Topic: Government and Politics

Big Money in Politics?

As we hear the usual frenzied concern about big money in politics, Cecilia Kang and Matea Gold offer an interesting fact in today’s Washington Post:

Total political advertising in 2014 is expected to reach a record $2.4 billion, up $100 million from four years ago, according to estimates by the Kantar Media research firm.

That sounds like a lot of money. But the first thing I notice is that the increase from 2010 is only about half the rate of inflation. Given the increasing scope of government, it might be surprising that the increase has been so minimal. But divided government may have caused some potential donors to see fewer opportunities and/or risks in the next couple of years.

The Institute for Justice offers another timely way to look at the magnitude of political spending:

Money in politics, from Institute for Justice

The World Misery Index: 109 Countries

Every country aims to lower inflation, unemployment, and lending rates, while increasing gross domestic product (GDP) per capita. Through a simple sum of the former three rates, minus year-on-year per capita GDP growth, I constructed a misery index that comprehensively ranks 109 countries based on “misery.” Below the jump are the index scores are for 2013. Countries not included in the table did not report satisfactory data for 2013.

The Costs of Ebola: Guinea and Sierra Leone

For a clear snapshot of a country’s economic performance, a look at my misery index is particularly edifying. The misery index is simply the sum of the inflation rate, unemployment rate and bank lending rate, minus per capita GDP growth. 

The epicenter of the Ebola crisis is Liberia. My October 15, 2014 blog reported on the level of misery in and prospects for Liberia.

This blog contains the 2012 misery indexes for Guinea and Sierra Leone, two other countries in the grip of Ebola. Yes, 2012; that was the last year in which all the data required to calculate a misery indexes were available. This inability to collect and report basic economic data in a timely manner is bad news. It simply reflects the governments’ lack of capacity to produce. If governments can’t produce economic data, we can only imagine their capacity to produce public health services.

With Ebola wreaking havoc on Guinea and Sierra Leone, the level of misery is, unfortunately, very elevated and set to soar.

Are Well-Meaning but Misguided Conservatives Being Seduced by the Value-Added Tax?

Having a vision of a free society doesn’t mean libertarians are incapable of common-sense political calculations.

For example, the long-run goal is to dramatically shrink the size and scope of the federal government, both because that’s how the Founding Fathers wanted our system to operate and because our economy will grow much faster if labor and capital are allocated by economic forces rather than political calculations. But in the short run, I’m advocating for incremental progress in the form of modest spending restraint.

Why? Because that’s the best that we can hope for at the moment.

Another example of common-sense libertarianism is my approach to tax reform. One of the reasons I prefer the flat tax over the national sales tax is that I don’t trust that politicians will get rid of the income tax if they decide to adopt the Fair Tax. And if the politicians suddenly have two big sources of tax revenue, you better believe they’ll want to increase the burden of government spending.

Which is what happened (and is still happening) in Europe when value-added taxes were adopted.

And that’s a good segue to today’s topic, which deals with a common-sense analysis of the value-added tax.

Here’s the issue: I’m getting increasingly antsy because some very sound people are expressing support for the VAT.

I don’t object to their theoretical analysis. They say they don’t want the VAT in order to finance bigger government. Instead, they argue the VAT should be used only to replace the corporate income tax, which is a far more destructive way of generating revenue.

And if that was the final–and permanent–outcome of the legislative process, I would accept that deal in a heartbeat. But notice I added the requirement about a “permanent” outcome. That’s because I have two requirements for such a deal:

1. The corporate income tax could never be reinstated.

2. The VAT could never be increased.

And this shows why theoretical analysis can be dangerous without real-world considerations. Simply stated, there is no way to guarantee those two requirements without amending the Constitution, and that obviously isn’t part of the discussion.

Attorneys General Aim at New Targets, Who Respond as Expected

The New York Times launches a series of investigative reports on corporate lobbying of state attorneys general. But you have to read fairly far down in the story to find the “nut graf” on why this is happening now. Radley Balko summed it up in a tweet: “As prosecutors get increasingly powerful, lobbyists will increasingly spend money to try to influence them.” And the article does note that: 

A robust industry of lobbyists and lawyers has blossomed as attorneys general have joined to conduct multistate investigations and pushed into areas as diverse as securities fraud and Internet crimes….

The increased focus on state attorneys general by corporate interests has a simple explanation: to guard against legal exposure, potentially in the billions of dollars, for corporations that become targets of the state investigations.

It can be traced back two decades, when more than 40 state attorneys general joined to challenge the tobacco industry, an inquiry that resulted in a historic $206 billion settlement.

Microsoft became the target of a similar multistate attack, accused of engaging in an anticompetitive scheme by bundling its Internet Explorer with the Windows operating system. Then came the pharmaceutical industry, accused of improperly marketing drugs, and, more recently, the financial services industry, in a case that resulted in a $25 billion settlementin 2012 with the nation’s five largest mortgage servicing companies.

The trend accelerated as attorneys general — particularly Democrats — began hiring outside law firms to conduct investigations and sue corporations on a contingency basis.

I wrote about this 30 years ago in the Wall Street Journal, citing Hayek’s assessment from 40 years before that:

Nobel laureate F.A. Hayek explained the process 40 years ago in his prophetic book The Road to Serfdom: “As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power.”

As the size and power of government increase, we can expect more of society’s resources to be directed toward influencing government.

Those who work to increase the size, scope, and power of government need to recognize: This is the business you have chosen. If you want the federal government to tax (and borrow) and transfer – and reallocate through prosecution – $3.8 trillion a year, if you want it to supply Americans with housing and health care and school lunches and retirement security and local bike paths, then you have to accept that such programs come with incentive problems, politicization, corruption, and waste. And that special interests will find ways to influence such momentous decisions, no matter what lobbying restrictions and campaign finance regulations are passed.

It Was Fifty Years Ago Today

Fifty years ago today, the actor Ronald Reagan gave a nationally televised speech on behalf of the Republican presidential nominee, Senator Barry Goldwater. It came to be known to Reagan fans as “The Speech” and launched his own, more successful political career.

And a very libertarian speech it was: 

This idea that government was beholden to the people, that it had no other source of power is still the newest, most unique idea in all the long history of man’s relation to man. This is the issue of this election: Whether we believe in our capacity for self-government or whether we abandon the American Revolution and confess that a little intellectual elite in a far-distant capital can plan our lives for us better than we can plan them ourselves.

You and I are told we must choose between a left or right, but I suggest there is no such thing as a left or right. There is only an up or down. Up to man’s age-old dream – the maximum of individual freedom consistent with order – or down to the ant heap of totalitarianism. Regardless of their sincerity, their humanitarian motives, those who would sacrifice freedom for security have embarked on this downward path. Plutarch warned, “The real destroyer of the liberties of the people is he who spreads among them bounties, donations and benefits.”

The Founding Fathers knew a government can’t control the economy without controlling people. And they knew when a government sets out to do that, it must use force and coercion to achieve its purpose.

Video versions of the speech here.

For libertarians, Reagan had his faults. But he was an eloquent spokesman for a traditional American philosophy of individualism, self-reliance, and free enterprise at home and abroad, and words matter. They change the climate of opinion, and they inspire people trapped in illiberal societies. And these days, when people claiming the Reagan mantle push for wars or military involvement in Iraq, Iran, Syria, and other danger spots, we remember that Reagan challenged the Soviet Union mostly in the realm of ideas; he used military force only sparingly. George W. Bush, whom some call “Reagan’s true political heir,” increased federal spending by more than a trillion dollars even before the financial crisis. We watch the antigay crusading of today’s conservative Republicans and remember that Reagan publicly opposed the early antigay Briggs Initiative of 1978 (featured in the movie Milk).

And in those moments libertarians are tempted to paraphrase the theme song of All in the Family and say, “Mister, we could use a man like Ronald Reagan again.”

Would that the current assault on economic freedom would turn up another presidential candidate with Reagan’s values and talents. More on Reagan here and here. 

Federalism Doesn’t Mean That States Can Do Whatever They Want

Cato and the Constitutional Accountability Center have filed another amicus brief in a marriage case, this one challenging Louisiana’s restriction of marriage licenses to opposite-sex couples and its non-recognition of out-of-state same-sex marriages. Filed in the U.S. Court of Appeals for the Fifth Circuit—where last month we filed in a case out of Texas—this is an appeal from the only ruling to uphold a state marriage law since the Supreme Court’s decision in United States v. Windsor struck down part of the Defense of Marriage Act. (A federal judge in Puerto Rico also recently upheld that commonwealth’s law.)

Our previous briefs, including in that Texas case and also regarding the marriage laws of Oklahoma, Utah, Virginia, Michigan, Tennessee, Kentucky, Indiana, and Wisconsin in the TenthFourth, Sixth, and Seventh Circuits, respectively, focused on the original public meaning of the Fourteenth Amendment’s Equal Protection Clause and its guarantee of “equality under law” for all. Here, however, we focus on federalism, democracy, and why states shouldn’t automatically get judicial deference when they pass legislation.

That is, the Fourteenth Amendment significantly reworked the constitutional order such that the U.S. Constitution now protects individual liberty against state infringement (which wasn’t the case before the Civil War). When the district court held that Louisiana was free to deny loving, committed same-sex couples the freedom to marry because the state “has a legitimate interest … for addressing the meaning of marriage through the democratic process,” it empowered the people of the states to use the democratic process to oppress disfavored minorities and thus overturned the constitutional order we’ve had since 1868.