In Bootleggers & Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics, economists Bruce Yandle and Adam Smith explain how money and morality are often combined in politics to produce arbitrary regulations benefiting cronies, while constraining productive economic activities by the general public.
It has just been over a week since President Obama made his “recess” appointments to the Consumer Financial Protection Bureau and the National Labor Relations Board. I suggested last week that this might turn out to be Obama’s “Court-Packing” moment, where he begins to discover that (some) Americans actually do care about the Constitution. While its clearly too early to say anything with certainty, it appears I may have been correct.
On January 3th, the day before the appointments, Obama’s job approval ratings, according to RealClearPolitics, averaged 47.2 approval and 47.8 disapproval. Basically a tie.
Today, his job approval is at 44.5 and disapproval is 50.3. Moving over the course of a week from a tie to a spread of almost 6 percentage points.
Usually we have not seen such large changes over the course of a week. Now obviously one cannot contribute all this decline to the recess appointments, but there were no other big Presidential announcements or even big economic news over the last week that could account for such a slide in support. So while this doesn’t prove anything, it does suggest these appointments, even if they are making his base happy, are coming at the expense of the support of independents.
One of the ways Massachusetts officials have tried to temper RomneyCare’s cost overruns was by denying participation to legal immigrants. Last week, the Commonwealth’s highest court ruled that restriction violates the Massachusetts Constitution:
Massachusetts cannot bar legal immigrants from a state health care program, according to a ruling issued Thursday by the state’s highest court…
The ruling said that a 2009 state budget that dropped about 29,000 legal immigrants who had lived in the United States for less than five years from Commonwealth Care, a subsidized health insurance program central to this state’s 2006 health care overhaul, violated the State Constitution.
“This appropriation discriminated on the basis of alienage and national origin,” wrote Justice Robert J. Cordy of the Supreme Judicial Court, ruling that the action “violates their rights to equal protection under the Massachusetts Constitution.”…
State officials say they will abide by the decision, although they are not yet sure how to pay for the change.
“This decision has significant fiscal impacts for the commonwealth, adding somewhere in the range of $150 million in annual costs to what is already a very challenging budget,” said Jay Gonzalez, secretary of administration and finance.
No doubt their “pay for” will involve another unpopular minority.
That’s the message I came away with after reading an online article from a Philadelphia Inquirer reporter about a decision by the state of Pennsylvania to limit eligibility for food stamps. The article is a perfect example of the difficulty advocates for limited government face in communicating their ideas through the mainstream press.
At issue is the PA Department of Public Welfare’s decision to eliminate eligibility for food stamps for people under the age of 60 who have more than $2,000 in assets (the value of one’s house, retirement benefits, and car would be excluded). The DPW estimates that only “2 percent of the 1.8 million Pennsylvanians receiving food stamps would be affected by the asset test.” Indeed, the DPW’s website notes that “Because of changes to SNAP, most Pennsylvania households are not subject to a net income limit, nor are they subject to any resource or asset limits.”
(SNAP is the acronym for the federal Supplemental Nutrition Assistance Program, which was known as the Food Stamp program until 2008 when Congress changed its name to sound more palatable. The program is run jointly by the U.S. Department of Agriculture and state governments, but federal taxpayers pay for the direct benefits.)
One of the “changes” that the DPW refers to is categorical eligibility, which basically means that Pennsylvania households already receiving benefits from other welfare programs, including cash welfare and Supplemental Security Income, automatically qualify for food stamps. In recent years, both the state of Pennsylvania and the federal government have made it easier to qualify for food stamps benefits.
Unfortunately, the Inquirer reporter either wasn’t aware of these details or didn’t deem them important enough for inclusion. Instead, he quotes ten—let me repeat that, ten—critics of the DPW’s decision. The critics include a “national hunger expert,” the legal director of a “leading anti-hunger group,” the executive director of the Greater Philadelphia Coalition Against Hunger, the executive director of the “liberal Pennsylvania Budget and Policy Center,” and an older woman who says that she’ll “have to give up paying for my health insurance.”
It took me all of two minutes to get a quote from Nathan Benefield, the director of policy analysis at Pennsylvania’s pro-liberty Commonwealth Foundation:
Unfortunately for taxpayers, politicians in Harrisburg and Washington have for the past few years considered it a “success” to have more families on welfare. Pennsylvania welfare eligibility and spending—including for food stamps—has exploded, threatening to crowd out everything else in the state budget. Means testing for assets is a common-sense reform to ensure those who truly need aid get it.
There, was that so hard?
Of course, journalists who are interested in getting the pro-liberty take on welfare reform are welcome to contact my colleagues and me at the Cato Institute. Honestly, we don’t want people to starve in order to save a buck—we just believe that the federal government is an improper and less effective means for assisting those who are truly in need. Pressed for time? Here are Cato essays on food subsidies, welfare, and federal subsidies to state and local government.
But I also believe in being intellectually honest, so I’ll defend a politician I don’t like (even Obama) when they do the right thing or when they get attacked for the wrong reason.
In the case of Romney, some of his GOP opponents are criticizing him for job losses and/or bankruptcies at some of the companies in which he invested while in charge of Bain Capital. But I don’t need to focus on that issue, because James Pethokoukis of AEI already has done a great job of debunking that bit of anti-Romney demagoguery.
In this post, I want to focus on the issue of tax havens.
Regular readers know that I’m a big defender of these low-tax jurisdictions, for both moral and economic reasons, and I guess that reporters must know that as well because I’ve received a couple of calls from the press in recent weeks. But I suspect I”m not being called because reporters want to understand international tax policy. Instead, based on the questions, it appears that the establishment media wants to hit Romney for utilizing tax havens as part of his work at Bain Capital.
As far as I can tell, none of these reporters have come out with a story. And I’m also not aware that any of Romney’s political rivals have tried to exploit the issue.
But I think it’s just a matter of time, so I want to preemptively address this issue. So let’s go back to 2007 and look at some excerpts from a story in the Los Angeles Times about the use of so-called tax havens by Romney and Bain Capital.
While in private business, Mitt Romney utilized shell companies in two offshore tax havens to help eligible investors avoid paying U.S. taxes, federal and state records show. Romney gained no personal tax benefit from the legal operations in Bermuda and the Cayman Islands. But aides to the Republican presidential hopeful and former colleagues acknowledged that the tax-friendly jurisdictions helped attract billions of additional investment dollars to Romney’s former company, Bain Capital, and thus boosted profits for Romney and his partners. …Romney was listed as a general partner and personally invested in BCIP Associates III Cayman, a private equity fund that is registered at a post office box on Grand Cayman Island and that indirectly buys equity in U.S. companies. The arrangement shields foreign investors from U.S. taxes they would pay for investing in U.S. companies. …In Bermuda, Romney served as president and sole shareholder for four years of Sankaty High Yield Asset Investors Ltd. It funneled money into Bain Capital’s Sankaty family of hedge funds, which invest in bonds and other debt issued by corporations, as well as bank loans. Like thousands of similar financial entities, Sankaty maintains no office or staff in Bermuda. Its only presence consists of a nameplate at a lawyer’s office in downtown Hamilton, capital of the British island territory. … Investing through what’s known as a blocker corporation in Bermuda protects tax-exempt American institutions, such as pension plans, hospitals and university endowments, from paying a 35% tax on what the Internal Revenue Service calls “unrelated business income” from domestic hedge funds that invest in debt, experts say. …Brad Malt, who controls Romney’s financial trust, said Bain Capital organized the Cayman fund to attract money from foreign institutional investors. “This is not Mitt trying to do something strange,” he said. “This is Bain trying to raise some number of billions from investors around the world.”
There are a couple of things worth noting about these excerpts.
1. Nobody has hinted that Romney did anything illegal for the simple reason that using low-tax jurisdictions is normal, appropriate, and intelligent for any business or investor. Criticizing Romney for using tax havens would be akin to attacking me for living in Virginia, which has lower taxes than Maryland.
2. Jurisdictions such as Bermuda and the Cayman Islands are good platforms for business activity, which is no different than a state like Delaware being a good platform for business activity. Indeed, Delaware has been ranked as the world’s top tax haven by one group (though American citizens unfortunately aren’t able to benefit).
Michael and Chantelle Sackett bought some Idaho land and began placing gravel fill on the site to prepare for laying a foundation for their dream home. Then they got something from the EPA: a “Compliance Order,” declaring that they were in violation of the Clean Water Act, because their land had been deemed a “wetland” subject to federal jurisdiction.
By beginning construction without a federal permit, the Sacketts were breaking the law and exposing themselves to civil and possibly criminal penalties, according to the Order. The Order instructed them to stop their construction and restore the property to its “original state” – it even told them what type of shrubbery to plant on the site, and exactly where to plant it. If they failed to comply with the order, they were subject to $37,500 fines per day.
The Sacketts were, understandably, shocked: they had no reason to think their property was a wetland; their neighbors had been allowed to build homes, and there was no indication in their title documents that the land was subject to federal control. So they asked for a hearing – and that was when they learned that the Compliance Order process does not entitle them to a hearing. They must either comply with the Order immediately to avoid the fines, or play chicken with the EPA – waiting until the EPA decides to file an “enforcement action.” At that time, they would be allowed to present their arguments that the land is not actually a “wetland.” But of course, by that time, the fines would have accumulated to hundreds of thousands or millions of dollars.
Worse, these Compliance Orders are issued by a single EPA bureaucrat, on the basis of “any evidence.” That’s the language of the statute itself – and federal courts have interpreted “any evidence” to mean even an anonymous phone call or a newspaper story.
And a Compliance Order doesn’t just demand that you obey EPA’s orders or face fines – ignoring a Compliance Order is a separately punishable offense against federal law, aside from the liability for any environmental damage. In other words, you can face penalties for violating the Clean Water Act and also for ignoring a Compliance Order. Worse still, ignoring a Compliance Order can serve as the basis of a finding of “wilfulness,” and thus the basis of criminal charges.
Pacific Legal Foundation represents the Sacketts and argues that they should have their day in court – either under federal statutes like the Administrative Procedure Act or under the Due Process Clause – without having to face the possibility of devastating penalties. PLF lawyer Damien Schiff argued the case today before the Supreme Court; while the justices were active in probing the weaknesses of both sides, the government’s lawyer didn’t do the EPA any favors. So today may have ended being a very good day for the Sacketts, even if the New York Times editorial page took the alarmist stance that allowing them to seek pre-enforcement judicial review would be a ”big victory to corporations and developers who want to evade the requirements of the Clean Water Act.”
Like many Americans, a growing number of post-9/11 veterans care more about protecting and defending the United States and less about transforming failed states, democratizing the Middle East, protecting wealthy allies, and sacrificing more American lives in the name of global hegemony.
Last Friday, ahead of Tuesday’s New Hampshire Primary, Gwen Ifill of the PBS Newshourinterviewed five Granite State Republicans and independents about their views on the Republican presidential field. In alluding to the divergence between keeping America safe and fighting wars indefinitely in the war on terror, New Hampshire voter and Iraq war veteran Joshua Holmes told Ifill:
HOLMES: …We haven’t defined what it is that is going to satisfy basically victory in the global war on terror. And until we define victory, until we develop a plan to achieve that victory and then to end the war, soldiers are going to continue to die.
IFILL: And who [of the candidates] do you think has got a plan?
HOLMES: I think that Dr. Paul is the first person, the only person now that Gary Johnson is out of the race. All of the other candidates are planning on continuing the global war on terror without any objectives.
Well, simply, the things that he was talking about four years ago have - they’ve manifested. I mean, he predicted the financial meltdown back in 2001 and warned about it for almost a decade before it happened.
He warned about the consequences of the Iraq war, especially the long-term consequences. And now we’re actually seeing those consequences. And that opens people’s minds to the idea that this guy, who did warn us, might have the solutions.
Mr. Holmes is notalone, particularly on the subject of war. One in three veterans of the post-9/11 military believe the wars in Iraq and Afghanistan were not worth fighting. A majority, according to the Pew Research Center, think America should be focusing less on foreign affairs and more on its own problems.
Most of the Republican presidential candidates, however, seemalltoowilling to surrender more American treasure and possibly more American soldiers, sailors, Marines, and airmen for preemptive strikes against Iran. Republicans would do best to appreciate the critics of intervention, a growing number of whom now reside within the post-9/11 military.