Archive for September, 2011
Term Limits and Popular Government
Rasmussen Reports has a new poll indicating 71 percent of the public want term limits for members of Congress. This finding is nothing new. Strong majorities have supported congressional term limits for the past two decades. What about before that? I decided to take a look at the Gallup polling going back more than six decades. Here’s what I found.
The first polling on the topic in 1947 showed 46 percent supporting limits for the House (48 percent opposed) and 52 percent favoring them for the Senate. Eight years later Gallup found support had fallen to 38 percent for senatorial limits. In 1964-5, from 48 to 50 percent favored term limits for members of both chambers. The late 1960s and early 1970s saw weak results for term limits. In 1969, 43 percent favored House limits; two years later a survey showed support for Senate limits had fallen to 39 percent.
And then everything changed.
Surveys in 1977 and 1981 showed about 60 percent support for limits on the terms of members in both houses. Later in the 1980s, support went up toward 65 percent or so. By 1994, Gallup found its first 70 percent response in favor of congressional term limits. A year later, the number was 67 percent. Thereafter, Gallup apparently did not poll on the topic, perhaps because the Supreme Court took term limits off the political agenda.
Still, in 2003, an NBC/Wall Street Journal survey found 67 percent of the public thought term limits were a good idea. A year later a Fox News/Opinion Dynamics poll found 78 percent supported the idea. Against this background, the Rasmussen poll makes perfect sense.
People sometimes argue that popular changes to the Constitution or the rules of the political game can reflect momentary passions that pass, leaving only unwise policies. This concern is not without merit. However, if the public indicates a strong and growing desire for change over more than three decades, shouldn’t a republican government follow that settled and presumably considered desire? I mean, republican government is government by the people, right?
Strength vs. Stupidity
The New York Times weighs in this morning with a timely and sensible editorial on military spending. The main focus is on the increasingly outdated pay and benefits system for the nation’s troops. Some choice excerpts:
Military pay, benefit and retirement costs rose by more than 50 percent over the…decade (accounting for inflation). Leaving aside Afghanistan and Iraq, those costs now account for nearly $1 out of every $3 the Pentagon spends.
Much of that is necessary to recruit and retain a high-quality, all-volunteer military….But current military pay, pension systems and retiree health care benefits are unsustainable and ripe for reform.
[...]
The retirement system is both unfair and increasingly expensive. Most veterans, including many who have served multiple combat tours, will never qualify for even a partial military pension or retiree health benefits. These are only available to those who have served at least 20 years. Those who do qualify can start collecting their pensions as soon as they leave service, even if they are still in their late 30s, making for huge long-term costs.
So far, so good. Two essential points bear repeating.
First, the rise in military spending over the past decade has not been driven solely by the costs of the wars in Iraq and Afghanistan. Pentagon costs are growing, and the rate of growth is rising. Programmatic reform is needed to reign in those costs; avoiding stupid wars won’t solve the problem (although it won’t hurt).
Second, the current system disproportionately rewards individuals who stay in the service for 20-plus years, and undercompensates those men and women who serve several tours, but who do not qualify for military retirement. A better system would allow anyone who has served to retain some of what they paid (or what taxpayers paid for them) into a portable retirement account that they control. Private industry has been steadily moving away from a fixed-benefit, pension-style system for years. I have heard the arguments against such a move, but I don’t find them particularly convincing.
One point from the Times editorial, however, calls out for clarification. The editors claim on two separate occasions that current military spending patterns are “unsustainable.” They conclude:
The United States already has a comfortable margin of [military] dominance….The Pentagon’s ambitions expanded without limit over the Bush era, and Congress eagerly wrote the checks. The country cannot afford to continue this way, and national security doesn’t require it. (emphasis added)
The latter point, “national security doesn’t require it,” is crucial, correct, and should be repeated at every opportunity. The former assertion, “the country cannot afford” it, is false. Repeating that claim plays into the hands of the inveterate hawks who never saw a war, or a weapon system, that wasn’t deserving of more lives/money.
The hawks are correct to point out that the United States has in the past, and could in the future, choose to spend as much or more on our military. Current spending levels amount to about five percent of GDP (when including the costs of the wars), and military spending as a share of total government spending has been falling steadily for years. According to the hawks, it is other spending, or too little revenue, that is putting our children and grandchildren into debt.
I wish that the Times had spent more time hammering the point that such spending is unnecessary. Contrary to anecdote and the evening news, the international system is remarkably stable and peaceful. The United States need not spend more than we did at the height of the Cold War in order to be secure from most threats. And those few genuine threats to our security could be handled with a smaller, more efficient military—if we offloaded some responsibilities to other countries that have sheltered under the U.S. security umbrella for decades.
The Times doesn’t directly address that last point. By focusing most of their attention on programmatic reforms to pay and benefits, and a bit on costly procurement of unnecessary weapons, but not enough to the underlying flawed assumptions that drive military spending, the editors contribute to the misconception that the U.S. military should continue to be the world’s policeman, and find ways to do this on the cheap.
That is unfortunate. Spending more than we need to doesn’t make us stronger. Ignoring our favorable strategic circumstances is simply stupid. We spend too much on our military because we ask our troops to do too much. To spend less, we must do less. The good news is that we can. The bad news is that too few people understand that.
Explaining the Perverse Impact of Double Taxation With a Chart
Whether I’m criticizing Warren Buffett’s innumeracy or explaining how to identify illegitimate loopholes, I frequently write about the perverse impact of double taxation.
By this, I mean the tendency of politicians to impose multiple layers of taxation on income that is saved and invested. Examples of this self-destructive practice include the death tax, the capital gains tax, and the second layer of tax of dividends.
Double taxation is particularly foolish since every economic theory—including socialism and Marxism—agrees that capital formation is necessary for long-run growth and higher living standards.
Yet even though this is a critically important issue, I’ve never been satisfied with the way I explain the topic. But perhaps this flowchart makes everything easier to understand.
There are a lot of boxes, so it’s not a simple flowchart, but the underlying message hopefully is very clear.
- We earn income.
- We then pay tax on that income.
- We then either consume our after-tax income, or we save and invest it.
- If we consume our after-tax income, the government largely leaves us alone.
- If we save and invest our after-tax income, a single dollar of income can be taxed as many as four different times.
You don’t have to be a wild-eyed supply-side economist to conclude that this heavy bias against saving and investment is not a good idea for America’s long-run prosperity.
There are various ways to protect yourself from double taxation, particularly by using IRAs and 401(k)s. You lock up your capital until retirement, but it is protected from double taxation.
Also, you cannot accumulate enough savings and investment to be subject to the death tax, though that’s not exactly aiming high.
But these strategies—and others—are not economically optimal. There should not be a tax bias against capital formation.
Too bad we can’t be more like Hong Kong, which has eliminated all extra layers of taxation.
That’s the benefit of real tax reform such as a flat tax. You get a low tax rate and you get rid of corrupt loopholes, but you also get rid of double taxation so that the IRS only gets one bite at the apple.
A ‘Soviet-Style Power-Grab,’ to Squelch Bad Press for ObamaCare
The Department of Health and Human Services has released new guidelines on communications between department employees and the media. The guidelines evidently require all communications to be approved by the Assistant Secretary for Public Affairs. Also: no off-the-record communications.
The media are not happy. The editor of FDA Webview & FDA Review writes (via Poynter; more here):
The new formal HHS Guidelines on the Provision of Information to the News Media represent, to this 36-year veteran of reporting FDA news, a Soviet-style power-grab. By requiring all HHS employees to arrange their information-sharing with news media through their agency press office, HHS has formalized a creeping information-control mechanism that informally began during the Clinton Administration and was accelerated by the Bush and Obama administrations. The U.S. now takes a large step toward joining other information-controlling countries like my native Australia, where government employees who talk with the news media without permission commit a federal crime. I came to the U.S. in 1974 to escape this oppression.
The HHS guidelines once again show that the purpose of a public information office is not to disseminate information to the public but to withhold information from the public.
Since this came on the heels of an HHS official announcing that the agency is scuttling ObamaCare‘s long-term care entitlement, a.k.a. the “CLASS Act,” one wonders if there is a connection. Or maybe HHS is just motivated by a general fear that the more the public learns about ObamaCare, the less we will like it.
(Update: Turns out, HHS released their new guidelines the same day that agency official voiced his opinion about the future of the CLASS Act. HT: Chris Jacobs.)
Comparison: Postal Service and Federal Government
The Institute for Research on the Economics of Taxation’s Michael Schuyler has written an interesting paper that compares the federal government’s bleak financial situation to that of the U.S. Postal Service. The entire paper is a good read, but here are a few key points:
- Congress is helping to run the USPS into the ground (see here for example). Congress is helping to run the government’s finances into the ground. We can’t separate Congress from the federal budget, but putting more space between Congress and the USPS could – and should – be done.
- The USPS is broke and it’s about to max out its $15 billion line of credit with the U.S. Treasury. Yet, Schuyler says that “the Postal Service is a model of financial rectitude compared to the overall federal government.” Yikes.
- The federal government gets the bulk of its revenues from taxation, which it extracts from citizens through force. The USPS depends on revenues generated from the sale of products and services. Thus, the USPS is on a “tighter leash.” As a result, the USPS has had to make more of an effort than the federal government to cut costs. Tightening the federal government’s “leash” by imposing restrictions on its ability to spend and borrow could help.
- The federal government’s “gaping fiscal hole” makes it harder to justify a bailout for the USPS. Schuyler says that Congress should instead allow the USPS “greater operational flexibility to lower costs in ways that would bring large savings relative to the inconvenience for mail users.”
See this Cato essay for more on the U.S. Postal Service.
On A Rental Solution to the Foreclosure Crisis
Dealing with the large overhang of foreclosed homes has been an issue vexing both policy-makers and real estate professionals, especially since both continue to resist the obvious solution of letting prices fall to their market-clearing levels. The latest “solution” is to increase the demand for excess housing by converting said homes to rental properties.
My first reaction to the proposal was maybe, but then are not the housing markets with excess owner units the same markets with a glut of apartments? Shifting a unit wouldn’t seem to impact the overall excess supply in a given market. Given my general willingness to subject my suspicions to empirical testing, off to the Census Bureau’s Housing Vacancy Survey I did go.
It seems my first reaction was half-right. If one compares owner vacancy rates with rental vacancy rates across metro areas, you do indeed find a positive correlation, but only about .5, which leaves considerable room for variation. Interestingly enough, that correlation, while still positive, becomes considerably smaller (.26) if one looks at just housing markets with above average owner vacancy rates.
The bottom line, in some markets like Portland OR or Seattle WA, the rental market is not so glutted that it could likely absorb a significant amount of vacant homes. In other markets, like Jacksonville FL, Dayton OH Phoenix, AZ or Las Vegas, NV, there is both a surplus of owner and rental properties. This implies that such homes would not be quickly rented or would have to rent at a considerable discount. Unsurprisingly these double glut markets are where the foreclosure crisis is centered.
Of course none of this changes the fact that the best way to get the housing market moving is to have the government stop meddling and allow market fundamentals to drive prices, instead of using government to pretend the bubble never ended.
The Encyclopedic Unconstitutionality of the Individual Mandate
My parents got me a set of Encyclopedia Britannica when I finished middle school; I had graduated from the “young people’s” reference collections, they told me, so it was time to move to “adult” research materials. (I should point out to readers who are currently students that ”encyclopedias” were “books” that presented a fairly exhaustive collection of basic knowledge about the world; I got my set a few years before the internet put such information at anyone’s fingertips for free.) And so it was with nostalgic delight that I accepted an invitation from Britannica’s modern online incarnation (to which David Boaz has contributed many short essays) to provide a short response — an op-ed, really — to an argument Penn law professor Kermit Roosevelt made supporting the individual mandate’s constitutionality.
Those who have followed Cato’s work on Obamacare won’t find much new here, but here’s an excerpt:
The Constitution simply does not permit the government to compel citizens into transactions to remedy what would otherwise be an economic hole in a given piece of legislation. Although the Necessary and Proper Clause allows Congress to adopt reasonable means to regulate interstate commerce, it is not a blank check permitting Congress to ignore constitutional limits by manufacturing necessities. Indeed, any law—“necessary” or otherwise—that would transform Congress’s authority into an open-ended power to legislate for “the general welfare” is unconstitutional.
While government lawyers emphasize the “uniqueness” of the health care market and the wisdom of the legislation at issue, “this case is not about whether the Act is wise or unwise . . . in fact, it is not really about our health care system at all. It is principally about our federalist system, and . . . the Constitutional role of the federal government.” Florida v. U.S. Dept. of Health & Human Services (Judge Roger Vinson’s decision striking down the individual mandate and with it all of Obamacare, Jan.31, 2011).
Read the whole thing.
Kozinski on Privacy at Constitution Day
The Hon. Alex Kozinski gave the annual B. Kenneth Simon lecture at Cato’s Constitution Day conference on September 15, 2011. He spoke about changing cultural expectations of privacy regarding new technologies and how judicial applications of the Fourth Amendment have changed over time to reflect these expectations. Judge Kozinski is the Chief Judge on the U.S. Court of Appeals for the Ninth Circuit.
The President Can’t Increase Congress’s Power Simply by Signing a Treaty
A lost episode of Jerry Springer found its way into the Supreme Court’s 2010-11 term in the case of United States v. Bond. Mrs. Bond, upset by the pregnancy that resulted from an affair between her husband and her erstwhile best friend, decided to take revenge. A trained microbiologist working at a chemical manufacturer, Mrs. Bond tried to poison her husband’s mistress by dusting her door knobs, mailbox, and car handles with dangerous, possibly lethal chemicals.
Upon being caught by (federal) postal inspectors, Mrs. Bond was charged with violating the law Congress passed to implement an international chemical weapons treaty. (There are no generally applicable federal attempted murder statutes, so prosecutors had to get creative to remain in federal court.)
But if general criminal statutes are beyond Congress’s powers, as even the most ardent federal-power activist must acknowledge, how did Congress have the power to pass the law that ensnared Mrs. Bond? — who, whatever her character flaws, was not selling chemical weapons to terrorists (the treaty’s target). Mrs. Bond thus hoped to challenge her conviction by arguing that Congress did not have the power to pass the law in question.
The Third Circuit, however, ruled that she did not have standing — a legal doctrine defining who has the right to bring a claim — to challenge the law on federalism grounds. Cato filed a Supreme Court brief supporting Mrs. Bond’s position and arguing that it makes no sense to deny standing to someone challenging a law under which she is being prosecuted. The Court unanimously agreed and remanded the case back to the Third Circuit, to finally hear arguments over whether the statute is beyond congressional power.
Cato has now reentered the fray, in a brief authored by Georgetown law professor Nicholas Quinn Rosenkranz and joined by the Center for Constitutional Jurisprudence. We again support Mrs. Bond’s claim that the law under which she was charged is beyond Congress’s enumerated powers. The main obstacle to this argument is the 1920 case Missouri v. Holland, a short and not completely clear opinion by Justice Oliver Wendell Holmes that has been interpreted to mean that Congress can expand its enumerated powers via the Treaty Clause.
In other words, even though Congress does not have the power to pass, for example, general criminal statutes, if Congress ratifies a treaty calling for such statutes, its power increases beyond constitutional limits. We argue that this is an astounding manner in which to interpret a Constitution that creates a federal government of limited powers. Not only would this mean that the Executive has the ability to expand congressional power by signing a treaty, but it would mean that foreign governments could change congressional power by abrogating a previously valid treaty — thus removing the constitutional authority from certain laws. We also point out how the most influential argument supporting Missouri v. Holland is based on a clear misreading of constitutional history and that the ruling is in deep tension with other cases.
On the treaty power, we’re in a constitutional quagmire that can only be escaped by limiting or overturning Missouri v. Holland. The Third Circuit can’t itself overturn a Supreme Court decision, of course, but it follows our brief, it can at least limit its damage.
English Fluency? Correct Pronunciation? Why Would Teachers Need Those?
As Pat Kossan reports in the Arizona Republic, the state of Arizona has averted a threatened civil-rights lawsuit from Washington by agreeing to stop monitoring teachers’ English fluency and pronunciation in the classroom. “In November, federal officials told Arizona that its fluency monitoring may violate the Civil Rights Act of 1964 by discriminating against teachers who are Hispanic and others who are not native English speakers.”
Does this strike you as perhaps a bit crazy? If so, it’s craziness with quite a pedigree. It was way back in the first Bush administration that the Equal Employment Opportunity Commission (EEOC) began filing lawsuits against employers for “discriminating” against employees with difficult-to-understand or heavily accented speech, the theory being that this served as an improper proxy for discrimination based on national origin. The scope for allowable exceptions was exceedingly narrow, too narrow to cover most teaching positions, as I wrote quite a while back when the issue had just come over the horizon in a Massachusetts case. Indeed, the National Education Association (I pointed out) had been prevailed on to pass a resolution “decrying disparate treatment on the basis of ‘pronunciation’ — quite a switch from the old days when teachers used to be demons for correctness on that topic.”
Don’t assume you can escape by choosing one of your local private schools. Their employment of teachers falls under the EEOC’s jurisdiction too.
Tolerance à la Mode Français
Given America’s at best mixed record on free speech, I am usually reluctant to point fingers at other countries, but Thursday’s fining of two French women for wearing a full face veil was a little over the top. Don’t get me wrong, I’m no fan of the burqa — as it leaves far too much to the imagination for my tastes — but I am a fan of tolerance and religious freedom.
I’m still trying to decide which is more absurd, that the law in question allows an exemption for clown masks (more rulings like this should take care of that need) or that in addition to a fine, the two women will be required to take lessons on “tolerance”. It seems to me the whole experience has already provided them a pretty clear lesson on French tolerance.
In much better news, Saudi Arabia announced “that the nation’s women will gain the right to vote and run as candidates in local elections to be held in 2015.” While such a change is obviously long over-due, and one can reasonable ask why wait until 2015, it is a positive change and should be celebrated.
Eight Questions for Protectionists
When asked to pick my most frustrating issue, I could list things from my policy field such as class warfare or income redistribution.
But based on all the speeches and media interviews I do, which periodically venture into other areas, I suspect protectionism vs. free trade is the biggest challenge.
So I want to ask the protectionists (though anybody is free to provide feedback) how they would answer these simple questions.
1. Do you think politicians and bureaucrats should be able to tell you what you’re allowed to buy?
As Walter Williams has explained, this is a simple matter of freedom and liberty. If you want to give the political elite the authority to tell you whether you can buy foreign-produced goods, you have opened the door to endless mischief.
2. If trade barriers between nations are good, then shouldn’t we have trade barriers between states? Or cities?
This is a very straightforward challenge. If protectionism is good, then it shouldn’t be limited to national borders.
3. Why is it bad that foreigners use the dollars they obtain to invest in the American economy instead of buying products?
Little green pieces of paper have little value to foreign companies. They only accept those dollars in exchange for products because they intend to use them, either to buy American products or to invest in the U.S. economy. Indeed, a “capital surplus” is the flip side of a “trade deficit.” This generally is a positive sign for the American economy (though I freely admit this argument is weakened if foreigners use dollars to “invest” in federal government debt).
4. Do you think protectionism would be necessary if America did pro-growth reforms such as a lower corporate tax rate, less wasteful spending, and reduced red tape?
There are thousands of hard-working Americans that have lost jobs because of foreign competition. At some level, this is natural in a dynamic economy, much as candle makers lost jobs when the light bulb was invented. But oftentimes American producers can’t meet the challenge of foreign competition because of bad policy from Washington. When I think of ordinary Americans that have lost jobs, I direct my anger at the politicians in DC, not a foreign company or foreign workers.
5. Do you think protectionism would help, in the long run, if we don’t implement pro-growth reforms?
If we travel down the path of protectionism, politicians will use that as an excuse not to implement pro-growth reforms. This condemns America to a toxic combination of two bad policies – big government and trade distortions. This will destroy far more jobs and opportunity that foreign competition.
6. Do you recognize that, by creating the ability to offer special favors to selected industries, protectionism creates enormous opportunities for corruption?
Most protectionism in America is the result of organized interest groups and powerful unions trying to prop up inefficient practices. And they only achieve their goals by getting in bed with the Washington crowd in a process that is good for the corrupt nexus of interest groups-lobbyists-politicians-bureaucrats.
7. If you don’t like taxes, why would you like taxes on imports?
A tariff is nothing but a tax that politicians impose on selected products. This presumably makes protectionism inconsistent with the principles of low taxes and limited government.
8. Can you point to nations that have prospered with protectionism, particularly when compared to similar nations with free trade?
Some people will be tempted to say that the United States was a successful economy in the 1800s when tariffs financed a significant share of the federal government. That’s largely true, but the nation’s rising prosperity surely was due to the fact that we had no income tax, a tiny federal government, and very little regulation. And I can’t resist pointing out that the 1930 Smoot-Hawley tariff didn’t exactly lead to good results.
We also had internal free trade, as explained in this excellent short video on the benefits of free trade, narrated by Don Boudreaux of George Mason University and produced by the Institute for Humane Studies.
My closing argument is that people who generally favor economic freedom should ask themselves whether it’s legitimate or logical to make an exception in the case of foreign trade.
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