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Cato Daily Dispatch for May 14, 2002

Bush Signs Pork Barrel Farm Bill

President Bush, setting aside his rhetorical devotion to free markets, signed a farm bill yesterday that will shower billions of dollars in new subsidies on bread-basket states that will help determine control of Congress in November's elections, according to The Washington Post.

Earlier this year, the president called for a bill that was "generous but affordable." Today, he simply called it generous. "It will promote farmer independence, and preserve the farm way of life for generations," Bush said. "It helps America's farmers, and therefore it helps America."

"There is little justification for the special hold that the agricultural industry has on taxpayers' wallets." write Chris Edwards and Tad DeHaven in the Cato Briefing Paper "Farm Subsidies at Record Level As Congress Considers New Farm Bill." "Other industries, such as the high-tech industry, are also risky and subject to large price swings but do not receive large-scale government subsidies. Moreover, farm households have higher incomes, on average, than do nonfarm U.S. households, and subsidies are skewed toward the largest and wealthiest farm businesses."

Pentagon On track to Test Missile Defense Despite Funding Hurdles

The Pentagon's missile defense agency said yesterday it remained on track to conduct two missile intercept tests this summer as Senate Democrats pressed a bid to slash funding for the controversial program.

Lt. Col. Rick Lehner, spokesman for the Missile Defense Agency, said officials were closely tracking the Senate Armed Forces Committee's bid to cut funding for missile defense by $812 million for fiscal 2003.

In "What's the Right Missile Defense System for America?" Senior Defense Policy Analyst Charles V. Peņa argues that "national missile defense has quietly become global international missile defense, designed not just to protect the United States (although missile defense is portrayed to the American public as defending the United States), but also allies and friends around the world."

This Thursday, May 16, the Cato Institute will host the policy forum "Bush-Putin Summit: The Future of Arms Control and Missile Defense," featuring Jack Spencer of the Heritage Foundation, Daryl Kimball of the Arms Control Association, and Cato's Peņa.

Supreme Court Upholds Forced Access, Stifles Market Competition

The Supreme Court handed a huge victory to start-up telephone companies yesterday by broadly affirming rules that force large phone companies to lease equipment to them at a low cost, according to The New York Times.

The price controls are meant to let rivals compete with the local phone companies by leasing access to their networks at a below market rate, rather than having to build their own systems. Although local telephone competition has been slow to catch on for a variety of reasons, rivals have blamed the "intransigence" of the dominant local companies.

Cato Director of Telecommunication Policy Studies Adam Thierer had the following comments on the ruling:

"The Supreme Court's ruling in Verizon Communications v. FCC rejects markets in favor of mandates. The decision is based on Romper Room economics: sharing is better than competing.

"The ruling will allow the FCC to continue to treat the telecom sector as its regulatory plaything and allow federal bureaucrats to micromanage the industry through a complex arsenal of network mandates and price controls.

"At a time when the nation desperately needs more investment and innovation from the telecommunications sector, the Supreme Court's ruling endorses the FCC's disturbing regulatory approach, which encourages potential rivals to seek access to existing networks instead of deploying new and better systems of their own. Thus, the court's ruling sends an alarming signal to potential rivals and investors by encouraging them to first look to government to gain access to archaic existing networks instead of building their own facilities-based infrastructure to square off against incumbent carriers.

"As a result of this decision, regulators will spend many more years gaming the system to encourage artificial market entry by small carriers, who are doing little more than hitching a free ride on older networks. The better solution would have been to reject the current command-and-control regime of access mandates and price controls in favor of market pricing and voluntary contracts. Investment and innovation will suffer as a result of the court's misguided decision."