Archives: 12/2007

Media Bias

There’s an interesting new blog called The Monkey Cage written by three political scientists at the George Washington University.  Any blog that takes its motto from H.L. Mencken deserves a look from libertarians, even if the authors are not libertarians (I have no idea whether they are or not).

The blog has only been up for a few days, but it already has some interesting posts on voter ID, campaign finance, and negative advertising in campaigns. The authors don’t follow the conventional wisdom on those issues. For example, they praise the work of Cato visiting research fellow John Mueller on the bias in threat assessments of terrorism. (You can find the short version of Mueller’s work here).

One of the group, John Sides, has a concise and interesting post on media bias.

His claim that newspapers are in the business of confirming the prior beliefs of their readers seems accurate, and yet it confirms the original concern (or, at least, a legitimate concern) about liberal bias: responding to readers or viewers leads to a biased or distorted account of reality.

Is there a market for unbiased reporting? You would think so, but perhaps not. Maybe it doesn’t matter. We may just dump media messages, bias and all, into the marketplace of ideas and trust that something like an unbiased political result will come out the other end.

Reading Sides, some might wonder: Why not relieve the media of market pressure as a way of dealing with bias? That prompts another question: Are NPR and the CPB free of political bias in their reporting and analysis?

The post also prompted the following thought: I have worked on the campaign finance issue for many years now and I have never talked to a reporter from major media who doubted any part, much less the whole, of the reform case. Political scientists have not found that campaign contributions have much effect on members of Congress (see the earlier link). But that has not affected the prior beliefs of reporters . One raw assertion of corruption by Fred Wertheimer outweighes a hundred careful studies of the influence of money on politics. That might suggest that how monolithic liberalism is in the media depends on the issue. But still, do reporters favor reform because they are liberal or because they get to write “Look, corruption!” a couple times a week? Or do they favor reform because it tends to suppress accounts of reality and messages that compete with the product offered by their employers? In other words, do they support regulations that confer directly nonproductive deadweight rents on their employers?

Finally, Sides does not discuss the Milyo-Groseclose study of media bias. Maybe he will in future posts.

Thomas Sorensen Avoids High Taxes

The International Herald Tribune does a great job describing tax competition in action in the European labor market.

Young Danes, often schooled abroad and inevitably fluent in English, are primed to quit Denmark for greener pastures. One reason is the income tax rate, which can reach 63 percent.

Denmark has fairly pro-market economic policies, ranking 15 in Economic Freedom of the World, and is enjoying solid economic growth. However, “success has given rise to an anxious search for talent among Danish companies, and focused attention on émigrés like Sorensen…The problem, employers and economists believe, has a lot to do with the 63 percent marginal tax rate paid by top earners in Denmark - a level that hits anyone making more than 360,000 Danish kroner, or about $70,000.”

The high taxes are driving out young and skilled Danes, many to London.

Danish taxes also contrast sharply with those in nearby London, often jokingly referred to among Danes as a Danish town, because so many of them live there. Lower taxes on high earners have been a centerpiece of the policy mix that has fed the rise of London as a global financial center since the 1980s.

Second Video Experiment

Many of you were kind enough to comment on the first video I narrated, which discussed the importance of a more competitive corporate tax system. Because of popular demand (perhaps a slight exaggeration), a second video has been released. This one discusses the vital role of tax competition as a constraint on government. Based in part on your suggestions, this new video was filmed in a real studio with professional equipment. And I even put on a coat and tie since a few people thought the casual look detracted from the message in the corporate tax video.

The message, of course, is what really matters in these videos. Regular readers of Cato-at-liberty surely have noticed that Chris Edwards and I regularly comment on the dramatic tax policy changes that are taking place all over the world. We would like to claim that this is because politicians are reading our papers, but a bigger factor is tax competition. Simply stated, because of globalization, it is much easier for the geese that lay golden eggs to fly across the border. This means governments are being forced to lower tax rates and reform tax systems.

This video, as well as a book that Chris and I are writing, explains this liberalizing process. But it’s not all good news; both the video and our future book warn that statist politicians want to curtail tax competition.

I would be very interested in receive feedback on this new video. Is the message compelling? Are footage and graphics being used effectively? Any thoughts or suggestions would be welcome.

We’re from the Government, and We’re Here to Help You Buy a House

There has been some good analysis of this week’s much-hyped agreement between the U.S. Treasury Department – which facilitated the meeting, we are told, but didn’t use any form of coercion – and mortgage lenders to bail out assist homeowners in danger of being slammed with a much higher monthly payment on their subprime mortgage come January. But there are some elements of the deal that haven’t been greeted with much skepticism – or, indeed, haven’t been reported much at all.

For starters, Treasury secretary Henry Paulson insists the agreement won’t cost taxpayers money. What he really should have said is that it won’t cost federal taxpayers money. But it might cost state taxpayers money. The White House will push Congress to let state governments issue tax-free bonds to fund programs that help homeowners refinance their mortgage. Those bonds have to be paid off by taxpayers some day. I usually like federalism, but this is not the sort I’ve grown to love.

Another part of the deal is to allow the Federal Housing Administration to expand its programs and help refinance 200,000 mortgages. As Paulson reminded reporters, the administration is asking Congress to increase the ceiling on the amount of FHA loans and lower the down-payment requirements to below the current rate of 3% of the home price. And here I was thinking big loans that were handed out with little or no money down were part of what got us into this problem in the first place. Silly me.

Nor is it really clear that the administration’s approach here won’t actually cost federal taxpayers money, either. The proposal allows the FHA to charge loan insurance premiums based on risk, like private lenders do. Currently, all FHA mortgage holders – at a high-risk of default or not – are charged the same amount.  You realize this is a much-needed change when you discover that currently the FHA is running deficit of $143 million because so many of its loans have gone bad and the premiums it collects from all loans isn’t enough to cover the losses. But, as Bloomberg News reports, the post-refinancing default rate of the subprime loans that the White House now wants the FHA to play with could be between 40 to 60 percent.  Taxpayers might get stuck paying for these loans after all.

The implicit theme of these proposals is that Uncle Sam might just be better at this mortgage business thing than the private sector. I guess it might be tiresome to insert a joke here about the U.S. Postal Service, eh?

Scientists to World: Cut Greenhouse Gases Now! World to Scientists: Zip It!

Yesterday, 215 scientists released a petition in Bali - site of a global confab to talk about whether and how we should talk about a future treaty to reduce greenhouse gas emissions - that “begs” the world to cut greenhouse gas emissions in half by 2050. I was quoted in an AP story on the matter to the effect that scientists are in no position to intelligently dictate such a policy. And as expected, some in the blogosphere howled.

I do not believe in leaving public policy to “guys in white coats” - in any discipline. And that’s not necessarily a proposition that vitiates against environmentally-friendly public policy. Climate scientists do not have the training to tell us whether the costs associated with reducing greenhouse gas emissions are less than, equal to, or greater than the costs of business as usual. And that’s something you would want to know before signing off on greenhouse gas emission reductions. When climate economists have explored that matter, they find little to support such emission reductions even if we accept the prognostications about the future coming out of the IPCC.

Likewise, economic calculations about the same are heavily predicated on how you feel about future costs and benefits. If you believe in valuing dollars and lives in, say, 2150 as much as you value dollars and lives today, then it’s hard to accept IPCC reports and not conclude that GHG emission cuts pass a cost-benefit test. If you apply a discount rate of, say, 3, 5, or 7 percent, then it’s hard to accept IPCC reports and not conclude that GHG emission cuts don’t pass a cost-benefit test. But how you value the future is subjective, and economists have no objectively “better” preference regarding that matter than you or I.

Many have argued that we should value our great grandchildren’s lives and money as much as we value our own. Fine - there is nothing objectively wrong with that belief. But if you do, hand in your Rawlsian membership card. That’s because you’re endorsing a policy that will transfer wealth and well-being from the relatively poor (us) to the very rich (them). That is, even if the Stern Review is correct about the economic costs of climate change, real per capita income in developing countries will be higher than that of the developed world today by 2100. Moreover, if you value the future every bit as much as you value the present - and thus embrace, say, a 0.1% discount rate - then simple math suggests you ought to be saving just about everything you earn.

I do not believe that “the experts” in any field should be dictating climate policy because there are plenty of important value judgments built in to those policies and experts however defined have no objectively better values than you or I. I do believe, however, that any serious reflection on the ethics of reducing greenhouse gas emission will find that the case for such a policy is harder to make than you might think, even if you accept what the IPCC is telling us.

Supreme Court and GITMO (Part 2)

Because of widespread interest in yesterday’s Guantanamo case, the Supreme Court released the audio of the oral argument.  Since Justice Anthony Kennedy is considered to be the deciding vote in what will be a 5-4 decision, I thought the most interesting and perhaps pivotal moment came at the very end of the oral argument.  If you have any interest in this debate at all, click on the audio link above and then skip to the good part at the 1 hour, 21 minute mark and just listen to the final three minutes. 

Justice Kennedy asks a question and attorney Seth Waxman begins his response, explaining the “Kafkaesque” procedures that are supposed to be a “substitute” for the writ of habeas corpus.  But then Waxman’s alloted time expires! Had the late Chief Justice William Rehnquist been presiding, he would have immediately pounded his gavel and thanked the attorneys–even if Waxman had been in mid-sentence.  Very strict about the clock, among other things. Fortunately, Chief Justice John Roberts was presiding–because he allowed Waxman an extra minute to complete his powerful closing argument in response to Justice Kennedy’s question.

Previous coverage here.  Podcast here