Cato Institute
1000 Massachusetts Ave, NW
Washington, DC 20001-5403
Phone (202) 842 0200
Fax (202) 842 3490
 Contact Us
Support Cato

Cato Daily Dispatch for September 15, 2005

Subscribe to the Daily Dispatch via email

(Links to outside sources were active as of the date of this dispatch; however, not all news sources maintain links to current stories indefinitely. Some links also may require registration.)

Return to Big Government
Airlines Declare Bankruptcy
Pledge of Allegiance Declared Unconstitutional

Return to Big Government

"President Bush will tell the nation tonight that he's committed to rebuilding New Orleans and the Gulf Coast, while eliminating the poverty and joblessness that were exposed in the wake of Hurricane Katrina," USA Today reports.

"In a prime-time speech from New Orleans, Bush also will pledge more federal help providing housing, health care and education to evacuees. 'We want to see a region that is better and stronger than before,' said Bush spokesman Scott McClellan."

In "No Longer out of Sight," Michael D. Tanner, director of health and welfare studies at the Cato Institute, writes: "In the wake of Hurricane Katrina, there will justifiably be calls to do something about the poverty that existed unseen in New Orleans and still exists in so many cities across America. Most of those speaking longest and loudest will be telling us to pour more money into various welfare programs. Doing so will help salve our conscience and tuck the poor safely out of sight until the next disaster forces us to face the consequences again. But it will do little to help these people escape poverty.

"The poor of New Orleans have been victims twice: of the storm and of the failed welfare state. As we pick up the pieces, let's not victimize them a third time. Let's try fighting poverty in ways that work."

In an article appearing in today's Washington Post, Cato Institute scholars Stephen Slivinski, director of budget studies, and Chris Edwards, director of tax policy studies, are quoted, warning of a looming "budget disaster," in response to the unprecedented federal spending for Hurricane Katrina relief.

To offset Katrina relief in the short-term and create savings to reduce the federal deficit over the long-term, Slivinski and Edwards propose $62 billion in spending cuts, including: "Cutting NASA in half, slashing energy research and subsidies just as Congress is gearing up to increase them in the face of soaring gasoline prices, cutting the U.S. Army Corps of Engineers' budget by $4.6 billion after its levees failed to protect New Orleans, and eliminating $4.2 billion in homeland security grants while lawmakers are debating the nation's lack of preparedness."

Airlines Declare Bankruptcy

"The US airline industry on Wednesday faced its biggest shake-out in a decade after Delta Air Lines and Northwest Airlines, the third- and fourth-largest carriers by revenue respectively, both filed for bankruptcy," the Financial Times reports.

"The bankruptcies after four years of heavy losses and at least 120,000 job losses across the sector are likely to accelerate an industry-wide restructuring around a low-cost model but could raise political pressure on the indebted federal agency that insures workers' pensions."

In "Is Pension Insurance the Next S&L Crisis?" Richard Ippolito, chief economist at the Pension Benefit Guaranty Corporation (PBGC) from 1986 to 1999, writes for Cato: "The Pension Benefit Guaranty Corporation (PBGC), the federal agency that insures private-sector defined-benefit pension plans in the event of bankruptcy, is in bad shape financially and rapidly getting worse. From 2000 to 2003, the agency went from a surplus of $9.7 billion to a deficit of $11.2 billion. Pension plan underfunding stands at more than $350 billion. Fully $85 billion is held by pensions whose sponsors have a bond rating below investment grade, including $6.4 billion held by United Airlines, which is in bankruptcy.

"Congress should recognize its shortcomings, and sever its ties to pension insurance. It should make the PBGC a true insurance pool. Pension insurance can continue to be mandatory, but after five years, each pension plan should be allowed to seek coverage in the private sector. In the meantime, the ownership of the pool should be turned over to the sponsors of the defined benefit plans, run by a board of directors elected by the plans according to procedure whereby votes are proportional to covered participants. The members of the pool would be liable for any further deficits that develop and they own any surplus that they create. Congress should pay in an amount that covers the problem they created as of the transfer date, allowing the pool to start fresh."

Pledge of Allegiance Declared Unconstitutional

"A federal judge declared Wednesday that the reciting of the Pledge of Allegiance in public schools is unconstitutional, a decision that could put the divisive issue on track for another round of Supreme Court arguments," The Associated Press reports.

"U.S. District Judge Lawrence Karlton ruled that the pledge's reference to one nation 'under God' violates schoolchildren's right to be 'free from a coercive requirement to affirm God.'"

In "What's Conservative about the Pledge of Allegiance?," Cato senior editor, Gene Healy, observes: "Hands on their hearts, more than 100 Republican members of Congress gathered on the steps of the Capitol to recite the pledge shortly after the Ninth Circuit Court of Appeals ruled for Newdow in June 2002. It was an effective photo-op, allowing the G.O.P. to cast itself as the defender of tradition. But not every tradition deserves defending. Though no one can be legally compelled to salute the flag, encouraging the ritual smacks of promoting a quasi-religious genuflection to the state. That's not surprising, given that the Pledge was designed by an avowed socialist to encourage greater regimentation of society."

Kristen A. Kestner, editor, kkestner@cato.org