Archive for May, 2011
Kentucky v. King
Awful ruling handed down by the Supreme Court this morning in a case called Kentucky v. King [pdf]. The case concerns the power to break into a person’s home without the occupant’s consent and without a warrant. Our homes are supposed to be our castles–so the general rule is that the police must get an independent judge to approve a warrant application before the door can be forced open. There are a few common sense exceptions to the general rule. For example, if someone is screaming for help, the police can enter. Also if the police are in hot pursuit, they can follow the suspect on to private property and into a home under such circumstances. Today’s ruling expands the exceptions to situations where the police suspect that the occupants of a house may be destroying contraband such as marijuana, cocaine, or other narcotics.
In this case, the police were after a drug dealer after he fled from a controlled-buy transaction. The dealer entered some apartment but the police were unsure of the unit number. As the police got closer, they could smell marijuana coming from a nearby apartment. Instead of posting an officer nearby and applying for a warrant, they decided to bang on the door, shouting “Police!” Hearing some rustling inside, the police broke down the door so evidence could not be destroyed. The occupants were arrested on drug charges and they later challenged the legality of the police entry and search. (As it happens, the dealer the police were trying to capture was found in another apartment.)
The lower courts have generally frowned on what they describe as exigencies manufactured by police conduct, but the Supreme Court has now overturned those lower court precedents by a 8-1 vote. In dissent, Justice Ginsburg asked the right question: “How ‘secure’ do our homes remain if police, armed with no warrant, can pound on doors at will and, on hearing sounds indicative of things moving, forcibly enter and search for evidence of unlawful activity?” And the unfortunate answer to the question is, a lot less secure.
A New Obstacle to Passing Trade Agreements
Despite previously supporting them, the Obama administration announced today that it would not submit the three outstanding preferential trade deals (with South Korea, Colombia and Panama) for a vote unless and until Congress reinstates an expanded version of Trade Adjustment Assistance, a program of benefits for workers who have lost their job because of competition from imports. Although the basic TAA program (with us since 1974) is still in place, a version expanded by the stimulus package in 2009 lapsed in February amid some Republicans’ concerns about its cost and its false premise: that workers who lose their jobs because of import competition are more deserving than other unemployed Americans. More on TAA here and here.
According to this article by Congressional Quarterly[$], the business community supports the enhanced TAA, seeing it as a worthwhile bribe compromise to secure votes for trade agreements. I understand that logic, even if I don’t support it. But the merits of that argument aside, and as I’ve outlined repeatedly, I’m not sure the deal holds anymore. While it is true that TAA has in the past been used to secure votes for trade agreements, that is not really necessary in this case. After all, if the Republicans all voted in favor of the agreements, then Democratic votes (those most likely to need some sort of assurance on welfare) would not be needed, unless the administration is implying a veto threat. Indeed, it is likely that making an expanded TAA a condition for the trade deals would cost some votes from conservative and tea-party minded Republicans. But the administration wants a larger TAA program in place, and this is their price. Stay tuned.
HT: Andy Roth at the Club for Growth
Newt Tries to Out-Romney Romney, Endorses ‘Public Option’ in Medicare
In 1995, shortly after becoming Speaker of the House, Newt Gingrich mulled a radical overhaul of the U.S. Food and Drug Administration. As he put it to a room full of health insurers, “Maybe we’ll take out FDA.”
What made Newt likable to advocates of freedom is sadly no longer part of his schtick. Here’s how Andrew Stiles reports on Newt’s appearance on Meet the Press yesterday:
“I don’t think right-wing social engineering is any more desirable than left-wing social engineering,” he said when asked about [House Budget Committee chairman Paul] Ryan’s [R-WI] plan to transition to a “premium support” model for Medicare. “I don’t think imposing radical change from the right or the left is a very good way for a free society to operate.”
As far as an alternative, Gingrich trotted out the same appeal employed by Obama/Reid/Pelosi — for a “national conversation” on how to “improve” Medicare, and promised to eliminate ‘waste, fraud and abuse,’ etc.
“I think what you want to have is a system where people voluntarily migrate to better outcomes, better solutions, better options,” Gingrich said. Ryan’s plan was simply “too big a jump.”
He even went so far as to compare it the Obama health-care plan. “I’m against Obamacare, which is imposing radical change, and I would be against a conservative imposing radical change.”
If you close your eyes, it’s like listening to The Princess Bride. Medicare and Medicaid are nothing if not social engineering. So by Newt’s logic, we should get rid of them. But Newt also says that radical change is bad, which means we can’t. That leaves incremental changes. But incremental changes to massive social-engineering experiments are themselves social engineering, so we clearly cannot make incremental changes, either. ObamaCare is both social engineering and radical change. Again by Newt’s logic, ObamaCare is bad, and we must get rid of it, but we can’t. Truly, he has a dizzying intellect.
Newt’s objection to Paul Ryan’s Medicare reforms is no less incoherent. It appears to be that the reforms approved by the House would eliminate the traditional Medicare program as an option for Americans who enroll after 2021. So far as I can tell, Newt’s opposition to this feature is consistent with his past positions on Medicare reform. He wants to let people stay in traditional Medicare if that’s what they prefer, and would have traditional Medicare compete against private insurance companies for Medicare enrollees.
But it is completely inconsistent with Newt’s opposition to President Obama’s call for a so-called “public option” to compete with private insurance companies. In 2009, Newt told Good Morning America:
I guarantee you the language they draft for the public plan will give it huge advantages over the private sector or it won’t work…what they will do is rig the game…I mean, anybody who’s watched this Congress who believes that this Congress is going to design a fair, neutral playing field I think would be totally out of touch with reality.
Newt may not realize this, but he was actually explaining why his preferred Medicare reforms would fail: Congress would rig the game to protect the “public option” that Congress offers to seniors — i.e., traditional Medicare. House Republicans, led by Paul Ryan, rather bravely stuck to their guns when they kept a “public option” out of their proposed Medicare reforms. Ryan is offering Republicans credibility and success. By his own admission, Newt is offering them failure.
What’s up with Mitt Romney and Newt Gingrich? Does the Republican presidential nomination race have some sort of prize for insincerity or incoherence that I don’t know about?
Finally, Newt endorsed a “variation of the individual mandate” (tell me again why he opposes ObamaCare?) and said there is “a way to do it that make most libertarians relatively happy.” He must have meant to say leftists rather than libertarians. Regardless, I invite Newt to come to the Cato Institute so he can explain to people who actually care about freedom just how happy he’s going to make us.
Fiscal and Social Conservatives
Recently I criticized Sen. Jim DeMint for saying, “It’s impossible to be a fiscal conservative unless you’re a social conservative,” and I noted that former governor Mike Huckabee had made similar points. Yesterday on “Fox News Sunday” Huckabee said, “all social conservatives I know are also fiscal conservatives. Not necessarily the other way around.”
Well, I can tell you one social conservative who isn’t a fiscal conservative — former governor Mike Huckabee. Here’s what Cato’s “Fiscal Policy Report Card on America’s Governors” reported in 2006, at the end of Huckabee’s tenure as governor of Arkansas:
Final-Term Grade, F; Final Overall Grade, D
Thanks to a final term grade of F, Huckabee earns an overall grade of D for his entire governorship. Like many Republicans, his grades dropped the longer he stayed in office. In his first few years, he fought hard for a sweeping $70 million tax cut package that was the first broad-based tax cut in the state in more than 20 years. He even signed a bill to cut the state’s 6 percent capital gains tax—a significant pro-growth accomplishment. But nine days after being reelected in 2002, he proposed a sales tax increase to cover a budget deficit caused partly by large spending increases that he proposed and approved, including an expansion in Medicare eligibility that Huckabee made a centerpiece of his 1997 agenda. He agreed to a 3 percent income tax “surcharge” and a 25-cent cigarette tax increase. In response to a court order to increase spending on education, Huckabee proposed another sales tax increase. Huckabee wants to run for the GOP presidential nomination next year. He’s already been hailed as a viable big-government conservative candidate by some. That seems about right: Huckabee’s leadership has left taxpayers in Arkansas much worse off.
Celebrating ‘World Trade Week’ by Remembering Smoot-Hawley
Carrying on an annual tradition dating back to President Franklin Roosevelt, President Obama issued a proclamation on Friday declaring this third week in May “World Trade Week.”
Of course, every week is world trade week at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, but in order to do our part as good citizens, we’ve organized a book forum this Tuesday, May 17, at 4 p.m. on a new book by Dartmouth College economist Douglas Irwin, titled, Peddling Protectionism: Smoot-Hawley and the Great Depression.
The Smoot-Hawley tariff bill is a fitting subject for any World Trade Week. As we note in the invitation:
More than 80 years after its passage, the Smoot-Hawley Tariff Act of 1930 still resonates in today’s debate over trade policy. Advocates of trade blame the law for deepening the Great Depression and warn of the economic damage from a reversion to protectionism. Skeptics of trade say its impact has been exaggerated. Economist and historian Douglas Irwin tells the messy and, at times, amusing story of how Congress dramatically raised tariffs in 1930 just as the world was plunging into depression, and analyzes the economic consequences of the most infamous trade bill ever enacted by Congress. Irwin then draws important lessons that can help today’s trade policymakers avoid the costly mistakes of the past.
Professor Irwin will talk about his book and answer questions about this turning point in U.S. trade history. There is still time to sign up here to attend the event in person at Cato’s F.A. Hayek Auditorium, or you can watch the live video feed online here.
What the Tea Party Hath Wrought?
The Internal Revenue Service is investigating campaign donations to groups incorporated under 501(c)(4) of the tax code. Some in the IRS apparently hope to apply gift taxes to the contributions.
Higher taxes on an activity would generally lead to less of that activity, especially if a good substitute exists that is not taxed. In this case, donors could give money to 527 groups. Such donations are exempt from taxation. But 527 groups are subject to disclosure of donors.
The IRS investigations involve tax provisions “that had rarely, if ever, been enforced.” Why now? We do not know. But 501(c)(4) groups played in a important part in the 2010 campaign. As you know, the party in power lost control of the House of Representatives in 2010. With the president’s re-election at stake in 2012, the administration might hope that that less money is available to fund the political speech of its opponents.
The White House has already issued a draft order requiring disclosure of political spending by government contractors. Now these investigations of donors. The IRS effort need not lead to legal complaints to be politically effective. As one expert notes, “The lack of clarity and the potential for not-insignificant taxation on these gifts will cause many of the biggest donors to think twice.”
Many people argue that mandatory disclosure of political spending has few costs and many benefits. Such laws are said to discourage few donors from funding political speech. If that is true, why is the Obama administration so interested in forcing donors out of anonymity?
Perhaps the administration believes deeply in transparency. Or perhaps the administration believes that attacking (no longer anonymous) donors will effectively discourage speech critical of the President in 2012.
The political misuse of the Internal Revenue Service should be a concern of everyone. During the Kennedy, Johnson, and Nixon administrations, presidents and their people decided, as John Dean put it at the time, to “use the available federal machinery to screw our political enemies.” Have we forgotten that history?
Gerson Gets It Wrong Again
Michael Gerson’s predictable, reflexive attack on Rep. Ron Paul in his May 10 op-ed in the WaPo for Paul’s sensible stand in favor of ending the futile crusade called the War on Drugs, makes a curious argument. He asserts that there is a “de facto decriminalization of drugs” in Washington, D.C. Curious, because there are few places in the nation where the drug war is waged more vigorously. Doesn’t seem to be working, does it?
Yet Gerson would expand the effort. Never mind that the social pathologies in the District for which Gerson’s compassionate conservative heart bleeds are mainly a result of making drugs illegal: Turf wars with innocents caught in the crossfire; children quitting school to sell drugs because of the artificially high prices prohibition creates; disrespect for the law due to a massive criminal subculture.
Gerson, one of the chief architects of the disastrous Bush II administration, should step away from his obsessive disdain for libertarianism and consider the nationwide decriminalization of drugs undertaken in Portugal in 2001. Drugs use is down, particularly among young people, and drug-related crimes have dropped precipitously. There is a reason hundreds of thousands of Mexicans have taken to the streets to call for the end to the war on drugs there that is tearing apart the fabric of Mexican society. On top of the social aspects of the drug war dystopia, Cato senior fellow and Harvard economist Jeffery Miron estimates that ending the drug war in the U.S. would save $41.3 billion annually. As usual, Ron Paul has it right.
Flynn’s ‘Recalibrating Homeland Security’
The May/June issue of Foreign Affairs focuses on “The New Arab Revolt” (also the focus of an event at Cato a month ago). Some of the articles have a touch of datedness because they refer to the continuing pursuit of Osama bin Laden. But not so Stephen Flynn’s “Recalibrating Homeland Security,” ($) a terrific discussion of how the federal government’s post-9/11 policies have failed to meet the challenge of terrorism. Flynn throws a sentence at the living icon of al Qaeda, but the insights of his article are well worth taking in.
Most insightfully, Flynn theorizes just why it is that “nearly a decade after al Qaeda struck the World Trade Center and the Pentagon, Washington still lacks a coherent strategy for harnessing the nation’s best assets for managing risks to the homeland—civil society and the private sector.”
During the Cold War, the threat of nuclear war with the Soviet Union required “a large, complex, and highly secretive national security establishment.”
To an extraordinary extent, this same self-contained Cold War-era national security apparatus is what Washington is using today to confront the far different challenge presented by terrorism. U.S. federal law enforcement agencies, the border agencies, and the Transportation Security Administration (TSA) are subsumed in a world of security clearances and classified documents. Prohibited from sharing information on threats and vulnerabilities with the general public, these departments’ officials have become increasingly isolated from the people that they serve.
This helps explain TSA’s effrontery with travelers, the “secrecy reflex,” and the ongoing risk of overreaction. Flynn stresses that focusing on resiliency will do our country much better than those brittle, fear-backed political demands for 100% protection.
“Read the whole thing” is a bloggic accolade that I use sparingly, recognizing the limits on readers’ time. At a brief 10 pages, despite the hurdle of having to log in/buy access to the article, Flynn’s “Recalibrating Homeland Security” gets my: Read the whole thing.
Monday Links
- It is false to assume that GM’s earnings report means the auto bailout was a success.
- It is false that, among other things, failing to raise the debt limit means defaulting on our obligations.
- It is false that Osama bin Laden’s death means torture is a good idea.
- It is false that international institutions can deliver what they say they can deliver.
- It is false that oil speculators are to blame for fluctuating oil prices:
What Hyman Roth Would Say about Government Waste
We often criticize a focus on government waste here at Cato. We point out that the real spending problem is the big-ticket programs, not “waste, fraud, and abuse.” But a series of recent stories in the Washington Post, several of them in Sunday’s paper, led me to write about government waste in today’s Britannica column. I followed up on my previous post about the scandal of the Alaska Native Corporation (SBA 8(a)) preference program:
Not much, even though it was hardly the first time that the problems with the Alaska Native Corporations program had been noted. There was a Senate hearing, with the reassuring title of “Promise Fulfilled: The Role of the SBA 8(a) Program in Enhancing Economic Development in Indian Country,” where “Alaska Natives and a Small Business Administration official defended federal contracting preferences for Indian and Native firms.” No critics were invited to the hearing. After all, “The purpose of the hearing is to allow the SBA, ANCS, NHOs, Indian tribes, shareholders and other stakeholders the opportunity to demonstrate the importance and legitimacy of the program to Native communities in fulfilling self-determination and self-sufficiency,” as 49-year senator Daniel Inouye (D-HI) and Alaska’s own Sen. Mark Begich wrote in a letter to whippersnapper senator Daniel Akaka (D-HI), who has served in Congress for only 34 of his 86 years and chairs the Senate Indian Affairs Committee.
And I noted:
And for those who like big government, I have to say: This is the business you have chosen. If you want the federal government to tax (and borrow) and transfer $3.6 trillion a year, if you want it to build housing for the poor and give special benefits to Alaska Natives, if you want it to supply Americans with health care and school lunches and retirement security and local bike paths, then you have to accept that such programs come with incentive problems, politicization, corruption, and waste. Maybe it’s worth the cost.
More details here.
Vouchers vs. Tax Credits in Pennsylvania
I blogged a few days ago about the school choice policy deadlock in Pennsylvania—between the House, which favors expanding the existing k-12 scholarship-donation tax credit program, and the Senate, which favors introducing a new voucher program. Today I have an op-ed in the Philadelphia Inquirer elaborating on that blog post.
One thing I didn’t mention in the op-ed is that the Protestant George Washington helped pay for the construction of the Catholic church that was burned to the ground in the Bible Riots of 1844. It is telling that the Bible Riots were not over what was preached in St. Augustine’s church, but rather over what was taught in Philly’s public schools. America has seen comparatively little religious conflict surrounding our places of worship, but an endless series of battles over the religious (and other) content of our public schools. The reason is simple: no American has to pay to build another man’s temple, shrine, church, mosque, synagogue, or coffee-shop; but we all have to pay for the public schools.
Vouchers extend to private schooling the flaw that has precipitated our endless “public school wars”: compulsion. Under a voucher program, all taxpayers must pay for every type of schooling, including varieties that might violate their deeply held convictions.
As I explain in the op-ed, and also in this commentary on the recent ACSTO v. Winn Supreme Court decision, tax credits avoid that compulsion. Participation in them is truly voluntary, and donors get to choose the scholarship organizations that receive their funds. In the case of direct education tax credits, they simply get to keep more of their own money to spend on their own children. Credits are thus a way to secure both freedom of choice for parents and freedom of conscience for taxpayers.
Could Technical Default Today Save America from Greek-Style Fiscal Disaster in the Future?
There’s a lot of buzz about a Wall Street Journal interview with Stanley Druckenmiller, in which he argues that a temporary delay in making payments on U.S. government debt (which technically would be a default) would be a small price to pay if it resulted in the long-term spending reforms that are needed to save America from becoming another Greece.
One of the world’s most successful money managers, the lanky, sandy-haired Mr. Druckenmiller is so concerned about the government’s ability to pay for its future obligations that he’s willing to accept a temporary delay in the interest payments he’s owed on his U.S. Treasury bonds—if the result is a Washington deal to restrain runaway entitlement costs. “I think technical default would be horrible,” he says from the 24th floor of his midtown Manhattan office, “but I don’t think it’s going to be the end of the world. It’s not going to be catastrophic. What’s going to be catastrophic is if we don’t solve the real problem,” meaning Washington’s spending addiction. …Mr. Druckenmiller’s view on the debt limit bumps up against virtually the entire Wall Street-Washington financial establishment. A recent note on behalf of giant banks on the Treasury Borrowing Advisory Committee warned of a “severe and long-lasting impact” if the debt limit is not raised immediately. …This week more than 60 trade associations, representing virtually all of American big business, forecast “a massive spike in borrowing costs.” On Thursday Federal Reserve Chairman Ben Bernanke raised the specter of a market crisis similar to the one that followed the 2008 bankruptcy of Lehman Brothers. As usual, the most aggressive predictor of doom in the absence of increased government spending has been Treasury Secretary Timothy Geithner. In a May 2 letter to House Speaker John Boehner, Mr. Geithner warned of “a catastrophic economic impact” and said, “Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover.”
Mr. Druckenmiller is not overly impressed by this hyperbole. The article continues with this key passage.
“Here are your two options: piece of paper number one—let’s just call it a 10-year Treasury. So I own this piece of paper. I get an income stream obviously over 10 years . . . and one of my interest payments is going to be delayed, I don’t know, six days, eight days, 15 days, but I know I’m going to get it. There’s not a doubt in my mind that it’s not going to pay, but it’s going to be delayed. But in exchange for that, let’s suppose I know I’m going to get massive cuts in entitlements and the government is going to get their house in order so my payments seven, eight, nine, 10 years out are much more assured,” he says. Then there’s “piece of paper number two,” he says, under a scenario in which the debt limit is quickly raised to avoid any possible disruption in payments. “I don’t have to wait six, eight, or 10 days for one of my many payments over 10 years. I get it on time. But we’re going to continue to pile up trillions of dollars of debt and I may have a Greek situation on my hands in six or seven years. Now as an owner, which piece of paper do I want to own? To me it’s a no-brainer. It’s piece of paper number one.” …”Russia had a real default and two or three years later they had all-time low interest rates,” says Mr. Druckenmiller. In the future, he says, “People aren’t going to wonder whether 20 years ago we delayed an interest payment for six days. They’re going to wonder whether we got our house in order.”
This is a very compelling argument, but it overlooks one major problem — the complete inability of Republicans to succeed in forcing fiscal reform using this approach.
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