Topic: General

Proven Reforms to Restrain Leviathan

Back in March, I shared a remarkable study from the International Monetary Fund which explained that spending caps are the only truly effective way to achieve good fiscal policy.

And earlier this month, I discussed another good IMF study that showed how deficit and debt rules in Europe have been a failure.

In hopes of teaching American lawmakers about this international evidence, the Cato Institute put together a forum on Capitol Hill to highlight the specific reforms that have been successful.

I moderated the panel and began by pointing out that there are many examples of nations that have enjoyed good results thanks to multi-year periods of spending restraint.

I even pointed out that we actually had an unintentional - but very successful - spending freeze in Washington between 2009 and 2014.

But the problem, I suggested, is that it is very difficult to convince politicians to sustain good policy on a long-run basis. The gains of good policy (such as what was achieved in the 1990s) can quickly be erased by a spending binge (such as what happened during the Bush years).

A Pattern of Problems in American Cities

Last December the federal Department of Justice concluded an investigation of the Cleveland Police Department.  That investigation found a pattern of excessive force in violation of the Constitution.  On Monday, Cleveland Mayor Frank Jackson agreed to a legal settlement with the feds to overhaul his police department’s policies and practices regarding the use of force and how it handles complaints and monitors the actions of its officers.  This is just the most recent police department to be scrutinized.  Following the riot in Baltimore, Attorney General Loretta Lynch announced that the Dept of Justice would be launching a pattern and practice investigation of that police department as well.  Local policymakers in Baltimore, Cleveland, and elsewhere, have let serious problems fester in their police departments and addressing those deficiencies is long overdue.  At the same time, we should also remember that policymakers are also doing a generally poor job on a broader range of issues, including the schools.  As it happens, our friends at Reason did a short film a while back titled “Saving Cleveland.”  The film covers several important issues and what needs to be done.

Last week, Cato hosted an event on Capitol Hill, Lessons from Baltimore, which covers additional issues not in the Reason film.  Policing, body cameras, and social welfare spending.  That event can be viewed here.

Balanced Budget Requirements Don’t Work as Well as Spending Limits

When I first came to Washington back in the 1980s, there was near-universal support and enthusiasm for a balanced budget amendment among advocates of limited government.

The support is still there, I’m guessing, but the enthusiasm is not nearly as intense.

There are three reasons for this drop.

  1. Political reality - There is zero chance that a balanced budget amendment would get the necessary two-thirds vote in both the House and Senate. And if that happened, by some miracle, it’s highly unlikely that it would get the necessary support for ratification in three-fourths of state legislatures.
  2. Unfavorable evidence from the states - According to the National Conference of State Legislatures, every state other than Vermont has some sort of balanced budget requirement. Yet those rules don’t prevent states like California, Illinois, Connecticut, and New York from adopting bad fiscal policy.
  3. Favorable evidence for the alternative approach of spending restraint - While balanced budget rules don’t seem to work very well, policies that explicitly restrain spending work very well. The data from Switzerland, Hong Kong, and Colorado is particularly persuasive.

Advocates of a balanced budget amendment have some good responses to these points. They explain that it’s right to push good policy, regardless of the political situation. Since I’m a strong advocate for a flat tax even though it isn’t likely to happen, I can’t argue with this logic.

Regarding the last two points, advocates explain that older versions of a balanced budget requirement simply required a supermajority for more debt, but newer versions also include a supermajority requirement to raise taxes. This means - at least indirectly - that the amendment actually is a vehicle for spending restraint.

Mr. President, Don’t Scapegoat Private Schools

It is not often I get a chance to latch on to someone as high profile as the President of the United States saying that public schools “draw us together.” But in his appearance at Georgetown University a couple of days ago, President Obama blamed, among other things, people sending their children to private schools for breaking down social cohesion and reducing opportunities for other children.

First, let’s get our facts straight: Private schools are not the main way better-off people, or people with high social capital, isolate themselves from poor families. Only 9 percent of school children attend private schools, and as Matt Ladner points out in a great response to the President, that percentage has been dropping over the years. No, the main way the better-off congregate amongst themselves is buying houses in nice places, which translates into access to good school districts. Even the large majority of the mega-rich appear to send their children to public schools, but rather than paying school tuition, their tuition is the far-steeper, far more exclusive price of a house. And let’s not pretend – as the President hinted – that we’ve seen anything close to long-term decreased funding for public schools. Even with a slight dip during the Great Recession, inflation-adjusted, per-pupil spending in public schools has well more than doubled since 1970.

On the deeper point, do we really know that public schools “draw us together,” and more importantly, do so better than private schooling? No, we don’t. That’s the accepted wisdom, but basic history doesn’t necessarily bear it out. Roman Catholics ended up starting their own school system – which at its peak in 1965 enrolled about 12 percent of all students – because the de facto Protestant public schools could not accommodate them. African-Americans, of course, were long legally excluded from public schools, especially white public schools. Similar situations existed for Asians and Mexican-Americans in some parts of the country. And, of course, public schools reflected the communities they served, which were often small and homogeneous. Finally, public schooling forces diverse people into a single system, which has led to seemingly incessant, cohesion-tearing clashes over values, personal identities, and much more.

Reich Is Wrong on the Minimum Wage

Watching Robert Reich’s new video in which he endorses raising the minimum wage by $7.75 per hour – to $15 per hour – is painful.  It hurts to encounter such rapid-fire economic ignorance, even if the barrage lasts for only two minutes. 

Perhaps the most remarkable flaw in this video is Reich’s manner of addressing the bedrock economic objection to the minimum wage – namely, that minimum wage prices some low-skilled workers out of jobs.  Ignoring supply-and-demand analysis (which depicts the correct common-sense understanding that the higher the minimum wage, the lower is the quantity of unskilled workers that firms can profitably employ), Reich asserts that a higher minimum wage enables workers to spend more money on consumer goods which, in turn, prompts employers to hire more workers.  Reich apparently believes that his ability to describe and draw such a “virtuous circle” of increased spending and hiring is reason enough to dismiss the concerns of “scare-mongers” (his term) who worry that raising the price of unskilled labor makes such labor less attractive to employers. 

Ignore (as Reich does) that any additional amounts paid in total to workers mean lower profits for firms or higher prices paid by consumers – and, thus, less spending elsewhere in the economy by people other than the higher-paid workers.

Ignore (as Reich does) the extraordinarily low probability that workers who are paid a higher minimum wage will spend all of their additional earnings on goods and services produced by minimum-wage workers. 

Understanding the World’s Energy Needs

A new documentary by Cato Senior Fellow Johan Norberg, shown recently on PBS stations nationwide, is a non-political look at the reality of the world’s energy problems. “Energy questions are complicated, and there are always trade-offs,” Norberg notes.    While bringing electricity to many remote villages in India and the Sahara causes an increase in carbon emissions, it also allows families to have refrigeration for their food, electricity to light their homes and the time to develop their lives beyond working just to sustain themselves every day.   “Don’t they deserve the same kinds of life changing benefits that power has brought the west?” Norberg asks.

This program explains how ALL sources of energy have their attributes and drawbacks.   It will take large amounts of low-cost power to fuel economic development in the third world, while also keeping up with growth in the developed world.  There is no “perfect” source to meet these needs:  Coal and oil make up a third of the current world energy supply, so while the infrastructure is in place and works fairly inexpensively, these fossil fuels are consistently tagged as “dirty.”  Natural gas is abundant and clean, and cheap and easy to use, but the means of getting to it (fracking) is controversial.  Nuclear energy power is one of the only large-scale alternatives to fossil fuels, but nuclear accidents like Chernobyl and Three Mile Island have made the public wary.  Hydro power is clean and fairly cheap, but dams have been targeted by environmentalist for harming fish populations. And, Norberg notes, most good sources of hydropower are already being utilized to their full capacity, leaving little chance to expand this resource.  Solar power is clean and abundant, but it doesn’t work when the sun doesn’t shine, and the infrastructure to capture it is expensive.  Wind supplies only one percent of energy globally because while it’s clean, it’s intermittent and doesn’t always come at the right velocity.

Norberg doesn’t make judgements, for the most part…except to say that top-down, government imposed “solutions” to the world’s energy problems have not worked yet, and are highly unlikely to suddenly start working. 

This is an excellent program for people who really want to understand the basics of world energy needs.  Watch it at Cato’s site here, and read more about the Free to Choose network here.

Sinking the Lusitania: Lying America into War, Again

The British luxury passenger liner RMS Lusitania was torpedoed a century ago. The sinking was deemed an atrocity of war and encouraged American intervention in World War I.

But the ship was carrying munitions through a war zone and left unprotected by the Royal Navy. The “Great War” was a thoroughly modern conflict, enshrouded in government lies. We see similar deceptions today.

World War I was a mindless imperial slugfest triggered by an act of state terrorism by Serbian authorities. Contending alliances acted as transmission belts of war. Nearly 20 million died in the resulting military avalanche.

America’s Woodrow Wilson initially declared neutrality, though he in fact leaned sharply toward the motley “Entente.” The German-led Central Powers were no prize. However, the British grouping included a terrorist state, an anti-Semitic despotism, a ruthless imperial power, and a militaristic colonial republic.

Britain was the best of a bad lot, but it ruled much of the globe without the consent of those “governed.” This clash of empires was no “war for democracy” as often characterized.