Archives: 02/2009

Can Anyone Find a Cure?

Stimulus plan supporters are using words such as “jumpstart” and “shovel-ready” to create an aura of rapid and productive action from their $787 billion bill heading for passage in Congress.

The CBO just released some details of the plan, which includes $575 billion in new spending and $212 billion in (mainly silly) tax cuts. Even if you believe in Keynesian jumpstart theory, a full 41% of the spending ($236 billion) will not occur until 2011 and after. Thus, even from a Keynesian perspective, $236 billion ought to be cut out of the package because it won’t be spent on ”shovel-ready” projects.

And by the way, even according to the CBO’s Keynesian-style model, the stimulus package will produce a negative effect on GDP in 2014 and all subsequent years.

In the end, if didn’t really matter what even Congress’s own economists said — today’s politicians simply love to spend money and will jump on any excuse to do so. It is an obsessive-compulsive disorder for which we have yet to find a cure.

Charter Schools’ Fine Print: “Made in Troy”?

A New York City charter school run by the highly-regarded KIPP network is bracing for a fight over the desire of many of its teachers to unionize, reports the New York Times. Unionization would surely bring work rules that would constrain the school leadership’s ability to peretuate its successful KIPP model.

Charter schools were one of the earliest incarnations of the modern U.S. school choice movement. Enjoying somewhat greater autonomy but generally lower funding than conventional public schools, they were intended to bring to the field of education some of the benefits of free markets. Overall, they tend to perform a bit better and more efficiently than regular public schools, but do not show the more consistent or significant advantages that genuine education markets demonstrate over public school monopolies.

But charter schools have a bigger problem than not quite having what it takes to create a free education maketplace. The great danger of charter schooling is that it could well prove to be a Trojan horse for the expansion of the existing 90% government school monopoly. Charter schools not only draw students away from the existing independent school sector, some are themselves former private schools that have opted to come under the umbrella of government charter status out of financial expediency. If, after absorbing students from the truly independent private sector, charter schools then lose what little autonomy they currently have, it will lead to the expansion of the existing state school monopoly.

That has long seemed to me to be their most likely outcome, and recent events are doing nothing to brighten that dismal prognosis. States and policymakers who want to innoculate themselves against the risk of charter schools gutting the independent sector while expanding the state school monopoly should adopt policies like education tax credits that give families easier access to truly independent schools.

Week In Review: Massive Spending, Nat Hentoff, Salary Caps and the Mexican Drug War

Deal Reached on Massive Spending Bill

The Washington Post reports, “A day after settling on the details of a nearly $790 billion economic stimulus package, congressional leaders moved to hold final votes on the plan tomorrow in hopes of sending it to President Obama to sign into law by his Presidents’ Day deadline.”

The House and Senate say they have agreed on a bill that will cost taxpayers $790 billion. But numbers can be deceiving, says Chris Edwards, Cato’s director of tax policy studies:

A huge threat from the $800 billion stimulus plan in front of Congress this week is that much of the spending may morph into a permanent expansion of government. If the bill is signed into law, lobbyists will immediately start pressing for the long-term extension of all the new spending on health care, transportation, education and other items.

Edwards calculates the actual cost of the spending bill will be about $3 trillion. “It’s madness,” he says.

Cato ran a full page ad in major newspapers nationwide showing that hundreds of economists agree that reducing the burden of government is the best way to overcome the current financial crisis. Cato released an online video about the ad, which made Cato’s YouTube channel the most viewed non-profit channel this week.

William Niskanen, Cato chairman emeritus and senior economist, sees no need to rush on the massive spending bill. “This is the fifth time in my adult life that the president has asked for or asserted unprecedented authority on an expedited basis with little or no congressional review,” he writes. “Each of the prior occasions turned out to be a disaster.”

On the campaign trail, Barack Obama promised that all non-emergency bills would sit for five days so the public could read, analyze and comment on them before he signed them into law. Surely five days won’t make a difference on the spending bill, says Jim Harper, Cato’s director of information policy studies. In a Cato Daily Podcast, Harper examines Obama’s pledge for transparency and says Obama should post the spending bill online for the public to see before signing it.

The Cato Institute Welcomes Nat Hentoff as Senior Fellow

Nat Hentoff, one of the foremost authorities on the First Amendment, has joined the Cato Institute as a senior fellow.

“The core of libertarianism is a defense of free speech,” said Ed Crane, president and founder of the Cato Institute.  “No American in recent history has done more in defense of free speech and the First Amendment than the great civil libertarian, Nat Hentoff.  All of us at Cato are honored to have him as a colleague.”

Hentoff left the Village Voice in December, where he had been a columnist for 50 years.  Hentoff’s column, “Sweet Land of Liberty,” has been distributed by the United Feature Syndicate since 1992.

In a Cato Daily Podcast, Hentoff discusses the record of Attorney General Eric Holder who recently sided with the Bush administration on a case involving rendition and detention of terror suspects. “Here we have the new order doing the same thing they’ve been criticizing the Bush administration for,” Hentoff says.

His first article as a Cato senior fellow, “The Cost of Criticizing Jihadists,” ran in the Washington Times this week.

Obama Announces Cap on Salary of Executives Receiving Aid

NPR reports, “President Obama announced stricter rules on executive compensation at banks receiving ‘exceptional’ levels of aid from the federal government. Some executives will have their annual salary capped at $500,000. Anything above that would have to be paid in stock that won’t vest until the firm has paid back its government loans.”

In an op-ed in the Washington Times, Cato senior fellow Richard W. Rahn takes a closer look at government restriction of pay for executives:

The problem is that once government stops being the referee of the economic game and decides to field players of its own or give some players advantages that others do not have, the whole system begins to break down. Those who are pushing for more government involvement with, and control over, the economy are ignoring two centuries of disastrous socialist experiments and 2,000 years of failed attempts to impose price and wage controls.

While media outlets proclaimed that Wall Street executives received $18.4 billion in bonuses last year, senior fellow Alan Reynolds explains why that number is misleading:

To use this ridiculously irrelevant estimate to attack the character of American business leaders is the height of irresponsibility. It is shameful. Anyone who does this sort of thing ought to show some restraint and some sense of responsibility.

When it comes to salary caps for executives who accepted bailout money, senior fellow Daniel J. Mitchell says, “Sorry, guys, you asked for it.”

Drug Violence Continues to Escalate in Mexico

Hundreds of people have been killed since Mexico escalated its war on drugs last year, CBS News reports. Ian Vasquez, director of Cato’s Center for Global Liberty and Prosperity, comments on a report that shows frustration with the drug war among Latin Americans.

In a new policy analysis, Ted Galen Carpenter, Cato’s vice president for defense and foreign policy studies, explains why the violence in Mexico poses a threat to the United States:

Abandoning the prohibitionist model of dealing with the drug problem is the only effective way to stem the violence in Mexico and its spillover into the United States. Other proposed solutions, including preventing the flow of guns from the U.S. to Mexico, establishing tighter control over the border, and (somehow) winning the war on drugs are futile.

Writing in the Houston Chronicle, Carpenter calls for President Obama to put drug violence in Mexico at the top of his national security agenda before it’s too late.

For more on the drug war in Latin America, read Carpenter’s book, Bad Neighbor Policy: Washington’s Futile War on Drugs in Latin America.

Obama’s Shock Doctrine

At the Guardian, I argue that President Obama and Rahm Emanuel are carrying out just what Naomi Klein predicted in The Shock Doctrine. Except that, as usual, it’s not deregulation and budget cutting that governments turn to in times of crisis. It’s more money and more power:

Last year the US economy was hit with one shock after another: the Bear Stearns bail-out, the Indymac collapse, the implosion of Fannie Mae and Freddie Mac, the AIG nationalisation, the biggest stock market drop ever, the $700bn Wall Street bail-out and more — all accompanied by a steady drumbeat of apocalyptic language from political leaders.

And what happened? Did the Republican administration summon up the spirit of Milton Friedman and cut government spending? Did it deregulate and privatise?


It did what governments actually do in a crisis — it seized new powers over the economy. It dramatically expanded the regulatory powers of the Federal Reserve and injected a trillion dollars of inflationary credit into the banking system. It partially nationalised the biggest banks. It appropriated $700bn with which to intervene in the economy. It made General Motors and Chrysler wards of the federal government. It wrote a bail-out bill giving the secretary of the treasury extraordinary powers that could not be reviewed by courts or other government agencies.

Now the Obama administration is continuing this drive toward centralisation and government domination of the economy. And its key players are explicitly referring to their own version of the shock doctrine. Rahm Emanuel, the White House chief of staff, said the economic crisis facing the country is “an opportunity for us”. After all, he said: “You never want a serious crisis to go to waste. And this crisis provides the opportunity for us to do things that you could not do before” such as taking control of the financial, energy, information and healthcare industries….

Occasionally, around the world, there have been instances where a crisis led to free-market reforms, such as the economic reforms in Britain and New Zealand in response to deteriorating economic conditions. Generally, though, governments seek to expand their power, and they take advantage of crises to do so. But they rarely spell their intentions out as clearly as Rahm Emanuel did.

Taking Cues from Terrorist Playbooks

Tony Blankley writes in today’s Washington Times that we need to emulate the federal Office of Censorship employed in World War II and screen all press outlets for pieces ostensibly favoring those that oppose us in our fight against terrorism.  Apparently, things have gone too far when newspapers allow a representative of Hamas to publish an op-ed and media outlets publish sensitive information about government programs.  As he puts it, “American newspapers should foster a free debate on government policies, not act as agents of enemy sabotage.”

I am unclear as to how requiring Uncle Sam’s say-so on any controversial discussion of national security policy is a “free debate.”  I am even less certain that all of this would be constitutional.

Worse yet, broad restriction of liberty is the response that terrorists want.  Terrorists don’t fear government overreaction; they bait it and incite it.  They need it.  With broad measures that restrict the freedom of movement of the population and tax our every move, they portray themselves as patriots and freedom fighters.  Talk of Wars on [a Noun] and “existential threats” only enhances the rhetoric of our enemies and incites public hysteria.

Don’t take my word for it.  Carlos Marighella, Brazilian insurgent and author of the Mini-Manual of the Urban Guerrilla, said as much decades ago:

The government has no alternative except to intensify its repression.  The police networks, house searches, the arrest of suspects and innocent persons, and the closing off of streets make life in the city unbearable.  The military dictatorship embarks on massive political persecution … [t]he armed forces, the navy and the air force are mobilized to undertake routine police functions… [t]he political situation in the country is transformed into a military situation in which the “gorillas” appear more and more to be the ones responsible for violence, while the lives of the people grow worse.

Instead of calling for censorship, Mr. Blankley ought to limit his response to criticizing the newspaper or countering the op-ed directly.  This is infinitely better targeted at his enemies and, let’s be honest, it isn’t hard to find contradictions between Hamas’s actions and whatever whitewash they put in an op-ed.

Mr. Blankley also points to the alleged probability of a nuclear bomb being set off in an American city within the next five years.  Benjamin Friedman has already debunked this unfounded claim in great detail.

As for protection of secret information, the abuse of the State Secrets privilege often has little to do with national security, and a lot to do with governmental liability.

Stop Hiding the Stimulus Bill

Here’s Paul Blumenthal of the Sunlight Foundation on the closed process being used to ram through the deficit-spending/economic stimulus bill:

[I]t is not just Republicans who are being denied access to the bill. Reporters, bloggers, and the general public are being denied an opportunity to review one of the most important pieces of legislation sent through Congress in a long time. Anyone who wants should express that, whatever the partisan reasons for denying access to the bill, the American people deserve a right to review this legislation. Slamming it through without letting anyone see, save for 7 or 8 congressmen and some staff, is not fair to the public or the legislative process.

This is a dangerous practice that the Democrats ran against in 2006 and now, in the majority, are unfortunately using to block their opposition’s attacks. The majority Democrats should maintain their previous position on running the most open and honest government by allowing the public to review this legislation. Anything less is unacceptable.

Nadya Suleman’s Octuplets & the Perils of Public Charity

The AP reports that you and I will be paying the cost of rearing Nadya Suleman’s newborn octuplets –  as well as her other six children – through various state and federal welfare programs:

Even before the 33-year-old single, unemployed mother gave birth to octuplets last month, she had been caring for her six other children with the help of $490 a month in food stamps, plus Social Security disability payments for three of the youngsters. The public aid will almost certainly be increased with the new additions to her family.

Also, the hospital where the octuplets are expected to spend seven to 12 weeks has requested reimbursement from Medi-Cal, the state’s Medicaid program, for care of the premature babies, according to the Los Angeles Times…

In California, a low-income family can receive Social Security payments of up to $793 a month for each disabled child. Three children would amount to $2,379.

The Suleman octuplets’ medical costs have not been disclosed, but in 2006, the average cost for a premature baby’s hospital stay in California was $164,273, according to the U.S. Department of Health and Human Services. Eight times that is more than $1.3 million, and the average cost for just one cesarean birth in 2006 was $22,762 in California.

A reasonable person might ask, “So what?  Poor kids need help.  Would you rather let them die?”  That certainly does not seem to be the answer.  Yet there are perils inherent in having government come to the rescue. 

One challenge confronting both public and private charity is known as the Samaritan’s dilemma: any effort to help the needy inevitably discourages self-help.  People at the margins don’t work as hard, or even take deliberate advantage of others’ altruism, which increases the number of people “in need.”  That appears to have happened in Suleman’s case:

Word of the public assistance has stoked the furor over Suleman’s decision to have so many children by having embryos implanted in her womb…

Suleman received disability payments for an on-the-job back injury during a riot at a state mental hospital, collecting more than $165,000 over nearly a decade before the benefits were discontinued last year.

Some of the disability money was spent on in vitro fertilizations, which was used for all 14 of her children, Suleman said. She said she also worked double shifts at the mental hospital and saved up for the treatments. She estimated that all her treatments cost $100,000.

The First Peril of Public Charity is that government does a relatively poor job of discouraging such opportunistic behavior.  Food stamps, Social Security disability payments, and Medicaid benefits are entitlement programs.  So long as Suleman meets the statutory eligibility criteria, she is legally entitled to benefits no matter how much she may be milking the system.  It is extremely difficult to tailor government eligibility rules (whether statutory or regulatory) to prevent all the possible forms of abuse.   And even if some government bureaucrat tries to cut off welfare recipients who are abusing the system, those recipients can sue the government and there are legions of lawyers who will help.  Private charity is much better at discouraging opportunistic behavior by tailoring assistance to the truly needy.  Did Suleman and her children truly need all the public assistance they had been receiving?  Would she have been able to afford in-vitro fertilization had she not been on public assistance?  If the availability of additional charity were less certain, would she have tried to get pregnant again?  Maybe, but probably not.

The Second Peril of Public Charity is that taxpayers and politicians respond to the First Peril of Public Charity by insisting that government take away people’s rights.  Much of the crusade against smokers’ and restaurateurs’ rights is justified by the need to limit government spending on medical care for smoking-related illness.  Ditto the crusade to limit your right to eat fatty foods. 

Suleman’s case has led taxpayers to recommend some startling policy responses:

On the Internet, bloggers rained insults on Suleman, calling her an “idiot,” criticizing her decision to have more children when she couldn’t afford the ones she had, and suggesting she be sterilized.

“It’s my opinion that a woman’s right to reproduce should be limited to a number which the parents can pay for,” Charles Murray [not the American Enterprise Institute scholar] wrote in a letter to the Los Angeles Daily News. “Why should my wife and I, as taxpayers, pay child support for 14 Suleman kids?”…

“From the outside you can tell that this woman was playing the system,” host Bryan Suits said on the “Kennedy and Suits” show on KFI-AM. “You’re damn right the state should step in and seize the kids and adopt them out.”

Emphasis added.

Those responses are a predictable consequence of government charity.  They reflect the same selfish rationale that the Church of Universal Coverage uses to argue for eliminating your right to choose health insurance. 

If somebody is abusing generosity, the appropriate response is not to take away their rights but to take away the generosity. (Some curtailment of parental rights can be justified if the children are in danger. But we don’t yet know if Suleman is going to get a reality-TV deal out of this.) Private charity can do that. Government is ill-equipped to do so, and so our rights come under attack.

The irony is that the Left’s adamant support for government charity is eroding smokers’ rights, property rights, dietary rights, medical rights, and now even the Left’s cherished reproductive rights – making the Left less and less liberal by the day.