Archives: December, 2011

USPS Gives Congress More Time to Kick Can

By
Tad DeHaven

Last week, the U.S. Postal Service filed a plan with its regulator to close half of its mail processing facilities and reduce delivery standards in order to reduce costs. I called the move a message to Congress because “the USPS is running on financial fumes and Congress is still trying to figure out how to kick the can down the road.”

This week, the USPS said that it’s delaying the closure of mail processing facilities and post offices by a few more weeks in order to give Congress more time to come up with “comprehensive postal legislation.” According to the press release, the delay comes “in response to a request made by multiple U.S. Senators.”

That’s hardly a surprise. Here’s what I wrote last week:

The biggest obstacle standing in the way of the proposal is, of course, Congress. I would venture a guess that legislation will be introduced to stymie the plan—if it hasn’t already. After all, members of Congress have consistently fought USPS efforts to shutter post offices. Naturally, the postal employees unions aren’t happy and will make sure that policymakers know it.

According to the Washington Post, “a group of 21 senators from mostly rural states led by Bernie Sanders, an independent from Vermont, signed a letter to congressional leaders asking them to add language to legislation that would halt closings for six months.” Sen. Sanders also sponsored legislation in November that would hand the USPS a bailout and preserve the status quo. Well, Sanders calls himself a socialist so I suppose it would make sense that he’d want to do whatever it takes to preserve the government’s floundering mail business.

And in other postal news, the House passed legislation on Tuesday to name a post office.

Topics: 
Tax and Budget Policy

Not Happy With the Declining Labor Share of Income, Talk to the Federal Reserve

By
Mark A. Calabria

Today’s Financial Times, among other media outlets, is reporting that share of national income coming from wages has “fallen to its lowest level since records began after the second world war….”  That level now stands at 58 percent, the post-war average is 63 percent.  The remainder comes largely from profits and capital gains.

It won’t be long before many start to suggest the usual, but broken, remedies of higher taxes, increasing the minimum wage and more unionization.  Putting aside the fact that I have no idea what the “correct” share for wages should be (and suspect neither does anyone else), this trend should come as no surprise when you have an economic system that bases much of its “prosperity” on the creation on serial asset bubbles.  Wages stagnating?  Well let’s run up house or stock prices.  Or at least that seems to be the thinking of the Federal Reserve.

The chart below compares the annual percentage change in the Dow-Jones Index (left axis) and the annual percent change in the effective federal funds rate (right axis), both on a monthly basis.  The correlation is a negative 0.1, indicating that as the federal funds rate is lowered, the Dow increases.  Of course the opposite then holds when the federal funds rate is raised.

The rub with all this is that running up asset prices only benefits those with assets.  The increase in asset prices will also increase capital gains, lowering the wage share of national income.  Even worse is that running up some asset prices, like that for housing, does nothing to increase wages, which are ultimately driven by increasing labor productivity.  So if you really want to help labor, let’s stop trying to create false wealth via easy credit, and try improving labor productivity instead. 

 

Topics: 
Finance, Banking & Monetary Policy

The Government Must Compensate for Property Damage Even If Its Taking Was Only ‘Temporary’

By
Ilya Shapiro

Cato today filed an amicus brief supporting a request that the Supreme Court review Arkansas Game & Fish Commission v. United States.  Here’s the case:

The Arkansas Game & Fish Commission owns and operates 23,000 acres of land as a wildlife refuge and recreational preserve; the preserve’s trees are essential to its use for these purposes. Clearwater Dam, a federal flood control project, lies 115 miles upstream. Water is released from the dam in quantities governed by a pre-approved “management plan” that considers agricultural, recreational, and other effects downstream. 

Between 1993 and 2000, the government released more water than authorized under the plan. AGFC repeatedly objected that these excessive releases flooded the preserve during its growing season, which significantly damaged and eventually decimated tree populations. In 2001, the government acknowledged the havoc its flooding had wreaked on AGFC’s land and ceased plan deviations. By then, however, the preserve and its trees were severely damaged, so AGFC sued the government, claiming damages under the Fifth Amendment’s Takings Clause.

The district court awarded $5.8 million in lost timber and reforestation costs based on the substantiality of the government’s flooding and the foreseeability of the damage it caused. The Federal Circuit reversed that decision, holding that the flooding of private land can never be a taking unless that flooding is permanent. It further held that, in determining whether the government’s intrusion on AGFC’s land was permanent or temporary, courts must focus on the character of the policy behind the intrusion rather the effects of the intrusion itself. A taking cannot have occurred here because each deviation from the plan constituted a “temporary” policy, the court concluded, so AGFC had no constitutional remedy.

AGFC is asking the Supreme Court to review its case; the Court itself has recognized that something less than a permanent invasion of land can constitute a compensable taking. Cato joined the Pacific Legal Foundation on a brief urging the Court to hear the case and uphold the Fifth Amendment rights of property owners whose land is destroyed by the federal government. Our brief highlights the conflict between the Federal Circuit’s decision and both Supreme Court and lower court precedent. First, an invasion of land by flooding is no different from an invasion of land by any other means. Second, the government’s self-professed “intent” that a possible taking be “temporary” should have no bearing on whether a Fifth Amendment remedy exists when that taking has, in fact, occurred. Instead, the relevant inquiry should be whether the government caused permanent damage and, if so, how much.

The Federal Circuit’s new rule — that, so long as it might be “temporary,” no government flooding can be remedied under the Fifth Amendment — runs afoul of the letter and spirit of a constitutional provision meant to compensate property owners for government intrusions on their land. We urge the Court to grant AGFC’s petition and maintain constitutional protections for private property.

The Supreme Court will decide in the new year whether to take the case, and would hear argument in the fall if it does.

Topics: 
Energy and Environment, Government and Politics, Law and Civil Liberties

Administration Bait and Switch in Afghanistan?

By
Doug Bandow

U.S. combat troops are leaving Afghanistan in 2014. That was the consistent message which I received on my NATO-organized visit two months ago to a country now defined by war. The American and European governments have promised to provide long-term financial assistance and combat training, but they plan on shifting the actual fighting to Kabul’s hands.

Maybe not, it now seems.  The U.S. ambassador to Afghanistan, Ryan Crocker, said America might just stick around and continue the war. Reported the New York Times:

The ambassador, Ryan C. Crocker, speaking at a roundtable event with a small group of journalists, said that if the Afghan government wanted American troops to stay longer, the withdrawal could be slowed. “They would have to ask for it,” he said. “I could certainly see us saying, ‘Yeah, makes sense.’ ”

The ambassador’s standard is whether the Afghan government asked the United States to stay. It would make more sense to ask the American people what they think.

The argument that it’s time for Washington to go, but to go in a manner which attempts to preserve something positive has appeal, though there are plenty of reasons to doubt that it is feasible. President Hamid Karzai & Friends appeared to be neither more competent nor better loved than when I visited last year. I don’t expect much improvement next year. Nevertheless, the case for a phased withdrawal deserves to be treated seriously.

But leave the United States must. Had President George W. Bush announced in 2001 that he was embarking on a long-term mission to transform Afghanistan by turning it into a Western-style liberal democracy with a strong central government in Kabul, he would have been laughed out of Washington. The American people would have unceremoniously tossed him out of office in 2004.

Yet remake Afghanistan is what the U.S. government now is attempting to do. When I asked what justified this expensive attempt at nation-building, Afghans and Americans alike warned that al Qaeda could reemerge. I assume no one really believed that. At least, I hope no one really believed that.

After all, al Qaeda is in sharp decline. Intelligence officials say that al-Qaeda’s presence in Afghanistan is minimal. The likelihood of revival seems small.

Moreover, terrorists have demonstrated an ability to operate all over the world. Of course, Osama bin Laden was killed in Pakistan. There are plenty of other potential sanctuaries available in failed and semi-failed states. Indeed, the biggest Islamic terrorist threat these days appears to come from local groups which identify with, but are not controlled by, al-Qaeda. Afghanistan is irrelevant to the latter’s operation and impact, and of no interest to other terrorists.

There’s also strong humanitarian appeal in staying, but that can’t justify endless war in Central Asia. Washington would never have intervened to make Afghanistan a more humane place. American troops have been fighting there for ten years—as long as World Wars I and II combined.

If the president plans on keeping U.S. troops in Afghanistan beyond the promised 2014, he should ‘fess up. Then the American people can make their views known. And, more important, they can take appropriate action in next year’s presidential election.

Topics: 
Foreign Policy and National Security, General

Unconstitutional Patrols and Second Class Citizens

By
Tim Lynch

It does not happen in the suburbs, but in the city, the police will sometimes just pounce on people who are not doing anything wrong and if you complain or ‘mouth off,’ things can get much worse.  Here is an excerpt from a ruling handed down today in DC. 

What is most disturbing about this case is the result: a young man in the community … who was engaged in peaceful activities (mowing the lawn, smoking a cigarette) and who the police knew at the time they stopped him was not doing anything unlawful, is approached by aggressive officers engaged in aggressive unconstitutional patrols, and this young man ends up being punched in the face with such force that he receives a black eye, kicked numerous times in the back, thrown on the ground, sprayed in the eyes with pepper spray, and finally, he receives two convictions on his record for assault on a police officer… . But for this unconstitutional police policy, appellant Crossland would not have suffered a physical attack on his person and would not have had these convictions on his record. Instead, he would have had a rather ordinary day in his community mowing the lawn and smoking a cigarette, a day he probably wouldn’t even have cause to remember, and it is very disturbing that the police in this case are essentially being rewarded for their unconstitutional behavior and aggressive unconstitutional police policy which was the direct cause of a highly volatile situation which led to this young man’s eventual convictions for assaulting them.

The full opinion can be found here [pdf].  One judge says he hopes the police will be admonished for violating the rights of individuals–aggressively confronting people who are not doing anything wrong–and wonders whether he is being naive and unrealistic.  Sorry to say that he is being naive and that’s part of the problem.  If the young man had gone along with the illegal stop and frisk and the officer left the scene after ten minutes, there would have been no real legal remedy available and that’s why these tactics are used over and over again. 

Author David Shipler spoke about this kinda thing at Cato a few weeks ago.  Related Cato work here

Topics: 
Law and Civil Liberties

Reality, Meet Education Policy. Education Policy, Please, Meet Reality!

By
Neal McCluskey

Nobody wants to be the guy – especially the Congress-guy – who says that we need to cut education spending. Nobody wants to be the target of attacks from both the well-intentioned and politically opportunistic that they hate children, only care about “the rich,” or any of the other deviousness  that long ago snuck up behind reasoned debate, threw a rope around its neck,  and pulled it backwards.

That’s been proven again today.

If you address it honestly, it’s nearly impossible to deny that federal education meddling has been not just a failure, but a failure with all sorts of bizzaro tendencies. Just look at today’s big edu-news story: Several months ago, Education Secretary Arne Duncan warned that this year 82 percent of the nation’s public schools would be identified as failing under the No Child left Behind Act.  A lot of people smelled pure politics behind the pronouncement – the administration wanted to unilaterally issue waivers from the law in exchange for states adopting POTUS-dictated policies – and today the Center on Education Policy released a report finding that only about 48 percent of schools “need improvement” under NCLB.

Wait, 48 percent? Isn’t that still really high?

It certainly seems so, but who the heck even knows? Every state sets its own standards-and-testing regime and most appear to have gamed the system wildly to stay out of trouble. So are all our schools failing? Half? And what even constitutes failing? No one knows, and few politicians appear willing to talk straight about it. (Of course, most probably have no idea what should constitute math and reading “proficiency” – the law’s goal – to begin with. Indeed, it’s an extremely subjective designation for anyone to make, though some in Washington act like they pretty much know what it is.)

Obviously, no sane individual would ever construct a system like this. But politically, all this illusion and contortion makes sense: Every politician wants to be seen as the savior of our children, but never wants the abuse that would come with creating and enforcing high standards, or being honest about progress made – or not made – under his or her watch. So we get all this sound, fury, and when you compare spending to test scores, educational nothing: 

 

Now, you’d think just the sheer lunacy of federal education policy making would make it clear to all that Washington should get out of education. And if that didn’t do it, the abysmal track record absolutely would. But no: Today the U.S. House of Representatives – the legislative body supposedly full of angry, tea-guzzling Republicans – produced their FY 2012 appropriations bill. And by how much did they cut the U.S. Department of Education budget? 20 percent? 2 percent? No, a microscopic 0.2 percent! A $153 million quark out of a $71.3 billion whale!

While office holders are wrongly considered our leaders by some – they are, in fact, our employees – you’d hope they’d lead a bit by ignoring short-term political consequences and cutting utterly failed programs. But that would be the triumph of hope over reality; politicians are as self-interested as anyone else, and will generally do only those things that help them keep or gain votes. So what must happen is that the public gets intimately familiar with the sick reality of federal education policy and votes based on it. And that means those of us at Cato’s Center for Educational Freedom, and others who know the truth, must do a better job of getting that word out and helping education policy to finally meet reality.

Topics: 
Education and Child Policy, General

One-Click Christmas Shopping

By
David Boaz

The Cato Institute offers lots of great Christmas gifts – Pocket Constitutions (also a good gift for Bill of Rights Day!), books, apparel, even Cato-branded Lands’ End merchandise. But I have my own holiday recommendations that I’ve made before.

I decided one year to give a young colleague a post-graduate course in political science and economics — P. J. O’Rourke’s books Parliament of Whores and Eat the Rich. So I went to my local Barnes & Noble to search for them. Not in Current Affairs. Not in Economics. No separate section called Politics. I decided to try Borders (RIP). But first — to avoid yet more driving around — I went online to see if my local Borders stores had them in stock. Sure enough, they did, in a couple of stores just blocks from the Cato Institute. Checking to see where in the store I would find them, I discovered that they would both be shelved under “Humor–Humorous Writing.” Oh, right, I thought, they’re not books on economics or current affairs, they’re humor.

Yes, P.J. is one of the funniest writers around. But what people often miss when they talk about his humor is what a good reporter and what an insightful analyst he is. Parliament of Whores is a very funny book, but it’s also a very perceptive analysis of politics in a modern mixed-economy democracy. And if you read Eat the Rich, you’ll learn more about how countries get rich — and why they don’t — than in a whole year of econ at most colleges. In fact, I’ve decided that the best answer to the question “What’s the best book to start learning economics?” is Eat the Rich.

On page 1, P. J. starts with the right question: “Why do some places prosper and thrive while others just suck?” Supply-and-demand curves are all well and good, but what we really want to know is how not to be mired in poverty. He writes that he tried returning to his college economics texts but quickly remembered why he hated them at the time–though he does attempt, for instance, to explain comparative advantage in terms of John Grisham and Courtney Love. Instead he decided to visit economically successful and unsuccessful societies and try to figure out what makes them work or not work. So he headed off to Sweden, Hong Kong, Albania, Cuba, Tanzania, Russia, China, and Wall Street.

In Tanzania he gapes at the magnificent natural beauty and the appalling human poverty. Why is Tanzania so poor? he asks people, and he gets a variety of answers. One answer, he notes, is that Tanzania is actually not poor by the standards of human history; it has a life expectancy about that of the United States in 1920, which is a lot better than humans in 1720, or 1220, or 20. But, he finally concludes, the real answer is the collective “ujamaa” policies pursued by the sainted post-colonial leader Julius Nyerere. The answer is “ujaama—they planned it. They planned it, and we paid for it. Rich countries underwrote Tanzanian economic idiocy.”

From Tanzania P. J. moves on to Hong Kong, where he finds “the best contemporary example of laissez-faire….The British colonial government turned Hong Kong into an economic miracle by doing nothing.”

You could do worse than to take a semester-long course on political economy where the texts are Eat the Rich and Parliament of Whores. So, bookstore owners, leave them in the Humorous Writing section for sure, but also put copies in the Economics, Politics, and Current Affairs sections.

Still time to buy them for Christmas and educate all your family and friends while they think they’re just being entertained!

Topics: 
General, Government and Politics, Political Philosophy

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