Obama Fires Izzo, Awards Michigan State 18 Points
Okay, I made that up. But suppose President Obama had reversed the outcome of the NCAA men’s basketball championship. That would kind of defeat the whole purpose of the tournament, wouldn’t it?
New at Cato
Here are a few highlights from Cato Today, a comprehensive daily email from the Cato Institute. You can subscribe, here.
- In a new study, “NATO at 60: A Hollow Alliance,” Ted Galen Carpenter argues that NATO has outlived whatever usefulness it once had.
- Doug Bandow weighs the usefulness of NATO in the American Spectator.
- David Isenberg discusses the use of private military and security contractors in war for United Press International.
- Timothy Lynch and Ilya Shapiro take on illegal searches in a legal brief submitted to the Supreme Court.
- In Monday’s Cato Daily Podcast, Dambisa Moyo, author of Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa, discusses the failure of government aid to Africa.
Week in Review: ‘Saving’ the World, Government Control and Drug Decriminalization
G-20 Summit Agrees to International Spending Plan
The Washington Post reports, “Leaders from more than 20 major nations including the United States decided Thursday to make available an additional $1 trillion for the world economy through the International Monetary Fund and other institutions as part of a broad package of measures to overcome the global financial crisis.”
Cato scholars Richard W. Rahn, Daniel J. Ikenson and Ian Vásquez commented on the London-based meeting:
Rahn: “President Obama of the U.S. and Prime Minister Brown of the U.K. will be pressing for more so-called stimulus spending by other nations, despite the fact that the historical evidence shows that big increases in government spending are more likely to be damaging and slow down recovery than they are to promote vigorous economic expansion and job creation.”
Vásquez: “The push by some countries for massive increases in spending to address the global financial crisis smacks of political and bureaucratic opportunism. A prime example is Washington’s call to substantially increase the resources of the International Financial Institutions… There is no reason to think that massive increases of the IFIs’ funds will not worsen, rather than improve, their record or the accountability of the aid agencies and borrower governments.”
Ikenson: “Certainly it is crucial to avoid protectionist policies that clog the arteries of economic recovery and help nobody but politicians. But it is also important to keep things in perspective: the world is not on the brink of a global trade war, as some have suggested.”
Ikenson appeared on CNBC this week to push for a reduction of trade barriers in international markets.
With fears mounting over a global shift toward protectionism, Cato senior fellow Tom Palmer and the Atlas Economic Research Foundation are circulating a petition against restrictive trade measures.
Obama Administration Forces Out GM CEO
President Obama took an unprecedented step toward greater control of a private corporation after forcing General Motors CEO Rick Wagoner to leave the company. The New York Post reports “the administration threatened to withhold bailout money from the company if he didn’t.”
Writing for the Washington Post, trade analyst Dan Ikenson explained why the government is responsible for any GM failure from now on:
President Obama’s newly discovered prudence with taxpayer money and his tough-love approach to GM and Chrysler would both have more credibility if he hadn’t demanded Rick Wagoner’s resignation, as well. By imposing operational conditions normally reserved for boards of directors, the administration is now bound to the infamous “Pottery Barn” rule: you break it, you buy it. If things go further south, the government is now complicit.
Wagoner’s replacement, Fritz Henderson, said Tuesday that after receiving billions of taxpayer dollars, the company is considering bankruptcy as an option. Cato scholars recommended bankruptcy months ago:
Dan Ikenson, November 21, 2008: “Bailing out Detroit is unnecessary. After all, this is why we have the bankruptcy process. If companies in Chapter 11 can be salvaged, a bankruptcy judge will help them find the way. In the case of the Big Three, a bankruptcy process would almost certainly require them to dissolve their current union contracts. Revamping their labor structures is the single most important change that GM, Ford, and Chrysler could make — and yet it is the one change that many pro-bailout Democrats wish to ignore.”
Daniel J. Mitchell, November 13, 2008: ”Advocates oftentimes admit that bailouts are not good policy, but they invariably argue that short-term considerations should trump long-term sensible policy. Their biggest assertion is that a bailout is necessary to prevent bankruptcy, and that avoiding this result is critical to prevent catastrophe. But Chapter 11 protection may be precisely what is needed to put American auto companies back on the path to profitability. Bankruptcy laws specifically are designed to give companies an opportunity — under court supervision — to reduce costs and streamline operations.”
Dan Ikenson, December 5, 2008: “The best solution is to allow the bankruptcy process to work. It will be needed. There are going to be jobs lost, but there is really nothing policymakers can do about that without exacerbating problems elsewhere. The numbers won’t be as dire as the Big Three have been projecting.”
Cato Links
- Is Portugal an example for the future of drug policy? Cato released a new case study this week by Salon writer Glenn Greenwald entitled, “Drug Decriminalization in Portugal: Lessons for Creating Fair and Successful Drug Policies.”
- As the North Atlantic Treaty Organization celebrates its 60th birthday, there are signs of mounting trouble within the alliance and increasing reasons to doubt the organization’s relevance regarding the foreign policy challenges of the 21st century. In a new study, Cato scholar Ted Galen Carpenter argues that NATO’s time is up.
- Should immigration agents target businesses knowingly hiring illegal immigrants? Cato scholar Jim Harper weighs in on a Fox News debate.
- Cato scholar Gene Healy warns, “Beware of the Cult of Obama,” in this week’s Washington Examiner column.
- Sign up today for Cato University 2009: Economic Crisis, War, and the Rise of the State.
Taxpayer Financing of Campaigns Returns
Taxpayer financing of congressional campaigns has returned.
Yesterday Senators Richard Durbin (D-IL) and Arlen Specter (R-PA) introduced a modified version of their public financing bill first proposed in 2007, now as then called the Fair Elections Now Act (FENA). The older version included “free media vouchers” and discounted ad rates for television; the new model focuses more on small contributions and matching funds from the federal treasury.
These bills to finance campaigns with government revenue are often introduced in Congress and rarely make any headway, much less pass either chamber. Their perennial failure is not difficult to understand. Members are interested in campaign finance regulations that make it more difficult for challengers to raise money. They are not interested in giving candidates federal revenue to run against incumbents. Members are especially unwilling to fund campaigns because the public takes a dim view of using taxes in this way.
FENA tries to avoid public opposition by creating the appearance that taxpayers do not actually fund this scheme.
As Politico reports:
In the Senate version, the public money would come from assessing the country’s largest government contractors with a small surcharge… In the House, the money would come from the sale of broadcast spectrum.
But the question should be asked: if public financing of campaigns will actually achieve all the great things claimed by its proponents, shouldn’t the public be asked to pay the bill? After all, the public can expect to receive the promised benefits. Why should the bill be financed by government contractors and the sale of public assets?
We know the answer to these questions. Durbin and Specter have to obscure the role of taxes in these schemes because the public would oppose the bill if taxpayers were on the hook for the funding. Yet the senators obscure rather than eliminate the role of the taxpayer who will have to pay higher levies to fund more expensive government contracts or to replace the money that might have been obtained from the sale of the spectrum. Once the FENA lunch turns out not to be free, will voters feel like paying the tab?
The rationale for the new program also merits attention. In the past, advocates of taxpayer financing argued that private financing of campaigns corrupted representation, policymaking, and the general political culture. Replacing private contributions with public financing would, it was claimed, remove private interests and end corruption. That rationale appealed to most of the supporters of public financing; they tend toward the left politically and had little trouble believing the Republicans running Congress — all of them — were corrupt. But 2006 brought the Democrats back to power, and general claims of corruption no longer fit the background assumptions of both powerful legislators and supporters of public financing. So we now hear little about corruption and a lot about how FENA will free up legislators to “tend to the people’s business.”
Will “tending to the people’s business” be enough to convince Americans to spend tax dollars funding congressional campaigns at a time of record public sector deficits brought about by reckless spending on bailouts and much else?
The question answers itself.
When the Government Takes Your Money, It Takes Your Property
When Daniel and Andrea McClung applied for a permit to build a small business on their property in Sumner, Washington, the city charged them nearly $50,000 to pay for improvements to the city’s entire storm drainage system.
The McClungs sued the city under the Fifth Amendment to the Constitution, whose Takings Clause prohibits the government from “taking” private property for public use without just compensation. They argue that the city cannot force them to pay fees for off-site pipes absent proof that their development would have a specific detrimental effect on the existing drainage system–and without any evidence that the impact was worth $50,000.
The Ninth Circuit ruled in favor of the city, reasoning that money is not property (so there could be no unconstitutional taking) and that because the fees were imposed by ordinance (so the city’s determination that the pipes needed upgrading was justification enough for the fees). The McClungs have now asked the Supreme Court to review their case.
Cato, joined by the Pacific Legal Foundation and the Building Industry Association of Washington, argues that this case is a perfect vehicle for the Court to revisit the scope of Fifth Amendment protections.
Our brief highlights the deep divisions among state and federal courts over several important issues, such as whether the Takings Clause applies to legislative (as opposed to bureaucratic) exactions and whether it applies to monetary exactions (not just burdens on land use). The Court should take this case to ensure that the standard for reviewing development conditions is uniform across the country and make clear that property right protections do not depend on ill-defined distinctions such as the form of property demanded by the government or the manner in which a condition is imposed.
Democrats Agree on Health Plan Outline: Be Afraid, Be Very Afraid
The New York Times reports that key congressional Democrats have agreed on the basic provisions for a health care reform bill. And while many details remain to be negotiated, the broad outline provides a dog’s breakfast of bad ideas that will lead to higher taxes, fewer choices, and poorer quality care.
Among the items that are expected to be included in the final bill:
- An Individual Mandate. Every American will be required to buy an insurance policy that meets certain government requirements. Even individuals who are currently insured — and happy with their insurance — will have to switch to insurance that meets the government’s definition of acceptable insurance, even if that insurance is more expensive or contains benefits that they do not want or need. Get ready for the lobbying frenzy as every special interest group in Washington, both providers and disease constituencies, demand to be included.
- An Employer Mandate. At a time of rising unemployment, the government will raise the cost of hiring workers by requiring all employers to provide health insurance to their workers or pay a fee (tax) to subsidize government coverage.
- A Government-Run Plan, competing with private insurance. Because such a plan is subsidized by taxpayers, it will have an unfair advantage, allowing it to squeeze out private insurance. In addition, because government insurance plans traditionally under-reimburse providers, such costs are shifted to private insurance plans, driving up their premiums and making them even less competitive. The actuarial firm Lewin Associates estimates that, depending on how premiums, benefits, reimbursement rates, and subsidies were structured, as many as 118.5 million would shift from private to public coverage. That would mean a nearly 60 percent reduction in the number of Americans with private insurance. It is unlikely that any significant private insurance market could continue to exist under such circumstances, putting us on the road to a single-payer system.
- Massive New Subsidies. This includes not just subsidies to help low-income people buy insurance, but expansions of government programs such as Medicaid and Medicare.
- Government Playing Doctor. Democrats agree that one goal of their reform plan is to push for “less use of aggressive treatments that raise costs but do not result in better outcomes.” While no mechanism has yet been spelled out, it seems likely that the plan will use government-sponsored comparative effectiveness research to impose cost-effectiveness guidelines on medical care, initially in government programs, but eventually extending such restrictions to private insurance.
Given the problems facing our health care system-high costs, uneven quality, millions of Americans without health insurance–it seems that things couldn’t get any worse. But a bill based on these ideas, will almost certainly make things much, much worse.
Or maybe it’s all just a massive April Fool’s joke.
Shuffle, Shuffle, Shuffle…
This morning I attended a federal student aid event at the New America Foundation. The big topic? Not the effect of aid on out-of-control college prices, by far the most important concern from the contexts of economic growth, affordability, fairness to taxpayers, etc. No, it was the Obama Administration’s “bold” (NAF’s word) proposal to kill the federal guaranteed student loan program and do all lending directly from Washington. It was just the kind of debate folks in DC love, one that sounds really important but leaves the government-created problem almost totally untouched.
Here’s the critical reality that was completely ignored: taxpayer-furnished financial aid – whether coming directly from DC or delivered by “private” institutions completely backed by DC – appears to be a very big enabler of rampant tuition inflation. Quite simply, as I lay out in the most recent Cato Handbook for Policy, when government ensures that customers can pay more, students demand more and colleges raise prices.
Of course, the argument that aid drives prices is not without its critics, but they’ve got a tough case to make both in terms of economic theory and college cost reality. In Washington, however, this isn’t even being discussed. In DC, it’s all about the deck chairs and nothing about the sinking ship. But then, as we’ve learned oh-so-clearly over the last several months, politicians gain little from averting disasters they’ve helped cause, and lots from handing out life jackets.
Fortunately, Cato is here to remind politicians about the important stuff, not just to bicker over which special interest gets the biggest tax-dollar windfall. On April 7 we will address the fundamental problems with student aid, hosting a Capitol Hill Briefing on the effects not just of switching from guaranteed lending to direct lending, but of all federal student aid. It’ll be just the kind of discussion Washington so desperately needs but so rarely has.
Register here to attend, or watch online the day of the event.
Events This Week
Tuesday, March 31, 2009
POLICY FORUM – Can the Market Provide Choice and Secure Health Coverage Even for High-Cost Illnesses?
12:00 PM (Luncheon to Follow)
In a study recently published by the Cato Institute, economist John Cochrane argues that the market can solve a huge piece of the health care puzzle: providing secure, life-long health insurance and a choice of health plans to even the sickest patients. The key, Cochrane explains, is to eliminate government policies that force the healthy to subsidize the sick, such as the tax preference for employer-sponsored coverage and other attempts to impose price controls on health insurance premiums.
Featuring John H. Cochrane, Myron S. Scholes Professor of Finance, University of Chicago Booth School of Business Research Associate, National Bureau of Economic Research; Bradley Herring, Assistant Professor, Johns Hopkins Bloomberg School of Public Health; moderated by Michael F. Cannon, Director of Health Policy Studies, Cato Institute.
Please register to attend this event, or watch free online.
Friday, April 3, 2009
P
OLICY FORUM – Drug Decriminalization in Portugal
12:00 PM (Luncheon to Follow)
In 2001, Portugal began a remarkable policy experiment, decriminalizing all drugs, including cocaine and heroin.
In a new paper for the Cato Institute, attorney and author Glenn Greenwald closely examines the Portugal experiment and concludes that the doomsayers were wrong. There is now a widespread consensus in Portugal that decriminalization has been a success. The debate in Portugal has shifted rather dramatically to minor adjustments in the existing arrangement. There is no real debate about whether drugs should once again be criminalized. Join us for a discussion about Glenn Greenwald’s field research in Portugal and what lessons his findings may hold for drug policies in other countries.
Featuring Glenn Greenwald, Attorney and Best-selling Author; with comments by Peter Reuter, Department of Criminology, University of Maryland; moderated by Tim Lynch, Director, Project on Criminal Justice, Cato Institute.
Please register to attend this event, or watch free online.
How Progressive Are You?
I’m two weeks late coming to this, but the “Democratic Wing of the Democratic Party” Obama Administration Farm Team Center for American Progress has developed a quiz aiming to answer the question, “How Progressive Are You?“ The quiz asks you to rank, on a 10-point scale, how much you agree with 40 different statements. Now, I won’t quibble here with the misuse of the word “progressive” — having debased the term “liberal” (which in any other country pretty much means what Cato supports), the Left moves on to its next target — but the quiz highlights the false dichotomy between “progressive” and “conservative.”
The fallacy of this linear political spectrum forces people to wring their hands and call themselves “socially liberal, fiscally conservative” — does anyone call themselves “fiscally liberal” even if they are? — or “moderate” (no firm views on anything, huh?) or anything else that adds no descriptive meaning to a political discussion. Where do you put a Jim Webb? A Reagan Democrat? A Ross Perot voter? A gay Republican? A deficit hawk versus a supply-sider? Let alone Crunchy Cons, Purple Americans, Wal-Mart Republicans, South Park Conservatives, NASCAR dads, soccer moms, and, oh yes, libertarians.
And the statements the quiz asks you to evaluate are just weird. I mean, yes, “Lower taxes are generally a good thing” (I paraphrase) gets you somewhere, but what does “Talking with rogue nations such as Iran or with state-sponsored terrorist groups is naive and only gives them legitimacy” get you? Or “America has taken too large a role in solving the world’s problems and should focus more at home”? What is the “progressive” response to these statements? The “conservative” one? I think I know what the Bush response and the Obama response would be to the first one, but how does either fit into any particular ideology?
The Institute for Humane Studies at least gives you a two-dimensional quiz, so you can see how much government intervention you want in economic and social affairs (the “progressive” view presumably being lots of intervention in the economy, none on social issues). And IHS poses classical debates in political philosophy rather than thinly veiled leading questions relating to current affairs.
In any event, when you finish the quiz, it tells you your score and that the average score for Americans is 209.5. How do they get this number? A selectively biased survey of people who frequent the CAP website would surely score much higher on the progressive scale. No, it’s based on a “National Study of Values and Beliefs.” Well, ok, but, again, if those are the types of questions you ask people — or, even worse, the quiz designers code the survey responses – I’m not sure how much I care about the result. (Incidentally, the survey reveals that “the potential for true progressive governance is greater than at any point in decades.” Great, that’s either a banal formulation of the fact that Democrats have retaken the political branches or a self-serving conclusion. Or both.)
In case anyone cares, I scored 100 out of 400, which makes me “very conservative.” I suppose that won’t come as a surprise to my “progressive” friends, but then I’m always talking to them about how bad the bailouts/stimuli are for the economy, how we should actually follow the Constitution, etc. All the folks who over the years have called me a libertine or hedonist, however, will not be amused to learn that I’m actually one of them…
Who’s Blogging about Cato
A few bloggers who wrote about Cato this week:
- New York Times blogger Andrew C. Revkin wrote about Cato’s forthcoming full-page ad on climate change that will run in newspapers around the country next week.
- Wes Messamore helped set the record straight: Cato scholars have criticized the growth of government regardless of who’s in power.
- Law blogger Kenneth Lammers reviewed Tim Lynch’s new book, In the Name of Justice.
- Jim Harper’s blog post on government transparency made the cut on Bruce McQuain’s “Quote of the Day” segment at QandO.
- Brandon Dutcher posted Cato’s Monday podcast with Adam Schaeffer on universal pre-school.
- John Hood discussed Jagadeesh Gokhale’s new paper on the financial crisis at The Corner.
Friday Podcast: ‘Obama’s Afghanistan Strategy’
President Obama has unveiled his plan for the war in Afghanistan, taking a more regional approach than the U.S. has in the past.
In Friday’s Cato Daily Podcast, foreign policy analyst Malou Innocent says it’s a critical step in the right direction, but stabilizing Afghanistan and fighting an insurgency can’t be accomplished while killing the livelihoods of so many Afghan farmers by destroying opium poppy.
In the future we should take Afghanistan as it is, rather than what we want it to be. So not only does that mean having a decreased reliance on a central state government from Kabul, but also understanding that many of the farms from these rural areas rely on the opium poppy crop for their own livelihood. So we should focus our efforts to targeting those who are in cahoots with insurgent groups and not simply those who are depending on it for their livelihood.
Her forthcoming paper, “Pakistan and the Future of U.S. Policy” will be released next month.
Week in Review: No End to Spending and Regulation in Sight
Geithner to Propose Unprecedented Restrictions on Financial System
The Washington Post reports, “Treasury Secretary Timothy F. Geithner plans to propose today a sweeping expansion of federal authority over the financial system… The administration also will seek to impose uniform standards on all large financial firms, including banks, an unprecedented step that would place significant limits on the scope and risk of their activities.”
Calling Geithner’s plan another “jihad against the market,” Cato senior fellow Jerry Taylor blasts the administration’s proposal:
What President Obama is selling is the idea that government must be the final arbiter regarding how much risk-taking is appropriate in this allegedly free market economy. It is unclear, however, whether anybody short of God is in the position to intelligently make that call for every single actor in the market.
Cato senior fellow Gerald P. O’Driscoll reveals the real reason behind the proposal:
Federal agencies have long had extensive regulatory powers over commercial banks, but allowed the banking crisis to develop despite those powers. It was a failure of will, not an absence of authority. If the authority is extended over more institutions, there is no reason to believe we will have a different outcome. This power grab is designed to divert attention away from the manifest failure of, first, the Bush Administration, and now the Obama Administration to devise a credible plan to deal with the crisis.
A new paper from Cato scholar Jagadeesh Gokhale explains the roots of the current global financial crisis and critically examines the reasoning behind the U.S. Treasury and Federal Reserve’s actions to prop up the financial sector. Gokhale argues that recovery is likely to be slow with or without the government’s bailout actions.
In the new issue of the Cato Policy Report, Cato chairman emeritus William A. Niskanen explains how President Obama is taking classic steps toward turning this recession into a depression:
Four federal economic policies transformed the Hoover recession into the Great Depression: higher tariffs, stronger unions, higher marginal tax rates, and a lower money supply. President Obama, unfortunately, has endorsed some variant of the first three of these policies, and he will face a critical choice on monetary policy in a year or so.
Obama Defends His Massive Spending Plan
President Obama visited Capitol Hill on Wednesday to lobby Democratic lawmakers on his $3.6 trillion budget proposal. Both the House and Senate are expected to vote on the plan next week.
In a new bulletin, Cato scholar Chris Edwards argues, “Sadly, Obama’s first budget sets a course for more government bloat, more economic distortions, and ultimately lower standards of living for everyone who is not living off of federal hand-outs.”
On Cato’s blog, Edwards discusses Obama’s misguided theory on government spending:
Obama’s budget would drive government health care costs up, not down. But aside from that technicality, the economics of Obama’s theory don’t make any sense.
Obama’s budget calls for a massive influx of government jobs. Writing in National Review, Cato senior fellow Jim Powell explains why government jobs don’t cure depression:
If government jobs were the secret of success, then the Soviet Union wouldn’t have collapsed, because it had nothing but government jobs. Communist China, glutted with government jobs, would have generated more income per capita than Hong Kong where, at least before the Communist takeover, there were hardly any government jobs, but Hong Kong’s per capita income was about 20 times higher than that on the mainland.
Multiplying the number of government jobs did nothing then and does nothing now to revive the private sector that pays all the bills, in large part because of the depressing effect of taxes required to pay for government jobs.
Cato on YouTube
Cato Institute is reaching out to new audiences with our message of individual liberty, free markets and peace. Last year, we launched our first YouTube channel, which has garnered thousands of views and subscriptions. Here are a few highlights:
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Cato on YouTube
