Archive for August, 2011
Top 3 Common Myths of Capitalism
Senior fellow Jeffrey Miron discusses some common myths about capitalism in this video by the Institute for Humane Studies’ Learn Liberty project. Learn more at LearnLiberty.org.
In the Grip of Regime Uncertainty, Again
The first chapter in Robert Higgs’ anthology Depression, War, and Cold War: Studies in Political Economy (Oxford University Press, 2006) is titled “Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed after the War.” This is a fitting title for a piece penned by the scholar who first nailed down the regime uncertainty idea and who rigorously dealt with it. According to Higgs:
“…regime uncertainty pertains above all to a pervasive uncertainty about the property-rights regime—about what private owners can reliably expect the government to do in its actions that affect private owners’ ability to control the use of their property, to reap the income it yields, and to transfer it to others on voluntarily acceptable terms. Will the government simply take over private property? Will it leave titles in private hands, but strip the owners of real control and profitable use of their properties? These questions fall under the rubric of regime uncertainty.”
Higgs explains why the New Deal policies embraced by President Roosevelt generated regime uncertainty and why the Great Depression lasted so long and was transformed into the Great Duration.
Treasury Secretary Henry Morgenthau knew that FDR was turning off businessmen, private investment and the economy. The Treasury Secretary repeatedly attempted to persuade FDR to back off. Indeed, in a cabinet meeting in 1937, Morgenthau was forced to put the matter to the President and put it to him in clear terms: “What business wants to know is: are we headed toward Socialism or are we going to continue on a capitalist basis?”
The Treasury Secretary was no match for the President, however. FDR didn’t back off and the country staggered into WWII.
We are staggering again under the weight of regime uncertainty. The Wall Street Journal‘s editorial “How Not to Grow the Economy” contains data that amply support that conclusion.
It’s time for a powerful insider to present President Obama with the “Morgenthau Question.”
Logo Contest for Libertarianism.org
Cato’s new project, Libertarianism.org, is having a logo contest with a $300 prize for the winner. Enter your design in the next 5 days for a chance to win!
Feds Take in Billions with Forfeiture Powers
Today’s Wall Street Journal has part 2 of its critical look at the powers of federal law enforcement agencies and the focus of this article is on the power to seize cash, cars, homes, and other assets from people who have not been convicted of a crime. It’s called “civil asset forfeiture” because there is no criminal prosecution. Here’s an excerpt (subscription only):
New York businessman James Lieto was an innocent bystander in a fraud investigation last year. Federal agents seized $392,000 of his cash anyway.
An armored-car firm hired by Mr. Lieto to carry money for his check-cashing company got ensnared in the FBI probe. Agents seized about $19 million—including Mr. Lieto’s money—from vaults belonging to the armored-car firm’s parent company.
He is one among thousands of Americans in recent decades who have had a jarring introduction to the federal system of asset seizure. Some 400 federal statutes—a near-doubling, by one count, since the 1990s—empower the government to take assets from convicted criminals as well as people never charged with a crime.
Last year, forfeiture programs confiscated homes, cars, boats, and cash in more than 15,000 cases. The total take topped $2.5 billion, more than doubling in five years, Justice Department statistics show.
The expansion of forfeiture powers is part of a broader growth in recent decades of the federal justice system that has seen hundreds of new criminal laws passed. Some critics have dubbed the pattern as the overcriminalization of American life.
Last year, Cato hosted an event on the problem of forfeiture law and before that published numerous books and studies and articles. It’s nice to see the Wall Street Journal highlighting this problem for its readership.
Early Lessons from Libya
Fighting rages in Tripoli, and Muammar Qaddafi’s regime hangs by a thread. Although much remains unknown, it is worthwhile to ponder the next steps, as well as look back on the assumptions that guided U.S. policymakers to become involved in the first place, and that may shape U.S. foreign policy going forward.
Specifically, while Qaddafi’s ouster will be a good thing for Libya, the lessons that are likely to be drawn from it, and especially of the U.S. role in it, might not be good for the United States. That is because the Libya story will be fit into a familiar narrative, one in which the United States is portrayed as uniquely suited to be the world’s government, with the U.S. military as a global constabulary, responding to threats large and small, distant and proximate. The Libyan intervention, according to the defenders of the status quo, demonstrates that there is no alternative.
Most Americans disagree. Such an approach to the world has taxed our military, and overburdened U.S. taxpayers, with no obvious benefit to U.S. national security. If Qaddafi falls, and what comes after him is a marked improvement, that doesn’t mean that the U.S. military needed to become involved, and it doesn’t mean that it must do so in other places, or in similar circumstances, in the future.
First, the most important question: Who will replace Qaddafi? We might know more about the rebel movement than we did in March, to the extent that the Transitional National Council represents them. But does it? (Recall Paul Wolfowitz’s response at an event at AEI in March. Asked who the rebels were, he told the questioner to “Google and find out”). More to the point, does the TNC command sufficient popular support that it will have the authority to govern Libya? We may soon find out.
And what does U.S. intervention in Libya signal for the future of U.S. foreign policy? Will U.S. warplanes soon be flying over Syria? Will U.S. bombs soon be raining down on Iran? Or on any other country that has the misfortune of being ruled by an incompetent or venal government? Once, the answer was clearly no; now we just don’t know.
When President Obama chose to intervene in Libya, with authorization from the UN Security Council, but not from the U.S. Congress, he violated nearly every one of the principles of the venerable Weinberger-Powell Doctrine: the war didn’t advance a vital U.S. security interest, and it lacked public support, a clear military objective, and an obvious exit strategy. It will be unfortunate if the likely outcome of the war in Libya — Qaddafi’s ouster — is used to repudiate the W-P doctrine once and for all. If it does, we are likely to see even more U.S. interventions, in a whole host of places that have not even the slightest connection to U.S. national security.
Finally, there is the question of Congress’s role in foreign policy. As the war dragged on, I was appalled by the rhetorical gymnastics that the Obama administration employed to evade the Constitution’s provision that vests the war power exclusively with the Congress. It will be tragic if the Libyan experience is taken as proof that this portion of the Constitution is null and void. Those who were willing to challenge the Obama administration’s claims should not abandon their posts just because Qaddafi’s forces have.
A few weeks before the start of the U.S./NATO campaign against Libya, Malou Innocent reminded us of British philosopher John Stuart Mill’s thoughts on revolution and political reform. In his classic text A Few Words on Nonintervention Mill explained that the subjects of an oppressive ruler must achieve freedom for themselves. And he worried “that if they have not sufficient love of liberty to be able to wrest it from merely domestic oppressors, the liberty which is bestowed on them by other hands than their own, will have nothing real, nothing permanent.”
That isn’t inevitable in the case of Libya, and I hope that it doesn’t play out that way. The Libyan people were clearly not well-served by the clownish, megalomaniacal Qaddafi, a man so naturally farcical that it is difficult to distinguish the genuine article from the SNL spoof of him. I am happy that the Libyan people appear poised to take control of their country. And I wish them well.
Is It ‘Well Worth the Money’?
A former congressional page tells the Washington Post that the recently ended page program was “well worth the money.” At the Encyclopedia Britannica Blog, I note:
Well, it would be, wouldn’t it? For those who benefited from it, it is indeed well worth the money. But, as with all government programs, the beneficiaries weren’t paying for it. Did the program do the taxpayers much good? Yes, in the days when members of Congress needed a way to get documents to one another, the page program may well have been an efficient use of resources. But times change; technology has eliminated a lot of jobs in the private sector, and there’s no reason to think it shouldn’t have the same impact in the public sector. Cynics point out that pages were mostly the children of people with good political connections. And then they make better connections: The writer who thought the program was “well worth the money” now runs a company that boasts of having made more than 500 million political robocalls over the past 30 years. So we all owe something to the page program!
Much more on the problem of concentrated benefits and diffuse costs, some appalling examples, and a suggestion as to how we might determine whether each government program is “well worth the money.”
A Challenging Question
If having more maids, valets, and drivers uplifted the world’s poor, could you do it? Or does maintenance of your egalitarian sensibilities require them to stay in their place?
Anarchists for Big Government
Three months ago I wrote a long, thoughtful (ahem) critique of the Washington Post’s use of the word “anarchists” to describe people outraged at the possibility that governments might finally be forced “to cut social benefits and slash public payrolls.”
“Odd anarchists,” I harrumphed, who “object to the state reducing its size, scope, and power.”
Today, Michael Cannon made the same point to many more people in a few pithy sentences on the Post’s letters page:
Anne Applebaum informed us that “the anarchists in Athens wanted more government spending” [“The smartphone riots?” op-ed, Aug. 11]. Which is it? Were they anarchists, who want no government? Or were they statists, who want more government?
The lesson? Write letters to the editor. People read them.
Meanwhile, two other letter-writers on the same page complain that the Post should not reveal how our tax dollars are spent, lest the masses turn against Washington. I disagree.
When an American Company Redomiciles to the Cayman Islands, What Lesson Should We Learn?
Another American company has decided to expatriate for tax reasons. This process has been going on for decades, with companies giving up their U.S. charters (a form of business citizenship) and redomiciling in low-tax jurisdictions such as Bermuda, Ireland, Switzerland, Panama, Hong Kong, and the Cayman Islands.
The companies that choose to expatriate usually fit a certain profile (this applies to individuals as well). They earn a substantial share of their income in other countries and they are put at a competitive disadvantage because of America’s “worldwide” tax system.
More specifically, worldwide taxation requires firms to not only pay tax to foreign governments on their foreign-source income, but they are also supposed to pay additional tax on this income to the IRS — even though the money was not earned in America and even though their foreign-based competitors rarely are subject to this type of double taxation.
In this most recent example, an energy company with substantial operations in Asia moved its charter to the Cayman Islands, as reported by digitaljournal.com:
Greenfields Petroleum Corporation…, an independent exploration and production company with assets in Azerbaijan, is pleased to announce that the previously announced corporate redomestication … from Delaware to the Cayman Islands has been successfully completed.
Because it is a small firm, the move by GPC probably won’t attract much attention from the politicians. But “corporate expatriation” has generated considerable controversy in recent years when involving big companies such as Ingersoll-Rand, Transocean, and Stanley Works (now Stanley Black & Decker).
Consumers and the ‘Smart Grid’
The drive to let consumer-level electricity prices float as prices do in innumerable other markets has been stunted by complaints about so-called “smart meters” that would give consumers the ability to respond to fluctuations in the realtime price of electricity.
When the California Energy Commission attempted to put these kinds of meters into new buildings, the knee-jerk reaction consisted largely of complaints about the government “taking over” consumers’ electricity consumption in the case of a looming blackout. For more on why these concerns lacked some essential context, listen to the podcast with Peter Van Doren on the case of the CEC.
As I discussed with economist Lynne Kiesling at Cato University, consumer-side responses to varying electricity prices could take many forms, from smarter appliances plugged into the same pricing information to battery technology to take advantage of times of low electricity demand. What’s more, dynamic pricing could someday let consumers turn the product of electricity into the service of electricity by allowing consumers to pay a premium for costlier but “greener” methods of electricity generation.
Here’s more from Kiesling on smart meters.
Deport Criminals, Not Students and Needed Workers
Tea Partiers, of all people, should understand this concept: The federal government’s resources are limited and should be focused on its core duties of administering justice and protecting basic rights. In that light, the Obama administration made a sensible decision this week to concentrate on deporting illegal immigrants who threaten the health and safety of Americans.
At the latest count, there are still 11 million people living in the United States without government authorization. The government would be incapable of deporting them all, and even if it could, it would cause tens of billions of dollars in damage to the American economy, as Cato research has demonstrated. Even the 300,000 illegal immigrants currently being processed through the deportation pipeline are clogging the system and drawing resources away from more important business.
In a letter to Senate leaders, Department of Homeland Security (DHS) Secretary Janet Napolitano said the administration would from now on concentrate on deporting those in the system who have committed serious crimes or who have any connections to crime or terrorism. As the secretary explained:
From a law enforcement and public safety perspective, DHS enforcement resources must continue to be focused on our highest priorities. Doing otherwise hinders our public safety mission—clogging immigration court dockets and diverting DHS enforcement resources away from individuals who pose a threat to public safety.
That sounds pretty reasonable. The flip side of the policy change is that hundreds of thousands of peaceable, otherwise normal immigrants who are working and studying in the United States without the right documentation will be allowed to stay and possibly even apply for legal status. Included in this group are undocumented spouses of U.S. military personnel, immigrants who were snared in the system when they actually reported crimes to police, and students who came to the United States as young children with their undocumented parents—students who would be eligible for legal status should Congress pass something like the DREAM Act.
Conservatives such as Rep. Lamar Smith (R-Texas) complain that the administration should be enforcing the law rather than ignoring it, but as I’ve argued for long time, the law as it is currently written is unenforceable and needs to be changed.
Free Speech? What’s Free Speech?
Internet site Gawker says that Ashton Kutcher’s editorship of Details magazine was “a brazenly self interested and highly misleading act of journalism.” He helped produce a special online version of the mag that featured tech companies he’s invested in without disclosing that fact.
Having disclosed it for him—the article is called “Ashton Kutcher Is a Massive Whore“—Gawker now reports on how federal officials are looking over their glasses at the television personality and entrepreneur.
“It’s certainly a possibility that a case like this could be investigated,” assistant Federal Trade Commission director Richard Cleland tells the Times of Kutcher’s Details special online issue, in which eight of 12 recommended products in one article were Kutcher investments. “If you’re out there promoting individual products that you have a specific investment in, it needs to be disclosed… If you have a significant economic investment that is not otherwise apparent, that may potentially affect the credibility of your endorsement, and I see that as a potential problem.” The FTC has made a priority out of online conflicts of interest.
It’s also possible Kutcher violated SEC rules. You’re not supposed to promote a company you partly own—say, in a magazine—if you know it’s soon to go public. And if a company’s shares trade on private secondary markets you must abide by federal rules on deceptive marketing, which a former SEC lawyer told the Times were “very broad… These rules apply any time there is a securities transaction.”
<sarcasm>You see, in the land of the free—where the government’s founding charter says it “shall make no law … abridging the freedom of speech”—you can’t just say any old stuff you want to in a magazine! Say things that help your business interests too much and you are obviously outside of what the quaint old Constitution says. The First Amendment is fuzzy on this. “[M]ake no law” might mean “make a law if you have a good reason.” Duh, Ashton! You’re pretty, but maybe not very smart, saying what you want in the United States of America.</sarcasm>
This episode itself illustrates why “make no law” works despite the fact that it allows sharp business practices. Gawker and other media outlets are actively curing any information deficit with plainly worded articles like “Ashton Kutcher Is a Massive Whore.” This is in aid of the caveat emptor rule, which works even better when people know they need to think for themselves and look for assistance from outlets like Gawker, of which there are an endless supply thanks to the Internet.
Caveat supplicantem if you think that the government is going to protect your interests as a consumer better than you can. Not even close. So there is no good reason for overturning the First Amendment here.
Cato on Facebook
Cato on Twitter
Cato on Google+
Cato on YouTube
