Topic: Cato Publications

This Month at Cato Unbound: What Keeps Money Out of Politics?

It’s called the Tullock Paradox: if you run the numbers, the expected returns to lobbying commonly appear much larger than they ought to be. Bad behavior pays really well, and yet corporations and interest groups routinely pass on what would seem, from a coldly amoral stance, to be easy money. Rational economic actors ought to bid up the price of government favor—and thus bid down the rate of return—but real-world actors don’t do so.

Why don’t we see even more money in politics? That’s the question we ask in the April, 2013 issue of Cato Unbound.

To answer that question, we have invited Fred L. Smith, founder and chairman of the Competitive Enterprise Institute, a man who has spent much of his career pondering just this question, and who benefits from an insider’s view of political advocacy. His lead essay suggests that there is a widespread distaste for political activity among people who would otherwise turn to lobbying, and often that’s with good reason.

To discuss with him the potential pitfalls of public choice modeling, we have invited a panel of distinguished academics: Professors Stephen Ansolabehere of Harvard University, Francesco Parisi of the University of Minnesota School of Law, and Raymond J. La Raja of the University of Massachusetts at Amherst.

As always, Cato Unbound readers are encouraged to take up our themes and enter into the conversation on their own websites and blogs, or on other venues. We also welcome your letters. Send them to jkuznicki at cato dot org. Selections may be published at the editors’ option.

Fresh Wonky Goodness

Two new projects of interest for public policy junkies have recently come to my attention–and both happen to be the creations of former Catoites. 

Marie Gryphon Newhouse, formerly a Cato education-policy scholar and now with Harvard’s Safra Center for Ethics, has started “a blog about think tank ethics and governance,” dubbed “the High Horse.” It’s part of her ongoing book project on that subject. Recent posts include an interview with Heritage’s Ed Meese and Marie’s take on a recent pay-for-play imbroglio involving Malaysia.   

Former Catoite Jerry Brito, now a senior research fellow at Mercatus, has (with Peter E. Snyder) put together Wonkmeme, a site that “aggregates and tracks over a hundred blogs covering law, economics, and public policy. It detects which blog posts are driving the day’s conversation and presents the resulting data in useful ways.” It also “also determines which books are the most widely discussed,” and hey look: Cult of the Presidency is currently #4 (click quick before it plummets!).

If ObamaCare Isn’t Vulnerable, Why Is the President Violating the Law to Save It?

From my oped in today’s Daily Caller, heralding the release of my new Cato white paper, “50 Vetoes: How States Can Stop the Obama Health Law”:

But the surest sign that Obamacare remains vulnerable is that the Obama administration is violating its own statute, congressional intent, and even a Supreme Court ruling in order to save the law.

In “50 Vetoes,” a study released today by the Cato Institute, I explain the administration is so afraid of a sticker-shock fueled backlash that it is preparing to spend more than $600 billion that Congress never authorized to numb consumers to the costs of this law. Along the way, the administration will impose roughly $100 billion in illegal taxes on employers and individuals (including some legal immigrants below the poverty level), and deny millions of individuals the right to purchase low-cost “catastrophic plans.”

To cement the law’s Medicaid expansion in place, the administration is also violating the Supreme Court’s ruling in NFIB v. Sebelius. The Court prohibited the federal government from coercing states into implementing the expansion. Yet HHS is still threatening every state with the loss of all federal Medicaid funds if they fail to implement parts of the expansion. These are not the actions of an administration that feels its health care law is secure.

Finally, supporters forget that President Obama and congressional Republicans have already repealed important parts of the law, including Obamacare’s third entitlement program — a long-term care program known as the CLASS Act, repealed as part of the “fiscal cliff” deal. President Obama is already repealing his law one provision at a time.

Obamacare supporters may scoff at repeal. But if vulnerable Democratic senators start hearing from their constituents about the chaos and sticker shock they experience later this year, the scoffing will cease.

Read the whole paper.

50 Vetoes: How States Can Stop the Obama Health Care Law

Today, the Cato Institute releases my latest working paper, “50 Vetoes: How States Can Stop the Obama Health Care Law.” From the executive summary:

Despite surviving a number of threats, President Obama’s health care law remains harmful, unstable, and unpopular. It also remains vulnerable to repeal, largely because Congress and the Supreme Court have granted each state the power to veto major provisions of the law before they take effect in 2014.

The Patient Protection and Affordable Care Act (PPACA) itself empowers states to block the employer mandate, to exempt many of their low- and middle-income taxpayers from the individual mandate, and to reduce federal deficit spending, simply by not establishing a health insurance “exchange.” Supporters of the law do not care for this feature, yet they adopted it because they had no choice. The bill would not have become law without it.

To date, 34 states, accounting for roughly two-thirds of the U.S. population, have refused to create Exchanges. Under the statute, this shields employers in those states from a $2,000 per worker tax that will apply in states that are creating Exchanges (e.g., California, Colorado, New York). Those 34 states have exempted at least 8 million residents from taxes as high as $2,085 on families of four earning as little as $24,000. They have also reduced federal deficits by hundreds of billions of dollars.

The Obama administration is nevertheless attempting to tax those employers and individuals, contrary to the plain language of the PPACA and congressional intent, and to deny millions of Americans the opportunity to purchase low-cost, high-deductible coverage. Employers, consumers, and even state officials in those 34 states can challenge those illegal taxes in court, as Oklahoma has done. States can also block those illegal taxes—and even stop the federal government from operating an Exchange—by approving a strengthened version of the Health Care Freedom Act.

The PPACA’s Medicaid expansion, which would cost individual states up to $53 billion over its first 10 years, is now optional for states, thanks to the Supreme Court’s ruling in NFIB v. Sebelius. Some 16 states have announced they will not expand their programs, while half of the states remain undecided. Yet the Obama administration is trying to coerce states into implementing parts of the expansion that the Court rendered optional. States can replicate Maine’s lawsuit challenging this arbitrary attempt to limit the Court’s ruling.

Collectively, states can shield all employers and at least 12 million taxpayers from the law’s new taxes, and still reduce federal deficits by $1.7 trillion, simply by refusing to establish Exchanges or expand Medicaid.

Congress and President Obama have already repealed the third new entitlement program the PPACA created—the Community Living Assistance Services and Supports Act, or CLASS Act—as well as funding for the “co-op” plans meant to serve as an alternative to a “public option.” A critical mass of states exercising their vetoes over Exchanges and the Medicaid expansion can force Congress to reconsider, and hopefully repeal, the rest of this counterproductive law. Real health care reform is impossible until that happens.

Zimbabwe’s Decline

Zimbabwe, a country with one of the world’s least free economies led for decades by the authoritarian Robert Mugabe, has been growing rapidly in recent years. It has outperformed the group of six African countries dubbed the “Lion Kings” because of their high growth. In a Cato paper released today, Craig Richardson explains the factors behind Zimbabwe’s growth, including high commodity prices, and why its performance is unsustainable. 

On Saturday, Zimbabwe voted on a referendum on a proposed constitution. The results should be known later this week, but as Richardson wrote Friday in a Wall Street Journal Europe op-ed, if the constitution is approved as expected, it will enshrine “government land grabs as perfectly legal.” Recall that the country began a period of severe economic and political turmoil precisely when the government began seizing large commercial farms at the beginning of the last decade. Unfortunately, most signs point to further decline for Zimbabwe.

And the King of the Fiscal Squeeze Is…Bill Clinton?

When Congressman Paul Ryan takes the stage at CPAC Friday morning, he will, of course, tout his new budget as a solution to America’s spending problem. The 2014 Ryan plan does aim to balance the budget in 10 years. That said, it would leave government spending, as a percent of GDP, at a hefty 19% – as my colleague, Daniel J. Mitchell, points out in his recent blog.  

Proposals like the Ryan budget are all well and good, but they are ultimately just that – proposals. If Congressman Ryan really wants to get serious about cutting spending, he should look to the one U.S. President who has squeezed the federal budget, and squeezed hard.

So, who can Congressman Ryan look to for inspiration on how to actually cut spending? None other than President Bill Clinton.

How can this be? To even say such a thing verges on CPAC blasphemy. Well, as usual, the data don’t lie. Let’s see how Clinton stacks up against Presidents Barack Obama and George W. Bush. As the accompanying chart shows, Clinton was the king of the fiscal squeeze.

Yes, Bill Clinton cut government’s share of GDP by a whopping 3.9 percentage points over his eight years in office. But, what about President Ronald Reagan? Surely the great champion of small government took a bite out of spending during his two terms, right? Well, yes, he did. But let’s put Reagan and Clinton head to head – a little fiscal discipline show-down, if you will (see the accompanying chart).

And the winner is….Bill Clinton. While Reagan did lop off four-tenths of a percentage point of government spending, as a percent of GDP, it simply does not match up to the Clinton fiscal squeeze. When President Clinton took office in 1993, government expenditures accounted for 22.1% of GDP. At the end of his second term, President Clinton’s big squeeze left the size of government, as a percent of GDP, at 18.2%. Since 1952, no other president has even come close.

Some might argue that Clinton was the beneficiary of the so-called “peace dividend,” whereby the post-Cold-War military drawdown led to a reduction in defense expenditures. The problem with this explanation is that the majority of Clinton’s cuts came from non-defense expenditures (see the accompanying table).

Admittedly, Clinton did benefit from the peace dividend, but the defense drawdown simply doesn’t match up to the cuts in non-defense expenditures that we saw under Clinton. Of course, it should be noted that the driving force behind many of these non-defense cuts came from the other side of the aisle, under the leadership of Speaker Gingrich.

The jury is still out on whether Ryan (or Boehner) will prove to be a Gingrich – or Obama, a Clinton. But, at the end of the day, the presidential scoreboard is clear – Clinton is the king of the fiscal squeeze.

So, when Congressman Ryan rallies the troops at CPAC with a call for cutting government spending, perhaps the crowd ought to accompany a standing ovation for the Congressman with a chant of “Bring Back Bill!”

You can follow Prof. Hanke on Twitter at: @Steve_Hanke

The Moral Authority of the State

If everyone judged the state and its agents by the same moral standards that they used for ordinary people, then nearly all of us would be libertarians. Judged in this way, essentially all governments behave appallingly.

“Yes,” comes the standard reply, “but we don’t judge governments by the same standards. The state is different, you see.”

Of course, it’s only fair to ask why that might be the case. This month at Cato Unbound, philosopher Michael Huemer does just that, addressing several of the standard reasons why the state purportedly has license to behave very differently from the rest of us. He finds them all lacking in one way or another.

Huemer’s essay draws on his new book, The Problem of Political Authority, in which he addresses nearly all of the most common justifications for treating the state as a moral agent with legitimate powers beyond those of the rest of us. For those who usually shy away from philosophy, Huemer is an intuitionist—he doesn’t build abstract systems of thought, which may or may not be convincing or even comprehensible. He begins instead with common, widely shared intuitions, in the hope that nearly all of us, whether utilitarians, deontologists, virtue ethicists, agnostics, or otherwise, will find his conclusions compelling.

To discuss with him, we’ve recruited a panel of distinguished thinkers of varying persuasions: George Mason economics professor Bryan Caplan, libertarian scholar-activist Tom G. Palmer, and Binghamton University philosophy professor Nicole Hassoun.

As always, Cato Unbound readers are encouraged to take up our themes, and enter into the conversation on their own websites and blogs, or on other venues. We also welcome your letters. Send them to jkuznicki at cato dot org. Selections may be published at the editors’ option.