Archives: April, 2007

Convoluted and Confused: Yet More Leonhardt-Bashing

Are we libertarians so cranky about David Leonhardt’s review of Brian Doherty’s Radicals for Capitalism because he really hit us where it hurts? No. We’re cranky because the review truly is astonishingly clueless. As big government conservative Ross Douthat puts it:

As I said, I hold no particular brief for libertarians, but as evidence that they have a particularly noteworthy “soft spot” for tyranny (compared to whom? the New York Times?), this [i.e., Friedman’s hour with Pinochet; Rothbard’s electoral flightiness; Rand’s HUAC testimony] is thin stuff indeed, and it feels like a lazy book reviewer’s attempt to find some bones to pick with a movement he doesn’t know all that much about.

Lazy and ignorant, yes. But also convoluted and confused! In his embarrassingly incoherent penultimate paragraph, Leonhardt fires away completely indiscriminately in an attempt to score some kind of hit (why the effort, anyway?) by mentioning obscure anti-Semites actual libertarians have never heard of, airing completely baffling claims about Bush’s “free-market approach to rebuilding Iraq,” and making representations about Cato’s stance on global warming that should get the fact-checker fired (if the Times used one). But David Boaz and Gene Healy have touched on all this below. So let me address this choice bit from Leonhardt:

In fact, across a range of major issues — energy policy, health care, retirement savings — a hybrid form of laissez-faire capitalism and collectivism seems to be ascendant. The market will be allowed to work its efficient magic, but government will step in to correct the market’s failures. “Libertarian paternalism” is the name two University of Chicago professors, Cass Sunstein and Richard Thaler, have devised for one version of this philosophy.

Many of the purists who populate “Radicals for Capitalism” would surely hate an idea like libertarian paternalism. But they also might understand that they helped to make it possible.

Now, Leonhardt is right that libertarians have helped make the popularity of “a hybrid form of laissez-faire capitalism and collectivism … ascendant” by making it completely intellectually discreditable to argue for collectivism unleavened by markets. He seems to think he’s making an interesting or relevant point by observing that Sunstein and Thaler have used a pattern of shapes that happen to spell the word “libertarian.” As I’ve pointed out before, this has nothing to do with libertarianism, the idea, and is little more than a spoonful of orthographic sugar to make their old fashioned paternalist medicine go down. Leonhardt also makes it sound as if “market failure” arguments are some kind of sexy new intellectual discovery that give the lie to full-on free marketeers and have breathed fresh life into the fusty old political philosophy of regulatory control by political elites. But, no.

Market efficiency does count as “magic,” as Leonhardt puts it – if the solidity of mostly empty-space matrices of molecules count as magic, that is. It’s just the way the world works, and minimally well-educated people know it. Magic surrounds us! That freely-set prices in well-ordered markets efficiently coordinate human cooperation and enable large surpluses from trade – that markets facilitate human prosperity – is an empirical fact now well-understood by anyone worth listening to about economics, politics or policy. That so many intellectuals (so many economics reporters?) still don’t understand how or why market coordination works, and don’t feel ashamed by their ignorance, shows just how far we have still to go.

A key to understanding market coordination is understanding that dynamically self-correcting systems need a steady stream of reliable feedback, which is what shifting market prices provide. If more people understood this, more people would be prepared to ask: Do policymakers in democratic governments generally receive the kind, quality, or volume of informational feedback they would need to spot and fix market failures – that is, to reliably spot genuine “market failures,” to devise the policies that would in fact correct them, to implement those policies in time, to assess accurately whether the policies are working, and to revise or remove them as circumstances change? Do democratically elected politicians generally receive the kind of feedback they would need to be motivated to do all that, even if such feedback mechanisms did exist? Do they get the feedback they would need to be motivated to appoint bureaucrats who would be motivated to make use all that information? Etc., etc. If the answer to each those questions is “Yes,” then why are we in Iraq, for example? If the answer to those question is “Yes,” then our world contains magic indeed.

Government initiatives often need a lot of magic to work, which is why they so often don’t – which is why there is so much government failure. However, part free-market, part statist chimeras don’t always need magic to fly, since markets can haul a lot of dead weight, if they are free enough. But what should we call the belief that we would all fly higher if only government could work more of its sandbagging magic? The audacity of hope. The extent to which “hybrid” energy, health, and retirement policies are going to be improved is the extent to which the government takes steps to stop banning certain kinds of markets – like dynamic spot-price markets in electricity, or real risk-sensitive insurance markets for health care.

As Brian Doherty’s book makes abundantly clear, libertarians have done more than anyone else over the past century to explain to the world how and why people flourish when we limit the institutions of coercion and legalize the institutions of free association and free exchange. No other major American political movement has such a clean conscience, such un-dirty hands. Leonhardt’s confused and aimlessly belligerent review should remind us that Doherty’s inspiring short history is only a beginning.

Sandy Berger, Music Fan?

Someone, most likely an aging baby boomer with sticky fingers, has been lifting CDs from the music library at the Voice of America, which uses them for its radio shows. Looks like an inside job. The library is open only to employees. The M.O. is that the person goes into the stacks and takes the CD but leaves the plastic case.

The thefts were noticed recently when someone tried to check out a Judy Collins disc but found only an empty case. In fact, the entire Collins collection is gone. A check of other collections showed that Peter, Paul & Mary and Bob Dylan recordings were also missing.

Washington Post, April 2

The USTR Pulls An All-Nighter

With only minutes before a key deadline, the Bush administration formally notified Congress last night that a deal had been reached with South Korea on a free trade agreement. The Office of the United States Trade Representative’s press release (which contains not many details and plenty of the usual mercantalist, all-exports-all-the-time rhetoric) can be viewed here.

As expected, rice was not included in the agreement. Korean negotiators had been adamant that rice, an extremely sensitive (i.e., protected) sector in Korea, was not on the table for negotiation and that a deal would be impossible if the United States insisted on pushing for access to the Korean rice market. On that basis, the Americans evidently decided to drop the rice issue.

Rice was never so much a concern, though, as beef. U.S. beef has been denied access to Korea on food safety grounds since late 2003, when BSE was found in beef originating in Canada. Although the issue was not formally part of the FTA negotiations, and thus was not resolved in the agreement itself, it has the potential to scupper it if lawmakers link their approval of the deal to resolution of the beef dispute. Sen. Max Baucus (D-MT), chair of the Senate Finance Committee, has made it clear that his support for the Korean FTA depends on a full re-opening of the Korean market to U.S. beef. (The Ranking Member of that Committee, Sen. Chuck Grassley (R.-IA), was somewhat more measured in his comments).

Similarly, Sen Debbie Stabenow (D-MI) sees that reducing Korean tariffs (albeit over a long phase-out period for trucks) on U.S. autos and a “restructuring” of the Korean auto tax structure is not enough: her press release insists that she will “do everything in [her] power to defeat this agreement and ensure that any future fast-track authority includes provisions guaranteeing that American businesses and workers can get a fair deal”. Sen. Stabenow does not say what specific measures would assuage her concerns, although one suspects that she is offended at the USTR’s refusal to specify minimum guaranteed sales targets.

In short: yes, the USTR met the deadline of concluding the deal so that it can be considered under fast-track authority. But its passage is far from secured.

More broadly, though, the statements of these lawmakers, especially if it is a taste of what is to come, should worry free-traders everywhere. While bilateral and regional trade agreements are, at best, only the third most optimal way of liberalising trade, the deal between South Korea and the United States was one of the more worthwhile agreements of this administration. And if Congress is going to base support for agreements on its ability to manage trade in certain sectors, then the trade agenda is in serious trouble.

A Reply to Ornstein and Corrado

The fifth anniversary of the Bipartisan Campaign Reform Act (also known as BCRA or McCain-Feingold) has arrived, and two of its defenders, Norman Ornstein and Anthony Corrado, took to the pages of The Washington Post yesterday to counter “a widespread view that BCRA did not work, that campaign reform has been a failure.”

They argue that McCain-Feingold has led to “the spectacular resurgence of political parties.” But the political parties were not in decline prior to 2002. They had been reviving since at least the mid-1990s, in part because of the resources that came from party soft money. Ornstein and Corrado say many people thought BCRA would hurt the parties. But, they say, that did not happen. Evidence? “In the two elections held before BCRA, the national parties raised a total of $2.1 billion, nearly half of it in unregulated ‘soft money’…In the two elections since, the parties raised exactly the same amount, but all in ‘hard money.’”

Notice the trick here. Ornstein and Corrado are comparing party fundraising in 2006 to party fundraising in 2002. They show that under BCRA in 2006 the parties raised as much hard money as they did soft and hard money in 2002. But that’s not what we want to know! We want to know whether the parties raised as much or more money in 2006 under BCRA as they would have in 2006 without BCRA. If they did, BCRA didn’t have much effect on fundraising.

As it happens, total party soft money fundraising doubled from mid-term election to mid-term election from 1992 onward. In 2006, the parties would have raised an additional $500 million in party soft money if BCRA had not passed. To be sure, some of the soft money that would have been raised turned up as hard money contributions to the parties in 2006 or as contributions to 527 groups. Even taking those into account, I suspect the parties would have raised  at least tens of millions of dollars more in 2006 if BCRA had not banned soft money fundraising. So it is not accurate to say that “our parties are richer.”  

According to Ornstein and Corrado, BCRA also made the parties “stronger at the grassroots,” citing party building and get-out-the-vote efforts. Yet in 2004 it was 527 groups (whose funding is not covered by BCRA) who supported the organizations that got out the Democratic vote in battleground states. By law, the 527 efforts could not be coordinated with the parties. As a result, the multi-million dollar contributions by George Soros and others did nothing to build up the Democratic party. In fact, many observers think the disjunction between the 527 get-out-the-vote effort and the Democratic party organization hampered Sen. Kerry’s presidential bid. As for party building, Howard Dean, the current head of the Democratic party, wanted to build up his party in 2006 even in states where Democrats had done poorly in the past. Dean’s party building effort came up short for lack of money. Had the Democrats been able to raise soft money, they would have had enough to both fight the 2006 election and build up their party across the board.

Ornstein and Corrado credit BCRA for a purported rise in small donors to the parties. By cutting off soft money, they imply, BCRA forced the parties to find small donors. They ignore two other factors. The Internet cut the cost of finding contributions and of making contributions. Meanwhile, the Iraq war and rising party competition mobilized donors and voters who otherwise might have stayed on the sidelines.

Our authors then confront the question of incumbent protection, an argument they associate with Newt Gingrich. They note that 22 House incumbents and 6 Senate incumbents lost in 2006. Ornstein and Corrado do not note that all 28 of those losing incumbents were Republican which might suggest a national wave of unhappiness directed at GOP candidates. BCRA did not offer enough incumbent protection for those 28 former members of Congress. But that does not prove that the Democratic wave of 2006 might not have been stronger in the absence of BCRA. As I argued earlier, their leaders believe the Democrats left 15 to 20 House seats on the table in 2006. Without BCRA, they would have had more party soft money to have pursued those 15 to 20 seats. Campaign finance regulations protect incumbents in more ways than one.

The effects on Democratic candidates and the Democratic party are important. 90 percent of congressional Democrats voted for BCRA. They believed the law would help Democratic candidates and their party. If we are honest, that partisan outcome was a leading, if not the primary, purpose of BCRA. (If you doubt that, ask the congressional Republicans of 2002: 80 percent of them voted against BCRA). So the question lingers: if Democrats ended up with less money and fewer House seats with BCRA than without it, was the law a success for Democrats in Congress and in the nation at large?

Ornstein and Corrado try hard to deflect this question. They identify opposition to BCRA with Republicans, conservative activists, and ideologues. Their Democratic readers are supposed to think, as they always have thought: Ick! Who wants to agree with stupid and evil people like that! Especially about money in politics. 

But that rhetorical gambit, like much of campaign finance “reform,” has grown stale. It’s not just the opponents of liberalism who are having doubts about Sen. McCain and his handiwork. I am certain that the smart, tough people who run Democratic congressional campaigns know BCRA cost the party seats. An important left-leaning expert on campaign finance has raised questions about the failures of the law. He also reports that the foundations that gave over $100 million to lobby for BCRA are wondering why they did so. That’s a lot of money for so little in return.

Not surprisingly, Ornstein and Corrado omit other consequences of BCRA. The law prohibited broadcast advertising within sixty days of a general election for a motion picture criticizing the current president of the United States. It also prohibited advertising within that time frame urging citizens to contact their representatives in Washington (if those representatives were running for re-election). We have no idea how much political speech was suppressed by BCRA’s ban on some issue ads.

BCRA’s prohibitions also fostered money moving to 527 groups followed by a regulatory push to eliminate such groups. If 527 groups are done away with, money may well go to nonprofit groups which will be followed by efforts to tightly control the political activities of such groups. BCRA has brought under state control a larger part of private political activity than ever before; it has also fomented a regulatory push that may yet deeply invade what’s left of private financing of political struggle.

The authors also omit BCRA’s failure to live up to the promises made by its supporters on the floor of the U.S. Senate. (I document these goals in the first chapter of The Fallacy of Campaign Finance Reform). BCRA did not restore public confidence in government, largely because campaign finance regulations have nothing to do with trust in government. It did not prevent corruption among several Republican members of Congress (and perhaps, one Democrat).

Ornstein and Corrado suggest the law reduced the number of negative ads. But that’s pure speculation. Judging by the complaints of the “reform community,” campaigns remain as negative as ever. Of course, negative advertising is good for American democracy, and in any case, advocates always said campaign finance regulations concerned money and not the content of speech. If BCRA really sought to improve the content of speech, doesn’t that mean the law violated the First Amendment from the start?

BCRA has had three other results, each hopeful in its own way.  

BCRA has had random political effects. People on the left, who generally support such restrictions on money in politics, discovered they too could be “reformed.” This discovery may reduce support for future restrictions on speech.

The law also fostered a successful bipartisan coalition against campaign finance regulation when BCRA’s defenders tried to regulate and restrict political speech on the Internet. Perhaps the Internet will remain a speech zone free of campaign finance regulation.

The law also appears to be a major obstacle to Sen. John McCain’s quest for the Republican presidential nomination. Perhaps in the future ambitious politicians will consider the electoral costs of supporting restrictions on speech. Emerging presidential candidate Fred Thompson, who voted for BCRA now says: “I wonder if we shouldn’t just take off the limits and have full disclosure with harsh penalties for not reporting everything on the Internet immediately.”

Neither misleading numbers nor rhetorical gambits can change the reality that BCRA has failed its supporters and the nation. Perhaps a new start with money and politics, one more mindful of the First Amendment, is in order.

April Fool’s Dud

Over the weekend, I put an April Fool’s Day post up on Tech Liberation Front, indicating a security breach in the NAPHSIS EVVE system.  It was almost instantaneously debunked by a commenter.  Thank you so much, blogosphere … .  The post was intended to illustrate some issues with identification-based security and the REAL ID Act.

The National Association for Public Health Statistics and Information Systems has developed and implemented the Electronic Verification of Vital Events system to allow immediate confirmation of the information on a birth certificate presented by an applicant to a government office anywhere in the nation irrespective of the place or date of issuance.

That sounds neat, but it is being incorporated into the REAL ID national ID system apparently without regard to the security issues involved. If we are going to use driver’s licenses for security purposes, each link in the chain of issuance is then a potential vulnerability.

What if the NAPHSIS EVVE system and others like it were compromised and made to confirm the issuance of birth certificates that didn’t actually exist? We could have untold numbers of licenses issued based on fraud. The system we have now, which provides a modicum of security, could collapse as fraudulently acquired driver’s licenses proliferate.

Two weeks ago, at the meeting of the Department of Homeland Security’s Data Privacy and Integrity Advisory Committee, I asked Stewart Baker, Assistant Secretary for Policy at DHS, what counter-measures might be employed by attackers on the REAL ID national ID system. He said, “We have done some thinking about that …” I’m not sure our confidence should be inspired.

Every weakness in the system should be explored carefully. I summarized some of them in Appendix A of my testimony at the Homeland Security and Governmental Affairs Committee last week.

Reviewing That Review

As David Boaz amply documents below, there are many irritating features to David Leonhardt’s NYT book review of Brian Doherty’s Radicals for Capitalism.  One that particularly stood out for me, however, was Leonhardt’s insinuation that libertarianism is partially to blame for the unfolding disaster in Iraq.  In a paragraph intended to catalogue libertarianism’s current political difficulties, Leonhardt writes that Bush’s “free-market approach to rebuilding Iraq has proven disastrous.”  Now, if there is a properly “free-market” approach to bombing, invading, and occupying countries that don’t threaten us, I’m unaware of it. 

Perhaps Leonhardt is referring to Paul Bremer’s 2003 refusal to reopen state-run factories.  But the line suggests a broader attempt to hang the biggest foreign policy disaster in 30 years around libertarians’ necks.  Nice try.  The Iraq mess is the product of an ideological joint venture between neoconservatives and liberal hawks.  Libertarians, in the main, opposed it.  The American Prospect’s Matt Yglesias–who’s no libertarian–understands this far better than Leonhardt.  As Yglesias put it a while back:   

the notion that anything even remotely resembling libertarianism could underwrite an effort to conscript huge quantities of resources from the American public and deploy them in an attempt to wholly remake the social and political order in a foreign country is too absurd to merit a rebuttal. This is an argument properly directed at egalitarian liberals, and we have reason to be asked to produce some specific arguments about why the dim prospects for succeeding at this were ex ante knowable (such arguments can, I think, be fairly easily produced) and/or why, given the opportunity costs, nation-building in Iraq was not a wise place to deploy the resources in question (this argument, I think, can be produced very easily). As long as the conversation is supposed to be proceeding on the shared basis of libertarianism, however, one hardly needs to say anything. It’s coercion, it’s planning, it’s every non-libertarian thing under the sun.

And as long as we’re passing out blame for the Iraq War, don’t forget that Leonhardt’s employer, the Grey Lady herself, deserves a large chunk.