Archives: February, 2012

More Pyrrhic Victories in Mexico’s Drug War

The New York Times reports today that Mexican authorities have arrested a major operative of the Sinaloa Cartel, adding to a string of significant blows against Mexico’s most important drug organization. The Felipe Calderón administration now boasts that since 2009, it has arrested or killed 22 of the 39 most important drug kingpins.

Is this significant? Not according to official documents of the U.S. government. The Office of Intelligence and Operations Coordination of the Custom and Border Protection agency looked at drug seizure data from January 2009 to January 2010 and matched it with the arrest or death of drug operatives (11 capos in total). It found that “there is no perceptible pattern that correlates either a decrease or increase in drug seizures due to the removal of key DTO [drug trafficking organization] personnel.”

And, as the latest National Drug Threat Assessment report by the Justice Department puts it, “The overall availability of illicit drugs in the United States is increasing. Heroin, marijuana, MDMA [ecstasy], and methamphetamine are readily available, and their availability appears to be increasing in some markets.” [p. 24]

The truth is that for every drug kingpin arrested or killed, there are many others waiting to take his job. As long as there is demand for drugs in the United States, there will be a supply. The question is whether that business should be in the hands of legal entrepreneurs—as in the alcohol and tobacco industries—or in the hands of violent criminals.

Broken Windows and the Unseen Crime Victims

Jack Goodwin was at home listening to a Lakers basketball game when he heard someone breaking one of his windows. He retrieved his handgun and then saw two intruders trying to gain entry at which point he fired, hitting one criminal. The other intruder ran away.

John Stossel and others have made the point that broken windows do not stimulate economic growth. Appearances can mislead—so we need to be mindful about where the money spent fixing the window would have been used if the windows had not been broken. Jack Goodwin’s broken windows provide us with a similar lesson: we need to consider what would have happened if this elderly man had no gun in his home because of a  government policy overriding his option/choice.

The new Cato study, Tough Targets, describes scores of such instances where citizens were able to stop attempted murders, rapes, and robberies.  And we are now tracking such cases on our new interactive map.  Co-author Clayton Cramer recently had this piece in the Washington Times.  More here and here.

Kaiser Family Foundation: If ObamaCare Increases the Cost of Your Coverage, That’s a ‘Benefit’

Jonathan Gruber, one of ObamaCare’s biggest defenders, estimates that even after accounting for the law’s tax credits and subsidies, nearly 60 percent of consumers in Wisconsin’s individual market (for example) will pay an average of 31 percent more for health insurance. Some will pay more than twice as much as they did pre-ObamaCare.

Inexplicably, the Kaiser Family Foundation, another defender of the law, counts everyone in the individual market—including those who would pay more—in its estimate of “the number of people who would benefit from the financial subsidies.”

Obama’s Proposed Cuts and the Scope of Government

The president’s fiscal 2013 budget includes a 213 page document that contains 210 proposed cuts, consolidations, and other savings. That sounds like a lot until one finds out that the alleged savings would only amount to $24 billion in a $3.8 trillion budget. Not only would the cuts do little to reduce the size of government, they would do nothing to reign in the scope of government.

The following are a few examples of what I’m talking about:

  • The administration proposes to eliminate the Environmental Protection Agency’s Clean Automotive Technology program for savings of $16 million. However, the proposed cut doesn’t reflect a sudden desire to end federal “green” subsidies to car manufacturers. Instead, the administration says “other Federal programs are better positioned to research, develop, demonstrate, and deploy a broad suite of advanced vehicle technologies.”
  • The administration proposes to cut funding for the Department of Health and Human Service’s Community Services Block Grant program from $679 million to $350 million. The administration cites reports from the HHS inspector general and the Government Accountability Office that “have documented failures in program oversight and accountability.” However, instead of proposing to completely terminate it, the administration says it’s going to fix the program and basically apologizes for having to cut it to meet discretionary spending caps.
  • The administration proposes to cut funding by $226 million for fossil fuel subsidies administered by the Department of Energy. These subsidies should be eliminated. But they should be eliminated along with all energy subsidies because the federal government should stop trying to pick winners and losers in the energy market. Unfortunately, it appears that the administration is really only interested in scoring political points with the “green” crowd.
  • The administration proposes to save a whopping $3 million by terminating the U.S. Department of Agriculture’s public broadcasting grant program. The administration correctly points out that the program is duplicative of the Corporation for Public Broadcasting. However, the CPB would get another $1 million in funding for an overall budget of $445 million. In other words, the proposed cut would have practically no effect on the federal government’s subsidization of PBS and NPR.

I could go on and on with examples but there’s no point. A glass-half-full type might say, “Well, at least the administration is proposing to cut something.” Unfortunately, the glass is nowhere close to being half full – it’s empty. The administration’s relatively paltry savings would still leave the budget with a projected deficit of $901 billion for fiscal 2013. And the deficit would only be smaller than last year because the government is projected to take in more revenue – not because the government would spend less. Worse, the federal government under this budget would continue to be an intrusive, metastasizing cancer on individual liberty and the economy.

Reporters Should Think Big on Budget Reforms

The Washington Post did a great job last week comparing spending earmarks by members of Congress with the locations of property they own in their states. Some members are apparently using our tax dollars to expand infrastructure near their homes and businesses, thus gaining a personal benefit from federal spending.

Washington Post reporters usually do great research on the spending behaviors of politicians, but they often don’t ask the big-picture questions. The Post has uncovered waste and corruption in earmarking, housing programs, and other federal activities, but the paper usually only suggests superficial reforms such as better ethics rules.

When you read the Post story on earmarks, the obvious problem with all the projects identified is that they are properly state, local, and private activities. The story summarized questionable earmarks for 30 members of Congress, and the spending activities included repaving roads, expanding highways, building parking lots, replenishing beaches, dredging harbors, improving traffic signals, and building light rail projects.

States, cities, and private businesses can and should finance these sorts of activities by themselves. There is no economic or technical reason why the federal government needs to be involved. Indeed, there are many disadvantages of federal involvement—including the pork barrel politics that the Post does a great job researching.

Today in the Post, I see the same problem with Walter Pincus’s interesting article on port dredging, which is carried out by the Corps of Engineers. Members of Congress have been battling to secure Corps’ projects in their districts for 150 years, and it’s always been a wasteful process. (Watch for my forthcoming essay on DG).

Pincus hints that port dredging is a subsidy to the “multibillion-dollar import-export business,” and he is right. But he doesn’t then proceed to address the obvious big-picture question: Can businesses support these activities by themselves without subsidies?

The answer is yes. Seaports and seaport dredging can be privatized. Hong Kong has the world’s best seaport according to the World Economic Forum (p. 391), and it is privately financed and operated. By contrast, U.S. seaports—which are generally government-owned—ranked just 23rd in the world, according to the WEF.

So let me suggest that when reporters are investigating problems with federal programs they ask a few big-picture questions. Is the program really needed? Can state governments or the private sector do it? What can we learn from reforms in other countries? After all, the federal government is running ongoing trillion-dollar deficits. To solve its giant fiscal problems, it will need much more than ethics and earmark reforms.

For background, see essays on privatization, fiscal federalism, and transportation.

The End of the Ex-Im Bank?

I’ve been getting a few inquiries lately from folks interested in hearing more about my ideas on closing down the Export-Import Bank of the United States. This is encouraging: Ex-Im typically sails through Congress unchallenged. It is quote-unquote self funding, so is not target number one when it comes to deficit reduction. And it has some powerful backers, including the Chamber of Commerce and Boeing. But in the aftermath of Fannie, Freddie, and Solyndra, people are – finally – beginning to ask questions about just how safe Ex-Im’s activities are for taxpayers, and what the dangers might be of increasing the amount of loans made to risky companies, as the Obama administration is pushing [$]. That move seems to fly in the face of Ex-Im’s admittedly dubious mission of financing only safe transactions (while, and this makes it especially incredible, supposedly only financing transactions the private sector won’t touch). Similarly, while the administration argues that we need to increase funding for Ex-Im to match increased export credit activity by countries such as China, I would argue that allowing Beijing to set the terms and pace of export credit policy in the United States is foolhardy at best.

U.S. airliners have launched a legal case against Ex-Im, arguing that its subsidized loan guarantees to foreign state-owned airliners such as Air India put American carriers at a disadvantage (a possibility I warned about in my paper). This provides a real-world, commercially significant example of the long-standing and self-evident charge that Ex-Im picks winners and losers in the American economy with, unsurprisingly to anyone with even a cursory familiarity with public choice theory, the most politically connected getting the support.

The bottom line is this: either politicians are serious about reducing the size and scope of the federal government or they are not. If they are, shutting down the Ex-Im Bank should be a no-brainer, especially in a political age when ”Don’t worry everybody – these loan guarantees are completely safe and pay for themselves” no longer convinces. And corporate welfare is distinctly on the nose.

Sebelius Admits ObamaCare Exchanges Aren’t Happening, Then Disqualifies Herself from Office

Politico Pro has published a short but remarkable article [$] stemming from an interview with HHS secretary Kathleen Sebelius. It offers a couple of illuminating items, and one very glaring one.

First, Sebelius undermines the White House’s claim that “28 States and the District of Columbia are on their way toward establishing their own Affordable Insurance Exchange” when she says:

We don’t know if we’re going to be running an exchange for 15 states, or 30 states…

So it turns out that maybe as few as 20 states are on their way toward establishing this “essential component of the law.” Or maybe fewer.

Second, the article reports the Obama administration has reversed itself on whether it has enough money to create federal Exchanges in states that decline to create them. The administration has repeatedly claimed that the $1 billion ObamaCare appropriates would cover the federal government’s costs of implementing the law. And yet the president’s new budget proposal requests “another $1 billion” to cover what Sebelius calls “the one-time cost to build the infrastructure, the enrollment piece of [the federal exchange], the IT system that’s needed.”

In other words, as I blogged yesterday, the Obama administration does not have the money it needs to create federal Exchanges. Therefore, if states don’t create them, ObamaCare grinds to a halt. (Oh, and this billion dollars is the last billion the administration will request. Honest.)

Most important, however, is this:

Even if Congress does not grant the president’s request for more health reform funding, Sebelius said her department will find a solution. “We are going to get it done, yes,” she said.

An HHS staffer prevented the reporter from asking Sebelius what she had in mind.

This is a remarkable statement. Sebelius basically just copped to a double-subversion of the Constitution: Congress appropriates money for X, but not Y. Sebelius says, “I know better than Congress. I’m going to take money away from X to fund Y.” Sebelius has already shown contempt for the First Amendment, first by threatening insurance carriers with bankruptcy for engaging in non-fraudulent speech, and again by crafting a contraceptives mandate that violates religious freedom. Now, she has decided the whole separation of powers thing is for little people. What will Sebelius do the next time something gets in the way of her implementing ObamaCare?

I don’t see why a federal official should remain in office after showing so much contempt for the Constitution she swore to uphold.