Archives: 05/2012

It’s Illegal to Say ‘None of Your Damn Business’

The government’s troops are rallying behind the Census Bureau’s American Community Survey. “After the House voted this month to defund a major part of the U.S. Census Bureau, the agency is taking the threat very seriously,” reports the Washington Times, “with its supporters in both business and government rallying to preserve the annual questionnaire.”

Wait. Who could be against the Census Bureau? Its constitutional charter is to enumerate citizens every ten years for the purpose of apportioning representation in Congress. This is a necessary and unremarkable administrative function.

Oh, wait—again. Government bloat is a law of gravity, and the Census Bureau does far, far more than count noses. Its American Community Survey has made the Census Bureau the research arm for the welfare/redistribution state and a source of corporate welfare in the form of demographic data about Americans.

So Census goes around asking people dozens of questions that have nothing to do with the agency’s constitutional purpose.

The ACS is controversial enough among the strongly principled that Census has a Web page entitled: “Is the American Community Survey legitimate?” Their answer: “Yes. The American Community Survey is legitimate. It is a survey conducted by the U.S. Census Bureau.” (Did you know there’s a whole class on the “appeal to authority” at Fallacy University?…)

The real authority they cite is Title 13 of the U.S. code, which, in section 221, allows the government to fine people who refuse to answer the Census Bureau’s questions. It’s illegal to say “none of your damn business” when a government official comes around asking about your toilet. I’ve written many times, in long form and short, that the helping hand of government strips away privacy before it goes to work.

So it’s nice to see that Rand Paul (R-KY) in the Senate and Ted Poe (R-TX) in the House have introduced a bill to make the American Community Survey voluntary, unless it’s a question that the Census actually needs for its constitutional purposes. Reading public comments on the House bill is particularly interesting. There is a good number of people who want to be left well enough alone. They shouldn’t be subject to penalties for saying so. It’s a matter of principle and privacy.

If You Love Something, Set It Free: A Case for Defunding Public Broadcasting

Available today is my new policy analysis, “If You Love Something, Set it Free: A Case for Defunding Public Broadcasting.” As a long-time fan of public broadcasting, particularly NPR, it has often irked me that public broadcasting spends so much time embroiled in political battles. The recent kerfuffles over Juan Williams’s controversial dismissal from NPR and the sting videos of NPR executives making derogatory remarks about the Tea Party were only the latest episodes in a long line of political squabbles that goes back to the very beginning, 1967, when President Lyndon Johnson signed the Public Broadcasting Act.

From the standpoint of politicians, however, political fights over public broadcasting’s content are not bugs, they’re features. Just as “war is the health of the state,” politicians view a politically controlled, sufficiently chastened public broadcasting system as a healthy one. During the debates over the Public Broadcasting Act, Sen. Norris Cotton (R-N.H.) explained how politicians would approach public broadcasting:

If this bill becomes law, … and if, as time goes on, we have occasion to feel that there is a slanting, a bias, or an injustice, we instantly and immediately can do something about it. First, we can make very uncomfortable, and give a very unhappy experience to, the directors of the corporation. Second, we can shut down some of their activities in the Appropriations Committee and in the appropriating process of Congress … . The Corporation is much more readily accessible … to the Congress, if it is desired to correct any injustice or bias which might appear.

As Senator Cotton’s remarks show, from the very beginning public broadcasting was intended to be politicized. In fact, the Corporation for Public Broadcasting (CPB) was partly created to provide a politically controlled voice in the marketplace of ideas.

Prior to the advent of government funding, noncommercial, education television thrived, with National Educational Television (NET) being the most famous. In the mid-to-late 60s, NET emerged as a strong counter-cultural voice. It challenged America’s role in Vietnam, it produced scathing documentaries about poverty, and it attacked members of Congress with ties to big banking. In order to maintain its independence from political influence, NET often refused federal funding.

With the Corporation for Public Broadcasting, President Johnson created a system that would use politically influenced funding to challenge NET’s iconoclastic programming. Later, President Nixon took keen interest in whether “anti-administration” broadcasts were broadcast either on NET (which took some federal money after the CPB was created), or the fledgling PBS. At one point, Nixon’s anger at unfriendly broadcasters caused him to veto funding to the CPB (Congress overrode the veto).

Forty years later, public broadcasting still works under the same system. There is, however, one marked exception. Both PBS and NPR have excelled at lowering their government dependency by finding non-governmental sources of money, primarily in the form of listener fund drives, foundations, and corporate underwriting. As a percentage of their operating budgets, the size of the federal contribution to public broadcasting is quite small, around 15%. As a percentage of the total federal budget, the ~$440 million for public broadcasting is little more than a rounding error.

So why should we even care about public broadcasting in this era of trillion-dollar deficits? Because the content of public broadcasting has always been and will always be significant to Americans. Public broadcasting carries the government’s imprimatur, and those who feel left out of programming are more than simply upset at not being heard; they have a valid object on principle to not being included in the “national message.” Conservatives most often raise this challenge, but similar complaints also come from the left-wing Fairness and Accuracy In Reporting (FAIR), the pro-Israel Committee for Accuracy in Middle-East Reporting (CAMERA), and others.

Freeing public broadcasting from federal funding would foreclose the ability of these groups and others to object on principle to public broadcasting’s content. Freedom from federal funding would allow public broadcasters to air edgy programming, controversial stories, and more hard-hitting critiques of the current administration’s policies. Finally, freedom from federal funding would not mean that PBS and NPR become corporate controlled. Instead, they would simply become noncommercial, nonprofit entities doing more of what they already do very well: raise money through donations. A five-year defunding period would allow for the needed internal changes, as well as set up the biggest fundraising event in public/noncommercial broadcasting’s history.

In short, if you love something, set it free.

Why Top Incomes Rose: Elasticity Not Corporate Executive Pay

The politically convenient media fascination with incomes of the top 1 percent has degenerated into a new obsession with the top one-tenth of one percent – the top 0.1 percent.  As before, the blame game points to greedy corporate executives.

One affluent member of the Top One Percent club, Paul Krugman, has narrowed his sights to the even more affluent top 0.1 percent in his new book, End This Depression Now!  He claims that, “Recent work by the economists Jon Bakija, Adam Cole and Bradley Heim gives us a good sense of who the top 0.1 percent are.  The short answer is that they’re basically corporate executives or financial wheeler-dealers.”

The phrase “corporate executives” clearly suggests CEOs and other top executives of publicly-traded corporations.  Unfortunately, the paper Krugman refers to (“Jobs and Income Growth of Top Earners and the causes of Changing Income Inequality”) shows that corporate executives account for a small and declining share of the income reported by the top 0.1%.

This table, adapted from that paper, shows that corporate executives in public companies accounted for only 15.5% of the very highest incomes in 2005, down from 21.1% in 1997.  If we include capital gains, corporate executives accounted for 16.8% of top 0.1 percent incomes in 2005, down from 23.9% in 1997.

Bakija, Cole and Heim come up with a bigger number by lumping corporate executives together with all “supervisors” and managers in any sort of nonfinancial business, including proprietorships and partnerships. But that hodge-podge is not what anyone understands as “corporate executives.”    Moreover, the famously huge windfalls of hedge funds managers, Warren Buffet and other “wheeler dealers” (which the study lumps together with accountants, analysts and bankers) likewise has next to nothing to do with corporate executives.

One part of the study, however, is quite relevant. Despite excluding tax-sensitive capital gains and using gross income rather than taxable income, Bakija, Cole and Heim find an elasticity of about 0.72 for the top 0.1 percent “suggesting a high degree of responsiveness to incentives for income-earning efforts (or income reporting) among those with the highest incomes, and a correspondingly large deadweight loss from imposing highly progressive tax rates on these taxpayers.”

Krugman’s book asks “why should [top] incomes have skyrocketed beginning around 1980?”  He doesn’t like my answer (calling me a “hired gun protecting the interest of the wealthy”), but my explanation is not much different from the elasticity estimates in this and many other studies cited in my recent Wall Street Journal article.  My explanation is that top incomes reported on individual tax returns always rise whenever top tax rates on salaries, business income, dividends and capital gains come down.  For example, the pay packages of corporate executives (which are now mainly tied to stocks and paid by stockholders) were tilted away from tax-exempt perks toward taxable stock options after tax rates came down.  But that is an example of high elasticity rather than a separate issue.

‘Useful’ Idiots and the American Community Survey

Since 2005, the Census Bureau has administered a set of probing questions to a large random sample of Americans each year. It’s called the American Community Survey, participation is mandatory, and the penalty for failing to comply is a fine of up to $5,000. The questions are so prying (“Do you have trouble bathing?”, “When do you leave for work in the morning?”) that many people find it hard to believe the government would have the temerity to demand answers to them, and so conclude that it must be a scam operated by unscrupulous con artists. Others simply lack confidence in the federal government’s promise to keep such information confidential (perhaps not surprising when it has shown itself incapable or disinclined to keep its mouth shut about even life-and-death anti-terrorism operations.)

The anti-ACS backlash has garnered the attention of some in Congress. The House has voted 232 to 190 to eliminate the survey altogether and Sen. Rand Paul has introduced legislation in the Senate to make it voluntary. They argue that it is inappropriate for the state to compel citizens to divulge such personal details, and that these questions are in no way required to fulfill the constitutional role of the Census, which is to apportion political representation based on population counts.

These bills have consternated a great many people from New York Times economics reporters and Forbes.com contributors, to associate editors for Bloomberg Businessweek and multitudes in the left-of-center blogosphere. Their counter-argument is fairly simple: this information is useful both to the state and to select private corporations and therefore the state should have the right to compel citizens to divulge it.

That so many people think this is a proper basis for determining the legitimacy of state powers is the most compelling evidence I have yet seen contradicting the Flynn Effect.

It would undeniably be useful for law enforcement officials to have finger prints, photos, and DNA samples for every person in the United States, and to track their movements at all times using GPS devices. And it would surely be useful to the medical community if citizens were randomly and forcibly assigned to participate in drug trials. Nevertheless, even ardent believers in the beneficence of government must be able to see that these would not be desirable practices in a free society.

Americans rightly expect to live their lives with a reasonable level of privacy. The Fourth Amendment to the Constitution protects them from government searches unless there is some compelling reason for them. But the reasons for making the ACS mandatory are not at all compelling. Medical and social science researchers manage to deal with their inability to forcibly assign subjects to treatment and control groups. Political pollsters manage to produce reasonable forecasts without being able to compel citizens to reveal how they will vote. And even when government _is_ in possession of all the necessary and relevant data, it quite frequently makes idiotic decisions anyway—so it isn’t even clear that these ACS data would necessarily lead to more effective government programs.

At the very least the ACS should not be mandatory. It probably shouldn’t exist at all.

Getting Serious about Fixing Washington

Demonstrating once again that it’s nothing if not the voice of the capital’s establishment, the Washington Post this morning opened its Sunday “Outlook” section with yet another major piece by establishment apologists Norman Ornstein (AEI) and Thomas Mann (Brookings), lamenting our “dysfunctional” politics and blaming it mostly on “extremist” Republicans who oppose “almost everything put forward by the Democrats.” Only three weeks ago the Post splashed a companion piece by the two across that Sunday section, “Let’s just say it: The Republicans are the problem.” And in the interim, Post associate editor Robert Kaiser wrote a glowing review of their new book on “the new politics of extremism” while several Post bloggers were pushing their thesis in their own posts. It must be an election year. (For a legal analogue of the Ornstein/Mann political thesis, see my “When All Is Politics, Nothing Is Law,” posted late Friday by the Daily Caller.)

Having set forth their critique three weeks ago, Ornstein and Mann today list five things that “won’t fix Washington” and four things that will. Four of the five that “will never work,” they say, are a third party, term limits, a balanced-budget amendment, and public financing of elections to restrain special interests. Read and judge for yourself whether their arguments are sound. They begin that fourth point, for example, by noting that “in the post-Citizens United world, the financing of political campaigns is a nightmare.” True, but the constitutional principles upheld by Citizens United aside, it seems not to have occurred to them that the welter of restrictions that they and others of their persuasion have promoted over the years go far toward explaining that nightmare.

The four things Ornstein and Mann believe will work begin, no surprise, with “realistic” campaign finance reform, including more disclosure and stricter enforcement of current law. From there they move on to redistricting reforms, restricting the Senate filibuster rules, and expanding the electorate by, among other things, fining or rewarding citizens so more will go to the polls, the idea being that “boosting overall turnout would help tilt the balance back toward where most Americans actually are: closer to the middle.” The upwards of half of all Americans who don’t vote are “closer to the middle”? If you’ve ever seen Jay Leno’s “man-on-the-street” interviews, you may want to question that—and question too whether encouraging such people to vote will solve many problems.

Here too, judge for yourself concerning all of those essentially structural proposals that Ornstein and Mann believe won’t and will work to correct our dysfunctional politics. I’ve saved for last the fifth of the things they say will never work because, in truth, it’s not really a structural proposal, like the others, but rather a perspective—and it leads to substantive issues that establishment people like Ornstein and Mann seem not to want to address. Their suggestive heading for this fifth thing that won’t work is “Stay calm—things will get back to normal eventually.” Those of this view argue that “acrimony and gridlock are built-in features of our political system” that wax and wane, Ornstein and Mann write; thus the 111th Congress “was extremely productive, passing health-care reform, financial regulation and an economic stimulus package.” They counter, however,

that an examination of the Obama presidency suggests that we are experiencing neither politics as usual nor an odd blip. We are witnessing unprecedented and unbalanced polarization of the parties, with Republicans acting like a parliamentary minority party opposing almost everything put forward by the Democrats; the near-disappearance of the regular order in Congress; the misuse of the filibuster as a weapon not of dissent but of obstruction; and the relentless delegitimization of the president and policies enacted into law.

Indeed, they contend that with “the defeat of problem-solvers such as Sen. Richard G. Lugar (R-Ind.) and the emergence of take-no-prisoners partisans such as Richard Mourdock, there is no reason to think the system will correct itself anytime soon.”

The thing to note in all of this is just what Ornstein and Mann count as “normal”—it’s government as “problem solver,” Congress as “extremely productive.” But that’s precisely the vision of government that is under assault today—and has been at least since Barry Goldwater challenged the “get-along, go-along” Republican establishment in 1964. Yet in truth that post-New Deal world that the establishment so longs to return to was the anomaly. We have “gridlock” today because the post-Goldwater challenge has finally reached critical mass. And that’s what the Washington establishment has yet to grant—witness its dismissal of Goldwater, its initial dismissal of Ronald Reagan, and its dismissal today of the Tea Party.

Still, it’s not problem solving as such that these anti-establishment “obstructionists” oppose—indeed, there’s no shortage of problems to be solved. Rather, it’s doing so through the big-government “solutions” that have given us those problems to begin with. Whatever the merits of the structural reforms establishment types like Ornstein and Mann are offering, their critique hardly explains our dysfunctional politics. Now that the opposition has reached critical mass, it’s increasingly clear that we have gridlock because the nation is deeply divided not over structure but over substance—over the very role of government. The establishment’s faith in government—in what are essentially public “solutions” to private problems, the core of progressivism—is under assault as never before, because that faith has come up dry. It’s long past time for the establishment to grasp that, because the reality that so animates the opposition—the ever growing deficits and debt the progressive faith has produced—is fast closing in upon us. And the inability of the Washington establishment to deal with it, except through more of the same government schemes that produced it, is the dysfunction that should most concern us all.

The Wall Street Journal’s Limited-Government Readers

The Wall Street Journal editorial page, usually a strong voice for limited government, was rapped by readers Thursday for positions that didn’t seem to meet that standard.

After the Journal urged President Obama to support the Defense of Marriage Act in order to allow the gay marriage issue “to be resolved democratically by the states,” Michael Weisberg wrote to point out that DOMA “overrides the laws and desires of the states, which have traditionally had jurisdiction in matters of marriage, as one would expect under the federal Constitution.” That’s a point we’ve also made here, and one that seems to confuse many of DOMA’s advocates.

Meanwhile, many readers objected to the Journal’s support for the Census Bureau’s American Community Survey (also a point we’ve made in this space). Adam Marcus and Berin Szoka of TechFreedom noted that Census data aren’t as private as we’re promised:

Our government has abused census data to awful effect, most notably in the internment of Japanese-Americans during World War II, as documented in a Scientific American article in 2007. More recently, the feds violated their express privacy policy by publishing all individual responses to the 1940 Census’s similarly extensive questions—not just aggregated results.

Like Robert L. Umbarger, they also point out that “the Constitution authorizes a census only to apportion congressional representatives,” so the government exceeds its authority when it requires Americans to answer questions on, as the Journal put it, “everything from demographics to income to commuting times.” Lisa Greenman reflects a traditional American suspicion of government:

At worst it is the federal government collecting private, personal data that can be used against its citizens. How ironic this piece was published under the one titled “The President’s Hit List.”

Van Bussmann notes, “Here comes yet another program to solidify government control over our lives. Information begets power.” He unconsciously echoed Sir John Cowperthwaite, the former administrator of the British colony Hong Kong during its rapid rise from poverty, about whom the Journal editorial page wrote in 2006, “One of the better known stories about the undeservedly obscure Cowperthwaite was his refusal to collect economic statistics about Hong Kong during his tenure as Financial Secretary, lest they produce an impulse toward central planning among the bureaucrats.”

It’s good to know that even when the Journal editorial writers are tempted by unwarranted federal programs, their readers are on the case.

Daniel in the Looter’s Den: My Adventures at the UN

I was at the United Nations yesterday for something called “The High Level Thematic Debate on the State of the World Economy.”

Most speakers, including the secretary general of the United Nations, the president of the European Commission, Paul Volcker, and Joseph Stiglitz, to varying degrees blamed private markets for the fiscal and financial problems of the world. Not surprisingly, there also was a consensus for more government—usually wrapped up in buzzwords such as “sustainable development” and “equitable growth” and ”coolective action”

I spoke in the afternoon as part of a roundtable on the economic crisis (see full schedule here). There were five speakers on my panel, including yours truly. Here are my thoughts on what the others said.

Dr. Supachai Panitchpakdi, secretary-general of the United Nations Conference on Trade and Development, must have been part of the buzz-word contest I mentioned yesterday. Lots of rhetoric that theoretically was inoffensive, but I had the feeling that it translated into a call for more government. But maybe I’m paranoid, so who knows.

Professor Dato’ Dr. Zaleha Kamaruddin, rector of the International Islamic University of Malaysia, was an interesting mix. At some points, she sounded like Ron Paul, saying nice things about the gold standard and low tax rates. But she also called for debt forgiveness and other forms of intervention. She explicitly said she was providing Islamic insights, so perhaps the strange mix makes sense from that perspective.

Former U.S. senator Alan K. Simpson also was a mixed bag. Simpson was co-chair of President Obama’s fiscal commission, which I thought was a disappointment because it endorsed higher taxes and urged subpar entitlement changes rather than much-needed structural reforms. He also went after Grover Norquist because of the no-tax pledge, which I think is a valuable tool to keep Republicans from selling out for bigger government. All that being said, Senator Simpson is a promoter of smaller government and he wants lower tax rates. So while I disagree with some of his tactical decisions, he was an ally on the panel and would probably do a pretty good job if he was economic czar.

Last but not least, Professor Jeffrey Sachs of Columbia University was a statist, as one would expect based on what I wrote about him last year. We clashed the most, arguing about everything from tax havens to the size of government. Interestingly, we both said nice things about Sweden, but I was focusing on policies such as school choice and pension reform, while he admired the large public sector. But I will admit he was a nice guy. We sat next to each other and did find a bit of common ground in that we both were sympathetic to the way Sweden dealt with its financial crisis about 20 years ago (a version of the FDIC-resolution approach rather than the corrupt TARP bailout approach).

My message, by the way, was very simple: Higher taxes won’t work. The “growth” vs. “austerity” debate in Europe is really a no-win fight between those who want higher spending vs. those who want higher taxes. The only good answer is to restrain spending with—you guessed it—Mitchell’s Golden Rule.

The good news is that I wasn’t tarred and feathered. Indeed, I even got a modest amount of positive feedback. The bad news is that I doubt I moved the needle.

But at least the United Nations was willing to have contrary voices, unlike the Organization for Economic Cooperation and Development, which once threatened to cancel a Global Tax Forum because of my short-lived participation.