Feds Giveth Jobs & Cars, Then Taketh Away Again
The bad news this morning on the impact of both the federal stimulus and the Cash for Clunkers program should not come as a surprise to anyone who has paid attention to the history of government intervention in the economy.
New data that the jobs created by the stimulus have been overstated by thousands is compelling, but it’s really a secondary issue. The primary issue is that the government cannot “create” anything without hurting something else. To “create” jobs, the government must first extract wealth from the economy via taxation, or raise the money by issuing debt. Regardless of whether the burden is borne by present or future taxpayers, the result is the same: job creation and economic growth are inhibited.
At the same time the government is taking undeserved credit for “creating jobs,” a new analysis of the Cash for Clunkers program by Edmunds.com shows that most cars bought with taxpayer help would have been purchased anyhow. The same analysis finds the post-Clunker car sales would have been higher in the absence of the program, which proves that the program merely altered the timing of auto purchases.
Once again, the government claims to have “created” economic growth, but the reality is that Cash for Clunkers had no positive long-term effect and actually destroyed wealth in the process.
Right now businesses and entrepreneurs are hesitant to make investments or add new workers because they’re worried about what Washington’s interventions could mean for their bottom lines. The potential for higher taxes, health care mandates, and costly climate change legislation are all being cited by businesspeople as reasons why further investment or hiring is on hold. Unless this “regime uncertainty” subsides, the U.S. economy could be in for sluggish growth for a long time to come.
For more on the topic of regime uncertainty and economic growth, please see the Downsizing Government blog.
Nanny State Doesn’t Like Competition – the English Version
A previous post by David Boaz poked fun at bureaucrats in Michigan for threatening a woman for the ostensible crime of keeping an eye on her neighbors’ kids without a government permit. English bureaucrats are equally clueless, badgering two women who take turns caring for each other’s kids. The common theme, of course, is that bureaucrats lack common sense — but the real lesson is that this is the inevitable consequence of government intervention (especially when politicians say they are “doing it for the children). The BBC reports:
England’s Children’s Minister wants a review of the case of two police officers told they were breaking the law, caring for each other’s children.
Ofsted said the arrangement contravened the Childcare Act because it lasted for longer than two hours a day, and constituted receiving “a reward”.
It said the women would have to be registered as childminders.
…Ms Shepherd, who serves with Thames Valley Police, recalled: “A lady came to the front door and she identified herself as being from Ofsted. She said a complaint had been made that I was illegally childminding.
“I was just shocked – I thought they were a bit confused about the arrangement between us. So I invited her in and told her situation – the arrangement between Lucy and I – and I was shocked when she told me I was breaking the law.”
…Minister for Children, Schools and Families Vernon Coaker insisted the Childcare Act 2006 was in place “to ensure the safety and wellbeing of all children”.
Filed under: Government and Politics; International Economics and Development; Regulatory Studies
Americans Don’t Want It
“Americans are more likely today than in the recent past to believe that government is taking on too much responsibility for solving the nation’s problems and is over-regulating business,” according to a new Gallup Poll.
New Gallup data show that 57% of Americans say the government is trying to do too many things that should be left to businesses and individuals, and 45% say there is too much government regulation of business. Both reflect the highest such readings in more than a decade.
Byron York of the Examiner notes:
The last time the number of people who believe government is doing too much hit 57 percent was in October 1994, shortly before voters threw Democrats out of power in both the House and Senate. It continued to rise after that, hitting 60 percent in December 1995, before settling down in the later Clinton and Bush years.
Also, the number of people who say there is too much government regulation of business and industry has reached its highest point since Gallup began asking the question in 1993.
That might give an ambitious administration pause. The independents who swung the elections in 2006 and 2008 clearly think things have gone too far. An administration as smart as Bill Clinton’s will take the hint and rein it in. Meanwhile, another recent poll, by the Associated Press and the National Constitution Center, shows that
Americans decidedly oppose the government’s efforts to save struggling companies by taking ownership stakes even if failure of the businesses would cost jobs and harm the economy, a new poll shows.
The Associated Press-National Constitution Center poll of views on the Constitution found little support for the idea that the government had to save AIG, the world’s largest insurer, mortgage giants Fannie Mae and Freddie Mac, and the iconic American company General Motors last year because they were too big to fail.
Just 38 percent of Americans favor government intervention – with 60 percent opposed – to keep a company in business to prevent harm to the economy. The number in favor drops to a third when jobs would be lost, without greater damage to the economy.
Similarly strong views showed up over whether the president should have more power at the expense of Congress and the courts, if doing so would help the economy. Three-fourths of Americans said no, up from two-thirds last year.
“It really does ratify how much Americans are against the federal government taking over private industry,” said Paul J. Lavrakas, a research psychologist and AP consultant who analyzed the results of the survey.
Note that 71 percent of the respondents opposed government takeovers, with 50 percent strongly opposed, before the “benefits” of such takeovers were presented.
President Obama is an eloquent spokesman for his agenda, and he has an excellent political team with a lot of outside allies to push it. But as the old advertising joke goes, you can have the best research and the best design and the best advertising for your dog food, but it won’t sell if the dogs don’t like it.
Bob McDonnell: The Modern Republican
This is from the Reagan administration’s deregulatory 1981 energy plan: “All Americans are involved in making energy policy. When individual choices are made with a maximum of personal understanding and a minimum of government restraints, the result is the most appropriate energy policy.”
Many modern Republicans claim devotion to Ronald Reagan’s ideas, but they often seem to forget about the “minimum of government” thing. The following points are from Republican Virginia gubernatorial candidate Bob McDonnell’s “More Energy, More Jobs” plan:
- “McDonnell was the chief sponsor of legislation creating the Virginia Hydrogen Energy Plan.”
- “McDonnell also supported grant programs for solar photovoltaic manufacturing, tax exemptions for solar energy and recycling property, and tax credits for solar energy equipment.”
- “In order to protect Virginia’s citizens from the skyrocketing wholesale prices of electricity seen in other states, McDonnell brought together all the necessary stake holders to re-regulate electricity in Virginia.”
- “Currently, Virginia is the second largest importer of electricity behind California. This is unacceptable.”
- “Bob McDonnell will establish Virginia as a Green Jobs Zone to incentivize companies to create quality green jobs. Qualified businesses would be eligible to receive an income tax credit equal to $500 per position created per year for the first five years.”
- “The Virginia Alternative Fuels Revolving Fund was established to assist local governments that convert to alternative fuel systems . . . Bob McDonnell will expand the purpose of this fund to include infrastructure such as refueling stations, provide seed money and aggressively pursue additional grants.”
- “Bob McDonnell will make Southwest and Southside Virginia the nation’s hub for traditional and alternative energy research and development…To assist with the attraction, building and operation of major energy facilities in Southside and Southwest Virginia, we will also support the establishment of the Center for Energy.”
- “To help Virginia universities gain access to federal stimulus money, as Governor, Bob McDonnell will establish the Virginia Universities Clean Energy Development and Economic Stimulus Foundation.”
- “As Governor, Bob McDonnell will leverage stimulus funding to incentivize individuals and businesses to conduct energy audits and encourage public private partnerships between small businesses and government.”
It’s true that McDonnell’s plan has some free market elements, and also that Ronald Reagan supported some wasteful energy boondoggles. However, the degree to which the modern Republican wants to micromanage and manipulate the energy industry is remarkable. McDonnell is almost setting out a Soviet five-year plan for a substantial part of the Virginia economy. For goodness sakes, he wants to treat Virginia like a separate country and try to fix the supposed problem that it is “importing” too much energy from other states!
It’s not just energy. Look at the top-down central planning ideas that McDonnell has for “creating jobs”:
Filed under: Energy and Environment; General; Government and Politics
Pervasive Illiteracy in the Afghan National Army
Matt Yglesias has a lot of smart things to say about the pervasive illiteracy plaguing the Afghan National Army. Upwards of 75 to 90 percent (according to varying estimates) of the ANA is illiterate.
As Ted Galen Carpenter and I argue in our recent Cato white paper Escaping the Graveyard of Empires: A Strategy to Exit Afghanistan, this lack of basic education prevents many officers from filling out arrest reports, equipment and supply requests, and arguing before a judge or prosecutor. And as Marine 1st Lt. Justin Greico argues, “Paperwork, evidence, processing—they don’t know how to do it…You can’t get a policeman to take a statement if he can’t read and write.”
Yglesias notes:
This strikes me as an object lesson in the importance of realistic goal-setting. The Afghan National Army is largely illiterate because Afghanistan is largely illiterate…we just need an ANA that’s not likely to be overrun by its adversaries. But if we have the more ambitious goal of created [sic] an effectively administered centralized state, then the lack of literacy becomes a huge problem. And a problem without an obvious solution on a realistic time frame [emphasis mine].
Such high levels of illiteracy serves to highlight the absurd idea that the United States has the resources (and the legitimacy) to “change entire societies,” in the words of retired U.S. Army lieutenant colonel John Nagl. Eight years ago, Max Boot, fellow for National Security Studies at the Council on Foreign Relations, likened the Afghan mission to British colonial rule:
Afghanistan and other troubled lands today cry out for the sort of enlightened foreign administration once provided by self-confident Englishmen in jodhpurs and pith helmets…This was supposed to be ‘for the good of the natives,’ a phrase that once made progressives snort in derision, but may be taken more seriously after the left’s conversion (or, rather, reversion) in the 1990s to the cause of ‘humanitarian’ interventions. [emphasis mine]
But as I highlighted yesterday at the Cato event “Should the United States Withdraw from Afghanistan?” (which you can view in its entirety here), policymakers must start narrowing their objectives in Afghanistan, a point Yglesias stresses above. Heck, as I argued yesterday, rational people in the United States are having difficulty convincing delusional types here in America that Barack Obama is their legitimate president. I am baffled by people who think that we have the power to increase the legitimacy of the Afghan government. It’s also ironic that many conservatives (possibly brainwashed by neo-con ideology) who oppose government intervention at home believe the U.S. government can bring about liberty and peace worldwide. These self-identified “conservatives” essentially have a faith in government planning.
Yet these conservatives share a view common among the political and military elite, which is that if America pours enough time and resources—possibly hundreds of thousands of troops for another 12 to 14 years—Washington could really turn Afghanistan around.
However, there is a reason why the war in Afghanistan ranks at or near the bottom of polls tracking issues important to the American public, and why most Americans who do have an opinion about the war oppose it (57 percent in the latest CNN poll released on Sept. 1) and oppose sending more combat troops (56 percent in the McClatchy-Ipsos survey, also released on Sept. 1). It’s because Americans understand intuitively that the question about Afghanistan is not about whether it is winnable, but whether it constitutes a vital national security interest. An essential national debate about whether we really want to double down in Afghanistan has yet take place. America still does not have a clearly articulated goal. This is why the conventional wisdom surrounding the war—about whether we can build key institutions and create a legitimate political system—is not so much misguided as it is misplaced.
The issue is not about whether we can rebuild Afghanistan but whether we should. On both accounts the mission looks troubling, but this distinction is often times overlooked.
It’s Not About the Speech to Schoolchildren
The reaction to President Obama’s planned speech to schoolchildren and the lesson plans sent out by the Dept. of Ed have sparked a firestorm of criticism and accusations about indoctrination, etc.
Many, many people just can’t understand what the big deal is. After all, it’s just a pep-talk about doing well in school and working hard. Sure, there was some language promoting Obama and political leaders. But who cares? It’s just a brief speech by the President after all. Just like Bush the Elder gave in gentler times (which got him a Congressional investigation).
Many are asking the same questions about a number of issues these days. Why the outrage over the deficit? Where were the complaints when Bush the Younger ran it up? Why so exercised about the government health option? Don’t we have Medicare and Medicaid?
Of course Cato scholars, libertarians and many conservatives have criticized these things all along. For some, the new sensitivity, the emotion, is the result of the proverbial straw on a camel’s back, the accumulation of dissatisfaction with various aspects of the government over decades. And what has changed for others is the pace and scope of government expansion at the close of the Bush presidency and the dawn of Obama’s.
The furious reaction to the politicized lesson plan and Obama’s speech to schoolchildren cannot be understood without the context of the bailouts, the stimulus, the debt, GM, the attempt to take over health care.
And now, our kids. And not just the speech and lesson plan, but federal expansion into preschool and early childhood initiatives and home visitations (however voluntary and innocuous-seeming in different times).
They . . . the government, the meddlers, the nannies . . . they are coming for our money, our doctors, our guns and our kids. They won’t stop until they control everything.
That’s how it looks to millions of Americans. Fair or not, people are now very sensitive to any actions by the Obama administration.
Just as a lifetime of exposure to an allergen and modest immune reactions can reach some ill-defined tipping point and bloom into full-blown anaphylaxis, many Americans have developed an acute allergy to government intervention and Obama’s grand plans.
In isolation, the reaction to this speech seems wild. Given the context, it’s completely understandable.
Strike a Blow for Freedom: Don’t Buy GM
Time and again my colleagues and I have warned that the government’s takeover of GM would divorce business decisions from economics and wed them to politics ‘til death do they part. But I won’t gloat. Better to be right and satisfied that government is reasonably restrained than right and house hunting in Galt’s Gulch.
We’ve already seen the president insist on the firing of a CEO, design and negotiate a bankruptcy plan devoid of much economic merit, impose preferences about which models to produce, and assure the diabolical, undeserving management of the UAW that GM won’t import small cars from its foreign plants to make space for its U.S.-produced budget-busting green vessels.
Now Congress is attempting to legislate its way into the boardroom. Last month, GM/Obama announced plans to terminate 1,300 dealerships, as part of a larger effort to reduce costs and, ultimately, turn a “profit.” (The term “profit” is, shall we say, imprecise in this case given the amount of production subsidization, fuel taxation, and tax code inducements that will be necessary to sustain GM for the foreseeable future). But many in Congress don’t like the idea. As reported in the Detroit Free Press:
By a unanimous vote, a U.S. House committee has approved a measure that would restore 2,100 dealers either cut or scheduled to be closed by General Motors Corp. and Chrysler Group LLC.
…The bill would turn back the clock to before the companies filed for bankruptcy, restoring the 789 dealers cut by Chrysler and 1,300 dealers GM chose to wind down.
…Executives from GM and Chrysler have both told Congress that cutting dealers was essential to their survival outside of bankruptcy, saving each company billions of dollars a year and strengthen their remaining sales force.
“This legislation, if passed, would put our long-term viability at risk,” said GM spokesman Greg Martin.
I suppose you can’t really blame Congress for trying to impose its wishes on GM. After all, the Constitution is silent on the matter of which branch of government furnishes the CEO of nationalized companies.
How Many Uninsured Are There?
The Wall Street Journal’s Numbers Guy tackles the question:
The Census Bureau estimates that the number of uninsured amounts to 45.7 million people. But the agency might be over-counting by millions due to faulty assumptions…
Even though legislation won’t cover many of them, illegal immigrants are especially difficult to enumerate: Few raise their hands to be counted. Prof. [Jonathan] Gruber estimates they make up about 13% of the uninsured today, or nearly six million people of that 45 million number…
Of the rest, some people are eligible for health insurance but don’t know it and many can afford it but don’t want it. About 43% of uninsured nonelderly adults have incomes greater than 2.5 times the poverty level, according to a report released Tuesday by the business-backed Employment Policies Institute.
He left out a few things, though.
The estimate of 46 million uninsured, which comes from a less-than-ideal government survey, has been the occasion of a fraud on the public. For 20 years, the Church of Universal Coverage told us that 40-some million Americans are uninsured for the entire year. Then, experts including the non-partisan Congressional Budget Office said that no, 40-some million is the number who are uninsured on any given day, and a lot of those people quickly regain coverage. The number of Americans who are uninsured for the entire year is actually 20-30 million. Yet the Church of Universal Coverage kept using that 40-some million estimate as if nothing had happened – even though the meaning of that estimate had completely changed.
The Congressional Budget Office also reports that as many as 15 percent of those 20-30 million chronically “uninsured” are eligible for government programs, so they’re effectively insured.
According to economists Mark Pauly of the University of Pennsylvania and Kate Bundorf of Stanford, as many as three-quarters of the uninsured could afford coverage but choose not to purchase it. Again, according to the Congressional Budget Office, 60 percent of the uninsured are under age 35, and 86 percent are in good-to-excellent health.
Government intervention has made health insurance unnecessarily expensive for them, so these folks quite sensibly don’t want to be ripped off. Mandating that they buy coverage is really about hunting them down and taxing them.
A Nation of Lawlessness
The matter of Chrysler’s bankruptcy seems to have rendered quaint our system of checks and balances. President Obama is breaking the law and the other two branches are letting him get away with it. One can probably understand how a smitten public might casually allow this president a stipend of unconstitutional acts, since he doesn’t scowl like Nixon or stutter like Bush. But, even a popular president (in particular, a popular president) must be held in check by the legislative and judicial branches.
And that’s not happening.
On Tuesday at 4:00 pm, Justice Ruth Bader Ginsburg “stayed pending further order” the bankruptcy-related transactions of Chrysler, giving hope the Supreme Court might hear the appeal filed on behalf of certain Indiana state pension and construction funds, who claim that their property rights as secured creditors were violated by the forced sale and that the use of Troubled Asset Relief Program funds to support Chrysler and facilitate its restructuring was illegal. Only 28 hours later, the Supreme Court decided against taking the appeal, despite the seemingly compelling issues at hand.
Just as the Bush administration was telling Congress last September that there was no time to debate the merits of a financial bailout and that the only course was to give Treasury Secretary Paulson carte blanche immediately to spend $700 billion, the Obama administration was telling the Supreme Court this week that time was of the essence and that Fiat would walk away from the Chrysler deal if it wasn’t allowed to proceed right away. Was that the decisive factor in the Supreme Courts rejection of the appeal? It seems to me the appeal contains some serious constitutional issues worthy of judicial consideration (consideration that goes beyond merely rubber-stamping the Obama administration’s pre-packaged, politically-driven bankruptcy plan for Chrysler, which is what Judge Gonzalez appears to have done).
But it’s now a done deal, possibly facilitated by illegalities.
Filed under: Government and Politics; Law and Civil Liberties; Trade and Immigration
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
Does Congress Know Media Markets Better Than Media Markets Do?
No. But some members of Congress think they do.
In the section of Tim Lee’s “Durable Internet” paper titled Customers Gone Wild: Why Ownership Doesn’t Mean Control, he showed how powerful online consumers are. They can surely decide whether media markets are forming up contrary to their interests, and they can punish providers who get on the wrong side of their demands.
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