Topic: Government and Politics

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.

Government Gold-Plating

Sen. Tom Coburn (R-OK) released his annual Wastebook this past week. It contains a laundry list of doozies. The U.S. government’s gold-plating operations included $190,000 to study compost digested by worms, $297 million for the purchase of an unused mega blimp, and $1 million on a Virginia bus stop where only 15 people can huddle under a half-baked roof. These questionable (read: absurd) expenditures only represent the tip of the iceberg.

In addition to supporting members of Congress and civil servants, U.S. taxpayers support welfare recipients. And they support them lavishly, too. Hawaii, Massachusetts, and D.C. residents receive sizeable welfare payments (read: salaries). Indeed, the magnitude of these payments exceeds the average salary of an American teacher, as well as a soldier deployed in Afghanistan, by at least $10,000 per year.

The public can forget all the clap-trap they are hearing about austerity. Indeed, a fairly dull knife could cut billions of dollars from the U.S. government’s largess. 

Bulgaria: Liquidate KTB, Now

The long-awaited audit of the Corporate Commercial Bank’s (KTB’s) assets has been released by the Bulgarian National Bank (BNB). In its wake, a debate has arisen about the future of the KTB: Should it be recapitalized? And if KTB is recapitalized, should the Bulgarian or the European authorities be responsible? However, it is clear from the results of the audit that, once the obscurity of the technocratic arguments is stripped away, there can be no debate. KTB should be liquidated as soon as possible, and whatever proceeds can be obtained in liquidation should be used to reimburse guarantees to depositors paid from the Bulgarian Deposit Insurance Fund (BDIF).

KTB should be liquidated because it is not, and apparently never has been, a commercial bank. Had KTB been operated according to commercial banking principles, it would be virtually impossible for KTB to destroy value on the scale witnessed by the independent auditors. As of September 30, 2014, the auditors estimate that 76% of the asset value in KTB’s non-financial loan portfolio, which accounts for 80% of KTB’s assets, has been lost.

Losing 76% on a commercial loan portfolio must be put into perspective. In making loans, commercial banks generally require a senior secured position. This means that in the event of default, the bank may take collateral from the borrower and use the proceeds from selling the collateral to recover the bank’s principal, prior to any other creditor. From 2003 to 2012, Standard and Poor’s found that European lenders recovered 78% of their principal, on average, from defaulted loans with these characteristics. Even where defaulted loans were not secured by collateral, European lenders averaged a 48% recovery rate. Compare these recovery rates to KTB’s pathetic implied recovery rate of 24%, and it becomes clear that KTB was not operating as a real bank.

The KTB audit report tells a story in which KTB blatantly ignored the basic pillars of commercial lending. According to the report, there is little evidence that initial loan underwriting and subsequent credit monitoring ever took place at KTB.

If KTB’s management were just grossly incompetent, it would be bad enough. But it appears they were also criminals. The BNB is forwarding the audit results to the Sofia City Prosecutor’s Office. The auditors state that KTB lied to and misled BNB banking supervisors, and engaged in transactions with no evident commercial purpose. The suspicion of criminal activity is just another reason why KTB should be liquidated, now.

Americans Don’t Know How Good They Have It

CAIRO—“I could be arrested when I leave here,” said a journalist who I met at the tiny Marriott near Cairo’s Tahir Square.  A student activist observed that he could be detained at any time. 

A veteran human rights activist calmly stated:  “Some of our groups will be closed.  Some of us will be imprisoned.  It is inevitable.”

Most foreigners travel to Egypt to play tourist.  I visited with a human rights delegation, reminding me yet again about how lucky Americans—and, indeed, most Westerners—are.

Most important are the basic characteristics of a free society.  The rule of law.  Civil liberties.  Criminal procedures.  Legal safeguards.  Democratic processes. 

Obviously, even nations which purport to have all of these often fall short.  However, few Americans or Europeans, or citizens of democratic Asian nations live in constant fear of arrest, imprisonment, and torture. 

In Egypt the uncertainty began when arriving.  On both of my trips the government knew our delegation was coming.  Both times I was pulled aside. 

On the first trip an entry guard took my passport and I waited for an hour before officials returned it and waved me on.  The second time after far shorter delay security officials formally welcomed me—after asking for my phone number and hotel destination. 

Of course, the U.S. occasionally stops people from entering, but not typically because they want to assess America’s human rights record.  Even after leaving the arrivals area on my first trip I had to wait again while the videographer joining us unsuccessfully attempted to persuade officials to let him bring in his camera. 

Both visits were filled with interviews—relating all sorts of harrowing stories.  Most every society has injustice and errors are sadly common in U.S. jurisprudence.  However, most Americans don’t expect a visit to a friend to turn into a stint in prison.

In Egypt for reasons of political repression and personal revenge people face arbitrary arrest, perpetual detention, fraudulent trials, and horrific imprisonment.  Some of the accounts we heard could be exaggerated or even false, but reports from people in many walks of life and across the political spectrum suggested that the slightest resistance to state authority risks freedom and even life.

Ebola Travel Restrictions – Marginal Measures

The recent story of a Liberian man in Dallas who had Ebola sparked a political conflagration around travel restrictions for countries where there are Ebola cases. The virus does not appear to have spread from him to anyone that did not come into direct contact with him in the Dallas hospital.

Many are arguing that his arrival in the United States means that all travel from the affected West African countries should be shut immediately. Others are arguing that travel should remain as open as it currently is – which is still heavily restricted. 

What happened to policy responses on the margin

Fortunately, the federal government took a marginal action yesterday. Fliers from Guinea, Liberia, and Sierra Leone will have to enter through one of five ports of entry and undergo an interview as well as a temperature check once they arrive in the United States. These restrictions are far less than the total ban sought by some folks and still more restricted than the current system  These checks do not interrupt the flow of aid to these West African countries either and will affect roughly 150 travelers per day.

Immigration or movement restrictions for legitimate health concerns are proper and already written into law. Travel restrictions to contain viruses different than Ebola have not been successful in the past. Ebola is far less communicable than the flu so the comparison to previous travel bans might not be appropriate.  

Americans have a very low chance of contracting Ebola while in the United States, let alone dying from it. The only person to die from Ebola in the United States contracted it in Liberia. I took a bigger risk of dying from a traffic accident this morning commuting to the office than I will ever face from Ebola.

More Americans are killed every year from their furniture than all Americans who have died from that dreaded hemorrhagic fever.

Those Americans who worry about Ebola focus on the freakishly high death rates for those who contract the virus – 50 percent for most strains of the virus (only 20 percent of Americans who have contracted Ebola have died.) But the death rate is not the most important figure; the chance of contracting the virus in the first place is the most important factor. 

So far, two American nurses who treated the Liberian man contracted Ebola from him. Both nurses are recovering. For the rest of us, that means the chances of contracting Ebola is about zero. No matter the death rate, a zero chance of contracting the disease means we will not die from it.     

Still, a few marginal precautions, like those put in place by the federal government, will impose a very small temporary cost and likely stop any future Ebola patients from coming to the United States on a commercial flight.    

Stop Squandering “Defense” Dollars on Rich Allies and Failed States

America accounts for nearly 40 percent of globe’s military outlays, but Washington hawks believe that the federal government never spends enough on the Pentagon.  The United States should scale back its international responsibilities and cut Pentagon outlays accordingly.

Military expenditures are the price of Washington’s foreign policy.  And the cost is high—about $627 billion budgeted this year, before counting extra expenditures for the latest Mideast war. 

The war lobby minimizes the magnitude of America’s military spending through statistical legerdemain:  real outlays have been falling and account for a lower percentage of GDP.

But the United States leads the world in military spending and is allied with every major industrialized state save China and Russia.  America and its allies collectively account for two-thirds of the globe’s military expenditures.

While Washington’s inflation-adjusted outlays have recently dropped, they previously rose significantly—almost 165 percent between 1998 and 2011.  It is only natural for expenditures to fall as Washington wound down two wars. 

Moreover, the percentage of GDP is irrelevant.  America’s GDP this year is almost seven times that in 1952, at the height of the Korean War.  Today’s GDP is roughly 3.5 times that in 1968, at the height of the Vietnam War and almost twice that in 1989, the peak of Ronald Reagan’s Cold War military build-up.  Washington today spends more in real resources on the military than in any of those years.