Archive for April, 2010
19 U.S. States Sold $1 Billion or More in China in 2009
The U.S.-China Business Council has performed a valuable public service by marshalling state-by-state figures on exports to China. In its annual survey, released this morning, the USCBC documents that 19 states exported $1 billion or more in 2009 to China, which is now the third largest market for U.S. exports.
In a statement accompanying the report, the USCBC noted that exports to China declined only slightly in 2009, compared to a 20 percent plunge in exports to the rest of the world. Top U.S. exports to China last year were computers and electronics, agricultural products, chemicals, and transportation equipment.
The USCBC figures tend to undercut complaints that China’s currency policies have stymied U.S. exports to that country. In fact, as I argued in an op-ed in the Los Angeles Times last week, since 2005, U.S. exports to China have been growing three times faster than our exports to the rest of the world.
There is agreement across the spectrum that the Chinese government should continue to move toward a more flexible, market-priced currency. But the export numbers do not give any support to the critics who want to threaten sanctions against China. In fact, as I concluded in my op-ed:
If the Obama administration hopes to double U.S. exports in the next five years, as the president announced in his State of the Union address, it should praise China for its growing appetite for U.S. goods and services, not threaten it with trade sanctions. Any company hoping to double its sales in the next five years would be foolish to pick a needless fight with one of its best customers.
Obama’s Fannie and Freddie Amnesia
Peter Wallison calls attention to President Obama’s amnesia regarding events that precipitated Fannie Mae and Freddie Mac’s collapse. Writing in the Wall Street Journal, Wallison points out that in 2005 then-Senator Obama joined with his Democratic colleagues in stopping legislation that would have helped rein in the government-sponsored housing duo’s risky behavior:
The bill would have established a new regulator for Fannie and Freddie and given it authority to ensure that they maintained adequate capital, properly managed their interest rate risk, had adequate liquidity and reserves, and controlled their asset and investment portfolio growth.
These authorities were necessary to control the GSEs’ risk-taking, but opposition by Fannie and Freddie—then the most politically powerful firms in the country—had consistently prevented reform.
The date of the Senate Banking Committee’s action is important. It was in 2005 that the GSEs—which had been acquiring increasing numbers of subprime and Alt-A loans for many years in order to meet their HUD-imposed affordable housing requirements—accelerated the purchases that led to their 2008 insolvency. If legislation along the lines of the Senate committee’s bill had been enacted in that year, many if not all the losses that Fannie and Freddie have suffered, and will suffer in the future, might have been avoided.
The president’s complicity in the housing collapse hasn’t stopped him from pinning the blame on Republicans, “special interests,” and Wall Street “fat cats.” As he does with other problems, the president blames everyone except himself and his party.
As I recounted in a Cato Policy Analysis, Fannie and Freddie epitomized the tawdry relationship between businesses that receive special federal breaks and policymakers. Democrats, including Obama’s chief of staff Rahm Emanuel, played a key role in facilitating Fannie and Freddie’s destructive activities. Emanuel, a then recent senior adviser to President Clinton, was appointed by Clinton to Freddie Mac’s board of directors, where he earned $320,000 in compensation and sold company stock worth more than $100,000.
Then there’s the current Office of Management and Budget director, Peter Orszag. In 2002, Fannie Mae commissioned a paper authored by Nobel Laureate Joseph Stiglitz, Jonathan Orszag, and Peter Orszag, who was then at the Brookings Institution. The study concluded that “the probability of default by the GSEs is extremely small.” Oops.
Given the company Obama keeps, it’s not surprising that the administration still hasn’t come up for a plan on what to do with Fannie and Freddie.
The administration has intentionally not incorporated Fannie and Freddie into the federal budget in order to hide the cost to taxpayers. And on Christmas Eve the administration quietly announced that the government would cover all of Fannie and Freddie’s losses beyond the original $400 billion limit through 2012. The Congressional Budget Office estimates that the final cost to taxpayers for bailing out Fannie and Freddie will approach that figure, although Wallison calls that projection “optimistic.”
See this essay for more on the problems the federal government causes in the housing market.
Don’t Give Up on the American People…at Least not Yet
Gloominess and despair are not uncommon traits among supporters of limited government — and with good reason. Government has grown rapidly in recent years and it is expected to get much bigger in the future. To make matters worse, it seems that the deck is stacked against reforms to restrain government. One problem is that 47 percent of Americans are exempt from paying income taxes, which presumably means they no longer have any incentive to resist big government. Mark Steyn recently wrote a very depressing column for National Review Online about this phenomenon, noting that, “By 2012, America could be holding the first federal election in which a majority of the population will be able to vote themselves more government lollipops paid for by the ever shrinking minority of the population still dumb enough to be net contributors to the federal treasury.” Walter Williams, meanwhile, has a new column speculating on whether this cripples the battle for freedom:
According to the Tax Policy Center, a Washington, D.C., research organization, nearly half of U.S. households will pay no federal income taxes for 2009…because their incomes are too low or they have higher income but credits, deductions and exemptions that relieve them of tax liability. This lack of income tax liability stands in stark contrast to the top 10 percent of earners, those households earning an average of $366,400 in 2006, who paid about 73 percent of federal income taxes. …Let’s not dwell on the fairness of such an arrangement for financing the activities of the federal government. Instead, let’s ask what kind of incentives and results such an arrangement produces and ask ourselves whether these results are good for our country. …Having 121 million Americans completely outside the federal income tax system, it’s like throwing chum to political sharks. These Americans become a natural spending constituency for big-spending politicians. After all, if you have no income tax liability, how much do you care about deficits, how much Congress spends and the level of taxation?
Steyn and Williams are right to worry, but the situation is not as grim as it seems for the simple reason that a good portion of the American people know the difference between right and wrong. Consider some of the recent polling data from Rasmussen, which found that “Sixty-six percent (66%) believe that America is overtaxed. Only 25% disagree. Lower income voters are more likely than others to believe the nation is overtaxed” and “75% of voters nationwide say the average American should pay no more than 20% of their income in taxes.” These numbers contradict the hypothesis that 47 percent of Americans (those that don’t pay income tax) are automatic supporters of class-warfare policy.
So why are the supposed free-riders not signing on to the Obama-Reid-Pelosi agenda? There are probably several reasons, including the fact that many Americans believe in upward mobility, so even if their incomes currently are too low to pay income tax, they aspire to earn more in the future and don’t want higher tax rates on the rich to serve as a barrier. I’m not a polling expert, but I also suspect there’s a moral component to these numbers. There’s no way to prove this assertion, but I am quite sure that the vast majority of hard-working Americans with modest incomes would never even contemplate breaking into a rich neighbor’s house and stealing the family jewelry. So it is perfectly logical that they wouldn’t support using the IRS as a middleman to do the same thing.
A few final tax observations:
The hostility to taxation also represents opposition to big government (at least in theory). Rasumssen also recently found that, “Just 23% of U.S. voters say they prefer a more active government with more services and higher taxes over one with fewer services and lower taxes. …Two-thirds (66%) of voters prefer a government with fewer services and lower taxes.”
There is a giant divide between the political elite and ordinary Americans. Rasmussen’s polling revealed that, “Eighty-one percent (81%) of Mainstream American voters believe the nation is overtaxed, while 74% of those in the Political Class disagree.”
Voters do not want a value-added tax or any other form of national sales tax. They are not against the idea as a theoretical concept, but they wisely recognize the politicians are greedy and untrustworthy. Rasumussen found that “just 26% of all voters think that it is even somewhat likely the government would cut income taxes after implementing a sales tax. Sixty-six percent (66%) believe it’s unlikely to happen.”
Fiscal restraint is a necessary precondition for any pro-growth tax reform. If given a choice between a flat tax, national sales tax, value-added tax, or the current system, many Americans want reform, but it is very difficult to have a good tax system if the burden of government spending is rising. Likewise, it would be very easy to have a good tax system if we had a federal government that was limited to the duties outlined in Article I, Section VIII, of the Constitution.
Republicans should never acquiesce to higher taxes. All these good numbers and optimistic findings are dependent on voters facing a clear choice between higher taxes and bigger government vs lower taxes and limited government. If Republicans inside the beltway get seduced into a “budget summit” where taxes are “on the table,” that creates a very unhealthy dynamic where voters instinctively try to protect themselves by supporting taxes on somebody else — and the so-called rich are the easiest target.
Last but not least, I can’t resist pointing out that I am part of a debate for U.S. News & World Report on the flat tax vs. the current system. For those of you who have an opinion on this matter, don’t hesitate to cast a vote.
How Much Government Snooping? Google It Up!
The secrecy surrounding government surveillance is a constant source of frustration to privacy activists and scholars: It’s hard to have a serious discussion about policy when it’s like pulling teeth to get the most elementary statistics about the scope of state information gathering, let alone any more detailed information. Even when reporting is statutorily required, government agencies tend to drag their heels making statistics available to Congress — and it can take even longer to make the information more widely accessible. Phone and Internet companies, even when they join the fight against excessive demands for information, are typically just as reluctant to talk publicly about just how much of their customers’ information they’re required to disclose. That’s why I’m so pleased at the news that Google has launched their Government Requests transparency tool. It shows a global map on which users can see how many governmental demands for user information or content removal have been made to Google’s ever-growing empire of sites — now including Blogger, YouTube, and Gmail — starting with the last six months.
So far, the information up there is both somewhat limited and lacking context. For instance, it might seem odd that Brazil tops the list of governmental information hounds until you bear in mind that Google’s Orkut social network, while little-used by Americans, is the Brazilian equivalent of Facebook.
There are also huge gaps in the data: The United States comes in second with 3,580 requests from law enforcement at all levels, but that doesn’t include intelligence requests, so National Security Letters (tens of thousands of which are issued every year) and FISA warrants or “metadata” orders (which dwarf ordinary federal wiretaps in number) aren’t part of the tally. And since China considers all such government information requests to be state secrets — whether for criminal or intelligence investigations — no data from the People’s Republic is included.
Neither is there any detail about the requests they have counted — how many are demands for basic subscriber information, how many for communications metadata, and how many for actual e-mail or chat contents. The data on censorship is similarly limited: They’re counting governmental but not civil requests, such as takedown notices under the Digital Millennium Copyright Act.
For all those limits — and the company will be striving to provide some more detail, within the limits of the law — this is a great step toward bringing vital transparency to the shadowy world of government surveillance, and some nourishment to the data-starved wretches who seek to study it. We cannot have a meaningful conversation about whether censorship or invasion of privacy in the name of security have gone too far if we do not know, at a minimum, what the government is doing. So, for a bit of perspective, we know that U.S. courts reported a combined total of 1,793 (criminal, not intel) wiretaps sought by both federal and state authorities. Almost none of these (less than 1 percent) were for electronic interception.
This may sound surprising, unless you keep in mind that federal law establishes a very high standard for the “live” interception of communications over a wire, but makes it substantially easier — under some circumstances rather terrifyingly easy — to get stored communications records. So there’s very little reason for police to jump through all the hoops imposed on wiretap orders when they want to read a target’s e-mails.
If and when Google were to break down that information about requests — to show how many were “full content” as opposed to metadata requests — we would begin to have a far more accurate picture of the true scope of governmental spying. Should other major players like Yahoo and Facebook be inspired to follow Google’s admirable lead here, it would be better still. Already, though, that one data point from a single company — showing more than twice as many data requests as the total number of phone wiretaps reported for the entire country — suggests that there is vastly more actual surveillance going on than one might infer from official wiretap numbers.
Policing for Profit
The Institute for Justice has produced a study, Policing for Profit, which highlights the abuse of civil asset forfeiture laws. Law enforcement agencies are empowered across the nation to seize and keep property suspected of involvement in criminal activity. Unlike criminal asset forfeiture, however, with civil forfeiture, a property owner need not be found guilty of a crime—or even charged—to permanently lose her cash, car, home or other property.
Most state laws are written in such a way as to encourage police agents to pursue profit instead of seeking the neutral administration of justice. The report grades each state and the federal government on its forfeiture laws and other measures of abuse. The results are appalling: Six states earned an F and 29 states and the federal government received a grade of D.
Institute for Justice has more on the report here, including a video showing the injustice created by these laws.
Cato is holding an event to highlight the findings of this report on Wednesday, April 28. Please join us for a discussion of policing, constitutional rights, and government accountability. You can register here.
Ending Title IX Survey a “No-Brainer”?
When kids want to know if other kids want to play a game they just ask, “Hey, wanna play?”
Apparently, that kind of straightforward interest assessment won’t cut it with the Obama administration, which today announced that it is eliminating the option for schools to survey women about their desires to play intercollegiate sports in order to comply with Title IX. The only safe way for schools to comply with the law, as a result, will be to have men and women participate in athletics in almost perfect proportion to their share of total enrollment, and without regard to how potentially disproportionate their desires to play.
In announcing the logic-leaping change, Vice President Biden said it was a “no-brainer.” That’s true, but not in the way Biden intended.
The main problem, though, almost certainly isn’t that Title IX supporters can’t see how obvious and straightforward a survey is for assessing interest in playing sports. The main problem is likely that many supporters don’t actually want women to be able to express their interest, lest its relative paucity be revealed. And, a survey would almost certainly show a big interest gap, as evidenced by three to four times as many men playing college intramural sports, or men flocking to sports sites on the internet while women clearly prefer social networking.
Of course, the fairest way to judge women’s interest in intercollegiate athletics isn’t a survey — which can’t easily capture intensity of interest – but letting women reveal their preferences by freely choosing between schools that offer lots of athletic opportunities and schools that don’t. And don’t say that that wouldn’t work because women would be systematically barred from the playing fields: Constituting nearly 57 percent of enrollment at four-year schools, colleges have huge incentives to offer women what they want. Which seems, sadly, to be exactly what Title IX supporters are afraid of.
Larry Downes on Internet “Reclassification”
A few weeks ago, the Court of Appeals for the D.C. Circuit rejected the FCC’s claim of authority to regulate Internet service. That was good news—and it sure didn’t create a crisis. It meant that the FCC would have to get authority from Congress if it wanted to regulate the Internet.
But a little hiccup in that plan quickly emerged: Congress won’t let the FCC regulate the Internet. Bills to do that have been floating around Capitol Hill for years, and they’ve never gotten traction.
So the proponents of government-controlled Internet access services have worked up an end-run around Congress: They want the FCC to try to reclassify Internet access from an unregulated “information service” to a “telecommunications service,” subject to common carrier regulation, like the monopoly phone system used to be (. . . and still is, generations after the monopoly ended).
Well, Larry Downes has been kicking the “reclassification” idea up and down the field. To relax, he’s been jumping up and down on ”reclassification.” Recently, Downes had a dream in which he took out a gun and shot “reclassification.” When he awoke, he did not apologize.
I recommend reading his post on the TechLiberationFront blog.
School Laptop Spycams Took 56,000 Pictures
Last week, I wrote that we’d learned that the Lower Merion School District may have gathered many more photos of more students than had previously been revealed. Now, the Philadelphia Inquirer has put a number on it: A security program installed on laptops assigned to students captured 56,000 images over the course of two years, including screenshots (showing programs in use and private messages being sent) and surreptitious webcam photos of students at home.
Many of these images, it should be noted at the outset, do appear to have come from laptops that really had been stolen. Almost two-thirds of the total came from six laptops that had been stolen from a high school gym, and which kept transmitting for almost six months, though even there it’s a close question whether a warrant should have been obtained. (Why it took six months to recover the laptops with an active security program running is a good question for another time.) But many of those pictures seem much harder to justify:
[I]n at least five instances, school employees let the Web cams keep clicking for days or weeks after students found their missing laptops, according to the review. Those computers – programmed to snap a photo and capture a screen shot every 15 minutes when the machine was on – fired nearly 13,000 images back to the school district servers.
Emphasis added. The district also says it only once activated the tracking program because a student had not paid the $55 insurance fee required before taking a laptop home. Blake Robbins, the student whose lawsuit brought the story to national attention, says that one case was his. That raises obvious questions about whether school officials might have exercised their discretion to activate the tracking program more readily in the case of particular students. The activation procedure itself hardly imbues one with great confidence: Apparently 10 school officials had the authority to request laptop tracking, which they might do with a simple informal e-mail.
Just turn this over in your head for a moment. You’ve got ten different administrators—and in practice, the network techs themselves—able to turn a child’s home laptop into a remote surveillance camera just by sending an e-mail reporting that a laptop is missing, or that a fee didn’t get paid on time. The laptop can take thousands of photos over the course of days or weeks, with neither parents nor students any the wiser until a scandal forces closer scrutiny. If Robbins hadn’t been confronted, or if administrators had made a point of deleting these pictures of children at home rather than keeping them lying around in storage indefinitely, there’s no reason to think anyone would ever have known. How many tens of thousands of parents have kids in one-to-one school laptop programs now? What don’t they know?
Court Ruling Is About Free Speech, Not Animal Cruelty
As expected from the oral argument in U.S. v. Stevens last fall – when Justice Alito was alone in expressing some support for the government’s position – the Court on Tuesday upheld the First Amendment by declining to add a category of unprotected speech. This was not, after all, a case about the “human sacrifice channel” or Michael Vick’s greatest dog fights. Indeed, cruelty to animals should be and is punished everywhere in the country. Instead, at issue here was a broadly drawn “depiction of animal cruelty” statute that could have ensnared Spanish tourism brochures or hunting instructional videos. More fundamentally, the Court rightly rejected the government’s proposed weighing of the “value” of speech against its “social cost.” That’s simply not the way Americans view the First Amendment.
The case is also notable because a solid majority of the Court rejected the “speech balancing test” defended by Solicitor General Elena Kagan, often mentioned as being on the short list of candidates to succeed retiring Justice John Paul Stevens. Chief Justice Roberts’ opinion, joined by all of the panel’s liberal justices, went so far as to call that argument by Kagan “startling and dangerous.” That is the kind of legal reproach that tends to be revisited at confirmation hearings.
Whitewashing Progressivism
Damon Root points out that the Center for American Progress has a particularly one-sided view of “The Progressive Tradition in American Politics.” [.pdf] To add to what Root is saying, my view is that American politics is essentially tribal warfare and an important factor in tribal warfare is the cohesion of the tribes. One way to accomplish this is by romanticizing history to create a powerful identity with which the tribesmen want to associate themselves. A political movement needs heroes, villains, narrative. But CAP’s account of the Progressive movement’s history is remarkably one-sided.
When I ticked over to CAP’s “Progressive Tradition” document [.pdf], I looked to see whether they included Wilson’s 1916 reasoning that it was “in order to keep the white race or part of it strong to meet the yellow race — Japan, for instance, in alliance with Russia, dominating China — [that made it] wise to do nothing” with respect to the war in Europe. They did not. In fact, the authors select the passive voice for describing Wilson’s slapdash diplomacy that sucked America into the war: “In his second term, he became preoccupied with international affairs due to the U.S. entry into World War I.” This phrasing makes it sound like “the U.S. entry” was an act of God, not an act of Wilson. Moreover, if someone without any prior knowledge read the document they would be painfully unaware that the reason Wilson “became preoccupied with international affairs” was because he got us into a war.
George Creel
What about the Committee on Public Information, a government propaganda machine that made George Bush look like Glenn Greenwald? The CPI worked in concert with (no kidding) the “Boy Spies of America” to root out insufficiently pro-war thinking. CPI’s perhaps most metaphysical pronouncement was that U.S. entrance to the Great War was, in fact, “a Crusade not merely to re-win the tomb of Christ, but to bring back to earth the rule of right, the peace, goodwill to men and gentleness he taught.” What about Roosevelt’s puffed-up belligerence, again foreshadowing Bush, in stating that “He who is not with us, absolutely and without reserve of any kind, is against us, and should be treated as an alien enemy”? What about the Palmer Raids, named for ur-Progressive and Attorney General A. Mitchell Palmer, wherein the U.S. Government ransacked union halls and homes, snatched up prisoners and held them without access to counsel or courts, and engaged in mass, summary, and unilateral deportations? Not a word.
As to the Red Scare more generally, the best the authors can do is to shrug that as Wilson’s “general intolerance of dissent during World I became exacerbated by fear of the 1917 Russian Revolution, he played a central role in promoting the Red Scare of 1917-20. The Red Scare made domestic activism a target of both police suppression and nativist sentiment, producing an atmosphere hardly conducive to the cause of progressive reform.” Is that supposed to be a denunciation?
In contrast to all this obfuscation and equivocation, poor Warren Harding comes in for a soaking for having produced “a sharp increase in racial violence and the rise of the Ku Klux Klan, new restrictions on immigration, rises in protective tariffs, increases in economic concentration, and tax cuts for the rich.”
Imagine if a conservative group came out with a history of American conservative thought that expressly linked modern American conservatism to the political thought of, say, John C. Calhoun, with only mealy-mouthed “to be sure” language like that used by CAP with respect to Progressivism. Lefties would be outraged, and rightly so. Will CAP clear the air on the Progressive movement’s history of racism, imperialism, executive supremacism and contempt for civil liberties? I bet I know the answer.
Don’t Confuse Me with the Facts
Opposition is building to the proposed D.C. Voting Rights Act because it also restricts D.C.’s draconian gun-control laws. Mary G. Wilson, president of the League of Women Voters of the United States, and Billie Day, president of the League of Women Voters of the District of Columbia, said today that “asking citizens to sacrifice their safety in order to have representation in Congress is unacceptable.”
And on NPR’s Morning Edition today, we heard the thoughts of D.C. councilwoman Mary Cheh, my con law professor: “I would rather wait to eternity before I bow down to the gun lobby and say ‘The only way I’m gonna get this is if we give up the right to protect ourselves.’”
The District’s gun laws protect us? By keeping guns out of the hands of criminals?
Libertarianism and Big Business: A Dissent
The March-April issue of Cato Policy Report featured a discussion among Timothy Carney, Uwe Reinhardt, and Ross Douthat of Carney’s book Obamanomics: How Barack Obama Is Bankrupting You and Enriching His Wall Street Friends, Corporate Lobbyists, and Union Bosses. The tenor of the discussion was reflected in the title, ”Big Business, Big Government, and Libertarian Populism.” Richard L. Gordon, a distinguished economist emeritus at Pennsylvania State University and a Cato adjunct scholar, took strong issue with all three commenters and sent us the following rebuttal, which we’re pleased to publish here:
The March/April Cato Policy Report covered a January 2010 Cato Book Forum on Timothy P. Carney’s Obamanomics. Carney summarized his book and there were responses from Uwe Reinhardt, a Professor at Princeton noted for advocacy of strong government intervention in health care, and Ross Douthat, a (first-year) New York Times columnist, a self-styled conservative who (from scanning his columns) seems a weak one. The result was three tirades about how big business runs government. It is surprising in the twenty-first century to see outside of WhiteHouse.gov, movies, and television dramas such naïve attacks on the power of big business. This is not the libertarianism that I know. However, superficially plausible dominance theories are too convenient not to revive frequently, regardless of enormous refutations. Thus, some key, familiar points need recollection.
The charge of big-business dominance has at least three flaws. First, it is a myth. Politicians created the massive growth of government with more input from intellectuals than from business executives. Second, it reverses causation; government ensnares industry. Third, it is absurd since big business, however defined, consists of diverse, often conflicting companies.
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