Cato Op-Eds

Subscribe to Cato Op-Eds feed
Individual Liberty, Free Markets, and Peace
Updated: 1 hour 5 min ago

Inflation and Injustice

Tue, 12/31/2013 - 13:35

Jim Harper

More than a few places in this world people are trying to better themselves by saving money. Many people without access to formal financial services (or awareness of their benefits) are trying to amass capital by squirreling away cash. If wariness and luck prevent that money from being stolen, their nest-eggs might provide life-saving health care, seed capital for businesses, the means to move, education for children, and numerous other enhancements to poor people’s well-being. I say good for them. But there are people out there who don’t care if government policy stands in the way.

Unknown to many cash-hoarders—unsophisticated investors who should have our sympathy—official government policy in many countries is to inflate the currency. Under stable conditions, such policies might reduce the value of the existing stock of money at a rate of about 2% per year.

That is a boon to governments, of course, which are typically debtors. The policy quietly reduces real government debt by 2% annually without need of raising official taxes. And whether they spend the money themselves or infuse their banking sectors with liquidity, governments use monetary policy to curry favor with important political constituencies, thus solidifying power.

Inflation is a mixed bag for the business sector. In some ways, it can make planning more difficult—the government’s willingness and ability to maintain inflation at a constant rate is often in doubt. But inflation can also help the business sector by spurring exports. (Nevermind that it raises the cost of imports. Those costs are mostly paid in small increments by the great mass of politically disorganized consumers.)

Inflation does a wonderful favor for business owners by awarding them the gains from increased productivity at the expense of workers. As George Selgin articulated in the pages of Cato Policy Report fifteen years ago, when the costs of inputs fall, competition should ordinarily cause prices to drop. This “good” deflation would cause a worker making the same wage year over year to enjoy increased purchasing power and a better life. But inflation deals workers whose wages remain constant a continuing real pay cut. That means employers don’t have to reduce the pay of stagnant workers in a deflationary environment. Workers have to get a raise from employers to keep up or get ahead.

All of us wealthy and well-educated—we, the “upwardly mobile”—seek and get raises or change jobs often enough to keep our salaries ahead of inflation. And we know enough to invest our savings in assets that will maintain value or increase in value relative to inflationary cash.

But not everyone is in a position to do this. Whether it’s lack of knowledge or lack of access, a person starting out to accumulate wealth by saving money will climb a slope made slippery by inflation. A person who saves $10 cash per month for 10 years at 2% inflation will lose more than $110 dollars-worth of value—nearly a year’s worth of savings—over that decade. That’s when inflation is steady and low.

More than once, I’ve come across commentators who are so interested in inflation as an economic matter that the existence of people seems to have come out of the equation. There are people in the world who are trying to better themselves in the best way they know how. Inflation is making that harder for them, and that’s wrong.

If government policy were to send armed personnel into the homes of the less-well-off to seize 2% of their wealth every year, or 10% every ten years, I have little doubt that our smart, thoughtful, and considerate commentator class would object to the rank unfairness of such a policy. But their green eyeshades seem to blind them to the fact that inflation is unjust.

There are parries to this argument. Inflation is not the greatest concern of many of the world’s poorest. That’s true, but nothing about that denies the injustice of taking wealth from poor people. A more subtle argument is that there is no guarantee that money will hold value. That’s also true, but when a government says things like “full faith and credit” about the money it is debasing, we are in the realm of fraud. We could at least let our sympathies lie with the poor and under-educated people who think they can store value by holding governments’ fiercely defended “legal tender.”

Categories: Policy Institutes

Libertarian Views in the Republican Party: An Outlier

Tue, 12/31/2013 - 12:07

David Kirby

Last week, Ross Tilchin at Brookings asked whether a stronger appeal to libertarian voters could help Republicans win elections. He was skeptical:

First, according to the [Public Religion Research Institute] PRRI poll, libertarians represent only 12% of the Republican Party. This number is consistent with the findings of other studies by the Pew Research Center and the American National Election Study. This libertarian constituency is dwarfed by other key Republican groups, including white evangelicals (37%) and those who identify with the Tea Party (20%).

Tilchin’s use of the phrase “consistent with” to describe the findings of other studies is, well, interesting. In fact, other studies have found almost three times more libertarians in the Republican Party than PRRI’s poll.

As I blogged at Cato and found in a study for FreedomWorks, libertarian views in the Republican Party are the highest level in a decade. According to my analysis of American National Election Studies data, libertarians represent 35 percent of the Republican Party, an increase of 9 percentage points since 2000. Gallup’s own studies confirm this trend: libertarian views represent 34 percent of the Republican Party, a 19 percentage point increase since 2002. See chart below.

How exactly are 35 percent and 34 percent “consistent with” 12 percent? A better word to describe PRRI’s finding would be “outlier.”

As Karlyn Bowman pointed out at Brookings’ own forum on the subject, PRRI’s finding that libertarians are 7 percent of Americans is at the very low end of other estimates of libertarian voters. In 2011, Pew’s Typology Survey found 9 percent libertarians. In 2012, Gallup’s Governance Survey found 25 percent libertarians. Emily Ekins averaged seven Reason-Rupe polls from 2011 to 2012 and found libertarians represented 24 percent of Americans.

David Boaz and I, in our original study on the “Libertarian Vote,” took a conservative middle ground, estimating that libertarians were 15 percent of voters in 2004. Of course, even a conservative 15 percent is twice as many libertarians as the 7 percent PRRI choose to recognize. And, picking a smaller number, as PRRI does, makes it easier to question or dismiss libertarian’s importance.

Fortunately, there’s a simple way to make PRRI’s data “consistent with” other findings. PRRI’s methodology defines libertarians based on nine issue questions, ranking answers for their libertarian-ness on a 7-point scale, with 1 being the most libertarian, and 7 being the least. Robbie Jones and the other authors at PRRI defined “libertarians” as respondents who score between 9 and 25 points. Respondents who scored 26-33 were categorized as “lean libertarian.”

If we add PRRI’s two categories of “libertarian” and “lean libertarian,” the data find 23 percent of Americans are broadly libertarian. Using this definition, PRRI’s data are actually quite “consistent with” the findings from other studies:

  • PRRI’s data show libertarians represent 36 percent of Republican Party in 2013, consistent with ANES and Gallup data;
  • Libertarians are about the same size as other key constituencies in the Republican Party, such as white evangelicals; 
  • Libertarians represent 56 percent, or half, of the tea party, consistent with the finding in Emily Ekins and my Cato study, “Libertarian Roots of the Tea Party.”

Of course, how to define libertarians and who counts as a “real” libertarian is a favorite parlor game of libertarian intellectuals. Do you count only those “hard core” libertarians who have rigorously consistent beliefs? Or, do you count those who hold broadly libertarian views or instincts that are different than conservatives or liberals? If you think this is a simple question, just amuse yourself with GMU economist Bryan Caplan’s 64-question “Libertarian Purity Test.”

What is missing from the PRRI study is that it doesn’t deal with this past literature, or make an argument for its methodology, one way or the other. Particularly when your definition of libertarians is an outlier, your readers deserve to have the finding placed in context.

Regardless, the very fact that PRRI and Brookings did this study is an important milestone. For many years, libertarian voters were a research topic of interest to a small group of think tankers, writers, and contrarian political strategists, as well as a handful of curious academics. But when the Ford Foundation funds a major study on libertarian voters, and Brookings hosts a panel with scholars PRRI, AEI, Cato, and the Ethics & Public Policy Center, I take this as a sign that libertarians are no longer politically ignorable.

That’s a good thing.

Categories: Policy Institutes

How Did U.S. Trade Policy Progress in 2013?

Tue, 12/31/2013 - 12:05

K. William Watson

Some may consider 2013 to mark the beginning of an important new era in U.S. trade policy.  The year began with President Obama proposing an ambitious U.S.–EU trade agreement in his state of the union address and ended with progress at the WTO after 12 years of stagnation.  But if we look past the hype and grand expectations for the future, we can see that there was only one major change in U.S. trade policy that actually occurred in 2013.

When the Generalized System of Preferences program expired on July 31, U.S. tariffs increased on imports from more than 120 developing countries.

The program would have been extended but for the opposition of Republican Senator Tom Coburn of Oklahoma.  You can read news accounts to learn about the saga in greater detail, but let me give you the annotated summary—a Republican senator put a hold on a bill that would prevent a tax increase because it didn’t include enough other tax increases to overcome the “expense” of Congress failing to raise taxes.

Yes, it defies logic. 

Unfortunately, this bizarre incident is more than just a case study into the peculiar facets of American legislative politics, it also brought us the year’s only significant change in U.S. trade law.

But don’t worry.  Most observers are confident that Congress will eventually extend the GSP program and retroactively refund all the duties collected since its expiration.

Just so we’re clear, the elected masters of our economy raised taxes on poor people in poor countries (and the Americans those people do business with), but they didn’t mean to and they’re going to fix it.  When they get around to that is anyone’s guess.

Categories: Policy Institutes

“We have to pass the bill to find out what’s in it"

Tue, 12/31/2013 - 10:27

David Boaz

The Affordable Care Act is like a big box of Christmas presents: you keep rummaging around in the peanuts and find hidden treasures. Or hidden costs, as it were. Here’s one I hadn’t heard of until today:

Office workers in search of snacks will be counting calories along with their change under new labeling regulations for vending machines included in President Barack Obama’s health care overhaul law.

Requiring calorie information to be displayed on roughly 5 million vending machines nationwide will help consumers make healthier choices, says the Food and Drug Administration, which is expected to release final rules early next year. It estimates the cost to the vending machine industry at $25.8 million initially and $24 million per year after that, but says if just .02 percent of obese adults ate 100 fewer calories a week, the savings to the health care system would be at least that great.

The rules will apply to about 10,800 companies that operate 20 or more machines. Nearly three quarters of those companies have three or fewer employees, and their profit margin is extremely low, according to the National Automatic Merchandising Association. An initial investment of $2,400 plus $2,200 in annual costs is a lot of money for a small company that only clears a few thousand dollars a year, said Eric Dell, the group’s vice president for government affairs.

“The money that would be spent to comply with this - there’s no return on the investment,” he said.

In my experience, vending machines shuffle their offerings fairly frequently. If the machine operators have to change the calorie information displayed every time they swap potato chips for corn chips, then $2,200 seems like a conservative estimate of costs. But then, as Hillary Clinton said when it was suggested that her own health care plan would bankrupt small businesses, “I can’t be responsible for every undercapitalized small business in America.”

Categories: Policy Institutes

Freedom of Thought Under Siege Around the Globe: When You are Not Free to Not Believe

Tue, 12/31/2013 - 09:34

Doug Bandow

Much of the world has just celebrated the most sacred Christian holiday, yet persecution of Christians has never been fiercer, especially in the Middle East.  Other faiths also suffer varying degrees of persecution. 

Nonbelievers also often are mistreated.  The lack of religious belief is less likely to be punished by communist and former communist regimes.  But such systems penalize almost all independent thought. 

Moreover, atheists and other freethinkers are at special risk in theocratic and especially aggressively Muslim states.  The International Humanist and Ethical Union recently published its second annual report, Freedom of Thought 2013: A Global Report on the Rights, Legal Status, and Discrimination Against Humanists, Atheists, and the Non-religious.

America’s Founders enshrined religious liberty in the U.S. Constitution because they understood the imperative of freedom of conscience and thought.  If a state is unwilling to respect a person’s most fundamental and intimate views, it is unlikely to leave them free to act.  Argued IHEU, “when thought is a crime, no other freedom can long survive.”

Freedom of Thought 2013 addresses the status of the non-religious.  Unfortunately, governments routinely violate the liberty not to believe. 

Concluded IHEU:  “the overwhelming majority of countries fail to respect the rights of atheists and freethinkers.  There are laws that deny atheists’ right to exist, revoke their right to citizenship, restrict their right to marry, obstruct their access to public education, prohibit them from holding public office, prevent them from working for the state, criminalize their criticism of religion, and execute them for leaving the religion of their parents.” 

Restrictions are many. IHEU figured that “in effect you can be put to death for expressing atheism in 13 countries,” all Muslim.

Persecution often fades into less virulent but still offensive discrimination.  Noted IHEU:  “Other laws that severely affect those who reject religion include bans on atheists holding public office, and some governments require citizens to identify their religion—for example on state ID cards or passports—but make it illegal, or do not allow, for them to identify as an atheist or as non-religious.” 

Moreover, “Religious privilege is one of the most common forms of discrimination against atheists.”  More controversially the organization includes “religious discrimination, or religious privilege, in this report even when its supporters claim it is merely ceremonial or symbolic.”  The latter is common in the U.S.

Not all persecution emanates from government.  Extra-legal violence is common and governments often do little or nothing in response. 

As I point out in my latest column for Forbes online:

Some religiously faithful may be inclined to dismiss the freedom not to believe.  However, Matt Cherry, the report’s lead author, emphasizes that “the fight for the rights of the non-religious [are] inextricable from the fight for the rights of the religious.”  All possess a fundamental right of belief and conscience, and an equally fundamental right to act on belief and conscience.

Obviously, one can disagree over details, including IHEU’s individual assessments.  Nevertheless, Freedom of Thought 2013 addresses a genuine and very serious threat to liberty.  Governments the world limit the most basic freedoms of belief, thought, and expression.  Moreover, it is easy to ignore the impact on individual lives if one shares the majority’s religious or other worldviews. 

IHEU judges 46 countries (counting the Palestinian territories) as involving “severe discrimination.”  The greatest problems come from the 29 nations categorized as guilty of “grave violations”:  Afghanistan, Bangladesh, Brunei, China, Comoros, Egypt, Eritrea, Gambia, Indonesia, Iran, Iraq, Jordan, Kuwait, Libya, Malaysia, Maldives, Mauritania, Morocco, Nigeria, North Korea, Pakistan, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Swaziland, United Arab Emirates, and Yemen.

Americans should review their practices at home.  Moreover, U.S. officials should include the liberty of non-believers in Washington’s human rights dialogue with other nations.

The rest of us also should promote freedom of conscience abroad.  Not by coercing and invading other countries, but by convincing, encouraging, pestering, pushing, pressuring, and embarrassing.  Everyone, from citizens to policymakers, has a stake in expanding liberty for those around us. 

Categories: Policy Institutes

Obamacare’s War on Civil Society: It Is Big Government or Nothing

Mon, 12/30/2013 - 09:49

Doug Bandow

Washington offers many opportunities for schadenfreude, that wonderful German word which means to enjoy the misery of others.  The realization of liberal professionals who voted for Barack Obama that they will be forced to spend more on health insurance was one of those moments. 

Reported the New York Times: “Many in New York’s professional and cultural elite have long supported President Obama’s health care plan.  But now, to their surprise, opera singers, music teachers, photographers, doctors, lawyers and others are learning that their health insurance plans are being canceled and they may have to pay more to get comparable coverage, if they can find it.”

It’s not that they didn’t have policies that they liked and wanted to keep.  It seems that the policies were too good. 

Explained the Times:  “The rationale for disqualifying those policies, said Larry Levitt, a health expert at the Kaiser Family Foundation, was to prevent associations from selling insurance to healthy members who are needed to keep the new health exchanges financially viable.”  Unfortunately for these privileged Obama supporters, most make too much money for even the generous subsidies available under the exchanges.

As I point out in the American Spectator online:

Admittedly, it takes a few moments to stop laughing after reading this article.  If you believe in social justice and all that, you shouldn’t whine about the government running up your costs to fulfill its elaborate social engineering plan.  After all, that’s the purpose of liberal government—create Rube Goldberg policy contraptions that promote some higher good.  So what if you get run over in the process?  Eggs and omelets as the old Communists liked to say.

Still, it is striking how government is destroying civil society institutions which meet real human needs.  Even stranger is the possible federal attack on charities and hospitals which are paying the premiums for low-income patients. 

For instance, the Los Angeles nonprofit A Better LA has begun to subsidize health insurance for low-income people through the California state exchange.  Some hospitals are doing the same.  Melinda Hatton of the American Hospital Association told the Journal:  “We thought it was the kind of thing the Affordable Care Act would really support and encourage.”

Well, no.

Insurers are counting on covering well-off, and presumably healthier, professionals, not less well-off, and presumably less healthy, nonprofessionals.  Reported the Journal:  “Help from nonprofits or hospitals could speed the arrival of less healthy customers into the exchanges, outpacing the arrival of younger, healthier people.”

The administration has yet to state a clear position.  But Health and Human Services has indicated its “concerns with this practice, because it could skew the insurance risk pool.” 

Government is threatening civil society institutions, ranging from charitable to business, which are aiding the poor, disadvantaged, and uninsured!  True, the aid process is disorganized, decentralized, uncertain, and uneven.  But that is society. 

This complex interplay is what makes community.  Discerning and addressing needs, organizing diverse approaches, and responding to the people in front of you is what genuine compassion, which once meant “suffering with,” is all about.  David Beito has detailed the once important role of mutual aid societies, and how they were replaced by “impersonal bureaucracies controlled by outsiders,” such as Obamacare health exchanges.

Ultimately, Barack Obama and his allies have the world backwards.  They believe that government trumps society, and the solution to any problem should start in Washington.  Individual choice and community relations are unimportant.

Professional associations and charities demonstrate that society should be the starting point.  People should be not just allowed but encouraged to organize to solve problems.  Not only are individual lives bettered, but the sinews of community are strengthened.  Instead of supplanting other institutions, government should act as the ultimate backstop to help meet social needs which are not otherwise addressed. 

As my colleague David Boaz observed, Obamacare is “another example of a big-government, left-liberal policy that is pushing people away from cooperation and community and toward atomistic individualism.”  It’s quite an accomplishment.  Who says President Obama is a failure!?

Categories: Policy Institutes

Obama versus the Constitution

Mon, 12/30/2013 - 08:30

Ilya Shapiro

Those engaged in my line of work – explaining and defending the Constitution, the most liberty-friendly system of governance yet devised – have been kept busy by the current occupant of the White House and the executive agencies he controls. President Obama’s signature health care legislation alone provides endless “teachable moments” regarding our founding document. To paraphrase Nancy Pelosi, the more we find out about Obamacare and its implementation, the more constitutional violations we find.

But if Obamacare is the biggest constitutional – let alone policy – disaster that Barack Obama has inflicted on the nation, it alas is far from the only one. As I put it in a new Forbes.com op-ed:

One of Barack Obama’s chief accomplishments has been to return the Constitution to a central place in our public discourse.

Unfortunately, the president fomented this upswing in civic interest not by talking up the constitutional aspects of his policy agenda, but by blatantly violating the strictures of our founding document. And he’s been most frustrated with the separation of powers, which doesn’t allow him to “fundamentally transform” the country without congressional acquiescence.

But that hasn’t stopped him. In its first term, the administration launched a “We Can’t Wait” initiative, with senior aide Dan Pfeiffer explaining that “when Congress won’t act, this president will.” And earlier this year, President Obama said in announcing his new economic plans that “I will not allow gridlock, or inaction, or willful indifference to get in our way.”

And so, as we reach the end of another year of political strife that’s fundamentally based on clashing views on the role of government in society, I thought I’d update a list I made two years ago and hereby present President Obama’s top 10 constitutional violations of 2013.

Here’s the list (only half of which is Obamacare-related):

  1. Delay of Obamacare’s out-of-pocket caps. 
  2. Delay of Obamacare’s employer mandate.
  3. Delay of Obamacare’s insurance requirements.
  4. Exemption of Congress from Obamacare. 
  5. Expansion of the employer mandate penalty through IRS regulation.
  6. Political profiling by the IRS.
  7. Outlandish Supreme Court arguments. 
  8. Recess appointments. 
  9. Assault on free speech and due process on college campuses.
  10. Mini-DREAM Act.

For more details, read the whole thing. Of course, there are still two days left in the year, so who knows what else may be in store.

 

Categories: Policy Institutes

Pages