Archives: July, 2010

DISCLOSE Again and Maybe for the Last Time

The DISCLOSE Act, slightly modified, is headed for a cloture vote on Tuesday afternoon. The alterations to the bill have changed few minds outside of Congress. It remains to be seen whether the modification in the bill — the sponsor removed a passage allowing labor unions to transfer funds among its affiliates — will be enough to attract enough support to achieve cloture.

My policy analysis of DISCLOSE applies to the altered bill.

The Center for Competitive Politics provides an analysis of the altered bill here.

The American Civil Liberties Union is sending around a letter of opposition that states “we believe this legislation would fail to improve the integrity of our campaigns in any substantial way while significantly harming the speech and associational rights of Americans.”

The ACLU has four objections to the altered bill:

  • The DISCLOSE Act fails to preserve the anonymity of small donors, thereby especially chilling the expression rights of those who support controversial causes.
  • The DISCLOSE Act would chill not only express advocacy on political candidates, but also issue advocacy.
  • The DISCLOSE Act imposes impractical requirements on those who wish to communicate using broadcast messages.
  • The DISCLOSE Act imposes unjust restrictions on contractors, TARP participants and corporations with minimal foreign participation.

Taxes Are for the Little People, not John Kerry

In the future, dictionary publishers should get rid of their existing definitions for “hypocrisy” and replace them with a photo of Massachusetts Sen.ator John Kerry. He’s just been caught committing the horrible sin of saving his family more than $500,000 by domiciling his new yacht in Rhode Island (which is a tax haven for such luxuries) rather than his home state. Or at least Senator Kerry says that tax planning is a horrible sin when conducted by “Benedict Arnold” companies and facilitated by those wicked tax havens. But I guess that it’s not such a bad thing when Senator Kerry is protecting his wealth. For the rest of us peasants, it’s our job to meekly get in line and submit to whatever taxes Senator Kerry graciously decides to impose.

The Boston Herald reports:

Sen. John Kerry, who has repeatedly voted to raise taxes while in Congress, dodged a whopping six-figure state tax bill on his new multimillion-dollar yacht by mooring her in Newport, R.I. Isabel — Kerry’s luxe, 76-foot New Zealand-built Friendship sloop with an Edwardian-style, glossy varnished teak interior, two VIP main cabins and a pilothouse fitted with a wet bar and cold wine storage — was designed by Rhode Island boat designer Ted Fontaine. But instead of berthing the vessel in Nantucket, where the senator summers with the missus, Teresa Heinz, Isabel’s hailing port is listed as “Newport” on her stern. Could the reason be that the Ocean State repealed its Boat Sales and Use Tax back in 1993, making the tiny state to the south a haven — like the Cayman Islands, Bermuda and Nassau — for tax-skirting luxury yacht owners? Cash-strapped Massachusetts still collects a 6.25 percent sales tax and an annual excise tax on yachts. Sources say Isabel sold for something in the neighborhood of $7 million, meaning Kerry saved approximately $437,500 in sales tax and an annual excise tax of about $70,000. …[S]tate Department of Revenue spokesguy Bob Bliss confirmed the senator “is under no obligation to pay the commonwealth sales tax.”

Liberty Requires Risk

That’s the message of my recent op-ed in the Daily Caller. New York City Mayor Michael Bloomberg’s initial reaction to the McDonald v. City of Chicago decision was to say that McDonald would have no impact on government’s ability to keep guns “out of the hands of criminals and terrorists.” This was a reference to legislation that Bloomberg supports that would allow the federal government to bar anyone the Attorney General thinks is a terrorist from purchasing a firearm. Not convicted of a crime in support of terrorism — that would make them a felon and already unable to purchase or own a firearm. No, being suspected of activity in support of or preparation for terrorism means you get the same treatment as if you were a convicted felon or had been involuntarily committed to a mental institution. So much for due process.

While D.C. v. Heller is the relevant decision (the AG’s double secret probation list is a federal, not state action), the premise of this legislation needs to be refuted. The proposition that guns and gun ownership are uniquely dangerous such that the right to keep and bear arms must be treated as a second-class provision of the Bill of Rights is willfully blind of the other instances where society accepts risk by safeguarding liberty in the face of foreseeable hazards. Justice Stephen Breyer embraced this misguided concept –– that the right to keep and bear arms is an enumerated, but non-fundamental, right that deserves a lesser degree of protection than the rest of the provisions of the Bill of Rights — in his McDonald dissent.

I counter that notion in this podcast:

Related thoughts from Ilya Somin here.

This Week in Government Failure

Over at Downsizing Government, we focused on the following issues this week:

Immigration Law Enforcement and False Arrests

Cato hosted a forum the other day about immigration policy and the controversial Arizona law that will be going into effect on July 29.   Dan Griswold made the case for comprehensive immigration reform while I offered a critique of the Arizona law.  Mark Krikorian from the Center for Immigration Studies was invited to offer a contrary perspective, which is the type of event we like to host — where a civil exchange of views can take place. 

Mr. Krikorian is continuing the debate now on his blog.  Since his blog post takes a shot at my remarks, I’ll offer a rejoinder here.

By way of background, there are at least four problems with Arizona’s move to involve local police in immigration law enforcement.  First, crime victims will be more reluctant to call on the police about violent crimes because they will fear deportation.  Second, police resources are scarce.  Priorities must be set.  Why divert personnel who are trying to respond to (or investigating) violent crimes so that they can arrest, book, and process men and women who pose no danger to the community? The police chief in Phoenix, Jack Harris, among many others, says the Arizona law will make things worse, not better.  Third, the Arizona law criminalizes honest work.  It is now a crime for an “unauthorized alien” to pick fruit in a field, wash cars, or clean homes or offices.  The worry used to be that people were crossing the border to take advantage of welfare benefits.  Now policymakers are making work a crime!  My fourth point was that involving local police in immigration enforcement will lead to scores of false arrests and that Hispanic Americans and Hispanic legal residents will be the ones enduring these false arrests. 

The first thing to note about Mr. Krikorian’s post is that he did not respond to any of those points. What he does say is that I showed a video clip of an obnoxious and boorish guy who refused to answer questions from the police.  He says that I believe the guy is a “hero” and that libertarians are “utopian” and favor “anarchism.” Hmmm. These are fanciful statements and I will leave it to fair-minded readers to judge the merits of those claims for themselves.  (To follow this exchange further, one should check out the film clip here, though I only showed about a 4 minute excerpt at the Cato forum due to our time constraints.)

In order to examine the scope of government power regarding detentions and questioning, one must necessarily find that line between a lawful detention and an illegal false arrest.  These encounters are very rarely captured on film so I thought the film clip might prove useful.  In a contest of manners, Mr. Krikorian may be right, that the activist in the car gets indignant very quickly as the police refuse to answer his question, “Am I being detained or am I free to leave?”  Let’s concede that right here.  On the law, however, the police are wrong.  And that was my point.

Let me explain.  This incident did not occur at a border crossing where passports must be shown.  This was not a traffic stop where license and registration must be presented by the driver.  This was some “checkpoint” where the police were trying to question all comers without a warrant, probable cause, or reasonable suspicion.  The police did their best to use a “show of authority” to pressure drivers to answer questions that they were under no legal obligation to answer. It was a false arrest. Was it a really awful false arrest?  No – it was a false arrest that lasted about ten minutes. 

One problem in this area is that 99 out of 100 people will cave in under the illegal pressure by the cops (“you are not free to go until you answer our questions”). Now I know that many are quite happy to answer the questions – that is their choice.  Others may get upset when they discover that their right to decline to answer questions was violated – but how many will go to the trouble of hiring a lawyer to bring a lawsuit to check this kind of government overreaching?  Virtually none, which means the law offers little practical protection for persons against false arrests, which means there might be quite a lot of them. 

Mr. Krikorian may believe that illegal immigration is so serious a problem that it requires more soldiers, more highway checkpoints, stiffer employer sanctions, the criminalization of work, and more ID checks for pedestrians inland, but it is just silly to say that those who disagree with him are “utopian.”

Investors: Fear the Process That Gave Us ObamaCare, Not Efforts to Repeal It

Ezra Klein writes:

So long as the political system is working reasonably well, we can get out from even quite a lot of debt. But the more it breaks down — the more the market sees things like the deficit commission rejected by its Republican sponsors in Congress, the more it hears threats to repeal the deficit reduction in health-care reform, the more it seems likely that Democrats will become just as unreasonably obstructionist when they become the minority — the more it has reason to worry.

I doubt that investors worry more when they hear threats to repeal ObamaCare or its Medicare cuts, which few took seriously in the first place. Given that the non-partisan Congressional Budget Office, the non-partisan chief actuary of the Medicare program, and even the International Monetary Fund have all expressed skepticism that those cuts will take effect, I expect investors have already discounted claims that ObamaCare will reduce the deficit.

More generally, the problem is not that the political system is breaking down.  That system is working pretty much the same way it always has and always will: it promotes irresponsibility.  Republicans and Democrats are merely responding to the incentives created by the system in which they operate.  (If they didn’t respond to those incentives, the political system would throw them out and replace them with people who do.)  If investors don’t already understand that, the sooner the better.

This is why responsible people want to take responsibility for our health care, etc., out of the hands of politicians.

Grinning and Bearing GM’s Bitter Ironies

Via General Motors, American taxpayers will soon own a 61 percent stake in a Texas-based company called AmeriCredit.  GM announced plans yesterday to acquire the auto finance firm for $3.5 billion, which management believes will help boost its auto sales and improve chances for an IPO later this year or next. 

Thus, a greater chance for re-privatization later is the rationalization for more nationalization now.

For those who opposed the nationalization of GM for its affront to free markets and the rule of law in the first place, the acquisition presents a dilemma.  On one hand, the deal means that the nationalization virus is spreading to infect another company in a different industry, ensuring that yet more business decisions are driven by political, rather than economic, considerations. (Although, to acknowledge the efforts of Messrs. Bush, Paulson, Obama, Dodd, Frank and others, politics already reigns supreme in the consumer finance industry.) One has to wonder what exemptions, loopholes, and carve-outs might be in store for AmeriCredit, as the administration crafts regulations to implement the just-passed “financial reform” legislation.

And Senator Chuck Grassley (R-IA), who questioned and brought attention to some of GM’s hyperbolic claims about its performance earlier this year, raised fresh doubts about the latest move:

If GM has $3.5 billion in cash to buy a financial institution, it seems like it should have paid back taxpayers first. After GM’s experience with GMAC, which left GM seeking a taxpayer bailout, you have to think the company and, in turn, the taxpayers would be better off if GM focused on making cars that people want to buy and stayed clear of repeating its effort to make high-risk car loans.

On the other hand, a course of action that gets the government out of the auto business as quickly as possible, and makes taxpayers as whole as possible, is probably the least objectionable. Though there are no guarantees that will happen, arguably that outcome is more likely if GM’s revenues and profits are higher.  And, according to auto industry analysts, the absence of a captive financing operation (GMAC, now called Ally Financial, is no longer part of GM) has hurt GM’s sales, especially in the “sub-prime” portion of the market.

The opening paragraph in the New York Times story on this topic yesterday went like this:

General Motors said Thursday that it had agreed to buy a financing company, AmeriCredit, for $3.5 billion so it can lease more vehicles and increase sales to consumers with lower credit ratings. 

According to that story, about 4 percent of GM’s sales go to sub-prime customers.  But GM’s sales could increase by as much as 20 percent if it “aggressively courts sub-prime buyers.”  Hmmm.  Haven’t we seen this movie before?  Is GM stealing a page from the Fannie/Freddie playbook? 

Well, apparently Ford and Toyota and the other big auto producers rely on their own captive financing units to make their vehicles accessible to those who wouldn’t qualify for credit from third-party financers.  But at least those automakers have shareholders to discipline lending behavior that might lead to increased default rates.  They may be more risk-averse or at least risk-conscious than a company spending other people’s money, whose success happens to be in the Obama administration’s best interests.

So where does this leave free market proponents?  Arguably, in the same boat as the Obama administration, pulling for higher GM revenues and profits.  Without successful operations, re-privatizing GM will be very difficult.

Of course, the final indignity—the ultimate heads-they-win-tails-we-lose irony in the GM saga—is that if GM is eventually re-privatized and if the taxpayers are made whole, proponents of similar interventions in the future will have a “success” story to tout.