Archive for October, 2010
In Which the French Are Explained, but They Remain Mistaken
The French youth are rioting over retirement ages, and I’ve seen it claimed that they’re failing to act in their own interests. More generous retirements have to be paid for by someone, and that “someone” will have to be the young workers. Why on earth are they shooting themselves in the foot like this? Why aren’t they acting in their class (err, age cohort) interests?
One of my favorite authors, Theodore Dalrymple, writes:
The lycéens’ demonstrations against the increase in the retirement age seemed to me something of a failure of the Cartesian critical spirit on which the French pride themselves… Whose labor, after all, do these lycéens imagine will pay for all of the unfunded pension obligations of the French state, as pensioners live longer and longer? Where do they imagine the money will come from?
He has a point here, but his explanation falls a bit short:
What probably accounts for the strikes is a mixture of combativeness—the prejudice that being against something is inherently superior, morally speaking, to being for it—and a desire for a day off from school.
Combativeness, sure. Nothing ever happens in France without someone going on strike. And nothing really important happens without a general strike. Now, the leaders do tend to be students, so I can’t dismiss the day off school hypothesis out of hand. But let’s at least look at the students’ own professed motives. Here’s what one of them had to say:
“If the reform passes, we’ll have even fewer chances to find work, we young people, because the jobs will be freed up more slowly.”
The impulse is both subtler and more ridiculous than Dalrymple realizes. It’s our old friend, the lump of labor fallacy: Force the oldsters into retirement, and it’s like a jobs program for everyone else. There is only so much labor to go around — not like jobs are ever created, you know — so we’d better be sure we get our fair share of it. Or so the theory goes. The protest signs, insofar as they communicate anything worth repeating, have often read “Place aux jeunes!” — Make room for the young! — or similar.
Not that this approach to economics makes any sense, either theoretically or practically. Putting someone out of work faster means he’s not producing anymore, which makes the economy worse off on the whole. And “his” job won’t necessarily stick around, because retirement is often the least painful time at which to eliminate a position entirely. Today’s workers aren’t likely to be trained for the same types of work as their parents and grandparents, and they shouldn’t necessarily want to be. The lump of labor fallacy imagines a world frozen in time, not one of dynamism and growth.
Republicans and Democrats Should Be Especially Concerned about the Threat of Government When Their Party Is in Charge
Gallup just released a poll showing that 46 percent of Americans view the federal government as an immediate threat to the rights and freedoms of ordinary Americans. My first reaction was to wonder why the number was so low. After all, we have a political elite that wants to do everything from control our health care to monitor our financial transactions.
But a secondary set of numbers is even more remarkable. As seen in this chart, both Republicans and Democrats tend to view the federal government as a threat mostly when the White House is controlled by the other party.
This complacency is very unfortunate. Republicans presumably want to limit government control over the economy, yet it was the Bush Administration that put in place policies such as Sarbanes-Oxley, the banana-republic TARP bailout, the corrupt farm bills, and the pork-filled transportation bills. Democrats, meanwhile, presumably want to protect our civil liberties, yet the Obama Administration has left in place virtually all of the Bush policies that the left was upset about just two years ago. There has been no effort to undo the more troublesome provisions of the PATRIOT Act. And shouldn’t honest liberals be upset that the Obama Administration is going to such lengths to defend the military’s don’t-ask-don’t-tell policy?
The lesson to be learned is that there is an unfortunate tendency for politicians to misbehave when they get control of the machinery of government. Lord Acton warned that “Power corrupts and absolute power corrupts absolutely.” It’s almost as if Republicans and Democrats do their best every day to confirm this statement.
British Military Cuts, Conservatives, and Neocons
Yesterday, Prime Minister David Cameron announced Britain’s biggest defense cuts since World War II. The cuts affect the British military across the board.
The Army will shed 7,000 troops; the Royal Navy and Royal Air Force will each lose 5,000 personnel; the total workforce in the Ministry of Defence, including civilians, will contract by 42,000. The Navy’s destroyer fleet will shrink from 23 to 19. Two aircraft carriers — already under construction — will be completed, but one of the two will be either mothballed or sold within a few years. Whether the one remaining flattop in the British fleet will actually deploy with an operational fixed-wing aircraft is an open question. They’ve decided to jettison their Harriers; a technological marvel when it was first introduced, it has a limited range and a poor safety record. In its place, the Brits still intend to purchase Joint Strike Fighters, but not the short take-off and vertical landing (STOVL) version.
And right on cue, Max Boot argues in today’s Wall Street Journal, following the Heritage Foundation’s James Carafano’s example, that fiscal conservatives should not use these cuts as an example of how to reign in deficits. According to Boot and Carafano, military spending is off-limits. Period.
But as I note at The Skeptics, most Americans do not buy into this argument:
In Boot’s telling, Cameron’s decision inevitably places a heavier burden on the shoulders of American taxpayers and American troops.
But why should Americans perform a function for other governments that they are obligated by tradition, law and reason to perform for themselves? Defense is, as Boot notes, “one of the core responsibilities of government.” I would go one better: defense is one of the only legitimate responsibilities for government. So why does Max Boot think that Americans should simply resign themselves to take on this burden, doing for others what they should do for themselves?
I suspect that he fears that most Americans are not comfortable with the role that he and his neoconservative allies have preached for nearly two decades, hence his preemptive shot across the bow of the incoming congressional class that will have been elected on a platform of reducing the burden of government. True, the public is easily swayed, and not inclined to vote on foreign policy matters, in general, but as I noted here on Monday, it seems unlikely that the same Tea Partiers who want the U.S. government to do less in the United States are anxious to do more everywhere else. And, indeed, such sentiments are not confined to conservatives and constitutionalists who are keenly aware of government’s inherent limitations. Recent surveys by the Chicago Council of on Global Affairs (.pdf) and the Pew Research Center (here) definitively demonstrate that the public writ large is anxious to shed the role of global policeman.
Click here to read the entire post.
Victory for Free Trade – At Least Within the Country
In July, I blogged about the case of Minnesota farmers who were facing criminal sanctions for engaging in interstate trade. Now I am happy to report that the city of Lake Elmo has torn down its onerous and unconstitutional trade barriers:
The change was made in response to a federal judge’s opinion in August that Lake Elmo’s protectionist law likely violated the U.S. Constitution because it discriminated against interstate commerce. Magistrate Judge Franklin L. Noel stated that the law “squelche[d] competition . . . altogether, leaving no room for investment from outside,” and would likely have “obliterate[ed] . . . the Lake Elmo markets in pumpkins and Christmas trees. . . . In fact, Plaintiffs have shown that the markets will be wiped out.”
Congrats to our friends at the Institute for Justice who spearheaded this case! You can read more here. And you can find Judge Noel’s opinion here.
Hat tip to Baylen Linnekin at Crispy on the Outside.
The Awesome Power of a Very Bad Idea
Foreign aid, as many (including myself) have argued, is a very bad idea. Aside from encouraging corruption and helping to keep nasty dictators in power, it is a major disincentive to necessary political and economic reforms.
Considering how little evidence the advocates of further foreign aid have to support their case and spending cuts across the Atlantic, you would have thought that aid budgets in rich countries would be among the first to be cut. Not so in Great Britain.
The Conservative-Liberal coalition’s spending cuts have been hailed as the most dramatic since WWII. For example, the island nation will lose its aircraft carrier, its famous Harrier jump jet fleet and thousands of jobs in the military. The defense budget will shrink by 7.5 percent, while other departments will be cut by 19 percent on average.
The only two departments that will not see any cuts are the socialist National Health Service (a bottomless money pit) and, you have guessed it, foreign aid, which will see an actual increase by an astonishing 37 percent.
Many will remember the Blair/Brown era for getting the UK involved in the Iraq War and bringing the country to the brink of bankruptcy. They should also remember it as an era that made support for foreign aid a badge of good citizenry — irrespective of common sense and all evidence to the contrary.
Public’s View of Federal Workers
A poll released this week by the Washington Post found that 52 percent of Americans think federal workers are overpaid and 49 percent said they thought federal workers work “less hard” than private sector workers. Also, 75 percent said that federal workers receive better pay and benefits than similar private sector employees.
Post columnist Joe Davidson says the last result in particular left Office of Personnel Management director John Berry “steaming”:
He said he was frustrated that “the Heritage and Cato misinformation campaign has obviously gained traction.” The two Washington, D.C., think tanks have produced widely discussed reports indicating that federal workers are paid too much. A “pretty prolonged misinformation campaign over the last six month leading up to this,” he said, “has worked.”
It’s not surprising that Berry – an individual who has spent his entire career working in government – doesn’t appreciate the fact that regular Americans aren’t enthusiastic about funding generous pay and benefits for federal workers.
While federal workers have received raises in recent years, millions of private sector employees have lost their jobs or have had to take pay and benefit cuts. Joe and Jane Lunchbucket might have less money for their family, but they still have to cough up money to pay for federal raises. If Berry is steamed, many of the nation’s taxpayers are getting burnt to a crisp, as the poll suggests.
An article at GovernmentExecutive.com underscores why Americans think the federal workforce is privileged. Berry’s OPM is “butting heads” with federal worker unions over the ridiculously bureaucratic process of firing employees. Although the article should be read in its entirety to appreciate the eye-glazing details, the fight boils down to OPM’s ability to remove workers who provide false information on official federal documents.
See this Cato essay for more on federal employee pay.
Upcoming G20 Summit in Seoul Raises Stakes for U.S.-Korea Trade Deal
The next G20 Summit, to be held November 11-12 in South Korea, is right around the corner. For free traders, the summit has taken on added meaning because of the promise President Obama made during the most recent G20 Summit held last June in Toronto to advance the U.S.-Korea free trade agreement (FTA):
The last time I was in Korea, I said that I would be committed to moving [the FTA] forward. And today I indicated to President Lee that it is time that our United States Trade Representative work very closely with his counterpart from the ROK to make sure that we set a path, a road, so that I can present this FTA to Congress…. I want to make sure that everything is lined up properly by the time that I visit Korea in November. And then in the few months that follow that, I intend to present it to Congress. It is the right thing to do for our country.
We agree, Mr. President. To help policymakers understand the high stakes and potential gains of the agreement, Cato Senior Fellow Doug Bandow has authored the new Cato Trade Briefing Paper, “A Free Trade Agreement with South Korea Would Promote Both Prosperity and Security,” released today.
A preview of Doug’s analysis also was published yesterday in the Daily Caller, under the title “South Korea Free Trade Agreement Key to Prosperity and Security.”
Waiting for Realityman
The edu-documentary Waiting for ‘Superman’ continues to generate lots of noise about fixing American education. Unfortunately, like the film itself, most of the noisemakers ultimately ignore reality: The only way to make educators truly put children first is to require that they satisfy parents — the customers — to get their money. And that can mean only one thing: transforming our education system into one in which parents control education funding and educators have to earn their business.
You would think that would be clear to members of the U.S. Chamber of Commerce. Think again: In a new report, the Chamber demonstrates that what’s really needed is not a visit from Superman, but for Realityman to give it a superpowered kick to the rear so that it will demand universal school choice, not the milquetoast tweaks of the government monopoly it meekly champions.
What follows are just a few examples of where the Realityman Signal shines brightly in the report — where the Chamber clearly sees the diabolical work of government monopoly, but ultimately fails to identify the culprit – calling out for our hero to save the Chamber.
First, the paper notes that “successful businesses use well-documented management and leadership practices that result in lean, accountable, flexible, high-achieving organizations.” Meanwhile, “these practices are often absent in school management. State [sic] and districts are not held accountable for their academic outcomes relative to their expenditures….”
No kidding: Businesses have to become ever-more efficient and effective or they’ll lose customers to better, cheaper competitors. Public schools, in contrast, have no real competition and get paid no matter what.
Next, if you aren’t happy with the state of your schools, the Chamber advises getting “tough with candidates and elected officials…. Call candidates, conduct town hall forums and invite the press, write op-eds, and call your local newspaper reporters who work on education issues.”
Now, is this how most businesses work? If a firm isn’t happy with a supplier, does it call its congressman, hold fora, pen op-eds, badger reporters, all in the hope of eventually persuading the supplier to change? Of course not: If the supplier doesn’t improve, the firm just finds a new one and moves on!
Finally, the Chamber laments that “other industries are changing, adapting, and harnessing the power of new technologies, but our education system resists change.”
There’s a simple explanation for this: Public schooling isn’t an “industry.” WordNet defines “industry” as “the organized action of making of goods and services for sale [italics added].” But public schools don’t sell anything. They simply take, and because they don’t have to earn any business they have little incentive to adapt new technologies.
Surely most businessmen recognize the forces that push them to do their best. Why can’t they see the desperate need for the same forces in education?
Save us, Realityman!
Heritage and Prop. 19
Over at the Huffington Post, I scrutinize a recent Legal Memorandum published by the Heritage Foundation on the Prop. 19 ballot initiative.
Here is an excerpt:
The Heritage memorandum claims that if Prop 19 were approved, it would conflict with the federal criminal statute, the Controlled Substances Act and thus “invite litigation that would almost certainly result in [Prop 19] being struck down” as unconstitutional. This legal claim is dead wrong. While it is true that the supremacy clause of the Constitution makes it clear that federal law will override a conflicting state law, that clause simply has no application here. The federal law on marijuana remains in force, but that does not mean that a state government is under any obligation to assist the feds. As the Supreme Court noted in New York v. United States (1992), the state governments are neither “regional offices nor administrative agencies” of the federal government. Let’s take another example. Suppose Congress were to criminalize, say, cotton candy–would California be in violation of the Constitution because its police agents are not now empowered to arrest people producing and possessing cotton candy? No. Nor could Congress compel the California legislature to move against cotton candy producers and consumers. Here again is the Supreme Court: “Even where Congress has the authority to pass laws requiring or prohibiting certain acts, it lacks the power directly to compel the States to require or prohibit those acts.” (New York v. United States, 505 U.S. 144, 166 (1992)). Prop 19 is consistent with the constitutional principle of federalism.
For additional Cato scholarship on drug policy, go here and here.
Cost-Slashing? No, Cost-Shifting.
Here’s a poor, unsuccessful letter I sent to the editor of the Los Angeles Times:
Three and a half million Californians may become eligible for subsidized private health insurance in 2014 under ObamaCare [“3.5 million Californians would be eligible for healthcare tax credits, study finds,” October 6], but those subsidies will not “slash the cost” of their health insurance. As ObamaCare causes health insurance premiums to rise by as much as 30 percent, the private-insurance subsidies will shift those costs to taxpayers. A bipartisan majority of Americans opposes ObamaCare in part because such shell games increase costs rather than reduce them.
Yes, We Do Bribe Kids!
While politicians probably support many policies for college students in part because they think the policies will be educationally or otherwise beneficial, vote buying is no doubt also important. Of course, it’s hard to find a politician who will actually cop to the latter. On this morning’s Today show, however, Democratic National Committee Chairman Tim Kaine came about as close to doing that as you could possibly hope for.
Responding to interviewer Ann Curry’s observation that President Obama has aimed a lot of campaigning at college students lately, Kaine noted that young people voted for Obama in record numbers in 2008, and “the message to young voters is pretty simple… we’ve done the largest expansion of the student loan program in American history… we’ve done a health care reform that allows youngsters to stay on their family insurance policy until age 26, and we’ve done important credit card reform that has helped young voters. So we have their attention….”
Translation: Kids, vote the right way, and keep that free stuff coming!
The False Choice Between a VAT and Impossible Spending Cuts
Governor Mitch Daniels of Indiana has triggered a spat among policy wonks with his recent comments expressing sympathy for a value-added tax (VAT). Kevin Williamson of National Review is arguing that a VAT will probably be necessary because there is no hope of restraining spending. Ryan Ellis of Americans for Tax Reform jumped on Williamson for his “apostasy,” arguing that a VAT would be bad news for taxpayers. From a policy perspective, I’m very much against a VAT because it will finance bigger government, as explained in this video.
That being said, Kevin Williamson makes a good point when he says that some supply-siders have neglected the spending side of the fiscal ledger. And it certainly is true that Republicans don’t seem very interested in curtailing the growth of government. But does this mean, as Williamson argues, but that our choices are limited to 1) a 36 percent spending cut, 2) catastrophic deficits and debt, or 3) a European-style value-added tax.
I actually think it would be a great idea to reduce the budget by 36 percent. That would bring the burden of federal spending back down to where it was in 2003. Notwithstanding the screams from various interest groups that this would generate, nobody was starving in the streets when the budget was $2.3 trillion rather than today’s $3.5 trillion. But Kevin is unfortunately correct in noting that this type of fiscal reform won’t happen.
Kevin is wrong, however, in saying that we therefore have to choose between either Greek-style deficits or a VAT. According to the Congressional Budget Office, tax revenues over the next 10 years will increase by an average of about 7.3 percent each year – and that’s assuming the tax cuts are made permanent and the AMT is adjusted for inflation. Reducing red ink simply requires that politicians exercise a tiny bit of restraint so that spending grows by a lesser amount. This video walks through the numbers and shows how quickly the budget could be balanced with varying levels of spending discipline.
By the way, it’s worth pointing out that the VAT has not prevented gigantic deficits in nations such as Greece, Japan, Ireland, Spain, England, etc, etc. Politicians in those nations implemented VATs, usually with promises that the money would be used to reduce other taxes and/or lower red ink, but all that happened was more spending and bigger government (this cartoon makes the point in a rather amusing fashion). In other words, Milton Friedman was right when he wrote that, ”In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.”
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