The state of Maryland has doled out more than $26 million in tax-credit subsidies to the hit Netflix series House of Cards, which films in the state. Last month in this space, my colleague David Boaz compared the arrangement itself to a House of Cards plot line: “It’s hard to imagine a better example of rent-seeking, crony capitalism, and conspiracy between the rich, the famous, and the powerful against the unorganized taxpayers.”
Shortly after he wrote, the plot began taking further twists reminiscent of fiction. In response to demands from the show’s producers for even steeper subsidies as the price of staying to film more seasons, some lawmakers decided to remind the Hollywood crowd who held the guns in the relationship:
Responding to a threat that the “House of Cards” television series may leave Maryland if it doesn’t get more tax credits, the House of Delegates adopted budget language … requiring the state to seize the production company’s property if it stops filming in the state. …
Del. William Frick, a Montgomery County Democrat, proposed the provision, which orders the state to use the right of eminent domain to buy or condemn the property of any company that has claimed $10 million or more credits against the state income tax. The provision would appear to apply only to the Netflix series, which has gotten the bulk of the state credits.
This smash-‘n’-grab approach to the use of eminent domain power is something of a local specialty in the Old Line State. In 1984, a bill was introduced in the Maryland legislature authorizing an eminent domain takeover of the Baltimore Colts, which had been eyeing the exits. In reaction, the owner packed the team into vans at night and moved to Indianapolis. In 2009, Gov. Martin O’Malley threatened eminent domain to keep the famed Preakness Stakes horse race, including its trademarks, copyrights, and contracts, from leaving Baltimore. (It stayed.)
On one level, it might seem like poetic justice for businesses that profit at taxpayer expense to come to grief through gross abuse of government power. But we should fear letting the power of eminent domain, dangerous enough when applied to land and rights of way, be asserted over intangible and movable assets. Once the state gets used to flexing that power, it will assuredly think of using it to seize enterprises whose entanglement with subsidies is less blatant and perhaps nonexistent. (Part of the answer, of course, is to stop the subsidy giveaways in the first place. And if the state can show that the producers somehow violated the terms applied heretofore to the deal, it would have a claim against them in more conventional litigation anyway.)
Cato adjunct scholar Ilya Somin discussed eminent domain over moveable and intangible assets in this 2009 post. He writes, “condemning mobile assets is a losing proposition for state and local governments – even if courts will let them do it,” noting that “businesses would quickly flee any jurisdiction that started using eminent domain in this way. … Moreover, other firms would forego the opportunity to move into the area in the first place.”
But on to the sequel: Legislators in Annapolis killed the eminent domain proposal in conference committee, and then frantic negotiations on extending the subsidies failed to reach agreement as to a final $3.5 million before the end of the legislative session last week, which means the state’s taxpayers may save that money (or save even more, if the show decides to leave).
Isn’t it nice when negotiations between two sets of rogues to fleece the rest of us break down? And it’s a credit to the structure of our constitutional system that it often succeeds in blocking such negotiations.
Congress passed the misnamed Patient Protection and Affordable Care Act four years ago. It was a signal political achievement. Alas, ObamaCare is proving to be a policy bust as Kathleen Sebelius leaves her job as Secretary of Health and Human Services.
For instance, health insurance premiums are rising dramatically, especially for the young. The federal government now mandates expensive “benefits” that many people do not need or desire.
Even more dramatic is the reverse Robin Hood redistribution from the generally lower-income young to the mostly wealthier old. As I point out in my new Forbes online article: “By requiring coverage irrespective of health status and limiting risk-based premium differentials ObamaCare shifted costs from gray-haired investment bankers to newbie sales associates. Despite the administration’s faux shock at the huge premium increases for the young, the legislation is working precisely as intended.”
Along with higher premiums came the destruction of existing plans. The president’s promise that if people liked their policies they could keep them was a calculated and cynical deception. The legislation explicitly overrode private choice to impose Washington’s preferred “benefit” mix.
Another impact of the ACA, discussed in a new report from the American Health Policy Institute, is to increase business costs through new taxes, mandated benefits, and administrative costs. Moreover, companies ultimately will end up paying indirect costs, such as a share of new taxes on others, such as for medical devices.
In 2012 large employers spent about $580 billion to cover employees and their dependents. AHPI figured these companies would have to spend an extra $4800 to $5900 per employee.
Some amount of this new expense will be shifted onto customers. How much depends on consumer demand and industry competitiveness. Moreover, companies will lose revenue as higher prices reduce sales.
Firms also will more aggressively shift costs onto employees. Between 1999 and 2013 the cost of employer-provided health insurance trebled, causing business to look for ways to cut corporate outlays. That effort will continue.
The third consequence of the ACA’s cost increases is to raise the price of hiring workers, which will reduce the number of jobs. The principle is simple: the more expensive government makes it for companies to add workers, the fewer workers companies will add.
Unfortunately, the administration is hiking business costs in more areas than just health care. Last year the Heritage Foundation’s James Gattuso and Diane Katz estimated that annual regulatory costs jumped roughly $70 billion during President Obama’s first term.
Explained Gattuso and Katz: “While historical records are incomplete, that magnitude of regulation is likely unmatched by any administration in the nation’s history.” In its fourth year alone the administration issued 2605 new rules, with annual regulatory costs jumping more than $23.5 billion. On top of that was another $4.6 billion in one-time implementation costs.
Unfortunately, there are thousands more proposed rules in the federal pipeline. Obviously, regulations have benefits as well as costs. However, public choice economics warns of perverse public incentives, with government agencies acting to advance their own interests—in particular, their influence, workforce, and budget—even if contrary to the public interest.
At a time of slow economic growth and high unemployment, the most painful consequence of hyper-regulation may be lost jobs. ObamaCare has a particularly pernicious impact because it directly raises the costs of hiring additional workers. And the president wants to inflate that burden still further by, for instance, raising the minimum wage and expanding regulations covering overtime pay.
The Affordable Care Act is many things, but it certainly is not affordable. “Vote for ObamaCare so people can find out what is in it,” declared then-House Speaker Nancy Pelosi. Now we know and most people are appalled at what they discovered. Higher costs, fewer choices, and lost jobs. Heckuva job, Barack!
Yonah Freemark, a writer over at Atlantic Cities–which normally loves any transit boondoggle–somewhat sheepishly admits that light rail hasn’t lived up to all of its expectations. Despite its popularity among transit agencies seeking federal grants, light rail “neither rescued the center cities of their respective regions nor resulted in higher transit use.”
Not to worry, however; Atlantic Cities still hates automobiles, or at least individually owned automobiles. Another article by writer Robin Chase suggests that driverless cars will create a “world of hell” if people are allowed to own their own cars. Instead, driverless cars should be welcomed only if they are collectively owned and shared.
The hell that would result from individually owned driverless cars would happen because people would soon discover they could send their cars places without anyone in them. As Chase says, “If single-occupancy vehicles are the bane of our congested highways and cities right now, imagine the congestion when we pour in unfettered zero-occupancy vehicles.” Never mind the fact that driverless cars will greatly reduce congestion by tripling roadway capacities and avoid congestion by consulting on-line congestion reports.
Chase’s motives are obvious: as the co-founder of several carsharing programs, including ZipCar and BuzzCar, she stands to make enormous profits if everyone adopts her model. Just why Atlantic Cities buys into her vision is less clear, but the love Atlantic Cities writers seem to have for transit and car sharing suggests a collectivist mentality, while the hatred they have for individually owned cars implies a dislike of giving other people freedom.
Of course, Chase has an explanation for why single- or zero-occupant vehicles are to be abhorred. “People consider the cost of individual car trips to be just the cost of gas,” she says, “and we won’t think twice about asking a driverless robot car to do our bidding.” In other words, people are too stupid to own their own cars; it would be much better to have a sharing system that forces people to see the “full cost” of driving (including profit for the owners of ZipCar).
Personally, I happily imagine sending my dog to a vet without me accompanying it. Even more likely, I look forward to sending my car in for servicing or to take an appliance to a shop for repair without wasting my time. People could be more productive if they didn’t have to be stuck behind the wheel of a car all the time, and everyone would be better off. But to Chase, such people would somehow pose a burden on everyone else.
Her solutions are, first, to make sure that “the cost for autonomous vehicles be high enough that each vehicle will need to be used well.” In other words, keep them out of the hands of ordinary people who might “misuse” them.
Second, she wants highway agencies to charge an extra per-mile fee to people whose cars run around without an occupant. Why? Zero-occupant cars impose no more costs on society than multi-occupant cars. The people who own the cars should get to decide when and where they go and how many people they will carry, not some central planner who hates cars and the freedom they offer.
There’s nothing wrong with car sharing if people want to do it, but it shouldn’t be imposed on people. The great thing about mass-produced automobiles is that nearly every household in American can afford one. Collectivists would send us back to the nineteenth-century two-class society in which a few wealthy people have freedom and mobility and everyone else is dependent on some collective form of transport–then they’ll demonize the people with freedom. That’s the wrong way for America to go.
The Dodd-Frank requirement that over-the-counter derivatives be centrally cleared is one of the (slightly) less controversial provisions of the Act, at least in spirit if perhaps not always in substance. But for a time, a few observers have worried - myself included - that concentrating derivatives clearing activities in one or two single-purpose entities may increase, rather than reduce, the risk to the broader economy posed by the default of a counterparty.
As it turns out, we skeptics are not alone. In yesterday’s Wall Street Journal, the good folks at BlackRock are cited as having raised concerns in a recent study about the lack of clarity regarding where the risk ultimately falls in the event of default by a large counterparty. Banks and investors want the clearinghouses themselves to backstop some of this risk. The BlackRock study notes that “post-crisis rules have forced a large swath of risky trades… and this risk needs to be addressed.”
It is perhaps, therefore, a good time to hark back to Craig Pirrong’s Cato Policy Analysis from 2010, released on the day the Act was signed into law. In it, Mr. Pirrong argues that central clearing leads to better and more efficient risk pricing ONLY if the clearinghouse has perfect information. He notes the risk sharing that occurs through the clearinghouse mechanism encourages excessive risk taking, which creates moral hazard. Pirrong also highlights that “if the clearinghouse has imprecise information, the margin levels it chooses will sometimes overly constrain the trading of its members and sometimes constrain them too little…all of these factors mean that it is costly for the clearinghouse to control moral hazard.” As Pirrong notes, a clearing mandate reduces market efficiency and poses “its own systemic risks in a world where information is costly.”
One of the major criticisms of the previous or “bilateral” approach to derivatives clearing was that banks and investors could not adequately monitor their own risk exposure to counterparties (with some side complaints about banks mispricing risk etc.). However, as the BlackRock study notes, it is not clear that the central clearing approach addresses this concern, especially since the rules governing outcomes in the event of a major default have yet to be finalized. In particular, if a major counterparty defaults and the clearinghouse is not holding sufficient collateral to cover that counterparty’s trades, who loses out? Is it the members? The Federal Reserve? (Remember, one of the Board’s first actions under Dodd-Frank was to allow clearinghouses to borrow at the discount window in the same way that commercial banks do). Will the clearinghouse perhaps declare bankruptcy (and, if so, what impact will the failure of a major utility have on operational stability)?
More importantly, just when counterparties have realized these products must be treated with caution, the system is incentivizing the market participants with the best information (the members) to pool and therefore increase the riskiness of their activities. Derivatives are an important economic tool and vital to most companies’ (financial or otherwise) risk management. But we should not assume that the framework created by Dodd-Frank will eliminate risk in the derivatives trade, real or perceived.
From the Washington Post:
For the parents of children with intractable epilepsy, the stream of constant seizures, emergency-room visits and powerful medications can become a demoralizing blur. Beth Collins of Fairfax County said her teenage daughter suffered as many as 300 epileptic seizures per day.
“There were days when I just laid in bed with her and prayed,” Collins said, “and watched her because I wasn’t sure what would happen.”
Now, the seizures have all but stopped. Each day, Collins gives her daughter Jennifer a dose of medical marijuana oil from a syringe, as any parent might administer liquid medicine to a child.
But Collins can’t offer the cannabis extract from her kitchen in Fairfax, where she raised Jennifer for 14 years. Instead, she does so in a small two-bedroom apartment in Colorado Springs….
“I feel a lot better,” Jennifer said of the treatment, which is scientifically untested. “I can focus more, I’m doing better on tests in school. My memory’s improved a lot.” Her seizures are “not completely gone,” but her mother said that “we’ve had days where I’ve seen very few, maybe one or two. That’s a major decrease.”
Another Virginia parent, Dara Lightle, says her daughter started having seizures at age 6. Nothing seemed to work. When doctors suggested removing part of her brain, Ms. Lightle put aside her earlier reservations about marijuana, and moved to Colorado. Daughter is doing much better. Instead of five seizures a day, she has had three seizures over the past 13 weeks.
Colorado and 19 other states have an medical exception to their laws banning marijuana. There is no exception in the federal law. To repeat, in the eyes of federal law, anyone who possesses marijuana is guilty of a crime. One more snippet from the Post:
Officials with the FDA, the Drug Enforcement Administration, the National Institute on Drug Abuse, and the Office of National Drug Control Policy all declined to discuss the government’s position on marijuana oil or relaxing restrictions on marijuana for research purposes.
Last week, former Justice John Paul Stevens penned an op-ed for the Washington Post on “The Five Words that Can Fix the Second Amendment.” The piece is actually an excerpt from his new book Six Amendments: How and Why We Should Change the Constitution. In the book, Stevens suggests some changes that would ratify his view of cases in which he stridently dissented, such as Citizens United and Heller.
Stevens’s dissent in Heller, the case in which a 5-4 Court held that the Second Amendment conveys an individual right to own guns even for those not part of a militia, is largely re-hashed in his Washington Post op-ed. In addition, there is, or was, a glaring error that the Post has since corrected sub rosa, that is, without acknowledging at the bottom that the piece was edited. As Josh Blackman originally reported, and thankfully preserved by excerpting, the first version contained this error:
Following the massacre of grammar-school children in Newtown, Conn., in December 2012, high-powered automatic weapons have been used to kill innocent victims in more senseless public incidents.
As Josh and others noted, not only were automatic weapons were not used at any recent high-profile mass shooting, they’ve been essentially illegal in the U.S. since 1934 and since 1986 they’ve been almost impossible to come by. Justice Stevens also repeated his error a few paragraphs down:
Thus, even as generously construed in Heller, the Second Amendment provides no obstacle to regulations prohibiting the ownership or use of the sorts of automatic weapons used in the tragic multiple killings in Virginia, Colorado and Arizona in recent years.
When you view the piece now, however, the words have magically disappeared. But they have not, apparently, disappeared from Justice Stevens’s book, which went to press with those errors. I don’t have a copy, but I checked by searching the inside of the book on Amazon for the word “automatic.”
Why is this omission important? Well, for one it is part of a long series of mistaken statements by many gun-controllers, including President Obama, who made a similar statement in a speech last spring. More generally, the gun control crowd often shows a pronounced ignorance of how guns work and which guns are actually illegal, which certainly doesn’t help when they try to make their case for more strict controls. For just two famous examples, Rep. Carolyn McCarthy (D-NY) once described a barrel shroud as the “shoulder thing that goes up” (it’s not), and Rep. Diana Degette (D-CO) once remarked that after high-capacity magazines are emptied they would not be reusable (they are).
It seems reasonable to conclude that, based on the prevalence of these errors by people who should know better, they don’t care too much whether their statements are accurate. To them, the fact that someone used a weapon to commit a mass shooting is enough to ban that weapon. Unfortunately for them, there is nothing about the weapons used in those atrocious crimes that meaningfully distinguishes them from weapons used every day by responsible, law-abiding Americans. The AR-15, for example, used by the shooter at Newtown, is the most popular rifle in the U.S. Ninety-nine point nine percent of the time it is used responsibly, including for self-defense. Ipso facto, it is not just for “spraying death.”
A better argument can be made that actual automatic machine guns “spray death.” And if those are what Justice Stevens believes were used at Newtown, then that seems relevant to his position on guns. I imagine, however, that his views wouldn’t change if he understood the truth. At the very least, however, the Washington Post should make clear that the piece was edited.
The Government Accountability Office’s annual duplication report is out. This year, the report highlights 30 ways that the federal government can save money. One way is to terminate the Advanced Technology Vehicles Manufacturing (ATVM) program, which provides government-subsidized loans to companies that make fuel-efficient cars. The program has been a failure, and it has cost taxpayers millions of dollars.
Established by the Energy Independence and Security Act of 2007, ATVM was authorized to provide a total of $25 billion in loans for projects that “support the production of fuel-efficient, advanced technology vehicles and components in the United States.” Companies that participated in the program could borrow funds directly from the government with very little out-of-pocket expenses—participants only had to pay some upfront borrowing costs. But Congress made the program even more lucrative in 2009 by provided $7.5 billion to help offset those borrowing costs.
The Department of Energy (DOE) has issued five ATVM loans totaling $8.4 billion so far—with an additional $3.3 billion in borrowing costs. In its promotional material for the program, DOE highlights three of the recipients: Ford Motor Company, Nissan North America, and Tesla Motors.
However, these DOE materials don’t mention loans to two other companies, Fisker Automotive and Vehicle Production Group (VPG). I think I know why: taxpayers lost almost $200 million on those two loans.
Fisker Automotive borrowed $529 million from the federal government to produce its luxury car, Karma. The loan was touted by the administration, including by Vice President Biden. Biden said “the story of Fisker is a story of ingenuity of an American company, a commitment to innovation by the U.S. government and the perseverance of the American auto industry.”
The car was a flop from the beginning. It was recalled, and it received poor performance ratings. Fisker lost an estimated $35,000 on each vehicle sold. A year after issuing the loan, DOE halted Fisker’s borrowing authority after the company had already borrowed $192 million. Fisker filed for bankruptcy shortly thereafter. Only $50 million of the $192 million has been recovered for taxpayers.
Vehicle Production Group had financial and production problems as well. In addition, its loan was questioned due to the political connection between its adviser and the White House. The adviser was a fundraiser for the White House and “headed Obama’s vice presidential selection committee in 2008.” The company quietly folded costing taxpayers the full $50 million loan.
The taxpayer losses from Fisker and VPG were in addition to the losses from other federal energy loans to companies such as Solyndra and Abound Solar. After all the bad press from these failed energy subsidies, demand for the loans dried up. According to a March 2013 report from GAO, DOE was no longer considering applications for the remaining $16.6 billion in loan authority and $4.2 billion in borrowing cost subsidies. Auto companies told GAO that the “costs of participating outweigh the benefits.”
However, Congress still has not rescinded ATVM’s loan authority. DOE could start reissuing loans under the failed program at any point, and it is re-launching its promotional efforts. Closing the program would not only save taxpayers money, it would reduce government interventions in the energy and automobile markets. For reformers in Congress, this change should be a no-brainer.
Political scientist Matt Grossmann discussed the results of his research on federal government growth in the Washington Post last week.
I combed through hundreds of history books covering American public policy since 1945, tracking the most significant domestic policy changes that made it into law and the actors that historians credit for those changes. Of the 509 most significant domestic policies passed by Congress, only one in five were conservative, in that they contracted the scope of government funding, regulation or responsibility. More than 60 percent were liberal: They clearly expanded government. The others offered a mix of liberal or conservative components or took no clear ideological direction.
Grossman mentioned one of the structural reasons why this has happened:
Liberal policies are self-reinforcing because they create beneficiaries who act as constituencies for their continuation and expansion. Policy debates center on what additional actions government should take, not whether to discontinue existing roles.
Grossman is essentially saying that not only has the size of the federal government expanded, but so has the scope. The problem is not just that programs such as Medicare keep growing, but also that Congress keeps adding new programs.
The following chart shows an official count of the number of federal benefit, subsidy, and aid programs—Medicare, farm subsidies, food stamps, and more than 2,000 others. The source is the CFDA website for recent years and hard copy CFDA catalogs for the older years.
There are many problems with The Washington Post’s recent article, “More College Students Battle Hunger as Education and Living Costs Rise.” Instead of discussing each problem—such as the claim that a college education is necessary for a good career—I’ll stick to research on quality of life.
When it comes to the claim that college students are going hungry, the article appears to be misleading sensationalism. The article argues that American college students are increasingly “food insecure” (i.e., they go hungry or lack access to nutritional food). This is supposedly a problem in part because students increasingly focus on obtaining food rather than studying.
In reality, Americans have never been more food secure. Over time, agricultural productivity has risen as food prices have dropped. (See Figure 1, below.) As incomes have increase, Americans use less of their total budget to purchase food (Figure 2). Today, calorie consumption in the United States is well above the recommended amount, even as we eat healthier foods more frequently (Figure 3).
While the figures deal with the population as a whole and do not isolate students as a group, neither does the article itself. The author only offers evidence that could imply students are hungrier than the rest of the population. In fact, the data on student hunger do not exist, which the author admits.
Of course, some college students aren’t eating a proper diet or are not eating enough. But I suspect that in a vast majority of cases, it’s not because they lack access to food or to nutritional food. Even the food budget examples that the author offers as insufficient for college students—$100 per month, $50 per week, or $10 per day—can purchase a filling and nutritional diet. Some healthy foods—black beans, oatmeal, bananas—are also some of the cheapest. And as someone who volunteers to feed the homeless with a private organization, I know there are plenty of charities that provide free food for the truly needy.
Perhaps universities should take this “news story” as a signal to offer courses that teach skills valuable in the real world, like budgeting. Instead of suggesting as much, the author mentions students’ inability to access food stamps, thus implying that yet another expansion of government could fix the problem. Ironically, the author also acknowledges that many private organizations already offer students free food, but claims that students are too proud to accept it. The author fails to take this opportunity to admit that much of the problem lies in poor budgeting and failure to take advantage of social structures, such as family and private charities, not lack of access to food. Then again, a news story about college students acting as college students tend to act—not sticking to a budget, eating unhealthily, being too proud to ask for help—would not sell many papers.
If you’d like an accurate take on food access and many other quality of life indicators, visit Cato’s new site, HumanProgress.org.
Why Did Western Nations Continue to Prosper in the 20th Century even though Fiscal Burdens Increased?
Daniel J. Mitchell
In the pre-World War I era, the fiscal burden of government was very modest in North America and Western Europe. Total government spending consumed only about 10 percent of economic output, most nations were free from the plague of the income tax, and the value-added tax hadn’t even been invented.
Today, by contrast, every major nation has an onerous income tax and the VAT is ubiquitous. Those punitive tax systems exist largely because—on average—the burden of government spending now consumes more than 40 percent of GDP.
To be blunt, fiscal policy has moved dramatically in the wrong direction over the past 100-plus years. And thanks to demographic change and poorly designed entitlement programs, things are going to get much worse, according to Bank of International Settlements, Organization for Economic Cooperation and Development, and International Monetary Fund projections.
While those numbers, both past and future, are a bit depressing, they also present a challenge to advocates of small government. If taxes and spending are bad for growth, why did the United States (and other nations in the Western world) enjoy considerable prosperity all through the 20th century? I sometimes get asked that question after speeches or panel discussions on fiscal policy. In some cases, the person making the inquiry is genuinely curious. In other cases, it’s a leftist asking a “gotcha” question.
I’ve generally had two responses.
1. The private economy can withstand a lot of bad policy, but there is a tipping point at which big government leads to massive societal damage. Or, to cite a specific example, the European fiscal crisis shows that the chickens have finally come home to roost.
2. Bad fiscal policy has been offset by good reforms in other areas. I explain that there are five major policy factors that determine economic performance and I assert that bad developments in fiscal policy have been offset by improvements in trade policy, regulatory policy, monetary policy, and rule of law/property rights.
I think the first response is reasonably effective. It’s hard for statists to deny that big government has created a fiscal and economic nightmare in many European nations.
But I’ve never been satisfied with the second response because I haven’t had the necessary data to prove my assertion.
However, thanks to Professor Leandro Prados de la Escosura in Madrid, that’s no longer the case. He’s put together some fascinating data measuring economic freedom in North America and Western Europe from 1850 to the present. Since he doesn’t include fiscal policy, we can see the degree to which there have been improvements in other areas that might offset the rising burden of taxes and spending.
Below is one of his charts, which shows the growth of economic freedom over time. For obvious reasons, he doesn’t include the periods surrounding World War I and World War II, but those gaps don’t make much of a difference. You can clearly see that nonfiscal economic freedom has improved significantly over the past 150-plus years. Most of the improvement took place in two stages, before 1910 and after 1980.
It’s worth noting that things got much worse during the 1930s, so it appears the developed world suffered from the same bad policies that Hoover and FDR were imposing in the United States.
Below is another chart, which highlights various periods and shows which policies were moving in the right direction or wrong direction. As you can see, the West enjoyed the biggest improvements between 1850 and 1880, and after 1980 (let’s give thanks to Reagan and Thatcher).
There also were modest improvements in 1880-1910 and 1950-1960. But there was a big drop in freedom between the World War I and World War II, and you can see policy stagnation in the 1960s and 1970s.
By the way, I wonder what we would see if we had data from 2007-2014. Based on the statist policies of Bush and Obama, as well as bad policy in other major nations such as France and Japan, it’s quite likely that the line would be heading in the wrong direction. But I’m digressing. Let’s get back to the main topic.
The moral of the story is that we’ve been lucky. Bad fiscal policy has been offset by better policy in other areas. We’re suffering from bigger government, but at least we’ve moved in the direction of free markets. That said, we may now be in an era when bad fiscal policy augments bad policy in other areas.
For further information, this video explains the components of economic success:Free Markets and Small Government Produce Prosperity
The New York Times has produced a useful video about the “super-predator” scare from the 1990s. At that time, we were already waging a drug war, so we were advised to build more prisons–and so we did. Then regrets.
You can watch the video here.
As it happens, we are also finding more scrutiny of neoconservative ideas at the movies. A new documentary film directed by Errol Morris looks at former Secretary of Defense, Donald Rumsfeld and the Iraq war. Here is the film trailer:
The Unknown Known Official Trailer #1 (2014) - Donald Rumsfeld Documentary HD
Ted Galen Carpenter
One of the more notable results of Russia’s invasion and annexation of Crimea is how unenthusiastic the Chinese government has been about that development. In a piece at China-U.S. Focus, I describe Beijing’s reaction as one of “nervous ambivalence.”
Moscow’s policy regarding Crimea sets extremely dangerous precedents from China’s standpoint. Amputating the province of a neighboring state through military occupation and a subsequent referendum to give the “secession” a façade of legitimacy, triggered multiple alarm bells in Beijing. Russia’s Crimea annexation violated China’s repeatedly stated position emphasizing respect for the territorial integrity of all states as a key principle of international behavior. Beijing’s emphasis on that principle is hardly surprising, given its own territorial issues involving Tibet, Xinjiang, and Taiwan. The last thing Chinese leaders want to encourage is a precedent whereby one or more of those entities might seek secession with the assistance of a hostile foreign power or combination of powers.
Unfortunately, U.S. officials are apparently oblivious to opportunities to exploit China’s nervousness. Instead, Washington seems determined to adopt measures that are likely to push Beijing and Moscow together. Obama administration officials have thrown diplomatic temper tantrums because Beijing has joined Moscow in resisting U.S.-led efforts to unseat Syrian leader Bashar al-Assad and impose increasingly harsh economic sanctions on Iran. On one occasion, Susan Rice denounced Chinese and Russian vetoes of a UN resolution on Syria, proclaiming that her country was “disgusted.” She added that those actions were “shameful” and “unforgivable.”
Washington’s position regarding China’s territorial disputes with neighboring states in both the South China and East China seas has been even clumsier and more provocative. The Obama administration has exhibited none-too-subtle, backing of Japan, the Philippines, Vietnam, and other rival claimants. Beyond such specific issues, China shares Russia’s growing worries about Washington’s dominant position in international affairs. Beijing is concerned that the United States and its allies are using their military and economic advantages to encroach upon important interests of China and other major powers in the international system. Secretary of Defense Chuck Hagel’s visit to China has not improved matters. A series of testy exchanges culminated with a pointed warning from Defense Minister Chang Wanquan that efforts to “contain” China will never succeed.
Henry Kissinger once observed that it should be a crucial objective of U.S. foreign policy to make sure that Washington’s relations with Beijing and Moscow are always closer than their relations with each other. U.S. officials are violating that wise approach. It is a dubious strategy to pressure either China or Russia over matters that are not vital to U.S. interests. Both Crimea and the East Asian islands disputes fit that description.
But as unwise as it would be to antagonize either power over such stakes, it would be utter folly to antagonize both of them simultaneously. Yet Washington is now in serious danger of making that blunder. At a minimum, U.S. officials need to carefully think through their priorities and not push China and Russia together into an anti-U.S. alliance.
As my colleague Ilya Shapiro noted last fall in this space, the Cato Institute joined an amicus brief before the Sixth Circuit U.S. Court of Appeals in a case called EEOC v. Kaplan Higher Education. As Ilya summed up the underlying situation:
Following several incidents of employee theft, Kaplan University did what any reasonable employer might do in similar circumstances: it instituted heightened screening procedures for new hires. This process included credit checks to filter out potential employees at greater risk of committing theft. These checks made no mention of any applicant’s race and Kaplan didn’t collect any race information from applicants, thus making the hiring process both race-neutral and race-ignorant. Nevertheless, the Equal Employment Opportunity Commission, which itself uses credit checks in hiring decisions, sued Kaplan under Title VII of the Civil Rights Act, claiming that the use of credit checks has an unlawfully disparate impact on African American applicants.
Because Kaplan doesn’t keep racial data for applicants, the EEOC had to come up with its own data to prove its case. The agency thus created a team of “race raters,” a group of seemingly random people who sorted Kaplan’s job applicants into racial categories based only on the applicant’s name and DMV photo. (You can’t make this stuff up!) Because of the unscientific and unreliable nature of this data, the EEOC was soundly rebuffed in the federal district court in Ohio where it brought its case.
Yesterday, in a slapdown that’s already the talk of the legal community, the Sixth Circuit panel rebuffed the federal agency and roundly backed Cato’s view of the case. The ruling is short and sweet – go read it here – but here are a few prime tidbits for those in a hurry:
In this case the EEOC sued the defendants for using the same type of background check that the EEOC itself uses. …
The district court considered every one of the Daubert factors [on expert witness admissibility] — and found that [EEOC expert Kevin] Murphy’s methodology flunked them all. …
The EEOC’s case goes downhill from there. …
We need not belabor the issue further. The EEOC brought this case on the basis of a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.
The outcome is a triumph for Seyfarth Shaw attorney Gerald L. Maatman, Jr. a dean of the employment bar, and all the more impressive because one of the three judges on the opinion is liberal lion Damon Keith, about as sympathetic a judicial ear as the EEOC could normally hope for. It’s a sharp setback for the agency’s dubious “disparate impact” campaign against employer use of credit and criminal records in hiring. And it’s also part of a pattern of rebuffs and defeats the EEOC has been dealt by judges across the country since President Obama turned the agency on a sharp leftward course with his appointments. We’ll have more to say about that pattern in future commentaries.
Former Florida Governor Jeb Bush is considering running for president. One good thing about presidential contenders who have been governors is that they have a measurable track record.
Part of that record is captured by Cato’s biennial “Fiscal Policy Report Card on America’s Governors.” This report issues grades of “A” to “F” to governors based on their taxing and spending policies. Here at Cato we believe in small government, so we award grades of “A” to the governors who cut taxes and spending the most.
Steve Moore and other Cato authors graded Bush four times during his eight years in office. In 2000 Bush received a “B.” In 2002 he scored an “A.” In 2004 he was down to a “B” again. In 2006 he fell to a “C.”
The basic story from the Cato reports is that Jeb Bush was a prolific tax cutter, but he let spending rise quickly toward the end of his tenure. Like George W. Bush, Jeb was good on taxes, but apparently not so good on spending.
Jeb Bush was in office from 1999 to 2007. Florida general fund spending increased from $18.0 billion to $28.2 billion during those eight years, or 57 percent. Total state spending increased from $45.6 billion to $66.1 billion, or 45 percent. (This is NASBO data from here and here). Over those eight years, Florida’s population grew 16 percent and the CPI, which measures inflation, grew 24 percent.
The chart on page 5 of this state budget document shows that total spending was restrained in Bush’s first term, but then rose quite rapidly in his second term. Similarly, the table on page 14 here shows the second-term budget expansion under Bush.
Over at Cato’s Police Misconduct web site, we have identified the worst case for the month of March. It was the case of the soon-to-be-former Philadelphia police officer, Kevin Corcoran. Mr. Corcoran was driving the wrong way down a one-way street near a group of individuals when one of them pointed out that the officer had made an illegal turn. The officer got out and aggressively approached the individuals, who readied their cell phone cameras to capture the incident. The footage (warning: graphic language) shows Corcoran accosting one of the persons filming, an Iraq war veteran, and shouting “Don’t fucking touch me!” before slapping the vet’s phone out of his hand, throwing him up against his police vehicle, arresting him, and driving off. Another of the cameras showed the vet with his hands up in a defensive posture, retreating from the officer. When the vet asked why he had been arrested, Corcoran said it was for public intoxication. Corcoran later cooled-off and, after finding out the individual was a veteran, let him go without charges.
Civil suits over Corcoran’s abuse of authority have been settled out of court in the past, but thanks to the quick cameras of the individuals he encountered here, Corcoran faces charges of false imprisonment, obstructing the administration of law, and official oppression—along with a suspension with intent to dismiss. This incident shows the importance of the right to film police behavior.
Readers help us to track police misconduct stories from around the country–so if you see an item in the news from your community, please take a moment and send it our way using this form.
Patrick J. Michaels and Paul C. "Chip" Knappenberger
Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”
As we mentioned in our last post, the federal Office of Management and Budget (OMB) is in the process of reviewing how the Obama administration calculates and uses the social cost of carbon (SCC). The SCC is a loosey-goosey computer model result that attempts to determine the present value of future damages that result from climate change caused by pernicious economic activity. Basically, it can be gamed to give any result you want.
We have filed a series of comments with the OMB outlining what is wrong with the current federal determination of the SCC used as the excuse for more carbon dioxide restrictions. There is so much wrong with the feds’ SCC, that we concluded that rather than just update it, the OMB ought to just chuck the whole concept of the social cost of carbon out the window and quickly close and lock it.
We have discussed many of the problems with the SCC before, and in our last post we described how the feds have turned the idea of a “social cost” on its head. In this installment, we describe a particularly egregious fault that exists in at least one of the prominent models used by the federal government to determine the SCC: The projections of future sea-level rise (a leading driver of future climate change-related damages) from the model are much higher than even the worst-case mainstream scientific thinking on the matter. This necessarily results in an SCC determination that is higher than the best science could possibly allow.
The text below, describing our finding, is adapted from our most recent set of comments to the OMB.
The Dynamic Integrated Climate-Economy (DICE) model, developed by Yale economist William Nordhaus (2010a), is what is termed an “integrated assessment model” or, IAM. An IAM is computer model which combines economics, climate change and feedbacks between the two to project how future societies are impacted by projected climate change and ultimately to determine the social cost of carbon (i.e., how much future damage, in today’s monetary terms, occurs for each unit emission of carbon (dioxide)).
In examining the climate change output from the DICE model, we found that it projects a degree of future sea level rise that far exceeds mainstream projections and are unsupported by the best available science. The sea level rise projections from more than half of the future scenarios examined exceed even the highest end of the projected sea level rise by the year 2300 as reported in the Fifth Assessment Report (AR5) of the UN’s Intergovernmental Panel on Climate Change (see Figure 1).
Figure 1. Projections of sea level rise from the DICE model (the arithmetic average of the 10,000 Monte Carlo runs from each scenario) for the five scenarios examined by the federal interagency working group (colored lines) compared with the range of sea level rise projections for the year 2300 given in the IPCC AR5 (represented by the vertical blue bar). (DICE data provided by Kevin Dayaratna and David Kreutzer of the Heritage Foundation)
Interestingly, Nordhaus (2010b) recognizes that the DICE sea level rise projections are outside the mainstream climate view as expressed by the IPCC:
“The RICE [DICE] model projection is in the middle of the pack of alternative specifications of the different Rahmstorf specifications. Table 1 shows the RICE, base Rahmstorf, and average Rahmstorf. Note that in all cases, these are significantly above the IPCC projections in AR4.” [emphasis added]
The justification given for the high sea-level rise projections in the DICE model (Nordhaus, 2010) is that they well-match the results of a “semi-empirical” methodology employed by Rahmstorf (2007) and Vermeer and Rahmstorf (2009).
However, as we have pointed out, recent science has proven the “semi-empirical” approach to projecting future sea level rise unreliable. For example, Gregory et al. (2012) examined the assumption used in the “semi-empirical” methods and found them to be unsubstantiated. Gregory et al (2012) specifically refer to the results of Rahmstorf (2007) and Vermeer and Rahmstorf (2009):
The implication of our closure of the [global mean sea level rise, GMSLR] budget is that a relationship between global climate change and the rate of GMSLR is weak or absent in the past. The lack of a strong relationship is consistent with the evidence from the tide-gauge datasets, whose authors find acceleration of GMSLR during the 20th century to be either insignificant or small. It also calls into question the basis of the semi-empirical methods for projecting GMSLR, which depend on calibrating a relationship between global climate change or radiative forcing and the rate of GMSLR from observational data (Rahmstorf, 2007; Vermeer and Rahmstorf, 2009; Jevrejeva et al., 2010).
In light of these findings, the justification for the very high sea-level rise projections produced by the DICE model is not acceptable.
Given the strong relationship between sea-level rise and future damage built into the DICE model, there can be no doubt that the SCC estimates from the DICE model are higher than the best science can allow and consequently, should not be accepted by the OMB as a reliable estimate of the social cost of carbon.
We did not investigate the sea-level rise projections from the other two IAMs employed in the federal SCC determination, but such an analysis must be carried out prior to extending any confidence in the values of the SCC resulting from those models—confidence that we demonstrate cannot be assigned to the DICE determinations of the social cost of carbon.
Gregory, J., et al., 2012. Twentieth-century global-mean sea-level rise: is the whole greater than the sum of the parts? Journal of Climate, 26, 4476-4499, doi:10.1175/JCLI-D-12-00319
Nordhaus, W. 2010a. Economic aspects of global warming in a post-Copenhagen environment. Proceedings of the National Academy of Sciences 107(26): 11721-11726.
Nordhaus, W., 2010b. Projections of Sea Level Rise (SLR), http://www.econ.yale.edu/~nordhaus/homepage/documents/SLR_021910.pdf
Here’s a law-school hypothetical for you: Suppose a gang-banger is pulled over for having expired tags on his car. He has no driver’s license, and records show that he has repeatedly driven without a license. The protocol in such situations is to impound the car to prevent him from driving unlicensed again, and the impoundment search reveals that he has guns hidden in the car. He is arrested, patted down, and his possessions seized to secure officer safety during his transportation and booking.
Now suppose that police officers take the gang-banger’s car out of the impound yard and drive it around looking for his confederates and for more evidence against him. Can they use the car for this purpose?
If you’re like most people, you probably think the answer is: “No.” But can you say why?
In two cell-phone-seizure cases headed for Supreme Court argument this month, Ilya Shapiro and I have argued for a sharp delineation of the property right that government agents seize when they arrest a suspect and take control of his things. They may rightly seize possession of an article, but they may not therefore put that item to whatever use they please.
The first paragraph above describes the facts in Riley v. California, on which we briefed the Court last month. Government agents did not use Riley’s car to further investigate him, but they twice used his cell phone to gather more evidence of his wrongful behavior.
Though they had properly seized the physical phone, they did not get a warrant to search the phone’s contents, and we think that violates the Fourth Amendment. Phones today carry huge amounts of information that are equivalent to the papers, postal mail, books, drawings, and portraits of the founding era, which the Fourth Amendment was designed to protect.
The second case we filed in today. It’s called United States v. Wurie, and it’s a similar case, in which arresting officers seized an arrestee’s flip-phone. After it received calls identified on the exterior display screen as coming from “my house,” they opened his phone and looked to see what the number was so they could learn the address and take their investigation there. We argue that they were entitled to observe and take cognizance of the information the phone put in plain view, but having seized the phone didn’t entitle them to use the phone for further investigation without a warrant—even though it seemed to provide easy access to interesting evidence.
They didn’t get a warrant to search at Wurie’s house either. They took his keys, which they had also seized upon his arrest, and used them to open the door to the vestibule of his duplex apartment, then test the lock on a second floor residence. The keys unlocked the door of the first-floor apartment, behind which was a woman and her baby.
Possession of those keys didn’t entitle government agents to go use them on the doors of two houses, even to turn the locks and confirm or deny their suspicions about Wurie’s residency.
The use of the keys is not an issue in the case, but it helps illustrate the difference between possession and use. When an item is taken from an arrestee in the interest of officer safety and preventing destruction of evidence, this does not entitle law enforcement officer’s to use it any way they please. Government agent’s use of Wurie’s cell phone to investigate him was an additional seizure beyond the taking of possession that happened when he was arrested. It should have required a warrant because of the volume of personal and private information—digital papers and effects—that cell phones access and store.
It may be easier to argue that cell phones shouldn’t be searched without a warrant because that violates a “reasonable expectation of privacy”—and it probably does—but that has not proven to be a constitutional test that courts can reliably administer. It is as likely to produce bad results as good ones because it puts judges in the role of making sweeping statements about societal values rather than determining the facts and law in individual cases.
If we can convince the Court to flex some atrophied property muscles and recognize the difference between taking possession of a thing and making use of it, this could be the basis of stronger Fourth Amendment law, in which the courts apply the terms of the law to the facts of cases rather than pronouncing rules based on soaring, untethered doctrine like the “reasonable expectation of privacy” test.
We’re only at hump day but this week has already seen the filing of a new anti-school choice lawsuit, the dismissal of another, the potential resolution of a third, and the adoption of a new school choice program. [UPDATE: Plus the passage of a second school choice program. See below.]
Alabama: Yesterday, a federal judge dismissed the Southern Poverty Law Center’s ridiculous lawsuit against Alabama’s scholarship tax credit program which essentially claimed that the program unconstitutionally violated the Equal Protection clause since it did not solve all the problems facing education in Alabama. The SPLC argued that the law creates two classes of citizens: those who can afford decent schooling and those who cannot. In fact, those classes already exist, but the law moves some students from the latter category into the former, as the judge wisely recognized:
“The requested remedy is arguably mean: Withdraw benefits from those students who can afford to escape non-failing schools. The only remedy requested thus far would leave the plaintiffs in exactly the same situation to which they are currently subject, but with the company of their better-situated classmates. The equal protection requested is, in effect, equally bad treatment,” the judge said.
The scholarship program still faces a lawsuit from Alabama’s teachers union.
Georgia: Anti-school choice activists filed a lawsuit against Georgia’s scholarship tax credit program, alleging that it violates the state constitution’s ban on granting public funds to religious institutions. The lawsuit is longer and more complicated than similar suits in other states, and portions requesting that the government enforce certain accountability measures (e.g. - making sure that only eligible students are receiving scholarships) may actually have merit. However, the central claim that a private individual’s money becomes the government’s even before reaching the tax collector’s hand has been forcefully rejected by the U.S. Supreme Court and other state supreme courts with similar constitutional language.
Kansas: In the best school choice news of the week, as a part of its school finance legislation, Kansas lawmakers included both a scholarship tax credit program for low-income students and a personal-use tax credit. The former would grant corporations tax credits worth 70% of their donations to scholarship organizations that aid students from families earning up to 185% of the federal poverty line. The program is capped at $10 million. The personal-use tax credit grants $1,000 per child in tax credits against the family’s property tax liability up to $2,500 in total for any family without any students attending a government school.
Louisiana: A federal judge has mostly sided with the U.S. Department of Justice in its lawsuit demanding that Louisiana fork over data about students participating in the state’s school voucher program, including their race and the racial breakdown of both the government schools they are leaving and the private schools they want to attend. The DOJ wanted that data so that it can challenge individual vouchers if a student’s departure would leave a district “too white” or “too black” (no word yet on whether the DOJ will challenge families whose decision to move out of the district has the exact same impact). However, the judge required the state to provide the data to the DOJ only 10 days before issuing vouchers rather than 45 days beforehand, as the DOJ had requested. A study sponsored by the state of Louisiana determined that the voucher program has had a positive impact on racial integration.
Lawsuits against scholarship tax credit programs in New Hampshire, North Carolina, and Oklahoma are still pending. Parents for Educational Freedom in North Carolina released the following video announcing their efforts to fight the lawsuit:PEFNC President Darrell Allison on “One of 4500” Campaign
Alaska: Last night, Alaska’s House of Representatives passed a scholarship tax credit program. The bill still has to go to the state senate and the governor.
Andrew J. Coulson
According to Politico,
Innovation has been slow to reach classrooms across America in part because the federal government spends very little to support basic research on education technology, a senior White House official said Tuesday.
Does the presence or absence of federal research spending really determine an industry’s rate of technological progress? Was federal spending a driving force in the leap from cathode ray tubes to flat panel displays? Was it responsible for the birth of the “brick” cell phone of 1984 and its astonishing progress from a pricy dumb radio to an inexpensive supercomputer/GPS device/entertainment center? Is federal research spending the reason desktop laser printers went from a $15,000 (inflation-adjusted) plaything of the rich to a $100 commodity?
No. Not really.
If anything, the rate of technological progress across fields seems negatively correlated with federal spending—and indeed with government spending at all levels. As illustrated in my recent study of State Education Trends, education has suffered a massive productivity collapse over the past 40 years. Perhaps not coincidentally, it is the only field in this country dominated by a government-funded, state-run monopoly.
Steve H. Hanke
President Francois Hollande has put in place a new French government led by Prime Minister Manual Valls. This maneuver has all the hallmarks of shuffling the deck chairs on the Titanic. Yes, one has the chilling feeling that accidents are waiting to happen.
President Hollande’s new lineup is loaded with contradictions. That’s not a good sign.
Just take Prime Minister Valls’ assertion that, when it comes to economics, he is a clone of Bill Clinton. For anyone familiar with the facts, this claim is bizarre, if not delusional.
When it comes to France’s fiscal stance, the Valls’ government is fighting austerity tooth and nail. Indeed, the Socialist government is seeking greater leeway from the European Commission (read: Germany) over targets for reducing France’s stubborn budget deficit. With French government expenditures accounting for a whopping 56.6 percent of GDP, it’s truly astounding that the government is reluctant to engage in a bit of belt tightening.
This brings us back to Valls’ self-promotion – namely, to compare himself to Bill Clinton. For a reality check, a review of the fiscal records of U.S. presidents is most edifying. Let’s take a look at Clinton:
The Clinton presidency was marked by the most dramatic decline in the federal government’s share of the U.S. economy since 1952, Harry Truman’s last full year in office. The Clinton administration reduced the relative size of government by 3.9 percentage points. Since 1952, no other president has even come close. At the end of his second term, President Clinton’s big squeeze left the size of government, as a percent of GDP, at 18.2 percent.
What is noteworthy is that the squeeze was not only in defense spending, but also in non-defense expenditures. Indeed, the non-defense squeeze accounted for 2.2 percentage points of Clinton’s total 3.9 percentage point reduction in the relative size of the federal government. Since 1952, the only other president who has been able to reduce non-defense expenditures was Ronald Reagan.
During his presidency, Clinton squeezed and squeezed hard, and his rhetoric matched his actions. Recall that in his 1996 State of the Union address, he declared that “the era of big government is over.”
When it comes to fiscal rhetoric and record, it’s hard to imagine that Manuel Valls – even in his wildest dreams – will be able to match Bill Clinton, the king of the fiscal squeeze.