Topic: Government and Politics

Bow Down Before the One You Serve

Last week, I wrote about the presidential candidates’ September 11 confab on state-subsidized “service.” Today, in the Wall Street Journal, Shika Dahlmia makes the case that even though both candidates hector us ceaselessly about national service, Obama has more detailed, and more troubling, plans:

Mr. Obama would create several new corps of his own: a Classroom Corps to help teachers and students in underperforming schools; a Health Corps for underserved areas; a Clean Energy Corps to weatherize homes and promote energy independence. The last is separate from his Global Energy Corps, to promote low-carbon energy solutions in developing countries.

Mr. Obama calls all this his “Plan for Universal and Voluntary Citizen Service.” It might live up to its “universal” billing, given that it would prod Americans of all age groups – from preteens to retirees – to sign up. But as to its voluntariness, the plan will make generous use of Uncle Sam’s money – and muscle.

By Mr. Obama’s account, he will make federal education aid conditional on schools requiring that high-school and even middle-school students perform 50 hours of service each year. He will also offer college students $4,000 every year for doing 100 hours of public service. That works out to $40 an hour – a deal that only the very wealthy could refuse. (The Obama campaign puts the price tag for this alone at $10 billion.) He promises to provide older Americans who perform civic service with “additional income security, including assistance with retirement and family-related costs, and continuation of health-care coverage.” But a government that links benefits to service can take away benefits for nonservice.

Neither candidate explicitly endorses mandatory national service. But of course, if you can’t graduate high school without a stint in Obama’s Power Rangers, that’s hardly voluntary.

Polling Presidential Power

There’s a new poll out from the Associated Press and the National Constitution Center that shows “Americans strongly oppose giving the president more power at the expense of Congress or the courts, even to enhance national security or the economy.” Which is certainly good news, but it doesn’t mean there’s deep public support for de-imperializing the presidency. As the survey itself shows, only a minority of Americans thinks our current, gargantuan presidency is “too powerful.”

Which is one reason why there’s been very little debate over presidential power in campaign over the last few months (I know, because I’ve been looking fruitlessly for op-ed news hooks). Even after the Bush years, presidential power is not a pressing electoral issue.

Last December, Charlie Savage did the electorate a service by getting all the presidential candidates to go on the record with their views on executive power. (Here are McCain, Obama, and Biden’s answers.) But the voters don’t punish candidates who break these promises like they do presidents who break a “no new taxes” pledge. If the voters did, the candidates would have worried more about flip-flopping on the wiretapping question, but both McCain and Obama felt they could do it with little difficulty.

So sure, around 2/3s of the respondents to the AP/National Constitution Center poll oppose further expansions of executive power. But how people answer broad, abstract questions about governance is one thing; what they actually demand from potential presidents is another thing entirely. If the rhetoric of this presidential campaign is any indication, voters continue to respond to the idea of the president as a combination miracle-worker-cum-national parent.

Barack Obama has, among other things, promised to hold back the oceans’ rise, “end the age of oil in our time,” and “create a Kingdom right here on Earth.”

In his acceptance speech, John McCain professed humility, only moments after a video montage that suggested God rescued him from a carrier-deck fire so he could be president someday. And, judging by Rudy Giuliani’s keynote address, McCain will bridge the Mommy Party/Daddy Party divide, becoming a all-purpose national parent: “And we can trust him to deal with anything, anything that nature throws our way, anything that terrorists do to us…. and we will be safe in his hands, and our children will be safe in his hands.” He’s got the whole world in his hands.

This expansive vision of presidential responsibility is incompatible with limited government. And so long as it prevails, we can’t take much comfort in the fact that Americans tell pollsters they’d like limits on presidential power.

More bad news here.

You’ll Get Served

Tonight Barack Obama and John McCain will appear together in New York to “discuss in depth their views on service and civic engagement in the post-9/11 era” in a primetime forum hosted by ServiceNation, “a dynamic new coalition of 110 organizations that has a collective reach of some 100 million Americans and is dedicated to strengthening our democracy and solving problems through civic engagement and service.” 

According to their website, bethechangeinc.org, ServiceNation does not support mandatory national service. Their model is a dramatically expanded version of the subsidized volunteerism so popular on both sides of the political aisle. (For Cato work on federal national service programs and proposals, go here.)

Starting Inauguration Day 2009 — and culminating on next year’s 9/11 anniversary — they’ll be pushing their “advocacy campaign for national service legislation.” Among the proposals they favor: “Expanding service on college campuses. Placing 1 million Americans per year in full- and part-time stipended national service by 2020.” As the website states: “This policy agenda proposes meaningful opportunities for service at every key life stage, and for every socioeconomic group, from kindergarten through the post-retirement years.”

One wonders what sort of useful “service” five-year-olds can perform in between playtime and naptime. But the point, apparently, is that “these proposals will help instill a culture of service at an early age and provide opportunities for Americans to continue serving throughout their lifetimes.”

As tonight’s event demonstrates, both parties link the call for national service to the tragedy of September 11th. At last month’s Saddleback Civil Forum on the Presidency, Pastor Rick Warren asked both candidates “what do you think is the greatest moral failure of America?”  McCain’s answer was especially interesting.  Was it slavery?  Indian removal?  Japanese internment?  Nope: 

I think America’s greatest moral failure has been… throughout our existence, perhaps we have not devoted ourselves to causes greater than our self-interest, although we’ve been at the best at it of everybody in the world.

McCain continued with a backhanded dig at President Bush’s post-9/11 advice to Americans to “Do your business around the country. Fly and enjoy America’s great destination spots. Get down to Disney World in Florida.” McCain told Warren:

I think after 9/11, my friends, instead of telling people to go shopping or take a trip, we should have told Americans to join the Peace Corps, AmeriCorps, the military, expand our volunteers, expand what you’re doing — (APPLAUSE) — expand what you’re doing, expand the current missions that you are doing, that you are carrying out here in America and throughout the world, in Rwanda. And I hope we have a chance to talk about that later on.

In an October 2001 Washington Monthly article, McCain displayed what Matt Welch has called his “essentially militaristic conception of citizenship.” He praised City Year, an AmeriCorps initiative operating in 13 cities: “City Year members wear uniforms, work in teams, learn public speaking skills, and gather together for daily calisthenics, often in highly public places such as in front of city hall.” He also endorsed the National Civilian Community Corps, “a service program consciously structured along military lines,” in which enrollees “not only wear uniforms and work in teams… but actually live together in barracks on former military bases.” McCain calls for expanding these two initiatives and “spread[ing] their group-cohesion techniques to other AmeriCorps programs.” But perhaps we can take heart in McCain’s grudging admission that “it is not currently politically practicable to revive the draft.”

In any event, it’s good that ServiceNation is encouraging people to help their neighbors out. But why does that effort have to culminate in federal legislation? All too many people, Left and Right, seem to buy into David Brooks’s notion that “ultimately, national purpose can only find its voice in Washington.” According to that mindset, if a barn-raising takes place without a federal subsidy, it’s like it hasn’t really happened at all.

Few of us will want to argue with noble sentiments like Obama’s (or was it God’s?) injunction to act as our “brother’s keeper” or McCain’s call to serve “a cause greater than our self interest.” But it’s hard to see how any of this is their — or the government’s — business.

Americans help each other out in myriad ways everyday without expecting a government paycheck or the seal of approval from a newly minted bureaucracy. But when Americans perform charitable works outside the state, it’s awfully hard for politicians to take credit for their service.

Fannie and Freddie: Socialist from the Start

When the Cato Institute was founded in 1977 one of the first things the board of directors did was set a policy that we would not accept government funding. A simple libertarian principle, really, that money forcibly extracted from people who do not agree with our approach to public policy should not have to fund it. For 32 years, that has been our policy. In 1995 I received a letter from John Buckley, a v.p. for communications at Fannie Mae informing me of the good news that Cato was going to receive a $100,000 grant from his institution. I wrote back, Thanks, but no thanks, we have a policy against receiving money from government institutions like Fannie Mae. Boy, did I ever get a nasty letter back from Buckley stating that in no way was Fannie Mae a government entity.

The surprise GOP landslide in 1994 had apparently scared the hell out of the overpaid bureaucrats at Fannie Mae and they had decided to start funding market-oriented groups as opposed to the regulatory-oriented groups they had favored for all of their existence. Their judgment about what the new GOP majority would do turned out to be as flawed as their judgment about subprime mortgages. Anyway, if you ever wondered why Fannie Mae and Freddie Mac have over 11,000 employees and $5 trillion in mortgages, it is because of the implicit (now explicit) federal guarantee. That guarantee sucked in money that in a free market would have gone to truly private firms. It led to the enormous salaries (and then consulting gigs) and the sloppy attention to whether or not loans could be repaid. So when I hear talking heads on TV this morning claiming socialism is alive and well in America by virtue of the federal takeover of Fannie and Freddie, I think, please, Fannie and Freddie have always been socialist institutions. This is not a market failure as so many are now claiming. It is a government failure, pure and simple.

I am proud that Cato rejected that $100,000 grant.

Bailout Nation

“If only we had a Republican administration in office, none of this would have happened,” my friend Deroy Murdock emailed me this morning. He meant the nationalization of two large companies, of course, though he could have been talking about a trillion-dollar spending increase, the expansion of entitlements, the federalization of education, or indeed the great leap forward to the imperial presidency.

But the bailout of Fannie Mae and Freddie Mac is another giant step toward government control of the economy. NPR reported this morning that the government takeover “could turn out to be a smart one.” Yes, if you think nationalization of the means of production just might work. The government is writing a blank check on the taxpayers. It might cost nothing, it might cost $25 billion, it might end up costing trillions of dollars, given the size of Fannie Mae and Freddie Mac’s portfolios and the risk of further large declines in housing prices.

And speaking of the imperial presidency–all these huge new powers and expenditures are being conducted without any sanction from Congress and with little public debate. This isn’t Venezuela, but the executive branch is certainly expanding its powers on its own authority. If only President Bush would put his new powers to a public referendum, maybe a Yon Goicoechea could arise to block them. Certainly no Friedman Prize candidate has stood up in Congress.

But the Fannie-Freddie takeover is not the only bailout in the works these days. There was the Bear Stearns bailout back in March. Which might not be considered a real bailout, as Bear Stearns shareholders lost most of their investment, though it was certainly a then-unprecedented assertion of federal power. Arnold Kling noted in April that the housing bill, at least, was a pure bailout for homebuilders. Now the Big Two and a Half automobile makers are asking for $50 billion of federal help. (Didn’t we already bail out Chrysler once? How many bailouts does one company get?) And now Congress is talking about “a second economic stimulus package, totaling $50 billion in the form of money for infrastructure projects, relief for state governments struggling with rising Medicaid costs, home heating assistance for the Northeast and upper Midwest, and disaster relief for the Gulf Coast and the Midwestern flood zone.” And Transportation Secretary Mary Peters wants “an $8 billion infusion” for the federal highway trust fund. It’s a good thing that the federal government is so flush with money these days, or we might be risking a large deficit.

Capitalism is a system of profit and loss. It works because each person and each company, in seeking its own interest, is led “as if by an invisible hand” to supply goods and services that others want. Companies that satisfy consumers prosper. Companies that can’t produce goods that consumers want–like Chrysler, repeatedly–suffer and sometimes go out of business. The failures are often painful. But as Dwight Lee and Richard McKenzie wrote in their book Failure and Progress (or at least in this column based on the book), “Economic failure is to the economy what physical pain is to the body. No one enjoys pain, but without it the body would lack the information needed to maintain its health.” Government subsidies to prevent business failure simply keep pouring money into businesses that are relatively unsuccessful at satisfying consumer desires. They are, among other things, censorship of vitally needed information. Employees, entrepreneurs, and investors need to know where their money and talent are most valuable. Profits and losses are key indicators of that.

When businesses make bad decisions, they should suffer economic losses. That’s how we keep the system honest and productive. Caroline Baum of Bloomberg points out that the bailout for subprime borrowers involved helping people to stay in homes that they couldn’t afford, in many cases because they misled lenders or connived with lenders who knew they could package and resell bad mortgages. When governments make bad decisions, they should not pour good money after bad. Instead, they should try to repeal burdensome regulations, privatize functions that ought to be private, and be willing to sell purchases they shouldn’t have made, even at a loss.

Plenty of people had warned about the problems of Fannie Mae and Freddie Mac. As Arnold Kling notes in a new Cato Briefing Paper, the current crisis ” may have been the most avoidable financial crisis in history.” Treasury Secretary Larry Summers was one of those Cassandras back in 1999. So was Lawrence J. White in a 2004 Cato Policy Analysis calling for privatization, or failing that, a clear removal of the federal guarantee for the two companies. Instead, Congress and successive administrations continued to push Fannie and Freddie to get bigger and to buy mortgages that were in clear jeopardy of default. And now, having created this crisis, the federal government proposes not to wind down the overextended companies but to take them over so they can get all the benefits of crack federal financial management. Kling proposes a better exit strategy.

What Do TV Ratings for Speeches Mean?

Last week it was reported that Barack Obama’s acceptance speech was the most-watched convention speech ever, with 38.4 million viewers. Then, six days later, the Republican vice presidential nominee came within an inch of his record total. And then Nielsen reported that John McCain’s speech edged out Obama’s, making him the most-watched presidential nominee ever.

But there’s a footnote to this victory. Nielsen rates the audiences on commercial networks. But PBS says that 3.5 million people watched its broadcast of Obama’s speech, while only 2.7 million watched McCain on PBS. Why? Need you ask? PBS is a government-funded network for liberals. More people watched McCain on the conservative Fox News Channel, more people watched Obama on the liberal PBS. So if you add in the PBS figures, Obama probably has a very slight edge in total viewers. (Nielsen also doesn’t rate C-SPAN, which doesn’t release viewing figures.)

But does any of this matter? Dudley Clendinen reported in the New York Times [$] on August 26, 1984, that more people watched Walter Mondale’s acceptance speech than President Reagan’s. Reagan went on to win the election by 59 to 41 percent. And Jesse Jackson’s convention speech drew more viewers than either Reagan or Mondale.

And that wasn’t the only time, Clendinen reported: “Mr. Humphrey outdrew Mr. Nixon on television [in 1968], but not in the polls. The same thing happened with Gerald R. Ford and Jimmy Carter [in 1976]. And it happened again four years ago, when President Carter lost to Ronald Reagan.”

So enjoy your Nielsen victory, Republicans. But don’t assume that a victory at the boob tube presages a victory a the ballot box.

(Footnote: I wondered if today’s candidates were really drawing more viewers than earlier nominees, in the days of three networks and no cable competition. As far as I can tell, yes they are. Reagan and Mondale in 1984 drew 19 million viewers each. Cable was already taking big bites out of the networks by then. Nielsen says that 35 million watched Jimmy Carter’s speech in 1976. He got a much larger percentage of a smaller population.)