Archives: 02/2010

The Return of Dan Coats

Former Indiana senator Dan Coats is running for his old seat again, 12 years after he left Congress and turned the seat over the now-retiring Evan Bayh.  Coats says he’s very concerned that “our elected officials in Washington continue to run up massive deficits, recklessly borrowing and spending record amounts of taxpayer money with no regard for the future generations of Americans who will inherit this staggering and ever-increasing debt,” and he has the support of conservative congressional leader Mike Pence. But I remember a Senator Dan Coats who enthusiastically promoted big, paternalist government. In the Heritage Foundation’s Policy Review, I responded to a Coats essay on his “Project for American Renewal,” launched with Bill Bennett, this way:

Coats says that the Project for American Renewal “is not a government plan to rebuild civil society” and that he favors “a radical form of devolution [that] would redistribute power directly to families, grass-roots community organizations, and private and religious charities.” But in practice he apparently believes that the federal government should tax American citizens, bring their money to Washington, and then dole it out to sensible state and local programs and responsible private institutions. Surely we have learned that government grants do not create strong, creative, vibrant private organizations. Rather, organizations that depend on government funding will have to follow government rules, will be unable to respond effectively to changing needs, and will get caught up in games of grantsmanship and bureaucratic empire-building.

Moreover, nearly every one of his bills would further entangle the federal government in the institutions of civil society. Under the Role Model Academy Act, the federal government would “establish an innovative residential academy for at-risk youth.” Under the Mentor Schools Act, the feds would provide grants to school districts wanting to develop and operate “same gender” schools. The Character Development Act would give school districts demonstration grants to work with community groups to develop mentoring programs. The Family Reconciliation Act would “provide additional federal funding … to implement a waiting period and pre-divorce counseling” for couples with children.

Many of these bills are intended to address real problems, such as the effects of divorce on children and the terrible plight of children trapped in fatherless, crime-ridden, inner-city neighborhoods. But why is it appropriate or effective for the federal government to intrude into these problems? Surely local school districts should decide whether to build same-sex schools or residential academies for at-risk youth; and if the people of, say, Detroit decide that such options would make sense, any theory of responsible, accountable government would suggest that the local city council or school board both make that decision and raise the funds to carry it out.

Many of Coats’s bills deal with symptoms – they try to reform public housing by setting aside units for married couples or to provide mentors for children without fathers – rather than dealing with the real problem, a welfare system that guarantees every teenager her choice of an abortion or an apartment if she gets pregnant. Some of the bills accept the federal Leviathan as a given and tinker with it – for instance, by requiring that every federal dollar spent on family planning be matched by another dollar spent on abstinence education and adoption services. Others just follow the failed liberal policy of handing out federal dollars for whatever Congress thinks is a good idea – school choice, restitution to crime victims, maternity homes, community crime-watch programs.

Over the past 60 years, we’ve watched the federal government intrude more and more deeply into our lives. We’ve seen well-intentioned government programs become corrupted by the ideologues and bureaucrats placed in charge. We’ve seen schools and charities get hooked on federal dollars. The nature of government doesn’t change when it is charged with carrying out conservative social engineering rather than liberal social engineering.

Let’s not forget that if, say, Coats’s Maternity Shelter Act were implemented next year, Donna Shalala, the secretary of health and human services, would be charged with implementing it. She might appoint HUD assistant secretary Andrew Cuomo to run it, or maybe unemployed ex-congressman Mel Reynolds, or maybe just some Harvard professor who thinks single motherhood is a viable lifestyle option for poor young women. One reason conservatives shouldn’t set up well-intentioned government programs is that they won’t always be in power to run them.

In the Washington Post, after criticizing various Clinton administration policies that seemed to reveal that Democrats just couldn’t give up their addition to big government, I wrote:

Republicans suffer from the same weakness. The latest example is the Project for American Renewal, launched Sept. 6 by William Bennett and Sen. Dan Coats (R-Ind.). Bennett and Coats endorse “devolution of federal authority and funding to state governments” but go on to argue that Republicans “need to offer a vision of rebuilding broken communities - not through government, but through those private institutions and ideals that nurture lives.” They stress that “even if government undermined civil society, it cannot directly reconstruct it.”

They talk the anti-big government talk even better than new Democrats, which is why the 1994 election saw a historic shift toward GOP. But look at the “be it enacted” clauses that follow of Bennett and Coats’s libertarian whereases.

As part of the Project for American Renewal, Coats has introduced 19 bills. They include:

  • The Mentor Schools Act, to provide grants of $1 million to school districts to develop “same gender” schools.
  • The Role Model Academy Act, to establish an innovative residential academy for at-risk youth.
  • The Kinship Care Act, to create a $30 million demonstration program for states to use adult relatives as the preferred placement option for children separated from their parents.
  • The Restitution and Responsibility Act, to provide grants to states for programs to make restitution to victims of crime.
  • The Assets for Independence Act, to create a four-year, $100 million demonstration program to establish 50,000 Individual Development Accounts, to be used for the purchase of home, college education or small business.
  • The Community Partnership Act, to institute demonstration grants for programs to match communities of faith with welfare recipients and nonviolent criminal offenders.

And on and on it goes. Most of the goals are good: Some students do better in all-boys or all-girls schools; children who lose their parents should ideally live with other adult relatives; restitution is a valuable aspect of dealing with a crime. But why does the federal government need to do any of those things? If the 10th Amendment and the new-found commitment to devolution of power mean anything, they mean that residential academies, victim restitution and welfare reform should be undertaken by state governments - if not local communities or even nongovernment groups.

And surely the First Amendment would recommend that such a worthy goal as matching “communities of faith” - that is, churches - with people in need should be undertaken without government support. As for 50,000 Individual Development Accounts, I’d like one - wouldn’t you?

Like the Democrats, the Republicans just don’t get it. They’re still living in the Washington that Roosevelt built, the Washington where if you think of a good idea you create a government program. But conservative social engineering, like liberal social engineering, will fail. Worse, it will create new problems.

Later that year Ed Crane, writing in Cato Policy Report, was perhaps even harsher, referring to the “vaguely Orwellian titles” of Coats’s proposed bills:

I mention that little episode because it is illustrative of a certain wide- eyed innocence on the part of many of our conservative friends. The most recent example is the Project for American Renewal being put forth by Sen. Dan Coats (R-Ind.) and neoconservative intellectual Bill Bennett, also of Empower America. It consists of some 19 bills that Coats has submitted in the Senate in an effort “to find some ways to nurture civil society.”

Most of the bills have vaguely Orwellian titles like the Compassion Credit Act, the Community Partnership Act, or the Family Reconciliation Act. Almost all of them amount to nothing more than conservative social engineering. The last bill, for instance, “would provide additional federal funding to states under the Family Preservation and Social Services Act, to implement pre-divorce counseling.” The Assets for Independence Act “would create a four-year $100 million demonstration program to establish 50,000 Individual Development Accounts.”

Never mind that, again, one would search in vain for the enumerated power in the Constitution that says most of those initiatives are within the purview of the federal government. Never mind even that conservatives who celebrated James Buchanan’s Nobel Prize for his work in public-choice theory should recognize that those little conservative policy gems will one day grow into the liberal monsters that so disappoint Jack Kemp.

The concern here is that some conservatives have in the post-Reagan era adopted what might be called the government habit. That is particularly true of neoconservatives, who trace their intellectual heritage to the left and who, for the most part, have a fundamentally benign view of the state. The problem to them has not been the power of government but the misuse of that power by wrongheaded politicians and bureaucrats.

Thus, Bill Bennett writes in the introduction to a booklet promoting the Project for American Renewal, “If the liberal fallacy is an abiding faith in the all-sufficiency of government, then the conservative fallacy could easily become an abiding faith in the all-sufficiency of nongovernment.” Well, not if Dan Coats has anything to say about it. And Coats is more of a traditional conservative.

The argument one hears from many conservatives, particularly inside the Beltway, is that you can’t replace something with nothing. But that sentiment simply reflects the government habit. After all, the American people are not “nothing.” Why not rephrase the issue: you can replace a failed government welfare program that has wasted billions, created dependency, and destroyed lives with the responsiveness, compassion, and prudence of a free people.

We can hope that a dozen years out of public office will have restored Dan Coats’s traditional Republican skepticism about government schemes. But as has been widely discussed, he’s spent those years working as ambassador to Germany and then as a lobbyist on Pennsylvania Avenue, two places where faith in individualism, civil society, and limited government is rare.

Government-Mandated Spying on Bank Customers Undermines both Privacy and Law Enforcement

I recently publicized an interesting map showing that so-called tax havens are not hotbeds of dirty money. A more fundamental question is whether anti-money laundering laws are an effective way of fighting crime – particularly since they substantially undermine privacy.

In this new six-minute video, I ask whether it’s time to radically rethink a system that costs billions of dollars each year, forces banks to snoop on their customers, and misallocates law enforcement resources.

Obama’s ‘Best’ Idea? Rationing Care via Clinton-esque Price Controls

Hoping to revive his increasingly unpopular health care overhaul, President Obama has invited Republicans to a bipartisan summit this Thursday and plans to introduce a new reform blueprint in advance of the summit.  On Sunday, the White House announced that a key feature of that blueprint will be premium caps, a form of government price control that helped kill the Clinton health plan when even New Democrats rejected it.

The New York Times reports on President Obama’s blueprint:

The president’s bill would grant the federal health and human services secretary new authority to review, and to block, premium increases by private insurers, potentially superseding state insurance regulators.

It bears repeating what Obama’s top economic advisor Larry Summers thinks about price controls:

Price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time.

For example, as I have written elsewhere, artificially limiting premium growth allows the government to curtail spending while leaving the dirty work of withholding medical care to private insurers: “Premium caps, which Massachusetts governor Deval Patrick is currently threatening to impose, force private insurers to manage care more tightly — i.e., to deny coverage for more services.”  No doubt the Obama administration would lay the blame for coverage denials on private insurers and claim that such denials demonstrate the need for a so-called “public option.”

As the Progressive Policy Institute’s David Kendall explained in a 1994 paper, the Clinton health plan contained similar price controls.  Kendall explains why they would be a disaster:

In spite of the late hour in the health care debate, Congress has not yet decided how to restrain runaway health care costs. The essential choices are a top- down strategy of government limits on health care spending enforced by price controls or a bottom-up strategy of consumer choice and market competition. History clarifies that choice: Previous government efforts to regulate prices in peacetime have invariably failed. Moreover, government attempts to control prices in the health care sector would undermine concurrent efforts to restructure the marketplace…

The idea of controlling costs by government fiat is seductively simple. But it rests on a conceit as persistent as it is damaging: that government bureaucracies can allocate resources more wisely and efficiently than millions of consumers and providers pursuing their interests in the marketplace. The alternative – one rooted in America’s progressive tradition of individual responsibility and free enterprise – is to improve the market’s ground rules in order to decentralize decision-making, spur innovation, reward efficiency, and respect personal choice.

As centrally planned economies crumble around the world, many in the United States seem bent on erecting a command and control economy in health care. This policy briefing examines the reasons why government price regulation would fail to constrain health care costs and create many adverse side effects…

Ultimately, government price regulation will always fail because it does not change the underlying economic forces driving up prices. If we are serious about slowing the growth of health care costs, we have to change the ways we consume and provide medical care. Price controls evade the hard but essential work of structural reform in health care markets: They are a quintessentially political response to an economic problem. The alternative is to allow well-functioning markets to set prices and allocate resources, while ensuring that all Americans have access to affordable health care coverage. The market-oriented approach leaves decisions to cost-conscious consumers and health care providers rather than bureaucrats.

Any of that sound familiar?  It’s worth reading the whole thing.

This is not hope.  This is not change.  (Much less a game-changer.)  It is, to pinch a phrase, a return to “the failed theories that helped lead us into this crisis.”

Keeping Pandora’s Box Sealed

The moment everyone was waiting for has arrived: The article Josh Blackman and I wrote, “Keeping Pandora’s Box Sealed: Privileges or Immunities, The Constitution in 2020, and Properly Extending the Right to Keep and Bear Arms to the States,” has officially come out in the Georgetown Journal of Law & Public Policy.  (I previously blogged about this article here, among other places, and here’s a recent reference on Reason’s blog.)  The journal thought enough of our work to publish it on page 1 of issue 1 of this year’s volume.

We’re also grateful to the journal editors for expediting the editing and publication process generally so that the article would come out in time for the McDonald v. Chicago argument.  Indeed, that strategy is already paying off, with “Keeping Pandora’s Box Sealed” having been cited in the petitioners’ reply brief – not to mention Cato’s amicus brief.  The Georgetown JLPP has been cited in Supreme Court opinions the past two terms, so we’re cautiously optimistic about our chance to continue this trend.

In addition to reading the article (also available on SSRN), you can also attend various presentations I’m giving in the next two weeks about McDonald v. Chicago and properly extending the right to keep and bear arms to the states:

  • Feb. 23 at lunch - University of New Mexico Law School (sponsored by the Federalist Society) - “McDonald v. City of Chicago and Properly Extending the Right to Keep and Bear Arms”
  • Feb. 25 at 1:30pm EST/10:30 PST - ABA Continuing Legal Education Teleconference - “Beyond Gun Control: McDonald v. City of Chicago and Incorporation of Bill of Rights” (registration fee, 1.5 hours of CLE credit)
  • Mar. 1 at 4pm - Cato Institute Policy Forum - “McDonald v. Chicago: Will the Right to Keep and Bear Arms Apply to the States?
  • [Mar. 2 at 10am - Supreme Court argument in McDonald - I will be giving a statement to the media scrum on the marble steps afterward]
  • Mar. 2 at 3:30pm - Georgetown University Law School - Post-Argument Discussion of McDonald and “Keeping Pandora’s Box Sealed” (sponsored by the GJLPP and the Federalist Society)
  • Mar. 3 at 12pm - Cato Institute Hill Briefing in B-340 Rayburn House Office Building - “McDonald v. Chicago: The Fourteenth Amendment and the Future of Gun Rights

You can also listen here to a half-hour podcast about “Keeping Pandora’s Box Sealed” that I recently recorded with the Independence Institute’s David Kopel (also a Cato associate policy analyst).

Great Moments in (Anti) Stimulus

There were many reasons to oppose last year’s so-called stimulus legislation. But perhaps one of the most compelling reasons is that politicians and bureaucrats inevitably do really stupid things because the federal budget is a racket designed to funnel the maximum amount of money to powerful interest groups. Here’s a great example from a story linked on Kausfiles.com. A city in New Hampshire wanted to stick its snout in the trough in order to subsidize a water treatment plant, but eventually decided to reject the money because the local government’s out-of-pocket costs would increase - primarily thanks to corrupt rules designed to line the pockets of union bosses, but also because of protectionist requirements and a mind-boggling $100,000 of paperwork expenses:

As stimulating as it might have sounded at the time, the city recently declined $2.5 million from the American Recovery and Reinvestment Act for its new water treatment plant because federal wage regulations would have forced the city to pay more for the project. …the low bidder — Penta Corporation — presented final cost of $21 million with the stimulus funds and $17.3 million without. So the city said thanks, but no thanks, to the stimulus funds. “It just didn’t make sense,” said Deputy Public Works Director David Allen. “It was going to cost us more money to take the money.” Stimulus funds mandate workers are paid using Davis-Bacon Wage Determination, which sets the pay scale for workers on federal projects and added $2.5 million to the bottom line. The “Buy American” provision would’ve added another $500,000 and Allen said there would have been significant administrative costs — upwards of $100,000 — for the city to track it the way the government requires over the course of the two-year project.