Archive for October, 2009
Bernanke Criticizes Trade Deficit, but Not Trade
In a speech on the West Coast this morning, Fed chairman Ben Bernanke at first glance appears to be agreeing with the critics of trade who blame the trade deficit for much of our economic ills. “Bernanke Calls for Action on Trade Gap,” according to the Wall Street Journal. “Bernanke warns against trade imbalances,” chimes in the French news agency, AFP.
Underneath the headlines, however, Bernanke’s comments offer no comfort for the critics. The real culprit is not “unfair trade” or “currency manipulation,” but misguided tax and spending policies in the United States and other major trading countries.
That is a point I hammer home in Chapter 5 of the new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization:
If our politicians are determined to do something about the trade deficit, the most constructive step they could take would be to promote a higher level of national savings. More domestic savings would reduce the need for foreign funds to finance domestic investment. … The most direct approach would be to reduce or eliminate the federal budget deficit. If the federal government were to borrow a few hundred billion dollars less each year, the pool of domestic savings would rise and more domestic funds would be available for investment. …Ironically, many members of Congress who complain loudest about the trade deficit have voted in the name of economic “stimulus” to plunge us ever deeper in debt.
Chairman Bernanke agrees. His policy prescription was not to raise barriers against imports, but to cut the federal government’s appetite for debt.
Flex Your Rights
Friends of the Cato Institute who closely follow the news about search and seizure and other civil liberties issues will probably know that there are simple, practical steps one can take to exercise our constitutionally guaranteed liberties, even when confronted by the police.
For everyone else, there’s Flex Your Rights. Founded by former Cato intern Steven Silverman, Flex Your Rights aims to teach ordinary citizens how to make good use of their civil liberties:
The vast majority of people are mystified by the basic rules of search and seizure and due process of law. Consequentially, they’re likely to be tricked or intimidated by police into waiving their constitutional rights, resulting in a greater likelihood of regrettable outcomes.
The sum of these outcomes flow into all major criminal justice problems — including racial and class disparities in search, arrest, sentencing and incarceration rates.
In order to ensure that constitutional rights and equal justice are upheld by law enforcement, we must build a constitutionally literate citizenry.
“Regrettable outcomes” aren’t limited to time behind bars for breaking the drug laws. Consider also damage to property during searches, loss of dignity and privacy, wasted law enforcement time, and police violence during what’s sure to be a nerve-wracking encounter. All of this can happen even when you’re not violating any laws at all, and that’s reason enough to refuse a search.
The police, and the laws themselves, should work for us, and if we don’t require their help, then that should usually be for us to decide. Flex Your Rights is here to help you do so. They’ve just launched a revamped website, which looks great, and they also have a new film in production titled 10 Rules for Dealing with Police. I look forward to seeing it!
An Overdue Acknowledgement that Stuff Costs Money
The Institute of Medicine issued a report today calling on whole scale changes to the National School Lunch and National School Breakfast programs (although nowhere does it question why we even have national nutrition programs, which surely properly belong to the states and/or school districts. But I digress). The changes all sound sensible enough: setting calorie limits for meals, increasing the amount of whole grains, fruit and vegetables in school meals, and reducing fat and sodium.
But here’s the clincher: the recommendations would cost money!
The panel acknowledged that its recommendations would increase costs and called for a higher federal reimbursement to school districts, capital investments and money to train cafeteria workers to make the changes. Food costs for breakfasts could rise as much as 9%, and for lunches as much as 25%, if all the recommendations were enacted, the committee said. (source: LA Times)
We should be grateful that the authors at least acknowledge the budgetary impacts of their recommendations. So often it is assumed that school nutrition programs can and should be changed regardless of the costs to taxpayers. Last week I taped a television debate show called Two Way Street (the show is scheduled to air in January, so check your local listings!) with a woman called Ann Cooper, the “Renegade Lunch Lady” (here’s Ann’s website). Ann is on a mission to “change the way our children are eating”. Her intentions are good, and I certainly agree with her that our woeful agriculture policies are skewing incentives towards certain food groups and away from fruit and vegetables.
Having said that, Ann’s experience with school cafeterias was, from what I can gather, gained in East Hampton, NY and Berkeley, CA. Hardly representative samples of consumers across America (although she has reportedly worked in Harlem and New York City, also). So often “success” in these sorts of places is seen as a scalable blueprint for the rest of the country. Indeed, Ann used her time on the show to encourage viewers to contact their member of Congress and urge increased Federal funding for nutrition programs.
On the contrary, I would argue that people instead encourage their congresscritters to devolve their ill-gotten power over school nutrition programs back to the local school districts, where they can make the best assessment of the costs and benefits of different plans, given local needs and resources.
Department of Bias
The Department of Justice just invalidated a move by the residents of Kinston, North Carolina, to have non-partisan local elections. Rationale?
The Justice Department’s ruling, which affects races for City Council and mayor, went so far as to say partisan elections are needed so that black voters can elect their “candidates of choice” – identified by the department as those who are Democrats and almost exclusively black.
The department ruled that white voters in Kinston will vote for blacks only if they are Democrats and that therefore the city cannot get rid of party affiliations for local elections because that would violate black voters’ right to elect the candidates they want.
This, coming from the same Department of Justice officials that wouldn’t know a civil rights violation if it picked up a club and barred them access to a polling place.
Internet Companies’ Bogus Plea for Regulation
Some of the most prominent Internet companies sent a letter yesterday asking for protection from market forces. Among them: Facebook, Google, Amazon, and Twitter.
A Washington Post story summarizes their concerns: “[W]ithout a strong anti-discrimination policy, companies like theirs may not get a fair shot on the Internet because carriers could decide to block them from ever reaching consumers.”
No ISP could block access to these popular services and survive, of course. What they could do is try to charge the most popular services a higher tariff to get their services through. Thus, weep the helpless, multi-billion-dollar Internet behemoths, we need a “fair shot”!
Plain and simple, these companies want regulation to ensure that ISPs can’t capture a larger share of the profits that the Internet generates. They want it all for themselves. Phrased another way, the goal is to create a subsidy for content creators by blocking ISPs from getting a piece of the action.
It’s all very reminiscent of disputes between coal mines and railroads. The coal mines “produced the coal” and believed that the profitability of the coal-energy ecosystem should accrue only to themselves, with railroads earning the barest minimum. But where is it written that digging coal out of the ground is what creates the value, and getting it where it’s used creates none? Transport may be as valuable as “production” of both commodities and content. The market should decide, not the industry with the best lobbyists.
What happens if ISPs can’t capture the value of providing transport? Of course, less investment flows to transport and we have less of it. Consumers will have to pay more of their dollars out of pocket for broadband, while Facebook’s boy CEO draws an excessive salary from atop a pile of overpriced stock holdings. The irony is thick when opponents of high executive compensation support “net neutrality” regulation.
Another reason why these Internet companies’ concerns are bogus is their size and popularity. They have a direct line to consumers and more than enough capability to convince consumers that any given ISP is wrongly degrading access to their services. As Tim Lee pointed out in his excellent paper, “The Durable Internet,” ownership of a network service does not equate to control. ISPs can be quickly reined in by the public, as has already happened.
A “net neutrality” subsidy for small start-up services is also unnecessary: They have no profits to share with ISPs. What about mid-size services—heading to profitability, but not there yet? Can ISPs choke them off? Absolutely not.
Large, established companies are not known for being ahead of trends, for one thing, and the anti-authoritarian culture of the Internet is the perfect place to play “beleaguered upstart” against the giant, evil ISP. There could be no greater PR gift than for a small service to have access to it degraded by an ISP.
The Internet companies’ plea for regulation is bogus, and these companies are losing their way. The leadership of these companies should fire their government relations staffs, disband their contrived advocacy organization, and get back to innovating and competing.
Next Move: Suing the Sun for Unseasonably Cool Weather
The New Orleans-based Fifth Circuit, the federal court of appeals where I once clerked, has allowed a class action lawsuit by Hurricane Katrina victims to proceed against a motley crew of energy, oil, and chemical companies. Their claim: that the defendants’ greenhouse gas emissions raised air and water temperatures on the Gulf Coast, contributing to Katrina’s strength and causing property damage. Mass tort litigation specialist Russell Jackson calls the plaintiffs’ claims “the litigator’s equivalent to the game ‘Six Degrees of Kevin Bacon.’”
In Comer v. Murphy Oil USA, the plaintiffs assert a variety of theories under Mississippi common law, but the main issue at this stage was whether the plaintiffs had standing, or whether they could demonstrate that their injuries were “fairly traceable” to the defendant’s actions. The court dismissed several claims but held that plaintiffs indeed could allege public and private nuisance, trespass and negligence. The court also held that these latter claims do not present a so-called “political question” that the court doesn’t have the authority to resolve. You can read about the Court’s ruling in more detail at the WSJ Law Blog and Jackson’s Consumer Class Actions and Mass Torts Blog.
This is actually the second federal appeals court to rule this way; last month, the Second Circuit (based in New York) held that states, municipalities and certain private organizations had standing to bring federal common law nuisance claims to impose caps on certain companies’ greenhouse gas emissions. Here’s the opinion in that case, Connecticut v. American Electric Power Company, and you can read a pretty good summary and analysis here.
Both of these cases, which herald a flood of global warming-related litigation, so to speak, owe their continuing vitality to the Supreme Court’s misbegotten 2007 decision in Massachusetts v. EPA. The 2006-2007 Cato Supreme Court Review covered that case in an insightful article by Andrew Morriss of the University of Illinois. (To get your copy of the latest (2008-2009) Review, go here.)
I should note from my own experience at the Fifth Circuit that the panel here consisted of the two worst judges on the court — Clinton appointees Carl Stewart and James Dennis — and one of Reagan’s weakest federal appellate appointments, Eugene Davis. Even Davis, however, wrote separately to note that while he agreed on the standing issue, he would have affirmed the district court’s dismissal of the suit on a different ground (that pesky proximate cause issue).
I predict that the full (16-judge) Fifth Circuit will review this case en banc –and if not that the Supreme Court will eventually take it up (if the district court on remand doesn’t again dispose of the case on causation grounds).
Online Privacy and the Commerce Clause
I fear that with the PATRIOT Act on the brain, I’ve been remiss in continuing the colloquy on behavioral ads and privacy regulation that I’d been having with Jim Harper—who flattered me by responding in a long and thoughtful essay a couple weeks back. Because there’s so much interesting stuff there, I hope he won’t mind if I restrict myself to the first part of his reply here, in the interest of making this all a bit more digestible to those whose fascination with the topic may not be quite as consuming as ours. I’ll consider briefly the constitutional issue Jim raises, and turn to some of the specifics of the issue—and the relative merits of the common law alternative—in another post.
So like every good dorm room bull session, we begin in the weeds of policy and quickly find ourselves breathing the rarefied air of constitutional theory. Supposing for the moment that we thought it were a good idea on policy grounds, would it be within the power of Congress to set ground rules for online advertisers who gather personal data from Web browsers? Recall that there are two particular rules that I’ve said I’d be tentatively open to, but which Jim rejects: a requirement of notice when information is being collected (say via a small link from the adspace to a privacy policy) and a rule establishing that privacy policies are enforceable, so that individual users can sue for damages if a company knowingly violates its stated policy (thus far, courts have not generally found these to be binding). Does this fall within the power to “regulate commerce … among the several states”? I think so. I’ll start with what I hope will be some uncontroversial arguments and go from there.
Obama: ‘All Part of the Job’
Via the Spectator‘s Alex Massie, comes this ABC News report on last Thursday’s Obama town hall in New Orleans:
“Why do people hate you?”, a fourth-grade boy asked Obama …. “They’re supposed to love you. And God is love.”
Massie comments,
Obama’s answer is actually pretty reasonable. But this is what happens when you make a mere elected politician assume the status of Priest-King. It is, in its own way, a corrupting influence. I don’t blame the kid asking the question since, heck, there are plenty of professional journalists in DC who basically think along the same lines. This isn’t Obama’s fault, but it’s a problem nonetheless.
True enough, Americans had an irrational conception of presidential responsibility long before 44 took office. Still, Obama’s far from blameless. At the same town hall, Obama commented :
“You know, I listen to, sometimes, these reporters on the news: Well, why haven’t you solved world hunger yet?” he joked.
Ha: silly reporters! They should ask the president about something he’s actually promised to do, like provide “a cure for cancer in our time,” or stop the oceans’ rise, or “create a Kingdom right here on Earth.”
Obama’s right that it’s “part of the job” that the president gets an outsized share of credit or blame for the direction of the country. It’s been that way for a long time. As Thomas Cronin put it in his classic 1970 essay “Superman: Our Textbook President”:
on both sides of the presidential popularity equation [the president’s] importance is inflated beyond reasonable bounds. On one side, there is a nearly blind faith that the president embodies national virtue and that any detractor must be an effete snob or a nervous Nellie. On the other side, the president becomes the cause of all personal maladies, the originator of poverty and racism, inventor of the establishment, and the party responsible for a choleric national disposition.
Barack Obama didn’t create this view of presidential responsibility; he inherited it. But, other than the occasional “change is hard” caveat, it’s not as though Obama’s sought to dispel the irrational expectations people invest in the office. To the contrary, he’s done more than any president in living memory to encourage the view that the president is a benevolent father protector endowed with magical powers — a living American talisman against hurricanes, terrorism, economic downturns, and spiritual malaise. It’s the sort of view that people ought to — but often don’t — grow out of by, say, fifth grade. And a good deal of the burgeoning public dissatisfaction with Obama stems from his aggressive attempts to secure powers to match the boundless responsibilities he embraces.
Who Is John Gupta?
Apparently Ayn Rand’s popularity is growing on the subcontinent. For more on Rand’s resurgence, attend or watch online this Cato event next week.
(H/T: Josh Blackman.)
Libertarianism in China
I am delighted to report that Libertarianism: A Primer has been published in Chinese. Let’s hope for sales in the tens of millions! The good folks at the Atlas Global Initiative posted an interview with me about the book, with subtitles in Chinese. (In my experience, it plays more smoothly if you turn the HD button off. But then, there’s nothing really new in the interview for American viewers.)
Thanks to the good folks at www.guominliyi.org and www.ipencil.org for making this book possible. The support of the project by a Chinese entrepreneur shows not only the growth of the Chinese economy, but one of the additional benefits of economic growth: diverse sources of wealth, with different people making different investments and encouraging diverse ideas.
Libertarianism: A Primer has also been published in Russian, Japanese, Spanish, Czech, Polish, Serbian, Bulgarian, Cambodian, Mongolian, Kurdish, and Persian. Translations into Arabic, Portuguese, and Italian are underway. And of course you can get it in audio form. Not Kindle yet, but feel free to tell them you’d like a Kindle edition.
Should the White House Be Taking on Fox?
Today’s Arena question over at Politico asks:
Is Fox News a “legitimate news organization?” Is the White House smart, or not so smart, to take on Fox?
Is Fox News a “legitimate news organization?” As compared to what? The New York Times? NPR? MSNBC? Please.
The Obama team, Democrats like my good friend Walter Dellinger, and the so-called Mainstream Media (MSM) howl about Fox News for two main reasons. First, Fox is covering news the MSM ignores because it doesn’t “fit.” And second, in part because of that, the Fox audience continues to grow while the MSM audience is shrinking, raising a serious question about whether the MSM is any longer “mainstream.”
Let’s not pretend that the MSM doesn’t “manage” the news. It does it mainly by deciding daily what is and is not “news” and then by deciding how to report that news. Do we need any better example than the current ACORN story? As Fox was bringing the facts to light, nowhere were those facts to be found in the MSM — until they could be ignored no longer. Or take the huge 9/12 anti-big-government rally here in Washington. Fox covered it for the event that it was. Where was it covered in The New York Times? On page A37. And more revealing still, in the NYT electronic edition, the second of three stories posted under “Politics” was headlined “Thousands Rally in Minnesota Behind Obama’s Call for Health Care Overhaul,” the third was headlined “Thousands Rally in Capital to Protest Big Government” — the implication being that the two rallies were equivalent in size when in fact the protest rally dwarfed the Obama rally by many multiples.
But why pretend it’s otherwise? The president himself admits the MSM bias. Speaking at the May 9 White House Correspondents’ Association Dinner, “I am Barack Obama. Most of you covered me. All of you voted for me. (Laughter and applause.) Apologies to the Fox table.” A good laugh line in that setting, to be sure, but only because he’s said at last what we all know to be true.
Walter Dellinger may write, citing no evidence, that the Tax Day Tea Party protests were “conceived and executed by Fox News,” but he surely knows that’s not true. He hails from North Carolina, albeit now from Duke. He knows that outside that cloister there’s protest in the land. Fox News isn’t generating that opposition to the Obama juggernaut. It’s real, but it’s so much easier for the MSM to blame the bearer of that news than to face the reasons for their own falling numbers: Their “news” doesn’t fit with what so many people see with their own eyes. I’m reminded of the great Groucho Marx line: “Who are you going to believe, me or your own eyes?”
C/P Politico’s Arena
Why Does Health Care Need Reform?
Is it because health care is special? Or is it because we have treated health care as though it were special?
David Goldhill is the CEO of the Game Show Network and author of “How American Health Care Killed My Father,” in the September 2009 issue of The Atlantic.
In this Cato video, Goldhill explains why a consumer-driven health care sector would never produce the often horrific problems we see in American medicine, and why the legislation moving through Congress fails to address those problems.
See Goldhill’s complete remarks here.
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