Archive for October, 2010
Welfare and Fiscal Federalism
The Washington Post recently reported on the federal government’s cash-welfare program, Temporary Assistance for Needy Families. Despite the deep recession, the TANF welfare rolls haven’t seen a dramatic increase. Meanwhile, other federal anti-poverty programs have seen the sizable increases that are to be expected in a recession:
Nationwide, welfare cases grew by 11 percent from the start of the recession through March, according to the Department of Health and Human Services. In contrast, the number of families getting food stamps jumped by 50 percent and the number getting unemployment benefits more than doubled. Medicaid grew by more than 13 percent from late 2007 to late 2009, according to the Kaiser Family Foundation.
As I’ve noted before, TANF’s tighter work and eligibility requirements have made it a less desirable option for those seeking government assistance. Over the past decade, inflation-adjusted spending on all federal anti-poverty programs has increased by 89 percent. Only TANF saw a decrease in spending.
When TANF replaced the federal government’s open-ended entitlement in 1996, it allowed the states great leeway to set benefits. California, which offers more generous benefits than other states, has seen its TANF rolls increase by almost 25 percent since the recession started. In contrast, Michigan and Rhode Island, which have seen a respective 2 percent increase and 10 percent decrease in their welfare rolls, offer less generous TANF benefits.
The variation in TANF enrollment among the states points to the desirability of handing off all responsibility for anti-poverty programs to the states. The beauty of fiscal federalism is that it enables states to pursue policies that better reflect local preferences, while constraining governments because of interstate competition. Federal policymakers should get out of the anti-poverty business as the Constitution intended.
Have Americans Turned against Free Trade?
A new Wall Street Journal/NBC News poll would seem to say yes. In a story over the weekend under the headline, “Americans Sour on Trade,” the Journal reports:
more than half of those surveyed, 53%, said free-trade agreements have hurt the U.S. That is up from 46% three years ago and 32% in 1999.
One plausible explanation for the sour mood toward trade is the business cycle. 1999 was near the peak of the long boom of the 1990s, when Americans were feeling good about just about everything. Even three years ago, the stock market was at a record high and unemployment was below 5 percent. In this light, trade is another casualty of the lingering recession, not a cause as many trade critics want to argue.
“Outsourcing” was a major source of anxiety in the poll. Americans overwhelming believe outsourcing of production and manufacturing work to other countries is a reason why the economy is struggling and new jobs are not being created. This collective attitude is more reflective of the complaints people hear in the media than of any hard reality on the ground.
As I document in my 2009 Cato book, Mad about Trade, only about 3 percent of job displacement in the United States can be blamed on trade. (See pp. 31-33.) For every one person in the unemployment line because of imports or outsourcing, there are 30 people who have been displaced from their jobs by technology, domestic competition, changing consumer tastes, or the general business cycle.
Despite the popular worries, outsourcing is more likely to attract business to the United States than send it overseas. Year after year, more direct manufacturing investment flows into the United States than out to other countries. Year after year, Americans sell more “business and professional services” to customers abroad than they buy.
The facts are on the side of expanding the freedom of Americans to trade and invest with people in other countries. What is lacking are political leaders in Washington who will stand up for the broader national interest of our country against the special interests who are exploiting anxiety about the economy to trash trade.
Giving Power to Experts Is No Way to Reform Health Care
In the latest Cato Policy Report, Cato adjunct scholar Arnold Kling‘s essay on the (mis)rule of experts explains why ObamaCare will fail:
Despite the many pages contained in the health care legislation that Congress enacted, the health care system that will result is for the most part to be determined. The design and implementation of health care reform was delegated to unelected bureaucrats, as was done in Massachusetts.
In Massachusetts, the promises of proponents have proven false, and the predictions of skeptics have been borne out. Costs have not been contained; they have shot up. Emergency room visits have not been curtailed; they have increased. The mandate to purchase health insurance has not removed the problem of adverse selection and moral hazard; instead, thousands of residents have chosen to obtain insurance when sick and drop it when healthy. The officials responsible for administering the Massachusetts health care system are no longer talking about sophisticated ways of making health care more efficient.
Instead, they are turning to the crude tactic of imposing price controls.
Once again, we have legislators putting unrealistic demands on experts. This results in the selection of experts with the greatest hubris, shutting out experts who appreciate the difficulty of the problem. When the selected experts find that their plans go awry, they take out their frustrations by resorting to more authoritarian methods of control.
With ObamaCare, that dynamic took hold before the law even took effect.
Yes, Virginia, Congress Is Not Santa Claus and Is Bound by the Constitution
The legal battle against Obamacare continues. In June, a district court in Richmond denied the government’s motion to dismiss Virginia’s lawsuit (in opposition to which Cato filed a brief). Despite catcalls from congressmen and commentators alike, it seems that there is, after all, a cogent argument that Obamacare is unconstitutional!
Having survived dismissal, both sides filed cross motions for summary judgment—meaning that no material facts are in dispute and each side believes it should win on the law. Supporting Virginia’s motion and opposing the government’s, Cato, joined by the Competitive Enterprise Institute and Georgetown law professor (and Cato senior fellow) Randy Barnett, expands in a new brief its argument that Congress has gone beyond its delegated powers in requiring that individuals purchase health insurance.
Even the cases that have previously upheld expansive federal power do not justify the ability to mandate that individuals buy a product from a private business. Those cases still involved people that were doing something—growing wheat, running a hotel, cultivating medical marijuana. The individual mandate, however, asserts authority over citizens that have done nothing; they’re merely declining to purchase health insurance. This regulation of inactivity cannot find a constitutional warrant in either the Commerce Clause, the Necessary and Proper Clause, or Congress’s taxing power. Such legislation is not “necessary” to regulating interstate commerce in that it violates the Supreme Court’s distinction between economic activity (which often falls under congressional power as currently interpreted) and non-economic activity (which, to date, never has), it is not “proper” in that it commandeers citizens into an undesired economic transaction.
Finally, the taxing power claim is a red herring: (a) neither the mandate nor the penalty for not complying with the mandate is a tax, and is not described as such anywhere in the legislation; (b) even if deemed a tax, it’s an unconstitutional one because it’s neither apportioned (if a direct tax) nor uniform (if an excise); (c) Congress cannot use the taxing power to enforce a regulation of commerce that is not authorized elsewhere in the Constitution.
The district court will hear arguments on the cross-motions for summary judgment in Virginia v. Sebelius later this month and we can expect a ruling by the end of the year.
Obamacare delenda est.
Another New Supreme Court Term, Another New Justice
Today is the first Monday in October, the traditional start of the Supreme Court term. While we have yet to see as many blockbuster constitutional cases on the docket as we did last term—which, despite the high profile 5-4 splits in McDonald v. Chicago and Citizens United actually produced fewer dissents than any in recent memory—we do look forward to:
- Two big free speech challenges, one over a statute prohibiting the sale of violent video games to minors, another the offensive protesting of a fallen soldier’s funeral;
- An Establishment Clause lawsuit against Arizona’s tax credit for private tuition funds (an alternative to educational voucher programs);
- Regulatory federalism (or “preemption”) cases involving:
- safety standards for seatbelts;
- an Arizona statute regarding the hiring of illegal aliens; and
- the forbidding of class-arbitration waivers as unconscionable components of arbitration agreements;
- Important ERISA and copyright cases;
- A case examining privacy concerns attending the federal government’s background checks for contractors; and
- A criminal procedure dispute regarding access to DNA testing that may support a claim of innocence.
Cato has filed amicus briefs in several of these cases—and in various others which the Court may decide to review later this year—so I will be paying extra-close attention.
Perhaps more importantly, we again have a new justice—and, as Justice White often said, a new justice makes a new Court. While her confirmation was never in any serious doubt, Elena Kagan faced strong criticism (including from me) on a variety of issues—most importantly on her refusal to “grade” past Court decisions or identify any specific limits to government power. The 37 votes against Kagan were the most ever for a successful Democratic nominee, which is emblematic of a turbulent political environment in which the Constitution and the basic question of where government derives its power figure prominently.
Given Kagan’s political and professional background, it is safe to assume that she’s not the second coming of Clarence Thomas. And because she replaces the “liberal lion” Justice Stevens, her elevation from “tenth justice” (as the solicitor general is known) to ninth is unlikely to cause an immediate change in issues that most divide the Court—particularly because she is recused from nearly half the cases this term. She could, however, add an interesting and nuanced perspective on a variety of lower-profile issues. Only time will tell what kind of justice Kagan will be now that she is, seemingly for the first time in her ambitious life, unconstrained to speak her mind.
Here’s to another interesting, varied, and (hopefully) liberty-enhancing year!
Why Government Should Not Give Nutrition Advice
There are plenty of reasons why politicians and government bureaucrats have no business telling you what you should eat. The Constitution grants the federal government no authority to do so, for one thing. Even if it did, it is simply wrong to force people to pay taxes so that other people can hand down nutritional advice or — God forbid – mandates.
A terrific article by Jane Black in The Washington Post illustrates why, furthermore, the government’s advice isn’t likely to be very good:
[H]istorically, the government has shied away from offering controversial advice. And with food, everything is controversial: A boost for one type of food in the guidelines can be viewed as a threat by providers of competing products. The result, critics say, is a nutritional education system so politically influenced that it is ineffective.
This year’s process appears to be no exception. In public comments, the meat lobby has opposed strict warnings on sodium that could cast a negative light on lunch meats. The milk lobby has expressed concerns about warnings to cut back on added sugars, lest chocolate- and strawberry-flavored milks fall from favor. Several members of the Massachusetts congressional delegation also weighed in against added-sugar restrictions in defense of the cranberry…
In 1977, a Senate select committee led by Sen. George McGovern (D-S.D.) was forced to beat a hasty retreat after it initially recommended that Americans could cut their intake of saturated fat by reducing their consumption of red meat and dairy products. Its revised guidelines suggested choosing “meat, poultry and fish that will reduce saturated-fat intake.”
McGovern, whose constituents included many cattle ranchers, lost his seat in 1980. Since then, in case after case, the guidelines have refrained from suggesting that Americans eat less of just about anything.
Public health advocates say that kind of vacuum is precisely the problem: By avoiding blunt messages about what not to eat, the government has spoken in a way that baffles consumers.
“The only time they talk about food is if it’s an ‘eat more’ message,” said Marion Nestle, a professor of nutrition at New York University and a longtime critic of the food industry. “If it’s a question of eating less, then they talk about nutrients.”…
[A]s in the past, translating scientific data into clear and useful recommendations poses political pitfalls. The advisory committee’s emphasis on a “plant-based” diet, for example, has caused much consternation among the powerful egg and meat lobbies who say the term might be misunderstood as advocating a vegetarian diet.
This problem trips up all big-government schemes. Right-wing and left-wing statists think they have a terrific idea: give the government power to do this or that, and Experts will use that power to improve mankind. But then the people with a financial stake get involved, and the effort ends up serving them more than mankind. See also health care, national defense, etc..
There Is No Libertarian or Conservative Argument for Higher Taxes
Eli Lehrer has an article on the FrumForum entitled “Five Revenue Raisers the GOP Should Back.” He argues it would be good to get rid of preferences such as the state and local tax deduction and the mortgage interest deduction, and he also asserts that there should be “user fees” for things such as transportation.
As an avid supporter of a flat tax and market pricing, I have no objection to these policies. Indeed, I would love to get rid of the state and local tax deduction so that taxpayers in Texas and Florida no longer have to subsidize the fiscal profligacy of politicians in California and New York.
But there is a giant difference between getting rid of certain tax preferences as part of revenue-neutral (or even better, tax-cutting) tax reform and getting rid of tax preferences in order to give politicians more revenue to spend.
The former is a noble goal. Who can argue, after all, with the idea of getting rid of the corrupt and punitive internal revenue code and replacing it with a simple and fair flat tax? Lots of loopholes are eliminated, so there are plenty of tax-raising provisions in tax reform. But every one of those provisions is offset by provisions that lower tax rates and get rid of double taxation of saving and investment.
The latter, by contrast, is an exercise in trying to lose with minimal damage — sort of the “French Army Theory” of taxation, surrender gracefully and hope that your new masters give you a few crumbs after their celebratory feast.
What is especially strange about this approach is that the Republicans who advocate higher taxes claim that they are political realists. Yet if we look at real-world evidence, the moment Republicans show their “realism” by putting taxes on the table, the entire debate shifts.
Instead of the debate being tax-hikes vs. no-tax-hikes, it becomes a debate over who-should-pay-more-tax. Republicans win the first debate. They get slaughtered in the second debate.
Remember when the first President Bush agreed to enter into tax-hike negotiations in 1990? He set out two conditions — that there should be a reduction in the capital gains tax and that there should be no increase in income tax rates. So what happened? As everyone with an IQ above room temperature predicted, the capital gains tax stayed the same and income tax rates increased.
Last but not least, this conversation only exists because some people have thrown in the towel, acquiescing to the idea that there is no way to balance the budget without higher taxes. Yet the Congressional Budget Office data shows that the budget can be balanced by 2020 simply by limiting annual spending growth to 2 percent.
What Privacy Invasion Looks Like
The details of Tyler Clementi’s case are slowly revealing themselves. He was the Rutgers University freshman whose sex life was exposed on the Internet when fellow students Dharun Ravi and Molly Wei placed a webcam in his dorm room, transmitting the images that it captured in real time on the Internet. Shortly thereafter, Clementi committed suicide.
Whether Ravi and Wei acted out of anti-gay animus, titillation about Clementi’s sexual orientation, or simply titillation about sex, their actions were utterly outrageous, offensive, and outside of the bounds of decency. Moreover, according to Middlesex County, New Jersey prosecutors, they were illegal. Ravi and Wei have been charged with invasion of privacy.
This is what invasion of privacy looks like. It’s the outrageous, offensive, truly galling revelation of private facts like what happened in this case. Over the last 120 years, common law tort doctrine has evolved to find that people have a right not to suffer such invasions. New Jersey has apparently enshrined that right in a criminal statute.
The story illustrates how quaint are some of the privacy “invasions” we often discuss, such as the tracking of people’s web surfing by advertising networks. That information is not generally revealed in any meaningful way. It is simply being used to serve tailored ads.
This event also illustrates how privacy law is functioning in our society. It’s functioning fairly well. Law, of course, is supposed to reflect deeply held norms. Privacy norms—like the norm against exposing someone’s sexual activity without consent—are widely shared, so that the laws backing up those norms are rarely violated.
It is probably a common error to believe that law is “working” when it is exercised fairly often, fines and penalties being doled it with some routine. Holders of this view see law—more accurately, legislation—as a tool for shaping society, of course. Many of them would like to end the societal debate about online privacy, establishing a “uniform national privacy standard.” But nobody knows what that standard should be. The more often legal actions are brought against online service providers, the stronger is the signal that online privacy norms are unsettled. That privacy debate continues, and it should.
It is not debatable that what Ravi and Wei did to Tyler Clementi was profoundly wrong. That was a privacy invasion.
Comparative Political Economy
Free-marketers often point to the varying success of pairs of countries — the United States vs. the Soviet Union, West vs. East Germany, Hong Kong and Taiwan vs. China — to illustrate the benefits of markets over planning, regulation, and socialism. Some even point out the closer but real differences in GDP per capita between the United States and Western Europe. In his 1984 book Endless Enemies (p. 380) Jonathan Kwitny added the less familiar pairs “Morocco versus Algeria, Malaysia versus Indonesia, Thailand versus Burma, Kenya versus Tanzania.” Now Rama Lakshmi reports in the Washington Post that we can see the results of two systems of political economy in one country:
It didn’t take long for the first athletes arriving in New Delhi last week for the upcoming Commonwealth Games to catch a glimpse of modern India’s two faces.
Their gateway to the country was the capital’s gleaming new international airport terminal, built by a privately led consortium and opened in June four months ahead of schedule.
But the official wristbands that the visitors were handed at the airport turned out to be an emblem of India’s famous red tape and government inefficiency. When the teams reached the athletes’ village, the police guarding the facility refused to recognize the IDs, saying that the Games Organizing Committee had not sent the required authorization order.
The jet-lagged athletes stood about under a tree for hours with their luggage, calling their embassies for help, and the problem was not finally resolved for four more days.
To observers, the incident illustrated more than just the well-documented sloppiness that has marked India’s preparations for the Games. It also underscored the gap that has emerged between a government rooted in a slower-moving, socialist era and a private entrepreneurial class that is busy building global IT companies, the world’s largest oil refineries and spectacular structures such as the $2.8 billion airport terminal.
“It is about two aspects of the India story,” said Rajeev Chandrasekhar, an entrepreneur and member of Parliament. “India’s private sector has been exposed to competition and therefore has developed capability. Accountability is firmly built into the entrepreneurial mind-set. But the government structure is a relic of the colonial past and continues to plod along.”…
For the Delhi [airport] project, [Grandhi Mallikarjuna]Rao said, his company worked with 58 government agencies.
“Our nation is in the process of transition from a command-and-control economic system to a more efficient market-driven structure,” he said. “It will take some time till this transition is complete.”
Given all this history, the interesting question is why some people in the United States want to continually transfer such vital functions as energy and health care from the competitive, accountable, capable entrepreneurial sector to the slower-moving, plodding, command-and-control bureaucratic sector. (Of course, the already-government-influenced health care and energy industries are not the most entrepreneurial sectors of the economy. But as the examples above demonstrate, even imperfect markets work better than government direction. Nor are the government-run local schools very competitive or accountable, but they are more so than they will be under tighter federal control.)
School House Pork
The trendy thinking might be that you’re loopy if you call for ending the U.S. Department of Education, or if you think the Constitution should actually have some bearing on federal education policy. Reality, however, strongly suggests that you’d be crazy not to think that way. If you have doubts, I urge you to read Pork 101: How Education Earmarks School Taxpayers, a new report on federal education “help” from the office of Sen. Tom Coburn (R-OK).
To start things off, the report succinctly summarizes the role the Constitution gives the feds in education: “The U.S. Constitution provides no role to the federal government in education.”
That’s not entirely accurate—the 14th Amendment empowers Washington to prohibit state and local discrimination in the provision of schooling, and the feds can control education in DC—but otherwise Washington really has zero constitutional authority to meddle in education.
Right after stating this, the report lays out the big ball of nothin’ we’ve gotten from decades of federal meddlin’ and spendin’. Some of the charts might be familiar…
Finally, the paper shines a light on the root problem with federal involvement: It ultimately serves the interests of politicians and special interests, not children or the public. Indeed, by focusing on education pork—legislative earmarks that go directly to favored constituencies—the report highlights politicians literally glorifying themselves with “education” dough.
There’s $1 million, for instance, to establish the Howard Baker School of Government at the University of Tennessee. Another $6 million for the William F. Goodling Institute for Research and Family Literacy at Penn State. There’s $5 million for the Daniel Patrick Moynihan Global Affairs Institute at Syracuse University. $1 million for the Paul Simon Public Policy Institute at Southern Illinois University. $2 million to the City College of New York for the now-infamous Charles B. Rangel Center for Public Service. And tens-of-millions for “Harkin Grants,” which are named after Senate Health, Education, Labor, and Pensions Committee chairman Tom Harkin. That’s the same Tom Harkin who has been raking for-profit colleges over the coals for, basically, serving themselves with taxpayer dollars.
Maybe they learned it by watching you, Senator Harkin.
There are many more examples of taxpayer-funded politician-aggrandizement in the report, as well as lots of other cuts of pig. Take it all in if you can stand it, then give some thought to who’s really nutty when it comes to federal education policy. The answer should be pretty clear.
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- With the release of its “Pledge to America,” House Republicans largely fell back on limited government platitudes.
- Are subsidized child care services being provided by sex offenders? Apparently, nobody knows.
- Head Start has a fraud problem. And by the way, the program doesn’t work.
- The U.S. Postal Service’s latest financial woes are a reminder that Congress should start focusing its attention on getting the government out of the mail business once and for all.
- Liberals and libertarians agree: it’s nonsense to suggest that a little belt-tightening and reductions in wasteful government spending will solve our fiscal problems.
‘Trial of the Century’ Hits 15-Year Mark
Earlier today I saw a CNN report about the O.J. Simpson case—15 years ago the verdict was announced and the entire country was tuning in to hear the result. The case was all over the news for a year—first the shocking news of the murder of Simpson’s former wife Nicole Brown Simpson and her friend Ronald Goldman, then the televised “white Bronco chase” around Los Angeles, then Simpson’s defense attorney “Dream Team” and prosecutor Marcia Clark’s life and looks, and then, at last, the verdict.
White America had a hard time accepting the fact that the police would lie about their actions (at one point early on, the police testified that they invaded Simpson’s estate because they were concerned about his “safety”—instead of admitting that they were tracking a suspect and trying to gather evidence).
Black America had a hard time explaining away the evidence of Simpson’s guilt. As I discussed in a 2003 Reason article, here are three examples of the incriminating evidence:
First, after the nationally televised slow-speed chase, the police recovered a “To Whom It May Concern” note written by Simpson’s own hand after he was charged with the murder, but before he was arrested. Defense attorney Robert Shapiro said he had little doubt that it was a suicide note. But an innocent person would very likely be outraged about being charged with a murder and eager to find the real killer. Prosecutors never presented the note to the jury.
Second, after the chase, the police also recovered several key pieces of incriminating evidence, but the prosecutors failed to use them during the trial. Officers found a fake mustache, a fake goatee, and, most damning, a receipt that showed the items were purchased two weeks before the murders — yet the prosecutors never asked jurors to consider why Simpson would need the elements of a disguise just prior to the murder of his wife and Ron Goldman.
Third, detectives tape-recorded an interview with Simpson just a day after the murders. Simpson, asked about a wound on his hand, admitted that he had cut himself the previous night and that instead of immediately applying a bandage, he dripped blood around his estate. When a detective asked him the cause of the cut, Simpson’s reply — again, on audiotape — was, “I have no idea, man.” Unbelievably, the jury never heard this audiotape or his bizarre admission that he was bleeding all over the place right around the time of his wife’s murder. Instead, prosecutors took weeks to present DNA evidence — and then, in response to the defense claim of a police frame-up, offered up a lame, “Yes, racist cops exist in the LAPD, but this case is not a frame-up.”
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