Ignorance of Economics Is No Excuse

The new Spanish leftist party Podemos takes great inspiration from the victory of Syriza in Greece. As NPR reports:

Much of Europe is watching Greece closely after an anti-austerity party won elections there last weekend. And Spaniards are paying particular attention because Greece may be influential. A similar new political party–left-wing, anti-establishment–has formed in Spain over the past year. And polls show that it could win power in elections this fall.

If Podemos is elected, Spaniards may be disappointed in the results. Consider the cognitive dissonance here:

Many Spaniards are … frustrated that while the economy here is growing, unemployment still tops 23 percent and double that for youth. Polls show voters are switching to Podemos. It promises to raise the minimum wage, hike taxes on the rich and re-evaluate whether Spain should pay its debts.

Making it more expensive to hire workers and reducing the return on investment don’t seem like policies designed to deal with Spain’s appalling unemployment problem. Europe has had higher unemployment than the United States for most of the past two decades. In 2004, economist William B. Conerly suggested some reasons for that: longer and more generous unemployment benefits, reducing the incentive to find a job; inflexible wages; and job protections that make businesses reluctant to hire workers whom they won’t be able to let go. The economist Mark Perry reports that the unemployment rate in European countries with a minimum wage is twice as high as in countries with no minimum wage. And minimum wage laws certainly seem to reduce youth employment.

Alas, as I noted after the State of the Union, President Obama also

wants more and better jobs. And yet he wants to raise taxes on the savings and investment that produce economic growth and better jobs. And he proposes a higher minimum wage, which would cost some low-skilled workers their jobs. 

Perhaps if we copy enough European policies, we can achieve European unemployment rates. In the meantime, the Spaniards seem likely to worsen their dire economic situation. 

Posted on January 30, 2015  Posted to Cato@Liberty

Ignorance of Economics Is No Excuse

The new Spanish leftist party Podemos takes great inspiration from the victory of Syriza in Greece. As NPR reports:

Much of Europe is watching Greece closely after an anti-austerity party won elections there last weekend. And Spaniards are paying particular attention because Greece may be influential. A similar new political party–left-wing, anti-establishment–has formed in Spain over the past year. And polls show that it could win power in elections this fall.

If Podemos is elected, Spaniards may be disappointed in the results. Consider the cognitive dissonance here:

Many Spaniards are … frustrated that while the economy here is growing, unemployment still tops 23 percent and double that for youth. Polls show voters are switching to Podemos. It promises to raise the minimum wage, hike taxes on the rich and re-evaluate whether Spain should pay its debts.

Making it more expensive to hire workers and reducing the return on investment don’t seem like policies designed to deal with Spain’s appalling unemployment problem. Europe has had higher unemployment than the United States for most of the past two decades. In 2004, economist William B. Conerly suggested some reasons for that: longer and more generous unemployment benefits, reducing the incentive to find a job; inflexible wages; and job protections that make businesses reluctant to hire workers whom they won’t be able to let go. The economist Mark Perry reports that the unemployment rate in European countries with a minimum wage is twice as high as in countries with no minimum wage. And minimum wage laws certainly seem to reduce youth employment.

Alas, as I noted after the State of the Union, President Obama also

wants more and better jobs. And yet he wants to raise taxes on the savings and investment that produce economic growth and better jobs. And he proposes a higher minimum wage, which would cost some low-skilled workers their jobs. 

Perhaps if we copy enough European policies, we can achieve European unemployment rates. In the meantime, the Spaniards seem likely to worsen their dire economic situation. 

Posted on January 30, 2015  Posted to Cato@Liberty

David Boaz discusses the State of the Union address on MSNBC’s Melissa Harris-Perry

Posted on January 24, 2015  Posted to Cato@Liberty

Slashing the Budget?

I’ve written before about the propensity of journalists to declare modest budget cuts—or reductions in the rate of growth of government spending—in apocalyptic terms such as “slashing” and “draconian.” I was thus amused by this line in a Washington Post editorial today:

Mr. Hogan is slashing those payments by half, which will mean cuts approaching 1 percent to the school budgets of both Montgomery and Prince George’s counties.

The editorial is generally sympathetic to budget cuts proposed by the new governor of Maryland, and of course the “extra funding from Annapolis mainly to cover higher teacher salaries” may actually be subject to larger cuts. Still, when the impact on the county school budget is “approaching 1 percent,” I’d think “slashing” is, well, overkill.

Posted on January 23, 2015  Posted to Cato@Liberty

The State of the Union: Please, Just Do No Harm

At the National Interest, I critique the president’s State of the Union speech:

Instead, we got a sweeping vision of a federal government that takes care of us from childhood to retirement, a verbal counterpart to the Obama campaign’s internet ad about “Julia,” the cartoon character who has no family, friends, church or community and depends on government help throughout her life. The president chronicled a government that provides us with student loans, healthcare, oil and the Internet.

The spirit of American independence, of free people pursuing their dreams in a free economy, was entirely absent. Indeed, the word “freedom” appeared only once in the speech.

I wasn’t so impressed with the “middle-class economics” he laid out:

The president wants more and better jobs. And yet he wants to raise taxes on the savings and investment that produce economic growth and better jobs. And he proposes a higher minimum wage, which would cost some low-skilled workers their jobs. Those proposals are not well thought out….

The president spoke a lot about the future. He mentioned Social Security, Medicare and Medicaid. And he twice boasted of shrinking deficits. But he never addressed the elephant in the room: The deficit is about to head back up, reaching $1 trillion in a few years. The national debt is $18 trillion and still growing. Worse, those entitlements programs have an unfunded liability of around $90 trillion. What’s his plan to avert an unprecedented financial crisis a few years after he leaves office? He didn’t say, because he has no plan.

Things got a little better when he turned to foreign policy:

When he turned from economics, the president offered a bit more to libertarian-minded voters. He said that we don’t want to be “dragged into costly conflicts that strain our military and set back our standing” or “dragged into another ground war in the Middle East.” He said that “when the first response to a challenge is to send in our military, then we risk getting drawn into unnecessary conflicts, and neglect the broader strategy we need for a safer, more prosperous world.” Music to noninterventionist and realist ears.

But the reality is somewhat different. He has officially ended the wars in Afghanistan and Iraq, but American troops remain in both countries, which are hardly experiencing postwar tranquility. He has bombed seven countries, three more than President Bush. We are getting more deeply entangled in a new war in Iraq and Syria, without congressional authorization. Obama asked Congress to “pass a resolution to authorize the use of force against ISIL. We need that authority.” Really? He hasn’t shown any need for it these past six months. Nor did he ask for authorization to wage war in Libya. The senator who said in his 2008 campaign, “The President does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation,” has become a president who acts as if he does.

I also found an opportunity to praise his promises on Cuba, criminal justice reform, and the dignity of every citizen. But I concluded:

Early in the speech the president said, “We need to set our sights higher than just making sure government doesn’t screw things up, the government doesn’t halt the progress we’re making. We need to do more than just do no harm.” Please, just do no harm. Americans will make plenty of progress if government doesn’t interfere. 

Posted on January 21, 2015  Posted to Cato@Liberty

The Real Problem with Obama’s State of the Union Address

“Nobody shoots at Santa Claus.” Al Smith’s jibe at FDR came to mind as I listened to President Obama’s laundry list of free stuff in the State of the Union speech.

The laundry list could have been worse. Cato Institute researchers counted 104 separate proposals in President Clinton’s 2000 address. I didn’t have the patience to count last night, but I’m sure there were fewer. There were some big tickets there, though, from tax hikes to free college.

As a libertarian, of course, I’d like to hear something like, oh, “the era of big government is over.” And maybe a program of economic freedom, civil liberties and peace.

Instead, we got a sweeping vision of a federal government that takes care of us from childhood to retirement, a verbal counterpart to the Obama campaign’s internet ad about “Julia,” the cartoon character who has no family, friends, church or community and depends on government help throughout her life. The president chronicled a government that provides us with student loans, healthcare, oil and the Internet.

Coercion, collectivism and bureaucracy are poor tools for decision making and progress.”

The spirit of American independence, of free people pursuing their dreams in a free economy, was entirely absent. Indeed, the word “freedom” appeared only once in the speech.

Obama prefers words such as “together” and “one people.” It’s common for political leaders to use such language, and then to present themselves as the embodiment of the nation, so that criticism of the official or his policies is divisive and unpatriotic.

Barney Frank memorably said, “Government is simply the name we give to the things we choose to do together.” But I didn’t choose to invade Iraq. Or to saddle the country with $18 trillion in public debt. Coercion, collectivism and bureaucracy are poor tools for decision making and progress.

The highest-profile item in the speech was a proposed $320 billion tax increase (over ten years), introduced rather evasively as “let’s close the loopholes that lead to inequality by allowing the top one percent to avoid paying taxes on their accumulated wealth.”

The president wants more and better jobs. And yet he wants to raise taxes on the savings and investment that produce economic growth and better jobs. And he proposes a higher minimum wage, which would cost some low-skilled workers their jobs. Those proposals are not well thought out.

Speaking of doing things together: If he wants to reach across the aisle and work with Republicans, why not work together on a tax-reform plan that would bring down the world’s highest corporate tax rate and eliminate loopholes? Why derail bipartisan cooperation on immigration by unilateral executive action?

The president declares he wants an economic program that benefits the middle class. What benefits the middle class, indeed what created the middle class, is a market economy in which people are free to produce, trade and invest. Taxes, government spending and regulation burden that process. President Obama’s tax-spend-and-regulate policies have given us the slowest recovery since World War II. You want to help the middle class? Lift those burdens.

The president spoke a lot about the future. He mentioned Social Security, Medicare and Medicaid. And he twice boasted of shrinking deficits. But he never addressed the elephant in the room: The deficit is about to head back up, reaching $1 trillion in a few years. The national debt is $18 trillion and still growing. Worse, those entitlements programs have an unfunded liability of around $90 trillion. What’s his plan to avert an unprecedented financial crisis a few years after he leaves office? He didn’t say, because he has no plan.

When he turned from economics, the president offered a bit more to libertarian-minded voters. He said that we don’t want to be “dragged into costly conflicts that strain our military and set back our standing” or “dragged into another ground war in the Middle East.” He said that “when the first response to a challenge is to send in our military, then we risk getting drawn into unnecessary conflicts, and neglect the broader strategy we need for a safer, more prosperous world.” Music to noninterventionist and realist ears.

But the reality is somewhat different. He has officially ended the wars in Afghanistan and Iraq, but American troops remain in both countries, which are hardly experiencing postwar tranquility. He has bombed seven countries, three more than President Bush. We are getting more deeply entangled in a new war in Iraq and Syria, without congressional authorization. Obama asked Congress to “pass a resolution to authorize the use of force against ISIL. We need that authority.” Really? He hasn’t shown any need for it these past six months. Nor did he ask for authorization to wage war in Libya. The senator who said in his 2008 campaign, “The President does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation,” has become a president who acts as if he does.

Libertarians applaud the president’s promise to pursue trade agreements. But instead of taking the opportunity to tell a huge audience about the benefits of free trade, he presented trade as an unfortunate necessity and promised that his trade agreements would be less bad than previous agreements. At least he wants to remove the failed embargo against Cuba.

He acknowledged the civil-liberties problems presented by the surveillance state, but merely assured us that the surveillance agencies are going to make nice from now on.

I applaud his desire to work on a bipartisan basis for criminal-justice reform and look forward to more specifics. Since, as he noted, he has no more campaigns to run, and he has demonstrated his willingness to exercise the powers of the office (and then some), perhaps he could start with a more generous use of the pardon power for people serving long prison terms for nonviolent offenses. And why no mention of the growing movement to legalize marijuana?

Finally, I appreciate the president’s inclusiveness in his rhetoric and his policies. In 2013, he paid tribute to “Seneca Falls, and Selma, and Stonewall.” This year he cited gay marriage as “a story of freedom”—indeed, his only mention of freedom—and he touched on the deepest roots of our liberty and our civilization in this passage: “we are a people who value the dignity and worth of every citizen: man and woman, young and old, black and white, Latino and Asian, immigrant and Native American, gay and straight, Americans with mental illness or physical disability.”

In discussing the Cuban embargo, Obama said, “When what you’re doing doesn’t work for 50 years, it’s time to try something new.” How many applications that maxim might have!

How about fifty years of a drug war that has created crime, corruption and overflowing prisons, but hasn’t stopped drug use or abuse? Or fifty years of education spending increases with no increase in test scores? Or fifty years of an interventionist foreign policy that has indeed dragged us into costly and unnecessary conflicts? Or fifty (now fifty-one) years of a War on Poverty that has cost our economy $16 trillion, but has not ended poverty and unemployment?

To reiterate: “When what you’re doing doesn’t work for 50 years, it’s time to try something new.”

Early in the speech the president said, “We need to set our sights higher than just making sure government doesn’t screw things up, the government doesn’t halt the progress we’re making. We need to do more than just do no harm.” Please, just do no harm. Americans will make plenty of progress if government doesn’t interfere.

Posted on January 21, 2015  Posted to Cato@Liberty

The Moral Arc: How Science and Reason Lead Humanity toward Truth, Justice, and Freedom

We hear a lot about moral decline these days. Michael Shermer, the author of Why People Believe Weird Things, The Believing Brain, and eight other books on the evolution of human beliefs and behavior, argues that the scientific way of thinking has made people — and society as a whole — more moral. The Age of Reason and the Enlightenment led theorists to apply scientific reasoning to the nonscientific disciplines of politics, economics, and moral philosophy. Instead of relying on the woodcuts of dissected bodies in old medical texts, physicians opened bodies themselves to see what was there; instead of divining truth through the authority of an ancient book, people began to explore the book of nature for themselves through travel and exploration; instead of the supernatural belief in the divine right of kings, people employed a natural belief in the right of democracy. Abstract reasoning, rationality, empiricism, and skepticism, Shermer says, have profoundly changed the way we perceive morality and, indeed, move us ever closer to a more just world. With advance endorsements from Steven Pinker, Jared Diamond, and Michio Kaku, this book is likely to provoke lots of debate.

Posted on January 21, 2015  Posted to Cato@Liberty

North Korea: One Nation under Kim

In a comprehensive article on the comprehensive 1984-like propaganda efforts of North Korea, Anna Fifield reports on some underlying themes:

Tatiana Gabroussenko, an expert on North Korean literature who teaches at Korea University in Seoul, said that by not allowing people to form their own opinions, North Korea infantilizes its citizens.

“North Korea molds children socially,” Gabroussenko said. Books for different generations have different styles but the same message and characters, sometimes involving South Korean “stooges” or American “beasts.”

“In the children’s version, a child will be fighting Americans by throwing pepper in their eyes and making them sneeze and cough,” Gabroussenko said. In the adult version, weapons, rather than condiments, are used.

“The message ‘We are one nation’ implies that you can’t rebel against your father, you can’t rebel about your government, that it’s important to stick together,” she said.

North Korea’s totalitarianism may be unique, exceeding even that in the Soviet Union and Cuba, though perhaps reminiscent of Maoist China. So one must be careful not to draw too many analogies between the Kim cult and the efforts of political leaders anywhere else.

Still, it’s worth noting that the themes of unity, “we are one nation,” and “it’s important to stick together” are employed by both democratic and non-democratic states. Incumbent presidents call for unity and decry divisiveness, in the United States and elsewhere. Recall how President Bush and his allies accused their opponents in 2001-8 of “erod[ing] our national unity,” of “divisive comments [that] have the effect of giving aid and comfort to our enemies by allowing them to exploit divisions in our country,” of “questioning the president’s leadership, …constantly throwing up hurdles to keep us from doing what we have to do to protect the American people.”

President Obama too declares that “we’re all in this together,” we must act “as one nation, and one people,” while charging that his critics “scare and mislead the American people” and “scare Americans with half-truths and outright lies.” His Department of Education produced lesson plans for American schools in which children would be asked such questions as

How will [President Obama] inspire us?

What is President Obama inspiring you to do?

Why is it important that we listen to the president and other elected officials?

Political leaders seek to present themselves as the embodiment of the nation, so that criticism of the official or his policies is divisive and unpatriotic. Combine that with language about “national unity,” “one nation,” “national purpose,” “national greatness,” and you have a recipe for the imperial presidency. You don’t often see the political opposition calling for unity around the national leaders (except in times of genuine threats to the nation’s existence or freedom); oppositions by definition want to change the nation’s leadership. 

The “all in this together” trope has been criticized many times in these pages, by Roger Pilon, Gene Healy, Ed Crane, and no doubt others. I took on the nationalistic collectivism of Obama and John McCain in 2008.

North Korea is unique. No democratic nation, and hardly any undemocratic nation, has such a comprehensive system of cult worship and brainwashing. But that doesn’t mean there aren’t collectivist themes that turn up in widely varying political systems.

 

Posted on January 20, 2015  Posted to Cato@Liberty

Hard Choices

It’s disconcerting for a publisher to discover that a horrific tragedy has made one of its current titles more relevant. But that’s what happened to the Cato Institute when 11 journalists at Charlie Hebdo and a police officer were murdered by Islamist extremists.

In November, we published The Tyranny of Silence, by Flemming Rose, the editor at the Danish newspaper Jyllands-Posten.Rose stirred up controversy in 2005 by publishing cartoons of Muhammad that led to protests, petitions, and an investigation by Danish prosecutors. More tragically, there were death threats to Rose and the cartoonists, an armed intruder in cartoonist Kurt Wester-gaard’s house, and more than 200 deaths in riots and violence in the Middle East and Africa.

Rose published the Danish edition of Tyranny of Silence, a book about the controversy and the future of free speech, in 2010. I was surprised to discover in 2013 that the manuscript had been translated into English but had not found a publisher. I brought it to the attention of John Samples, the editor-publisher of Cato Institute Press, who began to explore publication.

It’s disconcerting for a publisher to discover that a horrific tragedy has made one of its current titles more relevant.”

We had three questions in mind: safety, of course; the quality of the manuscript; and whether Rose was anti-|Muslim or genuinely an advocate of free speech and provocative journalism.

We determined that the publication of the book had not generated any violence in Denmark, and that the controversy over the cartoons had generally subsided in the nine or so years since they had been published. The manuscript was compelling, well written, and well translated. And my contacts in Denmark and Europe assured me that Rose was a genuine liberal with a strong anti-authoritarian bent, sharpened during his years as a reporter in the Soviet Union.

Given all that, the book was a natural fit for the Cato Institute. Since our founding in 1977, we’ve been committed to the libertarian values of individual liberty, limited government, free markets, and peace. We take our name from Cato’s Letters, a series of 18th-century newspaper essays by John Trenchard and Thomas Gordon that were enormously influential in shaping the ideas of the American Revolution. In essay #15, they set out one of their basic principles: “Without freedom of thought, there can be no such thing as wisdom; and no such thing as publick liberty…. In those wretched countries where a man can not call his tongue his own, he can scarce call any thing else his own.”

So we published the book, with a foreword by Nat Hentoff, perhaps the greatest First Amendment defender of the past generation and now a senior fellow at Cato. When The Tyranny of Silence appeared in November 2014, the response was good. On a brief visit to the United States, Rose spoke at Cato, the Newseum, and Philadelphia’s Pen and Pencil Club; he was interviewed by the Washington Post and did a Reddit AMA (Ask Me Anything) that garnered more than 200,000 page views.

Then came the horrors of January 7 in Paris. Suddenly the book was directly relevant to the crisis dominating world headlines: offensive cartoons, murdered journalists, the reaction of the West, the nature of liberal society. Suddenly everybody was calling: Time, the New York Times, CBS This Morning, ABC’s This Week, CNN, BBC, theDaily Mail, El Pais, theNew Republic, the Financial Times. The Tyranny of Silence’s Kindle edition shot to #1 on Amazon’s Civil Rights and Liberties list and also reached single digits on its Censorship, Political Freedom list, as well as similar lists in France, Germany, and Australia. We ordered a second printing.

Throughout these past few busy days, though, we’ve been deeply saddened by the events that brought such attention to our book.

Writing at Time.com, Cato senior fellow Walter Olson declared, “If you defend freedom of speech today, realize that ‘blasphemy’ is its front line, in Paris and the world.”

For years, blasphemy laws were assumed to be a relic of the past, but laws accomplishing much of the same effect are once again on the march in Europe, banning “defamation of religion,” insults to religious beliefs, or overly vigorous criticism of other people’s religions when defined as “hate speech.” This must go no further. One way we can honor Charb, Cabu, Wolinski, Tignous, and the others who were killed January 7 is by lifting legal constraints on what their successors tomorrow can draw and write.

And as Olson suggests, the Cato Institute will continue to stand for untrammeled freedom of speech as a foundational element of a free society.

Posted on January 20, 2015  Posted to Cato@Liberty

Dividing the Loot in Maryland

Anticipating the inauguration of a rare Republican governor in Maryland, the state’s big Democratic jurisdictions are getting worried about their access to the state treasury:

Montgomery and Prince George’s officials are trying to make sure their counties are not forgotten by Gov.-elect Larry Hogan.

The Anne Arundel County Republican, who will be sworn in Wednesday, has pledged to pay more attention to rural Maryland, which he says was neglected during the administration of outgoing Gov. Martin O’Malley (D). Those rural counties also voted for Hogan by overwhelming margins….

“The uncertainty of the new administration creates more of an impetus . . . for larger jurisdictions to come together,” said Prince George’s County Council Chair Mel Franklin (D-Upper Marlboro), who wants to form a “large-county caucus” to lobby in Annapolis.

They have nothing to worry about, right? Surely a governor wouldn’t direct taxpayer dollars on the basis of political favoritism? As it happens, I’ve been watching Maryland politics for many years, and this story reminded of one that appeared in the Washington Post 20 years ago this week, when Parris Glendening became governor:

In his first major act as Maryland governor, Parris N. Glendening unveiled a no-new-taxes budget today that unabashedly steers the biggest share of spending to the three areas that voted most strongly for him: Montgomery and Prince George’s counties and Baltimore.

Glendening proposed cuts in welfare and other state programs so he can build more schools, fight crime and create jobs, particularly in those three urban areas, the only ones where Glendening (D) won a majority of votes Nov. 8.

I thought that was such a perfect encapsulation of politics at its finest that I’ve quoted it numerous times, including in my forthcoming book The Libertarian Mind. I also like to quote this charming and honest description of politics in a letter written by Lord Bolingbroke, an English Tory leader in the eighteenth century:

I am afraid that we came to Court in the same dispositions as all parties have done; that the principal spring of our actions was to have the government of the state in our hands; that our principal views were the conservation of this power, great employments to ourselves, and great opportunities of rewarding those who had helped to raise us and of hurting those who stood in opposition to us.

I recall reading that Charlie Peters, the legendary editor of the Washington Monthly, used to say that state legislatures are just committees for dividing up the loot, though I can’t find it online. If he didn’t, he should have.

Posted on January 17, 2015  Posted to Cato@Liberty

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