Topic: Government and Politics

We’re from the Government, and We’re Here to Help You Buy a House

There has been some good analysis of this week’s much-hyped agreement between the U.S. Treasury Department – which facilitated the meeting, we are told, but didn’t use any form of coercion – and mortgage lenders to bail out assist homeowners in danger of being slammed with a much higher monthly payment on their subprime mortgage come January. But there are some elements of the deal that haven’t been greeted with much skepticism – or, indeed, haven’t been reported much at all.

For starters, Treasury secretary Henry Paulson insists the agreement won’t cost taxpayers money. What he really should have said is that it won’t cost federal taxpayers money. But it might cost state taxpayers money. The White House will push Congress to let state governments issue tax-free bonds to fund programs that help homeowners refinance their mortgage. Those bonds have to be paid off by taxpayers some day. I usually like federalism, but this is not the sort I’ve grown to love.

Another part of the deal is to allow the Federal Housing Administration to expand its programs and help refinance 200,000 mortgages. As Paulson reminded reporters, the administration is asking Congress to increase the ceiling on the amount of FHA loans and lower the down-payment requirements to below the current rate of 3% of the home price. And here I was thinking big loans that were handed out with little or no money down were part of what got us into this problem in the first place. Silly me.

Nor is it really clear that the administration’s approach here won’t actually cost federal taxpayers money, either. The proposal allows the FHA to charge loan insurance premiums based on risk, like private lenders do. Currently, all FHA mortgage holders – at a high-risk of default or not – are charged the same amount.  You realize this is a much-needed change when you discover that currently the FHA is running deficit of $143 million because so many of its loans have gone bad and the premiums it collects from all loans isn’t enough to cover the losses. But, as Bloomberg News reports, the post-refinancing default rate of the subprime loans that the White House now wants the FHA to play with could be between 40 to 60 percent.  Taxpayers might get stuck paying for these loans after all.

The implicit theme of these proposals is that Uncle Sam might just be better at this mortgage business thing than the private sector. I guess it might be tiresome to insert a joke here about the U.S. Postal Service, eh?

Food Fight

My post mocking Senators Harkin and Murkowski for micro-managing school menus has triggered a bit of chatter. Matthew Yglesias and Ezra Klein saw a reference to the post on Andrew Sullivan’s site and they both argue that somebody should monitor what kids eat. But they completely miss the point. The debate is not about whether kids should be allowed to eat junk food all day. As a parent, I worry about what kids will eat without appropriate guidance (heck, I worry about what I eat in the absence of adult supervision). Instead, this is a federalism issue. Should these decisions be made by parents and local school boards, or by headline-seeking politicians in Washington? The good news is that at least one presidential candidate is saying no to federal food police:

Fred Thompson wants the government to keep its hands off your dinner plate. …”I’m telling you, I don’t think that it’s the primary responsibility of the federal government to tell you what to eat,” Thompson said to applause when asked if his health care plan included any details on preventative care, a priority for Democratic candidates. “The fact of the matter is we got an awful lot of knowledge,” said the former Tennesse senator. “Sometimes we don’t have a whole lot of will power, and I don’t know of any government program that’s going to instill that.” Thompson, ever a fan of small government, said healthy living should be the responsibilities of families first.

Based on these sentiments, Thompson presumably does not want Congress micro-managing school cafeteria menus. But what about the other GOP candidates? Ron Paul surely is on the right side. Does anybody know where Giuliani, McCain, Huckabee and Romney stand on this issue?

Taxes in 2009

All the Democratic presidential candidates appear to agree that taxes must go up.

We have been here before. Bill Clinton promised tax cuts in 1992 and then supported increases. Democrats in Congress supported Clinton’s tax hikes just as they had voted for the 1990 tax increases.

The result? Democrats lost almost one-quarter (63 seats) of their House caucus in the elections for the 103rd and 104th Congress. The Republican president that proposed the 1990 increases lost two years later.

The current group of Democratic presidential contenders may have forgotten this history lesson. I suspect congressional Democrats running next year will remember it.

More Nanny-State Foolishness

Article I, Section VIII of the United States Constitution specifies the powers of the United States Congress. The list of congressional powers is not very long, comprising less than 20 items, so it did not take very long to discover that federal lawmakers do not have any power to regulate school lunches. So I was shocked, absolutely shocked, to read in the New York Times that Senators Harkin and Murkowski are pushing legislation to micro-manage the number of calories in vending-machine snacks (though they have graciously and generously decided to exempt the Girl Scouts):

Federal lawmakers are considering the broadest effort ever to limit what children eat: a national ban on selling candy, sugary soda and salty, fatty food in school snack bars, vending machines and cafeteria lines. …Senator Tom Harkin, Democrat of Iowa and the chairman of the Agriculture Committee, has twice introduced bills to deal with foods other than the standard school lunch, which is regulated by Department of Agriculture. Several lawmakers and advocates for changes in school food believe that an amendment to the $286 billion farm bill is the best chance to get control of the mountain of high-calorie snacks and sodas available to schoolchildren. Even if the farm bill does not pass, Mr. Harkin and Senator Lisa Murkowski, Republican of Alaska, a sponsor of the amendment, vow to keep reintroducing it in other forms until it sticks. …Food for sale would have to be limited in saturated and trans fat and have less than 35 percent sugar. Sodium would be limited, and snacks must have no more than 180 calories per serving for middle and elementary schools and 200 calories for high schools. The standards would not affect occasional fund-raising projects, like Girl Scout cookie sales.

The Politics of Free Speech Change for the Better

The politics of free speech are changing fast.

The presidential public financing system is all but dead, largely because the candidates are raising so much money they don’t need to dun the taxpayers for campaign cash. The Democrats have raised a lot more money for the coming election than the Republicans. The Supreme Court is starting to favor free speech in campaign finance cases and casting a cold eye on laws like McCain-Feingold.

For most of the past three decades, so-called “reform” groups have dominated DC battles about campaign finance. These special interest groups lobbied Congress while their lawyers practiced the art of restricting speech before the Federal Election Commission.

Now that too is changing. A new group, SpeechNow.org, has formed to fight restrictions on speech. They just asked the Federal Election Commission to issue an advisory opinion about whether their fundraising must follow the contribution limits in federal election law.

Contribution limits exist–in law, if not in fact–to prevent corruption or the appearance of corruption. But SpeechNow.org is not giving money to federal candidates for office, and it is not incorporated (corporations cannot legally give money to parties or candidates). The organization is funded solely by individuals, some of whom want to give more than $5,000 to support the work of the new group.

What are they planning to do? The Center for Competitive Politics, which along with the Institute for Justice provides legal counsel to SpeechNow.org, says that “the group wants to run TV ads supporting and opposing candidates on free speech issues during the 2008 election cycle.”

Think about that for a minute. A group of citizens wants to come together to pool their resources to speak out for and against candidates on matters concerning free speech. They don’t plan to give candidates or the parties money, so the corruption threat does not exist. What could be more in line with the First Amendment and the Constitution? And yet… SpeechNow.org finds itself asking the Federal Election Commission “mother may I?” just to exercise its constitutional rights.

That should make you angry.

But think about this too. SpeechNow.org is something different from what we’ve heard on these issues for so many years, a group that plans to defend the First Amendment outside the courtroom. And somewhere in this nation is at least one person who is willing to give SpeechNow.org more than $5,000 for that effort.

That gives me hope.

America’s Hall Monitor

Odd as it may seem, there are libertarians who are Giuliani enthusiasts–and some who even find “America’s Mayor” “electrifying.” David Boaz and David Weigel each provide some very good reasons to doubt that a Rudy presidency would be good for American liberty, among them his 1980s prosecutorial “reign of terror” against Wall Street, his unhinged approach to foreign policy, and an authoritarian streak that ought to disturb civil libertarians. But for a shorter indictment, it’s hard to beat this anecdote from Newsweek’s recent feature “Growing Up Giuliani”, in which the ambitious, officious young Rudy sounds like a cross between Douglas C. Neidermeyer and Tracy Flick:

Giuliani managed a friend’s campaign that year, hiring a U-Haul with a loudspeaker to cruise outside the school, but his highest office was hall monitor. He seemed to enjoy wearing a badge and disciplining students for minor infractions, such as talking during a fire drill. “He had a stern look,” says Jack J. Rengstl, another former Loughlin student. In the yearbook, in the usual “Most likely to …” categories, he was voted “Class Politician.”

Lind on Libertarianism

Michael Lind is at it again, proclaiming the death of libertarianism on the op-ed pages of the Financial Times. “The two great trends now,” he writes, “are the collapse of libertarianism as a political force and the rise of economic populism.”

In the piece Lind provides a potted history of America’s evolving political economy. In the opening act of 1932-1968, New Deal welfare-state liberalism occupied the political center, flanked on the left by economic populism and on the right by Eisenhower-style “dime store New Deal” conservatism. Then came the shift to the right during 1968-2004, when welfare-state liberalism was shunted to the left, a newly assertive libertarianism occupied the right, and moderate conservatism commanded the center. Now, according to Lind, anxieties over globalization have led to the rout of the libertarians and the rebirth of populism. So we’re back to where we began, with welfare-state liberalism in the center (where, according to Lind, it rightfully belongs).

I’ll concede that we’ve seen a cyclical shift in recent years somewhat along the lines Lind describes. The political terrain has become more difficult for supporters of free markets and limited government, and more inviting for Lou Dobbsian populism.

But we need to be careful to distinguish between cyclical and secular change. Lind focuses on the back-and-forth of the pendulum and misses the fact that the whole clock has been moving. And it’s been moving in a generally libertarian direction.

Lind merrily proclaims that welfare-state liberalism has reclaimed the center that it occupied during 1932-1968. But he ignores the fact that welfare-state liberals today are dramatically more libertarian on economic issues than their predecessors in their parents’ and grandparents’ generations. Nobody these days seriously supports a return to a 70% top income-tax rate, or Keynesian fine-tuning, or interest-rate controls for banks, or the phone monopoly, or regulated trucking; nobody touts nationalization or wage-and-price controls as cures for what ails.

The economy today is dramatically more competitive and entrepreneurial today, and markets are dramatically less regulated, than was the case a few decades ago. And notwithstanding Lind’s fond hopes for a return of the New Deal liberal ascendancy, there is little reason to believe that this huge secular shift is going to be reversed in the foreseeable future.