Archive for October, 2010
A History Lesson for Trade Bashers
Candidates from both parties are trying to win votes this fall by criticizing free trade and trade agreements. As John Steele Gordon points out in a wonderful historical essay, “The Great Mistake,” in the latest Barron’s Weekly:
We’ve been down this unfortunate road before. Recall the Smoot-Hawley tariff, named after its chief congressional sponsors, Sen. Reed Smoot of Utah and Rep. Willis Hawley of Oregon, both Republicans and both chairmen of the committees in charge of taxes.
Introduced in 1929 as the country was tipping into recession, their bill did not have a happy ending. It imposed steep tariff increases on agricultural as well as manufactured goods, raising overall U.S. tariffs to their highest levels in decades. When President Hoover reluctantly signed the bill in June 1930:
The stock market, once again a leading indicator, immediately turned south. It wouldn’t stop falling for two years—the Dow Jones Industrial Average gave up all its gains since its inception in 1896.
Other countries made good on their threats of retaliatory tariffs, and world trade collapsed. American exports had been $5.24 billion in 1929. Three years later U.S. exports were worth only $1.16 billion, a 78% decline. The Smoot-Hawley tariff would prove to be one of the major government mistakes that converted an ordinary recession into the calamity of the Great Depression.
The protectionist bill was bad politics as well as bad economics. Hoover, Hawley, and Smoot were all swept out of office in 1932.
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- It’s another day and another cost overrun in the federal government. This time it’s the Federal Bureau of Investigation’s Sentinel project.
- Postmaster General John Potter has announced that he is stepping down. Will he embrace privatizing the U.S. Postal Service like his predecessor?
- Vice President Joe Biden, an individual who has spent his entire career in government, possesses a child-like devotion to the federal government’s capabilities.
- The House Republican leadership warns that America is at a “critical crossroads” — and then offers to cut relatively minuscule whaling history subsidies.
- The federal government channels Monty Python: “Bring out your dead — and we’ll pay them!“
Bootleggers & Baptists, a Welcome Correction
In my recent “Bootleggers & Baptists, Sugary Soda Edition” post, I wrote that environmentalists and agribusiness team up to support ethanol subsidies. An alert Cato@Liberty reader writes to my colleague Jerry Taylor:
[Cannon] is no doubt right that environmentalists and agribusiness worked together to promote government subsidies to ethanol through about 2006. But by 2007 (when the ethanol mandate was doubled) the environmentalists had dropped out of the pro-ethanol coalition, to be replaced by national-security hawks! If you run into him, please tell him to stop blaming environmentalists for current biofuels policies!
If environmentalists have recently dropped their support for ethanol subsidies, they deserve credit for that. Mea culpa.
I would rather have been completely wrong about the environmentalists’ support for ethanol subsidies. But I’ll settle for being partly wrong.
Dusty Bookshelves and Long-Dead Writers
New York Times reporter Kate Zernike generated a lot of spit-takes in the blogosphere when she wrote on October 2 about how Tea Party activists are reading “once-obscure texts by dead writers“:
The Tea Party is a thoroughly modern movement, organizing on Twitter and Facebook to become the most dynamic force of the midterm elections.
But when it comes to ideology, it has reached back to dusty bookshelves for long-dormant ideas.
It has resurrected once-obscure texts by dead writers — in some cases elevating them to best-seller status — to form a kind of Tea Party canon. Recommended by Tea Party icons like Ron Paul and Glenn Beck, the texts are being quoted everywhere from protest signs to Republican Party platforms.
Pamphlets in the Tea Party bid for a Second American Revolution, the works include Frédéric Bastiat’s “The Law,” published in 1850, which proclaimed that taxing people to pay for schools or roads was government-sanctioned theft, and Friedrich Hayek’s “Road to Serfdom” (1944), which argued that a government that intervened in the economy would inevitably intervene in every aspect of its citizens’ lives.
So that’s, you know, “long-dormant ideas” like those of F. A. Hayek, the winner of the Nobel Prize in Economics, who met with President Reagan at the White House, whose book The Constitution of Liberty was declared by Margaret Thatcher “This is what we believe,” who was described by Milton Friedman as “the most important social thinker of the 20th century” and by White House economic adviser Lawrence H. Summers as the author of “the single most important thing to learn from an economics course today,” who is the hero of The Commanding Heights, the book and PBS series by Daniel Yergin and Joseph Stanislaw, and whose book The Road to Serfdom has never gone out of print and has sold 100,000 copies this year.
So that’s Kate Zernike’s idea of an obscure, long-dormant thinker.
Meanwhile, over the next few weeks after that article ran, the following headlines appeared in the New York Times:
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Cuts in Britain Ignore Views of Keynes
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What Would Keynes Say Today?
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Democrats Are at Odds on Relevance of Keynes
Apparently the Times isn’t always opposed to looking in the dusty books of long-dead writers. By the way, Keynes died in 1946, Hayek in 1992.
‘What Can We Get Away With?’
A New York Times account, based on an open-records request, sheds light on how Mayor Michael Bloomberg’s famously nannyish health department makes up its mind how far to go in food-scare advertising. In particular, a proposed YouTube campaign to scare consumers away from sweetened sodas resulted in
a protracted dispute in the department over the scientific validity of directly linking sugar consumption to weight gain — one in which the city’s health commissioner, Dr. Thomas A. Farley, overruled three subordinates, including his chief nutritionist.
Some highlights:
- “The scientists, she said [nutritionist Cathy Nonas], ‘will make mincemeat of us.’”
- “’Basic premise doesn’t work,’ Dr. Michael Rosenbaum, a professor of pediatrics and clinical medicine at Columbia”
- “’The science [i.e., efforts to be more accurate and precise in conveying the science] absolutely weakens our potential for mass distribution,’ [campaign manager Sabira] Taher wrote.”
- “’I think this is broad enough to get away with,’ [Nonas] wrote [of the final video].”
Isn’t it comforting to think that the city administration of New York — and its federal counterpart, staffed by very similar sorts of activist officials — are also in charge of regulating private advertising of food and many other products to make sure such ads are fair and not misleading?
Hispanics And Proposition 19
Polls suggest that Hispanics in California are largely opposed to Proposition 19, which would legalize marijuana in that state. This is unfortunate since Hispanics have historically been disproportionate victims of drug prohibition.
Earlier this week, David Kopel wrote a historical analysis in Encyclopedia Britannica of the racist origins of marijuana prohibition, which targeted Mexicans in particular. Back in the 1930’s when the federal government started cracking down on marijuana consumption, officials openly worried about the effect of the drug on “degenerate Spanish-speaking residents … who are low mentally, because of social and racial conditions.”
Some people might claim that even though racial profiling certainly was behind marijuana prohibition, its current enforcement affects all racial groups alike. However, a recent report from the Drug Policy Alliance shows that Hispanics are still overwhelmingly targeted by the police for marijuana offenses. The report states, “From 2006 through 2008, major cities in California arrested and prosecuted Latinos for marijuana possession at double to nearly triple the rate of whites,” even though surveys show that young Hispanics use marijuana at lower rates than young whites. Hispanics are still victims of racial profiling due to marijuana prohibition.
It is not surprising that a socially conservative electorate such as Hispanics would oppose marijuana legalization. Unfortunately, many misconceptions about drug legalization still abound and are magnified by opponents of the measure. Thus, it is important that Hispanics keep in mind that:
- Legalization doesn’t mean endorsing or consenting drug consumption.
- There is an important difference between drug consumption and drug abuse, just as there is a big difference between alcohol consumption and alcoholism.
- There is also a critical distinction between the negative consequences of drug abuse, such as family disintegration, health problems, loss of workers’ productivity, etc., and the negative consequences of prohibition, like crime, violence, corruption, and high mortality of users due to overdoses, etc. Many people, when arguing against legalization, bring up scenes of violence and crime, when actually these problems would greatly diminish once the illegal black market for drugs is legalized.
- Legalization doesn’t pretend to solve the problem of drug addiction nor the social ills related to this phenomenon, though there is evidence that liberal drug policies can abate drug addiction problems. However, what legalization mostly seeks is to eliminate the negative side-effects of prohibition.
Hispanics should also take note of what Colombian president Juan Manuel Santos has said about Proposition 19. The war on drug has been wreaking havoc in Latin America, and it’s increasingly threatening the institutional stability of Mexico and Central America, where many Californian Hispanics come from. Santos has signaled that passing Proposition 19 would force his government to push for a “world-wide discussion” on drug policy. Marijuana legalization in California could thus trigger a global debate on ending the war on drugs, which has cost Latin America dearly for so many years.
Hispanics in California have many reasons to favor the end of marijuana prohibition. They would be doing themselves a big favor if they vote yes next Tuesday.
So Long, Wonder Woman
Today is Michelle Rhee’s last day heading up DC’s public schools, and her departure should serve as a stern reminder: We’ve been forcing children to wait for Superman — or Wonder Woman — for far too long. There are no superheroes, and even when we think we’ve found one, they are almost always defeated by teachers unions, or internecine politics, or just plain burnout.
Rhee is a classic case of the first two, with her bold reforms raising the ire of the local union and eventually bringing the might of the American Federation of Teachers to bear in the mayoral election. But unions aren’t the only powers that ended Rhee’s crusade. Long-simmering divisions over the perceived aloofness of Rhee’s boss, Mayor Adrian Fenty, also landed huge political punches that eventually knocked Rhee out.
Rhee certainly isn’t alone in the Hall of Defeated Heroes. Alan Bersin stormed into San Diego’s superintendency in 1998, but his hard-charging style eventually divided the city and created an intense political backlash. He was gone in 2005. Carl Cohn, Bersin’s replacement, quit just two years into the job. “I don’t have the energy, heart and passion that I did when I first took the job,” he said. And then there’s Rudy Crew, who was ousted in Miami-Dade after four years. In that time the district was thrice named a finalist for the Broad Prize, which recognizes urban districts for major achievement gains. But Crew became embroiled in racial and ethnic tensions, as well as caught in a budgeting morass, and was booted.
But if there is no super-being to save the children, who can? Sadly, no one in a government monopoly, which is what public schooling is. In such a system only political power matters — after all, politicians make all the rules — and most of that power resides with teachers, administrators, and other public school employees. Because their very livelihoods come from the government system, they are the most motivated to engage in political combat, and through unions and other associations they are best able to organize. And because they are human, their natural proclivity is to fight for the most generous compensation, and least accountability to others, possible.
Parents and children — the people for whom the public schools are supposed to work — simply can’t counter that politicking force. They can’t constantly run political ads, work for campaigns, lobby, and take to the streets the way unions and other organized interests can. And that means polticians who side with parents against unions and administrators are taking a politically perilous — and often fatal — risk.
So the problem is not a lack of heroes. It’s that public schooling inherently crushes not just heroes, but the very people our educators are supposed to serve — parents and children.
Thankfully, knowing that makes the solution clear: We must take education money away from politicians, give it to parents, and in so doing take away the death ray, or robot army, or whatever you want to call the incredible power that government monopolies bestow on special interests. We must give parents school choice not so that they can become superheroes, but so that superpowers are no longer required to get their kids the education they need.
Try the 9/11 Conspirators in Both Federal Courts and Military Commissions?
That’s the proposal Benjamin Wittes makes in today’s Washington Post. Wittes says that by splitting the legal baby, by “charging the 9/11 case in both military commissions and federal court,” the Obama administration can satisfy political considerations on both sides of the aisle.
This is a path fraught with legal issues. The constitutional bar against double jeopardy would prevent a trial in one forum and re-trial in the other for the same actions. Wittes spells out his proposal in greater detail in this post at the Lawfare blog, and he acknowledges this risk. The same sovereign cannot try someone twice for the same crime and Wittes acknowledges that the “John Allen Muhammed Model,” named after one of the Beltway snipers, used the separate sovereigns doctrine in ways that do not apply to Guantanamo. The Beltway snipers were liable for separate crimes in Maryland and Virginia in a way that does not translate directly to the 9/11 conspirators.
Wittes recognizes these legal issues and proposes that federal prosecutors and military commissions prosecutors clearly separate the crimes they respectively charge.
I’d go further. The clearest way to make this work is not to “charg[e] the 9/11 case in both military commissions and federal court.” This proposal only works if you charge pre-9/11 conduct in an Article III court and the 9/11 attacks in a military commission.
The Double Jeopardy Clause of the Fifth Amendment would prevent “charging the 9/11 case in both military commissions and federal court.” Federal prosecutors charged Khalid Sheikh Mohammed well before 9/11 for his participation in the Bojinka Plot, a plan to blow up airliners over the Pacific Ocean. To the extent that he and other 9/11 co-conspirators can be charged with crimes related to Bojinka or other pre-9/11 attacks, this would pass constitutional muster. Otherwise, this is a not an advisable course of action.
Halloween: Uncle Sam Style
The Office of Senator Tom Coburn (R-OK) has released an appropriately timed report on federal subsidies that have gone to the deceased. From the introduction:
In the past decade, Washington sent over $1 billion of your tax dollars to dead people. Washington paid for dead people’s prescriptions and wheelchairs, subsidized their farms, helped pay their rent, and even chipped in for their heating and air conditioning bills.
In some cases, these payments quietly gather in a dormant bank account. In many others, however, they land in the pockets of still-living people, who are defrauding the system by collecting benefits meant for a now-deceased relative.
Since 2000, the known cost of these payments to over 250,000 deceased individuals has topped $1 billion, according to a review of government audits and reports by the Government Accountability Office, inspectors general, and Congress itself. This is likely only a small picture of a much larger problem.
As a Cato essay on fraud and abuse in federal programs discusses, these problems are endemic because the federal government is a “vast money transfer machine.” While federal subsidy programs should be cut because they harm the economy and are unfair to taxpayers, Coburn’s findings of pure waste represent one more reason to pursue terminations of federal programs.
Is the FAIR Tax a Political Liability?
In the past 15 years, I’ve debated in favor of a national sales tax, testified before Congress on the merits of a national sales tax, gone on TV to advocate for a national sales tax, and spoken with dozens of reporters to explain why a national sales tax is a good idea. Even though I prefer a flat tax, I’ve been an ardent defender of sales tax proposals such as the FAIR tax because it would be a great idea to replace the current system with any low-rate system that gets rid of the tax bias against saving and investment. I even narrated this video explaining that a national sales tax and flat tax are different sides of the same coin — and therefore either tax reform proposal would significantly improve prosperity and competitiveness.
I will continue to defend the FAIR tax and other national sales tax proposals that replace the income tax, but I wonder whether this is a losing battle. Every election cycle, candidates that endorse (or even say nice things about) the FAIR tax wind up getting attacked and put on the defensive. Their opponents are being dishonest, and their TV ads are grossly misleading, but they are using this approach because the anti-FAIR tax message is politically effective. Many pro-tax-reform candidates have lost elections in favorable states and districts, largely because their opponents were able to successfully demagogue against a national sales tax.
Misleading Headline Dept.: ‘Council Aids West Side Housing’
At his must-read blog Future of Capitalism, Ira Stoll points out (reprinted by permission) an instance in which the news-side WSJ uncritically accepts at face value the claims of New York City politicos:
“Council Aids West Side Housing” is the headline over a news article in the Wall Street Journal reporting, “A change to city zoning laws aims to preserve affordable housing for a large swath of the West Side, blocking new development in the Garment District, West Chelsea and Hudson Yards….The City Council voted on Wednesday to extend a zoning-law amendment that previously has been applied to Clinton, a midtown West area also known as Hell’s Kitchen. It now will also restricts landlords or developers from changing more than 20% of any multi-family building in the additional West Side neighborhoods. Council members say the rules will allow for building renovations but not demolitions…..About 1,500 units in 108 buildings will fall under the new amendment….The vote on Wednesday was an extension of the 1974 Clinton Special District amendment, which was passed to protect that area’s low-rise character and affordable housing.”
A free-market-oriented economist with some common sense might point out that restricting new high-rise development may preserve “affordable housing” for the lucky few occupants of the 1,500 units now locked into place. But this free-market-oriented economist with some common sense might also point out that by restricting the supply of new housing units, the change in the law won’t “Aid Housing,” as the headline claims, but it will actually hurt housing by making it illegal to build much more of it. People living outside these neighborhoods who would like to move in will have a harder time doing so now that the government has artificially restricted the housing supply. The Journal article doesn’t get into this.
A commenter further points out that the land-use freeze will cut into the property tax base on which the city can draw, meaning that the city will raise funds by taxing someone else — another reason to expect that life for city newcomers will be less affordable in coming years, not more.
A Witch Hunt Is Underway in Ecuador
Many people feared that President Rafael Correa would unleash a witch hunt in Ecuador after the police uprising of September 30th that his government quickly dubbed a “coup attempt.” As my colleague Gabriela Calderón wrote a few days after those incidents, the government’s narrative that Correa was kidnapped in a hospital by rogue elements of the national police has been severely undermined by several witnesses who claim that Correa stayed voluntarily in the building and was in control of the situation the entire time. Mary O’Grady of the Wall Street Journal also mentioned this in her weekly column.
One of these critical witnesses is César Carrión, director of the hospital where Correa was supposedly being held against his will. Carrión had not been implicated by the authorities in the police riots—until last week. On October 21st Carrión declared in a special report aired on CNN en Español that Correa hadn’t been kidnapped or faced any threat. A couple of days later, Correa lambasted Carrión on national TV, calling him a “conspirator” and warning him that “he better know who he’s dealing with, I’m the president and you’re my subordinate… you can’t make your boss look like a liar.” Carrión was fired from his post soon afterward, and yesterday he was arrested for “attempting to murder Rafael Correa.”
Many other people, including journalists, who dared to question the government’s dubious claim that there was a coup attempt (for example, the military high command gave its full support to the president the day of the supposed coup) have also been harassed by the authorities. However, some government officials apparently didn’t get the memo of the official coup attempt allegation. On the day of the uprising, Doris Soliz, minister of Political Coordination told CNN en Español that there wasn’t a coup under way. Also that day, Vinicio Alvarado, secretary of Public Administration denied on public TV the possibility of a coup, saying that the protest was simply “a specific demand from a government institution.”
International observers have also raised many doubts about the seriousness of Correa’s coup allegation. But what seems clear now is that the Ecuadorian government is dead serious in its efforts to use the incident to persecute political opponents and independent media. Those who challenge the official narrative, face the consequences.
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