Archive for December, 2009
Wednesday Links
- The top five most unbelievable lines from the health care reform debate this year.
- Alan Reynolds: Hey, leave Lieberman alone. “Human interest stories are sure to get readers’ sympathy. But emotion is no substitute for common sense.”
- The money behind climate science.
- Podcast: “Trouble for the Race to the Top Fund.”
- Cato Weekly Video: Is there a contradiction between Christianity and capitalism?
House to Get its Own House in Order
The headline strikes fear: “House Takes Steps to Boost Cybersecurity,” says the Washington Post.
What boondoggle are they embarking on now?
Cybersecurity is hundreds of different problems that should be handled by thousands of different actors. The federal government is in no position to “fix” cybersecurity, as I testified in the House Science Committee earlier this year.
But this is a good news story. Realizing that its own cybersecurity practices are not up to snuff, the House of Representatives will be ramping up training for its staff.
Better awareness of the ins and outs of securing computers, data, and networks will disincline Congress to undertake a rash, sweeping “overhaul” of the systems and incentives that produce and advance cybersecurity.
Stifling Innovation with Subsidies
A couple of weeks ago I wrote about a story in Wired regarding the Department of Energy’s Advanced Technology Vehicles Manufacturing Loan Program. The gist was that government subsidies to particular manufacturers are putting non-recipients at a competitive disadvantage in obtaining private capital. The author, a former Tesla Motors official, noted that “this massive government intervention in private capital markets may have the unintended consequence of stifling innovation by reducing the flow of private capital into ventures that are not anointed by the DOE.”
An article in yesterday’s Wall Street Journal builds on this theme by detailing the political shenanigans surrounding the DOE’s awarding of a loan to Finnish high-end automaker, Fisker Automotive:
When tiny Fisker Automotive Inc. hit a financing glitch last year, threatening its plan to build a fancy gasoline-electric hybrid car in Finland, it turned to the U.S. Department of Energy…Within months, Vice President Joe Biden, the former senator from Delaware, was helping lure the embryonic car company to a shuttered General Motors Co. factory four miles from his house in Wilmington, right across the tracks from Biden Park. Soon, Fisker Automotive, a two-year-old business that has yet to sell a car, won loans from the federal government totaling $528 million.
A DOE spokesman claimed that, in the Journal’s words, the subsidy decision process is insulated from politics. Oh sure, and I drive an emissions-free car that runs on fairy dust.
As the following snippet illustrates, multiple Delaware politicians teamed up to tilt the system to their state’s advantage:
On June 1, GM said it was closing 14 plants, including the one in Delaware…State officials and politicians were determined to keep it alive. In the middle of August, they learned the plant had drawn interest from Fisker. CEO Henrik Fisker came to see it and dropped by the office of a Delaware senator, Tom Carper, a Democrat. The visit unleashed a flurry of activity. Gov. Jack Markell, also a Democrat, quickly called an old friend at Kleiner Perkins to check on Fisker. Kleiner Perkins itself has political roots. A leading partner, John Doerr, sits on President Barack Obama’s economic advisory board, and another partner is former Vice President Al Gore.
Of course, the story can’t end without some grandstanding from the master of hyperbole himself, Joe Biden:
In a rousing speech, Mr. Biden recalled how every election year, including his first in 1972, ‘I would stand here at this gate and shake hands at every shift.’ He told of many ‘long talks’ he said he had had with Mr. Fisker. He called the project ‘a metaphor for the rebirth of the country.’
The article is long, but worth the read for those concerned that American capitalism might be taking a corporatist turn for the worse.
Bland CBO Memo, or Smoking Gun?
This weekend, the Congressional Budget Office released “a very strange memo” titled, “Budgetary Treatment of Proposals to Regulate Medical Loss Ratios.” You wouldn’t know it from the title, but that little memo is the smoking gun that shows how congressional Democrats have very carefully hidden more than half the cost of their health care bills.
First, a little history. Like both the House and Senate bills, the Clinton health plan would have mandated that individuals and employers purchase private insurance. In its 1994 score of the Clinton plan, Bob Reischauer’s CBO included those mandated “private” payments in the federal budget –- i.e., as federal revenues and federal expenditures.
And yet, none of the CBO scores of this year’s bills include the costs of similar individual/employer mandates as federal revenues or federal spending.
My read of the CBO’s score of the Clinton health plan is that the private-sector mandates accounted for around 60 percent of the Clinton health plan’s total cost, the remainder being (traditional) government spending. So how is it that the CBO made the full cost of the Clinton health plan apparent to the public in 1994, but may now be revealing only 40 percent of the cost of the Obama health plan?
For some time, I’ve suspected the answer is that congressional Democrats have very carefully tailored their individual and employer mandates to avoid CBO’s definition of what shall be counted in the federal budget. Democrats are still smarting over the CBO’s decision in 1994. By revealing the full cost of the Clinton plan, the CBO helped to kill the bill.
Since then, keeping the cost of their private-sector mandates out of the federal budget has been Job One for Democratic health wonks. While head of the CBO, Obama’s budget director Peter Orszag altered the CBO’s orientation to make it more open and collaborative. One of the things about which the CBO has been more open is the criteria it uses to determine whether to include mandated private-sector spending in the federal budget. The CBO even published a paper on the topic. Read this profile of Orszag by Ezra Klein, and you’ll see that those criteria were also a likely area of collaboration with lawmakers.
The Medical Loss Ratios memo is the smoking gun. It shows that indeed, Democrats have been submitting proposals to the CBO behind closed doors and tailoring their private-sector mandates to avoid having those costs appear in the federal budget. Proposals that would result in a complete cost estimate — such as the proposal by Sen. Rockefeller discussed in the Medical Loss Ratios memo — are dropped. Because we can’t let the public see how much this thing really costs.
Crafting the private-sector mandates such that they fall just a hair short of CBO’s criteria for inclusion in the federal budget does not reduce their cost, nor does it make those mandates any less binding. But it dramatically reduces the apparent cost of the legislation. It is the reason we’re all talking about an $848 billion Reid bill, rather than a $2.1 trillion Reid bill.
If someone sold you a house, or a car, or a mutual fund this way, we would put them in jail.
ObamaCare Cost Estimate Watch: Day #180
On Day #179 of the ObamaCare Cost Estimate Watch, Sen. Jim Webb (D-Va.) wrote in The Winchester Star of his involvement in the Senate health care debate:
At the start of this debate I was one of eight senators who called on Senate Majority Leader Harry Reid to post the text and complete budget scores of the health-care bill on a public web site for review at least 72 hours prior to both the first vote and final passage. This request was agreed to, affording proper transparency in the process.
On the contrary, as I explain in this Richmond Times-Dispatch oped, Reid did not comply with Webb’s request.
Indeed, a memo recently issued by the Congressional Budget Office suggests that Reid has been working very hard to conceal the legislation’s full cost all along.
Supreme Court Erases Legal Precedent for Auto Bailout
On Monday the Supreme Court released its last orders for the calendar year. Of particular note — apart from the non-release of the long-awaited decision in the Citizens United campaign finance case — the Court dismissed the cert petition in Indiana State Police Pension Trust v. Chrysler LLC as moot and vacated the underlying Second Circuit opinion. While this is not the ideal outcome – particularly for the Indiana creditors — it is in its own way an important decision preserving the integrity of bankruptcy law.
To recap: In January, Chrysler stood on the brink of insolvency. Purporting to act under the Emergency Economic Stabilization Act, the Treasury Department extended the car company a $4 billion loan using funds from the Troubled Asset Relief Program (TARP). Still in a bad financial situation, Chrysler initially proposed an out-of-court reorganization plan that would fully repay all of Chrysler’s secured debt.
The Treasury rejected this proposal and instead insisted on a plan that would completely eradicate Chrysler’s secured debt, hinging billions of dollars in additional TARP funding on Chrysler’s acquiescence. When Chrysler’s first lien lenders refused to waive their secured rights without full payment, the Treasury devised a scheme by which Chrysler, instead of reorganizing under a chapter 11 plan, would sell its assets free of all secured interests to a shell company, the New Chrysler.
Chrysler was thus able to avoid the “absolute priority rule,” which provides that a court should not approve a bankruptcy plan unless it is “fair and equitable” to all classes of creditors. The forced reorganization amounted to the Treasury redistributing value from senior, secured creditors to debtors and junior, unsecured creditors. The government should not have been allowed, through its own self-dealing, to hand-pick certain creditors for favorable treatment at the expense of others who would otherwise enjoy first lien priority.
While the Court’s ruling prevents the creditors from collecting what would have otherwise been considered their rightful portion of the liquidation, it also erases a terrible precedent from the federal judiciary’s books and reaffirms years of settled bankruptcy law. A decision upholding the Second Circuit’s ruling would have undercut the established practices of bankruptcy and introduced even more uncertainty into a still-uneasy market.
To put it more broadly, the bankruptcy laws are in place to ensure that debts are paid in an established and fair manner and not at the whim of whatever political actors happen to be in power at the time. Taking away that assurance stifles investment and thereby hurts the economy.
Cato joined the Washington Legal Foundation, the Allied Educational Foundation, and George Mason law professor Todd Zywicki on a brief supporting the creditors’ petition that you can read here. And you can watch Cato’s policy forum on the auto bailout here.
Obama, American Nationalism, and the Weird Anti-Materialism of the Foreign Policy Elite
Matt Yglesias puts down the bloody shirt long enough to make the modest-on-its-face claim that “actions, not words, will clarify Obama’s foreign policy.” I don’t think that’s quite right.
In one sense, of course, it is. For the bean counters among us, the outcomes are the real metric: whether the United States remains the sole superpower on the planet; whether a diplomatic resolution can be reached with Iran; whether Obama can (assuming he has has any intention to) get our military out of Iraq; whether his spun-like-cotton-candy Afghanistan policy can stabilize that sorry land — these are the things we’ll be looking at.
But the more important thing in the short term for Obama is probably to slake the nearly-unquenchable thirst of the David Brookses of the world — and probably the American people — to have their identities stroked. To take the most recent example, Brooks, William Kristol, Robert Kagan, and the Foreign Policy Elite of whom they are avatars were in desperate need of a cold shower and a trip to the nearest confessional after Obama indulged them by unsheathing the Mighty and Awesome Totem of American nationalism — before a crowd of peacey Norwegians no less. To take another example, witness the veritable panic, the hysterical and fluttering response to the imaginary Obama “apology tour” that didn’t exist and had no affect on anything in any event.
Indeed the Foreign Policy Elite is so captivated by the rhetoric, imagery, and perhaps most importantly the identity surrounding U.S. foreign policy it hardly has time to think seriously about the material realities. There are of course examples where analysts simply misrepresent material reality — witness this ridiculous characterization of Obama’s boost in defense spending as an “assault” on the defense budget — but in general the foreign policy commentariat seems more interested in how American power makes them feel than it is on the outcomes it produces. And witness the frenzy over the Oslo speech, the “apology tour” claptrap, or the whining about Obama’s restraint from calling on the Iranian people to start a revolution.
Charles Krauthammer, in a recent essay, went so far in the anti-materialist direction to claim that “decline is a choice.” “Decline — or continued ascendancy — is in our hands.” Of course, it isn’t always a choice, says Krauthammer. The British had it coming, for example, but the crucial factors in Krauthammer’s telling weren’t imperial overextension and the relative waning of its latent power but rather “the civilizational suicide that was the two world wars, and the consequent physical and psychological exhaustion.” Thus, nations decline in large part because of sapped will — perhaps this would be the foreign policy equivalent of the “mental recession” we heard about a year ago. If this is right, keeping a careful eye on will-sapping things is more than a parlor game.
But of course Krauthammer’s charge that Obama is willfully precipitating American decline cannot be substantiated by reference to material factors, so it’s perhaps no coincidence that he takes aim primarily at Obama’s “demolition of the moral foundations of American dominance.” Krauthammer’s central piece of evidence is telling:
In Strasbourg, President Obama was asked about American exceptionalism. His answer? “I believe in American exceptionalism, just as I suspect that the Brits believe in British exceptionalism and the Greeks believe in Greek exceptionalism.” Interesting response. Because if everyone is exceptional, no one is.
Reading this, I was reminded of Conor Cruise O’Brien’s observation that
Ideally those responsible for international affairs ought to be able to understand and moderate the holy nationalism of their own country and to discern, even when disguised, the operations and limits of holy nationalism in rival countries as well as in third-party countries.
Unfortunately this may be too much to hope for. There are serious cognitive difficulties involved. Any nationalism inherently finds it hard to understand any other nationalism or even to want to understand it. This is particularly true of holy nationalism. Rejection of the other is part of the holiness.
All of this is enough to make you wonder then — if Obama wanted to, could he just keep the opinion columnists — and the American people — happy with a regular genuflection at the altar of American nationalism rather than by providing them with actual wars and actual crusading? Would he if he could?
Cell Phone Searches? There’s an App for That.
Police hoping to rummage through a suspect’s cell phone after an arrest must apply for a warrant, the Ohio Supreme Court has ruled. That apparently makes it the first court to address a question I first wrote about two years ago, after Adam Gershowitz broached it in a law review article.
Normally, when police arrest someone—and recall that even trivial offenses may provide formal grounds for arrest—they’re entitled to conduct an incidental search of the person and their immediate vicinity, nominally for the purpose of uncovering any weapons and preventing the destruction of contraband. The new wrinkle as Gershowitz noted, is that we’ve begun routinely carrying vast stores of personal data around with us in our pockets: photos, correspondence, music and movies, Internet browsing histories, even whole libraries of books. What’s more, these little archives are typically connected, sometimes automatically, to still more personal information held remotely: mailboxes, calendars, bank accounts, purchasing histories, or in principle just about anything accessible online.
Suddenly a narrow, reasonable-sounding exception to the ordinary Fourth Amendment warrant requirement starts looking like a pretty huge loophole. The quantity of personal “papers and effects” that can be stored in an ordinary phone would have filled a house just a few decades ago. But if those smartphones are subject to “search incident to arrest,” there’s no longer any need to bother with judicial authorization for the search of a private home. And since a legal system governed by precedent subjects digital technologies to the tyranny of bad metaphors, there’s a disarmingly strong argument to be made that smartphones should be treated like any other physical “closed container”—a digital backpack or purse, at least with respect to the data stored locally on the phone.
This case involved more conventionally phone-like information: calling records. But the Court nevertheless saw the danger inherent in treating portable data storage devices as mere “containers,” holding that searches of phones were reasonable only to the extent they could be linked to the twin justifications of safety and preventing destruction of evidence. But as the ruling and dissent both note, there are a handful of precedents that appear to cut in the other direction. The question now is whether other courts will follow Ohio’s lead or remain mired in inapposite comparisons to knapsacks and cigarette packs.
REAL ID Retreats Yet Again
Several different outlets are noting the quiet passing of a Department of Homeland Security deadline to implement our national ID law, the REAL ID Act.
In May of 2008, with many states outright rejecting this national surveillance mandate, the DHS issued blanket waivers and set a new deadline of December 31, 2009 by which states were supposed to meet several compliance goals.
They have not, and the threat that the DHS/Transportation Security Administration would prevent Americans from traveling has quieted to a whimper.
The reason why? The federal government would be blamed for it. As Neala Schwartzberg writes in her review of the push and pull over REAL ID:
If I was a betting person (and I am from time to time) I’d bet the backed-up-down-the-corridor traveler who is then turned away after presenting his or her state-issued, official complete with hologram ID will blame Homeland Security.
Does the ongoing collapse of REAL ID leave us vulnerable?
Richard Esguerra of the Electronic Frontier Foundation says in this Wired article that REAL ID “threatens citizens’ personal privacy without actually justifying its impact or improving security.”
REAL ID remains a dead letter. All that remains is for Congress to declare it so. And it may be dawning on Congress that passing it a second time under the name “PASS ID” will not work.
The Problem Is Spending, not Deficits
Reckless spending increases under both Bush and Obama have resulted in unprecedented deficits. Congress will soon be forced to increase the nation’s debt limit by an astounding $1.8 trillion. Government borrowing has become such a big issue that some politicians are proposing a deficit reduction commission, which may mean they are like alcoholics trying for a self-imposed intervention.
But all this fretting about deficits and debt is misplaced. Government borrowing is a bad thing, of course, but this video explains that the real problem is excessive government spending.
Fixating on the deficit allows politicians to pull a bait and switch, since they can raise taxes, claim they are solving the problem, when all they are doing is replacing debt-financed spending with tax-financed spending. At best, that’s merely taking a different route to the wrong destination. The more likely result is that the tax increases will weaken the economy, further exacerbating America’s fiscal position.
Tuesday Links
- Whether you’re insured, uninsured, get health insurance on your own or through an employer, own a small business or work for someone else, this is what the health care bill means for you.
- An update on the hidden taxes in the health care bill.
- Why Obama should order the DEA to make more pot available for medical research.
- The U.S. Constitution mentions only three federal crimes (treason, piracy, and counterfeiting). Today, there are more than 4,000.
- Podcast: “Myths of Health Care Reform.”
Curtain Call for the ‘Public Option’ Sideshow
Senate Democrats now appear to be jettisoning the idea of creating a new government program to snuff out compete with private insurance companies. It was an audacious proposal from the start, as it made their health care plan even more left-wing than the Clinton plan, which voters soundly rejected for being too statist.
Yet it was always a sideshow that helpfully distracted the Left, the Right, and the mainstream from what shrewd Democrats and their allies at AHIP have really wanted all along: an individual mandate forcing all Americans to purchase health insurance under penalty of law.
As I argue in this Cato study, an individual mandate gives government more (and more immediate) control over Americans’ health care than even the so-called “public option” would. As it has in Massachusetts, an individual mandate will allow government to control what kind of insurance you buy, how much you pay, how insurers pay doctors, where doctors report to work, how doctors practice medicine, and what kind of medical care you get.
The question now is whether the Left, the Right, and the mainstream will recognize the Senate health care bill for what it is: a massive $450 billion bailout for private insurance companies that will drive health insurance premiums and taxes higher while reducing quality, all for the benefit of a small cadre of Democrats with a preternatural need to control other people’s health care.
(Cross-posted at Politico‘s Health Care Arena.)
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