Archives: 04/2010

Furor over Government Employees

Concern about the pay, benefits, and performance of government employees seems to be growing. Chris Edwards’s articles on how government pay is outpacing private-sector pay have generated media attention, cartoons, and angry rebuttals from the head of the federal Office of Personnel Management. Steven Greenhut has a new book, Plunder! How Public Employee Unions Are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation, and is writing lots of newspaper articles on the high costs of government unions, also the topic of a recent Cato Policy Analysis. New Jersey unions are not finding much sympathy as they try to hold on to their raises, benefits, pensions, and work rules in the face of Gov. Chris Christie’s attempt to cut the budget. Liberal journalist Mickey Kaus is running for the U.S. Senate, trying to warn California’s voters and the Democratic Party about the excessive power and destructive influence of public employee unions.

And now Saturday Night Live. The zeitgeist-riding comedy show had a truly harsh sketch this weekend about the “Public Employee of the Year Awards.” It touched every element of popular resentment toward government workers: “people with government jobs are just like workers everywhere – except for the lifetime job security, guaranteed annual raises, early retirement on generous pensions, and full medical coverage with no deductibles, office visit fees, or copayments” – “retirement on full disability” by an obviously young and healthy worker – “Surliest and Least Cooperative State Employee” – “3200 hours [a year] on the job, all of it overtime” – New York school janitors living in Florida – employees with two current jobs and full disability – an entire workday at the DMV without serving a single customer – no-work contracts –  surprisingly early closings – and “he’s on break.”

Time for unions to start worrying?

The IMF Is Urging Governments to Impose Regulatory and Tax Cartels to Benefit Politicians

Price fixing is illegal in the private sector, but unfortunately there are no rules against schemes by politicians to create oligopolies in order to prop up bad government policy. The latest example comes from the bureaucrats at the International Monetary Fund, who are conspiring with national governments to impose higher taxes and regulations on the banking sector. The pampered bureaucrats at the IMF (who get tax-free salaries while advocating higher taxes on the rest of us) say these policies are needed because of bailouts, yet such an approach would institutionalize moral hazard by exacerbating the government-created problem of “too big to fail.”

But what is particularly disturbing about the latest IMF scheme is that the international bureaucracy wants to coerce all nations into imposing high taxes and excessive regulation. The bureaucrats realize that if some nations are allowed to have free markets, jobs and investment would flow to those countries and expose the foolishness of the bad policy being advocated elsewhere by the IMF. Here’s a brief excerpt from a report in the Wall Street Journal:

Mr. Strauss-Kahn said there was broad agreement on the need for consensus and coordination in the reform of the global financial sector. “Even if they don’t follow exactly the same rule, they have to follow rules which will not be in conflict,” he said. He said there were still major differences of opinion on how to proceed, saying that countries whose banking systems didn’t need taxpayer bailouts weren’t willing to impose extra taxation on their banks now, to create a cushion against further financial shocks. …Mr. Strauss-Kahn said the overriding goal was to prevent “regulatory arbitrage”—the migration of banks to places where the burden of tax and regulation is lightest. He said countries with tighter regulation of banks might be able to justify not imposing new taxes.

I’ve been annoyingly repetitious on the importance of making governments compete with each other, largely because the evidence showing that jurisdictional rivalry is a very effective force for good policy around the world. I’ve done videos showing the benefits of tax competition, videos making the economic and moral case for tax havens, and videos exposing the myths and demagoguery of those who want to undermine tax competition. I’ve traveled around the world to fight the international bureaucracies, and even been threatened with arrest for helping low-tax nations resist being bullied by high-tax nations. Simply stated, we need jurisdictional competition so that politicians know that taxpayers can escape fiscal oppression. In the absence of external competition, politicians are like fiscal alcoholics who are unable to resist the temptation to over-tax and over-spend.

This is why the IMF’s new scheme should be rejected. It is not the job of international bureaucracies to interfere with the sovereign right of nations to determine their own tax and regulatory policies. If France and Germany want to adopt statist policies, they should have that right. Heck, Obama wants America to make similar mistakes. But Hong Kong, Switzerland, the Cayman Islands, and other market-oriented jurisdictions should not be coerced into adopting the same misguided policies.

McCotter’s Plan to Expand DMCA-Style Take-Downs

The “Cyber Privacy Act”? No it ain’t!

Michigan Representative Thaddeus McCotter (R) has introduced a bill to create a take-down regime for personal information akin to the widely abused DMCA process. The Digital Millennium Copyright Act established a system where copyright holders could as a practical matter force content off the Internet simply by requesting it.

McCotter’s proposal would similarly regulate every Internet site that has a comment section. He thinks it’s going to protect privacy, but he’s sorely mistaken. Its passage would undermine privacy and limit free speech.

I’ll take you through how McCotter’s gotten it wrong.

The operative language of H.R. 5108 is:

Any Internet website that makes available to the public personal information of individuals shall–

(1) provide, in a clear and conspicuous location on the Internet website, a means for individuals whose personal information it contains to request the removal of such information; and

(2) promptly remove the personal information of any individual who requests its removal.

The Federal Trade Commission would enforce the failure to abide by requests as it does unfair and deceptive trade practices. (Meaning: penalties.)

So if someone posts his or her name in a comment section and later regrets it, the operator of that web site would have to take it down. Sounds nice—and that is the right thing for webmasters to do when the circumstances warrant. But what about when they don’t?

Let’s say you run a site that receives hundreds or thousands of comments per day, many of them from anonymous visitors. Let’s say the site deals with controversial issues, and some visitors are angry at each other—they’re even angry at the site for hosting the discussion. Those visitors start working to undermine the conversation. They personally attack others, adopt false names, tell lies, and use vulgarities. This kind of person is well known on the web. They’re called “trolls.”

What would trolls do if federal law required webmasters to take down personal information by request? Simple: They would post the personal information of others. They would pose as others and falsely ask to have information taken down.

It’s a great way to attack a site: require it to consider hundreds or thousands of personal information take-down requests, each one backed by the threat of federal penalties.

What do you do as a webmaster to counter that? You require all comments to be tied to a fixed identity. Require a log-in before site visitors can comment. Then you can figure out later if the person requesting a take-down of personal information is the person who it pertains to.

What’s the result of that? Web sites collect and store more information about visitors. Then they turn around and use it for tracking and marketing. The information is available to litigators and government investigators, of course, through subpoenas and warrants.

Are you doing the math? McCotter’s “Cyber Privacy” bill is a proposal to increase Internet surveillance. Maybe he intends to improve Internet courtesy and decency. But decency is not a federal government project. It’s bottom-up, not top-down.

I write, of course, as a spare-time webmaster myself. The bills on WashingtonWatch.com get hundreds of comments per day. Many bills get lots of comments, but one in particular—subject of dispute, controversy, and trolling, along with productive political organizing—has over 130,000 comments.

I do a lot to foster a good visitor experience, consistent with maintaining the space available for free speech. I advise people about how to deal with trolls, I allow people to register so their stable identities can build trustworthy reputations, I proctor commenters about controlling vulgarities—sometimes strongly editing comments when they don’t, and I allow users to block commenters and words they don’t want to see.

When the context warrants it, I do remove personal information at the request of people that I believe are making honest, good faith requests. I think it’s part of what builds allegiance to the site.

But if I were required by law to do this, it would be an entirely different calculation. Each request would present me with a veiled legal threat, not a small customer service opportunity.

As trolls figured out how to exploit the law—the way some copyright holders exploit the DMCA—they could inundate small sites with requests. Webmasters would be right to treat all requests with suspicion. Confirming requests would require them to convert to greater surveillance. A percentage of the small sites and blogs that are hobbies or money-losers would just shut down comments rather than deal with the nonsense.

Representative McCotter’s plan to regulate Internet communications this way is no “Cyber Privacy” act. It’s anti-privacy, and it’s anti-free-speech.

Don’t Be Fooled — GM Is Still Government Motors

General Motors chairman Ed Whitacre is appearing in ads on all the Sunday morning shows repeating the message of his Wall Street Journal op-ed, titled “The GM Bailout: Paid Back in Full,” and the company’s full-page newspaper ads:

We’re proud to announce: We’ve repaid our government loan. In full. With interest. Five years ahead of the original schedule.

But wait: In the Wall Street Journal, Whitacre says the company has made a $5.8 billion payment to the governments of the United States and Canada. But don’t I recall that the GM bailout was $50 billion? Shikha Dalmia of the Reason Foundation explains the whole story in Forbes: First, part of the bailout went into an “escrow fund,” and that government money is being used to pay back the small part of the bailout that was officially a loan. Second, GM is asking for another $10 billion loan to retool its plants to meet the stiffer Corporate Average Fuel Economy standards, and paying back one government loan – with other government money – will make it easier to get another government loan.

And finally, of course, most of the bailout money was transferred to GM in return for a 60 percent stake in the company. And the taxpayers will get that money back if and when GM becomes a publicly traded company again, provided that the company’s market capitalization is eventually higher than it’s ever been in history. Don’t hold your breath.

These are called GM ads, but they could just as well be called BS ads.

U.S. Well-Being in the Age of Fossil Fuels

Elsewhere, I have shown data that, notwithstanding the Neo-Malthusian worldview, human well-being has advanced globally since the start of industrialization more than two centuries ago, despite massive increases in population, consumption, affluence, and carbon dioxide emissions. Here I will focus on long-term trends in U.S. well-being, as measured by the average life expectancy at birth, in the age of fossil fuels.

Since 1900, the U.S. population has quadrupled, affluence has septupled, GDP has increased 30-fold, synthetic organic chemical use has increased 85-fold, metals use 14-fold, material use 25-fold, and CO2 emissions 8-fold.  Yet life expectancy advanced from 47 to 78 years.

During the same period, emissions of air pollution waxed and waned. Food and water got safer, as indicated by the virtual elimination of deaths from gastrointestinal (GI) diseases between 1900 and 1970. Cropland, a measure of habitat converted to human uses — the single most important pressure on species, ecosystems, and biodiversity — was more or less unchanged from 1910 onward despite the increase in food demand.

For the most part, life expectancy grew more or less steadily for the United States, except for a brief plunge at the end of the World War I, accentuated by the 1918–1920 Spanish flu epidemic. As in the rest of the world, today’s U.S. population not only lives longer, it is also healthier. The disability rate for seniors declined 28 percent between 1982 and 2004/2005 and, despite quantum improvements in diagnostic tools, major diseases (e.g., cancer, and heart and respiratory diseases) now occur 8–11 years later than a century ago.

The reductions in rates of deaths and diseases since at least 1900 in the United States, despite increased population, energy, and material and chemical use, belie the Neo-Malthusian worldview.  The improvements in the human condition can be ascribed to broad dissemination (through education, public health systems, trade and commerce) of numerous new and improved technologies in agriculture, health and medicine supplemented through various ingenious advances in communications, information technology and other energy powered technologies (see here for additional details). The continual increase in life expectancy accompanied by the decline in disease indicates that new technologies reduced risks by a greater amount than any risks that they may have created or exacerbated due to pollutants associated with greater consumption of materials, chemicals and  energy,

And this is one reason why the Neo-Malthusian vision comes up short. It dwells on the increases in risk that new technologies may create or aggravate but overlooks the larger — and usually more certain — risks that they would also eliminate or reduce. In other words, it focuses on the pixels, but misses the larger picture, despite pretensions to a holistic worldview.

It was this mindset — legitimized as the “precautionary principle” — that led, for instance, to the premature reduction in DDT usage even in areas where malaria was endemic and could be reduced through its use.

Read the more detailed post, with figures, here.

A Reality Check for Neo-Malthusians

Neo-Malthusians bemoan population growth and view economic, technological, and fossil fuel development as inventions of the Devil. Yet between 1750 and 2007, despite an octupling of global population, and increases in affluence by an order of magnitude and CO2 emissions by three orders of magnitude, the average global life expectancy at birth — the single most important indicator for human well-being — more than doubled from 26 years to 69 years.

Not only are we living longer, we are also living healthier.

Read more  here.

State Fiscal Reforms

The Federal Reserve Bank of St. Louis recently held a conference on state and local government finances. I presented a paper discussing four reforms for state and local governments to consider: abolishing corporate income taxes, privatizing government activities, cutting public-sector compensation, and reforming public-sector labor laws.

Those may seem like disparate policy ideas, but the common theme is that governments need to be smaller, more efficient, and more flexible if America is to prosper in an age of intense global competition.