Archives: 05/2010

Kagan Nomination: Around the Web

  • Confirmation hearings are a “vapid and hollow charade”, or at least that’s what Elena Kagan wrote fifteen years ago. National Review Online invited me to contribute to a symposium on how Republican senators can keep the coming hearings from becoming such a charade, with results that can be found here.
  • The First Amendment has been among Kagan’s leading scholarly interests, and yesterday in this space Ilya Shapiro raised interesting questions of whether she will make an strong guardian of free speech values. Eugene Volokh looks at her record and guesses that she might wind up adopting a middling position similar to that of Justice Ginsburg. As Radley Balko and Jacob Sullum have noted, the departing John Paul Stevens ran up at best a mixed record on First Amendment issues, so the overall impact on the Court is far from clear.
  • Kagan’s other main scholarly topic has been administrative and regulatory law, and Nate Oman at Concurring Opinions warns that everything in her career “suggests that she is intellectually geared to look at the regulatory process from the government’s point of view.” Oman took an advanced seminar she taught, and brings back this cautionary report:

    It was an interesting class, mainly focused on the competition between bureaucrats and political appointees. In our discussions businesses were always conceptualized as either passive objects of regulation or pernicious rent-seekers. Absent was a vision of private businesses as agents pursuing economic goals orthogonal to political considerations. We were certainly not invited to think about the regulatory process from the point of view of a private business for whom political and regulatory agendas represent a dead-weight cost.

  • I’m not the only one who finds Kagan’s exclusion of military recruiters at Harvard wrongheaded, even while agreeing with her in opposing the gay ban. Peter Beinart made that argument in a widely noted post at The Daily Beast last month and now has a followup. Former Harvard law dean Robert Clark is in the Wall Street Journal today (sub-only) with an argument that Kagan’s policy was a continuation of his own and represented the sense of the law faculty as a whole. Emily Bazelon points out that the recruitment bar was overwhelmingly popular at top law schools at the time, an argument that as Ramesh Ponnuru points out may raise more questions than it answers. And Ilya Somin cautions against assuming that the wrongheadedness reflects any specifically anti-military bias.
  • One of John Miller’s readers recalls John Hasnas’s wise words on “empathy” in judging. David Brooks at the Times runs with the “Revenge of the Grinds” theme. SCOTUSblog rounds up some other reactions (with thanks for the link). And Brad Smith, writing at Politico, advises us to be ready should Citizens United come up at the hearing.

Income-based Taxpayer Ripoff

Great stuff on Forbes.com today by the Center for College Affordability and Productivity’s Daniel Bennett. Bennett examines the income-based student-loan repayment provisions attached to the health-care reconciliation law, and itemizes how much of their monthly repayment bill borrowers in most federal loan programs will be able to skip out on, leaving taxpayers holding the bag.

Check out Bennett’s entire, handy chart in the article to see the savings for numerous levels of debt and income, and I’ll just highlight the savings for borrowers with $25,000 in debt – slightly more than the average for those graduates who have any debt.

Basically, any single person at that debt level making below a little more than $60,000 a year would see savings under IBR. A federal loan of $25,000, with a 6.8 percent interest rate, would normally carry a monthly repayment of $383. But a person earning $60,000 a year would only pay $365 under IBR, a $19 monthly savings. And, of course, the IBR savings to the borrower – and loss to the taxpayer – gets bigger as income goes down.

Oh, and that’s really only half the story: While anyone with a federal loan (excluding PLUS loans) is now eligible for IBR, if you go into saintly non-profit work – including assuming the incredible hardships of working for the government – your remaining loan balance will be forgiven after only ten years of on-time payments, versus twenty for any devil who dares produce things for which people voluntarily pay!

Claybrook: All Your Data Are Belong to U.S.

I was pleased last week to testify in Congress about a draft bill that would mandate “event data recorders” in all new cars. Automobile black boxes or “EDRs” are an issue that found me a few years ago when I commented on their privacy consequences to a newspaper and heard from concerned drivers across the country.

My testimony to the House Commerce Committee’s Subcommittee on Commerce, Trade, and Consumer Protection had three main themes:

1) The Constitution doesn’t give Congress authority to design automobiles or their safety features;

2) Only a relevant sample of crash data is needed to improve auto safety—overspending on a 100% EDR mandate will keep the poor in older, more dangerous cars and undermine auto safety for that cohort; and

3) The privacy protections in the bill help, but consumers should control the existence and functioning of EDRs in their cars.

A co-panelist taking a different view was Joan Claybrook, President Emeritus of Public Citizen and a former administrator of the National Highway Traffic Safety Administration. In her testimony, Claybrook called for a near quadrupling of NHTSA’s budget to $500 million per year. She also called for the construction of what might be called “Total Auto Awareness” infrastructure.

“[T]he bill should require that the data collected by the EDR be automatically transmitted to a NHTSA database,” Claybrook wrote. She probably meant only crash data, and she paid lip service to privacy, but this represents a probable goal of the auto safety community. Our money, our cars, and our data are instruments for them to use in pursuit of their goals.

If this auto surveillance infrastructure is mandated, what EDRs collect, store, and transmit to government databases will grow over time.

They’re going to keep you alive, damnit, if it burns up all your freedom and autonomy to do it! It’s the beating heart count that matters, not the reasons for living.

No Eisenhower

Dwight D. Eisenhower

The Secretary of Defense gave a good speech over the weekend at the Eisenhower library.  Gates used the occasion to evoke Eisenhower and call for discipline in defense spending. But he didn’t really mean it.

The speech makes excellent points about how our military’s size long ago ceased to have anything to do with our potential enemies. He pointed out that the non-war defense budget has grown by about half since September 11 and that country’s current fiscal circumstance means that that growth has got to slow.

But the speech shows no indication that Gates wants to cut defense spending. It isn’t even clear that he has changed his view that defense spending should grow by about 2% annually no matter what happens in the world. He claims that while defense secretary he has canceled programs worth $330 billion in their lifetime. True, but they were replaced by other programs, and the budgets Gates has sent to the Hill have been bigger each year in real terms. A cynical take is that Gates is trying to preempt calls for defense cuts by acting as if roughly flat budgets require great discipline.

What’s really going on here is that the cost of the current defense program is growing so fast that you need large annual increases just to keep what you have. The main cause is rapid growth in the cost of operations and maintenance and personnel. Those accounts are squeezing others (research, development and procurement) needed for new vehicles and weapons. Last year, Gates responded to that pressure by proposing cuts in procurement spending. People treated him like a revolutionary for doing so, but he was just balancing his books. Now that the worst white elephant programs are gone (with several glaring exceptions), Gates is pushing the services to cut overhead costs and shift the saving into procurement. And he is telling them to buy more cheap platforms by controlling requirements creep.  Same price, better product. End of story.

The point Gates missed about Eisenhower is that he used strategy to limit spending. The New Look was an air force-first strategy that limited army and navy spending, much to the chagrin of those services. Gates’ enthusiasm for counter-insurgency wars has not lead him to propose cutting the navy and air force budgets to fund the super-sized ground forces one needs for such missions. His official strategy shows little inclination for hard choices.

Real reductions in military spending require reductions in the ambitions it serves. A cheaper military means doing less. This administration has shown no interest in that. Maybe the fiscal situation will force them to reconsider.

Initial Kagan Critiques Miss the (First Amendment) Point

As I’ve been re-reading Supreme Court nominee Elena Kagan’s publications – of which there are surprisingly few for someone of her achievements and reputation – I’ve had half an eye on the TV punditry.  It seems that the leading critique from both the right (e.g., Fox News, Senator Jon Kyl – who’s usually excellent on these things) and extreme left (e.g., Jane Hamsher) is that Kagan doesn’t have judicial experience. 

This just completely misses the point.  As a solicitor general (the “Tenth Justice”) and former dean of Harvard Law – where she did a magnificent job and gained the respect of scholars from across the political spectrum – not to mention senior roles in the Clinton White House, teaching at the University of Chicago and clerking for Justice Thurgood Marshall, Kagan absolutely has the credentials and intellectual chops to be a Supreme Court justice.  Indeed, as I said this morning, her scholarly persona means she’s probably better suited to being a justice than to being solicitor general – especially given that her performance as an oral advocate has left something to be desired.  And we’ve had plenty of non-judges on the Court, people coming from the executive branch (William Rehnquist), academia (Felix Frankfurter), private practice (Lewis F. Powell, Jr.), and politics (Hugo Black).

I actually agree with President Obama that it’s not a bad idea to have somebody with a “different” professional background on the Court – although Kagan’s time in the ivory tower is no more likely to give her a common touch than a nominee coming from the “judicial monastery.”  And, as the president said, Kagan “has won accolades from observers across the ideological spectrum, not just for her intellect and record of achievement, but also for her temperament.”  So the problem really isn’t her supposed lack of relevant experience.

One problem is precisely her very short paper trail – though there are no indications she’s anything but a conventional modern liberal, on which more in future – but something to tease out of that trail, combined with her year as SG, is a certain hostility to the freedom of speech.  For example, in her article “Regulation of Hate Speech and Pornography After R.A.V.,” she attempts to find a constitutional way to restrict the sorts of speech that she personally finds offensive.  And in her defense of the federal “depiction of animal cruelty” statute – which the Supreme Court struck down 8-1 – she argued for a balancing test weighing the value of speech against its social harm.  Not to mention her arguments in Citizens United, the campaign finance statute that, until it was struck down could have banned books, flyers, and movies that contained political speech.  (Interestingly, in Citizens United, she abandoned the very “level political playing field” argument the president invokes to criticize the decision.)

I’m of course not criticizing her appearance as an advocate defending the federal laws at issue in Stevens and Citizens United – that’s her job as solicitor general – but if you read the argument transcripts, you see that she could have done so in ways less sweepingly inimical to free speech. There is other evidence to this effect (see her First Amendment articles here, here, and here, plus others lacking public links), but you get the idea.

Europe’s Über Bailout

I’m semi-impressed with the Europeans for choosing the hog-wild approach to bailouts. Not because it is good policy, but rather because it will be a useful demonstration of the old rule that bad policy begets more bad policy (which begets God knows what, but it won’t be pretty). The background is that many European nations have been over-spending, over-taxing, and over-regulating. This has created a poisonous combination of weak economies, pervasive dependency, and political corruption, with Greece being the nation farthest down the path to Krugman-topia. Europe’s political elite at first thought they could paper over the problems with a $140 billion Greek bailout. The ostensible motives were to stop contagion and to demonstrate “solidarity,” but behind-the-scenes lobbying by big European banks (which foolishly own a lot of government debt from profligate nations such as Greece, Portugal, Spain, and Italy) may have been the most important factor. Regardless of the real motive, the original bailout was a flop, so the political class has decided to go with the in-for-a-dime-in-for-a-dollar approach and commit nearly $1 trillion of other people’s money to prop up the continent’s welfare states. The Wall Street Journal reports on the issue, noting that American taxpayers will be involuntary participants thanks to the financial world’s keystone cops at the International Monetary Fund:

The European Union agreed on an audacious €750 billion ($955 billion) bailout plan in an effort to stanch a burgeoning sovereign debt crisis that began in Greece but now threatens the stability of financial markets world-wide. The money would be available to rescue euro-zone economies that get into financial troubles. The plan would consist of €440 billion of loans from euro-zone governments, €60 billion from an EU emergency fund and €250 billion from the International Monetary Fund. Immediately after the announcement, the European Central Bank said it is ready to buy euro-zone government and private bonds “to ensure depth and liquidity” in markets, and the U.S. Federal Reserve announced it would reopen swap lines with other central banks to make sure they had ample access to dollars.

Back when Greece first began to collapse, I argued that bankruptcy was the best option. And I noted more recently that my colleague Jeff Miron reached the same conclusion. Everything that has since happened reinforces this viewpoint. Here are a few additional observations on this latest chapter in the collapse of the welfare state.

1. A bailout does not solve the problem. It just means that taxpayers bear the cost rather than the banks that foolishly lent money to corrupt and incompetent governments.

2. A bailout rewards profligate politicians and creates a moral hazard problem by letting other politicians think that it is possible to dodge consequences for reckless choices.

3. A bailout undermines growth by misallocating capital, both directly via bailouts and indirectly by signaling to financial markets and investors that governments are a “safe” investment.

4. A bailout will cause a short-term rise in the market by directly or indirectly replenishing the balance sheets of financial institutions, but this will be completely offset by the long-run damage caused by moral hazard and capital misallocation.

The last point deserves a bit of elaboration. Assuming markets continue to rise, the politicians will interpret this to mean their policies are effective. But that is akin to me robbing my neighbor and then boasting about how my net wealth has increased. In the long run (which is probably not too long from now), though, this system will not work. At best, Europe’s political elite have postponed the day of reckoning and almost certainly created the conditions for an even more severe set of consequences. No wonder, when I was in Europe a couple of weeks ago, I kept running in to people who were planning on how to protect their families and their money when the welfare state scam unravels. Their biggest challenge, though, is finding someplace to go. People use to think the United States was a safe option, but the Bush-Obama policies of bigger government have pushed America much closer to European levels of fiscal instability.

Public Pensions as Property Rights

On Thursday I noted that former California House Speaker Willie Brown said we shouldn’t worry about the cost of government workers’ pensions because “My guess is that the State of California, like most places involved with pensions, is going to cease to pay them.”

My former colleague Andrew Biggs, writing at The American, says Speaker Brown and I are, believe it or not, too optimistic:

In most states, accrued public-sector pension benefits carry an effective property right, either through legal rulings or outright constitutional provisions. As Donald Kohn, the vice chairman of the Federal Reserve Board, put it, “For all intents and purposes, accrued benefits have turned out to be riskless obligations.”

Some states interpret these rights as prospective, meaning that not only does a public-sector employee have a right to the benefits he’s already earned, but he has a right to continue earning benefits at the same rate no matter how financially unsustainable the pension formula may be. These provisions make state pension benefits far more assured than even Social Security, which the federal government can legally cut at anytime.

Plus, he says, the pension shortfalls are even larger than most analysts think.

Resume worrying.