Archive for October, 2011
Of Qaddafi and Kim Kardashian
Last week on The Tonight Show with Jay Leno, President Obama discussed the withdrawal of U.S. troops from Iraq, the 2012 Republican presidential field, and ubiquitous Hollywood socialite, Kim Kardashian. But the conversation got really interesting when it veered to the recent intervention in Libya.
Obama said that with the arrival of the Arab Spring, the late Libyan leader Moammar Qaddafi had an opportunity “to finally loosen his grip on power and peacefully transition to democracy. We gave him ample opportunity and he wouldn’t do it.” On the former leader’s killing, Obama said, “There’s a reason after [Osama] bin Laden was killed, for example, we didn’t release the photograph. I think that there’s a certain decorum with which you treat the dead even if it’s somebody who’s done terrible things.”
Hmmm, decorum. To some in the Beltway it may seem tired and trite to hear that U.S. foreign policy is flagrantly hypocritical when it comes to the subject of human rights. But it’s nonetheless noteworthy to hear prominent American leaders openly advocate intervening abroad in places like Libya in advance of the universal human aspiration to be free while continuing to support Middle East client states that repress their own people. Sadly, President Obama and other American leaders, especially in the wake of the momentous Arab Spring, are often perceived as liberty’s worst emissaries.
For numerous strategic and historical reasons, no American government has intervened militarily in countries such as Algeria, Jordan, or Yemen in defense of human rights. In Saudi Arabia, a long-time U.S. partner, homosexuals, apostates, and drug smugglers can be sentenced to execution, sometimes by beheading. In extreme cases, the convict’s body is crucified in public. And yet, the same U.S. government that offers unflinching support to the Saudi Kingdom led from behind for an intervention in Libya to stop an alleged massacre in Benghazi. In neighboring Egypt, meanwhile, for 29 years the U.S. government showered former President Hosni Mubarak with praise, despite his widespread use of torture and systematic repression of political prisoners. Washington also continues to support and arm the regime in Bahrain, which deliberately kills unarmed protesters and oppresses its people.
To promote human rights in Libya while supporting some of the world’s most heinous tyrannies may reflect America’s geopolitical preferences, but it makes a mockery of human rights and reveals an enormous discrepancy between what America claims to be doing and what it actually does. As much as Obama and his defenders want to strut around and promote their triumph over Moammar Qaddafi, people in the Middle East and around the world are well aware of this discrepancy. Such policies are not only abhorrent but also detrimental to America’s long-term interests. Advancing liberty is a painful and arduous process, but it can be done, and often independent of U.S. government efforts.
A ‘Runaway’ Grand Jury
The expression, “runaway grand jury,” is typically used to disparage a grand jury that has turned its attention toward officialdom. That’s happening in Texas where a grand jury is looking at a district attorney’s office and its use of controversial evidence in DWI cases.
For additional background on the grand jury, go here.
American Education, From Camelot to Obamaville
The president has relentlessly called for a more extensive—and expensive—federal role in education. Here’s just one example:
The human mind is our fundamental resource. A balanced Federal program must go well beyond incentives for investment in plant and equipment. It must include equally determined measures to invest in human beings—both in their basic education and training and in their more advanced preparation…. Without such measures, the Federal Government will not be carrying out its responsibilities for expanding the base of our economic… strength.
And if we spend all those new federal dollars on k-12 education, the president promised that “it will pay rich dividends in the years ahead.”
But here’s the strange part: in that same speech, the president made this seemingly ridiculous claim:
Our progress in education over the last generation has been substantial. We are educating a greater proportion of our youth to a higher degree of competency than any other country on earth.
It’s actually not so ridiculous when you learn that the president who said it was John F. Kennedy, in February of 1961. Back then, we really had been making educational progress.
Aside from the ill-fated National Defense Education Act of 1958, the federal government had made no attempt to improve k-12 academic achievement or attainment in the four decades before JFK… and yet, as he noted, American education did in fact improve during that period.
But within a couple of years of JFK’s assassination, Congress passed the Elementary and Secondary Education Act, now known as the No Child Left Behind Act. And in the four plus decades since, the feds have spent roughly $2 trillion trying to improve outcomes and attainment. Over that course of years, both graduation rates and academic achievement at the end of high school have been flat or declining.
Perhaps it could be argued that JFK couldn’t have known better. There was no history showing him what an expensive failure U.S. federal education spending would turn out to be. But the same cannot be said of President Obama, or of those in Congress who continue to tell the public, and presumably themselves, that fed ed. spending is a useful “investment.”
Today, we can look back at a half-century of failed federal education programs. We can think about how much better off the U.S. economy and our children would be if we hadn’t thrown $2 trillion at a calcified school monopoly that cannot spend money efficiently.
And reflecting on that history, perhaps we’ll find the wisdom not to repeat it.
Taxes, Economics, and Halloween
Seems like this is an appropriate day for this lesson about tax policy.
The last thirty seconds of the three-minute video actually contain some very good economics, roughly akin to this classic cartoon. Yes, incentives matter.
Speaking of cartoons, here’s one with a Halloween theme.
And since it is Halloween and everyone is thinking about candy, these two parodies of The Candyman song (here and here) are rather appropriate.
Reminiscences of Bill Niskanen from Robert Litan
Robert E. Litan, vice president for Research and Policy at the Ewing Marion Kauffman Foundation and senior fellow in Economic Studies at the Brookings Institution, sends along his thoughts on the passing of William Niskanen:
I am honored to join the long list of people who knew Bill and are deeply saddened by his loss. I am also perhaps one of his unlikeliest co-authors. In 1998, Bill and I wrote a little book Going Digital! that is one of only a couple of published collaborations ever between Brookings and Cato. It was written in the early days of the Internet and generally made a “hands off” case for it.
After the book was published, the State Department sponsored a speaking tour for the two of us in Spain. I had an unforgettable experience with Bill on the trip, especially in Barcelona, where after we were picked up the airport, we were warned by the State representative there about gypsy pickpockets in the middle of the city. Sure enough, no later than an hour later as the three of us were walking down one of the main thoroughfares in the City, we were surrounded out of nowhere by a throng of about 15 little people wearing veils – they looked like children but in fact were the very gypsies about whom we had just been warned – making a buzzing sound. In just a few seconds they were gone and about 20 steps later Bill discovered they had taken his wallet (I was fortunate to have been wearing a trench coat, so I was spared). We both then quickly ran after them, and unbelievably, they threw the wallet to the ground – without his cash of course – but with all of his other belongings, credit cards most importantly, intact.
I was in amazement, but Bill took it totally in stride as if we had just been on a Sunday stroll in the park. He was the perfect B type personality, alongside my A(+). And we must have appeared like Mutt and Jeff to everyone everywhere we went (those who know Bill knew his size, and my much smaller physical stature).
So I will always remember Bill as being part of an odd intellectual couple. I had a wonderful time writing the book and speaking about it. The whole experience was a privilege I will always treasure. Bill touched me in a very special way, as I know he did countless others. The world was a better place with him here, and it is worse off now that he is gone.
Thank you, Bill.
The GOP’s Legislative Malpractice
If you read Virginia Attorney General Ken Cuccinelli’s op-ed in Sunday’s Washington Post, you witnessed the too-rare spectacle of a Republican denouncing his own party’s hypocrisy on medical malpractice reform:
With Senate Bill 197 — legislation that would have the federal government dictate how state judges are to try medical malpractice cases and cap what state courts may award — several Republican senators have…take[n] an approach that implies “Washington knows best” while trampling states’ authority and the 10th Amendment. The legislation is breathtakingly broad in its assumptions about federal power, particularly the same power to regulate commerce that lies at the heart of all the lawsuits (including Virginia’s) against the individual mandate of the 2010 federal health-care law. I have little doubt that the senators who brought us S. 197 oppose the use of the commerce clause to compel individuals to buy health insurance. Yet they have no qualms about dictating to state court judges how they are to conduct trials in state lawsuits…
This legislation expands federal power, tramples the states and violates the Constitution. And if it were ever signed into law — by a Republican or Democratic president — I would file suit against it just as fast as I filed suit when the federal health-care bill was signed into law in March 2010 (15 minutes later).
For more on why ObamaCare is unconstitutional see this white paper by Cato chairman Bob Levy. For a discussion of why nearly all federal med mal reforms are unconstitutional, see this Policy Analysis by Bob Levy and Michael Krauss. For a discussion of why mandatory caps on damages may harm patients, see this recent Policy Analysis by Cato adjunct scholar Shirley Svorny. For an individual-rights-based approach to med mal reform, see this paper by yours truly.
Congress Just Can’t Stop Trying to Micromanage the Housing Market, Part 5,672
It seems like death and taxes are not the only constants in life, you can add the seemingly endless attempts of Congress to micromanage the housing market. The latest installment is the introduction of a bill, the SAVE Act (Sensible Accounting to Value Energy), sponsored by Sens. Michael Bennet (D-Colo.) and Johnny Isakson (R-Ga.).
The SAVE Act would require lenders to take into account, when underwriting the loan, potential savings from various energy savings features of the house. If a new appliance reduced your electric bill, Congress would require that the lender allow that ”savings” to used to bid for a higher priced house. The impact of the bill would be to allow for even higher debt-to-income ratios on the part of borrowers, as if high mortgage to income payments has had nothing to do with the mortgage crisis we are in.
Perhaps worse the bill would also direct appraisers to include energy savings into the value of the house. Sadly this is anything but “sensible accounting”. As any decent appraiser knows, a house is worth what someone will pay for it, not what the value of various improvements are. That’s why most residential appraisals are based upon comparable sales, and not simple cost or revenue accounting (marginal theory of value, anyone?).
Given that Congress’ constant meddling in the mortgage market is one of the very reasons we are in this mess, you’d think politicians would have a learned a lesson or two from the crisis. Think again.
Reminiscences of Bill Niskanen from Lew Uhler
Lew Uhler, founder and president of the National Tax-Limitation Committee, sends along these thoughts on the passing of Bill Niskanen:
We all develop wonderful friends over a lifetime. But few become an integral part of one’s perspective on life, challenge your conclusions when you are wrong, confirm your judgment when—occasionally—you may be right, and broaden your horizons at all times and in a civil and engaging way. That was Bill Niskanen during our nearly 40-year friendship.
Just two weeks ago, as he was a “resident” at the Washington Rehabilitation Hospital after major heart surgery, I was with him and Kathy frequently, urging him on in his rehab. While he was tentative physically, he was his old self mentally, as we discussed details of the balanced budget amendment and other issues pending before Congress.
I have thought about our years together since I “recruited” him to the “California Revenue Control and Tax Reduction Task Force” for then-governor Ronald Reagan in the fall of 1972. I was crisscrossing the nation in pursuit of the finest free-market minds I could find (remember, this was before Cato, Heritage, and many of the fine free-market think tanks in D.C. and well before the SPN state-based think tanks). Milton Friedman, Jim Buchanan and others who joined the Reagan team said, “You have to get Bill Niskanen at Berkeley at the Graduate School of Public Policy,” maybe because he had just published a key book on government in 1971, Bureaucracy and Representative Government. That’s when I first met Bill Niskanen.
After our Reagan-as-governor experience, Bill was hired by Ford Motor Company in Dearborn as their chief economist. While in Michigan, Bill translated California’s Prop. 1 of 1973 into Michigan’s successful tax limitation initiative, the Headlee Amendment, in 1978. Bill consulted informally on many more tax-and-spending limits around the nation.
Bill remained Ford’s chief economist until the company decided it would support trade laws that ran counter to Bill’s free-market views. He did the risky–but, as always, the honorable—thing and resigned. Ronald Reagan, who had come to respect Bill as part of our California Tax Reduction Task Force, appointed him to the President’s Council of Economic Advisers, where he served (including service as the Acting Chairman) into the second term of the Reagan administration. Bill helped shape the federal spending limit that passed the United States Senate in 1982. Then he went with Cato, and the rest is history.
For the past nearly 15 years, my frequent trips to D.C. have been spent with Bill at his home, and more recently with Bill and Kathy on Capitol Hill. My wife and I have enjoyed many tennis and canoeing weekends with Bill and Kathy at her home, “Clifton,” on the Eastern Shore.
Bill was very competitive on the clay court and didn’t tolerate losing well—but did so with resignation, dignity and lots of excuses.
Bill was a man of great faith and a regular church-goer. His singing voice was so good that he became a part of a highly distinguished choral group that performed each fall throughout the Capitol district and sang in many languages, including Russian and Bill’s ancestral Finnish tongue. He was a regular favorite at the Finnish Embassy.
Bill and Kathy’s latest treasure has been Winston, a young bulldog with an amazing likeness to his namesake. Winston transformed their world, and Bill spoiled Winston rotten.
We will treasure forever our time with the kid from Bend, Oregon, who made it to Harvard, excelled at the University of Chicago’s Economics Department, and who has left a legacy of ideas, works, and leadership unparalleled in the understanding of bureaucracy, government, free markets and human freedom.
It is my good fortune to have been a friend of Bill Niskanen.
Lefty Relics Gathering Dust
So the Associate Publisher of The Nation sends me an email asking me, “Have any lefty relics gathering dust in your closet?” They’re having a fundraising auction.
As it happens, I do have some lefty relics I’d like to get rid of. I have:
- Keynesianism
- Wilsonianism
- Nationalized health care
- Government Motors
- The idea that the Constitution grants “plenary” powers to the federal government
- The War on Poverty
- Racial preferences
This Week in Government Failure
Over at Downsizing the Federal Government, we focused on the following issues this past week:
- Federal infrastructure spending has a long and painful history of pork-barrel politics and bureaucratic bungling, with money often going to wasteful and environmentally damaging projects.
- Chris Edwards responds to critics of his critique of federal infrastructure spending.
- Mark Calabria thinks President Obama’s new mortgage plan should be held under water.
- My thoughts on the spending reforms proposed by Rick Perry.
- The president’s student loan plan: borrowers won’t get much relief, and taxpayers will get saddled with additional costs.
- The State Department spreads democracy—and money.
Follow Downsizing the Federal Government on Twitter (@DownsizeTheFeds) and connect with us on Facebook.
State Department Spreads Democracy—and Money
A friend points me to a recent article on Foreign Policy’s website written by a career State Department employee who spent a year in Iraq trying to “win the hearts and minds” of the Iraqi people. I’ve pretty much become numb to stories about government failure, but this one left me with my forehead planted on my desk.
Here are some of the ideas that government officials actually gave the green light to, using your tax dollars:
- French pastry classes for Iraqi women.
- A play about a town’s dispute over “the value of shade cast by a donkey.”
- A road constructed to facilitate commerce was instead used by insurgents to carry out attacks.
- A local artist was paid to paint a mural of “oiled, homoerotic Steve Reeves musclemen” on the wall of a gym.
- Bicycles were bought for impoverished children in a Baghdad neighborhood. However, the roads were too damaged and dangerous for the kids to ride their bikes, so the bike wheels ended up being used on wheelchairs for injured Iraqis.
- The creation of a Baghdad Yellow Pages even though only 250 businesses with permanent landlines could be found.
I suspect that some readers will respond that the federal government should instead be using taxpayer dollars to build roads and fund the arts here in the United States. However, as we demonstrate over and over again at DownsizingGovernment.org, the federal government does a lousy job of spending other people’s money at home or abroad—period.
Has the Cost of the Fannie-Freddie Bailout Fallen?
Yesterday the Federal Housing Finance Agency (FHFA) released its updated projections of the cost of rescuing Fannie Mae and Freddie Mac. These estimates update projections last made in October 2010. The big headline has so far read that costs have been revised lower. But will that really be the case?
If one digs into the revised numbers, a few striking facts emerge. First, FHFA states losses since October 2010 have been lower than projected for a variety of reasons, including that “foreclosure delays [have] pushed some defaults into later years” and “net interest income is higher … due to lower interest rates.” The first reason just sounds like a delay of the ultimate cost to me, rather than a reduction. And given that homes often lose value during the foreclosure process (who bothers to maintain a home he is going to lose ?), these foreclosure delays are just as likely to increase the ultimate costs, even if they do delay those costs.
On the interest rate question, first, do we believe rates are going to remain low indefinitely? Seems to me we could easily be in a situation in three to five years where the GSE funding costs are above their interest income. This especially becomes the case if Obama has his way and Fannie/Freddie re-finance a large share of their book into lower rates.
All this aside, the revisions are still a brutal reminder that taxpayers have so far sunk $169 billion into Fannie and Freddie, more than the ultimate costs of the TARP and more than the cost of the savings-and-loan crisis. The FHFA projects that, by the end of 2014, total taxpayer costs will be between $220 billion and $311 billion.
Any way you slice it, Fannie and Freddie have been a massive drain on taxpayers. The sooner we put an end to these entities, the sooner we can avoid having taxpayers pick up the dime for the next housing bubble.
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