Archive for the ‘Government and Politics’ Category
Obama’s Big Tax Hike on U.S. Multinationals Means Fewer American Jobs and Reduced Competitiveness
The new budget from the White House contains all sorts of land mines for taxpayers, which is not surprising considering the President wants to extract another $1.3 trillion over the next ten years. While that’s a discouragingly big number, the details are even more frightening. Higher tax rates on investors and entrepreneurs will dampen incentives for productive behavior. Reinstating the death tax is both economically foolish and immoral. And higher taxes on companies almost surely is a recipe for fewer jobs and reduced competitiveness.
The White House is specifically going after companies that compete in foreign markets. Under current law, the “foreign-source” income of multinationals is subject to tax by the IRS even though it already is subject to all applicable tax where it is earned (just as the IRS taxes foreign companies on income they earn in America). But at least companies have the ability to sometimes delay when this double taxation occurs, thanks to a policy known as deferral. The White House thinks that this income should be taxed right away, though, claiming that “…deferring U.S. tax on the income from the investment may cause U.S. businesses to shift their investments and jobs overseas, harming our domestic economy.”
In reality, deferral protects American companies from being put at a competitive disadvantage when competing with companies from other nations. As I explained in this video, this policy protects American jobs. Coincidentally, the American Enterprise Institute just held a conference last month on deferral and related international tax issues. Featuring experts from all viewpoints, there was very little consensus. But almost every participant agreed that higher taxes on multinationals will lead to an exodus of companies, investment, and jobs from America. Obama’s proposal is good news for China, but bad news for America.
Filed under: General; Government and Politics; International Economics and Development; Tax and Budget Policy
Thursday Links
- Why the Tea Partiers should not date the GOP: “This movement is simply saying: ‘We are fine without you, Washington. Now for the love of God, go attend a reception somewhere, and stop making health care and entrepreneurship more expensive than they already are.’”
- Why President Obama should be open to cutting military spending: “A real test of a leader’s wisdom and strength would recognize that more spending does not equal greater security.”
- A growing disconnect: “A nasty spat has erupted between Washington and Beijing over the Obama administration’s arms sales to Taiwan….The bulk of the evidence suggests that storm clouds are building in the US-China relationship.”
- Podcast: “Obama’s Permanent Bailouts” featuring Mark Calabria.
Filed under: Foreign Policy and National Security; General; Government and Politics
Obama Commands the Impossible
Today’s New York Times reports that President Obama has “ordered the rapid development of technology to capture carbon dioxide emissions from the burning of coal,” as well as mandating the production of more corn-based ethanol and financing farmers to produce “cellulosic” ethanol from waste fiber.
You’ve got to like the president’s moxie. Faced with his inability to pass health care reform and cap-and-trade, he now chooses to command the impossible and the inefficient.
Most power plants are simply not designed for carbon capture. There isn’t any infrastructure to transport large amounts of carbon dioxide, and no one has agreed on where to put all of it. Corn-based ethanol produces more carbon dioxide in its life cycle than it eliminates, and cellulosic ethanol has been “just around the corner” since I’ve been just around the corner.
However, doing what doesn’t make any economic sense makes a lot of political sense in Washington, because inefficient technologies require subsidies–in this case to farmers, ethanol processors, utilities, engineering and construction conglomerates, and a whole host of others. Has the president forgotten that his unpopular predecessor started the ethanol boondogle (his response to global warming) and drove up the price of corn to the point of worldwide food riots? Hasn’t he read that cellulosic ethanol is outrageously expensive? Has he ever heard of the “not-in-my-backyard” phenomenon when it comes to storing something people don’t especially like?
Yeah, he probably has. But the political gains certainly are worth the economic costs. Think about it. In the case of carbon capture, it’s so wildly inefficient that it can easily double the amount of fuel necessary to produce carbon-based energy. What’s not to like if you’re a coal company, now required to load twice as many hopper cars? What’s not to like if you’re a utility, guaranteed a profit and an incentive to build a snazzy, expensive new plant? And what’s not to like if you’re a farmer, gaining yet another subsidy?
Filed under: Energy and Environment; Government and Politics
Raising an Eyebrow at LaHood’s Toyota Remarks
In response to the large recalls affecting several Toyota models, Transportation Secretary Ray LaHood yesterday advised Americans to “stop driving” their Toyotas. In testimony before the House Appropriations subcommittee on transportation, LaHood said:
My advice to anyone who owns one of these vehicles is stop driving it, and take it to the Toyota dealership because they believe they have the fix for it.
Later in the day, he elaborated:
I want to encourage owners of any recalled Toyota models to contact their local dealer and get their vehicles fixed as soon as possible. NHTSA will continue to hold Toyota’s feet to the fire to make sure that they are doing everything they have promised to make their vehicles safe. We will continue to investigate all possible causes of these safety issues.
As Transportation Secretary in an administration that is politically vested in the success of General Motors (recall how taxpayers were forced to take a 60% stake in GM for $50 billion+), was LaHood exploiting an opportunity to tip the scales further in GM’s favor? I guess we’ll never know for sure, but as long as GM remains nationalized, any comments by administration officials on matters affecting the auto industry should be viewed skeptically and through this prism, as they can irresponsibly move markets.
Filed under: Government and Politics; Trade and Immigration
Socialists Shouldn’t Have to Admit Libertarians Into Their Club
Hastings College of the Law, a public law school in California, has a policy prohibiting discrimination on the basis of “race, color, religion, national origin, ancestry, disabilities, age, sex or sexual orientation.” In 2004, the Christian Legal Society, a religious student organization at the school, applied to become a “recognized student organization” — a designation that would have allowed CLS to receive a variety of benefits afforded to about 60 other Hastings groups. While all are welcome to attend CLS meetings, CLS’s charter requires that its officers and voting members abide by key tenets of the Christian faith and comport themselves in ways consistent with its fundamental mission, which includes a prohibition on “unrepentant” sexual conduct outside of marriage between one man and one woman.
Hastings denied CLS registration on the asserted ground that this charter conflicts with the school’s nondiscrimination policy. CLS sued Hastings, asking for no different treatment than is given to any registered student group. The district court granted Hastings summary judgment and the Ninth Circuit affirmed. The Supreme Court granted certiorari to determine whether Hastings’s refusal to grant CLS access to student organization benefits amounted to viewpoint discrimination, which is impermissible under the First Amendment.
Yesterday Cato filed an amicus brief supporting CLS — authored by preeminent legal scholar Richard Epstein – in which we argue that CLS’s right to intimate and expressive association trump any purported state interest in enforcing a school nondiscrimination policy. While Hastings may impose reasonable restrictions on access to limited public forums, it should not be allowed to admit speakers with one point of view while excluding speakers who hold different views. Our brief also discredits Hastings’s assertion that its ability to exclude the public at large from school premises renders their content-based speech restrictions constitutional.
We urge the Court to safeguard public university students’ right to form groups – which by definition exclude people – free from government interference or censorship. (Of course, our first choice would be for the government to get out of the university business and our second choice would be to stop forcing taxpayers to pay for student clubs, but given those two realities — as in the case at hand – freedom of association is the way to go.)
Filed under: Government and Politics; Law and Civil Liberties; Political Philosophy
Criminalizing Politics
Steve Poizner, the California insurance commissioner who is seeking the Republican nomination for governor, created a stir this week by charging opponent Meg Whitman’s campaign with attempting to coerce him out of the race. He said he had reported her campaign to state and federal law enforcement authorities.
What did Whitman actually do? Well, Poizner said that Whitman consultant Mike Murphy had contacted a Poizner staffer by phone and email to urge him to withdraw from the race. The email, released by Poizner, said: “I hate the idea of each of us spending $20 million beating on the other in the primary, only to have a badly damaged nominee. And we can spend $40 million tearing up Steve if we must; bad for him, bad for us, and a crazy waste to tear up a guy with great future statewide potential.” In the email, Murphy went on to suggest that if Poizner dropped out of the race before the June 8 vote, Whitman and her team would immediately get behind him for a 2012 challenge to Sen. Dianne Feinstein.
Poizner says that’s not only “strong-arm tactics” but possibly an illegal inducement to get him to withdraw. But isn’t this really just politics as usual? Don’t candidates as a matter of course say “support me this time, and I’ll support you next time” or “run for a different office and I’ll endorse you”? Presidential candidates, or their campaign managers, are often said to have promised the vice presidency to more than one rival to clear the field.
The point about spending $40 million of Republican money tearing up fellow Republicans is a pretty common complaint about party primaries. In fact, National Review correspondent John J. Miller raised just that concern about the Rick Perry-Kay Bailey Hutchison showdown in Texas.
Even during the Rod Blagojevich flap over “selling” a Senate seat, the always-provocative Jack Shafer and Jim Harper both asked, Isn’t this what politicians do? They make deals — including deals like “I’ll support your campaign if you’ll make my buddy (or me) a Cabinet secretary.” No doubt the promises are often worthless, but they still get made. Blagojevich and Murphy have reminded pols all over the country that such deals are better made in person, not via email or telephone.
Politics ain’t beanbag, Mr. Poizner. Accept the deal or reject it. But “let’s clear the field and spend our money fighting the other party” is pretty standard politics. And a darn sight better than another standard political practice, using the taxpayers’ money to bribe the voters to support you.
Wednesday Links
- David Boaz debates at The Economist: Is Obama failing? “In many ways, Obama has just doubled down on George W. Bush’s policies of bailouts, takeovers, expanded Fed powers and nationalizations. In a recession he is adding debt, taxes and regulation to the burdens already felt by business.” Readers can vote and join the debate.
- Ever wonder why weather forecasters can get things so wrong?
- Looking for a primer on the causes of the financial crisis? The new Cato Policy Report has answers.
- Podcast: “Citizens United and SpeechNow.org” featuring Steve Simpson of the Institute of Justice.
Why the Slow Recovery?
“Wealthy Face Higher Taxes.” That’s the headline that greeted two million American businesspeople Tuesday when they opened their Wall Street Journals. Inside, another banner head: “Big Firms Would Face Deeper Tax Bite.” Turn to the New York Times: “A Red-Ink Decade/Obama Budget Sees Years of Deficits.” The Financial Times: “Obama to target overseas tax breaks.” Investor’s Business Daily: “Higher Taxes for All in Obama Budget, $1.6 Tril 2010 Deficit.” And the Washington Post (not that many productive people get that on their doorstep): “Obama budget would spend billions more.”
And President Obama wonders why banks aren’t lending, employers aren’t hiring, and investors are holding back? As the Economic Policy Institute illustrates, this is the slowest recovery of any postwar recession.
![[chart: Current downturn is far worse than any other in post-War period]](http://www.epi.org/page/-/img/20100127_snapshot_580.jpg)
Let’s hope the Obama administration soon learns that higher taxes, more regulation, a larger share of GDP shifted to government, fears of Fed monetization of soaring debt — not to mention newspaper reports of Obama budgeteers “flipp[ing] through the tax code, looking for ideas” — can only discourage employers, investors, and entrepreneurs. Robert Higgs has cited the role of “regime uncertainty” in prolonging the Great Depression, as investors worried about what FDR might do next. Will Wilkinson points to Treasury Secretary Tim Geithner’s saying “businesses want certainty. They need certainty so they can make long-term plans today.” Unfortunately, Will says, “Creating completely irresponsible, economically chilling regime uncertainty would appear to be the basic modus operandi of the Obama administration.”
Taxes, regulation, and uncertainty — and Obama asks why businesses aren’t lending, investing, and hiring.
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Tax and Budget Policy
When Individuals Form Corporations, They Don’t Lose Their Rights
The blogosphere has been abuzz on the heels of the Supreme Court’s landmark Citizens United opinion. Hysteric criticisms of the speculative changes to our political landscape aside — including the President’s misstatements in the State of the Union — one of the most common and oft-repeated criticisms is that the Constitution does not protect corporations. Several “reform” groups have even drafted and circulated constitutional amendments to address this concern.
This line of attack demonstrates a fundamental misunderstanding of both the nature of corporations and the freedoms protected by the Constitution, which is exemplified by the facile charge that “corporations aren’t human beings.”
Well of course they aren’t — but that’s constitutionally irrelevant: Corporations aren’t “real people” in the sense that the Constitution’s protection of sexual privacy or prohibition on slavery make no sense in this context, but that doesn’t mean that corporate entities also lack, say, Fourth Amendment rights. Or would the “no rights for corporations” crowd be okay with the police storming their employers’ offices and carting off their (employer-owned) computers for no particular reason? — or to chill criticism of some government policy.
Or how about Fifth Amendment rights? Can the mayor of New York exercise eminent domain over Rockefeller Center by fiat and without compensation if he decides he’d like to move his office there?
So corporations have to have some constitutional rights or nobody would form them in the first place. The reason they have these rights isn’t because they’re “legal” persons, however — though much of the doctrine builds on that technical point — but instead because corporations are merely one of the ways in which rights-bearing individuals associate to better engage in a whole host of constitutionally protected activity.
That is, the Constitution protects these groups of rights-bearing individuals. The proposition that only human beings, standing alone, with no group affiliation whatsoever, are entitled to First Amendment protection — that “real people” lose some of their rights when they join together in groups of two or ten or fifty or 100,000 — is legally baseless and has no grounding in the Constitution. George Mason law professor Ilya Somin, also a Cato adjunct scholar, discusses this point here.
In any event, as Chief Justice Roberts said in his Citizens United concurrence: “The First Amendment protects more than just the individual on a soapbox and the lonely pamphleteer.” Justice Scalia makes the same point, explaining that the text of the Constitution “makes no distinction between types of speakers.” The New York Times isn’t “an individual American” but its speech is still protected under the First Amendment (regardless of any exemption for “media corporations” — whatever those are in a world where conglomerates own interests not limited to media, not to mention the advent of blogs and other “new” media).
A related line of attack is that individuals acting through corporations should be denied their freedom of speech because corporations are “state-created entities.” The theory goes that if a state has the power to create corporations, then it has the power to define those entities’ rights. Somin rebuts the weakness of this argument here, correctly pointing out that nearly every newspaper and political journal in the country is a corporation.
In short, the contention that the First Amendment does not protect corporations ignores the fact that there is no constitutional difference between individuals and groups of individuals, however organized. Still, I give credit to the groups who are proposing constitutional amendments that would limit corporate rights: at least they recognize that, after Citizens United, there is no basis upon which to argue that the First Amendment does not protect corporate political speech. The Free Speech Clause, after all, is blind as to the nature of the speaker.
For further concise refutations of the basic arguments against Citizens United, see here (points 3-6 address issues relating to corporations and their rights).
Filed under: Government and Politics; Law and Civil Liberties
Debate: Is Obama Failing?
At the Economist website, I’m debating the question, “This house believes that Barack Obama is failing.” I’m taking the affirmative. Readers are allowed to vote, and the Economist’s typically left-leaning readers are voting for Obama by about the same margin that Americans are rejecting his health care plan. So feel free to mosey on over there, read both sides of the argument, and cast your vote. My bottom line:
When your policies aren’t working, the voters have noticed and your transformative ideological agenda is moving broad public opinion in the other direction, it’s safe to say you’re failing.
Rebuttals and closing statements will follow in a few days. But don’t delay! Visit today!
The Unrelenting Battle over Campaign Finance
Following on the heels of November’s gubernatorial elections in Virginia and New Jersey, the loss of Ted Kennedy’s Senate seat in Massachusetts two weeks ago was a devastating blow to Democratic Party hopes. But it must have been especially devastating to President Obama, who promised an adoring University of Missouri crowd, just before he was elected, that “We are five days away from fundamentally transforming the United States of America.” Yet it would appear, judging from the unrelenting commentary and from the president’s own behavior last week, that those losses pale in comparison to the government’s loss before the Supreme Court two days after the polls closed in Massachusetts. For 11 days now the wailing over the Court’s Citizens United decision has not ceased. Indeed, campaign finance regulation, intimately connected to incumbency protection, is a bedrock principle of modern liberalism.
Exhibit A is E.J. Dionne’s column today in the Washington Post — his second in a week on the subject. Last week, railing against the “reckless decision by Chief Justice John Roberts’s Supreme Court and the greed of the nation’s financial barons,” he charged the Court with “an astonishing display of judicial arrogance, overreach and unjustified activism” and urged “a new populist-progressive alliance” to demand “legislation to turn back the Supreme Court’s effort to undermine American democracy” — including a bill prohibiting political spending by corporations who hire lobbyists, no less.
Today, however, Dionne has last Wednesday’s unseemly episode of Obama rebuking a silent Supreme Court to work with. And, like the immortal Daniel Schorr on yesterday’s NPR Sunday Morning, he puts all the blame on Justice Samuel Alito for seeming to mouth, silently, “Not true” when Obama, before all assembled and a watching nation, tendentiously misstated the holding in Citizens United. But Dionne doesn’t stop there, of course. No, he thanks Alito. You see, “Alito’s inability to restrain himself” brought a long-ignored truth to the nation: “The Supreme Court is now dominated by a highly politicized conservative majority intent on working its will, even if that means ignoring precedents and the wishes of the elected branches of government.” Likening Obama’s behavior to President Reagan’s writing a 1983 article criticizing Roe v. Wade — I didn’t make that up – Dionne chastises conservatives for their double standard: “Reagan had every right to say what he did. But why do conservatives deny the same right to Obama?” Where does one begin?
Turning finally to “the specifics of Obama’s indictment,” Dionne tries to defend the president’s misstatements, but unfortunately the precision ordinarily expected of such a wordsmith seems to have deserted him. Citing Obama’s claim that the Court had reversed “a century of law” and also opened “the floodgates for special interests — including foreign corporations,” Dionne writes that ”Obama was not simply referring to court precedents but also to the 1907 Tillman Act, which banned corporate money in electoral campaigns.” That’s not what the Tillman Act did: It banned direct corporate contributions to campaigns. Only in 1947 were independent campaign expenditures by corporations (and unions) banned — and more clearly so only in 1990, which is the ban the Court overturned. Moreover, pace Obama, foreign corporations are still specifically banned from contributing anything of value “in connection with a Federal, State or local election.” Thus, in claiming, without more, ”that the ruling opens a loophole for domestic corporations under foreign control to make unlimited campaign expenditures,” Dionne seems simply to be passing along what he’s read or heard from others. Nothing in the Court’s opinion warrants that conclusion.
But it’s Dionne’s larger claim that most demands an answer — that an “activist” Roberts Court, exercising “raw judicial power,” is ”ignoring precedents and the wishes of the elected branches of government.” That’s hardly the definition of “activism.” That’s what the Court should be doing, where it’s warranted by the Constitution, whether the Court is defending the rights of blacks to attend unsegregated schools or of gays to sexual freedom or of corporate owners, the shareholders, to engage in political speech through their corporation consistent with their articles of incorporation and by-laws. The claim that corporations aren’t people is a red herring. Corporate owners are people, and their right to speak can take many forms. Fortunately, we have a First Amendment, which protects not only corporate owners but E.J. himself from all but the error of his ways.
[Cross-posted at Politico Arena]
Filed under: Government and Politics; Law and Civil Liberties
An Issue Campaign Passing as Intellectual Inquiry
I was pleased when I learned that Harvard professor Lawrence Lessig had asked to come speak to us at Cato. Julian Sanchez has done a terrific job of capturing some of the subjects highlighted by his visit last week. Lessig is very keen on public financing of elections. In the end, however, Lessig’s visit reminded me of a birthday party I attended many years ago — something had been wrong with the cream sauce on the tortellini.
The day after Professor Lessig spoke to a small group of us at lunch, a friend forwarded me an email he had sent to his followers describing his visit to our “prominent conservative think tank.” His email, PowerPoint presentation, and talk were all framed as if we are on “the right,” which doesn’t sit well with many of us given the profound errors of modern conservatism.
I don’t mind when politicians, reporters, and cab drivers call the Cato Institute “conservative.” I don’t expect them to know better. I’ll even use the “conservative” moniker to advantage as an advocate if it can communicate that our support of civil liberties spans ideologies. But Lessig knows the difference between conservative and libertarian, and he wasn’t trying to show that there’s pan-ideological agreement on certain ideas. Or maybe he was…
His email talked about how, “nearly universally, [we] saw the same problems [he] did,” about our “shared” views, and “agreement that 20 years of conservative Presidents in the last 29 did not produce less government or simpler taxes.” Conspicuously absent was any reference to the polite but persistent challenges we addressed to Professor Lessig’s thesis, framing, and assumptions in the discussion that followed his presentation.
I think most of us believe that money ineluctably follows power. Accordingly, smaller government — not “better” campaign finance laws, and definitely not speech controls — will reduce the need for, and power of, money in politics.
But as I thought about it, I continued to grow doubtful that Professor Lessig was interested in an actual discussion of such issues. Why, for example, did he deliver a 20-minute, canned PowerPoint presentation — decent fare for college students — to ten or so Ph.D.s in economics and political science, top think-tank executives, and deeply experienced Washington hands? (And, ugh, the corny appeal to Ronald Reagan.) It wasn’t to bring the conference staff up to speed. My conclusion is that Lessig came to produce a video he could tout to his fan-base. Lessig tames the conservative lions.
Filed under: Government and Politics; Telecom, Internet & Information Policy
Lawrence Lessig, Libertarian
This past week Professor Lawrence Lessig of the Harvard Law School dropped into the Cato Institute to give his stump speech on his new passion: the corruption in government. There is no question that he has picked a subject large enough to test his own ambitions, for the ever expanding size of government opens up new avenues for political intrigue that leave the defenders of small government like myself in tears, no matter which party is in power.
Lessig and I, it seems, share a common bond on the identification of the disease. But his presentation to the Cato Institute did not reflect the chasm on the question of remedy. Lessig is a one-dimensional man. Once he thinks that public funding of elections is the cure for the political disease, he mounts his crusade. I am an academic, not a public crusader. And I don’t much appreciate being enlisted without my knowledge in a campaign not entirely to my liking.
So by way of penance, I think that Lessig should enlist himself in my academic cause. I hope that in the spirit of internet openness he will post on his web site my take on his venture. He could start by adding a third caption to the (unauthorized) use of my picture: After putting the words, Public Funding, he should make the new slide “Public Funding Skeptic”—which best captures the flow of our discussion. In the course of that exchange, I identified what I thought was the cause of the current malaise.
At various times, I extolled the virtues of Lochner v. New York, and championed a narrow reading of the commerce power. I passionately defended the use of term limits—10 in the house and four in the senate—that were short enough to have some bite, but long enough to allow for continuity in government. I attacked the built-in incumbent bias to modern elections. I went out of my way to denounce the limitations on campaign funding contained in the McCain/Feingold Act, which just got beat up in the Supreme Court’s recent decision in Citizens United v. Federal Election Commission, just as I hoped it would do in my prior Forbes.com column. I insisted that limitations on campaign finance could intensify the lobbying on particular issues. Truth be known, he was doing all the back-pedaling, not me.
You can be the judge: just listen to our discussion to see if it lines up with the mock-heroic account of his own intellectual derring-do he gave to his Cato audience, two of whom emailed me to ask, what gives:
Richard Epstein … at the end of this debate was willing to concede that in his view the only solution he saw—or one solution, he also wants term limits—but one solution to this economy of influence, this economy of corruption, was, as he described it, public funding.
Note how much error Lessig can pack into a single sentence. It wasn’t a debate. I didn’t “concede” a thing, least of all to him. I didn’t “also want” term limits. I was gung ho for them. I didn’t particularly support public funding initiatives. I didn’t oppose them in small elections, even though I thought they were likely to fail.
Next note the omissions. Lessig never mentions that most of my remarks were devoted to explaining why efforts to stop political action won’t do much good unless and until the rules of the game are so altered so that politicians have little to sell or little to threaten. So in a spirit of generous reciprocation, I hereby announce that Lessig has “conceded” the soundness of all my attacks on the New Deal and thus count him as a principled ally in the fight for structural reform that returns us to the original constitutional design. Then think just how much harder that task has become. If the self-appointed champion in the war against corruption can’t be counted on to give an accurate account of a recorded dialogue in which he took part, what chance do the rest of us mere mortals have to put an end to political corruption?
Filed under: Government and Politics; Telecom, Internet & Information Policy
Obama Can Blame Bush All He Wants, But His Budget Is Even Worse
In the defensive-sounding statement released with his budget this morning, President Obama repeatedly blames the previous administration for leaving him in a position where he had “no choice” but to send the nation deeper into debt. He blames “irresponsible risk-taking and debt-fueled speculation—unchecked by sound oversight” for a deep recession that he speciously claims his administration’s massive spending prevented from becoming a depression.
Not once does the president acknowledge the role the government played in fomenting the recession. Instead, the president promises to move away from “business as usual” even though more spending, deficits, and debt are precisely that: business as usual. In this regard, the Obama administration’s first term is looking more like George W. Bush’s third term. Bush left the president with a $1.4 trillion deficit in FY2009; the deficit under Obama’s first year is set to rise to $1.6 trillion and would still be $1.3 trillion in FY2011.
Just like Bush, the president proposes minuscule savings through a small number of program terminations and reductions. But overall spending continues to rise, and in a $3.8 trillion budget the president’s disingenuous attempt to “cut” anything amounts to little more than a rounding error. The president also proposes to freeze non-security discretionary spending for three years, which he falsely claims will “help put our country on fiscally sustainable path.” In reality, last year’s stimulus and appropriations spending binge will mean actual outlays for this tiny portion of the overall budget will still be higher than what Obama inherited.
The president says that “rising to these challenges is the responsibility we bear for the future of our children, our grandchildren, and our nation.” The truth is our children and grandchildren are going to pay a painful price for the Bush/Obama profligacy. Present and future generations would be better served by Washington putting on the spending brakes and bringing to an end the economic distortions caused by government interventions.
Filed under: Government and Politics; Tax and Budget Policy
There Is Some Budget Good News, but It Is Actually Really Bad News
The Office of Management and Budget has released the President’s FY2011 budget and the Congressional Budget Office has released its semi-annual Budget and Economic Outlook. Much of the coverage of these documents has focused on deficit numbers. This is not a trivial concern, particularly since the Bush-Obama policies of bigger government have dramatically boosted red ink.
But the most important numbers in the budget documents are the estimates of what is happening to government spending. The good news is that burden of government spending is projected to decline over the next few years from about 25 percent of GDP to less than 23 percent of GDP.
That’s the good news. The bad news is that federal government outlays only consumed 18.2 percent of economic output when Bush took office. In other words, notwithstanding the good news cited above, the size and scope of government has increased dramatically since 2001. The worse news is that the long-run spending forecasts show a cataclysmic expansion in the burden of government. The “optimistic” estimate is that the federal government will consume more than 30 percent of GDP by 2050 and 40 percent of GDP by 2080.
Filed under: Government and Politics; Tax and Budget Policy
Do Democratic Presidents Create More Jobs?
Politifact.com looked into a remark from Rep. Carolyn Maloney, D-N.Y., that “Democrats have been considerably more effective at creating private-sector jobs.”
The statement was rated true, as a purely statistical matter. Yet the poltifact researcher did a good job questioning the significance of his own figures. He noted, correctly, that the president usually “deserves less credit for the good times — and less blame for the bad times.” And he added that job figures can be driven by outside factors such as oil price shocks, demographic changes or soldiers coming home after World War Two. He wryly noted “how surprised we are that Eisenhower, who presided over the ‘happy’ 1950s, managed an anemic half-percent job growth per year, while Jimmy “Malaise” Carter finished second with 3.45 percent annual job growth.” Anyone who remembers the runaway inflation of the Carter era will realize that annual rates of job growth are not enough to describe the overall economic situation.
The author also quoted me making the point that “timing can be hugely important.” It is so important, in fact, that we may need to add another dimension to politifact’s true-false meter to deal with political comments that are simply meaningless.
For the record, what follows is the full text of my email on this topic:
The error involved with assigning rates of job growth to Presidential terms is that six recent Presidents took office within a few months of the start of a recession: Obama (recession began December 2007), H.W. Bush (July 1990), G.W. Bush (Mar 2001), Reagan (July 1981), Nixon (Dec. 1969) and Ike (July 1953). As it happens, four of the five were Republicans.
One might argue that recessions launched near the end of the previous administration helped get these men elected. But these recessions were clearly left over from events that began previous years. It didn’t help that the first Pres. Bush passed a tax increase three months after the 1990 recession began, but the start of that recession is more plausibly blamed on the earlier spike in oil prices when Iraq invaded Kuwait.
Since employment is a lagging indicator (one of the last things to improve), that means average job growth among Presidents who took office near the start of recessions is bound to look bad in comparison with Presidents who took office after an expansion was well underway. Bill Clinton took office in 1993, long after recession ended in March 1991. The same was true of Truman, LBJ and Carter. JFK took office a month before the 1960 recession ended.
Two-term Presidents also have more time to show good numbers, but only if they’re lucky enough to get out of office just before the next recession starts. Clinton squeaked by (despite falling stock prices and industrial production 2000), but Nixon, Eisenhower, Carter and G.W. Bush did not.
Since Bush 2nd began and ended office in recession, averages over 8 years outweigh 4 reasonably good years. This unprecedented bad timing is exaggerated by Paul Krugman’s comparison of “decades” [and President Obama’s recent reference to “the lost decade” of 1999-2009] which relies on starting and ending each decade in boomy 1959 rather than slumping 1960, ditto 1969 rather than 1970, 1979 rather than 1980, 1989 rather than 1990, and 1999 rather than 2000.
In short, statistics about employment growth over Presidential terms are dominated by the timing of the “business cycle” (including Federal Reserve policy), and have no apparent connection to economic policies attributed to the White House (as opposed to Congress).
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Tax and Budget Policy
Karl Rove’s Spending
Former George W. Bush adviser Karl Rove enjoys complaining about the spendthrift ways of President Obama and the Democrats. But I noted in a Wall Street Journal letter today:
Annual average real spending grew faster under President George W. Bush than any president since Lyndon Johnson… Even leaving out defense, President Bush was the biggest spender since Republican Richard Nixon.
My letter pointed to two prior op-eds by Rove, but he was at it again yesterday in the Journal. He said that his former boss “cut in half the growth of discretionary domestic spending from the sizzling 16 percent rate of President Bill Clinton’s last budget.” Call me crazy, but I don’t think supporting domestic spending growth of 8 percent during a time of very low inflation is an acheivement to crow about.
Over at National Review, Veronique de Rugy apparently gets just as annoyed as I do hearing big-spending Republicans complain about big-spending Democrats.
Mr. Rove’s columns are usually very interesting, but I’d like to see him accept at least some of the blame for the exploding size of government during his tenure at the White House.
Here are the data on spending by presidents.
Filed under: Government and Politics; Tax and Budget Policy
Larry Lessig and the Lunching Libertarians
Outside the realm of copyright, Cato folk (and libertarians generally) don’t often see eye-to-eye with left-leaning cyberlawyer and Harvard prof Lawrence Lessig. Nevertheless, I wasn’t too surprised when Lessig signaled his interest in opening a dialogue with Cato scholars about his Change Congress project and his research on political corruption. After all, we’ve long argued that an expansive state will inevitably attract moneyed interests eager to feed at the public trough or co-opt well-intentioned regulation to stifle competitors. And as Lessig argues, legislators may come to see growing government as a means of creating supportive constituencies.
He’s posted the presentation he gave to a group of us at a luncheon discussion earlier this week, which I think makes an interesting case:
As he writes over at the Huffington Post, we see many of the same structural problems, though we differ as to the solutions. Lessig has been critical of the legal reasoning behind the recent Citizens United decision, which we at Cato welcomed. Despite this, we were pleasantly surprised to hear Lessig aver that he is not interested in overturning the decision—that he prefers, rather, to find ways of reducing the political influence of special interest money without restricting speech. Lessig’s favored solution is public financing of elections, whereas I think the majority here at Cato share the skepticism of my colleague John Samples about the viability of that kind of reform.
Filed under: Government and Politics; Political Philosophy; Telecom, Internet & Information Policy
The Presidential Scold
Today, Politico Arena asks for comments on:
Duking it out in Baltimore
My response:
It’s all well and good that President Obama wants to meet with Republicans — giving the appearance of reaching out — but when it’s mainly to “chastise” them for opposing his programs, as the AP is reporting after his session at the House Republicans’ retreat in Baltimore today, it’s little but a continuation of the lecture he gave to Congress, the Supreme Court, and even the American people on Wednesday evening. “I am not an ideologue,” he’s reported to have said. Yet it appears that he rejected the Republicans’ proposals for a different approach to health care, a line-item veto for spending bills, and across-the-board tax cuts.
But why should that surprise? Ideologues aren’t open to new or different ideas, because they have the truth. Yet the deeper truth that’s been apparent all along is that we have here a president who, along with so many on his staff, has little grasp of economic reality, because he has no experience in the business world — indeed, appears often to be hostile to that world. Just today, for example, the White House unveiled its plan for a new tax break to spur job creation. As reported by CNN, Obama “wants to give businesses a $5,000 tax credit for each net new employee they hire this year.” The CNN headline captures it all: “Here’s $5,000. Go hire someone.” That’s not the way the world works. Temporary tax gimmicks like that, which the White House estimates will cost $33 billion, are hardly what’s needed. If businesses are to start hiring on a regular basis, they need assurance of a regular climate that will enable them to plan rationally. This administration has given them anything but that kind of assurance. And today’s meeting in Baltimore, like Wednesday night’s lecture, hasn’t helped.
The Next Step after Citizens United
The debates following the Citizens United decision continue, thanks in part to President Obama’s criticism of the U.S. Supreme Court during the State of the Union address. Keeping track of those debates might cause you to miss what may well turn out to be the next step in liberalizing our campaign finance laws, the case of SpeechNow.org v. Federal Election Commission which was argued last Wednesday before the entire U.S. Court of Appeals for the D.C. Circuit.
SpeechNow is a group of individuals with a clear mission: “SpeechNow would like to run advertisements urging voters to elect federal candidates who support full protections for First Amendment rights and to defeat candidates who are hostile to those rights.” The group has made sure that its members are independent of candidates for office and the political parties.
You would think they could set up the group and spend as they wish since SpeechNow is not tied to a candidate or party and hence cannot pose a threat of corruption. After all, the First Amendment protects speech by individuals, and the courts have only permitted regulations related to corruption (contribution limits) or public education (mandatory disclosure of spending).
Unfortunately federal law requires any groups that receives contributions of more than $1,000 during a calendar year or spends more than $1,000 during a year to register as a “political committee.” That status would mean disclosure of SpeechNow’s members and limits on contributions and spending. Fulfilling reporting and other requirements and observing the contribution limits would kill SpeechNow’s effort before it started. No group, no ads, no speech.
The Federal Election Commission argues that allowing speech by SpeechNow’s members would lead to corruption. Elected officials, they assert, will reward people who support favored speech even if those people are independent of a candidate or a party. Justice John Paul Stevens endorsed this corruption argument in Citizens United. He was dissenting and had the support of a minority of his fellow justices. The judges who heard the case for the circuit court seemed to believe Citizens United had weakened this sort of corruption argument.
Citizens United limited the power of the federal government over independent expenditures and speech by groups taking a corporate form. The reasoning in that case should apply with added force to individuals associating together to speak, individuals who have no ties to candidates or the political parties.
We’ll keep you up-to-date on the fortunes of the SpeechNow effort. For now, you can read more about the case at the Institute for Justice website or see an account of the circuit court hearing here.
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