Archives: May, 2012

White House Cronyism Is Disturbing, But Not New

The Obama campaign is trying to hang so-called “vulture” capitalism around Mitt Romney’s neck, but as two excellent opinion pieces explain, it’s the administration’s crony capitalism that’s the really disturbing story.

The first piece, written by the Wall Street Journal’s Kim Strassel, explains the difference:

Like Mr. Romney, Mr. Obama has presided over bankruptcies, layoffs, lost pensions, run-ups in debt. Yet unlike Mr. Romney, Mr. Obama’s C-suite required billions in taxpayer dollars and subsidies, as well as mandates, regulations, union payoffs and moral hazard.

Strassel singles out the Solyndra debacle and the administration’s bailout of the unions General Motors. She notes that the alternative to profit-driven free enterprise, which the president is critical of, “is an Obama capitalism that is driven by political favoritism, government subsidies, mandates, and billions in taxpayer underwriting.”

In the second piece, Washington Post columnist Marc Thiessen says that “if Romney’s record in private equity is fair game, then so is Obama’s record in public equity—and that record is not pretty.” Thiessen lists numerous examples of companies that the administration gambled on with taxpayer money and lost. But what’s really disturbing is the administration’s cronyism:

Amazingly, Obama has declared that all the projects received funding “based solely on their merits.” But as Hoover Institution scholar Peter Schweizer reported in his book, “Throw Them All Out,” fully 71 percent of the Obama Energy Department’s grants and loans went to “individuals who were bundlers, members of Obama’s National Finance Committee, or large donors to the Democratic Party.” Collectively, these Obama cronies raised $457,834 for his campaign, and they were in turn approved for grants or loans of nearly $11.35 billion. Obama said this week it’s not the president’s job “to make a lot of money for investors.” Well, he sure seems to have made a lot of (taxpayer) money for investors in his political machine.

Lest any readers think that I’m shilling for Mitt Romney, I have provided comments to journalists that were critical of Romney’s Bain Capital for seeking government subsidies (for an example, see here). And if Romney has a specific plan to eliminate the Department of Energy’s subsidy programs, I’m not aware of it. That points to a more fundamental problem: so long as the federal government can stick its nose into the marketplace, cronyism is inevitable. Indeed, cronyism has been a persistent problem under both Democratic and Republican presidencies. For example, a Cato essay on scandals at the Department of Housing & Urban Development details the rampant cronyism at HUD during the Reagan administration:

Using congressional testimony, HUD documents, and interviews, the New York Times compiled a lengthy list of those benefiting from their political connections to HUD in the 1980s. Some earned substantial consulting fees for persuading [HUD Secretary Samuel] Pierce and his top aides to approve federal subsidies, while others used their connections to secure HUD subsidies for their own projects…

In 1990, a report adopted unanimously by the House Government Operations Committee concluded, “At best, Secretary Pierce was less than honest and misled the subcommittee about his involvement in abuses and favoritism in HUD funding decisions. At worst, Secretary Pierce knowingly lied and committed perjury during his testimony.” An independent counsel investigation into HUD activities under Pierce’s watch was instituted in 1990 and wrapped up in 1996. Pierce himself was not indicted based on his agreement to admit that “he created an atmosphere at HUD that allowed influence-peddling to go on.” In all, the independent counsel investigation into HUD corruption on Pierce’s watch yielded 17 convictions, including convictions of three former HUD assistant secretaries.

Romney, Kerry Miss the Point on Threats: Size Matters

Senator John Kerry (D-MA) is the latest person to mock Mitt Romney’s declaration that the Russian Federation “is, without question, our number one geopolitical foe.” It was a pretty silly statement, particularly given the fact that Russia is a demographic basket case and a very humble economic power. But there’s all sorts of weirdness going on in Romney’s assertions and those of his critics.

Take, for example, Wolf Blitzer’s follow up to the Romney assertion:

BLITZER:  But you think Russia is a bigger foe right now than, let’s say, Iran or China or North Korea? Is that—is that what you’re suggesting, Governor?

ROMNEY:  Well, I’m saying in terms of a geopolitical opponent, the nation that lines up with the world’s worst actors.  Of course, the greatest threat that the world faces is a nuclear Iran.  A nuclear North Korea is already troubling enough.

But when these—these terrible actors pursue their course in the world and we go to the United Nations looking for ways to stop them, when—when Assad, for instance, is murdering his own people, we go—we go to the United Nations, and who is it that always stands up for the world’s worst actors?

It is always Russia, typically with China alongside.

And—and so in terms of a geopolitical foe, a nation that’s on the Security Council, that has the heft of the Security Council and is, of course, a—a massive nuclear power, Russia is the—the geopolitical foe and—and the—and they’re—the idea that our president is—is planning on doing something with them that he’s not willing to tell the American people before the election is something I find very, very alarming.

In fairness to Governor Romney, it does seem like he realizes he’s made a gaffe here, so he tries to back up and take another run at it. But in doing so, he just makes it worse. Taking a mulligan, he tries to pivot from the Russia allegation by folding in Iran (“the greatest threat the world faces”) and North Korea, and gesturing at Syria.

It’s the same thing Kerry does in his condescending lecture to Romney:

We have much bigger problems on this planet in the Middle East, with the evolution of Egypt, with the challenge of Syria, terrorism, al-Qaeda in Yemen, and so forth.

Both of these guys should be ashamed of themselves. And they ought to be light-headed from the amount of threat inflation they’re doing. We spend too much time debating the relative size of our enemies and too little debating their absolute size. Every country at all times has a #1, #2, and #3 “geopolitical foe.” But the threat environments posed by those foes vary radically.

In a better world, American political elites would discuss the absolute level of threat they face rather than just bickering over our enemies’ batting order. As Ben Friedman and I recently wrote in Orbis:

The dirty little secret of U.S. defense politics is that the United States is safe—probably the most secure great power in modern history. Weak neighbors, vast ocean barriers, nuclear weapons and the wealth to build up forces make almost nonexistent the threats that militaries traditionally existed to thwart. Americans cannot seriously fear territorial conquest, civil war, annexation of peripheral territories, or blockade. What passes for enemies here are small potatoes compared with what worried most states at most times. Most U.S. military interventions affect U.S. security at best marginally. We have hopes and sometimes interests in the places where we send troops, but no matter how much we repeat it to honor the troops, it is untrue that they are fighting to protect our freedom.

Part of the reason our national security politics are pathological is that we focus disproportionately on debating which enemy is the biggest without stopping to ask how big the enemies are.

If your three biggest problems are being infected with Black Death, having a bull rhino charging at you, and being knee-deep in quicksand, you can wonder—for a few seconds, at least—which is your #1 problem. Similarly, if your three biggest problems are that you got into an argument with your spouse about who left a dish in the sink, your shoelaces are untied, and you can’t log in to Facebook, you can puzzle over which of those is bigger. But only a fool would miss the distinctions between the two scenarios.

Cross-posted from the Skeptics at the National Interest.

U.S.-Pakistan Relations: The Afridi Affair and Its Aftermath

Yet again, U.S.-Pakistan relations have hit a new low. Days after a deal to reopen NATO supply routes into Afghanistan fell through, and two back-to-back U.S. drone strikes rocked northwest Pakistan in a 24-hour period, tensions flared again after a tribal court sentenced Dr. Shakil Afridi—a Pakistani citizen who helped the United States track-down Osama bin Laden with a fake vaccination program—to 33 years in prison.

Republicans and Democrats on Capitol Hill were appalled, and Secretary of State Hillary Clinton called the move “unjust and unwarranted.” Apparently, U.S. officials and lawmakers are surprised that the chasm separating Washington and Islamabad is growing wider after years of papering over their differences.

Yesterday, in response to Dr. Afridi’s 33-year sentence under the Frontier Crimes Regulation, the Senate Appropriations Committee voted to cut aid to Pakistan by a symbolic $33 million. That’s not enough—it represents just 58% of the amount the president requested for Pakistan. Washington should go further and phase out assistance entirely.

Today in the New Jersey Star-Ledger, my coauthor Aimen Khan and I argue that ending aid to Pakistan is the right course for both countries:

The U.S. must carefully calibrate a policy with Pakistan that continues diplomatic relations absent large sums of aid. While cutting aid to Pakistan might be temporarily destabilizing, Pakistan’s support for militant Islamists is arguably more harmful to regional stability. Moreover, while emergency-type humanitarian aid can be beneficial to the Pakistani people, economic development aid intended to promote growth has been detrimental, allowing Islamabad to avoid confronting its rampant corruption and budgetary problems with the necessary urgency.

The Pakistani government and people stand united in their belief that Pakistan does not need the U.S. Phasing out U.S. aid to Pakistan benefits both parties and better reflects strategic realities.

As is common with U.S. military and foreign aid to unstable governments, it typically serves to entrench the prerogatives of military and civilian elites. Quite perversely, in return for the tens of billions of dollars that American taxpayers forked over to Islamabad, many in Pakistan have come to blame Washington for their deteriorating situation. Even well-intentioned assistance under the much-lauded Kerry-Lugar aid package was viewed within Pakistan as an infringement on sovereignty, mainly because it came with intrusive strings attached. Furthermore, U.S. aid and arm-twisting have failed to pressure or persuade Pakistan to go after militants we deem to be a threat to our interests, including the Afghan/Quetta Shura/Karachi Taliban, Hekmatyar, and the Haqqanis.

From the 30,000-foot view, from Islamabad to New Delhi, it appears that Washington is slowly making a long-term pivot in South Asia. But as this author argued years ago, reconciling this pivot in the context of Afghanistan has been nothing short of a failure. The United States and Pakistan do not trust one another, NATO slouches toward an exit, and Pakistan has become more radicalized, destabilized, and encircled by India and militants.

But I digress. Please click here to read the full op-ed. Enjoy!

 

Tax Credit Policy Design for School Choice: A Response to John Kirtley

There are few people with whom I am so much in agreement on the goals of education policy as John Kirtley. To the extent that we differ, it’s chiefly about the best ways of achieving those shared goals. With that in mind, here are my thoughts on his recent post on Education RedefinEd.

Regulation of Private Schools under Education Tax Credit Programs

I’ve no reason to think that the customary financial reporting requirements imposed on scholarship-granting organizations (SGOs) are problematic, but the same cannot be said about regulations imposed on the private schools themselves. In response to an earlier post by Adam Schaeffer, John writes that “Adam is absolutely correct that you can only drive so much excellence through top-down accountability.” But Adam actually goes further, arguing that there is no evidence you can drive any excellence through “top-down accountability” (read: “government regulations”) on private schools. The purpose of noting the corruption in state schools (e.g., in Florida and Atlanta) is to show that even the vast array of government regulations imposed on public schools fails to curtail such defects. And, as I found in reviewing the worldwide literature comparing different types of government, pseudo-market, and market education systems, it is the least regulated, most market-like systems that consistently do the best job of serving families across all measured outcomes.

If there were compelling evidence that government regulations on schools could reduce corruption or boost academic achievement, there might be a case for such regulations being added to tax credit programs. But no such evidence exists to the best of my knowledge. In addition to failing to achieve its intended goals, regulation inhibits the educational freedom and diversity that are responsible for the market’s efficiency and responsiveness to families—undermining the whole purpose of a choice program.

The one and only empirically defensible argument in favor of regulations of schools under tax credit programs is political: in some states, it may not be possible to enact tax credit programs without such regulations. In that case, a judgment call has to be made on whether the regulations are so bad as to compromise the program and make it unworthy of passage, because it would fail to produce positive results and give the movement a black eye that would mistakenly be carried over to better, freer programs.

But that argument does not apply to states that have already enacted relatively free school choice programs, by definition: the bills have already passed, so the regs weren’t politically necessary.

Multi-SGO vs. Single SGO Tax Credit Program

 John also argues that a proliferation of SGOs increases the risk of a financial or other SGO scandal in any given year. It’s a plausible argument. If the probability of a scandal breaking out at any one SGO is fixed, and that probability is equal to x, then the probability of a scandal breaking out at any one of a group of SGOs would be = 1 – (1 – x)^N, where N is the number of SGOs. As N goes up, so does the likelihood of at least one scandal occurring.

On the other hand, it seems likely that the probability of a scandal breaking out at an SGO is not fixed, but rather is proportional to the number of people the SGO employs. Hiring more people raises the chance that you eventually hire someone crooked. Tempting as it is to develop a full-blown mathematical model for scandal risk based on the number and size of the SGOs, it seems sufficient to say that the two factors probably cancel each other out to a considerable extent. In other words, it is not obvious that scandal risk would be appreciably different in single SGO vs. multi-SGO environments.

But the absolutely crucial factor that the above discussion omits is that the impact of a scandal also varies with respect to the number of SGOs. If you have 200 SGOs, each of limited size, and one of them has a scandal, it’s no big deal. Donors will just stop giving to that SGO and it will go out of business unless it manages the Herculean task of convincing the public it has mended its ways. Parents that had gotten scholarships from it will then seek scholarships from one of the SGOs that is now receiving the donations that the corrupt one used to get. In fact, this is just what would have happened in the case of the errant donation that John mentions, whether or not any new regulations were imposed.

Indeed, we see this with charities in general. Charitable giving is hugely popular in the United States, but every year some charities are found to be fraudulent or mismanaged. This has had little or no effect on the popularity of charitable giving over time. The system has proven extremely resilient as former donors to the fallen charities have simply shifted their giving to better-run institutions. There has been no move to winnow down America’s charitable landscape either overtly or indirectly (such as by drastically limiting the share of donations that can be used for operational overhead, and thereby driving most institutions out of business).

John likens the probability of a scandal at an SGO in a multi-SGO tax credit program to “giving the enemy a hand grenade.” Extending that simile, the single SGO model is like giving opponents a nuclear time bomb. What happens if there is only one SGO that accepts all the donations in a state and it succumbs to a scandal? Donors have nowhere else to turn. Many will likely stop donating and poor families who were depending on those scholarships will suffer. That, in turn, will not sit well with legislators or the public, who would likely act to re-open the flow of funds to those families.

But how would they go about trying to do that on short notice? One way would be for the state to take over the corrupt SGO and promise to set it aright. As we’ve seen, state control of education does not prevent scandals, so that won’t work—but it would destroy the independence of the program. Another alternative would be for the state to create its own SGO alongside the corrupt one, with much the same effect. Yet another option would be for the state to impose a passel of new regulations on the corrupt SGO, promising that these would solve the problem—which, as we’ve seen, they’d be highly unlikely to do. And finally, the state could simply shut the program down entirely, forcing all those families back into the state school monopoly, which they had deliberately chosen to flee. Every one of those outcomes is far worse than the outcome in a state with many SGOs. Indeed, even without a scandal, a single-SGO system represents a vastly easier and more tempting target for a state takeover than a distributed, multi-SGO system.

I am both very happy and very relieved to grant that John’s organization, Step Up for Students, is impeccably run and is not likely to suffer a scandal in the foreseeable future. But, as Adam asks, what happens if/when John and the organization’s current top executives are gone? And similarly, what happens in states that don’t have a John Kirtley to create and brilliantly staff and oversee their one and only SGO? I’ve been around long enough to know that John Kirtleys do not grow on trees. The school choice movement is astonishingly lucky to have him as one of its leading lights. And because of the rarity of his invaluable qualities, it is unwise to design a policy that relies on similarly exceptional individuals to lead every SGO in every state in perpetuity.

Some SGOs will inevitably be overseen by less experienced, capable and honorable people (just as some public school districts are today) and so our education policies must systematically minimize the damage that mismanagement and corruption can do. Giving donors real choice among a panoply of different SGOs is the only mechanism yet suggested to accomplish this task, and one that has proven its value for generations in the broader charitable sector.

Preserving Parental Choice

There is another important reason to prefer the multi-SGO model, a goal that John and I deeply share: preserving real parental choice. A central conclusion of my journey through education history from classical Greece to modern America, England, Canada and Japan was that parents generally make better choices for their own children than even “expert” third parties make on their behalf. That is true whether the third parties are government bureaucracies or private institutions. And in my reading of that history I failed to find a single education system in which third parties who were paying for children’s education indefinitely restrained themselves from shaping what or how those children were taught. Ultimately, the money came with strings attached. (The G.I. Bill, sometimes presented as a counterfactual to this observation, is actually not relevant, since the pattern I’m describing is for elementary and secondary education. It is when children are young and their minds most malleable that the temptation is greatest to shape them in whatever image the third party wishes.)

We’d be wise to expect that pattern to continue. But if all third party payment ultimately comes with strings, how do you preserve the maximum level of parental choice? You prevent any single individual or organization from gaining a monopoly in third party education subsidies. By ensuring that a multiplicity of funding sources exists, you make it possible for parents to seek assistance from whichever organization most closely comports with their needs and preferences.

The freedom of donors to give to different SGOs that match their different educational ideals thus offers unique protection to families against being forced to accept strings they object to.

The alternative John suggests, legislatively forbidding SGOs from attaching any conditions to their scholarships, is unlikely to achieve its intended aim in the long run. Certainly there is no precedent for it, and it is easy to think of cases that would undermine it. What happens when schools begin to open that refuse to serve gay students? Or that exclusively serve them? What about Wiccan schools? What about “Marx’s Manifesto Middle School”? What about “Hayek High”? For each one of these schools, there is a distinct and sizable constituency that would deeply object to funding it. So what happens if all SGOs have to fund all of them? Do angry, coerced donor/taxpayers roll over and go gently into that good night of compulsion? No. They demand that their representatives impose restrictions on the eligibility criteria for private schools. But since we live in a pluralistic society, that ultimately will result in a gradual accretion of homogenizing restrictions on the kinds of education schools can offer, winnowing down the range of choices available to families—precisely the opposite of the intended goal.

Nor is this merely a hypothetical. I suspected this phenomenon would exist based on my research for Market Education: The Unknown History, but recently tested it statistically by comparing the level of regulation imposed on private schools under voucher versus education tax credit programs. Under vouchers, every taxpayer is compelled to pay for every government-approved private school. Under tax credit programs (with the partial exception of Florida’s) donors have very broad latitude in choosing the kind of SGO they will support, and SGOs have similar latitude. So, based on my theory, we would expect vouchers programs to result in more heavily regulated private schools than tax credit programs because of the compulsion that vouchers perpetuate but tax credits avoid. After crunching the numbers using two different statistical methods and allowing for thousands of different randomized ways of measuring regulatory burden, I found that vouchers do impose a large and statistically significant extra burden of regulation on private schools that tax credits do not. This evidence is not dispositive, but it is consistent with the analysis outlined above, and it’s the only evidence we have. I suggest that we ignore it not so much at our own peril as at the peril of the children we seek to serve.

One Model to Rule Them All?

In any discussion of the “best” policy, I think it’s wise to consider the possibility that any one of us (or even all of us) could be wrong. Education policy is hard. We can of course do our best to collect the widest possible body of relevant evidence, and to test our recommendations empirically whenever possible. We can and should have more discussions like this one, which are hugely valuable. But after all that, we could still be missing something.

Given that reality, there is one other step we can consider to maximize our chances of getting education policy right: we can let different models coexist side by side for a few decades and watch how well they perform, rather than trying to homogenize them up front. If one program doesn’t work quite as well as another, we will see that and be able to learn from it. But if we insist on conformity in the short term, we may never learn those important lessons. And if we settle on a fundamentally flawed model, the results could fall very far short of our hopes and expectations.

Of course, in any state that is just adopting a school choice program for the first time, there has to be a decision as to which program is best. But in states where programs have already been implemented, it seems far wiser to allow them to mature independently rather than to try to “fix” them or even supplant them with new and different programs simply because we believe that they may suffer shortcomings in the future.

Almost anything is better than the status quo monopoly, and yet we’ve had this awful monopoly for a century and a half. It’s hard to correct mistakes once a policy monoculture has established itself and crowded out the alternatives.

Mirror, Mirror, on the Wall, Which President Is the Biggest Spender of All?

A financial columnist named Rex Nutting recently triggered a firestorm of controversy by claiming that Barack Obama is not a big spender.

Here’s the chart he prepared, which certainly seems to indicate that Obama is a fiscal conservative. Not only that, it shows that Republicans generally are the big spenders, while Democrats are frugal with other people’s money.

In some ways, these numbers don’t surprise me. I’ve explained before that Bush bears a lot of blame for the big expansion in the burden of government this century, and I’ve specifically pointed out that he deserves the blame for most of the higher spending from the 2009 fiscal year (which began October 1, 2008).

That being said, Nutting’s numbers seemed a bit nutty. Sorry, couldn’t resist. Nutting’s numbers actually seem accurate, including the fact that he decided that Obama should be responsible for $140 billion of the spending in Bush’s last fiscal year (a number he may have taken from one of my posts).

But sometimes accurate can be misleading, so I decided to dig into the data.

I went to the Historical Tables of the Budget from the Office of Management and Budget, and I calculated all the numbers for every President since LBJ (with the exception of Gerald Ford, whose 2-year reign didn’t seem worth including).

But I corrected a big mistake in Nutting’s analysis. I adjusted the numbers for inflation, using OMB’s GDP deflator.

As you can see, this changes the results. My chart isn’t as pretty, but based on the inflation-adjusted average annual growth of outlays, it shows that Clinton was the most frugal president, followed by the first President Bush and Obama.

With his guns-n-butter Keynesianism, it’s no big surprise that LBJ ranks last. And “W” also gets a very low grade.

But then I figured we should take interest payments out of the budget and focus on inflation-adjusted “primary spending.” After all, Presidents shouldn’t be held responsible for the national debt that existed before they took office.

Looking at these numbers, it turns out that Obama does win the prize for being the most fiscally conservative president in recent memory. Reagan jumps to second place. Clinton is in third place, which won’t surprise people who watched this video, while W and LBJ again are in last place.

But I don’t want my Republican friends to get too angry with me, so let’s expand our analysis. Just as we don’t want to blame Presidents for net interest payments on debt that was accrued before their tenure, perhaps we should make sure they don’t get credit or blame for defense outlays that often are dictated by external events.

There’s obviously room for disagreement, but most people will agree that the Cold War and 9/11 meant higher defense spending, regardless of which party controlled the White House. Similarly, the collapse of the Soviet Empire inevitably meant lower military expenditures, regardless of whether Republicans or Democrats were in charge.

So let’s now look at primary spending after subtracting defense outlays (still adjusting for inflation, of course). All of a sudden, Reagan jumps to the top of the list by a comfortable margin. LBJ and W continue to score poorly, but Nixon takes over last place.

But it’s also worth noting that Obama still scores relatively well, beating Clinton for second place. Inflation-adjusted domestic spending (which is mostly what we’re measuring) has grown by 2.0 percent annually during his three years in office.

So does that mean Obama deserves re-election? Well, before you answer, I want to make one final calculation. Just as there are good reasons to exclude interest payments because they’re not something a president can control, we also should take a look at what spending would be if we don’t count the cost of bailouts.

To be sure, these types of expenditures can be controlled, but if we go with the assumption that the federal government was going to re-capitalize the banking system (whether using the good FDIC-resolution approach or the corrupt TARP approach), then it seems that Presidents shouldn’t get arbitrary blame or credit simply because some financial institutions failed during their tenure.

So let’s take the preceding set of numbers and subtract out the long-run numbers for deposit insurance, as well as the TARP outlays since 2009. And keep in mind that repayments of TARP monies (as well as deposit insurance premiums) show up in the budget as “negative spending.”

As you can see, this produces a remarkable result. All of a sudden, Obama drops from second to second-to-last.

This is because there was a lot of TARP spending in Bush’s last fiscal year (FY2009), which created an artificially high benchmark. And then repayments by banks during Obama’s fiscal years counted as negative spending.

When you subtract out the big TARP spending surge, as well as the repayments, then Bush 43 doesn’t look quite as bad (though still worse than Carter and Clinton), while Obama takes a big fall.

In other words, Obama’s track record does show that he favors an expanding social welfare state. Outlays on those programs have jumped by 7.0 percent annually. And that’s after adjusting for inflation! Not as bad as Nixon, but that’s not saying much since he was one of America’s most statist presidents.

Allow me to conclude with some caveats. None of the tables perfectly captures what any president’s fiscal record. Even my first table may be wrong if you want to blame or credit presidents for the inflation that occurs on their watch. And there certainly are strong arguments that bailout spending and defense spending are affected by presidential policies rather than external events.

And keep in mind that presidents don’t have full power over fiscal policy. The folks on Capitol Hill are the ones who actually enact the bills and appropriate the money.

Moreover, the federal government is akin to a big rusty cargo ship that is traveling in a certain direction, and presidents are like tugboats trying to nudge the boat one way or the other.

But enough equivocating. The four different tables at least show more clearly which presidents presided over faster-growing government or slower-growing government. More importantly, the various tables provide a good idea of where most of the new spending was taking place.

We can presumably say Reagan and Clinton were comparatively frugal, and we can also say that Nixon, LBJ, and Bush 43 were relatively profligate. As for Obama, I think his tugboat is pushing in the wrong direction, but it’s only apparent when you strip out the distorting budgetary impact of TARP.

Mass Surveillance: No Need for Debate?

It’s been almost four years since the FISA Amendments Act of 2008 put President Bush’s warrantless wiretap program on legal footing by authorizing broad, programmatic surveillance of Americans’ international communications. The only thing the public really knows about it so far is that it was almost immediately misused, resulting in “significant and systemic” overcollection of Americans’ purely domestic communications. Subsequent reporting revealed that the improperly “overcollected” communications could number in the millions, and included former president Clinton’s private e-mails. So naturally, the Senate is charging ahead toward the renewal of these sweeping powers without hearings or debate.

It’s not just the public that’s in the dark about the use of the FAA mind you. Sen. Ron Wyden has been clamoring for more information—and, to the extent possible, public deliberation—for months now. Yet the Director of National Intelligence has told Wyden that “it is not possible to identify the number of people located in the United States whose communications may have been reviewed under the authority of the FAA,” though he did refer to classified reports indicating the “number of collection targets that were later determined to be located in the United States.” Meanwhile, work continues on a multibillion dollar NSA decryption and data storage facility capable of storing all that information indefinitely. The only real check on this is activity is congressional oversight, which as intelligence scholar Amy Zegart demonstrates in her important recent book Eyes on Spies: Congress and the United States Intelligence Community, is largely chimerical.

Meanwhile, there are serious questions about whether the FAA is even constitutional. But the government doesn’t want any court to even consider those questions: It has petitioned the Supreme Court to shoot down a challenge to the law before it even begins, in a case to be heard in the coming term.

This is a truly incredible state of affairs. We have a vast apparatus for intercepting—and retaining indefinitely—American communications on a mass scale. We are being asked to take it as an article of faith that this is absolutely necessary to the security of the United States, even though similar claims about the original warrantless wiretap program could not be substantiated by later internal audits. The government doesn’t want to have to even defend the constitutionality of this program in front of a judge. And Congress doesn’t seem interested in so much as discussing the question, or making the public privy to so much as the raw numbers involved, before giving the NSA four more years of carte blanche. But hey, look over there, someone tangentially related to a presidential campaign said something dumb on cable television! Clearly there’s no time to discuss trivia like this “vast government database of intercepted communications.”

Protectionism in a Can of Tuna

In an op-ed posted yesterday on Forbes, I praised a decision by the World Trade Organization’s Appellate Body for recognizing the true nature of federal regulations that define what kind of tuna can be called dolphin-safe.  In one part of the ocean where the Mexican fishing fleet operates the rules are very strict, but everywhere else, including the parts of the ocean where the U.S. fishing fleet operates, tuna can be called dolphin safe without regard to whether dolphins were actually killed in the fishing process.

Rather than providing consumers with accurate information, as the government and other advocates contend, the consequence of the dolphin-safe labeling requirement is to provide discriminatory protection for the U.S. tuna industry by misleading those consumers.

The case highlights the reality that government is not a reliable guardian of consumer welfare, and that you invariably get more (or in this case less) than you bargained for when you put your faith in government mandated standards.  As I wrote in the op-ed:

Without this law, consumers would be free to demand tuna caught without setting on dolphins, or they might prefer to buy only tuna whose capture was certified as dolphin safe by an independent observer.  Under the current regime, tuna producers are completely prohibited from providing that information on product labels.  A policy designed to protect dolphins by harnessing the power of consumers depends on having informed consumers with access to all relevant information.  Consumers who want to protect dolphins from tuna fishers are not served by a law that actually protects U.S. tuna fishers from Mexican competition.

Abiding by international rules that promote free trade across borders is easily accomplished by adhering to the principles of free enterprise here at home.