Tag: transparency

Federal Reserve as Cash Cow

Scheduled for consideration before the House Financial Services Committee this week is a draft bill creating a Consumer Financial Protection Agency. 

While there is a lot wrong with the bill – after all it is based on the premise that somehow consumers were tricked into not making a downpayment or re-financing thousands out of their homes, and then walking away – perhaps the most important provision, and the least discussed, is funding the agency by a transfer of cash from the Federal Reserve.  Section 119 of the bill requires the Federal Reserve to transfer an amount equal to 10 percent of its expenses to the new agency’s Director. 

This I believe is the first time in history that Congress is using the Federal Reserve to simply fund another agency.  Why stop there, how about have the Fed just prints trillions of dollars to pay for the rest of the government?  If Congress believes this agency will benefit the public, then the agency should be funded by the public, by a direct appropriations raised by taxes. 

Of course after watching Ben Bernanke turn the Fed’s balance sheet into a slush fund for Wall Street, it was only going to be a matter of time before someone in Congress decided to use that slush fund for their own purposes.  So much for transparency in government.

What Does the State Department Not Want Us to Know about Honduras?

Senator Jim DeMint from South Carolina recently traveled to Honduras and found—no surprise—a peaceful country and broad support for the ouster of President Zelaya among members of civil society, the supreme court, political parties and others. In an op-ed in this weekend’s Wall Street Journal, DeMint describes his trip in light of Washington’s continuing support of Zelaya and its condemnation of what it calls a “coup.” U.S. policy is mystifying since the ousted president’s removal from office was a rare example in Latin America of an institutional defense of democracy as envisioned by the constitution and interpreted by the Supreme Court that ruled that the president be removed. (For independent opinions on the case, see here and here.)

However, the Senator reports a legal analysis at the State Department prepared by its top lawyer that apparently has informed Washington’s policy but that has not been made public nor even released to DeMint despite his repeated requests. In the interest of democracy and transparency, the State Department should immediately release its legal report. Maybe then we (which includes much of the hemisphere) will be less mystified about what is driving Washington policy toward Honduras. Or at least we’ll have a better insight on the administration’s understanding of democracy.

Senate Health Regulation Bill Includes National ID Plan

Thanks to the push for a more transparent Congress, we’re getting a better look at what new health care regulations might shape up to be. Alas, not a very good look: with weak justifications, the Senate Finance Committee is working on a strange “plain language” description of the bill, and apparently not planning to read or release the final language.

I’ve found something worth noting, though, in each of the bill versions I’ve seen. The Senate Finance Committee’s Rube Goldberg plan for health care in America has a provision establishing paragraph talking about “Eligibility Verification.”

If you want to access the “state exchanges” or collect the federal tax credits created by the bill, your eligibility will have to be verified. Here’s what it says:

Eligibility Verification. In order to prevent illegal immigrants from accessing the state exchanges or obtaining federal health care tax credits, the Chairman‘s Mark requires verification of the following personal data. Name, social security number, and date of birth will be verified with Social Security Administration (SSA) data. For individuals claiming to be U.S. citizens, if the claim of citizenship is consistent with SSA data then the claim will be considered substantiated. For individuals who do not claim to be U.S. citizens but claim to be lawfully present in the United States, if the claim of lawful presence is consistent with Department of Homeland Security (DHS) data then the claim will be considered substantiated. Individuals whose status is expected to expire in less than a year are not allowed to obtain the tax credit. Individuals whose claims of citizenship or lawful status cannot be verified with federal data must be allowed substantial opportunity to provide documentation or correct federal data related to their case that supports their contention.

Translation: Every American who wants to access a “state exchange” or get the tax credits in the bill would have to submit data about themselves to the Social Security Administration or Department of Homeland Security for verification. If you don’t do it, no exchanges or tax credits. If your data doesn’t match, no exchanges or tax credits, unless you can convince SSA or DHS bureaucrats that you are who you say you are.

Sound familiar? Then you probably read my Cato Policy Analysis “Electronic Employment Eligibility Verification: Franz Kafka’s Solution to Illegal Immigration.” The paper discusses how verification of immigration status for employment eligibility would plunge Americans into a Kafka-esque bureaucracy and deny many law-abiding Americans the ability to work. Ultimately, the system requires a national identification card.

The same goes with a health care “eligibility verification” system. If you’re one of the millions of people about whom the Social Security Administration has bad data, plan to spend long hours waiting in line to plead with indifferent federal bureaucrats for health care access. When attacks and complications on the verification system break it down, they’ll move to “strengthen” the system. Get ready to dig up your birth certificate—they’ll want to scan it into their computers—plan to be photographed and fingerprinted, and get ready to stand in line for your national ID card.

It was refreshing to see Joe Wilson heckle the president the other week—the president is our employee, after all—but in their enthusiasm to generate differences with President Obama, Republicans may be coalescing behind plans to push a national ID and federal background check system that all freedom-loving Americans should reject.

Carper: We Trust Our Staff So You Can Trust Us

A deep fissure between federal lawmaking practices and the Internet-fueled expectations of the people is just starting to open.

Here’s a fascinating interview with Senator Tom Carper (D-DE), in which he justifies not reading the legislation that he votes on.

He’s right that the bills Congress passes are almost incomprehensible, but he draws the wrong conclusion from it. It’s not OK to pass bills that you can’t read and literally don’t understand.

Congress and the bureaucracy will come to learn a lesson that other parts of our society have learned: The Internet changes things.

Because it is now possible to see legislation before Congress passes it, Americans now expect to see legislation before it passes. And they will come to expect that their representative understand it—in detail.

A machine has grown up in Washington over the past two hundred years where representatives rely on colleagues who rely on staff to write bills. This has not produced a desirable body of federal law, and it is not a process that the public will accept for much longer.

Hey G-20! Here’s How You Curb Protectionism

Last week I recommended reading a new paper published by the Lowy Institute in Australia, which proposes an utterly sensible reform for the G-20, if curbing protectionism is a serious aim.

Using Australia’s own successful experience as an example, the authors recommend other countries adopt “domestic transparency” programs, which would essentially include analysis from an independent, apolitical board or agency that measures the real costs and benefits of proposed trade restrictions.

The findings of these independent reviews would be accessible to the public—and probably published in newspapers and other popular media—in advance of any decision to impose or reject the proposed trade restrictions. The findings wouldn’t legally bind the authorities to take any particular action, but would help chase from the shadows the real costs of protectionism, so that those ultimately making the decision know that the public at large is aware of the costs.

When a politician knows that he/she can benefit politically by imposing import duties, the costs of which are hidden in higher prices paid by consumers, who are unlikely to make the causal connection, there is a profound asymmetry of incentives and disincentives. The politician is much more likely to choose to secure the political benefit of imposing duties since the costs are hidden. But if light is shone on those costs, through domestic transparency initiatives, that asymmetry is reduced or eliminated. Politicians, under these circumstances, can go back to the special interests and say how much they’d like to help out with a tariff, but the costs don’t justify the measure. And the protection-seekers know the politician’s hands are tied because the public is aware of those costs.

Well, Alan Mitchell of the Australian Financial Review on Monday supposed how the presence of a domestic transparency regime would have affected President Obama’s tire tariff decision. It is very instructive:

The case of the Chinese tyres provides a striking example. The action was taken under a section of the US Trade Act popularly known as the “China-specific safeguard” provision. The act allows increased import duties if the imports cause, or even just threaten, material injury to US producers. If material injury is identified, the president must take action against the imports unless he determines that the “provision of such relief is not in the national economic interest.”

 The US International Trade Commission (ITC) publicly advises the president on the issue of material injury, and on the level of trade barriers needed to stop it, but not on the question of the national economic interest.

The president is left to determine that for himself. And the public is aware of nothing but the ITC-endorsed case for protection….

Suppose the ITC had been asked to also publicly advise the President on whether action against Chinese tyres was in the national economic interest. There is no doubt about what its advice would have been. The duties on Chinese tyres will save some jobs among US producers of low-cost tyres, but at the price of propping up uneconomic producers, and at the cost of jobs lost among US tyre retailers and in other sectors of the economy….

Had the ITC advised that action was against the national economic interest, the President would have been in a much stronger position to reject the demand, if he had wanted to. He may not have wanted to, of course….

The US action against Chinese tyres was initiated by a complaint from the unions that are an important part of Obama’s support base. But even if Obama had protected the tyre makers against the advice of the ITC, an important blow still would have been struck against protectionism. The American people would have heard the truth from an unimpeachable source: the protection of inefficient tyre makers is against the US economic interest….

It would have been a small but important step towards educating and changing public opinion. And, without that, multilateral trade reform will never gain the domestic political support it needs to bring down trade barriers in agriculture and services.

This is what could have been had ”domestic transparency” already been embraced in the United States.  See the point in such a reform?

The “Read the Bill” Debate and Government Growth

There’s an interesting back-and-forth over at the Volokh Conspiracy about whether legislators should have to read the actual legislative text of bills they vote on. Most people’s intuitive reaction is: “Duh, of course!” But if you’ve ever actually spent time poring over legislative text, you know that reading the bill itself seldom leaves you with a very good sense of what it does. Legislation is typically a tangle of modifications along the lines of “Strike paragraph 2, replace the period with a semicolon, insert the word ‘reasonable’ in the following sentence…”—which is why legislators have staffers who prepare plain-English summaries of the effects of legislation. Now certainly it would be possible to render bills somewhat more readable to ordinary people. Saving paper is not a huge concern in the digital era, so there’s no good reason legislation couldn’t simply contain the full text of the statutory provisions it amended, perhaps including a side-by-side comparison highlighting the changes. Even this, however, wouldn’t necessarily be all that illuminating. I’ve got a reference book on my desk that contains the 80-or-so pages of the Foreign Intelligence Surveillance Act, and then a few hundred pages explaining what it actually means. It’s not enough to know what the verbatim text says; you need to understand how it interacts with other statutes, how key terms are defined in the law, how courts have interpreted the law’s provisions, and so on.

Legislation could be written in a somewhat more transparent way, but in light of all these complex interactions, it can’t actually be that much more transparent, for the same reason computer programs are a lot longer and more impenetrable than a plain-English description of what the program does. Achieving a result in a complex rule-based system requires a level of precision and sensitivity to how terms are used within the system that’s at odds with colloquial description. Of course, for precisely the same reason that summaries will give an ordinary person a better understanding of a law than scrutiny of the verbatim text, they also give a very incomplete understanding. An ordinary language description will tell you what a computer program is supposed to do. If you want to know whether it’s going to crash or open up a security vulnerability under certain conditions, perhaps when it interacts with other software running simultaneously, you need to have a look at the source code. Again, if you’ve spent any time digging through legislation, you know that the staff summary of a bill often glosses over many interesting little details and ambiguities you can ferret out while reading the text.

Most legislators, of course—even those with legal training—cannot possibly have the kind of expertise needed to undertake meaningful scrutiny of the details of legislative text outside a tiny number of issue areas. So does it make sense to insist that every member of Congress literally “read the bill”? Probably not. The actual text will contain important details not captured in a summary, but only an expert will really understand what those are on the basis of the text anyway. Crucially, this is not a function of needless obscurantism on the part of Congress: it is a necessary feature of legislation in a legal system as complex as ours. Which means that there’s a pretty basic tension between the value of democratic transparency and a large, complex government. Past a certain point, it’s more or less impossible for any individual legislator—let alone ordinary citizens—to really understand the vast majority of bills Congress takes up in any detailed way.