Archive for the ‘Government and Politics’ Category
The Correct Question for the Supreme Court
Eric Brown poses the correct question here.
The Supreme Court said in Austin v. Michigan Chamber of Commerce that the state of Michigan could indeed ban that particular advertisement.
Filed under: Government and Politics; Law and Civil Liberties
The Failure of Do-Nothing Policies
A news story from today in a slightly alternate universe:
Jobless Rate at 26-Year High
Employers kept slashing jobs at a furious pace in June as the unemployment rate edged ever closer to double-digit levels, undermining signs of progress in the economy, and making clear that the job market remains in terrible shape.
The number of jobs on employers’ payrolls fell by 467,000, the Labor Department said. That is many more jobs than were shed in May and far worse than the 350,000 job losses that economists were forecasting.
Job losses peaked in January and had declined every month until June. The steep losses show that even as there are signs that total economic activity may level off or begin growing later this year, the nation’s employers are still pulling back.
White House press secretary Robert Gibbs said, “President Obama proposed a $787 billion stimulus program to get this country moving again. He tried to save the jobs at GM and Chrysler. But the do-nothing Republicans filibustered and blocked that progressive legislation, and these are the results.”
House Speaker Nancy Pelosi said at a press conference, “We begged President Bush to save Fannie Mae, Merrill Lynch, Bank of America, AIG, the rest of Wall Street, the banks, and the automobile industry. We begged him to spend $700 billion of taxpayers’ money to bail out America’s great companies. We begged him to ignore the deficit and spend more money we don’t have. But did he listen? No, he just sat there wearing his Adam Smith tie and refused to spend even a single trillion to save jobs. And now unemployment is at 9.5 percent. I hope he’s happy.”
Democrats on Capitol Hill agreed that the “do-nothing” response to the financial crisis had led to rising unemployment and a sluggish economy. If the Bush and Obama administrations had been willing to invest in American companies, run the deficit up to $1.8 trillion, and talk about all sorts of new taxes, regulations, and spending programs, then certainly the economy would be recovering by now, they said.
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Immigration and Labor Markets; Tax and Budget Policy
Congress Just Raised Our Credit Card Fees
Technically, it was the companies which raised their fees. But they did so to anticipate new legislative restrictions on fees taking effect. Congress wanted to cut costs for consumers, but ended up costing them instead.
Credit card companies are raising interest rates and fees seven months before new rules go into effect that will limit their ability to do so, much to the irritation of Congress and consumer advocates.
Chase, for instance, will raise the minimum payment required of some of its customers from 2 percent to 5 percent of the statement balance starting in August. Chase and Discover have increased the maximum fee charged for transferring a balance to the card to 5 percent of the amount, up from 3 and 4 percent, respectively. Bank of America last month raised the transaction fee for balance transfers and cash advances from 3 to 4 percent. Card issuers including Bank of America and Citi also continue to cut limits and hike up rates, which they have been doing with more frequency since January.
“This is a common practice and will continue to be common, because issuers can do these things for really no reason until February,” said John Ulzheimer, president of consumer education for Credit.com, which tracks the industry. “It’s what I call the Credit Card Trifecta — lower limits, higher rates, higher minimum payments.”
It’s not just the top card issuers making changes. Atlanta-based InfiBank, for example, will raise the minimum annual percentage rate it charges nearly all of its customers in September “in order to more effectively manage the profitability of our credit card account portfolio in a very challenging economic environment,” said spokesman Kevin C. Langin.
The flurry of activity, which the banks say is necessary to shore up their revenue losses, has irked members of Congress, who passed a new credit card law, which was signed by President Obama in May. The law, among other things, would prevent card companies from raising rates on existing balances unless the borrower was at least 60 days late and would require the original rate to be restored if payments are received on time for six months. The law would also require banks to get customers’ permission before allowing them to go over their limits, for which they would have to pay a fee.
One hates to think of what additional “help” Congress plans on providing for us in the future.
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Regulatory Studies
Obama Adopts the Mikulski Principle
Economists have advanced many theories of taxation. But as usual, the one that seems to explain the policies of the Obama administration best is what I call the Mikulski Principle, the theory most clearly enunciated in 1990 by Sen. Barbara Mikulski (D, Md.):
Let’s go and get it from those who’ve got it.
Just take a look at the myriad taxes proposed or publicly floated by President Obama and his aides and allies:
- Raise the top income tax rates from their current 33 percent and 35 percent rates to 36 percent and 39.6 percent in 2011
- Limit itemized deductions for people paying high rates
- Increase capital gains and dividend taxes by 33 percent for people paying high income tax rates
- Impose a value-added tax (VAT) on all goods and services
- Raise the Social Security tax by lifting the cap
- Raise a variety of business taxes by $353 billion over 10 years, including repeal of LIFO rules, restoring Superfund taxes, seven tax increases on energy companies, and more
- Tax employer-provided health benefits
- Implement a cap-and-trade system for emissions permits, the functional equivalent of a massive new tax
- Tax drivers on their mileage
- Change rules to raise gift taxes
- Restore the estate tax at 45 percent
- Raise cigarette tax by 62 cents a pack
- Raise taxes on beer, wine, liquor, and soda
- Eliminate health savings accounts and flexible savings accounts
- Tax employer-provided cellphones
- Tax AIG employee bonuses
- Raise taxes on overseas corporate earnings
As the links will indicate, not all of these taxes have been formally proposed, and some have already run into sufficient criticism to have become unlikely. But together they illustrate the mindset of an administration and a Congress determined to extract as much money as they can from Americans rather than cut back on expenditures, which have doubled in about eight-and-a-half years.
Indeed, the administration’s programs remind us that today is July 2, the 233rd anniversary of the day on which the Continental Congress voted for American independence, issuing a document that declared, among other things,
He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.
Civil Liberties and President Barack W. Bush?
It’s fair to say that civil liberties and limited government were not high on President George W. Bush’s priorities list. Indeed, they probably weren’t even on the list. Candidate Barack Obama promised “change” when he took office, and change we have gotten. The name of the president is different.
Alas, the policies are much the same. While it is true that President Obama has not made the same claims of unreviewable monarchical power for the chief executive–an important distinction–he has continued to sacrifice civil liberties for dubious security gains.
Civil libertarians recently accused President Obama of acting like former President George W. Bush, citing reports about Mr. Obama’s plans to detain terrorism suspects without trials on domestic soil after he closes the Guantánamo prison.
It was only the latest instance in which critics have argued that Mr. Obama has failed to live up to his campaign pledge “to restore our Constitution and the rule of law” and raised a pointed question: Has he, on issues related to fighting terrorism, turned out to be little different from his predecessor?
The answer depends on what it means to act like Mr. Bush.
As they move toward completing a review of their options for dealing with the detainees, Obama administration officials insist that there is a fundamental difference between Mr. Bush’s approach and theirs. While Mr. Bush claimed to wield sweeping powers as commander in chief that allowed him to bypass legal constraints when fighting terrorism, they say, Mr. Obama respects checks and balances by relying on — and obeying — Congressional statutes.
“While the administration is considering a series of options, a range of options, none relies on legal theories that we have the inherent authority to detain people,” Robert Gibbs, the White House press secretary, said this week in response to questions about the preventive detention report. “And this will not be pursued in that manner.”
But Mr. Obama’s critics say that whether statutory authorization exists for his counterterrorism policies is just a legalistic point. The core problem with Mr. Bush’s approach, they argue, was that it trammeled individual rights. And they say Mr. Obama’s policies have not changed that.
“President Obama may mouth very different rhetoric,” said Anthony D. Romero, executive director of the American Civil Liberties Union. “He may have a more complicated process with members of Congress. But in the end, there is no substantive break from the policies of the Bush administration.”
The primary beneficiaries of constitutional liberties are not terrorist suspects, but the rest of us. The necessary trade-offs are not always easy, but the president and legislators must never forget that it is a free society they are supposed to be defending.
Filed under: Foreign Policy and National Security; Government and Politics; Law and Civil Liberties
Cap ‘n Trade: The Ultimate Pork-Fest
Some naive people might have been convinced that the U.S. House voted to wreck the American economy by endorsing cap and trade because it was the only way to save the world. But even many environmentalists had given up on the bill approved last Friday. It is truly a monstrosity: it would cost consumers plenty, while doing little to reduce global temperatures.
But the legislation had something far more important for legislators and special interests alike. It was a pork-fest that wouldn’t quit.
As the most ambitious energy and climate-change legislation ever introduced in Congress made its way to a floor vote last Friday, it grew fat with compromises, carve-outs, concessions and out-and-out gifts intended to win the votes of wavering lawmakers and the support of powerful industries.
The deal making continued right up until the final minutes, with the bill’s co-author Representative Henry A. Waxman, Democrat of California, doling out billions of dollars in promises on the House floor to secure the final votes needed for passage.
The bill was freighted with hundreds of pages of special-interest favors, even as environmentalists lamented that its greenhouse-gas reduction targets had been whittled down.
Some of the prizes were relatively small, like the $50 million hurricane research center for a freshman lawmaker from Florida.
Others were huge and threatened to undermine the environmental goals of the bill, like a series of compromises reached with rural and farm-state members that would funnel billions of dollars in payments to agriculture and forestry interests.
Automakers, steel companies, natural gas drillers, refiners, universities and real estate agents all got in on the fast-moving action.
The biggest concessions went to utilities, which wanted assurances that they could continue to operate and build coal — burning power plants without shouldering new costs. The utilities received not only tens of billions of dollars worth of free pollution permits, but also billions for work on technology to capture carbon-dioxide emissions from coal combustion to help meet future pollution targets.
That deal, negotiated by Representative Rick Boucher, a conservative Democrat from Virginia’s coal country, won the support of the Edison Electric Institute, the utility industry lobby, and lawmakers from regions dependent on coal for electricity.
Liberal Democrats got a piece, too. Representative Bobby Rush, Democrat of Illinois, withheld his support for the bill until a last-minute accord was struck to provide nearly $1 billion for energy-related jobs and job training for low-income workers and new subsidies for making public housing more energy-efficient.
Representative Joe Barton, a Texas Republican staunchly opposed to the bill, marveled at the deal-cutting on Friday.
“It is unprecedented,” Mr. Barton said, “but at least it’s transparent.”
This shouldn’t surprise anyone who follows Washington. Still, the degree of special interest dealing was extraordinary. Anyone want to imagine what a health care “reform” bill is likely to look like when legislators finish with it?
Filed under: Energy and Environment; Government and Politics; Tax and Budget Policy
Government Motors Gears Up
Mother Goose and Grimm, by Mike Peters, June 30.
Support for Federal Reserve Audit Increasing
Last week Cato hosted a policy forum on “Bringing Transparency to the Federal Reserve,” featuring Congressman Ron Paul. As mentioned in CQ Politics, Rep. Paul’s bill, HR 1207, has been gaining considerable momentum in the House, with currently 244 co-sponsors, ranging from John Boehner to John Conyers Jr. In fact, the Senate companion bill was introduced by Senator Bernie Sanders.
Fed Chairman Ben Bernanke discussed the very topic of Federal Reserve Transparency at Cato’s annual monetary conference in the Fall of 2007.
After praising moves toward greater transparency at the Fed, Bernanke argued that “monetary policy makers are public servants whose decisions affect the life of every citizen; consequently, in a democratic society, they have a responsibility to give the people and their elected representatives a full and compelling rationale for the decisions they make.”
Chairman Bernanke also goes on to argue that “improving the public’s understanding of the central bank’s objectives and policy strategies reduces economic and financial uncertainty and thereby allows businesses and households to make more-informed decisions.” Bernanke’s full remarks can be found in the Spring 2008 issue of the Cato Journal.
Over the last two years, we have seen an almost tripling of the Federal Reserve’s balance sheet to $2.3 trillion, resulting from the bailouts of AIG and Bear Stearns and the creation of 14 new lending programs.
Our recent forum, and Rep. Paul’s bill, bring much needed debate and focus to the issue of Fed’s inner-workings.
Filed under: Finance, Banking & Monetary Policy; Government and Politics
The Roberts Revolution to Come
As I mentioned yesterday, the U.S. Supreme Court surprised many people by ordering a reargument in the case of Citizens United v. Federal Election Commission. Specifically, the Court called for the parties to the case to address the question of overruling Austin v. Michigan Chamber of Commerce.
The Court decided Austin v. Michigan Chamber of Commerce in 1989. The state of Michigan had prohibited corporations from spending money on electoral speech. In the case in question, the Chamber of Commerce wished to pay for an advertisement backing a candidate for the House of Representatives. The Chamber took this action on its own and not in tandem with the candidate or his party. Paying for the ad was a felony under Michigan law.
A majority of the Court in 1989 said the Michigan law did not violate the First Amendment. However, the majority had a problem. Previous cases permitted limits on funding electoral speech only in pursuit of a compelling state interest: the prevention of quid pro quo corruption or its appearance. The Court had also ruled that independent spending by groups could not corrupt candidates.
So the majority needed a novel rationale for approving Michigan’s suppression of speech. The majority concluded that speech funded by corporations would distort the democratic process and that the state could prohibits such outlays to prevent harms done by “immense wealth.” In other words, the Austin majority tried to redefine “corruption” as “inequality of influence.” That revision had its own set of problems. Buckely v. Valeo, the Ur-decision in campaign finance, had excluded equality as a compelling state interest justifying regulation of campaign finance.
It is easy to see why the Buckley Court had rejected equality of influence as a reason for restricting political speech. Imagine Congress could prohibit speech that had “too much influence.” But how could that be determined? A majority in Congress would be tempted to suppress speech that threatened the power of that majority. Paradoxically, the equality rationale would strengthen those who already held power while vitiating representative government. The First Amendment tries to prevent that outcome.
In last year’s decision in Davis v. FEC, the Court again rejected the equality rationale for campaign finance laws. More and more the Austin decision is looking like bad law.
Justices Kennedy and Scalia, both current members of the Court, wrote dissents in Austin. Justice Thomas has called for Austin to be overruled in other contexts. Neither Justices Roberts nor Alito is likely to vote to uphold Austin (or the relevant parts of McConnell v. FEC for that matter). But it would seem that either or both of them were unwilling to strike down a precedent without a formal hearing. That hearing will come on September 9 with a decision expected by Thanksgiving.
Almost six years after the Court utterly refused to defend free speech in McConnell v. FEC, the Roberts Court may be ready to vindicate the First Amendment against its accusers in Congress and elsewhere.
Filed under: Cato Publications; Government and Politics; Law and Civil Liberties
The Importance of Just Saying No
Conservatives are accused of being a party of “no.” Fine. That is an indispensable word in politics because most new ideas are false and mischievous. Furthermore, the First Amendment’s lovely first five words (”Congress shall make no law”) set the negative tone of the Bill of Rights, which is a list of government behaviors, from establishing religion to conducting unreasonable searches, to which the Constitution says: No.
Filed under: Government and Politics; Health, Welfare & Entitlements; Law and Civil Liberties; Political Philosophy
Institutional Crisis Unfolds in Honduras
A serious institutional crisis is taking place in Honduras as a result of President Manuel Zelaya’s call for a new constitution that would allow for his reelection. Zelaya, a close ally of Hugo Chávez, is barred from pursuing a second term in the general elections in November.
Unfortunately for Zelaya, he doesn’t have the backing of his own party, much less any other major political group. So he has moved unilaterally to call for a referendum on the need for a new constitution. The vote, which is scheduled for this Sunday, has been declared illegal by the Supreme Court and the Electoral Tribunal, and condemned by the Honduran Congress and attorney general (whose office is not part of the cabinet in Honduras).
Despite the widespread institutional opposition to his plans, Zelaya is pushing for the vote. On Wednesday he ordered the Honduran armed forces to start distributing the ballots and other electoral materials throughout the country. The army chief, complying with the Supreme Court ruling, refused to obey the order. Zelaya sacked him, which prompted the resignation of all other leading army officers and the defense minister.
The attorney general is asking Congress to impeach Zelaya for violating the institutional order and abusing his powers. Last night, the Congress discussed removing Zelaya from his office. The president is defiant and has accused the Congress of attempting a coup.
In the meantime, thousands of Zelaya’s supporters are taking to the streets. Yesterday, a mob personally led by Zelaya stormed a Honduran air force base in order to retrieve the electoral materials that the generals refused to distribute. The army is reportedly deploying troops in the capital Tegucigalpa to prevent possible riots.
Filed under: Government and Politics; Law and Civil Liberties
Buy American, Destroy American Jobs
The “buy America” provision in the misnamed stimulus bill was supposed to protect jobs in the U.S. Alas, by encouraging foreign protectionism, the measure is likely to end up destroying American jobs.
Indeed, the provision has all the earmarks of a grand political fiasco. Reports the Financial Times:
Confusion reins. For fear of missing out on contracts, many companies are demanding that all their suppliers are Buy American-compliant regardless of any exemptions.
“Those companies that can comply are of course thrilled and are trumpeting that in their marketing. Those that cannot are in agony and are losing business and cutting workers,” says David Ralston, a government procurement lawyer at Foley & Lardner. “The many companies that find themselves in the gray areas are calling their lawyers.”
Canada’s government has been an early and vocal lobbyist against the measures, sending officials to Washington to warn that a trade war is brewing. Canadian municipalities threatened to attach “do not Buy American” provisions to their own public projects after manufacturers were cut out of US stimulus projects, but have agreed to hold off while the national government tries to resolve the problem.
Canada wants to broker a bilateral trade agreement on government contracts which would extend all the way down to the level of local authority. The US trade representative says it is open to the idea.
While this would quieten the Canadians, it could spark cries of protest from the US’s other trading partners. The British ambassador has given several speeches in recent weeks chastising the US over Buy American and the way it is being implemented. The Europeans are watching closely. But could the US write bilateral deals with them all? Buy American’s supporters in Congress would surely kick back.
The Chamber of Commerce is proposing a compromise. It has called on the administration to tell municipalities to act as if they were signatories to the federal government’s agreements. “I think there is enough flexibility for OMB [the Office of Management and Budget] to make that change. I don’t have a crystal ball but for multiple reasons it would make sense for them to do it,” says Chris Braddock, the Chamber’s procurement expert.
On Monday all groups with a stake in the debate submitted their written comments to the OMB, the White House department handling the stimulus. The administration must now write the final rules on how to implement Buy American.
The U.S. has gained enormously from the expansion of trade in recent years. We all will lose if Washington now encourages a global retreat from free markets.
Press Release Economics in Michigan Picked Apart
This morning I blogged on the wave of state governments giving away taxpayer money to businesses in the name of “creating jobs.” One of the examples I mentioned is the Michigan Economic Development Corporation (MEDC), a state program that exists to generate press releases to provide cover for the state’s lamentable fiscal policies.
Michael LaFaive at the Mackinac Center for Public Policy in Michigan was kind enough to send me a recent report he wrote on the folly of state subsidies to businesses. State officials like to solicit studies from local universities that just happen to conclude that such-and-such government program is creating X number of jobs. (Of course, in the rare occurrence that a study doesn’t come back with what the bureaucrats were expecting, such study will likely disappear into thin air. I’ve seen that happen first hand.) Michael’s paper deconstructs a study on the purported benefits of Michigan’s film maker subsidies, which was prepared by Michigan State University at the behest of the MEDC. A quote he cites from a 2006 study on tourism-related economic development programs nails it:
“Most economic impact studies are commissioned to legitimize a political position rather than to search for economic truth. Often the result is mischievous procedures that produce large numbers that study sponsors seek to support a predetermined position.”
If you read nothing else, read the section on page 4 entitled “Why Government Subsidies Won’t Save Michigan’s Economy.” The reasons apply to all fifty states, not just Michigan.
Trouble in Obamaland
The Washington Post reports on a recent survey:
The poll found little change in underlying public attitudes toward government since the inauguration, with slightly more than half saying they prefer a smaller government with fewer services to a larger government with more services. Independents, however, now split 61 to 35 percent in favor of a smaller government; they were more narrowly divided on this question a year ago (52 to 44 percent), before the financial crisis hit.
The Obama team probably assumes people who identify as Republicans will disapprove of Obama’s actions sooner rather than later. Independents, however, are crucial to keeping up his public approval and thereby getting what he wants out of Congress. On the size of government — as well as on many specific policy issues — Obama is now running counter to public opinion.
This may be the beginning of the end of the beginning.
Americans Want Smaller Government
A new Washington Post-ABC News poll again shows that voters prefer “smaller government with fewer services” to “larger government with more services”:
Obama has used the power and financial resources of the federal government repeatedly as he has dealt with the country’s problems this year, to the consternation of his Republican critics. The poll found little change in underlying public attitudes toward government since the inauguration, with slightly more than half saying they prefer a smaller government with fewer services to a larger government with more services. Independents, however, now split 61 to 35 percent in favor of a smaller government; they were more narrowly divided on this question a year ago (52 to 44 percent), before the financial crisis hit.
The Post calls a 54 to 41 lead for smaller government “barely more than half,” which is fair enough, though it’s twice as large as Obama’s margin over McCain. It’s also twice as large as the margin the Post found in the same poll in November 2007.
I’ve always thought the “smaller government” question is incomplete. It offers respondents a benefit of larger government–”more services”–but it doesn’t mention that the cost of “larger government with more services” is higher taxes. The question ought to give both the cost and the benefit for each option. A few years ago a Rasmussen poll did ask the question that way. The results were that 64 percent of voters said that they prefer smaller government with fewer services and lower taxes, while only 22 percent would rather see a more active government with more services and higher taxes. A similar poll around the same time, without the information on taxes, found a margin of 59 to 26 percent. So it’s reasonable to conclude that if you remind respondents that “more services” means higher taxes, the margin by which people prefer smaller government rises by about 9 points. So maybe the margin in this poll would have been something like 59 to 37 if both sides of the question had been presented.
For more on “smaller government” polls, see here and here.
The “Culture of Spending” from the Mouths of Babes
Each semester, when I speak to Cato’s new employees and interns, I give them a quick discussion of some of the reasons that government tends to grow, such as the problem of concentrated benefits and diffuse costs and what James Payne called “the culture of spending.” In his book by that title, Payne noted:
The congressman lives in a special world, a curiously isolated world that is dominated by the advocates of government action. He is subjected to a broad chorus of persuasion that incessantly urges the virtues of spending programs. Year after year he hears how necessary government programs are.
Day after day, year after year, people come to the congressman’s office with stories about why some particular government program is needed — to help their grandfather, their brother-in-law, their community — and rarely if ever does a constituent fly to Washington to urge his congressman to vote against any particular one of the myriad programs that add up to his entire income tax bill.
The Washington Post has a great illustration of this problem in the Sunday paper. The little town of Owego, New York, was excited to hear that Lockheed Martin would build the new presidential helicopter — it’s called Marine One, though fortunately for Lockheed the government wanted 23 of them — at a plant in Owego. But as the price tag ballooned from $6.8 billion to $13 billion, even politicians began to see it as an unnecessary expense. The military canceled the program on June 1. Hundreds of jobs will be lost in Owego. And as the Post writes:
An 11-year-old Owego girl, whose parents are longtime Lockheed employees, recently hand-wrote a letter to Obama. It was published in the local newspaper and quickly became a voice for her shaken community.
“Lockheed is the main job source in Owego,” Hailey Bell, now 12, wrote. “If you shut down the program, my mom may lose her job and a lot of other people too. . . . Owego will be a ghost town. I’ve lived here my whole life and I love it here! Please really, really think it over.”
I’m sure she loves her parents and her town. And there’s no reason to expect Hailey to understand what $13 billion means to taxpaying Americans all over the country. But this is just the kind of story that members of Congress hear all the time: save my parents’ jobs, save my community, save our farms. And it all adds up to a $4 trillion federal budget with a $1.8 trillion deficit. (And by the way, if you Google “fiscal 2009 budget,” you will quickly find the Obama administration’s budget page, which somewhat oddly does not show the actual budget totals but does invite you to “Use the map below to learn more about how the President’s 2010 Budget is restoring long-term opportunity and prosperity in your state.”)
For a more, shall we say, adult view of what it means to direct federal dollars to particular areas, we might turn to an advertisement in the Durango, Colorado, Herald in 1987, which touted the Animas-La Plata dam and irrigation project and made explicit the usual hidden calculations of those trying to get their hands on federal dollars:
Why we should support the Animas-La Plata Project: Because someone else is paying the tab! We get the water. We get the reservoir. They get the bill.
That’s the way they tell it back home, usually without putting it in writing. In public and in Washington, they say, “Without this dam, our little town will waste away. Only you can save us, Mr. Congressman.” And it’s bankrupting us.
Privatize the Post Office
Another day, another story on financial troubles at the federal government’s mail monopolist. We don’t expect the government to make our blue jeans, transport fruits and veggies from the farm to the market, build computers and IPods, or manage the manufacturing of automobiles, so why must it continue to deliver first-class mail? The quality of the USPS’s “services” has been a punchline in my family since I learned to walk. But with technology rendering it’s clunky business model increasingly moot, Government Mail’s bottom line is looking uglier and uglier. It would cost me 44 cents to mail a letter to California, and it would cost me the same amount to mail that letter to the next town over. What sense does that make?
As today’s editorial in the Washington Post leads off:
THE POST office may be the next too-big thing. If it continues on its present course, the U.S. Postal Service stands to post $6 billion to $12 billion in losses by the end of the fiscal year. By the end of the second quarter of fiscal 2009, it had racked up an operating loss of more than $2 billion, almost equal to its total losses last year. So far, the Postal Service has depended on loans from the Federal Financing Bank, a federal borrowing agency, to help make up the difference, but it is fast approaching its $15 billion credit limit. Something has to give.
Kudos to the Washington Post for proceeding to acknowledge that the rest of the western world has been trending toward privatization of it’s government mail monopolies for years. My colleague Chris Edwards recently touched on the issue of privatizing the USPS as part of a larger piece on privatizing a plethora of federal operations:
The mammoth 685,000-person U.S. Postal Service is facing declining mail volume and rising costs. The way ahead is to privatize the USPS and repeal the company’s legal monopoly over first-class mail. Reforms in other countries show that there is no good reason for the current mail monopoly. Since 1998, New Zealand’s postal market has been open to private competition, with the result that postage rates have fallen and labor productivity at New Zealand Post has risen. Germany’s Deutsche Post was partly privatized in 2000, and the company has improved productivity and expanded into new businesses. Postal services have also been privatized or opened to competition in Belgium, Britain, Denmark, Finland, the Netherlands, and Sweden. Japan is moving ahead with postal service privatization, and the European Union is planning to open postal services to competition in all its 27 member nations.
Going Bankrupt Double-Quick
George W. Bush and the Republicans worked hard to ruin the U.S. government’s finances. The Obama administration and the Democrats are doing an even better job of wrecking the Treasury.
Treasuries headed for their second monthly loss, pushing 10-year yields up the most in almost six years, as President Barack Obama’s record borrowing spree overwhelmed Federal Reserve efforts to cap interest rates.
Notes, little changed today, also tumbled this week on speculation the worst of the economic recession is over. A private report today will show confidence among U.S. consumers gained in May for a third month, economists said. South Korea’s National Pension Service, the nation’s largest investor, plans to reduce the weighting of U.S. bonds in its holdings, the government said in a statement.
“It’s a disastrous market,” said Hideo Shimomura, who oversees $4 billion in non-yen bonds as chief fund investor at Mitsubishi UFJ Asset Management Co. in Tokyo, a unit of Japan’s largest bank. “I expected yields to rise but not this fast. We will see new highs in yields.”
The benchmark 10-year note yielded 3.61 percent at 6:29 a.m. in London, according to BGCantor Market Data. The 3.125 percent security due in May 2019 traded at a price of 95 30/32.
Ten-year rates rose about half a percentage point in May, extending an increase of 46 basis points in April. The two-month climb was the most since July and August of 2003. A basis point is 0.01 percentage point.
As borrowing costs rise, so will future deficits, requiring more borrowing, which will push up interest rates, hiking future deficits, requiring…
Just how are we going to finance trillions of dollars for health care reform while wrecking the economy with cap and trade? And then there’s the $107 trillion in unfunded liabilities for Social Security and Medicare.
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Tax and Budget Policy
“It’s a Lot Easier to Promise to Change Washington Than It Is to Actually Change It”
The New York Times has an interesting story on President Obama’s continuing failure to follow through on his “Sunlight Before Signing” promise. On the campaign trail, he said he would post bills online for five days before signing them. Two dozen bills now have his signature, and only one has been posted for five days before signing.
The article (and accompanying video) fixes on a couple of reasons why the president might be excused from carrying out the promise. One is the technical difficulty of managing potentially hundreds of thousands of comments. The promise did not include a promise to publish comments, though — much less to read them (though it would be politically astute to appear to do so). In my view, the difficulty of administering a public comment system — which was not part of the promise — does not excuse the failure to post the bills Congress presents to the president for five days before he signs them.
A second excuse is that posting bills online would be ineffectual. Ellen Miller of the Sunlight Foundation is quoted saying, “There isn’t anybody in this town who doesn’t know that commenting after a bill has been passed is meaningless.”
I have done my level-best to illustrate how a five-day hold at the White House would have good effects on reducing earmarks, parochial amendments, and other shenanigans — such as congressional approval of bonuses to AIG executives.
Miller’s preferred approach — placing a similar hold on bills before they leave Congress — would have a similar effect — but nothing dramatically more open. Just as under a presidential hold, members of Congress and Senators would be more reticent to introduce potentially controversial amendments. Just as under a presidential hold, they would carefully avoid a blossoming of debate about their pet projects at the end of the legislative process. A congressional hold would change the upstream behavior of the politicians — just like a presidential hold would.
A presidential hold and a congressional hold are both good ideas, and they are not mutually exclusive. The presidential hold has a key advantage: The president has already promised it — to the cheers of American voters.
The New York Times story reports a small step toward meeting the actual terms of President Obama’s pledge:
“In order to continue providing the American people more transparency in government, once it is clear that a bill will be coming to the president’s desk, the White House will post the bill online,” said Nick Shapiro, a White House spokesman. “This will give the American people a greater ability to review the bill, often many more than five days before the president signs it into law.”
If this means posting links to bills on the Thomas legislative system from Whitehouse.gov, this is something the White House has done sporadically, and it would increase transparency by a small margin if it were regularized. The administration should establish a uniform URL where bills are posted so that every American can easily find every bill the president signs. But, in terms of fulfilling President Obama’s promise, “posting a link from WhiteHouse.gov to THOMAS of a conference report that is expected to pass doesn’t cut it.”
I think this is grudging progress toward implementation of President Obama’s “Sunlight Before Signing” promise. In the video, the author of the Times article has the best line illustrating why the White House deserves modest congratulations for taking this step: “It’s a lot easier to promise to change Washington than it is to actually change it.”
Filed under: Government and Politics; Telecom, Internet & Information Policy
Uncle Sam a Generous Boss
Federal unions, government officials, and the Washington Post’s “Federal Diary” column frequently suggest that federal civilian workers are underpaid. They suffer from a large “pay gap” compared to private sector workers, or so the story goes.
But in the Post’s “Jobs” section yesterday, human resources specialist Lily Garcia argues that “Uncle Sam Is a Boss You Can Rely On.” For job seekers, Garcia points to the many advantages of federal work:
- “Generous benefits, solid pay, and relative job security — a combination that is challenging to find in the private sector, even in the best of times.”
- The “widest selection of health-care plans of any U.S. employer.”
- “Liberal amounts of paid time off.”
- Very lucrative retirement benefits.
- Family-friendly policies such as “first priority and subsidies at a number of top-notch day-care facilities.”
- “Federal employees are paid relatively well . . . [and] practically guaranteed periodic within-grade pay raises.”
- Finally, “federal employees cannot be unceremoniously fired.” I’ve found that only about 1 in 5,000 federal civilian workers are fired each year due to poor performance.
Is the lack of firing a result of the superb quality of the federal workforce and superior management practices? Hardly. Garcia notes that the downside of working for Uncle Sam is that the government “has its fair share of bullies, sycophants and incompetents who pick on employees, display favoritism, mismanage operations and find creative ways to manipulate the rules to their advantage.” I’d guess more than its fair share. Since federal workers are rarely fired, the ranks of non-performing managers and workers grows over time, contributing to the bureaucratic ineptitude we are all familiar with in the federal government.
To improve workforce efficiency, I’ve suggested privatizing as many federal activities as possible, include postal services, air traffic control, and passenger rail. To cut costs, I’ve suggested a federal wage freeze and a cut in federal benefits as part of a plan to reduce federal budget deficits.
For more from Lily Garcia, see here. For more from me, see here.
The White House as Animal Farm
As George Orwell’s Animal Farm closes, the revolutionary pigs have been transformed into oppressive humans. It took some time to occur on the Animal Farm. It’s taken just a few months in the Obama White House.
President Barack Obama is morphing into George W. Bush, as administration attorneys repeatedly adopt the executive-authority and national-security rationales that their Republican predecessors preferred.
In courtroom battles and freedom-of-information fights from Washington, D.C., to California, Obama’s legal arguments repeatedly mirror Bush’s: White House turf is to be protected, secrets must be retained and dire warnings are wielded as weapons.
“It’s putting up a veritable wall around the White House, and it’s so at odds with Obama’s campaign commitment to more open government,” said Anne Weismann, chief counsel for Citizens for Responsibility and Ethics in Washington, a legal watchdog group.
Certainly, some differences exist.
The Obama administration, for instance, has released documents on global warming from the Council on Environmental Quality that the Bush administration sought to suppress. Some questions, such as access to White House visitor logs, remain a work in progress.
On policies that are at the heart of presidential power and prerogatives, however, this administration’s legal arguments have blended into the other. The persistence can reflect everything from institutional momentum and a quest for continuity to the clout of career employees.
“There is no question that there are (durable) cultures and mindsets in agencies,” Weismann acknowledged.
Conservatives once opposed executive aggrandizement. Then with George W. Bush in office, they embraced the idea of the presidency as a kind of elective monarchy. With President Barack Obama now pushing the executive power grab, will conservatives rediscover their inner-Constitution and again join the barricades for liberty?
Filed under: Foreign Policy and National Security; Government and Politics; Law and Civil Liberties
The Biggest Leeches Always Live
By proposing to eliminate the Federal Family Education Loan Program, President Obama has raised a pretty big ruckus in the relatively staid world of higher education policy. For the uninitiated, FFELP uses taxpayer dollars to essentially guarantee profits to participating financial institutions, and to keep student loans cheap and abundant.
Since neither corporate welfare nor rampant tuition inflation are really good things, getting rid of this beast would be a welcome move. Unfortunately, the president wants to replace FFELP with direct-from-Washington lending and to plow the savings into Pell Grants, so there’ll be no savings for taxpayers and probably very little beneficial effect on college prices.
As I wrote on NewMajority.com in May, no one should expect big lenders to get kicked off the federal gravy train:
[T]he Obama administration is saying they’d keep private companies as servicers of loans to maintain quality customer service. Of course, this could very well be worse than the status quo: It will likely keep at least the biggest current lenders (read: Sallie Mae) at the political trough, but Washington will be THE lender for all students.
Right I was! Or, at least, signs of my prescience keep getting brighter: Despite Obama promising to go to war against an ”army” of lenders’ lobbyists, the U.S. Department of Education just awarded Sallie Mae and three other big lenders lucrative contracts to service federal loans. So while smaller leeches could very well be removed from their supply of taxpayer blood, the biggest will keep on sucking!
Filed under: Education and Child Policy; Finance, Banking & Monetary Policy; Government and Politics
Good Policy and Strategy in NJ
Chris Christie, the Republican candidate in New Jersey’s gubernatorial race this year, has some life in him. He’s going to hit incumbent Jon Corzine hard on the education issue and is making urban education reform and private school choice a central part of his platform.
Some highlights on Christie from the NYT:
He’s white, he’s conservative, and his support is strongest in New Jersey’s suburbs, where the public schools include some of the nation’s best.
Yet Christopher J. Christie, the Republican candidate for governor, is hunting for votes in cities like Newark, Camden and Trenton, where Democrats routinely pile up big margins, but where black and Hispanic parents are increasingly running out of patience with the public schools, among the nation’s worst…
But what could emerge as the sleeper issue is Mr. Christie’s push for education reform: merit pay for teachers, more charter schools, and above all, [education tax credits] as a way to give poor and minority children better educational choices and create competition that would improve the public schools…
Mr. Christie said that he did not expect to carry any heavily Democratic cities. But he is gambling that school choice has become popular enough among urban blacks and Latinos that he can cut into their support for Mr. Corzine, who opposes it.
Just a note: The article talks primarily about “vouchers,” but the private school choice plan being pushed there is a donation tax credit program. Reporters have difficulty with the distinction.
Filed under: Education and Child Policy; Government and Politics
Cooperating against the Censors
One of the consequences of governments attempting to crack down on dissent is increasing cooperation among groups in different countries pushing for greater liberty and human rights. For instance, some of the most important aid for Iranian protesters is coming from Chinese dissidents.
Reports Nicholas Kristof in the New York Times:
The unrest unfolding in Iran is the quintessential 21st-century conflict. On one side are government thugs firing bullets. On the other side are young protesters firing “tweets.”
The protesters’ arsenal, such as those tweets on Twitter.com, depends on the Internet or other communications channels. So the Iranian government is blocking certain Web sites and evicting foreign reporters or keeping them away from the action.
The push to remove witnesses may be the prelude to a Tehran Tiananmen. Yet a secret Internet lifeline remains, and it’s a tribute to the crazy, globalized world we live in. The lifeline was designed by Chinese computer engineers in America to evade Communist Party censorship of a repressed Chinese spiritual group, the Falun Gong.
Today, it is these Chinese supporters of Falun Gong who are the best hope for Iranians trying to reach blocked sites.
“We don’t have the heart to cut off the Iranians,” said Shiyu Zhou, a computer scientist and leader in the Chinese effort, called the Global Internet Freedom Consortium. “But if our servers overload too much, we may have to cut down the traffic.”
Unfortunately, the struggle against government repression remains a difficult one. But the development of a global human rights community with members willing to help each other wherever they are is an extremely positive sign.
Filed under: Foreign Policy and National Security; Government and Politics
Hold the Presses! Public Doesn’t Believe Obama on Deficits!
Shocking, I know. But while the public likes President Barack Obama personally, they are just a bit more skeptical when it comes to his policies. Such as deficit reduction.
A substantial majority of Americans say President Obama has not developed a strategy to deal with the budget deficit, according to the latest New York Times/CBS News poll, which also found that support for his plans to overhaul health care, rescue the auto industry and close the prison at Guantánamo Bay, Cuba, falls well below his job approval ratings.
This shows that the public is paying attention to what is going on in Washington. In fact, the president’s policy is debt inflation rather than reduction. You know — $13 trillion in bail-outs (so far; who knows what new financial disasters await!), nearly $1 trillion in “stimulus” spending, proposed budget deficits of nearly $10 trillion over the next decade, health care “reform” which will run trillions (the only argument is how many) over the same period, and more, much more.
Yes, I’d say that the president has no strategy to deal with the budget deficit, other than to increase it at every opportunity.
Transparency in All Things
The Recovery Accountability and Transparency Board is seeking requests for production of a better Recovery.gov. And in a bold stroke the Sunlight Foundation is stepping up to bid.
A substantial amount of database and Web talent circulates around and in the Sunlight Foundation, and they can produce as good a Web site or better than any government contractor - and cheaper too.
I think Sunlight stands a pretty good chance in this, simply because the contract award will now be subject to public scrutiny. Value-for-dollar to the taxpayer will be easily discernible, and that will raise the political risks of awarding the contract based on cronyism or go-with-whatchya-knowism. Transparency in all things.
If Sunlight wins the contract, I have little doubt that they will produce a much better site and make real progress in transparency and oversight — things I talked about at our December 2008 conference, “Just Give Us the Data!”
Kudos to Sunlight for taking this bold and fun step.
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