Archive for November, 2011
Bring It On, OWS!
This morning POLITICO Arena asks:
Has the Occupy Wall Street movement accomplished anything?
My brief response:
Has OWS accomplished anything? Yes, it’s revived the mindless, narcissistic approach to public affairs that came out of the 1960s. And I’m delighted that the mainstream media has given OWS far more sympathetic attention than it ever gave the Tea Party, because it’ll all play out in next year’s elections. March on, OWS!
John Mueller Joins Cato
I am pleased to announce that John Mueller, a leading scholar in the fields of political science, international relations, and national security, has joined the Cato Institute as a senior fellow.
All of us at Cato are very excited to have John as a colleague. Over the last decade as a professor of political science and as the Woody Hayes Chair of National Security Studies at the Ohio State University’s Mershon Center for International Security Studies, John has taken on the conventional wisdom in the national security arena with a rare combination of accessible, breezy prose and meticulous cost-benefit analysis. In particular, he has focused on how policymakers inflate national security threats at home and abroad.
His newest book, Terror Money and Security, which he presented at a recent Cato forum, examines whether the gains in security over the past decade were worth the funds expended. For the vast majority of U.S. homeland security and counterterrorism policies, John and his co-author, Mark Stewart, resoundingly conclude “no.”
As a member of the Cato Institute, John will contribute to our multitude of programs and publications while furthering his work on the subjects of security, defense, and U.S. foreign policy. Cato is fortunate to have such a brilliant scholar join its staff.
For more Cato Institute work on foreign policy and national security, go here.
Solyndra: Crooked Politics or Just Bad Economics?
Amy Harder has a good take on the Solyndra issue in National Journal Daily (subscription required):
Lesser evil: crony capitalism or bad policy?
Energy Secretary Steven Chu is about to find out when he testifies before a House panel on Thursday about the $535 million loan guarantee his department awarded to Solyndra, the now-bankrupt solar-energy company that was, before its demise, the poster child for America’s renewable-energy industry and President Obama’s 2009 Recovery Act.
The White House and the Energy Department say the influence of political donors such as Oklahoma oil billionaire George Kaiser, whose venture-capital firm was the major investor in Solyndra, did not sway any of the administration’s decisions on Solyndra’s loan guarantee, which was funded from the stimulus package.
By denying politics was involved, the administration is saying that its top officials genuinely and continuously thought Solyndra was a good bet—despite numerous warnings raised both inside and outside of the administration—and that the loan-guarantee program was being carefully managed despite oversight reports and an internal West Wing memo that said otherwise.
“As time went on, there was a growing concern because of the cash-flow,” Chu said in an interview with NPR on Tuesday. “And so we certainly were watching this and looking at this very closely. And eventually we recognized they were in deep trouble.”
Yet, throughout the two years Solyndra was borrowing money from federal coffers, the DOE essentially stayed the path right up until the bitter end when the California-based manufacturer went bankrupt in September. When Solyndra was on the brink of bankruptcy in late 2010, DOE decided to restructure the loan to try to keep the company afloat.
Meanwhile, in today’s congressional hearing, Energy Secretary Steven Chu insisted that “the final decisions on Solyndra were mine, and I made them with the best interest of the taxpayer in mind. . . . I did not make any decision based on political considerations.” This came on a day when the front page of the Washington Post reported:
In the two years preceding its collapse, Solyndra and its biggest investor aggressively asserted themselves in dealings with the Obama administration, pushing Energy Secretary Steven Chu to visit the company’s headquarters to help it raise private money and later suggesting it would file for bankruptcy if the Energy Department rejected its proposed rescue plan. . . .
“The DOE really thinks politically before it thinks economically,” a Solyndra board member wrote in December to George Kaiser, an Obama fundraiser whose family funds owned a third of the company.
Thoughts on the ‘Minibus’ Spending Bill
The House is scheduled to vote this evening on a fiscal 2012 “minibus” packaging of three appropriations bills (Agriculture, Commerce-Justice-Science and Transportation-HUD) agreed to in conference on Monday. It includes a continuing resolution to keep the government funded through December 16th, thus avoiding a government “shutdown.”
In sum, I think the bill is largely business as usual, although policymakers and those who subsist on the federal programs funded by the affected agencies will claim otherwise:
- The legislation provides funding at the higher levels sought by the Democratic-controlled Senate – about $5.4 billion more than what the Republican-controlled House wanted. Overall funding versus fiscal 2011 is flat, but lower than fiscal 2010. It’s less than what the president wanted to spend, but that hurdle was so low a mouse would have tripped over it.
- It includes $2.3 billion for disaster spending, which is excluded from the budget caps negotiated as part of the deal to increase the debt ceiling.
- Some programs saw cuts, some programs saw increases. Anything of consequence that would rein in the size and scope of government? Not that I can see.
- The housing lobbyists win again: the bill increases the size limit on mortgages that Federal Housing Administration can insure to $729,750. That principled decision was made at a time when a taxpayer bailout of the FHA is becoming increasingly likely.
Once again, Congress hits the snooze button.
Democracy – Whatever That Is – and Education
Democracy is inherently good, and since public schools are democratically controlled they, too, are inherently good. Right?
You’d think so from the way many people invoke “democracy” when championing government schools, but thanks to a recent blog post from the Fordham Institute’s Mike Petrilli, we might have a rare opportunity to actually scrutinize that assumption. A few days ago, Petrilli questioned the value of local school boards in light of what seems to be frequent capture by teachers unions, and was immediately accused of attacking “democracy” by historian Diane Ravitch.
“Gosh, Mike,” Ravitch wrote in the comments section, “it sounds as though you have identified the real problem ‘reformers’ face: democracy.”
With that the battle was on, and it’s one I’m happy to join: A huge problem we face in education is, indeed, democracy.
Before I go further, the first thing that’s necessary to do is define “democracy.” Unfortunately, that’s something rarely done by those who wield the term like a rhetorical chainsaw, swinging it wildly at anyone who might question government schooling. Typically, it seems the word is employed to just vaguely connote some sort of action by “the people” — whoever they are — as opposed to “elites,” or to indicate that popular voting is in some fashion used to make laws.
That said, the most basic definition of democracy — the one you probably learned in grade school – follows these lines: “Control of an organization or group by the majority of its members.” You might also assume the word means representative democracy, where people vote for their representatives and majorities of reps make the laws, but usually the word’s use isn’t even that precise.
Demos vs. Cato: Say No to Bailouts
Over at PolicyMic, Cato scholar Daniel J. Mitchell debates Demos co-founder David Callahan on whether massive government bailouts saved us from a second Great Depression, or plunged the economy into a prolonged recession that hurt taxpayers and undermined the self-corrective mechanisms of the market. Mitchell argues:
The Bush-Obama policies of bailouts and regulation have been bad for taxpayers, but they’ve also been bad for the economy.
A vibrant and dynamic economy requires the possibility of big profits, but also the discipline of failure. Indeed, capitalism without bankruptcy is like religion without hell.
Yet that’s what politicians from both parties have created. Profits are private and losses are socialized, so is anyone surprised that Wall Street responds to these incentives with imprudent risk?
Crumbling Bridges and Infrastructure Fearmongering
When I testified to the Joint Economic Committee yesterday, the subject of bridges came up again and again. Numerous people said or implied that our bridges are crumbling and falling down, and that more funding was desperately needed.
The problem with that narrative is that the number of bridges that are in bad shape has been falling steadily over time. The nation’s bridges appear to be in better condition than ever, as indicated by data from the Federal Highway Administration. The FHWA’s inventory of bridges identifies those that are “structurally deficit” and “functionally obsolete.” Definitions for those terms are here.
The chart shows that the share of the 100,000+ bridges in the National Highway System that are either S.D. or F.O. has declined steadily since 1992. (Hat tips: Randal O’Toole and Matt Fay)
What are Occupiers Reading?
My letter in the Washingon Post the other day suggested that the DC Occupiers would gain from reading Hayek. After all, they have voluntarily created a new community with rules and institutions akin to the spontaneous order of a limited-government capitalist society.
I haven’t yet seen copies of the Road to Serfdom when I’ve walked by the DC encampment, but Drudge is highlighting evidence that the New York Occupiers are reading the U.S. Constitution. Roger Pilon tells me that that’s a vintage 1998 Cato version of the Constitution that the hippie in the picture is holding aloft.
So you never know—numerous highly regarded libertarians started out as leftists. I admit the evidence is thin, but maybe the next Thomas Sowell is sitting right there in McPherson Square.
Should Guatemala’s New President Follow Mexico’s Strategy?
Last week I visited Guatemala, where the new president-elect, Otto Pérez Molina, has promised to deploy the army to fight organized crime. Pérez Molina—himself a former army general—even said that he will follow Felipe Calderón’s lead in declaring an all out war against drug cartels. He should think twice about that strategy.
Let’s look at what happened to Mexico’s murder rate when Felipe Calderón came to power in December 2006 and launched a military offensive against drug cartels. The murder rate in that country, measured as the number of homicides per 100,000 inhabitants, had been experiencing a steady decline since the mid-nineties. However, it skyrocketed after the army went into the streets, unleashing unprecedented violence as the cartels fought back and escalated their vicious infighting.
One clear phenomenon in Mexico is that, instead of placating violence, the deployment of the army helped to magnify it. The reason is that, even when the army could claim victory by killing or arresting a drug kingpin or dismembering a gang, it would only create a vacuum that other cartels would try to fill—violently. Mexico’s highly fractious criminal spectrum, with at least seven significant drug cartels vying for control of territory, is to some extent the result of the government’s war against organized crime.
Still, Mexico’s murder rate in 2010 (21.5 killings per 100,000 inhabitants) is about half that of Guatemala (41.4 murders per 100,000 inhabitants). There are two reasons why things could get much worse in Guatemala: First, the army is ill-prepared to fight the powerful Mexican cartels that already have a presence in that country. After the peace accord of 1996, the size of the Guatemalan army went from 50,000 troops to only 16,000. If the cartels have put up a fight to the better-equipped Mexican army, one can only wonder what would happen to its smaller and poorer Guatemalan equivalent. Second, even if the army is successful in weakening the cartels, the same vacuum phenomenon that takes place in Mexico would happen in Guatemala. So far, Mexico’s two most powerful cartels, Sinaloa and Los Zetas, control different parts of Guatemala’s territory, but they haven’t engaged each other in that country yet. That could change if the army strikes a significant blow to one of them, giving an opportunity to the rival.
Guatemalans elected Otto Pérez Molina for his promise to fight crime with an iron fist. However, his strategy could certainly backfire, leaving Guatemalans much worse off than they already are.
Five Lessons for America from the European Fiscal Crisis
I’ve written about the fiscal implosion in Europe and warned that America faces the same fate if we don’t reform poorly designed entitlement programs such as Medicare and Medicaid.
But this new video from the Center for Freedom and Prosperity, narrated by an Italian student and former Cato Institute intern, may be the best explanation of what went wrong in Europe and what should happen in the United States to avoid a similar meltdown.
I particularly like the five lessons she identifies.
1. Higher taxes lead to higher spending, not lower deficits. Miss Morandotti looks at the evidence from Europe and shows that politicians almost always claim that higher taxes will be used to reduce red ink, but the inevitable result is bigger government. This is a lesson that gullible Republicans need to learn – especially since some of them want to acquiesce to a tax hike as part of the “Supercommitee” negotiations.
2. A value-added tax would be a disaster. This was music to my ears since I have repeatedly warned that the statists won’t be able to impose a European-style welfare state in the United States without first imposing this European-style money machine for big government.
3. A welfare state cripples the human spirit. This was the point eloquently made by Hadley Heath of the Independent Women’s Forum in a recent video.
4. Nations reach a point of no return when the number of people mooching off government exceeds the number of people producing. Indeed, Miss Morandotti drew these two cartoons showing how the welfare state inevitably leads to fiscal collapse.
5. Bailouts don’t work. This also was a powerful lesson. Imagine how much better things would be in Europe if Greece never received an initial bailout. Much less money would have been flushed down the toilet and this tough-love approach would have sent a very positive message to nations such as Portugal, Italy, and Spain about the danger of continued excessive spending.
If I was doing this video, I would have added one more message. If nations want a return to fiscal sanity, they need to follow “Mitchell’s Golden Rule,” which simply states that the private sector should grow faster than the government.
This rule is not overly demanding (spending actually should be substantially cut, including elimination of departments such as HUD, Transportation, Education, Agriculture, etc), but if maintained over a lengthy period will eliminate all red ink. More importantly, it will reduce the burden of government spending relative to the productive sector of the economy.
Unfortunately, the politicians have done precisely the wrong thing during the Bush-Obama spending binge. Government has grown faster than the private sector. This is why this new video is so timely. Europe is collapsing before our eyes, yet the political elite in Washington think it’s okay to maintain business-as-usual policies.
Please share widely…before it’s too late.
David Friedman at Cato
David Friedman, the author of Hidden Order, Law’s Order, and Future Imperfect, will speak at the Cato Institute on Tuesday, November 29, at noon. His topic will be “The Market for Law.”
Is there a market for good law? Without the state providing law, could it be offered by multiple, private, and competing agencies? David Friedman, professor of law at Santa Clara University, explored this idea in his classic 1973 book, The Machinery of Freedom: Guide to a Radical Capitalism. But in the years since, he’s revised and strengthened some of his theories. In this talk, he will offer these new ideas from the last 30 years of thinking about the market for law.
David Friedman is always interesting and provocative. Register now! And note: because of our ongoing expansion project, this event will be held one block east of Cato at the Undercroft Auditorium, 900 Massachusetts Ave. NW.
Read more about David Friedman at Libertarianism.org.
Sneaking Race-Based Government Through the Tropical Back Door
Those of you who follow this blog know of the special place in my heart for Hawaiian constitutional issues. Cato has even filed several Hawaii-related amicus briefs; here’s my post about the latest one, last month. This is in part because thinking about the Constitution and individual liberty is even more fun in the context of palm trees, trade winds, and tiki bars, but more than that, developments in Hawaii tend to get overlooked or dismissed as parochial and “not really” relevant to the American project.
Unfortunately, that sort of benign neglect plays into the hands of those who want to wreak all sorts of havoc with our constitutional order. And once those who don’t care about limited government, individual liberty, and equality under the law gain a toehold anywhere, Honolulu as much as Hartford, that creates a dangerous precedent — a political and jurisprudential tsunami, if you will, that threatens to swamp the mainland.
Such is the case with the infamous Akaka Bill (which I most recently covered in a blogpost that links to my previous work on the subject). This bill, introduced in every Congress since 2000, would create a race-based governing entity that would negotiate with the federal and state governments over all sorts of issues — effectively carving out a system of racial spoils.
Now, Hawaii’s senators, Daniel Akaka and Daniel Inouye, have long said that their pursuit of this legislation would always be above-board and transparent… until a couple of weeks ago when Inouye, as chairman of the Senate Appropriations Committee, had a sentence inserted into the massive Interior Department funding bill allowing the federal government to recognize Native Hawaiians in the same way that American Indians and Native Alaskans are recognized (but without immediate federal benefits). This, combined with a state resolution labeling the “Native Hawaiian people” as the only indigenous Hawaiians, is part of a piecemeal strategy to get the Akaka Bill in through the backdoor.
For more coverage of these developments, see this report, as well as these two articles ($). For Hawaii’s fuzzy relationship with the Voting Rights Act, see this article. For reasons on why this is all not just sneaky but a terrible idea — and unconstitutional — again, see my previous writings.
At base, Hawaiians have a very different history and political sociology from the tribes that were accommodated in our (dubious and counterproductive) Indian law, which itself is a unique compromise with pre-constitutional reality. It would be a shame to destroy that beautiful state’s spirit of aloha (welcome).
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