Topic: Trade and Immigration

A Government That “Works,” but for Whom?

In his inaugural address yesterday, President Obama tried to step around the central question of whether the federal government has grown too big and powerful:

The question we ask today is not whether our government is too big or too small, but whether it works, whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end.

Even in skirting the question, President Obama has in effect come down on the side of bigger government. His statement assumes that government programs will be central to creating jobs and providing health care and retirement security. For every problem confronting American families, it is just a question of finding the right program that “works.” He leaves off the table the very real possibility that government intervention has made each of those problems more difficult for Americans to solve, and that the answer really is a smaller role for government.

The other open question is who decides if a government program “works.” President Obama has wrapped himself in the mantle of change, yet as a candidate he endorsed the 2008 farm bill. The existing U.S. policy of production subsidies and import tariffs, a policy that has remained essentially unchanged for 75 years, arguably “works” for a small number of relatively well-off sugar, dairy, corn, rice, and cotton farmers. But for the vast majority of Americans, the farm bill delivers higher and more volatile prices at the store, billions of dollars a year in additional government spending, higher cost for U.S. businesses, a degraded environment, and a harder slog out of poverty for millions of farmers in less developed countries. [You can go here to find Cato research on how farm programs have failed to work in our national interest.]

If Senator and candidate Obama could not see the need to end our failed farm policies, it is hard to imagine many if any other programs that will come to an end under his administration.

For more on how scrapping farm subsidies would be a good first step toward removing failed government programs, watch this video:

Ways and Means to Subvert Foreign Policy

President-elect Obama has emphasized his intention to focus on restoring America’s squandered credibility with the rest of the world. He might want to reinforce that message for Congress or begin the process of distancing himself from its leadership because, like it or not, trade policy is a tool of foreign policy, and Congress isn’t looking very diplomatic about trade.

Yesterday, House Ways and Means Committee chairman Charles Rangel and Subcommittee on Trade chairman Sander Levin introduced the Trade Enforcement Act of 2009. Among the legislation’s provisions:

  • It would make it easier for domestic industry to obtain trade restrictions in antidumping and China-specific safeguard cases.
  • It impugns and defies World Trade Organization dispute settlement decisions.
  • It compels the Commerce Department to reverse its implementation of a WTO decision last year on the issue of “zeroing.” 
  • It establishes an Office of the Congressional Trade Enforcer to investigate foreign barriers to U.S. exports and to systematically develop complaints to file with the WTO, among other provisions.

Clearly, the United States is well within its rights to bring cases against its trade partners to the WTO. And generally, if U.S. exporters are facing market barriers that our trade partners committed to dismantle, then I support efforts to seek redress. But it is a bit condescending — indeed it whiffs Rumsfeldian — to so publically berate a WTO decision and question its authority (the official language in the legislation actually includes a several-hundred word diatribe against the WTO Appellate Body’s decision) in the same bill that presumes that our trade partners will heed the WTO’s verdicts. That is the kind of exceptionalism and arrogance for which the president-elect is hoping to make reparations.

It remains to be seen what becomes of this legislation or even if there will be a noticeable uptick in U.S. protectionism. But Congress’s increasingly unilateralist instincts on trade and its willingness to humiliate important trade and security partners in Colombia and South Korea by not considering long-pending trade agreements will definitely complicate Obama’s international fence-mending efforts.

Laudable Economic Stimulus Plan in Mexico

While the United States and many other countries flirt with the idea of raising barriers to trade, our enlightened neighbor to the south has a more promising response to the global economic contraction.

On January 2, the Calderon administration initiated a plan (discussed here; HT to Scott Lincicome) to unilaterally reduce tariff rates on about 70 percent of the items on its tariff schedule. Those 8,000 items comprising 20 different industrial sectors accounted for about half of all Mexican import value in 2007. When the final phase of the plan is implemented on January 1, 2013, the average industrial tariff rate in Mexico will have fallen from 10.4% to 4.3%.

The objectives of the plan are to reduce business operating costs, attract and retain foreign investment, raise business productivity, and provide consumers a greater variety and better quality of goods and services at competitive prices. Perhaps our free trade advocacy is having a positive impact on public policy after all. I suspect those objectives are very well served by the plan.

Mexico is no stranger to unilateral trade liberalization—so they’re not just grasping at straws here. This is a tried and true approach to economic growth in Mexico and throughout the world. Many of the reforms Mexico agreed to in the North American Free Trade Agreement were already undertaken before the NAFTA went into effect in 1994. They were undertaken with the same objectives in mind. So, Mexico has some experience and credibility on the issue of the benefits of unilateral trade liberalization.

Let’s hope the rest of the world is watching, if not waiting in the wings.

Porqué Amo La Raza

Several months ago, the National Council of La Raza convened a group of health care wonks to help that organization make up its mind about how Congress should reform the tax treatment of health care.  The wonks included people from Harvard University, the Urban Institute, the Kaiser Family Foundation, Families USA, the United States Hispanic Chamber of Commerce, and elsewhere.

La Raza took the unusual step of inviting a libertarian (me) to be part of that discussion, despite our divergent views.  Where La Raza wants to expand the State Children’s Health Insurance Program, for example, I advocate repealing SCHIP.  I’m glad they invited me; it was one of the most enjoyable policy discussions I’ve ever had.

La Raza took the further unusual step of publishing a transcript of that discussion.  If you’ve ever wondered what it’s like to be a libertarian in the very un-libertarian world of health care policy – and you know you have – I recommend giving it a read.  Oh, and you’ll also learn a lot about health policy from a lot of smart people.

Here is the final product of those deliberations, La Raza’s policy paper on health tax incentives, in which La Raza plugs (without endorsement) my proposal for large health savings accounts.

Enjoy the Bowls—You’re Paying for Them

In the Wall Street Journal, Mark Yost explores the taxpayer subsidies to major college football bowl games:

while everyone’s fretting over the bailout package for the auto industry, most taxpayers would be shocked to learn that they’re also footing the bill for some of these highly profitable bowl games. From 2001 to 2005, seven tax-exempt bowls received $21.6 million in government aid.

During that time, 38 percent of the Brut Sun Bowl’s revenue came from a Texas rental-car tax. Now that’s Brutish.

And what do the bowls do with those taxpayer dollars? Well, they put on a football extravaganza, of course. But also:

To ensure the bowl games maintain their tax-exempt status, the committees hire state and federal lobbyists. Watts Partners, the Washington, D.C., lobbying firm run by former University of Oklahoma quarterback and Rep. J.C. Watts, has been paid more than $500,000 in consulting fees by the BCS.

So, as happens with many other government-funded enterprises, taxpayers’ money is spent on lobbyists to keep the taxpayers’ money flowing. Some of the money also goes to pay bowl executives upwards of $400,000. Leaving aside the issue of why tax-funded entities should pay their executives more than the president of the United States, I’m not surprised that bowl committees pay a CEO a handsome salary to make everything work perfectly. But I wonder: We hear a lot of complaints about the high pay of corporate CEOs. If the executive director of a $30 million bowl game is paid $400,000, how much should the CEO of a $30 billion company get?

More on taxpayer subsidies for sports business here and here. A lengthy bibliography here (pdf).

New Congress, New National ID Proposals

The new Congress came roaring out of the gate yesterday, with more than 350 new bills introduced. That should be enough for an entire two years, but they’re not likely to stop there.

Among many other subjects, Congress will consider creating “a secure Social Security card.” The idea is to protect seniors from identity theft, and the author of this legislation no doubt intends not to create a national ID. But the reality is that this would be a nationally uniform card made secure with a nationally standardized biometric, and it’s very likely that it would be administered with a national biometric database. That’s a national ID system, and it is a profound threat to American liberty.

You can learn a bit about identification and identification policy in my book, Identity Crisis.

Congress has also already seen a bill to mandate electronic employment eligibility verification. That can only be done through a national identity system, as I articulated in my paper: “Franz Kafka’s Solution to Illegal Immigration.”

And here’s a bill that would do both.

Welcome new Congress! Now go home.