Archive for March, 2010

Tuesday Links

Posted by Chris Moody

  • Estimates of the health care overhaul’s real cost over 10 years run as high as $3.5 trillion, including $600 billion in new taxes from the start.
  • Will claims that the health care overhaul is unconstitutional get anywhere? Here is your guide to the possible legal challenges to the new law.

How Can We Be at Cyberwar if We Don’t Know What It Is?

Posted by Jim Harper

Brilliant column from William Jackson on GCN.com debunking “cyberwar”:

“The United States is fighting a cyberwar today and we are losing it,” former National Security Agency chief and national intelligence director Mike McConnell wrote in a recent op-ed column in the Washington Post. “It’s that simple.”

It is neither simple nor true. Failure to distinguish between real acts of war and other malicious behavior not only increases the risks of war, but also distracts us from more immediate threats such as online crime.

The habit of threat inflation is harmful to the country. Jackson’s welcome take on “cyber” threats earns an accolade I rarely give out: Read the whole thing.

The Establishment Is Offended

Posted by Roger Pilon

Today Politico Arena asks:

Should Republican leaders be doing more to reign in the rhetoric?

My response:

One hesitates to weigh in on this mud-slinging for fear of getting muddy oneself.  But neither should commentary on Republican and tea-party reaction to Sunday’s House vote be left to the suddenly self-righteous Democratic left:  After all, it’s their appalling disregard for democratic principles and processes that gave rise to the weekend’s demonstrations and outbursts.  So a few points are in order, simply to put things in perspective.

First, let’s not leap to factual conclusions.  Last evening the Lehrer News Hour reported (along with Politico this morning) that Rep. Randy Neugebauer shouted “baby killer” as Rep. Bart Stupak was speaking Sunday night.  Yet NPR reported that Neugebauer actually shouted “It’s a baby killer” — referring to the bill, not to Stupak.  Neither version is acceptable, but there is a difference.  Likewise, claims about protesters’ taunts should be treated cautiously as well, especially since they’ve been denied, and as yet no footage has emerged to support them.  Yet we see here at the Arena this morning that Harvard’s Theda Skocpol is writing, without a shred of evidence, that ”Quite a few Republican public officials are even flirting with threats of violence against political figures they oppose.”  So let’s not pretend that the right has a corner on irresponsibility.

Second, even if the claims about protesters’ taunts prove to be true, how is that a warrant for condemning the entire tea-party movement, or the Republican party, as many on the left are doing?  No broad political movement can control its every “member.”  Yet we find people like House Majority Whip Jim Clyburn saying that GOP leaders “ought to be ashamed of themselves for bringing these people here to Washington.”  Perhaps Rep. Clyburn has forgotten that we still have the right to protest.  That’s what the first tea party was about.  And let’s remember that George Washington had to wade into the “mob” from time to time to keep order.

And that brings me to a final point.  The symbolism of the Democratic left’s hostility to the “tea baggers” should not go unnoticed.  The tea party movement’s roots are in the American Revolution.  These ordinary Americans are protesting the Washington ”Establishment” — which presently is the Democratic juggernaut – much as American Patriots were protesting the oppressive British Establishment that was “eating out their substance” with “a long train of abuses and usurpations.”  The Democratic left should think long and hard about those parallels.  The times they are a-changin’.

Postmaster Indicates Need for Privatization

Posted by Tad DeHaven

A recent Senate Appropriations subcommittee hearing on the U.S. Postal Service’s dire financial prospects found little enthusiasm for the USPS’s idea to eliminate Saturday mail service. Financial Services subcommittee chairman Sen. Richard Durbin (D-IL) said “serious questions need to be asked and answered,” and ranking member Sen. Susan Collins (R-ME) expressed concern that it would send the USPS into “a death spiral.”

The USPS is already in a death spiral due to changes in technology, high labor costs, and costly congressional mandates that have left it facing a projected $238 billion in losses over the next ten years. The USPS says dropping Saturday service would save the USPS $3 billion a year. However, the Postal Regulatory Commission believes the savings would be significantly smaller. Regardless, if the USPS stops Saturday service then private firms should be allowed to provide Saturday mail service.

Better yet, the USPS monopoly should be completely repealed and private firms allowed to deliver mail every day of the week. Interestingly, Postmaster General John Potter’s testimony inadvertently makes a case for privatizing the USPS.

Potter notes that when private businesses are losing money, they sell off assets, close locations, and reduce employment. He cites Sears, L.L. Bean, and Starbucks as recent examples of companies making cost cutting moves in the face of declining revenues. The Government Accountability Office’s testimony noted that the USPS has more retail outlets (36,500) than McDonalds, Starbucks, and Walgreens combined. Yet, its post offices average 600 visits per week, which is only 10 percent of Walgreen’s average weekly traffic.

In his testimony, Potter states:

If the Postal Service were provided with the flexibilities used by businesses in the marketplace to streamline their operations and reduce costs, we would become a more efficient and effective organization. Such a change would also allow us to more quickly adapt to meet the evolving needs, demands, and activities of our customers, now and in the future.

This is precisely why the USPS needs to be privatized and subjected to the demands of the market and not the whims of Congress. Members of congress always raise a fuss when the USPS targets postal outlets for closure in their districts.

Potter wants Congress to suspend a requirement that the USPS pre-fund its retiree health benefits. He argues that the trust fund for these payments has a $35 billion balance, which he says is enough to pay the health premiums for its 500,000 retirees through their lifetimes.

The more fundamental problem is the existence of this generous benefit to begin with. Potter notes that private companies aren’t subject to a pre-funding mandate. But the vast majority of private companies don’t even offer retiree health benefits. The GAO also points out that the USPS retiree benefits are generous even by government standards:

USPS pays a higher percentage of employee health benefit premiums than other federal agencies (80 percent versus 72 percent, respectively). In addition, USPS pays 100 percent of employee life insurance premiums, while other federal agencies pay about 33 percent.

Potter naturally wants more flexibility in dealing with the USPS’s excessive labor costs. The average postal employee receives $83,000 a year in total compensation. Employee pay and benefits constitute 80 percent of the USPS’s cost structure, which despite increased automation has remained the same since the 1960s. But so long as the USPS remains a government enterprise, it’s hard to imagine Congress standing up to the postal unions and giving management the labor flexibility it desires.

Finally, Potter wants the USPS to have more freedom when it comes to pricing and getting into new lines of business:

We also need the ability to expand our products and services, and ensure prices for our Market-Dominant products are based on the demand and cost of each individual product.

“Market-Dominant” is an Orwellian way of saying “Government Granted Monopoly.” Again, if the Postmaster wants mail prices to have an economic rationale, then the USPS needs to be privatized so that the market can efficiently set prices. Further, the USPS has a poor track record when it comes to expanding into services not protected by its monopoly. Plus it would be competing against the private sector on advantageous terms due to its status as a government enterprise.

What Potter wants — and needs — is something that only the private sector can provide. If the Senate hearing is any indication, Congress has no present plans to relinquish its control over the dying government monopoly. Instead, the USPS will likely continue to bleed red until policymakers run out of band-aids and are finally confronted with the choice of either privatization or direct taxpayer funding.

Ireland Imposes Real Cuts on Bureaucrat Pay

Posted by Daniel J. Mitchell

Ireland may be in a recession (caused in large part by misguided housing subsidies), but there are two things worth admiring about the Emerald Isle’s public policy. Many wonks already know about the first policy, the 12.5 percent corporate tax rate that helped transform Ireland from the “sick man of Europe.” But it seems that Irish policymakers are reading Chris Edwards, because the second admirable policy is that lawmakers actually cut civil service compensation by 13.5 percent. And these are real cuts, not the type of phony gimmick you find in Washington, where something is called a “cut” simply because it didn’t increase as fast as previously planned.

A columnist writing in the UK-based Times wonders why Irish bureaucrats did not go nuts with public protests and speculates that maybe they actually understand that they have a sweetheart deal compared to their brethren in the productive sector of the economy:

Because of the budget deficit, shrinking economy and untenable level of national debt, all public service salaries will be cut by an average of 13.5 per cent, with immediate effect…and will apply to frontline public workers in health, education, transport and local services and also to MPs, Ministers of State and the Attorney-General. …Couldn’t happen, could it? Actually it has, and close to home. …public sector pay in the Republic has been cut. Not frozen, sharply cut. …although the payslips have been changed for many months now, the schools are open, the hospitals treat the sick, rubbish is collected and paper pushed around briskly enough in public organisations. Belts are tight all right and pips are squeaking; but the country whose public pay once led the EU league has not imploded into the chaos of suicidal strikes, unburied bodies, closed schools and garbage mountains, which the UK or France would expect as a matter of course if a government did any such thing. …Yet the pay cuts — I say again, 10 to 15 per cent cuts in pay, real and immediate holes in the family budget — have not caused the enraged citizenry to pull down the pillars of the temple around their own heads and everybody else’s. They just haven’t. Why? …unlike the self-righteous whiners who speak for British public service unions, middle-Ireland still knows that a secure and pensionable job is a privilege: that working in the public sector is not an altruistic gift to the nation, but a damn lucky break.

Since I have a multi-part series on “Bureaucrats vs. Taxpayers” at my International Liberty blog, I especially enjoyed this part of the column, which provides a real-world glimpse at the corrupting allure of cushy government employment:

I saw a spirited, self-mocking sketch performed by 12-year-olds in a village hall entertainment the other night about “Marty Matchmaker O’Donoghue, where every ould stocking will find an ould shoe”. The girl being advertised to the men is talked up by the matchmaker as having “a Government Job! A clerk at the council office — I tell ye, she’s a laying hen!” Friends confirm that it’s an old saying: “Marry a teacher or a nurse, you’ve got a laying hen.” It does not seem that way in boom times, but even in the UK it is becoming true.

Taxpayer Choice + Parental Choice = Education Reform That’s Constitutional

Posted by Ilya Shapiro

Arizona grants income tax credits for contributions made to school tuition organizations (“STO”).  These STOs must these donations for scholarships that allow students to attend private schools.  This statutory scheme broadens the educational opportunities for thousands of students by enabling them to attend schools they would otherwise lack the means to attend. 

The Ninth Circuit held that the tax credit program violated the Establishment Clause because many of the STOs — as it happens, a decreasing majority — provide scholarships for students to attend parochial schools.  Counsel for the defendants, including the Institute for Justice, asked the Supreme Court to review the case — and indeed to summarily reverse the Ninth Circuit, based in part on a 2002 case (Zelman v. Simmons-Harris) rejecting a similar challenge to a school voucher program.  Cato filed a brief, joined by the Foundation for Educational Choice and the American Federation for Children, supporting this request. 

Our brief argues that the funds received by STOs are the product of individual taxpayers’ “genuine and independent choice” — the touchstone by which the Court judges the religious neutrality of statutes allowing for taxpayer money to fund religious education.  Moreover, the tax credit scheme is indistinguishable from similar charitable tax deduction programs that the Court has previously held to pass constitutional muster.  While the Ninth Circuit reasoned that Arizona parents feel pressured to send their kids to parochial schools due to limited scholarships available for secular schools, it failed to consider that the share of STO money available to secular schools was nearly twice as large as the share of families choosing to send their children to secular schools. 

Far from being an impediment to parental freedom, the autonomy Arizona grants to taxpayers and STOs is ultimately essential to it.  More generally, should the lower court’s opinion be allowed to stand, the progress made to broaden the educational opportunities of students across the country will be stifled. 

The name of the case is Arizona Christian School Tuition Organization v. Winn.  The Court will likely decide before it breaks for the summer whether to take it up — and, indeed, whether to summarily reverse the Ninth Circuit.

Another Argument for Limited Government

Posted by John Samples

Megan McArdle writes:

Obviously, yes, I was upset yesterday.  I’m glad that this could bring so much joy to peoples’ hearts, and of course to know that for many people, the happiest part of passing health care reform seems to have been knowing that it made people like me unhappy

For many people, a major reason to engage in politics is the pleasure gained from schadenfreude, a German word that means “joy from injury or harm.”  Given that, shouldn’t we try to limit politics and its outcome, government? Or is a society with more schadenfreude better than one with less?

Monday Links

Posted by Chris Moody

  • Late Sunday night, the House voted 219-212 to pass the health care bill. Cato health policy experts were blogging throughout the weekend. Read all of their analysis here.
  • Don’t bet on it: Why Republicans won’t really try to repeal the health care overhaul.

Rat Falls Back on the Broken Window Fallacy

Posted by David Boaz

In Sunday’s “Pearls Before Swine” comic strip, the nefarious Rat is now a PR flak. And when his client accidentally blows up downtown, he comes up with a solid economic defense:

Pearls Before Swine

Go here for Frederic Bastiat’s original explication of the “broken window fallacy,” and for way too much detail, go to Wikipedia. John Stossel breaks some windows here and talks to Walter Williams about the implications.

Knocked Out, but Not Knocked Down: Spinning the Taliban Defeat in Marjah

Posted by Malou Innocent

Remember Marjah? The Taliban stronghold in southern Afghanistan captured several weeks ago by U.S. and Afghan forces? I remember the offensive being hailed as a big deal. Well, what happened?

Although they have been pushed out of power in Marjah, Taliban insurgents have slowly been trying to reassert some measure of control.

Marjah residents have told U.S. Marines that Taliban insurgents are coming around at night to threaten and beat Afghans who cooperate with the Americans.

In at least one confirmed case, said U.S. military officials, the Taliban beheaded a local resident suspected of working with U.S. forces. The U.S. Marines are checking out at reports of at least two other beheadings in Marjah.

If that weren’t enough, the newly appointed Afghan official for Marjah, described as “the Afghan face of the American-led military offensive,” is Haji Zahir, who served four years in a German prison for attempted murder after stabbing his stepson.

Maybe this question will come across as obvious, but what discernible interest does America have in clearing regions we can’t hold, and backing ex-cons to disperse hundreds of thousands of U.S. tax payer dollars “to repair schools, clean canals, and compensate Afghan families who lost relatives” to people who will likely turn back to the Taliban anyway?

While residents of Marjah have little affection for the Taliban, they say they nevertheless prefer them over the non-Islamic Americans and the corrupt Kabul government.

This piece in Foreign Policy, “Down the AfPak Rabbit Hole,” confirms my suspicions that the offensive in Marjah was in part a PR stunt intended to galvanize public support for the war back at home (HT: Justin Logan).

The “Rabbit Hole”‘s authors, Thomas H. Johnson, a research professor at the Naval Postgraduate School, and M. Chris Mason, a retired Foreign Service officer who served as a political officer in Paktika province, write “this battle—the largest in Afghanistan since 2001—is essentially a giant public affairs exercise, designed to shore up dwindling domestic support for the war by creating an illusion of progress.”

That sentiment was echoed several weeks ago by Greg Jaffe and Craig Whitlock of the Washington Post. They write, “The campaign’s goals are to convince Americans that a new era has arrived in the eight-year-long war and to show Afghans that U.S. forces and the Afghan government can protect them from the Taliban.”

For some sanity on this situation, and how much we have lost our way, listen to “Afghanistan and Conservatives” featuring Joe Scarborough.”

It’s NOT a Health Bill, NOT a Medicare Tax and It Can’t Possibly Cost Only $940 Billion

Posted by Alan Reynolds

  • The “reconciliation bill” is not a “health bill” but an anti-health bill.  It relies heavily on price controls, taxes and fines to punish doctors, hospitals and formerly innovative companies the produce prescription drugs and medical devices.  If we treated farmers, food companies and grocery stores the way Congress threatens to treat the health industries would anybody expect food to become better or cheaper?
  • The 3.8% tax on both labor and investment income is not a “Medicare tax.”  It’s surtax on income that goes into the slush fund, not the Medicare trust.
  • The bill could not possibly cost “only” $940 billion unless it contained a sunset provision — repealing the law after 2019.  

In fact, new spending is negligible for four years.  At that point the government would start luring sixteen million more people into Medicaid’s leaky gravy train, and start handing out subsidies to families earning up to $88,000.  Spending then jumps from $54 billion in 2014 to $216 billion in 2019.   That’s just the beginning.

To be unduly optimistic (more so than the CBO), assume that the new entitlement schemes only increased by 7% a year.   At that rate spending would double every ten years — to $432 billion a year in 2029, $864 billion a year in 2039, and more than $1.72 trillion by 2049.  That $1.72 trillion is a conservative projection of extra spending in one year, not ten.  How could that possibly not add to future deficits?

Could anyone really imagine that the bill’s new taxes and fines could possibly grow by 7% a year?   On the contrary, most of the claimed revenues are either a timing fraud (such as treating $70 billion for long-term care premiums as newly found treasure) or self-defeating.

The hypothetical tax on Cadillac plans (suspiciously postponed until 2018), for example,  is designed to discourage such plans from being offered by employers or wanted by employees — that is, it’s designed to yield less and less over time.

Moreover, the accumulating penalties on reporting joint incomes above $250,000 — a 39.6% tax, a 3.8 % income surtax, a 0.9% Medicare surtax, rapid phasing-out of deductions and exemptions — would greatly discourage any activity that would push income above $250,000.   Most obviously, no sensible family whose income is normally below that pain threshold would be so foolish as to sell enough assets to let capital gains to push them over the line.

(If even half of the punitive tax plans are enacted, I plan to launch a “249 Club” whose members pledge to never again report more than $249,000).