Archive for March, 2011
A Happy Birthday to The Wealth of Nations
Today marks the 235th anniversary of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations, otherwise known as The Wealth of Nations. I chatted with GMU economics professor Russ Roberts on the book and its enduring impact. This is the first of a two-part discussion:
And you might as well subscribe to the podcast via iTunes or your RSS reader.
The FBI Arrested Your Neighbor for Child Pornography!
An unsettling thought. Some allegations are so ugly that it’s hard to reserve judgment until the accused has had a chance to explain. This report from the Today Show is a reminder as to why our legal system has trials and a presumption of innocence.
CNBC ♥ Milton Friedman
Business network CNBC outflanks Fox Business Network by running a new promo ad featuring Milton Friedman’s 1979 interview with Phil Donahue, wherein Friedman challenges Donahue’s views about capitalism and “greed”:
Lefties don’t like it. They don’t like it at all; they want you to write CNBC and complain. Yet they’re forced to concede that the video shows “the Right’s financial guru besting a liberal talk show host.” (Milton Friedman called himself a liberal, or a libertarian, not a conservative or rightist.)
Let’s just hope MSNBC doesn’t find out!
Unions and Kids
Over at Think Progress, a bevy of commenters dispute an anecdote shared in my book Market Education. Here’s what I wrote, in the teaser to chapter 8:
In late October of 1995, officials of the Pepsi company announced at Jersey City Hall that their corporation would donate thousands of dollars in scholarships to help low-income children attend the private school of their choice. The immediate response of the local public school teachers’ union was to threaten that a statewide boycott of all Pepsi products could not be ruled out. Pepsi vending machines around the city were vandalized and jammed. Three weeks later, company officials regretfully withdrew their offer.
What are government school teachers’ unions so afraid of?
The source article for this episode is of course cited in the book, but here is the link to that article on the Education Week newspaper’s website.
Some of the commenters made the point that policy should not be driven by anecdotes. I agree, which is why I already blogged the evidence that only private sector competition can control skyrocketing public school spending.
Obama’s Military Tribunals
This week Obama announced that he intends to prosecute prisoners before military tribunals. The administration is taking pains to point out that Obama is not embracing the Bush policy. These will be Obama’s tribunals, not Bush’s. But since Mr. Obama’s executive order can be revised or withdrawn at any time, the new and improved procedures do not amount to much. The tribunals were wrongheaded under Bush and the critique applies equally well to Obama’s “new” policy.
As others have noted, Obama has now embraced tribunals, Gitmo, and the Patriot Act. Bad news, but at least Obama kept his promises to end the wars and get us on a sound financial footing.
For additional Cato work related to military tribunals, go here and here.
Not Possible in This Dimension
Over at the Fordham Institute, Senior Fellow Peter Meyer continues the assault on logic that Fordham has insisted on perpetrating when it comes to national curriculum standards. Writing about a New York Times story on the deceptive curriculum “guidelines” manifesto released by a number of national-standards supporters earlier this week, Meyer declares that:
Contrary to popular belief (especially in some Tea Party circles), a national curriculum, done properly, does not threaten local control. As we learn in this story, plenty of folks, including Randi Weingarten and our own Checker Finn, have signed on to a “common curriculum,” which its proponents say will constitute only about half of a school’s “academic time.”
Maybe I’m missing some very small but incredibly powerful wrinkle in the logic here, but it seems to me that by definition forcing local districts to use national standards must threaten local control. Indeed, it must not only threaten it, it must actually defeat it. And this is in no way changed by the curriculum having to account for “only about half” of a school’s time: Hours formerly controlled locally are now controlled nationally, which is inescapably a major incursion on local control.
Maybe in some dimension white is black, black is white, and ants are really walruses. But in this dimension, as far as I know, the laws of reality and logic must still apply — even to national curriculum standards.
Ezra Klein vs. the Secretary of Agriculture
It seems that Secretary of Agriculture Tom Vilsack took exception to Ezra Klein’s recent blog post on “Why we still need cities”. Someone at the USDA emailed Ezra, outlining the Secretary’s concerns and to set up a time for the two of them to talk. Ezra took notes during their discussion and, yesterday, posted a “lightly edited” transcript of their conversation.
The Secretary had plenty of the standard talking points on hand — and some new ones, like the fact that we should support farm subsidies because rural America has good values and farmers don’t feel appreciated – but Ezra expertly took him to task, deftly pushing back on the non-sequiturs, questionable assumptions and enduring myths about the need for farm subsidies. He even gets in a worthy swipe at sugar tariffs and the “need” to produce all our food in America. Read the entire thing; it is worth your time.
(HT: Justin Logan)
Obligatory Charlie Sheen Post
Is this the last blog in America that hasn’t commented on the Charlie Sheen meltdown? There isn’t much of a public policy angle, of course. Oh sure, employment-law analysts are looking at whether Warner Bros. has the right to fire Charlie Sheen. John Stossel and Bill O’Reilly talked about that question Tuesday night. But I’ve got another contribution. If Sheen is gone, Warner Bros. is going to need another actor — and a new “situation” — to keep its hit show “Two and a Half Men” on the air. Here’s my treatment:
A womanizing actor (John Stamos) is delighted to buy a Malibu beach house at a fire-sale price when the owner (Charlie Sheen) suddenly leaves town. Then he’s shocked to discover that the brother and nephew of the previous owner are living in the house, not paying rent, and refusing to leave. He tells them to get out, but Stamos brings in a lawyer (Julianna Margulies) who tells him that under California lawyer-tenant law he can’t evict the people who are living there.
Warner Bros. might want to seek out the writer of Pacific Heights, a 1990 thriller that is almost a documentary on the horrors of landlord-tenant law. A young couple (Matthew Modine and Melanie Griffith) buy a big house in San Francisco and then rent an apartment to a young man (Michael Keaton). He never pays them, and they can’t get him out, and then things get really scary. The lawyer lectures the couple — and the audience — on how “of course you’re right, but you’ll never win.” I just knew this happened to someone — maybe the screenwriter or someone he knew. Sure enough, when Cato published William Tucker’s book Rent Control, Zoning, and Affordable Housing, and I asked the director of Pacific Heights, the legendary John Schlesinger, for a jacket blurb, he readily agreed to say “If you thought Pacific Heights was fiction, you need to read this book”; and he told me that the screenwriter had a relative who had gone through a tenant nightmare.
Of course, Warner Bros. might prefer to hire that screenwriter for a movie about a company that hires a charming and handsome new employee (Charlie Sheen) who brings in lots of money but turns out to be a nightmare to work with. Can they fire him? Hilarity ensues.
Federal Budget Cap at 3%
The federal government is approaching its legal borrowing limit, and fiscal conservatives in Congress are wondering what spending reforms they can extract in return for supporting a debt-limit increase. Various sorts of balanced budget amendments and debt limits relative to GDP are being kicked around. I support those ideas, but I fear that they may be too complicated to gain traction right now.
A simpler idea would be to impose a statutory limit on annual spending growth of 3 percent. If total federal outlays in a year were $4 trillion, the government couldn’t spend more than $4.12 trillion the next year. It would be that simple.
Such a limit would be easy for policymakers and the public to understand and enforce. It would put ongoing pressure on Congress to cut discretionary programs and reform entitlements. With spending growth limited to 3 percent, the budget would be balanced in just over a decade and growing surpluses would be generated after that. The federal government would shrink as a share of GDP. The math is simple: federal revenues and GDP are expected to grow substantially faster than the 3 percent spending limit over the next decade and beyond.
I want Congress to enact major cuts to spending, not just to limit spending growth. But one advantage of an annual growth cap is that it would lock-in any spending cuts that are made, and thus spending would be ratcheted downwards.
Under such a limit, the OMB and CBO would issue regular reports showing spending for the coming fiscal year relative to the projected legal cap, which would make it clear to political leaders, reporters, and voters how much needs to be cut. The president would also be required to propose a budget each year that fit under the estimated legal cap. If the beginning of a new fiscal year arrives and spending is still expected to be above the limit, the president would be required by law to impose an across-the-board cut to bring spending into line.
In the past, I’ve proposed a spending growth cap equal to the sum of inflation plus population growth. (This sum is expected to be about 3 percent in coming years). But a fixed and explicit percent cap would be even simpler and easier to enforce. A fixed percent cap would also encourage policymakers to support a low-inflation policy by the Fed because the lower was inflation, the higher the budget limit in constant dollar terms.
The chart shows the proposed spending in Obama’s new budget compared to spending capped at 3 percent. The spending cap line assumes that the GOP’s discretionary cuts are put in place this year. It also assumes that spending grows at the maximum 3 percent each year, but if spending were restrained more than that, the cap would ratchet down to a lower level. The chart also shows projected federal revenues based on CBO data, assuming the extension of current income tax cuts and AMT relief. (See page 22).
Limiting spending growth to 3 percent is a modest goal, but over time the results would be quite dramatic compared to Obama’s no-reform spending plan. Spending in 2021 would be about $1 trillion less than the president is projecting—$4.7 trillion rather than $5.7 trillion. As a share of GDP, Obama’s 2021 spending of 23.9 percent would be cut to 19.9 percent. And the budget would be closing in on balance that year with revenues at 18.6 percent of GDP with tax relief in place. (Figures based on OMB GDP).
At DownsizingGovernment.org, I’ve proposed spending cuts that would take the federal government down to 15 percent of GDP or less. But getting a new budget mechanism signed into law takes centrist support, and I think that a 3 percent growth cap to balance the budget in a decade or so is a reasonable goal that could gain broad agreement.
Finally, it makes sense to include in such a budget law the ability of policymakers to spend over the cap temporarily for emergency war funding with a two-thirds vote in both House and Senate. Without such a temporary escape hatch, Congress would likely simply repeal the law when it entered a costly war.
I’ve discussed a spending growth cap in more detail here and here and here. Dan Mitchell has made similar observations about spending growth rates. The folks at One Cent Solution are recommending a tighter cap.
Spending Growth: Nondefense Discretionary
Last week I compared “other mandatory” spending in fiscal 2007 to the president’s proposal for fiscal 2012. Several readers requested that I produce a chart showing a similar breakdown for nondefense discretionary spending (or “domestic discretionary”).
The following chart breaks down nondefense discretionary outlays according to Budget Enforcement Act categories. These categories generally consist of programs from multiple departments and agencies. For example, “Science, Space, & Technology” includes programs at the National Science Foundation, Department of Energy, and NASA.
Note: The president’s fiscal 2012 budget proposes that surface transportation outlays, which make up the majority of spending in the transportation category, be budgeted as mandatory rather than discretionary.
Nondefense discretionary spending accounts for approximately 17 percent of total federal spending. It is this relatively small, but nonetheless important, portion of overall federal spending that Republicans and Democrats are currently arguing over. Democrats are balking at a Republican proposal to trim $61 billion in nondefense discretionary funding. A new Cato video puts the GOP’s proposed cuts in perspective.
No to No-Fly Zones
My Washington Examiner column this week is on the growing drumbeat for military action in Libya. That allegedly serious people are proposing, as Defense Secretary Gates puts it, “the use of the US military in another country in the Middle East,” ought to be appalling. If the last ten years haven’t convinced you that a little prudence and caution might serve us well in foreign policy, what would?
Recently Senators John McCain (R-AZ) and Joe Lieberman (I-CT), the Bobbsey Twins of knee-jerk interventionism, chastised Obama for dragging his feet on the path toward war. They called for arming the rebels and implementing a no-fly zone, for starters.
“I love the military,” Sen. McCain complained “but they always seem to find reasons why you can’t do something rather than why you can.” Alas, “can’t is the cancer of happen,” as Charlie Sheen reminded us recently.
Even so, I argue in the column, there are good reasons to resist the call for this supposedly “limited” measure.
But let’s stipulate that NATO warplanes (mainly U.S. fighters, of course) could deny pro-Gadhafi forces the ability to deploy air power. That would not impede their ability to murder on the ground. What then?
NATO flew more than 100,000 sorties in Operation Deny Flight, the no-fly zone imposed over Bosnia from 1993 to 1995, yet that wasn’t enough to prevent ethnic cleansing or the killing of thousands of Bosnians in the 1995 Srebrenica massacre.
It did, however, help pave the way for a wider war and a 12-year nation-building mission. In for a penny, in for a pound — intervention tends to have a logic of its own.
This is a good occasion, then, to reflect on a fundamental question: What is the U.S. military for? Humanitarian interventionists on the Left and the Right seem to view it as an all-purpose tool for spreading good throughout the world — something like the “Super Friends” who, in the Saturday morning cartoons of my youth, scanned the monitors at the Hall of Justice for “Trouble Alerts,” swooping off regularly to do battle with evil.
Our Constitution takes a narrower view. It empowers Congress to set up a military establishment for “the common defence … of the United States,” the better to achieve the Preamble’s goal of “secur[ing] the Blessings of Liberty to ourselves and our Posterity.” Armed liberation of oppressed peoples the world over wasn’t part of the original mission.
Funny enough, when he first got to Washington, John McCain occasionally appreciated the virtues of foreign policy restraint. As Matt Welch recounts in his book McCain: The Myth of a Maverick: “In September 1983, as a freshman congressman and loyal foot soldier of the Reagan revolution, John McCain voted against a successful measure to extend the deployment of US Marines in war-torn Lebanon.” In a speech on the House floor, McCain argued that “The fundamental question is, what is the United States’ interest in Lebanon?…. The longer we stay in Lebanon, the harder it will be for us to leave.”
Later, Welch writes that, in 1987, when President Reagan reflagged Kuwaiti oil tankers in the Persian Gulf, offering them “US Navy protection against a threatening Iran, McCain was livid.” He took to the pages of the Arizona Republic to complain that the move was “a dangerous overreaction in perhaps the most violent and unpredictable region in the world…. American citizens are again be asked to place themselves between warring Middle East factions, with…. no real plan on how to respond if the situation escalates.”
It’s been a long time since Senator McCain made such good sense on foreign policy.
High Schools to the President: What Thrill?
A couple of years ago, I was highly critical of President Obama’s first, it turns out annual, televised school-year kickoff address to America’s students. At the time I got a lot of emails telling me how outrageous my stance was, and how anyone, of any political persuasion, should be thrilled to have the President of the United States talk to their kids.
Apparently, the thrill is gone when you actually have to do a little work to get the President. According to internal White House memos, the President’s “Race to the Top High School Commencement Challenge” – in which schools compete for a chance to get the Prez as their graduation speaker — had generated only 68 applications as of February 28, which was after the original application deadline of Feburary 25. (The White House has extended the deadline to March 11.) To put that in perspective, the nation had over 24,000 public secondary schools as of the 2007-08 school year, meaning only about 0.3 percent of public high schools have expressed any serious desire to have the President send their charges off to adulthood. (Well, or college.)
So have our high schools suddenly discovered the Constitution, which gives the President no authority to meddle in education? Probably not, but it certainly does undermine the argument that it is a super-terrific thing anytime the Commander in Chief can take to the podium to tell kids to work hard and stay in school. Apparently, it’s only super-terrific if you don’t have to lift a finger — well, other than to work your TV remote — to get the President to talk to your kids.
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