Archive for December, 2011
PA Senate Should Unwrap the EITC Bill
It’s often difficult to recognize the value of things we already have and easy to take old gifts for granted.
For much of this year, an intense and bruising battle has raged over the issue of education vouchers in Pennsylvania. This week, the House once again rejected the voucher proposal that has passed the Senate and is supported by Gov. Tom Corbett.
Overlooked amidst the tumult is another, better school choice bill passed months ago by the House and now waiting for action in the Senate. The House passed a huge expansion of the Educational Improvement Tax Credit (EITC), more than doubling the size of the program with an astonishing 96 percent in favor to 4 percent opposed. At current levels of student support, it would help more than 60,000 additional children get a good education.
The EITC program has been a priceless gift to the children and state of Pennsylvania each year since 2001, helping to improve public schools and allowing taxpayers to invest education dollars more effectively. And an expanded credit program would bring the gift of a good education to tens of thousands more children, the gift of empowerment to thousands of parents.
The Senate can easily deliver these gifts to Pennsylvania for the New Year; just unwrap the EITC bill passed by the House and take a vote.
‘They’d Rather Be Caught Sacrificing to Satan Than Voting for Obamacare’
Michigan has become the latest to repudiate Obamacare:
In an action with major implications for health reform in Michigan, the state House has voted to turn down—at least for now—nearly $10 million in federal funds to create a statewide health exchange by 2014 to sell more affordable, standardized health insurance to consumers and small businesses.
The Michigan House’s action is consistent with what everyone from the American Legislative Exchange Council to the Heritage Foundation to the Cato Institute has recommended that states do: refuse to create an Exchange and send the money back to Washington.
Our friend Jack McHugh of the Mackinac Center for Public Policy writes:
Under the Michigan Constitution, no money can be spent by the state—including federal grant money—unless the Legislature passes an appropriation bill authorizing the spending…
House Republicans have shown no eagerness [to create a state Obamacare exchange], and that reluctance extended to this appropriation bill. In the colorful words of House Appropriations Chair Chuck Moss, R-Birmingham, to MIRS News, “They’d rather be caught sacrificing to Satan than voting for Obamacare, so that’s the way it is.”
Jonathan Adler and I explain in this Wall Street Journal oped how Michigan officials can protect Michigan employers (including the state government itself) from penalties under Obamacare’s employer mandate—and even help bring down the entire law—by refusing to create an Exchange.
RIP Christopher Hitchens
Christopher Hitchens, a man of great passions and great talents, perhaps the greatest essayist of our age, has died. Among his lesser-known works was a Cato Institute talk, “Mayor Bloomberg’s Nanny State,” delivered at a seminar in New York City on December 10, 2004.
Ten years before that, in his still-thoroughly-leftist era, he offered us this backhanded compliment in the Nation of December 12, 1994:
During the lunacy of the Reagan period, I was impressed by how often it was the Cato Institute that held the sane meeting or published the thoughtful position paper.
Herewith “Mayor Bloomberg’s Nanny State”:
I often take the train from Washington, D.C., to New York and back. A few years ago they put the smoking car on the end of the train so nonsmokers wouldn’t have to go through it to get to other parts of the train. And then the day came when they said, “We’re taking that car off the train altogether.” And I thought, “Now we’ve crossed a small but important line.” It’s the difference between protecting nonsmokers and state-sponsored behavior modification for smokers.
And I thought there was insufficient alarm at the ease with which that was done. Because state behavior modification, no matter what its object, should be viewed skeptically at the very least. There’s serious danger in the imposition of uniformity—the suggestion that one size must fit all.
When the complete ban on smoking in all public places was enacted in California, I called up the assemblyman who wrote the legislation and I said: “I’ve just discovered that bars are not going to be able to turn themselves into a club for the evening and charge a buck for admission for people who want to have a cigarette. You won’t be able to have a private club. You won’t even be able to have a smoke-easy, if you will, in California.”
And he said, “That’s right.”
I said, “Well, how can you possibly justify that?”
The Debates and Gary Johnson
Karl Rove writes in the Wall Street Journal that “the debates have allowed every potentially serious candidate to be seen by large audiences.” One thing that has generally made presidential candidates serious is experience in executive office, especially as governor. After voters elected Carter, Reagan, Clinton, and Bush minor over a period of 30 years, it became conventional wisdom that governors make much stronger presidential candidates than senators. After senators swept the field in 2008, and Sen. Barack Obama won, that preference seemed in doubt. But now voices on both left and right are asking whether President Obama’s lack of executive experience is indeed a problem.
So it’s worth asking how much executive experience the Republican candidates have. Here’s what I come up with:
Rick Perry 11 years
Gary Johnson 8 years
Jon Huntsman 5 years
Mitt Romney 4 years
Michelle Bachmann 0
Newt Gingrich 0
Ron Paul 0
Rick Santorum 0
So Rove thinks “the debates have allowed every potentially serious candidate to be seen by large audiences.” And yet the Republican party and the big media have excluded the candidate with the second-most experience as governor. And so I wonder again, how does the establishment exclude a Republican governor who got elected twice—and served his full terms—in a Democratic-leaning swing state, had a successful record, vetoed more bills than all other governors combined, proposed the boldest policies in the country on both school choice and drug policy reform, and then left the state with a budget surplus?
As James Peron wrote at Huffington Post,
Johnson sees himself as socially liberal and fiscally conservative. Most polls show that a large percentage of voters fall into this category. A majority of voters supports depoliticized markets and balanced budgets, a majority supports gay marriage, and half the public wants to legalize marijuana, which is a plurality. A majority thinks sending troops to Iraq was a mistake and wants out. You’d think Gary Johnson would be a natural choice for them.
And you’d think that even Karl Rove would agree that a two-term Republican governor with that potential appeal would be a “potentially serious candidate” who ought to have a chance to debate the other candidates.
WTO Remains a Force for Good
Trade ministers from more than 150 countries are gathering today in Geneva, Switzerland, for a three-day ministerial meeting of the World Trade Organization. These meetings happen every two years or so. No great breakthroughs are expected at this one, but it does offer an opportunity to take stock of where the WTO and world trade stand a decade after China’s entry into the organization and the launch of the still ongoing Doha Development Round.
News from the first day is a reminder that the organization can still deliver real trade liberalization. Forty-two members, including the United States, announced just a few hours ago that they had revised the WTO’s Government Procurement Agreement to open up an estimated $100 billion in annual government purchases to more international competition, potentially saving taxpayers billions of dollars a year.
The revised GPA will also give U.S. companies a fairer shot at winning contracts to supply goods and services to foreign governments. It is a partial antidote to the protectionist trend in the United States and elsewhere to restrict government spending to domestic suppliers in the misguided view that that will stimulate domestic demand.
The Doha Round may be stalled, but global trade has continued to expand. Even with the sharp downturn in trade during the recent Great Recession, in the decade since 2001 global trade volume has increased 44 percent, according to the WTO web site. Trade growth has been especially robust in East Asia and other emerging markets. The anti-market protestors can take some satisfaction in the lack of progress in negotiations, but globalization marches on.
A decade after its entry into the organization, China remains a mixed economy with significant trade barriers, but it has become one of the more open major developing economies. And it is now subject to the WTO dispute settlement mechanism and other disciplines that keep its economy more open than it would be outside the organization. There were dire warnings about a flood of imports from China if we allowed it to join, but in the past decade U.S. exports to China have grown significantly faster than imports from China.
As the chart below shows, since China’s entry into the WTO in December 2001, U.S. exports of goods to China have grown more than five-fold while U.S. imports of Chinese goods have grown four-fold. The robust export growth reflects both the growth of the Chinese economy and the decline of its trade barriers against goods of major export interest to the United States. For that we can give the WTO a major share of the credit.
As I’ve written elsewhere, there are other good reasons to see the WTO as a positive if modest factor in the global economy–to the benefit of the United States and the freedom to trade across the world.
Why Hayek Would Hate SOPA
Watching the House Judiciary Committee’s markup session on the latest version of the Stop Online Piracy Act, I’m struck by how the bill exemplifies what F.A. Hayek called the “Fatal Conceit” of government planners and regulators. As Rep. Jason Chaffetz noted with incredulity, a bill that would perform major surgery on the Internet is moving forward, at breakneck speed, without any doctors in the room. Legislators who think it’s cute to make jokes about how little they understand network technology are endorsing regulation of that technology, in statutory language has only just been introduced in its current form, without so much as a hearing from the actual engineers who are loudly warning of its grave defects. But the “fatal conceit” is inherent in the attempt to issue this kind of top-down mandate on the Internet, even with the best expert advice.
In many ways, the Internet is a perfect embodiment of Hayek’s concept of an evolved “spontaneous order.” Its enormous complexity is the product of relatively simple rules that allow individuals to deploy their local knowledge productively without having to understand the total system. Each layer in the “stack” of protocols in the Internet is independent, which means I can write a network application or generate content without having to understand the details of Internet addressing, packet routing, or how WiFI and Ethernet work: I just need to know how to pass application data to the next layer.
Moreover, the standards themselves are the product of gradual evolution, as engineers voluntarily adopt them following a long process of deliberation and consensus-building. Often, that makes the process necessarily quite slow. As former assistant DHS secretary and NSA general counsel Stewart Baker observes, the vital DNSSEC standard, designed to secure the Internet addressing system and guard against malicious hijacking of Internet traffic, has been in the works for 15 years. But SOPA would create massive regulatory uncertainty about the status of client software robustly implementing that standard. In short, argues Baker, “SOPA will kill DNSSEC,” to the detriment of global cybersecurity. Legislators seem to imagine that they can simply add language saying that their mandates aren’t meant to impair cybersecurity, as if uttering the magic words were enough to make it so. But you can’t just inject a top-down national mandate into a global evolutionary process and expect to achieve the effects the planners intend without disruptive consequences.
This isn’t just a narrow issue with one specific protocol, though. The general approach of SOPA is to attempt to solve a content problem—copyrighted material circulating illicitly—with a mandate targeting a completely different level of the Internet’s architecture, where domain names are translated into network addresses.That guarantees a poor fit between regulatory aims and outcomes, and enormously magnifies the likelihood of unpredictable and unintended consequences. That unpredictability is increased because—in what might otherwise seem like a wise example of regulatory flexibility—SOPA leaves it to providers to pick the best method of blocking forbidden sites, which means we’re likely to see different providers testing a variety of approaches. A dramatic example of how attempts to blocking can generate unexpected cascading failures was provided in 2008, when Pakistan ordered the blocking of YouTube—and inadvertently broke access for millions of users around the world.
Some legal scholars have suggested a “Layers Principle” to guide Internet policymaking. In brief, legislators and regulators should respect the independence of Internet layers by targeting solutions, as nearly as possible, at the layer where the problem exists. The Digital Millennium Copyright Act takes this sort of approach by providing a notice-and-takedown mechanism that targets specific cases of infringing content. SOPA, by contrast, violates this principle by seeking to solve a content problem by regulating the Internet’s addressing system. A Congress that displayed a modicum of humility about its ability to effectively redirect the operation of such a complex, organic, evolving system would accept that these blunt and broad interventions, however well-intentioned, are more likely to damage the system than achieve the intended result.
Published: My First Year Battling Obamacare
Back in June, I wrote about a law review article I had just completed that detailed my first year or so of activities surrounding the Obamacare lawsuits. Well, now it’s officially published, in the Florida International University Law Review. Here’s the abstract:
This article chronicles the (first) year I spent opposing the constitutionality of Obamacare: Between debates, briefs, op-eds, blogging, testimony, and media, I have spent well over half of my time since the legislation’s enactment on attacking Congress’s breathtaking assertion of federal power in this context. Braving transportation snafus, snowstorms, and Eliot Spitzer, it’s been an interesting ride. And so, weaving legal arguments into first-person narrative, I hope to add a unique perspective to an important debate that goes to the heart of this nation’s founding principles. The individual mandate is Obamacare’s highest-profile and perhaps most egregious constitutional violation because the Supreme Court has never allowed – Congress has never claimed – the power to require people to engage in economic activity. If it is allowed to stand, then no principled limits on federal power remain. But it doesn’t have to be this way; as the various cases wend their way to an eventual date at the Supreme Court, I will be with them, keeping the government honest in court and the debate alive in the public eye.
Go here to download “A Long Strange Trip: My First Year Challenging the Constitutionality of Obamacare.”
And the Other Washington Is Messed Up, Too
In a new op-ed, I have the regrettable task of pointing out to my fellow Washingtonians (of the PNW rather than D.C. variety) that we have increased public school spending in the past decade by $1.6 billion and gotten _________ in return. Nothing. Nada. Rien du tout, mes concitoyens.
NAEP scores are pretty much flat at the end of high school, as are SAT scores. It is hard to argue that we really care about children’s education when we’re willing to waste $1.6 billion that is purportedly meant for that purpose. If politicians and voters in the Evergreen State do decide, at some point, to do something for children, the first step would be to stop wasting that $1.6 billion. The next step would be to follow the lead of other states, like Florida, that have found ways to improve student achievement while _lowering_ taxes.
USPS Gives Congress More Time to Kick Can
Last week, the U.S. Postal Service filed a plan with its regulator to close half of its mail processing facilities and reduce delivery standards in order to reduce costs. I called the move a message to Congress because “the USPS is running on financial fumes and Congress is still trying to figure out how to kick the can down the road.”
This week, the USPS said that it’s delaying the closure of mail processing facilities and post offices by a few more weeks in order to give Congress more time to come up with “comprehensive postal legislation.” According to the press release, the delay comes “in response to a request made by multiple U.S. Senators.”
That’s hardly a surprise. Here’s what I wrote last week:
The biggest obstacle standing in the way of the proposal is, of course, Congress. I would venture a guess that legislation will be introduced to stymie the plan—if it hasn’t already. After all, members of Congress have consistently fought USPS efforts to shutter post offices. Naturally, the postal employees unions aren’t happy and will make sure that policymakers know it.
According to the Washington Post, “a group of 21 senators from mostly rural states led by Bernie Sanders, an independent from Vermont, signed a letter to congressional leaders asking them to add language to legislation that would halt closings for six months.” Sen. Sanders also sponsored legislation in November that would hand the USPS a bailout and preserve the status quo. Well, Sanders calls himself a socialist so I suppose it would make sense that he’d want to do whatever it takes to preserve the government’s floundering mail business.
And in other postal news, the House passed legislation on Tuesday to name a post office.
Not Happy With the Declining Labor Share of Income, Talk to the Federal Reserve
Today’s Financial Times, among other media outlets, is reporting that share of national income coming from wages has “fallen to its lowest level since records began after the second world war….” That level now stands at 58 percent, the post-war average is 63 percent. The remainder comes largely from profits and capital gains.
It won’t be long before many start to suggest the usual, but broken, remedies of higher taxes, increasing the minimum wage and more unionization. Putting aside the fact that I have no idea what the “correct” share for wages should be (and suspect neither does anyone else), this trend should come as no surprise when you have an economic system that bases much of its ”prosperity” on the creation on serial asset bubbles. Wages stagnating? Well let’s run up house or stock prices. Or at least that seems to be the thinking of the Federal Reserve.
The chart below compares the annual percentage change in the Dow-Jones Index (left axis) and the annual percent change in the effective federal funds rate (right axis), both on a monthly basis. The correlation is a negative 0.1, indicating that as the federal funds rate is lowered, the Dow increases. Of course the opposite then holds when the federal funds rate is raised.
The rub with all this is that running up asset prices only benefits those with assets. The increase in asset prices will also increase capital gains, lowering the wage share of national income. Even worse is that running up some asset prices, like that for housing, does nothing to increase wages, which are ultimately driven by increasing labor productivity. So if you really want to help labor, let’s stop trying to create false wealth via easy credit, and try improving labor productivity instead.
The Government Must Compensate for Property Damage Even If Its Taking Was Only ‘Temporary’
Cato today filed an amicus brief supporting a request that the Supreme Court review Arkansas Game & Fish Commission v. United States. Here’s the case:
The Arkansas Game & Fish Commission owns and operates 23,000 acres of land as a wildlife refuge and recreational preserve; the preserve’s trees are essential to its use for these purposes. Clearwater Dam, a federal flood control project, lies 115 miles upstream. Water is released from the dam in quantities governed by a pre-approved “management plan” that considers agricultural, recreational, and other effects downstream.
Between 1993 and 2000, the government released more water than authorized under the plan. AGFC repeatedly objected that these excessive releases flooded the preserve during its growing season, which significantly damaged and eventually decimated tree populations. In 2001, the government acknowledged the havoc its flooding had wreaked on AGFC’s land and ceased plan deviations. By then, however, the preserve and its trees were severely damaged, so AGFC sued the government, claiming damages under the Fifth Amendment’s Takings Clause.
The district court awarded $5.8 million in lost timber and reforestation costs based on the substantiality of the government’s flooding and the foreseeability of the damage it caused. The Federal Circuit reversed that decision, holding that the flooding of private land can never be a taking unless that flooding is permanent. It further held that, in determining whether the government’s intrusion on AGFC’s land was permanent or temporary, courts must focus on the character of the policy behind the intrusion rather the effects of the intrusion itself. A taking cannot have occurred here because each deviation from the plan constituted a “temporary” policy, the court concluded, so AGFC had no constitutional remedy.
AGFC is asking the Supreme Court to review its case; the Court itself has recognized that something less than a permanent invasion of land can constitute a compensable taking. Cato joined the Pacific Legal Foundation on a brief urging the Court to hear the case and uphold the Fifth Amendment rights of property owners whose land is destroyed by the federal government. Our brief highlights the conflict between the Federal Circuit’s decision and both Supreme Court and lower court precedent. First, an invasion of land by flooding is no different from an invasion of land by any other means. Second, the government’s self-professed “intent” that a possible taking be “temporary” should have no bearing on whether a Fifth Amendment remedy exists when that taking has, in fact, occurred. Instead, the relevant inquiry should be whether the government caused permanent damage and, if so, how much.
The Federal Circuit’s new rule — that, so long as it might be “temporary,” no government flooding can be remedied under the Fifth Amendment — runs afoul of the letter and spirit of a constitutional provision meant to compensate property owners for government intrusions on their land. We urge the Court to grant AGFC’s petition and maintain constitutional protections for private property.
The Supreme Court will decide in the new year whether to take the case, and would hear argument in the fall if it does.
Administration Bait and Switch in Afghanistan?
U.S. combat troops are leaving Afghanistan in 2014. That was the consistent message which I received on my NATO-organized visit two months ago to a country now defined by war. The American and European governments have promised to provide long-term financial assistance and combat training, but they plan on shifting the actual fighting to Kabul’s hands.
Maybe not, it now seems. The U.S. ambassador to Afghanistan, Ryan Crocker, said America might just stick around and continue the war. Reported the New York Times:
The ambassador, Ryan C. Crocker, speaking at a roundtable event with a small group of journalists, said that if the Afghan government wanted American troops to stay longer, the withdrawal could be slowed. “They would have to ask for it,” he said. “I could certainly see us saying, ‘Yeah, makes sense.’ ”
The ambassador’s standard is whether the Afghan government asked the United States to stay. It would make more sense to ask the American people what they think.
The argument that it’s time for Washington to go, but to go in a manner which attempts to preserve something positive has appeal, though there are plenty of reasons to doubt that it is feasible. President Hamid Karzai & Friends appeared to be neither more competent nor better loved than when I visited last year. I don’t expect much improvement next year. Nevertheless, the case for a phased withdrawal deserves to be treated seriously.
But leave the United States must. Had President George W. Bush announced in 2001 that he was embarking on a long-term mission to transform Afghanistan by turning it into a Western-style liberal democracy with a strong central government in Kabul, he would have been laughed out of Washington. The American people would have unceremoniously tossed him out of office in 2004.
Yet remake Afghanistan is what the U.S. government now is attempting to do. When I asked what justified this expensive attempt at nation-building, Afghans and Americans alike warned that al Qaeda could reemerge. I assume no one really believed that. At least, I hope no one really believed that.
After all, al Qaeda is in sharp decline. Intelligence officials say that al-Qaeda’s presence in Afghanistan is minimal. The likelihood of revival seems small.
Moreover, terrorists have demonstrated an ability to operate all over the world. Of course, Osama bin Laden was killed in Pakistan. There are plenty of other potential sanctuaries available in failed and semi-failed states. Indeed, the biggest Islamic terrorist threat these days appears to come from local groups which identify with, but are not controlled by, al-Qaeda. Afghanistan is irrelevant to the latter’s operation and impact, and of no interest to other terrorists.
There’s also strong humanitarian appeal in staying, but that can’t justify endless war in Central Asia. Washington would never have intervened to make Afghanistan a more humane place. American troops have been fighting there for ten years—as long as World Wars I and II combined.
If the president plans on keeping U.S. troops in Afghanistan beyond the promised 2014, he should ‘fess up. Then the American people can make their views known. And, more important, they can take appropriate action in next year’s presidential election.
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