Topic: Government and Politics

Sullivan on Wehner on Obama

Peter Wehner argued in yesterday’s WaPo that, although it’s seemingly impossible to dislike Obama, the guy’s just too liberal for conservatives to support. Andrew Sullivan, the conservative author of a favorable profile of Obama in the Atlantic a few months back, chimes in:

If a Democrat ran for office today pledging a massive increase in entitlement spending, a decades-long multi-trillion dollar nation-building project in the Middle East, the biggest increase in discretionary spending since LBJ, a huge increase in the power of the executive branch, a doubling of the federal education budget, a de facto amnesty program for 12 million illegal immigrants, and a cool additional $32 trillion to the country’s unfunded liabilities … would Wehner be saying he is out of bounds for conservatives because he is a special interest group liberal?

Nothing in Obama’s policy book comes even close to the massive lurch to the left that Pete Wehner engineered and supported and celebrated when it was done by a Republican president.

Ouch. That’s going to leave a mark.

Would You Vote to Put this Statist in the White House?

Last month, I wrote on this site about a Republican who genuinely believed in limited government. The bad news is that my example was not from this year’s campaign, but instead came from a 1920s-era video featuring Calvin Coolidge. After further research, I’ve discovered a more recent video that captures the words of someone who is getting a lot of attention in this year’s GOP campaign. Sadly, this high-profile Republican uses class-warfare rhetoric to condemn tax cuts. He urges more income distribution and a bigger role for the federal government. He even claims that corporate profits cause inflation. Would you vote for someone who gave this speech?

Excessive Salaries for State and Local Bureaucrats

USA Today reports on the growing compensation gap between bureaucrats and workers in the productive sector of the economy. My colleague Chris Edwards already has documented how federal bureaucrats are overpaid, so the extravagant compensation for state and local bureaucrats is not very surprising

State and local government workers are enjoying major gains in compensation, pushing the value of their average wages and benefits far ahead of private workers, a USA Today analysis of federal data shows. The gap is widening every year, rising by an average $1.02 an hour last year and $2.45 an hour over the past three years.

…State and local government workers now earn an average of $39.50 per hour in total compensation, reports the Bureau of Labor Statistics (BLS). Private workers earn an average of $26.09 an hour. Benefits are a big reason for the gap.

…From 2000 to 2007, public employees enjoyed a 16% increase in compensation after adjusting for inflation compared with 11% for private workers. The nation has 20 million state and local government employees. About 116 million people work in the private sector.

The pay gap obviously is bad news for taxpayers, but the bigger issue may be the misallocation of labor. When compensation for bureaucrats is excessive, this encourages people to migrate into government jobs. This means that they are not in the private sector, producing value for their fellow citizens. This does not mean, to be sure, that every bureaucratic position is useless and every bureaucrat is lazy (I’ll resist the temptation to comment on DMV offices) and it does not mean that every private employee is a workaholic. But over the long run, the economy’s performance will suffer because labor is not being used productively.

The Democrats’ Mod Squad

The Democratic candidates remind me of the Nixon-era TV series “The Mod Squad”: One white, one black, one blonde.

And really, that’s all I know about the show and about all I know about the candidates. What are the differences among them? Obama is eloquent and elegant. Hillary is earnest. Edwards is TV-actor cute and shouts more than the others–not that that ended up counting for much.

And like the TV show, the Democrats’ Mod Squad is based on a lot of ideas that seemed cool in the early ’70s –  energy independence, groovy kinds of alternative energy, national health insurance, fine-tuning the economy, higher taxes, cheap money, interest rate freezes, corporation-bashing, and ending the war but not any time soon.

So instead of a bridge to the 21st century, the Democrats this year are offering us a bridge to the post-Woodstock era.

But the good news is that while the early ’70s were marked by plenty of policy disasters—Nixon’s wage and price controls, Ford’s “Whip Inflation Now” buttons, Carter’s “turn down your thermostats”—those things did make more people aware that the old regulatory policies had dramatically slowed down economic growth. As the ’70s went on and turned into the early ’80s, good things actually started to happen. Transportation, energy, finance, and telecommunications were deregulated. Capital gains and then income tax rates were reduced. Both large corporations and large unions were on the decline. CNN, Microsoft, and Apple were founded. Blacks, women, and gay people moved into the mainstream of society. After Watergate and Vietnam, Congress curbed some of the powers of the presidency.

Maybe the Mod Squad will once again be a precursor of better times to come.

McCain Undone?

John McCain has a campaign finance problem. When his campaign was down and out, he agreed to take public funding for the primaries. Public funding comes with spending limits overall and by state. Also, a candidate who accepts funding cannot raise money from private sources. Now that it is possible he will be the nominee, McCain will want to be free of those fundraising and spending limits, but he cannot withdraw from the public system. Or perhaps he could but only with the approval of the FEC, which is not operating because of a struggle over its nominees. The FEC does not now have a quorum to meet and regulate. (The lack of a quorum was caused by Barack Obama’s hold on a nominee to the FEC, but never mind).

McCain will want out of the public system because he is probably close to hitting the limit, and he could not get more money for his campaign until he received public funding after the GOP convention during the summer.  His “dark period” would thus be a period without campaign funding that would run from spring until after the GOP convention. During that “dark period” Obama or Hillary, both of whom have not accepted public funding for the primaries, would be able to continue spending money; some of that spending would be directed against McCain after Obama or Hillary has secured the party’s nomination.

So McCain needs to get out of the public system and fast. One way would be to refuse public funding for the fall campaign; he could then start raising money privately now; however, he pledged to accept public funding for the general election if his opponent did so. Obama has taken a similar pledge.   Also, McCain would get around some of this by using “outside groups” (527 groups and others ) to fund his effort, but he has been a fierce critic of such groups and tactics.

I have often noticed that people whom you would expect to support campaign finance regulation (e.g. liberal Democrats) often are strident critics of the system if they have had some personal contact with the web of regulation.  McCain is in a mess fostered in part by his own self-righteousness. Somehow I do not expect his personal contact with the system will make him a critic of it in 2009.

See also Mark Schmitt’s concise and informative report.

McCain Scores, Romney Punts on Trade Policy

Free trade has come under withering fire during this election season, with Lou Dobbs–style populism on the rise. The Democratic candidates have fallen over themselves to criticize NAFTA, trade with China, and the alleged harm trade has done to the U.S. economy. So it was refreshing this morning to read an unapologetic endorsement of trade expansion from one of the Republican presidential campaigns.

In an op-ed in today’s Wall Street Journal, one of Sen. John McCain’s senior policy advisers, Douglas Holtz-Eakin, offered this description of what kind of trade policy the Arizona Republican would pursue as president:

Mr. McCain will re-affirm American leadership in global trade. It is essential that American workers have access to the 95% of the world’s customers that are outside our borders. The U.S. should engage in multilateral, regional and bilateral efforts to reduce barriers to trade, level the global playing field and build effective enforcement of global trading rules. Opening new markets for trade in goods and services is an indispensable aspect of economic freedom, for entrepreneurs and workers, and a proven road to greater prosperity.

As a student of history, Mr. McCain rejects those who preach the false virtues of economic isolationism — those who urge the U.S. to bury its head in the sand. The world made the grave error of building walls against trade 75 years ago, which contributed to the Great Depression. Since then, the U.S. has been in the forefront of the fight for reduced barriers to trade. It has reaped the benefits of sustained growth in standards of living, an awesome display of innovation and technical advance, an explosion in the variety, quality and affordability of consumer goods, a rise in home ownership, and ascendancy to the position of world’s greatest economy.

Well said. Note that McCain’s adviser even touts the consumer benefits of import competition through more variety and quality and lower prices. Politicians almost never seem to care about whether consumers benefit from trade policy, preferring to carry water for the noisiest producers complaining about pesky foreign competition.

In contrast, a nearby op-ed by a supporter of Mitt Romney devoted only one sentence to trade, and the line was more ominous than optimistic: “Our jobs are being sought by new competitors from nations like China and India.”

That sentence on trade was sandwiched between a grim warning about “violent, radical jihadists” and our government’s spending binge — as though imported shoes and laptops from China and tech-support call centers in India were “challenges” to our nation on a par with al Qaeda and out-of-control federal spending.

My Cato colleague Mike Tanner has thoughtfully dissected the strengths and weaknesses of both McCain and Romney elsewhere on the Cato blog, but on trade policy, McCain’s team was the clear winner in today’s skirmish.

Flex-Fuel Nonsense

Over at National Review Online today, Clifford May asks:

What if lawmakers could guarantee that the price you pay to fill your car’s tank will go down, not up, in the years ahead? What if they could launch a new industry that creates more jobs for more Americans? What if this would produce environmental benefits, too? Would that not send a message to the markets? And would that not represent the kind of change so many politicians have been promising?

All of this would come true, Mr. May believes, if the federal government would force auto makers to ensure that every new car sold in the United States could run on gasoline OR high blends of ethanol OR methanol OR fill-in-the-blank. After all, it would only cost about $100 up-front during the manufacturing process to make such “flex-fueled” cars a reality, a modest investment that would give motorists a ready-made ability to run their cars on whatever strikes their fancy.

Well, to answer Mr. May’s questions in the order they are posed, they can’t, they won’t, it wouldn’t, it would, and it wouldn’t.

Congress can no more guarantee that fuel prices will go down from now until the end of time than it can guarantee a robust sex life for fat, balding, middle-aged men. Fuel prices are subject to supply and demand curves that do not answer to Congress — particularly in global energy markets.

The conceit that government can create jobs by creating industries out of whole cloth glosses over the fact that the money needed to create those industries and those jobs starves other industries of cash that will, in turn, eliminate other jobs. While it’s not inconceivable that government could on balance create more jobs than it destroys in this manner (that is, that the industry created is more labor-intensive than the industries harmed), that’s still not a good reason to go forward. After all, one might on balance increase employment in the United States by banning modern farm machinery and food imports, which would put a lot of people into the fields. But no sane person would endorse such a thing on economic grounds. Economic growth occurs when we increase productivity, and we don’t necessarily do that by biasing investment toward labor-intensive activities.

Promoting alternative fuels is not necessarily good for the environment. Ethanol, for instance, increases urban smog without any corresponding reduction in greenhouse gas emissions. It drains already depleting groundwater reserves and pollutes those that remain. It puts millions of additional acres of land under the plow, which in turn kills ecosystems and further pollutes navigable waterways. In short, gasoline looks positively “Green” compared to many of the fuels Mr. May hopes to champion.

Mr. May is correct, however, about the fact a mandate like this would send a message to the markets. The message would be “Congress is not a serious legislative body.” But to be fair, it’s not as if the market hasn’t heard that message before.

Mr. May is wrong, however, to think that a flex-fuel mandate would represent the kind of “change” that most politicians are promising. Congress has told Detroit how to build its cars for decades now. Nothing new there.

The main reason that this sales pitch is hollow, however, has to do with the fact that, at present, there is no cheap alternative to gasoline. The problem isn’t that cars can’t use the fuel. The problem is the cost of the fuel. For instance, on wholesale spot markets as of Jan. 24, 87 octane was selling at $2.32 per gallon. Compare that to the price for alternative fuels (in the same spot wholesale markets) once you adjust for the differences in energy content:

• E100 ethanol — $3.53 per gallon
• B100 biodiesel — $3.97 per gallon
• Methanol — $4.22 per gallon

In short, there’s a good reason why auto companies aren’t popping flex-fuel capabilities into every engine sold: consumers don’t seem willing to spend the $100 extra for that extra. Well, to be precise, most consumers don’t seem that interested. Some are in fact buying flex-fueled vehicles right now — 4 million such vehicles are thought to be on the road at present and dozens of models are on sale right now. But some of us aren’t willing to fork over the extra money for the option to use those fuels over the lifetime of our new car.

Should Congress override consumer preferences in that regard? No. Given the high cost of alternatives, consumers are not acting irrationally when they say “no thanks” to flex-fueled vehicles.

Would auto companies be advantaged by a flex-fuel mandate? Mr. May thinks so, but auto executives tend to disagree. My guess is that Mr. May knows less about their business than they do.

If and when alternative fuels are cheaper than gasoline, you can rest assured that consumers will increase their demand for flex-fueled vehicles and that auto makers will supply them out of simple interest in profit. Government mandates are not necessary.