Archives: 06/2011

Should American Taxpayers Finance another Big Fat Greek Bailout?

It appears that American taxpayers are about to subsidize another Greek bailout (via the Keystone Cops at the IMF). This is way beyond economically foolish. It is also morally offensive.

To turn Winston Churchill’s famous quote upside down, “Never have so many paid so much to subsidize such an undeserving few.”

Let’s start with a few facts:

  • Greece’s GDP is roughly equal to the GDP of Maryland.
  • Greece’s population is roughly equal to the population of Ohio.
  • Despite that small size, in both terms of population and economic output, Greece already has received a bailout of about $150 billion (actual amount fluctuates with the exchange rate).
  • Don’t forget the indirect bailout resulting from purchases of Greek government bonds by the European Central Bank.
  • Now Greece is angling for another bailout of about $150 billion.

Is there any possible justification for throwing good money after bad with another bailout? Well, if you’re a politician from Germany or France and your big banks (i.e., some of your major campaign contributors) foolishly bought lots of government bonds from Greece, the answer might be yes. After all, screwing taxpayers to benefit insiders is a longstanding tradition in Europe.

But from a taxpayer perspective, either in Europe or the United States, the answer is no. Or, to be more technical and scientific, the answer is “Heck no, are you friggin’ out of your mind?!”

Consider these fun facts from a recent column by John Lott and then decide whether the corrupt politicians of Greece (and the special interest groups that receive handouts and subsidies from the Greek government) deserve to have their hands in the pockets of American taxpayers:

Despite Greece’s promises, government spending is up over last year’s already bloated levels, the deficit is bigger than ever, and it has utterly failed to meet the promised sell-off of some government assets. Not a single public bureaucrat has been laid off so far. …Greece can pay off €300 of the €347 billion debt by selling off shares the government owns in publicly traded companies and much of its real estate holdings. The government owns stock in casinos, hotels, resorts, railways, docks, as well as utilities providing electricity and water. But Greek unions fiercely oppose even partial privatizations. Rolling blackouts are promised this week to dissuade the government from selling of even 17 percent of its stake in the Public Power Corporation. …Greeks apparently believe that they have Europe and the world over a barrel, that they can make the rest of the world pay their bills by threatening to default. Greece’s default would be painful for everyone, but for Europe and the United States, indeed for the world, the alternative would be even worse. If politicians in Ireland, Portugal, Spain, Italy, and other countries think that their bills will be picked up by taxpayers in other countries, they won’t control their spending and they won’t sell off assets to pay off these debts. Countries such as Greece have to be convinced that they will bear a real cost if they don’t fix their financial houses while they still have the assets to cover their debts. …The real problem is the incentives we are giving to other countries. We have to make sure that “Kicking the can down the road” isn’t an option.

Just for good measure, here are a few more interesting factoids in a Wall Street Journal column by Holman Jenkins.

[Greece is] one of the most corrupt, crony-ridden, patronage-ridden, inefficient, silly economies in Christendom. …The state railroad maintains a payroll four times larger than its ticket sales. When a military officer dies, his pension continues for his unwed daughter as long as she remains unwed. Various workers are allowed to retire with a full state pension at age 45.

To be blunt, Greek politicians have miserably failed. Wait, that’s not right. You can’t say someone has failed when they haven’t even tried. Let’s be more accurate and say that Greek politicians have succeeded. They have scammed money from taxpayers in other nations to prop up a venal and corrupt system of patronage and spoils. Sure, they’ve made a few cosmetic changes and trimmed around the edges, but handouts from abroad have enabled them to perpetuate a bloated state. And now they’re using a perverse form of blackmail (aided and abetted by big banks) to seek even more money.

Let’s now re-ask the earlier question: Should American taxpayer finance the corrupt big-government policies of Greece?

  • Or perhaps we should think like economists, so let’s rephrase the question: Should we misallocate capital so that funds are diverted from private investment to corrupt Greek politicians?
  • Or maybe we should think like parents who have to worry about spoiling a child and the signal that sends to the other kids, so let’s ask the question this way: Should we encourage bad behavior in Spain, Italy, Portugal, etc, by giving another bailout to Greece’s corrupt politicians?
  • Or should we think about this issue from the perspective of addiction counselors and rephrase the question: Should we reward self-destructive behavior by providing more money to corrupt political elites in Greece?
  • Or how about we think like moral human beings, and ask the real question: Should we take money from people who earned it and give it to people who think they are entitled to live at the expense of others?

Since we paraphrased Churchill earlier, let’s answer these questions by butchering Shakespeare: “A bailout from every angle would smell to high Heaven.”

I wrote back in February of 2010 that a Greek bailout would be a mistake and every development since that time has confirmed that initial commentary.

But that doesn’t matter. Politicians have a different way of looking at things. They look at a policy and wonder whether it increases their power and generates campaign contributions. And when you understand their motives, you begin to realize why they will answer yes to the previous set of questions.

For ObamaCare, June Has Been a Very Cold Month

That’s the subject of my latest Kaiser Health News column:

Obamacare passes two milestones this month. It has been exactly two years since the first version of the legislation appeared in Congress. And it has now enjoyed exactly two years of solid public opposition. Yet this month has been harsher than most.

It is almost enough to make you feel sorry for ObamaCare.  Almost.

Beware the Depends Bomber?

My Washington Examiner column this week is on TSA, the federal agency that’s its own reductio ad absurdum.

In the latest TSA atrocity, the agency forced a wheelchair-bound, 95-year-old leukemia patient to remove her adult diaper, for fear she might be wired to explode. “It’s something I couldn’t imagine happening on American soil,” her distraught daughter told the press: “Here is my mother, 95 years old, 105 pounds, barely able to stand, and then this.”

My God, what is she on about? Proper procedure was followed!

As I point out in the column:

in a classic case of “mission creep,” TSA is taking its show on the road and the rails.

Remember when, pushing his bullet-train boondoggle in the 2011 State of the Union, President Obama cracked that it would let you travel “without the pat-down”? Not funny—also, not true.

Earlier this year, Amtrak passengers in Savannah, Ga., stepped off into a TSA checkpoint. Though the travelers had already disembarked the train, agents made women lift their shirts to check for bra explosives. Two weeks ago, armed TSA and Homeland Security agents hit a bus depot in Des Moines, Iowa, to question passengers and demand their papers.

These raids are the work of TSA’s “Visible Intermodal Prevention and Response” (VIPR or “Viper”) teams—an acronym at once senseless and menacing, much like the agency itself.

All this is happening at a time when al Qaeda looks more harried, pathetic, and weaker than ever. But hey, you can never be too careful, right?

Feel Safer?

100,000+ Cribs May Be Headed for Dumpsters Today

Last December the Consumer Product Safety Commission (CPSC) adopted new standards for crib design, a step mandated by the famously overreaching Consumer Product Safety Improvement Act of 2008 (CPSIA). The commission decided to go well beyond a set of voluntary design standards that had been widely adopted the year before; it also chose to make the new rules retroactive, rendering unlawful the sale of many existing cribs whose overall safety record is otherwise acceptable—no one would think of subjecting them to a recall, for instance. Commissioner Nancy Nord:

The day care industry did protest that the rule, as proposed, would result in approximately a $1/2 billion hit to a group that could not immediately absorb costs of such magnitude, especially on the heels of having just bought new cribs to meet the standards of 2009. As a result, at the last minute just before finalizing the rule, the Commission agreed to amend the proposed rule to delay the effective date for this group by 18 months. There was no analysis behind this date; basically, it was pulled out of a hat.

Manufacturers and sellers fared less well, however, and were stuck with a deadline of June 28, 2011, that is, today. Commission staff predicted that retailers would not suffer significant economic harm, which turned out to be wrong, as the commission learned when they began hearing from “small retailers who are stuck with stranded inventory that they cannot sell, also asking for a delay,” according to Nord.

How much stranded inventory? Quite a lot, says Commissioner Anne Northup:

The retailers of these cribs, which the Commission deemed were safe enough to continue to be used for another two years in day care facilities, stand to lose at least $32 million dollars when they are required to throw out noncompliant cribs on June 28.

That’s a lot of landfill space that may be needed in coming days. Nord again:

An internal survey of 5 retailers found that those companies had at least 100,000 non-complying cribs in inventory. A survey done by a trade association representing one part of the small retailer community found that 35 companies had 17,500 cribs that cannot legally be sold in two weeks.

Retailers pleading for a longer transition period got no mercy from the hard-line pro-regulation Commission majority led by Obama appointee Inez Tenenbaum. In a similar way, the much vaster stranded-inventory problems and compliance nightmares engendered by CPSIA as a whole keep getting worse rather than better, due to an equally obdurate attitude from the commission’s current leadership and its Democratic allies in Congress. Politically and with the press, there seems to be little downside in striking cost-no-object For the Children postures, even if the result is to place untenable burdens on the sorts of local shopkeepers and service providers who specialize in meeting the everyday needs of children.

Related, at my website Overlawyered: “Thanks for standing by for eight months after we told you to stop selling your infant slings pending a recall. We’ve decided no recall is needed. What, you’re out of business? Never mind.”

Conrad Black Ordered Back to Prison

Over at NRO, Mark Steyn on last Friday’s order that Conrad Black report back to federal prison:

With a system that relies on multiple charges and an ability to pressure everybody else in the case to switch sides, you can win (as Conrad did) nineteen-twentieths of the battles and still lose the war. He’s a wealthy businessman, and nobody has any sympathy for those. But it’s even worse if you’re a nobody. A New Hampshire neighbor of mine had the misfortune to attract the attention of federal prosecutors for one of those white-collar “crimes” no one can explain in English. The jury acquitted him in a couple of hours. Great news! The system worked! Not really. By then, the feds had spent a half-decade demolishing his life, exhausting his savings, wrecking his marriage, and driving him to attempt suicide. He’s not a big scary businessman like Conrad, just a small-town nobody. And he’ll never get his life back. Because, regardless of the verdict, the process is the punishment — which is the hallmark of unjust justice systems around the world.

According to the New York Times report, the judge was moved by numerous letters from inmates who said that Conrad Black had changed their lives for the better.  Black wrote about his experience with the American justice system here—spot on.

For Cato work on the Black case, go here (pdf).  Still more on the problems in the white-collar context here and here.

Après Chávez, le Déluge?

Rumors abounded this weekend about Hugo Chávez’s apparent critical health condition. The Nuevo Herald reported that the Venezuelan president could be suffering from prostate cancer. On June 9, while visiting Cuba, Chávez fell ill and was treated for a “pelvic abscess.” Since then, the loquacious caudillo, who for over a decade has flooded Venezuelan airwaves with endless TV addresses, has been conspicuously out of sight. All we have is a picture released to the media showing a frail Hugo Chávez holding onto Fidel Castro (aged 84) and his brother Raúl (aged 80).

Speculation increased on Saturday after Nicolás Maduro, Venezuela’s Foreign Relations Minister, said that Chávez was waging a “great battle for his health” while admitting that he wasn’t doing well. But perhaps the most ominous statement came from Chávez’s older brother, Adán, governor of the state of Barinas, who warned yesterday that supporters of the president should be ready to take up arms to defend his revolution. “It would be inexcusable to limit ourselves to only the electoral and not see other forms of struggle, including the armed struggle,” said the elder Chávez.

This is where things can get extremely ugly. Nobody knows what could happen to chavismo without Hugo Chávez. Many people expected Chávez to resort to violence next year in case he lost his reelection bid (a real possibility given popular discontent due to rising food prices, food and energy shortages, and increasing crime). This is why he created a socialist militia with tens of thousands armed civilians bent on “defending the revolution” no matter what. Also, Chávez promoted General Henry Rangel Silva as head of the Armed Forces after Rangel stated that the army would not allow the opposition to win the presidential election in 2012. However, in all these scenarios, Chávez was always the one calling the shots.

If Chávez passes away or is permanently incapacitated, the question becomes: Who will take over Venezuela and his political movement? The Constitution requires the Vice-president Elías Jaua to be sworn it as president. However, it is very likely that Chávez’s absence will open a fratricidal struggle within the ranks of chavismo for the control of government power. During his 12 years in office, Chávez has diligently made sure that no apparent successor takes the spotlight. Caudillos don’t have real VPs, a situation that could lead to chaos if the caudillo dies while in office.

A historical parallel can be drawn with the passing of Juan Domingo Perón in Argentina in 1974. His wife, Isabel, was his Vice-President and she took over the presidency after Perón’s death, as required by the Constitution. However, her tenure was marked by the increasing violence of the “Montoneros,” a radical left-wing terrorist group that claimed to uphold the leftist legacy of Juan Domingo Perón. The situation reached a critical point when the Armed Forces deposed Isabel Perón with a military coup in 1976 and led a “Dirty War” against left-wing elements of society that resulted in the killing and disappearance of approximately 30,000 people in 7 years. Perón’s death and lack of a viable successor led to chaos and slaughter.

The driving force behind the different forces within chavismo is graft, not ideology. As Gustavo Coronel documented in a paper published by Cato in 2006, corruption is rampant in Hugo Chávez’s Venezuela, and it permeates all levels of government, including powerful elements of the military. It is unlikely that those who have been enriching themselves in the last 12 years would call it quits if their leader passes away. A violent struggle could therefore ensue within the ranks of chavismo for the control of government.

Venezuela’s democratic opposition movement should play its cards carefully. If Hugo Chávez dies or is incapacitated, the opposition should demand that the Constitution be respected and Vice-President Jaua take over until next year’s presidential election. The international community, and in particular the Organization of American States, should also be assertive in stating that Venezuela would face international diplomatic ostracism (e.g., expulsion from the OAS, travel ban for regime leaders, freezing of their bank accounts, etc.) if elements within the government stage a coup or try to stay in power through armed struggle.

We will know the gravity of Hugo Chávez’s health condition by July 5th. He had called for a big international summit that day to celebrate Venezuela’s bicentennial anniversary. If he calls off the jamboree, or if he is absent, it will signal that his health has very likely gravely deteriorated, and speculation about his succession will be overwhelming.

Court Says Punishing Political Speech Violates First Amendment

With its last opinion on the last day of the term, the Supreme Court brought things back to constitutional basics by striking down a state law that punished political speech. Whatever the motivations behind Arizona’s so-called Clean Elections Act, giving a publicly funded candidate more taxpayer-provided money every time his privately funded opponent—or his supporters—have “spoken too much” clearly chills speech. In elections, where there is no effective speech without spending money, matching funds provisions triggered by speech fail First Amendment scrutiny.

And this result should’ve been obvious to the entire Court, not just a five-justice majority, in the wake of the Davis v. FEC “Millionaires’ Amendment” case from 2008. Davis struck down the part of McCain-Feingold in which spending by individually wealthy candidates triggered increased contribution limits for their opponents. If the mere possibility of your opponent getting more money is unconstitutional, then the guarantee that your opponent will get more money—as was the case under the Arizona law—is even more so.

Allowing the government to burden political speech in this fashion not only diminishes the quality of political debate, but ignores the fundamental principle upon which the First Amendment is premised: that the government cannot be trusted to regulate political speech for the public benefit. Moreover, the state cannot condition the exercise of the right to speak on the promotion of a viewpoint contrary to the speaker’s.

Here’s Cato’s brief in the case, Arizona Free Enterprise Club’s Freedom Club PAC v. Bennett.