Topic: Regulatory Studies

Glory-of-Government Religiosity Finds Bailout Skeptics “Willfully Stupid”

When you believe in things that you don’t understand,
Then you suffer,
Superstition ain’t the way

- Stevie Wonder

David Ignatius is entitled to this opinion:

We have just lived through one of the more notable successes of government intervention in modern times – the auto and bank rescues that almost surely saved the country from another Great Depression.

But if his intention is to convince skeptics—and not just to rally the deflated spirits of those who came to Washington with high hopes of teaching Americans how to love their government—he does a lousy job.  A bold assertion like his requires supporting evidence more rigorous than hearsay, superstition, and the opinions of his friend, and former “Car Czar,”  Steven Rattner.

Ignatius considers the bailouts successful because GM is still in business and the banking sector didn’t collapse.  According to Ignatius (often channeling Rattner):

Private companies made bad decisions that put the U.S. economy at risk; government made good (if politically unpopular) decisions to keep these mismanaged companies afloat, fearing that a collapse would mean much worse trouble…Private actors made bad decisions, but public officials generally made good ones…Washington is such an easy target that we forget the real villains of this story are the bankers and auto executives who steered their companies toward disaster.

Well.

Where is the credible evidence that without the interventions we were headed for another Great Depression?  Where is support for the argument that it’s smart to keep “mismanaged companies afloat”?  Where are the convincing facts (not the figures produced by the Big Three’s PR machine in November 2008) that the auto industry would have shed 2 to 3 million jobs had the government not intervened to save GM and Chrysler on the administration’s terms?  Where are the soothing facts that the incentives to avoid failure in the banking and auto sectors have not been weakened by the interventions?  Where is the compelling defense against the charge that government policies that subsidized chosen firms in the mortgage industry created the incentives for risk-taking—that Ignatius pegs as the root cause of the problem—in the first place?

Apparently, Ignatius doesn’t swell with desire for limited constitutional government. He writes, “It’s one thing to denounce government when it fails to achieve its goals.  But to ignore government’s achievements in times of crisis is willfully stupid.”

It’s clear that Ignatius column is more of an ideologically-driven rant doubling as a pitch for Rattner’s new book about the heroic role of the Auto Task Force in saving the auto industry.   As I wrote a few months ago in response to Rattner’s chest-puffing:

Rattner’s verdict rests on the singular consideration that “a year after the government-sponsored bankruptcies of GM and Chrysler, both patients are alive and progressing well toward recovery.” But that’s like hailing the stable medical condition of a drunk driver after an accident, while ignoring the injuries to the family in the vehicle he struck.

The impact of the auto intervention on its victims doesn’t factor into Rattner’s analysis.

Rattner’s claim of auto “rescue” success is the product of a straw-man set-up. The most compelling objections to the bailout were not rooted in the belief that the government couldn’t use its assumed power to help GM and Chrysler.  On the contrary, the most compelling objections were over concerns that the government would do just that.  It is the consequences of that intervention—the undermining of the rule of law, the confiscations, the politically-driven decisions, and the distortion of market signals—that animated the most serious objections.

Thus, any verdict on the outcome of the auto industry intervention must take into account, among other things, the billions of dollars in property confiscated from the auto companies’ debt-holders; the higher risk premium built into U.S. corporate debt, as a result; the costs of denying Ford and the other more successful auto producers the spoils of competition (including additional market share and access to the resources misallocated at GM and Chrysler); the costs of rewarding irresponsible actors, like the United Autoworkers union, by insulating them from the outcomes of what should have been an apolitical bankruptcy proceeding; the effects of GM’s nationalization on production, investment, and public policy decisions; the diminution of U.S. moral authority to counsel foreign governments against market interventions that can adversely affect U.S. businesses competing abroad, and; the corrosive impact on America’s institutions of the illegal diversion of TARP funds under two presidential administrations.

It is willfully deceptive to direct the public’s attention away from these less discernible, but very consquential costs of the bailout.

A Hidden Cost of ObamaCare

Today at the Cato Institute, Duke University Prof. Chris Conover presented his estimates of the economic losses that will be created by the taxes necessary to fund ObamaCare.  This chart is taken from his presentation:

The Excess Burden of ObamaCare

Here’s Conover’s full presentation (with comments by former Congressional Budget Office director Douglas Holtz-Eakin), as well as his Cato Policy Analysis, and his op-ed.

Michigan Court Wrong on Obamacare, Even Exceeds Its Own Powers

The passage of Obamacare heralded an important discussion on whether the Constitution places any effective limits on federal power and, in particular, where Congress gets the constitutional warrant to require every person to enter the private marketplace and buy a particular good or service.  This is a healthy discussion to have, including in the courts.  

Today’s ruling in Michigan, dismissing the Thomas More Law Center’s challenge to the individual mandate, while disappointing to those of us who believe that the government lacks the power to commandeer people to engage in transactions – “economic mandates,” as it were – is but one of many legal decisions we can expect on the way to the Supreme Court’s ultimate resolution of this important issue.  Indeed, this summer we saw a ruling by a federal judge in Virginia allowing that state’s legal challenge to the individual mandate and other aspects of the health care legislation to proceed.  And last month, a federal judge in Florida heard arguments in a similar lawsuit brought by 20 other states – a decision on which we can expect later this fall.  Other serious cases continue in Arizona, Missouri, Ohio, the District of Columbia, and elsewhere.

Perhaps most notable about the Michigan opinion, however, is the scant space spent on the serious Commerce Clause arguments on which hundreds of pages have been filed in these cases by top lawyers, legal experts, and academics (including Cato – yes, I’m heavily vested in this litigation).  After granting that the plaintiffs had standing and that the case was ripe for adjudication, and rejecting the government’s odd Anti-Injunction Act defense, Judge Steeh takes only seven and a half pages to reject the plaintiffs’ arguments – half of which is spent reciting existing doctrine.  It is as if the court merely issued a “placeholder” opinion, pending a “real” resolution on appeal.

And the novel conclusion we gain from this curt disposition is that Congress can now regulate people’s “economic decisions,” as well as do anything that is part of a “broader regulatory scheme.”  If the Supreme Court eventually upholds the kind of reasoning Judge Steeh used here, nobody would ever be able to claim plausibly that the Constitution limits federal power.  Finding the individual mandate constitutional would be the first interpretation of the Commerce Clause to permit the regulation of inactivity – requiring an individual to engage in economic activity. 

The federal government would then have wide authority to require Americans engage in activities of its choosing, from eating spinach and joining gyms (in the health care realm) to buying GM cars.  Or, under Judge Steeh’s “economic decisions” theory, Congress could tell people what to study in school or what job to take.  That may be the unfortunate state of the law in a few years – once the Supreme Court has weighed in, and I doubt it would ever go so far in any event – but it is not up to district courts to extend constitutional doctrine on their own.

How ObamaCare Is Destroying Consumer Protections

In this morning’s Charlotte Observer, I explain how ObamaCare is destroying consumer protections.  Exhibit A is Blue Cross Blue Shield of North Carolina’s decision to refund $156 million to its policyholders:

BCBSNC’s refunds show that ObamaCare is leaving seriously ill patients with less protection, not more. Health insurance was hardly perfect before ObamaCare, but BCBSNC’s policyholders had insurance that had pre-funded many of their future medical bills.

Now, ObamaCare has effectively transferred those reserves from the sick to the healthy. Seriously ill policyholders now have less protection against BCBSNC reneging on its commitments to them. Competition used to discourage skimping; ObamaCare rewards it.

Due to space considerations, the editors dropped the parts where I explain (A) how research by Harvard economist (and sometime Obama advisor) David Cutler shows that under ObamaCare’s price controls, insurers must compete to avoid the sick, and (B) that ObamaCare is blocking further innovations – such as those foreseen by University of Chicago economist John Cochrane – that would provide even greater protection to the sick.

Why Government Should Not Give Nutrition Advice

There are plenty of reasons why politicians and government bureaucrats have no business telling you what you should eat.  The Constitution grants the federal government no authority to do so, for one thing.  Even if it did, it is simply wrong to force people to pay taxes so that other people can hand down nutritional advice or – God forbid – mandates.

A terrific article by Jane Black in The Washington Post illustrates why, furthermore, the government’s advice isn’t likely to be very good:

[H]istorically, the government has shied away from offering controversial advice. And with food, everything is controversial: A boost for one type of food in the guidelines can be viewed as a threat by providers of competing products. The result, critics say, is a nutritional education system so politically influenced that it is ineffective.

This year’s process appears to be no exception. In public comments, the meat lobby has opposed strict warnings on sodium that could cast a negative light on lunch meats. The milk lobby has expressed concerns about warnings to cut back on added sugars, lest chocolate- and strawberry-flavored milks fall from favor. Several members of the Massachusetts congressional delegation also weighed in against added-sugar restrictions in defense of the cranberry…

In 1977, a Senate select committee led by Sen. George McGovern (D-S.D.) was forced to beat a hasty retreat after it initially recommended that Americans could cut their intake of saturated fat by reducing their consumption of red meat and dairy products. Its revised guidelines suggested choosing “meat, poultry and fish that will reduce saturated-fat intake.”

McGovern, whose constituents included many cattle ranchers, lost his seat in 1980. Since then, in case after case, the guidelines have refrained from suggesting that Americans eat less of just about anything.

Public health advocates say that kind of vacuum is precisely the problem: By avoiding blunt messages about what not to eat, the government has spoken in a way that baffles consumers.

“The only time they talk about food is if it’s an ‘eat more’ message,” said Marion Nestle, a professor of nutrition at New York University and a longtime critic of the food industry. “If it’s a question of eating less, then they talk about nutrients.”…

[A]s in the past, translating scientific data into clear and useful recommendations poses political pitfalls. The advisory committee’s emphasis on a “plant-based” diet, for example, has caused much consternation among the powerful egg and meat lobbies who say the term might be misunderstood as advocating a vegetarian diet.

This problem trips up all big-government schemes.  Right-wing and left-wing statists think they have a terrific idea: give the government power to do this or that, and Experts will use that power to improve mankind.  But then the people with a financial stake get involved, and the effort ends up serving them more than mankind.  See also health care, national defense, etc..

‘New Food Safety Bill Could Make Things Worse’

That’s not just my view; that’s the view of writer Barry Estabrook, an ardent critic of the food industry (“Politics of the Plate”), writing at The Atlantic. You needn’t go along completely with Estabrook’s dim view of industrialized agriculture to realize he’s right in one of his central contentions: “the proposed rules would disproportionately impose costs upon” small producers, including traditional, low-tech and organic farmers and foodmakers selling to neighbors and local markets. Even those with flawless safety records or selling low-risk types of foodstuff could be capsized by new paperwork and regulatory burdens that larger operations will be able to absorb as a cost of doing business. (Earlier here and here.)

Things could reach a showdown any day now. The food safety bill had stalled in the Senate under criticism from small farmer advocates, as the New York Times acknowledged the other day in an absurdly slanted editorial that somehow got printed as a news article. Now Harry Reid is talking about forcing the bill through before the midterms. Significantly – as advocates of the bill trumpet – large foodmakers and agribusiness concerns have signed off on the bill as acceptable to them. Well, yes, they would, wouldn’t they?

I was on TV the other week (Hearst news service) trying to make a few of these points. I borrowed my closing line from an excellent Steve Chapman column, which I was unable to credit on air, but can credit here.

How ObamaCare Threw Gays, Immigrants under the Bus

In the wake of Senate Democrats’ inability to break a GOP filibuster of the defense appropriations bill, to which Democrats hoped to attach the pro-immigration Dream Act and a repeal of the military’s “don’t ask, don’t tell” policy, the Reason Foundation’s Shikha Dalmia writes in Forbes:

But if Harry Reid was the proximate cause of this bill’s demise, ObamaCare was the fundamental cause. The ugly, hardball tactics that Democrats deployed to shove this unpopular legislation down everyone’s throat have so poisoned the well on Capitol Hill that Democrats have no good will left to make strategic alliances on even reasonable legislation anymore. When a party has such huge majorities, even small gestures of reconciliation are enough to splinter the ranks of opponents and obtain cooperation. But Democrats played the game of our way or the highway with ObamaCare, ignoring warnings that this would render them completely impotent for the rest of President Obama’s term. Indeed, Republican Senator Lindsey Graham of South Carolina,who had been working with Senator Chuck Schumer of New York to craft comprehensive immigration reform, gave up in disgust in the wake of ObamaCare.

How ironic that a president who got elected on the promise of bipartisan comity has produced nothing but partisan rancor. And his signature legislation that was supposed to save America’s most vulnerable has begun by throwing them under the bus.

Dalmia assigns Republicans their (ample) share of the blame, too.  Read the whole thing.