Archives: 02/2008

Land-Use Regulation and the Credit Crisis

“I am sick of everyone blaming the breakdown in the credit and housing markets on subprime loans,” says D.C.-area homebuilder Michael Hill in the Washington Post. Subprime mortgages were only a symptom of the real problem, which is unaffordable housing.

But what made American housing unaffordable? Hill is silent on that question, but University of Washington economist Theo Eicher knows the answer: land-use regulation. As reported in the Seattle Times, Eicher has just completed a study showing that land-use planning is adding hundreds of thousands of dollars to the cost of homes in many states.

Eicher’s research confirms my recent Cato policy analysis, The Planning Tax, which shows that growth-management planning has made housing unaffordable in a dozen or so states, particularly Hawaii, California, Florida, Maryland, Oregon, Washington, and most of the New England states. Meanwhile, housing remains pretty affordable in most other states, including the fast-growing states of Georgia, North Carolina, and Texas, because land-use planners have not yet seized power in those states.

In many cities, Eicher’s estimates of the cost of planning are very close to mine. For example, he estimates planning added $200,000 to the cost of a home in Seattle; my estimate was $180,000. For a detailed discussion of the differences between our two studies, see my blog, The Antiplanner.

Research by Harvard economist Edward Glaeser has shown that land-use regulation not only drives up housing prices, it makes them more volatile too — more prone to crashes. It was just such a bubble and subsequent crash in property markets that has laid the Japanese economy low for more than a decade.

Sadly, planning advocates are trying to convince legislatures and city councils in most states that don’t have growth-management planning to pass such legislation and write such plans. Those plans not only deny the American dream of homeownership to low- and moderate-income families, they put the U.S. economy increasingly at risk of a Japanese-style crash.

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Even the Washington Times Says Bush Is Wrong about FISA

This is pretty cool. Not because it quotes me (although that’s pretty cool too), but because it’s the Washington Times, which is occasionally criticized for the right-ward slant of its news coverage, running an article that basically says that that President Bush and his allies in Congress are wrong about FISA:

Many intelligence scholars and analysts outside the government say that today’s expiration of certain temporary domestic wiretapping laws will have little effect on national security, despite warnings to the contrary by the White House and Capitol Hill Republican leaders.

Of course, this has been true all along. There wasn’t an emergency last August when Congress was stampeded into passing the Protect America Act. There wasn’t an emergency last month when the two-week extension got passed. And nothing catastrophic is happening now that the PAA is lapsing. But as long as the president said there was an emergency and the Democrats acted like there was an emergency, journalists weren’t going to say otherwise. When both “sides” of a dispute agree on some point, most journalists will simply accept that point as valid and don’t dig any deeper.

Now that House Democrats are willing to forthrightly state that the expiration of the PAA isn’t a big deal — and act like it’s not a big deal — journalists suddenly have to do their homework and find out who’s telling the truth. And once they do their research, it’s not hard to figure out who’s got the better argument.

Sometimes, good policy is good politics. I think this is one of those cases. If the House leadership capitulates to the president in the next few weeks, it will reinforce the impression that the president was right all along, and we really do need to sacrifice Americans’ privacy in order to fight terrorism. If, on the other hand, House Democrats refuse to enact legislation that undermines judicial oversight or the rule of law, it will cause journalists to write stories like this one, that dig deeper into the arguments of each side. Since in reality, the argument for eviscerating FISA is built on little more than distortions and alarmist rhetoric, that heightened scrutiny will only help those who believe in the rule of law.

Did the CBO Just Blow a Hole in HillaryCare 2.0?

Sen. Hillary Clinton promises to “reduce the geographic variation in care” provided to Medicare beneficiaries. That’s code for government rationing — i.e., giving seniors in high-spending regions less medical care. That may or may not be a bad thing. For one, it may not affect seniors’ health. But the Congressional Budget Office today released a report that may take the wind out of the sails of many variation-reducers.

Some argue that the driving force behind this variation in medical spending is Medicare’s fee-for-service payment system, which gives doctors an incentive to do more stuff. Some doctors just appear to get carried away by that incentive.

Opponents of fee-for-service payment argue that global budgets and capitation — such as exist in the Veterans’ Health Administration — would reduce unwarranted variation in medical spending by eliminating the financial incentive to over-treat patients.

Enter the CBO report, which states:

It appears … that the centrally budgeted VA system does not display much less geographic variation in spending than is exhibited in the unbudgeted Medicare program … . In addition to exhibiting geographic variation in spending, the VA system shows substantial variation in patterns of clinical practice despite the fact that VA’s management tracks providers’ compliance with national guidelines for the treatment of many medical conditions … . The implication is that local norms can influence practice patterns, even in a relatively centralized system that places a strong institutional emphasis on adherence to clinical guidelines for care.

Egad, could this mean that unwarranted variation would persist even under a single-payer system? Or that government planners can’t control doctors as much as proponents of planning claim?

Perhaps. But it also means that the less-stringent payment reforms that Sen. Clinton proposes — “pay-for-performance” financial incentives that work within Medicare’s fee-for-service payment system — aren’t likely to make a dent in unwarranted variation.

Gingrich Conflates Meaning of Indigo vs. Cobalt

Electoral scholars and pundits appear to be reaching consensus that the Democratic nomination could very well be decided by the superdelegates. Writing in today’s New York Times, AEI scholars Thomas Mann and Norm Ornstein project that neither Obama nor Clinton is “likely to come close to the 2,025 delegates needed to win the nomination” from their pledged delegate counts. The key to the nomination, they write, is winning enough support from the 796 superdelegates.

Even though Democratic Party insider and superdelegate herself Donna Brazile said on CNN, “If 795 of my colleagues decide this election, I will quit the Democratic Party,” Mann and Ornstein express faith that the superdelegates will fulfill their purpose and produce a candidate behind whom Democrats will unify. At this point, anyway, that process seems more likely to produce bitterness than unity.

Meanwhile, on the pages of today’s Wall Street Journal, Newt Gingrich opines that, given the seeming stalemate, the only way to produce a legitimate Democratic presidential candidate is for the party to permit Michigan and Florida to hold do-over primary elections. Excluding those states’ delegations from the nominating process or including them and awarding the majority of those delegates to Clinton (who won those technically-meaningless-at-the-time elections after breaking her pledge not to campaign there) boils down to a choice between disenfranchising voters in two states or allowing party insiders to run roughshod over the nominating process. That, Gingrich claims, would constitute a “tainted or stolen” nomination, which would potentially “delegitimize the election itself and its outcome.” Gingrich implores: “The voters — not the party insiders — have the moral authority to choose the nominee.”

I agree with Newt that voters have the moral authority (and having primary elections in the first place honors that truth). But this is an issue between and among a group of people called Democrats, who are members of the same political party by choice. This is a nominating election, which is administered according to party rules, which have been agreed to — at least tacitly — by all party members. One of the rules is that there are superdelegates, whose opinions carry more weight then Joe and Jane Democrats’.

In the cases of Florida and Michigan, party rules were broken and consequently, members’ privileges were revoked. Voters haven’t been disenfranchised; party members have been disciplined.

How the issue is “resolved” will say nothing about the legitimacy of the general election and its outcome. How could a McCain victory in November be delegitimized by Democratic Party nominating procedures? Even more to the point, how could a Clinton or Obama victory in November be delegitimized when the proper rules and processes yield either her or him as the party’s nominee?

The best way to “resolve” the issue is to stay the course.  Rules are in place to guide the process. That doesn’t mean there won’t be discord; there probably will be. But changing the rules now, at this late date, to avoid implementing the original party nominating rules would be the real scandal.

2008 Looking to Be a Bountiful Harvest of Dumb Foreign Policy Ideas

It’s only the day after Valentine’s Day, but we’re already looking at a pretty solid year in terms of dumb foreign policy ideas emanating from the renowned Foreign Policy Community. The newest entry, coming on the heels of the announcement of our ginormous, wasteful defense budget is the new push to expand the nation-building office in the State Department. Robin Wright gives us a peek through the keyhole in the WaPo, opening the article with her tongue appropriately in cheek:

Are you a road engineer who speaks Urdu? A city planner fluent in Arabic? Maybe a former judge who happens to know Pashto and seeks foreign adventure?

Right. It’s really a shame, because all of the former judges I know familiar with Islamic jurisprudence are actually speakers of Turkic languages. (Kidding.) The point here is that for a federal government that can only scrape together 50 Arabic speakers to work as FBI agents, it’s a little nutty to think we have the requisite skill-sets to staff a nation-building office. (Maybe we should just take people off translating suspected terrorist documents to do some work on irrigation and urban planning? Please.)

Wright then turns to the unfortunate substance of the (non-)debate over the new policy:

The 2009 budget calls for $248 million for the program, up from $7.2 million in the 2007, he said.

The idea of an emergency civilian corps has had mixed congressional reception since State’s Office of the Coordinator of Reconstruction and Stabilization (CRS) was created in 2004. Herbst so far has fewer than 90 people who have been deployed in small teams to Afghanistan, Chad, Haiti, Iraq, Kosovo, Lebanon, Nepal, Sri Lanka and Sudan.

Under the new budget proposal, the CRS nucleus would grow to a 250-person Active Response Corps pulled from U.S. agencies, including Agriculture, Commerce, Justice and Treasury. It would include city planners, economists, port operators and correction officials, Herbst said. They would undergo months of training. Their mission would be to deploy within the first 72 hours of a U.S. military landing. As much as 80 percent of the team would be dispatched for as much as one year.

“We are proposing shifts across our civilian agencies that will bring all elements of national power to bear in the defense of America’s vital interests,” Herbst told Congress.

The second group would be a roughly 2,000-strong Standby Response Corps, again pulled from all branches of government and having the same diverse skills. They would train for two or three weeks a year and would be the second group to deploy in a crisis. Between 200 and 500 would deploy within 45 to 60 days of a crisis onset, Herbst said in an interview.

The third group is the Civilian Reserve Corps of about 2,000 that would be pulled from the private sector and state or local governments, much like the military reserve. Its members would sign up for a four-year commitment, which would include training for several weeks a year and an obligation to deploy for as much as one of the four years, Herbst said.

This is a recipe for disaster. As Chris Preble and I pointed out more than two years ago, “the overwhelming majority of failed states have posed no security threat to the United States.” Further, we argued, “attacking a threat rarely involves paving roads or establishing new judicial standards.” Accordingly, as Ben Friedman, Harvey Sapolsky, and Chris (the guy’s a busy man!) pointed out in a paper released Wednesday, the best policy response to this reality is “a wise and masterly inactivity in the face of most foreign disorder.”

As usual, the U.S. government finds itself running, not walking, in the opposite direction from reality.

Two Sides of the Rule of Law Coin

The president has argued that “[i]f these companies are subjected to lawsuits that could cost them billions of dollars, they won’t participate. They won’t help us. They won’t help protect America.” Pretty scary stuff. But as Kurt Opsahl at EFF points out, if this is an accurate reflection of the telecom companies’ position (and it’s quite possible the president is misrepresenting their position), it’s little more than blackmail. It suggests that the telecom companies would hold the nation’s security hostage for a get-out-of-jail-free card.

Kurt also points out that complying with judicially-issued warrants isn’t optional. The intelligence community isn’t reliant on the goodwill of the telecom industry to ensure compliance. A company that refuses to participate in a lawful eavesdropping program would be ordered to do so by a judge and held in contempt if it refused. So there’s no reason to worry about the telecom companies “not cooperating.” Judges will compel them to cooperate if they’re legally required to do so.

In a sense, complying with lawful surveillance requests and refusing to comply with unlawful ones are two sides of the coin called the rule of law. It’s outrageous that a company would voluntarily violate its customers’ privacy when the law prohibits them from doing so. It would be equally outrageous for a company to refuse to cooperate after the government had gone through the appropriate legal channels. We don’t want decisions about who gets spied on to be subject to the whim of either the president or telecom executives. That’s why we entrust that decision to judges, who are knowledgeable about the law and insulated from corrupted influences.

Meet the New Boss, Same as the Old Boss

In his final press conference as Russian president, Vladimir Putin made clear yesterday that as prime minister he has no intention of playing second fiddle to his chosen successor, Dmitry Medvedev. “I have been president for eight years and worked pretty well. I won’t need to hang his portrait,” he remarked.

Putin added: “The highest executive power in the country is the Russian government, led by the premier.” One can’t imagine any of his prime ministers saying that and getting away with it during his presidency. He also made it clear he will remain prime minister throughout Medvedev’s turn in office, or for as long as “I am meeting goals that I myself have fixed.”

As if to emphasize that Putin will remain the real boss in the Kremlin, Russia’s new ambassador to NATO, Dmitry Rogozin, told the Financial Times, “Putin’s role will be as strong as ever.” Closely linked with Putin, Rogozin, a well-known nationalist politician, can even sound like the bullish outgoing president. Asked in the interview about Japan’s protest this week over a Russian bomber violating the country’s airspace, Rogozin joked: “It’s been a long time since the Japanese have seen the Russians in the air. They got quite a surprise.”

Putin’s marathon press conference yesterday was vintage stuff: he was full of his usual bluster. It was all in marked contrast and tone to Medvedev, who in a speech today in Siberia talked about how he wanted to improve relations with Russia’s neighbors. So it looks like we are going to see a routine of good cop, bad cop. Some analysts wonder if Medvedev will be prepared to play a secondary role to Putin. Will a divided power system emerge? My money is on Putin and his KGB friends to retain the upper hand.