Author Archive
The Failure of Do-Nothing Policies
A news story from today in a slightly alternate universe:
Jobless Rate at 26-Year High
Employers kept slashing jobs at a furious pace in June as the unemployment rate edged ever closer to double-digit levels, undermining signs of progress in the economy, and making clear that the job market remains in terrible shape.
The number of jobs on employers’ payrolls fell by 467,000, the Labor Department said. That is many more jobs than were shed in May and far worse than the 350,000 job losses that economists were forecasting.
Job losses peaked in January and had declined every month until June. The steep losses show that even as there are signs that total economic activity may level off or begin growing later this year, the nation’s employers are still pulling back.
White House press secretary Robert Gibbs said, “President Obama proposed a $787 billion stimulus program to get this country moving again. He tried to save the jobs at GM and Chrysler. But the do-nothing Republicans filibustered and blocked that progressive legislation, and these are the results.”
House Speaker Nancy Pelosi said at a press conference, “We begged President Bush to save Fannie Mae, Merrill Lynch, Bank of America, AIG, the rest of Wall Street, the banks, and the automobile industry. We begged him to spend $700 billion of taxpayers’ money to bail out America’s great companies. We begged him to ignore the deficit and spend more money we don’t have. But did he listen? No, he just sat there wearing his Adam Smith tie and refused to spend even a single trillion to save jobs. And now unemployment is at 9.5 percent. I hope he’s happy.”
Democrats on Capitol Hill agreed that the “do-nothing” response to the financial crisis had led to rising unemployment and a sluggish economy. If the Bush and Obama administrations had been willing to invest in American companies, run the deficit up to $1.8 trillion, and talk about all sorts of new taxes, regulations, and spending programs, then certainly the economy would be recovering by now, they said.
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Immigration and Labor Markets; Tax and Budget Policy
Obama Adopts the Mikulski Principle
Economists have advanced many theories of taxation. But as usual, the one that seems to explain the policies of the Obama administration best is what I call the Mikulski Principle, the theory most clearly enunciated in 1990 by Sen. Barbara Mikulski (D, Md.):
Let’s go and get it from those who’ve got it.
Just take a look at the myriad taxes proposed or publicly floated by President Obama and his aides and allies:
- Raise the top income tax rates from their current 33 percent and 35 percent rates to 36 percent and 39.6 percent in 2011
- Limit itemized deductions for people paying high rates
- Increase capital gains and dividend taxes by 33 percent for people paying high income tax rates
- Impose a value-added tax (VAT) on all goods and services
- Raise the Social Security tax by lifting the cap
- Raise a variety of business taxes by $353 billion over 10 years, including repeal of LIFO rules, restoring Superfund taxes, seven tax increases on energy companies, and more
- Tax employer-provided health benefits
- Implement a cap-and-trade system for emissions permits, the functional equivalent of a massive new tax
- Tax drivers on their mileage
- Change rules to raise gift taxes
- Restore the estate tax at 45 percent
- Raise cigarette tax by 62 cents a pack
- Raise taxes on beer, wine, liquor, and soda
- Eliminate health savings accounts and flexible savings accounts
- Tax employer-provided cellphones
- Tax AIG employee bonuses
- Raise taxes on overseas corporate earnings
As the links will indicate, not all of these taxes have been formally proposed, and some have already run into sufficient criticism to have become unlikely. But together they illustrate the mindset of an administration and a Congress determined to extract as much money as they can from Americans rather than cut back on expenditures, which have doubled in about eight-and-a-half years.
Indeed, the administration’s programs remind us that today is July 2, the 233rd anniversary of the day on which the Continental Congress voted for American independence, issuing a document that declared, among other things,
He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.
Banks, Bailouts, and Political Pressure
The Washington Post reports:
Sen. Daniel K. Inouye’s staff contacted federal regulators last fall to ask about the bailout application of an ailing Hawaii bank that he had helped to establish and where he has invested the bulk of his personal wealth.
The bank, Central Pacific Financial, was an unlikely candidate for a program designed by the Treasury Department to bolster healthy banks. The firm’s losses were depleting its capital reserves. Its primary regulator, the Federal Deposit Insurance Corp., already had decided that it didn’t meet the criteria for receiving a favorable recommendation and had forwarded the application to a council that reviewed marginal cases, according to agency documents.
Two weeks after the inquiry from Inouye’s office, Central Pacific announced that the Treasury would inject $135 million.
As we’ve said here many times, going back to 1983, when government is in the business of making economic decisions, you inevitably get more lobbying, more campaign spending, and more political influence on economic decision-makers.
Government Motors Gears Up
Mother Goose and Grimm, by Mike Peters, June 30.
The Importance of Just Saying No
Conservatives are accused of being a party of “no.” Fine. That is an indispensable word in politics because most new ideas are false and mischievous. Furthermore, the First Amendment’s lovely first five words (”Congress shall make no law”) set the negative tone of the Bill of Rights, which is a list of government behaviors, from establishing religion to conducting unreasonable searches, to which the Constitution says: No.
Filed under: Government and Politics; Health, Welfare & Entitlements; Law and Civil Liberties; Political Philosophy
Americans Want Smaller Government
A new Washington Post-ABC News poll again shows that voters prefer “smaller government with fewer services” to “larger government with more services”:
Obama has used the power and financial resources of the federal government repeatedly as he has dealt with the country’s problems this year, to the consternation of his Republican critics. The poll found little change in underlying public attitudes toward government since the inauguration, with slightly more than half saying they prefer a smaller government with fewer services to a larger government with more services. Independents, however, now split 61 to 35 percent in favor of a smaller government; they were more narrowly divided on this question a year ago (52 to 44 percent), before the financial crisis hit.
The Post calls a 54 to 41 lead for smaller government “barely more than half,” which is fair enough, though it’s twice as large as Obama’s margin over McCain. It’s also twice as large as the margin the Post found in the same poll in November 2007.
I’ve always thought the “smaller government” question is incomplete. It offers respondents a benefit of larger government–”more services”–but it doesn’t mention that the cost of “larger government with more services” is higher taxes. The question ought to give both the cost and the benefit for each option. A few years ago a Rasmussen poll did ask the question that way. The results were that 64 percent of voters said that they prefer smaller government with fewer services and lower taxes, while only 22 percent would rather see a more active government with more services and higher taxes. A similar poll around the same time, without the information on taxes, found a margin of 59 to 26 percent. So it’s reasonable to conclude that if you remind respondents that “more services” means higher taxes, the margin by which people prefer smaller government rises by about 9 points. So maybe the margin in this poll would have been something like 59 to 37 if both sides of the question had been presented.
For more on “smaller government” polls, see here and here.
The “Culture of Spending” from the Mouths of Babes
Each semester, when I speak to Cato’s new employees and interns, I give them a quick discussion of some of the reasons that government tends to grow, such as the problem of concentrated benefits and diffuse costs and what James Payne called “the culture of spending.” In his book by that title, Payne noted:
The congressman lives in a special world, a curiously isolated world that is dominated by the advocates of government action. He is subjected to a broad chorus of persuasion that incessantly urges the virtues of spending programs. Year after year he hears how necessary government programs are.
Day after day, year after year, people come to the congressman’s office with stories about why some particular government program is needed — to help their grandfather, their brother-in-law, their community — and rarely if ever does a constituent fly to Washington to urge his congressman to vote against any particular one of the myriad programs that add up to his entire income tax bill.
The Washington Post has a great illustration of this problem in the Sunday paper. The little town of Owego, New York, was excited to hear that Lockheed Martin would build the new presidential helicopter — it’s called Marine One, though fortunately for Lockheed the government wanted 23 of them — at a plant in Owego. But as the price tag ballooned from $6.8 billion to $13 billion, even politicians began to see it as an unnecessary expense. The military canceled the program on June 1. Hundreds of jobs will be lost in Owego. And as the Post writes:
An 11-year-old Owego girl, whose parents are longtime Lockheed employees, recently hand-wrote a letter to Obama. It was published in the local newspaper and quickly became a voice for her shaken community.
“Lockheed is the main job source in Owego,” Hailey Bell, now 12, wrote. “If you shut down the program, my mom may lose her job and a lot of other people too. . . . Owego will be a ghost town. I’ve lived here my whole life and I love it here! Please really, really think it over.”
I’m sure she loves her parents and her town. And there’s no reason to expect Hailey to understand what $13 billion means to taxpaying Americans all over the country. But this is just the kind of story that members of Congress hear all the time: save my parents’ jobs, save my community, save our farms. And it all adds up to a $4 trillion federal budget with a $1.8 trillion deficit. (And by the way, if you Google “fiscal 2009 budget,” you will quickly find the Obama administration’s budget page, which somewhat oddly does not show the actual budget totals but does invite you to “Use the map below to learn more about how the President’s 2010 Budget is restoring long-term opportunity and prosperity in your state.”)
For a more, shall we say, adult view of what it means to direct federal dollars to particular areas, we might turn to an advertisement in the Durango, Colorado, Herald in 1987, which touted the Animas-La Plata dam and irrigation project and made explicit the usual hidden calculations of those trying to get their hands on federal dollars:
Why we should support the Animas-La Plata Project: Because someone else is paying the tab! We get the water. We get the reservoir. They get the bill.
That’s the way they tell it back home, usually without putting it in writing. In public and in Washington, they say, “Without this dam, our little town will waste away. Only you can save us, Mr. Congressman.” And it’s bankrupting us.
How Many Attended the Tea Parties?
Back in April there was a lot of debate about how many people actually attended the April 15 “tea parties” to oppose President Obama’s tax and spending programs. Pajamas Media, an enthusiastic backer of the protests, offered an estimate upwards of 400,000.
Nate Silver of the FiveThirtyEight blog, a more skeptical observer, diligently compiled what he considered “nonpartisan and credible” estimates — mostly from mainstream media or police sources — and came up with a detailed sum of about 311,000. Not bad for widely dispersed events, most with no big-name speakers or celebrities, not hyped by the major media (though certainly hyped by some of the conservative media).
But I’ve recently stumbled across reports of two tea parties that didn’t make Silver’s list. In a long profile of a councilwoman who supported Obama in Greenwood, South Carolina, the Washington Post reports on her encountering 200 people at a tea party in Greenwood. And the latest compilation of newspaper clippings from the Mackinac Center includes an April 16 article from the Midland (Michigan) Daily News about a tea party there that attracted 500 people. So who knows how many other farflung events didn’t get included in Silver’s comprehensive list?
Andrew Samwick of Dartmouth complained that the tea parties — and maybe even libertarians — weren’t clearly focused on the problem of spending. As I said in a comment there, I think that’s an unfair charge:
Here’s how one major news outlet reported them:
Nationwide ‘tea party’ protests blast spending - CNN.com (http://www.cnn.com/2009/POLITICS/04/15/tea.parties/ )
ABCNews.com said “Anti-Tax ‘Tea Parties’ Protest President Obama’s Tax and Spending Policies.” USA Today wrote, “What started out as a handful of people blogging about their anger over federal spending — the bailouts, the $787 billion stimulus package and Obama’s budget — has grown into scores of so-called tea parties across the country.”It’s hard to put specific cuts, especially COLAs and the like, on protest signs; but I think it’s fair to say that the tea-party crowds were complaining about excessive spending and “generational theft.”
The Government Is Not the Economy
Rep. Zoe Lofgren (D-CA) is very upset that the Obama administration has rejected the California state government’s request for a bailout. She tells the Washington Post:
This matters for the U.S., not just for California. I can’t speak for the president, but when you’ve got the 8th biggest economy in the world sitting as one of your 50 states, it’s hard to see how the country recovers if that state does not.
First, presumably Lofgren knows that the federal government is projecting a deficit of $1.8 trillion for the current fiscal year — so where is this emergency aid for California to come from?
But perhaps even more importantly, Lofgren seems to confuse the state of California with the State of California. That is, she confuses the people and the businesses of California with the state government. There’s no clear and direct relationship between the two. The state government is currently running a large deficit and is warning of a “fiscal meltdown.” Of course, as it continued to issue claims of fiscal meltdown and painful cuts over the past many years, California has continued to spend. The state has nearly tripled spending since 1990 (doubled in per capita terms). It went on a spending binge during the dotcom boom and never adjusted to the lower revenues after the bust. During the Schwarzenegger years the state has increased spending twice as fast as inflation and population growth. What were they thinking?
But a bailout for the government won’t necessarily help the recovery of the state’s economy. In fact, by increasing taxes and/or borrowing, it would likely weaken the national economy. And by encouraging continued irresponsible spending by the state government, it would just be an enabler of destructive policies that suck money out of the productive sector of California’s economy. We all want the California economy to recover. But that’s not the same thing as giving more money to the California government.
My Morning Tabloid
Why is a U.S. senator’s extramarital affair on the front page of The Washington Post this morning?
Don’t get me wrong, I like a juicy sex scandal as well as the next guy. And I’m amused at my friend and former colleague Radley Balko’s Facebook comment (or was it a tweet? who can keep up with the new media?) that ”sadly, growing public acceptance for gay marriage has given yet another conservative politician no choice but to cheat on his wife.” But this affair fit Bill Kristol’s definition of good Republican behavior: “Republicans have old-fashioned extramarital affairs with other adults.” No prostitution, no underage interns, no public toilets.
So why is it front-page news?
Meanwhile, you know what’s not on the front page, today or any day so far? President Obama’s firing of the AmeriCorps inspector general, in apparent violation of a law that Senator Obama voted for, perhaps in retaliation for the IG’s investigation of Sacramento mayor Kevin Johnson, an Obama supporter. It’s an interesting story. As a Wall Street Journal lead editorial explained:
In April 2008 the Corporation [for National and Community Service] asked Mr. Walpin to investigate reports of irregularities at St. HOPE, a California nonprofit run by former NBA star and Obama supporter Kevin Johnson. St. HOPE had received an $850,000 AmeriCorps grant, which was supposed to go for three purposes: tutoring for Sacramento-area students; the redevelopment of several buildings; and theater and art programs.
Mr. Walpin’s investigators discovered that the money had been used instead to pad staff salaries, meddle politically in a school-board election, and have AmeriCorps members perform personal services for Mr. Johnson, including washing his car.
Other papers have been on the story, notably the Washington Examiner. But as even The Washington Post’s ombudsman notes, not a word in the Post (until a small story on page A19 today, featuring the Obama administration’s spin on the issue). The Post is, however, ahead of The New York Times, which has apparently not run a word on the story, even online, though it did have room for the senatorial affair.
And I have to wonder: If George W. Bush had fired an inspector general who had alleged fraud by a key Bush supporter, would the Post and the Times have covered the story?
Mises on Obama
I was rereading George Nash’s book The Conservative Intellectual Movement in America, and I found this ever-more-timely and surprisingly pithy quotation from Ludwig von Mises in his book Bureaucracy:
They promise the blessings of the Garden of Eden, but they plan to transform the world into a gigantic post office.
(Meanwhile, thanks to the continuing progress made by the non-state sector of society, what a wonderful world in which both these brilliant books can be read either in hard copy or on line!)
Save Free Enterprise–Starting Now
As Dan Mitchell noted below, the U.S. Chamber of Commerce has launched a “Campaign for Free Enterprise” to stop the “rapidly growing influence of government over private-sector activity.” Chamber president Thomas Donohue told the Wall Street Journal that an “avalanche of new rules, restrictions, mandates and taxes” could “seriously undermine the wealth- and job-creating capacity of the nation.”
Indeed. Given the scope and extent of the Obama administration’s assaults on private enterprise — national health insurance, energy central planning, pay czars, abrogation of contracts, skyrocketing spending, and so on — free enterprise can use all the help it can get. I welcome the Chamber to the fight.
But it would be nice if the Chamber had joined the fight for economic freedom a bit earlier, say back in February when many of us were trying to stop the administration’s massive “stimulus” spending bill. That bill’s official cost is $787 billion; with interest, it would be about $1.3 trillion; and if you assume that its temporary spending increases will be extended, it will cost taxpayers about $3.27 trillion over 10 years.
Back then, Donohue had a few criticisms of the bill, but
The bottom line is that at the end of the day, we’re going to support the legislation. Why? Because with the markets functioning so poorly, the government is the only game in town capable of jump-starting the economy.
Or they might even have started defending free enterprise last fall, instead of going all-out to push the TARP bailout through Congress.
Converts to the cause of limited government are always welcome. But we might not need a $100 million Campaign for Free Enterprise if American business had opposed big government when the votes were going down in Congress. Still, better late than never.
Filed under: Government and Politics; Political Philosophy; Tax and Budget Policy
Who’s Running the American Economy Now?
Who’s the top dog in American business these days? Washington, says the Washington Post:
That’s one of the main themes of this week’s Capital Connection conference put on by the Mid-Atlantic Venture Association. . . . This time, policy wonks and government insiders will also be there.
Reed E. Hundt, former Federal Communications Commission chairman, and Tommy G. Thompson, former Health and Human Services secretary, will be speaking, as will VentureBeat blog author Matt Marshall and GigaOm author Om Malik, two well-known technology bloggers. Washington hasn’t been a frequent stop for them in the past.
It’s just one more sign of the region’s growing clout in the business and technology world. This is where stimulus dollars are doled out, where the economic recovery is taking shape, and where regulations — many of which directly affect businesses — are being crafted and rewritten. Of course, lawyers and lobbyists are getting a great deal of business helping folks find ways to tap into stimulus money. . . .
Companies familiar with the Beltway culture are well-positioned to benefit from the government’s increased role in nearly every sector. . . .
The conference, which is open to the public for the first time, demonstrates the growing nexus between the business community and the government, said Julia Spicer, MAVA’s executive director.
“The spread between the two worlds has tightened a bit,” she said. “The economy is the real focal point” of the conference, “and the government has a definite role in that.”
Filed under: Government and Politics; Telecom, Internet & Information Policy
The Politics of Stimulus Spending
USA Today investigates how members of Congress are “working behind the scenes to try to influence how the [stimulus] money is spent.”
Congress and President Obama proudly noted that there were no earmarks in the $787 stimulus bill. But…
Ten of 27 departments and agencies receiving stimulus money have released records of contacts by lawmakers under Freedom of Information Act requests USA TODAY filed in April. Those records detailed 53 letters, phone calls and e-mails recommending projects from 60 members from February through the end of May. Thirteen of those lawmakers voted against the stimulus package.
Critics of the stimulus bill pointed out that government money is always politically directed. It’s little consolation to be proven right.
A Tip of the Hat to Tom Paine
Thomas Paine, one of the fathers of American freedom, died almost unmourned 200 years ago today. Brendan O’Neill remembers him at BBC.com:
In January 1776 he published a short pamphlet that earned him the title The Father of the American Revolution.
Titled simply, Common Sense, the work has been described by the Pulitzer-winning historian Gordon S Wood as “the most incendiary and popular pamphlet of the entire [American] revolutionary period”. It put the case for democracy, against the monarchy, and for American independence from British rule.
Lefties like Harvey Kaye, a professor at the University of Wisconsin-Green Bay and author of Thomas Paine and the Promise of America, like to say
He put the case for political democracy AND social democracy, arguing in The Rights of Man that young people and the elderly should be afforded financial security by their governments. These welfare ideals are under attack right now, in our era of recession.
He has a point, though I suspect that Paine would think that the American welfare state has exceeded the sort of minimal provision for the poor that he had in mind. As for me, I rather like the fact that he proposed to execute any legislator who so much as proposed a bill to issue paper money and make it legal tender. A bit too strong, I concede. But a healthy understanding of what fiat money can do to people who work hard and save their money.
Find some of Thomas Paine’s best writings in The Libertarian Reader.
Americans Want Global Warming Action Now
Dana Milbank has the evidence:
For the past few years, liberal activists have gathered in Washington each spring for the Take Back America conference….
But now that Obama has actually taken back America, the activists at this year’s gathering feel a bit like the dog that finally caught up with the car. Organizers changed the name from Take Back America to America’s Future Now, but that didn’t prevent a sharp decline in participation. …
Hickey estimates attendance dropped from 2,500 last year to 1,500 this year, and even that may overstate things. At yesterday morning’s four concurrent “issue briefings,” 585 chairs were set out. Only 213 of them were occupied, including just 15 for the session on global warming.
Obama’s Energy Reading
The Washington Post writes about how President Obama became obsessed with grabbing our complex energy systems by the scruff of the neck and shaking them into something more appealing to Ivy League planners. I was struck by this vignette:
But even before the late-night session in July, Obama had begun to educate himself about energy and climate and to use those issues to define himself as a politician, say people who have advised him. He read a three-part New Yorker series on climate change, for instance, and mentioned it in three speeches.
It’s great that he read a three-part series in the New Yorker. But has the president ever actually read anything by a climate change skeptic? Actually, a better term would be “a climate change moderate.” Leading “skeptic” Patrick J. Michaels, for instance, of Cato and the University of Virginia, isn’t skeptical about the reality of global warming. His summary article in the Cato Handbook for Policymakers begins:
Global warming is indeed real, and human activity has been a contributor since 1975.
But he also notes that climate change is complex, and its policy implications are at best unclear. “Although there are many different legislative proposals for substantial reductions in carbon dioxide emissions, there is no operational or tested suite of technologies that can accomplish the goals of such legislation.” The flawed computer models on which activists rely cannot reliably predict the future course of world temperatures. The apocalyptic visions that dominate the media are not based on sound science. The best guess is that over the next century there will be very slight warming, without serious implications for our environment our society. Michaels’s closing appeal to members of Congress would also apply to President Obama and his advisers:
Members of Congress need to ask difficult questions about global warming.
Does the most recent science and climate data argue for precipitous action? (No.) Is there a suite of technologies that can dramatically cut emissions by, say, 2050? (No.) Would such actions take away capital, in a futile attempt to stop warming, that would best be invested in the future? (Yes.) Finally, do we not have the responsibility to communicate this information to our citizens, despite disconnections between perceptions of climate change and climate reality? The answer is surely yes. If not the U.S. Congress, then whom? If not now, when? After we have committed to expensive policies that do not work in response to a misperception of global warming?
Please, President Obama — in addition to the lyrical magazine articles on the apocalyptic vision that you read, please read at least one article by a moderate and widely published climatologist before rushing into disastrously expensive policies.
The Corporate Culture at Government Motors
David Brooks comes in for his share of criticism in these parts, but he has a very astute column today about the ways that government ownership will worsen an already problematic corporate culture at a once-great company:
Fifth, G.M.’s executives and unions now have an incentive to see Washington as a prime revenue center. Already, the union has successfully lobbied to move production centers back from overseas. Already, the company has successfully sought to restrict the import of cars that might compete with G.M. brands. In the years ahead, G.M.’s management will have a strong incentive to spend time in Washington, urging the company’s owner, the federal government, to issue laws to help it against Ford and Honda.
Sixth, the new plan will create an ever-thickening set of relationships between G.M.’s new owners — in government, management and unions. These thickening bonds between public and private bureaucrats will fundamentally alter the corporate culture, and not for the better. Members of Congress are also getting more involved in the company they own, and will have their own quaint impact.
The end result is that G.M. will not become more like successful car companies. It will become less like them.
Is Obama Making America like Sweden?
If only.
Just as the Obama administration takes over another once-great American company, Sweden is busy privatizing. As the Christian Science Monitor reported recently:
Last week, the country’s center-right government began selling off state-owned pharmacies, one of the country’s few remaining nationalized companies, as part of an ambitious program of liberal economic reforms started in 2006. In the same week, a study by the Swedish Unemployment Insurance Board revealed that almost half of the country’s jobless lacked full unemployment benefits. Many opted out of the state scheme when the cost of membership was raised last year; others were ineligible.
State pensions, schools, healthcare, public transport, and post offices have been fully or partly privatized over the last decade, making Sweden one of the most free market orientated economies in the world, analysts say.
Please, President Obama, send Larry Summers to Sweden to get some new ideas for economic reform.
Filed under: International Economics and Development; Political Philosophy
Democratic Deficit Hawks?
In a hagiographic profile of Obama budget director Peter Orszag, Ryan Lizza of the New Yorker writes of the “pressure” he might get from congressional deficit hawks:
The respective heads of the House and Senate Budget Committees, John Spratt, Jr., of South Carolina, and Kent Conrad, of North Dakota, have spent years trying to control the deficit…
Kent Conrad, the chairman of the Senate Budget Committee, has made eradicating the federal budget deficit his life’s work.
Now, you’d think that if the ranking Democrats on the congressional budget committees had made deficit reduction their life’s work, the budget wouldn’t have, you know, skyrocketed over the past decade and more. So let’s go to the tape.
The National Taxpayers Union has given Spratt an F for his votes on federal spending every year for more than a decade. (He had a couple of D’s earlier in his career.) In the past two years, he voted with the taxpayers 5 and 6 percent of the time. He voted for spending bills more often than the average member of the House, and more often than the average Democrat. Some deficit hawk!
Conrad has an almost identical record — almost all F’s, with ratings of 5 and 6 in the past two years.
By another measurement, in the 109th Congress (the most recent for which these calculations are available), Spratt voted for $184 billion in additional spending and voted to cut — drum roll, please — $4.8 billion in spending. Conrad voted to cut $8 billion, but he also voted to hike spending by $362 billion. In what world are these guys “trying to control the deficit”?
NTU does have one analysis that makes Conrad and Spratt look a little better: the bills they have sponsored or cosponsored. Spratt introduced 32 bills that would increase spending and 2 that would cut spending. While that may not sound very thrifty, it compares favorably to, say, Hilda Solis’s 110 bills to increase spending or Barney Frank’s 112. And the total new spending in Spratt’s bills — $7 billion — is positively Randian. Conrad’s record is similar — 36 bills to increase spending by $8 billion, which compares very favorably to, for instance, Hillary Clinton and Thad Cochran.
Apparently Conrad and Spratt don’t introduce too many spending bills, but they vote for all the ones that get to the floor. Not exactly a strategy that holds the budget down. The search for a fiscally conservative Democrat continues.
California, Here We Come
Next week the Cato Institute will hold seminars in Los Angeles and Santa Barbara. The program is the same both places.
Leda Cosmides, one of the world’s leading evolutionary psychologists, will kick things off at 11 a.m. with a talk on our intuitive ideas about fairness and justice. Then Cato’s Michael Tanner will warn about the horrors of Obamacare and Dan Mitchell will tell us that it doesn’t matter because the country’s going to be bankrupt anyway. Former California congressman and Senate candidate, and potential governor, Tom Campbell will wrap things up after lunch with a discussion of the state’s fiscal predicament.
A sobering program for sobering times. Sign up now!
Richard Epstein on Sotomayor
Cato adjunct scholar Richard Epstein of the University of Chicago and New York University, finds much to worry about in Judge Sonia Sotomayor’s nomination to the Supreme Court:
The treatment of the compensation packages of key AIG executives (which eventually led to the indecorous resignation of Edward Liddy), and the massive insinuation of the executive branch into the (current) Chrysler and (looming) General Motors bankruptcies are sure to generate many a spirited struggle over two issues that are likely to define our future Supreme Court’s jurisprudence. The level of property rights protection against government intervention on the one hand, and the permissible scope of unilateral action by the president in a system that is (or at least should be) characterized by a system of separation of powers and checks and balances on the other.
Here is one straw in the wind that does not bode well for a Sotomayor appointment. Justice Stevens of the current court came in for a fair share of criticism (all justified in my view) for his expansive reading in Kelo v. City of New London (2005) of the “public use language.” Of course, the takings clause of the Fifth Amendment is as complex as it is short: “Nor shall private property be taken for public use, without just compensation.” But he was surely done one better in the Summary Order in Didden v. Village of Port Chester issued by the Second Circuit in 2006. Judge Sotomayor was on the panel that issued the unsigned opinion–one that makes Justice Stevens look like a paradigmatic defender of strong property rights.
I have written about Didden in Forbes. The case involved about as naked an abuse of government power as could be imagined. Bart Didden came up with an idea to build a pharmacy on land he owned in a redevelopment district in Port Chester over which the town of Port Chester had given Greg Wasser control. Wasser told Didden that he would approve the project only if Didden paid him $800,000 or gave him a partnership interest. The “or else” was that the land would be promptly condemned by the village, and Wasser would put up a pharmacy himself. Just that came to pass. But the Second Circuit panel on which Sotomayor sat did not raise an eyebrow. Its entire analysis reads as follows: “We agree with the district court that [Wasser's] voluntary attempt to resolve appellants’ demands was neither an unconstitutional exaction in the form of extortion nor an equal protection violation.”
Maybe I am missing something, but American business should shudder in its boots if Judge Sotomayor takes this attitude to the Supreme Court.
O Canada!
So not only is Canada economically freer than the United States, with government spending and taxes about to be lower than ours, now the Canadian navy has saved an American ship from a pirate attack off Somalia. It may be time to play “The World Turned Upside Down” again.
Filed under: International Economics and Development; Tax and Budget Policy
Bailout Nation
The four top business headlines in the Washington Post the other day were:
More Homeowners Getting Aid, but Demand Keeps Rising
AIG Could Repay U.S. in 3 to 5 Years, Chief Tells Congress
Treasury Clarifying Rules for Bailed-Out Firms
Small Auto Suppliers Seek Help in Wake of Giants’ Woes
It’s certainly true, as BBC and other journalists have noted, that the center of American business and finance is now Washington, not New York. The headlines above (in the paper edition, but some of them can be found here) indicate that all sorts of businesses and individuals are looking to the Obama administration for bailouts and loans and “capital injections.” And one could find similar stories about federal money for states, cities, big insurance companies, and more. Money and credit were once allocated by owners of capital, who stood to gain or lose on the strength of their decisions. Now capital is being allocated by politicians and bureaucrats, who have none of their own money at risk and who may well see their own power enhanced by an economy that remains slow.
Back in September, as the bailout of Fannie Mae and Freddie Mac ushered in a new era of federal help for failing companies, I wrote a blog post titled “Bailout Nation.” I didn’t know the half of it; still to come were the AIG bailout, TARP, federal subsidies to banks and automobile companies, and more. But I warned then:
Capitalism is a system of profit and loss. It works because each person and each company, in seeking its own interest, is led “as if by an invisible hand” to supply goods and services that others want. Companies that satisfy consumers prosper. Companies that can’t produce goods that consumers want–like Chrysler, repeatedly–suffer and sometimes go out of business. The failures are often painful. But as Dwight Lee and Richard McKenzie wrote in their book Failure and Progress (or at least in this column based on the book), “Economic failure is to the economy what physical pain is to the body. No one enjoys pain, but without it the body would lack the information needed to maintain its health.” Government subsidies to prevent business failure simply keep pouring money into businesses that are relatively unsuccessful at satisfying consumer desires. They are, among other things, censorship of vitally needed information. Employees, entrepreneurs, and investors need to know where their money and talent are most valuable. Profits and losses are key indicators of that.
Turns out that David Ignatius had warned of a “Bailout Nation” in a column a few months before that:
As every parent knows, the danger of cutting a special break for one child is that all the other children will demand the same thing. “It’s not fair,” goes the inevitable refrain. “You said Susie could eat ice cream and watch TV until midnight, so why can’t I?” The parents start caving, and family discipline is shot.
We’re now in a comparable cycle of bestowing special economic favors on members of the national family who have been hurt by the credit market crisis. “It’s not fair,” argue the housing interests and consumer advocacy groups. “Bear Stearns got a financial bailout, so why shouldn’t we?” And they’re right, by the simplest schoolyard definition of fairness.
So the line grows of people demanding breaks on financial obligations they can’t afford.
Neither of us is very happy about being so prescient. And what no one seems to discuss is, Where is all this bailout money coming from? Much of it is just being created on the balance sheets of the Federal Reserve, which portends rising inflation. Certainly it’s too much to be paid for in taxes, even in the fondest dreams of Barack Obama and Nancy Pelosi. Is Bernie Madoff advising the Treasury these days?
How much money is it? CNNMoney estimates that the federal government has now committed $10.5 trillion. Christopher Barker at the Motley Fool concludes that ”the combined total of existing, announced, and potential outlays from the Federal Reserve and U.S. government agencies that are directly attributable to the financial crisis will breach $13 trillion!”
This is nuts. Would Paulson and Bernanke have acted differently last April if they’d known where we would be in a year? They’d have known if they’d read David Ignatius’s column. Or if they’d read some history; when governments start handing out money to troubled institutions, there will be no limit to the number of troubled institutions. And in barely a year, you get small auto parts companies coming to Washington saying that if automakers and large suppliers are getting government help, they should too. President Bush and his Treasury secretary started this process, but Obama and the Democrats own it now. Do they have a plan that doesn’t end in inflation and bankruptcy?
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Tax and Budget Policy
What Caused Atlas Shrugged Sales to Soar?
Sales of Atlas Shrugged have risen sharply this year, and various observers from the Ayn Rand Institute to the Economist have attributed the jump to “uncanny similarities between the plot-line of the book and the events of our day,” in the words of ARI’s Yaron Brook. The Economist writes,
Whenever governments intervene in the market, in short, readers rush to buy Rand’s book. Why? The reason is explained by the name of a recently formed group on Facebook, the world’s biggest social-networking site: “Read the news today? It’s like ‘Atlas Shrugged’ is happening in real life”.
Brook told CNN:
“So many people see the parallels with actually what’s going on, with the government taking over the banks, with the government kind of taking over the automobile industry, a president who fires the CEO of a major American corporation. These are the kind of things that come out of ‘Atlas Shrugged.’ “
But is this story right? Do news headlines generate book sales? How did people who read about TARP or bank nationalizations know that those events were reminiscent of a novel published in 1957? Maybe their friends told them “It’s just like Atlas Shrugged,” and they ran out and bought the book.
Obama’s Unerring Instinct for Aides with Authoritarian Instincts
President Obama has appointed New York City health commissioner Thomas Frieden to head the Centers for Disease Control. Public health is an important issue, but as Jacob Sullum points out at Reason, Frieden has a weak grasp of what’s “public” in the world of health:
Frieden, an infectious disease specialist who is known mainly as an enthusiastic advocate of New York’s strict smoking ban, heavy cigarette taxes, trans fat ban, and mandatory calorie counts on restaurant menu boards, embodies the CDC’s shift from illnesses caused by microbes to illnesses caused by lifestyle choices. “Dr. Frieden is an expert in preparedness and response to health emergencies,” Obama said today, ”and has been at the forefront of the fight against heart disease, cancer and obesity, infectious diseases such as tuberculosis and AIDS, and in the establishment of electronic health records.” Some of these things are not like the others. When it comes to justifying the use of force, there is a crucial difference between health risks imposed by others (such as bioterrorists or TB carriers) and health risks that people voluntarily assume (by smoking or overeating, for example). In the former case, even those who believe that government should be limited to protecting individual rights can see a strong argument for intervention; in the latter case, intervention can be justified only on paternalistic or collectivist grounds. Frieden either does not recognize or does not care about this distinction.
Frieden told the Financial Times in 2006 that “when anyone dies at an early age from a preventable cause in New York City, it’s my fault.” That’s a breathtaking vision of the scope and power of government. If you eat butter or salt, or smoke, or climb mountains, or ride a motorcycle, or bungee-jump, or run with the bulls in Pamplona, Dr. Frieden feels that he and the government are personally responsible. This isn’t paternalism; your parents usually let you make your own decisions along about the age of 18. And it isn’t fair to nannies to call it “nanny state” regulation: after all, nannies are paid to take care of children until they can care for themselves; they don’t barge into your home or your bar or your restaurant uninvited, issuing orders to adults. Maybe the right term is food fascism, for the attempt to use force to tell adults what they can and can’t eat, smoke, or purchase.
More on the distinction between public health problems and health problems that are merely widespread here.
And more about Obama’s appointment of “a bunch of statist ideologues who have been waiting years or decades for an election and a crisis that would allow them to fasten on American society their own plan for how energy, transportation, health care, education, and the economy should work” here.
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