Archive for the ‘Regulatory Studies’ Category
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
Banks, Bailouts, and Political Pressure
The Washington Post reports:
Sen. Daniel K. Inouye’s staff contacted federal regulators last fall to ask about the bailout application of an ailing Hawaii bank that he had helped to establish and where he has invested the bulk of his personal wealth.
The bank, Central Pacific Financial, was an unlikely candidate for a program designed by the Treasury Department to bolster healthy banks. The firm’s losses were depleting its capital reserves. Its primary regulator, the Federal Deposit Insurance Corp., already had decided that it didn’t meet the criteria for receiving a favorable recommendation and had forwarded the application to a council that reviewed marginal cases, according to agency documents.
Two weeks after the inquiry from Inouye’s office, Central Pacific announced that the Treasury would inject $135 million.
As we’ve said here many times, going back to 1983, when government is in the business of making economic decisions, you inevitably get more lobbying, more campaign spending, and more political influence on economic decision-makers.
The European Union Stops Banning Ugly Veggies
The European Union has helped create a continental European market and knock down protectionist barriers, which is good. But it also has created another opportunity for meddling bureaucrats to interfere with people’s lives.
Now consumer protests have led to at least one victory for liberty. Reports London’s Sun newspaper:
Now the European Commission has finally scrapped the 20-year ban on 26 types of fruit and veg including asparagus, celery and aubergines.
They ruled they can now be sold - as long as they are labelled as “intended for processing”.
Sainbury’s spokeswoman Lucy Maclennan said: “We are delighted to have played a part in winning the wonky veg war against these bonkers EU regulations.”
Tesco spokesman Adam Fisher said: “It’s not before time. We welcome this move.”
And last night it was predicted the change could see some prices fall by 40 PER CENT.
A Commission official said: “Times have changed - now household budgets are tighter and there is the problem of wasting food.”
One bad regulation down. Who knows how many to go?
Filed under: International Economics and Development; Regulatory Studies; Trade
Higher Taxes for Health Care, Fewer Jobs
President Obama broke his pledge not to raise taxes on lower- and middle-income families with his large tobacco tax increase back in February. It appears that the increase is not just hurting tobacco consumers, but also hurting workers in the cigar industry. From Tampa Bay Online:
Tampa will lose part of its cigar heritage in August when Hav-A-Tampa shuts its factory near Seffner and lays off about 495 employees, closing a factory that has been operating since 1902.
Several things conspired to hurt Altadis’ sales, McKenzie said, including the recession and the growth of indoor smoking bans. The bans have especially hurt sales in cold-weather states, where it’s impractical to smoke a cigar outdoors in the winter, he said.
However, the company attributed much of its trouble to the State Children’s Health Insurance Program, or SCHIP, a federal program that provides health insurance to low-income children. It is funded, in part, by a new federal tax on cigars and cigarettes. McKenzie couldn’t say how much sales of Hav-A-Tampa cigars had fallen off, but the numbers have dropped significantly, he said.
Previously, federal excise taxes on cigars were limited to no more than a nickel, said Norman Sharp, president of the Cigar Association of America trade group. The tax increase, which took effect April 1, raises the maximum tax on cigars to about 40 cents, Sharp said.
This health-tobacco legislation raised taxes $65 billion over 10 years. Imagine the damage that would be caused by the giant health bill currently moving through Congress, which will cost $1 trillion or more over 10 years.
Hat Tip: Tad DeHaven
Filed under: Health, Welfare & Entitlements; Regulatory Studies
Michael Lind’s Economic Philistinism
In a recently published article for the journal Democracy, Michael Lind of the New America Foundation lays out “The Case for Goliath” (registration required) — i.e., for returning to the good old days of price-and-entry regulation and cartelized industries. No, seriously.
I’ll give Lind credit for daring to go where his fellow devotees of “nostalgianomics” fear to tread. Many on the left these days look back fondly at the ’50s and ’60s when activist government and strong unions coincided with a narrowing income distribution. What they fail to recognize, or at least admit, is that the political economy of that supposed golden age rested on a systematic muting of competition, both by circumstance and deliberate policy. The devastation of Europe and Japan in World War II, price-and-entry controls, high trade barriers, and the threat of antitrust enforcement against industry leaders all combined to make heavy unionization and above-market wages for union workers economically viable.
This glaring oversight is understandable. There is, after all, overwhelming economic evidence that competition beats cartelization of industry hands down. When government restricts entry by new firms, the predictable result is a stifling of innovation. For example, consider this admission by former FCC chairman Michael Powell: “Because the history of the FCC is, when something happens that it doesn’t understand, kill it. We tried to kill cable. We tried to kill long-distance. When [MCI founder] Bill McGowan starting stringing out microwave towers that threatened AT&T, the FCC tried to stop him. The FCC tried to kill cable because it was going to threaten broadcasting.” (For more details on the the FCC’s lamentable track record, see here.)
The upshot is that progressive fantasies of a return to the good old days are just that — fantasies. Private-sector unions have withered and shrunk not because of changes in labor law, but because unionized firms haven’t been able to hack it in the new, more competitive marketplace (see “Auto industry, U.S.”). So the only way to get back to the days of Big Labor is by throttling the main engine of innovation and productivity: competition. And, well, that just doesn’t sound very progressive, does it?
Lind, though, grasps the nettle and chooses cartels and unions over economic progress. He does try to argue that we can have our cake and eat it too, but his case boils down to a crude post hoc ergo propter hoc fallacy: the big move toward cartelization in the ’30s was followed by good times in the ’50s and ’60s (let’s not talk about the ’70s), so therefore cartelization was good for the economy! Yes, and the Union won the Civil War with inferior generals, so perhaps poor military leadership is a key to victory. The fact is, the strong economic performance of the early postwar decades occurred in spite of, not because of, widespread restrictions on competition.
Though the anticompetitive nostrums Lind peddles are pure poison, he nonetheless deserves commendation. By identifying correctly the link between cartelization and strong unions, Lind highlights the essentially reactionary nature of progressives’ infatuation with Big Labor. He has therefore, however unwittingly, performed a public service.
P.J. O’Rourke on the New “Obamamobile”
It has been a good run, but it appears government might finally bring America’s love affair with the car to an untimely end, says Cato Mencken Research Fellow P.J. O’Rourke. The author of the new book Driving Like Crazy, spoke at Cato last week about classic cars, government regulation, the takeover of GM and the forthcoming “Obamamobile.”
Money in Politics, Virigina Edition
Bruce Bartlett has a good opinion piece on money in politics in Forbes. He mostly focuses on self-funding candidates who rarely win even when they contribute large sums to their own campaigns. The recent Democratic gubernatorial primary in Virginia, which Bartlett mentions, saw Terry McAuliffe spend over $7 million and lose badly. McAuliffe financed his bid in the usual way by attracting contributions. His success at fundraising may have cost him votes in the end.
Despite the McAuliffe example and others mentioned by Bartlett, people still believe “only money matters in politics” or “money buys elections.” The truth is, money matters but not all that much. Other factors, like circumstances, partisanship and the quality of the candidate, have more effect on the outcome of any election. It is true that incumbent members of Congress generally raise more than their challengers and almost always defeat them. But if you take into account the quality of a challenger, money has little effect on the outcome of a race.
We hear little these days about money buying elections. The people who complain about the power of money to subvert democracy are almost always on the left. If money buys elections, is Obama’s presidency a subversion of democracy? After all, the current president is the most successful fundraiser in American history, and not all of his money came from small contributors. But Obama didn’t buy the election of 2008. He was running against an unpopular administration with the economy mired in a deep recession. Obama was a skillful candidate who ran an effective campaign. John McCain could have matched Obama’s fundraising and the Republican still would have lost.
Money is overrated in politics. Just ask Terry McAuliffe.
There Really Is Nothing that Congress Won’t Make the Federal Government’s Business…
. . . including a “performance standard” for breast pumps.
America Threatened as Never Before
The Justice Department is on the job. Perceiving a dire threat against the American republic, they have acted to keep America safe. As my colleague Sallie James noted yesterday, they are stealing confiscating the money of Internet gamblers.
Reports Richard Morrison of our friends at the Competitive Enterprise Institute:
Just when it seemed that those in power had begun to think about Internet poker in a positive light, the Department of Justice throws us back into the digital dark ages by seizing $34 million in funds rightfully owned by around 27,000 online poker players. The government is alleging that the funds are associated with illegal online gambling and money laundering.
In a letter sent to Alliance Bank, the prosecutor said accounts held by payment processor Allied Systems Inc. are subject to seizure and forfeiture “because they constitute property involved in money laundering transactions and illegal gambling offenses.” The letter was signed by Arlo Devlin-Brown, assistant U.S. attorney for the Southern District of New York.
Knowing that the federal government is busy violating our privacy and grabbing our money to save us from ourselves just makes one feel great to be an American
Filed under: Regulatory Studies; Telecom, Internet & Information Policy
Cash for Clunkers Lesson: How to Use the $$ to Buy a Gas Guzzler
My son’s station car is an old Ford Explorer AWD which, despite being a V-6, was rated at about 15 mpg. Approaching 100,000 miles, the SUV’ s resale value is very low.
The House approved a bill to give him a $3,500 voucher to buy a car that is supposed to get only 18 mpg, or $4,500 if it gets 20 mpg. Only 18-20 mpg? That’s not moving us much closer to President Obama’s pie-in-the-sky 35.5 mpg goalpost is it?
Consider how easy it would be to game this giveaway program by using that $4,500 voucher to buy a big SUV or V-8 muscle car.
First of all, with Chrysler and GM dealerships folding, it should be easy to buy a mediocre Chevy Cobalt or Dodge Caliber for about $10,000 more than the voucher.
What you do next is sell that boring econobox, even if you end up with $1,000 less than you paid — that still leaves you with $3,500 of free money, courtesy of taxpayers.
As this process unfolds, the flood of resold small cars will make it even harder for GM, Chrysler and Ford dealers to get a decent price for small cars, because of added competition from new cars being resold as used.
That’s their problem, not yours.
So, take the $9,000 net from reselling the crummy little car plus the $4,500 from Uncle Sam. Then use that $13,500 to make a big down payment on a used Cadillac Escalade, Toyota Tundra pickup or Corvette.
File this under “unintended consequences” (my own file is running out of space).
Filed under: Energy and Environment; Government and Politics; Regulatory Studies; Tax and Budget Policy
Online Gambling: According to the Feds, You’ll Be Holding Today
From The Wall Street Journal today, an article about the federal freezing or seizing of 27,000 online gambling accounts (including that of one of my colleagues, who shall remain nameless but is $150 short today).
I blogged a few weeks ago about some (admittedly very dim) light on the horizon so far as the freedom to gamble online is concerned, but this is a setback indeed. The Poker Players’ Alliance (a lobby group for online poker players) says this is the first time that players’ accounts (as opposed to the gambling site operators themselves) have been targeted.
U.S. laws against gambling online, and the way those laws are administered, are an affront to personal freedom and a threat to our trading relationships.
Filed under: Law and Civil Liberties; Regulatory Studies; Trade
FDA to Regulate Tobacco? Big Mistake
Handing tobacco regulation over to the FDA, as Congress is poised to do, is an epic public health mistake. It is tantamount to giving the keys of the regulatory store to the nation’s largest cigarette manufacturer, Philip Morris.
The legislation that will be voted on shortly in the Senate was cooked up out of public sight by Philip Morris, Sen. Ted Kennedy, Rep. Henry Waxman, and anti-tobacco lobbyists. Philip Morris staffers themselves even wrote large portions of the bill.
There are significant, and numerous, problems with the FDA regulating tobacco, and virtually no benefits to public health. Kennedy, Waxman, and the public health establishment present their legislation as a masterful regulatory stroke that will end tobacco marketing, prevent kids from starting to smoke, make cigarettes less enjoyable to smoke, and reduce adult smoking. But FDA regulation of tobacco will do none of these things.
The bill fails to correctly identify the reasons why young people begin to smoke, and concentrates almost exclusively on restricting tobacco marketing, while leaving the other risk factors for adolescent smoking unaddressed. There is nothing in the proposed legislation that shows the FDA understands the well-documented connections between education, poverty and smoking status, connections that provide the key to helping adults stop smoking.
Obama’s FCC Pick to Seek Internet Regulation
Politico reports that President Obama’s nominee to head the Federal Communications Commission, Julius Genachowski, is expected to pursue “‘net neutrality” regulation of broadband Internet service.
In his paper, The Durable Internet: Preserving Network Neutrality without Regulation, Tim Lee shows why regulation is not needed to preserve the good engineering principle he calls “end-to-end.” His paper also shows how regulation intended to serve consumer-friendly ends is often captured and used by regulated industries to suppress competition and artificially raise profits, denying consumers the benefits of free markets.
Filed under: Regulatory Studies; Telecom, Internet & Information Policy
GM’s Nationalization and China’s Capitalists
GM’s restructuring under Chapter 11 includes plans to sell off the Hummer, Saab, and Saturn brands. Well, just one day after GM’s bankruptcy filing, a Chinese firm has come forward with a $500 million offer to purchase Hummer. The prospective buyer is Sichuan Tengzhong Heavy Industrial Machinery Co Ltd, a manufacturing company in western China, which hopes to become an automaker.
Not only is the Hummer offer the first bid for a GM asset in bankruptcy, but the bidder is foreign. Not only is the bidder foreign, but Chinese. And not only is the bidder Chinese, but the Hummer was first developed by the U.S. military. Thus, this is certain to be characterized as a national security matter, and the Committee on Foreign Investment in the United States (CFIUS) will have to review the proposal. There should be little doubt that the economic nationalists will be out in full force, warning CFIUS against transferring sensitive technologies to Red China.
Let me offer two quick points, as the bulging veins in my temples pulsate with disdain for official Washington.
First, if this deal is rejected (even if the bidder is scared away by detractors), any remaining credibility to the proposition that the United States will once again become that beacon on a hill, exemplifying for the world the virtues of free markets and limited government, will vanish into the ether. There has been too much U.S. hypocrisy on free trade and cross-border investment and too much double talk about the impropriety of government subsidizing national champions, that another indiscretion in a high profile case will blow open the already-bowing flood gates to economic nationalism worldwide. Considering that U.S. companies sell five times as much stuff to foreigners through their foreign subsidiaries than by exporting from the United States, investment protectionism is as advisable as nationalizing car companies.
Second, the willingness of this Chinese company to purchase Hummer serves as a stark reminder of what could have been. Had George W. Bush not allocated TARP money to GM last December, in circumvention of Congress’s rejection of a bailout, then GM likely would have filed for bankruptcy on January 1. At that point, there would likely have been plenty of offers from foreign and domestic concerns for individual assets to spin off or for equity stakes in the New GM. There would have been plant closures, dealership terminations, and jobs losses, as there is under the nationalization plan anyway. But taxpayers wouldn’t be on the hook for $50+ billion, a sum that is much more likely to grow larger than it is to be repaid. It is also a sum that will serve as the rationalization for further government interventions on GM’s behalf.
Filed under: Government and Politics; Regulatory Studies; Trade
Haywood v. Drown
The Supreme Court ruling in Haywood v. Drown got lost in the news last week, but it was an important constitutional case involving the principle of federalism. The issue concerned the extent to which the central government can commandeer state judicial systems. Unfortunately, by a narrow 5-4 vote, the Court gave the central government a green light.
Justice Clarence Thomas filed another one of his sober, scholarly opinions in dissent and I think he makes the case rather well. Excerpt:
The Court holds that New York Correction Law Annotated §24, which divests New York’s state courts of subject-matter jurisdiction over suits seeking money damages from correction officers, violates the Supremacy Clause ofthe Constitution, Art. VI, cl. 2, because it requires the dismissal of federal actions brought in state court under42 U. S. C. §1983. I disagree. Because neither the Constitution nor our precedent requires New York to open its courts to §1983 federal actions, I respectfully dissent.
Although the majority decides this case on the basis of the Supremacy Clause, see ante, at 5–13, the proper starting point is Article III of the Constitution. Article III, §1, provides that “[t]he judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.” The history of the drafting and ratification of this Article establishes that it leaves untouched the States’ plenary authority to decide whether their local courts will have subject-matter jurisdiction over federal causes of action.
Until this setback, the Court’s conservatives were doing well in this corner of the law. In New York v. United States (1992), the Court ruled that state legislatures were not subject to federal direction. In Printz v. United States (1997), the Court ruled that state executive officers were not subject to federal direction. This case stood for the proposition that state courts are not subject to federal direction. Alas, Justice Anthony Kennedy joined the liberals to subordinate the states to federal control.
Here’s a practical example to illustrate the problem. It’s bad enough when Congress wants to pass a law like the Americans with Disabilities Act (pdf)–a law that will create a flood of litigation. But what if Congress goes a step further and writes the law in such as way as to say ”take all those time-consuming lawsuits to the state courts. Federal judges and personnel can’t be bothered with that stuff!” So state courts get clogged or state lawmakers must raise taxes to alleviate the added burden, which blurs accountability. That’s what is likely to happen. Or, to be precise, continue to happen with increasing frequency. The feds have permission to foist costs on to the states.
But, to be clear, the main issue here is the proper division of federal and state authority. Even if Congress were to get around the problem of unfunded mandates by throwing money at the states, each state should retain control over its judiciary. As Justice Thomas notes, the issue of federal supremacy is too often distorted by liberals. Within its proper sphere, the feds are supreme. Liberals want supremacy and federal authority that is plenary. Wrong. Obama’s Supreme Court nominee should be asked about federalism and the doctrine of enumerated powers at the confirmation hearings.
Filed under: General; Government and Politics; Law and Civil Liberties; Regulatory Studies
A Compelling Government Interest in… Fabulous Drapes!
Libertarians often disagree with their non-libby friends about the need for government-mandated occupational licensing in fields like medicine. The idea behind such licensing is that the government has a compelling interest in protecting citizens and that licensing actually achieves that end. The evidence is not as cut and dried on the latter point as many people assume, but at least there’s enough meat there to warrant a discussion.
Whatever you think about occupational licensing in the context of medicine, there’s one field where the government’s “compelling interest” — and ability to successfully execute on it – is particularly hard to defend: interior design.
In three U.S. states, government officials are, right now, “protecting” their citizens from bad Feng Shui, misguided uses of prints with plaids, gauche arrangements of bric-a-brac, and other crimes against fabulosity. No one in Florida, for instance, can call himself an interior designer lest he receives the official imprimatur of the state. The Institute for Justice has filed suit to overturn the licensing requirement. Imagine the harm to Floridians if they succeed….
No. I can’t imagine any either.
In this field, more than any other, the real reason for most occupational licensing becomes apparent: cartelization to protect incumbent businesses from competition.
UPDATE: Check out this video by ReasonTV about the interior design license laws around the country.
Wal-Mart: Health Food Store?
As someone who believes in liberty, my natural inclination is to defend a company like Wal-Mart from the usual attacks. You know, the company should pay its employees more (sure, just like all other companies, including libertarian think tanks!). Wal-Mart destroys local businesses (that is, enterprises which offer fewer choices but at higher prices, and whose customers cheerfully flee when given an alternative). The people most likely to attack Wal-Mart are those who would never shop there and don’t know anyone who does shop there.
It’s always nice to find evidence to back my inclinations. It turns out that Wal-Mart not only lowers prices for poor people, but improves their health. Reporting on this improbable result is Radley Balko, formerly at Cato and now at Reason:
In the popular imagination, a big-box store such as Wal-Mart is more often seen as part of the problem than part of the solution: We associate Wal-Mart with large women in stretch pants, fat kids sucking down tubs of soda, and morbidly obese men inching down the snack-food aisle in motorized shopping carts. The store makes candy, chips, and soda ridiculously cheap—so wouldn’t Wal-Mart contribute to the obesity problem?
That’s what economists Art Carden of Rhodes College and Charles Courtemanche of the University of North Carolina at Greensboro suspected. So they conducted a study to find out. Carden and Courtemanche have done a number of studies on Wal-Mart. Carden insists they get no funding from the company, directly or indirectly. Rather, he says, the two free-market economists have been intrigued by the Wal-Mart debate and wanted to test some of the more common criticisms of the store. Generally, they’ve found that the worst fears about Wal-Mart are unfounded, and that the stores have a mostly positive impact on their communities.
But they thought this one might be different. “We expected the study to show an increase in obesity in communities with a Wal-Mart,” Carden says. “We know that Wal-Mart lowers the cost of food, but we figured it’s not always the best food for you.”
To their surprise, they found the opposite—there was a small but statistically significant reduction in obesity rates in communities with a Wal-Mart, perhaps because the store also sells fresh produce of good quality at a good price.
Broadening the study to big-box stores in general, the effect was even more pronounced. “People actually bought more produce, more fruits and vegetables,” Carden says. “Instead of just eating more, they ate a higher-quality diet—a lower-fat diet than the rest of the population.”
It appears that people aren’t as stupid as paternalistic politicians believe. And markets ain’t half bad either.
Filed under: Government and Politics; Health, Welfare & Entitlements; Regulatory Studies
Privacy Regulation: Expensive and Ineffective
Lee Gomes writes on Forbes.com with a clear-eyed reminder that privacy regulation has been costly, yet failed to deliver. Lovers of government intervention will, of course, take this as an argument to double-down.
Filed under: Regulatory Studies; Telecom, Internet & Information Policy
Sarbanes-Oxley under Attack… from the Supreme Court!
Today the Supreme Court agreed to review a case brought by our friends at the Competitive Enterprise Institute that challenges the constitutionality of the Public Company Accounting Oversight Board (PCAOB, pronounced “peek-a-boo”). The constitutional problem with the PCAOB — there are many policy problems — is that its officers are appointed in an unconstitutional manner.
Under the Appointments Clause of Article II, section 2, the president has the exclusive power to appoint and remove government officials. The members of the PCAOB – which enforces the massive regulatory scheme Sarbanes-Oxley imposes on public companies – are appointed by the SEC, however, which then has limited supervisory/removal power. While this structural defect may seem like a minor technicality, what it means is that the awesome power to set accounting standards — not least Sarbox section 404, which has cost the economy over a trillion dollars — impose taxes, and levy criminal and civil penalties is vested in a bunch of unaccountable bureaucrats. Entities with similar authority, even those having a modicum of political independence, such as the IRS Commissioner and Federal Reserve governors, are all vetted by the president and the Senate.
The court below (the D.C. Circuit), however, held that PCAOB members are inferior officers and, as such, Congress “may limit and restrict the power of removal as it deems best for the public interest.” But this gets the Constitution backwards; Congress isn’t allowed to insulate important decisionmakers from political accountability. As CEI’s press release says:
If the President can pick and remove the PCAOB members, as the Appointments Clause requires, he will be on the hook for their policy failures, and thus have an interest in making them develop sound policies that protect investors and don’t stifle economic growth. He won’t be able to blame the red tape on an unaccountable agency whose officials he doesn’t select or control.
The Court will hear the case, Free Enterprise Fund v. PCAOB — which I previously blogged about here – in late fall.
Filed under: Government and Politics; Law and Civil Liberties; Regulatory Studies
Obama’s Unerring Instinct for Aides with Authoritarian Instincts
President Obama has appointed New York City health commissioner Thomas Frieden to head the Centers for Disease Control. Public health is an important issue, but as Jacob Sullum points out at Reason, Frieden has a weak grasp of what’s “public” in the world of health:
Frieden, an infectious disease specialist who is known mainly as an enthusiastic advocate of New York’s strict smoking ban, heavy cigarette taxes, trans fat ban, and mandatory calorie counts on restaurant menu boards, embodies the CDC’s shift from illnesses caused by microbes to illnesses caused by lifestyle choices. “Dr. Frieden is an expert in preparedness and response to health emergencies,” Obama said today, ”and has been at the forefront of the fight against heart disease, cancer and obesity, infectious diseases such as tuberculosis and AIDS, and in the establishment of electronic health records.” Some of these things are not like the others. When it comes to justifying the use of force, there is a crucial difference between health risks imposed by others (such as bioterrorists or TB carriers) and health risks that people voluntarily assume (by smoking or overeating, for example). In the former case, even those who believe that government should be limited to protecting individual rights can see a strong argument for intervention; in the latter case, intervention can be justified only on paternalistic or collectivist grounds. Frieden either does not recognize or does not care about this distinction.
Frieden told the Financial Times in 2006 that “when anyone dies at an early age from a preventable cause in New York City, it’s my fault.” That’s a breathtaking vision of the scope and power of government. If you eat butter or salt, or smoke, or climb mountains, or ride a motorcycle, or bungee-jump, or run with the bulls in Pamplona, Dr. Frieden feels that he and the government are personally responsible. This isn’t paternalism; your parents usually let you make your own decisions along about the age of 18. And it isn’t fair to nannies to call it “nanny state” regulation: after all, nannies are paid to take care of children until they can care for themselves; they don’t barge into your home or your bar or your restaurant uninvited, issuing orders to adults. Maybe the right term is food fascism, for the attempt to use force to tell adults what they can and can’t eat, smoke, or purchase.
More on the distinction between public health problems and health problems that are merely widespread here.
And more about Obama’s appointment of “a bunch of statist ideologues who have been waiting years or decades for an election and a crisis that would allow them to fasten on American society their own plan for how energy, transportation, health care, education, and the economy should work” here.
Filed under: Government and Politics; Health, Welfare & Entitlements; Regulatory Studies
Week in Review: The War on Drugs, SCOTUS Prospects and Credit Card Regulation
White House Official Says Government Will Stop Using Term ‘War on Drugs’
The Wall Street Journal reports that White House Drug Czar Gil Kerlikowske is calling for a new strategy on federal drug policy and is putting a stop to the term “War on Drugs.”
The Obama administration’s new drug czar says he wants to banish the idea that the U.S. is fighting ‘a war on drugs,’ a move that would underscore a shift favoring treatment over incarceration in trying to reduce illicit drug use…. The Obama administration is likely to deal with drugs as a matter of public health rather than criminal justice alone, with treatment’s role growing relative to incarceration, Mr. Kerlikowske said.
Will Kerlikowske’s words actually translate to an actual shift in policy? Cato scholar Ted Galen Carpenter calls it a step in the right direction, but remains skeptical about a true change in direction. “A change in terminology won’t mean much if the authorities still routinely throw people in jail for violating drug laws,” he says.
Cato scholar Tim Lynch channels Nike and says when it comes to ending the drug war, “Let’s just do it.” In a Cato Daily Podcast, Lynch explained why the war on drugs should end:
Cato scholars have long argued that our current drug policies have failed, and that Congress should deal with drug prohibition the way it dealt with alcohol prohibition. With the door seemingly open for change, Cato research shows the best way to proceed.
In a recent Cato study, Glenn Greenwald examined Portugal’s successful implementation of a drug decriminalization program, in which drug users are offered treatment instead of jail time. Drug use has actually dropped since the program began in 2001.
In the 2009 Cato Handbook for Policymakers, David Boaz and Tim Lynch outline a clear plan for ending the drug war once and for all in the United States.
Help Wanted: Supreme Court Justice
Justice David Souter announced his retirement from the Supreme Court at the end of last month, sparking national speculation about his replacement.
Calling Souter’s retirement “the end of an error,” Cato senior fellow Ilya Shapiro makes some early predictions as to whom President Obama will choose to fill the seat in October. Naturally, there will be a pushback regardless of who he picks. Shapiro and Cato scholar Roger Pilon weigh in on how the opposition should react to his appointment.
Shapiro: “Instead of shrilly opposing whomever Obama nominates on partisan grounds, now is the time to show the American people the stark differences between the two parties on one of the few issues on which the stated Republican view continues to command strong and steady support nationwide. If the party is serious about constitutionalism and the rule of law, it should use this opportunity for education, not grandstanding.”
Obama Pushing for Credit Card Regulation
President Obama has called for tighter regulation of credit card companies, a move that “would prohibit so-called double-cycle billing and retroactive rate hikes and would prevent companies from giving credit cards to anyone under 18,” according to CBSNews.com.
But Cato analyst Mark Calabria argues that this is no time to be reducing access to credit:
We are in the midst of a recession, which will not turn around until consumer spending turns around — so why reduce the availability of consumer credit now?
Congress should keep in mind that credit cards have been a significant source of consumer liquidity during this downturn. While few of us want to have to cover our basic living expenses on our credit card, that option is certainly better than going without those basic needs. The wide availability of credit cards has helped to significantly maintain some level of consumer purchasing, even while confidence and other indicators have nosedived.
In a Cato Daily Podcast, Calabria explains how credit card companies have been a major source of liquidity for a population that is strapped for cash to pay for everyday goods.
Filed under: Cato Publications; General; Law and Civil Liberties; Regulatory Studies
Checker Finn Is 99.44 Percent Right
Fordham Foundation president Checker Finn notes today that recent upticks on the National Assessment of Educational Progress cannot be reasonably credited to the No Child Left Behind act (hat tip to Bill Evers). The NCLB, President Bush’s signature education initiative, was supposed to improve student achievement through bureaucratic accountability measures.
But after noting that NCLB’s proponents can’t back up their claims that the law is working, Finn suggests that we need an “education-achievement ‘audit agency’ to sort out the claims and counterclaims about student performance.”
Maybe. But Amazon.com didn’t have to be told by a federal product quality audit czar to allow its customers to rate the products it sells. They’ve done it because it’s good business. In fact, no matter what product or service you’re interested in, there are resources on the Web to find out virtually anything you could possibly want to know about it. Reviews by users, professional reviews, criticism from competitors…. As a result, consumers are better informed than ever before. Except in education, which operates outside the free enterprise system.
Sure, we could add a bureaucratic audit agency and hope that it will make our bureaucratic education accountability law accountable, and that that, in turn, will make our bureaucratic education system efficient and innovative.
Or we could just do what we know already works in every other sector of the economy: let consumers choose, and make it easy for a diversity of public and private schools compete to serve them.
Filed under: Education and Child Policy; Regulatory Studies
Love the Cards, Hate the Card Issuers
God hates the sin but loves the sinner, we are told. Americans have a similar attitude towards credit cards. They love the cards but hate the card issuers.
Naturally, President Barack Obama has picked up on this sentiment and wants the credit card companies to be “fair.” Reports the Washington Post:
The Obama administration yesterday called for an end to unfair credit card industry practices such as retroactive interest rate increases for any reason, late-fee traps that penalize borrowers with weekend or middle-of-the-day deadlines and teaser rates that last less than six months.
In a written statement released by the Treasury Department, the administration outlined practices it would like Congress to reform as it considers two bills that would crack down on the industry. One proposal would force card companies to apply payments above the minimum amount to the highest interest rate debt. To crack down on over-limit fees, the administration would also like Congress to require card companies to get customers’ permission to set up accounts so transactions over the limit can still be processed.
There are lots of reasons to criticize the practices of credit card companies, but many of the rules are simply mechanisms to charge riskier borrowers more. If you pay off your bill every month, you don’t pay the extra fees and interest. If you are more disorganized, short on cash, or both, you pay more.
Higher charges make it possible to provide more credit to more people. Of course, politicians believe in the latter but not the former. Banks should provide credit cards, make loans, and issue mortgages to everyone, irrespective of credit standing, at rates akin to those charged Bill Gates. Anything more is viewed as a variant of “predatory” lending deserving condemnation.
Maybe it would be best for some people not to buy so much on credit, but that isn’t — at least so far — the government’s decision. However, it would be more honest if government branded people with the Scarlet C and banned them from borrowing than prohibiting companies from charging higher rates and fees to reflect higher credit risks.
The credit card debate is stranger than most in Washington. Listening to critics you’d think that the card companies were dragooning people off the streets, forcing them at gunpoint to sign up for cards, and demanding that they spend money else their children will be kidnapped and sold into slavery. Precisely who was forced to accept and use these terrible cards with their terrible terms? No one.
Instead of posturing as defenders of the body politic, crusading politicians should, as my friend Don Boudreaux of George Mason University suggested, give up their day jobs and start credit card companies. These entrepreneurs then could offer consumers better cards with less onerous terms, making everyone better off.
Any takers?
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Regulatory Studies
Cleveland Park Embraces Free Markets
Cleveland Park, an upscale neighborhood here in the District of Columbia, might be the last place you would expect appeals to the principles of the free market. It is, after all, the home of what David Brooks once called ”Ward Three Morality,” an outlook that celebrates government control of the economy. But not always.
Recently an entrepreneur proposed opening a new wine store in Cleveland Park. He sought the support of the advisory neighborhood commission, a local government board, before making his case for a liquor license to DC’s Alcohol Beverage Control Board. The most serious opposition to the entrepreneur’s plans seems to have come from an existing wine store nearby. According to its attorney, the existing wine store was “a beloved extension of the community.” More candidly he noted the new store would offer competition to the existing business. At this point, you might think: the Cleveland Park commission blocked opening of the new business while congratulating themselves on protecting the town from a ruthless “capitalist logic.”
Well, not quite. Peter Fonseca, the lawyer for the entrepreneur, reportedly “urged the commissioners to consider free-market principles when making their decision. ‘This is America.’” And they did: “Commissioner Richard Rothblum agreed, saying commissioners should not get in the way of free enterprise. ‘I don’t think we have any place telling people what their business plan should be.’” The commission then voted 8-0 to support the entrepreneur’s effort at the Alcohol Control Board. The appeal to “free market principles” seems to have carried the day in Cleveland Park!
Perhaps this is only the beginning. If the free market is desirable for fine wines, why not the auto industry and the banks?
New at Cato
Here are a few highlights from Cato Today, a daily email from the Cato Institute. You can subscribe, here
- The new edition of Regulation examines the Employee Free Choice Act (EFCA), the legal drinking age and climate change policies.
- In The Week, Will Wilkinson argues that the Obama administration should rethink its drug policy and that prominent marijuana users should “come out of the closet.”
- Gene Healy points out in the Washington Examiner why the Serve America Act (SAA) is no friend to freedom.
- The Cato Weekly Video features Rep. Paul Ryan discussing the Obama administration’s budget.
- In Wednesday’s Cato Daily Podcast, Patri Friedman discusses seasteading and the prospects for liberty on the high seas.
Filed under: Cato Publications; General; Government and Politics; Regulatory Studies; Tax and Budget Policy
Fight Moral Panics — With Beer!
In the UK and here at home, brewers have increasingly been producing specialty beers with the alcohol content of wine. Naturally, it’s time for a moral panic:
The new breed of bitters, with their intense flavours and alcohol contents of up to 12 per cent, are the work of young brewing entrepreneurs trying capture the attention — and cash — of lager-guzzling twentysomethings.
Beer writers and aficionados have welcomed the speciality bottles, which can contain 10 times as much hops as a traditional pint, as a necessary revitalisation of a market dominated by corporate giants turning out similar 4 per cent brown bitters.
But alcohol campaigners have complained that drinkers may be unaware of the strength of the new products, a single 330ml bottle of which is enough to make an adult exceed their daily recommended alcohol intake.
In January the Portman Group, the alcohol industry watchdog, ruled the brashest exponent of the movement, BrewDog brewery in Aberdeen, had broken its code on responsible marketing for its Speed Ball beer, named after the cocktail of cocaine and heroin which killed the actor John Belushi, star of The Blues Brothers.
Despite the group rejecting complaints against three of BrewDog’s other beers, Punk IPA, Rip Tide and Hop Rocker, its managing director, James Watt, accused Portman of being “outdated” and “out of touch”. He did, however, concede that his company had been provocative. “We thought we would give them something worth banning us for,” he said.
Good for them.
Note the comically low, and comically named, “recommended daily alcohol intake,” which would apparently forbid splitting a standard bottle of wine with another drinker. (Is there any better way to drink wine?) Incidentally, today’s 750 mL bottle derives from the “fifth,” or fifth of a gallon, which in the good old barrel-chested days of yore may well have been a single-serving portion.
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