Archives: 05/2011

FTC Advert: Cut Our Budget!

An insert that ran in the Washington Times this week didn’t say directly that the Federal Trade Commission’s budget should be cut. But a few short steps get you there.

The FTC-produced insert—a 16-page, color brochure appearing in a number of papers—is titled: “Living Life Online.” It’s aimed at teaching children how to use the Internet, with articles titled: “Sharing Well With Others” and “Minding Your Manners.” An ad on the back points kids to an FTC Web site about advertising called, and little smart-phone insets contain factoids like:

DID YOU KNOW? Teens text 50 messages a day on average, five times more than the typical adult (who sends or receives 10 text messages a day).

Well, I have some factoids to share, too:

DID YOU KNOW? The U.S. Constitution provides for a federal government of limited, enumerated powers (and teaching kids about the Internet is not one of them).

Here’s another:

DID YOU KNOW? The federal government has had massive deficit spending in recent years, of $459 billion in FY2008, $1.4 trillion in FY2009, $1.3 trillion in FY2010, and $1.5 trillion in FY2011 (which is a huge damper on economic recovery).

It’s time to make serious budget cuts, and a government agency that seeks to replace parenting with government propagandizing to children is a great opportunity to do that.

Cato’s Downsizing Government project has been making its way through the major agencies, but don’t overlook the little ones. President Obama’s budget called for the FTC to spend $321 million in fiscal 2012. Zeroing that out would save a bunch, not only in direct expenses but in the dead-weight loss to the economy and consumer welfare symbolized by the FTC’s awful “Man Restraining Trade” statues.

A Life of One’s Own

Since Tuesday’s oral arguments in Virginia v. Sebelius—the first Obamacare challenge to reach the circuit court level, and one in which Cato also filed an amicus brief—the legal blogosphere has been discussing the Fourth Circuit panel’s incredulity concerning the activity/inactivity distinction at the heart of our arguments against Obamacare. As Ilya Shapiro explains, we contend that if Congress’s power to regulate “interstate commerce” reaches the inactivity of not buying health insurance, then there is nothing it does not reach. The Supreme Court will eventually have to grapple with this question and decide whether the distinction is constitutionally meaningful.

As Volokh conspirator Jonathan Adler points out, the activity/inactivity distinction is long-standing. At common law, there was no legally enforceable duty to rescue. In other words, if you didn’t act to create the danger, you would not be liable for your inactivity in not helping. To put it bluntly: you would have no legal liability if you ignored a drowning child.

Legal philosophers have grappled with the meaning of “act” and “omission” for centuries. While there are some difficult issues to ponder, there is also an element of navel-gazing in the question and the Supreme Court may have to gaze long at their navels to answer it. But it is worth remembering why the act/omission distinction matters in a free society. At the risk of getting too philosophical, I will add some thoughts of my own.

Anyone who has been to law school has likely had long conversations, probably in torts class, over whether the act/omission distinction is both meaningful and moral. If your torts class was like mine, your professor lamented the “no duty to rescue” rule as evidence of our individualistic and selfish society. Many law professors believe our slavish adherence to the act/omission distinction not only allows us to let children drown, but that it is just another “Western” belief that holds back a robust welfare state.

The aversion to mandating action, however, is not about letting children drown. I wouldn’t let a child drown and I imagine you wouldn’t either. The extreme hypothetical helps gloss over a meaningful principle for normal, run-of-the-mill cases. Just as bad facts make bad law, bad hypotheticals can blur vital principles. The act/omission distinction helps delineate, albeit imperfectly, the personal sphere of control and the governmental sphere of control.

Despite many who want to equate the two, what is legal is not the same as what is moral. In fact, these two categories can work against each other—performing an act of kindness because you fear authority diminishes the act’s moral character.

But we distinguish between the legal and the moral for deeper reasons as well: it helps maintain the crucial separation between the government and civil society, ensuring that the government doesn’t become the absolute ruler of our lives and the values we choose to hold dear. The theory that there are proper spheres of governmental control and proper spheres of private control is one of the great and under-appreciated victories of Western culture.

The act/omission distinction also matters because resources are scarce. Acting uses resources that could be used for alternate purposes. Omitting uses none. While you can take on a literally infinite set of omissions, you can only take on a finite number of acts. Using resources—time, money, strength, natural resources, etc.—for one thing means they are not being used for something else.

To put this in real-world terms: Obamacare’s individual mandate to maintain minimum health care coverage could eventually cost someone tens of thousands of dollars that they would have spent on other things. One of those things may have been another 50” television. However, it is just as likely that the money may have been spent on sending a child to college (or, given the age of those likely to go without insurance, sending oneself to college), donated to a church or a favorite non-profit, or invested in a fledgling business. Mandating action—that is, the use of scarce resources—overrides individual value preferences and substitutes other values through force. In other words, the government is telling you that your value preferences are wrong.

This is how the necessary distinction between government and civil society is slowly eroded. Creating legally enforceable duties to use your resources politicizes resource allocation problems. But our lives are already resource allocation problems, with or without government. How you manage your time and efforts is not just a question for your day-planner, it’s a profound existential quandary. Politics is one of the worst ways that resource allocation problems can be addressed. At the extremes, it becomes dehumanizing. Special interests will fight over your resources and decide how they should be allocated. It’s actually worse than watching sausages get made.

This is why libertarians are treating the Obamacare litigation as a critical moment in constitutional law. Sure we’ve been taxed before, and civil society has already been significantly eroded by government overreach. But we’ve rarely been commanded, particularly in a way so obviously designed to avoid political liability for raising taxes. Our parades of horribles—for example, the hypothetical “buy broccoli mandate”—may elicit eye-rolling from some, but violating the act/omission distinction in principle, as the government threatens to do here, means a principle is no longer standing in the way.  “Just this once” is hardly reassuring.

I understand that much of what I’ve said here, if taken to its logical conclusions, would prohibit any taxation. I am not advocating that. I am only pointing out a subtle and important distinction through which these questions can be viewed. A government that has total power to dictate when, how, and whether resources will be used is a government that has the power to dictate your life-plan and decide for you which things matter the most. The act/omission distinction has helped maintain the crucial line between the private and the public spheres, allowing for the possibility that government can be avoided by keeping to oneself.

The fact that the Fourth Circuit judges were “baffled” by the action/inaction distinction is disturbing to say the least. We lose something very important if they rule for the government, something that generations of enlightenment-era political philosophers articulated as a critical line between freedom and total government control. Let’s hope the Supreme Court doesn’t also forget those lessons.

Friday Links

  • Despite GM’s recent profitability, the auto bailout was a bad idea.
  • A parent fixing a nutritious lunch is a better way to combat childhood obesity than the school taking pictures of what children eat.
  • Spending cuts for an increase in the debt ceiling are a step in the right direction – but they need to be real spending cuts.
  • Please join us Tuesday, May 17, 2011 for a Book Forum on Peddling Protectionism: Smoot-Hawley and the Great Depression, featuring the author Douglas A. Irwin, Professor of Economics, Dartmouth College; with comments by Daniel Griswold, director of Cato’s Herbert A. Stiefel Center for Trade Policy Studies. Complimentary registration is required by noon, eastern, Monday May 16, 2011. We hope you can join us in person, or online.

A Race against Time or a Race to Civil War?

The drawdown of U.S. forces from Afghanistan will start this July, with a complete withdrawal of “combat troops” by the end of 2014. The newly emerging conventional wisdom, however, is that Afghan security forces are not ready to take over responsibility, since serious efforts to strengthen those forces only really began in 2009. But rather than validate an open-ended mission to build national institutions in Afghanistan, looming problems in the hand-off from foreign to indigenous forces epitomize the flawed process of state building.

The 285,000-strong Afghan army and police, under the authority of the Ministries of Defense and Interior, respectively, are expected to increase to a total of 305,000 by this October. However, numbers tell only part of the story.

In a new report entitled “No Time to Lose,” British charity Oxfam and three other NGOs warn that the army and police, collectively known as the Afghan National Security Forces (ANSF), account for a substantial portion of harm inflicted on Afghan civilians. “At least 10 percent of Afghan civilians killed in the conflict in 2010 were killed by their own security forces,” according to the report. Aside from casualties, violations of human rights, including sexual abuse of children, mistreatment of detainees, and cruelty inflicted on villagers by local police, who many Afghans consider criminal gangs, illustrate the full extent of the problem.

Even worse, while the justice systems function swimmingly for those with “political connections,” the vast majority of Afghans have little recourse to stop such abuses because, “There is no satisfactory mechanism by which an individual can lodge a complaint against the ANSF.”

As the saying goes, “no justice, no peace.” And, as I learned during a trip to Afghanistan last year, many Afghans, especially those living in rural subsistence areas, seek redress for communal disputes by turning to their local district mullah. He provides basic security and rudimentary justice and, more often than not, doubles as a Taliban operative. Because the national government is either profoundly incompetent or entirely absent in many areas, those classified as “insurgents” by U.S. forces pick up the slack and provide for the practical needs of local people.

Interestingly enough, support for the insurgency may thrive not in resource-starved provinces, but in areas where malevolent government authorities wield their powers with impunity. Afghan Taliban leader Mullah Omar once proclaimed, “If the police of a state consist of people who are immoral and irreligious … how can they protect the property, dignity, and honor of the people?”

If this weren’t enough, the ethnic composition of the ANSF may very well create the dynamics for a future civil war. In the Afghan National Army (ANA), Uzbek and Hazara officers are underrepresented, while Tajik officers are overrepresented. Pasthun representation in the officer corps is in line with its share of the population, but recruiting ground forces in Pashtun areas has been difficult, despite them making up roughly 40 percent of the population. This “lack of ethnic balance across the force,” according to a RAND report, remains an important personnel issue.

An American trainer helps to explain the problems composing an ethnically diverse and representative army:

The influence of ethnicity has profound implications for patronage, nepotism and other corruption. Moreover, ethnic divisions may be further complicated by fighting that took place between ethnic groups during the Soviet/Afghan and Civil Wars. During this period, killings along ethnic lines were commonplace. A mentor may never quite know how deep the mistrust and anger goes between different ethnic tribes, but it is clearly a factor in how Afghans interact with each other.

Many of these problems are not new. The International Crisis Group (ICG) warned in 2009 that the army ranks are rife with “ethnic and political factionalism.” And despite efforts to create a national force imbued with a unified “Afghanistan-first” mentality, “From the lower officers upward,” one retired military officer told the ICG, “it is not a national army. It is a political army. You have people working for different factions within the ministry of defense, so today what you have is an army that serves individuals not the nation.”

One expert I spoke to while in Afghanistan, who was one of the first Americans to help rebuild the country in 2001, offered this simple analogy: think back to the American Civil War. Few Confederate soldiers went to jail. Robert E. Lee went on to be a professor. Davis went to jail briefly, and was let out and wrote his memoirs. The moral of the story is that all the southern states were reintegrated. But imagine if Union soldiers went door-to-door to look for Confederate soldiers to bring them to jail. The Civil War would have never ended. But this is what is happening now in Afghanistan. Former elements of the Northern Alliance, mainly comprised of Tajiks, Hazara, Uzbeks, and Turkmens, are hunting former Taliban, mainly Pashtuns, in the south and exacting tribal and ethnic vendettas left over from the 1990s.

The starkest example of this was last year’s offensive in the southern village of Marjah. Despite the area being predominately Pashtun, Operation “Moshtarak”—Dari for “together”—was led by non-Pashtun Tajik and Hazara soldiers. Such problems pervade other incursions in the south.

This author, a staunch proponent of withdrawal, is under no illusions that as U.S. forces begin exiting Afghanistan, bloodshed will likely follow. But it’s important to proceed with our eyes open and learn the right lessons from our decade-long involvement. To a certain extent, Afghanistan’s amalgam of disparate tribal and ethnic groups—many of whom have historic grievances against one another—will always hamper stabilization. But rather than merely attributing Afghanistan’s impeding doom solely to the absence of functioning central government institutions, we should also consider how the process of building those national institutions will lead to increased violence and conflict.

Cross-posted from The National Interest

Obama’s GM Quagmire

Media are reporting this morning that the Treasury has decided to hold off on selling any of its remaining 500 million shares of General Motors stock until at least July. The Obama administration had hoped to divest as soon as possible  after May 22, but GM’s stock price hasn’t been cooperating.

As much as the president doesn’t want the odor of nationalization following him on the campaign trail, the administration is equally concerned about having to explain why it took a $10 billion to $20 billion direct loss by divesting when it did. By deferring sales until July, the administration presumably is hoping for a stock price boost from second quarter earnings. But that is unlikely for several reasons, which I explained in the Daily Caller yesterday. Here’s the gist in a few passages from that op-ed:

The soonest the U.S. Treasury can sell the remaining 500 million shares (according to terms of the initial public offering) is May 22, but the administration would also like to “make the taxpayers whole.” The problem for the president on that score is that the stock price — even in the wake of this week’s earnings report — isn’t cooperating. As of this morning’s opening bell, GM stock was valued at $31.07 per share. If all of the 500 million remaining publicly-owned shares could be sold at that price, the Treasury would net less than $16 billion. Add that to the $23 billion raised from the initial public offering last November, and the “direct” public loss on GM is about $11 billion — calculated as a $50 billion outlay minus a $39 billion return.

To net $50 billion, those 500 million public shares must be sold at an average price of just over $53 — a virtual impossibility anytime soon. Why? The most significant factor suppressing the stock value is the market’s knowledge that the largest single holder of GM stock wants to unload about 500 million shares in the short term. That fact will continue to trump any positive news about GM and its profit potential, not that such news should be expected.

Projections about gasoline prices vary, but as long as prices at the pump remain in the $4 range, GM is going to suffer. Among major automakers, GM is most exposed to the downside of high gasoline prices. Despite all of the subsidies and all of the hoopla over the Chevy Volt (only 1,700 units have been sold through April 2011) and the Chevy Cruse (now subject to a steering column recall that won’t help repair negative quality perceptions), GM does not have much of a competitive presence in the small car market. Though GM held the largest overall U.S. market share in 2010, it had the smallest share (8.4%) of the small car market, which is where the demand will be if high gas prices persist. GM will certainly have to do better in that segment once the federally mandated average fleet fuel efficiency standards rise to 35.5 miles per gallon in 2016.

Deservedly reaping what it sowed, the administration finds itself in an unenviable position. It can entirely divest of GM in the short term at what would likely be a $10-to-$15 billion taxpayer loss (the stock price will drop if 500 million shares are put up for sale in a short period) and face the ire of an increasingly cost- and budget-conscious electorate. Or the administration can hold onto the stock, hoping against hope that GM experiences economic fortunes good enough to more than compensate for the stock price-suppressing effect of the market’s knowledge of an imminent massive sale, while contending with accusations of market meddling and industrial policy.

Or, the administration can do what it is going to do: First, lower expectations that the taxpayer will ever recover $50 billion. Here’s a recent statement by Tim Geithner: “We’re going to lose money in the auto industry… We didn’t do these things to maximize return. We did them to save jobs. The biggest impact of these programs was in the millions of jobs saved.” That’s a safe counterfactual, since it can never be tested or proved. (There are 225,000 fewer jobs in the auto industry as of March 2011 than there were in November 2008, when the bailout process began.)

Second, the administration will argue that the Obama administration is only on the hook for $40 billion (the first $10 billion having come from Bush). In a post-IPO, November 2010 statement revealing of a man less concerned with the nation’s finances than his own political prospects, President Obama asserted: “American taxpayers are now positioned to recover more than my administration invested in GM, and that’s a good thing.” (My emphasis).

The administration should divest as soon as possible, without regard to the stock price. Keeping the government’s tentacles around a large firm in an important industry will keep the door open wider to industrial policy and will deter market-driven decision-making throughout the industry, possibly keeping the brakes on the recovery. Yes, there will be a significant loss to taxpayers. But the right lesson to learn from this chapter in history is that government interventions carry real economic costs.

By ‘No Federal Control’ We Mean ‘Yes, Federal Control’

People are starting to fight back against the sneaky push for nationalized curricula, and folks at the Thomas B. Fordham Institute are revealing their true colors in response.

Yesterday, Fordham President Chester Finn and Executive VP Michael Petrilli responded to the national standards “counter-manifesto” released on Monday, and they were none too happy with its signatories, accusing them of peddling “half truths, mischaracterizations, and straw men.” What seemed to aggravate them most of all was the assertion that “common” standards would lead to de facto federal curricula, something they say neither they nor their national-standards loving friends – including the Obama administration – want.

At this point, who’s buying this? True, it’s possible that Fordham and friends might really not want a federal curriculum – I can’t read minds – but the federal government through Race to the Top has already bribed states into adopting the Common Core standards; Washington is paying for the development of national tests; and the Obama administration’s “blueprint” for reauthorizing No Child Left Behind would make national standards the law’s accountability backbone. So even if you don’t want this to lead to a federal curriculum, that is exactly what you are going to get. If the feds use money taken from taxpayers to force states to adopt national standards and tests, and if Washington rewards or punishes states based on those tests, then you have a federal curriculum. I mean, if it walks like a duck…

The good news in Fordham’s response, perhaps, is that they appear to have responded to my challenge to loudly renounce any federal funding for national standards and related material if they really want this to be voluntary. Unfortunately, they’ve responded with a resounding “no”: Finn and Petrilli write that “we have no particular concern with the federal government…helping to pay” for the creation of curricular guides and other material and activities to go with national standards.

This happiness to keep the feds paying pretty much puts the final rip in the tissue-thin “voluntarism” ruse. But if you’re not satisfied with my analysis, try this post over at Jay Greene’s blog, in which Jay reproduces a terrific fill-in-the-blanks analysis of Fordham’s tricky prose by Charles Miller, former chair of the Board of Regents of the University of Texas and a very astute observer of education politics. Let’s just say, he writes what I suspect everyone who is familiar with the federal government – and Fordham – is thinking.

One last thing bears mentioning. In defense of Finn and Petrilli, they do get one thing right: they take a lot of the counter-manifesto signatories to task for having pushed hard for state-level centralization while decrying such top-down control at the federal level. Of course, Fordham ignores little things like “federalism” and the “Constitution” with this argument, but it is true that a government monopoly is likely to be dreadful whether at the state or national level. Then again, they don’t actually make that argument either, so they’re actually just trying to score lame hypocrisy points. And they follow that with this cheapest of shots at libertarians and, well, any Americans who would like to have control over what their children learn:

Some libertarian signers of the counter-manifesto may indeed believe that we should let schools, districts, and parents make every single educational decision no matter how irresponsible, hare-brained, or even harmful to kids.

Why, that’s exactly what libertarians think! When contemplating policy, we’ve given no consideration to whether individuals will overall make better decisions than special-interest dominated government, or looked at the empirical evidence that education is better the more decentralized control is, or considered the value of freedom in society, or anything like that. We’re just mindlessly wedded to liberty and don’t care who gets hurt.

At last, the leaders of the national-standards-driving Fordham Institute have demonstrated – if not fully said – exactly what they think.  It is not a very comforting vision.

Righting the Balance

In 1913, the Seventeenth Amendment cut an important tie in the Constitution between state legislatures and the Congress. In the original Constitution, states were empowered to choose the senators who would represent them in Congress. The result? Senators had an allegiance to the state government as much as the people of the state they represented.

Why does this matter? Well, today—with direct, popular election of senators—there isn’t much of anyone looking after state legislatures in Congress. Accordingly, the federal government continually tries to turn states into administrative outposts of the federal government rather than respecting them as the independent political powers they’re supposed to be.

In program after program, remote federal officials set policy and raise taxes, then require states to administer the programs. When things go a-mess, people don’t know whether it’s the federal government or the state government they need to talk to. Political accountability suffers, contributing to the big morass of government in the United States today.

Now, it wasn’t all sweetness and light before the Seventeenth Amendment rejiggered our governmental system, but it isn’t sweetness and light now either.

So yesterday, constitutional amendments were introduced in both the House and Senate to right the balance. House Joint Resolution 62 and Senate Joint Resolution 12 would propose an amendment to the Constitution giving states the right to repeal federal laws and regulations. Under the amendments, when two-thirds of the states ratify repeal of a federal mandate, it would come off the books.

The idea is to again right the balance between the states and the federal government. Most of its effect would be upstream: the Congress would be a lot more circumspect, knowing that the states could reject its laws if they went too far. But occasionally states would get a head of steam and lop out a federal law that they find disagreeable. The federal legislature would have to be a little more humble.

The federal government and its officials are pretty remote from the people compared to state legislators. Some way to right the balance would be good, whether it’s this specific idea, repeal of the Seventeeth Amendment, or some other. The “Madison Amendment” would work toward the same end by empowering states to propose constitutional amendments the way the Congress now does.

In this modern era of national transportation, high-speed communications, and global markets, many people believe that it’s natural for regulation to gravitate to the national level (often not considering that the logical end is global regulation). But technological change has not altered the rule that government closer to the people—or self-rule by the people themselves—is best. We pay a high price every day in this country for having cut a tendon in the constitutional structure with the Seventeenth Amendment and direct election of senators. It’s good to see efforts out there to right this balance.