Archives: July, 2011

McConnell’s Cave-In and Boehner’s Opportunity

Senate Minority Leader Mitch McConnell has offered the president a way to raise the debt ceiling by $2.5 trillion without having to cut spending. The WaPo reports that “McConnell’s strategy makes no provision for spending cuts to be enacted.”

This appears to be an epic cave-in and completely at odds with McConnell’s own pronouncements in recent months that major budget reforms must be tied to any debt-limit increase.

House Republicans should obviously reject McConnell’s surrender, and they should do what they should have done months ago. They should put together a package of $2 trillion in real spending cuts taken straight from the Obama fiscal commission report and pass it through the House tied to a debt-limit increase of $2 trillion. Then they shouldn’t budge unless the White House and/or the Senate produce their own $2 trillion packages of real spending cuts, which could be the basis of negotiating a final spending-cut deal.

For those who say that House tea party members won’t vote for a debt increase, I’d say that $2 trillion in spending cuts looks a lot better than the alternative of having Democrats and liberal Republicans doing an end-run around them with McConnell’s no-cut plan.

For those who say that House members are scared of voting for specific spending cuts, I’d say that they’ve already done it by passing the Paul Ryan budget plan. I’d also say that you can’t claim to be the party of spending cuts without voting for spending cuts.

Obama’s Fiscal Commission handed Republicans ready-made spending cuts on a silver platter—Republicans will never get better political cover for insisting on spending cuts than now.

Copyright Monkey Business

Given enough time, a monkey sitting at a typewriter will type out the complete works of William Shakespeare. Believe it or not, it’s called the infinite monkey theorem. A thousand monkeys at a thousand typewriters would cut the time in half … or something.

But would the monkey hold the copyright?

We may soon find out. Or at least we’ll be entertained by the tiff between TechDirt’s Mike Masnick and a person claiming to represent the owner of a photograph taken by, yes, a monkey.

The short answers are: 1) A photograph taken by a monkey probably isn’t copyrighted, and 2) if it were, displaying the photo in a discussion of its copyright status is probably fair use. The lesson is: many, many people don’t understand what the copyright laws are, or why they are.

Mike participated in our “Copyright Controversies” conference some years ago. Should there be a sequel, we’ll invite the monkey.

Strong Cities, Strong Communities: Bad Idea

When government officials come up with what they claim to be a wonderful new idea, I often think of an old Saturday Night Live skit from 1990 poking fun at commercials for blue jeans. The skit’s scene is a group of middle-aged buddies getting ready to play basketball in their new “Bad Idea Jeans.” Each guy optimistically announces a plan to do something that is actually a “bad idea.” For example, a character says “I don’t know the guy but I’ve got two kidneys and he needs one, so I figured…” and “BAD IDEA” flashes across the screen. (The skit can be watched here.)

The White House’s new “Strong Cities, Strong Communities” initiative had that BAD IDEA screen shot flashing repeatedly in my mind as I read the press release:

Today, the Obama Administration launched Strong Cities, Strong Communities (SC2), a new and customized pilot initiative to strengthen local capacity and spark economic growth in local communities while ensuring taxpayer dollars are used wisely and efficiently. To accomplish this, federal agencies will provide experienced staff to work directly with six cities: Chester, PA; Cleveland, OH; Detroit, MI; Fresno, CA; Memphis, TN; and New Orleans, LA. These teams will work with local governments, the private sector, and other institutions to leverage federal dollars and support the work being done at the local level to encourage economic growth and community development.

Additionally, communities nationwide will be eligible to compete for comprehensive economic planning assistance through a grant competition designed to spark local innovation. By integrating government investments and partnering with local communities, SC2 channels the resources of the federal government to help empower cities as they develop and implement their vision for economic growth.

The Wall Street Journal reports that federal officials from HUD, Labor, Commerce, Transportation, and the Small Business Administration will be “deployed” to the cities. In other words, the Obama administration wants to send bureaucrats from federal agencies that are notorious for wasting other people’s money to help local bureaucrats do a more “efficient” job of spending other people’s money. That’s like asking Anthony Weiner to fix your Twitter account.

A couple of the cities chosen by the administration are ironic. Seriously, hasn’t the federal government done enough to New Orleans already? Detroit is an example of why decades of federal subsidies to urban centers in decline have been a failure. As I note in a Cato essay on HUD community development subsidies, of which Detroit has been the fifth largest recipient since 2000, federal handouts create a disincentive for local officials to pursue sound policy reforms:

Despite all the abuses, perhaps policymakers believe that Community Development Block Grants are nonetheless effective at stimulating growth. After 30 years and more than $100 billion it should be easy to demonstrate the program’s success, but it’s hard to find any examples of city rejuvenation created by the program. Instead, numerous cities, such as Detroit, which have been major CDBG recipients, have fallen further into decline. The reality is that no amount of federal money can overcome the local hurdles to growth in cities such as Detroit—including political corruption and destructive tax and regulatory policies. Indeed, just like international development aid, federal aid to the cities likely increases corruption and stalls much-needed local reforms.

Some people will view this initiative as a crass effort to shore up urban support for the president’s reelection campaign. There’s probably a good bit of truth to that criticism. But both parties have been using subsidies to state and local government to curry political support for decades. Therefore, Republicans who raise a stink over the administration’s initiative should be prepared to work for the involved programs to be abolished. Otherwise, the complaints will amount to little more than political hot air.

See this Cato essay for more on federal subsidies to state and local government.

Interplanetary Greatness Conservatism

My Washington Examiner column this week is on the final flight of the Space Shuttle, and what looks to be the withering away of the manned space program. In 2004, President Bush announced plans for a moonbase and an eventual Mars mission. But last year President Obama effectively cancelled the moonbase, and has exhibited little desire to liberate Mars. That’s good news, I argue:

“We are retiring the shuttle in favor of nothing,” Michael Griffin, Bush’s NASA administrator, wailed to the Washington Post recently.

Here, as usual, “nothing” gets a bad rap. I’ll be “in favor of nothing” until the advocates of federally funded spaceflight can come up with an argument for it that doesn’t make me spray coffee out my nose.

NASA’s Griffin failed that test in 2005, when he gave an interview to the Washington Post insisting it was essential that “Western values” accompany those who eventually “colonize the solar system,” because “we know the kind of society we would get if you, for example, carry Soviet values. That means you want a gulag on Mars. Is that what you’re looking for?”

Well … is it, punk?

When you strip away the few half-hearted “practical” arguments space partisans offer (it turns out that the space program didn’t even give us TANG, by the way) you’re mostly left with sentimental piffle. Listening to some of them, I’m half-tempted to mount a First Amendment challenge to the space program as an unconstitutional establishment of religion.

A 2008 report from MIT on “The Future of Human Spaceflight” argued that federal funding was justified as a means to promote “an expansion of human experience, bringing people into new places, situations and environments, expanding and redefining what it means to be human.” Those are *scientists* making that argument. But if your best explanation for why spaceflight is a public good gets into “sweet mystery of life” territory, then maybe you don’t have a very good argument for public funding.

Unfortunately, President Obama didn’t actually kill funding for human spaceflight. We’re now embarked on a public-private partnership, with NASA dollars flowing to companies like Space X. In fact, Obama has publicly pledged to seek slight increases in NASA’s budget.

But whether it’s done via a “government-business partnership” or not, there’s no reason we should be funding manned space exploration at all.

This is another thing President Eisenhower got right, incidentally:

he “would not be willing,” he said, “to spend tax money to send a man around the moon … There is such a thing as common sense,” he said, “even in research.” A moon project would be just “a stunt.”

But, since federally funded human spaceflight is a massive, “heroic,” allegedly inspiring but ultimately senseless government crusade, it’s no surprise, I guess, that neoconservatives love it. And nobody loves it more than Charles Krauthammer. Here he is in 2007, waxing rhapsodic about “the music of the spheres.”:

You should feel something when our little species succeeds in establishing new life in a void that for all eternity had been the province of the gods. If you don’t feel that, you are—don’t take this personally—deaf to the music of our time.

Look up, Krauthammer urged spacefans in 2009, after it had become clear that Barack Obama lacked “Kennedy’s enthusiasm” to boldly go, etc. “That is the moon,” Krauthammer declared, and “for the first time in history,” it had become “a nightly rebuke.” This is the burden of the Interplanetary Greatness Conservative: the moon—the very moon!—mocks you.

Personally, I’m deaf to “the music of the spheres.” But I’m all for the efforts of private entrepreneurs who can hear it. If people want to advance space exploration on their own dime and at their own risk, more power to them. And the government should neither help nor hinder them.

As Central Falls Falls

The New York Times has an article today on the plight of Central Falls, Rhode Island, a 19,000-population industrial city that may declare bankruptcy under the fiscal weight of $80 million in pension obligations for police and fire officers. Unlike some coverage of municipal fiscal woes, this one does not dance around the way some of the problem originates in misguided labor policy:

The city, just north of Providence, is small and poor, but over the years it has promised police officers and firefighters retirement benefits like those offered in big, rich states like California and New York. These uniformed workers can retire after just 20 years of service, receive free health care in retirement, and qualify for full disability pensions when only partly disabled.

“Promised” is a word of art here, because the city wasn’t really making all of these concessions on a voluntary basis, as its negotiator explains:

state law called for binding arbitration, which for many years was a clubby process that emphasized comparable benefits all across the state more than any city’s ability to pay.

“Binding” arbitration, just to be clear, does not mean that the city agreed beforehand to settle disputes with the unions by way of arbitration; it means that state law imposed an arbitrator’s edict whether city managers ever signed up for the arbitration route or not. It thus differs from the contractually specified arbitration upheld lately in consumer contexts by the U.S. Supreme Court in AT&T v. Concepcion, a decision assailed by many of the same politicos who see no problem with genuine mandatory arbitration in the labor context.

The crisis in municipal finance wrought by binding public-sector arbitration and related laws comes as no surprise to readers who remember Cato’s excellent 2009 study “Vallejo Con Dios: Why Public Sector Unionism Is a Bad Deal for Taxpayers and Representative Government” by Don Bellante, David Denholm, and Ivan Osorio. (The California city of Vallejo declared bankruptcy in 2008 following the failure of negotiations with police and fire unions over unsustainable compensation.)

One point the otherwise thorough Times article omitted: many politicians in Washington have worked for years to impose a Central-Falls-like legal climate on states and localities lucky or farsighted enough to have avoided one in the past. During last fall’s lame duck session, then-Majority Leader Harry Reid (D-Nev.) tried to push through the truly appalling Public Safety Employer–Employee Cooperation Act, which not only would have forced police and fire unionization on reluctant states and localities but also provided that in case of impasse (quoting Heritage) “States would have to provide a dispute resolution mechanism, such as binding arbitration.” And the misnamed Employee Free Choice Act (EFCA), a priority of President Obama during his first years in office, would have imposed binding arbitration on the private sector. Central Falls may now be hurtling toward the waterfall, but how many other communities are just one political shove away from plunging into the same fiscal rapids?

Put Federal Flood Insurance Out of Its Misery

The House of Representatives is scheduled this week, as early as today, to consider an extension and “reform” of the National Flood Insurance Program (NFIP), administered by FEMA. Since Hurricane Katrina in 2005, the NFIP has been about $18 billion in the hole. And this is from a program that only collects around $2 billion a year in premiums, which barely covers losses and expenses in a normal year. So make no mistake, the NFIP is still on course to cost the taxpayer billions more in the future.

Even before Katrina, the Congressional Budget Office estimated that the NFIP was receiving a subsidy of close to a billion dollars a year. Under CBO’s optimistic projections, the House’s reform bill would increase NFIP revenues by about $4 billion over the next ten years, making only a small dent in the program’s current deficit.

The projected cost savings could potentially be lost by the expansion of the NFIP in the House bill. Yes, you read that correctly. Despite being deep in debt, the House is proposing to expand the coverage, and hence the risk, underwritten by the NFIP. For instance, the reform bill adds coverage for living expenses and “business interruption expenses,” as well as increasing the coverage limit from $350,000 (250k for structure and 100k for contents) to about $520,000 per home.

Such a massive expansion of coverage would likely drive out the existing providers of excess flood insurance coverage. And yes, you also read that correctly: there are a handful of insurers that offer private flood insurance. There is absolutely no reason that the private market could not offer flood insurance. Yes, rates might go up for the highest risk properties, but they would likely go down for others (and clearly reduce costs to the taxpayer). And given the high administrative costs of the NFIP (about 30 percent of premiums go directly to private insurance companies to help run it), it is likely that a completely private system of flood insurance would be cheaper.

In the aftermath of the housing bubble and its extreme costs to the taxpayer, we should eliminate the vast array of subsidies for housing construction, including the NFIP. If there’s one thing we should have learned, the underpricing of risk can have disastrous results.

This Month at Cato Unbound—What’s Wrong with Expert Predictions

This month’s Cato Unbound looks at the failure of expert forecasting.

When I was very young my father received a book of expert predictions edited by David Wallechinsky, Amy Wallace, and Irving Wallace, titled simply The Book of Predictions. How’d they do? Awfully.

Virtually no one predicted the peaceful end of the Soviet empire. The next big technology was still outer space, not information. Nuclear war and overpopulation vied with exotic environmental disasters to do us in. Want to print a document? Your computer can do that! Just walk to the end of your street, where you’ll find a device called a “printer.” I’ve kept the book, and I’ve been interested in the failure of expert prediction ever since.

This month at Cato Unbound, experts—sorry, we had to—Dan Gardner and Philip Tetlock lay out the evidence against forecasting, along with suggestions for how to improve it. But they conclude that many forms of forecasting, even those that once seemed just on the horizon, will perhaps always remain a dream:

Natural science has discovered in the past half-century that the dream of ever-growing predictive mastery of a deterministic universe may well be just that, a dream. There increasingly appear to be fundamental limits to what we can ever hope to predict. Take the earthquake in Japan. Once upon a time, scientists were confident that as their understanding of geology advanced, so would their ability to predict such disasters. No longer. As with so many natural phenomena, earthquakes are the product of what scientists call “complex systems,” or systems which are more than the sum of their parts. Complex systems are often stable not because there is nothing going on within them but because they contain many dynamic forces pushing against each other in just the right combination to keep everything in place. The stability produced by these interlocking forces can often withstand shocks but even a tiny change in some internal conditional at just the right spot and just the right moment can throw off the internal forces just enough to destabilize the system—and the ground beneath our feet that has been so stable for so long suddenly buckles and heaves in the violent spasm we call an earthquake. Barring new insights that shatter existing paradigms, it will forever be impossible to make time-and-place predictions in such complex systems. The best we can hope to do is get a sense of the probabilities involved. And even that is a tall order.

Human systems like economies are complex systems, with all that entails. And bear in mind that human systems are not made of sand, rock, snowflakes, and the other stuff that behaves so unpredictably in natural systems. They’re made of people: self-aware beings who see, think, talk, and attempt to predict each other’s behavior—and who are continually adapting to each other’s efforts to predict each other’s behavior, adding layer after layer of new calculations and new complexity. All this adds new barriers to accurate prediction.