Archive for March, 2011
Wasting Time on Government Waste
A recent poll found that 60 percent of those surveyed believe that problems with the federal budget can be solved by simply eliminating waste, fraud, and abuse. In fact, 40 percent strongly agreed with this erroneous position.
One reason for this mistaken belief is that the average American’s daily dose of news usually comes with fresh examples of the government blundering or being gamed. It’s not difficult for most folks to distinguish between right and wrong. Thus, in addition to being generally easy to digest, such stories are emotive.
Pinning the blame on rampant government waste is also a convenient scapegoat. Most Americans don’t have a clue as to what constitutes the federal government’s $3.8 trillion budget. And they’d rather not hear that the programs they benefit from are culprits. For example, the same poll found that 49 percent disagreed that Social Security and Medicare are a major source of problems for the federal budget.
Fixating on waste, fraud, and abuse is also a convenient scapegoat for politicians from both parties. Politicians who don’t tell their constituents that they’ll work to eliminate government waste are as common as the dodo. Previous House Speaker Nancy Pelosi instructed her committee chairs to uncover waste, fraud, and abuse as part of a fanciful effort to “ensure fiscal discipline for the long term.” The House Republicans’ “Pledge to America” included a vacuous promise to “root out government waste.”
Bloomberg’s Caroline Baum recently pointed out that for all the angst expressed by politicians over government waste, it sure isn’t going away:
Everyone who wants to eliminate waste, fraud and abuse in government, raise your hand.
Lots of hands. Good.
Next question: If everyone is in favor of streamlining the federal bureaucracy, why are we still creating committees and ordering up reports instead of talking about the problem in the past tense?
Here’s the quick answer: All those overlapping government programs have oversight committees looking after them and constituencies behind them; constituencies with money and votes.
What few on Capitol Hill want to acknowledge is that waste, fraud, and abuse comes with government the same way a Happy Meal comes with a toy and a drink. Wise liberals understand that repeated government failures can undermine popular support for government programs and interventions. Therefore, politicians who claim to want a smaller, less intrusive government should – at most – use the countless examples of waste, fraud, and abuse to build a case for eliminating programs and agencies.
Unfortunately, instead of capitalizing on these opportunities, alleged devotees of a more limited government often waste their time on quixotic moral crusades to “make government more efficient.” In doing so, they’re really just playing into the hands of those that want big government. They’re also helping lead citizens to believe that our budget problems can be solved with a little house cleaning.
‘So How Are Democrats and Republicans Different?’
I present you Robert Laszewski’s magnificent take on ObamaCare and Wisconsin, Democrats and Republicans.
Filed under: Cato Publications; General; Government and Politics; Health Care
Does Rep. Aderholt Support or Oppose Having a National ID?
Rep. Robert Aderholt (R-AL) is the chairman of the House Appropriations Subcommittee on Homeland Security. That’s the subcommittee that makes spending decisions for the Department of Homeland Security and the programs within it, including the REAL ID Act.
Earlier this month, a constituent of his from Fyffe, Alabama posted a question on Mr. Aderholt’s Facebook page:
Rep. Aderholt, I’ve seen reports that the “REAL ID ACT” will be implemented in May of this year, giving the govt the ability to track every person who has a drivers license via encoded GPS. Is this actually the case and if so, what is the House going to do to stop this Orwellian infringement of our Liberty. Also, HOW could this have happened in the first place!
Mr. Aderholt has not replied.
But Right Side News recently reported on a hearing in which DHS Secretary Janet Napolitano presented her agency’s budget request. The DHS has not requested funds for implementing REAL ID. But according to the report, Chairman Aderholt “pointedly reminded” the committee of the need for funding of REAL ID.
It is good of Representative Aderholt to give his constituents a means to contact him and to invite public discussion of the issues. It’s an open question whether he will listen more closely to the voice of his constituents or to influences in Washington, D.C. who would like to see law-abiding American citizens herded into a national ID system.
At Least 82 Percent of Education Is Politics
The big schooling story is U.S. Secretary of Education Arne Duncan’s assertion that this year 82 percent of public schools could be identified as failing under No Child Left Behind. That’s a huge percentage, and also hugely disputed. But the real story here, as always, is that government control of schooling is all about politics, not education.
Start with the 82 percent figure. It’s a consequence of NCLB’s demand that all students be “proficient” in mathematics and reading by 2014. That’s a severely reality-challenged goal, especially if proficient is supposed to mean having mastered fairly tough material. But the law largely wasn’t driven by reality — it was driven by politicians wanting voters to see them as uncompromising on bad schools.
Now the controversy. People who track NCLB results — including many Democrats — say the 82 percent figure is ridiculously inflated. Reports the Washington Post:
“I find it hard to believe,” said Jack Jennings, a former Democratic congressional aide who is president of the Center on Education Policy, an independent think tank that tracks the law. “I think they really stretched it for dramatic effect.”
And why the possible prioritization of “dramatic effect” over “reality”? Because the Obama administration is pushing to get the law rewritten along lines it likes, and might very well feel the need to scare the bejeepers out of the public to get momentum behind it:
Charles Barone, a former congressional aide who helped draft the 2002 law, called Duncan’s projection “fiction.” Barone tracks federal policy for a group called Democrats for Education Reform, which is generally in accord with Obama’s policies on education changes.
“He’s creating a bogeyman that doesn’t exist,” Barone said of Duncan. “Our fear is that they are taking it to a new level of actually manufacturing a new statistic – a ‘Chicken Little’ statistic that is not true – just to get a law passed. It severely threatens their credibility.”
But hold on! With only about 37 percent of schools identified as failing last year, the leap to 82 percent certainly does seem improbable. But quietly evading the spirit of NCLB — actually improving educational outcomes – some states backloaded their improvement goals to very late in the full-proficiency game, betting NCLB would be gutted by 2014 and they’d never be held accountable. So some states really might be on the verge of having to pay the piper big time, and the failure rate perhaps could be set to rise dramatically. But you’d have to know a lot about the political machincations in every state to figure that out.
The Cost of Delaying Foreclosures
With State AGs and the Federal Government pushing to further extend the mortgage foreclosure process for late borrowers, one might assume that these government officials believe that further delay has no costs, and is at most a transfer from the lender to the borrower. Judging from the results of a recent working paper, by economists Shuang Zhu and Kelley Pace at Louisiana State, they would be wrong. Further foreclosure delays impose significant costs, not just on the economy and lenders, but also on other borrowers.
Zhu and Pace start with the observation: “The longer the period between first missing payment and foreclosure sale, the more valuable the default option becomes. The borrower preserves the option to either keep defaulting or cure the default in the future. Since this option value grows with the foreclosure period, longer expected foreclosure periods increase the propensity to default on mortgage loans.”
As state and local law govern the foreclosure process, the authors examine differences across areas to see if such differences in delay impact the rate of foreclosures. Interestingly enough, they do find that the longer are delays, the greater is the foreclosure rate.
Given that lenders understand that delays are costly, this is likely to show up in the price of the mortgage. Zhu and Pace find that with each additional six month delay in foreclosure, mortgage rates increase by 10 basis points. As delays are running an extra year or so now, mortgage rates are higher by about 20 basis points due to government efforts to extend the foreclosure process. This might seem small, but its also the amount many claimed Fannie Mae and Freddie Mac lowered rates by. Clearly the costs of delaying foreclosures are not borne just by the banks, but by anyone hoping to get a mortgage. For those who would respond “but mortgages are cheap” – they are only cheap due to cheap money. The spread of mortgage rates over Treasuries is actually about 20 basis points above its historical norm.
Also of interest is that Zhu and Pace, using S&P/Case-Shiller house price futures, find that in cities where borrowers have lower future home price expectations, they default at a greater rate. I believe this lends some support to the notion that we should stop trying to hold up prices and let them hit a point where up is the only direction. The paper is full of interesting findings, and also includes a useful literature review of the default literature.
David Broder on Cato
Long time political observer, David Broder, passed away yesterday. He did not believe in free markets and limited government, but he did have some nice things to say about the work of the Cato Institute. Here is a 2002 column that I sometimes pass on to people who do not know much about the role of think tanks:
Thanks to Two Think Tanks–Heritage and Cato
by David S. Broder
Wednesday, May 8, 2002; Page A21This is a week of celebration for two of Washington’s great dissenters on the right. On successive nights, dinners are honoring Edwin Feulner for his 25 years at the helm of the Heritage Foundation and Edward Crane for his role in founding the Cato Institute a quarter-century ago. The success of their think tanks is something to cheer, even if, as is my case, you often disagree with their policy prescriptions.
To appreciate what they have achieved, you have to recall that in 1977, when Feulner left his congressional staff job to run the four-year-old Heritage (which he had helped found) and when Crane started Cato out in San Francisco, Jimmy Carter had just been inaugurated and Democrats controlled both houses of Congress. “It was not a hospitable time for Republicans, let alone conservatives,” Feulner recalled.
Today, with Republicans running the White House and the House of Representatives and one vote away from regaining control of the Senate, it is easy to see the triumph of conservatism as a historical inevitability. It was not. The political victory can be credited largely to Ronald Reagan. But it was also an intellectual battle, in which Heritage and Cato, along with the older American Enterprise Institute, played a critical role.
Heritage and Cato have become so proficient in generating and promoting ideas that the liberal movement has had to create its own think tanks to compete. With generous corporate and foundation support and thousands of grass-roots contributors, Heritage boasts a staff of 185 and a budget of $28 million; Cato, 98 staffers and $16 million.
In their headquarters buildings, Heritage on Capitol Hill and Cato in a handsome modern structure closer to the White House, they sponsor a steady stream of conferences and churn out papers and books, nudging and prodding the policymakers and opinion-shapers. Feulner has Heritage on hair-trigger, rushing out suggestions before congressional hearings and bill markups. “We sweat the details” critical to the legislative process, he told me. Cato, Crane remarked in a separate interview, “is a little more academic and long-term in its thinking.”
Heritage, which had a foothold in Washington when Reagan arrived, wrote a blueprint for his first term called Mandate for Leadership, which became a kind of handbook for the new administration. Tax cuts, missile defense, enterprise zones for cities and scores of other ideas migrated from Heritage to the White House and Capitol Hill.
Cato, which moved to Washington in 1982, has sponsored legal studies influential in the Supreme Court decisions reviving the 10th Amendment limits on federal authority. At times, their agendas overlap. A central, but still unfulfilled dream of Cato’s since 1979, now shared by Heritage, is the conversion of Social Security into a system of private retirement accounts.
But the two are not twins. Heritage is mainstream conservative, emphasizing free-market economics and robust national security policy, with some forays into social policy on health care and welfare reform. Cato is libertarian in its roots, more radical in its critique of federal programs, more skeptical about the U.S. international role and decidedly liberal (in the classic sense) on issues of personal freedom and civil liberties.
Their usefulness in Washington politics stems from their intellectual honesty and their willingness to question conventional wisdom, even when their friends are in power. A case in point is the bipartisan but outlandishly expensive farm subsidy bill, which President Bush is preparing to sign. Heritage’s Stuart Butler denounced it last week as “a shameless example of corporate pork-barrel spending.” And when the establishment was recently cheering the latest campaign finance “reform,” Cato and Heritage held forums challenging the government’s right to regulate political speech.
In this city, noted for the narrowness of its intellectual range, it is sometimes wildly unpopular — but absolutely vital — to have institutions that question fundamental assumptions and occasionally declare that the emperor of the moment has no clothes. Cato and Heritage do that — to Republican presidents as well as Democrats.
They are also models of healthy democratic discourse at a time when too much of the policy debate here takes the form of “Crossfire”-style exchanges of insults. They have staffed themselves with scholars and writers who share their basic political orientations. But their doors are open to other views, and the policy forums they run are not only stimulating but good-tempered.
What Crane told me is true: “The Washington think-tank world is a great example of how people can have a civil discussion and debate. You don’t see it in politics, but politics these days is largely devoid of content.”
As long as that is true, all of us who work here in politics or journalism have reason to be thankful that Heritage and Cato are around.
Wisconsin: Post-Mortem & Predictions
Last night’s vote by the Wisconsin-based portion of the Wisconsin Senate has received enormous attention. The scope of collective bargaining by school district and other government employees has been narrowed, and the state will no longer automatically garnish workers’ wages to pay union dues.
This was the right thing to do. But how much of a difference will these changes actually make to the state’s bottom line? As I’ve noted, the presence or absence of collective bargaining is not strongly correlated with school district spending. Instead, unions have won their massively (42%) above- market compensation through well-funded political action; which brings us to the question of automatic paycheck deduction of union dues.
Without automatic dues withdrawals, will public school unions still be able to afford their fantastically successful political activities? There’s no reason to doubt it. Given the huge compensation premium public school employees enjoy over their private sector counterparts, they have a powerful incentive to voluntarily keep funding the political action that helped win it.
Indeed, we can see this already in right-to-work states like South Carolina. Public school employees there have no collective bargaining rights and there is no automatic union dues withdrawal, but the Palmetto State nevertheless has a teachers’ union and an administrators’ association that have spent large sums of money on political action. It’s worked. Despite not being the wealthiest of states, South Carolina still spends roughly $12,000 per pupil on its public schools, and its public school teachers earn more than the state’s median household income. The teacher and administrator groups have also successfully defeated every legislative effort thus far to open up the state’s education system to private sector competition and parental choice.
The only way to rein-in out-of-control public school spending is thus to give both families and taxpayers an alternative to the government monopoly status quo. Cut taxes on folks who pay for their own children’s education, or who donate to non-profit scholarship organizations that subsidize private school tuition for the poor. Many states are doing this already on a small scale. By so doing so on a larger scale, families will have much greater choices and taxpayers will reap enormous savings.
Time for a Reality Check on the Trade Deficit
The U.S. trade deficit rose in January, according to this morning’s monthly trade report from the U.S. Commerce Department, and on cue the news is being greeted as a bad omen for the U.S. economy.
Reflecting the conventional wisdom, this morning’s Associated Press story states as a matter of fact, with no attribution:
A widening trade deficit hurts the U.S. economy. When imports outpace exports, more jobs go to foreign workers than to U.S. workers.
Oh really? As I’ve documented elsewhere, the U.S. economy actually grows faster during periods when the trade deficit is widening compared to when it is shrinking. That’s because an expanding economy increases demand for imports as well as domestically made goods. Stronger growth also attracts more foreign investment, which is the flip side of the trade deficit.
The same story is true for jobs. In Chapter 5 of my 2009 Cato book, Mad about Trade, I show how the unemployment rate invariably rises during periods when the trade deficit is “improving,” and declines during periods when the deficit is “worsening.” (Check out Table 2.2 on p. 81, courtesy of Google Books.)
Just think back to the 1990s. From 1992 to 2000, the trade deficit widened from 0.5 percent of GDP to 3.9 percent. During that same period, the unemployment rate fell from 7.3 percent to 3.9 percent and the economy added more than 18 million jobs.
More recently, the trade deficit narrowed sharply between 2007 and 2009 as a share of GDP, while the economy lost more than 8 million jobs and unemployment soared.
The conventional wisdom on trade deficits and the economy is due for a reality check. If politicians believe that “a widening trade deficit hurts the economy,” contrary to all the evidence, they will be more tempted to reach for the snake oil of protectionism.
USDA’s Budget Boom
Spending at the U.S. Department of Agriculture will be an estimated inflation-adjusted 43 percent higher this year compared to just a decade ago. The following chart shows the dramatic rise in USDA spending from fiscal 1970 to the president’s projection for fiscal 2011:
Most folks probably think of farm subsidies when they think of the USDA. However, farm programs only account for 19 percent of total USDA outlays. The vast majority of USDA spending, 69 percent, goes to food subsidies: food stamps, school breakfast and lunch programs, and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). In fact, spending on food stamps alone this year will account for roughly half of total USDA spending.
Why aren’t these programs housed at the Department of Health and Human Services, the government’s chief welfare bureaucracy? The answer is politics, of course. Every five years or so Congress passes a new “farm bill,” which updates or sets the agenda for USDA programs and policies. Stuffing welfare programs in with traditional farm subsidies engenders broad legislative support for the total legislative package. Including food subsidies helps secure votes from urban and suburban legislators who would otherwise have little or no incentive to vote for farm subsidies.
See here for more on downsizing the Department of Agriculture, including both farm and food subsidies.
Good News! Online Tracking is Slightly Boring
You have to wade through a lot to reach the good news at the end of Time reporter Joel Stein’s article about “data mining”—or at least data collection and use—in the online world. There’s some fog right there: what he calls “data mining” is actually ordinary one-to-one correlation of bits of information, not mining historical data to generate patterns that are predictive of present-day behavior. (See my data mining paper with Jeff Jonas to learn more.) There is some data mining in and among the online advertising industry’s use of the data consumers emit online, of course.
Next, get over Stein’s introductory language about the “vast amount of data that’s being collected both online and off by companies in stealth.” That’s some kind of stealth if a reporter can write a thorough and informative article in Time magazine about it. Does the moon rise “in stealth” if you haven’t gone outside at night and looked at the sky? Perhaps so.
Now take a hard swallow as you read about Senator John Kerry’s (D-Mass.) plans for government regulation of the information economy.
Kerry is about to introduce a bill that would require companies to make sure all the stuff they know about you is secured from hackers and to let you inspect everything they have on you, correct any mistakes and opt out of being tracked. He is doing this because, he argues, “There’s no code of conduct. There’s no standard. There’s nothing that safeguards privacy and establishes rules of the road.”
Securing data from hackers and letting people correct mistakes in data about them are kind of equally opposite things. If you’re going to make data about people available to them, you’re going to create opportunities for other people—it won’t even take hacking skills, really—to impersonate them, gather private data, and scramble data sets.
If Senator Kerry’s argument for government regulation is that there aren’t yet “rules of the road” pointing us off that cliff, I’ll take market regulation. Drivers like you and me are constantly and spontaneously writing the rules through our actions and inactions, clicks and non-clicks, purchases and non-purchases.
There are other quibbles. “Your political donations, home value and address have always been public,” says Stein, ”but you used to have to actually go to all these different places — courthouses, libraries, property-tax assessors’ offices — and request documents.”
This is correct insofar as it describes the modern decline in practical obscurity. But your political donations were not public records before the passage of the Federal Election Campaign Act in 1974. That’s when the federal government started subordinating this particular dimension of your privacy to others’ collective values.
But these pesky details can be put aside. The nuggets of wisdom in the article predominate!
“Since targeted ads are so much more effective than nontargeted ones,” Stein writes, ”websites can charge much more for them. This is why — compared with the old banners and pop-ups — online ads have become smaller and less invasive, and why websites have been able to provide better content and still be free.”
The Internet is a richer, more congenial place because of ads targeted for relevance.
And the conclusion of the article is a dose of smart, well-placed optimism that contrasts with Senator Kerry’s sloppy FUD.
We’re quickly figuring out how to navigate our trail of data — don’t say anything private on a Facebook wall, keep your secrets out of e-mail, use cash for illicit purchases. The vast majority of it, though, is worthless to us and a pretty good exchange for frequent-flier miles, better search results, a fast system to qualify for credit, finding out if our babysitter has a criminal record and ads we find more useful than annoying. Especially because no human being ever reads your files. As I learned by trying to find out all my data, we’re not all that interesting.
Consumers are learning how to navigate the online environment. They are not menaced or harmed by online tracking. Indeed, commercial tracking is congenial and slightly boring. That’s good news that you rarely hear from media or politicians because good news doesn’t generally sell magazines or legislation.
Another Life Taken
Bad enough that people get arrested and jailed for drug offenses, but the proliferation of SWAT teams and the tactic of breaking into homes, especially during the night, is reckless. In this case, the break-in did not lead to any shooting, but as the 68-year old suspect was lying on the ground, complying with all the police commands, he was accidently shot and killed.
FRAMINGHAM, Mass.—A Framingham police officer who shot and killed a 68-year-old man during an early morning drug raid will not face criminal charges.
Prosecutors say the shooting was an accident and Duncan’s actions “do not rise to the level of criminal conduct.”
But attorneys for the family of Eurie Stamps said Wednesday that they will launch a civil rights investigation because the shooting was unjustifiable, his rights were violated and those responsible must be held accountable for his death.
Authorities say Duncan lost his balance while preparing to handcuff Stamps after members of the SWAT team stormed the Fountain Street home just after midnight on Jan. 5.
The Middlesex district attorney’s office says officer Paul Duncan stumbled and accidentally fired his rifle, hitting Stamps as he lay on the floor on his stomach with his hands up.
More here.
Leaving Afghanistan?
On Monday, Defense Secretary Robert Gates, speaking in Kabul, stated that the United States “will be well-positioned to begin drawing down some U.S. and coalition forces this July.” But as Greg Jaffe of the Washington Post reports, the planned reductions likely wouldn’t lead to a major change in the U.S. mission in Afghanistan. Indeed, even as Gates is stating that the United States will adhere to its date to begin withdrawing troops, negotiations are in the works that could establish a long-term security presence for the U.S. beyond 2014 and might include permanent military bases.
Secretary Gates and General Petraeus both claim progress in Afghanistan. But their concepts of progress are murky and exist within a strategy that has never had clearly defined objectives.
Today, I attended a discussion on U.S. strategy in Afghanistan and Pakistan hosted by the Foundation for the Defense of Democracies. The other attendees included journalists, think tankers, and government professionals—former and current. On The Skeptics blog, I outlined some of the important points of discussion that I think help explain our broader problems in the region.
I would characterize the general mood as grim. A few attendees pointed to the killing of a number of Taliban figures in both Afghanistan and Pakistan, and reports of progress in Marja and the rest of Helmand province as evidence of progress. These gains, one speaker maintained, were sustainable and would not necessarily slip in the event that U.S. forces are directed elsewhere.
(Giles) Dorronsoro (visiting scholar at the Carnegie Endowment), disputed these assertions. He judged that the situation today is worse than it was a year ago, before the surge of 30,000 additional troops. The killing of individual Taliban leaders, or foot-soldiers, was also accompanied by the inadvertent killing of innocent bystanders, including most recently nine children. So there is always the danger that even targeted strikes based on timely, credible intelligence, will over the long term replace one dead Talib with two or four or eight of his sons, brothers, cousins, and tribesman. How many people have said “We can’t kill our way to victory”?
For Dorronsoro, the crucial metric is security, not number of bad guys and suspected bad guys killed. And, given that he can’t drive to places that he freely visited two or three years ago, he judges that security in the country has gotten worse, not better. Many U.S. and Western troops cannot leave their bases without encountering IEDs or more coordinated attacks from insurgents. U.S. and NATO forces don’t control territory, and there is little reason to think that they can. Effective counterinsurgencies (COIN) are waged by a credible local partner, a government that commands the respect and authority of its citizens. That obviously doesn’t exist in Afghanistan. The Afghan militia, supposedly the key to long-term success, is completely ineffective.
Click here to read the entire post.
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