Archive for December, 2009
Timber Payments and Logrolling
Since 1908, the U.S. Forest Service has paid 25 percent of its gross receipts to the states for spending on roads and schools in the counties where national forests are located. In the Pacific Northwest, receipts started to decline in the late 1980s due to lower timber sales as a result of efforts to protect the spotted owl. In 1993, Congress responded with additional “spotted owl payments” to the affected states. A 2000 law spread these payments to all national forests, but the bulk continued to go to the Pacific Northwest.
When the law was reauthorized last year, members of Congress used it as an opportunity to grab money for their states. According to the Associated Press:
The federal largesse initially focused on a handful of Western states, with Oregon alone receiving nearly $2 billion. Spending of that magnitude, though, sparked a new timber war — this one among politicians eager to get their hands on some of the logging money. A four-year renewal of the law, passed last year, authorizes an additional $1.6 billion for the program through 2011 and shifts substantial sums to states where the spotted owl never flew. While money initially was based on historic logging levels, now any state with federal forests — even those with no history of logging — is eligible for millions in Forest Service dollars. Doling out all that taxpayer money is based less on logging losses than on the powerful reality of political clout.
Democratic New Mexico Senator Jeff Bingaman bluntly admitted that the money grab was a result of good ole congressional logrolling:
Of much more important note: New Mexico’s two senators served as chairman and ranking Republican on the Senate committee that rewrote the timber payments formula. New Mexico’s increase under the new formula was 692 percent… Bingaman defended the changes. ‘Frankly we had to broaden the program in order to get the support to go ahead and do a reauthorization, and that’s exactly what we did,’ he said in an interview.
And of course, the porkfest was bipartisan:
Senate Minority Leader Mitch McConnell, R-Ky., was an early backer of the law and provided political cover for Republicans to support it… Timber harvests in Kentucky’s Daniel Boone National Forest have been modest in recent decades — ranging from $7,600 to $77,000 annually — but Clay County, Ky., which includes part of the forest, received $338,510 this year from the timber program, a 341 percent increase.
A Cato essay on the U.S. Forest Service notes that a “reform step would be to revive federalism by eliminating federal forest subsidies to the states and turning portions of the national forests over to the states. Other activities could be privatized… Some experts have proposed full privatization of the national forests.”
Such reforms would help to address the chaotic nature of current forest management through the federal political process, as illustrated by the spotted owl saga.
Copenhagen: Let the Games Begin!
25,000 bureaucrats, factota, hangers on, and representatives of various environmental organizations have just converged on Copenhagen for the UN’s latest “Conference of the Parties (COP) to its infamous 1992 climate treaty. Expect a lot of heat, not much light, and a punt right into our next election.
President Obama says that the US will agree to a “politically binding” reduction of our emissions of carbon dioxide to a mere 17% of 2005 levels by 2050. This will allow the average American the carbon dioxide emission of the average citizen in 1867. Obama’s pronouncement has stepped all over the toes of the US Senate, which really doesn’t want to vote on similar legislation this election year. Jim Webb, a democrat heretofore very loyal to the President recently wrote Obama a very tersely worded note reminding him that the power to commit the nation to such a regulation lies with the Senate, not with the Commander-in-Chief.
The UN’s own climate models show that even if every nation that has obligations under the failed Kyoto Protocol (which is supposed to be replaced by the Copenhagen Protocol) did what Obama wants, that only 7% of prospective warming would be prevented by 2100. The world’s largest emitter—China—was exempt then, and won’t agree to these reductions now.
Instead they will agree to reduce “carbon intensity”—the amount of carbon dioxide emitted per unit GDP—by 20% per decade. This is nothing but business as usual for a developing or robust economy. In fact, when President George W. Bush said that was our global warming policy, he was roundly booed. The Chinese announcement—already telegraphed, is being greeted with unmitigated praise by the same environmentalists who beat on Bush for the exact same policy. India has just announced that there is no way that they will agree to any emission reductions unless we pay them lotsa money. Obama thinks that’s a good idea, too. Polling data, anyone?
Since there’s no way that India and China will agree to large reductions, the real result of Copenhagen is that the climate can will be kicked down the road to the next COP, which begins on November 8, 2010, right down the road in Mexico City. That’s six days after our Congressional election, guaranteeing that cap-and-tax will be on the voters’ minds when they close the curtain on the current Congress.
One Thing Greenspan Got Right and Bernanke Didn’t
While both Greenspan and Bernanke merit considerable blame for helping to inflate the housing bubble, it is worth mentioning what Greenspan did get right: bringing to the attention of Congress and the public the risk posed to our financial system from Fannie Mae and Freddie Mac.
During Bernanke’s confirmation hearing last week, Banking Committee Chairman Chris Dodd criticized the Fed for not doing enough to warn Congress on systemic risks facing the economy. Given Dodd’s attendance record, both as Chair and before, he can perhaps be forgiven if he missed one of Greenspan’s many appearances before the Banking Committee.
To help remind us, on Feb. 24, 2004, Greenspan told the Banking Committee:
Concerns about systemic risk are appropriately focused on large, highly leveraged financial institutions such as the GSE’s…to fend off possible future system difficulties, which we assess as likely…preventive actions are required sooner rather than later.” In Greenspanspeak, that translates to “do something now.
Again on April 6, 2005, Greenspan warned the Banking Committee:
When these institutions were small, the potential for such risk, if any, was small. Regrettably, that is no longer the case. From now on, limiting the potential for systemic risk will require the significant strengthening of GSE regulation.
These are just a few of Greenspan’s many warnings to Congress on the risks posed by Fannie and Freddie. In addition, economists at the Fed published numerous studies, during Greenspan’s tenure, on the nature of Fannie and Freddie.
Sadly, upon taking over as Chair of the Federal Reserve, Ben Bernanke scaled back these efforts. Gone was the published economic research on GSEs. Gone was the loud voice of authority from a Fed Chairman on GSE policy. Instead, Bernanke choose to appease the GSE’s protectors in Congress.
While the Federal Reserve does not maintain primary regulatory authority over Fannie and Freddie, the Fed has long been viewed as the most credible voice in Washington on issues of systemic risk. When faced with the choice of protecting the Fed, or protecting the financial system, by raising the pressure on GSE reform, Bernanke punted. How he can be trusted to find the courage to taken on the next “Fannie Mae” is beyond me.
Big Out-of-Control Government Has Had Better Days at the Supreme Court
This morning at the Supreme Court, the federal government argued for the continued existence of the Public Company Accounting Oversight Board (PCAOB, pronounced peek-a-boo) — and by extension the nefarious financial regulatory scheme known as Sarbanes-Oxley. Cato filed a brief supporting a free market advocacy group and an accounting firm, who sued PCAOB for violating both the Appointments Clause and general constitutional separation-of-powers principles.
Passed with scant deliberation in the wake of the Enron and WorldCom scandals, the Sarbanes-Oxley Act of 2002 established PCAOB to oversee the accounting practices of the nation’s public companies. As my piece with Cato legal associate Travis Cushman details today, PCAOB enjoys the rare authority to make its own laws, collect taxes, inspect records, prosecute infractions, make judgments, and impose sanctions.
Traditionally, independent agencies that serve such executive functions must be accountable to the president. PCAOB members, however, may only be removed “for cause” by members of the Securities and Exchange Commission, who in turn may only be removed “for cause” by the president. I previously blogged about the case, Free Enterprise Fund v. PCAOB, here, here, and here.
As far as how the argument went, I think the forces of limited constitutional government have eked out a 5-4 victory. Justices Ginsburg, Breyer, and Sotomayor were extremely hostile to the challengers’ argument, while the Chief Justice and Justices Scalia and Alito were supportive. (Scalia at one point joked that he had no less power than the president — meaning not very much — to influence PCAOB.) Justice Stevens only spoke up once but seemed to show a leaning towards the government position. Justice Thomas, while remaining silent, can be expected to support the view of D.C. Circuit Judge Brett Kavanaugh — whose blistering yet scholarly dissent likely prompted the Court to take up the case.
And so the ruling rests, as often happens with the most interesting cases, on the shoulders of Justice Kennedy. I remain cautiously optimistic that Kennedy will decide to uphold constitutional checks and balances and strike down what has become an unholy new branch of government.
Two curious notes from the argument: 1. Petitioners’ counsel Michael Carvin referenced Cato’s brief in discussing PCAOB’s overreach internationally — seeking to regulate even foreign accounting standards – without oversight from the State Department or the SEC, let alone the president; 2. PCAOB brought its own lawyer to argue alongside the solicitor general, begging the question: if PCAOB is subservient to the SEC and/or the president, why does it need its own counsel to represent its own views?
All the News That’s Fit to Subsidize
Today, Politico Arena asks:
NPR v. Fox News?
My post:
Do I sense a bit of chutzpa in Politico’s report today that NPR executives have asked their top political correspondent, Mara Liasson, to reconsider her appearances on Fox News because of what the executives perceive as the network’s political bias? The request would be impertinent if NPR itself were beyond reproach, ideologically, but “fair and balanced” it is not. It’s a playpen for the left, subsidized by the American taxpayer, exceeded in its biases only by Pacifica Radio, another tax subsidized playpen straight out of the late ’60s.
There’s nothing wrong with a news organization tilting left or right, of course: let the public then decide, as the Fox News numbers show the public is doing. (And that, plainly, is what’s behind the White House efforts to marginalize the one network that’s had the audacity to criticize it systematically.) There is something deeply wrong, however, with asking the public to subsidize that tilt. NPR and its listeners would be screaming, and rightly so, if the taxpayers were subsidizing Fox News. Is it any different in their case? And please don’t say that NPR’s news is “news” — we’re all adults here. There’s a reason conservatives, mostly, and libertarians want to reduce the reach of government. It’s because so much of life — from news to education, religion, health care, the arts, and so much more — is fraught with values about which reasonable people can have reasonable differences. For that, there is only one answer: freedom, including freedom, as Jefferson put it, from having to subsidize views one finds abhorrent.
Afghanistan Withdrawal in July 2011? Don’t Bet on It
Secretary Gates and Secretary Clinton, among other administration officials, indicated this weekend that the July 2011 date for troop withdrawal from Afghanistan should not be interpreted as an exit strategy, but as a “ramp rather than a cliff.” It now appears the president will not be obligated to adhere to any withdrawal date and can adjust as he deems fit.
President Obama’s decision to include a withdrawal date in his speech sends a mixed message to allies and enemies about America’s commitment to the region. It is a misguided effort to placate the American public’s waning support for the mission. Obama should instead be looking for ways to leave Afghanistan, not excuses to dig us in deeper.
Essentially, the strategy is to apply the Iraq model to Afghanistan: a rapid infusion of troops followed by a painfully slow withdrawal. Of course, that strategy is premised on the hope that everything will run smoothly. There is little reason to believe it will.
In the end, the strategy aimed at defeating the Taliban and securing Afghanistan will never be perfect. Instead, a strategy of narrowly defined objectives that center on our original mission in entering the country—disrupting al Qaeda—is the only policy that is acceptable given the costs that the U.S. will incur.
Adding Free Speech Insult to Property Rights Injury
My friend and former law firm colleague Mark Sigmon — who co-authored Cato’s brief in the New Haven firefighters case — is representing a man facing daily fines for displaying a large political message on his house.
David Bowden was upset about the way he had been treated by the town of Cary, NC, regarding damage to his property during a road-widening project. This past July, Bowden hired someone to paint “Screwed By The Town of Cary” on the front of his house. A few weeks ago, the town gave Bowden seven days to remove the sign or face daily fines — $100 for the first day, $250 for the second, $500 for each subsequent day – for violating a local sign ordinance. That’s when Mark, who’s affiliated with the ACLU of North Carolina, filed a lawsuit on Bowden’s behalf. The complaint alleges that the town violated Bowden’s rights to free speech and to petition his government under the First Amendment and similar provisions of North Carolina’s constitution.
While the facts of this case are a bit colorful – and I’m sure Mark is enjoying the notoriety (here’s his appearance on Fox & Friends) — this is no laughing matter. The town appears to be compounding the damage it did to a resident’s property rights by now violating his rights to speech and political expression. At least now the town has agreed to refrain from enforcing its ordinance and levying fines until the case is resolved — which is essentially a capitulation to Bowden’s request for a preliminary injunction.
For more news on this story go here, here, and here. And you can read the ACLU’s press release and access all the legal pleadings in the case here.
The Virtual Fourth Amendment
I’ve just gotten around to reading Orin Kerr’s fine paper “Applying the Fourth Amendment to the Internet: A General Approach.” Like most everything he writes on the topic of technology and privacy, it is thoughtful and worth reading. Here, from the abstract, are the main conclusions:
First, the traditional physical distinction between inside and outside should be replaced with the online distinction between content and non-content information. Second, courts should require a search warrant that is particularized to individuals rather than Internet accounts to collect the contents of protected Internet communications. These two principles point the way to a technology-neutral translation of the Fourth Amendment from physical space to cyberspace.
I’ll let folks read the full arguments to these conclusions in Orin’s own words, but I want to suggest a clarification and a tentative objection. The clarification is that, while I think the right level of particularity is, broadly speaking, the person rather than the account, search warrants should have to specify in advance either the accounts covered (a list of e-mail addresses) or the method of determining which accounts are covered (“such accounts as the ISP identifies as belonging to the target,” for instance). Since there’s often substantial uncertainty about who is actually behind a particular online identity, the discretion of the investigator in making that link should be constrained to the maximum practicable extent.
Climategate and Development Economics
As the Copenhagen summit on global warming opens today, development economist Bill Easterly laments the intellectual corruption affecting climate science and compares it to the state of affairs in the field of development economics:
The analogy that got me interested in Climategate is of course with social science in development, where the problem is vastly worse. Advocacy on global poverty distorts everything from the data to the econometrics, as this blog frequently complains, so that credibility of development social scientists is sinking to dangerously low levels. It’s so bad that there is never a “Povertygate” scandal, because “Povertygate” is the norm rather than the exception.
Here We Go Again
In the early 1990s, two Federal Reserve studies on mortgage lending were held up by proponents of interventionist government as proof that banks were discriminating against minorities. The government swung into action with lawsuits against allegedly discriminatory lenders, HUD started pressuring Fannie Mae and Freddie Mac to target the “underserved,” and the Community Reinvestment Act was enhanced to pressure lenders into lowering their lending standards. A decade later, the housing bubble, which was fueled by short-sighted government policies, burst and the financial well-being of many minority families crumbled along with it.
In a bad case of déjà vu, it’s being reported that “regulators will be bringing pressure on banks to make greater efforts to serve poorer communities after an FDIC survey showed that more than a quarter of U.S. households have little or no financial activity through banks.” This language is eerily similar to language employed in the 1990s that fueled liberal housing loan practices we now know were downright foolish. The recent news report continues:
The survey, conducted through the Census Bureau, found that 25.6 percent of the nation’s households – representing some 60 million adults – are ‘unbanked’ or ‘underbanked’… minorities, particularly African Americans, are disproportionately part of this group. More than half the black households fell into the two categories.
‘Access to an account at a federally insured institution provides households with an important first step toward achieving financial security – the opportunity to conduct basic financial transactions, save for emergency and long-term security needs, and access credit on affordable terms,’ FDIC chairman Sheila Bair said in a statement.
It used to be the “undeserved” in the housing market who supposedly needed the government’s help. Now it’s the “underbanked.” We were told that government involvement was necessary to make housing more “affordable.” Now the government is saying access to credit needs to be more affordable.
A lot of establishment analysts oppose term limits on Congress because they claim that we need experienced leaders to deal with today’s complex policy problems. But government officials stubbornly refuse to learn from their own mistakes, as we’ve seen over and over since the housing bust.
Monday Links
- How the European Union can bring peace to the Middle East.
- Nat Hentoff on the health care debate: “We do not elect the president and Congress to decide how short our lives will be. That decision is way above their pay grades.”
- Video: What can autism teach us about economics?
- Cato’s Malou Innocent debates the troop build up in Afghanistan.
- Over at Cato Unbound, experts discuss the positive and negative outcomes of modernity.
- Podcast: Driverless cars? They aren’t as far away as you think.
How Michigan Could Save $3.5 Billion a Year
Michigan is facing a projected $2.8 billion state budget shortfall. As a result, Governor Granholm has cut $212 million from state public school spending — rousing the ire of parents and education officials around the state. But if Michigan merely converted all its conventional public schools to charters, without altering current funding formulas, it would save $3.5 billion.
Here’s how: the average Michigan charter school spends $2,200 less per pupil than the average district school — counting only the state and local dollars. Put another way, Michigan school districts spend 25 percent more state and local dollars per pupil, on average, than charter schools. Sum up the savings to Michigan taxpayers from a mass district-to-charter exodus and it comes to $3.5 billion.
Anyone who wants to check that calculation can download the Msft Excel 2007 spreadsheet file I used to compute it. It contains both the raw data from the relevant NCES Common Core of Data files, and all the calculations. Among other things, it shows total per pupil spending and the pupil teacher ratio for every charter school and every public school district in the state. (Unlike certain climatologists, some of us researchers not only keep our data around, we’re actually happy to share them).
Journalists who have questions about this file are welcome to get in touch. Note that it is also viewable, I believe, with the free OpenOffice spreadsheet program, though I haven’t tested that.
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