Archives: August, 2011

How Judges Protect Liberty

By
David Boaz

In my Encyclopedia Britannica column this week, I take a look at “the responsibility of judges to strike down laws, regulations, and executive and legislative actions that exceed the authorized powers of government, violate individual rights, or fail to adhere to the rules of due process.”

Certainly they don’t always live up to those expectations, as Robert A. Levy and William Mellor wrote in The Dirty Dozen: How Twelve Supreme Court Cases Radically Expanded Government and Eroded Freedom. 

The column might have been more timely last summer, when Judge Andrew Napolitano concluded one of his Freedom Watch programs on the Fox Business Channel by hailing four federal judges who had courageously and correctly struck down state and federal laws:

  • Judge Martin L. C. Feldman, who blocked President Obama’s moratorium on oil drilling in the Gulf of Mexico;
  • Judge Susan Bolton, who blocked Arizona’s restrictive immigration law;
  • Judge Henry Hudson, who refused to dismiss Virginia’s challenge to the health care mandate; and
  • Judge Vaughn Walker, who struck down California’s Proposition 8 banning gay marriage.

That was a good summer for judicial protection of liberty. But as I note, there have been more examples this year, reminding us of James Madison’s predictions that independent judges would be “an impenetrable bulwark against every assumption of power in the legislative or executive.”

Topics: 
General, Government and Politics, Law and Civil Liberties

Rich People Should Help the Poor by…Making Smart Investments and Earning Big Profits

By
Daniel J. Mitchell

There’s a very provocative article on the New York Times website that criticizes Steve Jobs for his supposed lack of charitable giving:

Surprisingly, there is one thing that Mr. Jobs is not, at least not yet: a prominent philanthropist. Despite accumulating an estimated $8.3 billion fortune through his holdings in Apple and a 7.4 percent stake in Disney (through the sale of Pixar), there is no public record of Mr. Jobs giving money to charity. He is not a member of the Giving Pledge, the organization founded by Warren E. Buffett and Bill Gates to persuade the nation’s wealthiest families to pledge to give away at least half their fortunes. (He declined to participate, according to people briefed on the matter.) Nor is there a hospital wing or an academic building with his name on it. …the lack of public philanthropy by Mr. Jobs — long whispered about, but rarely said aloud — raises some important questions about the way the public views business and business people at a time when some “millionaires and billionaires” are criticized for not giving back enough… In 2006, in a scathing column in Wired, Leander Kahney, author of “Inside Steve’s Brain,” wrote: “Yes, he has great charisma and his presentations are good theater. But his absence from public discourse makes him a cipher. People project their values onto him, and he skates away from the responsibilities that come with great wealth and power.”

But why, to address Leander Kahney’s criticism, should we assume that Mr. Jobs has done nothing for the poor? He’s built a $360 billion company. That presumably means at least $352 billion of wealth in the hands of people other than himself. And that doesn’t even begin to count how consumers have benefited from his products, the jobs he has created, and the indirect positive impact of his company on suppliers and retailers.

To give credit where credit is due, the article does present this counterargument. It reports that Mr. Jobs told friends, “that he could do more good focusing his energy on continuing to expand Apple than on philanthropy.”

This is a critical point. Do we want highly talented entrepreneurs and investors dropping out of the private sector and giving their money away after they’ve reached a certain point, say $5 billion? Or do we want them to focus on creating more wealth and prosperity?

Interestingly, Warren Buffett used to understand this point (before he started arguing that politicians could more effectively spend his money). And Carlos Slim Helu still does:

Mr. Jobs, 56 years old, is not alone in his single-minded focus on work over philanthropy. It wasn’t until Mr. Buffett turned 75 that he turned his attention to charity, saying that he was better off spending his time allocating capital at Berkshire Hathaway — where he believed he could create even greater wealth to give away — than he would ever be at devoting his energies toward running a foundation. And last year, Carlos Slim Helú, the Mexican telecommunications billionaire, defended his lack of charity and his refusal to sign the Giving Pledge. “What we need to do as businessmen is to help to solve the problems, the social problems,” he said in an interview on CNBC. “To fight poverty, but not by charity.”

None of this is to say that charitable giving is wrong. I’m proud to say that my employer, the Cato Institute, refuses to accept money from government. This means we are completely dependent on private philanthropy.

But those of us who work at Cato understand that creating wealth—maximizing the size of the economic pie—is the most important priority. And if the pie is big, generous people then have more ability to make contributions to worthy causes such as school choice scholarship funds, the Salvation Army, or (ahem) America’s best think tank.

Topics: 
General, Government and Politics, Political Philosophy

What’s a Conservatorship Good For?

By
Mark A. Calabria

A central reason that Fannie Mae and Freddie Mac have not played a bigger role in rescuing homeowners, or otherwise handing out “freebies,” is that these two companies are in conservatorship.

Conservatorship is almost like a bankruptcy proceeding, or a receivership in the banking context, but without the power to impose losses. I’ve been criticized for believing that a conservatorship requires Fannie’s regulator to “conserve” the company, and not simply allow it to be used as a slush fund. The basis of said criticism is that FHFA, Fannie’s regulator, has a broad public mission, which could include handing out freebies to underwater borrowers.

Matt Yglesias suggests that “clearly the purpose of creating the FHFA and taking Fannie and Freddie into conservatorship can’t have been to minimize direct taxpayer financial losses on agency debt.” Now, Matt makes a lot of Congress being vague in the statute. And he is correct about it being vague, in some areas, but it isn’t here.

As one of the two people (the other being Peggy Kuhn) who actually drafted that section of the Housing and Economic Recovery Act (HERA) during my time as staff on the Senate Banking Committee, I can clearly say the purpose of the drafters, in terms of conservatorship, was to nurse those companies back to health. Again, how do I know that? Because I was there.

Of course, if one simply read that section of the statute, Section 1145 of HERA, which amends Section 1367 of the 1992 GSE Act, one would clearly see what the purpose, duties, and role of a conservatorship actually is. For instance, what does the law say the powers of a conservatorship are? They are to ”take such action as may be—(i) necessary to put the regulated entity in a sound and solvent condition; and (ii) appropriate to carry on the business of the regulated entity and preserve and conserve the assets and property of the regulated entity.”

Now, I don’t see anything in there about handing out freebies to underwater borrowers. Citing an agency-written mission statement or a vague “purposes” at the beginning of an act is no substitute for actually reading the provisions of a statute.

Topics: 
Finance, Banking & Monetary Policy

An 85 Percent Increase in Health Care Fraud Prosecutions? Be Still My Beating Heart…

By
Michael F. Cannon

USA Today reports that the Obama administration’s efforts may yield an 85 percent rise in federal fraud prosecutions.  Yawn.

Fraud expert Malcolm Sparrow:

By taking the fraud and abuse problem seriously this administration might be able to save 10 percent or even 20 percent from Medicare and Medicaid budgets. But to do that, one would have to spend 1 percent or maybe 2 percent (as opposed to the prevailing 0.1 percent) in order to check that the other 98 percent or 99 percent of the funds were well spent.  But please realize what a massive departure that would be from the status quo. This would mean increasing the budgets for control operations by a factor of 10 or 20. Not by 10 percent or 20 percent, but by a factor of 10 or 20. [emphasis added]

That’s not going to happen, as I explain here and in this video:

Topics: 
General, Government and Politics, Health Care

Disaster Relief Is Not Free

By
Roger Pilon

Today POLITICO Arena asks:

House Republicans contend that any new funds spent because of Hurricane Irene or other disasters should be offset by cuts elsewhere. Democrats call that an unfair and unprecedented approach to emergency management. Is this conditioning of disaster relief on budget offsets elsewhere fiscally responsible or cold-hearted?

My response:

Disaster relief is a form of welfare – transferring assets from some to others. We can do that voluntarily, or through government. If the latter, then in a world of scarcity – i.e., the real world – only those who haven’t grasped those elementary facts can imagine that the issue won’t be political.

Republicans are right to remind us that there’s no such thing as free disaster relief, and to ask what we want to give up to provide such relief. Democrats who call that question “unfair” and an “unprecedented approach to emergency management” are right on the second point. That’s why we’re in our deficits and debt mess. So the question remains: give up something, or incur more debt? Take your choice, but choose you must.

Topics: 
Tax and Budget Policy

For U.S. Multinationals, More Jobs Abroad Mean More Jobs at Home

By
Daniel Griswold

We haven’t heard politicians complain much lately about “tax breaks for U.S. companies that ship jobs overseas,” perhaps because the next federal election is still more than a year away.

An article in the Financial Times today shows why that charge rings pretty hollow anytime in the election cycle. In an interview with CEO Doug Oberhelman of Caterpillar Inc., the FT notes that the Peoria, Ill.-based maker of earth-moving equipment has been thriving even though the domestic U.S. economy has been stuck in low gear.

Like many U.S. multinational companies, Caterpillar has been expanding its sales and profits by selling its products in rapidly growing emerging markets while spreading its production facilities around the world. Here’s the key passage for those politicians who complain about U.S. companies investing and hiring abroad:

In recent months, [Caterpillar] has announced plans for new factories in Singapore, Thailand, China and Brazil.

In the US, it is building a new distribution centre in Washington state while expanding its factories in North Dakota and Kansas.

Caterpillar has hired about 29,000 people worldwide in the past 20 months, some 13,000 of them in the US, with most of the rest in China, Brazil, Mexico and the UK.

The Caterpillar experience shows that job creation is not a zero-sum game, where jobs created abroad by U.S. companies must come at the expense of production and employment in the United States. In fact, as I show in my 2009 book Mad about Trade (pp. 100-104), the Caterpillar experience is not unusual. U.S. employment by parent companies will typically rise and fall in synch with employment at their affiliates abroad. For U.S. multinationals:

Foreign and domestic operations tend to complement each other and expand together. A successful company operating in a favorable business climate will tend to expand employment at both its domestic and overseas operations. More activity and sales abroad usually require more managers, accountants, lawyers, engineers, and production workers at the parent company.

As for those “tax breaks for shipping jobs overseas,” I explained why they are not a problem in an op-ed in the New York Post during the last election cycle. Keep it handy for when the demagoguery starts flying again next fall.

Topics: 
International Economics and Development, Trade and Immigration

More on the Military-Industrial Complex, APSA Edition

By
Christopher A. Preble

Early this year, Cato hosted a half-day conference to commemorate the 50th anniversary of Dwight David Eisenhower’s farewell address, commonly known as the military-industrial complex speech. I also spoke on this issue at Gettysburg College, where Eisenhower retired and wrote his memoirs, and I offered my thoughts on the significance of the speech in a review of James Ledbetter’s Unwarranted Influence: Dwight D. Eisenhower and the Military Industrial Complex.

This is such a rich topic that Ben Friedman and I decided to host an encore presentation at the American Political Science Association’s annual meeting in Seattle. The panel will be held on Thursday, September 1, at 2 pm, in Hyatt Portland AB (Don’t ask me what that means. Consult the conference program for more details). In addition to me and Ben, the panel features UT’s Eugene Gholz, who also spoke at Cato in January, Andrew Ross from the University of New Mexico, Notre Dame’s Michael Desch, and William Ruger from Texas State University (and the co-author, with Jason Sorens, of Freedom in the 50 States: An Index of Personal and Economic Freedom).

I plan to focus my remarks on Eisenhower’s particular perspective on military spending and government spending.

When he warned of the military-industrial complex in January 1961, he didn’t question the need for an enormously strong – and quite expensive – military. He genuinely believed that most such spending was essential to deterring and eventually defeating the Soviet Union.

But were he alive today, I think Ike would have been most disappointed, though perhaps not surprised, that the United States maintains a massive military more than 20 years after the collapse of the Soviet empire. Indeed, in real, inflation-adjusted dollars, the United States in 2011 will spend more on national security, broadly defined, than at any time since World War II. More than Truman spent during the Korean war; more than Johnson and Nixon spent during Vietnam. More, even, than Ronald Reagan spent in the early 1980s.

On reflection, Eisenhower would likely say that the persistence of a huge military budget without the threat to justify it reflects the power and influence of the military-industrial complex. He recognized that whereas U.S. economic interests had once broadly favored peace, there were, by the time he left office, crucial segments of industry, and entire regions of the country, that had become dependent on the sales of arms and equipment to the U.S. military.

As Eisenhower had predicted, the creation of a permanent armaments industry during the Cold War had created similarly permanent political constituencies that objected to cutting the military, or at least to cuts in the particular part of the military that happened to affect them directly. Whereas Americans had once armed for war, and then returned to peaceful pursuits when the wars ended, they now arm for the sake of arming. Every weapon system has defenders in Congress. Every community can come up with a dozen reasons for why their base shouldn’t be cut. And that explains why it is so hard to cut the military’s budget.

But it isn’t impossible. I’ll talk more about why that is on Thursday at APSA, and follow up with a summary of my remarks on the blog this Friday.

(Cross-posted from TNI’s The Skeptics)

Topics: 
Foreign Policy and National Security

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