Topic: General

What if They Held an Election and Nobody Came?

The interesting story about the new Associated Press-Ipsos poll is not the further decline in approval ratings for President Bush and the Republican Congress. The interesting story is how the decline is being driven by discontent among self-identified conservative voters.

Bush’s disapproval rating among conservatives is 45%. That is not as high as the overall 66% disapproval score, but it is quite remarkable considering Bush is supposed to be—according to the media—the most conservative president since Ronald Reagan. Even more stunning is the whopping 65% negative score among polled conservatives for the Republican Congress. Close to a third of conservatives surveyed would be happier if the GOP lost control of Congress.

There are many reasons for the low poll numbers. But one of the primary drivers of conservative discontent with the GOP has got to be that the Republican Congress and President Bush are the biggest spenders since LBJ.

The AP-Ipsos results seem to corroborate what other pollsters have discovered among likely voters over the past two years. In February 2006, a George Washington University Battleground poll revealed that only 36% percent of those surveyed trusted Republicans in Congress to keep spending under control—down from 47% in the same poll two years before. This isn’t because Democrats have effectively wrapped themselves in the mantle of fiscal responsibility. It’s entirely a result of the public realizing that the GOP is no longer a party committed to small government.

As a result of this, many Republicans might shift from being “likely voters” in November to deciding they’d rather not put up with the fuss of showing up to vote at all. And that’s exactly what has Republican strategists worried. Why would conservatives bother to pull the lever for a Republican candidate when continued GOP control of Congress seems likely only to give them the sort of Big Government they would expect from Democrats? That’s not what Republican leaders want to hear from their base before a mid-term (read: low turnout) congressional election in which support of the party faithful is essential to victory.

Pundits suggest that the poll numbers of late are a harbinger of a 1994-like realignment in Congress. It’s probably too early to make such grand predictions. Perhaps a better historical comparison is with the 1998 congressional elections.

At that time, Republicans were coming off of a year when they seemed to have made peace with Big Government. A few weeks before the midterm elections of 1998, the Republican Congress approved a budget that hiked non-defense discretionary spending by over 5% that year—low by comparison to today’s budgets, but over twice what was promised in the Contract with America budget. They also funded a record amount of pork-barrel projects, reversed their promise to phase-out farm subsidies, and passed a highway bill that at the time was the most expensive and earmark-laden in U.S. history. In other words, the 1998 session of Congress was in every way a rout of the very ideals that sparked the Republican Revolution in the first place.

What was the result? The GOP lost a net three seats in the House, narrowing their majority to five seats. Exit polls showed that turnout among self-identified conservatives dropped 6% from 1994 to 1998. This may not sound like a lot, but consider this: Republican House candidates received a total of 32 million votes, and Democratic candidates received 31 million votes—a difference of about 2%. In a race that close, Republicans needed all the help that could be mustered from self-identified conservatives. But those voters were clearly peeved that Republicans had lost their fiscal backbone and decided to stay home on Election Day.

Whether 2006 will be a replay of 1998 or even 1994 will at least partly depend on whether Republicans can dispel their reputations as big spenders. 

The Devil in Massachusetts

Betsy McCaughey digs into some of the details on the effects on business of Massachusetts’ brave, new health insurance experiment:

Say, for example, you open a restaurant and don’t provide health coverage. If the chef’s spouse or child is rushed to the hospital and can’t pay because they don’t have insurance, you – the employer – are responsible for up to 100% of the cost of that medical care. There is no cap on your obligation. Once the costs reach $50,000, the state will start billing you and fine you $5,000 a week for every week you are late in filling out the paperwork on your uncovered employees (Section 44). These provisions are onerous enough to motivate the owners of small businesses to limit their full-time workforce to 10 people, or even to lay employees off.

What else is surprising about this new law? Union shops are exempt (Section 32).

Of course, in states like Maryland (where I live), the possibility of killing off jobs in small businesses would hardly deter the passage of similar laws.  As far as politicians here are concerned, undermining the private economy is not a legislative bug.  It’s a feature.

Back from the Former USSR

I’ve just returned from a fascinating week in Russia and Ukraine. I was in Moscow last week to deliver some lectures regarding my book on globalization, Against the Dead Hand, which was recently translated into Russian. From there I traveled down to Kiev to improve Cato’s contacts with liberal (in the everywhere-but-America sense of that word) organizations there. 

My overwhelming impression from the visit: what a difference an oil boom makes! Now in the fifteenth year since the collapse of the Soviet Union, neither Russia nor Ukraine has had much success in making the transition from communism to a viable market economy (according to the latest Economic Freedom of the World report, Ukraine ranks 103rd in the world, with Russia trailing just behind at 115th). Despite this and many other similarities, there is one critical difference between the two countries: Russia has oil and gas, and Ukraine doesn’t.

As a result, Moscow fairly reeks of money these days – luxury retail outlets everywhere, the roads choked with Mercedes sedans, non-stop construction projects. On a plane flight I met an American whose job seems to be schmoozing the new Russian nomenklatura on behalf of American investors. Boy, did he have some stories to tell – like one about a group of bigwigs who recently paid a big-name Hollywood actor a half-million bucks just to fly to Russia and hang out with them for a few days. While I can’t vouch for the accuracy of that story (and therefore won’t give the actor’s name), the fact that it seemed entirely plausible tells you something about the amount of money sloshing around that town these days.

Kiev, meanwhile, is a charming, beautiful city – but poor. Just off Kreshchatik Street, the city’s main boulevard, are lovely old buildings in dismal, Soviet-era disrepair. And the only Western retail establishments I saw were McDonald’s, Reebok, and Benetton – not exactly catering to the glitterati.

For precisely this reason, I am much more optimistic about Ukraine’s propects for reform than I am about Russia’s. Seduced by all the easy money, Russia under Putin has decided for the time being that Jed Clampett beats Adam Smith as an economic role model. And with the abandonment of economic reform has come a nasty crackdown on political freedom. Ukraine, on the other hand, has no easy way out. And so, perhaps, its improving political climate (whatever one makes of the results of the recent parliamentary elections, at least they were free and fair) will create the space within which durable economic improvements can eventually be achieved.

D.C. Circuit 1, WaPo 0

Substantive due process cases make normally careful commentators sloppy. As many readers know, the D.C. Circuit ruled on Tuesday that “a terminally ill, mentally competent adult patient’s informed access to potentially life-saving … new drugs … warrants protection under the Due Process Clause.” Comes the Washington Post editorial board with a slapdash discussion of the case. The Post argues that the decision pulls a new constitutional right “out of thin air”—one that could “create a right to LSD or marijuana.”

Golly. Is that right? Now, there’s no denying the Court’s substantive due process line of cases is controversial. But this decision didn’t pop out of thin air and its not going to legalize marijuana. [Warning: lengthy legal discussion follows.]

The D.C. Circuit is a lower court, obligated to follow superior court precedent. The Supreme Court over the last three decades has dipped again and again into the substantive due process well. Let’s put Roe v. Wade, the most controversial example, to the side. The most restrictive framework for assessing substantive due process follows the framework set out in Justice Scalia’s plurality opinion Michael H v. Gerald D (joined by Chief Justice Rehnquist). Scalia’s opinion in Michael H makes three points:

1. Constitutionally protected liberty interests must be rooted in a “fundamental principle of the common law.”

2. The Court must select “the most specific level at which a relevant tradition protecting, or denying protection to, the asserted right can be identified.”

3. The liberty interest cannot be rooted in abstractions or generalizations. It must be rooted in a concrete description of actual case law.

The Court has since disagreed, sharply, about how to apply these principles. But, as Michael H underscores, even the most conservative members of the Court agree that the “liberty interests” protected by the due process clause include more than just freedom from restraint.

The Abigail decision does a level job of following the framework laid out in Michael H. It is at its strongest in its reliance on the common law tort rule creating a duty to refrain from “intentionally prevent[ing] a third person from giving to another aid necessary to his bodily security,” which, under Michael H, provides the most specific common law support for the liberty interest recognized.

The challenge for the case is twofold: First, the tort duty against interference with self-help and rescue is, as the court recognizes, ancient but infrequently invoked. It’s arguable that the frequency in which a widely recognized tort is invoked should not factor into whether it rises to the level of a liberty interest, since this sort of empirical judgment isn’t something courts do well. Rather, the legal question is whether the right is ancient and widely accepted as a formal principal of tort law today. (The principal problem for this argument is Lawrence v. Texas, which held state sodomy laws applied to consensual adult homosexual conduct violate the Due Process Clause, based in part on the way in which sodomy laws have been historically prosecuted. But, as the D.C. Circuit notes, some lower courts have viewed Lawrence as “not, properly speacking, a substantive due process decision.”)

Second, the pervasiveness of drug restrictions will lend credence to an argument that common law rule has been limited with respect to certain kinds of administrative regulations and can no longer be described as part of our legal traditions. The D.C. Circuit’s basic argument is that federal prohibitions on marketing of new drugs are too spotty to have displaced the basic common law rule. This is surely the most problematic part of the opinion, because the Michael H framework suggests that the presence of a countervailing regulatory tradition can refute the existence of a liberty interest. Hence the relevance of the dissent’s discussion of a history of drug regulation in colonial and nineteenth century state drug laws.

Here, there are perhaps two arguments for the D.C. Circuit. First, perhaps the evidence of a fundamental right should differ depending on whether the regulation is state or federal: perhaps a history of federal regulation is relevant to the scope of due process limits on federal law. (Michael H and most other substantive due process cases, such as Cruzan and Glucksberg, involve state laws.)

Second, and more interestingly, the D.C. Circuit argues that the challenge involves a challenge to an administrative regulation, not to a federal statute. The logic of the D.C. Circuit (see footnote 9 of the opinion for this point) appears to be that administrative regulations promulgated under a legislative delegation of rulemaking authority come with a lesser presumption of constitutionality for purposes of fundamental rights analysis. The point is fuzzy, but appears to assume that, in such challenges, plaintiffs bear a lesser burden of proving a liberty interest than they do when confronting a duly enacted federal statute. This argument is perhaps the most intriguing—and, to my mind, the most fertile for defenders of the D.C. Circuit’s decision.

If I read the case right, the latter point adds additional fuel for explaining why this decision says nothing about marijuana and LSD: both drugs are labeled Schedule I drugs (no accepted medical use) by Congress. The decision can only have implications for Schedule I drugs if the FDA uses its delegated authority to reschedule either drug.  Not likely any time soon, I’m afraid.

The point is, even under the most restrictive approach to substantive due process, the D.C. Circuit has a fairly reasonable argument based on precedent. And the D.C. Circuit must follow the Supreme Court’s precedents as it understands them. The decision is surely open to challenge, as even its staunchest defenders must admit. But only a sloppy lawyer can say this decision popped out of thin air.

Why Can’t Suri Laugh?

Tom Cruise and Katie Holmes (AKA TomKat) had a baby last month, Suri Holmes.  Apropos, this week the Medicare program’s public trustees reported that even though only 7 percent of TomKat’s federal income taxes now go toward Medicare, when Suri turns 15 years old, 25 percent of the federal income taxes levied on her modeling earnings will go straight to Medicare.  By the time Suri turns 25 years old, 40 percent of the federal income taxes levied on her book deal will help finance Medicare benefits for her dear old dad, who will then be 68 years old.

The Social Security Side-Step

In describing the contents of the Social Security Trustees’ latest annual report, most reporters have described the changes as “minor.” That impression rests, however, on a comparison of a large number with a gigantic number—the present value of Social Security’s financial shortfall over 75 years to the present value of total payrolls, also projected over the next 75 years.

Note that according to the report, an additional 2 percentage points must be added to payroll tax rates immediately and must be kept in place permanently. That’s unlikely, and precisely because we are describing the shortfall as “no big deal.”

Problem is, the cost escalates the longer we wait. How long would we wait? When it becomes as large as four percentage points? Six? No, if it becomes that large, chances are taxpayers would revolt and the system would have to face benefit cuts.

Benefit cuts? At a time when beneficiaries are more numerous and politically powerful? Unlikely. Then what?

Buried inside the report are other, larger estimates of the system’s shortfall—the “actuarial deficit” calculated without a time limit is reported to be $13.3 trillion. Including the outstanding Treasury liabilities to Social Security that must be paid for out of higher income or other non-payroll taxes, the total financial shortfall compared to benefits is a whopping $15.2 trillion. And compared to total future payrolls, this amount equals 3.7 percentage points.

Most reports attached some variant of “let’s not panic, these numbers are very uncertain” to the perpetuity estimates of Social Security’s shortfall.

Not panic? OK. But ignore? That’s effectively the message. If we don’t like the outlook, we should just ignore it. It’s not going to affect us. We’ll collect our benefits well before then, so why bother?

That’s not the advice financial planners would give to an individual or family facing uncertainty in personal finances. Rather, they would recommend purchasing insurance or hedging their portfolios by diversifying assets.

But prudence with personal assets and profligacy with public ones imply a collision course—one that’s unlikely to deliver “social security.”

Someone recently asked: Even if God told us these numbers were correct, what can we do today? After all, we can only distribute future outputs to meet future needs. This reminded me of Jacob and the Pharaohs. In that story, Jacob suggested filling the granaries well before the famines arrived—in other words, saving and investing more today.

Existing institutions—Social Security Trust Funds and such—haven’t worked in that regard. Indeed, the evidence points to the exact opposite outcome: Today’s entitlement programs are inducing us to spend more, work less, and retire earlier than ever before.
Rather than give up on a structural reform of Social Security, our efforts need redoubling.

Max Boot, Oil, and the “Dictatorship Dividend”

In the LA Times today, Max Boot identifies a real problem: oil revenue goes disproportionately to some pretty odious regimes. His solutions, such as “increase federal funding for research and rollout of fossil-fuel substitutes such as hydrogen, cellulosic ethanol (produced from grasses and agricultural waste) and plug-in electric engines,” reflect a touching faith in the ability of the federal government to pick winners among all the potential alternatives to oil out there. He would be on stronger ground if we were to argue “tax the hell out of oil and let’s see what emerges.”

Unfortunately, the cost gap between conventional gasoline and the alternatives is quite steep. Look at Europe for instance. Even with gasoline taxes that put prices at between $5-8 per gallon, we don’t see non-oil transportation fuels penetrating the market in any significant way.

I call this the “wish upon a star” policy. Yes, it would be nice if we could render oil valueless through some sort of concerted government effort. But we have made a number of great and small stabs toward that end over the decades and have nothing to show for it save for bankrupt companies, synfuel stories that no one apparently pays any attention to anymore, and forgotten white elephants like California’s glorious attempt in the early 1990s to produce high performance golf carts to replace the automobile. But alas, hope springs eternal.

If consumers want to strike a blow against “the dictator dividend” associated with gasoline consumption, there’s nothing stopping them. Don’t buy gasoline. Ride a bike. Walk. Tool around in a golf cart. Retrofit your car to run on vegetable oil or “Bio-Willie.” If that’s too much for you, you can always simply cut back on gasoline and shrink the dividend that way. There’s nothing here that government needs to do that we can’t do ourselves—if we really want to go where Boot would take us.