Archives: 03/2011

Thursday Links

  • The Obama Doctrine fails to address the limitations of Washington’s attempts to shape foreign conflicts.
  • The 2012 Republican presidential field has thus far failed to produce a small-government conservative.
  • FREE E-BOOK: Government Failure: A Primer on Public Choice is available for reading and download (PDF) for a limited time on our website.
  • Republicans and Democrats are quibbling over a measly $61 billion in spending cuts–that’s a failure of leadership.
  • Under the failing status quo, Big Sugar wins, and Joe Taxpayer loses.
  • Ian Vásquez, director of Cato’s Center for Global Liberty and Prosperity, joined C-SPAN’s Washington Journal to talk about the failure of foreign aid:


REAL ID: An Afterthought, Tacked On

Yesterday, the Senate Homeland Security and Governmental Affairs Committee had a hearing entitled: “Ten Years After 9/11: A Report From the 9/11 Commission Chairmen,” part of what evidently will be a series commemorating the tenth anniversary of the 9/11 attacks this September.

At the end of his oral statement, former 9/11 Commission co-chairman Tom Keane made a half-hearted pitch for implementation of the REAL ID Act, the national ID law Congress passed attached to a military spending bill in early 2005. His written statement with fellow former co-chair Lee Hamilton dedicates three paragraphs (out of 23 pages) to the appeal for the national ID law.

The paltriness of Keane’s argument for a national ID parallels the recommendations of the 9/11 Commission report. It dedicated three-quarters of a page (out of 400+ pages) to identity documents. The 9/11 Commission report did not detail how a national ID would have secured against 9/11 in any way that is remotely cost-effective. Indeed, nobody ever has, much less how having a national ID would secure against future attacks.

In his testimony, Governor Keane touted the expertise of the Bipartisan Policy Center’s National Security Preparedness Group, with which he is affiliated. Given all that expertise and the supposed urgency of implementing the national ID law, you would think that the Bipartisan Policy Center’s Web site would have a definitive articulation of how REAL ID would secure the country. It doesn’t.

At the time it was rammed through Congress, Senator Lieberman (I-CT) spoke out against REAL ID on the Senate floor:

I urge my colleagues to oppose the REAL ID Act. We must ask our Senate conferees not to allow such a controversial measure to be pushed through Congress on an emergency spending bill. The REAL ID Act contradicts our historic identity as a nation that provides haven for the oppressed. The REAL ID Act would not make us safer. It would make us less safe.

If the 9/11 Commission co-chairs, the Bipartisan Policy Center, or any other set of advocates want to go to battle over REAL ID, they should make their best case for having this national ID. Tell us how it would work, and how it would defeat the counterattacks and complications of national-scale identity systems. Anyone attempting to do so can expect a schooling from yours truly, of course. The alternative, which I recommend, is to drop the national ID advocacy and work on things that cost-effectively secure the country without sacrificing our freedom and privacy.

Happy Birthday Walter Williams

Today marks the 75th birthday of one of the greatest champions of liberty in American history, Walter E. Williams.  Like his good friend the late Milton Friedman, Williams is a brilliant economist who specializes in making economics understandable to the layperson.  The John M. Olin Distinguished Professor of Economics at George Mason University in Fairfax, Virginia, Williams has long been an adjunct scholar at Cato.  He is the author of nine books, one of which, South Africa’s War Against Capitalism, Cato published in 1989.  No sooner did Williams publish his autobiography this year, Up from the Projects, than he published a terrific new book, out this month, Race & Economics:  How much can be blamed on discrimination?  Like many Cato scholars, he is a member of the Mont Pelerin Society.

On issues ranging from deregulation of the economy to legalizing drugs, Walter Williams is a passionate, laissez-faire libertarian.  His libertarianism greatly improves The Rush Limbaugh Show where he is a frequent guest host.  Williams rubs elbows with the movers and shakers in America, being a member in good standing of the secretive Bohemian Grove.  Even more secretive is his participation in the influential, Washington, D.C.-based Politically Incorrect Boys Club among whose members are included Cato’s Beloved Founder Ed Crane, and senior fellows Richard Rahn and Dan Mitchell.

All of us at Cato wish our dear friend Walter a very Happy Birthday!

ObamaCare Implementation Meets Resistance in More States

Republican governors Rick Scott (FL), Sean Parnell (AK), and Bobby Jindal (LA) have flatly refused to implement ObamaCare.  Efforts to create an ObamaCare health insurance “Exchange” are meeting resistance in other states too.  According to Politico:

In South Carolina, tea party activists have been picking off Republican co-sponsors of a health exchange bill, getting even the committee chairman who would oversee the bill to turn against it.

A Montana legislator who ran on a tea party platform has successfully blocked multiple health exchange bills, persuading his colleagues to instead move forward with legislation that would specifically bar the state from setting up a marketplace.

And in Georgia, tea party protests forced Gov. Nathan Deal to shelve exchange legislation that the Legislature had worked on for months.

According to NewHampshireWatchdog.org:

New Hampshire’s Executive Council voted unanimously [to table] a request from the state Insurance Commissioner to accept $666,000 to study how to set up a health insurance exchange called for under the Patient Protection and Affordable Care Act.

Councilor David Wheeler (R-Milford) argued that the study would take New Hampshire down the path of ObamaCare…Councilor Chris Sununu (R-Newfields) worried that it would provide ammunition to those seeking to increase state control over health care, and might put state taxpayers on the hook for the cost on an exchange.

Reason’s Peter Suderman writes:

At first glance, the law seems like a trap for those who both oppose the law and favor federalism: ObamaCare calls on states to set up exchanges; in any state that does not sufficiently comply by 2013, the federal government will simply swoop in and set up an exchange on its own. That leaves governors who oppose the law in something of a bind: Either take control and set up a state-run exchange, or let the federal government step in and run things itself…But there are a number of reasons why governors in that position might want to sit out the implementation process. For one thing, states won’t have much flexibility to design the exchanges as they see fit, despite the administration’s protestations to the contrary…. For governors who oppose the law, refusing to set up the exchanges is also a smart move politically….

If these state governments are skeptical enough of the law’s constitutionality to sign onto a lawsuit challenging it, they probably shouldn’t be devoting time and resources to implementing it either.

Lugar Targets Federal Sugar Racket

The federal government has been meddling with sugar production since 1934. Today’s convoluted system of supply controls, price supports, and trade restrictions benefits domestic sugar producers at the expense of consumers and utilizing industries. In other words, sugar producers “win” and the rest of the country “loses.”

Sen. Richard Lugar (R-IN) just introduced the “Free Sugar Act of 2011,” which would abolish the federal sugar racket. In a Washington Times op-ed on his bill, Lugar doesn’t pull any punches:

The collapse of communism brought an end to many of the world’s command-and-control economic systems and central planning by government bureaucrats. But a notable exception is the United States government’s sugar program. A complicated system of marketing allotments, price supports, purchase guarantees, quotas and tariffs that only a Soviet apparatchik could love, the U.S. sugar program has actually lasted longer than the Soviet Union itself.

A Cato essay on agricultural regulations and trade barriers elaborates on points Lugar makes in his op-ed:

  • The big losers from federal sugar programs are U.S. consumers. The Government Accountability Office estimates that U.S. sugar policies cost American consumers almost $2 billion annually. (Lugar says it could be as much as $4 billion.)
  • The GAO found that 42 percent of all sugar subsidies go to just 1 percent of sugar growers. To protect their monopolies, many sugar growers, such as the Fanjul family of Florida, have become influential campaign supporters of many key members of Congress.
  • U.S. food industries that buy sugar are harmed by current sugar policies as well. The employment in U.S. sugar growing is 61,000, which compares to employment in U.S. businesses that use sugar of 988,000.  According to a government report, for each sugar growing and harvesting job saved through high U.S. sugar prices, nearly three confectionery manufacturing jobs are lost.
  • Numerous U.S. food manufacturers have relocated to Canada where sugar prices are less than half of U.S. prices and to Mexico where prices are two-thirds of U.S. levels.

The federal government engages in a lot activities that are difficult to defend. But when it comes to sugar, the government’s protections are clearly indefensible.

What’s Wrong with Imported Oil?

In a speech today at Georgetown University, President Obama called for a goal of cutting America’s oil imports by one-third within a decade. Like all efforts to wean Americans from big, bad imports, such a policy will mean we will all pay more than we need to for the energy that helps to power our economy.

I’ll leave it to my able Cato colleagues to dissect the president’s proposal in terms of energy policy, but in terms of trade policy, this is about as bad as it gets.

We Americans benefit tremendously from our relatively free trade in petroleum products. Like all forms of trade, the importation of oil produced abroad allows us to acquire it at a price far lower than we would pay if we had to rely more heavily on domestic oil supplies.

The money we save buying oil more cheaply on global markets allows our whole economy to operate more efficiently. Oil is the ultimate upstream input that virtually all U.S. producers use to make their final products, either in the product itself or for shipping. If U.S. manufacturers and other sectors are forced to pay sharply higher prices for petroleum products because of import restrictions, their final goods will cost more and will be less competitive in global markets. If households are forced to pay more for gasoline and heating oil, consumer will have less to spend on domestic goods and services.

The president talked in the speech about the goal of not being “dependent” on foreign suppliers, but most of our oil imports come from countries that are either friendly or at least not in any way an adversary. According to the U.S. Department of Commerce, one third of our oil imports in 2010 came from our two closest neighbors and NAFTA partners, Canada and Mexico. Another third came from the problematic providers in the Arab Middle East and Venezuela (none from Iran, less than one-third of 1 percent from Libya.) The rest came from places such as Nigeria, Angola, Colombia, Brazil, Russia, Ecuador and Great Britain.

Even if, by the force of government, we could reduce our imports by a third, there is no reason to expect that the reduction would be concentrated in the problematic providers. In fact, oil is generally cheaper to extract in the Middle East, so a blanket reduction would probably tilt our imports away from our friends and toward our real and potential adversaries.

In one speech, the president has managed to state a policy goal that is bad trade policy, bad security policy, and bad foreign policy.

Lobbyist Writes Fact & Evidence-Free Op-ed, Analyst Not Shocked At All

I recently gave testimony on the merits of an education tax credit bill that’s being considered in South Carolina. Molly Spearman, executive director of the S.C. Association of School Administrators, a public school lobbying group, denounces both the bill and my testimony today in The State newspaper.

Ms. Spearman’s comments reveal either a complete disregard for the basic facts and research findings, or an ignorance of those facts, resulting in errors big and small.

On the small side, she refers to me as a “paid consultant from the Virginia-based Cato Institute” when in reality I’m a policy analyst at the Cato Institute, which is based in Washington D.C. And while I am, unsurprisingly, paid a salary by my employer, I received no compensation of any kind in return for my testimony in the South Carolina legislature.

More concerning, Ms. Spearman claims that an education tax credit program like the one proposed in SC “has no research-based support that is works.” Her review of the research on credit programs appears to have consisted of calling someone in the Florida Department of [Public] Education to ask them why they thought academic achievement in Florida has increased.

Ms. Spearman apparently missed the official government study, conducted by academic researcher David Figlio at Northwestern University, which found the credit program significantly improved the academic achievement of public school students. That’s not surprising, since it’s consistent with the seventeen other studies that find private school choice programs improve public school performance.

Ms. Spearman also dismisses the state savings expected from the program based on a shocking misunderstanding of education funding. State savings are based on the amount of the credit and the amount of state funding that changes when a student leaves public school; fixed classroom costs have nothing to do with it. The state will save about $500 per student under this program.

The school districts will save much more; about $5,500 in additional funds for every student who leaves even after subtracting fixed costs. Ms. Spearman acts as if almost no money is saved when a student leaves. Here’s a question; then why do public school demand full funding for each additional new student? It works both ways … if one fewer student saved little money, then one more would add little cost. In fact, an academic study has found that only about 20 percent of student funding in South Carolina is fixed in the short term. In the long-term, there are no fixed costs at all.

Again, this is no surprise; an official government analysis found Florida’s credit saved about $1.50 for ever dollar in credits while improving the academic achievement of public school students. Numerous studies demonstrate large actual and potential savings from private choice programs.

There are more errors in other areas, which is remarkable for a piece under 700 words, but I’ll close with Ms. Spearman’s final thought; “We are falling behind our neighbors in North Carolina and Georgia. We cannot gamble on this legislation.”

How ironic … Georgia adopted  a relatively large education tax credit program in 2008, while North Carolina is seriously considering a tax credit proposal of it’s own this year. South Carolina can’t afford not to adopt education tax credit reform.

Had Ms. Spearman done her due diligence on this education issue, or had she called me and asked, she could have avoided these embarrassing errors.

Ms. Spearman’s article is all the more concerning because she is a former schoolteacher and now leads the S.C. Association of School Administrators. South Carolina’s children and taxpayers deserve far better from their leaders in public education