House Speaker John Boehner, in his speech to the Economic Club of New York on Monday night, was very clear about the conditions for which he would support an increase in the federal debt limit:

… Without significant spending cuts and reforms to reduce our debt, there will be no debt limit increase.  And the cuts should be greater than the accompanying increase in debt authority the president is given.

We should be talking about cuts of trillions, not just billions.

They should be actual cuts and program reforms, not broad deficit or debt targets that punt the tough questions to the future.

And with the exception of tax hikes — which will destroy jobs — everything is on the table.

Congress is institutionally incapable of formulating and approving a large responsible package of spending cuts in the next month or two, even if there were the basis for an agreement in the longer run.  The most likely outcome of this condition is that Congress would approve an increase in the debt limit for the next year or two with no significant amendments.  John Boehner would be the major loser from this outcome, for having talked tough and promised too much, without delivering anything to his party base.

Another possible outcome of this condition is that an increase in the debt limit would be deferred indefinitely.  This would lead to a period of fiscal anarchy in which total federal spending would have to be reduced to federal revenues on a month-by-month basis, and non-interest spending would have to be reduced about 40 percent with no political guidance on what activities are paid how much.

The House Republicans are better advised to sort out their priority budget changes in the longer run.  I suggest that it is desirable to maintain a commitment against any increase in tax rates but to consider major reductions in what is now roughly one trillion dollars of off-budget tax preferences; such reductions would increase both revenue and economic growth.  Finally, I  suggest that reductions in the defense budget should also be considered.  In a world in which the United States now faces no major power military threat, total real (inflation-adjusted) annual national security spending is now over twice that during the Ford and Carter administrations and over 40 percent of the total national security spending by all governments.

For the most part, I suggest, the Republican fiscal priorities are correct, but it will take better preparation and a longer time to implement these priorities.

Boehner’s Price for Increasing the Federal Debt Limit is a post from Cato @ Liberty - Cato Institute Blog

Martin Feldstein, a distinguished economist and a former colleague, made a surprising case for maintaining a large U.S. defense budget, despite a huge federal budget deficit, in the annual Irving Kristol lecture Tuesday night at the American Enterprise Institute.

On one point, he was clearly right: we can afford it. “There is no danger of bankrupting ourselves by so-called ‘imperial overreach’ when we spend less than 5 percent of GDP on defense” (in fact, 5.6 percent of GDP in 2010).

But he failed to make a convincing case that we should spend this much for defense, especially given the dire outlook for federal deficits and the debt. In 2010, U.S. real (inflation-corrected) spending for national security was over twice the annual spending during the Ford and Carter administrations and over 40 percent of total current world defense spending. What conditions, what national objectives, might justify continued U.S. defense spending of this or a higher magnitude?

Feldstein first plays the China card, arguing that “The United States should maintain a military capability such that no future generation of Chinese leaders will consider a military challenge to the United States or consider using military force to intimidate the United States or our allies,” maybe forgetting that a much weaker China successfully challenged us in Korea in the early 1950s. He next makes the case for the importance of a global military presence, arguing that “We have to make it clear by our budgets and by our actions that we are the global force now and will continue to be that in the future.” And finally, “we have to ask ourselves whether we have a moral obligation to defend our allies. …. There are those who say the United States should not be the global policeman. But if not us, who? As the only democratic superpower with the ability to defend and punish, do we not have a moral obligation to be willing to use that power?” All of this assumes without argument or evidence that it is important for the world to have a global policeman, that we can play this role effectively, and that it is a moral obligation for the United States to serve in this role.

The U.S. military had a central role in the most important strategic development since World War II — prevailing in the Cold War against the (former) Soviet Union. But it is critical to recognize that our military has not been very effective as a global policeman or nation builder. The Korean War ended in a draw, leaving a despotic communist government, now with nuclear weapons, in control of North Korea. After 20 years of a U.S. military presence, we abandoned Vietnam to a communist government that now controls most of southeast Asia. The U.S.-sponsored invasion of the Bay of Pigs was defeated, leaving a communist government in control of a large island 90 miles from Florida. U. S. forces have now been in Afghanistan for nearly 10 years without securing it from lightly armed local forces without significant external support. And U.S. forces have now been in Iraq for over eight years without securing it from frequent terrorist attacks.

I wonder what evidence Feldstein or anyone else would offer to support a view that the United States has a comparative advantage as the global policeman. Most of our allies can afford higher defense spending if our support is reduced. The total GDP of the European Union is higher than the U.S. GDP. The GDP of South Korea is many times that of North Korea. There is no obvious calamity that would result if the U.S. contribution to the collective defense with our allies were reduced.

Yes, we can afford a large defense budget, and national security is one of the few federal programs for which there is clear constitutional authority. But like the budgets for most other federal programs, the defense budget is too large. So a substantial reduction of the defense budget should be on the table in any serious effort to avoid a fiscal collapse, a threat that is more serious and more urgent than any that might be effectively countered by trying to maintain the role of a global policeman.

Martin Feldstein on the Defense Budget is a post from Cato @ Liberty - Cato Institute Blog

A new House rule requires that every new bill or joint resolution introduced in the House include a statement citing the specific powers in the Constitution granted to Congress to enact the proposed law.  In the absence of such a statement, the clerk of the House will not accept the bill and it will be returned to the sponsor.

This new rule may have two potentially valuable effects:

• For some time, this rule may have a valuable educational effect, reminding new House members, returning members, and the public that Article 1, Section 8 of the Constitution authorizes only 18 federal powers – far fewer than the powers that the federal government has assumed, especially during the past 75 years.
• The constitutional citations for House bills that are approved would be part of the legislative record that the Supreme Court may consider in subsequent litigation bearing on the constitutionality of Acts of Congress.

This rule, however, is also likely to have two potentially negative effects:

• This rule, by limiting new legislation to federal activities for which there is express or implied authority in the Constitution, would severely limit the potential of Congress to exercise legislative authority over the many current federal  activities for which there is no such authority.
• In the absence of  authority in the Constitution for many types of current federal activities or others that Congress may wish to approve, Congress – like the Supreme Court – is likely to rationalize their judgments by elastic interpretations of the general welfare clause, the interstate commerce clause, or the necessary and proper clause.

An alternative interpretation of this new rule, however, would maintain its potentially valuable effects, maintain the potential for Congress to exercise legislative authority over federal activities for which there is no authority in the Constitution, and avoid the equivocation that is characteristic of statements about the powers of the federal government for which there is no authority in the Constitution: A new bill should be cleared for a vote when accompanied by a statement that identifies either the constitutional authority for the federal activities addressed by the bill or the lack thereof.  In the latter case, a statement such as the following should be sufficient for the House clerk to clear a bill for a vote:

There is no authority in the Constitution for the federal activities addressed by this bill.  For such time as any relevant constitutional issues are not resolved and the measures addressed by this bill remain in force as positive law,  we accept the responsibility to assure that this activity is administered efficiently and fairly and to propose changes that would better serve the American people.

This alternative interpretation of the new rule would increase the opportunity for members of Congress to express their views about the constitutional issues bearing on the powers of the federal government but would maintain their potential to legislate.  It is important to maintain an effective separation of powers within the federal government.  Congress does not have an impressive record as a legislature, but it would be a lousy constitutional court.

Cite the Constitutional Authority or the Lack Thereof! is a post from Cato @ Liberty - Cato Institute Blog

At the beginning of his inaugural address, President Obama observed that

“America has carried on, not simply because of the skill or vision of those in high office, but because we the people have remained faithful to the ideals of our forebears and true to our founding documents.” [my italics]

Although Obama had taught constitutional law for 12 years, the rest of his address raises a question whether he has ever read the Constitution. For he spells out his vision by committing his administration to a wide range of activities for which there is little or no authority in the Constitution.

“We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place and wield technology’s wonders to raise health care’s quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age.”

Moreover, he asserts, our government should be judged by “whether it works — whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified,” not by such “stale political arguments” as whether the policies that might generate these outcomes are constitutional and generate benefits higher than the costs.

Nor are the commitments of his administration to be limited to those of greatest concern to Americans.

“To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow, to nourish starved bodies and feed hungry minds. And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to the suffering outside our borders; nor can we consume the world’s resources without regard to effect.”

“What is required of us now is a new era of responsibility – a recognition, on the part of every American, that we have duties to ourselves, our nation, and the world.”

President Obama is intelligent and charming –- but not wise. The Constitution only authorizes the president to be the chief executive of the federal government and the commander-in-chief of the armed forces, ample challenges to the most skilled person, but the president is not the sole leader of the federal government, the American nation, or the free world. Based on his inaugural address, President Obama has no apparent sense of the limits of what he can and should do –- and that will reduce his effectiveness in addressing those issues within his clear authority.

Obama’s Constitution is a post from Cato @ Liberty - Cato Institute Blog

For the second time in six years, the Bush administration has asked Congress for nearly unlimited authority without an independent professional review of the evidence that led the administration to request such authority.

In making the case for the Iraq war resolution, according to Senator John D. Rockefeller, “the administration repeatedly presented intelligence as fact when it was unsubstantiated, contradicted or even nonexistent. As a result, the American people were led to believe that the threat from Iraq was much greater than actually existed.”

As it turned out, of course, no “weapons of mass destruction” were ever discovered.

The skeletal proposal for the Troubled Asset Relief Program states that “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency. The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this act without regard to any other provision of law regarding public contracts” – again without an independent professional review of the evidence that led the administration to request such extraordinary authority.

In both cases, the administration requested urgent congressional approval of these measures when members of Congress were anxious to go home to run for reelection. And a final irony: the total direct cost of the Iraq war to date has been about $700 billion, the same amount that the administration has requested to buy bad mortgages.

Another $700 Billion is a post from Cato @ Liberty - Cato Institute Blog

The prize for the best policy idea of the week goes to Steve Ahlenius, the president of the Chamber of Commerce in McAllen, Texas on the Mexican border.  As reported in The Monitor, a local newspaper:

McAllen, Texas calls for a wall around Washington, D.C.

We feel the need to protect ourselves from bad legislation, bad ideas, and a waste of taxpayer money.

A wall around their homes and businesses will give the legislators and Washington bureaucrats a better understanding of what kind of message this action will send.

Let’s see if they decide to climb over it, tunnel under it, or walk around it.

Build a Wall is a post from Cato @ Liberty - Cato Institute Blog

On Monday, a student at Virginia Tech shot and killed 32 of his colleagues and then himself – the most deadly peacetime shooting incident in U.S. history. Many Americans are still grieving about this incident and are puzzled about what would lead a young man to such deadly behavior.

On Wednesday, terrorists killed 312 civilians in Iraq, including 140 civilians in a truck bombing across from the busy Sadriya market in a mostly Shi’ite neighborhood in Baghdad, only hours after Prime Minister al-Maliki committed the Iraqi government to assume responsibility for security by the end of this year. The deaths due to the terrorism in Iraq on Wednesday substantially exceeded the high level of recent terrorism. Terrorists killed 500 Iraqi civilians last week, including 47 civilians killed when a suicide bomber blew up a car at a busy bus station in Karbala.  A truck bomb destroyed a major bridge across the Tigris River, and a suicide bomber penetrated the fortress-like Green Zone, blowing himself up inside the parliament cafeteria and killing one member of parliament. Moreover, last week was not unusual in Iraq. Over the past year, terrorist attacks killed 73 Iraqi civilians per day, including those by the 17 bombings that killed 50 or more civilians. (These estimates are from press releases by Antiwar.com and are based on reports in the Iraqi press).

Most Americans have no comprehension of the level of terrorism in Iraq. Since the American population is 12 times the Iraqi population, the above numbers should be multiplied by 12 to understand the relative magnitude of terrorist activities in the United States and Iraq. At the recent rate of terrorist activities in Iraq, around 876 Americans per day would be killed by terrorist attacks! At that rate, Americans would be experiencing a level of grief and despair beyond our current comprehension.

I draw several lessons from this morbid comparison: There is every reason to improve our understanding of the motives that led to the massacre at Virginia Tech and the responses that might have reduced the number of fatalities, because the victims were Americans and these conditions are more likely to be under our control. At the same time, we should recognize that the presence of a substantial number of American troops in Iraq may have contributed to but, at least, has not reduced the extraordinary rate of terrorism, that more troops or different tactics are not likely to be more successful, and that the several civil wars underway in Iraq are not under our control. We have an important stake in reducing the number of future incidents like that at Virginia Tech and Oklahoma City. It is much less clear that we have an important stake in the outcome of the several civil wars in Iraq.

Morbid Comparisons is a post from Cato @ Liberty - Cato Institute Blog

Our responses to the threat of terrorism are all too often described as “the war against terrorism.”  But this makes no linguistic sense; terrorism is one of many dangerous phenomena, not an enemy.  We do not describe our responses to the threat of hurricanes, for example, as a war against hurricanes.  More important, the war metaphor has severely biased both the nature and extent of our responses to the threat of terrorism.

First, the war metaphor implies that the primary response to the threat of terrorism should be a military response.  Terrorism, however, is the tactic of those who are motivated to seek political change by violence but are militarily weak.  The most important and too often neglected first question to address is whether some change in policy — such as the foreign basing of U.S. military forces — would reduce the motive for a terrorist threat against Americans at a lower cost than any other potential response.  Maybe not.  In that case, the most effective responses to the residual threat of terrorism are improvements in intelligence, intelligence sharing, and the capability of local police forces — with several special operations forces the only important military response.  The very expensive new weapons systems in the U.S. defense budget, in contrast, contribute nothing to increasing our security against the threat of terrorism.

Second, the war metaphor leads to an overreaction to the the threat of terrorism by inviting misleading comparisons of current conditions with those during prior conditions properly described as wars.  Those who defend an aggressive response to the threat of terrorism are quick to point out that the current losses of liberty and property to counter this threat have been small relative to those during wars.  But the threat of terrorism is very different than the threats during a war in three dimensions: Terrorism presents the small probability of a small loss (unless terrorists acquire a nuclear weapon) but one that may be extended indefinitely.  A war presents a larger probability of a large loss but one that is likely to be limited to a few years.  Most of us are prepared to sacrifice some liberty and property when there is an increased threat to our lives, but the difference in conditions presented by the threat of terrorism and wars strongly affects how much that we are prepared to sacrifice.  In general, people should be expected to be willing to pay a lower current price for security when the expected loss is lower and the period of potential loss is longer; for both of these reasons, how much liberty and property we should be expected to sacrifice in response to the threat of terrorism is far less than during a war.

This perspective leads me to conclude that the U.S. Government should substantially reduce the several dimensions of the current cost of responding to the threat of terrorism to a level sufficient to support only the most effective of these responses for a duration that may be indefinitely long.  Americans may have a lot to learn by a better understanding how Britain, Spain, and some other countries have responded to a threat of terrorism for decades with little sacrifice of liberty or property.

We may still need to replace the war metaphor with some metaphor that better reflects an effective, sustainable response to the threat of terrorism, but I will leave that to someone who is a better wordsmith.

Putting an End to “The War on Terror” is a post from Cato @ Liberty - Cato Institute Blog

For the moment, the Democrats are expected to win control of one or both houses of Congress in the congressional election this fall.  That may have two strongly beneficial effects on the Republican Party:

1. More congressional Republicans will rediscover their commitment to fiscal responsibility when most of the proposals for increased spending originate in a house of Congress controlled by the Democrats.  For the past five years, in contrast, congressional Republicans approved almost all proposals for increased spending by the Republican president or their party colleagues. 
2. More social conservatives will rediscover their commitment to federalism in order to protect the authority to address value issues by state governments when it becomes clear that there is no political opportunity for federal decisions on these issues.  With the first unified Republican federal government in 50 years, in contrast, social conservatives have been motivated to propose federal political decisions on these issues for which there is no national consensus.

The combination of a long unnecessary war, the fiscal excesses disguised as compassionate conservatism, and an intolerant social agenda has almost destroyed the traditional Republican political coalition, leaving many of us without any enthusiasm for the candidates and policies of either party.  The first step to restoring the Republican Party, ironically, may be a Democratic victory in the congressional election this fall.

Several years in the political wilderness may do much to clear the mind.

Divided Government May Help Restore the Republican Party is a post from Cato @ Liberty - Cato Institute Blog

Iraq is an artificial country, the combination of three former Ottoman provinces with a quite different Muslim group dominant in each province. Few people have significant loyalty to any government of the combination of these provinces, and Iraq can probably be held together only by a strong man who commands the support of the military. After Tito’s death, for example, the former Yugoslavia broke up into six independent governments, and the separation of Serbia and Kosovo is still likely.

My judgment is that the only plausible political equilibria in Iraq are the emergence of a strong man or the fragmentation into three independent governments dominated by the Sunnis, Shia, and the Kurds. A civil war, I suggest, may be the necessary next step toward either of these outcomes. Current U.S. government policy, of course, is to try to achieve an accomodation among these groups without continued violence or an indefinite U.S. military role, an outcome that is desirable but increasingly implausible.

The U.S. government may not have the capability to prevent a civil war in Iraq, and in any case, we may not have a dog in that fight.

Our government, ironically enough, may prefer the emergence of a Sunni strong man to maintain a unified Iraq, someone like Saddam Hussein who is not subservient to Iran; and of course, Hussein was “our” man in the Middle East during the Iran-Iraq war. Fragmentation into three governments would be the preferred outcome only if it did not precipitate a larger regional war. The problem is that the Turks may oppose an independent Kurdistan on their border, and the Saudis may oppose a Shia state subservient to Iran on their border.

The increasing sectarian violence in Iraq may yet be controlled by the military and police forces of the current government without indefinite U.S. military support. Fine, but the Iraqi government should be aware that popular support for an indefinite U.S. military role in Iraq is falling rapidly. In the event of a more open civil war, the U.S. government should avoid taking any side in the conflict and should pursue a loss-minimizing strategy during a rapid phase-out of U.S. troops. In anticipation of a possible fragmentation of Iraq, the U.S. government may still have enough leverage on other governments to reduce the prospect of a larger regional war.

There is no plausibly rewarding outcome to the U.S. role in Iraq. Sometimes, the wisest course, if also the most difficult, is to choose the least bad of a set of bad outcomes.

A Civil War May Be the Necessary Next Step Toward a Political Equilibrium in Iraq is a post from Cato @ Liberty - Cato Institute Blog

President Bush has endorsed adding the former Soviet province of Georgia to NATO, a measure that seems designed to provoke the Russians without adding any net benefits to the alliance.  Georgia would bring more liabilities than assets to NATO because it is inherently indefensible.  It is nearly surrounded by Russia; its only border with NATO is a short border with eastern Turkey.  Georgia has no significant military forces of its own, and Russian troops already occupy two enclaves there.

Article V of the NATO Charter obligates all NATO governments to respond to an attack on any NATO country, increasing the probability that a minor confrontation between Georgia and Russia would lead to a larger war between NATO and Russia.  NATO should not be broadened to include countries on the Russian border unless those countries have substantial military forces and defensible borders.  For a similar reason, the earlier addition of the three Baltic countries to NATO was a mistake.  Peaceful and productive relations with Russia are more important than any value these new members bring to the United States and NATO.

President Bush was gracious in hosting the president of Georgia this week and was correct to support the major economic reforms that Georgia has initiated.  But he was wrong in endorsing NATO membership as a sort of after-dinner mint.  There are much larger issues at stake for the U.S., Europe, and Russia.  One wonders what Bush now expects to accomplish with Putin at the G-8 meeting in St. Petersburg next week.  

Madness!!! is a post from Cato @ Liberty - Cato Institute Blog

Last week, I wrote about the Public Company Accounting Oversight Board (PCAOB). Here’s an update:

Last week, the Securities and Exchange Commission appointed an obscure member of the Federal Reserve Board as chairman of the PCAOB, increasing his annual salary from $165,200 with the Fed to $615,000. 

Again, Congress ought to use this occasion to question the purpose and structure of one of its recent creations. 

Updating “An Unnecessary, Expensive, and Probably Unconstitutional Board” is a post from Cato @ Liberty - Cato Institute Blog

Congress should pay attention to what is happening with one of their recent creations.  The Securities and Exchange Commission will soon appoint two members of the Public Company Accounting Oversight Board (PCAOB), a private monopoly that was created by the Sarbanes-Oxley Act of 2002. This board is unnecessary, expensive, and probably unconstitutional.

This board was created to establish auditing standards for all public accounting firms and to monitor the performance of these firms, based on the presumed failure of Arthur Andersen, one of the formerly Big 5 public accounting firms, to adequately audit the financial reports of Enron. The Sarbanes-Oxley Act, however, left in place a major conflict of interest affecting these firms: The public accounting firms continue to be paid by the companies that they audit. Instead of correcting this conflict of interest, Congress established a new board to regulate all of the public accounting firms, although only a few such firms have ever been charged with a major breach of auditing standards. Congress could have corrected this conflict of interest by shifting the payment for audits from the audited firms to the stock exchanges on which the firms are listed; the stock exchanges would then recover the audit payments in their listing fees.  In this case, the PCAOB would be unnecessary, an overreaction to what was apparently a rare breach of the existing auditing standards.

The PCAOB is outrageously expensive. The chairman is paid an annual salary of $615,000, and each of the other four members are paid an annual salary of $500,000 — in both cases, a multiple of the salary of the President of the United States who has many more serious problems to worry about.

Moreover, all of the candidates for the two open positions are current or former federal officials for whom a much lower salary was a sufficient incentive.

As a private monopoly with both regulatory powers and taxing powers, the PCAOB is probably also unconstitutional. The PCAOB sets its own budget that is financed by a mandatory fee on all public listed corporations. A case has already been filed that challenges the constitutionality of the PCAOB, which if successful would probably invalidate the whole of the Sarbanes-Oxley Act. So much the better.

For an update, see here.

An Unnecessary, Expensive, and Probably Unconstitutional Board is a post from Cato @ Liberty - Cato Institute Blog

Most of the members of the conference committee on the immigration bill seem to have forgotten our own heritage.

Compared to the present, the United States had a higher rate of immigration just prior to World War I when we had no significant immigration controls (except against the Chinese) and no federal welfare programs. Most of these immigrants were from Ireland, Italy, Hungary, Poland, and other poor European countries; most spoke no English and had only crude manual skills. Many Americans from families who had been here for more than a few generations were prone to speak disparagingly about the status and prospect of the new immigrants. For all that, almost all of these new immigrants (including my grandfather) were work-oriented, family-oriented, no burden to others, and, within a generation, fully assimilated Americans.

Most current immigrants, other than being Hispanic, are very much like those who chose to make their future in the United States a century ago. The record of recent immigrants is impressive: a relatively high employment rate, a relatively low rate of birth to single mothers, and an unusually low incarceration rate. So far, the one major difference from prior immigrants is that the Hispanics are less education-oriented. Given the opportunity, there is every reason to expect them to be good workers, good neighbors, and fully assimilated Americans within a generation. 

The one major difference from a century ago that affects this issue is that the United States is now a substantial welfare state. Illegal immigrants appear to be net taxpayers to the federal government but net tax burdens to state and local governments, especially if they have children in school. 

The primary solution to this problem is to build a wall around the welfare state, not the U.S. nation-state. For new immigrants, access to social services could be limited to emergency health care. Access to public schooling could be limited to those children born in the United States. Access to the full range of social services could be limited, for example, to those who have four years of legal work experience, a record of full payment of taxes, and no felony conviction. 

A supplementary solution to this problem would be a federal transfer to those states and local governments with an unusual number of immigrants. This approach should substantially reduce the opposition to immigration by residents of the border states.

Building a wall around the country, in contrast, is unnecessary, futile, and offensive.

Build a Wall around the Welfare State, Not around the Country is a post from Cato @ Liberty - Cato Institute Blog

House Republicans have one last chance to demonstrate that they have any remaining intelligence or principles. On June 13, the House Appropriations Committee approved a bill that would increase the minimum wage from $5.15 to $7.25 per hour over the next three years. This bill, with the support of seven Republicans on the committee, would implement one of the highest priorities of the congressional Democratic leadership.

An increase in the minimum wage is one of the dumbest possible policies for the following reasons:

1. The employment of the least-skilled members of the labor force—often new entrants—would be reduced.
2. The non-wage benefits and working conditions of those who keep their jobs at the higher wage would probably be reduced.
3. Most of those who keep their jobs at the higher wage would be secondary workers in non-poor families.

An increase in the minimum wage has long been a symbolic issue for the Democrats, however inconsistent with their other professed political values. House Republicans should challenge the Democrats on this issue, pointing out that an increase in the minimum wage would most hurt those that they claim to help. To do this, the House Republicans should split off the minimum wage provision from the appropriation bill, allow a separate floor vote on this provision, and demonstrate the absurdity of this proposal by a defeating this measure by a large margin. I’m waiting for a demonstration of good sense, in part, to determine whether there is any remaining reason to favor a Republican majority in the House.

House Faces the Dumbest Bill of the Year (So Far): A $2.10 Increase in the Minimum Wage is a post from Cato @ Liberty - Cato Institute Blog

All of this blogtalk about which major party is likely to be more receptive to libertarian policy positions, I suggest, is a waste of time unless the winning candidate of either party is dependent on the votes of libertarians.

Increased outrage about the state of American politics and the prospect for a larger number of close elections increases the potential effectiveness of a different libertarian party — one that sometimes endorses one or the other major party candidate but does not run a party candidate for that position.

The Libertarian Party’s efforts to promote their policy positions by running Libertarian candidates is counter-productive when they reduce the vote for their favored major party candidates. A disciplined group that is prepared to endorse one or the other major party candidate in a close election, however, can have a substantial effect on the issue positions of both major party candidates. The following conditions must be met to achieve this effectiveness:

1. The party cannot run a separate candidate.
2. The size of the party must be larger than the expected vote difference between the major party candidates.
3. After the major party candidates are selected, the party leadership must have the opportunity to bargain with both major party candidates on the issue positions of highest priority for the party.
4. The party, as much as possible, must act in concert to support the major party candidate who is chosen by the members of the party in that district.

There is no reason for this libertarian party to be active in any district for which the party does not meet all four of the above conditions. (For most libertarians, the most difficult of these conditions to meet, I suspect, is condition 4.) In addition, the party should not emphasize the same issues in every district, because the choice of these issues should depend on those for which the major party candidates are willing to bargain.

This is a strategy to increase the approval of libertarian policy positions rather than the usually counter-productive effort to increase the number of votes for Libertarian candidates. Maybe it is better to term the organization that I have described as a libertarian political action group, not a libertarian party.

A Case for a Different Libertarian Party is a post from Cato @ Liberty - Cato Institute Blog

Harold Meyerson (Washington Post, May 10) was wrong to conclude that “The emerging Republican game plan for 2006…(reflects) their bankruptcy of ideas.” The Republican problem is not their lack of ideas but that the Bush administration has confused the politics of governing with the politics of campaigning. In 2005, President Bush proposed or endorsed major reforms of social security, taxes, immigration, and tort law. Most of these proposed reforms have not yet been addressed because the Bush administration would not work with Democrats to find a common ground, and the Democratic leadership would not even acknowledge the problems of current law that these proposed reforms would address. The prospect for comprehensive immigration reform is better only because of substantial support among the Democrats.

For all that, it is the Democratic Party that has been bankrupt of appealing policy ideas for the past 30 years. Marty Peretz, the editor of the New Republic, recently remarked that

It is liberalism that is now bookless and dying. Who is a truly influential liberal mind in our culture? Whose ideas challenge and whose ideals inspire? There’s no one, really. What’s left is the laundry list: the catalogue of programs…that Republicans aren’t funding, and the blogs, with their daily panic dose about how the Bush administration is ruining the country.

The policy proposals that are now bubbling up from the congressional Democratic leadership are a grab-bag of old ideas, some of which are remarkably dumb. An increase in the minimum wage is dumb because it reduces the employment of the least-skilled members of the labor force with most of the benefits accruing to secondary workers in non-poor families. An increase in the fuel economy standards is dumb because it reduces the cost of driving and applies only to new vehicles. One proposal that merits serious bipartisan attention is to revive the pay-as-you-go rules on federal spending and taxation that expired in 2002.

In summary, the Bush administration needs to learn how to govern, and the Democrats need to generate some appealing new policy ideas.

Republicans Need to Relearn How to Govern; Democrats Need New Policy Ideas is a post from Cato @ Liberty - Cato Institute Blog

For nearly 30 years, many Republicans have asserted that the best way to control federal spending is to “Starve the Beast” by reducing federal tax revenue. Moreover, this assertion has been endorsed by two Nobel-laureate economists, Milton Friedman and Gary Becker.

There are at least three problems with this perspective:

1. It is most implausible that reducing the tax burden of government spending on current voters would reduce the level of government spending that Congress would approve. In private markets, there is a consistent negative relation between the price of a good or service and the amount demanded.
2. The “Starve the Beast” assertion is inconsistent with the facts, at least since 1980.  My study finds that there was a strong negative relation between the federal spending percent of GDP and the federal revenue percent of GDP from 1981 through 2005, even controlling for the unemployment rate.
3. An increased belief in the “Starve the Beast” assertion has substantially reduced the traditional Republican concern for fiscal responsibility – leading to a pattern of tax cuts, increased spending, and increased deficits. This pattern has been strongest during the current Bush administration, primarily because the Republicans control both the administration and a majority of both houses of Congress.

In 2005, federal revenues were 17.8 percent of GDP. My estimate is that an increase of federal revenues to about 19 percent of GDP would be necessary to stabilize the federal spending percent of GDP. Control of at least one house of Congress by the Democrats, however, is likely to be necessary to achieve this outcome. Republicans should not consider this inconsistent with Reaganomics. After the major reduction in marginal tax rates in 1981, Reagan approved tax increases in each of the next three years and a major tax reform that increased federal revenues in the short run.

“Starve the Beast” Just Does Not Work is a post from Cato @ Liberty - Cato Institute Blog