Archive for October, 2011
The CLASS Act: This Is Confidence-Inspiring?
In the Daily Caller, I explain how the failure of ObamaCare‘s “CLASS Act” highlights the fatal flaws in the rest of the law:
As it turns out, CLASS collapsed even before its 2012 start date. The same thing happened when Obamacare imposed the same sort of price controls on health insurance for children in September 2010: the markets for child-only coverage collapsed in a total of 17 states, and are slowly collapsing in even more…
In the face of this setback, Obamacare supporters are naturally declaring victory. Jonathan Cohn of The New Republic sees “vindication.” Kevin Drum of Mother Jones proudly announces, “What happened here is that government worked exactly the way it ought to.” The Washington Post’s Ezra Klein instructs, “The CLASS experience should, if anything, make us more confident in the underlying law.” It’s hard to argue with such logic, but let’s try…
Obamacare inspires confidence in its supporters, then, because one part of the law throws a Hail Mary pass to prevent another part of the law from stripping Americans of the insurance that currently protects them from illness and impoverishment. Feel safer?
So if you’d like secure protection from illness and impoverishment, repeal ObamaCare. Or say your prayers.
Europe to Rating Agencies: Shut Up, or Else
Now I’m no fan of the current government created oligopoly we have among the credit rating agencies, but the EU’s recent proposal to ban downgrades on government debt, when the country in question is undergoing a “rescue”, shows why the answer is to deregulate the market for credit ratings.
Of course the EU claims it wants to eliminate the “conflicts of interest” between the issuers of debt, who often pay for the ratings, and the agencies that provide those ratings. If investors were truly free to decide on the merit of ratings, rather than required by regulation to use them, then this conflict of interest could easily be solved via reputational effects. And while the EU proposal might lessen this problem, it does so at the cost of creating a far bigger one: the conflict of interest between governments and rating agencies.
As witnessed by S&P’s treatment by the U.S. government, after it downgraded the U.S., having the rating agencies regulated by the very entities they are supposed to rate is a recipe for disaster. Instead of Europe trying to create its own rating agencies, in order to avoid inconvenient truths about European government finances, Europe should do us all a favor by encouraging European-based rating agencies that would be beyond the reach of the U.S. government.
Tea Party vs. Occupy Wall Street
Cato’s Tom Palmer discusses the Occupy Wall Street movement and the Tea Party in a debate with The Nation‘s Peter Rothberg at PolicyMic:
The Tea Party has a coherent message: Stop the bailouts, stop the cronyism, and stop swindling today’s voters with empty promises and sinking future generations under mountains of debt…
What caused the crisis, the indebtedness, the unemployment, the stagnation? The culprits are state agencies and enterprises, including our Federal Reserve…
The Occupiers have the wrong address. The subprime crisis was designed in Washington, not New York…
Government debts and printing-press money will harm future generations. It’s unfair. It’s immoral. And it’s going to be solved not by occupying Phoenix, or Wall Street, or Atlanta, but by demanding that spendthrift politicians stop the bailouts and the cronyism, put the brakes on spending, and pay attention to a truly radical concept: arithmetic. Those are sound Tea Party values.
Read the full article: “Who Should Americans Support: the Tea Party or Occupy Wall Street?”
This Week in Government Failure
Over at Downsizing the Federal Government, we focused on the following issues this past week:
- Chris Edwards proposes an alternative to Herman Cain’s 9-9-9 tax reform plan.
- My reaction to Ron Paul’s plan to cut federal spending can be summed up in one word: Hallelujah.
- Chris Edwards wonders if Canada stole the Tenth Amendment to our Constitution.
- Unfortunately, government spending in the United States is 41 percent of GDP.
- The Government Accountability Office throws water on a taxpayer bailout for the U.S. Postal Service.
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State Government Business Subsidies in the News
Federal energy subsidies to business are a hot national topic thanks to the Solyndra scandal. Flying below the radar—and deserving more national media attention—are grants and other targeted incentives given to businesses by state governments. There is little doubt in my mind that there are state-subsidized “Solyndras” waiting to be discovered.
The Wall Street Journal took a step in this direction by noting in an editorial that a struggling lithium-ion battery maker subsidized by the Obama administration also received handouts from the State of Indiana. The editorial chides the administration for having “made a habit of investing your cash in their clunkers.” A series of investigations from WTHR-TV in Indianapolis has demonstrated that the administration of Indiana Gov. Mitch Daniels shares that same bad habit (see here).
The Journal editorial’s concluding lines correctly sum up the problem with government subsidies to businesses:
Better to leave commercial financing decisions to private investors and bankers who are likely to take more care with their own money. Politicians write the press releases first and worry about the taxpayer losses later.
As I’ve previously discussed, it was my experience as a state budget official in the Daniels administration that led me to coin the phrase “press release economics” to describe these subsidies. Indeed, WTHR’s investigations of the Indiana Economic Development Corporation showed that the Daniels administration was adept at taking credit for “creating jobs” that never materialized.
Obama: U.S. Troops to Leave Iraq
President Obama has just announced that U.S. troops will leave Iraq by the end of this year. Some might wonder if the Obama administration is bluffing, in the hope that Iraqi politicians will relent to U.S. demands.
The key sticking point appears to have been the Iraqis’ unwillingness to afford U.S. servicemen and women the legal protections extended by most other governments around the world. As I argued earlier this week, the United States should not concede to the Iraqis’ demands, which would expose our troops to serious threats to their rights and liberties.
It is possible that the two sides could resume negotiations. There will still be a very large U.S. diplomatic presence, including a sizable number of security personnel. But there will be only about 150 troops.
By that token, I think it increasingly likely that we will be celebrating the end of the Iraq war come January 1, 2012. I’m trying not to be overly optimistic. My hopes have been dashed many times. But the White House is trying to put a positive spin on the story. They are speaking of the progress that the Iraqis have made in the political and security realms. They have suggested that the Iraqis are truly capable of defending themselves and governing themselves. Whether they actually believe that is anyone’s guess, but if the Obama administration carries through on its promise to remove U.S. troops by the end of the year, the president and his national security team will have heeded the wishes of the American people, not to mention abided by their promises, and those of their predecessor.
This costly and counterproductive war—launched under false pretenses, sold to the American people as a cakewalk and an operation that would be paid for by Iraqi oil revenues—may finally, mercifully, be coming to an end. I certainly hope that is the case.
Romney Supports National ID, Government Pre-Approval of Working
Speaking at a town hall meeting at Morningside College in Sioux City, Iowa yesterday, Republican presidential candidate Mitt Romney backed a national ID system and government pre-approval of all new hires in the country. It’s a stunning amount of power he wants the federal government to have.
Addressing a question about illegal immigration (starting at 30:40 in this video) he said:
You’ve got to crack down on employers that hire people that are illegal, and that means you have to have a system that identifies who’s here legally, with a biometric card that has: this is the person, they’re allowed to work here. You say to an employer, you look at that card, you swipe it in your computer, you type in the number, it instantly tells you whether they’re legal or not.
He’s describing an expanded E-Verify system, and the biometric national identity system that has been proposed for it. That system would not only be used for controlling employment, of course. Like the Social Security number did when it caught mission creep, the national ID Romney talks about would come to be used to control access to housing, to financial services and credit, gun ownership, health care and medicine, the list goes on and on.
It’s technically possible to have a biometric card that solely indicates one’s qualification to work under federal law, but as I wrote in my paper, “Franz Kafka’s Solution to Illegal Immigration,” there is almost no chance that the government would limit itself this way. E-Verify requires a national identity system, and Mitt Romney wants that national identity system.
Obamacare Litigation Update: All the Briefs the Supreme Court Needs to Take the Case Are In
In the last week, we’ve seen another slew of Supreme Court filings regarding the various Obamacare lawsuits. Most notably, the private plaintiffs in the Florida/Eleventh Circuit case (the NFIB and two individuals)—represented by Mike Carvin and Randy Barnett, among others—filed their response to the government’s cert petition last Friday, two weeks before it was due!
So, as with the cert petitions themselves at the end of September, the private plaintiffs initiated a “filing cascade” (my phrase, not a legal term of art) and forced the government’s hand. The government then filed its consolidated response (to both the private and state plaintiff petitions) on Wednesday, and the (26) state plaintiffs—represented by former solicitor general Paul Clement—also filed their response to the government’s petition.
Got all that? It basically means that all the necessary filings are in and the case is “ready for distribution” to the justices’ chambers for consideration of the cert petitions, which could happen as early as the Court’s November 10 conference. That means we could see an order about which case(s)/issue(s) the Court is taking as early as November 14.
So that’s the timing. A brief note on substance: As you may recall, the Eleventh Circuit plaintiffs want the Court to review the following issues: whether the individual mandate exceeds federal power, the new Medicaid regulations/expansion as coercing the states, the mandate that states provide health insurance in their roles as employers, and severability. The government, for its part, wants the Court to review the individual mandate, whether the Anti-Injunction Act makes the suits unripe (it argues that the AIA doesn’t apply but still, oddly, wants the Court to weigh in), and severability. On this last point, the government has reiterated its position that if the individual mandate falls, the guaranteed-issue and community-rating provisions must fall with it—a position that garnered some media attention but is both consistent with its previous arguments and honest lawyering. (It’s disingenuous as a matter of basic economics to argue that the overall reform can survive without the individual mandate, even if that’s the incongruous position that the Eleventh Circuit took rejecting the government’s “concession” on severability.) Of course, the government is also hoping that the idea that striking the individual mandate also means striking the provision requiring coverage of pre-existing conditions will make the Court hesitant to do so.
Note that the government also filed its response to the Liberty University petition and still has time to file a response to Virginia’s cert petition (on the state standing issue), both out of the Fourth Circuit. It argues, as do the Eleventh Circuit plaintiffs, that the Court should hold these petitions (as well as the Thomas More Legal Center’s out of the Sixth Circuit) pending resolution of the Eleventh Circuit case. Finally, the D.C. Circuit has yet to issue its opinion in the Obamacare case argued there a month ago.
For more on both the timing and which issues the Court is likely to take, see Lyle Denniston’s excellent analysis at SCOTUSblog.
Should You Need a License to Hang Curtains?
The latest example of liberty-reducing occupational licensing schemes comes to us from Florida, where a law restricts the practice of interior design to people the state has licensed. Those wishing to pursue this occupation must first undergo an onerous process ostensibly in the name of “public safety.”
In reality, the law serves as an anti-competition measure that protects Florida’s current cohort of interior designers. Our friends at the Institute for Justice have pursued a lawsuit against the law but lost their appeal in the Eleventh Circuit.
Cato has now joined the Pacific Legal Foundation on an amicus brief asking the Supreme Court to review that ruling. The lower court got it wrong not just with respect to the right to earn a living, however, but also on First Amendment grounds.
That is, interior design, as a form of artistic expression, is historically protected by the First Amendment. Indeed, interior designers are measured primarily on the value of their aesthetic expression, not for any technical knowledge or expertise. This type of artistry is a matter of taste, and the designer and client usually arrive at the end result through collaboration and according to personal preferences. Thus, the designer-client relationship has little in common with traditionally regulated professions such as medicine, law and finance, where bad advice can have real and far-reaching consequences—but even then, the Supreme Court has emphasized the First Amendment implications of placing “prior restraints” on expression through burdensome licensing schemes.
Instead of following that precedent, however, the circuit court carved out a constitutionally unprotected exception for “direct personalized speech with clients.” Florida’s “public safety” justification is similarly weak, given that the state has presented no evidence of any bona fide concerns that substantiate a burdensome licensing scheme that includes six years of higher education and a painstaking exam—instead relying on cursory allegations that, for example, licensed designers are more adept at ensuring that fixture placements do not violate building codes.
Finally, the Eleventh Circuit’s ruling disregarded the infinite array of auxiliary occupations the Florida law subjects to possible criminal sanctions: wedding planners, branding consultants, sellers of retail display racks, retail business consultants, corporate art consultants, and even theater-set designers could all get swept in. The state has already taken enforcement actions against a wide spectrum of people who are not interior designers, including office furniture dealers, restaurant equipment suppliers, flooring companies, wall covering companies, fabric vendors, builders, real estate developers, remodelers, accessories retailers, antique dealers, drafting services, lighting companies, kitchen designers, workrooms, carpet companies, art dealers, stagers, yacht designers, and even a florist. This dragnet effect also suggests that the law is too broad to survive constitutional scrutiny.
The Court will likely decide by the end of the year (or early 2012) whether to take this case of Locke v. Shore.
Another Romneycare/Obamacare Similarity: Earning Their Sponsors Insurance-Company Love
I’ve been meaning to post this article from OpenSecrets.org that sheds light on the claim that either Obamacare or its twin, Romneycare, somehow “get tough” on insurance companies:
Health Insurance Industry Opens Check Books for Mitt Romney, Barack Obama
Research by the Center for Responsive Politics shows that President Barack Obama and his GOP rival Mitt Romney, the former governor of Massachusetts, are the only two presidential candidates to have raised more than $40,000 from the health insurance industry so far this election cycle…Both men have favored health care policies that include an individual mandate for people to purchase private insurance plans. Romney did so as governor of Massachusetts, and Obama did so as part of the health care reform package he signed into law last year…
Such mandates are supported by the insurance industry, which stand to benefit from increased customers as well as from government subsidies that help enroll people who could not otherwise afford insurance.
Romney, in fact, has received more than five times as much money from the health insurance industry than any other GOP presidential candidate, according to the Center’s research.
That should weigh on the minds of states that are considering whether to create the health insurance “exchanges” that will implement Obamacare’s individual mandate and subsidies for insurance companies.
Living in the Past
A year after Kate Zernike wrote in the New York Times that Tea Partiers were “resurrect[ing] once-obscure texts by dead writers”—such as F. A. Hayek, who won the Nobel Prize in 1974 and died in 1992—the New Yorker‘s cover depicts Wall Streeters in top hats and bushy mustaches. That’s an image from, what, the 1930s? Or maybe the 1870s? Who’s “reach[ing] back to dusty bookshelves for long-dormant ideas” now?
How Much Homeland Security Is Enough? Monday Book Forum
At noon Monday, Professors John Mueller and Mark Stewart will be here to discuss their new book: Terror Security and Money: Balancing the Risks, Benefits and Costs of Homeland Security. Register here.
The question in this post’s title is the book’s. It quantifies Mueller’s skepticism about the utility of homeland security spending with cost-benefit analysis, which is Stewart’s specialty. They use this analysis, which is employed by various federal agencies as part of the regulatory review process, to show that little of what the Department of Homeland Security does is a good investment. That is, the bulk of its activities cost more—measured in lives or dollars— than they save. In the conclusion, where you find most of the book’s political science, Mueller and Stewart discuss why DHS avoids this sort of analysis—neither it nor its political advocates have much reason to advertise its wastefulness—and why that should change.
Alan Cohn, Deputy Assistant Secretary for Policy at DHS, has boldly agreed to join the proceeding. DHS rules prohibit him from commenting directly on the book, but he will presumably defend his department and discuss how it considers policies’ cost and benefits, or what it calls risk management.
That all sounds very wonky, I know. Here is why the book and forum should interest those not particularly concerned with homeland security or risk analysis: the book calls a bluff. One of the great myths about U.S. national security is that it aims to maximize safety. Almost everyone speaks about security as if this were so.
The truth is instead that every security policy, indeed every government policy, is a choice among risks. Most policies aim to mitigate risk in some way and by expending resources expose us to other risks. Our policy preferences and ideologies are largely beliefs about which risks to combat socially and which to leave to individuals, or least how much attention we should pay to competing risks. Our society, it turns out, is willing to pay far more to save lives from terrorism than most other dangers. That is, we value lives lost from it far more highly than those lost in other ways. We trade small gains in protection from terrorists for substantial losses in our ability to combat other troubles.
By asking what U.S. homeland security would look like it if truly aimed to maximize safety against all dangers, Mueller and Stewart’s book makes plain that we have chosen to do otherwise. People that disagree about the merit of that choice should agree at least that it is one we should make openly. Democracies make better choices when they perceive them.
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