Archives: October, 2010

Obama’s Attack on the Chamber of Commerce: Perfectly Consistent

Today POLITICO Arena asks:

Will President Obama’s campaign finance attacks on the U.S. Chamber of Commerce and others resonate with voters over the next three weeks?

My response:

With so many senior advisors leaving the White House so early in the term, you have to wonder who’s left to advise the president except, well – the president. And judging from his attacks on corporate campaign spending generally and the U.S. Chamber of Commerce in particular, you’re inclined to believe that that’s the case. After all, the attacks are perfectly consistent with the president’s larger agenda.

As others here at the Arena have noted, not since the New Deal have we seen so sustained an anti-business political agenda as has come from this president. Under such an assault, is it any wonder that businesses have created so few jobs, or that they’re fighting back? Yet for that, the president is criticizing them – with campaign finance claims that not even the New York Times finds credible.

This campaign finance angle has an especially unseemly air about it, however – see the Wall Street Journal’s editorial this morning about Democrats unleashing the IRS and Justice on donors to their political opponents. The effort to restrict the speech that campaign finance represents – promoted by the political establishment, especially Democrats – has always been at bottom about incumbency protection, not “good government.” We didn’t hear complaints when Obama abandoned the public financing system in 2008, for example, as “unconscionable” amounts of private money poured into his campaign. Obama may be barking now that the shoe’s on the other foot, but his bark rings as hollow as his agenda, which is why it’s not resonating with the voters, and is not likely to in the three weeks ahead.

November Nail in Rail Coffin?

The New York Times offers an unintentionally hopeful story on Republican candidates running for governor who could become significant obstacles for the Obama administration’s high-speed rail agenda.

As I recently discussed, Wisconsin GOP gubernatorial candidate Scott Walker has taken the position that Washington can keep the $810 million it allocated for a “high-speed” rail line between Madison and Milwaukee that would operate at speeds achieved in the 1930s. The Times article shows that Walker isn’t alone:

Similar concerns are threatening to stall many of the nation’s biggest train projects. In Ohio, the Republican candidate for governor, John Kasich, is vowing to kill a $400 million federal stimulus project to link Cleveland, Columbus and Cincinnati by rail. In Florida, Rick Scott, the Republican candidate for governor, has questioned whether the state should invest in the planned rail line from Orlando to Tampa. The state got $1.25 billion in federal stimulus money for the project, but it will cost at least twice that much to complete.

And the nation’s most ambitious high-speed rail project, California’s $45 billion plan to link Los Angeles and San Francisco with trains that would go up to 220 miles per hour, could be delayed if Meg Whitman, a Republican, is elected governor. “In the face of the state’s current fiscal crisis, Meg doesn’t believe we can afford the costs associated with new high-speed rail at this time,” said Tucker Bounds, a campaign spokesman.

Whitman is right: California can’t afford high-speed rail, nor can the rest of the country. A Cato essay on high-speed rail notes that it would cost around $1 trillion to build a nationwide system of high-speed rail. That’s a lot of other people’s money to spend on a mode of transportation that “would not likely capture more than about 1 percent of the nation’s market for passenger travel.”

Randal O’Toole nicely sums up why high-speed rail doesn’t make any sense:

The history of transportation shows that we adopt new technologies when they are faster, more convenient, and less expensive than the technologies they replace. High-speed rail is slower than flying, less convenient than driving, and far more expensive than either one. As a result, it will never serve more than a few marginal travelers.

In the meantime, Amtrak – the poster child for bad federal transportation ideas – recently unveiled a $117 billion, 30-year “vision” for high-speed rail in the Northeast Corridor.

From the Washington Post:

At a news conference at Philadelphia’s 30th Street Station on Tuesday, Amtrak President Joseph Boardman said the proposal is at the visionary stage, and there’s no funding plan in place. It aims for high-speed rail by 2040.

Of course Amtrak has no funding in place – it depends on taxpayer subsidies to remain in operation!

As a series of Cato essays on the Department of Transportation demonstrates, policymakers should be focusing on getting the private sector more involved in the financing and operation of transportation.

Mirror, Mirror, on the Wall, Which Nation Has the Most Debt of All?

The Economist has a fascinating webpage that allows readers to look at all the world’s nations and compare them based on various measures of government debt (and for various years).

The most economically relevant measure is public debt as a share of GDP, and you can see that the United States is not in great shape, though many nations have more accumulated red ink (especially Japan, where debt is much higher than it is even in Greece).  As faithful readers of this blog already understand, the real issue is the size of government, but this site is a good indicator of nations that finance their spending in a risky fashion.

By the way, keep in mind that these figures do not include unfunded liabilities. For those who worry about debt, those are the truly shocking numbers (at least for the United States and other nations with government-run pension and health schemes).

This Week in Government Failure

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

  • The variation in welfare enrollment among the states points to the desirability of handing off all responsibility for anti-poverty programs to the states.
  • A recent stack of audits is a reminder of the bureaucratic bungling that comes with government programs, particularly at HUD.
  • Instead of spreading transportation subsidies across every form of transportation, the federal government should cease with the seemingly endless interventions and allow free individuals to figure out what makes the most sense.
  • We celebrate the beginning of hockey season with a look at fiscal policy north of the border. First, the Canadian economy boomed during the 1990s and 2000s as government spending was dramatically reduced. Second, the Canadian experience illustrates that a lot of progress can be made if even modest cuts are implemented and then spending is constrained so that it grows at a slower rate than the overall economy.

Mario Vargas Llosa’s Nobel Prize

The news that Peruvian novelist Mario Vargas Llosa won the Nobel Prize for literature has gratified me beyond words. The award is a huge boost for liberty in Latin America.  Through his literary genius, prolific essays, and ceaseless activism, Vargas Llosa long established himself as perhaps Latin America’s most well-known public intellectual, and certainly its most well-known classical liberal. For decades, he has used his ability to reach a mass audience to promote the principles of the free society, becoming the region’s foremost advocate of democratic capitalism.

It was not always so. In the 1960s when his first novels appeared to wide acclaim, Vargas Llosa was representative of the Latin American intellectual establishment in his admiration of the Cuban revolution and his advocacy of radical leftist politics. Even then, however, anti-authoritarianism and a concern for the individual were prominent themes in his novels. In an example of independent thinking that characterizes Vargas Llosa’s commitment to the truth, he broke with the intellectual establishment in the early 1970s, strongly denouncing Fidel Castro’s revolution and turning away from statism in general. His increasingly forceful defense of individual liberty was strengthened by his discovery, by the 1970s, of the work of Nobel laureate Friedrich Hayek, whom Vargas Llosa cites as one of the three biggest intellectual influences on his thinking (the others being Karl Popper and Isaiah Berlin)

An extremely versatile communicator, Vargas Llosa has explored Latin America’s deepest social problems and has demystified the utopian vision of demagogic leaders so common in Latin American history. A major theme of his 1981 novel, The War of the End of the World, for example, was that collectivist promises of a better life, or happiness, can only end in fanaticism—especially if various brands of collectivism are pitted against each other—precisely because civilization depends on the primacy of the individual and a close regard to the real world as opposed to dogmatic reliance on abstract but erroneous ideas of how the world might work. 

In places like Russia or Latin America where there is little or no tradition of individual liberty and people place little trust in the main institutions of society, the novelist often holds a special, almost God-like place. Fair or not, he is viewed as trustworthy because his ideas are his own and because he has somehow managed to remain independent from the corrupting influences of society. This has given Vargas Llosa a standing from which he has regularly offered up statements that have instantly provoked debate and that have often passed into national lexicons. In 1990, for example, during a visit to Mexico, he famously referred to the system of government under Mexico’s long-ruling PRI party as the “perfect dictatorship.” That scandalized the political class and the intelligentsia through much of Latin America, but any Mexico City cab driver would tell you that it was absolutely true. 

Last year at a conference organized in Caracas by the market-liberal CEDICE think tank and at a time when Hugo Chavez was radicalizing his socialist revolution, Vargas Llosa declared, “We don’t want Venezuela to become a totalitarian communist state.” That provoked Chavez to challenge him and the “neoliberals” to a nationally televised debate, in what turned out to be a ploy that Chavez backed out of once Vargas Llosa accepted the challenge. Vargas Llosa thus won the debate without holding it. The whole episode was prominently reported in the region and was a blow to Chavez, emphasizing the closed and cowardly nature of his regime.

When Vargas Llosa writes and speaks about economics, the effect is similar, as when he explains that historically in Latin America capitalism never existed. For those wishing to understand how Latin American economies really work, and how the free market is the most compatible economic system with the way Latin Americans live, I still recommend Vargas Llosa’s prologue to the early editions of Hernando de Soto’s classic, The Other Path, as one of the clearest statements about the region’s political economy. 

Perhaps the best example of Vargas Llosa’s influence in setting the agenda is in his native Peru. At the end of the 1980s, after President Alan Garcia had driven the country to ruin, Vargas Llosa decided to run for president, having already rallied mass protests against Garcia’s plans to further socialize the country. Vargas Llosa articulated an explicitly libertarian campaign platform, calling for radical market reforms. He lost the 1990 election to Alberto Fujimori, who ran a gradualist platform and relied on scare tactics and dirty tricks to win over the electorate.

But Vargas Llosa’s ideas won. After Chile, Peru became the Latin American country that implemented the most radical and comprehensive set of reforms in a short period of time. The reforms led to high growth and were highly popular. When Fujimori then abrogated the constitution and closed the Congress, Vargas Llosa rightly criticized the move and the abuses that followed. But the economic reforms that subsequent democratic governments stuck to or deepened have transformed the country and so far turned it into a Latin American success story. As such, Peru is showing Latin Americans the superiority of market democracy as opposed to populist authoritarianism. It is no wonder that Alan Garcia, currently Peru’s president for a second time, is the bitterest of rivals with Hugo Chavez. Alan Garcia is now yet another of Vargas Llosa’s converts.

I owe a debt of gratitude to Vargas Llosa, a fellow Peruvian. I have been influenced by him from a young age and, when studying at Northwestern University during his run for president, his libertarian platform informed my studies and ran in stark contrast to the lectures given by my leftist professor of Latin American politics. I’m honored that Vargas Llosa has since become a friend, generously supportive of Cato’s efforts and helpful as always to all of us throughout the region who promote liberal principles. Through his conduct and his ideas, he continues to be a teacher.

Gracias Mario.

Do We Have a Problem of Too Much Spending or Too Little Revenue?

Here’s a chart from Veronique de Rugy’s new article on federal revenues vs. spending in The American. Amazing how the problem becomes obvious when you look at real numbers and don’t get trapped into using “baseline” math (as I explain in my latest video).

By the way, find out when John Stossel’s program on Fox Business News airs in your area. Veronique is a guest this week talking about these issues.