Tag: Ross Douthat

IRS Lied to Congress about Targeting Tea Party

On Friday, the IRS admitted that when “social welfare” groups with the terms “tea party” or “patriot” in their names applied for 501(c)(4)/tax-exempt status, IRS agents targeted them for extra (and extra-legal) scrutiny to ensure they were not engaged in politicking. The Washington Post reports, “about 75 groups were selected for extra inquiry — including, in some cases, improper requests for the names of donors.” IRS agents did not apply similar scrutiny to groups with “progressive” in their names.

Over the weekend, more details emerged. It now appears the IRS lied to Congress about this practice for more than a year. It also appears the IRS is still targeting tea-party groups today, in part because IRS bureaucrats believe groups that “educat[e] on the Constitution and Bill of Rights” deserve greater scrutiny.

Here’s a rundown. 

Senior IRS officials have known about these abuses for nearly two years. The Associated Press reports: “Senior Internal Revenue Service officials knew agents were targeting tea party groups as early as 2011…on June 29, 2011, Lois G. Lerner, who heads the IRS division that oversees tax-exempt organizations, learned at a meeting that groups were being targeted, according to the watchdog’s report. At the meeting, she was told that groups with ‘Tea Party,’ ‘Patriot’ or ‘9/12 Project’ in their names were being flagged for additional and often burdensome scrutiny…Lerner instructed agents to change the criteria for flagging groups ‘immediately’…”. IRS agents also gave extra scrutiny to groups that “criticize how the country is being run.”

The IRS tried to get away with it again. The Washington Post reports:

the agency revised its criteria a week later.

But six months later, the IRS applied a new political test to groups that applied for tax-exempt status as “social welfare” groups, the document says. On Jan. 15, 2012 the agency decided to target “political action type organizations involved in limiting/expanding Government, educating on the Constitution and Bill of Rights, social economic reform movement”…

The agency did not appear to adopt a more neutral test for social welfare groups…until May 17, 2012…

Of course, these revised criteria are not politically neutral either. Tea-party groups are still far more likely to receive extra scrutiny than progressive groups. Lots of right-leaning political groups describe their mission as working to limit government or educate people about the Constitution. Far fewer left-leaning groups emphasize educating people about the Constitution or openly declare their mission is to expand government. And note: the U.S. government treated groups as suspect if they educate the public about the Constitution and Bill of Rights. Let that one sink in.

The IRS lied to Congress for more than a year. The Associated Press reports: “At a congressional hearing March 22, 2012, [then-IRS commissioner Douglas] Shulman was adamant in his denials. ‘There’s absolutely no targeting.’” Senior IRS staff knew that claim was false nine months before Shulman made it. Yet they let Shulman’s false statement to Congress go uncorrected, amid a congressional investigation into whether the IRS was targeting tea-party groups, for another 14 months. According to the Washington Post, “The IRS made no mention of targeting conservative groups in five separate responses to congressional inquiries between Nov. 18, 2011, and June 15, 2012, according to the [inspector general’s] timeline.” Even if we view the facts in the light most favorable to the IRS and assume Shulman did not know he was uttering a falsehood – which, by the way, would mean he is a very poor manager – the IRS’s failure to correct that falsehood pretty much makes it a lie. I don’t mean that in the phony way PolitiFact uses the term. I mean a real lie.

The IRS did not come forward of its own accord. The Associated Press: “The Treasury Department’s inspector general for tax administration is expected to release the results of a nearly yearlong investigation in the coming week.” House Oversight Committee chairman Darrell Issa (R-CA) put it, “Before the IG’s report comes to the public or to Congress as required by law, it’s leaked by the IRS to try to spin the output. This mea culpa’s not an honest one.”

IRS officials maintain the targeting of tea-party groups was the work of low-level employees and not politically motivated. Yet the agency has shown a willingness to deceive Congress and the public about its own misconduct. Congress should conduct a thorough investigation.

Even if it is true that low-level IRS bureaucrats were acting on their own, Congress’ investigation should examine the role Obama administration officials played in encouraging those bureaucrats to single out the tea party. As New York Times columnist Ross Douthat explains:

Where might an enterprising, public-spirited I.R.S. agent get the idea that a Tea Party group deserved more scrutiny from the government than the typical band of activists seeking tax-exempt status? Oh, I don’t know: why, maybe from all the prominent voices who spent the first two years of the Obama era worrying that the Tea Party wasn’t just a typically messy expression of citizen activism, but something much darker — an expression of crypto-fascist, crypto-racist rage, part Timothy McVeigh and part Bull Connor, potentially carrying a wave of terrorist violence in its wings.

It would be very bad if senior Obama administration officials ordered the IRS to intimidate the president’s political opponents. It would scarcely be better if administration officials denounced their opponents until IRS bureaucrats took the hint.

People should lose their jobs over this.

On ObamaCare, David Frum Just Doesn’t Get It

David Frum knows that ObamaCare can’t be repealed.  But don’t worry, he also knows how to make it palatable to Republicans:

  1. Move up the start date of ObamaCare’s state waiver program from 2017 to 2014.  As I explain here, that program will only produce alternatives to ObamaCare that are equally or more anti-market, such as a single-payer system.  Frum wants that to happen sooner.
  2. Raise taxes, on everybody.  I swear I am not making that up.
  3. Replace ObamaCare’s individual mandate with an equally coercive tax credit that accomplishes the same thing, but which the courts would probably uphold.  Bra-vo.  Frum implies it is necessary to “work around” the fact that Republicans are not “entirely rational” when it comes to the individual mandate.  (True, but they’re getting more rational all the time.)
  4. Republicans should embrace government rationing of health care.  Frum counsels Republicans to “unleash the cost controllers” and become the “green eyeshade party willing to do the disagreeable work of squeezing waste from the system.”  How?  Well, he doesn’t call for Medicare vouchers, under which enrollees would ration their own care.  In fact, he has thrown cold water on that idea.  But the only alternative is to have the government ration care.  And Frum makes no distinctions between the elderly and non-elderly, which leads me to believe he wants Republicans to ration care to the under-65 crowd too.  Slap that on a bumper sticker!

In sum, Frum’s GOP-palatable alternative to ObamaCare is … ObamaCare.  But maybe more coercive.  And implemented sooner.  With higher taxes.  And less vulnerable to legal challenges.  And with Republicans playing the bad guy.

Frum laments that Republicans mistakenly threw away the opportunity to work with Democrats to implement these brilliant ideas in 2009 and 2010.  But Republicans did so because these brilliant ideas hurt people.  They were wrapped into a bill called ObamaCare, and Republicans rejected it.  They were right to do so.  And they are right that ObamaCare can’t be fixed.

(Related: Ramesh Ponnuru previously took down Ross Douthat’s ideas for fixing ObamaCare.)

(Also related: CNN has signed Frum to provide conservative commentary during the 2012 election.)

E-Verify and Common Sense

This weekend, New York Times op-ed columnist Ross Douthat wrote a piece full of common sense thinking about immigration control and the E-Verify federal background check system.

“Common sense”—or “what most people think”—is an interesting thing: When generations of direct experience accumulate, common sense becomes one of the soundest guides to action. Think of common law, its source deep in history, molded in tiny increments over hundreds of years. Common law rules against fraud, theft, and violence strike a brilliant balance between harm avoidance and freedom.

When most people lack first-hand knowledge of a topic, though, common sense can go quite wrong. Such is the case with ”common sense” in the immigration area, which is not a product of experience but collective surmise. Douthat, who has the unenviable task of leaping from issue to issue weekly, indulges such surmise and gets it wrong.

Take, for example, the premise that American workers lose when immigration rates are high: “Amnesty,” says Douthat, would “be folly (and a political nonstarter) in this economic climate, which has left Americans without high school diplomas (who tend to lose out from low-skilled immigration) facing a 15 percent unemployment rate.”

On the whole, American workers do not lose out in the face of immigration. To the extent some do, it is penny-wise and pound foolish to retard our economy (in which displaced workers participate) and overall well-being (which affects displaced workers, too) in the name of protecting status quo jobs for a small number of native-borns.

Full immigration reform that includes generous opportunities for new low-skill workers is not folly, whatever its political prospects may be.

But I want to focus on Douthat’s conclusion that E-Verify is the way forward for immigration control. He cites a study finding that Arizona’s adoption of an E-Verify mandate caused the non-citizen Hispanic population of Arizona to fall by roughly 92,000 persons, or 17 percent, over the 2008–2009 period, and concludes:

[M]aybe — just maybe — America’s immigration rate isn’t determined by forces beyond any lawmaker’s control. Maybe public policy can make a difference after all. Maybe we could have an immigration system that looked as if it were designed on purpose, not embraced in a fit of absence of mind.

Though tentative, his implication is that a national E-Verify mandate is the solution. Everything that came before was the product of fevered impulses.  Maybe E-Verify is the most practical solution. Douthat’s calm tone sounds like common sense.

Ah, but neither Douhtat or the authors of the study have thought that problem all the way through (and the study doesn’t claim to): The decline in Arizona was not produced simply by moving illegal immigrants from Arizona back to Mexico and Central America. They went to Washington state and other places in the United States that are less inhospitable to immigrants. A national E-Verify mandate would offer no similar refuge, and the move to underground (or “informal”) employment would occur in larger proportion than it did in Arizona.

The report also cautions that the honeymoon in Arizona may not hold:

[T]he initial effects of the legislation are unlikely to persist if actors in the labor market learn that there are no consequences from violating these laws. Hence, for long-term effectiveness, policymakers should also consider the role of employer sanctions, which have not played a large role in Arizona’s results so far. However, policymakers must weigh the sought-after drop in unauthorized employment against the costs associated with shifting workers into informal employment.

That’s antiseptic language for: investigations of employers, raids on workers, heavy penalties on both, and growth in black markets and a criminal underground. “Balmy” is a way of describing the temperature potatoes pass through in a pressure cooker.

It’s hard, on analysis, to see Arizona’s experience being replicated or improved upon by an E-Verify mandate that’s national in scale without a great deal of discomfort and cost. I surveyed the demerits of electronic employment eligibility verification in “Franz Kafka’s Solution to Illegal Immigration.”

There is more not to love in the Douthat piece. Take a look at this shrug-o’-the-shoulders to the deep flaws in the concept of “internal enforcement” and E-Verify:

Arizona business interests called it unfair and draconian. (An employer’s business license is suspended for the first offense and revoked for the second.) Civil liberties groups argued that the E-Verify database’s error rate is unacceptably high, and that the law creates a presumptive bias against hiring Hispanics. If these arguments sound familiar, it’s because similar critiques are always leveled against any attempt to actually enforce America’s immigration laws. From the border to the workplace, immigration enforcement is invariably depicted as terribly harsh, hopelessly expensive and probably racist into the bargain.

We should disregard these problems because they’re familiar? With regard to E-Verify, they’re familiar because they are the natural consequence of dragooning the productive sector into enforcing maladjusted laws against free movement of people from a particular ethnic category to where their labor is most productive.

Problem-solving is welcome, and columnists like Ross Douthat have to at least point to a solution with regularity. But this effort, sounding in common sense, does not rise to the challenge. The solution is not even more enforcement of laws inimical to human freedom. The solution is reforming immigration laws to comport with … common sense!

Ross Douthat’s War on Theory

I have been following the reporting out of Egypt with the same interest as other onlookers, and I share their ignorance. I know very little about Egypt and do not feel competent to offer predictions, much less advocate for one or the other position on the questions posed to the United States by events in that country.

While the events themselves are exhilarating to watch, of equal interest to me has been the parade of American commentators who know nothing about Egypt but nonetheless have been providing copious commentary on the subject.  I thought Andrew Exum’s lament on this phenomenon was particularly righteous.  Watching cable news, Exum reports that he was:

absolutely stunned by the willingness of the show’s guests to opine about Egypt without having any actual experience in or expertise on Egypt or the broader Middle East. Is it really that tough to say, “Hey, that’s a great question, Joe, but I am not really the best guy to give the viewers at home a good answer?”

Instead, guest after guest – most of whom are specialists in or pundits on U.S. domestic politics – made these broad, ridiculously sweeping statements about the meaning and direction of the protests.

It is in this context that Ross Douthat continues his war against those who make their foreign policy theories explicit:

Ross Douthat | photo by Josh Haner/The New York Times

The long-term consequences of a more populist and nationalistic Egypt might be better for the United States than the stasis of the Mubarak era, and the terrorism that it helped inspire. But then again they might be worse. There are devils behind every door.

Americans don’t like to admit this. We take refuge in foreign policy systems: liberal internationalism or realpolitik, neoconservatism or noninterventionism. We have theories, and expect the facts to fall into line behind them. Support democracy, and stability will take care of itself. Don’t meddle, and nobody will meddle with you. International institutions will keep the peace. No, balance-of-power politics will do it.

But history makes fools of us all…

Sooner or later, the theories always fail. The world is too complicated for them, and too tragic. History has its upward arcs, but most crises require weighing unknowns against unknowns, and choosing between competing evils.

The fact that theories are imperfect does not make them any less necessary.  We take refuge in foreign policy theories because there is no alternative.  As Ben Friedman pointed out in responding to Douthat previously, it is impossible to have foreign policies without foreign-policy theories.  The same goes for economics, domestic politics, and a whole range of human behavior.  People take (or oppose) various actions based on their expectations about what outcomes the actions will (or will not) produce.  Whether people are conscious of it or not, our expectations are products of our theories.  People disagree about which theories are good and which are bad, but we all have them.

Libertarianism and Big Business: A Dissent

The March-April issue of Cato Policy Report featured a discussion among Timothy Carney, Uwe Reinhardt, and Ross Douthat of Carney’s book Obamanomics: How Barack Obama Is Bankrupting You and Enriching His Wall Street Friends, Corporate Lobbyists, and Union Bosses. The tenor of the discussion was reflected in the title, ”Big Business, Big Government, and Libertarian Populism.” Richard L. Gordon, a distinguished economist emeritus at Pennsylvania State University and a Cato adjunct scholar, took strong issue with all three commenters and sent us the following rebuttal, which we’re pleased to publish here:

The March/April Cato Policy Report covered a January 2010 Cato Book Forum on Timothy P. Carney’s Obamanomics. Carney summarized his book and there were responses from Uwe Reinhardt, a Professor at Princeton noted for advocacy of strong government intervention in health care, and Ross Douthat, a (first-year) New York Times columnist, a self-styled conservative who (from scanning his columns) seems a weak one. The result was three tirades about how big business runs government. It is surprising in the twenty-first century to see outside of WhiteHouse.gov, movies, and television dramas such naïve attacks on the power of big business. This is not the libertarianism that I know. However, superficially plausible dominance theories are too convenient not to revive frequently, regardless of enormous refutations. Thus, some key, familiar points need recollection.

The charge of big-business dominance has at least three flaws. First, it is a myth. Politicians created the massive growth of government with more input from intellectuals than from business executives. Second, it reverses causation; government ensnares industry. Third, it is absurd since big business, however defined, consists of diverse, often conflicting companies.

Much, including the most problematic, expansion of government, has almost nothing to do with big business and is certainly not what any big (or small) firms would want. The entitlements explosion is in social security, government-employee pensions, Medicaid, and Medicare. The first is notoriously a shifting of savings from private firms to an entirely government-run program with a rigid reliance on treasury paper debt whose repayment is dubious. Other government pension plans do invest in the private sector so they rely somewhat on private firms. Again, this only displaces what individuals would have done for themselves, despite the fears of libertarian interventionists.

The messes that are Medicaid and Medicare do involve among many others big businesses in pharmacy and medical insurance. In the latter case, the non-profit Blue Cross and Blue Shield companies are major, often dominant factors. The other, more important participants are the large number of separate medical providers and hospitals. The final involved sector is much of American business. To lessen the impact of World-War II wage and price controls, the U.S. government extended to medical insurance the legal fiction used for Social Security that part of insurance costs could be called “employer contributions” and not considered income subject to personal income tax. Basic economic theory amply confirmed by empirical research shows that these payments are labor costs and lead to reduced direct compensation.

The result is a system in which payment is widely separated from decisions about medical procedures. Physicians err on the side of ordering additional tests because they know that neither they nor the patient directly incur the costs. (The fear of lawsuits may increase that bias, but it is unclear that tort reform without reform of insurance provision would make a big difference.) The prime fault of Obama care is that it reinforces, rather than lessens, the separation of patient from payee. This again is hardly an ideal for business.

Even more obviously, another great problem area, education, suffers from a government takeover so ancient and thorough that only specialists are aware of its existence. The federal government increasingly intervenes into pre-college education. Since World War II, all government has greatly expanded its role in higher education to the extent that the great private universities are heavily government dependent. Congress tacked on to the health-care bill the total government takeover of college loans. Only a lunatic would postulate that any of this is due to a big-business conspiracy to control minds, particularly given the massive leftward tilt of academia.

The largest non-entitlement component of the federal government, defense, does notoriously, in part, involve an excessively cozy relationship with suppliers. However, spending for equipment is dwarfed by direct and indirect personnel costs. The spending on equipment, like many government decisions, is distorted by Congressional obsession with bringing jobs to their districts. No big-business excuse applies to nondefense discretionary spending. In short, it is a mockery to assert big business is the primary source of excessive government spending.

Second, politicians, rather than business executives, generate the dependence on government. What was described as a craven sellout to big pharma was actually part of the ruthless blackmail through which the Obama administration silenced a wide range of the potential criticism of its health-care monstrosity. Aside from all the normal government tools of torture such as the Internal Revenue Service, the antitrust agencies, and the Environmental Protection Agency, drug companies are subject to special and critical government scrutiny. The companies must endure the cumbersome, slow, expensive, ineffective Food and Drug Administration approval process. The industry relies on patent protection and re-importation bans to secure profits sufficient to recover research costs bloated by regulation.

The “big” drug and insurance companies were far from the only frightened firms. Despite widespread physician concerns, the American Medical Association abandoned its long-time opposition. More strikingly, AARP, the relentlessly wrong-headed self-created representative of seniors, flooded its publications with distorted pro-legislation articles.

This is unfortunately typical of the pressures companies face. Anyone who argues that lobbying is improper fails to recognize the excessive power that government possesses. It becomes essential to resist in every legitimate way widespread unbridled pressure. As Obama and his admirers constantly demonstrate, response to outrageous interventionist claims is regularly defamed. Efforts are made to discredit and even ban critics. In such a situation, limiting lobbying and other forms of response is an outrageous threat to constitutional government.

Famously, Microsoft did not take lobbying seriously until hit by dubious antitrust suits. In the energy sector, clearly pressures to go green and not oppose global-warming policies caused enormous fawning by a distressingly wide range of companies. Many leading retailers have jumped on green initiatives such as the long-life-bulb bandwagon arising because legislators responded to three decades of public resistance by forcing use of these bulbs. Exxon, after slander over its support, far smaller than that of the U.S. government, of research skeptical of global-warming concerns, has added a green tinge to its advertising, albeit not as blatantly as BP and Chevron. General Electric became a sell-out due to its involvement in financing, medical equipment, and power generating devices. The major banks and brokers faced and suffered badly from the political pressures to lend heavily to potential homebuyers with questionable financial situations.

At best, we can admit that big business is no less, but not no more, likely than any interest group to seek to twist the web of government control in its favor. A prime example of the defects is that Obama regularly assumes away trade-union influence in his attacks on interest groups. One of my great teachers, M.A. Adelman, forcefully argued that it is the voting power of interest groups that matters. He reached that conclusion in studying the antitrust attack on A&P that was driven by the extensive anti-chain store outlook of the thirties. His student Peter Pashigian showed that similarly automobile dealers secured protection from automobile manufacturers. When Adelman turned to oil, he found that “small” oil producers were sheltered at great cost to consumers from competition, domestic as well as imported, by big oil. A long-time concern about banking was the legislation limiting bank consolidation. A well-known, but regularly neglected part of this is the unreality of the big versus small company distinction. In most of these cases, the protected were rich local notables. In contrast, through pension funds and mutual funds increasingly, big companies are ultimately owned by much less affluent people.

Finally, a pro-big-business or even a general pro-business outlook is a nonsense concept. Big businesses conflict, not just with small business, but with each other. Protection of the once-big business of steel production was at the expense of the manufacturers of automobiles and other durable goods and their customers. The oil industry disagreed with the automobile industry on the best policy, given the inevitability of action, to reduce gasoline consumption legislatively. Large retailers relentlessly turn to imports when domestic producers, big and small, become too expensive.

This last point is key to understanding what libertarian economics is about. Decades before tea parties, libertarians were for limited government that involves among other things free markets. We want the market to decide winners and losers. We feel that private monopoly is so rare and difficult to detect and reform or regulate that we oppose purportedly anti-monopoly policies.

The real danger is the unopposed monopoly power of government. The need is protection from politicians unaware of the limits of prudent, constitutional government. The heath-care debate provided many examples. The quintessence of the disgraceful process of passing Obamacare was Nancy Pelosi, yielding a grossly oversized gavel, leading an unnecessarily confrontational walk up the Capitol steps through a wall of peaceful protestors, instead of taking the underground access that is available. Less dramatic, but more chilling, was the consistent dismissal by the law’s proponents of constitutional flaws in the bill. It suggests a variant on what Jimmy Durante’s character in Jumbo said when caught with an elephant, “Constitution, what Constitution?” As Cato has validly argued, what we need is less, not more, restrictions on speech and stringent term limits.

Richard L. Gordon
Pennsylvania State University

For some other libertarian views on this topic, see Roy A. Childs, Jr., “Big Business and the Rise of American Statism” or this discussion at Cato Unbound.

The Big Government-Big Business Health Care Plan

Ross Douthat at the New York Times, with help from Reihan Salam and Tim Carney, explains how the Senate health care bill can be both a government takeover and a huge subsidy to the insurance industry:

We’ve achieved an unusual left-right convergence in the health care debate: Both conservatives and liberals are attacking the current version of reform as an egregious giveaway to the insurance industry. (Both sides sound an awful lot like Tim Carney, in other words.) Suddenly, it’s hard to tell the difference between the right’s Yuval Levin (“The bill is basically a massive subsidy to the insurers — it is not a reform of the system”) and the left’s Markos “Daily Kos” Moulitsas (“it’s unconscionable to force people to buy a product from a private insurer that enjoys sanctioned monopoly status”).

Ed Kilgore argues that the two sides’s concerns, while superficially similar, are actually contradictory:

… on a widening range of issues, Obama’s critics to the right say he’s engineering a government takeover of the private sector, while his critics to the left accuse him of promoting a corporate takeover of the public sector. They can’t both be right, of course, and these critics would take the country in completely different directions if given a chance.

He’s right about the gulf between the critics’ prescriptions, but I think he’s wrong about the incompability of their critiques. Here’s Reihan, explaining why:

Actually, it is entirely possible for both sets of critics to be correct. The concern from the right isn’t that the Obama approach will literally nationalize for-profit health insurers. Rather, it is that for-profit health insurers will continue evolving into heavily subsidized firms that function as public utilities, and that seek advantage by gaming the political process. Profits, including profits governed by medical loss ratios, can and will then be cycled into political action, which leads to the anxiety concerning a “corporate takeover of the public sector.” Again, progressives don’t literally believe that such a takeover is happening. Instead, they believe, rightly, that subsidies without effective cost containment represent a massive windfall for the private insurance sector, including non-profit insurers that generate salaries for large numbers of politically active middle and upper middle class professionals.

So yes, Obama does not intend to nationalize the private insurance industry and then turn around and auction off the new nationalized health agency to Rupert Murdoch or Monsanto. But the anxieties of critics on the left and right are, to italicize for a moment, perfectly compatible.

The point is that the more intertwined industry and government become, the harder it is to discern who’s “taking over” whom — and the less it matters, because the taxpayer is taking it on the chin either way. Or to put it another way: The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which …

Tim Carney will discuss his book, Obamanomics: How Barack Obama Is Bankrupting You and Enriching His Wall Street Friends, Corporate Lobbyists, and Union Bosses, at a Cato Book Forum on January 12.