Archive for December, 2011
Teddy Roosevelt Is No Model for a President
Cato senior fellow Jim Powell, author of Bully Boy: The Truth about Theodore Roosevelt’s Legacy, writes at Forbes.com today that TR is a bad model for President Obama:
Theodore Roosevelt was the man who, in 1906, encouraged progressives to promote a federal income tax after it was struck down by the Supreme Court and given up for dead. He declared that “too much cannot be said against the men of great wealth.” He vowed to “punish certain malefactors of great wealth.”
Perhaps TR’s view was rooted in an earlier era when the greatest fortunes were made by providing luxuries for kings, like fine furniture, tapestries, porcelains and works of silver, gold and jewels. Since the rise of industrial capitalism, however, the greatest fortunes generally have been made by serving millions of ordinary people. One thinks of the Wrigley chewing gum fortune, the Heinz pickle fortune, the Havemeyer sugar fortune, the Shields shaving cream fortune, the Colgate toothpaste fortune, the Ford automobile fortune and, more recently, the Jobs Apple fortune. TR inherited money from his family’s glass-importing and banking businesses, and maybe his hostility to capitalist wealth was driven by guilt.
Like Obama, TR was a passionate believer in big government – actually the first president to promote it since the Civil War. He said, “I believe in power…I did greatly broaden the use of executive power…The biggest matters I managed without consultation with anyone, for when a matter is of capital importance, it is well to have it handled by one man only …I don’t think that any harm comes from the concentration of power in one man’s hands.”
Also like Obama, TR was almost entirely focused on politics – personalities, speeches, publicity and so on. He seemed to be concerned about an economic issue only when it became a big problem, particularly if it was big enough to affect the next election. There wasn’t much evidence of long-term thinking beyond the next election. Certainly there was no evident awareness of unintended consequences.
Much more here.
Why Are American Tax Dollars Subsidizing a Paris-Based Bureaucracy so It Can Help the AFL-CIO Push Obama’s Class-Warfare Agenda?
To be blunt, I’m not a big fan of the Organization for Economic Cooperation and Development. But my animosity isn’t because OECD bureaucrats threatened to have me arrested and thrown in a Mexican jail.
Instead, I don’t like the Paris-based bureaucracy because it pushes a statist agenda of bigger government. This Center for Freedom and Prosperity study has all the gory details, revealing that OECD bureaucrats endorsed Obamacare, supported the failed stimulus, and are big advocates of a value-added tax for America.
And I am very upset that the OECD gets a giant $100 million-plus subsidy every year from American taxpayers. For all intents and purposes, we’re paying for a bunch of left-wing bureaucrats so they can recommend that the United States adopt that policies that have caused so much misery in Europe. And to add insult to injury, these socialist pencil pushers receive tax-free salaries.
And now, just when you thought things couldn’t get worse, the OECD has opened a new front in its battle against free markets. The bureaucrats from Paris have climbed into bed with the hard left at the AFL-CIO and are pushing a class-warfare agenda. Next Wednesday, the two organizations will be at the union’s headquarters for a panel on “Divided We Stand – Tackling Growing Inequality Now.”
Co-sponsoring a panel at the AFL-CIO’s offices, it should be noted, doesn’t necessarily make an organization guilty of left-wing activism and misuse of American tax dollars. But when you look at other information on the OECD’s website, it quickly becomes apparent that the Paris-based bureaucracy has launched a new project to promote class-warfare.
For instance, the OECD’s corruption-tainted Secretary-General spoke at the release of a new report on inequality and was favorable not only to higher income tax rates, but also expressed support for punitive and destructive wealth taxes.
Over the last two decades, there was a move away from highly progressive income tax rates and net wealth taxes in many countries. As top earners now have a greater capacity to pay taxes than before, some governments are re-examining their tax systems to ensure that wealthier individuals contribute their fair share of the tax burden. This aim can be achieved in several different ways. They include not only the possibility of raising marginal tax rates on the rich but also…reassessing the role of taxes on all forms of property and wealth.
And here’s some of what the OECD stated in its press release on income differences.
The OECD underlines the need for governments to review their tax systems to ensure that wealthier individuals contribute their fair share of the tax burden. This can be achieved by raising marginal tax rates on the rich.
Like Obama, the folks at the OECD like to talk about “fair share.” These passages sounds like they could have been taken from one of Obama’s hate-and-envy speeches on class warfare.
But the fact that a bunch of Europeans support Obama’s efforts to Europeanize America is not a surprise. The point of this post is that the OECD shouldn’t be using American tax dollars to promote Obama’s class-warfare agenda.
Here’s a video showing some of the other assaults against free markets by the OECD. This is why I’ve written that the $100 million-plus that American taxpayers send to Paris may be – on a per dollar basis – the most destructively wasteful part of the entire federal budget.
One last point is that the video was produced more than one year ago, which was not only before this new class-warfare campaign, but also before the OECD began promoting a global tax organization designed to undermine national sovereignty and promote higher taxes and bigger government.
In other words, the OECD is far more destructive and pernicious than you think.
And remember, all this is happening thanks to your tax dollars being sent to Paris to subsidize these anti-capitalism statists.
Mandatory Minimum Sentences
Federal Appellate Judge Andre Davis has penned an op-ed about mandatory minimum sentences. Here’s an excerpt:
As a judge on the U.S. Court of Appeals for the Fourth Circuit, I learn of many personal narratives. Tony Gregg’s bears retelling.
Mr. Gregg was a user, a seller, a “snitch” for the FBI. His early life was marked by abuse and instability, suicide attempts, jails and prison stays. As a drug user, Mr. Gregg resorted to selling crack cocaine — not kilos, but several grams at a time out of a hotel room in a run-down section of Richmond, Va.
Not unexpectedly, he was arrested and convicted. A district judge sentenced Mr. Gregg to the mandatory term of life imprisonment, required by statute, at the discretion of the prosecutor, for a third conviction of a felony drug offense.
When Mr. Gregg’s case came before me and my colleagues on appeal, there was nothing we could do but uphold the sentence of life in prison. The appellate court, like the disapproving trial court, found its hands were tied.
I do not believe Mr. Gregg deserves life in prison — the kind of sentence often imposed on convicted murderers — but I am handicapped by mandatory minimum sentencing guidelines, set by the Anti-Drug Abuse Act of 1986.
And Mr. Gregg’s is far from the only story that underscores the kind of handcuffing by mandatory minimums that U.S. judges habitually face.
After 25 years of watching countless Tony Greggs serve out impossibly long sentences for transgressions that would be better served by drug treatment and social safety nets, I say with certainty that mandatory minimums are unfair and unjust. They cost taxpayers too much money and make very little sense.
For more information, vist the FAMM web site.
Podcast: How States Can Shut Down ObamaCare
Here’s a podcast on how states can shut down ObamaCare.
And here are links to additional material, including an op-ed that provides an overview, a blog post about Sen. Orrin Hatch (R-UT) getting involved, a blog post on how presidential candidates could get involved, and finally a blog post on what the Obama administration has to say about all this.
The Student Aid ‘Myth’ Myth
There’s a very disturbing tendency among academics — though many people in policy fights do it — to dodge substantive debate by declaring, basically, “the other side is full of garbage so just ignore them.” You probably see it most glaringly about climate change — no one credible disagrees with Al Gore! — but I see it far too frequently regarding the possibility that government student aid, the bulk of which comes from Washington, is a significant factor behind college price inflation.
Today, we are treated to this lame dodge in a letter to the Washington Post from Terry Hartle, Senior Vice President at the American Council on Education, arguably the most powerful of Ivory Tower advocacy groups. He writes:
Second, we must do away with one of the most persistent and pernicious myths of higher education: that increases in federal aid drive up the cost of college. Several studies, including two by the Education Department, show there is no link between federal student aid and tuition increases. But there are still those who would have people believe that modest increases in student aid programs are the driving force behind institutions’ decisions about tuition and fees.
I would love to put this “myth” myth to rest. Yes, as I discuss in my recent policy analysis, there are serious challenges in trying to prove that aid fuels price inflation. Lots of variables affect what colleges charge; you need to study long time frames encompassing several business cycles; and you have to account for the fact that aid automatically rises when prices do. So while there is tremendous logical reason to think aid has enabled price inflation — former college presidents acknowledge as much, basic economics says subsidies drive up demand, etc. — like any social science there is no definitive proof.
That sure as heck doesn’t mean, though, that there isn’t any research showing government aid driving price inflation, even if it doesn’t prove it. In addition to the incredibly powerful rational reasons to strongly suspect aid plays a big role in out-of-control college pricing, there is, indeed, empirical evidence. For the benefit of the whole debate I offer a smattering of it below, hopefully putting an end to the disturbing denial tactic employed by Hartle and others. Hopefully, but not likely….
John D. Singell, Jr., and Joe A. Stone, “For Whom the Pell Tolls: The Response of University Tuition to Federal Grants-in-Aid,” Economics of Education Review 26, no. 3 (2006): 285-95.
Bridget Terry Long, “How Do Financial Aid Policies Affect Colleges? The Institutional Impact of Georgia Hope Scholarships,” Journal of Human Resources 30, no. 4 (2004): 1045-66.
Bradley A. Curs and Luciana Dar, “Do Institutions Respond Assymetrically to Changes in State Need- and Merit-Based Aid? ” Working Paper, November 1, 2010.
Rebecca J. Acosta, “How Do Colleges Respond to Changes in Federal Student Aid,” Working Paper, October 2001.
Michael Rizzo and Ronald G. Ehrenberg, “Resident and Nonresident Tuition and Enrollment at Flagship State Universities,” in College Choices: The Economics of Where to Go, When to Go, and How to Pay for It, edited by Caroline M. Hoxby, (Chicago, IL: University of Chicago Press, 2004).
Income Inequality Data Has Flaws
In the Wall Street Journal yesterday, Alan Reynolds pointed out some of the flaws in the data being used in the income inequality debate. Far too many policymakers, analysts, and reporters assume that the data showing rising inequality is carved in stone, but it isn’t. Some portion of the supposed change in income inequality in recent decades is a statistical artifact due to changes in marginal tax rates and other factors.
One of Alan’s points is that fluctuations in capital gains (CG) realizations by the top 1 percent of earners plays an important role in that group’s measured income share out of total American income. I constructed two charts with Alan’s data to illustrate the point. The two charts are scatter plots using data from 1979 to 2009.
Chart 1: Lower CG Tax Rates Lead to Higher CG Realizations for the Top 1%. In years when we had a higher 28 percent CG tax rate, the share of high earners’ income from CG is lower. In years when we’ve had lower 15 and 20 percent CG rates, the share is higher.
Chart 2: Higher CG Realizations Increase the Measured Share of the Top Earners’ Income. In years with lower CG tax rates, high earners realize more CG, and that inflates their measured share of total American income.
(Note for data wonks: Regressions on these two relationships were highly statistically significant, i.e. high F-statistics).
Information Regulation that Hasn’t Worked
When Senator William Proxmire (D-WI) proposed and passed the Fair Credit Reporting Act forty years ago, he almost certainly believed that the law would fix the problems he cited in introducing it. It hasn’t. The bulk of the difficulties he saw in credit reporting still exist today, at least to hear consumer advocates tell it.
Advocates of sweeping privacy legislation and other regulation of the information economy would do well to heed the lessons offered by the FCRA. Top-down federal regulation isn’t up to the task of designing the information society. That’s the upshot of my new Policy Analysis, “Reputation under Regulation: The Fair Credit Reporting Act at 40 and Lessons for the Internet Privacy Debate.” In it, I compare Senator Proxmire’s goals for the credit reporting industry when he introduced the FCRA in 1969 against the results of the law today. Most of the problems that existed then persist today. Some problems with credit reporting have abated and some new problems have emerged.
Credit reporting is a complicated information business. Challenges come from identity issues, judgments about biography, and the many nuances of fairness. But credit reporting is simple compared to today’s expanding and shifting information environment.
“Experience with the Fair Credit Reporting Act counsels caution with respect to regulating information businesses,” I write in the paper. “The federal legislators, regulators, and consumer advocates who echo Senator Proxmire’s earnest desire to help do not necessarily know how to solve these problems any better than he did.”
Management of the information economy should be left to the people who are together building it and using it, not to government authorities. This is not because information collection, processing, and use are free of problems, but because regulation is ill-equipped to solve them.
Med Mal Reform: Manhattan Institute v. Cato II
The debate between Cato adjunct scholar Shirley Svorny and the Manhattan Institute’s Ted Frank continues today over at PointofLaw, as Svorny points out that while no system is entirely rational, a liability system offers certain benefits that the alternatives proposed do not.
Ignore the Hawks on Iran, Too
This week, experts at the (neo)conservative American Enterprise Institute (AEI) released a report on how to deal with a nuclear-armed Iran.
The authors argue that because of the “rising consensus” that a preemptive attack is unappealing, and that sanctions likely will fail, they recommend “a coherent Iran containment policy.” That approach entails, among other things, that America “work toward a political transformation, if not a physical transformation, of the Tehran regime.” Leaving aside the fact that Washington has already once “physically transformed the Tehran regime” — when alongside the British it overthrew Iran’s democratically elected prime minister in 1953 and restored the Shah — there is a broader problem that comes with listening to proponents of the calamitous decision to invade Iraq.
Take, for instance, report co-author Danielle Pletka, who years ago decreed “Saddam’s entire Ba’athist government must be replaced.” Little surprise that someone who promoted a war based on a web of misleading information is now peddling the notion that Iran is less than a year from obtaining a nuclear weapon.
More credible voices suggest otherwise. The nonprofit Arms Control Association (ACA) observed that the most-recent IAEA report suggests “[I]t remains apparent that a nuclear-armed Iran is still not imminent nor is it inevitable.” Iran was engaged in nuclear weapons development activities until it stopped in 2003, and as Cato’s Justin Logan observes, the IAEA’s own report shows there is no definitive evidence of Iran’s diversion of fissile material.
When Pletka was called out for her “less than a year” prediction, she turned up her nose and snapped:
Quibblers will suggest that there are important “ifs” in both these assessments. And yes, the key “if” is “if” Iran decides to build a bomb. So, I suppose when I said “less than a year away from having a nuclear weapon,” I should have added, “if they want one.” But… isn’t that the point? Do we want to leave this decision up to Khamenei?
Confronted with ambiguous information, and forced to infer intentions, hawks evince the very same arrogance and overconfidence that helped open the door for Iranian influence in the region in the first place by toppling Saddam Hussein’s regime (Pletka advocated repeatedly for this leading up to the 2003 invasion). Pletka and others who years ago had the gall to argue that Iraq “will end when it ends” are today worthy of being ignored on Iran.
Med Mal Reform: Manhattan Institute v. Cato
Cato adjunct scholar Shirley Svorny‘s recent paper, “Could Mandatory Caps on Medical Malpractice Damages Harm Consumers?,” has sparked a debate with the Manhattan Institute’s Ted Frank at PointOfLaw.com.
The Self-Congratulating Washington Establishment
My new post at Huffington Post looks at a dinner of the Panetta Institute and what it says about cozy relationships among the Washington establishment:
So let’s see . . . an institute founded by and bearing the name of the secretary of defense, who also served 17 years in Congress, including four years as chairman of the House Budget Committee, and as director of the Office of Management and Budget, White House chief of staff, and director of the CIA, is giving an award to his immediate predecessor, who also served as CIA director, and to a quintessentially establishment Washington journalist, and to a scholar at both Georgetown University and the Brookings Institution who in addition to her time at the Federal Reserve has served as director of the Congressional Budget Office, director of OMB, co-chair of the Bipartisan Policy Center’s Task Force on Debt Reduction. That is like an entire Washington establishment at one head table.
More on what this establishment has wrought, and right and wrong ways to break up the iron triangle, at the link.
Feds Palling Around With Mexican Cartels
Two years ago the Washington Post reported that the Immigration and Customs Enforcement agency brought dangerous Mexican drug traffickers to the U.S. who, while continuing their criminal activities in Mexico and the U.S., also served as informants to the federal authorities in their war on drugs.
In June, Operation Fast and Furious came to light where the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) allowed suspicious straw-purchasers of firearms to buy weapons in the U.S. and smuggle them into Mexico. The purpose was to track the guns all the way to the ultimate buyer—a Mexican drug trafficking organization. Overall, the ATF facilitated the purchase of hundreds of guns by Mexican cartels. Many were later found in crime scenes in Mexico, including one where a U.S. Border Patrol agent was assassinated.
On Sunday, the New York Times reported that the Drug Enforcement Agency has been laundering millions of dollars for Mexican cartels. The goal of the undercover mission is to follow the money all the way up to the top ranks of the criminal organizations. However, as the NYT notes, “So far there are few signs that following the money has disrupted the cartels’ operations and little evidence that Mexican drug traffickers are feeling any serious financial pain.”
So there we have it: in the name of the war on drugs, the federal government has provided safe havens to Mexican drug traffickers, facilitated their purchase of powerful firearms, and has even laundered millions of dollars for the cartels.
After spending millions of dollars toward fighting the drug war in Mexico, the United States has little to show for its efforts. It seems Washington is becoming more desperate each year to produce new leads and results. These three incidents display a stunning lack of foresight and borders on the federal government aiding the Mexican drug cartels, with little to show in return. The unintended consequences of these programs aimed at dismantling the cartels would be laughable were it not for the thousands that have died in Mexico’s drug related violence.
It is time for the United States to rethink the war on drugs and consider policies that will successfully undermine the Mexican drug cartels.
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