Archives: 09/2009

Congress to Lift the Travel Ban to Cuba?

Bloomberg News reports today that the U.S. House may pass a bill by the end of the year lifting the almost five-decade-old ban on travel to Cuba by American citizens. The step is long overdue. According to the article:

A group of House and Senate lawmakers proposed in March ending restrictions to allow all U.S. citizens and residents to travel to Cuba. [Rep. Sam Farr, a California Democrat] said the legislation, known as the “Freedom to Travel to Cuba Act,” also has enough votes to clear the Senate, where Senator Byron Dorgan, a North Dakota Democrat, and Republican Senator Michael Enzi of Wyoming introduced the legislation.

As Rep. Farr succinctly added, “If you are a potato, you can get to Cuba very easily, but if you are a person, you can’t, and that is our problem.”

“If you are a potato, you can get to Cuba very easily,” he said. “But if you are a person, you can’t, and that is our problem.”

I rebut a lot of what Sen. Dorgan has said about free trade and globalization in my new book, Mad about Trade, but on the issue of the Cuban embargo and travel ban, Sen. Dorgan and most of his fellow Democrats are pushing in the right direction, while most Republicans still vote to maintain our failed policies. For more on why the travel ban and embargo should be lifted, read my speech at Rice University in 2005.

Here is one issue where those of use who support less government and more economic freedom really can hope for progressive change.

Robbing Peter to Pay Paul

The FDIC’s insurance fund, which it uses to pay off despositors in failed banks, is getting low. One way it can bolster its reserves is to draw on a $100 billion line of credit from the Treasury. Instead, however,

Senior regulators say they are seriously considering a plan to have the nation’s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.

A brilliant scheme to avoid another taxpayer bailout? Not really.

The banks are willing to lend because the FDIC will pay them a good interest rate. Repayment is virtually guaranteed because the FDIC can always draw on its line of credit. Thus the banks are getting a better deal than they would in the marketplace (that’s why they are doing this), so the scheme is a backdoor way of further bailing out the banks.

Why go through this charade? Apparently, using the Treasury credit line

is said to be unpalatable to Sheila C. Bair, the agency chairwoman whose relations with the Treasury secretary, Timothy F. Geithner, have been strained.

“Sheila Bair would take bamboo shoots under her nails before going to Tim Geithner and the Treasury for help,” said Camden R. Fine, president of the Independent Community Bankers. “She’d do just about anything before going there.”

Instead, the FDIC will con the taxpayers. The FDIC has no choice under existing policy, of course, but to pay off depositors of failing banks. They should just be honest about how who is paying for it.

C/P Libertarianism from A to Z

Tuesday Links

  • Richard Rahn on the growing debt bomb, set to explode within three years: “Expect to see record high real interest rates and/or inflation, coupled with a collapse of many ‘entitlements.’”
  • Let the battle of ideas begin: Economists debate the monetary lessons of the last recession.

You Don’t Have to Be a Czar, Baby, to Be in My Show

Raging against “czars” seems all but obligatory these days for movement conservatives. The proliferation of Obama administration czars means “a giant expansion of presidential power,” warns Karl Rove, former domestic policy czar for the Bush administration–which I suppose proves once again that the capacity for embarassment is a career liability in this town.

Conservatives ought to be concerned about the growth of executive power. But as I argue in my Washington Examiner column this week, “czars” are pretty far down any serious list of executive-power concerns:

conservatives’ current bout of czar mania elevates symbolism over substance. All the focus on a scary moniker for certain executive officials misses the real problem: Unconstitutional delegation of power to the executive branch. Whether those illegitimate powers are exercised by unconfirmed presidential advisers or the president himself is quite beside the point….

Often, czars are mere figureheads, appointed to signal concern over the latest hot-button issue. As one presidential scholar puts it, “when in doubt, create a czar.”

True, it’s problematic that some of these appointees aren’t vetted by the Senate, and that presidents claim czars don’t have to answer to Congress – as when the Bush administration asserted in 2002 that executive privilege shielded then-homeland security czar Tom Ridge from testifying on the Hill.

But as the Washington Independent’s Dave Weigel has pointed out, many of the “czars” who appear on the conservative target list already have to be confirmed by the Senate. Others don’t, but when Obama is hell-bent on taking over the health care sector – one-sixth of the U.S. economy – it’s bizarre to agonize over the allegedly unchecked power exercised by the likes of the AIDS and urban affairs czars.

Similarly, while it’s great to see a nutter like Van Jones denied a federal salary, few of those cheering Jones’ defenestration can coherently explain what the green jobs czar actually does, or the threat he was supposed to represent.

What, was Jones going to give 9/11 “Truthers” and black nationalists jobs weatherizing homes? Will we stop wasting money on such projects now that he’s gone?

More here.

Gruber on Whether Mandates Are Taxes

Yesterday, on PBS’s NewsHour, I debated MIT health economist Jonathan Gruber on (among other things) whether the individual mandate in President Obama’s health plan is a tax.  As you can see in this video, Gruber pretty clearly states that the mandate is not a tax:

Which seems to conflict with what he wrote in his textbook:

Suppose…the government mandated that everyone buy full insurance at the average price of $825 per year…This would not be a very attractive plan to careful consumers, however, who could view themselves as essentially being taxed in order to support this market, by paying higher premiums than they should based on their risk.

There are really two government interventions at play in that example: the mandate that requires everyone to purchase insurance (whether they want it or not), and the price controls that force low-risk consumers to pay more than an actuarially fair premium.  One could say that it is the price controls, rather than the mandate, that Gruber likens to a tax.  It might be inconsistent, however, to suggest that when price controls force you to pay more for something than the market would charge, that is a tax, but when a mandate forces you to purchase something you don’t want at all, that’s not a tax.

Gruber also suggests that, for better or worse, the arbiter of whether a mandate is a tax is the Congressional Budget Office, and the CBO has said that the mandates in the leading health-reform bills are not a tax.  I think that’s incorrect for a few reasons.

  1. As I mentioned on the NewsHour and blogged earlier, the CBO has affirmed that the penalties for non-compliance are taxes.
  2. The CBO has not declared that the mandated private payments that result from the individual mandate are not a tax.  What the CBO has said is that – as the leading health-reform bills exist today – those mandated private payments do not meet the CBO’s definition of “federal revenues.”  In this report, the CBO explains that it will consider those mandated private payments to be federal revenues only if the government denies consumers a “sufficient” or “meaningful” or “substantial” degree of choice among health plans.  Faced with the necessity of drawing a line between what it will and will not include in the federal budget, the CBO made a judgment call and drew a line.  The agency went no farther; it did not say that mandates are taxes only if they fall on one side of that line.
  3. If the CBO’s determination of what constitutes “federal revenues” were to be the arbiter of what constitutes “a tax,” that would lead to absurd results.   Suppose Congress enacts the Baucus mandate, and then next year a new CBO director changes the rule so that those mandated private payments do count as federal revenues.  The result?  A massive tax increase!  Despite the fact that CBO has no authority to raise taxes.  And despite the fact that there would be no tax increase.   CBO’s change of heart would not alter public or private fiscal flows by one penny.

The president and his supporters have a tough road to hoe if they want to claim the individual mandate isn’t a tax.

Correction of the Day

A Sept. 18 Page One article about the community organizing group ACORN incorrectly said that a conservative journalist targeted the organization for hidden-camera videos partly because its voter-registration drives bring Latinos and African Americans to the polls. Although ACORN registers people mostly from those groups, the maker of the videos, James E. O’Keefe, did not specifically mention them.

Washington Post, September 22, 2009

Original article here.

What is Condoleezza Rice Talking About?

In an interview with Fortune Magazine, former Secretary of State Condoleezza Rice says, “The last time we left Afghanistan, and we abandoned Pakistan, that territory became the very territory on which Al Qaeda trained and attacked us on September 11th.” She goes on to say, “So our national security interests are very much tied up in not letting Afghanistan fail again and become a safe haven for terrorists.” She declared, “It’s that simple, if you want another terrorist attack in the U.S., abandon Afghanistan.”

Actually, Ms. Rice, it’s not that simple. Your logic ignores the fact that terrorists can move to governed spaces. Rather than setting up in weak, ungoverned states, enemies can flourish in strong states because these countries have formally recognized governments with the sovereignty to reject foreign interference in their domestic affairs. This is one reason why terrorists find sanctuary across the border in Pakistan. Besides, 9/11 was planned in many other countries with competent law enforcement agencies, Germany and the United States included.

If there were (god forbid!) another 9/11, it would prove that invading and forcibly democratizing two Muslim-majority countries has not made America safer. In fact, if Ms. Rice is so concerned about abandoning Afghanistan, where was she in 2002 when her boss diverted America’s resources away from those who attacked us on 9/11 by invading a country that did not?

Americans should reject Ms. Rice’s atrocious interpretation of policy and remember that she and her ilk were adept at keeping the American public in an elevated state of panic. Fear-mongering should be rejected and replaced with a sober analysis of policy and its consequences.

Al Qaeda poses a manageable security problem, not an existential threat to America. Yet, as I mention here, policymakers tend to conflate al Qaeda with indigenous Pashtun-dominated militias. America’s security, however, will not be at risk even if an oppressive regime takes over a contiguous fraction of Afghan territory; and if the Taliban were to provide sanctuary to al Qaeda once again, it would be easier to strike at the group within Afghanistan than in neighboring, nuclear-armed Pakistan.