Topic: Government and Politics

Prosperity in Washington

 The current Attorney General, Eric Holder, left DC’s Covington and Burling to return to the Justice Department, where he held a senior post during the Clinton years.  Holder’s mission is to supposedly ”rein in the free market excesses of the last eight years.”  Bush’s people are done with their own crackdown and are now returning to DC’s big law firms to warn their client business firms about the coming crackdown by Holder’s prosecutors.  This is sorta like the GOP legislators who are now trying to lodge complaints about Obama’s spending.  Despite the rhetoric, both sides aggrandize federal power and then enrich themselves (pdf) while advising businesspeople on how to comply with myriad regulations  from the alphabet agencies.

For related Cato work, go here and here.

GM’s Nationalization and China’s Capitalists

GM’s restructuring under Chapter 11 includes plans to sell off the Hummer, Saab, and Saturn brands. Well, just one day after GM’s bankruptcy filing, a Chinese firm has come forward with a $500 million offer to purchase Hummer. The prospective buyer is Sichuan Tengzhong Heavy Industrial Machinery Co Ltd, a manufacturing company in western China, which hopes to become an automaker.

Not only is the Hummer offer the first bid for a GM asset in bankruptcy, but the bidder is foreign. Not only is the bidder foreign, but Chinese. And not only is the bidder Chinese, but the Hummer was first developed by the U.S. military. Thus, this is certain to be characterized as a national security matter, and the Committee on Foreign Investment in the United States (CFIUS) will have to review the proposal. There should be little doubt that the economic nationalists will be out in full force, warning CFIUS against transferring sensitive technologies to Red China.

Let me offer two quick points, as the bulging veins in my temples pulsate with disdain for official Washington.

First, if this deal is rejected (even if the bidder is scared away by detractors), any remaining credibility to the proposition that the United States will once again become that beacon on a hill, exemplifying for the world the virtues of free markets and limited government, will vanish into the ether. There has been too much U.S. hypocrisy on free trade and cross-border investment and too much double talk about the impropriety of government subsidizing national champions, that another indiscretion in a high profile case will blow open the already-bowing flood gates to economic nationalism worldwide. Considering that U.S. companies sell five times as much stuff to foreigners through their foreign subsidiaries than by exporting from the United States, investment protectionism is as advisable as nationalizing car companies.

Second, the willingness of this Chinese company to purchase Hummer serves as a stark reminder of what could have been. Had George W. Bush not allocated TARP money to GM last December, in circumvention of Congress’s rejection of a bailout, then GM likely would have filed for bankruptcy on January 1. At that point, there would likely have been plenty of offers from foreign and domestic concerns for individual assets to spin off or for equity stakes in the New GM. There would have been plant closures, dealership terminations, and jobs losses, as there is under the nationalization plan anyway. But taxpayers wouldn’t be on the hook for $50+ billion, a sum that is much more likely to grow larger than it is to be repaid. It is also a sum that will serve as the rationalization for further government interventions on GM’s behalf.

Haywood v. Drown

The Supreme Court ruling in Haywood v. Drown got lost in the news last week, but it was an important constitutional case involving the principle of federalism.  The issue concerned the  extent to which the central government can commandeer state judicial systems.  Unfortunately, by a narrow 5-4 vote, the Court gave the central government a green light.

Justice Clarence Thomas filed  another one of his sober, scholarly opinions in dissent and I think he makes the case rather well.  Excerpt:

The Court holds that New York Correction Law Annotated §24, which divests New York’s state courts of subject-matter jurisdiction over suits seeking money damages from correction officers, violates the Supremacy Clause ofthe Constitution, Art. VI, cl. 2, because it requires the dismissal of federal actions brought in state court under42 U. S. C. §1983. I disagree. Because neither the Constitution nor our precedent requires New York to open its courts to §1983 federal actions, I respectfully dissent.

Although the majority decides this case on the basis of the Supremacy Clause, see ante, at 5–13, the proper starting point is Article III of the Constitution. Article III, §1, provides that “[t]he judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.” The history of the drafting and ratification of this Article establishes that it leaves untouched the States’ plenary authority to decide whether their local courts will have subject-matter jurisdiction over federal causes of action.

Until this setback, the Court’s conservatives were doing well in this corner of the law.  In New York v. United States (1992), the Court ruled that state legislatures were not subject to federal direction.  In Printz v. United States (1997), the Court ruled that state executive officers were not subject to federal direction.  This case stood for the proposition that state courts are not subject to federal direction.  Alas, Justice Anthony Kennedy joined the liberals to subordinate the states to federal control.

Here’s a practical example to illustrate the problem.  It’s bad enough when Congress wants to pass a law like the Americans with Disabilities Act (pdf)–a law that will create a flood of litigation.  But what if Congress goes a step further and writes the law in such as way as to say ”take all those time-consuming lawsuits to the state courts. Federal judges and personnel can’t be bothered with that stuff!”  So state courts get clogged or state lawmakers must raise taxes to alleviate the added burden, which blurs accountability.  That’s what is likely to happen. Or, to be precise, continue to happen with increasing frequency.  The feds have permission to foist costs on to the states.

But, to be clear, the main issue here is the proper division of federal and state authority.  Even if Congress were to get around the problem of unfunded mandates by throwing money at the states, each state should retain control over its judiciary.  As Justice Thomas notes, the issue of federal supremacy is too often distorted by liberals.  Within its proper sphere, the feds are supreme.  Liberals want supremacy and federal authority that is plenary.  Wrong.  Obama’s Supreme Court nominee should be asked about federalism and the doctrine of enumerated powers at the confirmation hearings.

Here Comes World Government

Colleague Dan Mitchell sent me this heart-warming press release from the Organization for Economic Cooperation and Development, an international government organization.

Tax collectors worldwide to co-operate in revenue-raising to offset fiscal deficits.

The sub-heading is “Tax Commissioners Worldwide Join Forces To Tackle Fiscal Challenges Posed By The Financial And Economic Crisis.”

Crazy me, but I thought the way to get out of the economic crisis was for businesses and entrepreneurs to start investing and hiring again. But no, the key is apparently to launch a global drive to drain more money from the damaged private sector and fatten up the coffers of bloated governments.

The chair of the OECD’s Forum on Tax Administration, Pravin Gorhan, helpfully points out in the press release: “Tax plays a fundamental role in development through mobilising revenue, promoting growth, reducing inequalities and reinforcing governments’ legitimacy, as well as achieving a fair sharing of the costs and benefits of globalisation.”

You don’t have to be a libertarian to see what a government-centric view these OECD officials have. Taxes promote growth? I don’t think so. And we don’t need to hear about “reinforcing governments’ legitimacy” from an unelected government body that has been far overreaching its authority to force policy changes on the democratically elected governments of lower-tax nations.

If you don’t think this sort of worldwide police effort jibes with the American ideals of life, liberty, and the pursuit of happiness, you should contact your member of Congress because U.S. taxpayers pay one-fourth the budget of the Paris-based OECD.

Week in Review: Sotomayor, North Korean Nukes and The Fairness Doctrine

Obama Picks Sotomayor for Supreme Court

sotomayorPresident Obama chose federal Judge Sonia Sotomayor on Tuesday as his nominee for the U.S. Supreme Court, the first Hispanic Latina to serve on the bench.

On Cato’s blog, constitutional law scholar Roger Pilon wrote, “President Obama chose the most radical of all the frequently mentioned candidates before him.”

Cato Supreme Court Review editor and senior fellow Ilya Shapiro weighed in, saying, “In picking Sonia Sotomayor, President Obama has confirmed that identity politics matter to him more than merit. While Judge Sotomayor exemplifies the American Dream, she would not have even been on the short list if she were not Hispanic.”

Shapiro expands his claim that Sotomayor was not chosen based on merit at CNN.com:

In over 10 years on the Second Circuit, she has not issued any important decisions or made a name for herself as a legal scholar or particularly respected jurist. In picking a case to highlight during his introduction of the nominee, President Obama had to go back to her days as a trial judge and a technical ruling that ended the 1994-95 baseball strike.

Pilon led a live-chat on The Politico’s Web site, answering questions from readers about Sotomayor’s record and history.

And at The Wall Street Journal, Cato senior fellow John Hasnas asks whether “compassion and empathy” are really characteristics we want in a judge:

Paraphrasing Bastiat, if the difference between the bad judge and the good judge is that the bad judge focuses on the visible effects of his or her decisions while the good judge takes into account both the effects that can be seen and those that are unseen, then the compassionate, empathetic judge is very likely to be a bad judge. For this reason, let us hope that Judge Sotomayor proves to be a disappointment to her sponsor.

North Korea Tests Nukes

The Washington Post reports, “North Korea reportedly fired two more short-range missiles into waters off its east coast Tuesday, undeterred by the strong international condemnation that followed its detonation of a nuclear device and test-firing of three missiles a day earlier.”

Writing in the National Interest online, Cato scholar Doug Bandow discusses how the United States should react:

Washington has few options. The U.S. military could flatten every building in the Democratic People’s Republic of Korea (DPRK), but even a short war would be a humanitarian catastrophe and likely would wreck Seoul, South Korea’s industrial and political heart. America’s top objective should be to avoid, not trigger, a conflict. Today’s North Korean regime seems bound to disappear eventually. Better to wait it out, if possible.

On Cato’s blog, Bandow expands on his analysis on the best way to handle North Korea:

The U.S. should not reward “Dear Leader” Kim Jong-Il with a plethora of statements beseeching the regime to cooperate and threatening dire consequences for its bad behavior. Rather, the Obama administration should explain, perhaps through China, that the U.S. is interested in forging a more positive relationship with [the] North, but that no improvement will be possible so long as North Korea acts provocatively. Washington should encourage South Korea and Japan to take a similar stance.

Moreover, the U.S. should step back and suggest that China, Seoul, and Tokyo take the lead in dealing with Pyongyang. North Korea’s activities more threaten its neighbors than America. Even Beijing, the North’s long-time ally, long ago lost patience with Kim’s belligerent behavior and might be willing to support tougher sanctions.

Cato Media Quick Hits

Here are a few highlights of Cato media appearances now up on Cato’s YouTube channel:

Democratic Deficit Hawks?

In a hagiographic profile of Obama budget director Peter Orszag, Ryan Lizza of the New Yorker writes of the “pressure” he might get from congressional deficit hawks:

The respective heads of the House and Senate Budget Committees, John Spratt, Jr., of South Carolina, and Kent Conrad, of North Dakota, have spent years trying to control the deficit…

Kent Conrad, the chairman of the Senate Budget Committee, has made eradicating the federal budget deficit his life’s work.

Now, you’d think that if the ranking Democrats on the congressional budget committees had made deficit reduction their life’s work, the budget wouldn’t have, you know, skyrocketed over the past decade and more. So let’s go to the tape.

The National Taxpayers Union has given Spratt an F for his votes on federal spending every year for more than a decade. (He had a couple of D’s earlier in his career.) In the past two years, he voted with the taxpayers 5 and 6 percent of the time. He voted for spending bills more often than the average member of the House, and more often than the average Democrat. Some deficit hawk!

Conrad has an almost identical record — almost all F’s, with ratings of 5 and 6 in the past two years.

By another measurement, in the 109th Congress (the most recent for which these calculations are available), Spratt voted for $184 billion in additional spending and voted to cut — drum roll, please — $4.8 billion in spending. Conrad voted to cut $8 billion, but he also voted to hike spending by $362 billion. In what world are these guys “trying to control the deficit”?

NTU does have one analysis that makes Conrad and Spratt look a little better: the bills they have sponsored or cosponsored. Spratt introduced 32 bills that would increase spending and 2 that would cut spending. While that may not sound very thrifty, it compares favorably to, say, Hilda Solis’s 110 bills to increase spending or Barney Frank’s 112. And the total new spending in Spratt’s bills — $7 billion — is positively Randian. Conrad’s record is similar — 36 bills to increase spending by $8 billion, which compares very favorably to, for instance, Hillary Clinton and Thad Cochran.

Apparently Conrad and Spratt don’t introduce too many spending bills, but they vote for all the ones that get to the floor. Not exactly a strategy that holds the budget down. The search for a fiscally conservative Democrat continues.

Cato Scholar Brings Administration to Heel

Last week, I complained loudly that the “Speeches” section of the Whitehouse.gov Web site had only four speeches on it, the most recent coming at the end of February.

And, voila, today the site is transformed. A new “speeches and remarks” page at that location has a 28-page list of official utterances from President Obama since he took office.

Does it matter a lot that people can now more easily find what President Obama has said? It kinda does. Americans will go a little more often right to the source rather than relying on media interpretations of what the president is saying. In the aggregate, we’ll have a better informed, slightly more skeptical, and more empowered populace.

Kudos to the folks at the White House for making the change. In retrospect, it appears that some arcane difference between “speeches” and “remarks” kept many important things the president says off the “Speeches” page. For my part, a 6,500-hundred word oration on national security delivered from behind a lectern is a speech, but the White House calls such a thing “remarks.”