Archive for July, 2009
The Failure of Do-Nothing Policies
A news story from today in a slightly alternate universe:
Jobless Rate at 26-Year High
Employers kept slashing jobs at a furious pace in June as the unemployment rate edged ever closer to double-digit levels, undermining signs of progress in the economy, and making clear that the job market remains in terrible shape.
The number of jobs on employers’ payrolls fell by 467,000, the Labor Department said. That is many more jobs than were shed in May and far worse than the 350,000 job losses that economists were forecasting.
Job losses peaked in January and had declined every month until June. The steep losses show that even as there are signs that total economic activity may level off or begin growing later this year, the nation’s employers are still pulling back.
White House press secretary Robert Gibbs said, “President Obama proposed a $787 billion stimulus program to get this country moving again. He tried to save the jobs at GM and Chrysler. But the do-nothing Republicans filibustered and blocked that progressive legislation, and these are the results.”
House Speaker Nancy Pelosi said at a press conference, “We begged President Bush to save Fannie Mae, Merrill Lynch, Bank of America, AIG, the rest of Wall Street, the banks, and the automobile industry. We begged him to spend $700 billion of taxpayers’ money to bail out America’s great companies. We begged him to ignore the deficit and spend more money we don’t have. But did he listen? No, he just sat there wearing his Adam Smith tie and refused to spend even a single trillion to save jobs. And now unemployment is at 9.5 percent. I hope he’s happy.”
Democrats on Capitol Hill agreed that the “do-nothing” response to the financial crisis had led to rising unemployment and a sluggish economy. If the Bush and Obama administrations had been willing to invest in American companies, run the deficit up to $1.8 trillion, and talk about all sorts of new taxes, regulations, and spending programs, then certainly the economy would be recovering by now, they said.
Congress Just Raised Our Credit Card Fees
Technically, it was the companies which raised their fees. But they did so to anticipate new legislative restrictions on fees taking effect. Congress wanted to cut costs for consumers, but ended up costing them instead.
Credit card companies are raising interest rates and fees seven months before new rules go into effect that will limit their ability to do so, much to the irritation of Congress and consumer advocates.
Chase, for instance, will raise the minimum payment required of some of its customers from 2 percent to 5 percent of the statement balance starting in August. Chase and Discover have increased the maximum fee charged for transferring a balance to the card to 5 percent of the amount, up from 3 and 4 percent, respectively. Bank of America last month raised the transaction fee for balance transfers and cash advances from 3 to 4 percent. Card issuers including Bank of America and Citi also continue to cut limits and hike up rates, which they have been doing with more frequency since January.
“This is a common practice and will continue to be common, because issuers can do these things for really no reason until February,” said John Ulzheimer, president of consumer education for Credit.com, which tracks the industry. “It’s what I call the Credit Card Trifecta — lower limits, higher rates, higher minimum payments.”
It’s not just the top card issuers making changes. Atlanta-based InfiBank, for example, will raise the minimum annual percentage rate it charges nearly all of its customers in September “in order to more effectively manage the profitability of our credit card account portfolio in a very challenging economic environment,” said spokesman Kevin C. Langin.
The flurry of activity, which the banks say is necessary to shore up their revenue losses, has irked members of Congress, who passed a new credit card law, which was signed by President Obama in May. The law, among other things, would prevent card companies from raising rates on existing balances unless the borrower was at least 60 days late and would require the original rate to be restored if payments are received on time for six months. The law would also require banks to get customers’ permission before allowing them to go over their limits, for which they would have to pay a fee.
One hates to think of what additional “help” Congress plans on providing for us in the future.
Obama Adopts the Mikulski Principle
Economists have advanced many theories of taxation. But as usual, the one that seems to explain the policies of the Obama administration best is what I call the Mikulski Principle, the theory most clearly enunciated in 1990 by Sen. Barbara Mikulski (D, Md.):
Let’s go and get it from those who’ve got it.
Just take a look at the myriad taxes proposed or publicly floated by President Obama and his aides and allies:
- Raise the top income tax rates from their current 33 percent and 35 percent rates to 36 percent and 39.6 percent in 2011
- Limit itemized deductions for people paying high rates
- Increase capital gains and dividend taxes by 33 percent for people paying high income tax rates
- Impose a value-added tax (VAT) on all goods and services
- Raise the Social Security tax by lifting the cap
- Raise a variety of business taxes by $353 billion over 10 years, including repeal of LIFO rules, restoring Superfund taxes, seven tax increases on energy companies, and more
- Tax employer-provided health benefits
- Implement a cap-and-trade system for emissions permits, the functional equivalent of a massive new tax
- Tax drivers on their mileage
- Change rules to raise gift taxes
- Restore the estate tax at 45 percent
- Raise cigarette tax by 62 cents a pack
- Raise taxes on beer, wine, liquor, and soda
- Eliminate health savings accounts and flexible savings accounts
- Tax employer-provided cellphones
- Tax AIG employee bonuses
- Raise taxes on overseas corporate earnings
As the links will indicate, not all of these taxes have been formally proposed, and some have already run into sufficient criticism to have become unlikely. But together they illustrate the mindset of an administration and a Congress determined to extract as much money as they can from Americans rather than cut back on expenditures, which have doubled in about eight-and-a-half years.
Indeed, the administration’s programs remind us that today is July 2, the 233rd anniversary of the day on which the Continental Congress voted for American independence, issuing a document that declared, among other things,
He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.
Civil Liberties and President Barack W. Bush?
It’s fair to say that civil liberties and limited government were not high on President George W. Bush’s priorities list. Indeed, they probably weren’t even on the list. Candidate Barack Obama promised “change” when he took office, and change we have gotten. The name of the president is different.
Alas, the policies are much the same. While it is true that President Obama has not made the same claims of unreviewable monarchical power for the chief executive–an important distinction–he has continued to sacrifice civil liberties for dubious security gains.
Civil libertarians recently accused President Obama of acting like former President George W. Bush, citing reports about Mr. Obama’s plans to detain terrorism suspects without trials on domestic soil after he closes the Guantánamo prison.
It was only the latest instance in which critics have argued that Mr. Obama has failed to live up to his campaign pledge “to restore our Constitution and the rule of law” and raised a pointed question: Has he, on issues related to fighting terrorism, turned out to be little different from his predecessor?
The answer depends on what it means to act like Mr. Bush.
As they move toward completing a review of their options for dealing with the detainees, Obama administration officials insist that there is a fundamental difference between Mr. Bush’s approach and theirs. While Mr. Bush claimed to wield sweeping powers as commander in chief that allowed him to bypass legal constraints when fighting terrorism, they say, Mr. Obama respects checks and balances by relying on — and obeying — Congressional statutes.
“While the administration is considering a series of options, a range of options, none relies on legal theories that we have the inherent authority to detain people,” Robert Gibbs, the White House press secretary, said this week in response to questions about the preventive detention report. “And this will not be pursued in that manner.”
But Mr. Obama’s critics say that whether statutory authorization exists for his counterterrorism policies is just a legalistic point. The core problem with Mr. Bush’s approach, they argue, was that it trammeled individual rights. And they say Mr. Obama’s policies have not changed that.
“President Obama may mouth very different rhetoric,” said Anthony D. Romero, executive director of the American Civil Liberties Union. “He may have a more complicated process with members of Congress. But in the end, there is no substantive break from the policies of the Bush administration.”
The primary beneficiaries of constitutional liberties are not terrorist suspects, but the rest of us. The necessary trade-offs are not always easy, but the president and legislators must never forget that it is a free society they are supposed to be defending.
New Government of Honduras Takes a Wrong Turn
Facing mounting international pressure to reinstall a would-be despot, the provisional government of Honduras is taking a very wrong turn by asking the National Assembly to temporarily extend curfew powers and limit basic individual liberties.
The government claims that the measures, which will be in place for 72 hours, are justified to prevent any civil unrest given the imminent return of former president Manuel Zelaya to the country. However, the provisional authorities are actually undermining the rule of law and constitutional liberties that they claimed to be protecting when removing Zelaya from power last Sunday.
The individual rights and liberties that would be affected: the inviolability of homes, the right to protest peacefully, the guarantee against being held for more than 24 hours without charges, and the freedom to move around the country undisturbed.
These actions are unjustified. By moving to take away civil liberties from Hondurans, the provisional government undercuts its moral standing vis-à-vis the increasingly autocratic rule of Manuel Zelaya it came to replace. Even if these measures are meant to be temporary, history shows that once a government claims emergency powers, it is very hard to completely relinquish them once the “emergency” is gone.
Moreover, these restrictions do little service to the argument of the new Honduran government that Zelaya’s removal was not a military coup d’état. Having the army policing the streets and curbing the free movement of people and their right to protest peacefully gives the impression that the military is in charge and calling the shots.
The Honduran government should scrap these measures and reassure the population that their individual rights and liberties guaranteed under the Honduran constitution will be fully respected.
Cap ‘n Trade: The Ultimate Pork-Fest
Some naive people might have been convinced that the U.S. House voted to wreck the American economy by endorsing cap and trade because it was the only way to save the world. But even many environmentalists had given up on the bill approved last Friday. It is truly a monstrosity: it would cost consumers plenty, while doing little to reduce global temperatures.
But the legislation had something far more important for legislators and special interests alike. It was a pork-fest that wouldn’t quit.
As the most ambitious energy and climate-change legislation ever introduced in Congress made its way to a floor vote last Friday, it grew fat with compromises, carve-outs, concessions and out-and-out gifts intended to win the votes of wavering lawmakers and the support of powerful industries.
The deal making continued right up until the final minutes, with the bill’s co-author Representative Henry A. Waxman, Democrat of California, doling out billions of dollars in promises on the House floor to secure the final votes needed for passage.
The bill was freighted with hundreds of pages of special-interest favors, even as environmentalists lamented that its greenhouse-gas reduction targets had been whittled down.
Some of the prizes were relatively small, like the $50 million hurricane research center for a freshman lawmaker from Florida.
Others were huge and threatened to undermine the environmental goals of the bill, like a series of compromises reached with rural and farm-state members that would funnel billions of dollars in payments to agriculture and forestry interests.
Automakers, steel companies, natural gas drillers, refiners, universities and real estate agents all got in on the fast-moving action.
The biggest concessions went to utilities, which wanted assurances that they could continue to operate and build coal — burning power plants without shouldering new costs. The utilities received not only tens of billions of dollars worth of free pollution permits, but also billions for work on technology to capture carbon-dioxide emissions from coal combustion to help meet future pollution targets.
That deal, negotiated by Representative Rick Boucher, a conservative Democrat from Virginia’s coal country, won the support of the Edison Electric Institute, the utility industry lobby, and lawmakers from regions dependent on coal for electricity.
Liberal Democrats got a piece, too. Representative Bobby Rush, Democrat of Illinois, withheld his support for the bill until a last-minute accord was struck to provide nearly $1 billion for energy-related jobs and job training for low-income workers and new subsidies for making public housing more energy-efficient.
Representative Joe Barton, a Texas Republican staunchly opposed to the bill, marveled at the deal-cutting on Friday.
“It is unprecedented,” Mr. Barton said, “but at least it’s transparent.”
This shouldn’t surprise anyone who follows Washington. Still, the degree of special interest dealing was extraordinary. Anyone want to imagine what a health care “reform” bill is likely to look like when legislators finish with it?
Calling Secretary Napolitano: Arizona to Reject EDLs
Department of Homeland Security Secretary Janet Napolitano has been all over the map on national ID issues. As governor of Arizona, she signed a memorandum of understanding with the Bush DHS to implement “enhanced driver’s licenses” in her state. These are licenses with long-range RFID chips built into them. But then she turned around and signed legislation barring implementation of the REAL ID Act in Arizona.
Now, having taken federal office, she again favors REAL ID — or at least under its new name: PASS ID. (Her efforts to put distance between REAL ID and PASS ID have not borne fruit.)
In some respects, PASS ID is worse than REAL ID. It would give congressional approval to the “enhanced driver’s license” program — invented by DHS and State Department bureaucrats to do long-range (and potentially surreptitious) identification of people holding this type of card. Back home, the Arizona legislature has just passed a bill to prohibit the state from implementing EDLs.
So the former governor of Arizona, who has both supported and rejected national ID programs, now supports a bill to approve the national ID program her home state rejects. Napolitano seems to be taking the national ID tar baby in a loving embrace.
Health Care Priorities
As Washington debates a big increase in federal health care spending, I came across these two articles on what a splendid job the government is doing managing its current health programs.
Harvard professor Malcolm Sparrow recently testified that roughly $100 billion or more of Medicare and Medicaid dollars go down the drain each year due to fraud. It’s easy to rip these programs off because of their vast size and electronic claims processing. Medicare processes more than 1 billion of claims each year.
This Washington Post article last year described one particular example of the fraud. A high-school drop-out managed to bilk Medicare out of $105 million by submitting a 140,000 false claims from her laptop computer.
So we’ve got $100 billion or so of taxpayer’s hard-earned money being stolen each year from our current public health care plans. You would think that with today’s giant budget deficit that the highest priority of policymakers would be to reform these programs to reduce the unbelievable and disgusting amounts of graft. But no, many in Congress and President Obama have decided that current government health care works so well that they want to expand it.
President Obama wants to create a new “public health option” to “keep insurance companies honest.” Hey Mr. President, you should do something about the $100 billion of dishonesty in current public health plans, instead of hitting up taxpayers to fund an even more bloated health care budget.
Finally, an Education Muckraker!
I’ve often complained on this blog that there are no education muckrakers – no reporters who will actually go out and investigate the misleading claims so often fed to them by politicians and public school officials. Well, it turns out there’s at least one, and his name is Ron Matus.
After being told countless times that public schools in Florida spend just $7,000 per pupil annually, Matus decided to do what no other ed reporter in the state (so far as I know) has done: check it. In a blog post today, he explains where the $7,000 number comes from, he points out that the actual total is $12,000 per pupil, and he lets readers decide which number is more relevant to them. Way to go, Mr. Matus!
I particularly enjoyed this line: “[Department of Education] officials say it’s fair to roll federal money into a per-pupil spending figure – that money does go to operational costs – but not capital outlay and debt service.”
Apparently schools don’t need buildings anymore! Wonderful news! Now that Floridians no longer have to pay for construction and renovation costs, they’ll save $6 billion a year. That is, they’ll start saving it as soon as the Department of Education gives it back to them. What’s that? They don’t want to give it back even though they say it doesn’t count? Gee. I guess it does count then, doesn’t it?
This public school emperor isn’t just naked, he’s mincing about flamboyantly and daring on-lookers to call him sartorially challenged. Well we dare, pal, we dare. If you want buildings to house all those students, and you want the billions to pay for them, then the St. Pertersburg Times, at least, is going to start counting it.
If there are any other reporters out there who have similarly tracked down the real total per pupil spending numbers, let me know and I’ll cite your work here. Or, if you’d like to try it but don’t know where to start, drop me an e-mail.
Those Who “Serve” Us Celebrate
Those who think that the college-educated, or soon to be so, should have more and more of their education funded by taxpayers – whether those taxpayers themselves attended college or not – are shooting off the fireworks a bit early this year, celebrating increasingly generous federal aid going into effect today.
Perhaps the most galling part of all the increasingly free-flowing aid is how much is being targeted at people who work in “public service.” Ignoring for the moment that the people who make our computers, run our grocery stores, play professional baseball, and on and on are all providing the public with things it wants and needs, to make policy on the assumption that people in predominantly government jobs are somehow selflessly sacrificing for the common good is to blatantly disregard reality.
Consider teachers, as I have done in-depth. According to 2007 Bureau of Labor Statistics data, adjusted to reflect actual time worked, teachers earn more on an hourly basis than accountants, registered nurses, and insurance underwriters. Elementary school teachers – the lowest paid among elementary, middle, and high school educators – made an average of $35.49 an hour, versus $32.91 for accountants and auditors, $32.54 for RNs, and $31.31 for insurance underwriters.
So much for the notion that teachers get paid in nothing but children’s smiles and whatever pittance a cruel public begrudgingly permits them.
How about government employees?
Chris Edwards has done yeoman’s work pointing out how well compensated federal bureaucrats are, noting that in 2007 the average annual wage of a federal civilian employee was $77,143, versus $48,035 for the average private sector worker. And when benefits were factored in, federal employee compensation was twice as large as private sector. But don’t just take Chris’s word and data to see that federal employment is far from self-sacrificial – take the Washington Post’s “Jobs” section!
And it’s not just federal employees or teachers who are making some pretty pennies serving John Q. Public. As a recent Forbes article revealed, it’s people at all levels of government, from firefighters to municipal clerks:
In public-sector America things just get better and better. The common presumption is that public servants forgo high wages in exchange for safe jobs and benefits. The reality is they get all three. State and local government workers get paid an average of $25.30 an hour, which is 33% higher than the private sector’s $19, according to Bureau of Labor Statistics data. Throw in pensions and other benefits and the gap widens to 42%.
Recently, my wife and I have been watching the HBO miniseries John Adams, and I couldn’t help but make the observation: In Adams’ time, many of those who served the public truly did so at great expense to themselves, often risking their very lives and asking little, if anything, from the public in return. Today, in contrast, many if not most of those who supposedly serve the public do so at no risk to themselves – indeed, unparalleled security is one of the great benefits of their employment – but are treated as if their jobs are extraordinary sacrifices. And so, as we head into Independence Day, it seems the World has once again been turned upside down: In modern America, the public works mightily to serve its servants, not the other way around.
Banks, Bailouts, and Political Pressure
The Washington Post reports:
Sen. Daniel K. Inouye’s staff contacted federal regulators last fall to ask about the bailout application of an ailing Hawaii bank that he had helped to establish and where he has invested the bulk of his personal wealth.
The bank, Central Pacific Financial, was an unlikely candidate for a program designed by the Treasury Department to bolster healthy banks. The firm’s losses were depleting its capital reserves. Its primary regulator, the Federal Deposit Insurance Corp., already had decided that it didn’t meet the criteria for receiving a favorable recommendation and had forwarded the application to a council that reviewed marginal cases, according to agency documents.
Two weeks after the inquiry from Inouye’s office, Central Pacific announced that the Treasury would inject $135 million.
As we’ve said here many times, going back to 1983, when government is in the business of making economic decisions, you inevitably get more lobbying, more campaign spending, and more political influence on economic decision-makers.
Excellent WSJ Column on Health Care Nonsense
By George Newman. A sampling:
“The cost of health care rises two to three times as fast as inflation.”
That’s like comparing the price of hamburger 30 years ago with the price of filet mignon today and calling the difference inflation.
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