Archives: February, 2012

One Year Later, Another Look at Obamanomics vs. Reaganomics

On this day last year, I posted two charts that I developed using the Minneapolis Federal Reserve Bank’s interactive website.

Those two charts showed that the current recovery was very weak compared to the boom of the early 1980s.

But perhaps that was an unfair comparison. Maybe the Reagan recovery started strong and then hit a wall. Or maybe the Obama recovery was the economic equivalent of a late bloomer.

So let’s look at the same charts, but add an extra year of data. Does it make a difference?

Meh… not so much.

Let’s start with the GDP data. The comparison is striking. Under Reagan’s policies, the economy skyrocketed.  Heck, the chart prepared by the Minneapolis Fed doesn’t even go high enough to show how well the economy performed during the 1980s.

Under Obama’s policies, by contrast, we’ve just barely gotten back to where we were when the recession began. Unlike past recessions, we haven’t enjoyed a strong bounce. And this means we haven’t recovered the output that was lost during the downturn.

This is a damning indictment of Obamanomics

Indeed, I made this point several months ago when analyzing some work by Nobel laureate Robert Lucas. And it’s been highlighted more recently by James Pethokoukis of the American Enterprise Institute and the news pages of the Wall Street Journal.

Unfortunately, the jobs chart is probably even more discouraging. As you can see, employment is still far below where it started.

This is in stark contrast to the jobs boom during the Reagan years.

So what does this mean? How do we measure the human cost of the foregone growth and jobs that haven’t been created?

Writing in today’s Wall Street Journal, former Senator Phil Gramm and budgetary expert Mike Solon compare the current recovery to the post-war average as well as to what happened under Reagan.

If in this “recovery” our economy had grown and generated jobs at the average rate achieved following the 10 previous postwar recessions, GDP per person would be $4,528 higher and 13.7 million more Americans would be working today. …President Ronald Reagan’s policies ignited a recovery so powerful that if it were being repeated today, real per capita GDP would be $5,694 higher than it is now—an extra $22,776 for a family of four. Some 16.9 million more Americans would have jobs.

By the way, the Gramm-Solon column also addresses the argument that this recovery is anemic because the downturn was caused by a financial crisis. That’s certainly a reasonable argument, but they point out that Reagan had to deal with the damage caused by high inflation, which certainly wreaked havoc with parts of the financial system. They also compare today’s weak recovery to the boom that followed the financial crisis of 1907.

But I want to make a different point. As I’ve written before, Obama is not responsible for the current downturn. Yes, he was a Senator and he was part of the bipartisan consensus for easy money, Fannie/Freddie subsidies, bailout-fueled moral hazard, and a playing field tilted in favor of debt, but his share of the blame wouldn’t even merit an asterisk.

My problem with Obama is that he hasn’t fixed any of the problems. Instead, he has kept in place all of the bad policies - and in some cases made them worse. Indeed, I challenge anyone to identify a meaningful difference between the economic policy of Obama and the economic policy of Bush.

  • Bush increased government spending. Obama has been increasing government spending.
  • Bush adopted Keynesian “stimulus” policies. Obama adopted Keynesian “stimulus” policies.
  • Bush bailed out politically connected companies. Obama has been bailing out politically connected companies.
  • Bush supported the Fed’s easy-money policy. Obama has been supporting the Fed’s easy-money policy.
  • Bush created a new health care entitlement. Obama created a new health care entitlement.
  • Bush imposed costly new regulations on the financial sector. Obama imposed costly new regulations on the financial sector.

I could continue, but you probably get the  point. On economic issues, the only real difference is that Bush cut taxes and Obama is in favor of higher taxes. Though even that difference is somewhat overblown since Obama’s tax policies - up to this point - haven’t had a big impact on the overall tax burden (though that could change if his plans for higher tax rates ever go into effect).

This is why I always tell people not to pay attention to party labels. Bigger government doesn’t work, regardless of whether a politician is a Republican or Democrat. The problem isn’t Obamanomics, it’s Bushobamanomics. But since that’s a bit awkward, let’s just call it statism.

Home Is Where the Congressional District Is

During the congressional redistricting season, you could almost get the idea that members of Congress look at the process this way:

1. I am entitled to be in Congress.

2. I need to figure out which constituents deserve to be represented by me.

There have been lots of stories recently about members of Congress declaring that “home is where the congressional district is.” Here’s the latest:

Tea party firebrand Rep. Allen West (R-Fla.) announced Tuesday that he will switch districts and run for reelection in Florida’s new 18th district.

West’s 22nd district, which was already Democratic-leaning, got even tougher under a new GOP redistricting plan released last week. The new district would have gone about 57 percent for President Obama in the 2008 presidential race.

But Rep. Tom Rooney’s (R-Fla.) decision earlier Tuesday to run in the open and Republican-leaning 17th district rather than the swing 18th freed West up to make the switch to the neighboring district, which is just north of his current district, which spans from West Palm Beach to Fort Lauderdale.

“Congressman Rooney is a statesman and has been an honorable public servant to the constituents of Florida’s 16th Congressional district,” West said, referring to Rooney’s current district, which is re-numbered from 16 to 18 under the new plan. “It is my goal to continue the success Congressman Rooney has had in Florida’s 16th Congressional district in the newly proposed 18th district.”

Glad that’s working out for everybody. Meanwhile, here are a few other cases:

Pleasanton’s own Rep. Jerry McNerney has looked at the changes coming in California’s soon-to-be-drawn political map and has made a decision: He’s moving east, along with his district, to San Joaquin County.

Where in San Joaquin Co? Uh…..

“When he settles on a place in San Joaquin County we’ll announce the location,” spokesperson Sarah Hersh told us….

“After spending so much time in San Joaquin County, it truly is my home,” McNerney said Thursday. “That’s why I’m planning to move my residence to San Joaquin County and put down even more roots in this community.”

–San Francisco Chronicle, July 28, 2011

With Rep. Grace Napolitano’s decision this week to run in the 32nd district east of Los Angeles, fellow California Democratic Rep. Linda Sánchez announced Thursday that she will run in the newly drawn 38th district….

Had Napolitano not switched, Sánchez could have opted to run in the open 47th district based in Long Beach, which mostly lies outside her current district.

–Roll Call, September 1, 2011

 House hopefuls across the country are busy building their 2012 campaigns — hiring staff, raising money and wooing early support. For some, the only thing missing is a seat to run for.

Call it the ghost district phenomenon: The once-a-decade drawing of new congressional maps has thrust some candidates into an awkward limbo, with at least a dozen running for seats that don’t yet exist but that will be crafted in the months to come.

– Politico, September 6, 2011

Downsizing the Interior Department

Cato has published a new section on www.downsizinggovernment.org that examines the Department of the Interior.

Interior is not one of the largest departments in terms of spending, but it has huge control over the lands and resources of the western United States. It oversees more than 500 million acres of land through the Bureau of Land Management, the National Park Service, the Fish and Wildlife Service, and other agencies. The department also houses the Bureau of Reclamation, which distributes subsidized water, and the Bureau of Indian Affairs, which administers aid programs for American Indians.

Here are some of ideas discussed at www.downsizinggovernment.org/interior:

  • Federal Lands: During the nation’s first century, the federal government focused on selling and giving away its lands to individuals, businesses, and state governments. In the 20th century, the government reversed course and began grabbing more land, but federal ownership has not led to sound economic or environment stewardship. A revival of federalism in land policies is long overdue.
  • American Indians: The federal government has an appalling record in its dealings with Indian tribes, and since 1824 the Bureau of Indian Affairs has been one of the most mismanaged and destructive of federal agencies. The path to prosperity for Indians is not through federal subsidies and top-down regulations, but through reforms to property rights and other institutions on reservations.
  • Water Subsidies: The Bureau of Reclamation operates dams and other water infrastructure in the western states. Its large subsidies for irrigation combined with restrictions on water transfers are contributing to a growing water crisis in many areas. Policymakers should focus on reforms to reduce subsidies, transfer federal infrastructure to state and private ownership, and move towards water trading in open markets.

One interesting thing about reforming the Department of the Interior is that economists and environmentalists share some common ground. Federal policies that set prices for irrigation water, grazing lands, timber, and other resources too low are both economically inefficient and harmful to the environment.

Another interesting thing about Interior is that its long history reveals that special interest lobbying, corruption, and mismanagement are nothing new in Washington. Interior’s troubles have included the “Indian ring” corruption scandals of the 19th century, the Teapot Dome scandal of the 1920s, and Jack Abramoff’s influence peddling during the George W. Bush years.

In 1828, one expert noted that “the derangements in the fiscal affairs of the Indian department are in the extreme… there is a screw loose in the public machinery somewhere.” Fast forward to 2006, and Interior’s Inspector General found that “short of a crime, anything goes at the highest levels of the Department of the Interior.”

Isn’t two centuries of federal bungling and failed policies enough? Policymakers should begin exploring ways to downsize the Department of the Interior.

New Cato Study: Tough Targets

Today, Cato is releasing a new study, Tough Targets: When Criminals Face Armed Resistance from Citizens, by Clayton Cramer and David Burnett.  The paper makes use of a news report-gathering project to explore in more detail how Americans use guns in self-defense.

The paper makes many excellent points, but I’ll mention just three here.  First, the average person tends to imagine that these self-defense situations involve criminals getting shot.  Such cases do occur, but the overwhelming number of self-defense cases involve situations where the gun is never fired.  

The second point relates to the first.  The average person usually does not hear about defensive gun cases because news media organizations do not consider the incidents worthy of coverage.  If a burglar runs away from a break-in when he discovers that someone is at the home and is armed, it may only garner a terse mention in the paper, if it makes the newspaper at all.  With no shot fired, no injuries, and no suspect in custody, newspeople typically decline coverage.  The point here is not to criticize the news media’s handling of such incidents–rather it is just to remind readers that we tend to hear about criminals using guns to perpetrate crimes, but we do not hear about many self-defense cases.  In this milieu, it is understandable why many people would develop negative opinions about guns.

Third, when a gun owner does shoot a rapist or is able to hold a burglar at gunpoint until the police arrive on the scene, it is very likely that more than one crime has been prevented.  That’s because had the culprit not been stopped, he very likely would have targeted other people as well.

Gun control proponents stress the idea of harm reduction.  They say the enactment of  firearm regulations will reduce accidents and the criminal use of guns.  But if policymakers are truly interested in harm reduction, they must consider the number of crimes that are thwarted by gun owners.  Each year gun owners prevent a great deal of criminal mayhem–murders, rapes, batteries, and robberies.  Tough Targets gathers dozens and dozens of examples of ordinary people using guns to stop criminal attacks.  The defensive use of guns happens much more often than most people realize.

In addition to the paper itself, we have a new page on the Cato web site that will track, to the extent we can, defensive gun cases around the country.

For more information, listen to a podcast interview with co-author Clayton Cramer, or see related Cato scholarship.

‘The Problem with CLASS Is That It’s Voluntary.’

As I write, the House is debating a bill that would repeal the CLASS Act, one of two new entitlements created under ObamaCare. It’s hard express just how awful this program is. Here’s my attempt from back in October, when the Obama administration admitted CLASS is a bust:

The idea behind CLASS was that the government would run a voluntary and self-sustaining insurance plan to help the disabled pay for long-term care, including nursing home care…

Congress required CLASS to set each applicant’s premiums according to the average applicant’s risk of needing such long-term care, rather than her individual risk. But averaged premiums are only attractive to people with above-average risks. Since few people with below-average risks would enroll, the average premium would rise. That would encourage more people with below-average risks not to enroll, and the vicious cycle would continue until the program collapsed.

As it turns out, CLASS collapsed even before its 2012 start date. The same thing happened when Obamacare imposed the same sort of price controls on health insurance for children in September 2010: the markets for child-only coverage collapsed in a total of 17 states, and are slowly collapsing in even more.

Everyone with a rudimentary understanding of insurance saw this coming. The government’s non-partisan actuaries warned of “a very serious risk” that CLASS would be “unsustainable.” One wrote, “Thirty-six years of actuarial experience lead me to believe that this program would collapse in short order and require significant federal subsidies to continue.”

The Democratic chairman of the Senate Budget Committee called CLASS “a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of.” An Obama administration official wrote, “Seems like a disaster to me.” One of President Obama’s own cabinet secretaries called the program “totally unsustainable” and echoed a presidential commission on fiscal responsibility by recommending it be “reformed or repealed.”

Sen. Tom Harkin (D-IA) has diagnosed the fatal flaw in this most ill-conceived government program. I swear, I am not making this up:

The problem with CLASS is that it’s voluntary.

Harkin isn’t the first person to wistfully lament that CLASS would be such a great program if only we could put non-participants in jail. He’s just the first person I know of who has said so explicitly. Others have said that the collapse of the CLASS Act should inspire confidence in the rest of ObamaCare, which imposes the same type of price controls on health insurance, and then threatens to put people in jail if they don’t buy it. Here’s how I described that strategy back in October:

Obamacare inspires confidence in its supporters, then, because one part of the law throws a Hail Mary pass to prevent another part of the law from stripping Americans of the insurance that currently protects them from illness and impoverishment. Feel safer?

Rather than make the CLASS Act compulsory, Congress should make the rest of ObamaCare voluntary:

[Ezra] Klein writes, “One way of looking at the administration’s [CLASS] decision is that it shows a commitment to fiscal responsibility.” If so, then let’s handle the rest of Obamacare exactly the same way. Congress should require Obamacare’s health insurance provisions to be voluntary and self-sustaining, just like CLASS: no individual mandate, no taxpayer subsidies. Or is fiscal irresponsibility part of the plan?

Harkin and other ObamaCare defenders have a profound lack of respect for other people’s freedom and dignity. The problem with that is that it’s voluntary. If it were a medical condition, it might be excusable.

Photo ID Laws Mean Some Won’t Vote

Because all of us are with ourselves all day every day, we naturally tend to think that our own lives are pretty standard fare. But that’s just not so in a country of 300+ million people ranging over a vast expanse. So I found worthwhile this NPR story on people who don’t have IDs, people who face difficulty with laws requiring IDs to vote. Not everyone trundles down to the DMV and plunks down money and paperwork for an ID whenever they please.

The voter ID issue is a hot one. Some are strongly committed to the idea that identification requirements are needed to suppress voter fraud. There isn’t much evidence of that problem, and to worry about impersonation fraud at polling places, one has to put aside absentee ballot fraud, which is probably much easier, as well as election fraud—rigged vote counts, for example—which is much more efficient.

States should tinker with their voting rules and processes, each seeking for itself the methods that optimally secure elections while facilitating voting. It’s a big country, and different states may require different rules. My emphasis has always been on avoiding a national voter ID system, which would inevitably be a national ID system, paving the way for greater federal control of individuals’ lives.

Contraceptives Mandate Brings ObamaCare’s Coercive Power into Sharper Focus

President Obama is catching some well-earned blowback for his decision to force religious institutions “to pay for health insurance that covers sterilization, contraceptives and abortifacients.” You see, ObamaCare penalizes individuals (employers) who don’t purchase (offer) a certain minimum package of health insurance coverage. The Obama administration is demanding that coverage must include the aforementioned reproductive care services. The exception for religious institutions that object to such coverage is so narrow that, as one wag put it, not even Jesus would qualify. HHS Secretary Kathleen Sebelius reassures us, “I believe this proposal strikes the appropriate balance between respecting religious freedom and increasing access to important preventive services.” Ummm, Madam Secretary…the Constitution only mentions one of those things. The Catholic church is hopping mad. Even the reliably left-wing E.J. Dionne is angry, writing that the President “utterly botched” the issue “not once but twice” and “threw his progressive Catholic allies under the bus.”

As I wrote over and over as Congress debated ObamaCare, anger and division are inevitable consequences of this law. I recently debated the merits of ObamaCare’s individual mandate on the pages of the Wall Street Journal. Here’s a paragraph that got cut from my essay:

We can be certain…that the mandate will divide the nation. An individual mandate guarantees that the government—not you—will decide what medical services you will purchase, including contraceptives, fertility services that result in the destruction of human embryos, or elective abortions. The same apparatus that can force Americans to subsidize elective abortions can also be used to ban private abortion coverage once the other team wins. The rancor will only grow.

Or as I put it in 2009,

Either the government will force taxpayers to fund abortions, or the restrictions necessary to prevent taxpayer funding will reduce access to abortion coverage. There is no middle ground. Somebody has to lose. Welcome to government-run health care.

The same is true for contraception. The rancor will grow until we repeal this law.

ObamaCare highlights a choice that religious organizations – such as the United States Conference of Catholic Bishops, where my grandfather served as counsel – have to make. Either they stop casting their lots with Caesar and join the fight to repeal government health care mandates and subsidies, or they forfeit any right to complain when Caesar turns on them. Matthew 26:52.