Archive for April, 2010
Tuesday Links
- Gene Healy: Why terrorism isn’t an existential threat: “It’s worth remembering that terrorism has always been a weapon of the weak — and it usually fails”
- Was the Iraq War worth it? Malou Innocent: “Don’t believe the hype. The Iraq war remains a mistake of mammoth proportions. And Iraq’s election represents a pyrrhic victory, as the economic, political, and moral costs of the occupation far outweigh any benefits.”
- Doug Bandow on the problem with international alliances: “Washington collects alliances like people collect Facebook friends. …Contrary to the U.S. government’s current practice, America needs fewer allies. Washington should no longer act as the world’s 9-1-1 number.”
- Podcast: “Forestalling Foreclosures Redux” featuring Mark A. Calabria.
Congress Is Hurdle to USPS Reforms
National Journal reports that two key policymakers don’t support the U.S. Postal Service’s desire to eliminate Saturday mail delivery. House Financial Services Appropriations Subcommittee Chairman Jose Serrano (D-NY) says he’ll be working with USPS management and the postal unions to avoid service cuts. And House Oversight and Government Reform Federal Workforce Subcommittee ranking member Jason Chaffetz (R-UT) announced that he too opposes the move.
Chaffetz intends to introduce legislation that would instead eliminate twelve delivery days a year. Twelve days? With the USPS facing $238 billion in losses over the next ten years, it’s hard to understand why the Republican congressman is fiddling around with such small changes.
From the article:
Chaffetz said he is concerned that if the Postal Service cuts Saturday deliveries, it could end up hurting itself in the long run by creating an opening for private delivery companies. “You have got to serve your customers, or somebody else will come in and do it for you,” he said.
What private delivery companies? UPS and FedEx are allowed to compete with the USPS on express mail delivery, but the USPS has a government-granted monopoly on regular mail. In pointing out that the USPS’s reduction in services isn’t good for customers, Chaffetz unintentionally make the cases for opening up the mails to competition from private providers.
“The challenge for the Postal Service is to become more relevant to people’s lives,” he said. “They have been cutting back … and I applaud them for that. The Postal Service is also one of the few things highlighted in U.S. Constitution. They’ve got to figure out ways to cut and make it more relevant.”
Mr. Chaffetz: The Constitution gives the federal government the power “to establish Post Offices and post Roads.” It doesn’t say the government has to have a monopoly over the provision of mail. Nor does it say that Congress must perform this service. Today, there are better private options.
The reality is that the USPS is bleeding red ink because it is becoming less relevant to people’s lives because of electronic communication. Surely Rep. Chaffetz doesn’t want the government’s mail monopolist involved in electronic correspondence to make it more “relevant”?
A story out of Finland demonstrates why that would be a bad idea. Finland’s state-owned postal service is testing a cost-cutting idea that would have it open mail, scan it, and then send an electronic copy to a digital mailbox. The original mail would then be sealed up and physically delivered, but delivery would only be done twice a week. Fins are rightly concerned about their civil liberties being violated by the government viewing their private correspondence.
The underlying idea behind the Finnish experiment is nonetheless sound. In a competitive market for mail delivery, electronic scanning and transmittal would be a more cost-effective — and thus perhaps profitable — way of getting people their mail. This could be especially appealing for costly-to-deliver rural areas, which proponents of the USPS often cite as a reason why mail privatization is untenable.
Play Ball! But Not With Taxpayer Money
As we enjoy the opening week of the new baseball season, we should reflect on the dastardly organization that spends too much money and raises the price of baseball for everyone.
No, it’s not the New York Yankees: it’s the United States government.
You see, as discussed in this recent New York Times op-ed, the price of baseball has increased all across the Major Leagues because of the tax write-off (read: subsidy) that businesses get to treat clients and employees to ball games:
There are many reasons for the price explosion, but a critical factor has been the ability of businesses to write off tickets as entertainment expenses — essentially a huge, and wholly unnecessary, government subsidy.
These deductions have led to higher ticket prices in two ways. On the demand side, they have fueled competition for scarce seats, with business taxpayers bidding in part with dollars they save through the deductions.
While baseball parks built in the 1960s and before held as many as 56,000 seats, the modern trend is toward smaller-capacity parks, with a higher percentage of total space dedicated to skyboxes. The new Yankee Stadium, the only major-league park built since 2000 with more than 44,000 seats, has 3,000 fewer seats than its 1923 predecessor but almost three times as many skybox suites.
Of course, libertarians support low general taxes for a variety of reasons, but targeted tax breaks for luxury items pad the pockets of billionaire sports team owners, give a discount to companies showing off their “generosity” to clients, and generally distort the economy, all at a cost to taxpayers (including those who aren’t even baseball fans).
Boo! America’s national pastime of baseball should not be corrupted by national and state governments’ parochial pastime of corporate welfare.
For more in-depth analysis on the business of sports, read anything by Andrew Zimbalist or Home Team by my former professor Michael Danielson. (Danielson taught a great class on the political economy of sports; my classmates who thought it would be a gut were in for a rude awakening.)
H/T: Above the Law
Is the Obama Mortgage Foreclosure Plan Legal?
While considerable attention has rightly focused on the failure of President Obama’s various mortgage foreclosure plans to actually lower the rate of foreclosures, few have bothered to even ask whether the plan is allowable under the TARP statute.
Alex Pollock at AEI first raised this issue during testimony before the Congressional Oversight Panel. Alex’s point is that TARP only allows the modification of mortgages that are actually acquired by the government. Recall the original purpose of the TARP was to buy “troubled assets.” In managing those assets, Congress required the executive branch to come up with a plan to assist the borrowers behind those troubled assets.
Apparently unlike the Treasury department, I believe we should go back to the language of the statute in determining what it allows and doesn’t allow. Section 110(b)(1) is quite clear: “to the extent that the Federal property manager holds, owns, or controls mortgages, mortgage backed securities…” Nowhere else in TARP is there any other ability to establish a mortgage modification program. In using TARP funds to pay for modifications of loans not owned by the federal government, the Obama administration is acting far outside of its legal authority under TARP.
Many, including myself, have criticized the TARP as a massive delegation of spending power from Congress to the Treasury Department. Such delegation is, in my mind, clearly unconstitutional. However, even within such a broad delegation, there are parameters in which Treasury must act. Treating TARP as simply a large pot of money to spend however Treasury chooses is nothing short of illegal.
Strategic Terrorist Interrogation
The cover story of this month’s National Interest focuses on different approaches to terrorist interrogation. Matthew Alexander, former senior military interrogator and author of How to Break a Terrorist: The U.S. Interrogators Who Used Brains, Not Brutality, to Take Down the Deadliest Man in Iraq, profiles Colonel Tito Karnavian, the chief of intelligence for Detachment 88, Indonesia’s premier counterterrorist force. Karnavian’s approach to interrogation is strategic, as opposed to the tactical scenarios that dominate the debate in America.
The goal of the interrogators is not intelligence information that can prevent future terrorist attacks, but the conversion of the extremists into advocates against violent jihad. Interrogators have, de facto, become the primary facilitators of rehabilitation. In this manner, Karnavian has turned a tactical weapon into strategic leverage, and the results speak for themselves.
Following the implementation of Karnavian’s interrogation strategy, Indonesia did not have a terrorist bombing for almost the entire three years between 2006 and 2009, no doubt chalked up to the cooperation of numerous imprisoned extremists. Two former senior JI members captured by Detachment 88 have since written books admitting their erroneous violent beliefs. One book was a national best seller in Indonesia. In comparison, U.S. interrogation strategy, although improved since the revelations of torture and abuse at Abu Ghraib in 2005, is in the Stone Age.
Slippery Slopes and the New Paternalism
At Cato Unbound this month, economist and Cato adjunct scholar Glen Whitman discusses “soft” paternalism — the attempt to manage consumers’ choices in such a way that their “real” preferences come forward.
One often-cited example takes place in the cafeteria: Put fruit and healthy snacks up front, and people will be more likely to choose them. Put the chocolate cake first, and that’s what they pick instead. Paternalism, the argument runs, lies on a continuum, and some forms of it are really quite harmless. It’s not (or not only) a boot stamping on a human face forever. It’s also the nice lady at the cafeteria, who helps you pick out healthy food. Healthy food is what you really wanted anyway. So what could be wrong with that?
Whitman, however, turns the argument around a bit: Legislators, too, suffer from bias. What if paternalistic legislation proves sort of like that chocolate cake? By placing it up front, and by making it look appealing, legislators may choose it too often, and they may neglect the healthier — but to them less appealing — choice of freedom. What if a little paternalism now turns into a lot of paternalism later? And where are our “real” preferences, anyway? Whitman offers arguments for why a slippery slope may very well exist here, and examples of how the theory of soft paternalism has developed teeth in practice.
Joining him later this week will be noted economists Richard Thaler, Jonathan Klick, and Shane Frederick, for a discussion that should last through the next couple of weeks. Be sure to stop by often and see it develop.
Unions and Government Debt
In a recent bulletin, I argued that public-sector unions impose various costs and burdens on state and local governments. Here is some more evidence.
The chart below shows a scatter plot of the union shares in state/local government workforces and state/local government debt levels as a share of state gross domestic product. Each blue dot is a U.S. state.
The variables are correlated — as the union share increases, a state tends to have a higher government debt load. The chart shows the fitted regression line in pink dots (R-square=0.27; F-stat=18; t-stat on the union share variable=4.2).
The correlation is likely caused by the fact that unionized government workers are powerful lobby groups that push for higher government-worker compensation and higher government spending in general.
(Thanks to Amy Mandler for data help and Andrew Biggs for suggestions. Andrew’s work on state debt is here).
Washington Prospers While America Suffers
Unemployment in the heartland may be high and incomes may be stagnating in most of the nation, but Washington, DC, continues to be an oasis of prosperity as more of the nation’s resources get consumed by government. The latest evidence comes from the Washington Post, which reports on the federal government’s insatiable demand for more real estate.
Evidence of the federal government’s growing influence on Washington area commercial real estate is illustrated in big deals it is working on both sides of the table: auctioning a 127,000-square-foot Bethesda building previously occupied by the National Institutes of Health and moving to snatch up vast spaces in buildings on the private market that have been vacant for months. The General Services Administration is seeking to unload the 10-story building that the NIH vacated in 2002 when it consolidated offices into other buildings in Bethesda. The recommended opening bid for the online auction, which runs from April 30 to July 2, is $14 million. At the same time, federal leasing activity is expanding, according to Jones Lang LaSalle, the real estate firm representing the government. The government signed deals for 750,000 square feet of space in the District in the first quarter of 2010, compared with 670,000 square feet in the city for all of 2009.
It’s hard to pick out the most depressing part of the article. Signing leases for more space in the first quarter of 2010 than in all of 2009 might be at the top of the list. That is presumably a good (and discouraging) measure of the growth of government. But for those who enjoy reading about incompetence and inefficiency, the government’s eight-year (and counting) project to sell one office building may be at the top of the pile.
The GSA decided to sell the 46-year-old former NIH building at 7550 Wisconsin Ave. in Bethesda eight years ago. “We have a process we have to go through before we sell a building. We have to offer it to homeless housing, to local government,” said Bob Peck, commissioner for the GSA’s Public Buildings Service.
More discouraging factoids include a six-figure increase in the number of bureaucrats (just in the DC area), and the fact that the government is going to squander huge amounts of money on green renovations, which will require taxpayers to cough up lots of money for the contractors doing the work and for five-year leases (which probably means ten, knowing the sloth-like pace of government work) so the bureaucrats can be housed elsewhere during the work.
Expansion of the government’s role in the nation’s financial markets, increased defense spending and the new health-care law are driving its demand for more space. The government is expected to increase its Washington area payroll by as many as 100,000, according to Partnership for Public Service, a nonprofit group that helps the federal government find workers. “The government spent 2009 planning for the growth. We’re going to see the growth materialize in 2010,” said Scott Homa, research manager for Jones Lang LaSalle. The government also is overhauling many of its buildings, making them energy efficient. As a result, several agencies will need to lease space in the commercial market for five years or so during renovations.
Bush, Rove, and Limited Government
Conservatives Craig Shirley and Don Devine write in the Sunday Washington Post that Karl Rove’s memoir wrongly depicts Rove and President George W. Bush as conservatives. “Big-government conservatives,” maybe, Shirley and Devine say. But not actual conservatives. After all,
From William F. Buckley Jr. to Barry Goldwater to Ronald Reagan, the creators of the modern conservative movement always taught that excessive concentration of power in government leads inevitably to corruption and the diminution of personal freedoms….
Modern American conservatism has roots in the ideas of philosopher John Locke, the founding fathers and the notion that humans’ natural state is freedom.
But Bush? He imposed strict new federal regulations on local schools and massive new costs through his prescription drug entitlement. Not to mention
steel tariffs, the creation of the Department of Homeland Security, the McCain-Feingold campaign finance law, a massive agricultural subsidy bill, and other spending and regulatory moves by the Bush administration that tilted power toward Washington and away from individuals and states.
All too true. And a point made many times by Cato Institute analysts. But Shirley and Devine could have gone further. Policies that “tilted power toward Washington”? How about the attempt to nationalize marriage law, for 200 years a matter reserved to the states? Or the Republican legislation to move the Schiavo family’s tragedy out of Florida courts and into federal court? Or they could have mentioned an administration with a vision of the Constitution that included “a president who cannot be restrained, through validly enacted statutes, from pursuing any tactic he believes to be effective in the war on terror; [and] who has the inherent constitutional authority to designate American citizens suspected of terrorist activity as ‘enemy combatants,’ strip them of any constitutional protection, and lock them up without charges for the duration of the war on terror— in other words, perhaps forever.”
The Post gave Shirley and Devine only half a page — far too little to enumerate all of the Bush administration’s assaults on limited, constitutional government. But they’ve done a service in reminding conservatives that this was no conservative administration.
Regulation and the Knowledge Problem
Glenn Reynolds, a law professor at the University of Tennessee but better known as Instapundit, writes in the Washington Examiner that the controversy over big corporations’ reporting the impact of the new health care legislation on their tax bills illustrates the “Knowledge Problem” identified by Nobel laureate F. A. Hayek in “The Use of Knowledge in Society” and other writings. Hayek pointed out that the information needed to run an economy doesn’t exist in any one database or agency. It is scattered among millions of people and made available to others by means of the price system. Planning and regulation do away with the information embodied in prices and try to improve on market outcomes by making use of far less information.
Reynolds writes, “Recent events suggest that it’s not just the economy that regulators don’t understand well enough — it’s also their own regulations.”
The United States Code — containing federal statutory law — is more than 50,000 pages long and comprises 40 volumes. The Code of Federal Regulations, which indexes administrative rules, is 161,117 pages long and composes 226 volumes.
No one on Earth understands them all, and the potential interaction among all the different rules would choke a supercomputer. This means, of course, that when Congress changes the law, it not only can’t be aware of all the real-world complications it’s producing, it can’t even understand the legal and regulatory implications of what it’s doing.
The new health care bill is going to increase the tax burden on large corporations that provide prescription drug benefits for their retirees. Companies are required by Generally Accepted Accounting Principles and Securities and Exchange Commission regulations to report any adverse changes in their expected tax liabilities. So several companies did so, producing headlines that weren’t favorable to Obamacare. Rep. Henry Waxman, chairman of the House Energy and Commerce Committee, is summoning the CEOs of those companies to a show trial in Washington to intimidate other CEOs from announcing the costs of Obamacare — at least until after the election.
Regulations interacting with each other with unanticipated effects — that’s the topic Jeffrey Friedman wrote about recently in Cato Policy Report, with regard to the financial crisis:
You may think that the government caused the financial crisis. But you don’t know the half of it. And neither does the government….
The regulators seem to have been as ignorant of the implications of the relevant regulations as the bankers were….
Omniscience cannot be expected of human beings. One really would have had to be a god to master the millions of pages in the Federal Register — not to mention the pages of the Register’s state, local, and now international counterparts — so one could pick out the specific group of regulations, issued in different fields over the course of decades, that would end up conspiring to create the greatest banking crisis since the Great Depression. This storm may have been perfect, therefore, but it may not prove to be rare. New regulations are bound to interact unexpectedly with old ones if the regulators, being human, are ignorant of the old ones and of their effects….
This premise would be questionable enough even if we started with a blank legal slate. But we don’t. And there is no conceivable way that we, the people — or our agents in government — can know how to solve the problems of modern societies when our efforts have, in fact, been preceded by generations of previous efforts that have littered the ground with a tangle of rules so thick that we can’t possibly know what they all say, let alone how they might interact to create another perfect storm.
In substance, there is a striking similarity between social democracy and the most utopian socialism. Whether through piecemeal regulation or central planning, both systems share the conceit that modern societies are so legible that the causes of their problems yield easily to inspection. Social democracy rests on the premise that when something goes wrong, somebody — whether the voter, the legislator, or the specialist regulator — will know what to do about it. This is less ambitious than the premise that central planners will know what to do about everything all at once, but it is no different in principle.
Sorry — Ravitch Not Ridiculous
In a fit of pique, I intemperately suggested in the title of my last post that the content of Diane Ravitch’s recent Washington Post op-ed was ridiculous. That was over the top: As is obvious, I disagree with Ravitch on school choice, and my review of her latest book makes clear that I am dubious about her various policy prescriptions. But, heck, we agree on much about what ails the No Child Left Behind Act, and her thoughts on choice are hardly on the fringe. So even though I think her choice critiques very wrong, one’s opinions can be thought wrong by me without qualifying as ridiculous.
That said, we do still need to talk about such things as federal teacher-quality demands…
More Ravitch Ridiculousness
Great post by Chris Edwards responding to historian Diane Ravitch’s op-ed in today’s Washington Post. For a good ripping apart of Ravitch’s reality-free thinking from an education-policy standpoint, check out my review of her new book over at School Reform News.
Oh, and let’s please get something straight: Ravitch has never been the one-time “strong supporter” of school choice she claims to have been. Sadly, this claim seems designed mainly to make it appear that she’s had some sort of serious “come (back) to public schools” moment. But as she writes in her new book, she had never really given much thought to choice until she joined the George H.W. Bush administration in 1991, and then she just tried to cram it into her “worldview.”
“The issue of choice had never really been important to me,” she writes, “but I found myself trying to incorporate the arguments for choice into my own worldview.”
Does this sound either like a strong supporter of choice, or someone who had really thought choice through and understood why and how it would work? Nope, and that comes right through in her simplistic conclusion that because really limited choice like charter schools and tiny voucher programs don’t make huge differences, all choice should be abandoned.
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