Archives: October, 2010

Nine Key Ballot Initiatives to Watch

While everyone is focused on the battle to see which party will control the House and/or Senate, there are several issues that voters will directly decide that deserve close attention. Here are nine initiatives that I’ll be watching next Tuesday.

1. Imposing an income tax in the state of Washington - This is the one I’ll be following very closely. I have a hard time thinking that voters would be dumb enough to impose an income tax, but the Pacific Northwest is a bit crazy on these issues. Oregon voters, for instance, approved higher tax rates earlier this year.

2. Stopping eminent domain abuse in Nevada - This initiative is very simple. It stops the state from seizing private property if the intent is to transfer it to a private party (thus shutting the door that was opened by the Supreme Court’s reprehensible Kelo decision).

3. Marijuana legalization in California - Proponents of a more sensible approach to victimless crimes will closely watch this initiative to see whether Golden State voters will say yes to pot legalization, subject to local regulation. (David Boaz and Juan Carlos Hidalgo already have commented on the implications of this vote)

4. Strengthen rights of gun owners in Kansas - If approved, this initiative would remove any ambiguity about whether individuals have the right to keep and bear arms.

5. Protecting health care freedom in Arizona - For all intents and purposes, this is a referendum on Obamacare. I’m hoping that it will pass overwhelmingly, thus giving a boost to the repeal campaign. There’s apparently a similar initiative in Oklahoma, but it hasn’t gotten as much attention.

6. Reducing benefits for bureaucrats in San Francisco - If one of the craziest, left-wing cities in America decides to require bureaucrats to make meaningful contributions to support their bloated pension and health benefits, that’s a sign that the gravy train may be in jeopardy for bureaucrats all across the nation.

7. Making it easier to increase government spending in California - The big spenders want to get rid of the two-thirds requirement in the state legislature to approve a budget. This would pave the way for even bigger government in a state that already is close to bankruptcy.

8. Reducing the sales tax in Massachusetts - The entire political establishment is fighting this proposal to roll back the sales tax from 6.25 percent to 3 percent, and pro-spending lobbies are pouring big money into a campaign against the initiative, so you know it must be a good idea.

9. Controlling benefits for bureaucrats in Louisiana - The initiative would require a two-thirds vote to approve any expansion of taxpayer-financed benefits for government employees.

Data Formats —> Public Oversight

Rep. Darrell Issa (R-CA) has a terrific op-ed piece on Internet-age government transparency in the Washington Examiner today:

If agencies used consistent data formats for their financial information, their financial reports could be electronically reconciled. It would be possible to trace funds from Congressional appropriations through agencies’ budgets to final use. The same data could flow automatically into USASpending.gov, without the errors and inconsistencies that make it unreliable today.

The idea is simple, if not easy to implement. Put government data in uniform formats, accessible to the public, and let public oversight work its will. Whether you prioritize good government, small government, or both, expect improvement.

Heightening the Contradictions in Iran

This, it seems to me, is a sign of a brittle, weak government that is fighting time and surviving exclusively on its nationalist credential:

TEHRAN (Reuters) - Iran will not allow its universities to begin teaching certain disciplines it deems too “Western,” and existing courses will be revised, a senior Education Ministry was quoted as saying Sunday.

“Expansion of 12 disciplines in the social sciences like law, women’s studies, human rights, management, sociology, philosophy….psychology and political sciences will be reviewed,” Abolfazl Hassani was quoted as saying in the Arman newspaper.

“These sciences’ contents are based on Western culture. The review will be the intention of making them compatible with Islamic teachings.”

Hassani said Iranian universities will not be allowed to open new departments in these disciplines and the curricula for existing departments would be revised.

Link via John Sides.

What Gets You Most Upset about the TARP Bailout, the Lying, the Corruption, or the Economic Damage?

As an economist, I should probably be most agitated about the economic consequences of TARP, such as moral hazard and capital malinvestment. But when I read stories about how political insiders (both in government and on Wall Street) manipulate the system for personal advantage, I get even more upset.

Yes, TARP was economically misguided. But the bailout also was fundamentally corrupt, featuring special favors for the well-heeled. I don’t like it when lower-income people use the political system to take money from upper-income people, but it is downright nauseating and disgusting when upper-income people use the coercive power of government to steal money from lower-income people.

Now, to add insult to injury, we’re being fed an unsavory gruel of deception as the political class tries to cover its tracks. Here’s a story from Bloomberg about the Treasury Department’s refusal to obey the law and comply with a FOIA request. A Bloomberg reporter wanted to know about an insider deal to put taxpayers on the line to guarantee a bunch of Citigroup-held securities, but the government thinks that people don’t have a right to know how their money is being funneled to politically-powerful and well-connected insiders.

The late Bloomberg News reporter Mark Pittman asked the U.S. Treasury in January 2009 to identify $301 billion of securities owned by Citigroup Inc. that the government had agreed to guarantee. He made the request on the grounds that taxpayers ought to know how their money was being used. More than 20 months later, after saying at least five times that a response was imminent, Treasury officials responded with 560 pages of printed-out e-mails – none of which Pittman requested. They were so heavily redacted that most of what’s left are everyday messages such as “Did you just try to call me?” and “Monday will be a busy day!” None of the documents answers Pittman’s request for “records sufficient to show the names of the relevant securities” or the dates and terms of the guarantees.

Here’s another reprehensible example. The Treasury Department, for all intents and purposes, prevaricated when it recently claimed that the AIG bailout would cost “only” $5 billion. This has triggered some pushback from Capitol Hill GOPers, as reported by the New York Times, but it is highly unlikely that anyone will suffer any consequences for this deception. To paraphrase Glenn Reynolds, “laws, honesty, and integrity, like taxes, are for the little people.”

The United States Treasury concealed $40 billion in likely taxpayer losses on the bailout of the American International Group earlier this month, when it abandoned its usual method for valuing investments, according to a report by the special inspector general for the Troubled Asset Relief Program. …“The American people have a right for full and complete disclosure about their investment in A.I.G.,” Mr. Barofsky said, “and the U.S. government has an obligation, when they’re describing potential losses, to give complete information.” …“If a private company filed information with the government that was just as misleading and disingenuous as what Treasury has done here, you’d better believe there would be calls for an investigation from the S.E.C. and others,” said Representative Darrell Issa, the senior Republican on the House Committee on Oversight and Government Reform. He called the Treasury’s October report on A.I.G. “blatant manipulation.” Senator Charles E. Grassley of Iowa, the senior Republican on the Finance Committee, said he thought “administration officials are trying so hard to put a positive spin on program losses that they played fast and loose with the numbers.” He said it reminded him of “misleading” claims that General Motors had paid back its rescue loans with interest ahead of schedule.

P.S. Allow me to preempt some emails from people who will argue that TARP was a necessary evil. Even for those who think the financial system had to be recapitalized, there was no need to bail out specific companies. The government could have taken the approach used during the S&L bailout about 20 years ago, which was to shut down the insolvent institutions. Depositors were bailed out, often by using taxpayer money to bribe a solvent institution to take over the failed savings & loan, but management and shareholders were wiped out, thus  preventing at least one form of moral hazard.

Santos: ‘Proposition 19 Could Change Colombia’s Drug Policy’

Colombian president Juan Manuel Santos has stated that if Proposition 19 passes next week in California and marijuana is legalized in the state, it could force his country to rethink its drug policy.

“Tell me if there is a way to explain to a Colombian peasant that if he produces marijuana we are going to put him in jail… [while] the same product is legal [in California]. That’s going to produce a comprehensive discussion on the approach we have taken on the fight against drug trafficking,” said Santos, who, a couple of months earlier, endorsed the call for a debate on drug legalization made by Mexican president Felipe Calderón. However, Santos has also said that he believes that legalization will increase drug consumption, a presumption that has been rebutted by evidence in countries with liberal drug policies such as Portugal.

Today, in his opening remarks at a Latin American presidential summit held in the Colombian city of Cartagena, Santos brought up [in Spanish] the subject again : “If we don’t act in a consistent way on this issue, if all we are doing is to send our fellow citizens to jail while in other latitudes the market is being legalized, then we have to ask ourselves: isn’t it time to review the global strategy against drugs?”

Santos’ statements have been backed by his Minister of Foreign Relations, who even said in an interview with El Tiempo, Colombia’s leading newspaper, that the country’s new seat on the UN Security Council could be “a good place” to start a “worldwide discussion” on the way that the war on drugs is being conducted.

It’s ironic–and gratifying–that the president of Washington’s closest ally in Latin America is the leading voice in the region questioning the wisdom of the war on drugs. It shouldn’t be a surprise, though. Back in 1998 Juan Manuel Santos signed a public letter to then Secretary General of the UN Kofi Annan denouncing the war on drugs as a “failed and futile” experiment, and calling for drug policies to be based on “common sense, science, public health and human rights.”

Even though the impact of Proposition 19 in California and the United States could be limited, Juan Manuel Santos’ statements show that its reverberations in Latin America could be significant.

Postmaster General Stepping Down

Postmaster General John Potter has announced that he is stepping down. The Washington Post speculates on the reason for Potter’s departure:

It is not immediately clear why Potter decided to step down, though USPS staffers and others in the postal community – a wide fraternity including the shipping industry, labor unions and large retailers – signaled recently that he was likely to go after another record year of financial losses and failing to earn greater management flexibilities from Congress.

When Potter testified before a Senate Appropriations subcommittee hearing in March on the USPS’s desire to drop Saturday delivery, I noted that his comments indicated the need to privatize the U.S. Postal Service.

In his testimony, Potter stated:

If the Postal Service were provided with the flexibilities used by businesses in the marketplace to streamline their operations and reduce costs, we would become a more efficient and effective organization. Such a change would also allow us to more quickly adapt to meet the evolving needs, demands, and activities of our customers, now and in the future.

Of course, Congress has shown virtually no interest in giving the USPS, which is bleeding red ink, the greater flexibility it needs. This makes me wonder if Potter will reach the same conclusion that his predecessor, William Henderson, reached following his departure from the USPS.

Three short months after Henderson stepped down as postmaster general in June 2001, he penned an op-ed in the Washington Post that called for the USPS to be privatized.

Henderson wrote:

But for all the ways in which the Postal Service already resembles a private company, it lacks the advantages of any other corporation, such as being able to turn on a dime when it comes to rate changes, perhaps raising prices at times of high demand and lowering prices to entice customers during traditionally slow times, which for the Postal Service means summer. Today, a price change requires the permission of the Postal Rate Commission – a yearlong process.

And unlike a private company, the Postal Service has a universal service obligation, meaning it must deliver everywhere, six days a week, at a regularly scheduled time, making the delivery even for a single piece of mail, which is not cost-effective. And it means delivering in the Grand Canyon and in rural Alaska and in high-risk neighborhoods and lots of other places where delivery is not cost-effective.

The trade-off is that the Postal Service gets monopoly protection; no private company is allowed to compete with it head to head by carrying letter mail or using the mailbox. It should give up that protection for the greater benefits of privatization.

Henderson’s conclusion still rings true almost ten years later:

I can’t believe that 25 years from now the Postal Service will still be owned by the federal government. But the point is that, as with any government asset, this one needs to be maximized. And that means we need to free ourselves from the usual discussion about controlling costs or keeping rates stable or mailing more, all of which is simply a form of denial about the real issue. The model itself is not going to work for the long haul: It must be changed.

Unfortunately, Congress is still in denial. In commenting on Potter’s departure, Sen. Susan Collins (R-ME) offered the vacuous statement that his successor “must strengthen the Postal Service by cutting costs, enticing more customers and putting this vital institution on a sound financial footing.” Instead, Sen. Collins and her colleagues need to recognize that the USPS model “is not going to work for the long haul” so long as politicians ultimately remain in charge.

The Phantom Menaces in the ACLU’s Case for Net Neutrality

I’m accustomed to finding myself on the same page as the American Civil Liberties Union–and in particular with the razor sharp Jay Stanley, who heads their Technology & Liberty program. But their recent report urging the necessity of net neutrality regulation only makes me more skeptical. I’ve always pretty much shared the position of my colleague Tim Lee: The open, end-to-end nature of the Internet is an important driver of both innovation and free expression–important enough that if it were systematically threatened, there would be a decent case for regulatory intervention. But that end-to-end architecture is also pretty resilient, even if some ISPs might wish otherwise. And while it’s easy to think of deviations from neutrality that would be pernicious, it’s also not hard to imagine specific non-neutral practices that might benefit consumers without undermining that broader end-to-end structure. The real policy question ought to be how to get enough competition in broadband markets that consumer choice selects for the latter against the former. Since broadband isn’t all that competitive in many regions, the question is whether we can afford to wait and deal with problems as they arise in a narrowly tailored way, or whether there’s some urgent need for a broad architectural mandate.

The ACLU says there is, and cites ten terrifying “abuses” that supposedly show the need to legislate now. But as I read over the list, I found I couldn’t help but think of those old Saturday Night Life “Coffee Talk” sketches, where a farklempt Mike Meyers would throw out such food for thought as: “Grape Nuts contain neither grapes nor nuts, discuss.” Because ACLU’s list of abuses mostly consists of examples that either aren’t actually net neutrality violations, or for which there are obvious remedies that don’t require neutrality regulation. Let’s discuss:

  • AT&T’s “jamming” of a Pearl Jam concert, in which singer Eddie Vedder’s remarks attacking then-president George Bush were bleeped out of a webcast. Obviously, it would be pretty troubling if your ISP were filtering your datastream to remove political content of which it disapproved. But that’s not what happened here at all. AT&T, via a deal with the Lollapalooza music festival, was streaming the Pearl Jam concert on its own content hub. Now, obviously, whoever was editing the stream and decided to treat criticism of Bush as equivalent to profanity made a highly dubious judgment call, but the point is that AT&T was acting as a content provider here, not a carrier: The filtering happened before the content hit the network, and no proposed neutrality rules I’m aware of would have prohibited this.
  • BellSouth’s “censorship” of Myspace. According to BellSouth’s own account, a glitch in their system temporarily left their outraged users unable to access the popular social networking site. “Some suspected” that the company was actually testing some kind of tiered access system, and decided to do so by blocking a popular site without notice, antagonizing their paying customers. Some also suspect the moon landing was faked, but I wouldn’t make it the basis of legislation.
  • Verizon briefly denied the abortion-rights group NARAL access to a program whereby users who texted a dedicated “short code” could sign up for SMS updates; the company almost immediately reversed its decision. This is, obviously, not a case involving Internet neutrality, and while it’s certainly a case involving the ability of a network owner to discriminate between users of its network services, the issues involved are pretty different. These “short code” services often permit users to either sign up for fee-based updates or donate money to causes via charge added directly to their monthly phone bill. As indicated by their prompt reversal, the rationale for denying NARAL here–desire to avoid partnering with causes on either side of a “controversial” issue–was probably ill considered, but this is clearly a case where the company is partnering with the provider in a way that goes beyond carriage, because they’re also effectively acting as a payment processor. That means they’ll have an interest in vetting partners in a way you wouldn’t expect a mere carrier to vet every content provider on the network. Even if you think this particular type of discrimination ought to be prohibited, this is really a distinct case raising issues separate from those involved in the Internet Neutrality debate, and ought to be considered separately.
  • Proposed filtering for copyright infringement. This is indeed a terrible and, in practice, unimplementable idea–for one because there’s no easy way to distinguish illegal from legal copying (as when I stream music I’ve purchased from my desktop or server to a mobile device). There’s also a pretty good case that this would already be illegal under federal wiretap laws…which may be why the “proposals,” referenced in an article from January 2008, haven’t actually gotten anywhere.

There are a handful of other cases that either may or definitely do count as potentially troubling neutrality violations–the most famous being Comcast’s throttling of BitTorrent traffic. At least two involve ISPs in Canada, which I wouldn’t have thought is the FCC’s problem. In some of these cases, I’d even agree that regulatory action is justified–but by the FTC, not the FCC. If you are advertising access to “the Internet,” then choking off access to whole classes of popular services or degrading throughput well below advertised speeds, well, that’s what we call a deceptive business practice. (In a more libertarian world, this might be handled by another mechanism; in the world we’ve got, it’s the FTC’s lookout.) Maybe there’s a case to be made for more specific transparency rules to establish when and how consumers have to be informed about non-neutral routing policies–certainly no ISP should be allowed to block access to a website and conceal the policy by making it look like a technical glitch–but I have no idea why you’d make the leap to a sweeping architectural mandate before trying something along those lines.

More generally, I’m a little puzzled about why the ACLU is weighing in on this at all. It’s true that ISP routing practices, like the practices of many private firms, could have implications for “free expression” broadly conceived. But not everything that might promote or hinder expression is part of the civil liberties portfolio, which has traditionally been limited to restraints on freedom imposed by government. To the extent federal policies inhibit broadband competition, one might say the government is in some sense complicit in whatever private policies restrict expression, but here again, the obvious remedy is to look for more pro-competitive policies. In any event, this is far enough outside their usual wheelhouse that you’d think it would make more sense for them to remain, well… neutral on this one.