second quarter of 2008 in Germany, France, Italy, Japan, Singapore and Hong Kong. By no coincidence, that was when the price of oil rose as high as $145 a barrel. Soaring oil prices raise the cost of production and distribution for many industries, and reduce real household incomes and therefore consumption. Nine of the ten postwar U.S. recessions were preceded by a major spike in the price of oil.
In a piece for the Claremont Review of Books (written last November), I conclude , “This recession is not just a U.S. problem, not just about housing, and not just financial.”
Compare the decline in real GDP over the past 4 quarters (from The Economist):
|
U.S. |
-0.2% |
|
France |
-1.0 |
|
Germany |
-1.6 |
|
Britain |
-1.8 |
|
Italy |
-2.6 |
|
Japan |
-4.6 |
Europeans Want Regulatory Harmonization at G20 Summit
Reuters has a very disturbing article about the wish list that Europeans have put together for the April G20 Summit in London. Rather than focus on the source of the financial crisis by calling for sound money and elimination of housing subsidies, the Europeans want to dramatically increase the size and power of international bureaucracies such as the International Monetary Fund. But if the IMF completely failed to predict the financial crisis, why would anyone think the bureaucrats should get more power and more tax dollars? Not surprisingly, the Europeans also want regulatory harmonization, with every jurisdiction required to impose onerous levels of red tape. Apparently, the private sector needs to be punished to atone for the mistakes of governments. Not surprisingly, the Europeans also want to regulate private-sector pay. But the most dangerous plank in their platform is the call for sanctions against jurisdictions that reject the regulatory cartel and instead maintain market-based financial systems. This panoply of bad ideas is a direct threat to American interests, so it will be interesting to see whether the U.S. delegation acquiesces to these bad ideas:
European leaders met in Berlin on Sunday to prepare a common stance on overhauling global financial rules ahead of a broader summit of G20 nations in London on April 2. Below are highlights from a “chair’s summary” of conclusions from the meeting that was seen by Reuters: …We propose that the International Monetary Fund (IMF) and the Financial Stability Forum (FSF) be charged with monitoring and promoting the implementation of the international recommendations on putting the Action Plan into practice. We have today underscored once again our conviction that all financial markets, products and participants must be subject to appropriate oversight or regulation, without exception and regardless of their country of domicile. This is especially true for those private pools of capital, including hedge funds… We also agreed that credit rating agencies should be subject to mandatory registration and oversight. …A list of uncooperative jurisdictions and a toolbox of sanctions must be devised as soon as possible. …We will strongly advocate (at the London summit)…the development of an effective early warning system by the IMF and FSF, working in close cooperation. We will strongly advocate (at the London summit)…the adoption of principles on compensation practices to prevent bonus payments that contribute to excessive risk-taking. …We have agreed today to support doubling the funds available to the IMF.
‘Tons of Jobs’ Opening Up in D.C.
Business Week reports that the national capital area is barely sensing the recession:
Washington is getting a boost from government spending to fight the recession and fix the financial system, as well as the ongoing expenses of fighting wars in Iraq and Afghanistan and promoting homeland security. While President Barack Obama pointedly left Washington for Denver to sign the $787 billion stimulus package on Feb. 17, locals expect the metro area to garner a big share of the dollars.
“Oversight alone will (mean) tons of new jobs,” enthuses Jill Landsman, a spokeswoman for the Northern Virginia Assn. of Realtors, who says the pace of home sales has picked up over the past year even as prices have continued to fall.
Cato analysts propose to slash jobs in Washington–at least 100 agencies and programs [pdf]. It’s no big mystery why tons of people in the capital oppose Cato proposals.
Stepping on My Posse Comitatus Nerve
My colleague Ben Friedman has previously blogged on the brigade-sized homeland defense element that the Army is putting on standby for domestic emergencies. Like Ben, I think that this sets a bad precedent for future domestic military deployments.
Plenty of civilian officials and military officers share this sentiment and don’t want to make homeland security a military proposition, like this Air Force JAG officer writing on the fictional military coup of 2012, and this Army JAG reservist discussing the pre-9/11 erosion of the Posse Commitatus Act. It is worth noting that the Department of Justice would be the prosecuting agency for Posse Commitatus violations, so you would need an ahistorical self-policing executive branch to provide real deterrence.
So color me a little bothered by a joint military police-highway patrol DUI checkpoint. While it is passed off as a “show of good relations between our two departments,” it is not a sight that the American public should get too accustomed to. Neither is a National Guard exercise using a local town for cordon and search training. As a unit representative explains, “[w]e will need to identify individuals that are willing to assist us in training by allowing us to search their homes and vehicles and to participate in role-playing.” Count me out. At least the guy acknowledges that “this operation could be pretty intrusive to the people of Arcadia.”
In many ways, the line between civilian and military spheres of government is the line of liberty. Separating our common defense from our domestic tranquility was the vision of the Founders, and we shouldn’t turn our back on it lightly.
UPDATE: Since I wrote this, the National Guard decided to scale back the exercise. So much for my career as a Third Amendment crusader.
Those Federal Strings that Come with Bail-Out Cash
Companies tend to like getting bailed out. Heck, I wouldn’t mind a personal bail-out. I mean, that nice Nigerian fellow promised me a share of the unclaimed bank account from his country’s late dictator. It isn’t my fault the deal didn’t work out!
Government cash has led naturally to restrictions on employee compensation. It has also encouraged people to turn to politicians to get loans from banks. There was the notorious case in Chicago (full, it seems, of notorious cases!) where workers demanded that Bank of America bail out their failing firm because it canceled the line of credit to the firm. After all, BoA had received federal money. That meant it was supposed to willy-nilly give cash away, irrespective of the prospect of being repaid. Illinois politicians piled on and naturally the bank caved.
Now people are calling their congressmen when they get rejected for a loan at banks that collected government checks. Reports McClatchy Newspapers:
Rep. Mel Watt is used to dealing with constituents who need help with government agencies.
But once Congress passed a $700 billion bailout of the banking system, some people started turning to the Charlotte Democrat for help with the private sector. They’ve asked him to assist their appeals of rejected loan applications from banks that collected federal bailout money.
It’s an unusual type of request for Watt, who views the pleas as a sign of the times. An increasingly unsettled American public is looking for help with their own economic hardship but also asking for accountability because banks and other big businesses are getting bailed out by the government.
On the one hand, this is outrageous. On the other hand, if the taxpayers have to support the banks, why shouldn’t the banks support the taxpayers? The logic is obvious even if the consequences are potentially catastrophic.
It won’t be easy to roll back the federal government’s leap into socialism American-style. But if we don’t halt the federal subsidy express, there might not be much real “free enterprise” left in America when we finish.
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