Archives: May, 2009

Simultaneously Destroying and Subsidizing the Auto Industry

The Obama Administration has announced new fuel-economy regulations and emissions rules that will boost the cost of new car by at least $1300. This is probably another nail in the coffin of the American automobile industry, but Jerry Taylor is the guy to provide thoughtful analysis. When I read about the new White House scheme, the first thing that came to my mind was this extremely clever video (yes, I am envious that my videos are not this creative) about the type of car we will all be driving if politicians continue to run amok:

Congress “Helps” Credit Card Customers

One of the best laugh lines always has been “I’m from the government and I’m here to help you.”  Certainly that’s true when it comes to consumer protection.

In the name of saving customers from the evil, rapacious credit card companies Congress plans on limiting access to credit.  It also is working to hike costs for people with good credit.

Reports the New York Times:

Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.

Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.

“It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”

This makes a lot of sense.  We’re worried about bad debt, bad mortgages, and bad loans.  So Congress is going to penalize people with good credit who carefully manage their financial affairs.  Of course!

It has long been evident that Congress has the reverse Midas touch.  Everything congressmen touch turns to, well, this is a family-oriented blog.  You can fill in the blank.

If Congress wants to help consumers, the best thing it could do is take an extended recess.

Don’t Fear Attacks on the Food Supply

Bruce Schneier, a participant in our January counterterrorism conference, reviews a recent report and discusses the possibility of attacks on the food supply in a post on his blog:

The quantities involved for mass poisonings are too great, the nature of the food supply too vast and the details of any plot too complicated and unpredictable to be a real threat. That becomes crystal clear as you read the details of the different incidents: it’s hard to kill one person, and very hard to kill dozens. Hundreds, thousands: it’s just not going to happen any time soon. The fear of bioterror is much greater, and the panic from any bioterror scare will injure more people, than bioterrorism itself.

New at Cato

Find more Cato commentary and analysis by joining the Cato Institute Facebook page or follow us on Twitter.

  • Chris Edwards co-authors an article in The Washington Post arguing why we should look to Canada as an example of fiscal conservatism.
  • In Monday’s Cato Daily Podcast, Mark Calabria weighs in on the aftermath of the financial crisis.

Canada and Jefferson’s Natural Progress

Thomas Jefferson famously opined that “the natural progress of things is for liberty to yield and government to gain ground,” but Canada has bucked that gloomy forecast in recent years. As my co-authored op-ed in the Washington Post yesterday showed, Canada has:

  • Cut government spending
  • Cut government debt
  • Balanced its budget consistently
  • Pre-funded its version of Social Security to make it solvent
  • Decentralized power within its federation of provinces
  • Cut taxes, particularly corporate taxes 

Meanwhile, the United States has headed in the opposite direction in each of these policy areas. Consider further that Canada has other economic policy advantages over the increasingly uncompetitive welfare state to its south:

  • Canada has more liberal immigration policies for highly skilled workers than does the United States, which has added greatly to the entrepreneurial vibrancy of Canada’s economy.
  • Canada has long had a stable,  efficient, and competitive financial sector, which avoided the government-assisted meltdown that occurred in the United States.
  • Canada has a home ownership rate as high as the United States, yet it does not have a distortionary mortgage interest tax deduction.
  • Canada recently implemented large Roth IRA style savings accounts, which are much more flexible than the U.S. version.
  • The Canadian federal capital gains tax rate is 14.5 percent, which compares to the current 15 percent in the United States and 20 percent under Obama’s tax plan.
  • Canada has no federal ministry or department of education. The K-12 schools are the sole responsibility of the provinces, yet Canadian kids  generally do better than American kids on international tests.
  • In recent years, Canada has probably been more supportive of NAFTA, and free trade in general, than its main trading partner, the United States.

Major pro-market reforms are possible in advanced welfare states – Jefferson can be proven wrong, as Canada illustrates. U.S policymakers can prove Jefferson wrong as well. They can start by cutting spending, decentralizing power out of Washington, and making pro-growth tax reforms in response to globalization, as Canada has, rather than imposing self-defeating “Buy America” provisions and making childish rants about “corporations moving jobs offshore.”

Pakistani Nukes: The Solution or the Problem?

The New York Times writes up the revelation that Pakistan is rapidly expanding its nuclear weapons arsenal.  Congressmen and Senators, we’re told, are worried that US military aid might be diverted to this purpose.

Two points here.

1. Insofar as we are giving money to Pakistan, it probably doesn’t matter much if we restrict it to our priorities. Money is fungible – by funding something Pakistan might have paid for itself, we free its funds for other priorities. Maybe it’s the case that the Pakistanis view aid that US gives them for counterinsurgency and counterterrorism capability as purely wasteful – and therefore wouldn’t spend a dime if we didn’t provide it. But probably they would have bought much of this capability if we didn’t, and therefore we are freeing up funds for other purposes like the expansion of the nuclear weapons arsenal. If we don’t want to help them do that, we should quit funding them, period.

2. Lots of people point out that Pakistan’s big problem is India – that its preoccupation with its largely indefensible Indian border prevents it from devoting sufficient resources to pacifying its restive Pashtuns and encourages it to employ high-risk strategies like using extremists to tie down Indian forces in Kashmir. 

What you don’t hear much is that nuclear weapons, and particularly the secure second strike capability that Pakistan is likely pursuing, is a potential solution to this problem. Nuclear weapons are a cheap form of defense. In theory, the security that they provide against Indian attack would allow Pakistan to limit its militarization, stop bankrolling extremists, and focus on securing its own territory as opposed to its border. (Note: I’m not arguing that that’s necessarily right, I’m arguing that if you think vulnerability to India is what creates danger for us in Pakistan, you should consider the utility of nuclear weapons in solving this problem).

Pakistan’s nuclear weapons are frightening, no question. But the series of wars Pakistan and India have fought since their split should put that fear in perspective. If they can arrest conventional conflict, the nukes are doing great good.

With our president calling for a nuclear-weapons free world, it’s worth considering whether abolishing nukes makes sense if you can’t abolish war.

Irony! Get Your Red-Hot Health-Care Irony!

Someone forwarded me an email update from our friends at the Center for American Progress Action Fund (motto: “Disagree with us? Then you hate progress.”).

In one blurb, CAPAF’s crack team of spin-disclosers chides Republicans for discussing health care reform using the language recommended by pollster Frank Luntz, who “advised Republicans to fearmonger” Obama’s proposals to death!  Or something.

The same email had another blurb titled, “INSURANCE COMPANIES AT THE TABLE?” There, CAPAF’s crack team of spin-disclosers describe how “health insurance companies and lobbying groups” stood beside President Obama last week to announce their support for reducing spending growth.  The blurb continues:

However, days later, the insurance companies tried to walk back their promises, saying Obama had overstated their commitments. Richard Umbdenstock, the president of the American Hospital Association, wrote to his company’s state and local affiliates to “clarify” that “[t]he groups did not support reducing the rate of health spending by 1.5 percentage points annually.” However, the letter to Obama signed by Umbdenstock and the other insurance leaders specifically pledged…

Umbdenstock and the other insurance leaders”??  Since when do we classify hospitals as insurance companies?  And if “the insurance companies…sa[y] Obama had overstated their commitments,” why not quote the insurance companies?  Could they not find such a quote?

It’s as if CAPAF’s crack team of spin-disclosers has decided to blame every development that might threaten a – ahem – government take-over of health care on the insurance companies.  Now why might they want to do that?  Could it be because insurance companies are less popular than hospitals?

And how would CAPAF’s crack team of spin-disclosers know that?  By listening to a … pollster?