Topic: Government and Politics

Using Markets to Solve Water Shortages

South Florida is suffering a water shortage, but the shortage only exists because politicians are unwilling to allow market-based pricing. There is no shortage in the markets for air conditioners, automobiles, and haircuts, but that is because prices are allowed to rise and fall to reflect market conditions.

An article posted at TCSDaily.com offers a first-hand account of living with government-imposed price restrictions and draws an appropriate analogy to the price controls that caused gasoline shortages in the 1970s:

So here we are, in the spring of 2007, with rain below average, with a low lake level, little else in the way of reservoirs, and a water shortage. What is the response? Well, a rational response might be to price a scarce commodity such that people will use it only as they need it, and not frivolously. …Instead, we get the response of the local commissars. So, not allowing the market to work, and not allowing prices to provide signals to the participants, they have decided to run our lives for us.

…I live at an odd numbered address. That means that if I want to water my lawn, I can only do it on Monday, Wednesday and Saturday mornings, from four to eight AM. I can water my plants with a hose on the same days, but only between five and seven PM. My neighbors across the street, and behind my house on the next block, get Sunday, Tuesday and Thursday.

…Over thirty years ago, in the first OPEC oil embargo, the government, rather than allowing prices to rise to account for the reduced supply, told people when they could purchase gas based on the parity of their license plate — even one day, odd the next. My recollection was that this did nothing to alleviate the shortage — the lines remained. The problem was only solved when Nixon-era price controls on oil were lifted, the market was allowed to work, and oil prices eventually (and it didn’t take all that long) fell to historical lows.

…[H]ere’s a radical concept. How about pricing the commodity to the market? Maybe, if people had to pay more for water to water their lawn, they’d use less of it? Yes, I know that it’s hard to believe, but there really are some people out there who buy less of something if the price is higher.

John Edwards and Family Decisions

More than a week after Senator John Edwards’s decision to remain in the presidential race despite the recurrence of his wife Elizabeth’s cancer, pundits are starting to sharply criticize the decision. They say that he is consumed by ambition and that his priorities are out of whack.  They say that he should be spending time with his wife and especially with his two small children.

I had a similar reaction: these two children need their parents with them now more than ever.  They may lose their mother soon.  And if their father spends two years campaigning, they won’t see much of him.  If his campaign is successful, they won’t spend time much time with him for the rest of their childhood.

But who am I to judge the intimate family decisions of John and Elizabeth Edwards?  I can’t possibly know as much about their values and goals as they do.

If John and Elizabeth Edwards have spent the past ten—or fifteen—or twenty years working toward the White House, it may well be their very considered decision that that effort should continue.  In particular, it may be that the one thing Elizabeth Edwards wants most in her life is to see her husband in the White House.  Assuming that Elizabeth Edwards genuinely believes that John would be a good president (I don’t, but I’m not making the decision), then she may very well have decided that what he can do for the country is more important than what he can do for his children. As Rick said to Ilsa in Casablanca, “it doesn’t take much to see that the problems of three little people don’t amount to a hill of beans in this crazy world.”

So pundits would do well to assume that no one knows the trade-offs involved in the Edwardses’ decision better than the Edwardses.  In this case, as in so many others, it makes sense to let the people most closely involved in the decision make that decision.

But here’s the irony.  John Edwards doesn’t believe that families should be allowed to make the important decisions about their lives.  He doesn’t think families should be allowed to decide where their children will go to school.  He doesn’t think families should be allowed to decide how or whether to save for retirement.  He doesn’t think families should be allowed to decide what drugs to use, either pharmaceutically or recreationally. He supports a national health care system that would deny families the right to choose their own doctor.

In this presidential year, it would be good for Americans to reaffirm our commitment to the principle that families—not pundits and not government—should make the important decisions about their lives.

Supreme Court to EPA: Hurry Up and Wait?

Lots of news outlets have been describing the Supreme Court’s opinion in Massachusetts v. EPA along the following lines: “Supreme Court says global warming is bad; tells EPA to fix the problem.”

Is that right? Not really.

In fact, if you read between the lines of the majority’s decision, its not clear that it will alter EPA policy one jot or tittle.

“Regulation,” under the Clean Air Act, can take a number of forms: It can take the form of declaring aspirational emission standards. Or it can take more draconian forms, such as looming technology mandates and imminent implementation deadlines, backed by tough civil and criminal penalties.

Even assuming that, after the Court’s decision yesterday, the EPA has to “regulate” in the sense of promulgating some GHG emission standards, the Court’s decision leaves the EPA with ample room to argue that it can defer deciding when and how to implement those standards in light of the potentially high and uncertain costs of implementation.

Its true, of course, that some parts of the Clean Air Act prohibit the EPA from undertaking this sort of cost-benefit analysis. The parts of the CAA governing auto emission standards are, however, different. There, the EPA retains considerable discretion weigh costs and-benefits—particularly when it comes to the “when” and “how” of implementing emission controls. For example, as Justice Stevens notes, section 202(a)(2) of the CAA gives the EPA broad discretion to delay implementation of pollution controls to the extent that “the Administrator finds necessary to permit the development and application of the requisite [pollution control] technology, giving appropriate consideration to the cost of compliance within such period.” Put in plain English, that means that if the “costs” of developing effective pollution-reducing technologies are very large, and the pay off of this R&D is in the far-distant future, the CAA doesn’t require the EPA to implement its standards right away.

The Court’s opinion also reaffirms the great deference owed to the EPA’s decision not to enforce any standards that it might promulgate. In the words of Justice Stevens yesterday, an “agency has broad discretion to choose how best to marshal its limited resources and personnel to carry out its delegated responsibilities.” Given the breadth of discretion granted the agency to defer implementation under provisions like section 202(a)(2), and the costs and uncertainties associated with implementation, that deference may give the EPA very substantial room to defer—perhaps for a very long time—implementation of a federal GHG enforcement regime, freeing the EPA to deal with more immediate and pressing environmental problems.

Nor is analysis of the EPA’s leeway to delay implementation much different if, as some assume, the Court’s decision means that GHG emissions are also “pollutants” under CAA provisions dealing with “national ambient air quality standards.” True, in Whitman v. American Trucking Association, the Court held that the EPA must set NAAQS without regard to the costs of implementation. But in his concurrence in that case, Justice Breyer suggested that even CAA requirements governing national ambient air quality standards permit some modified cost-benefit analysis. He emphasized, for example, that when setting NAAQS, the EPA doesn’t have to eliminate “any health risk, however slight, at any economic cost, however great.” It is only required to eliminate “unacceptable” risks, defined as those that the public is not willing to tolerate at any cost.

New American car emissions count for only 6% of worldwide carbon dioxide emissions. Eliminating these emissions wouldn’t necessarily reverse global warming or even appreciably slow it—particularly given the dynamic nature of emissions in developing countries. Thus, its far from evident that the added global warming risks created by new American car emissions are “unacceptable” in the sense suggested by Justice Breyer.  On the face of the record, its also far from clear that the risks posed by other GHG-omitting sources in the U.S., such as stationary sources, are any more publicly “unacceptable” in the sense meant by Breyer, given uncertainty about the payoff of unilateral American remediation and given the cost and current feasibility of GHG control technology.

Ultimately, then, the key flaw with the EPA’s decision may not have been the outcome of that decision, or even the overarching reasons given by the EPA for its decision. The fatal flaw may have been only the conclusory nature of the reasons given by the EPA for its decision. For example, the EPA said that it wouldn’t act now because effective GHG-reducing technologies weren’t feasible at present and wouldn’t be feasible in the near future. But the EPA didn’t make any effort to quantify, or otherwise support with evidence, that feasibility assessment. Instead, it offered its conclusions as facts that courts must accept at face value—something five justices weren’t willing to do. But if the EPA can supplement its feasibility conclusions with at least some evidence, it may be able to pull at least one or two justices—most likely Breyer or Kennedy–into the dissenters’ orbit.

(This post is cross-posted at ScotusBlog).

Sandy Berger, Music Fan?

Someone, most likely an aging baby boomer with sticky fingers, has been lifting CDs from the music library at the Voice of America, which uses them for its radio shows. Looks like an inside job. The library is open only to employees. The M.O. is that the person goes into the stacks and takes the CD but leaves the plastic case.

The thefts were noticed recently when someone tried to check out a Judy Collins disc but found only an empty case. In fact, the entire Collins collection is gone. A check of other collections showed that Peter, Paul & Mary and Bob Dylan recordings were also missing.

Washington Post, April 2

A Reply to Ornstein and Corrado

The fifth anniversary of the Bipartisan Campaign Reform Act (also known as BCRA or McCain-Feingold) has arrived, and two of its defenders, Norman Ornstein and Anthony Corrado, took to the pages of The Washington Post yesterday to counter “a widespread view that BCRA did not work, that campaign reform has been a failure.”

They argue that McCain-Feingold has led to “the spectacular resurgence of political parties.” But the political parties were not in decline prior to 2002. They had been reviving since at least the mid-1990s, in part because of the resources that came from party soft money. Ornstein and Corrado say many people thought BCRA would hurt the parties. But, they say, that did not happen. Evidence? “In the two elections held before BCRA, the national parties raised a total of $2.1 billion, nearly half of it in unregulated ‘soft money’…In the two elections since, the parties raised exactly the same amount, but all in ‘hard money.’”

Notice the trick here. Ornstein and Corrado are comparing party fundraising in 2006 to party fundraising in 2002. They show that under BCRA in 2006 the parties raised as much hard money as they did soft and hard money in 2002. But that’s not what we want to know! We want to know whether the parties raised as much or more money in 2006 under BCRA as they would have in 2006 without BCRA. If they did, BCRA didn’t have much effect on fundraising.

As it happens, total party soft money fundraising doubled from mid-term election to mid-term election from 1992 onward. In 2006, the parties would have raised an additional $500 million in party soft money if BCRA had not passed. To be sure, some of the soft money that would have been raised turned up as hard money contributions to the parties in 2006 or as contributions to 527 groups. Even taking those into account, I suspect the parties would have raised  at least tens of millions of dollars more in 2006 if BCRA had not banned soft money fundraising. So it is not accurate to say that “our parties are richer.”  

According to Ornstein and Corrado, BCRA also made the parties “stronger at the grassroots,” citing party building and get-out-the-vote efforts. Yet in 2004 it was 527 groups (whose funding is not covered by BCRA) who supported the organizations that got out the Democratic vote in battleground states. By law, the 527 efforts could not be coordinated with the parties. As a result, the multi-million dollar contributions by George Soros and others did nothing to build up the Democratic party. In fact, many observers think the disjunction between the 527 get-out-the-vote effort and the Democratic party organization hampered Sen. Kerry’s presidential bid. As for party building, Howard Dean, the current head of the Democratic party, wanted to build up his party in 2006 even in states where Democrats had done poorly in the past. Dean’s party building effort came up short for lack of money. Had the Democrats been able to raise soft money, they would have had enough to both fight the 2006 election and build up their party across the board.

Ornstein and Corrado credit BCRA for a purported rise in small donors to the parties. By cutting off soft money, they imply, BCRA forced the parties to find small donors. They ignore two other factors. The Internet cut the cost of finding contributions and of making contributions. Meanwhile, the Iraq war and rising party competition mobilized donors and voters who otherwise might have stayed on the sidelines.

Our authors then confront the question of incumbent protection, an argument they associate with Newt Gingrich. They note that 22 House incumbents and 6 Senate incumbents lost in 2006. Ornstein and Corrado do not note that all 28 of those losing incumbents were Republican which might suggest a national wave of unhappiness directed at GOP candidates. BCRA did not offer enough incumbent protection for those 28 former members of Congress. But that does not prove that the Democratic wave of 2006 might not have been stronger in the absence of BCRA. As I argued earlier, their leaders believe the Democrats left 15 to 20 House seats on the table in 2006. Without BCRA, they would have had more party soft money to have pursued those 15 to 20 seats. Campaign finance regulations protect incumbents in more ways than one.

The effects on Democratic candidates and the Democratic party are important. 90 percent of congressional Democrats voted for BCRA. They believed the law would help Democratic candidates and their party. If we are honest, that partisan outcome was a leading, if not the primary, purpose of BCRA. (If you doubt that, ask the congressional Republicans of 2002: 80 percent of them voted against BCRA). So the question lingers: if Democrats ended up with less money and fewer House seats with BCRA than without it, was the law a success for Democrats in Congress and in the nation at large?

Ornstein and Corrado try hard to deflect this question. They identify opposition to BCRA with Republicans, conservative activists, and ideologues. Their Democratic readers are supposed to think, as they always have thought: Ick! Who wants to agree with stupid and evil people like that! Especially about money in politics. 

But that rhetorical gambit, like much of campaign finance “reform,” has grown stale. It’s not just the opponents of liberalism who are having doubts about Sen. McCain and his handiwork. I am certain that the smart, tough people who run Democratic congressional campaigns know BCRA cost the party seats. An important left-leaning expert on campaign finance has raised questions about the failures of the law. He also reports that the foundations that gave over $100 million to lobby for BCRA are wondering why they did so. That’s a lot of money for so little in return.

Not surprisingly, Ornstein and Corrado omit other consequences of BCRA. The law prohibited broadcast advertising within sixty days of a general election for a motion picture criticizing the current president of the United States. It also prohibited advertising within that time frame urging citizens to contact their representatives in Washington (if those representatives were running for re-election). We have no idea how much political speech was suppressed by BCRA’s ban on some issue ads.

BCRA’s prohibitions also fostered money moving to 527 groups followed by a regulatory push to eliminate such groups. If 527 groups are done away with, money may well go to nonprofit groups which will be followed by efforts to tightly control the political activities of such groups. BCRA has brought under state control a larger part of private political activity than ever before; it has also fomented a regulatory push that may yet deeply invade what’s left of private financing of political struggle.

The authors also omit BCRA’s failure to live up to the promises made by its supporters on the floor of the U.S. Senate. (I document these goals in the first chapter of The Fallacy of Campaign Finance Reform). BCRA did not restore public confidence in government, largely because campaign finance regulations have nothing to do with trust in government. It did not prevent corruption among several Republican members of Congress (and perhaps, one Democrat).

Ornstein and Corrado suggest the law reduced the number of negative ads. But that’s pure speculation. Judging by the complaints of the “reform community,” campaigns remain as negative as ever. Of course, negative advertising is good for American democracy, and in any case, advocates always said campaign finance regulations concerned money and not the content of speech. If BCRA really sought to improve the content of speech, doesn’t that mean the law violated the First Amendment from the start?

BCRA has had three other results, each hopeful in its own way.  

BCRA has had random political effects. People on the left, who generally support such restrictions on money in politics, discovered they too could be “reformed.” This discovery may reduce support for future restrictions on speech.

The law also fostered a successful bipartisan coalition against campaign finance regulation when BCRA’s defenders tried to regulate and restrict political speech on the Internet. Perhaps the Internet will remain a speech zone free of campaign finance regulation.

The law also appears to be a major obstacle to Sen. John McCain’s quest for the Republican presidential nomination. Perhaps in the future ambitious politicians will consider the electoral costs of supporting restrictions on speech. Emerging presidential candidate Fred Thompson, who voted for BCRA now says: “I wonder if we shouldn’t just take off the limits and have full disclosure with harsh penalties for not reporting everything on the Internet immediately.”

Neither misleading numbers nor rhetorical gambits can change the reality that BCRA has failed its supporters and the nation. Perhaps a new start with money and politics, one more mindful of the First Amendment, is in order.

McCain Surges On

From this morning’s Washington Post:

After a heavily guarded walk through a newly fortified Baghdad market, Sen. John McCain declared that the American public was not getting “a full picture” of the progress unfolding in Iraq.

McCain…cited a drop in murders, the creation of a constellation of joint U.S.-Iraqi military outposts and a rise in intelligence tips as signs of the progress.

“These and other indications are reason for cautious optimism,” McCain said.

[…]

His comments came on a day when the military reported that six American soldiers had been killed by roadside bombs southwest of Baghdad.

More evidence, if any was needed, that John McCain is at least as disconnected from reality as our current president.