The Federal Government Is So Big, It Even Takes the Washington Post’s Breath Away

On the front page of today's Washington Post, above the fold, a news story begins:
If nothing else, the crisis over the debt ceiling is reminding the country of the astonishing reach of the federal spigot, encapsulated by a figure that President Obama tossed out recently: The government sends out “70 million checks” every month.
Reporter Alec MacGillis went on to note that the president underestimated:
The figures used by Obama and Geithner were, if anything, too low. They relied on Treasury Department figures from June that include Social Security (56 million checks that month), veterans benefits (4.5 million checks), and spending on non-defense contractors and vendors (1.8 million checks). But those numbers do not include reimbursements to Medicare providers and vendors (100 million claims in June), and electronic transfers to the 21 million households receiving food stamps. Nor do they include most spending by the Defense Department, which has a payroll of 6.4 million active and retired employees and, on average, pays nearly 1 million invoices and 660,000 travel expense claims per month.
However, we should remember that
The mind-boggling number challenges a common critique of the federal government as a creaky apparatus where tax dollars are lost in the bureaucratic cracks. From the vantage point of the 70 million or 80 million checks, the government is a finely tuned machine that brings in revenue and disperses it back out across the country.
Whew. For a minute there I was worried.  

Posted on July 27, 2011  Posted to Cato@Liberty

Lobbyists Are Doing Fine in the Recession

In this week's Encyclopedia Britannica column I write:
Headlines this week reported a slight decline in reported expenditures by federal lobbyists. Of course, it would have been hard to keep up the pace set as companies and other interest groups fought to get a piece of the TARP bailout, the massive stimulus bill, the omnibus appropriations bill, the health care bill, and other spending and regulatory bills that passed during the 2008-2010 legislative frenzy. But don’t worry about the big lobbying firms. They’ll do fine.
I explain why those reports can be misleading, cite Adam Smith and F. A. Hayek and lots of recent news stories, and conclude:
Lobbying is one of the costs—not the worst cost, but certainly a galling one—of a government that is “generous and compassionate,” based on “a progressive vision of our society,” a government that “helps families find jobs at a decent wage, care they can afford, a retirement that is dignified,” a government that “directs help to the inspired and the effective,” a government that will “restore the security of working families.” If that’s the government you want, then lobbying is an inevitable adjunct. Let’s not forget that analysis from Craig Holman of Public Citizen: “the amount spent on lobbying . . . is related entirely to how much the federal government intervenes in the private economy.”
Read the whole thing.

Posted on July 25, 2011  Posted to Cato@Liberty

The Norwegian Killer’s Anti-individualist Nationalism

Does it matter what political agenda motivated Anders Behring Breivik, who is allegedly responsible for two attacks in Norway that killed some 93 people? In some sense, no. He's a mass murderer, and he deserves society's severest punishment (which in Norway is apparently 21 years in prison, or approximately three months for each murder). But as with each such attack, there's been a rush to blame some ideological faction or other. As usual these days, some writers didn't bother waiting for evidence before assuming that the perpetrator was Islamic and rushing into print with condemnation of people who would make cuts in a U.S. defense budget as large as the rest of the world combined or begin to wind down the Afghan war after 10 years (!). But surely NPR takes the cake for the most ridiculous name-dropping. This morning Linda Wertheimer, who has 40 years of journalistic experience at NPR, interviewed Goran Skaalmo of the Norwegian Business Daily about Breivik. At about 3:20 of the audio, Wertheimer asks Skaalmo:
I was reminded of the American writer Ann [sic] Rand, in that he talks in his manifesto about the government being too soft, too sort of politically afraid to draw the kind of nationalist lines that he calls for.
Say what? When did Ayn Rand ever call for a hard, nationalist government? She was an immigrant, of course, and Breivik was greatly motivated by anti-immigration sentiment. She was staunchly individualist, just the opposite of nationalism. And she favored a government strictly limited to the protection of individual rights. Wertheimer reaches new depths in stupid Ayn Rand references. A Norwegian newspaper's report on Breivik (in an automatic Google translation) includes this telling line:
In one of the posts he states that politics today no longer revolves around socialism against capitalism, but that the fight is between nationalism and internationalism.
His online posts and his 1500-page online book seem to point to a fairly consistent nationalist, anti-immigrant, anti-Islamic "cultural conservative" defense of Europe's "Judeo-Christian culture." Meanwhile, Norwegian bloggers have discovered that he lifted large passages from the 35,000-word manifesto of the anti-capitalist "Unabomber" Theodore Kaczynski.

Posted on July 24, 2011  Posted to Cato@Liberty

Bastiat on Free Trade and Living on the State

The estimable James Grant reviews a new collection of writings of the brilliant Frederic Bastiat, published by the beneficent Liberty Fund, in the always scintillating Review section of the Saturday Wall Street Journal:
Because nobody else can understand them, modern economists speak to one another. They gossip in algebra and remonstrate in differential calculus. And when the pungently correct mathematical equation doesn't occur to them, they awkwardly fall back on the English language, like a middle-aged American trying to remember his high-school Spanish. The economist Frédéric Bastiat, who lived in the first half of the 19th century, wrote in French, not symbols. But his words—forceful, clear and witty—live to this day.
Bastiat might have something to say about the attitudes and policies that have brought both Europe and the United States to the brink of debt disaster:
"The dominant notion, the one that has permeated every class of society," he wrote in the wake of the Revolution of 1848, "is that the state is responsible for providing a living for everyone." "Poor people!" he lamented of the duped French populace in the same tumultuous year. "How much disillusionment is in store for them! It would have been so simple and so just to ease their burden by decreasing their taxes; they want to achieve this through the plentiful bounty of the state and they cannot see that the whole mechanism consists in taking away ten to give it back eight, not to mention the true freedom that will be destroyed in the operation!"
And of course, taking away eight to give back ten is fun while it lasts. But it can't last forever.

Posted on July 23, 2011  Posted to Cato@Liberty

Should There Be ‘Shared Sacrifice’?

At the Encyclopedia Britannica blog, I take on the argument made, for instance, by President Obama in his Friday news conference:
We should not be asking sacrifices from middle-class folks who are working hard every day, from the most vulnerable in our society -- we should not be asking them to make sacrifices if we’re not asking the most fortunate in our society to make some sacrifices as well.
I call that a fundamentally flawed argument:
The main thing our government does these days, despite the lack of any constitutional authority for it, is tax some people and transfer money to other people. ...But there is no moral equivalence in the two sides of the transfer system. On the one hand, the government takes money by force from people who have earned it. On the other hand, it gives some of that money to people who have not earned it. Taking yet more money that people have earned is simply not equivalent to reducing the size of a government transfer.
There is, however, one way that we could ask businesses and the rich to join in the deficit-reduction effort:
But here’s a way to satisfy both those who see spending as the problem and those who want the highest-taxed Americans to pay yet more: Start cutting subsidies to businesses and the rich. Let’s cut out the big-business subsidy machine, the Export-Import Bank. Let’s get rid of farm subsidies. Let’s tell affluent people who build houses in coastal flood areas to pay for their own flood insurance at market prices.
Read the whole thing.

Posted on July 19, 2011  Posted to Cato@Liberty

The Debt Ceiling and the Balanced Budget Amendment

The Washington Post editorializes:
A balanced-budget amendment would deprive policymakers of the flexibility they need to address national security and economic emergencies.
A fair point. Statesmen should have the ability to "address national security and economic emergencies." But the same day's paper included this graphic on the growth of the national debt: National Debt Does this look like the record of policymakers making sensible decisions, running surpluses in good year and deficits when they have to "address national security and economic emergencies"? Of course not. Once Keynesianism gave policymakers permission to run deficits, they spent with abandon year after year. And that's why it makes sense to impose rules on them, even rules that leave less flexibility than would be ideal if you had ideal statesmen. Indeed, the debt ceiling itself should be that kind of rule, one that limits the amount of debt policymakers can run up. But it has obviously failed. We’ve become so used to these stunning, incomprehensible, unfathomable levels of deficits and debt — and to the once-rare concept of trillions of dollars — that we forget how new all this debt is. In 1980, after 190 years of federal spending, the national debt was “only” $1 trillion. Now, just 30 years later, it’s sailing past $14 trillion. Historian John Steele Gordon points out how unnecessary our situation is:
There have always been two reasons for adding to the national debt. One is to fight wars. The second is to counteract recessions. But while the national debt in 1982 was 35% of GDP, after a quarter century of nearly uninterrupted economic growth and the end of the Cold War the debt-to-GDP ratio has more than doubled. It is hard to escape the idea that this happened only because Democrats and Republicans alike never said no to any significant interest group. Despite a genuine economic emergency, the stimulus bill is more about dispensing goodies to Democratic interest groups than stimulating the economy. Even Sen. Charles Schumer (D., N.Y.) — no deficit hawk when his party is in the majority — called it “porky.”
Annual federal spending rose by a trillion dollars when Republicans controlled the government from 2001 to 2007. It has risen another trillion during the Bush-Obama response to the financial crisis. So spending every year is now twice what it was when Bill Clinton left office. Republicans and Democrats alike should be able to find wasteful, extravagant, and unnecessary programs to cut back or eliminate. They could find some of them here in this report by Chris Edwards. In the Kentucky Resolutions, Thomas Jefferson wrote, "In questions of power, then, let no more be heard of confidence in man, but bind him down from mischief by the chains of the Constitution." Just so. When it becomes clear that Congress as a body cannot be trusted with the management of the public fisc, then bind them down with the chains of the Constitution, even — or especially — chains that deny them the flexibility they have heretofore abused.

Posted on July 19, 2011  Posted to Cato@Liberty

Vive La Revolution?

Today is the 222nd anniversary of the storming of the Bastille on July 14, 1789, the date usually recognized as the beginning of the French Revolution. I'll be speaking this weekend at FreedomFest on the topic, "Liberty, Equality, Fraternity: A Libertarian Version." I previewed part of my talk at this week's Britannica Blog column. So what should libertarians think about the French Revolution? The great Henny Youngman, when asked “How’s your wife?” answered, “Compared to what?”
Compared to the American Revolution, the French Revolution is very disappointing to libertarians. Compared to the Russian Revolution, it looks pretty good. And it also looks good, at least in the long view, compared to the ancien regime that preceded it.... Lord Acton wrote that for decades before the revolution “the Church was oppressed, the Protestants persecuted or exiled, . . . the people exhausted by taxes and wars.” The rise of absolutism had centralized power and led to the growth of administrative bureaucracies on top of the feudal land monopolies and restrictive guilds.... The results of that philosophical error—that the state is the embodiment of the “general will,” which is sovereign and thus unconstrained—have often been disastrous, and conservatives point to the Reign of Terror in 1793-94 as the precursor of similar terrors in totalitarian countries from the Soviet Union to Pol Pot’s Cambodia. In Europe the results of creating democratic but essentially unconstrained governments have been far different but still disappointing to liberals.... Still, as Constant celebrated in 1816, in England, France, and the United States, liberty
is the right to be subjected only to the laws, and to be neither arrested, detained, put to death or maltreated in any way by the arbitrary will of one or more individuals. It is the right of everyone to express their opinion, choose a profession and practice it, to dispose of property, and even to abuse it; to come and go without permission, and without having to account for their motives or undertakings. It is everyone’s right to associate with other individuals, either to discuss their interests, or to profess the religion which they and their associates prefer, or even simply to occupy their days or hours in a way which is most compatible with their inclinations or whims.
Compared to the ancien regime of monarchy, aristocracy, class, monopoly, mercantilism, religious uniformity, and arbitrary power, that’s the triumph of liberalism.
Read the whole thing.

Posted on July 14, 2011  Posted to Cato@Liberty

New Light on Paternalism

Yesterday Mario Rizzo pointed out a couple of new studies on the unexpected results of paternalist policies designed to "nudge" Americans into making what their betters consider smart decisions. In today's Wall Street Journal, Energy Secretary Steven Chu sums up the paternalist view very concisely. Opposing a House bill to repeal the 2007 federal law that effectively outlaws incandescent light bulbs, Chu says:
We are taking away a choice that continues to let people waste their own money.
Exactly. The government wants to take away our choice. It wants to take away our right to make our own decision. It doesn't trust us to make our own choices. And why should it? Secretary Chu won the Nobel prize in physics. He's obviously smarter than we are. Sure, some people just don't like fluorescent light. Some people don't like the way the new bulbs come on slowly. Some people don't like the curlicue look. Some find that they don't in fact last longer than incandescent bulbs. Some are skeptical about promises of long-term savings, or simply prefer to spend less now. But none of that matters to Secretary Chu and other paternalists. They know that these bulbs are best for us, and so they "are taking away a choice" that they don't think people should make. That's the difference between the libertarian and paternalist views in a nutshell.

Posted on July 9, 2011  Posted to Cato@Liberty

New Paternalist Surprises

The front pages of Thursday's Wall Street Journal and Washington Post (links below) both featured stories on the unexpected consequences of the sort of "nudging" policies recommended by so-called "libertarian paternalists." Mario Rizzo, an economist at New York University who often blogs at ThinkMarkets, sent along this commentary to share with C@L readers:
As Glen Whitman and I have repeatedly argued, new paternalism faces a knowledge problem similar to that uncovered by F.A. Hayek in his critique of socialist calculation. In our view, paternalists cannot acquire the knowledge they need to implement policies that are effective according to their own standards. The new paternalism purports to nudge people toward the better satisfaction of their own preferences than people can achieve themselves. We are too ignorant, too weak-willed, and computationally too incompetent to satisfy our real or underlying preferences. We save too little for our retirement because we are overly impatient and cannot postpone spending.  We eat too many calories because we underweight the costs of future illness due to obesity. The new paternalists thought they had at least a partial solution to the first problem of undersaving. For those people who have employer-sponsored retirement savings programs we can use a common “defect” in decisionmaking to help them out.  People are prone to status-quo bias, that is, they tend to leave in place whatever situation they may find themselves in. So when employees are automatically enrolled in retirement savings unless they opt out, more people are enrolled than when the default is non-enrollment unless they opt in. What could be simpler?  Make the default automatic enrollment, and voila more retirement savings! Now comes the annoying data. According to a recent study commissioned by the Wall Street Journal more people are indeed enrolled in 401k programs as predicted. However, those who would have chosen enrollment under the old opt-in system (around 40% of new workers) tended to remain in a lower salary allocation in the default (frequently 3%) than they would have chosen on their own. So instead of using the status-quo bias to increase savings it turned out that the automatic enrollment decreased savings among this group. Read more...

Posted on July 8, 2011  Posted to Cato@Liberty

Liberalism and Debate in China

The Asian edition of the Wall Street Journal has just published essays by two Chinese liberal scholars who have spoken and written for the Cato Institute. Mao Yushi created quite a storm in China with his article on the website of Caixin magazine criticizing Mao Zedong (no relation). He received threatening phone calls and warning visits. Nevertheless, he has now published a version of the essay in English, translated by my former colleague Jude Blanchette, now working in China for the Atlas Economic Research Foundation. It's still pretty tough:
Mao Zedong was once a god. With the uncovering of more and more documents and information, he is gradually returning to human form. Some still view Chairman Mao as a god, however, and view any critical discussion of him as blasphemous.... Mao not only created suffering for China, he exported his theory to the world so that all could share in his cruelty. He encouraged armed revolution in Malaysia, India, Thailand, the Philippines, Burma, Indonesia, Nepal and Sri Lanka. Perhaps Mao's greatest student was Pol Pot, who stands as the most ruthless killer in recent history. More than 30 years after his death, the world is still dealing with Mao's legacy.... After Mao's death, Hua Guofeng and Ye Jianying seized the Gang of Four, and China's Supreme Court sentenced them to death. Yet the leader of the Gang of Four can still be glimpsed hanging above the Gate of Heavenly Peace and his picture is printed on the money we use every day.
Meanwhile, Liu Junning tells Journal readers that Maoism is not the whole of China's heritage. Indeed, he says (as noted in Libertarianism: A Primer and The Libertarian Reader), Laozi (Lao-tzu or Lao-tse) was one of the earliest exponents of ideas we might now call liberal or libertarian:
Indeed, what we now call Western-style liberalism has featured in China's own culture for millennia. We first see it with philosopher Laozi, the founder of Taoism, in the sixth century B.C. Laozi articulated a political philosophy that has come to be known as wuwei, or inaction. "Rule a big country as you would fry a small fish," he said. That is, don't stir too much. "The more prohibitions there are, the poorer the people become," he wrote in his magnum opus, the "Daodejing." For Mencius, a fourth-century B.C. philosopher and the most famous student of Confucius, a kingdom would be able to defend itself from outside attack if the king "runs a government benevolent to the people, sparing of punishments and fines, reducing taxes and levies. . . ." Note that Laozi and other classical thinkers also drew a connection between good, limited government in general and prosperity in particular. To say that the narrative of liberty vs. power is uniquely "Western" is to turn a blind eye to the struggles of those who have gone before us. Individual rights are not a Western development any more than paper and gunpowder are inventions that are uniquely Chinese. Is Marxism "German"? Is Buddhism "Indian"? Of course not. When ideas are born, they take flight into the world to be used, improved or discarded by all of humanity. Constraints on political power and the protection of individual rights belong to all.... China will truly prosper only when individuals such as Liu Xiaobo, Ai Weiwei and the many other Chinese patriots who speak for reform are safe in the knowledge that they can do so without a late-night knock on the door from the government.
My own thoughts on the ideas of the American Revolution and of the Chinese Communist Party appeared at the Britannica Blog on Monday.

Posted on July 6, 2011  Posted to Cato@Liberty

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