Archives: February, 2010

How to Tell When ObamaCare Is Dead

By
Michael F. Cannon

Democrats have lots of ambitions.  One of them is their health care overhaul, which included a lot of “pay-fors” – i.e., spending cuts that would pay for ObamaCare’s new entitlements.  But they also want a jobs bill, a “doc fix,” and other things that require new government spending.  Those also require pay-fors – unless Democrats are willing to expand further a $1-trillion-plus deficit – and pay-fors are a scarce commodity.

Today, CongressDaily’s Anna Edney reports:

Some, though, are skeptical Democrats would use any of the pay-fors because that would mean officially declaring the reform effort dead.

“I don’t expect any effort to dismantle the reform bill until there’s no pulse,” one lobbyist said.

Right now, ObamaCare is mostly dead. And as we all know, “There’s a big difference between mostly dead and all dead…Mostly dead is slightly alive.”

A good way to tell when ObamaCare is all dead is when Democrats start picking at the carcass for pay-fors.

Topics: 
Cato Publications, General, Health Care

FHA Bailout Watch

By
Tad DeHaven

The Federal Housing Administration has been one of the government’s main instruments for propping up the housing market in the wake of the housing bust. But as has been widely reported, the FHA is in danger of needing a taxpayer bailout because of rising defaults on mortgages it insures.

FHA-insured loans originated in 2007 and 2008 – when Bush administration housing officials were mainly concerned with “winning back our share of the market” – are defaulting at higher rates as this graphic from the Washington Post shows:

FHA officials are optimistic a bailout won’t be needed, but the Post reports that not everyone shares this optimism:

The audit, released in November, found that the cash the FHA set aside to pay for unexpected losses had dipped to historic lows, well below the level required by law. As of Sept. 30, those reserves were estimated at $3.6 billion, down from nearly $13 billion a year earlier. The most recent figure represents 0.53 percent of the value of all FHA single-family-home loans – far lower than the 2 percent required by Congress.

But Ann Schnare, a former Freddie Mac official, said the situation could be even worse. She said the audit underestimates future losses because it does not take into account all loans that are now overdue, only those that the FHA has paid claims on.

To avoid a bailout, the FHA recently proposed more stringent standards, which would include raising the premiums it charges to cover losses. However, even if a bailout isn’t needed and the FHA continues to “make money,” that would only call into question the need for the FHA to begin with. Why can’t the private sector provide all mortgage insurance?

The answer is that the mortgage lending industry likes knowing it can originate mortgages that the government will cover in the event of a default. Heads they win, tails Uncle Sam loses. The president’s new budget makes this clear in addressing concerns about the FHA’s currently low reserves:

However, it is important to note that a low capital ratio does not threaten FHA’s operations, either for its existing portfolio or for new books of business. Unlike private lenders, the guarantee on FHA and other federal loans is backed by the full faith and credit of the Federal Government, and is not dependent on capital reserves — FHA can never “run out” of money.

That’s right – the federal government can simply tax, borrow, or fire up the printing presses.

The government has been propping up the housing market with taxpayer subsidies in the wake of a housing boom and bust it helped create. If policymakers continue to keep the housing market on artificial life support, taxpayer will remain on the hook. If it pulls the plug and the market takes another downward spiral, Washington will probably rush in with more bailouts.  It appears taxpayers can’t win.

See this essay for more on federal housing finance.

Topics: 
Finance, Banking & Monetary Policy, Tax and Budget Policy

When Individuals Form Corporations, They Don’t Lose Their Rights

By
Ilya Shapiro

The blogosphere has been abuzz on the heels of the Supreme Court’s landmark Citizens United opinion.  Hysteric criticisms of the speculative changes to our political landscape aside – including the President’s misstatements in the State of the Union – one of the most common and oft-repeated criticisms is that the Constitution does not protect corporations. Several “reform” groups have even drafted and circulated constitutional amendments to address this concern.

This line of attack demonstrates a fundamental misunderstanding of both the nature of corporations and the freedoms protected by the Constitution, which is exemplified by the facile charge that “corporations aren’t human beings.”

Well of course they aren’t — but that’s constitutionally irrelevant:  Corporations aren’t “real people” in the sense that the Constitution’s protection of sexual privacy or prohibition on slavery make no sense in this context, but that doesn’t mean that corporate entities also lack, say, Fourth Amendment rights.  Or would the “no rights for corporations” crowd be okay with the police storming their employers’ offices and carting off their (employer-owned) computers for no particular reason? — or to chill criticism of some government policy. 

Or how about Fifth Amendment rights?  Can the mayor of New York exercise eminent domain over Rockefeller Center by fiat and without compensation if he decides he’d like to move his office there?

So corporations have to have some constitutional rights or nobody would form them in the first place.  The reason they have these rights isn’t because they’re “legal” persons, however – though much of the doctrine builds on that technical point – but instead because corporations are merely one of the ways in which rights-bearing individuals associate to better engage in a whole host of constitutionally protected activity.

That is, the Constitution protects these groups of rights-bearing individuals. The proposition that only human beings, standing alone, with no group affiliation whatsoever, are entitled to First Amendment protection – that “real people” lose some of their rights when they join together in groups of two or ten or fifty or 100,000 – is legally baseless and has no grounding in the Constitution. George Mason law professor Ilya Somin, also a Cato adjunct scholar, discusses this point here.

In any event, as Chief Justice Roberts said in his Citizens United concurrence: “The First Amendment protects more than just the individual on a soapbox and the lonely pamphleteer.” Justice Scalia makes the same point, explaining that the text of the Constitution “makes no distinction between types of speakers.” The New York Times isn’t “an individual American” but its speech is still protected under the First Amendment (regardless of any exemption for “media corporations” – whatever those are in a world where conglomerates own interests not limited to media, not to mention the advent of blogs and other “new” media).

A related line of attack is that individuals acting through corporations should be denied their freedom of speech because corporations are “state-created entities.” The theory goes that if a state has the power to create corporations, then it has the power to define those entities’ rights. Somin rebuts the weakness of this argument here, correctly pointing out that nearly every newspaper and political journal in the country is a corporation.

In short, the contention that the First Amendment does not protect corporations ignores the fact that there is no constitutional difference between individuals and groups of individuals, however organized.  Still, I give credit to the groups who are proposing constitutional amendments that would limit corporate rights: at least they recognize that, after Citizens United, there is no basis upon which to argue that the First Amendment does not protect corporate political speech.  The Free Speech Clause, after all, is blind as to the nature of the speaker.

For further concise refutations of the basic arguments against Citizens United, see here (points 3-6 address issues relating to corporations and their rights).

Topics: 
Government and Politics, Law and Civil Liberties

Obama’s Troubles and U.S. Foreign Policy

By
Christopher A. Preble

At their National Security Experts blog, The National Journal asks:

President Obama is in a rough political patch…So, what does his weakened position mean for his handling of foreign affairs and for the tack that allies, rivals and outright enemies take toward the U.S.?

I respond:

I don’t believe that the president will rely on a major foreign policy initiative to turn around his political fortunes. He has many things on his plate right now. He spent just nine minutes on foreign policy in the SOTU, and the American people have clearly signaled a desire to focus on problems here at home.

I’m not entirely happy with this turn of events. I think the country’s turn inward – in the form of trade protectionism, nativism, and anti-immigrant sentiment – is particularly worrisome. But the wise course for those in Washington is to come up with a foreign policy that can be sustained with a modicum of popular support. They should find a way for us to be engaged in the world without being in charge of it.

So far, I see no evidence of a change away from the assumptions that have guided U.S. foreign policy through four post-Cold War administrations, two Republican and two Democrat (plus GHW Bush for part of his term). The just released QDR repeats many of the same mantras about U.S. power as a global public good that we’ve heard for years.

Up to now, the practice has been to distort and confuse the purpose of U.S. foreign policy. The policy elite in Washington and New York know that the public expects the U.S. military to be used to advance American security, when in fact much of what it does underwrites the security of others. As Michael Mandelbaum wrote several years ago, “To make sacrifices largely for the benefit of others counts as charity, and for Americans, as for other people, charity begins at home.”

Obama and his team, and probably his successor, might manage to sustain the dominant posture for a while longer. Other countries have no great desire to assume responsibilities for their own defense, or for policing their respective regions.

But at the end of the day, all politics is local. Americans can’t be expected to care more about things that occur 8,000 miles from our shores than they do about things in the Gulf of Mexico, or in New Mexico. In an era of crushing fiscal imbalance, and an increasingly complex international environment, now is the time to revisit some of the core assumptions of the past two decades and ask: Is this where we want to be 20 years from now, with the U.S. military still the world’s policeman, and with the rest of the world anxious, querulous and resentful when we use that power, or even when we don’t?

If we choose to make a change, even a modest change in the direction of greater burden sharing with allies who have grown too comfortable under the U.S. security umbrella, we might look back on this period fondly. If we don’t, we are likely to see it as a missed opportunity.

Topics: 
Foreign Policy and National Security

Robert Gates, Meet Robert Gates

By
Justin Logan

“If the Department of Defense can’t figure out a way to defend the United States on a budget of more than half a trillion dollars a year, then our problems are much bigger than anything that can be cured by buying a few more ships and planes.”
- Defense Secretary Robert Gates, Speech to Economic Club of Chicago, July 16, 2009

“The situation out there in the world doesn’t change and the world is getting more dangerous rather than less so.  The Defense Department certainly spends a lot of money but if you look at where the Defense Department is today it certainly is within historical norms.”

- Defense Secretary Robert Gates, responding to suggestions that his new $741 billion budget should be cut, February 2, 2010

Topics: 
Foreign Policy and National Security

Is the Threat of Cyberattack Growing?

By
Jim Harper

The New York Times dutifully reports that the Director of National Intelligence says it is. But it’s hard to know what that means. The word “cyberattack” has no usefully fixed definition.

And the important questions—plural—include: 1) whether cyberattacks—plural—are growing in number and sophistication more quickly than the capability of infrastructure owners to fend them off and recover from them; 2) which, if any, owners lack incentives to secure their infrastructure and what security externalities they might create; and 3) what levers—such as contract liability, tort liability, or regulation—might correct any such market failures.

Some lines in Director Blair’s statement are quite telling. Compare this:

Terrorist groups and their sympathizers have expressed interest in using cyber means to target the United States and its citizens.

to this:

The cyber criminal sector in particular has displayed remarkable technical innovation with an agility presently exceeding the response capability of network defenders.

Now, which class of actors are you going to worry about—the ones that dream of doing something bad? Or the ones that have the sophistication to do something bad? Probably the latter.

While calling for a federal intelligence-community role in “cybersecurity,” Blair confesses that this is more of a crime problem that the business sector needs to handle than a true national security issue in which the leading role would be played by government.

The good news is that crime syndicates don’t prosper by killing their hosts. Don’t look for catastrophic failure of our technical infrastructures arising from this most serious of “cyber” threats.

There’s no question that cybersecurity is important. But it’s also manageable. I shared my thoughts on “cybersecurity” last year with the House Science Committee.

Topics: 
Foreign Policy and National Security, Telecom, Internet & Information Policy

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