Archives: 12/2008

Pols Target Jury Trials for Budget Savings

Pols in New Hampshire are under pressure to cut state spending so they are now proposing to, of all things, stop jury trials.   Where to begin? They would have us believe that there is no fat left in the budget?  Not credible.  Are the pols looking for the path of least resistance?  No special interest group in the capital looking out for jurors–so go there?  Whatever happened to the Constitution?  When an institution is put into the Constitution itself, it is no longer a  discretionary spending matter.  The pols are not free to do a cost-benefit analysis of the Bill of Rights and then reinterpret those provisions so that they comport with the accountant’s findings.  Pols that don’t get this need to be shown the door–before they start talking about postponing elections, which are also expensive.

Congress Doesn’t Vote, Gets a Pay Raise

Members of Congress are getting a pay raise for 2009. With the economy in dire straits, you’d think members would be afraid to be seen voting themselves a raise. And so they were. But the good news – for Congress – is that if they don’t vote on their pay raise, then they get it. It’s automatic!

Now one might say that members of Congress run a very large enterprise – a federal government that spends $3 trillion a year, and getting larger every day – so it’s not unreasonable for them to get at least as much pay as they do. But FedEx Corp. and other companies are cutting the pay of senior managers. Surely members of Congress would not argue that they have managed the finances of the U.S. government better than the managers at FedEx, Motorola, Eastman Chemical, and other companies have handled their firms’ challenges. If members of Congress had their pay cut when the budget is not balanced, maybe we’d get more fiscal responsibility in Washington.

The Hill newspaper notes that members made $30,000 in 1969, which would be the inflation-adjusted equivalent of $195,000 today. Perhaps members of Congress should not be rewarded for overseeing such a striking erosion in the value of the dollar over just 40 years.

TSA Screening as ‘Security Theater’

Yesterday, 60 Minutes interviewed Security Expert Bruce Schneier about Transportation Security Administration (TSA) screening practices at airports.  A timely report as the travel crush gets underway.

Bruce Schneier will be speaking at Cato’s Counterterrorism conference next month.  Also, check out today’s podcast with another conference speaker, former FBI agent, Mike German.  The conference is part of a three-year Cato initiative on counterterrorism and civil liberties.

“A Real Regulator”

Sunday’s Meet the Press had a fascinating colloquy on securities regulation, revealing Washington’s immense capacity for self-deception.

David Gregory set up the story, on which CNBC’s Erin Burnett commented:

MR. GREGORY: … I want to stay in New York and something else that has rocked Wall Street beyond the economy, and that is Bernard Madoff. Big money man, investment man who was the darling of Wall Street for many, many years. Now it turns out he ran a giant Ponzi scheme and billions have been lost, from the small investor to, to Jewish organizations and, and philanthropies across the country. Steve Pearlstein, who writes about the economy for The Washington Post, wrote this: “With the Madoff story, it is now revealed that the masters of the universe aren’t just too clever by half—they’re not that clever at all. For years, they not only allowed themselves to be bamboozled by a con artist but also willingly and enthusiastically served as his market agent, offering friends, relatives and favorite charities the opportunity to invest with their good pal, Bernie Madoff. (So much for the idea that wealthy individuals and ‘sophisticated’ institutional investors don’t need the protection of government regulators.)” Was anybody watching?

MS. BURNETT: It, it is incredible, because there had been credible complaints brought to the SEC that said along the lines of, “This is too good to be true. You don’t get these sorts of consistent returns.”

MR. GREGORY: Mm-hmm.

MS. BURNETT: And they didn’t do anything about it. But they’re—you know, I was talking to Mort Zuckerman, the New York real estate man, earlier this week, and he had lost $30 million in one of his charities that was invested with Bernie Madoff. And he said, “I didn’t even know who the guy was. I had given my money to somebody else who actually”…

MR. GREGORY: Right.

MS. BURNETT: …”entrusted the entire $30 million to one guy, a guy I’d never heard of, and then I get a letter finding out that it’s completely gone.” So you’re talking about some very sophisticated people who were completely duped, and maybe some of them should have been doing more due diligence. Some of them were trusting that role to others…

MR. GREGORY: Right.

MS. BURNETT: …who had a fiduciary responsibility to do it. But there’s no question we need a real regulator.

“[W]e need a real regulator.”

Ms. Burnett, the SEC that failed to prevent this is a real regulator.

When regulators fail to address a problem ahead of time, when they regulate inefficiently, when they hand their rulemaking organs to the industries they are supposed to oversee, those are all the actions of real regulators. That’s what you get with real regulation.

What Burnett meant when she called for a “real” regulator, of course, was “the regulator I can imagine.” The regulators people imagine are foresighted, interested only in the public good, they’re resistant to lobbying, and they run efficient organizations. But these characteristics are simply imaginary.

Watching discussions like these, you come to realize how legislation and regulation thrive on self-deception and the appeal to ego.

Thousands of people come to Washington and stay because they believe that they can design the ideal regulatory system. They think they know how to write a law or a regulation that works for everyone, that protects consumers, that doesn’t pick winners and losers in the marketplace, that doesn’t make the glaring errors that we see month in and month out on Sunday morning political shows.

(If only voters didn’t elect the wrong guy. If only lobbyists didn’t ‘corrupt’ the system. If only, if only, if only … .)

Alas, we’re stuck with real regulators. They fail, and when people rely on them, the failures of regulation are magnified. (Not that Mort Zuckerman should get his money back from anyone other than Bernard Madoff. No bailout.)

Libertarians and pro-Washington people (for lack of a better term) have the same goals: honest, transparent marketplaces, productive economies, healthy and happy people. The difference is that Washingtonians strive to defeat human nature rather than harnessing it, and they build a bigger and bigger machine for doing that, sometimes calling it “real regulation.”

I’m So Poor I Can Barely Fire My Raku Pottery!

With L.A. school officials constantly complaining about funding shortfalls, the State of California seemingly in perpetual financial crisis, and federal lawmakers assuming that school districts have poor facilities due to lack of funds, this little number really makes you think: Does any district really need a $232 million art-school building equipped with, among other things, “floor-to-ceiling windows with motorized blackout shades….an outdoor atrium for firing Japanese raku pottery” and “a conical library whose dazzling interior swirls upward to an off-center skylight”? Probably not, and it really makes it hard to keep tolerating the incessant public-schooling complaints about woeful underfunding. Neither the broad data (see Indicator B1), nor such anecdotal evidence as the far-too-mundanely named Central High School No. 9, support the claim.

Kennedy on Jerusalem

Getting named New York’s junior senator apparently requires pandering to those who support Israel’s right wing.

From Nick Confessore’s written interview with Caroline Kennedy (and her staff) in the New York Times:

Q. Do you believe that an undivided Jerusalem must be the national capital of the State of Israel?
A. Yes, Caroline believes that an undivided Jerusalem must be the national capital of the State of Israel.