Archives: 11/2011

This Week at Libertarianism.org

This week at Libertarianism.org,

Bring It On, OWS!

This morning POLITICO Arena asks:

Has the Occupy Wall Street movement accomplished anything?

My brief response:

Has OWS accomplished anything? Yes, it’s revived the mindless, narcissistic approach to public affairs that came out of the 1960s. And I’m delighted that the mainstream media has given OWS far more sympathetic attention than it ever gave the Tea Party, because it’ll all play out in next year’s elections. March on, OWS!

John Mueller Joins Cato

I am pleased to announce that John Mueller, a leading scholar in the fields of political science, international relations, and national security, has joined the Cato Institute as a senior fellow.

All of us at Cato are very excited to have John as a colleague. Over the last decade as a professor of political science and as the Woody Hayes Chair of National Security Studies at the Ohio State University’s Mershon Center for International Security Studies, John has taken on the conventional wisdom in the national security arena with a rare combination of accessible, breezy prose and meticulous cost-benefit analysis. In particular, he has focused on how policymakers inflate national security threats at home and abroad.

His newest book, Terror Money and Security, which he presented at a recent Cato forum, examines whether the gains in security over the past decade were worth the funds expended. For the vast majority of U.S. homeland security and counterterrorism policies, John and his co-author, Mark Stewart, resoundingly conclude “no.”

As a member of the Cato Institute, John will contribute to our multitude of programs and publications while furthering his work on the subjects of security, defense, and U.S. foreign policy. Cato is fortunate to have such a brilliant scholar join its staff.

For more Cato Institute work on foreign policy and national security, go here.

Solyndra: Crooked Politics or Just Bad Economics?

Amy Harder has a good take on the Solyndra issue in National Journal Daily (subscription required):

Lesser evil: crony capitalism or bad policy?

Energy Secretary Steven Chu is about to find out when he testifies before a House panel on Thursday about the $535 million loan guarantee his department awarded to Solyndra, the now-bankrupt solar-energy company that was, before its demise, the poster child for America’s renewable-energy industry and President Obama’s 2009 Recovery Act.

The White House and the Energy Department say the influence of political donors such as Oklahoma oil billionaire George Kaiser, whose venture-capital firm was the major investor in Solyndra, did not sway any of the administration’s decisions on Solyndra’s loan guarantee, which was funded from the stimulus package.

By denying politics was involved, the administration is saying that its top officials genuinely and continuously thought Solyndra was a good bet—despite numerous warnings raised both inside and outside of the administration—and that the loan-guarantee program was being carefully managed despite oversight reports and an internal West Wing memo that said otherwise.

“As time went on, there was a growing concern because of the cash-flow,” Chu said in an interview with NPR on Tuesday. “And so we certainly were watching this and looking at this very closely. And eventually we recognized they were in deep trouble.”

Yet, throughout the two years Solyndra was borrowing money from federal coffers, the DOE essentially stayed the path right up until the bitter end when the California-based manufacturer went bankrupt in September. When Solyndra was on the brink of bankruptcy in late 2010, DOE decided to restructure the loan to try to keep the company afloat.

Meanwhile, in today’s congressional hearing, Energy Secretary Steven Chu insisted that “the final decisions on Solyndra were mine, and I made them with the best interest of the taxpayer in mind… . I did not make any decision based on political considerations.” This came on a day when the front page of the Washington Post reported:

In the two years preceding its collapse, Solyndra and its biggest investor aggressively asserted themselves in dealings with the Obama administration, pushing Energy Secretary Steven Chu to visit the company’s headquarters to help it raise private money and later suggesting it would file for bankruptcy if the Energy Department rejected its proposed rescue plan… .

“The DOE really thinks politically before it thinks economically,” a Solyndra board member wrote in December to George Kaiser, an Obama fundraiser whose family funds owned a third of the company.

Thoughts on the ‘Minibus’ Spending Bill

The House is scheduled to vote this evening on a fiscal 2012 “minibus” packaging of three appropriations bills (Agriculture, Commerce-Justice-Science and Transportation-HUD) agreed to in conference on Monday. It includes a continuing resolution to keep the government funded through December 16th, thus avoiding a government “shutdown.”

In sum, I think the bill is largely business as usual, although policymakers and those who subsist on the federal programs funded by the affected agencies will claim otherwise:

  • The legislation provides funding at the higher levels sought by the Democratic-controlled Senate – about $5.4 billion more than what the Republican-controlled House wanted. Overall funding versus fiscal 2011 is flat, but lower than fiscal 2010. It’s less than what the president wanted to spend, but that hurdle was so low a mouse would have tripped over it.
  • It includes $2.3 billion for disaster spending, which is excluded from the budget caps negotiated as part of the deal to increase the debt ceiling.
  • Some programs saw cuts, some programs saw increases. Anything of consequence that would rein in the size and scope of government? Not that I can see.
  • The housing lobbyists win again: the bill increases the size limit on mortgages that Federal Housing Administration can insure to $729,750. That principled decision was made at a time when a taxpayer bailout of the FHA is becoming increasingly likely.

Once again, Congress hits the snooze button.

Democracy - Whatever That Is - and Education

Democracy is inherently good, and since public schools are democratically controlled they, too, are inherently good. Right?

You’d think so from the way many people invoke “democracy” when championing government schools, but thanks to a recent blog post from the Fordham Institute’s Mike Petrilli, we might have a rare opportunity to actually scrutinize that assumption. A few days ago, Petrilli questioned the value of local school boards in light of what seems to be frequent capture by teachers unions, and was immediately accused of attacking “democracy” by historian Diane Ravitch.

“Gosh, Mike,” Ravitch wrote in the comments section, “it sounds as though you have identified the real problem ‘reformers’ face: democracy.”

With that the battle was on, and it’s one I’m happy to join: A huge problem we face in education is, indeed, democracy.

Before I go further, the first thing that’s necessary to do is define “democracy.” Unfortunately, that’s something rarely done by those who wield the term like a rhetorical chainsaw, swinging it wildly at anyone who might question government schooling.  Typically, it seems the word is employed to just vaguely connote some sort of action by “the people” – whoever they are – as opposed to “elites,” or to indicate that popular voting is in some fashion used to make laws.

That said, the most basic definition of democracy – the one you probably learned in grade school –  follows these lines: “Control of an organization or group by the majority of its members.” You might also assume the word means representative democracy, where people vote for their representatives and majorities of reps make the laws, but usually the word’s use isn’t even that precise.

This lack of precision leads to numerous problems, and a big one was illustrated in an exchange between Bob Bowdon – of Cartel and ChoiceMedia.tv fame – and Rutgers University professor Bruce Baker. Bowdon had a Flypaper post pointing out numerous cases in which ”the people” enacted education policies disliked by teachers unions, and the unions, instead of accepting the “democratic” outcomes, headed to the courts to thwart the new laws. Baker would have none of this argument, in the comments section of Petrilli’s post calling Bowdon’s entry an “absurd and misinformed rant.” Why? Largely because Bowdon failed to acknowledge that courts in Georgia – where one of the legal actions cited by Bowdon occurred – were taking perfectly legitimate action in striking down a charter school law that violated the state’s constitution.

Of course, Baker isn’t talking about democracy, at least in any precise way (or the feel-good, “people rule” sense I think Ravitch meant to convey) but a constitutional republic with separation of powers. That’s a very different thing, with a very different goal, from simple majority rule. As The Federalist discusses with great insight, a constitutional republic with checks and balances is a system intended to minimize the threat government poses to individuals, while enabling it to do those things that government must do.  That does not at all seem to be the “democracy” Ravitch and company were lauding, and you can’t reasonably blame Bowdon for turning that against them. Live by the loaded, imprecise definition, die by the loaded, imprecise definition. Unfortunately, that makes it much harder to have a useful debate about education governance.

But why don’t we want pure democracy?

Aside from the towering logistical problems, uninhibited majority rule is an existential threat to individual liberty, the true foundation of American society. Should my ability to drum up support from 50.1 percent of voters be all that’s needed to have your house taken from you, your speech quashed, and your family imprisoned? Of course not, but pure democracy would not only allow that, it would give it complete legal sanction.

So a constitutional republic, with its checks, balances, and enumerated powers, is infinitely preferable to pure democracy. However, it is a much harder concept to employ when you just want people to feel good about public schools, or angry about efforts to change them. “For crying out loud, they are democratic schools – schools controlled by the people – you evil 1-percenter!” (Cue foreboding tyranny-of-the-majority music.) And just because a form of governance is better than democracy doesn’t mean it works well.

Why does this superior form of government still largely fail? To really get into this question I recommend Cato’s Government Failure: A Primer in Public Choice, available free online! I’ll just briefly hit the main, inherent pathology of government that constantly leads to skewed results.

Ultimately, it comes down to concentrated benefits and diffuse costs: The people who get the greatest benefit from a policy will be the most motivated to participate in the politics of that policy, while the costs are usually highly diffuse, giving the people paying for it relatively little incentive to politick. In education, the greatest benefit is accrued by the school employees – the people whose very livelihoods come from the system – hence they exert hugely disproportionate power. They are also much easier to organize than parents or taxpayers.  

In light of this basic inequality of incentives, it is no surprise that teachers unions (and other education employee organizations) wield disproportionate influence. Teachers and administrators aren’t bad people, it’s simply that normal incentives give them much more reason to constantly engage in education politics than the average voter, taxpayer, or even parent, for whom there are many other major concerns than trying to influence the district, state, of federal government on education policy. 

To deal with the effects of concentrated benefits and diffuse costs in school districts, Petrilli suggests a couple of possible options: a move toward greater mayoral control of the schools, as exists in New York City, or having states control education. But these are fraught with at least as much peril as local control.

At the risk of violating an Italian corollary of Godwin’s Law, the mayoral control argument seems to come down to this: Mussolini made the trains run on time. Essentially, if you can put someone with dictatorial power in charge he won’t have to worry about special interests and can do what needs to be done. Plus, in the case of mayoral control there wouldn’t be real dictatorship – Il Duce could be voted out in four years.

Obviously, though, there’s a reason the term “dictator” doesn’t enjoy the same esteem as, say, ”chocolate,” or “Betty White” – people generally don’t like the way dictators turn out. Maybe you’ll get one who’s benevolent and wise – in which case you’ll just be troubled by your ultimately nonexistent freedom – but more likely you’ll get one who’s stupid, or cruel, or a combination of the two. And what do you do when the dictator imposes a bad reading curriculum on your kids, or closes a school that might have served them well? Just suffer.

But there’s the election – you can hold a mayor responsible then! Of course, that puts us right back in the concentrated benefits, diffuse costs problem, where the special interests are likely to be much more active in politicking than the average voter. And the problem isn’t just that: When the public votes for mayor, the vote is based not only on education policies, but also law enforcement, sanitation, sodium speakeasy crackdowns, and myriad other things. In other words, it is almost impossible to send an unambiguous message that the public is angry about education when so many issues affect who votes and why.

All these problems remain with state or federal control. There’s a reason the National Education Association, American Federation of Teachers, American Association of School Administrators, etc., have big headquarters in the Washington, DC, area, and their state affiliates run hefty operations in state capitals: they are wielding political power! And, like mayoral elections, voting in state or federal elections isn’t just about education, but taxation levels, wars, roads, bridges to nowhere, extramarital affairs, “do nothing” congresses, birth certificates, and so on.

At this point you might feel that democracy really is bad, and generally doomed to failure. And you’d be right, which is why government should be restricted to doing only those things that private individuals cannot do, and one of those things is not furnishing education. We know that private individuals can and do supply widespread education from our own history, in which education and literacy had very broad reach before government schools existed, and in which private schools often thrived – including a huge system of parochial schools – despite having to compete with “free” alternatives. Perhaps even more compelling, we can see it in the massive for-profit schooling industries that out-teach government schools in the poorest places in the world.

So what is the viable solution to our education governance problems? To end government control of education, setting both educators and parents free. Move to a system of universal school choice, in which funding is controlled by parents, educators have the autonomy to run their own schools, and all involved have equal power because free, voluntary exchange – not wielding political influence – is how business is done. Don’t make parents and taxpayers engage in endless, plodding, political warfare in which they’ll always be outgunned. Let them exercise immediate power by taking their kids – and the money to educate them – out of schools that do not satisfactorily serve them and put them into schools that do.

Thanks again to Mike Petrilli for daring to question “democracy,” and I hope it spurs a truly thoughtful, honest discussion about this absolutely crucial topic.

Demos vs. Cato: Say No to Bailouts

Over at PolicyMic, Cato scholar Daniel J. Mitchell debates Demos co-founder David Callahan on whether massive government bailouts saved us from a second Great Depression, or plunged the economy into a prolonged recession that hurt taxpayers and undermined the self-corrective mechanisms of the market. Mitchell argues:

The Bush-Obama policies of bailouts and regulation have been bad for taxpayers, but they’ve also been bad for the economy.

A vibrant and dynamic economy requires the possibility of big profits, but also the discipline of failure. Indeed, capitalism without bankruptcy is like religion without hell.

Yet that’s what politicians from both parties have created. Profits are private and losses are socialized, so is anyone surprised that Wall Street responds to these incentives with imprudent risk?

Read Mitchell’s post here, and the other side here.