Archive for March, 2011
Bastiat on the Japanese Tsunami
Nathan Gardels at the Huffington Post writes (emphasis added):
No one — least of all someone like myself who has experienced the existential terror of California’s regular tremors and knows the big one is coming here next — would minimize the grief, suffering and disruption caused by Japan’s massive earthquake and tsunami.
But if one can look past the devastation, there is a silver lining. The need to rebuild a large swath of Japan will create huge opportunities for domestic economic growth, particularly in energy-efficient technologies, while also stimulating global demand and hastening the integration of East Asia.
But as French political economist Frédéric Bastiat noted, destruction isn’t stimulative because it cannot create wealth:
Obama Administration to Take a Stand on Privacy, But it Ain’t Fixing the Strip-Search Machine Morass
At least one report has it that a Commerce Department official will announce the Obama administration’s support for “baseline privacy legislation” at a Wednesday Senate Commerce Committee hearing.
You mean, like, the Fourth Amendment? If only it were so.
The action is in the House Government Reform Committee, which is holding a hearing on the Transportation Security Administration’s strip-search machines. What’s the administration’s “baseline privacy policy” on that?
I’ve already written two posts in the last year (1, 2) titled “Physician, Heal Thyself”…
Those Non-Meddling Kids
For once, a new poll on the political attitudes of young Americans brings some good news. The poll, “D.C.’s New Guard: What Does the Next Generation of American Leaders Think?”[.pdf] is from the Brookings Institution, and it’s the subject of my Washington Examiner column this week:
“It’s a survey of the type of kids who run for student government and choose to spend their summer vacations working in Washington,” the authors explain, “youth who already have the ‘Washington bug’ and have set themselves towards a career in politics and policy.” In other words … creeps!
If you’re the rare bird who favors limited government at home and abroad, you can hardly expect good news from a poll of this generation’s Tracy Flicks*. After all, aren’t these just the sort of model U.N. types who’ve always wanted to run the world?
Maybe not: The Brookings study contains some surprisingly encouraging findings about the attitudes of our future policy elites.
When given a list of possible foreign policy actions and asked to prioritize them, our precocious politicos put “build a stronger military force to ensure deterrence” near the bottom. Moreover, nearly 58 percent of these “young leaders” agreed with the statement that “the U.S. is too involved in global affairs and should focus on more issues at home.”
Only 10 percent “thought that the United States should be more globally proactive.”
I’ve read a lot of polling data on the Millennials’ politics, and, from a libertarian perspective, they’re a mixed bag. On the plus side, they’re socially liberal, and totally uninterested in culture-war politics. On the minus, they exhibit higher levels of faith in government than do older generations, leading the Center for American Progress to call them “The Progressive Generation.”
But if, as the Brookings survey suggests, even GenY’s model-UN types don’t want to run the world, then the future looks less bright for neoconservatives than it does for libertarians.
* reference is to the Greatest Political Movie of All Time, 1999′s “Election”:
A Routine, Run-of-the-Mill Half-Billion-Dollar Corruption Story
It may be Michael Kinsley who first said that the scandal in Washington is not what’s illegal, it’s what’s legal. Maybe a corollary is that the scandal is what people don’t even notice when it’s exposed. The Washington Post splashed a huge story of corruption across the front page of its Sunday Business section. The pull quote in the center read
A D.C. lawyer and her associates secured $500 million in federal contracts to benefit Alaska native corporations. Less than one percent made it back to Alaska.
And so far this impressive story by Robert O’Harrow Jr. has generated 4 comments, 7 tweets, 11 “likes” on Facebook, and only one other blog post that I can find. Are we so jaded that a full-page investigation of self-dealing and corruption involving affirmative action, small business, defense contracting, and complicated financial maneuvers just doesn’t get our juices flowing? And if one diligent reporter, who obviously spent a lot of time on this story, could find this much fraud by one well-connected contractor, how much could a hundred reporters find? I generally don’t think that “waste, fraud, and abuse” is the key to cutting federal spending; you have to go after the big programs, like transfer payments and military spending. But as Everett Dirksen almost said, $500 million here, $500 million there, pretty soon you’re talking real money. So let me just turn the floor over to O’Harrow to tell you what he found:
Book ‘Em, Danno
I hope you’ve got your NCAA bracket in by now. The NCAA estimates that 35 million Americans will do so. But keep in mind: As the Washington Post notes, you’re breaking the law:
Office pools, despite the warnings of law enforcement officials, are among the country’s most popular illegal activities. The FBI estimates that roughly $2.5 billion is gambled on the NCAA tournament, and only $80 million is bet legally through Nevada sports books. A good portion of the rest takes the form of $5 or $10 entry fees to participate in a bracket-pick NCAA tournament pool.
Is this the most popular illegal activity in America? Well, the Office of National Drug Control Policy says that 104 million Americans have used marijuana, 28.5 million in the past year.
Does it make sense to criminalize peaceful activity that tens of millions of Americans enjoy? Discuss.
Federal Spending Cap: Corker vs. 3%
The American Action Forum will host a conference on Capitol Hill this afternoon to discuss budget reform (details here). Sen. Bob Corker (R-TN) will discuss his “Commitment to American Prosperity Act,” which would cap federal spending at a declining percentage of GDP over ten years. Spending as a percentage of GDP would eventually be reduced to 20.6 percent, which is equal to the average from 1970 to 2008.
Corker’s plan properly places the focus of deficit reduction on the source of the problem: too much spending. A concern with Corker’s plan is that it is somewhat complicated, which could make it difficult to explain to the public. Chris Edwards, who will be speaking at today’s event, recently showed that the government can get its finances under control by imposing a statutory limit on annual spending growth of 3 percent.
Chris explains:
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.
The following chart shows spending growth capped at 3 percent versus Corker’s plan to cap spending at a decreasing percentage of GDP:
Both plans effectively limit spending growth, although the 3 percent cap would be more successful in limiting spending in the long-run. The major difference is that the 3 percent cap has the advantage of being easier to explain to the public. Public support is important for spending limitation legislation to gain traction.
Bruce Cook, the chairman and CEO of the One Cent Solution, will also be participating in today’s discussion. The Mercatus Center’s Jason Fichtner recently released a similar proposal called the “One Percent Solution.” These budget cap proposals would be tighter.
The Mortgage Industry-Government Revolving Door
The Washington Post is reporting that current Federal Housing Administration (FHA) head David Stevens, who only last week announced he was leaving FHA, is going to be the new head of the Mortgage Bankers Association (MBA).
When Stevens was first nominated to head FHA, I have to admit I was concerned. FHA has a long history of prioritizing the interests of the mortgage industry over that of the taxpayer. And here was a guy right out of the real estate industry (former Freddie Mac exec). My expectations weren’t exactly high. Maybe because of that, I’ve been largely impressed. As FHA Commissioner, Stevens has taken eliminating fraud seriously, as well as avoiding a taxpayer bailout of FHA (so far).
All that said, it is hard to imagine that in under a week’s time, he interviewed with and was hired by the Mortgage Bankers Association. So while there’s no evidence that he was looking at an MBA job while carrying out his duties running FHA, there is certainly the appearance of such. The appropriate thing to do would be to leave FHA before getting a job with the very industry that FHA regulates and subsidizes.
Again I think Stevens has done a far better job at FHA than many of his predecessors, and I don’t believe he played a role in the financial crisis, but I do believe the cozy relationship between the mortgage industry and our federal government did play a huge role in the crisis.
ADA Service Animals: The Silence of the Goats
As I note in a New York Post opinion piece published on Sunday, today marks an unusual milestone: the executive branch of the U.S. government is actually rolling back a significant burden imposed on business owners and others under the Americans with Disabilities Act (ADA). Because the subject matter is an unusually colorful one — the widespread misclassification of household pets, including such exotic species as iguanas, goats, and boa constrictors, as “service animals” under the ADA — you’d think there’d be major press coverage. And yet with scattered exceptions here and there, public attention has been muted. And there’s a story in that too.
In the early years of the law (as I observe in the Post piece) the ADA’s mandate that businesses admit service animals caused little stir because dogs trained to help persons with blindness, deafness and some other disabilities are skillfully trained to stay on task while ignoring such distractions as food, strangers and the presence of other animals. But given the law’s lack of definitions, combined with lopsided penalties should a defendant guess wrong — $10,000 is possible for a first violation — shop owners began seeing more and more rambunctious spaniels and irritable purse dogs, to say nothing of rabbits, rats, ferrets, lizards and critters of many other sorts. Doctors obligingly wrote notes testifying that the animals were helpful for mood support or to fend off depression; you can buy “therapy dog” vests online with no questions asked.
The new rules toughen things up. With a minor exception for miniature horses, service animals will now have to be dogs; they’ll have to be trained to perform a service; and while that service can relate to an “invisible” disability, including one of a psychiatric nature, it cannot be based simply on mood support or similar goals. Also, they’ll need to be on-leash unless their service requires otherwise.
In revising the rule, the Obama administration was heeding the wishes not of frazzled retailers but of disabled-rights advocates themselves. As press coverage recounts, persons who employ well-trained service animals suffer not only from public backlash but also from more tangible setbacks such as disturbances that can arise when other, less well-trained animals challenge their dog in an indoor setting. If the new change counts as deregulation, it’s a sort of accidental and tactical deregulation not arising from any notion that it’s better to leave private owners free to set their own rules.
And that helps explain the absence of fanfare, not to say stealth, with which the Obama administration is letting the new rule go into effect. Knowing that the change will be unpopular with some of its own constituents, it seems happy to forgo credit with constituencies that might favor deregulation — notwithstanding the public fuss a few weeks ago about the President’s newfound interest in reducing regulatory burdens. That interest remains, to say the least, untested.
Are Mortgages Cheaper in the U.S.?
As Congress and the White House continue to debate the future of Fannie Mae and Freddie Mac, one of the oft heard concerns is that if we eliminate all the various mortgage subsidies in our system, then the cost of a mortgage will increase. There certainly is a basic logic to that concern. After all, why have subsidies if they don’t lower the price of the subsidized good. Of course some, if not all, of said subsidy could be eaten up by the providers/producers of that good.
All this begs the question, with all the subsidies we have for mortgage finance, are mortgages actually cheaper in the U.S.? While not perfect, one way of answering that question is to look at mortgage rates in other countries. Although every developed country has some sort of government intervention in their mortgage market, almost all have considerably less support then that provided by the U.S. (For a useful comparison of international differences see Michael Lea’s paper).
The European Mortgage Federation regularly collects information on mortgage pricing by EU countries. The latest complete annual data from the EMF’s Hypostat database is for 2009, with at least a decade of historical data.
A quick glance reveals that mortgage rates in most European countries are not all that different than rates in the U.S. For instance in 2009, the U.S. 30 year mortgage rate was, on average, 5.04; whereas mortgages in France averaged 4.6 and those in Germany averaged 4.29. In the UK, the average was 4.34.
Part of this difference is driven by product type. For instance, in France, most mortgages tend to be 15 year, which one would expect to be cheaper than a 30 year. But the French 15 year rate of 4.6 isn’t all that different from the current U.S. 15 year rate of 4.1. As lending rates are usually bench-marked off the rate on government debt, part of the slightly higher rate in some European countries is due to their higher government borrowing rate. If we instead measure mortgage costs as a spread over government funding costs (as reported by the OECD), then many European countries look more affordable than the U.S. For instance, German mortgages price about 100 basis points over long-term German govt debt; whereas U.S. mortgages price about 140 basis points over long-term U.S. government debt.
I don’t expect these numbers to settle the debate. A variety of other costs, such as points paid or required downpayments, differ dramatically across countries. Unfortunately that data does not seem to be readily available. What the preceding comparison does suggest, however, is that even without Fannie and Freddie, U.S. mortgage rates aren’t necessarily going to be a lot higher.
ObamaCare: a Federal Takeover, No Matter Who Runs the Exchanges
Merrill Goozner read my article in the March 21 National Review, in which I argue that states should refuse all ObamaCare funds and refuse to erect an ObamaCare Exchange that would execute the law’s many health-insurance regulations. Since ObamaCare provides that the feds will set up and administer an Exchange in states that don’t do so themselves, Goozner concludes that I’m actually advocating a federal takeover of health care. Really?
Goozner either completely missed the point of my article, which I sort of doubt, or he’s trying to be cute. Let’s assume it’s the former.
As I explain in that article, under ObamaCare the feds will write all the rules governing health insurance, so who administers the Exchanges is well-nigh irrelevant. ObamaCare is a federal takeover of health care, no matter who runs these new government bureaucracies that we call health insurance Exchanges.
Then again, there is reason to suspect that Goozner is just trying to be cute. ObamaCare apologists know that if states stop implementing the law, it will be easier for Congress to repeal it or for the Supreme Court to strike it down. They know that if states don’t set up their own Exchanges, HHS may not be able to set them up itself, which would jeopardize the federal government’s ability to start doling out ObamaCare’s hundreds of billions of dollars in new debt-financed entitlement spending in 2014. So it makes sense to attack or ridicule me for suggesting that states should obstruct ObamaCare because he suspects that could bring the whole miserable operation down. But surely Goozner can come up with something more plausible than suggesting that I’m advocating a federal takeover of health care.
Filed under: Cato Publications; General; Government and Politics; Health Care
Tuesday Links
- Still think the War on Drugs is a good idea, or that it’s working? Decreases in cocaine production in Colombia have been almost fully offset by increases in Peru and Bolivia.
- Why is nobody talking about the right of Wisconsin taxpayers to not deal with unions?
- “If you’re the rare bird who favors limited government at home and abroad, you can hardly expect good news from a poll of this generation’s Tracy Flicks.” (Maybe not.)
- NPR and PBS are using taxpayer dollars to lobby for… more taxpayer dollars. But that’s hardly a new game in Washington.
- Afghanistan: nation-building on crack.
- Saying no to a no-fly zone over Libya should be a no-brainer:
Lugar on Libya
Daniel Larison points to this statement by Sen. Richard Lugar which is really a breath of fresh air:
Sen. Richard Lugar
…Given the costs of a no-fly zone, the risks that our involvement would escalate, the uncertain reception in the Arab street of any American intervention in an Arab country, the potential for civilian deaths, the unpredictability of the endgame, the strains on our military, and other factors, it is doubtful that U.S. interests would be served by imposing a no-fly zone over Libya. If the Obama Administration is contemplating this step, however, it should begin by seeking a declaration of war against Libya that would allow for a full Congressional debate on the issue. In addition, it should ask Arab League governments and other governments advocating for a no-fly zone to pledge resources necessary to pay for such an operation.
[...]
Finally, given continuing upheaval in the Middle East, we should understand that the situation in Libya may not be the last to generate calls for American military operations. We need a broader public discussion about the goals and limits of the U.S. role in the Middle East, especially as it pertains to potential military intervention.
Emphasis mine. To hear a member of Congress reassert its Constitutional prerogative over the war power is really refreshing. The late Robert C. Byrd would be pleased.
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