Archive for April, 2011
This Week in Government Failure
Over at Downsizing the Federal Government, we focused on the following issues this week:
- A lot of Americans are aware that their tax dollars subsidize cotton farmers. However, it’s unlikely that many Americans are aware that their tax dollars are now supporting cotton farmers in Brazil.
- Chris Edwards released an updated version of his Plan to Cut Spending and Balance the Federal Budget. No sacred cows are spared. Defense, domestic, and so-called entitlement programs are all cut.
- The good news in a new Deloitte survey of members of the U.S. business community is that optimism is on the rise. The bad news is that the heavy hand of government is still a dark cloud hovering over the recovery.
- In her budgets, in her speeches, and in her strategic plans, Secretary of Labor Hilda Solis says that her “vision” for federal action is “Good Jobs for Everyone!”
- Some good news for once: President Obama’s dream of connecting 80 percent of Americans to a high-speed rail line appears to be dead.
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The Good, The Bad, and The Ugly
The Good: Congressional investigators are in Arizona to gather information on the ATF’s ill-conceived “Gunwalker” operation that supplied Mexican drug cartels with weapons. As I wrote at National Review, street agents objected from the beginning, but were told in no uncertain terms to pipe down:
Agents raised warnings to their superiors about the quantity of sales and the rising violence across the border, but were told that the operation had been approved at ATF headquarters. They were also told that if they didn’t like it, they were welcome to seek employment at the Maricopa County jail as detention officers making $30,000 a year.
I’d like to think that investigators will find that managerial incompetence was the culprit and not intentional facilitation of cross-border violence in order to hype gun control for the sake of Mexico. We’ll see.
The Bad: Philadelphia TSA screener Thomas Gordon has been arrested on child pornography charges.
The Ugly: Unions worked (for unrelated reasons) to keep said TSA screener in his job a few months before his arrest.
Thanks to AFGE’s legal assistance, a TSO at Philadelphia International Airport will remain employed at TSA after being proposed for removal. TSO Thomas Gordon had difficulty maintaining his work schedule because he had to take care of a family member…
“It means a great deal to me to know that my union — AFGE — has my back in situations like this,” Gordon said.
Now that the TSA screener workforce has voted to unionize, the only question is which union will represent them. Expect a stout union defense against any allegations of TSA excesses in patting down children or attractive women. If a union doesn’t defend the bad apples, it isn’t doing its job. Just ask the families of Sal Culosi and Erik Scott.
Debt Ceiling: Political Games
Back in January I noted that some analysts believe that the statutory debt ceiling should be eliminated. They view the potential for political brinksmanship as creating an unnecessary risk that financial markets will get rattled if there’s a chance the government won’t make good on its debt obligations in a timely manner. I argued that “forcing policymakers to spar publicly over fiscal policy is healthy, especially at a time when analysts generally agree that the country is headed toward an economic catastrophe if Washington’s mounting debt isn’t brought under control.”
I maintain that view four months later, but an article in Politico illustrates the absurd political shenanigans that accompany debt ceiling deliberations.
Sen. Bob Corker (R-TN) is building bipartisan support for a plan that 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. No tax increases.
Corker has been touring his state pitching the plan as part of a deal to raise the debt ceiling. Democratic Senators Claire McCaskill (D-MO) and Joe Manchin (D-WV) have endorsed it, as has Sen. Joe Lieberman (I-CT) who caucuses with the Democrats. Good news, right? Not according to Republican apparatchiks.
From the article:
“Corker’s heart may be in the right place on this legislatively, but it would help if he was more focused on winning back a Senate Republican majority, than hurting the feelings of vulnerable Democrats who recognize the political cover this affords them,” said one senior GOP aide. “McCaskill, Manchin and others can vote for it, and campaign on it, knowing full well that Harry Reid and Chuck Schumer have enough votes to kill it.”
On Tuesday, Corker got into a squabble with the National Republican Senatorial Committee, which ridiculed Manchin for backing the plan by saying it had “zero chance” of passing because it was opposed by Reid. An angry Corker believed the NRSC was squashing the plan’s growing momentum, and had a series of phone calls with NRSC officials expressing his frustration. A spokesman for the NRSC later said that the political committee shouldn’t have “underestimated Sen. Corker’s legislative skills and certainly hope he is successful in this effort.”
Sad as it is, that’s the way it works in Washington, folks. Hey, nevermind that Corker is at the very least planting on Democratic soil the idea that a debt ceiling deal should be focused on reducing spending and not tax hikes. Nope, what’s really important is making sure that Democrats do the wrong thing in order to bolster Mitch McConnell’s Senate Majority Leader prospects. After all, spending and debt didn’t go through the roof when Republicans controlled the House, Senate, and White House, right?
Pardon my sarcasm and obvious contempt, but this is the sort of nonsense that I repeatedly experienced during my days as a Senate staffer. Americans tend to get all hot and bothered over this or that politician, but much of what “gets done” in Washington is actually carried out by party operatives, sycophantic staffers, and lobbyists. All of this leads to a refrain I increasingly end media appearances with: Why do we give these people so much control over our lives?
Gays and the Law
Dale Carpenter of the University of Minnesota Law School, who wrote a Cato Policy Analysis on the Federal Marriage Amendment, has an op-ed today in the New York Times about changing attitudes among lawyers and judges about sexual orientation:
The prestigious law firm King & Spalding has not fully explained its decision this week to stop assisting Congress in defending the law that forbids federal recognition of same-sex marriage. But its reversal suggests the extent to which gay men and lesbians have persuaded much of the legal profession to accept the basic proposition that sexual orientation is irrelevant to a person’s worth and that the law should reflect this judgment.
And speaking of sexual orientation and the legal profession, don’t miss our upcoming Policy Forum with superlawyers and co-counsels Ted Olson and David Boies, “The Case for Marriage Equality: Perry v. Schwarzenegger,” on May 18.
Donald Trump as Litigation Bully
Do you need another reason — besides the tariff talk, the eminent domain trail, the inane birtherism, and, well, the hundred other reasons — to hope the presidential campaign of Donald Trump goes nowhere? Well, here’s another reason: he’s an aggressive, some might say abusive, user of lawsuits and threats of lawsuits against those who apply unwanted scrutiny to his business operations.
Twenty years ago, analyst Marvin Roffman of the Philadelphia investment firm of Janney Montgomery Scott predicted that Trump’s then-new Taj Mahal casino would have difficulty recouping its huge investment, in part because of its troubled Atlantic City location. As financial predictions go, Roffman’s was a very shrewd one, borne out by the later restructuring of the casino’s finances, which was costly for bondholders. At the time, however, Trump threatened the Janney firm in no uncertain terms: “I am now planning to institute a major lawsuit against your firm unless Mr. Roffman makes a public apology or is dismissed.” No profile in courage, the Janney firm proceeded to fire Mr. Roffman.
More recently, Trump pursued New York Times reporter Tim O’Brien and Warner Books through extensive defamation litigation (eventually dismissed) over O’Brien’s 2005 book TrumpNation, which placed a much lower valuation on the net worth of Trump’s empire than Trump thought proper or accurate.
There are words that come to mind to describe wealthy people who repeatedly use lawsuits or the threat of lawsuits to shut up or extract apologies from people they think have criticized them, and one of those words is “bully.” Why one would seek out that sort of character trait in a candidate for higher office is anything but clear.
Police Didn’t Know Using Taser 18 Times on Man Was Illegal
It is not that easy to win a lawsuit against the police.
Just ask Thomas Olson. He sued the police for excessive force after they used a Taser on him 15–18 times after he had been handcuffed. This month a court concluded that there was no controlling legal authority. That is, the officers had no notice from the caselaw or regulations that they might be using excessive force. One wonders how specific the regulations have to be and how many times the officers involved may have used Tasers inappropriately but no lawsuit was ever filed.
And what sort of government would have policies so lenient toward its agents and yet tell the rest of us that we can be punished for things we “should have” done something about — even in instances where we had no notice?
Will Americans Bite the Bullet — and Vote for Individual Choice?
Today POLITICO Arena asks:
Rep. Paul Ryan, architect of House Republicans’ budget plan, has faced a series of angry questions at town hall meetings, thanks in part to groups like the Democratic National Committee and the progressive activist group Americans United for Change. Can they use town halls to turn public opinion against the budget plan, as happened with Democrats’ health care proposals in summer 2009? And is the fury organic or mostly manufactured?
My response:
Unlike the fierce Tea Party reaction to Obama’s health care scheme in the summer of 2009, which came spontaneously from the bottom up and continued through November 2010, the angry reaction at the moment to the House Republicans’ budget plan is largely manufactured by the Democratic left and is not likely to last — or, if it does, we’re in more trouble than we imagine. What the 2010 elections demonstrated was the ability of the American people to discern change they could not believe in, and to do something about it. One hopes they’ll see enough change in the Ryan plan that they can believe in.
Take, for example, Ryan’s proposal to change Medicare from a “defined benefit” to a “defined contribution” plan, which has generated the most early opposition. The bottom line here is really quite simple. The CBO projects that Congress would have to double all federal income-tax rates to keep Medicare and other entitlements on their current path. That would cripple the economy — and itself end Medicare as we know it, and much else besides — so Congress must reduce Medicare spending growth.
The basic question, therefore, is whether bureaucrats decide what health care seniors receive (the Democratic method) or seniors themselves decide which benefits are most valuable to them (the Ryan plan). Will more Americans prefer to have their health care rationed by others, or by themselves? We shall see.
‘Birther’ Duo of Trump and Corsi Immune to Evidence
Donald Trump is not the only person who can claim credit, if that is the right word, for prompting President Obama to release the official, long form of his birth certificate yesterday. Another factor behind the decision was probably the pending release on May 17 of Jerome Corsi’s latest book, Where’s the Birth Certificate?
Here’s the product description from Amazon.com:
Over the course of more than three years of research, Jerome Corsi assembles the evidence that Barack Obama is constitutionally ineligible for the office of the presidency. As a New York Times bestselling author, Harvard graduate, and investigative journalist, Corsi exposes in detail key issues with Obama’s eligibility, including the fact the President has spent millions of dollars in legal fees to avoid providing the American people with something as simple as a long-form birth certificate.
The question of where the president was born should have been answered definitively yesterday for any reasonable person, but Trump and Corsi are both spinning the release of the long-form certificate as some sort of triumph. Such is the resilience of conspiracy theories that are by definition immune to factual evidence.
I was alerted to Corsi’s brand of scholarship in late 2009 when he authored the book America for Sale, which supposedly exposed the conspiracy by a “global elite” to sell our jobs and our wealth to foreigners through free trade, NAFTA, and the World Trade Organization. I pointed out a number of factual problems with Corsi’s argument, including errors of simple math, in a tough but fair review published by National Review Online.
Undaunted by the latest development, Corsi’s publisher Joseph Farah told the Washington Post this week that he “fully expected this to happen” and takes credit for Obama releasing his birth certificate, exclaiming, “I’m delighted! I’m triumphant!”
Farah is now moving the goal posts, telling the Post that even if Obama was actually born in the United States, the fact that his father was a citizen of Kenya continues to cast doubt on his eligibility to be president. “If your father is Kenyan, how are you an American citizen?” he is asking.
Actually, the U.S. Constitution and 150 years of interpretation by the Supreme Court have left no doubt that the child of an American-born citizen, such as the president’s mother, and a legal foreign-born resident, such as Obama’s father, is a U.S. citizen by birthright. The only real question today is whether the U.S.-born children of illegal immigrants are U.S. citizens, but I haven’t heard anybody allege (yet, anyway) that Obama’s father was in the country illegally when his son was born.
As President Obama said himself yesterday, it is time to put this silliness behind us and move on to the weighty issues we need to address.
Good Jobs for Everyone!
In my quest to downsize the government, I’ve been looking at the Department of Labor budget recently. My vision is to cut federal spending to create a freer and more prosperous society. James Madison’s vision was for a federal government of “few and defined” powers.
I’ve discovered that the Secretary of Labor, Hilda Solis, has a different vision. In her budgets, on her speaking podiums, and in her strategic plans, she says that her “vision” for federal action is “Good Jobs for Everyone!”
She doesn’t just want open labor markets so that people can pursue their own careers. No, she wants the 17,000 administrators in her department to find a good job for every single American. “Good Jobs for Everyone . . . will guide everything we do here at the department,” she says.
That’s lovely, but where does she get the legal authority for it? Article 1, Section 8 in the Constitution allows the federal government to coin money, establish a patent system, and maintain a navy, but it doesn’t say anything about “good jobs for everyone.”
I suppose worrying about constitutional authority is passé. Political leaders today want to think big. So in the spirit of Secretary Solis, here are some ideas for other cabinet secretaries needing a new and exciting vision:
- Secretary of Agriculture: Soaring crop prices for all farmers!
- Secretary of Commerce: Huge profits for every business!
- Secretary of Defense: More wars and fat contracts for all weapons makers!
- Secretary of Education: Straight As for all students!
- Secretary of Energy: Windmills for every family!
- Secretary of Health and Human Services: Huge portions but slim waists for all!
- Secretary of Housing: Granite countertops and Jacuzzis for every home!
- Secretary of Justice: Lawsuits for all accidents!
- Secretary of Transportation: High-speed subway trains for every village!
- Secretary of the Treasury: More IRS agents because someone has to pay for all this!
Supreme Court Rules That Arbitration Provisions Should Be Enforced
A few readers have now asked me about the “libertarian” reaction to yesterday’s Supreme Court ruling that allows companies to use boilerplate contract provisions that require consumers to arbitrate any disputes individually rather than coming together as a class action for arbitration purposes (let alone being able to bring claims into court). That is, where an individual claim isn’t worth that much money (about $30 in yesterday’s case of AT&T Mobility v. Concepcion), no lawyer will take the case and so only by having a class file collectively, the argument goes, will justice be served.
The ruling broke down 5-4 on “conventional” lines, with an opinion by Justice Scalia, joined by the Chief Justice and Justices Kennedy, Thomas, and Alito, holding that the Federal Arbitration Act trumped (“preempted” by operation of the Constitution’s Supremacy Clause) California law that was more favorable to the plaintiffs. Justice Thomas also filed a concurrence, noting that “state public policy against arbitration” is not enough to revoke a contract with an arbitration agreement. Justice Breyer dissented, joined by Justices Ginsberg, Sotomayor, and Kagan, arguing that certain class action waivers are unenforceable.
Here’s some more background (edited from a useful summary I received in a Heritage Foundation email): A cellular telephone contract between the parties provided for arbitration of all disputes, but did not permit classwide arbitration. After the Concepcions were charged sales tax on the retail value of phones provided for free under their service contact, they sued AT&T, and their suit was consolidated with a class action alleging false advertising and fraud. The district court denied AT&T’s motion to compel arbitration. The Ninth Circuit affirmed, reasoning that the Federal Arbitration Act, which makes arbitration agreements valid and enforceable except on such grounds as exist to revoke any contract, did not require arbitration because the prohibition on classwide proceedings was “unconscionable” under California law. The Supreme Court reversed, stating that arbitration agreements must be placed on equal footing with other contracts and California’s rule was preempted by the FAA and its strong federal policy favoring informal arbitration.
I’ll leave it to my colleagues Walter Olson, our expert on civil litigation, and Roger Pilon, who has written and spoken extensively on preemption, to comment on the particulars of the opinion if they wish. What I will say generally is that (1) we at Cato take the enforceability of contracts quite seriously, but (2) preemption is a very technical area of law that has to be examined on a case-by-case, statutory-provision-by-statutory-provision basis. See, for example, this Cato Supreme Court Review article from a few years ago, and also the relevant section of last year’s “Looking Ahead” essay that presciently previewed the Concepcion case (kudos to Erik Jaffe!). Finally, Roger will be writing an article piece on this term’s preemption cases for the next Review — but you’ll have to wait till Constitution Day in September for that!
Has President Obama Given up on Changing U.S. Foreign Policy?
Today in Politico I have an op-ed titled “How Washington changed Obama.” In the piece, I argue that the recent appointments of Leon Panetta as secretary of defense and Gen. David Petraeus as director of the CIA, combined with revelations in the recent New Yorker article by Ryan Lizza, suggest that President Obama has given up on changing U.S. foreign and defense policy:
Panetta is a dubious choice to fulfill Obama’s recent pledge to trim military spending. Any secretary charged with realizing that pledge would need extraordinary credibility with Capitol Hill Republicans, many of whom are determined to continue raining money on the Pentagon regardless of the nation’s parlous fiscal position. Despite having once been a Republican, Panetta ran for Congress as Democrat and has served prominently in Democratic administrations. He is unlikely to craft the pragmatic consensus needed to give the Pentagon a haircut.
Petraeus’s nomination poses a different problem. He has spent the past decade focused— at the behest of his commanders in chief — on what we used to call the “global war on terrorism.” But is U.S. nation-building in the Muslim world the most important national security and intelligence problem we face today?
[…]
The U.S. desperately needs to change its focus. We account for roughly half the world’s military spending, yet we feel terribly insecure. We infantilize our allies so that they won’t pay to defend themselves and instead allow us to do it for them. We stumble into small- and medium-sized foreign quagmires the way many people eat breakfast — frequently and without much thought.
Read the rest of the op-ed here.
Today’s GDP Report Perpetuates Myth That Imports ‘Subtract’ from Growth
The U.S. Commerce Department just released its initial snapshot of first-quarter economic growth this morning. The new news is that economic growth slowed to 1.8 percent, a disappointing rate that will do nothing to shrink unemployment. The old news is that the report continues to label rising imports as a “subtraction” from gross domestic product (GDP).
According to the prevalent Keynesian view, rising imports depress economic growth by causing domestic demand to “leak” abroad. Every good or service we import is one less that must be provided by U.S. workers, or so the thinking goes. Note the final, highlighted sentence in this passage from today’s report:
The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, and nonresidential fixed investment that were partly offset by negative contributions from federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.
In Table 2, the Commerce Department calculates that rising imports subtracted 0.72 percentage points from real GDP in the first quarter. This will be widely interpreted as meaning that GDP growth would have been 2.5 percent last quarter if those burdensome imports had not increased.
This is all bunk, as I try to explain in a Cato study released earlier this month, titled, “The Trade-Balance Creed: Debunking the Belief that Imports and Trade Deficits Are a ‘Drag on Growth.’”
One source of confusion is the fact that the government estimates GDP, not by measuring what we actually produce each quarter, but by measuring what we spend. The government doesn’t know whether private households, corporations, or the government are spending on a domestically produced good or an imported good, or how much of an exported good is made up of imported components. To avoid over-counting, it subtracts total imports from total domestic expenditures to derive what was produced domestically. The subtraction of imports only cancels out the overstatement, not real GDP.
In fact, as I argue in the study, imports contribute to real GDP growth by providing raw materials, parts, and machinery at more affordable prices for a broad swath of U.S. industry. And when consumers save money on imported goods and services, they have more left over to spend on other domestic goods and services. If the money we spend on imports does not come back to buy our exports, it returns to buy U.S. assets, which also contributes to economic growth through lower interest rates and direct investment in our productive capacity.
As a final refutation of the prevailing creed, I present evidence that shows that the U.S. economy consistently performs better during periods when imports and trade deficits are rising as a share of GDP compared to periods when they are decreasing.
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