Featuring Benjamin H. Friedman, Research Fellow in Defense and Homeland Security Studies, Cato Institute; Spencer Ackerman, Senior Writer, WIRED Magazine; and Julian Sanchez, Research Fellow, Cato Institute; moderated by Laura Odato, Director of Government Affairs, Cato Institute.
Renowned development economist Deepak Lal draws on 50 years of experience around the globe to describe developing-country realities and rectify misguided notions about economic progress.
The Cato Institute tops a new measure of think tank performance in the United States, according to a recent report. Cato bested all other U.S. think tanks in the main category of “Aggregate Profile per Dollar Spent.” “I’m grateful to the Center for Global Development for showing that Cato gives its sponsors something I wish government gave more of to taxpayers: bang for the buck,” said Cato CEO John Allison.
The Supreme Court decided Citizens United two years ago this week. The complaints about the ruling that have emerged since are often bizarre and misrepresent much of the landmark ruling’s import. Here’s what the case was about.
Almost nowhere in the complaints about the Citizens United ruling will you hear that the case decided that certain books or Pay-per-View broadcasts could no longer be banned by the Federal Election Commission.
(And here’s more from attorney James Bopp, Jr. on the ultimate ruling.)
Since Citizens United, complaints from Common Cause and occupiers of various parks across the United States tend to focus on corporatepersonhood, the scourgeof SuperPACs and at least one group’s troubling idea to amend the Constitution so that—once and for all—“campaign spending is not a form of speech protected under the First Amendment.”
One would think that after a housing boom driven by cheap credit, we would have heard the end of the “minorities charged higher rates regardless of credit” narratives. But our friends at the Economic Policy Institute continue to spin the myth that it is really race, and not credit history, that determines a borrower’s interest rate.
EPI cleverly starts out by lumping most borrowers into the same category: “In recent years, Latino and African American consumers with good credit scores of 660 and higher have too often ended up with high interest rate mortgages, mortgages which are supposed to go to risky borrowers.” First of all, 660 is not a good credit score. We can debate whether it’s poor or mediocre, but it isn’t good. According to the Federal Reserve, loans with a FICO of around 660 default at a rate of almost nine times that of loans with a FICO of 720 or higher (see table below). To mix the two and claim they are the same risk is misleading, at best.
So let’s start with some basic facts:
For a variety of reasons, including differences in age, Latino and black borrowers have lower credit scores than white borrowers. This still holds even when you exclude loans to borrowers with credit scores below 660 or 620. Second, defaults continue to vary, by large magnitudes, even for rates above 660. To imply 660 is equal to 700 or that 700 is equal to 780 is false.
There have also been a number of studies that reject the claim of large, or even any, differences in mortgage pricing by race, when one includes relevant variables. A recent NY Federal Reserve Bank study concludes:
we find no evidence of adverse pricing by race, ethnicity, or gender in either the initial rate or the reset margin. Indeed, if any pricing differential exists, minority borrowers appear to pay slightly lower rates.
A recent study in the peer-reviewed Journal of Real Estate Research concludes
that up to 90% of the African American APR gap, and 85% of the Hispanic APR gap, is attributable to observable differences in underwriting, costing, and market factors that appropriately explain mortgage pricing differentials. Although any potential discrimination is problematic and should be addressed, the analysis suggests that little of the aggregate differences in APRs paid by minority and non-minority borrowers are appropriately attributed to differential treatment.
We all should be offended by racial discrimination. But these vast claims of discrimination, where none actually appears to exist, contributed to the federal push to get everyone a mortgage. This push has come at great cost to the taxpayer, our economy, and—as importantly—to the very families it claimed to help.
Tomorrow will be the anniversary of the Citizens United decision. We have also been hearing a lot about “Super PACs,” which have supported a lot of speech in the Republican primaries. That speech has had a good effect: voters have heard a lot more about the candidates, their positions, and their character. Such information can only lead to better elections.
You might recall that Citizens United involved a movie about Hilary Clinton partially funded by a corporation. You might also notice that the Super PAC ads are not being funded by corporations but rather by individuals. What’s going on? Why can individuals freely fund political speech in South Carolina and other states?
Citizens United established the principle that government cannot prohibit the funding of speech undertaken independently of candidates and the parties. It did not free up spending on speech by individuals.
The decision that accomplished that was SpeechNow.org v. Federal Election Commission. In that case, a federal court found that individuals who want to associate with one another to fund political speech cannot have their contributions limited by government. Individuals can give what they want to an independent group and spend what they want on speech. That seems logical now, but prior to SpeechNow it was not the law.
Consider what might have happened if SpeechNow had not been decided. It would have been up to the Federal Election Commission to decide how to apply the Citizens United principle that independent speech should be free of government suppression. The FEC does not have a good record on moving quickly to liberalize campaign finance regulations (to put it mildly). The Super PACs question might well be tied up in the bureaucracy.
Voters in South Carolina and elsewhere have reason to celebrate the second anniversary of Citizens United. As we rightly celebrate that decision, we should not forget SpeechNow, the decision that made free speech a reality for voters in South Carolina and everywhere.
In substituting naked force for conciliation and compromise, the British hoped to use Bostonians as an example and thereby cow other colonies into submission. But the Coercive Acts had precisely the opposite effect. They stiffened American resolve, inflamed passions even more, and instigated the crucial transition from resistance to revolution.
On Wednesday, we released the third lecture in our Exploring Liberty series. Tom G. Palmer, author of Realizing Freedom: Libertarian Theory, History, and Practice, leads a whirlwind tour through human history to document the rise of libertarian ideas, starting with the Mesopotamian epic of Gilgamesh and progressing through the history of ancient Greece and Rome, medieval Europe, the Renaissance, and the Enlightenment thinkers.
History is rarely so neat. The Soviet entry into the eastern theater of war, taking place on the same day as Nagasaki, may have been sufficient all by itself. If so, the bombings are harder to justify.
And today we posted video of a 1996 talk by Randall G. Holcombe. Holcombe is an economics professor at Florida State University. In this new video, he compares different theories from David Ricardo, Adam Smith, Israel Kirzner, and other economists regarding the relationship between entrepreneurship and wealth creation. The lecture was filmed at a Future of Freedom Foundation seminar on Austrian Economics.
I’m mystified, though, why some Republicans are willing to walk into such a trap. If you were playing chess against someone, and that person kept pleading with you to make a certain move, wouldn’t you be a tad bit suspicious that your opponent really wasn’t trying to help you win?
When I talk to the Republicans who are open to tax hikes, they sometimes admit that their party will suffer at the polls for agreeing to the hikes, but they say it’s the right thing to do because of all the government red ink.
I suppose that’s a noble sentiment, though I find that most GOPers who are open to tax hikes also tend to be big spenders, so I question their sincerity (with Senator Coburn being an obvious exception).
But even if we assume that all of them are genuinely motivated by a desire to control deficits and debt, shouldn’t they be asked to provide some evidence that higher taxes are an effective way of fixing the fiscal policy mess?
I’m not trying to score debating points. This is a serious question.
European nations, for instance, have been raising taxes for decades, almost always saying the higher taxes were necessary to balance budgets and control red ink. Yet that obviously hasn’t worked. Europe’s now in the middle of a fiscal crisis.
Run up spending and debt, raise taxes in the naming of balancing the budget, but then watch as deficits rise and your credit-rating falls anyway. That’s been the sad pattern in Europe, and now it’s hitting that mecca of tax-and-spend government known as Illinois.
…Moody’s downgraded Illinois state debt to A2 from A1, the lowest among the 50 states. That’s worse even than California.
…This wasn’t supposed to happen. Only a year ago, Governor Pat Quinn and his fellow Democrats raised individual income taxes by 67% and the corporate tax rate by 46%. They did it to raise $7 billion in revenue, as the Governor put it, to “get Illinois back on fiscal sound footing” and improve the state’s credit rating. So much for that.
…And—no surprise—in part because the tax increases have caused companies to leave Illinois, the state budget office confesses that as of this month the state still has $6.8 billion in unpaid bills and unaddressed obligations.
In other words, higher taxes led to fiscal deterioration in Illinois, just as tax increases in Europe have been followed by bad outcomes.
Whenever any politician argues in favor of a higher tax burden, just keep these two points in mind:
1. Higher taxes encourage more government spending.
The combination of these two factors explains why higher taxes make things worse rather than better. And they explain why Europe is in trouble and why Illinois is in trouble.
The relevant issue is whether the crowd in Washington should copy those failed examples. As this video explains, higher taxes are not the solution.
By now, probably everyone has heard these old Obamacare saws:
March 9, 2010 - “We have to pass the bill so that you can find out what is in it.” (House Speaker Nancy Pelosi)
March 28, 2010 - “As more and more people get to understand what’s in this bill, people are going to like it.” (Pennsylvania Gov. Ed Rendell)
August 4, 2010 - “It’s very obvious that people have a lack of understanding of our health care reform bill… The more people learn about this bill, the more they like it… The trend is turning all over America today… Once you explain what’s in the bill, the American people of course like it.” (Senate Majority Leader Harry Reid)
Here’s how those predictions have borne out:
Thus supporters have now gone from claiming that of course the public will love Obamacare to declaring, We need to make people dependent on government for their health care pronto, or Obamacare is sunk:
January 19, 2012 - “The more we educate people about the law, the more they’ll be able to take advantage of the benefits. The more they take advantage of the benefits, the harder it will be for opponents to take those benefits away. Once you have something and you like it and you’re using it, you will fight with your own member of Congress to keep it.” (HHS Secretary Kathleen Sebelius)
Obamacare will not benefit people by lowering the cost of medical care, as even Sebelius must know by now. The only way Obamacare will “benefit” anybody is by making him or her the recipient of an explicit or implicit government transfer. That is, Obamacare is going to rob Peter to subsidize Paul. Obamacare’s survival depends on making Paul dependent on that government transfer. I’m just surprised Sebelius is being so up front about it.
Two weeks ago I wrote about the emergency appeal of Texas’s new redistricting maps that reached the Supreme Court last month and was argued early last week. The state argued that the interim maps a three-judge district court in San Antonio drew didn’t defer sufficiently to the maps passed by the Texas legislature (which could not go into direct effect because they hadn’t been approved by either the Justice Department or a three-judge D.C. district court, per the requirements of Section 5 of the Voting Rights Act). A group of challengers, meanwhile, claimed that Texas’s maps discriminated against and diluted the voting strength of minorities in violation of the VRA’s Section 2. Cato’s brief supported neither side but urged the Court to reconsider the constitutionality of the modern VRA altogether, not least because Sections 2 and 5 conflict with each other and with the Constitution.
Today, the Supreme Court unanimously overturned the San Antonio court’s maps because that court may not have used the “appropriate standards” in drawing its interim maps. In a tight 11-page opinion, the Court made clear that, regardless of the legal ambiguities and other challenges the lower court faced, it still had to use the Texas legislature’s maps as a starting point and only deviate from them on districts where the Section 2 plaintiffs had a “likelihood of success on the merits” of their claims or where there was a “reasonable probability” of failing to get Section 5 approval. Here’s the nut of the Court’s decision:
To the extent the District Court exceeded its mission to draw interim maps that do not violate the Constitution or the Voting Rights Act, and substituted its own concept of “the collective public good” for the Texas Legislature’s determination of which policies serve “the interests of the citizens of Texas,” the court erred.
That legal ruling is almost certainly correct – and in any event provides much-needed guidance for future such difficult situations – but may not change the ultimate result all that much because the district court most erred in explaining how it did it what it did rather than in doing it. It even deferred significantly to the Texas maps after saying that it owed them no deference!
Unfortunately, the perfect storm that landed this case in the Supreme Court’s lap – no Section 5 “preclearance,” potentially viable Section 2 challenges, the need to have maps finalized quickly for the timely administration of primaries, the undesirability of having courts draw maps and the lack of clear rules of doing so – is not unique. Justice Thomas is thus onto something when he reiterated today, in his separate concurrence, his long-held position that Section 5 is unconstitutional.
But the problem is bigger than that: the Voting Rights Act as a whole has served its purpose but is now outmoded and unworkable – and consequently unconstitutional. Section 2 requires race-based districting, even as Section 5, along with the Fourteenth and Fifteenth Amendments, seem to prohibit it. For its part, Section 5 arbitrarily prevents common national redistricting standards. These tensions cannot but produce chaotic proceedings like those here, which are replicated every redistricting cycle. This state of affairs only serves to frustrate state legislatures, the judicial branch, and the voting public.
Put simply, the VRA’s success has undermined its continuing viability; courts and legislatures struggle mightily and often fruitlessly to satisfy both the VRA’s race-based mandate and the Fifteenth Amendment’s equal treatment guarantee. Section 5’s selective applicability precludes the establishment of nationwide districting standards, confounding lower courts and producing different, often contradictory, treatment of voting rights in different states – in large part because Sections 2 and 5 themselves conflict with each other.
These difficulties – constitutional, statutory, and practical – disadvantage candidates, voters, legislatures, and courts, and undermine the VRA’s great legacy of vindicating the voting rights of all citizens. While Perry v Perez may not have been the right vehicle for doing so because of exigencies involved in election administration, the Court should reconsider the constitutionality of the Voting Rights Act as presently conceived at the next available opportunity.
