Topic: General

Selective Outrage

Here’s the webpage for Rep. Sensenbrenner’s breathlessly titled hearing on the FBI search of Rep. Jefferson’s office: “RECKLESS JUSTICE: Did the Saturday Night Raid of Congress Trample the Constitution?” It’s a stacked deck–four scholars who share Sensenbrenner’s outrage over the raid.

Perhaps the testimony of Jonathan Turley or Bruce Fein, both of whom have been on the right side of important separation of powers issues in the last few years, will change my mind. But right now the congressional reaction to the search reminds me of President Clinton piously invoking the Constitution in defense of the God-given, natural right to fool around with the help and lie about it in court. As Clinton put it at a news conference in 2000: “on the impeachment, let me tell you, I am proud of what we did there, because I think we saved the Constitution of the United States.”

If you’re going to defend the Constitution, you could pick clearer grounds than a narrow interpretation of “high crimes and misdemeanors,” and it would also be nice if you’d demonstrated the slightest interest in defending it before Ken Starr came knocking. Similarly, if you’re going to complain about “Trampling the Constitution,” it’s a little unseemly to start with penumbras and emanations from the Speech or Debate Clause, when you have a president who claims inherent authority to break any law that Congress passes if he believes it constrains his freedom of action in the war on terror. Marty Lederman puts it well:

if this were part of a concerted congressional effort to fight back against the tide of Executive aggrandizement, the outrage might be understandable. But Congress has been almost completely indifferent, for two years running now, with respect to very serious separation-of-powers challenges – an Executive branch that has repeatedly asserted a constitutional power to ignore statutes regulating the conduct of war; that has kept virtually all of its dubious activities secret from the legislature and public; that has resisted any serious oversight; that has engaged in widespread surveillance of U.S. citizens without warrant or probable cause of wrongdoing (or that the U.S. persons are agents of al Qaeda); etc. And Congress has simply sat back and done nothing. If Denny Hastert, et al., had been fighting tooth and nail on torture, and oversight of Iraq, and the manipulation of intelligence, and the use of signing statements to signal noncompliance with scores of statutes, and violations by NSA of FISA and other statutes, etc., then perhaps this latest incident would rightly be seen as a straw that broke the camel’s back. But… Congress has instead allowed its own core constitutional powers – such as the enactment of laws – to be swept aside with impunity by an Administration with a strikingly aggressive view of Executive prerogatives. That legislators care much more about the sanctity of the contents of their offices than about the enforcement of the laws they have written is, perhaps, predictable, but nevertheless unfortunate.

Sloan’s Cash Cow

Columnists often have cash cows–storylines that they milk over and over. Allan Sloan writes the “Deals” column in the Washington Post, and his cash cow is outrage over corporate mergers and acquisitions that avoid taxes.

In dozens of columns, Sloan has complained about corporations that (legally) minimize their taxes when doing M&As. Typically, he implies that we would be better off if every M&A on Wall Street got hit with a hefty tax of 30 percent or so. In today’s column, Sloan complains that a proposed transfer of the Atlanta Braves from Time Warner to Liberty Media would avoid $700 million in taxes, and that average taxpayers would be ”shut out.”

Here are some issues that I’ve never seen Sloan address:

1) Does it make sense to tax M&As at all? Why should Uncle Sam get a pound of flesh every time American businesses do some restructuring? M&As often have capital-gains-tax implications. But capital gains taxes can represent a double-taxation on business earnings. Under a more efficient tax system, capital gains would not be taxed at all.

2) Two items that make the tax effects of M&As complex are capital gains and depreciation. These items are unique to income taxes. Under a consumption-based tax system, such as the Steve Forbes Flat Tax, they would be eliminated and M&As vastly simplified. Why not focus on tax reform as a systematic fix to the problems of M&As, rather than complaining about each individual deal?

3) Better yet, why not eliminate the corporate income tax altogether, as many eminent conservative and liberal economists have advocated over the decades? Corporate taxes are ultimately paid for by workers, consumers, and individual shareholders. The former group probably bears most of the burden in the modern globalized economy. If $700 million of taxes were avoided on the Atlanta Braves’ deal, the biggest winners are likely to be American workers.

Whining about the particular effects of our complex tax code is easy. I’d rather see columnists like Sloan tell us how to simplify the code so that corporations aren’t encouraged to pursue the fancy tax sheltering that he chronicles in the first place.  

A Flood of Immigrants?

In the midst of the Senate debate on an immigration bill this month, the Heritage Foundation published a report claiming that legalization of undocumented workers already here and creation of a temporary-worker program would unleash a flood of more than 100 million new immigrants in the next 20 years. The headline-catching number turned heads on Capitol Hill, provided grist for talk radio, and hardened the opposition to immigration reform.

In hindsight, however, the number looks less and less plausible. Consider: If immigrants did come in such numbers, the average would be 5 million a year. That compares to an average immigration inflow, legal and illegal, of about 1.5 million during the past decade. The U.S. economy simply could not produce enough jobs each year during the next two decades to attract and employ that many immigrants. We also know from experience that previous attempts at legalization did not unleash a flood of so-called chain migration, in which newly legalized and naturalized workers sponsor spouses, children, parents and siblings. Check out an op-ed article posted today on the Cato web site that spells out in detail why the 103 million figure is a gross exaggeration. 

The Congressional Budget Office, in its own study [.pdf] released May 16, calculates that immigration reform along the lines of what the Senate passed last week would increase immigration over the next decade by less than 8 million. And an analysis by the President’s Council of Economic Advisers found numerous methodological faults with the Heritage study, including double counting and failure to account for emigration.

The Heritage study generated a lot of heat in an already over-heated immigration debate. Unfortunately, it failed to provide any real light.   

HSAs Grow Faster than Critics’ Understanding of HSAs

An article in today’s Detroit Free Press reports that health savings accounts (HSAs) are catching on, and showcases some of the less-valid criticisms HSAs.

In the article, Jason Furman of the Center on Budget and Policy Priorities argues that a family of four with an annual income of $30,000 and the usual expenses is unlikely to be able to save $5,000 per year in an HSA.

There are a number of problems with that argument.  For example, it doesn’t address the question, “Compared to what?”  The alternative to HSAs is usually comprehensive third-party health coverage, which carries much higher premiums than high-deductible health insurance.  If the family can’t afford to save, where are they supposed to get the money to pay those higher premiums?  Also, there’s nothing in the HSA law that says a family must have $5,000 of cost sharing.  The family’s cost sharing could be as low as $2,100.  (Less cost sharing means higher premiums, but shouldn’t the family be able to make that tradeoff for themselves?)

The article raises a number of other criticisms of HSAs, all of which I address in a study released today by the Cato Institute titled, “Health Savings Accounts: Do the Critics Have a Point?

Peruvian Elections and the Future of Latin American Populism

The upcoming Peruvian runoff elections for president may provide another sign that the wave of Hugo Chavez-style populism in Latin America has crested. The contest is between Alan Garcia–a former populist president who ruined the country during his term (1985-1990) with heterodox economic policies (Peru was set back 30 years in terms of per capita income; had 7,000 percent inflation in 1990; and much of the country was controlled by the Shining Path guerrillas)–and Ollanta Humala–an extreme nationalist and populist who, following the example of Chavez, led a brief but failed rebellion against the outgoing regime of President Alberto Fujimori in 2000. Humala´s popularity among the most disenfranchised of Peru´s poor, especially in the country´s interior, went virtually unnoticed among Peru´s elite and the press until last year. (Peruvian adjunct scholar Enrique Ghersi was alone in foreseeing this development in an op-ed in the Christian Science Monitor in 2003).
 
Garcia promises to run a responsible government that respects the constitution and the separation of powers, including the independence of the central bank. Humala promises nationalizations, a rejection of the free trade agreement with the United States pending in the congress, a constituent assembly to draft a new constitution, and the arrest of corrupt ex-presidents including Garcia himself. 

Polls give Garcia a lead in the June 4 elections, especially among voters in urban areas and along the coast. Peruvians don´t love Garcia; many who plan on voting for him even hate him but consider him a lesser of two evils who will stick to democracy and be constrained by a Peruvian economy that is much more open than it was during the 1980s. Humala´s authoritarianism promises to change the rules of the game in a way that scares most Peruvians.
 
I’m writing from Moyobamba, Peru.  In the rural areas surrounding this jungle town where the Andes turn into the Amazon rain forest, most villages have no sewerage or running water and electricity for some areas is recent. Rural Peruvians here will vote for Humala. But those votes are not necessarily ideological. Many will vote for Humala because they feel they have nothing to lose from rejecting the traditional political system that has served them poorly. Indeed, were the supposedly neo-liberal former president Fujimori (1990-2000) allowed to run again, the poor here would overwhelmingly give him their votes. The two most popular presidents in this part of the country are Fujimori–for pacifying the country by getting rid of leftist guerrillas who terrorized rural areas–and Fernando Belaunde, who in the 1960s built major roads connecting the region to the rest of the country. 
 
Garcia´s likely election will be a blow to Hugo Chavez. Chavez has explicitly endorsed Humala, leading to heated and continuing exchanges between Chavez and Garcia, who accuses the Venezuelan president of interfering in Peru´s internal affairs and of planning on using Humala as his puppet. Chavez may have an ally and a client in Bolivian President Evo Morales, but his Bolivarian dream of uniting Latin America under his leadership is being undermined by a Latin American reality: Latin America´s usually irresponsible governments more often than not, thankfully, do not get along. 
 
Thus Brazil and Bolivia are in a dispute over Bolivia´s nationalization of gas companies that belong to Brazil and provide that country with much energy; Mexican President Vicente Fox has clashed publicly with Chavez about Mexico´s relations with the United States; and the leftist governments of Argentina and Uruguay are in a heated dispute about a border issue. 
 
The election of Garcia will not be a victory for market liberals or a definitive defeat of populism. As a Peruvian economist recently described to me, Peru, with its long coast and Andean and jungle interior, is part Chile (modern and open) and part Bolivia (more backward and isolated).  A Garcia presidency will be mostly mediocre with a possibility of market reforms in some areas (agriculture and perhaps property titling, for example) and with Humala as a remaining, significant irritant. 
 
Such is the uneven pace of progress in Latin America these days. But it would be progress nonetheless. The next bit of major good news in the region may come from Mexico, where presidential elections in July may result in the rise to power of Felipe Calderon, a market liberal now leading in the polls, and the defeat of populist Andres Manuel Lopez Obrador, Chavez´s favored candidate.