Is an Independent Fed Better? by David Boaz

Rep. Ron Paul now has a majority of the House of Representatives supporting his bill for an independent audit of the Federal Reserve System. He presented his case at a Cato Policy Forum recently, with vigorous responses from Bert Ely and Gilbert Schwartz. Now more than 200 economists have signed a petition calling on Congress to “defend the independence of the Federal Reserve System as a foundation of U.S. economic stability.” The petition seems implicitly a rebuttal to Paul's bill. Allan Meltzer, a leading monetary scholar and frequent participant in Cato's annual monetary conferences, declined to sign the petition and explained why: “I wrote them back and said, ‘the Fed has rarely been independent and it strikes me that being independent is very unlikely’” in the current environment. Cato senior fellow Gerald O'Driscoll adds:
it is not the critics of the Fed who threaten its independence, but the Fed’s own actions.  Its intervention in the economy is unprecedented in size and scope. It is inevitable that those actions would lead to calls for further Congressional oversight and control. 
One of the lessons here is that once you create powerful government agencies, from tax-funded schools to central banks, there are no perfect libertarian rules for how they should be run. The way to protect freedom is to let people make their own decisions in civil society.  Schools have to decide what to teach, offending the values of some parents and taxpayers. The Fed can be independent and unaccountable and undemocratic, or it can be subject to the political whims of elected officials; neither is a very attractive prospect.

Posted on July 17, 2009  Posted to Cato@Liberty

Randal O’Toole Takes on Smart Growth in the NYT by David Boaz

The New York Times has a long profile today of Cato's Randal O'Toole, scourge of urban planners.
But O'Toole doesn't fit the portrait of a corporate advocate. On visits to Capitol Hill, he blends in as a middle-aged, middle-height man in a dark suit -- but his beard gives him away, its shaggy twists seemingly fitting for a forest dweller. He wears a string tie that most Americans would only recognize on Colonel Sanders. His lapel doesn't carry the standard-issue flag pin but a bronze bust of his dog, Chip. The Belgian tervuren won it in a dog show. O'Toole routinely hikes and bikes dozens of miles, and he proudly announces that he has never driven a car to work. Far from living on a luxurious Virginia manor, he left his last Oregon town when it added a third stoplight. Now, from his home computer in Camp Sherman, Ore., population 300, O'Toole rails against smart-growth policies as money sponges that never calm traffic, fill seats on trains, or help the environment.
The story ends with Randal on his way to a conference in Las Vegas, which I also attended. There in the 80-degree early morning heat, he biked 50 miles each morning, on a folding bicycle that he could fit into a suitcase -- and still got back to the hotel in time to fix my Powerpoint before my speech. He's a Renaissance man.

Posted on July 16, 2009  Posted to Cato@Liberty

Turning Tide? by David Boaz

Mark Krikorian of National Review reminds us that Gene Healy had complained about the "Obama Shop" at Washington's Union Station, featuring lots of "Obama-related tchotchkes and talismans." Every shop I've been into lately -- from Macy's to 7-11 to the airport souvenir shops -- has offered Obamastuff. It's been oppressive. But I just passed through Dulles Airport, and guess what the America! store on Concourse C was offering? Sure, they had Obama t-shirts, along with the usual White House shot glasses and Washington Monument paperweights. But as you walked past the store, you saw these t-shirts out front:
  • "I Love My Country; It's the Government I'm Afraid Of" (an oldie but goodie that I first saw a few years ago)
  • "Don't Blame Me; I Voted for McCain and Palin" (that one might need a bit of editing)
  • "Where's My Bailout?" (see it here)
The store is probably a leading indicator of what's selling. So I'll be keeping an eye on it on my next trip.

Posted on July 14, 2009  Posted to Cato@Liberty

Mandate for Taxes? by David Boaz

The New York Times reports that House Democrats want to raise money for health care with a $550 billion tax hike on people who produce the most wealth. The Times says,
the proposal is perhaps the clearest expression yet of the mandate that Democrats believe they won last November, when voters expanded Democratic majorities in Congress and sent Barack Obama to the White House.
If Democrats think they won a mandate for huge tax increases -- without talking about them -- then 2010 ought to be fun.

Posted on July 14, 2009  Posted to Cato@Liberty

Spend Money to Save Money? by David Boaz

You know all those promises that spending more taxpayers' money on some program will actually result in taxpayer savings -- eventually? Check out this story in Sunday's Parade magazine:
Ten years ago, Congress created a new system of government credit cards for federal employees booking work-related travel. The cards were meant to curb waste and abuse. But since their introduction, charges have doubled—from $4.39 billion in 1999 to $8.28 billion last year. Among the expenses flagged in a new report from the Congressional Research Service: $3700 for laser eye surgery, $4100 for a first-class trip to Hawaii, and $100 million in unclaimed refunds for airline tickets that were purchased but never used.
Of course, the doubled spending is not all waste, at least not in the narrow sense. In the past nine Bush-Obama years, total federal spending doubled from about $1.8 trillion to $3.6 trillion. But certainly it doesn't look like the promised efficiencies have been realized.

Posted on July 6, 2009  Posted to Cato@Liberty

The Politicians and the Founders by David Boaz

Both President Obama and Sen. John McCain cited the Founders in their weekly radio addresses today, as they made the case for government actions that would have appalled those Founders. Obama invoked "the indomitable spirit of the first American citizens who made [independence] day possible" in arguing for a federal takeover of education, energy, and health care. He might have trouble explaining how his policies reflect the spirit of the men who left us such words as these:
He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance. If we can prevent the government from wasting the labors of the people, under the pretence of taking care of them, they must be happy. Were we directed from Washington when to sow and when to reap, we should soon want bread. A wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.
Meanwhile, McCain called for the American government to more vigorously support the protesters in Iran. What would the Founders say to him?
The great rule of conduct for us in regard to foreign nations is in extending our commercial relations, to have with them as little political connection as possible....Harmony, liberal intercourse with all nations, are recommended by policy, humanity, and interest. Peace, commerce, and honest friendship with all nations, entangling alliances with none.
[America] has abstained from interference in the concerns of others, even when conflict has been for principles to which she clings, as to the last vital drop that visits the heart. ...Wherever the standard of freedom and Independence has been or shall be unfurled, there will her heart, her benedictions and her prayers be. But she goes not abroad, in search of monsters to destroy. She is the well-wisher to the freedom and independence of all. She is the champion and vindicator only of her own.
Maybe each week there should be three national radio broadcasts: one from the incumbent president, one from the other big-government party, and one reflecting the views of the Founders.

Posted on July 4, 2009  Posted to Cato@Liberty

The Failure of Do-Nothing Policies by David Boaz

A news story from today in a slightly alternate universe:
Jobless Rate at 26-Year High Employers kept slashing jobs at a furious pace in June as the unemployment rate edged ever closer to double-digit levels, undermining signs of progress in the economy, and making clear that the job market remains in terrible shape.
The number of jobs on employers' payrolls fell by 467,000, the Labor Department said. That is many more jobs than were shed in May and far worse than the 350,000 job losses that economists were forecasting. Job losses peaked in January and had declined every month until June. The steep losses show that even as there are signs that total economic activity may level off or begin growing later this year, the nation's employers are still pulling back.
White House press secretary Robert Gibbs said, "President Obama proposed a $787 billion stimulus program to get this country moving again. He tried to save the jobs at GM and Chrysler. But the do-nothing Republicans filibustered and blocked that progressive legislation, and these are the results." House Speaker Nancy Pelosi said at a press conference, "We begged President Bush to save Fannie Mae, Merrill Lynch, Bank of America, AIG, the rest of Wall Street, the banks, and the automobile industry. We begged him to spend $700 billion of taxpayers' money to bail out America's great companies. We begged him to ignore the deficit and spend more money we don't have. But did he listen? No, he just sat there wearing his Adam Smith tie and refused to spend even a single trillion to save jobs. And now unemployment is at 9.5 percent. I hope he's happy." Democrats on Capitol Hill agreed that the "do-nothing" response to the financial crisis had led to rising unemployment and a sluggish economy. If the Bush and Obama administrations had been willing to invest in American companies, run the deficit up to $1.8 trillion, and talk about all sorts of new taxes, regulations, and spending programs, then certainly the economy would be recovering by now, they said.

Posted on July 2, 2009  Posted to Cato@Liberty

Obama Adopts the Mikulski Principle by David Boaz

Economists have advanced many theories of taxation. But as usual, the one that seems to explain the policies of the Obama administration best is what I call the Mikulski Principle, the theory most clearly enunciated in 1990 by Sen. Barbara Mikulski (D, Md.):
Let’s go and get it from those who’ve got it.
Just take a look at the myriad taxes proposed or publicly floated by President Obama and his aides and allies: As the links will indicate, not all of these taxes have been formally proposed, and some have already run into sufficient criticism to have become unlikely. But together they illustrate the mindset of an administration and a Congress determined to extract as much money as they can from Americans rather than cut back on expenditures, which have doubled in about eight-and-a-half years. Indeed, the administration's programs remind us that today is July 2, the 233rd anniversary of the day on which the Continental Congress voted for American independence, issuing a document that declared, among other things,
He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.

Posted on July 2, 2009  Posted to Cato@Liberty

Banks, Bailouts, and Political Pressure by David Boaz

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.

Posted on July 1, 2009  Posted to Cato@Liberty

Government Motors Gears Up by David Boaz

Mother Goose and Grimm, by Mike Peters, June 30.

Posted on July 1, 2009  Posted to Cato@Liberty

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