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Free Trade in Doctors

Cato Op-Eds - Thu, 02/27/2014 - 16:04

Simon Lester

I wish I knew more about the medical system, so that I could write more intelligently about domestic and international trade issues in this area. With the caveat that there is a lot I don’t know here, I’m excited by the following development that will hopefully allow more inter-state trade in medical services:

A significant barrier to the interstate practice of telehealth is closer to being broken down. The Federation of State Medical Boards (FSMB) has completed and distributed a draft Interstate Medical Licensure Compact, designed to facilitate physician licensure portability that should enhance the practice of interstate telehealth.  Essentially, the compact would create an additional licensing pathway, through which physicians would be able to obtain expedited licensure in participating states.  As the FSMB notes in its draft, the compact “complements the existing licensing and regulatory authority of state medical boards, ensures the safety of patients, and provides physicians with enhanced portability of their license to practice medicine outside their state of primary licensure.”  This is a potentially significant development because burdensome state licensure requirements have been a major impediment to the interstate practice of telehealth. A physician practicing telehealth is generally required to obtain a medical license in the state where the patient—not the physician—is located.  As a consequence, physicians wishing to treat patients in multiple states need to obtain a license in each of those states in order to practice medicine lawfully, a lengthy and expensive process.

Thinking even bigger, the same idea could be applied internationally.

Categories: Policy Institutes

Does Occupational Licensing Make Sense?

Cato Op-Eds - Thu, 02/27/2014 - 11:10

Jeffrey A. Miron

The standard argument for occupational licensing - government-imposed limits on who can supply medical, legal, plumbing, and other services - is that such laws protect the public from low-quality provision of these services.

This argument is not convincing on its own: licensing limits the quantity of services provided, raising price, and thus harming consumers. A necessary condition for licensing to make sense, therefore, is that any improvements in service quality outweight the losses from higher prices.

A new study, however, finds that when de-regulation allows nurse practioners to perform more tasks without doctor supervision, the price of well-child medical exams declines (as implied by standard economics), with no “changes … in outcomes such as infant mortality rates.”

In at least this case, therefore, licensure is all cost and no benefit.

Categories: Policy Institutes

Bulgaria’s Currency Board versus Ukraine’s Chaos

Cato Op-Eds - Thu, 02/27/2014 - 10:55

Steve H. Hanke

When Communism inevitably and finally collapsed, Bulgaria’s economy was a basket case – behind almost all other communist basket cases, including Ukraine’s. Indeed, Bulgaria defaulted on its debt in 1990. By February 1991, Bulgaria had broken out in a bout of hyperinflation, with the inflation rate at 123% per month. And in February 1997, Bulgaria experienced the agonies of hyperinflation again, with the inflation rate reaching 242% per month. 

As he looked into the abyss, President Petar Stoyanov decided against taking the plunge and appointed me as his advisor in January 1997. I immediately prescribed a currency board system to put an end to Bulgaria’s malady, something I had laid out for Bulgaria back in 1991 (Steve H. Hanke and Kurt Schuler, Teeth for the Bulgarian Lev: A Currency Board Solution. Washington, D.C.: International Freedom Foundation, 1991.).

Bulgaria installed a currency board in July 1997. The lev was backed 100% by German marks and traded freely at a fixed rate of 1000 leva to 1 mark. Inflation and interest rates fell like stones. The economy stabilized, and the Bulgarians learned that, even though stability might not be everything, everything is nothing without stability. Discipline at last.

Yes, the main feature of a currency board is the fiscal and financial discipline that it provides. No more running to the central bank for a fiscal bailout. A currency board ties the hands of those meddlesome monetary authorities. And forget the silly theoretical and obscure arguments made by economists who don’t embrace fixed exchange rates. A currency board regime is all about discipline.

As we watch Ukraine melt down once again, we can see what could have been (and what could be) if Ukraine would have only embraced a system of discipline (read: currency board) – like Bulgaria did in 1997. The following table tells the tale:

Bulgaria versus Ukraine

Country

GDP per Capita (USD)

Fiscal Balances %GDP

Current Account Balances %GDP

General Govt. Gross Debt %GDP

Gross Borrowing Needs %GDP

Import Coverage Ratio (FX Reserves / Imports)

W.B. Ease of Doing Business 2014 Rank

Bulgaria

$7,623

-1.9%

1.5%

16.0%

2.6%

6.7

58

Ukraine

$4,011

-8.7%

-8.9%

42.8%

11.0%

1.9

112

Sources: Bulgarian National Bank, National Bank of Ukraine, J.P. Morgan (Emerging Markets Research), International Monetary Fund (IFS), World Bank (Doing Business). 

Prepared by Prof. Steve H. Hanke, The Johns Hopkins University.

Categories: Policy Institutes

Obama Administration Rips Off Middle Class and Threatens Elephants

Cato Op-Eds - Thu, 02/27/2014 - 10:32

Doug Bandow

As I’ve written before, the Obama administration plans to effectively ban the sale of all ivory in America, even if purchased or inherited legally years ago. If you can’t prove its age, you can be arrested and have your property confiscated—unless you are well-connected and exempted.

Elephants are being killed for their ivory. Activists unable to protect the animals now are targeting Americans who followed the law in buying and selling legal old ivory objects. 

But as I point out my latest piece in the American Spectator:

advocates of banning antique sales seem more interested in punishing people who bought and sold ivory legally because they bought and sold ivory, not because doing so would prevent poaching.  It is an exercise in moral vanity and political posturing, not practical conservation.

Some ban proponents complain of the difficulty of distinguishing between new and old ivory. Actually, European carving disappeared decades ago. Asian carving continues, but old and new differ in character, subject, wear, age, coloring, quality, and more. 

Nor do collectors of and dealers in antiques seek out poached ivory. Punishing people who followed the law and invested in legal objects might make a few extremists feel good, but won’t save a single elephant today.

Ivory entered America legally until 1989. Antiques with proper certification could be imported after that. But in mid-February the administration announced that if you had followed the law, it planned to render your collection or inventory essentially valueless.

The new guidance from the U.S. Fish and Wildlife Service indicated that most every auctioneer, collector, and dealer—and anyone else who has purchased or received something made of ivory—better hire a lawyer before selling their ivory possessions. 

The prospective rules are biased against average folks. If you represent the non-profit cultural establishment, you’ll get around the rules.

Point one, no “commercial” imports even of antiques will be allowed. However, the rules apparently will exempt “museum and educational specimens.” According to the administration’s reasoning, non-profit institutions will have a unique right to continue driving elephants to extinction.

Point two, exports are banned, except antiques in what the government calls “exceptional circumstances.” But “certain noncommercial items” will be allowed, so people with friends in government likely will be able to hurdle any new burdens in a single bound. Everyone else better hire a lawyer or lobbyist.

Point three, only antiques, proved through “documented evidence” will be eligible for sale across state lines. How many antiques in America have “documented evidence” attesting to their age? At least a wealthy collector with a valuable item can try to find an expert and procure a CITES certificate. Of course, museum transfers likely won’t be considered commercial and non-profits may be able to engage in low-key extortion: “Donate it to us and we can ensure a generous appraisal to get you a substantial tax deduction.”

Point four, only documented old ivory, imported before 1990, can be sold even within a state. Say you acquired a bunch of ivory items over the years and retired in, say, Bozeman, Montana. Got notarized certificates for everything? See what you can get for your collection in Helena. 

More likely, of course, you won’t have any documentation when items were brought to America. Then you can’t even take the objects—legally, at least—to a local flea market. Not that people would pay you more than a pittance there.

The administration emphasizes it will still allow legal sales. That’s only if you are friends with the Interior Secretary, or a congressman feared by the Interior Secretary. Or find a broker, well-connected but discreet antique dealer, or private collector network. Otherwise, tough.

Ironically, the new policy will reduce genuine conservation efforts. The Fish and Wildlife Service will have to shift resources away from those linked to the killing of elephants and toward thousands of Americans who’s only mistake was to follow the law.

The administration should reverse course to focus on poaching. If not, Congress should block implementation and enforcement of the rules.  Punishing average Americans for lawful behavior isn’t fair to them—or helpful to elephants. 

Categories: Policy Institutes

Freedom on Film

Cato Op-Eds - Thu, 02/27/2014 - 09:15

David Boaz

It’s Oscar time again, and once again there are some Best Picture nominees of special interest to libertarians. Dallas Buyers Club is a terrific movie with a strong libertarian message about self-help, entrepreneurship, overbearing and even lethal regulation, and social tolerance. 12 Years a Slave is a profound and painful movie about the horrors of slavery in a country conceived in liberty. Philomena is a tender personal story that sharply attacks the Catholic church and its censorious attitude toward sex, themes that would resonate with some libertarian viewers. This wasn’t the best year for libertarian movies – 2000 was pretty good – but libertarians will have some rooting interest Sunday night.

As I told Washington Post film critic Ann Hornaday in 2005, “America is basically a libertarian country, so Americans are going to put libertarian themes into the art they create, and sometimes it’s more explicit and sometimes it’s less so. But it’s not a big surprise to see individualism, anti-totalitarianism and fighting for freedom and social tolerance showing up in American art.” Here are some of my favorite examples (and of course they’re not all American):

Shenandoah, a 1965 film starring Jimmy Stewart, is often regarded as the best libertarian film Hollywood ever made. Stewart is a Virginia farmer who wants to stay out of the Civil War. Not our fight, he tells his sons. He refuses to let the state take his sons, or his horses, for war. Inevitably, though, his family is drawn into the war raging around them, and the movie becomes very sad. This is a powerful movie about independence, self-reliance, individualism, and the horrors of war. (There’s also a stage musical based on the movie that’s worth seeing, or you could listen to the antiwar ballad “I’ve Heard It All Before” here.)

War may be the most awful thing men do, but slavery is a close contender. Steven Spielberg’s Amistad (1997) tells a fascinating story about a ship full of Africans that turned up in New England in 1839. The question: Under American law, are they slaves? A long legal battle ensues, going up to the Supreme Court. Libertarians like to joke about lawyers. Sometimes we even quote the Shakespeare line, “The first thing we do, let’s kill all the lawyers” — not realizing that that line was said by a killer who understood that the law stands in the way of would-be tyrants. Amistad gives us a picture of a society governed by law; even the vile institution of slavery was subject to the rule of law. And when the former president, John Quincy Adams, makes his argument before the Supreme Court, it should inspire us all to appreciate the law that protects our freedom.

Lawyers play an important role in two other fine libertarian films. The Castle was produced in Australia in 1997 but reached the United States in 1999. It’s a very funny film about a character who thinks that living near the airport is just great. He even likes looking up at the massive power lines near his house because they remind him of what man can accomplish. Shades of Ayn Rand! Anyway, a man’s home is his castle, and the protagonist is shocked when the airport decides to seize his property to extend its runway. He fights the system to no avail until a smooth, well-dressed lawyer — way out of the lead character’s league — shows up and offers to take his case. Again we see powerful interests forced to defend themselves in a law-governed society. A nice defense of private property, and very funny to boot.

That same season in 1999 I also enjoyed The Winslow Boy, a David Mamet remake of a Terrence Rattigan play/movie from 1948. Despite a very different atmosphere — a stuffy, bourgeois family in Victorian England vs. a comic contemporary Australian family — it has two things in common with The Castle: a proud father who will do anything to defend his home and family, and a distinguished British lawyer who comes to the family’s aid. Mr. Winslow’s teenage son is expelled from the Naval Academy. Convinced his son is innocent, Winslow challenges the expulsion. When the Academy refuses any sort of due process, Winslow exhausts his life savings in a fight through the courts. The theme is the right of every person in a decent society to justice.

So Big (1953) stars Jane Wyman as a wealthy young woman suddenly delivered into poverty. She becomes a teacher, marries a farmer, has a son, loses her husband, and must run the farm on her own, at a time when women didn’t do that. It’s an inspiring story of self-reliance, and the disappointment she feels when her son chooses money and society over the architecture he loves. Based on a novel by Edna Ferber, the screenplay sounds almost Randian at times. Don’t see the 1932 version starring Barbara Stanwyck; it’s flat and boring. The difference is unbelievable.

The Palermo Connection (1990) is an odd Italian-made movie (but in English) cowritten by Gore Vidal. New York city councilman Jim Belushi runs for mayor on a platform to legalize drugs and take the profits out of the drug trade. The Mafia isn’t happy. His life is threatened. So he decides to go on a honeymoon, in the middle of his campaign — to Sicily. I said it was odd. But interesting, and very pointed.

Pacific Heights (1990) is a thriller that is almost a documentary on the horrors of landlord-tenant law. A young couple buys a big house in San Francisco and rents an apartment to a young man. He never pays them, and they can’t get him out, and then things get really scary. The lawyer lectures the couple — and the audience — on how “of course you’re right, but you’ll never win.” I just knew this happened to someone — maybe the screenwriter or someone he knew. Sure enough, when Cato published William Tucker’s book Rent Control, Zoning, and Affordable Housing, and I asked Pacific Heights director John Schlesinger for a jacket blurb, he readily offered “If you thought Pacific Heights was fiction, you need to read this book”; and he told me that the screenwriter had a relative who had gone through a tenant nightmare.

Finally, I’ll mention My Beautiful Laundrette, made for British television in 1985. What’s interesting about this film is that novelist/screenwriter Hanif Kureishi thought he was making a savage indictment of Thatcherite capitalism. But to me, the good characters in the movie — white and Pakistani, gay and straight — are the ones who work for a living, and the bad characters are clearly the whining socialist immigrant intellectual, who doesn’t like his son opening a small business, and the British thugs who try to intimidate the young Pakistani businessman. My favorite line: The enterprising brother of the layabout intellectual takes a young working-class Briton (Daniel Day-Lewis) with him to evict some deadbeat tenants. The young Brit suggests that it’s surprising the Pakistani businessman would be evicting people of color. And the businessman says, “I’m a professional businessman, not a professional Pakistani. There is no question of race in the new enterprise culture.” I think Kureishi thinks that’s a bad attitude. The joke’s on him.

If you’d like more film recommendations, I’m delighted to report that Miss Liberty’s Guide to Film is available again—on Kindle. It offers more than 250 short reviews of movies with libertarian themes.

Categories: Policy Institutes

Political Poster Week Continues: "Safety First"

Cato Op-Eds - Thu, 02/27/2014 - 09:01

Walter Olson

Countless gorgeous posters, many of them French, promote the consumption of alcohol, but few achieve high style while arguing the Prohibitionist cause. Anti-saloon campaigners were better known for sketches of sentimentally drawn children, drunks in gutters, and pinstriped tycoons in top hats raking in bucks from the liquor traffic (imagery that reminds us of the close affinity between that and other Progressive-era anti-business movements). 

So where’d this Art Deco gem come from? It’s not immediately clear. It would be easy to mistake it for a simple traffic-safety poster, until you notice that as the vehicles whiz past each other in their Futurist way, the red diagonal that keeps them separate is labeled “PROHIBITION.” My online quest for its origins came up blank: among the few clues is the artist signature “LEW” at lower left, which also appears on this almost equally striking poster for the anti-alcohol cause. The latter poster includes the phrase “Outlawed or Legalized,” and the use of “z” rather than “s” in “Legalized” suggests American rather than British origin. 

In retrospect, of course, we know the traffic-safety message was to prove far more effective as an impetus to legal restriction of alcohol than most of the others. It would seem strange today for public officials to lecture us against enjoying a glass of Merlot based on moral disapproval or concern for our family responsibilities, but few flinch when the police chief of Austin proposes criminalizing driving on a meager 0.05 blood alcohol, with a Texas state senator explaining: “Some people shouldn’t be driving after one drink.”

Categories: Policy Institutes

This Weekend’s RLCSC State Convention

State News - Wed, 02/26/2014 - 23:54

Well, it’s time for our state convention starting this Friday evening! We have two different sessions — a business session and the public session with speakers.

Friday evening business session events are at no charge and open to all dues paying members and their guests. The Saturday events require a ticket which may be purchased by going to http://www.rlcimpact.com/tickets

Here is a schedule of events:

======================================
BUSINESS SESSION – FRIDAY FEBRUARY 28TH
======================================

Cost: $0.00
Location: Mount Pleasant Waterworks, 1619 Rifle Range Rd, Mount Pleasant, SC 29464

Agenda:
5:30 PM – Registration
6:15 PM – Opening (invocation & pledge)
6:20 PM – Appointment of Credentials and Rules Committee
6:30 PM – Parliamentary Training Seminar
8:00 PM – Election of officers (Chairman, Vice Chairman, Secretary, Treasurer)
8:30 PM – Election of Board Members
8:45 PM – Resolutions*
9:30 PM – Adjournment

* Resolutions may be submitted to secretary@rlcsc.org or presented in writing. They will be considered in the order presented until all resolutions have been considered or until the 9:30 PM adjournment time, whichever comes first.

Resolutions submitted so far:

1. Recognition of the Grand Strand, Catawba, and Lakelands Chapter as local chapters of the Republican Liberty Caucus of South Carolina

==================================
SATURDAY PUBLIC SESSION – MARCH 1ST
==================================

Cost: $69.00 non-members, $39.00 members
Tickets: http://www.rlcimpact.com/tickets
Location: Charleston Rifle Club, 2221 Heriot St., Charleston, SC 29403

Agenda:
8:30 AM – Registration
9:00 AM – Opening (invocation and pledge)
9:10 AM – Outgoing chairman’s address
9:20 AM – Introduction of new officers and board
9:25 AM – Morning breakout session instructions
9:30 AM – Morning breakout session

MORNING BREAKOUT SESSION
Main Hall – Sheriff Ray Nash on the Constitution
Bowling Alley – Tom Sheridan and John Kuhn on Precinct Organizing

10:15 AM – Morning Break
10:45 AM – Speaker: State Treasurer Curtis Loftis
11:00 AM – Dr. Mike Vasovski, State Chair of the Ron Paul 2012 Campaign
11:15 AM – Matthew Sheffield, Founder of Newsbusters.org
12:00 PM – Lunch (Music provided by Robbie Bowen)
12:55 PM – Afternoon breakout session instructions
1:00 PM – Afternoon breakout session

AFTERNOON BREAKOUT SESSION
Main Hall – Jesse Graston on a Constitutional Amendment Convention of the States
Bowling Alley – Dr. Scott Pearson on Financial Strategies for World Changers
Conference Room – Stephen Calk on Disaster Preparedness

2:00 PM – SC Senator Lee Bright, Candidate for US Senate
2:15 PM – Elizabeth Moffly, Candidate for State Superintendent of Education
2:30 PM – Sherri Few, Candidate for State Superintendent of Education
2:45 PM – Nse Epko, 2nd Vice Chair, South Carolina Republican Party
3:00 PM – Jack Hunter, Contributing Editor Rare.us and former advisor to Rand Paul
4:00 PM – Remarks from New Chairman of the Republican Liberty Caucus of SC
=========================================
ANNUAL LIBERTY FELLOWSHIP DINNER – MARCH 1ST
==========================================

Cost: $49.00
Tickets: http://www.rlcimpact.com/tickets
Location: Charleston Rifle Club, 2221 Heriot St., Charleston, SC 29403

6:00 PM – Dinner provided. Cash bar available.

Guest speaker: Michael Maharrey, National Communications Director of the 10th Amendmen Center

Also in attendance: Jack Hunter and other speakers from the day’s events.
Michael Maharrey serves as the national communications director for the Tenth Amendment Center.

Hailing from Lexington, Ky., he’s extremely proud that his home state originated the Principles of ’98 laying the groundwork for state nullification of unconstitutional acts, and he’s the author of Our Last Hope – Rediscovering the Lost Road to Liberty, a historical, philosophical and moral case for nullification.

Michael speaks at events across the United States, and frequently appears as a guest on local and national radio shows advancing constitutional fidelity and liberty through decentralization.

As a working journalist, Michael has written and reported for several newspapers, including the St. Petersburg Times and the Kentucky Gazette, covering local and state politics, and sports. Mike won a pair of 2009 Kentucky Press Association awards while serving as the sports editor for the Woodford Sun in 2009. He also worked for a local television news outlet writing web content for the station’s award-winning website.

The post This Weekend’s RLCSC State Convention appeared first on Republican Liberty Caucus of South Carolina.

Categories: State Charter News

Proposed IRS Rulemaking Would Chill Public Advocacy

Cato Op-Eds - Wed, 02/26/2014 - 15:38

Caleb O. Brown

Tomorrow ends the comment period for a proposed IRS rule that would change the way groups from the Sierra Club to the NRA advocate on behalf of their members. By defining “candidate-related political activity” as the rule has, election time could compel these groups to scrub their websites and Twitter feeds of almost any mention of political candidates.   On March 4, join us for an event exploring the proposed rule. And you can learn more by listening to today’s Cato Daily Podcast with Allen Dickerson, legal director of the Center for Competitive Politics.

You can always subscribe to the podcast here.

Categories: Policy Institutes

Is the Grand Jury System a Joke?

Cato Op-Eds - Wed, 02/26/2014 - 14:25

Tim Lynch

An excerpt from the Charlotte Observer:

During a single four-hour workday last week, a Mecklenburg County grand jury heard 276 cases and handed down 276 indictments.

That means the 18 jurors heard evidence, asked questions, weighed whether the charges merit a trial, then voted on the indictments – all at the average rate of one case every 52 seconds….

“The entire system is a joke,” said Joe Cheshire, a Raleigh attorney who handles high-profile criminal cases across the state. “There is absolutely no living, breathing person with any kind of intellect who believes that a grand jury could consider and vote on 10 complex issues in the period of time that they use to deliberate on hundreds.”

Charlotte attorney Jim Cooney agrees. Rather than check the power of government, grand juries have become a prosecutor’s ally, he said, “that hands out indictments like they’re boxes of popcorn.”

The article notes that the one recent case where a grand jury declined to issue an indictment involved a police officer.  Hmm.

For Cato scholarship on the problems with the grand jury system, go here.

Categories: Policy Institutes

Further Thoughts on Arizona's "Religious Freedom" Bill

Cato Op-Eds - Wed, 02/26/2014 - 14:24

Walter Olson

My colleague Ilya Shapiro has skillfully laid out some points often overlooked in the furor over Arizona’s SB 1062. In particular, the bill is a variation on what’s known as a “mini-RFRA” – that is, a state bill patterned after the federal Religious Freedom Restoration Act (RFRA) of 1993 – and can scarcely be understood outside the context of how RFRAs work, why they managed to sail almost uncontroversially through the U.S. Congress in 1993 with bipartisan support, and how they have since emerged as a serious obstacle to particular policy ambitions such as ObamaCare’s universal employer contraceptive mandate, with a resulting tendency for liberal opinion to swing against them (yet often with a curious reluctance to come right out and say that RFRA itself goes too far).  

A few points I’d add: 

* First, the various religion-and-discrimination bills moving in multiple state legislatures are very different from each other and demand separate analysis. (This Mother Jones account, while strongly opposed to all the bills, is better than most about acknowledging their differences.) The first bill to provoke a national furor was the very extreme measure passed by the Kansas lower house, which would have (among other things) introduced a new legal right for many public servants not to do their jobs and created rights to sue employers for not accommodating anti-gay sentiment. The Republican leadership of the Kansas Senate quite sensibly flagged these incursions on the rule of law and on the freedom of private enterprise as reasons to kill the bill

* What of the Arizona proposal? Eleven leading religion-and-law scholars, including such heavy hitters as Michael McConnell and Douglas Laycock, correct some misconceptions about the bill in this letter reproduced at Power Line. The Arizona bill pushes mini-RFRAs into highly disputed territory by specifying that it applies not just to “government” but to “state action” more broadly, the crucial difference being that it aims to insert a right to religious accommodation as a defense in litigation between private parties arising from state laws. (Contrary to some imaginings, the bill creates a right of attorneys’ fee recovery by prevailing religious-accommodation claimants only when the adverse party is a government.) To confess my biases, as a general matter I like the idea of affording wider religious-liberty defenses in most anti-discrimination statutes applying to private actors. At the same time, doing it this way – by pushing out the boundaries of RFRA to change the playing field of private litigation at one stroke, rather than pause for a debate about how best to address multiple areas and situations – strikes me as fairly sure to generate unintended consequences and unexpected results. When advocates warn Arizona Gov. Jan Brewer she will be sailing the ship of state into uncharted waters if she signs the bill, this is the provision that most makes me think they’re on to something. 

* Why not let the Arizona episode begin a debate about whether RFRAs have gone too far or not far enough? The law’s status as a bright new idea in the Clinton era doesn’t mean it should be immune from renewed scrutiny today with the perspective two decades of experience affords. At best, speaking as one not unsympathetic with its aims, it was and is at best a very blunt instrument, one that tends to privilege sincere religious belief over equally sincere belief grounded in something other than religion. It’s entirely conceivable that it and its state imitators go too far as applied to some subjects, yet perhaps not far enough as applied to others. 

Such a debate might prove more productive than the usual bitter round in the culture wars.

 

Categories: Policy Institutes

Bank Tax Is Wrong "Fix" for Too-Big-To-Fail

Cato Op-Eds - Wed, 02/26/2014 - 12:43

Mark A. Calabria

Chair of the House Ways and Means Committee Dave Camp is soon to roll out a plan for comprehensive tax reform. He is to be commended for doing so. Our tax code is an absolute mess with incentives for all sorts of bad behavior. Early reports suggest, however, that Congressman Camp will also include a “bank tax” to both raise revenue and address the “Too-Big-To-Fail” (TBTF) status of our nation’s largest banks. While the evidence overwhelmingly suggests to me that TBTF is real, with extremely harmful effects on our financial system, I fear Camp’s approach will actually make the problem worse, increasing the market perception that some entities will be rescued by the federal government.

Bloomberg reports the plan would raise “would raise $86.4 billion for the U.S. government over the next decade…would likely affect JPMorgan Chase & Co, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley.” The proposal would do so by assessing a 3.5 basis-point tax on assets exceeding $500 billion.

While standard Pigouvian welfare analysis would recommend a tax to internalize any negatives externalities, TBTF is not like pollution, it isn’t something large banks create. It is something the government creates by coming to their rescue. I don’t see TBTF as a switch, but rather a dial between 100 percent chance of a rescue and zero. By turning the banks into a revenue stream for the federal government, we would likely move that dial closer to 100 percent–and that is in the wrong direction. For the same reason, I have opposed efforts to tax Fannie Mae and Freddie Mac in the past. The solution is not to bind large financial institutions and the government closer together, as a bank tax would, but to further separate government and the financial sector. Just over a year ago, I laid out a path for doing so in National Review. Were we to truly end bailouts, limiting government is the only way to get that dial close to zero.   

If we want to use the tax code to reduce the harm of financial crises, then we should focus on reducing the preferences for debt over equity, which drive so much of the leverage in our financial system.  I’ve suggest such here in more detail. There are also early reports that Camp’s plan will reduce some of these debt preferences. Let’s hope those remain in the plan.

Categories: Policy Institutes

Folly of Federal Flood Insurance

Cato Op-Eds - Wed, 02/26/2014 - 11:29

Chris Edwards

Subsidized flood insurance is one of the many federal programs that is counter to both sound economic policy and sound environmental policy. Congress created the National Flood Insurance Program (NFIP) in 1968 to help homeowners in flood-prone areas purchase insurance. The FEMA-run program covers floods from river surges and storms on the seacoasts.

In recent years, the NFIP has gone hugely into debt and it may be bailed-out by taxpayers at some point. The program has encouraged people to build homes in areas that are too hazardous to safely occupy. It has encouraged towns to expand development in flood-prone areas. And the program undermines constitutional federalism by prompting the federal government to reach its regulatory tentacles into local zoning issues.

The NFIP subsidizes wealthy people with multiple payouts after their homes on the seacoasts are repeatedly destroyed. The program is very bad policy—a seemingly good idea to policymakers in the 1960s that has ended up creating growing distortions.

When I started reading about the NFIP recently, I was surprised to learn that Congress made sensible reforms to it in 2012 under the Biggert-Waters Act. The best reform would be a complete repeal of the NFIP, but in the meantime the 2012 law was a good start at reducing the program’s costs and distortions.

Alas, the prospect of Congress staying on a pro-market, pro-environment reform path was apparently too good to be true. No sooner had the ink dried on the 2012 law than members of Congress began trying to reverse the reforms.

This week, Congress will be voting on a bill that backtracks on the 2012 reforms. I have not studied the details of the new bill, but Diane Katz at the Heritage Foundation has penned a nice overview.

Categories: Policy Institutes

Political Poster Week Continues: "I Need Smokes"

Cato Op-Eds - Wed, 02/26/2014 - 10:30

Walter Olson

 

As I noted in my book The Rule of Lawyers, it’s not by happenstance that the sharpest increases in Americans’ smoking rates have come in wartime. Nicotine staves off the boredom, fear, and loneliness of life on the front lines, and the smoking habit encourages socialization among troops. Years later, the federal government was at pains to downplay its vigorous promotion of tobacco use as part of both the WWI and WWII war effort. (It had a sideline in promoting some other important forms of substance abuse as well, notably amphetamine-munching.)

This poster, of World War I vintage, would have made a good illustration for the article I wrote in Reason a while back on government contributions to product-related risk. For some other tobacco-related war poster themes, check the Hoover Institution political poster database

Categories: Policy Institutes

For Marriage Equality, Religious Liberty, and the Freedom of Association

Cato Op-Eds - Wed, 02/26/2014 - 08:53

Ilya Shapiro

Even though I’m for marriage equality – next week I’ll be filing a brief supporting the challenge to the marriage laws of Oklahoma and Utah in the U.S. Court of Appeals for the Tenth Circuit – I have no problem with Arizona’s SB 1062.

SB 1062 does nothing more than align state law with the federal Religious Freedom Restoration Act (which passed the House unanimously, the Senate 97-3, and was signed by President Clinton in 1993). That is, no government action can “substantially burden” religious exercise unless the government uses “the least restrictive means” to further a “compelling interest.” This doesn’t mean that people can “do whatever they want” – laws against murder would still trump religious human sacrifice – but it would prevent the government from forcing people to violate their religion if that can at all be avoided. Moreover, there’s no mention of sexual orientation (or any other class or category).

The prototypical scenario that SB 1062 is meant to prevent is the case of the New Mexico wedding photographer who was fined for declining to work a same-sex commitment ceremony. This photographer doesn’t refuse to provide services to gay clients, but felt that she couldn’t participate in the celebration of a gay wedding. There’s also the Oregon bakery that closed rather than having to provide wedding cakes for same-sex ceremonies. Why should these people be forced to engage in activity that violates their religious beliefs?

For that matter, gay photographers and bakers shouldn’t be forced to work religious celebrations, Jews shouldn’t be forced to work Nazi rallies, and environmentalists shouldn’t be forced to work job fairs in logging communities. This isn’t the Jim Crow South; there are plenty of wedding photographers – over 100 in Albuquerque – and bakeries who would be willing to do business regardless of sexual orientation, and no state is enforcing segregation laws. I bet plenty of Arizona businesses would and do see more customers if they advertised that they welcomed the LGBT community.

At the end of the day, that’s what this is about: tolerance and respect for other people’s beliefs. While governments have the duty to treat everyone equally under the law, private individuals should be able to make their own decisions on whom to do business with and how – on religious or any other grounds. Those who disagree can take their custom elsewhere and encourage others to do the same. 

Categories: Policy Institutes

Portugal Drug Decriminalization Back in the News

Cato Op-Eds - Tue, 02/25/2014 - 15:33

Tim Lynch

Yesterday on Bloomberg TV’s Street Smart, Hanna Hetzer of the Drug Policy Alliance gave an interview about 10 years of  drug decriminalization in Portugal. You can watch the video here.

Cato published the landmark study on Portugal’s drug decriminalization policy in 2009.  Check it out.

Categories: Policy Institutes

Political Poster Week Continues: "Come On, Dad!"

Cato Op-Eds - Tue, 02/25/2014 - 11:57

Walter Olson

Yes, it’s political poster week at Cato at Liberty. (Yesterday’s “Inspectors All Round” poster for the Conservative Party is here). This poster also appeared during the 1929 British general election and although by that point the rapidly declining Liberal Party had, alas, abandoned its one-time allegiance to principles of economic non-intervention, it was still an important locus of support for some good causes such as free trade.

Tomorrow: be patriotic and supply all the tobacco you can.

Categories: Policy Institutes

Pounding the Table, Not the Facts, on School Choice

Cato Op-Eds - Tue, 02/25/2014 - 09:01

Jason Bedrick

There’s an old legal proverb about how to win a court case: “If the law is on your side, pound the law. If the facts are on your side, pound the facts. If neither is on your side, pound the table.” In this factually-challenged attack on school choice, two lawyers at the UNC Center for Civil Rights do a great deal of table pounding.

Despite mountains of evidence to the contrary, the lawyers charge that school choice programs don’t work and that they increase racial segregation. For example, they claim: 

…in states with [school choice] programs, student achievement at the private schools is no better, and often worse, than in the public schools. In fact, in Milwaukee and Cleveland, whose voucher programs are the country’s longest running, traditional public school students outperform voucher students on available proficiency measures.

Even read in the most charitable light, the lawyers misleadingly compare apples and orangataungs. Participants in school choice programs are generally more disadvantaged than the general population, so it is absurd to compare their average performance against the general population, which includes all the students in wealthy “public” school districts (where low-income parents have been arrested for trying to enroll their kids). Government school advocates rightly object when someone compares average private school performance to average government school performance. The private schools outperform government schools on average, but because both parents and the private schools select each other, the comparison breaks down. The same is true here.

A meaningful comparison requires a randomized-controlled trial, which is the gold standard of social science research because the process of randomization allows researchers to compare like against like and to isolate the effect of the “treatment” (in this case, the offer of a school choice scholarship). Fortunately, there have been 12 such studies addressing this very question from highly-respected institutions like Harvard University and the Brookings Institution. Eleven found that school choice programs lead to positive student outcomes, including higher academic performance and higher rates of high school graduation and college matriculation. One study found no statistically significant difference and none found a negative impact.

These studies include evaluations of the Milwaukee and Cleveland school voucher programs that the lawyers falsely claimed were underperforming vis-a-vis government schools. In fact, a longitudinal study of the Milwaukee program found that it increased academic performance, graduation rates, and college enrollment (and did so at about half the cost per pupil):

“Students enrolled in the Milwaukee voucher program are more likely to graduate from high school and go to college than their public school counterparts, boast significantly improved reading scores, represent a more diverse cross-section of the city, and are improving the results of traditional public school students,” said the study’s press release.

“Among the new findings are that students enrolled in the Milwaukee Parental Choice Program (MPCP)—the nation’s oldest private school choice program currently in operation—not only graduate from high school on time by seven percentage points more than students enrolled in Milwaukee Public Schools (MPS), but they are also more likely to enroll in a four-year college and persist in college.”

In other words, the lawyers’ assertion that the achievement of school choice students is “is no better, and often worse” is flat out false. It’s not possible to state with any certainty where they’re getting their faulty information (quite possibly the usual suspects), but President Obama made similarly false claims in a recent TV interview, prompting prominent researchers including of Paul E. Peterson of Harvard University and Patrick Wolf of the University of Arkansas to correct the record:

The faulty empirical claims about the effectiveness of school choice programs were bad enough, but the lawyers’ greater offense was cynically raising the specter of racial segregation:

We also know the historical links between racism and private schools. In 1964, 83 private schools enrolled approximately 9,500 students in N.C. But from 1968 to 1972 – when advocates and the federal government began to enforce meaningful school desegregation – the state jumped from 174 private schools and 18,000 students, to 263 schools and over 50,000 students. Surging enrollment in non-public schools was often concentrated in areas with high concentrations of African-American students , and the segregative legacy of these private schools and academies continues to this day:

Bertie County is 62 percent African American. Lawrence Academy was founded in Bertie County in 1968. Its student body is 98 percent white.

Halifax County is 53 percent African-American. Halifax Academy and Hobgood Academy were both founded in 1969. Halifax Academy is 98 percent white; Hobgood Academy is 95 percent white.

Hertford County is over 60 percent African-American. Ridgecroft School, founded in 1968, is 97 percent white.

Northampton County is 58 percent African-American, but Northeast Academy, established in 1966, is 99 percent white. 

First, it’s absurd to link the history of segregation solely to private schools when the public schools were segregated for over a century. This is especially absurd since inter-district segregation is now higher among government schools than 50 years ago.

Second, these anecdotes tell us absolutely nothing without context. It’s possible that these schools are illegally discriminating on the basis of race, but it’s also possible that this merely reflects the fact that, under the status quo, wealthier whites are better able to afford private school than less wealthy blacks, which is exactly the inequity that NC’s school voucher program seeks to address.

It’s telling that the lawyers refrained from citing any of the empirical evidence on the matter:

Eight empirical studies have examined school choice and racial segregation in schools. Of these, seven find that school choice moves students from more segregated schools into less segregated schools. One finds no net effect on segregation from school choice. No empirical study has found that choice increases racial segregation.

Additionally, a recent study from the Louisiana Department of Education also found that the state’s school voucher program improves racial integration. More than 85 percent of the scholarship recipients in Louisiana are black. Likewise, school choice programs in other states disproportionately benefit minority students, including 81 percent of scholarship students in Milwaukee, Wisconsin, and 78 percent in Florida.

The lawyers concluded that it is “a twisted irony that the leaders of the voucher movement claim a racial justice rationale for their scheme.” In fact, the twisted irony is that an organization with the words “civil rights” in their title would work so hard to deprive minorities of the ability to choose the schools that work best for their own kids. They’re joined by other defenders of the government school monopoly who are suing to block North Carolina’s nascent school choice program. If these self-proclaimed “civil rights” lawyers really cared about racial justice, they would stop standing in the school house door.

Categories: Policy Institutes

Congress against Budget Reform: Voting to Hike Subsidies for People Who Build in Flood Plains

Cato Op-Eds - Mon, 02/24/2014 - 16:22

Doug Bandow

Uncle Sam is essentially broke.  But the federal government keeps spending.  The House is voting this week on a measure already adopted by the U.S. Senate to suspend money-saving reforms adopted less than two years ago.

In 1968 Congress created the National Flood Insurance Program, shifting the cost of disasters from people who chose to live in flood-prone areas to taxpayers who don’t.  Over time Congress kept cutting premiums.  By 1982 two-thirds of participants received a subsidy.

NFIP turned into foolishness squared.  The first cost is financial:  the federal government keeps insurance premiums low for people who choose to build where they otherwise wouldn’t.  The Congressional Research Service figured that the government charges about one-third of the market rate for flood insurance.  The second cost is environmental:  Washington essentially pays participants to build on environmentally-fragile lands that tend to flood. 

Uncle Sam also has a propensity to spend billions more to rebuild public buildings and infrastructure in flood zones. 

Although not every NFIP beneficiary is wealthy, CRS noted:  “Some critics point out that the costs—financial risk and ecological damage—are widely distributed to taxpayers across the country and the benefits, by contrast are disproportionately enjoyed by wealthy counties and by owners of vacation homes.”

NFIP’s overall liability is $1.3 trillion.  Today total program debt is about $25 billion.  Economists Judith Kildow and Jason Scorse warned that “the flood insurance program is a fiscal time bomb for the government.” 

So disastrous were the program’s finances that even Congress felt the need to act.  In July 2012 legislators approved the Biggert-Waters Flood Insurance Reform Act in an attempt to make the NFIP more accurate, efficient, and solvent.  For different properties rates were increased and subsidies were cut.  Overall, the legislation was expected to save about $25 billion.

The amendment worked—too well.  Insurance bills began increasing.  People used to living well at taxpayer expense complained to their legislators.  Interest groups which profit from property sales also raced to Capitol Hill,  

So now reform co-sponsor Rep. Maxine Waters (D-Ca.) is pushing to delay the reforms until 2018.  Of course, in 2018 no one will be more willing to pay higher premiums, and undoubtedly will again lobby for further relief from Congress.

Explained Waters:  “Never in our wildest dreams did we think the premium increases would be what they appear to be today.”  Her new legislation, backed by a mix of Republicans and Democrats, would bar increases in premiums and reductions in subsidies for some properties, restore earlier subsidies for others, and mandate an “affordability study.”

Said Waters:  “neither Democrats nor Republican envisioned it would reap the kind of harm and heartache that may result from this law.”  She was echoed by Nicholas Pinter, a professor at Southern Illinois University, who advocated reforms but also “compassion for Americans living on flood-prone lands.” 

As I point out in my new article on Forbes online: 

Actually, those people need to be held responsible for their actions.  Compassion should be accorded taxpayers, who have suffered for decades.  Mississippi Commissioner of Insurance Mike Chaney said the NFIP should not make up its shortfall from homeowners who “simply followed the rules.”  But if not them, who?  After all, they received the benefits of the subsidized insurance.

At the end of January, the Senate voted to effectively kill the 2012 reform.  That would “return the program to a state of insolvency,” Shai Akabas of the Bipartisan Policy Center told the New York Times

The Republican House leadership has approved a vote on a companion measure.  Even the White House criticized Congress’ potential U-turn.

In fact, the 2012 measure didn’t go far enough.  Congress should eliminate federally-subsidized flood insurance—entirely.  There is no justification for turning Uncle Sam into a back-stop for wealthy vacationers and other privileged recipients of federal largesse.

Like Uncle Sam, NFIP is broke.  It should be killed, not reformed.  Legislators should start exhibiting compassion for American taxpayers.

Categories: Policy Institutes

The Missing Data in Krugman's German Austerity Narrative

Cato Op-Eds - Mon, 02/24/2014 - 16:07

Daniel J. Mitchell

There’s an ongoing debate about Keynesian economics, stimulus spending, and various versions of fiscal austerity, and regular readers know I do everything possible to explain that you can promote added prosperity by reducing the burden of government spending.

Simply stated, we get more jobs, output, and growth when resources are allocated by competitive markets. But when resources are allocated by political forces, cronyism and pork cause inefficiency and waste.

That’s why statist nations languish and market-oriented countries flourish.

Paul Krugman has a different perspective on these issues, which is hardly a revelation. But I am surprised that he often times doesn’t get the numbers quite right when he delves into specific case studies.

He claimed that spending cuts caused an Estonian economic downturn in 2008, but the government’s budget actually skyrocketed by 18 percent that year.

He complained about a “government pullback” in the United Kingdom even though the data show that government spending was climbing faster than inflation.

He even claimed that Hollande’s election in France was a revolt against austerity, notwithstanding the fact that the burden of government spending rose during the Sarkozy years.

My colleague Alan Reynolds pointed out that Krugman mischaracterized the supposed austerity in the PIIGS nations such as Portugal, Ireland, Italy, Greece, and Spain.

We have another example to add to the list.

He now wants us to believe that Germany has been a good Keynesian nation.

Here’s some of what Professor Krugman wrote for the New York Times.

I hear people trying to dismiss the overwhelming evidence for large economic damage from fiscal austerity by pointing to Germany: “You say that austerity hurts growth, but the Germans have done a lot of austerity and they’re booming.” Public service announcement: Never, ever make claims about a country’s economic policies (or actually anything about economics) on the basis of what you think you’ve heard people say. Yes, you often hear people talking about austerity, and the Germans are big on praising and demanding austerity. But have they actually imposed a lot of it on themselves? Not so much.

In some sense, I agree with Krugman. I don’t think the Germans have imposed much austerity.

But here’s the problem with his article. We know from the examples above that he’s complained about supposed austerity in places such as the United Kingdom and France, so one would think that the German government must have been more profligate with the public purse.

After all, Krugman wrote they haven’t “imposed a lot of [austerity] on themselves.”

So I followed the advice in Krugman’s “public service announcement.” I didn’t just repeat what people have said. I dug into the data to see what happened to government spending in various nations.

And I know you’ll be shocked to see that Krugman was wrong. The Germans have been more frugal (at least in the sense of increasing spending at the slowest rate) than nations that supposedly are guilty of “spending cuts.”

To ensure that I’m not guilty of cherry-picking the data, I look at three different base years. But it doesn’t matter whether we start before, during, or after the recession. Germany increased spending at the slowest rate.

Moreover, if you look at the IMF data, you’ll see that the Germans also were more frugal than the Swedes, the Belgium, the Dutch, and the Austrians.

So I’m not sure what Krugman is trying to tell us with his chart.

By the way, spending in Switzerland grew at roughly the same rate as it did in Germany. So if Professor Krugman is highlighting Germany as a role model, maybe we can take that as an indirect endorsement of Switzerland’s very good spending cap?

But I won’t hold my breath waiting for that endorsement to become official. After all, Switzerland has reduced the burden of government spending thanks to the spending cap.

Not exactly in line with Krugman’s ideological agenda.

P.S. This isn’t the first time I’ve had to deal with folks who mischaracterize German fiscal policy. When Professor Epstein and I debated a couple of Keynesians in NYC as part of the Intelligence Squared debate, one of our opponents asserted that Germany was a case study for Keynesian stimulus. But when I looked at the data, it turned out that he was prevaricating.

P.P.S. This post, I hasten to add, is not an endorsement of German fiscal policy. As I explained while correcting a mistake in the Washington Post, the burden of government is far too large in Germany. The only good thing I can say is that it hasn’t grown that rapidly in recent years.

P.P.P.S. Let’s close with a look at another example of Krugman’s misleading work. He recently implied that an economist from the Heritage Foundation was being dishonest in some austerity testimony, but I dug into the numbers and discovered that, “critics of Heritage are relying largely on speculative data about what politicians might (or might not) do in the future to imply that the Heritage economist was wrong in his presentation of what’s actually happened over the past six years”

Categories: Policy Institutes

Marijuana's Moment

Cato Op-Eds - Mon, 02/24/2014 - 14:58

Tim Lynch

Very good, front page story in yesterday’s Washington Post entitled, “Marijuana’s Moment?

The highlight is a quote from former drug czar, General Barry McCaffrey: “The momentum to treat marijuana as a legal drug is irreversible.”  Wow.  The last time I was on a panel with him was about two years ago and it was quite evident then that the tide was turning, but I expected him to keep fighting.  According to the Post story, the former drug czar no longer accepts invitations to appear on television.  That will save me some time fact-checking him.

Here’s another excerpt from the Post story:

America has been at the edge of marijuana legalization several times during the past half-century, but never as close to mass acceptance of the drug as the nation is today.

Since the 1960s, the United States has traveled on a herky-jerky trip from hippies and head shops to grass-roots backlash by suburban parents, from enthusiastic funding of the war on drugs to a gathering consensus that the war had little effect on marijuana use. Now, for the first time, marijuana legalization is winning majority support in public opinion polls and a drug used by about 6 percent of Americans — and one-third of the nation’s high school seniors — is starting to shake off its counterculture reputation. It is winning acceptance even from some police, prosecutors and politicians.

But is this time really different? Why is the current campaign for legalization resonating when previous ones did not? Today’s leap toward legality is entwined with the financial desperation of cash-strapped states, an Internet-driven revolution in how Americans learn about marijuana and its medicinal uses, and a rising libertarian sensibility in which many liberals and conservatives alike have grown skeptical of government’s role in telling citizens how to medicate themselves.

The momentum is now obvious and it is great to see the drug warriors in retreat, but marijuana is still considered contraband in 48 states and under federal law.  There is still much work to do.  It costs money to start and win initiative campaigns, for example.  It used to be hard to raise money because donors thought it was a hopeless cause.  Now potential donors are making the mistake that legalization is “inevitable.”  The shift in public opinion helps, but it does not assure political action.  To complete the job, friends of legalization need to step up their efforts.  The next state to consider marijuana legalization–by initiative–will be Alaska this summer.

For more info on Cato’s work, go here.

Categories: Policy Institutes

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