Archive for September, 2010
Democrats Turn on Trade in Desperation
In the 2006 and 2008 election cycles, Republican candidates for Congress tried to save their bacon by running against immigration. In 2010, according to the Wall Street Journal this morning, a number of Democrats are trying to save their seats by running against trade. I predict the Democratic tactic will be as fruitless as the Republican effort before it.
Democratic incumbents have been running TV ads accusing their Republican challengers of favoring trade agreements, outsourcing, and tax breaks for U.S. companies that invest abroad. The charges are wrong on substance, as I address at length in my 2009 Cato book Mad about Trade: Why Main Street America Should Embrace Globalization, but running against trade has not proven to be a vote getter, either.
It is difficult to find a presidential or congressional election anywhere that has turned on trade. While most voters have an opinion on trade, the issue tends to rank down the list of top concerns, far behind the economy, jobs, and, in this election cycle, government spending and debt.
Demonizing trade is an especially odd campaign tactic in 2010. The recession of 2008-09 was not caused by trade, but by the bursting of the housing bubble. As the economy slowly recovers, trade has been one of the bright spots, with a healthy increase in exports fueling a revival of the closely watched manufacturing sector, as my Cato colleague Dan Ikenson blogged a few days ago.
Democrats running against trade should remember that the “Clinton economy” of the 1990s that they often speak nostalgically of restoring was built in significant part on the passage of major trade agreements and a robust expansion of trade.
ObamaCare’s Threat to Free Speech
On Friday, I blogged about HHS Secretary Kathleen Sebelius’ letter to the health insurance lobby, in which she attempts to stifle political speech by using the new powers that ObamaCare grants her to threaten health insurance companies that claim ObamaCare’s coverage mandates are one cause behind rising premiums. (Never mind that the insurers’ estimates — which project that ObamaCare will increase premiums in 2011 by as much as 9 percent — are in line with those put forward by HHS.)
Here’s a smattering of reactions from others.
- The Wall Street Journal: “The Health and Human Services secretary…warned that ‘there will be zero tolerance for this type of misinformation and unjustified rate increases.’ Zero tolerance for expressing an opinion, or offering an explanation to policyholders? They’re more subtle than this in Caracas.”
- Chicago Tribune: “President Obama’s health care reform plan, enacted in March, is not terribly popular with the American people…The administration can’t tell the public to stop grousing. It can, however, try to silence health insurers who have the nerve to say out loud what basic economic theory indicates…Apparently, harsh punishment is in store for anyone who refuses to parrot the administration line. But there is every reason to think this alleged libel is true.”
- Tyler Cowen: “Nowhere is it stated that these rate hikes are against the law (even if you think they should be), nor can this ‘misinformation’ be against the law…[The letter] is worse than I had been expecting.”
- Ed Morrissey: “Rarely have we heard a Cabinet official tell Americans to stay out of political debates at the risk of losing their businesses. It points out the danger in having government run industries and holding a position where politicians can actually destroy a business out of spite.”
- Michael Barone: “Sebelius is threatening to put health insurers out of business in a substantial portion of the market if they state that Obamacare is boosting their costs…The threat to use government regulation to destroy or harm someone’s business because they disagree with government officials is thuggery. Like the Obama administration’s transfer of money from Chrysler bondholders to its political allies in the United Auto Workers, it is a form of gangster government.”
- Eugene Volokh: “even if such action would be constitutionally permissible, it would be quite troubling, as would threats that seem to hint as such action: It would involve the Administration’s deliberately trying to suppress criticism of its policies, under a ‘misinformation’ standard that sounds highly subjective and politically contestable. (Consider [Sebelius'] reference ‘to our analysis and those of some industry and academic experts’ — what about the analysis of other industry and academic experts?) Perhaps I’m missing some important context here. But my first reaction is that this is ominous behavior on the Administration’s part, and seems to have both the intent and effect of suppressing criticism of the Administration’s policies — including criticism that simply expresses opinions the Administration dislikes, and makes estimates that it disagrees with, and not just criticism that contains objectively demonstrable ‘misinformation.’”
In The Wall Street Journal, economist Russ Roberts recently explained one of the main themes of Friedrich Hayek’s The Road to Serfdom:
When the state has the final say on the economy, the political opposition needs the permission of the state to act, speak, and write. Economic control becomes political control.
One need not agree with all of Hayek’s conclusions to see how ObamaCare is threatening political freedom.
Pakistan: Washington’s Blind Spot in Afghanistan
I have a piece in the latest issue of Foreign Service Journal that details the ongoing clash of competing strategic interests among the United States, Pakistan, India, Iran, and other regional powers in Afghanistan . It’s a point I’ve belabored in the past (see here, here, here, and here, for example), yet it remains an understated problem in Washington’s Central and South Asia policy. C’est la vie.
Check it out!
Slouching Towards a New Supreme Court Term
We’re now three weeks away from the new Supreme Court term – I know you’re as excited as I am — and after a summer that included big opinions from The Nine, more confirmation hearings, and front-page district court decisions (on ObamaCare, immigration, and gay marriage), we roll into a fall full of even more legal intrigue. Indeed, the first Monday of October that marks the first high court arguments of the new season is pretty much the first day of school for us Court-watchers. And what better way to go back to school than to attend Cato’s ninth annual Constitution Day symposium this coming Thursday?
But don’t think that Constitution Day marks my re-emergence into the public sphere after a long six weeks slaving away at the Cato Supreme Court Review. No, that moment, when I opened my office door, shook off the cobwebs, and went forward into our glorious future came last week, with panels on ObamaCare and immigration reform at the University of Virginia and Liberty University, respectively. Those two law schools did a wonderful job in organizing and publicizing their events. And here’s the rest of my schedule through the end of October, many of which continue my ObamaCare debate challenge (events sponsored by the Federalist Society are asterisked):
- Sept. 13 at 1pm at Boston University Law School – Preview of the New Supreme Court Term*
- Sept. 14 at noon at Harvard Law School – Debate on the Constitutionality of Obamacare against Prof. Mark Tushnet*
- Sept. 17 at noon at Rayburn House Office Building B-340 – Capitol Hill Briefing on the Supreme Court and Economic Liberty
- Sept. 20 at 5pm at Loyola University Law School (Chicago) – Panel on the Constitutionality of Obamacare*
- Sept. 21 at noon at Northwestern University Law School (Chicago) – Preview of the New Supreme Court Term*
- Sept. 22 at noon at University of Illinois at Urbana-Champaign – Debate on the Constitutionality of ObamaCare*
- Sept. 25 – George Mason law professor and Cato adjunct scholar Ilya Somin‘s wedding – Please do congratulate him!
- Sept. 28 at 12:30 – University of Kansas Law School – Debate on the Constitutionality of ObamaCare*
- Sept. 29 at lunch – Kansas City Federalist Society Lawyers Chapter – ObamaCare and Missouri’s Prop C*
- Sept. 30 at 8:30 – Missouri Bar Association Annual Meeting - Panel on the Supreme Court
- Sept. 30 at 1pm – University of Missouri Law School – The Constitutionality of Obamacare*
- Oct. 4 at 10am – U.S. Supreme Court – First Monday!
- Oct. 5 at 5pm – Widener University Law School (Delaware) – The Constitutionality of Obamacare*
- Oct. 9 at 7pm – Washington Capitals home opener against the New Jersey Devils (I’m a season-ticket holder)
- Oct. 12 at noon – Lewis & Clark University Law School (Portland, OR) – TBD*
- Oct. 12 in the evening – Portland Federalist Society Lawyers Chapter – TBD*
- Oct. 13 at noon – Willamette University Law School – TBD*
- Oct. 16 at 6pm – University of Toronto Schools Centennial Gala (Go Blues!)
- Oct. 19 at noon – University of Southern California Law School (L.A.) – Immigration*
- Oct. 20 at noon – Chapman University Law School – Immigration*
- Oct. 21 at noon – Orange County Federalist Society Lawyers Chapter – TBD*
- Oct. 22 all day – Chapman University Law School Nexus Journal of Law & Policy Symposium – “Citizens Divided on Citizens United: Campaign Finance Reform and the First Amendment”
- Oct. 26 at lunch – Stanford University Law School – TBD*
- Oct. 27 at noon – University of the Pacific Law School (Stockton, CA) – Debate on the Constitutionality of Obamacare*
- Oct. 28 at 12:45 – University of California at Berkeley Law School – Debate on Judicial Activism*
If you come out to any of these events, please do come up and introduce yourself.
Why Are Statists so Sensitive About Cuba?
I touched a raw nerve with my post about Fidel Castro admitting that the Cuban model is a failure. Matthew Yglesias and Brad DeLong both attacked me. DeLong’s post was nothing more than a link to the Yglesias post with a snarky comment about “why can’t we have better think tanks?” Yglesias, to his credit, tried to explain his objections.
This leads Daniel Mitchell to post the following chart which he deems “a good illustration of the human cost of excessive government.”…this mostly illustrates the difficulty of having a rational conversation with Cato Institute employees about economic policy in the developed world. Cuba is poor, but it’s much richer than Somalia. Is Somalia’s poor performance an illustration of the human costs of inadequate taxation? Or maybe we can act like reasonable people and note that these illustrations of the cost of Communist dictatorship and anarchy have little bearing on the optimal location on the Korea-Sweden axis of mixed economies?
I’m actually not sure what argument Yglesias is making, but I think he assumed I was focusing only on fiscal policy when I commented about Cuba’s failure being “a good illustration of the human cost of excessive government.” At least I think this is what he means, because he then tries to use Somalia as an example of limited government, solely because the government there is so dysfunctional that it is unable to maintain a working tax system.
Regardless of what he’s really trying to say, my post was about the consequences of excessive government, not just the consequences of excessive government spending. I’m not a fan of high taxes and wasteful spending, to be sure, but fiscal policy is only one of many policies that influence economic performance. Indeed, according to both Economic Freedom of the World and Index of Economic Freedom, taxes and spending are only 20 percent of a nation’s grade. So nations such as Sweden and Denmark are ranked very high because the adverse impact of their fiscal policies is more than offset by their very laissez-faire policies in just about all other areas. Likewise, many nations in the developing world have modest fiscal burdens, but their overall scores are low because they get poor grades on variables such as monetary policy, regulation, trade, rule of law, and property rights. This video has more details.
So, yes, Cuba is an example of “the human cost of excessive government.” And so is Somalia.
Sweden and Denmark, meanwhile, are both good and bad examples. Optimists can cite them as great examples of the benefits of laissez-faire markets. Pessimists can cite them as unfortunate examples of bloated public sectors.
P.S. Castro has since tried to recant, claiming he was misquoted. He’s finding out, though, that it’s not easy putting toothpaste back in the tube.
Secretary Sebelius Slips on the Brass Knuckles
This week saw more bad news for ObamaCare. So the Obama administration slipped on the brass knuckles.
Last week brought news that health insurance premiums grew by a smaller increment in 2010 than in any of the past 10 years. On Tuesday, The Wall Street Journal reported that ObamaCare appears to be turning that around:
Health insurers say they plan to raise premiums for some Americans as a direct result of the health overhaul in coming weeks, complicating Democrats’ efforts to trumpet their signature achievement before the midterm elections. Aetna Inc., some BlueCross BlueShield plans and other smaller carriers have asked for premium increases of between 1% and 9% to pay for extra benefits required under the law, according to filings with state regulators.
The Journal even included this handy chart, where the blue bars show how much ObamaCare will add to the cost of certain health plans in 2011.
Source: Wall Street Journal
In addition, a Mercer survey of employers found that 79 percent expect they will lose their “grandfathered” status by 2014, and therefore will become subject to many more of ObamaCare’s new mandates—a much higher figure than the administration had estimated. Employers expect those additional mandates will increase premiums by 2.3 percent, on average, and boost the overall growth of premiums from 3.6 percent to 5.9 percent in 2011.
They Can’t Even Sell Jon Stewart on ObamaCare
| The Daily Show With Jon Stewart | Mon – Thurs 11p / 10c | |||
| Tim Kaine | ||||
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(The health care discussion occurs between 2:00 and 3:15.)
Goolsbee on Tax Incentives
Today President Obama appointed Austan Goolsbee to be his new chair of the Council of Economic Advisers, replacing Christina Romer, who has headed back to Berkeley. Because Goolsbee is already a member of the CEA, the appointment helps Obama avoid a Senate confirmation process that could have easily become a referendum on his administration’s economic policies.
Given that the appointment seems more one of convenience that anything else — Goolsbee is not a macroeconomist, which would seem to be what one would want at the moment. His primary expertise is in tax policy. So let’s look at some of his work:
On private research and development — where the President has proposed new incentives — Goolsbee wrote in the American Economic Review: “When the government increases R&D spending through subsidies or by direct provision, a significant fraction of the increased spending goes directly into higher wages, an increase in the price rather than the quantity of inventive activity.” That hardly seems like a ringing endorsement of more R&D tax credits.
Goolsbee has also written on investment tax incentives, which are also being pushed by Obama. In the Quarterly Journal of Economics, he writes: ” much of the benefit of investment tax incentives does not go to investing firms but rather to capital suppliers through higher prices. A 10 percent investment tax credit increases equipment prices by 3.5-7.0 percent.” It seems that Obama wants to do for capital what he’s tried to do for housing, just inflate prices without really changing the fundamentals and spend a lot of money doing so.
Here’s to hoping that Goolsbee doesn’t suffer the fate of his predecessor by abandoning everything he’s previously written in the interest of political expediency.
Obama Administration Wins in State Secrets Case
A split panel of the 9th Circuit Court of Appeals decided, on a 6-5 vote, that a lawsuit filed by extraordinary rendition and torture victims is barred by the State Secrets Privilege. Over a year ago, a three-judge panel ruled that the case should proceed with traditional application of the Privilege — individual pieces of evidence would be excluded based on their secret nature, but other evidence would remain available for litigation.
Robert Chesney has some thoughtful commentary on how the current state of the law deals with rule of law versus individual justice concerns. By any measure this is, as Glenn Greenwald notes, a broad victory for the government and further evidence of continuity between the Bush and Obama administrations’ approaches to terrorism.
A Surveillance State Coda
The program of warrantless NSA wiretapping (and data mining) authorized by President George W. Bush shortly after the 9/11 attacks prompted a flurry of intense debate over its legality when it was disclosed by The New York Times back in 2005. Those arguments have, by now, been so thoroughly rehearsed that there’s not a whole lot new to say about it.
But like Monty Python’s Black Knight, some of those old arguments keep popping up — as evidenced by John Eastman’s contribution to the Cato Unbound roundtable on the digital surveillance state we held last month. So while the roundtable’s over, I thought it would be convenient to round up a compact version of the main arguments in one place, for the convenience of folks who might not want to slog through the many law review articles that have been written on the subject.
Laura Tyson’s Confused Case for a Second Stimulus
I was a bit critical of Laura Tyson’s New York Times article on “Why We Need a Second Stimulus.” Apparently I wasn’t nearly critical enough.
The Nation and National Public Radio are advising President Obama to “stop listening to infrastructure-phobic advisers like Larry Summers and start taking counsel from Laura Tyson, a member of his Economic Recovery Advisory Board who argues that $1 trillion in infrastructure investment is needed over the next five years.”
At The Atlantic, senior editor (and Boston Globe columnist) Joshua Green thinks Laura Tyson’s article “underscored what a loss it is for the Obama administration that it couldn’t manage to find a place for her on its economic team.” Mr. Green can’t imagine why a Berkeley professor who wants to add an extra trillion to federal spending wouldn’t be the ideal budget director.
In the article that so impressed Mr. Green, Tyson wrote, “The primary cause of the [current] labor market crisis is a collapse in private demand… By late 2009, in response to unprecedented fiscal and monetary stimulus, household and business spending began to recover. But by the second quarter of this year, economic growth had slowed to 1.6 percent.”
Combining “fiscal and monetary stimulus” in a single phrase is a clumsy way to conceal the irrelevance of “fiscal stimulus” (debt-financed federal spending) to GDP growth in 2009. Fiscal stimulus means the Treasury sells more bonds. Monetary stimulus means the Fed buys more bonds. To discuss those transactions as if they had the same effect is just another mysterious Keynesian incantation.
Tyson claims there is “too little appreciation for how stimulus spending has helped stabilize the economy and how more of the right kind of government spending could boost job creation and economic growth.” She wants much more spending on unemployment benefits (a paradoxical definition of a jobs program) and on aid to state and local governments (where unemployment rates are relatively low).
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- The U.S. Postal Service is bleeding red ink, but a postal union says it wants “more” wages and benefits. Having watched the unionized workforces at GM and Chrysler receive preferential treatment from the federal government, there’s little incentive for them not to ask for more.
- President Obama announced his intention to take the country $50 billion deeper into debt in order to finance more public infrastructure projects. Why not give privately funded and operated infrastructure a chance?
- A new study finds that federal subsidies to the states result in higher future state taxes. This has important implications for state fiscal policy considering the recent rise in federal subsidies to state and local government.
- By producing a vague “plan” to cut a relatively small amount of spending while avoiding the more politically volatile issues of entitlements and defense, Republican House Minority Leader John Boehner is signaling that he’s apparently content to ride to victory in the fall on the back of an unpopular president.
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