Tom Davis: Policy, What’s That?

News of the intellectual demise of the Republican Party comes almost daily. In its coverage of the bipartisan vote in favor of the farm bill (which overrode a well-deserved Bush veto) the Washington Post included this reaction:

 ”If I was a farm-belt guy, I would be all over my district now, saying, ‘I stood with you, not the party of the president,’ said Rep. Tom Davis (R-Va.), who wrote to GOP leaders last week, urging them to defy Bush or at least allow rank-and-file members to save themselves. ‘Anytime you can separate yourself from someone with a 28 percent favorability rating, that’s a good thing.’ “

As Davis noted, he’s not a farm-belt guy. So one would think that he would want to stand up for the taxpayers in his suburban district and against the massive $300 billion grab by well-off farm businesses.

Indeed, Davis is retiring from Congress this year, so one would think that he would want to stand up for the general national interest for a change, rather than defending special interests and pushing his party’s advantage (as he sees it), as he often has during 14 years in the House.

Sadly, it’s all about politics for such legislators. The idea that members of Congress should promote policies to improve economic growth, increase individual freedom, and reform failed programs is completely foreign to them.

One can imagine that a conversation between Rep. Davis and an agricultural economist would go something like this:

Economist: The huge subsidies in this farm bill will distort markets, damage the economy, hurt the environment, and strain our international trade relationships.

Tom: What?

Economist: The agricultural industry is the most coddled in America, with dozens of programs subsidizing every aspect of the farm business. Why should this industry be specially favored by the government?

Tom: Huh?

Economist: Farm households have higher incomes than other American families. Farm incomes have risen rapidly in recent years, and farm prices are at record highs. Now should be the time to cut subsidies, not expand them.

Tom: I don’t follow.

Economist: Alas, I see that the farm lobby organized a massive campaign in favor of the farm bill, and they have bombarded Capitol Hill with propaganda, while twisting the arms of your colleagues.

Tom: Now I got ya! That’s right, us Republicans need to respond to the concerns of these hard-pressed farmers and help them out in rough times!

Economist: But, as I said, these are good times for farmers …

Tom:  Yes, yes, yes, we need to pass this bill and guarantee good times for the farmers–and, God willing, good times for GOP candidates this fall.

De-Debunker: Low-Hanging Fruit

Another day, another debunking.

DHS Assistant Secretary for Policy Stewart Baker has another effort to debunk information about the E-Verify program on DHS’ Leadership Journal blog. In this case, it’s “Debunking the ‘E-Verify Capacity Problem.’”

Critics say that only 60 thousand employers are registered with E-Verify, while there are 6 million employers in the U.S. But this is an example of using an accurate statistic to produce a misleading result. Many of those 6 million employers won’t hire a single worker this year. Others will hire thousands. What counts is how many individual hires the system can handle… . Based on a recent load testing, the system has the capacity to handle 240 million queries a year. That’s three to four times the number of people who are usually hired in a given year.

Fair enough, and frankly I hadn’t been aware of there being an argument about a “capacity” problem with E-Verify’s servers or data systems.

Running a Web search on “E-Verify capacity” to see what the capacity argument is, I found little other than a Government Accountability Office report which says the following:

A mandatory E-Verify program would necessitate an increased capacity at both U.S. Citizenship and Immigration Services (USCIS) and SSA to accommodate the estimated 7.4 million employers in the United States… . Although DHS has not prepared official cost figures, USCIS officials estimated that a mandatory E-Verify program could cost a total of about $765 million for fiscal years 2009 through 2012 if only newly hired employees are queried through the program and about $838 million over the same 4-year period if both newly hired and current employees are queried… . . SSA has estimated that implementation of a mandatory E-Verify program would cost a total of about $281 million and require hiring 700 new employees for a total of 2,325 additional workyears for fiscal years 2009 through 2013.

That’s a very different kind of capacity - and very expensive. I have written here before about a Social Security Administration workers’ union official who pointed out the lacking capacity at SSA to handle national E-Verify.

The difference in these kinds of capacity reveals an inference in my and others’ criticism of E-Verify that Baker and the folks at DHS may be missing. I may have been too obscure again yesterday when I wrote, “Just because you have a glass coffee table, that doesn’t mean you can build a glass sundeck.”

The class of businesses currently using E-Verify is particularly proactive about not hiring illegal immigrants – either because they are naturally fastidious or because they have been subject to enforcement actions that practically or legally require it. They may self-select against hiring potential illegal immigrants – perhaps avoiding native or fluent Spanish speakers, for example. If their motivation is avoiding trouble with the feds, these employers may not tell workers about tentative nonconfirmations, getting rid of them under other pretenses. Or they may prescreen workers using E-Verify before even hiring them. (Sure, E-Verify fan, tell yourself it’s against the rules - like driving over the speed limit is against the rules.) This all makes it look to folks like Stewart Baker like they’re catching illegal workers.

For what they’re worth, these employers are the low-hanging fruit for the E-Verify program. This is the best E-Verify will get. The rest of the nation’s employers, and the workers they hire, will produce higher error rates and new, more difficult problems.

The capacity of E-Verify’s databases and servers may be fine. The capacity of the various federal agencies to sort out the results of national E-Verify – not so good.

Too Far Inside

Don’t get me wrong. I’m a big fan of Inside Higher ED—the content’s free, they’ve run some stuff I’ve written, and co-founder Doug Lederman has graciously moderated a Cato forum—but those guys have got to get outside of higher ed a little more. That, at least, is what I’m forced to conclude if they really believe the teaser they wrote today for an article about federal efforts to stave off an as-yet nonexistent student loan crisis:

As federal agencies formally unveil plan to avert student loan availability crisis, officials earn grudging credit from players across the political and student aid spectrum.

What exactly constitutes the “political spectrum”? Apparently, a group that ranges all the way from the president of the Career College Association—which lobbies for for-profit colleges—to liberal Rep. George Miller (D-CA), with the head of the Project on Student Debt and the CEO of Sallie Mae in between. It’s a spectrum that consists exclusively of the color blue: People who think Washington should be heavily involved in student aid and send federal money their way–except for Miller, who does the sending.

Obviously, in the real world that’s no political spectrum at all, but maybe when you deal exclusively with Washington and higher ed, you feel like that’s a huge divide, indeed.

An Inexplicable Vote

Yesterday, the House passed the Renewable Energy and Job Creation Act, which is essentially a hodgepodge of tax provisions, most of which extend existing tax breaks, such as the R&D tax credit and production incentives for renewable fuels.  There are also a few new items, such as a tax cut specifically for trial lawyers who work on a contingency basis.  These tax breaks are offset with $55 billion in tax increases on hedge fund managers and multinational corporations.

The bill passed easily – virtually all Democrats supported it, along with a few dozen Republicans.

As reported in CongressDaily (subscription required), Republican Congressman David Hobson supported the bill with the following justification:

“Probably the responsible vote is ‘no,’ but how do you explain that in a media that’s frantic over gasoline prices? Frankly, this has nothing to do with gasoline prices, but you can’t explain it, and it taxes the rich guys,” Hobson said.

Incidentally, Congressman Hobson hails from a “safe” GOP district in Ohio.  He has been in Congress since 1990 and has won reelection each cycle with no less than 61 percent of the vote.  He already announced that he will retire at the end of the current Congress. Nonetheless, for political reasons, he supported a bill he knows to be unmeritorious.

If a retiring congressman from a safe district cannot muster up the gumption to oppose an admittedly bad bill that contains a hefty tax hike, what does that mean for the state of Congress?

L-1 and China - Oh, Nevermind - Naomi Klein

In a recent Cato TechKnowledge, I highlighted a company called L-1 Identity Solutions that is likely to be a key sponsor of any continuing efforts to implement the REAL ID Act, our moribund national ID law.

L-1 features prominently in a current Rolling Stone article which points out how the company is working with China to build surveillance technologies that the state will use in its attempt to maintain a grip on power.

But before you get to that, you have to stomach this:

Remember how we’ve always been told that free markets and free people go hand in hand? That was a lie. It turns out that the most efficient delivery system for capitalism is actually a communist-style police state, fortressed with American “homeland security” technologies, pumped up with “war on terror” rhetoric. And the global corporations currently earning superprofits from this social experiment are unlikely to be content if the lucrative new market remains confined to cities such as Shenzhen. Like everything else assembled in China with American parts, Police State 2.0 is ready for export to a neighborhood near you.

There are serious issues here, but they’re so mixed up with ideological vomitus that it’s hard to carry on reading. If this paragraph isn’t just meaningless, the author has obviously deemphasized telling an interesting story in favor of indoctrinating readers with–well, whatever the substance is behind those anti-globalization street-puppet shows.

Sure enough, when I went to see who wrote it, it was Naomi Klein. The same Naomi Klein, I assume, who inspired Johan Norberg to pen his recent briefing paper, “The Klein Doctrine: The Rise of Disaster Polemics.”

Milton Friedman’s legacy survives her book with ease, so it didn’t trouble me much. But confusing the kids who read Rolling Stone about the role of communism in keeping China unfree? That could actually do some damage.

A Health Fed?

Lots of people, on both the Left and the Right, want government to plan economic activity.  Honest central planners recognize that highly concentrated and well-organized groups of producers and consumers typically hijack the plan’s new taxes, subsidies, and regulations.  The central planners are typically horrified to see what their carefully laid plans look like after being put through the political grinder.

Clever central planners look for ways to protect their plans from the influence of their fellow citizens.  For example, some planners seek to restrict their fellow citizens’ right to petition the government for a redress of grievances.  (I have often remarked that if you can’t implement your plans without taking away someone else’s First Amendment rights, maybe you should rethink your plans.)

Other central planners seek to create special government bodies to execute their plans.  These bodies would have the power to tax, spend, and regulate, but their decisions could only be overturned by the people’s representatives with great difficulty.  Indeed, the very purpose of these bodies is to allow the planners to govern their fellow citizens without having to worry so much about the consent of the governed. 

Certain health care reformers have set about this path.  Across the political spectrum, observers acknowledge that government wields enormous power over America’s health care sector, and that those powers are often co-opted to serve private ends.  For example, former Senate Majority Leader Tom Daschle (D-SD) recently remarked:

Congress is just not capable of being the manager of a health care system and yet it’s largely Congress today that has that responsibility. It hasn’t worked for the last 50 years. It’ll work even less in the next 50.

As a result, Daschle and others propose that Congress create a “federal health board” to manage the health care sector.  The Federal Health Board would do things like require you to purchase health insurance, dictate what kind of health insurance you will purchase, set the prices for health insurance and medical goods and services, etc..  In other words, the Federal Health Board would have the power to bankrupt corporations, to force doctors to change the way they do business, to deny medical care to patients, and to shift massive amounts of resources from one part of the country to another.  The problem is, some corporations, doctors, patients, and regional interests would try to block parts of The Plan, either on their own or through their representatives in Congress.

Since it would be so hard for the Federal Health Board to do its job with all that meddling by the governed, Daschle et alia want to insulate the Board from the political process.  Specifically, they want Congress to model a new Federal Health Board on the existing Federal Reserve Board.  That would enable the “health Fed” to focus on the public good, much like the Federal Reserve Board manages the money supply and guides interest rates without any of the unseemly pandering to special interests that goes on in Congress and other government bodies.  Because that’s how the Fed operates, right?

Maybe not.  Economist Allan H. Meltzer of Carnegie-Mellon University has read the transcripts of every meeting of the Fed’s Open Market Committee going back to 1913, and has written a two-volume history of the Federal Reserve.  Interviewed recently for one of Russ Roberts’ excellent EconTalk podcasts, Meltzer dismissed the idea that the Federal Reserve is immune from political pressures:

We talk about an independent Federal Reserve, but in reading and writing the history of the Federal Reserve, there are very few occasions since the 1930s when the Fed actually practiced independence.  There was the [Paul] Volcker era; he was certainly an independent central bank governor.  But [current Fed chairman Ben] Bernanke is anything but an independent central bank governor.  He is being leaned on by the Congress, and he accedes to them.  So even though he may worry about inflation … he’s … trying to respond to the short-term pressures instead of thinking ahead and thinking longer-term …

That brings him to the interest rate, because that’s the thing that people in the market see.  The Wall Street people …  put him under great pressure because they own a lot of bonds and mortgages.  And they believe that if he lowers the federal funds rate, it will lower the price of their mortgages and bonds, and they will have smaller losses.  And so they are on his back all the time to do more, to cut the interest rate that he controls, hoping that the rates that they see and own will go down, and their … losses will become smaller …

In reading the minutes of the Fed and watching what they do, the Fed has always been very much afraid of Congress.  And it took someone with the stamina and arrogance, in a way, of Volcker to be able to get around that … By the summer of 1982, [Congress was] facing an election and they were on his back to ease up … He wouldn’t admit that he was [easing up], but he did …

The idea of having a really independent agency in Washington, that’s just not going to happen … The Federal Reserve derives its power from Congress … The Fed’s power is delegated, and they are very much aware that Congress could always change that … [The Fed] manages to hang on to some measure or vestige of independence, but it is very much concerned – always – about what the Congress is doing, and doesn’t want to deviate very far from that.

What can’t come through in a transcription is that Meltzer chuckled at “the idea of having a really independent agency in Washington.”

So if the central planners seek to insulate their health care reforms from the political process, modeling a new health planning board on the Fed won’t achieve that goal.  That’s probably a good thing.  Power with accountability is dangerous enough.  Power without accountability is truly frightening. 

An important advantage of free-market health care reforms is that they provide accountability without allowing anyone to consolidate much power at all.  That seems a much happier state of affairs.

Who’s Un-American?

Kevin Carey over at The Quick and the Ed has been in a bit of a spat with Andrew Coulson about education tax credits and school choice, and Andrew has been doing just fine dealing with Carey’s substantive arguments. I just want to quickly hit one of his non-substantive attacks, an all-too-typical smear against people who dare question delivering education through government schools: Preferring a system of private provision of education is “un-American.”

That is utter, utter bunk, and the history of American education makes this abundantly clear. I’m on the road right now on borrowed computer battery time so I offer only one tiny timeline to illustrate this. There are lots of good histories, though, that Carey and others can–and should–read for more in-depth discussion. Anyway, the tiny timeline: The U.S. Constitution was ratified in 1789. Horace Mann began his common schools crusade in 1837. That means that the nation was founded almost five decades before the basic seed of the modern, government-dominated, public-school system was planted. And, of course, the basic building block of the nation wasn’t government schooling, but quite the opposite: individual liberty. The Declaration of Independence–written more than six decades before Mann went to work–explains that.

So what seems “un-American” now?