Archives: October, 2012

European Politicians Share Obama’s View of a ‘Balanced Approach’

President Obama supports higher taxes, but he usually claims he only wants higher tax rates on rich people. Heck, he promised back in 2008 that “no family making less than $250,000 a year will see any form of tax increase.  Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

I guess we’re supposed to forget the higher tax burdens that were imposed on the middle class by Obamacare in 2010 and the SCHIP legislation in 2009.

Obama’s other rhetorical trick is to claim he wants a “balanced approach.” Translated from Washington-speak to English, that means he wants more of our money. But it’s a soothing way to demand more money. After all, who’s against “balance”?

I actually agree with the president—but only if one uses honest math. Needless to say, he wants to use Washington math, where spending increases get redefined as spending cuts if the burden of government spending doesn’t rise as fast as was projected in some artificial baseline.

This is why the budget deals put together by politicians almost always are awful. In order to protect the goodies they hand out to various special interests, the politicians use fake numbers to pretend they’re restraining spending, but when the dust settles, it turns out that the only real result is that taxpayers are forking over more of their hard-earned cash to Washington.

Actually, that statement is incomplete. We need to remember that taxpayers in other nations also get cheated by their politicians. Below the jump is a stunning chart that was shown at yesterday’s Cato Institute conference on “Europe’s Crisis and the Welfare State.” Put together by Veronique de Rugy of the Mercatus Center, it shows that politicians across the Atlantic have imposed €9 of higher taxes for every €1 of spending cuts.

And keep in mind, as Veronique noted in her comments, that many of these so-called spending cuts were merely reductions in planned increases!

This matters because I’m getting increasingly worried that gullible Republicans will get seduced into some sort of budget summit designed to trick them into supporting the Simpson-Bowles tax-hike package.

As I’ve previously explained, this would be a terrible idea. It means a big tax hike, including an increase in the double taxation of income that is saved and invested. It also relies on gimmicks rather than real entitlement reform.

I don’t like higher taxes, but I wouldn’t be completely upset if a tradeoff resulted in some permanent reforms to control the growth of government. But that’s definitely not the case with Simpson-Bowles. And, as Veronique showed, it’s not the case in Europe either.

P.S. It’s rather ironic that the New York Times inadvertently revealed that the only budget deal that worked was the one in 1997 that cut taxes rather than raised taxes.

Romney Sidesteps Questions on Locking Up Citizens

That’s the  story in today’s Washington Times.

Here’s an excerpt:

Mitt Romney sidestepped questions Wednesday about whether he would have signed the National Defense Authorization Act (NDAA) that authorizes the indefinite detention of terror suspects, including American citizens, saying he didn’t have enough information on the law.

Responding to a question at a town hall style meeting at a large manufacturer here, the Republican presidential nominee said he will take a look “at that particular piece of legislation” and said that when it comes to the issue of indefinite detention he would try to strike a balance between protecting personal liberties and protecting the nation from terrorist attacks.

“Detain”  and “detention”  are  euphemisms for “jail” and “imprison.”  Don’t fall for that.

More here and here.

Gay Marriage in the Swing States

Many Republicans believed after the 2004 election that 11 ballot measures to ban gay marriage brought conservative voters to the polls and helped to increase President Bush’s vote over 2000. There’s good reason to doubt the 2004 story, notably the fact that the increase in Bush’s share of the vote rose just slightly less in the marriage-ban states than in the other states.

But now there’s new evidence that this isn’t going to be a winning issue for Republicans. The Washington Post reports:

In February, a poll by the [Des Moines Register] newspaper found that 56 percent of Iowans were opposed to legislative efforts to pass a constitutional amendment to ban same-sex marriage. That is consistent with other swing states: Voters back gay marriage by 21 points in Florida, 15 points in Ohio and nine in Virginia, new Washington Post polls found.

Read that again: “Voters back gay marriage by 21 points in Florida, 15 points in Ohio and nine in Virginia.”

The poll also found that nationally 63 percent of the tiny number of genuine swing voters support gay marriage.

No wonder Romney isn’t talking about it.

Another Post article gave more details on the swing-state polls:

In Florida, 54 percent of voters think same-sex marriage should be legal, while 33 percent say it should be illegal. In Ohio, 52 percent say it should be legal, while 37 percent say it should be illegal….In Virginia, the nine-point gap between those who support and oppose same-sex marriage — 49 percent in favor and 40 percent opposed — represents a significant gain in support compared with a Post poll in May, when 46 thought it should be legal and 43 percent said it should be illegal.

And then there’s this, which is perhaps more important for the future than for next month’s election:

Age is an important factor: About two-thirds or more of those younger than 40 support legalizing gay marriage in each state. Among voters ages 40 to 49, the figure in Florida is 58 percent, but that dips to under half in Ohio and Virginia. Those ages 50 to 64 appear more divided, with a majority of seniors in Ohio and Virginia opposed to gay marriage.

Whatever happens in this year’s elections, in the long run Republicans are on the wrong side of this issue. And some Republicans are noticing.

Why Sebelius Campaigns So Hard for Her Boss — and Why He Won’t Fire Her

Secretary of Health and Human Services Kathleen Sebelius has been campaigning so enthusiastically for President Obama that she – whoops! – broke a federal law that restricts political activities by executive-branch officials. Federal employees are usually fired for such transgressions, but no one expects that to happen to Sebelius. Heck, she got right back in the saddle.

Every cabinet official (probably) wants to see the president reelected, and no president relishes dismissing a cabinet official. But in this case, there’s an additional incentive for Sebelius to campaign for her boss and for Obama not to fire her.

ObamaCare creates a new Independent Payment Advisory Board that – “fact checkers” notwithstandingis actually a super-legislature with the power to ration care to everyone, increase taxes, impose conditions on federal grants to states, and wield other legislative powers. According to legend, IPAB will consist of 15 unelected “experts” who are appointed by the president and confirmed by the Senate. Yeah, good one.

In fact, if the president makes no appointments, or the Senate rejects the president’s appointees, then all of IPAB’s considerable powers fall to one person: the Secretary of Health and Human Services. The HHS secretary would effectively become an economic dictator, with more power over the health care sector than any chamber of Congress.

If Obama wins in November, he would have zero incentive to appoint any IPAB members. The confirmation hearings would be a bloodbath, not unlike Don Berwick’s confirmation battle multiplied by 15. Sebelius, on the other hand, would not need to be re-confirmed. She could assume all of IPAB’s powers without the Senate examining her fitness to wield those powers. If Obama fired her, or the voters fire Obama, then the next HHS secretary would have to secure Senate confirmation. Again, bloodbath. That makes Kathleen Sebelius the only person in the universe who could assume those powers without that scrutiny.

No wonder she’s campaigning so hard. No wonder Obama won’t fire her.

Speed of Politics, Speed of Tech

The Brookings Institution held a forum this morning on “Fostering Internet Competition“—at which, oddly, many panelists seemed resigned to the idea that one layer or another of the Internet would not be competitive: The question, as they saw it, was how to regulate the monopoly player at one layer to foster competition at the next layer up.

For Loyola University law professor Spencer Waller, it is online social platforms like Facebook and Twitter and Google that raise the specter of monopoly, and the question is how to regulate them so as to ensure competition and innovation in services built atop these platforms.  Harvard’s Susan Crawford thought the application layer could probably take care of itself, provided the monopolistic physical infrastructure—the means of providing broadband connectivity to end users—was properly regulated. Only one panelist, media theorist Doug Rushkoff, seemed interested in the possibility of fostering competition all the way down—he was, rather astonishingly, the first to utter the phrase “mesh networking” at the very end of the question and answer period. The others—as revealed by frequent analogies to electric grids and interstate highways—seemed stuck in a model that failed to take seriously what is probably the most important fact about Internet policy: Technology moves faster than politics.

The beguilingly broad word “infrastructure” may be partly at fault here. Roads, sewers, railway lines, electric grids, broadcast spectrum, broadband pipes, the TCP/IP protocol, and Facebook are all “infrastructure” in some sense. They’re also wildly different in many ways—and loose analogies that conflate them are lethal to sound policy thinking. Whether a particular infrastructure provider constitutes a “monopoly” or even a “natural monopoly,” after all, is powerfully determined by technological context. Telephone service is only a “natural monopoly” until someone invents cell phones—and as an important and prescient Cato anthology The Half-Life of Policy Rationales pointed out, technological progress often alters that context so radically that it undermines the justification for policies implemented in response to the problems of the old context.  This obvious point suggests a simple rule of thumb: Even if you have a clear cut problem that seems amenable to a regulatory solution, only act if you’re sure the context in which that problem is embedded will change a good deal more slowly than the political process moves, because a regulatory scheme that no longer fits the facts on the ground may well be difficult to dislodge even when it’s doing harm. Or, in a nutshell: Make sure there’s more inertia in your infrastructure than in your regulatory structure.

Roads and bridges and electric grids are technologies with a lot of inertia. They’re big, clunky physical objects that, once built, are apt to remain in use for 50 or 100 years. Even as particular physical pieces of each network are torn down and replaced, the essential nature of the technology remains constant: We drive on wheeled vehicles over concrete; power is delivered to homes over buried or suspended wires. When these infrastructures look like natural monopolies, reasonable people can debate what kind of regulatory structure is appropriate, but a policy well adapted to the facts of the technology is likely to remain relatively well adapted, because the facts change slowly. The roads and power grid in the town where I was born were mostly there before I was born.

This is not what Internet technology looks like. When I was in high school, as ordinary Americans were just starting to get wind that something called “the Internet” existed, almost everyone who connected from home connected over ordinary phone lines to a dial-up service—and many wondered which of these behemoths might ultimately dominate the market: CompuServe, Prodigy, GEnie, Delphi, or America Online? (Remember them?)  By the time I finished college, home users were largely connecting via  cable television pipes—and for many Americans, that remains the lone wired broadband option even now. But as growing numbers of Americans connect primarily through mobile devices, it’s hardly their only option or getting on the Internet—and as 4g wireless broadband networks roll out nationally, with a variety of other wireless broadband technologies waiting in the wings—it becomes increasingly possible for the average user to ditch wired broadband entirely, even for applications like high-quality streaming video. (Crawford, rather oddly, referred in passing to wireless broadband as a “natural monopoly”—by which I think she meant there are fewer national carriers than she’d like, but I can’t be certain.)

To be sure, wireless broadband is unlikely to match the top speeds of the fastest wired FiOS lines anytime soon—and Baja Fresh isn’t a perfect substitute for Chipotle. But perfect substitutability has never been necessary to provide competitive pressure and avoid the harms of monopoly. The wireless alternative just has to be a good enough substitute for enough customers that the wireline provider can’t afford to act like they’re the only game in town.

Notwithstanding all this, it is no doubt true that there are currently many Americans for whom broadband is a monopoly service available from their local cable operator, with locally available wireless Internet too slow to constitute a realistic replacement. But even if (purely for the sake of argument) you’ve got the perfect legislative response to the current facts on the ground, the relevant policy question is whether those facts are likely to remain constant over the time it takes to implement that legislative response—and, because regulatory structures have their own inertia, two and three and five years later. It seems obvious they are not.

The assumption of a persistent monopolist in online platforms seems even more obviously confused. Facebook is now supposed to be the invulnerable social networking monopolist. A few years ago it was MySpace, which took the crown from Friendster. In the world of search, we’re all beholden to the imperial will of Altavista… wait, sorry, I meant Yahoo!… wait, sorry, I meant Google. Is it still Google? How about now?

There is, to be sure, plenty government could do to foster greater competition at the lowest layer of the Internet stack. It is a little insane that, in a country where the overwhelming majority of households have cable or satellite TV (or have abandoned traditional TV entirely for services like Netflix and Hulu), federal policy keeps some of the most valuable spectrum locked up as a delivery mechanism for reruns of Friends in high def, something the FCC is slooowly moving to change. The agency could also be moving faster to encourage experiments with spectrum sharing and “white spaces.” All of these exciting possibilities would have made for a fascinating discussion about how public policy could “foster Internet competition.” So it was disappointing that most of the Brookings panelists seemed to assume the indefinite persistence of the status quo, and focused on how to make monopoly bearable. If we’d taken this approach a decade ago, we’d probably be getting the first final rulemaking out of the Subcommittee on Ask Jeeves any day now.

Obama, Romney Avoiding a Serious Discussion on China

Mitt Romney attempted to refine his foreign policy platform in a speech at the Virginia Military Institute on Monday, but he was again long on rhetoric and short on strategy. What passed for substance in the speech was largely focused on the Middle East. Predictably, most of the reactions to the speech also focused on the Middle East, mainly President Obama’s policy toward Iran’s nuclear program and his response to the attack on the U.S. consulate in Benghazi, Libya, last month.

Notably absent from the media coverage and the speech itself was China. In fact, Romney mentioned China only once. This is discouraging since the U.S.-China relationship will likely be the most important foreign policy issue over the next few decades.

In today’s Cato Podcast, Justin Logan, director of foreign policy studies, discusses America’s China policy and the presidential candidates’ lack of focus on the issue. Obama and Romney have each spent time demagoguing China on their currency and other trade issues. But this political rhetoric has been at the expense of any serious effort to discuss at length how the candidates disagree when it comes to the U.S.-China relationship. Instead, the foreign-policy debate has centered on the greater Middle East, where U.S. interests are much smaller. The candidates exemplify a bipartisan obsession with the Middle East when in large part the consequential issues that the United States will face in the years to come will be much further to the east.

Import Patent Court: Reform or Repeal?

Sometime between 2013 and 2015, Congress will likely take up the issue of reforming the rules that allow the International Trade Commission to operate as a specialized patent court for imports.  This is a good thing.  The ITC has seen an explosion in the number of new Section 337 cases brought over the last five years.  Most of these ITC investigations run parallel to district court cases, and many of them are brought by so-called patent trolls, entities that own patents for the sole purpose of litigating them and benefit from the ITC’s quick procedures and powerful remedies.

The need for reform has never been so obvious as it is today.  Unfortunately, the rhetoric used by reform advocates and the scope of their proposals misguidedly call for the ITC to return to its protectionist roots.

Some proposals offered to fix the problem with patent trolls include strengthening the domestic industry requirement and the public interest analysis, both of which would limit who could bring a successful case to the ITC.  The only reason these tests exist at the ITC in the first place is because Section 337 was designed to protect U.S. producers from foreign competition.  Strengthening the tests simultaneously makes the process more protectionist and increases the differences between ITC and district court litigation that have caused the problems reformers are trying to fix.

Perhaps these reforms really will reduce problems caused by patent troll access to the ITC, but they assume that the ITC serves a legitimate function that should be preserved.  Before taking this move, reformers need to ask, “Do U.S. manufacturers really need more tools to enforce patents against importers?”

I answer that question in the negative in this week’s National Law Journal.  Section 337 is not only a bad patent law, it is a bad trade law, because it has no non-protectionist justification:

One argument made in favor [of Section 337] is that district courts may lack jurisdiction to stop foreign patent thieves from flooding the market with counterfeit goods.  A quick glance at the parties of any recent ITC investigation shows just how unrealistic that concern is.  Respondents in currently ongoing investigations include many big-name American companies such as Apple, Motorola and Intel as well as reputable foreign brands such as Nintendo, Nokia and Sony. Section 337 is a solution to a nonexistent problem.

Treating imports differently just because they’re imports is the essence of protectionism.  Section 337 violates the rules of the World Trade Organization because there is no justification for that different treatment, potentially exposing the United States to embarrassing sanctions and diminishing our ability to provide global leadership in international trade policy.

Curtailing the ability of the ITC to decide patent cases is a good idea, but tweaking the law to address specific problems will not end the protectionism and might make it worse.  Leaving the law intact also leaves the door open to further problems in patent policy.  In addition to easier remedies for patent trolls, the ITC has fewer exceptions for process patent infringement and doesn’t follow the new rules in last year’s America Invents Act limiting joinder of unrelated defendants.  The existence of a second enforcement track operating under a different law makes the entire patent system less responsive to unforeseen policy challenges.

What reform advocates fail to realize is that the protectionist impulse keeping Section 337 alive is in fact the underlying cause of all of its problems.  In a recent Cato Policy Analysis, Still A Protectionist Trade Remedy: The Case for Repealing Section 337, I argue that the problems caused by patent enforcement at the ITC cannot be solved by piecemeal reform and that the whole process is not worth fixing anyway.  Partial reform just kicks the can down the road until the next problem boils to the surface of political attention.