Archive for May, 2009
Privacy Regulation: Expensive and Ineffective
Lee Gomes writes on Forbes.com with a clear-eyed reminder that privacy regulation has been costly, yet failed to deliver. Lovers of government intervention will, of course, take this as an argument to double-down.
“They Don’t Have the Money to Pay Us Back”
When they let their guard down, politians can say the most revealing things. In today’s Wall Street Journal, representatives of local governments in California attacked Governor Schwarnenegger’s plan to borrow $2 billion from local property tax revenues to cover some of the state’s budget shortfalls. In response, Don Knabe, chairman of the Los Angeles County Board of Supervisiors said, “They’re hijacking our dollars. They don’t have the money to pay us back. It’s a joke.”
Given that California doesn’t have the money to pay back borrowing from its local government, it’s likely they might not be able to pay back borrowing from private investors either. To solve this problem, we have the Municipal Bond Insurance Enhancement Act, on which the House Financial Services Committee held a hearing this week. To encourage investors to buy California’s risky debt, the federal government would cover any losses to the investor. We’re told that the federal government would charge bond-issuing governments insurance premiums to cover any losses, but the federal government’s history of setting rates based on politics rather than risk (have you looked at the health of the National Flood Insurance Program lately?) guarantees that the taxpayer would likely have to cover billions in losses on any guarantee of California’s debt.
E-Verify: The Surveillance Solution
The federal government will keep data about every person submitted to the “E-Verify” background check system for 10 years.
At least that’s my read of the slightly unclear notice describing the “United States Citizenship Immigration Services 009 Compliance Tracking and Monitoring System” in today’s Federal Register. (A second notice exempts this data from many protections of the Privacy Act.)
To make sure that people aren’t abusing E-Verify, the United States Citizenship and Immigration Services Verification Division, Monitoring and Compliance Branch will watch how the system is used. It will look for misuse, such as when a single Social Security Number is submitted to the system many times, which suggests that it is being used fraudulently.
How do you look for this kind of misuse (and others, more clever)? You collect all the data that goes into the system and mine it for patterns consistent with misuse.
The notice purports to limit the range of people whose data will be held in the system, listing “Individuals who are the subject of E-Verify or SAVE verifications and whose employer is subject to compliance activities.” But if the Monitoring Compliance Branch is going to find what it’s looking for, it’s going to look at data about all individuals submitted to E-Verify. “Employer subject to compliance activities” is not a limitation because all employers will be subject to “compliance activities” simply for using the system.
In my paper on electronic employment eligibility verification systems like E-Verify, I wrote how such systems “would add to the data stores throughout the federal government that continually amass information about the lives, livelihoods, activities, and interests of everyone—especially law-abiding citizens.”
It’s in the DNA of E-Verify to facilitate surveillance of every American worker. Today’s Federal Register notice is confirmation of that.
O Canada!
So not only is Canada economically freer than the United States, with government spending and taxes about to be lower than ours, now the Canadian navy has saved an American ship from a pirate attack off Somalia. It may be time to play “The World Turned Upside Down” again.
The Terminator Turns into a Spendinator
Appearing on Larry Kudlow’s CNBC show, I warn that tax-and-spend policies are turning California into an American version of France. But for those who want all the gory details, Reason TV has an excellent new video.
Who’s Going to Buy Your Debt, Mr. President?
The administration’s presumption that America can borrow its way to prosperity has taken a couple of big hits over the last couple days.
First, just as the Third World debt crisis destroyed the belief among international bankers that countries don’t go bankrupt, so is the West’s borrowing binge ending the belief among international investors that the U.S. and other Western nations are safe economic bets.
Reports the Wall Street Journal:
Britain was warned by Standard & Poor’s Ratings Service that it may lose its coveted triple-A credit rating, triggering a drop in U.K. bonds and sparking global fears about the consequences of massive debts being incurred by the U.S. and other major nations as they try to dig out from the economic crisis.
…
The announcement quickly sent waves across the Atlantic. Investors initially dumped U.K. bonds and the pound, heading for the relative safety of U.S. Treasurys. But within hours, worries about an onslaught of new U.S. bond sales and the security of America’s own triple-A rating drove down the prices of U.S. Treasurys.
The yield of the benchmark U.S. 10-year bond, which moves in the opposite direction to the price, rose by 0.15 percentage point from Wednesday to 3.355%, its highest level in six months.
The relative gloom about the U.K. and the U.S. was apparent Thursday in the market for credit-default swaps, where investors can buy and sell insurance against sovereign defaults. Five years of insurance on $10 million in U.K. debt jumped to around $81,000 a year, from $72,000 earlier in the day. U.S. debt insurance cost the equivalent of $37,500 — in the same range as France at $38,000, and Germany at $35,000.
A shot across the bow of the American ship of state, some analysts have called it.
But shots also were being fired from another direction: East Asia. The Chinese are starting to have doubts about Uncle Sam’s creditworthiness. Reports the New York Times:
Dan Mitchell: ‘California Is the France of America’
California voters have spoken, and they said no to California’s high tax budget balancing proposals in a special election Tuesday.
Cato scholar Dan Mitchell debated Air America founder Mark Walsh on CNBC yesterday, and called California “The France of America,” for their tax and spend policies:
Cheney vs. Obama: Tale of the Tape
In case you missed it, President Obama and former Vice President Dick Cheney spoke separately today on terrorism and national security. Like two boxers at a pre-fight press conference, they each touted their strength over their opponent. They espoused deep differences in their views on national counterterrorism strategy.
The Thrilla in Manilla it ain’t. As Gene Healy has pointed out, they agree on a lot more than they admit to. Harvard Law professor and former Bush Office of Legal Counsel head Jack Goldsmith makes the same point at the New Republic. Glenn Greenwald made a similar observation.
However, the areas where they differ are important: torture, closing Guantanamo, criminal prosecution, and messaging. In these key areas, Obama edges out Cheney.
No Balanced Budget, No Raise
Ben Goddard writes in The Hill about the new taxpayer revolt in California this week. The political establishment put together a package of initiatives that it thought would fix the budget process there — but the people weren’t buying it. The only thing they passed was the measure to ban salary increases for legislators if they didn’t balance the budget.
There are similar proposals floating around Capitol Hill. If bills were subject to a popular vote, it seems like such a thing would be likely to pass.
Declining Support for More Spending
The Pew Research Center has come out with the report of its latest survey on trends in political values. There is much interesting stuff here. For example:
The public continues to broadly support stricter environmental laws and regulation, but its willingness to pay higher prices, and suffer slower economic growth for the sake of environmental protection has declined substantially from two years ago. In the new poll, 51% agree that protecting the environment should be given priority even if it causes slower economic growth and some job losses, down from 66% in 2007. At the same time, the share saying that people should be willing to pay higher prices in order to protect the environment has dropped from 60% in 2007 to 49% currently. This represents a 17-year low point on this measure. Surprisingly, declines since 2007 in support for economic sacrifices to protect the environment have been particularly large among young people and political independents.
These results suggest one reason cap-and-trade is having trouble in Congress. Imagine what might happen if the public actually had to pay more for Obama’s green agenda.
The results are also consistent with the hypothesis that support for government spending should begin to decline almost immediately after Obama took office.
Why We Shouldn’t Bomb Iran–From an Unlikely Source
Many of the same people who were telling us what a cakewalk invading Iraq would be are now lobbying to bomb Iran. They assure us it would be another cakewalk which would restore American prestige around the world. Indeed, North Korea and other rogue states would come groveling.
Right.
But an unusual opponent of launching another war has emerged. Reports the Jerusalem Post:
There is no viable military option for dealing the Iranian nuclear threat, and efforts by the Israeli government and its supporters to link that threat to progress in peace with the Palestinians and Syria are “nonsense” and an obstacle to the Arab-Israeli and international cooperation essential to changing Iranian behavior.
That’s the conclusion of Keith Weissman, the Iran expert formerly at the American Israel Public Affairs Committee (AIPAC), speaking publicly for the first time since the government dropped espionage charges against him and his colleague, Steve Rosen, earlier this month.
There’s no assurance an attack on Iran’s nuclear facilities – even if all of them could be located – would be anything more than a temporary setback, Weissman told me. Instead, a military strike would unify Iranians behind an unpopular regime, ignite a wave of retaliation that would leave thousands dead from Teheran to Tel Aviv, block oil exports from the Persian Gulf and probably necessitate a ground war, he said.
“The only viable solution is dialogue. You don’t deal with Iran with threats or preaching regime change,” said Weissman, who has lived in Iran, knows Farsi (as well as Arabic, Turkish and French) and wrote his doctoral dissertation at the University of Chicago on Iranian history. That’s where the Bush administration went wrong, in his view.
“President Bush’s demand that Iran halt all nuclear enrichment before we would talk with the regime was an excuse not to talk at all,” Weissman said. “And the administration’s preaching of regime change only made the Iranians more paranoid and told them there was no real desire to engage them, only demonize them. The thing they fear most is American meddling in their internal politics.”
His arguments would have had no effect on the previous administration. But his judgment offers powerful and welcome backing for President Barack Obama, who seems determined to pursue diplomacy.
Labor’s Waxing Political Influence
It has long been recognized that many capitalists are the greatest enemies of capitalism. They want free enterprise for others, not themselves.
Unfortunately, organized labor tends to be even more statist in orientation. Unions now routinely lobby for government to give them what they cannot get in the marketplace.
Labor influence is greatest in the public sector. And as government’s power has expanded during the current economic crisis, so has the influence of unions. Observes Steve Malanga in the Wall Street Journal:
Across the private sector, workers are swallowing hard as their employers freeze salaries, cancel bonuses, and institute longer work days. America’s employees can see for themselves how steeply business has fallen off, which is why many are accepting cost-saving measures with equanimity — especially compared to workers in France, where riots and plant takeovers have become regular news.
But then there is the U.S. public sector, where the mood seems very European these days. In New Jersey, which faces a $3.3 billion budget deficit, angry state workers have demonstrated in Trenton and taken Gov. Jon Corzine to court over his plan to require unpaid furloughs for public employees. In New York, public-sector unions have hit the airwaves with caustic ads denouncing Gov. David Paterson’s promise to lay off state workers if they continue refusing to forgo wage hikes as part of an effort to close a $17.7 billion deficit. In Los Angeles County, where the schools face a budget deficit of nearly $600 million, school employees have balked at a salary freeze and vowed to oppose any layoffs that the board of education says it will have to pursue if workers don’t agree to concessions.
Call it a tale of two economies. Private-sector workers — unionized and nonunion alike — can largely see that without compromises they may be forced to join unemployment lines. Not so in the public sector.
Government unions used their influence this winter in Washington to ensure that a healthy chunk of the federal stimulus package was sent to states and cities to preserve public jobs. Now they are fighting tenacious and largely successful local battles to safeguard salaries and benefits. Their gains, of course, can only come at the expense of taxpayers, which is one reason why states and cities are approving tens of billions of dollars in tax increases.
The government’s increased power over the economy also gives organized labor a new hook to lobby for more special interest privileges. For instance, the AFL-CIO is arguing that the federal bailout of the auto industry should bar the companies from moving factories overseas.
Explains the union federation:
The pundits and politicians inside the Washington Beltway don’t get: If the United States continues to send its manufacturing jobs [1] overseas—as [2] General Motors and Chrysler are now proposing—the result will be more low-income U.S. families.
So today, workers, economists, academics and business and union leaders, fresh from the “[3] Keep It Made in America” bus tour through the nation’s heartland, brought that message to the policymakers’ doorstep as part of a teach-in on Capitol Hill.
The 11-day, 34-city bus tour showcased the ripple effect on communities of the lost jobs in manufacturing. ([4] See video.) Today, during the teach-in, those who took part brought the stories they heard along the tour and presented principles for revitalizing the auto industry to members of Congress and the press.
Labor officials have been making similar arguments about bank lending. If you got bailed out by Washington, then you have an obligation to keep funding bankrupt concerns. Never mind getting paid back, and paying back the taxpayers.
Markets are resilient, but can survive only so much political interference. If the American people aren’t careful, they might eventually find themselves living in an economy more appropriate for Latin America than North America.
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