We’ve often deplored the continued push of criminal prosecution into matters that were once considered more suitable for regulation or for the operation of civil law. A little-noted report a few weeks back in the Los Angeles Times may indicate the next milestone in overcriminalization:

The U.S. attorney has launched a fraud investigation to determine whether Los Angeles city officials ignored federal laws designed to protect the disabled when building or fixing up housing. …

The investigation spans January 2001 to the present, the letters said. If violations are uncovered, city agencies that used federal housing funds could face financial penalties, lose out on future grants or possibly become the subject of a criminal investigation, said [city official] Bill Carter…

Disabled activists sought an investigation because, to quote the LAT again,

In testimony and in person, activists alleged that doors were sometimes too heavy for wheelchair users to open, elevators were not working in at least one city-funded building, and managers either refused to rent to wheelchair users or did not have apartments available for them, [advocate Becky] Dennison said.

The activists also felt ignored because various management recommendations they made to local officials had been ignored. They already have a right to file civil suits over their grievances: indeed, shortly after the U.S. Attorney’s investigation came to light three advocacy groups did file a civil suit against the city.

There are very real problems of fraud — plain old graft and money-raking — on the L.A. public housing scene. But the idea of redefining fraud to include ADA noncompliance is a different matter. If taken seriously, it would mean exposing ordinary as well as dishonest local officials across the country to the specter of criminal liability. It’s notoriously hard to assure that either new or renovated buildings are 100% compliant with ambitious interpretations of the law; a design fix that satisfies three ADA consultants may displease a fourth. Criminal liability should arise from very clear, preannounced standards of conduct. That’s not the ADA.

Maybe the U.S. Attorney’s office is just raising the criminal issue as a bit of bravado to please its friends in the advocacy world and strong-arm the city into settling. But as playwrights know, if a shotgun is shown above the fireplace in Act I, by the middle of Act III a shot will ring out. This misguided extension of federal fraud law is worth challenging now.

Prison Terms for Not Installing ADA Ramps? is a post from Cato @ Liberty - Cato Institute Blog

My Cato colleague John Cochrane – who is way smarter than I am — has a generally excellent op-ed in today’s Wall Street Journal on ObamaCare’s contraception mandate:

Salting mandated health insurance with birth control is exactly the same as a tax—on employers, on Catholics, on gay men and women, on couples trying to have children and on the elderly—to subsidize one form of birth control…

The tax rate and spending debates that occupy the media are a small part of the effective taxes and spending that the government achieves by these regulatory mandates…

The natural compromise is simple: Birth control, abortion and other contentious practices are permitted. But those who object don’t have to pay for them. The federal takeover of medicine prevents us from reaching these natural compromises and needlessly divides our society…

Sure, churches should be exempt. We should all be exempt.

My only quibble is with his claim, “Insurance is a bad idea for small, regular and predictable expenses.”

That’s generally true. But medicine is an area where, potentially at least, small up-front expenditures (e.g., on hypertension control) could prevent large losses down the road. So it may be economically efficient for health plans to cover some small, regular, and predictable expenses. Both the carrier and the consumer would benefit. In fact, that would be the market’s way of telling otherwise uninformed consumers, “Hey! Controlling your hypertension is a really good for you!” And really, if someone is so risk-averse that they want health insurance with first-dollar coverage of everything – and they’re willing to pay the outrageous premiums that would accompany such coverage — why should we take issue with that?

ObamaCare’s contraceptive-coverage mandate demonstrates that government does  a horrible job of picking only those types of “preventive” services for which first-dollar coverage will leave consumers better off. But I also think advocates of free-market health care generally need to let go of the idea that health insurance exists only for catastrophic expenses.

Cochrane on ObamaCare’s Contraceptive-Coverage Mandate is a post from Cato @ Liberty - Cato Institute Blog

When Ronald Reagan said that big government undermined the economy, some people dismissed his comments because of his philosophical belief in liberty.

And when I discuss my work on the economic impact of government spending, I often get the same reaction.

This is why it’s important that a growing number of establishment outfits are slowly but surely coming around to the same point of view.

• The European Central Bank published a study showing “…a significant negative effect of the size of government on growth.”
• A study by two Harvard economists found that “large adjustments in fiscal policy, if based on well-targeted spending cuts, have often led to expansions.”
• The Organization for Economic Cooperation and Development noted in recent research that welfare programs are economically destructive because they lure people into dependency because “net disposable income would increase despite putting in fewer hours.”
• A study from the International Monetary Fund concluded that “Cuts to pension and health entitlements had the most beneficial effect on economic growth.”

This is remarkable. It’s beginning to look like the entire world has figured out that there’s an inverse relationship between big government and economic performance.

That’s an exaggeration, of course. There are still holdouts pushing for more statism in Pyongyang, Paris, Havana, and parts of Washington, DC.

But maybe they’ll be convinced by new research from the World Bank, which just produced a major report on the outlook for Europe. In chapter 7, the authors explain some of the ways that big government can undermine prosperity.

There are good reasons to suspect that big government is bad for growth. Taxation is perhaps the most obvious (Bergh and Henrekson 2010). Governments have to tax the private sector in order to spend, but taxes distort the allocation of resources in the economy. Producers and consumers change their behavior to reduce their tax payments. Hence certain activities that would have taken place without taxes, do not. Workers may work fewer hours, moderate their career plans, or show less interest in acquiring new skills. Enterprises may scale down production, reduce investments, or turn down opportunities to innovate. …Over time, big governments can also create sclerotic bureaucracies that crowd out private sector employment and lead to a dependency on public transfers and public wages. The larger the group of people reliant on public wages or benefits, the stronger the political demand for public programs and the higher the excess burden of taxes. Slowing the economy, such a trend could increase the share of the population relying on government transfers, leading to a vicious cycle (Alesina and Wacziarg 1998). Large public administrations can also give rise to organized interest groups keener on exploiting their powers for their own benefit rather than facilitating a prosperous private sector (Olson 1982).

In other words, government spending undermines growth, and the damage is magnified by a poorly designed tax policies.

The authors then put forth a theoretical hypothesis.

…economic models argue that the excess burden of tax increases disproportionately with the tax rate—in fact, roughly proportional to its tax rate squared (Auerbach 1985). Likewise, the scope for self-interested bureaucracies becomes larger as the government channels more resources. At the same time, the core functions of government, such as enforcing property rights, rule of law and economic openness, can be accomplished by small governments. All this suggests that as government gets bigger, it becomes more likely that the negative impact of government might dominate its positive impact. Ultimately, this issue has to be settled empirically. So what do the data say?

These are important insights, showing that class-warfare tax increases are especially destructive and that government spending undermines growth unless the public sector is limited to core functions.

Then the authors report their results.

Figure 7.9 groups annual observations in four categories according to the share of government spending in GDP during that year. Both samples show a negative relationship between government size and growth, though the reduction in growth as government becomes bigger is far more pronounced in Europe, particularly when government size exceeds 40 percent of GDP. …we provide new econometric evidence on the impact of government size on growth using a panel of advanced and emerging economies since 1995. As estimates can be biased due to problems of omitted variables, endogeneity, or measurement errors, it is necessary to rely on a broad range of estimators. …They suggest that a 10 percentage point increase in initial government spending as a share of GDP in Europe is associated with a reduction in annual real per capita GDP growth of around 0.6–0.9 percentage points a year (table A7.2). The estimates are roughly in line with those from panel regressions on advanced economies in the EU15 and OECD countries for periods from 1960 or 1970 to 1995 or 2005 (Bergh and Henrekson 2010 and 2011).

These results aren’t good news for Europe, but they also are a warning sign for the United States. The burden of government spending has jumped by about 8-percentage points of GDP since Bill Clinton left office, so this could be the explanation for why growth in America is so sluggish.

Last but not least, they report that social welfare spending does the most damage.

Governments are big in Europe mainly due to high social transfers, and big governments are a drag on growth. The question is whether this is because of high social transfers? The answer seems to be that it is. The regression results for Europe, using the same approach as outlined earlier, show a consistently negative effect of social transfers on growth, even though the coefficients vary in size and significance (table A7.4). The result is confirmed through BACE regressions. High social transfers might well be the negative link from government size to growth in Europe.

The last point in this passage needs to be emphasized. It is redistribution spending that does the greatest damage. In other words, it’s almost as if Obama (and his counterparts in places such as France and Greece) are trying to do the greatest possible damage to the economy.

In reality, of course, these politicians are simply trying to buy votes. But they need to understand that this shallow behavior imposes very high costs in terms of foregone growth.

To elaborate, this video discusses the Rahn Curve, which augments the data in the World Bank study.

As I argue in the video, even though most of the research shows that economic growth is maximized when government spending is about 20 percent of GDP, I think the real answer is that prosperity is maximized when the public sector consumes less than 10 percent of GDP.

But since government in the United States is now consuming more than 40 percent of GDP (about as much as Spain!), the first priority is to figure out some way of moving back in the right direction by restraining government so it grows slower than the private sector.

Data in New World Bank Report Shows that Large Public Sectors Reduce Economic Growth is a post from Cato @ Liberty - Cato Institute Blog

Cato adjunct scholar John H. Cochrane has a terrific piece in the Wall Street Journal today on the Obamacare vs. religious freedom brouhaha. In particular, though it’s not Cochrane’s main point, I thought this was spot-on:

Our nation is divided on social issues. The natural compromise is simple: Birth control, abortion and other contentious practices are permitted. But those who object don’t have to pay for them. The federal takeover of medicine prevents us from reaching these natural compromises and needlessly divides our society.

For those of you who don’t follow education very closely this might seem like a fairly novel point. Unfortunately, this also probably seems novel for many who do follow education, even many who do so professionally. But it shouldn’t, because unlike in health care, government has been the dominant provider of education for well over a century, and social conflict and division have been its constant companions.

Welcome to our war-torn world, health care. Better bring a helmet.

Welcome to Our War-torn World, Health Care is a post from Cato @ Liberty - Cato Institute Blog

One of the issues discussed in my new essay on the Bureau of Indian Affairs (BIA) is the lobbying by groups of American Indians seeking official tribal status. The BIA has the power to confer tribal status, and it does so in a non-transparent manner. With official status comes tribal access to a wide range of federal subsidy programs plus the ability to earn monopoly profits with a casino. The gaining of official status for tribes was one of Jack Abramoff’s specialty services.

The most recent BIA decision to confer tribal status is a classic case. The 221-member Tejon tribe in California received a thumbs up from the BIA in January 2012. The group’s reservation and its tribal status had been dissolved decades ago, but it hired some powerful Washington lobbyists to work their magic. An article in the Bakersfield Californian notes, “In their quest to gain recognition, the Tejons had the help of an unnamed ‘financial backer’ who had paid $300,000-plus to the tribe’s attorneys.” This financial backer was “banking on a casino.”

A Mountain Enterprise story says that once the Tejon tribe’s status was official, “speculation began almost immediately about the tribe’s plans to affiliate with Tejon Ranch Corporation and Las Vegas investors to establish a casino facility.” Famous D.C. lobby shop Patton Boggs earned $120,000 in fees on the deal.

For the Tejons, the lobbyists produced results. There are hundreds of Indian groups who have petitioned the BIA for tribal status, and the BIA only confers status to a few tribes a year. Yet somehow the Tejons managed to jump to the front of the queue. This list (and this one) appear to show that the tribe ranked low on the recognition waiting list at #230 (but I admit I’m not an expert on how the system works).

The tribes who hire lobbyists don’t always win. Here’s a story about the 450-member Muwekma Ohlone of California:

Financed by their own casino sugar daddy, Florida real estate tycoon Alan Ginsburg and his associates, as well as with proceeds from the tribe’s own archaeological consulting firm, the otherwise humble Muwekma have spent millions of dollars on the effort. Much of that money has gone toward procuring the aid of a high-powered Washington, D.C., law firm…. [R]ecognition would open the door for the tribe… to place land in federal trust as a ‘reservation’ on which it could open a casino. Indeed, should they attain recognition, the Muwekma almost assuredly will become the envy of non-gaming tribes from outlying regions of the state who’ve tried and thus far not succeeded at ‘reservation shopping’ — that is, attempting to set up casino operations in urban areas far from their aboriginal homeland.

The Muwekma Ohlone tribe lost an important court ruling last year, which has set back their search for official recognition. In this case, the only winners were the lawyers and lobbyists, who apparently pocketed huge fees from the tribe. This data source shows that lawyers and lobbyists gain about $20 million a year in fees on Indian gaming-related issues. Jack Abramoff alone raised $80 million from half a dozen tribal clients in the early 2000s for lobbying on a wide range of tribal issues.

Indian gaming and other complex regulatory schemes usually generate “rent” or monopoly privileges that groups vie for a manner that is unproductive to society as a whole. When the government confers special benefits through regulation, wealth is channeled to lawyers and lobbyists but the overall economy shrinks due to the misallocation of resources.

The best policy for gaming would be to repeal all government restrictions and to treat gaming like any other industry. That would eliminate rents and the related lobbying, and it would create an equal and competitive playing field for Indians and non-Indians alike.

The good thing about Indian gaming is that it has shown that Indians are every bit as entrepreneurial as other Americans. But gaming is not likely to be a stable platform for long-term Indian economic development. That’s because as tribal and nontribal gaming continues to expand, profit levels in tribal gaming are likely to decline.

A more durable strategy for Indian prosperity is to make institutional reforms on reservations to encourage broad-based investment in a range of industries, as discussed here.

Indian Gaming: The Lobbyists Always Win is a post from Cato @ Liberty - Cato Institute Blog

Regarding legislation to create an ObamaCare “Exchange” in Virginia, the Richmond Times-Dispatch explains:

Republicans at the General Assembly are falling prey to the fallacy of the false alternative…

[H]ere are the real options facing Virginia: (a) federal bureaucrats determine the form of our exchange, or (b) federal bureaucrats determine the form of our exchange. There is no (c)…

Running a health-insurance exchange would cost a lot of money — money Virginia does not have. Since Washington will dictate how it will be run, Washington should pick up the tab.

RTD: ‘Insurance Exchange: Just Say No’ is a post from Cato @ Liberty - Cato Institute Blog

Today the Obama administration will announce, according to early press reports, that ten states (of eleven that applied) will be receiving waivers from key provisions of the No Child Left Behind Act. That’s right, the 2002 education law passed by Congress and signed by President Bush that absurdly insisted that all children will be proficient in mathematics and reading by 2014. Now President Obama, unilaterally, is telling states that they can forget all that as long as they adopt — or at least have ”plans” to adopt – reforms to his liking, such as national curriculum standards and teacher evaluations based on student standardized testing progress.

At this point, it is almost impossible to keep track of the federal savaging of the Constitution in supposed service of education. First there was the federal expenditure of money, allowed by none of the enumerated powers, largely starting in the 1960s. Then there was the growing attachment of controls to that money — again, with no Constitutional authority — culminating in NCLB. Now there is the blatant disregard for the separation of  powers by a President who just decided he didn’t like waiting for Congress to reauthorize the law, and a Congress that exhibits no spine whatsoever when it comes to this power grab because, well, no one seems to like NCLB.

Within this fiasco is all the evidence anyone should need to see why the Feds must be extracted from education. While Washington can drop humongous sacks of taxpayer dough on states and districts, and impose lots of bureaucratic rules and regulations, it can’t actually make education much better. Indeed, the whole point of NCLB was to end decades of Washington spending billions for no return. And what happened? Exactly what state, district, and school-level bureaucrats and unions expected: “accountability” swerved off the road before the 2014 deadline. It took longer than expected — it was a slightly more nerve-wracking game of political chicken than usual — but in the end the entrenched interests won because they’re the most motivated to bring the political pain. After all, their very livelihoods are at stake.

Aside from desegregation — which it has Constitutional authority to compel — the federal government has done no meaningful good in education. Why? Because the special interest-driven reality of politics ensures it can’t do any good. Yet we not only let it continue to trample the Constitution by meddling in education, we are allowing it to shred the Constitution into ever-smaller bits in order to “fix” the destruction it has wrought. And for this, all who turn a blind eye to the Constitution in the name of “the children” are to blame.

Waiving Goodbye to the Constitution is a post from Cato @ Liberty - Cato Institute Blog

The media tide of the past two days has carried in a great flood of stories on science, technology, engineering and math (STEM) education. ABC, NBC, AP, Reuters, the Christian Science Monitor, Politico, the Detroit News, and others joined in. This torrent of attention is due to a White House science fair at which the president announced several initiatives to boost student achievement in those fields. Details are scant, but based on the administration’s press release it seems that $100 million or so would go to encourage particular kinds of teacher’s college programs. Various extracurricular STEM programs funded by non-profit foundations were also touted in the release.

The obvious irony in the president’s plan to tweak teachers’ college programs is that those programs are themselves a key part of the problem. The nation’s state school monopolies typically require most or all of their teachers to either have a degree from a government-approved college of education or to be pursuing such a degree during evenings and weekends. Few of those studying or working in STEM fields are willing to sit through a teachers’ college program—with good reason. Not only are these programs often pointless according to their own graduates, they are not associated with improved student performance. They are a requirement without a function–at least without a function that benefits students. The one thing they do accomplish is to erect a barrier to entry that protects incumbent teachers from competition, allows the specter of “teacher shortages” to be floated at regular intervals, and thus to justify above market wages [state school teachers receive compensation that is roughly $17,000 per year higher than their private sector counterparts].

As a result, many of the most promising teaching candidates in these fields are weeded out from the start. President Obama’s plans to “improve” this barrier to entry into the profession amounts to reupholstering the deck chairs on the sunken Titanic.

But how to ensure that only effective teachers lead the nation’s classrooms given that the government certification process is not just useless but counterproductive? Here, again, there is irony. Somehow, in the thousands of different fields in which scientists and engineers work every day, the competent are distinguished from the incompetent. And somehow, those who underperform are either helped to improve or cut loose to seek work in a field (or with an employer) to which their talents are better suited. It is ludicrous to suggest that managers can effectively evaluate the work of the scientists and engineers they employ in every field _except_ education.

The media would do us all a favor if they would look past the Obama administration’s marshmallow launcher for a moment and contemplate the effect that our massive barrier to entry into the teaching profession has on recruiting scientists and engineers.

The Irony of the President’s STEM Initiatives is a post from Cato @ Liberty - Cato Institute Blog

Associated Press photojournalist Noah Berger captured this thousand-word image near the Occupy Oakland demonstrations last month.

(AP Photo/Noah Berger)

Many Cato@Liberty readers will get it immediately. They can stop reading now.

For everyone else, this image perfectly illustrates the ethos of what I call the Church of Universal Coverage.

Like everyone who supports a government guarantee of access to medical care, the genius who left this graffiti on Kaiser Permanente’s offices probably thought he was signaling how important other human beings are to him. He wants them to get health care after all. He was willing to expend resources to transmit that signal: a few dollars for a can of spray paint (assuming he didn’t steal it) plus his time. He probably even felt good about himself afterward.

Unfortunately, the money and time this genius spent vandalizing other people’s property are resources that could have gone toward, say, buying him health insurance. Or providing a flu shot to a senior citizen. This genius has also forced Kaiser Permanente to divert resources away from healing the sick. Kaiser now has to spend money on a pressure washer and whatever else one uses to remove graffiti from those surfaces (e.g., water, labor).

The broader Church of Universal Coverage spends resources campaigning for a government guarantee of access to medical care. Those resources likewise could have been used to purchase medical care for, say, the poor. The Church’s efforts impel opponents of such a guarantee to spend resources fighting it. For the most part, though, they encourage interest groups to expend resources to bend that guarantee toward their own selfish ends. The taxes required to effectuate that (warped) guarantee reduce economic productivity both among those whose taxes enable, and those who receive, the resulting government transfers.

In the end, that very government guarantee ends up leaving people with less purchasing power and undermining the market’s ability to discover cost-saving innovations that bring better health care within the reach of the needy. That’s to say nothing of the rights that the Church of Universal Coverage tramples along the way: yours, mine, Kaiser Permanente’s, the Catholic Church’s…

I see no moral distinction between the Church of Universal Coverage and this genius. Both spend time and money to undermine other people’s rights as well as their own stated goal of “health care for everybody.”

Of course, it is always possible that, as with their foot soldier in Oakland, the Church’s efforts are as much about making a statement and feeling better about themselves as anything else.

The Ethos of Universal Coverage is a post from Cato @ Liberty - Cato Institute Blog

After much wrangling and consternation, the Greek government has agreed to the latest round of “drastic austerity measures,” the most significant of which is the promise to cut 15,000 government jobs. In return, the Greeks will receive 130 billion euros ($170 billion) of European bailout money to keep the Greek state afloat and, crucially, in the eurozone. That, anyway, is the plan.

The leaders of the political parties that “support” the Greek technocratic (i.e. unelected) government still have to approve the cuts, which they might not do because the unions threaten a general strike. But, there are additional problems as well. First, many of those 15,000 government workers will likely come from the ranks of those who are close to retirement. While the number of government workers will thus shrink, the government’s unsustainable social security burden will worsen. Second, the government workforce (i.e. public servants and employees of the Greek parastatals) account for over 22 percent of the Greek labor force of 4.4 million. That means that the number of people working for the government will decline from 968,000 to 953,000—a reduction of 1.6 percent. And that is what amounts to a “drastic austerity measure” in Greece!

Cutting the Government—Greek Style is a post from Cato @ Liberty - Cato Institute Blog

A three-judge panel of the Ninth Circuit Court of Appeals has ruled that California’s ban on same-sex marriage — enacted in 2008 in a popular vote on Proposition 8 — violates the constitutional right to equal protection. The court’s decision upheld a 2010 decision by former Judge R. Vaughn Walker, a Reagan-Bush appointee, that found marriage to be a fundamental right protected by the Constitution, and that the proposition “fails to advance any rational basis in singling out gay men and lesbians for denial of a marriage license.” Proponents of Proposition 8 will likely appeal the decision either to the full Ninth Circuit or directly to the Supreme Court.

The American Foundation for Equal Rights is the sponsor of the case, Perry v. Brown (originally Perry v. Schwarzenegger). Cato Institute chairman Robert A. Levy is co-chairman of AFER’s Advisory Board. He and co-chair John Podesta wrote in the Washington Post in 2010:

Nearly a century after the 14th Amendment was ratified in 1868, the Supreme Court unanimously affirmed that “marriage is one of the ‘basic civil rights of man.’ ” That 1967 case, Loving v. Virginia, ended bans on interracial marriage in the 16 states that still had such laws.

Now, 43 years after Loving, the courts are once again grappling with denial of equal marriage rights — this time to gay couples. We believe that a society respectful of individual liberty must end this unequal treatment under the law…. The principle of equality before the law transcends the left-right divide and cuts to the core of our nation’s character. This is not about politics; it’s about an indispensable right vested in all Americans.

Levy and Podesta, along with AFER’s lawyers Ted Olson and David Boies, spoke at this Cato Institute forum. And Levy also wrote about the case in this New York Daily News column.

In this 7-minute video Levy, Podesta, Olson, and Boies make the case for equality in marriage law:

The Circuit Court Ruling on Proposition 8 is a post from Cato @ Liberty - Cato Institute Blog

The liberty-lovers at New Hampshire’s Josiah Bartlett Center for Public Policy have produced this video of my appearance before the New Hampshire House of Representatives where I argued against creating health insurance “Exchanges”:

(Notice my rapt audience.)

Should New Hampshire Create a Health Insurance Exchange? is a post from Cato @ Liberty - Cato Institute Blog

Is it April Fool’s Day? Has somebody in Paris hacked the website at the Organization for Economic Cooperation and Development? Have we been transported to a parallel dimension where up is down and black is white?

Please forgive all these questions. I’m trying to figure out why any organization—even a leftist bureaucracy such as the OECD—would send out a press release entitled, “Rising tax revenues: a key to economic development in Latin American countries.”

Not even Keynesians, after all, think higher taxes are a recipe for growth.

Ah, never mind. I just remembered that the OECD is a hotbed of statism, so the press release makes perfect sense. After all, the U.S.-taxpayer-funded organization has become infamous for reflexively advocating big government.

• The OECD has an anti-tax competition project designed to prop up Europe’s bankrupt welfare states.
• The OECD is pushing a “Multilateral Convention” that is designed to become something akin to a World Tax Organization, with the power to persecute nations with free-market tax policy.
• The OECD has endorsed Obama’s class-warfare agenda, publishing documents endorsing “higher marginal tax rates” so that the so-called rich “contribute their fair share.”
• The OECD pulled off a hat trick of bad policy in a 2010 document, promoting a value-added tax, Obama’s global warming agenda, and failed Keynesian stimulus.
• The OECD endorsed Obamacare, as I explain in this video.
• The OECD even advocates higher taxes when nations are in the middle of economic crisis.

With this dismal track record, it’s hardly a surprise that the Paris-based bureaucracy is now pushing to undermine prosperity in Latin America. Here’s some of what the OECD said in its release.

Additional tax revenues enable governments to simultaneously improve their competitiveness and promote social cohesion through increased spending on education, infrastructure and innovation. Latin American countries have made great strides over the past two decades in raising tax revenues.

You won’t be surprised when I tell you that the Paris-based bureaucrats do not bother to provide even the tiniest shred of proof to support the silly claim that higher taxes improve competitiveness. But that shouldn’t be surprising since even Keynesians don’t believe something that absurd.

And the claim about social cohesion also is a bit of a stretch given the riots, chaos, and social disarray in many European nations.

The only accurate part of the passage is that Latin American nations have increased tax burdens over the past 20 years. To the tax-free bureaucrats at the OECD, that is making “great strides.”

Let’s see what else the OECD had to say.

Despite these improvements, significant gaps between Latin America and OECD countries remain. The average tax to GDP ratio in OECD countries is much higher than in Latin American countries (33.8% compared to 19.2% in 2009, respectively). As the countries in the region still find themselves in relatively strong economic conditions, now is the time to consider reforms that generate long-term, stable resources for governments to finance development.

Wow. The OECD is implying that Latin American nations should mimic OECD nations. In other words, the bureaucrats in Paris apparently think it makes sense to tell nations to copy the failed high-tax, welfare-state model of countries such as Greece, Italy, and Spain.

Is that really the lesson they think people should learn from recent fiscal history? Are they really so oblivious and/or blinded by ideology that they issued the release as these European nations are in the middle of a fiscal crisis?

To further demonstrate their bias, the folks at the OECD even acknowledged that the Latin American nations, with their less oppressive tax regimes, are enjoying “relatively strong economic conditions.” Normal people would therefore conclude that the failed high-tax European nation should copy Latin America on fiscal policy, not the other way around. But not the geniuses at the OECD.

Now that we’ve addressed the awful policy advice of the OECD, let’s take a moment to look at the real policy challenges facing Latin America.

The Fraser Institute, in cooperation with dozens of other research organizations around the world, produces every year a comprehensive survey measuring Economic Freedom of the World.

The report ranks 141 nations based on dozens of variables that are used to construct scores for five key measures of economic freedom. Of those five categories, the Latin nations have the highest average ranking on…you guessed it…fiscal policy.

Yet the OECD wants policies that will undermine the competitiveness of the Latin nations, hurting them in the area where they are doing a halfway decent job.

If the bureaucrats actually wanted to boost economic performance in Latin America, they would be pressuring those nations to make reforms in the two areas where the burden of government is most severe—legal structure/property rights and regulation.

But that would make sense, which is contrary to the OECD’s mission of promoting statism.

The only semi-positive thing to say about the OECD is that it is consistent. As this video explains, the Paris-based bureaucrats are advocating bigger government in the United States. And to add insult to injury, they’re using American tax dollars to push that agenda.

What a scam. Politicians from various nations send taxpayer money to Paris. The bureaucrats at the OECD then issue reports and studies saying the politicians in those countries should raise taxes and increase the burden of government. Everybody wins…except for taxpayers and the global economy.

Per dollar spent, OECD subsidies may be the most destructively wasteful part of the federal budget. And that says a lot.

Acting as the Typhoid Mary of the Global Economy, the OECD Urges Higher Taxes in Latin America is a post from Cato @ Liberty - Cato Institute Blog

E.J. Dionne was in high dudgeon at the Washington Post this morning over Citizens United, the Supreme Court’s January 2010 campaign finance decision that ever since has driven the Left into fits of apoplexy. Taking his cue from Obama’s infamous State-of-the-Union condemnation of the Court shortly after the decision came down, plus the class warfare meme at the core of Obama’s reelection campaign, Dionne attacks not only the Court’s wisdom but its motives:

A more troubling interpretation [than “naiveté”] is that a conservative majority knew exactly what it was doing: that it set out to remake our political system by fiat in order to strengthen the hand of corporations and the wealthy. Seen this way, Citizens United was an attempt by five justices to push future electoral outcomes in a direction that would entrench their approach to governance.

Indeed, the Court’s decision “should be seen as part of a larger initiative by moneyed conservatives to rig the electoral system against their opponents,” Dionne continues. Pointing to recent state legislation aimed at ensuring electoral integrity, such as voter ID laws, he charges that “conservatives are strengthening the hand of the rich at one end of the system and weakening the voting power of the poor at the other.”

Reading this screed you’d think that the moneyed classes, including corporations, were all on the Right. Yet as the Post itself reported last fall, “despite frosty relations with the titans of Wall Street, President Obama has still managed to raise far more money this year from the financial and banking sector than Mitt Romney or any other Republican presidential candidate.” Indeed, “Obama has outdone Romney on his own turf, collecting $76,600 from Bain Capital employees through September – and he needed only three donors to do it.”

So let’s get that white-hat/black-hat silliness out of the way and turn to the charge that the Court “set out to remake our political system by fiat.” The charge, if you read the majority’s opinion, is preposterous on its face. Only Justice Stevens has clung to the idea that money is not speech. (Want proof that it is? How much speech have you heard from the presidential campaign of former Louisiana Governor Buddy Roemer, who accepts no contributions over $100?) Well if money is speech, then the First Amendment tells us, straightforwardly, that “Congress shall make no law abridging the freedom of speech.”

Regrettably, despite that simple imperative, the Court has allowed numerous restrictions on the contributions side of the campaign finance ledger. But in Citizens United it opened the door to those who speak through their corporations or unions (the Left’s outrage is directed only to the corporations side of the decision, of course), provided the spending is not coordinated with the candidate. Thus, far from having torn down “a century’s worth of law” – Dionne alludes to the 1907 Tillman Act, which banned corporations from giving directly to candidates – Citizens United simply repealed a provision of the 1947 Taft-Hartley Act that prohibited corporate and union expenditures on independent, non-candidate coordinated campaigns.

But Dionne’s confusion doesn’t end there. Like almost every other Leftist, he attributes the rise of super PACs, his main target, to the decision in Citizens United. But it was the March 2010 DC Circuit’s decision in Speech Now v. FEC that brought about those entities. And almost all super PACs are funded by individuals, not corporations or unions. What Speech Now did was lift the ban on individual contributions of more than $5,000 when individuals get together to speak through Political Action Committees that are independent of candidates.

Dionne abhors those PACs, of course. So do the candidates, because they have no control over what “their” PACs say. (“Save me from my friends!”) Far better it would be if contributors were able to give directly to a candidate’s campaign. This is a big country, with over 300 million people and millions of corporations and unions. Are we really to believe, with so many potential contributors, that candidates for federal office would be easily bought and sold if that were allowed? Well in states with few campaign finance restrictions for state offices – where the number of potential contributors is substantially smaller – the evidence simply does not support the wild charges of corruption that so animate the Dionnes of the world. But what is evidence when your real agenda is class warfare?

E.J. Dionne on Campaign Finance as Class Warfare is a post from Cato @ Liberty - Cato Institute Blog

In recent weeks, officials from two states have claimed that if they do not set up an ObamaCare health insurance “Exchange,” the state will lose federal Medicaid or State Children’s Health Insurance Program funds. Idaho Gov. Butch Otter (R), has since walked back that claim. New Hampshire Commissioner of Health and Human Services Nicholas Toumpas has not.

In a January 19 letter to the New Hampshire House of Representatives, Toumpas writes:

The Patient Protection and Affordable Care Act (“ACA”) mandates that states create a virtual health coverage marketplace called an Exchange. To ensure compliance with this federal mandate the law provides that having an Exchange in place by January 1, 2014, is a condition precedent to receipt of Medicaid funding commencing in 2014.

I have not heard the Obama administration or any other ObamaCare supporter claim that the law contains such a mandate. I have made inquiries in a handful of states. None of them report that the Obama administration has said that failing to create an Exchange will result in the loss of Medicaid or SCHIP funds. If what Toumpas says is true, it will certainly come as a shock to the 35 states that have not enacted legislation to create an Exchange, including many states that have flat-out refused.

But is it true? Parts of ObamaCare might seem to support Toumpas’ claim.

• Section 1311 declares that each state “shall” set up an Exchange.
• The law also imposes conditions on the receipt of federal Medicaid and SCHIP funds, and those provisions do make reference to Exchanges. Section 2101 provides that, with regard to certain children who are not eligible for SCHIP, states receiving federal SCHIP funds “shall establish procedures to ensure that the children are enrolled in a qualified health plan that…is offered through an Exchange established by the State under section 1311.”
• Section 2201 provides that as a condition of receiving federal Medicaid funds, states “shall establish procedures for” several things, including “ensuring that individuals who apply for but are determined to be ineligible for [Medicaid and SCHIP] are screened for eligibility for enrollment in qualified health plans offered through such an Exchange.” The words “such an Exchange” refer to the words “an Exchange established by the State under section 1311,” which appear a few lines before.

Thus, sections 2101 and 2201 might seem to require states to establish an Exchange so that the required “procedures” can interface with it. But there are serious problems with that interpretation.

First, the directive that states “shall” create Exchanges does not amend that part of the U.S. code where Congress imposes conditions on Medicaid and SCHIP funds—i.e., the Social Security Act, or chapter 7 of title 42. It instead appears in chapter 157, which is also where Congress explains that the consequence for failing to create an Exchange is that the federal government will create one.

Second, sections 2101 and 2201 provide, respectively, that states “shall establish procedures to” enroll certain children through a state-run Exchange, and that states “shall establish procedures for” enabling the state’s Medicaid-eligibility system to coordinate with a state-run Exchange. One need not diagram those sentences to see that the object of “shall establish” is “procedures,” not “Exchange.”

Third, ObamaCare does create these “coordination” conditions within the Social Security Act. That fact demonstrates that ObamaCare’s authors knew how to make the directive to create an Exchange an explicit condition of receiving Medicaid and SCHIP funds, if that’s what they wanted to do.

Fourth, if ObamaCare’s authors had intended to condition Medicaid and SCHIP funds on the creation of Exchanges, or if that were a defensible interpretation of the law as written, then one might expect to have heard members of Congress discussing it. One might expect the Obama administration to have informed states of this condition as part of their effort to encourage states to implement the law. I have been paying fairly close attention to this issue. I have seen no evidence of either.

Fifth, the Supreme Court has held that “if Congress desires to condition the States’ receipt of federal funds, it must do so unambiguously, enabling the States to exercise their choice knowingly, cognizant of the consequences of their participation.” It is simply not credible to argue that ObamaCare unambiguously conditions Medicaid and SCHIP funds on the creation of an Exchange. The law never does so explicitly, and the language and structure of the law militate against the claim that it does so implicitly.

A more reasonable interpretation of these conditions is that states will be in compliance so long as they have the required procedures at the ready—regardless of whether those procedures are coordinating with a state-created Exchange, a federal Exchange, or no Exchange (in the event that neither level of government creates one).

I have no doubt that, had ObamaCare’s authors had any inkling that two thirds of states might balk at setting up an Exchange, they would have made it a condition of Medicaid and SCHIP participation. But they didn’t foresee the widespread resistance ObamaCare would encounter. When drafting ObamaCare and for some time afterward, they honestly thought, “The more people learn about this bill, the more they [will] like it.” Thus they didn’t create that requirement.

If Toumpas is the only state or federal official who sees this mandate in the law, that’s probably because it isn’t there. Just as important, there is no evidence that the Obama administration sees or is enforcing such a requirement. If Toumpas has such evidence, he should furnish it.

Until then, New Hampshire and the other 49 states can be confident that refusing to create an Exchange will not cost them Medicaid or SCHIP funds.

Will States Lose Medicaid Funds If They Fail to Create an ObamaCare ‘Exchange’? is a post from Cato @ Liberty - Cato Institute Blog

…is that it overshadowed news that the U.S. House of Representatives overwhelmingly voted to repeal one of two new entitlement programs created by Obamacare—the ironically named CLASS Act—with a bipartisan three-fifths majority. (With numbers like that, Congress could even repeal Obamacare’s death panel!)

But really, one private organization pulling funding for another private organization is way more important than Congress voting to repeal an entitlement program … isn’t it?

The Real Tragedy of the Komen/Planned Parenthood Flapdoodle is a post from Cato @ Liberty - Cato Institute Blog

We at Cato enjoy citing Frederic Bastiat’s 1845 classic of free-trade pamphleteering, the “Petition of the Candlemakers,” which addresses the French Parliament as follows:

…We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival… is none other than the sun…

The satire goes on to demand that the government banish the unfair competition and restore proper encouragement to domestic industry by requiring that owners exclude sunlight from all building windows.

Once again real life is making it hard to tell satire from reality — appropriately, in Bastiat’s France. According to an Agence France-Presse account, a French commercial court has ordered Google to pay 500,000 Euros to a local map company for unfair practices that constitute an abuse of the “dominant position of its Google Maps application.” In particular, Google provides its maps for free, unlike complainant Bottin Cartographes, which charges good money and has apparently run into trouble holding onto its customers on that basis. Cory Doctorow at BoingBoing:

Bottin Cartographes argued that Google was only planning to give away the service for free until all the competitors had been driven out of business and then they would start charging. This seems implausible to me, and contrary to Google’s business model (give away services, make money from mining the use of those services). Google says it will appeal.

The problem with being a libertarian satirist is that government’s real-world doings keep matching and outrunning the satire.

P.S. Note that the French case arose not from Google’s furnishing of its free map service to individual end customers, but from its furnishing of its map API to businesses that typically adapt it for use in their own sites; as commenters at BoingBoing note, Google has indeed introduced fees for its largest business users of this type (which has caused some of them to adapt by switching from Google’s API to OpenStreetMap, a free wiki-based map service). In short, the complaints about free pricing of too excellent a product draw on the antitrust theory of predatory pricing, which American courts have held in general disfavor since the Chicago antitrust revolution but which continues to hold sway in some other parts of the world. For more on the predatory pricing theory, see these Cato publications.

France: Google’s Free Map Service Unfair To Commercial Map Sellers is a post from Cato @ Liberty - Cato Institute Blog

On this day last year, I posted two charts that I developed using the Minneapolis Federal Reserve Bank’s interactive website.

Those two charts showed that the current recovery was very weak compared to the boom of the early 1980s.

But perhaps that was an unfair comparison. Maybe the Reagan recovery started strong and then hit a wall. Or maybe the Obama recovery was the economic equivalent of a late bloomer.

So let’s look at the same charts, but add an extra year of data. Does it make a difference?

Meh… not so much.

Let’s start with the GDP data. The comparison is striking. Under Reagan’s policies, the economy skyrocketed.  Heck, the chart prepared by the Minneapolis Fed doesn’t even go high enough to show how well the economy performed during the 1980s.

Under Obama’s policies, by contrast, we’ve just barely gotten back to where we were when the recession began. Unlike past recessions, we haven’t enjoyed a strong bounce. And this means we haven’t recovered the output that was lost during the downturn.

This is a damning indictment of Obamanomics

Indeed, I made this point several months ago when analyzing some work by Nobel laureate Robert Lucas. And it’s been highlighted more recently by James Pethokoukis of the American Enterprise Institute and the news pages of the Wall Street Journal.

Unfortunately, the jobs chart is probably even more discouraging. As you can see, employment is still far below where it started.

This is in stark contrast to the jobs boom during the Reagan years.

So what does this mean? How do we measure the human cost of the foregone growth and jobs that haven’t been created?

Writing in today’s Wall Street Journal, former Senator Phil Gramm and budgetary expert Mike Solon compare the current recovery to the post-war average as well as to what happened under Reagan.

If in this “recovery” our economy had grown and generated jobs at the average rate achieved following the 10 previous postwar recessions, GDP per person would be $4,528 higher and 13.7 million more Americans would be working today. …President Ronald Reagan’s policies ignited a recovery so powerful that if it were being repeated today, real per capita GDP would be $5,694 higher than it is now—an extra $22,776 for a family of four. Some 16.9 million more Americans would have jobs.

By the way, the Gramm-Solon column also addresses the argument that this recovery is anemic because the downturn was caused by a financial crisis. That’s certainly a reasonable argument, but they point out that Reagan had to deal with the damage caused by high inflation, which certainly wreaked havoc with parts of the financial system. They also compare today’s weak recovery to the boom that followed the financial crisis of 1907.

But I want to make a different point. As I’ve written before, Obama is not responsible for the current downturn. Yes, he was a Senator and he was part of the bipartisan consensus for easy money, Fannie/Freddie subsidies, bailout-fueled moral hazard, and a playing field tilted in favor of debt, but his share of the blame wouldn’t even merit an asterisk.

My problem with Obama is that he hasn’t fixed any of the problems. Instead, he has kept in place all of the bad policies – and in some cases made them worse. Indeed, I challenge anyone to identify a meaningful difference between the economic policy of Obama and the economic policy of Bush.

• Bush increased government spending. Obama has been increasing government spending.
• Bush adopted Keynesian “stimulus” policies. Obama adopted Keynesian “stimulus” policies.
• Bush bailed out politically connected companies. Obama has been bailing out politically connected companies.
• Bush supported the Fed’s easy-money policy. Obama has been supporting the Fed’s easy-money policy.
• Bush created a new health care entitlement. Obama created a new health care entitlement.
• Bush imposed costly new regulations on the financial sector. Obama imposed costly new regulations on the financial sector.

I could continue, but you probably get the  point. On economic issues, the only real difference is that Bush cut taxes and Obama is in favor of higher taxes. Though even that difference is somewhat overblown since Obama’s tax policies – up to this point – haven’t had a big impact on the overall tax burden (though that could change if his plans for higher tax rates ever go into effect).

This is why I always tell people not to pay attention to party labels. Bigger government doesn’t work, regardless of whether a politician is a Republican or Democrat. The problem isn’t Obamanomics, it’s Bushobamanomics. But since that’s a bit awkward, let’s just call it statism.

One Year Later, Another Look at Obamanomics vs. Reaganomics is a post from Cato @ Liberty - Cato Institute Blog

During the congressional redistricting season, you could almost get the idea that members of Congress look at the process this way:

1. I am entitled to be in Congress.

2. I need to figure out which constituents deserve to be represented by me.

There have been lots of stories recently about members of Congress declaring that “home is where the congressional district is.” Here’s the latest:

Tea party firebrand Rep. Allen West (R-Fla.) announced Tuesday that he will switch districts and run for reelection in Florida’s new 18th district.

West’s 22nd district, which was already Democratic-leaning, got even tougher under a new GOP redistricting plan released last week. The new district would have gone about 57 percent for President Obama in the 2008 presidential race.

But Rep. Tom Rooney’s (R-Fla.) decision earlier Tuesday to run in the open and Republican-leaning 17th district rather than the swing 18th freed West up to make the switch to the neighboring district, which is just north of his current district, which spans from West Palm Beach to Fort Lauderdale.

“Congressman Rooney is a statesman and has been an honorable public servant to the constituents of Florida’s 16th Congressional district,” West said, referring to Rooney’s current district, which is re-numbered from 16 to 18 under the new plan. “It is my goal to continue the success Congressman Rooney has had in Florida’s 16th Congressional district in the newly proposed 18th district.”

Glad that’s working out for everybody. Meanwhile, here are a few other cases:

Pleasanton’s own Rep. Jerry McNerney has looked at the changes coming in California’s soon-to-be-drawn political map and has made a decision: He’s moving east, along with his district, to San Joaquin County.

Where in San Joaquin Co? Uh…..

“When he settles on a place in San Joaquin County we’ll announce the location,” spokesperson Sarah Hersh told us….

“After spending so much time in San Joaquin County, it truly is my home,” McNerney said Thursday. “That’s why I’m planning to move my residence to San Joaquin County and put down even more roots in this community.”

–San Francisco Chronicle, July 28, 2011

With Rep. Grace Napolitano’s decision this week to run in the 32nd district east of Los Angeles, fellow California Democratic Rep. Linda Sánchez announced Thursday that she will run in the newly drawn 38th district….

Had Napolitano not switched, Sánchez could have opted to run in the open 47th district based in Long Beach, which mostly lies outside her current district.

–Roll Call, September 1, 2011

 House hopefuls across the country are busy building their 2012 campaigns — hiring staff, raising money and wooing early support. For some, the only thing missing is a seat to run for.

Call it the ghost district phenomenon: The once-a-decade drawing of new congressional maps has thrust some candidates into an awkward limbo, with at least a dozen running for seats that don’t yet exist but that will be crafted in the months to come.

– Politico, September 6, 2011

Home Is Where the Congressional District Is is a post from Cato @ Liberty - Cato Institute Blog

Cato has published a new section on www.downsizinggovernment.org that examines the Department of the Interior.

Interior is not one of the largest departments in terms of spending, but it has huge control over the lands and resources of the western United States. It oversees more than 500 million acres of land through the Bureau of Land Management, the National Park Service, the Fish and Wildlife Service, and other agencies. The department also houses the Bureau of Reclamation, which distributes subsidized water, and the Bureau of Indian Affairs, which administers aid programs for American Indians.

Here are some of ideas discussed at www.downsizinggovernment.org/interior:

• Federal Lands: During the nation’s first century, the federal government focused on selling and giving away its lands to individuals, businesses, and state governments. In the 20th century, the government reversed course and began grabbing more land, but federal ownership has not led to sound economic or environment stewardship. A revival of federalism in land policies is long overdue.
• American Indians: The federal government has an appalling record in its dealings with Indian tribes, and since 1824 the Bureau of Indian Affairs has been one of the most mismanaged and destructive of federal agencies. The path to prosperity for Indians is not through federal subsidies and top-down regulations, but through reforms to property rights and other institutions on reservations.
• Water Subsidies: The Bureau of Reclamation operates dams and other water infrastructure in the western states. Its large subsidies for irrigation combined with restrictions on water transfers are contributing to a growing water crisis in many areas. Policymakers should focus on reforms to reduce subsidies, transfer federal infrastructure to state and private ownership, and move towards water trading in open markets.

One interesting thing about reforming the Department of the Interior is that economists and environmentalists share some common ground. Federal policies that set prices for irrigation water, grazing lands, timber, and other resources too low are both economically inefficient and harmful to the environment.

Another interesting thing about Interior is that its long history reveals that special interest lobbying, corruption, and mismanagement are nothing new in Washington. Interior’s troubles have included the “Indian ring” corruption scandals of the 19th century, the Teapot Dome scandal of the 1920s, and Jack Abramoff’s influence peddling during the George W. Bush years.

In 1828, one expert noted that “the derangements in the fiscal affairs of the Indian department are in the extreme… there is a screw loose in the public machinery somewhere.” Fast forward to 2006, and Interior’s Inspector General found that “short of a crime, anything goes at the highest levels of the Department of the Interior.”

Isn’t two centuries of federal bungling and failed policies enough? Policymakers should begin exploring ways to downsize the Department of the Interior.

Downsizing the Interior Department is a post from Cato @ Liberty - Cato Institute Blog