Archive for February, 2011
Great Moments in Human Rights: Creating an Entitlement for Free Soccer Broadcasts in Europe
Forget the Magna Carta and the Constitution. Don’t pay attention to the end of slavery. Ignore the defeat of the Nazis or the collapse of the Soviet Empire.
If you want a real victory for humanity, European courts have ruled that people have the right to free soccer games on TV. Apparently, people are now “entitled” to anything that is “of major importance” to society.
Isn’t that just peachy? Europe is slowly collapsing under the weight of the welfare state. Nations such as Greece and Portugal already have reached the point of fiscal collapse. But rather than address these problems, the political elites at the European institutions have decided on a modern-day version of bread and circuses for the masses.
Here’s a blurb from the Financial Times.
European countries are entitled to ban the exclusive airing of World Cup and European football championship games on pay-TV in order to allow wider public viewing on free channels, one of Europe’s top courts has ruled. The ruling is a blow for Fifa, which organises the World Cup finals, and Uefa, which handles the European Football Championship finals. Both organisations depend heavily on the sale of broadcasting rights for much of their income and had challenged the extent to which games had to be shown more widely. But on Thursday the General Court in Luxembourg slapped down their arguments and ruled in favour of Belgium and the UK, which had included games organised by Fifa or Uefa on their lists of events they considered to be “of major importance” to society and so entitled to wider audiences.
President (and Governors) Should Heed Court and Stop Implementing ObamaCare
In yesterday’s Providence Journal, my colleague Ilya Shapiro and I argue that, since a federal court has voided ObamaCare as unconstitutional, the Obama administration should immediately cease all efforts to implement ObamaCare:
Federal courts do not issue advisory opinions. The parties to any lawsuit are bound by any resulting judgment.
At minimum, then, the government lacks authority to implement ObamaCare where the case was decided, in the Northern District of Florida, and the 26 state plaintiffs need take no action to do so. Likewise, members of the National Federation of Independent Business, another plaintiff in the case, may now be entitled to the same protection from Obamacare’s requirements.
Moreover, it is not unreasonable to argue that Vinson’s ruling applies to the nation as a whole. After all, this lawsuit facially attacked the law rather than just challenging its application to particular parties….
In so uncertain a legal context, it is simply reckless for financially strapped federal and state governments to pour resources into changing our health care system when those changes may not ultimately pass constitutional muster.
Governors should follow the example of Florida Gov. Rick Scott (R), who recently told a Cato audience in Naples that Florida will not implement any aspect of ObamaCare. Listen to excerpts from Scott’s remarks here. Read the full Cannon-Shapiro oped here.
The State of State Subsidies
Chris Edwards recently penned a piece that makes the case for cutting federal subsidies to state and local governments. In a related budget bulletin, he shows that there are now over 1,100 federal aid programs for state and local governments.
I’ve produced two charts that illustrate the extraordinary growth in federal subsidies to state and local government using the latest figures in the president’s 2012 budget proposal.
The first chart shows the inflation-adjusted increase in federal subsidies to states and local governments since 1941, separated into “health” and “non-health” categories:
The second chart shows the inflation-adjusted increase in total federal subsidies to state and local governments since 2000:
Like countless other individuals and interest groups, state and local government officials have become addicted to federal taxpayer money. This addiction has encouraged irresponsibility and profligacy at all levels of government. It has also prevented citizens from appreciating the true cost of the services they demand from state and local governments.
In the next couple of months, state and local officials will wail and gnash their teeth over proposals from Washington to cut back on the federal feeding tube. Journalists who are tempted to be overly-sympathetic to state and local officials should look at these charts and ask themselves why these folks never seem to be able to get their fiscal houses in order despite all the “free” money they’re getting from federal taxpayers.
See this Cato essay on the need to revive fiscal federalism.
Homeownership Before the New Deal
The latest canard offered for keeping taxpayers on the hook for mortgage risk is that, without such, homeownership would limited to the wealthy. Sarah Rosen Wartell of the Center for American Progress stated before the House Subcommittee on Capital Markets, “The high cost, limited availability, and high volatility of pre-New Deal mortgage finance meant that homeownership was effectively limited to the wealthy.” Congressman Al Green repeated the point. As I’ve generally found Sarah to be one of the more reasonable CAP employees, and that this is fundamentally an empirical question, I would have expected her to offer some evidence to support such a claim. Alas, she did not. So I will.
According to the US Census Bureau, at the turn of the century in 1900, the US homeownership rate was 46.5%. I’m pretty sure that even Sarah wouldn’t claim that close to half of US households in 1900 were “wealthy.” Interestingly enough, homeownership after the first 10 years of the New Deal was lower than before the New Deal.
While 46.5% is about 20 percentage points below the current rate, the population in 1900 was considerably younger, and one thing we do know is that homeownership is positively correlated with age. In 1900, 54% of the US population was under the age of 25, a reasonable cut-off for homeownership. Today, that number is 35%. I don’t think it would be a stretch to say the greatest driver behind the homeownership rate over the last 100 years has been the aging of the US population, probably followed by the increase in household incomes (homeownership and income are also closely correlated).
Hopefully this will put to rest the myth that FDR and the New Deal gave homeownership to the masses. The fact is that homeownership was fairly widespread long before the New Deal. I await the next myth from the Fannie Mae apologists. If they are wise, they will try one that isn’t so easily falsified.
Why the Senate’s Vote on the Patriot Act Is Actually Pretty Good News
Last night, By an overwhelming 86-to-12 margin, the Senate approved a temporary 90-day extension of three controversial provisions of the Patriot Act scheduled to sunset at the end of the month. The House just voted to move forward on a parallel extension bill, which will presumably pass easily. Because I’m seeing some civil libertarian folks online reacting with dismay to this development, I think it’s worth clarifying that this is relatively good news when you reflect on the outlook from just a couple of weeks ago.
The House has already approved a one-year extension that would plant the next reauthorization vote on the right eve of primary season in a Presidential election cycle, all but guaranteeing a round of empty demagoguery followed by another punt. As of last week, everyone expected the Senate to bring Sen. Dianne Feinstein’s three year reauthorization—which also extends the odious FISA Amendments Act of 2008—to the floor. The discussion on the Senate floor last night makes it clear that this didn’t happen because of pushback from legislators who were sick of kicking the can and wanted time to hold hearings on substantive reforms.
This is actually a better outcome than simply letting the three sunsetting powers lapse—which, realistically, was not going to happen anyway. First, because at least one of the expiring authorities, roving wiretaps, is a legitimate tool that ought to be available to intelligence investigators if it’s amended to eliminate the so-called “John Doe” loophole. Second, because while all three of these provisions have serious defects that raise legitimate concerns about the potential for abuse, they are collectively small beer compared with National Security Letters, which have already given rise to serious, widespread, and well documented abuses. One of the three sunsetting powers has never been used, and the other two are invoked a couple dozen times per year. All three involve court supervision. The FBI issues tens of thousands of National Security Letter requests each year, the majority targeting American citizens and legal residents, without any advance court approval. The vast majority of the thousands of Americans whose financial and telecommunications records are seized each year are almost certainly innocent of any wrongdoing, but their information is nevertheless retained indefinitely in government databases. With very few exceptions, these people will never learn that the government has been monitoring their financial transactions or communication patterns. Forcing a debate now on the expiring provisions opens a window for consideration of proposals to rein in NSLs—including a new sunset that would create pressure for continued scrutiny.
A new Pew poll released this week reports that Americans remain fairly evenly split on the question of whether the Patriot Act is “a necessary tool that helps the government find terrorists” or “goes too far and poses a threat to civil liberties.” (Perhaps unsurprisingly, with the change of administration, Democrats have become more supportive and Republicans somewhat more skeptical.) But this is actually a signally unhelpful way to frame debate about legislation encompassing hundreds of reforms to the byzantine statutory framework governing American intelligence investigations—more a toolbox than a “tool.” The question shouldn’t be whether you’re “for” or “against” it, but whether there are ways to narrow and focus particular authorities so that legitimate investigations can proceed without sweeping in so much information about innocent people. A three-month extension signals that Congress is finally, belatedly, ready to start having that conversation.
Stimulus Spending Testimony
I testified today to a a subcommittee of the House Oversight and Government Reform Committee looking at the effects of the 2009 stimulus bill (the “American Recovery and Reinvestment Act”).
Some of the discussion regarded the continuing claims by stimulus supporters that the $800 billion bill created millions of jobs. To most people, such a claim now seems laughable–unemployment is still very high two years later and the recovery from the recession is very sluggish compared to prior recessions.
Also testifying was Stanford economist John Taylor, who offered a view on why economists using Keynesian models are still claiming success for the ARRA bill:
“Why do some argue that ARRA has been more effective than the facts presented here indicate? Many evaluations of the impact of ARRA use economic models in which the answers are built-in, and were built-in before the stimulus package was enacted. The same economic models that said, two years ago, that the impact would be large now show that the impact is in fact large.”
Taylor’s testimony looks at the actual effects of the stimulus in the national income accounts data, rather using an assumption-filled model. Taylor concludes:
“In sum, the data presented here indicate that the American Recovery and Reinvestment Act was not effective in stimulating the economy … Currently, the increased debt caused by ARRA—both directly through its deficit financing and indirectly through its de-emphasis on controlling spending—is likely a drag on economic growth.”
Thanks to Tyler Grimm and the committee team for organizing the hearing. It’s important to explore the costly failures of such big spending programs as ARRA because the next time the economy goes into a downcycle the Keynesians, sadly, will be back to Capitol Hill pushing their expensive solutions and further bankrupting the nation.
Looking for a Free Ride
The Harris Poll finds that most Americans favor cuts in foreign economic aid, foreign military aid, spending by the regulatory agencies generally, space programs, subsidies to business, and federal welfare spending. All good stuff.
On the other hand, a significant plurality opposes cuts in defense spending. Fewer than one in four favor cuts in federal education spending or health care. 11 percent favor cutting Social Security payments. Over one-third favor spending more on education, health care, and Social Security.
How seriously should we take these results?
Simple observation of Congress suggests that most Americans are not willing to pay more taxes. The Obama administration found that in focus groups Democrats were not willing to raise taxes on anyone except individuals making more the $200,000 annually or families above $250,000 each year (now you know why the Obamacare taxes are the way they are). Taxpayers evidently are not willing to pay for current spending since the annual public deficit runs into the trillions.
I conclude that survey respondents want to sustain or increase public spending at a cost to someone else, perhaps “the rich” or future citizens who will repay public debt. These survey respondents, in other words, want a free ride. A more charitable interpretation would be that respondents have not thought much about the cause and effect relationship between spending and taxes, at least with regard to the abstractions posed in a survey. Neither interpretation flatters the respondents.
I recall James Madison’s remark in Federalist no. 10 that majorities tend toward policies antagonistic to “the rights of other citizens, or to the permanent and aggregate interests of the community.” Policymakers have little reason to take seriously these fantasies. Whether they will have the courage to ignore them is another question.
The Drug War and Black America
Here is a new publication from Cato, “How the War on Drugs Is Destroying Black America,” (pdf) by John McWhorter, who is a lecturer in linguistics and American Studies at Columbia University and a contributing editor to the Manhattan Institute’s City Journal and The New Republic. Here is his conclusion:
If we truly want to get past race in this country, we must be aware that it will never happen until the futile War on Drugs so familiar to us now is a memory. … The time to end the War on Drugs, therefore, is yesterday.
Read the whole thing. You can also listen to McWhorter’s speech by clicking here.
For additional Cato work related to drug policy, go here.
Snooki Tax Creates Jobs!
The IRS says it needs 1,054 more staffers — at a cost of more than $359 million in fiscal 2012 alone — just to watch over the initial implementation of Obamacare. And this is before the individual mandate kicks in, the non-compliance with which the IRS is also supposed to police (which by itself doesn’t make the non-compliance penalty, let alone the mandate, a tax — for those of you following the constitutional taxing power arguments).
Among this new IRS battalion will be 81 people assigned to “Snooki tax” enforcement, making sure that tanning salons pay a new 10 percent excise tax. Their cost: $11.5 million. (And again for you constitutional taxing power fans: the Snooki tax, because it’s an excise — a tax on a transaction or activity or enjoyment of a privilege — is an actual tax, so no constitutional defects here whatever the wisdom of this policy might be.)
So don’t let anyone say that Obamacare is “job-killing.” Clearly the solution to all our unemployment problems is to create all sorts of new taxes and then hire everyone in the country to enforce them against everyone else. (Also, we should block out the sun to create jobs for candlemakers, which policy would of course go hand in hand with outlawing incandescent light bulbs.)
H/T: Josh Blackman
Republicans Punt on Farm Subsidies. Again.
While I fully agree with my colleagues that President Obama “chickened out” in general in his FY2012 budget proposal, in one area he had the courage to propose some cuts that have proven controversial for ages: farm subsidies. His plan would lower the income eligibility limits for subsidies (from $500,000 to $250,000 for off-farm AGI per farmer, and an on-farm AGI limit of $500,000, down from $750,000.) It would also lower the cap on annual direct payments that individuals can receive — from a maximum of $40,000 to $30,000.
The administration’s proposal would affect only about 2 percent of the total recipients of direct payments — subsidies that flow every year regardless of prices or farm output to owners of land that may or may not still be used for farming – and it does not by any means go far enough. But at least it is a start.
On the other side of the aisle, the Republicans followed their Republican Study Committee colleagues in failing to propose any cuts to “farm subsidies” as we typically understand them in their FY2011 budget proposal. To be sure, 22 percent of the $60 billion in cuts they propose would come from the “agriculture function,” and they indeed get rid of entire programs, but they are mainly to the nutrition and conservation areas of the USDA’s responsibilities. Nothing, so far as I can tell, from the commodity programs.
I’m under no illusions that cutting farm subsidies are the key to our ever-growing fiscal mess. But it is telling that the Republicans can find not one dime in our bloated, distorting, regressive, corrupt farm programs to cut, even as farmers’ incomes and wealth soar.
On the upside, a group of legislators is proposing amendments to limit direct payments and put an end to the disgraceful deal on cotton subsidies cooked up by the administration last year. So maybe some reform can come from there.
(This hardly needs to be said, but the farmers’ groups are, of course, maintaining their position that farm programs should be subject to cuts no greater than the cuts to other areas of federal spending.)
Trying Colombia’s Patience on Trade
Our friends in Colombia have been waiting more than four years for the U.S. government to consider a pending free-trade agreement between our two countries. According to an interview this week with Colombia’s ambassador to the United States, Gabriel Silva, Colombians are “losing patience” with their American ally.
The frustration in Colombia is understandable. The agreement was signed in November 2006, but it has been locked in the cupboard since then by labor unions and their congressional allies who claim the Colombian government has not done enough to curb violence in that country against union members.
My Cato colleague Juan Carlos Hidalgo and I examine the agreement and the claims against it in a new Cato Free Trade Bulletin, “Trade Agreement Would Promote U.S. Exports and Colombian Civil Society.” We found that on the commercial side the agreement would deliver the “level playing field” the politicians always tell us they want. Once implemented, it would open the door to an additional $1 billion in U.S. exports.
As for violence against union members, we report the latest evidence that the number of union members killed is down dramatically in recent years, and prosecutions are up even more sharply. Contrary to the story told by critics of the agreement, the murder rate among union members in Colombia is actually far lower than the rate among the general population.
You can read the full bulletin here.
Obama’s Budget Means the Burden of Government Spending Will be $2 Trillion Higher in Ten Years
Fiscal policy wonks (like me, I’m forced to admit) sometimes miss the forest because we focus too much on individual trees.
So while I think my posts on the spending and revenue sides of Obama’s new budget contained lots of useful information, I didn’t pay any attention to the elephant in the room (I’m really going overboard with metaphors, huh?).
The most important number in Obama’s budget is that he is proposing $5.7 trillion of spending in 2021, about $2 trillion more than is being spent this year, according to table S-1 of the budget.
Here’s everything you need to know about Obama’s budget, in one chart.
It’s important to make three additional observations. First, Obama’s budget is based on all sorts of optimistic assumptions and rosy scenarios, as explained by Brian Riedl of the Heritage Foundation. When CBO produces a re-estimate of the President’s budget, it almost certainly will show hundreds of billions of dollars of additional spending.
Second, the slope of the line if the graph is very revealing. The first two years look very impressive, with almost no change in spending, but the goal of fiscal policy, to borrow a phrase from the health care debate, should be “bending the cost curve” of government. Short-run gimmicks, to put it mildly, don’t have any long-run impact. That’s why the most important number in Obama’s budget is the $5.7 trillion burden of spending in 2021. That’s a mark of fiscal failure, and it exists because Obama’s budget increases spending at twice the rate of inflation between 2013 and 2021.
Third, many people have appropriately criticized the White House for moving the fiscal goalposts (oops, another metaphor) and focusing on a technical budget concept known as “primary deficit” or “primary balance” instead of traditional budget measures. This is an arcane issue involving the difference between total spending compared to overall spending minus interest payments. Yes, the White House is being slippery, even earning a false rating from PolitiFact, but this is a red herring (there I go again) issue. What really matters is the size of government, not regular deficits or primary deficits. Too many Republicans are fixating on the symptom of too much borrowing and paying insufficient attention to the underlying disease of too much spending. This video explains further.
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