A Warning for President Obama by David Boaz

Last November's rejection of the failed GOP didn't mean voters were ready to embrace a massive increase in the size of the federal government, says Scott Keeter, director of survey research at Pew Research Center:
Obama campaigned for strong government action on the economy and health care, and most of his voters agreed with this direction. But Obama's efforts to expand the role of government have alienated many of those who did not vote for him but nonetheless gave him high marks when first he took office. Pew Research's political values survey this spring showed no surge in public demand for more government. Indeed, anti-government sentiment, which had been building for years, was heightened by the financial bailout and stimulus program.

Posted on August 31, 2009  Posted to Cato@Liberty

Measuring Policy Success by David Boaz

NPR reported this morning that "Cash for Clunkers" style programs in Germany and France are "popular and successful." Successful by what standard? I see that the Wall Street Journal has reported that in Europe “'cash for clunker' programs have breathed fresh life into a battered auto industry." Yes, by that standard, no doubt subsidies for buying cars are successful in encouraging the sale of cars. Certainly subsidies to homebuying encouraged the buying of homes. A "Cash for Computers" program would "breathe fresh life" into computer sales. Make it "Cash for Compaq" or "Cash for Windows," and you could direct purchasers to particular companies. But to declare a policy successful, shouldn't you mean that it makes the country better off? And that means that the subsidies produced more economic growth or more overall consumer satisfaction than a policy of nonintervention would have. That's a much harder standard to meet. Subsidies by definition divert consumer choices from their natural outcome. Economists generally agree that subsidies create deadweight losses for society. And sometimes, by distorting consumer decisions and encouraging decisions that don't make real economic sense -- as in the long effort to channel consumer resources into housing -- subsidies eventually prove unsustainable and unstable. Indeed, it seems likely that another part of the Wall Street Journal was correct when it described "Cash for Clunkers" as "crackpot economics."

Posted on August 13, 2009  Posted to Cato@Liberty

Media Failure? by David Boaz

Just a few minutes ago on the washingtonpost.com homepage, there was an example of one of my pet peeves about bias -- possibly unconscious bias -- in the way the major media cover issues. A homepage headline read "Price of Failure on Health Care," and the Howard Kurtz article itself is titled "The Price of Failure." Kurtz explores what would happen if "health care reform [goes] down in flames." So what does he mean by "Failure on Health Care"? He means President Obama not getting the sweeping new government programs that he seeks. But to many of us Post readers, that would actually be "Success on Health Care." It would mean that American health care would not get worse under the burden of government regulations and restrictions. The media tendency to refer to the defeat of a big-government scheme as "failure" reflects a possibly unconscious bias toward government action. As I've written before:
Does one ever hear “Congress failed today to reduce taxes”? “No Progress on Deregulation”? I don’t think so. Journalists unconsciously assume that Congress should Do the Right Thing. When it doesn’t, that’s “failure” or “no progress.” Journalists and headline writers should try to find neutral language to describe Congress’s actions.
(Kurtz's article actually focuses on the political consequences to Obama of not passing his signature issue, and I have no quarrel with the article. But the headlines convey the sense that it would be a "failure" for Congress not to pass a government health-care plan.)

Posted on August 12, 2009  Posted to Cato@Liberty

Obama Channels John Ashcroft by David Boaz

At his town meeting in New Hampshire, President Obama urged people not to listen to those who seek to "scare and mislead the American people." Meanwhile, his new White House website "Reality Check" -- your tax dollars at work, folks, on political propaganda -- warns supporters that "the road ahead will surely reveal more aggressive efforts from defenders of the status quo to confuse and scare Americans with half-truths and outright lies." I immediately thought of former Attorney General John Ashcroft's notorious declaration in December 2001: "to those who scare peace-loving people with phantoms of lost liberty, my message is this: Your tactics only aid terrorists for they erode our national unity and diminish our resolve." Presidents and their teams don't like criticism. They have total access to the media -- primetime, nationally televised speeches and press conferences, weekly radio addresses, websites, massive party and political organizations, journalists at their beck and call. Their every passing comment is news. Their speeches dominate the headlines. They set the agenda, whether it's the Patriot Act or health care bills. And yet they can't abide criticism. And when the criticism is effective, they lash out. They denounce their opponents for seeking to "scare peace-loving people with phantoms of lost liberties" or "confuse and scare Americans with half-truths and outright lies." (Quick: which one of those was 2001, and which was 2009?) But the fact is that the Bush administration's actions after 9/11 really did result in a loss of liberty, and the Obama administration's plans for our health care really should scare Americans. And libertarians have been, and will continue to be, in the forefront of Americans resisting intrusions on liberty by administrations from both parties. They won't be dissuaded by Nixonian claims that dissent and criticism are divisive and damaging to national unity.

Posted on August 12, 2009  Posted to Cato@Liberty

The Rule of Law or the Rule of a Man? by David Boaz

The Obama administration's pay czar is busily making plans for America's financial companies:
Kenneth R. Feinberg has the unprecedented task of deciding executive compensation at seven companies that received large government bailouts. His meetings with American International Group, Citigroup, Bank of America, General Motors, Chrysler, Chrysler Financial and GMAC have been conducted in secret, with neither Feinberg nor the companies willing to say much in public.... Feinberg, who has sole discretion to set compensation for the top 25 employees of each of those companies, has 60 days to make a determination after the proposals are complete. Under the administration's initiative to curb excessive pay practices, each of the seven companies must also receive his approval for how it pays the rest of its 100 most highly compensated executives and employees. The companies must submit pay plans for these employees by Oct. 12.... During the videoconference with AIG employees, Feinberg mostly avoided giving them detailed answers to their questions. Many of the employees left frustrated because he gave them no sense of whether he would seek to modify contracts that promise them upcoming bonuses, said people familiar with the session.... Senior Treasury Department officials say they do not want Feinberg to set precise prescriptions for how companies compensate employees. Instead, his task is to evaluate pay according to several principles. For instance, does an employee's compensation reward short-term, risky business behavior? Or, on the contrary, is the compensation tied to longer-term performance goals? Does it allow the company to remain competitive and recruit top talent?
Note also: "Mr. Feinberg's decisions won't be subject to appeal." Classical liberals often talk about "the rule of law, not the rule of men." This isn't even "the rule of men," it's the rule of one man. Let us hope that Kenneth Feinberg is a wise, merciful, and incorruptible ruler. NOTE: I recognize that Feinberg's authority extends only to companies that have received large government bailouts, and there's a certainly a case to be made that if companies take taxpayers' money, they can darn well live with government salaries. But it's just that kind of political intrusiveness -- along with demanding that auto firms keep all their dealerships, or make "green" cars, or build their cars in this country, or whatever -- that makes government-run or -dominated companies inefficient. So as Gary Becker says, it's a "fatal conceit" to assume that Kenneth Feinberg knows better than the market how much top talent should be paid. And some of the people who support the idea of a "pay czar" want his authority to extend beyond the government-supported companies.

Posted on August 11, 2009  Posted to Cato@Liberty

No Consensus on Stimulus by David Boaz

Following up on Chris Edwards' comments, Alan Blinder of Princeton writes in the Washington Post that the stimulus is working and "we need to stay the course." But Casey Mulligan of the University of Chicago writes in the New York Post that 90 percent of the stimulus money hasn't been spent yet, so we could still stop it before it does too much harm:
The best case scenario for the stimulus law gives us results that are miniscule compared with the costs. In the worst case scenario, we actually pay money to further harm an already struggling economy.... It would have been designed better if money had stayed with the taxpayers instead of funneling through dozens of federal agencies -- an option that is still available. Otherwise, we are looking at heavy taxes -- and further economic damage -- down the road to pay for all the borrowing.
Mulligan wrote earlier in the New York Times that "The economy has gotten worse than the Obama administration had predicted it would be even if Congress had spent nothing on 'fiscal stimulus.'" Mulligan provides more details at his blog stopthefiscalstimulus.com. Meanwhile, Mario Rizzo of New York University asks
what is the mechanism by which about $70 billion in extra spending (this is the amount of the total stimulus package now spent) reduces the rate of increase in unemployment and reduces the rate of decrease in output in a $14 trillion economy? If my advanced arithmetic is correct this is ½ of 1 percent of the GDP. What kind of Super Multiplier is that?
He goes on to point out that unemployment is now higher than the administration predicted just a few months ago it would be if we didn't pass the stimulus. So how can we believe today's econometric claims about the good effects of the so-called stimulus?

Posted on August 11, 2009  Posted to Cato@Liberty

Tax Tax Tax at the Washington Post by David Boaz

A banner headline at the top of the Washington Post Sunday Metro section reads
It's Time for Deeds to Step Up to the Plate on a Tax Increase
Columnist Robert McCartney, for years the top editor of the Metro section, says that Virginia's Democratic gubernatorial nominee should "Propose to raise taxes to fix the roads. Yes, you read that correctly. Raise taxes." No doubt a lot of Republicans are hoping that Deeds will take the Post's advice. McCartney goes on to say that taxes must go up because (in bold) "The public sector needs to expand." Because, you see, the infrastructure is failing in Virginia and also in D.C., and "Virginia's roads clearly require extra revenue." Well, let's see. Virginia's state budget doubled between 1996 and 2006, from $17 billion to $34 billion. And the governor's office estimated last December that the state would spend $37 billion in 2009 and $37.6 billion in 2010. Thanks to the recession, and to the state's habit of spending during good years as if the party would never end, those numbers may drop slightly. But even with the current shortfalls, the budget's gone up by $20 billion in the past 14 years, and they can't find enough to fix the roads? What have they spent that extra $20 billion on? Do Mr. McCartney, Mr. Deeds, and other tax-hikers ever think about prioritizing state spending? The Virginians who call themselves the Tertium Quids do. They urge the legislators to review the recommendations of the Wilder Commission and the Virginia Piglet Book to find some opportunities for savings. Read more...

Posted on August 10, 2009  Posted to Cato@Liberty

The Boys Who Cried “Racist” by David Boaz

Some people on the left can't see any excuse for opposition to collectivism except racism. (Which is, of course, as Ayn Rand said, "the lowest, most crudely primitive form of collectivism.") Today it's Paul Krugman:
But they’re probably reacting less to what Mr. Obama is doing, or even to what they’ve heard about what he’s doing, than to who he is. That is, the driving force behind the town hall mobs is probably the same cultural and racial anxiety that’s behind the “birther” movement, which denies Mr. Obama’s citizenship.
That is, Paul Krugman can't understand why people would oppose government control of health care — or skyrocketing deficits, or a federal takeover of education, energy, and finance along with health care — unless they're driven by racism. But he's not the only one who sees racists under every bed. Take Washington Post cultural writer Philip Kennicott yesterday, in an essay titled "Obama as the Joker: Racial Fear's Ugly Face":
[T]he poster is ultimately a racially charged image. By using the "urban" makeup of the Heath Ledger Joker, instead of the urbane makeup of the Jack Nicholson character, the poster connects Obama to something many of his detractors fear but can't openly discuss. He is black and he is identified with the inner city, a source of political instability in the 1960s and '70s, and a lingering bogeyman in political consciousness despite falling crime rates... Superimpose that idea, through the Joker's makeup, onto Obama's face, and you have subtly coded, highly effective racial and political argument. Forget socialism, this poster is another attempt to accomplish an association between Obama and the unpredictable, seeming danger of urban life.
He's talking about a poster that depicts Obama as the Joker from last year's Batman movie over the word SOCIALISM. It's not a very effective poster; what does the Joker have to do with socialism? But it's ridiculous to see racism in it. Read more...

Posted on August 7, 2009  Posted to Cato@Liberty

Summer — or Back to School — Reading by David Boaz

The Cato Institute has published thousands of books, studies, articles, and op-eds, and most of them are on our website. But there's lots of good reading material published elsewhere, and now our analysts are offering handy guides to the best reading in such fields as Principles of Liberty, Constitutional Studies, Health Care, Foreign Policy, and more. I know that reading lists can sometimes be intimidating — where to start? — and too much of just a list. So these lists are annotated; each recommendation is briefly described. And at my insistence, (almost) all the analysts have started their lists with "Read This First" to suggest a foundational or introductory book or essay. Check them out here.

Posted on August 7, 2009  Posted to Cato@Liberty

Lobbying: A Booming Business in a Politicized Economy by David Boaz

Lobbying expenditures are up in the second quarter of the Obama administration, reports the Center for Responsive Politics. Well-connected Democratic lobbyists like former House majority leader Richard Gephardt and Tony Podesta, the brother of Obama transition director John Podesta, did especially well. Given the administration's focus on nationalizing health care and energy, it's no surprise that health care and energy companies were the biggest spenders. Businesses don't have unified interests, of course; some health care companies and industry sectors lobby against a government-run insurance plan while they support a federal mandate that every American purchase health insurance. Other firms may just work to get their own members onto the gravy train. As Craig Holman of the Nader-founded Public Citizen told Marketplace Radio the last time such a report was issued, “the amount spent on lobbying . . . is related entirely to how much the federal government intervenes in the private economy.” Marketplace’s Ronni Radbill noted then, “In other words, the more active the government, the more the private sector will spend to have its say…. With the White House injecting billions of dollars into the economy, lobbyists say interest groups are paying a lot more attention to Washington than they have in a very long time.” Of course, this is not a new story. I pointed out in the Wall Street Journal in 1983 that Hayek had told us what to expect back in 1944:
If more money can be made by investing in Washington than by drilling another oil well, money will be spent there. Nobel laureate F.A. Hayek explained the process 40 years ago in his prophetic book The Road to Serfdom: "As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power."
In a graphic on page A6 of the February 13 edition, not available online, the Washington Post reported that “A Washington Post analysis found that more than 90 organizations hired lobbyists to specifically influence provisions of the massive stimulus bill.” The graphic showed that the number of newly registered lobbying clients had peaked on the day after Obama’s inauguration and continued to grow as the bill worked its way through both houses of Congress. More on the frenzied efforts to get a piece of the taxpayers’ money in the spending bill here and here. And the beat goes on: The congressional newspaper The Hill reports, "Lobbyists lining up for shot at climate bill." And that of course is why Patrick Appel reports at the Andrew Sullivan blog that Washington is the hottest city for job-seekers these days. If you want money flowing to the companies with good lobbyists and powerful congressmen, then all these spending and regulatory bills may accomplish something. But we should all recognize that we're taking money out of the competitive, individually directed part of society and turning it over to the politically controlled sector. Politicians rather than consumers will pick winners and losers. Just as important, businesses will devote their time, money, and brainpower to influencing decisions made in Washington rather than to developing better products and delivering them to consumers. The tragedy is that the most important factor in America's economic future -- in raising everyone's standard of living -- is not land, or money, or computers; it's human talent. And an increasing part of the human talent at America's companies is being diverted from productive activity to protecting the company from political predation. With every spending program and every new regulation, the parasite economy sucks in another productive enterprise. Do we really want the best brains at companies from General Motors and General Electric (this quarter's biggest lobbyist) to Google and Goldman Sachs focused on working Washington rather than serving consumers?

Posted on August 4, 2009  Posted to Cato@Liberty

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