Archive for September, 2010
Internet Censorship
On August 24th, the Attorneys General of 17 states sent a letter [PDF] to the founder and CEO of the Craigslist online platform, to “request” that they take down the “Adult Services” section of the site. The link to that section of the site now stands with a “CENSORED” label over the place where the link stood.
On the TechLiberationFront blog, Ryan Radia has a good write-up, including the legal protections Craigslist enjoys under federal law as a provider of an “interactive computer service.” The AGs undoubtedly know that could not directly shut down Craigslist. They wouldn’t have a legal leg to stand on if they attacked the site for the behavior of its users. But they also know that publically badgering Craigslist can win them political points and cut into the site’s image, profits, and ultimately, perhaps, viability. Several Attorneys General have doggedly asked Craigslist to patrol the behavior of its millions of users, never satisfied with the company’s efforts.
The turning point seems to have been a CNN “ambush” interview with Craigslist founder Craig Newmark in which reporter Amber Lyon sprung a terrific gotcha line, calling Craigslist “the Wal-Mart of online sex trafficking.” It’s a sound-bite with just enough truth: In a community of millions of people, there may be some such trafficking.
Newmark is an unusual character in any world, but especially in media and politics. He is meek, soft-spoken, and utterly guileless. A part of West-Coast tech’s recent interest in East-Coast government and politics, Newmark sought me ought a few months ago for a wide-ranging, ambling, and—for those reasons—charming chat.
Newmark was utterly caught off guard by the interview with the CNN reporter. The tape rolls through painfully awkward moments when Newmark remains simply silent or paces around, making him look stupid, mendacious, or both. (His comment on the interview is here, to which Lyon responds in the video linked above at “ambush.”)
The AGs smelled blood in the water. Their letter pounces on Craigslist and Craig Newmark’s inartful performance.
So the next step is the “CENSORED” block on Craigslist’s “Adult Services” section. Perhaps it’s meant to engender support for First Amendment rights, and to an extent it has. Early returns show support for Craigslist. But it may also create an expectation that large Web sites on which a tiny minority of people abuse speech rights to plan and execute crime may lose their speech protections themselves.
In case it needs pointing out, shutting down a Web site, or the portion of a Web site, on which people plan crime will only move crime to other places on the Internet. The cost to free speech in the AGs’ badgering of Craigslist vastly outweighs the infinitesimal crime-prevention benefit.
The Attorneys General sacrificing speech this way are: Richard Blumenthal (D) of Connecticut (a candidate for U.S. Senate), Dustin McDaniel (D) of Arkansas, Lawrence G. Wasden (R) of Idaho, Lisa Madigan (D) of Illinois, Tom Miller (D) of Iowa, Steve Six (D) of Kansas, Douglas F. Gansler (D) of Maryland, Mike Cox (R) of Michigan, Jim Hood (D) of Mississippi, Chris Koster (D) of Missouri, Michael A. Delaney (D) of New Hampshire, Richard Cordray (D) of Ohio, Patrick C. Lynch (D) of Rhode Island, Henry McMaster (R) of South Carolina, Robert E. Cooper, Jr. (D) of Tennessee, Greg Abbott (R) of Texas, and Kenneth T. Cuccinelli, II (R) of Virginia.
Obama’s New Stimulus Schemes: Same Song, Umpteenth Verse
Like a terrible remake of Groundhog Day, the White House has unveiled yet another so-called stimulus scheme. Actually, they have two new proposals to buy votes with our money. One plan is focused on more infrastructure spending, as reported by Politico.
Seeking to bolster the sluggish economy, President Barack Obama is using a Labor Day appearance in Milwaukee to announce he will ask Congress for $50 billion to kick off a new infrastructure plan designed to expand and renew the nation’s roads, railways and runways. …The measures include the “establishment of an Infrastructure Bank to leverage federal dollars and focus on investments of national and regional significance that often fall through the cracks in the current siloed transportation programs,” and “the integration of high-speed rail on an equal footing into the surface transportation program.”
The other plan would make permanent the research and development tax credit. The Washington Post has some of the details.
Under mounting pressure to intensify his focus on the economy ahead of the midterm elections, President Obama will call for a $100 billion business tax credit this week… The business proposal – what one aide called a key part of a limited economic package – would increase and permanently extend research and development tax credits for businesses, rewarding companies that develop new technologies domestically and preserve American jobs. It would be paid for by closing other corporate tax loopholes, said the official, speaking on condition of anonymity because the policy has not yet been unveiled.
These two proposals are in addition to the other stimulus/job-creation/whatever-they’re-calling-them-now proposals that have been adopted in the past 20 months. And Obama’s stimulus schemes were preceded by Bush’s Keynesian fiasco in 2008. And by the time you read this, the Administration may have unveiled a few more plans. But all of these proposals suffer from the same flaw in that they assume growth is sluggish because government is not big enough and not intervening enough. Keynesian politicians don’t realize (or pretend not to realize) that economic growth occurs when there is an increase in national income. Redistribution plans, by contrast, simply change who is spending an existing amount of income. If the crowd in Washington really wants more growth, they should reduce the burden of government, as explained in this video.
The best that can be said about the new White House proposals is that they’re probably not as poorly designed as previous stimulus schemes. Federal infrastructure spending almost surely fails a cost-benefit test, but even bridges to nowhere carry some traffic. The money would generate more jobs and more output if left in the private sector, so the macroeconomic impact is still negative, but presumably not as negative as bailouts for profligate state and local governments or subsidies to encourage unemployment – which were key parts of previous stimulus proposals.
Likewise, a permanent research and development tax credit is not ideal tax policy, but at least the provision is tied to doing something productive, as opposed to tax breaks and rebates that don’t boost work, saving, and investment. We don’t know, however, what’s behind the curtain. According to the article, the White House will finance this proposal by “closing other corporate tax loopholes.” In theory, that could mean a better tax code. But this Administration has a very confused understanding of tax policy, so it’s quite likely that they will raise taxes in a way that makes the overall tax code even worse. They’ve already done this in previous stimulus plans by increasing the tax bias against American companies competing in world markets, so there’s little reason to be optimistic now. And don’t forget that the President has not changed his mind about imposing higher income tax rates, higher capital gains tax rates, higher death tax rates, and higher dividend tax rates beginning next January.
All that we can say for sure is that the politicians in Washington are very nervous now that the midterm elections are just two months away. This means their normal tendencies to waste money will morph into a pathological form of profligacy.
Historic Preservation: When It Takes a Village
In 2003 the state of Connecticut offered the coastal village of Stony Creek a $250,000 grant to make possible the long-overdue restoration of Seaside Hall, home of its beloved fife-and-drum corps. After a hard look at the extensive strings the state attached to the money, the townspeople decided to do the job themselves instead. Now the renovation is nearing completion after years of spaghetti dinners, auctions, and other local efforts. Karen Lee Torre recounts the story in the Connecticut Law Tribune.
The fife and drum corps can be seen in period regalia here and, performing at the hall in civilian clothes, here. For some readers, incidentally, the village of Stony Creek may ring a bell as the place where author Ayn Rand worked on her novel “Anthem” while summering with husband Frank O’Connor in 1937.
Born-Again Budget Hawks (D-BS)
“Now on Democrats’ agenda: Budget cuts,” proclaims a front-page headline in Saturday’s Washington Post. The online headline reads, “Democrats add fiscal austerity as a campaign issue.”
Good news, huh? Let’s check it out:
The candidate was outraged — just outraged — at the country’s sorry fiscal state.
“We have managed to acquire $13 trillion of debt on our balance sheet,” he fumed to a roomful of voters. “In my view, we have nothing to show for it.”
And that was a Democrat, Sen. Michael Bennet of Colorado, who voted “yes” on the stimulus, the health-care overhaul, increased education funding and other costly bills Congress approved under his party’s control.
Meanwhile,
Paul Hodes, the Democratic Senate candidate in New Hampshire, recently proposed $3 billion in spending cuts that would slice airport, railroad and housing funds. Elected to the House four years ago as an anti-war progressive, Hodes lamented that “for too long, both parties have willfully spent with no regard for our nation’s debt.”
So Senator Bennet is outraged at the national debt — for which we have “nothing to show” — but he has voted, apparently, for every one of the spending bills in his time in the Senate that have created today’s $13 trillion debt. The National Taxpayers Union says his overall voting record on spending bills rates an F.
And Representative Hodes is calling for a $3 billion spending cut. Sounds big, eh? Front-page news indeed. But of course, it’s less than 0.1 percent of the 2011 federal budget — and that’s assuming that all these cuts would come out of this year’s budget. Hodes’s press release doesn’t make that clear; they might be cuts over 5 years or so. And his very next press release said he was fighting for federal funds for local New Hampshire services.
Both Republicans and Democrats want voters to think that they’re getting tough on spending, deficits, and debts. But their statements are at wide variance with their actual records and actions. We didn’t pile up $13 trillion in debt while no one was looking; members of Congress, of both parties, voted for these bills. Voters need to watch what they do, not what they say.
My colleague Chris Edwards, quoted by reporter Shailagh Murray, is a little more polite:
“The problem from a fiscal conservative voter’s point of view is that every member or wannabe member claims to be a fiscal conservative these days, so it’s more difficult than usual to separate the wheat from the chaff,” said Chris Edwards, director of tax policy studies at the Cato Institute, a libertarian-leaning think tank.
Born-Again Budget Hawks (R-BS)
“Three top Republican House members have written a book that repeatedly criticizes former GOP leaders as well as President Obama,” reports the Washington Post. “In ‘Young Guns,’ scheduled for release Sept. 14, Reps. Eric Cantor (Va.), Kevin McCarthy (Calif.) and Paul D. Ryan (Wis.) cast the Republican congressional leaders who preceded them as a group that “betrayed its principles” and was plagued by ‘failures from high-profile ethics lapses to the inability to rein in spending or even slow the growth of government.’”
Good point! And one we’ve made several times at Cato.
But how credible are the messengers? Once you ruin a brand, it can take a long time to restore it. And part of the solution is owning up to your own errors, not just pointing the fingers.
In this case, I’m sorry to discover that Reps. Cantor and Ryan both voted for the Bush administration’s No Child Left Behind Act in 2001, expanding federal control over education. They both voted for the costly Iraq war in 2002. They both voted for the Medicare Prescription Drug, Improvement, and Modernization Act in 2003, which was projected to add more than $700 billion to Medicare costs over the following decade. They both voted for the Emergency Economic Stabilization Act of 2008, which included the $700 billion TARP bailout. (Rep. McCarthy, who joined the House in 2007, voted against TARP.)
To be fair, all three of the authors get A’s and B’s in the annual ratings of Congress by the National Taxpayers Union, which means they have better records on spending than most of their colleagues. But I’ll be curious to see if the book admits that any of the near-trillion-dollar votes discussed above were mistakes — not just by the departed Bush, Hastert, and DeLay but by many Republican members of Congress.
‘Government Efficiency’
I recently criticized the idea that policymakers should focus their attention on making government more “efficient.” Instead, I argued that policymakers should focus their reform efforts on reducing government’s size.
Government efficiency proponents make the mistake of viewing the cost of government in the same light as the cost of operating a private business. However, government cannot operate like a business because it isn’t a business.
Private businesses obtain their revenue through voluntary exchange: consumers willingly give a business their money in return for a product. Businesses must control the cost of providing a product in order to maximize profits. A business that does not adequately control its costs can find itself undercut by a competitor offering a like product at a lower price. In the private sector, the market sets the price of a product through the interaction of supply and demand.
Government is unconcerned with “profit.” The “cost” of government is equal to the taxes extracted from the private sector to pay for government activities, plus the economic damage caused by extracting resources from the private sector. Taxes are involuntarily obtained through compulsion and force. Regardless of the value a citizen assigns to the services provided by government, a citizen must pay for those services, and at a price set by government. The price one pays for government is primarily a function of political factors, which are only indirectly influenced by economic considerations.
Therefore, the question of how efficiently government provides services is less important than deciding what services government should provide. For example, it matters little how quickly the USDA processes subsidy checks for farmers. More important is whether farmers should be receiving subsidy checks at all.
KFF/HRET Survey Part II: Isn’t This Good News, Too?
As I blogged earlier, yesterday the Kaiser Family Foundation and the Health Research & Educational Trust released their survey of employer-sponsored health benefits in 2010.
For most of this survey’s history, it included a very useful graph of the average growth rate of employer-sponsored insurance premiums. Here’s the graph from their 2007 survey:
(The grey and light-green lines represent year-to-year growth in overall inflation and wages, respectively.)
Unfortunately, 2007 was the last year that KFF/HRET included that graph in their annual survey. Had they included that graph this year, it would have shown an even more heartening moderation of premium growth:
A lot of things can drive premium growth. I discussed a couple of them in my last post. Some factors that could cause premium growth to moderate might not be all that welcome; if insurers dumped all their sick enrollees, for example. But absent dramatic evidence of that, isn’t this good news? And isn’t good news worth highlighting?
Experience Is a Good Teacher, But She Sends in Terrific Bills
[above quote attibuted to American writer Minna Thomas Antrim (1861-1950)]
The AP reports on trouble facing the Chinese census:
After years of reforms that have reduced the government’s once-pervasive involvement in most people’s lives, some Chinese are proving reluctant to give up personal information and harboring suspicions about what the government plans to do with their details.
Gov. Barbour Breaks with GOP on Immigration
OK, the headline may be a bit overstated, but recent comments on immigration by Gov. Haley Barbour of Mississippi are different enough from what most of his fellow Republicans are saying to be newsworthy.
In a video interview released earlier this week (see link below), Barbour expressed appreciation for the Hispanic immigrant workers who helped rebuild his state after Hurricane Katrina in 2005, and for the need to be more open to highly skilled immigrants from countries such as India.
Barbour is an important figure in the GOP. He is in his second term, chairs the Republican Governors Association, and led the Republican National Committee back in 1994 when the party swept into power in Congress.
When asked what he would say to people in California who are upset about illegal immigration, Barbour responded:
Let me just tell you, I’ve had a different experience than perhaps some other governors. I don’t know where we would have been in Mississippi after Katrina if it hadn’t been for the Spanish speakers that came in to help rebuild, and there’s no doubt in my mind some of them weren’t here legally. Some of them were, some of them weren’t. But they came in, they looked for the work—if they hadn’t been there, if they hadn’t come and stayed for a few months or a couple of years, we would be way, way, way behind where we are now.
Every country—I don’t care if it’s the United States of America or Papua New Guinea, every country has gotta have a secure border. If you can’t secure your border, you’re not much of a country, and we’ve gotta secure our border. But we’ve gotta do so with the recognition that even in our lifetime we’re gonna have a labor shortage in the United States. We don’t want to be like Japan, where the aging population is supported by fewer and fewer and fewer and fewer.
So there’s gotta be a way—a) we gotta secure the border, but b) we’ve got to work through how are we gonna make sure we’ve got the labor we need in the United States. H1B visas—a huge, huge thing. My idea is everybody from Stanford who’s from India that gets a PhD, we oughta stamp citizenship on his diploma, so instead of him going back to India and starting a business that employs 1,800 people, that he’ll start a business that employs 1,800 people in Des Moines, Iowa, instead of India. A lot of this is just common sense, and common sense tells us we’re not gonna take ten or twelve or fourteen million people [currently here illegally] and put them in jail and deport them. We’re not gonna do it, and we need to quit—some people need to quit acting like we are, and let’s talk about real solutions.
KFF/HRET Survey, Part I: Some People Don’t Know Good News When They See It
Every year, the Kaiser Family Foundation and the Health Research & Educational Trust produce the leading survey of employee health benefits. Yesterday, KFF and HRET issued their survey of health benefits in 2010 with a news release that begins:
Family Health Premiums Rise 3 Percent to $13,770 in 2010…
Premiums rose by just 3 percent? Great news! Last year, KFF/HRET guesstimated that the average cost of family coverage could hit $14,539 in 2010. Working families saved hundreds of dollars!
Not so fast, says KFF/HRET. The main reason premiums rose less than expected is that “businesses have been shifting more of the costs of health insurance to workers through … deductibles and other cost-sharing,” said KFF president and CEO Drew Altman. Actually, deductibles and other cost-sharing do not shift health insurance costs; they reduce the amount of insurance. What they shift is the cost of health care, from the insurance pool to individual members of the pool.
Nevertheless, greater cost-sharing does appear to be a significant factor behind the minimal growth in premiums:
Many employers are … raising the annual deductibles workers must pay before their health plans begin to share most health care costs. A total of 27 percent of covered workers now face annual deductibles of at least $1,000, up from 22 percent in 2009, the survey finds. Among small firms (3-199 workers), 46 percent face such deductibles…
Among other plan types, only consumer-driven plans (which are high-deductible plans that also include a tax-preferred savings options such as a Health Savings Account or Health Reimbursement Arrangement) saw growth in their market share. Such plans now enroll 13 percent of covered workers, up from 8 percent last year…
“Consumer-driven plans have clearly established a foothold in the employer market, tripling their market share from 4 percent in 2006 to 13 percent today,” said study lead author Gary Claxton, a Kaiser vice president and director of the Healthcare Marketplace Project.
Competing Naïvetés: How to Produce a Privacy-Protective Society
My Economist.com debate on whether governments should “do far more to protect online privacy” has now concluded. The vote on the motion went to my opponent, supporting government involvement by a margin of 52 to 48 percent.
I won a moral victory, perhaps, moving the vote from 70 percent in favor of government intervention to the very close ending tally. My commentary highlighting the substantial role of government in undermining privacy seems to have begun moving the dial in my direction.
A pleasant side-effect of the debate was to open lines of communication with a number of my privacy-advocate colleagues, many of whom do not share my libertarian outlook. One called me naïve to think consumers can successfully demand privacy given the imposing wall of corporate practices that rely on intensive and comprehensive data collection.
Full health privacy, for example, would require a marketplace in which consumers can pay cash for services or demand that information about their treatments not be shared. It is illegal for a pharmacy to fill a prescription without identifying the patient apparently, a requirement that sets up the conditions for nationwide tracking of patients’ medicines and, inferentially, their health conditions.
This prescription tracking is facilitated and reinforced by government regulation, of course. Consumers cannot exercise privacy self-help when the law requires pharmacies to collect information about them. Freedom to pay cash for medicines, and to do so unidentified, is at best a long way off, to be sure.
But I had suggested the naïveté of the pro-government view as well:
The arguments for government control certainly seem to rest on good-hearted premises: if we just elect the right people, and if they just do the right thing, then we can have a cadre of public-spirited civil servants dispassionately carrying out a neutral, effective privacy-protection regime.
But this romantic vision of government seems never to come true. Crass political dealmaking inhabits every step, from the financing of elections, to logrolling in the legislative process, to implementation that favours agencies’ interests and the preferences of the politically powerful.
State Bureaucrats Continuing to Advance REAL ID
Across the country, state legislatures have objected to, and outright rejected, the national ID and surveillance mandate imposed on them by the REAL ID Act. Passed in May 2005 with a compliance deadline three years later, the law has never been implemented. The Department of Homeland Security has repeatedly threatened to deny air travel to people from the states refusing compliance, then backed down when states have not caved to its demands.
But state legislatures are one thing. State-level bureaucrats are quite another. And they are hedgehogging along, positioning their states to implement the national ID law.
Writes Alan Greenblatt in State Legislatures magazine:
In a number of states, motor vehicle departments are doing the behind-the-scenes work necessary to move closer to compliance, including updating computer systems, installing face-recognition software and setting up more secure card production rooms. . . . [E]very state is moving toward compliance. Even in the 14 states where legislatures have explicitly rejected REAL ID through laws or resolutions, some moves have been made in the direction of compliance.
Politicians come and go, but the bureaucrats are in it for life. And they can grow their portfolio be building a national ID.
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