The Surreptitious Socialism of the Strong by David Boaz

George Will despairs that we already have a good bit of the socialism that John McCain warned about in the waning moments of his decade-long quest for Rooseveltian power. That is, we already have a lot of government redistribution of wealth, though we have almost no overt advocacy of socialism:  "This is partly because Americans are an aspirational, not an envious, people. It is also because the socialism we do have is the surreptitious socialism of the strong, e.g., sugar producers represented by their Washington hirelings." Rent-seeking, economists call it--using the government to get privileges, such as a grant, a subsidy, a tariff, or a restriction on one's competition. It's one of those things we free-marketers rail against all the time, in papers on free trade, corporate welfare, government spending, and virtually every other activity of the modern state. More broadly, we point out, as Will did, that it's impossible to have nonpolitical allocation of trillions of dollars of taxpayers' money handed out by government. If you don't want the powerful to lobby and manipulate in order to get their share of the money, then leave it in the marketplace. If you put it in the hands of politicians, expect political allocation. Responding to Will, Christopher Orr at the New Republic says, "insofar as there are two kinds of spreading the wealth around, 'rent-seeking' (which we can all agree is bad) and 'socialism' (which Will implicitly concedes is less bad), conservatives are relatively more friendly to the former and liberals are relatively more friendly to the latter." Hmmm. Is that so? I suppose if you think of the Bush administration as "conservatives," then you have a good case. And Orr may be too young to remember actual conservatives back in the days B.G.W.B. But I'm not. And I recall, for instance, the first program that Democrats rallied around when the Reaganites stormed ashore in 1981 with their pitchforks and meat cleavers in hand. Nexis confirms that a day after the administration made a broad budget-cutting proposal, these words led page A1 of the Washington Post: "The entire Democratic leadership in the House joined yesterday in warning the Reagan administration to keep its budget-cutting hands off the synthetic fuels subsidy program Congress created last year." Democrats love corporate welfare, and even liberal intellectuals are far less critical of it than are libertarians and free-market conservatives. And it's not just corporate welfare. All the elements of the liberal interventionist state are both product and generator of rent-seeking. You can say that rent-seeking is an unfortunately inevitable by-product of having the government do good. But to want a $3 trillion federal government with vast regulatory powers that isn't awash in rent-seeking is, as Milton Friedman wrote, like saying "I would like to have a cat, provided it barked." Cats meow, and government money flows to those with political power.

Posted on November 17, 2008  Posted to Cato@Liberty

Would an Auto Bailout Lead to National Greatness? by David Boaz

There have been plenty of criticisms here of neoconservatism and "national greatness conservatism," but two of the occasional targets, Charles Krauthammer and David Brooks, have just published devastating critiques of the auto industry bailout. Here's Krauthammer in the Washington Post:
First, the arbitrariness. Where do you stop? Once you've gone beyond the financial sector, every struggling industry will make a claim on the federal treasury. What are the grounds for saying yes or no? The criteria will inevitably be arbitrary and political. The money will flow preferentially to industries with lines to Capitol Hill and the White House. To the companies heavily concentrated in the districts of committee chairmen. To clout. Is this not precisely the kind of lobby-driven policymaking that Obama ran against? Second is the sheer inefficiency. Saving Detroit means saving it from bankruptcy. As we have seen with the airlines, bankruptcy can allow operations to continue while helping to shed fatally unsupportable obligations. For Detroit, this means release from ruinous wage deals with their astronomical benefits (the hourly cost of a Big Three worker: $73; of an American worker for Toyota: $48), massive pension obligations and unworkable work rules such as "job banks," a euphemism for paying vast numbers of employees not to work. The point of the Democratic bailout is to protect the unions by preventing this kind of restructuring. Which will guarantee the continued failure of these companies, but now they will burn tens of billions of taxpayer dollars. It's the ultimate in lemon socialism. Democrats are suggesting, however, an even more ambitious reason to nationalize. Once the government owns Detroit, it can remake it. The euphemism here is "retool" Detroit to make cars for the coming green economy. Liberals have always wanted the auto companies to produce the kind of cars they insist everyone should drive: small, light, green and cute. Now they will have the power to do it.
And David Brooks in the New York Times:
This is a different sort of endeavor than the $750 billion bailout of Wall Street. That money was used to save the financial system itself. It was used to save the capital markets on which the process of creative destruction depends. Granting immortality to Detroit’s Big Three does not enhance creative destruction. It retards it. It crosses a line, a bright line. It is not about saving a system; there will still be cars made and sold in America. It is about saving politically powerful corporations. A Detroit bailout would set a precedent for every single politically connected corporation in America. There already is a long line of lobbyists bidding for federal money. If Detroit gets money, then everyone would have a case. After all, are the employees of Circuit City or the newspaper industry inferior to the employees of Chrysler? It is all a reminder that the biggest threat to a healthy economy is not the socialists of campaign lore. It’s C.E.O.’s. It’s politically powerful crony capitalists who use their influence to create a stagnant corporate welfare state.
Hear, hear. The intellectual case for the bailout--if there was one--surely can't survive these two clear and analytical critiques in the nation's most influential newspapers. But then, protectionism couldn't survive the analytical critique of Adam Smith in 1776, and yet it persists. So we can't assume that members of Congress will read Brooks and Krauthammer and sheepishly drop the idea of handing a big pile of taxpayers' money to corporate managers, stockholders, and unions who have dug themselves into a deep hole. Krauthammer and Brooks both make a careful distinction between the financial bailout and the proposed auto industry bailout. Krauthammer posits the Wall Street intervention as "an emergency measure to save the financial sector on the grounds that finance is a utility. No government would let the electric companies go under and leave the country without power. By the same token, government must save the financial sector lest credit dry up and strangle the rest of the economy." But bailing out Detroit is put forth as a scheme to save jobs, and where does that process stop? Krauthammer warns that the "drift toward massive industrial policy threatens to grow into the guaranteed inefficiencies of command-economy maximalism." For those of us who opposed all the taxpayer bailouts, starting back with Bear Stearns―or with Chrysler in 1979―all these bad ideas may seem to run together. Bear Stearns, AIG, the general financial industry, the auto industry―it's all government intervening with taxpayers' money to favor some businesses or industries that made mistakes. Perhaps because they weren't so critical of the measures to deal with the financial crisis, Krauthammer and Brooks find it easier to see what's very different about the Detroit bailout. And they both make crucial points: the dangers of political allocation of resources, the benefits of bankruptcy and restructuring, the industry's partially self-inflicted wounds, the desire of some Democrats for political power over corporate decisionmaking, the dangers of corporate capitalism. Let's hope members of Congress read and underline both columns.

Posted on November 15, 2008  Posted to Cato@Liberty

Pelosi Power by David Boaz

Politico declares Speaker of the House Nancy Pelosi "the most powerful woman in U.S. political history." I once suggested that White House aide Karen Hughes, "the most powerful shaper of the words and message of a president of the United States whose own command of the language seems weaker than average," held that position and got altogether too little attention for her accomplishment. But Politico is probably right these days. And along with the breakthrough campaigns of Hillary Clinton and Sarah Palin, it's the sign of a new era in American politics. Women are going to be major players. But it remains to be seen whether that will make much substantive difference. Pelosi seems to wield her power in much the same way that male speakers did, on behalf of policy positions that match the center-left of the Democratic party. P.S. One of the best moments capturing the rise of Clinton and Palin this year was this exchange between Tina Fey (Palin) and Amy Poehler (Clinton) on Saturday Night Live:
Sarah Palin: Just look at how far we've come. Hillary Clinton, who came so close to the White House... and me, Sarah Palin, who is even closer. Can you believe it, Hillary? Hillary Clinton: [ forcing a hard smile ] I cannot!

Posted on November 13, 2008  Posted to Cato@Liberty

The $700 Billion Honeypot by David Boaz

The Washington Post reports:
[There is] an army of accountants, financial advisers, asset managers, lobbyists and others descending on Washington as part of the government's attempts to rescue the economy and bail out industries. Big consulting firms like PriceWaterhouseCoopers and Ernst & Young have booked extended-stay apartments and blocks of hotel rooms. Out-of-town financial experts are scouting for office space, expecting to lease it for several months as they help do work for Treasury and others. Commercial real estate brokerage companies have pulled lawyers and salesmen who usually put together deals on downtown offices to work out loans and foreclose on properties. Some have dubbed themselves the "TARP team" after the Treasury's Troubled Asset Relief Program created to sort through assets. "Everything from the policies, the regulations, to the money and the contracts to do the work will be emanating out of Washington, so people want to be here," [lawyer Larry] Wolk said. "Wall Street has moved to K Street." National crises often provide a stimulus to the Washington economy.... "Firms see this as a potential gold mine," said Anirban Basu, an economist and chief executive of Sage Policy Group in Baltimore. For Washington, "that has to translate into business sales, high-powered restaurant meals, business suit purchases, and travel and luxury hotel stays. We often talk about D.C. being different economically than the rest of the country and this is perfectly true. I don't see much evidence of a slowdown here."
As I wrote two years ago, "When you spread food out on a picnic table, you can expect ants. When you put $3 trillion on the table, you can expect special interests, lobbyists and pork-barrel politicians."

Posted on November 9, 2008  Posted to Cato@Liberty

The Ballad of Ron Paul by David Boaz

The Onion offers a lyrical farewell to the Ron Paul campaign (via Brian Doherty):
WASHINGTON—After piling the last of his Campaign for Liberty signs in the back of a beat-up Ford truck Thursday, Rep. Ron Paul (R-TX) once again abandoned his candidacy for president and rode on out toward the low western sun, but not before vowing to come back to Washington "when [the country] is ready." "When the river swirls and the wind blows, and when uncontrollable inflation forces us to revert to the gold standard, and the Federal Reserve bank is exposed as the unconstitutional, neofascist cabal it really is, you'll see me coming over that hill," said Paul, leaving a dusty cowboy hat and a stack of "no" votes on his seat in the House of Representatives. "But don't you fret, America. If you ever feel like your government is getting too big or too intrusive, just give a little whistle, and there I'll be. I'll be there quicker'n you can spit." Although no one has seen or heard from the Texas congressman since Thursday, sources report the Ron Paul for President campaign has gained an additional $2.3 million in contributions since his disappearance.
Hearing the echoes of Tom Joad in that "final speech," and noticing that in fact Ron Paul has been all over the airwaves as practically the only congressional critic of the bailout and the policies that led to it, I got to musing about another working-class icon, Joe Hill:
I dreamed I saw Ron Paul last night, Still running on TV. Says I "But Ron, you lost 'em all" "I’ll never quit" said he, "I’ll never quit” said he. "The Money Power beat you, Ron, they beat you, Ron" says I. "Takes more than Fox to beat ideas,” Says Ron "I didn't quit" Says Ron "I didn’t quit.” "In South Carolina, Ron," says I, “You stood up to the war. Then Rudy knocked you back again.” Says Ron, “But I was right.” Says Ron, “But I was right.” From Baghdad back to Main Street, In every funeral hall Where grieving moms inter their sons, it's there you find Ron Paul, it's there you find Ron Paul! And taking on the Fed Reserve and smiling with his eyes, Says Ron, “The bailout cannot work, It’s time to privatize. It’s time to privatize." From Texas up to Washington, in every lecture hall, Where working men defend their gold, it's there you find Ron Paul, it's there you find Ron Paul! I dreamed I saw Ron Paul last night, Still running on TV. Says I "But Ron, you lost 'em all." "I’ll never quit" says he, "I’ll never quit” says he.

Posted on November 8, 2008  Posted to Cato@Liberty

Switching Sides? by David Boaz

Orin Kerr at the Volokh Conspiracy (via the New York Times) cynically predicts some reversals of position by both Democrats and Republicans in the coming months:
1) Republicans Must Now Oppose Executive Power; Democrats Must Be In Favor Of It. In the last few years, Republicans have been the defenders of executive power: A muscular executive has been needed to fight the war on terror. On the other hand, Democrats have opposed a strong executive on the ground that it threatens the rule of law. Please note that these arguments must now switch. Republicans must now talk of the dangers of executive power; Democrats must now speak of how a strong and agile executive branch is necessary to a modern democracy. 2) Republicans Must Now Oppose Judicial Confirmations; Democrats Must Be In Favor. In the last few years, Republicans wanted an up-or-down vote on judicial nominees; one of their leading blogs on the judicial confirmations was On the other hand, Democrats focused on the importance of carefully evaluating judicial candidates. Please note that these arguments must now switch, too. Republicans should now visit (still an available domain name, btw — won’t be for long!), and Democrats should emphasize the need for a quick up or down vote. 3) Republicans Must Now Favor Legislative Oversight; Democrats Must Now Oppose It. You get the point by now. Yup, everyone has to switch sides on this one, too. If we all stick to the script, in 6 months the old arguments of the Bush era will be long forgotten. (Oh, and extra credit to those who charge the other side with hypocrisy for changing sides without noting that they have changed sides, too.)
Well, he might be right. And we may also see Republicans once again waxing eloquent about how the filibuster protects minority rights and Democrats railing against its obstructionism. But I'll note that here at the Cato Institute we try to be nonpartisan. I think we always favor due consideration of judicial nominations, followed by confirmation of those who properly understand the Constitution and its limits on power. We've criticized President Clinton's abuse of executive power and President Bush's — and the general problem. We've called for congressional oversight when Republicans were in the White House and when Democrats were. We hope that the new president and the 111th Congress will restore civil liberties and checks and balances. If they don't, Cato scholars will point that out.

Posted on November 7, 2008  Posted to Cato@Liberty

A Sweeping Rejection of President Bush by David Boaz

Left-liberal groups are quick to declare Barack Obama's win a broad endorsement of the "progressive" agenda, their highly inaccurate name for more taxes, more spending, more entitlements, and more regulation. After a trillion-dollar increase in federal spending during the Bush administration and the biggest expansion of entitlements since Lyndon Johnson, it hardly seems likely that what's troubling the American economy or the American people is an insufficiency of government. The big problem for John McCain and the rest of the Republicans last night was George W. Bush and his big-government conservatism. Bush had a 25 percent approval rating, and Congress's was even lower. Republicans hoped up until election day that voters would notice that the unpopular Congress was run by Democrats. But after 8 years of Bush and 12 years of a Republican Congress, just recently ended, voters saw the Republicans as the incumbents who were responsible for the mess in Washington. Concerns about Obama were sufficient to allow McCain to run 20 points ahead of Bush's approval rating in a time of economic crisis. But the hole was too deep. Bush and the Republicans promised choice, freedom, reform, and a restrained federal government. They delivered massive overspending, the biggest expansion of entitlements in 40 years, centralization of education, a floundering war, an imperial presidency, civil liberties abuses, the intrusion of the federal government into social issues and personal freedoms, and finally a $700 billion bailout of Wall Street that just kept on growing in the last month of the campaign. Voters who believed in limited government had every reason to reject that record. Commentators who talk about whether the Republican party moved too far to the right, or too far to the center, miss the point. There are different kinds of "right." See this New York Times graphic on independent voters, which picks up on some of the themes we've talked about in our work on libertarian voters. Lots of independents -- as well as voters who identify with one of the major parties -- hold broadly libertarian, or "fiscally conservative and socially liberal," views. A lot of those voters moved from voting Republican to voting Democratic between 2000 and 2006, and it looks like they did so again this year. As we had predicted, Republicans racked up further losses in the most libertarian parts of the country, such as New Hampshire and the Mountain West. Obama won affluent, educated voters and professionals. And if conservative Republicans continue to respond to the loss of educated voters by declaring themselves proud to be "real Americans" who don't care much for book learning and Darwinism and elite stuff, they will only accelerate the process. Big-government conservatism, a toxic combination of the religious right and the neoconservatives, lost badly on Tuesday. But the voters didn't give a ringing endorsement to big-government liberalism. Fifty-nine percent of voters call themselves "fiscally conservative and socially liberal," and that's a rich vein the Republican party is ignoring. If Obama governs as a centrist, he may make it very difficult for the Republicans to recover. But a candidate in either party who presented himself as a product of the social freedom of the Sixties and the economic freedom of the Eighties would be tapping into a market that both parties have yet to nail down.

Posted on November 5, 2008  Posted to Cato@Liberty

Get Yourself a Crate of Scalpels by David Boaz

On Marketplace Radio Will Wilkinson offers some advice to the president-elect:
Congratulations, Barack Obama! You're the next President of the United States. Sadly, the government's so broke that even new curtains for the Oval Office are beyond the bounds of fiscal responsibility. Thanks to the war, the Wall Street bailout, the lousy economy, and the drop in tax revenue, your big campaign plans just got a lot smaller. Here's my advice: First, you've got to get spending under control. Yes: Bring the troops home, and shrink the military. But there's enormous waste in the non-defense budget, too, and you need to go after it. You said we need to cut spending with a scalpel, not a hatchet. Well, if you don't want to leave your kids with a crushing tax burden, you better get yourself a crate of scalpels. Second, drop the xenophobic claptrap. The stuff from the debates about "mortgaging our future" by "borrowing from the Chinese to pay the Saudis" has got to stop. We are not, and cannot be, a self-contained fortress city. It's good that capital markets are international. It's good that energy markets are international. It's good for prosperity and it's good for peace that we're all in it together. Help save America's economy by making it even more open to the goods and people of the world. Third, get real on the "new energy economy." You've been claiming that the government can simultaneously create millions of new jobs, spur growth-enhancing innovation, and save the Earth by politically picking winners among energy companies. It's a beautiful dream. But in reality, it means nothing more than the greening of corporate welfare and an increase in energy prices. Our struggling economy can't afford that. You've got Congress on your side and the wind of public opinion at your back -- which is exactly why you should take it slow. This election was exactly what you said it was: a referendum on the last eight years of George W. Bush and his coalition. The voters agreed it was time to throw the bums out. But if you overreach, you'll be tomorrow's bum. Remember how popular Newt Gingrich's Contract for America was? Yeah. Me neither.

Posted on November 5, 2008  Posted to Cato@Liberty

A Rebirth of Freedom? by David Boaz

Back in July Sen. Barack Obama promised to repeal any executive orders that “trample on liberty”:
Barack Obama told House Democrats on Tuesday that as president he would order his attorney general to scour White House executive orders and expunge any that “trample on liberty,” several lawmakers said. . . . The Illinois senator “talked about how his attorney general is to review every executive order and immediately eliminate those that trample on liberty,” said Rep. Jerrold Nadler, D-N.Y.
Good stuff! Perhaps that could include reviewing whether the federal government had any authority to partially nationalize banks, a sweeping intervention not authorized by Congress in the $700 billion bailout bill. Under what authority did the president and the secretary of the treasury start purchasing equity in major corporations? Cato's legal scholars would be happy to work with the new administration to review and rescind executive orders, signing statements, memos, and other documents that grant excessive power to the executive branch or otherwise "trample on liberty." Some of the Bush administration's excesses in this regard were reviewed by Gene Healy and Tim Lynch in Power Surge: The Constitutional Record of George W. Bush. But I hope the new president realizes that Bush isn’t the first president to issue executive orders that “trample on liberty.” It was President Bill Clinton’s aide, Paul Begala, who drooled at the notion of using executive orders to do what Congress wouldn’t go along with: “Stroke of the pen. Law of the land. Kinda cool.” For a look at some pre-Bush executive orders that might warrant elimination, Obama’s attorney general might consult “Executive Orders and National Emergencies: How Presidents Have Come to ‘Run the Country’ by Usurping Legislative Power,” published by Cato in 1999. There he can find information about Clinton orders that nationalized land, sought to reverse Supreme Court rulings, rewrote the rules of federalism, and waged war in Yugoslavia. As Obama himself has said in recent days, channeling Frederick Douglass, "Power concedes nothing without a fight." Many people are skeptical that a new president will make good on his pledge to constrain executive power. But if he's committed to the rule of law and the separation of powers, we're ready to help.

Posted on November 5, 2008  Posted to Cato@Liberty

To the Future: Good Advice from Jeff Flake by David Boaz

In Monday's Washington Post Rep. Jeff Flake offers Republicans some good advice for the climb back:
I suggest that we return to first principles. At the top of that list has to be a recommitment to limited government. After eight years of profligate spending and soaring deficits, voters can be forgiven for not knowing that limited government has long been the first article of faith for Republicans.... Second, we need to recommit to our belief in economic freedom. Adam Smith's "The Wealth of Nations" may be on the discount rack this year, but the free market is still the most efficient means to allocate capital and human resources in an economy, and Americans know it. Now that we've inserted government deeply into the private sector by bailing out banks and businesses, the temptation will be for government to overstay its welcome and force the distribution of resources to serve political ends. Substituting political for economic incentives is not the recipe for economic recovery.... In some respects, raising a new standard was made easier by yesterday's rout. The Republican Party is not bound by election-year promises made by its presidential nominee. More important, the party is finally untethered from the ill-fitting and unworkable big-government conservatism that defined the Bush administration.

Posted on November 4, 2008  Posted to Cato@Liberty

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