Archives: 07/2011

‘Cut, Cap and Balance,’ the Debt Ceiling and Federal Spending

Cato Institute scholars Daniel J. Mitchell and Chris Edwards evaluate the plans offered by Republicans for lowering federal spending using a so-called “Cut, Cap and Balance” proposal that would make small cuts to federal spending in the short run, cap federal spending, and balance the federal budget using a tax-limited balanced budget amendment to the Constitution.

The Frightening Philosophy of Public Schooling, in a Nutshell

From a New York Times article on wealthy suburbanites opposing charter schools in their districts:

Millburn offers Mandarin only in high school, fueling the arguments of those seeking the new charters. “Kids are like sponges,” said Yanbin Ma, a Hanyu founder. “There are so many things they can absorb and become good at, and I feel that our public schools haven’t done enough to take advantage of that.”

But to Mr. Stewart, a leader in a growing opposition that includes Livingston mothers who have helped collect more than 800 petition signatures, this sounds “selfish.”

“Public education is basically a social contract — we all pool our money, so I don’t think I should be able to custom-design it to my needs,” he said, noting that he pays $15,000 a year in property taxes. “With these charter schools, people are trying to say, ‘I want a custom-tailored education for my children, and I want you, as my neighbor, to pay for it.’ ”

Could there be a philosophy of education any less compatible with a free society – or any society composed of unique individuals – than the one-size-must-fit-all, communal model championed by Mr. Stewart ? No way – yet that is exactly what we’ve got.

Obama Drops Elizabeth Warren for Former Ohio AG

Bloomberg is reporting that President Obama will nominate former Ohio Attorney General Richard Cordray to be the first director of the Consumer Financial Protection Bureau (CFPB), removing former Harvard Law Professor Elizabeth Warren from contention.  Of course this nomination might not amount to anything, as Senate Republicans continue to oppose any nominee until changes are made to the CFPB to improve its accountability and transparency.

Cordray is still somewhat an unknown.  His service as Ohio AG was relatively short, filling in the remaining term of the previous AG who left under scandal.  Cordray was then defeated by former Sen. Mike DeWine.

One of Cordray’s first actions as AG was to abandon a baseless and misguided suit against paint-makers for long-ago lead paint violations.  After Rhode Island’s Supreme Court threw out a similar suit, Ohio remained the last hope of the trial bar’s shakedown of the paint manufacturers. But then one of the defendants was Ohio’s Sherwin Williams, so at least Cordray knows not to mess with the politically powerful (so he’ll be a perfect fit in the Obama administration).

Cordray did his best to bring the Ohio foreclosure process to a near standstill, with repeated litigation against lenders.  So it should be no surprise that as CFPB director he will make sure that no borrower ever has to repay any obligation ever again (OK, a little exaggeration there).  He also managed to go one step beyond the usual practice of state AG’s outsourcing “justice” to the trial bar and invited non-profits, like ACORN, to supplement Ohio’s consumer complaint process.   As if Ohio didn’t have enough legitimate consumer complaints to handle.

All this aside, the problem with the CFPB is less who runs it than its flawed structure and basis.  In all likelihood, the CFPB will help do for consumer credit what the federal government has done to the mortgage market, which is screw it up royally and leave the taxpayer holding the bag.

Campus Show Trials

Harvey Silverglate, co-founder and chairman of the board of the Foundation for Individual Rights in Education (FIRE) and a Cato adjunct scholar, has an excellent op-ed in today’s Wall Street Journal highlighting the emerging problem of due process violations on college campuses. As Ilya Shapiro has written about previously, the Department of Education’s Office of Civil Rights recently sent out a letter outlining new procedural requirements for dealing with claims of sexual harassment and assault. Despite its cordial opening — it begins with the words “Dear Colleague” — the letter carries the de facto force of law: universities that receive public funds (nearly all of them) may have their funding stripped if they don’t follow the new guidelines.

The new guidelines threaten to turn the campus courts at some of our most august institutions into “kangaroo courts” that ignore basic rights of the accused, such as the right to confront accusers. Most disturbingly, universities are now commanded to use a “preponderance of the evidence” standard in adjudicating claims of sexual assault, including rape. The preponderance of the evidence standard is little more than a hunch, and is often described as a simple 50.01% probability of guilt.

In 1970, in the case of In re Winshop, the Supreme Court ruled that a standard of proof “beyond a reasonable doubt” is constitutionally required in criminal cases. The Court wrote:

The requirement of proof beyond a reasonable doubt has this vital role in our criminal procedure for cogent reasons. The accused, during a criminal prosecution, has at stake interests of immense importance, both because of the possibility that he may lose his liberty upon conviction and because of the certainty that he would be stigmatized by the conviction. Accordingly, a society that values the good name and freedom of every individual should not condemn a man for commission of a crime when there is reasonable doubt about his guilt.

Moreover, use of the reasonable doubt standard is indispensable to command the respect and confidence of the community in applications of the criminal law. It is critical that the moral force of the criminal law not be diluted by a standard of proof that leaves people in doubt whether innocent men are being condemned. It is also important in our free society that every individual going about his ordinary affairs have confidence that his government cannot adjudge him guilty of a criminal offense without convincing a proper factfinder of his guilt with utmost certainty.

While universities are not putting anyone in jail, merely being accused of a rape, much less being convicted by your university, has many of the same concerns as a criminal trial. As if to supply an object lesson that illustrates the Supreme Court’s well-articulated concerns, Silverglate opens his op-ed with the following harrowing story:

On Jan. 27, 2010, Mr. [Caleb] Warner learned he was accused of sexual assault by another student at the University of North Dakota. Mr. Warner insisted that the episode, which occurred the month prior, was entirely consensual. No matter to the university: He was charged with violating the student code and suspended for three years. Three months later, state police lodged criminal charges against his accuser for filing a false police report. A warrant for her arrest remains outstanding.

Among several reasons the police gave for crediting Mr. Warner’s claim of innocence was evidence of a text message sent to him by the woman indicating that she wanted to have intercourse with him. This invitation, combined with other evidence that police believe indicates her untruthfulness, has obvious implications for her charge of rape.

Nevertheless, university officials have refused to allow Mr. Warner a re-hearing—much less a reversal of their guilty verdict. When the Foundation for Individual Rights in Education (FIRE), a civil liberties group of which I am board chairman, wrote to University President Robert O. Kelley to protest, the school’s counsel, Julie Ann Evans, responded. She wrote that the university didn’t believe that the fact that Mr. Warner’s accuser was charged with lying to police, and has not answered her arrest warrant, represented “substantial new information.” In any event, she argued, the campus proceeding “was not a legal process but an educational one.”

In the wake of cases like the Duke lacrosse case, it is troubling that the OCR has decided that the rights of the accused on college campuses need fewer protections. Expect to see more travesties of justice in the months and years to come if these regulations stand. Thankfully, FIRE is on the front lines fighting for students’ constitutional rights.

This Week in Government Failure

Over at Downsizing the Federal Government, we focused on the following issues this past week:

  • People here in Washington are now considering military spending cuts that they thought strategically unwise and politically impossible just a few years ago. And conservatives are joining in.
  • Federally funded spaceflight is the quintessential neoconservative project: a giant, wasteful crusade designed to fill Americans’ supposedly empty lives with meaning.
  • The Obama administration wants to send bureaucrats from federal agencies that are notorious for wasting other people’s money to help local bureaucrats do a more “efficient” job of spending other people’s money.
  • President Obama’s Fiscal Commission handed Republicans ready-made spending cuts on a silver platter — Republicans will never get better political cover for insisting on spending cuts than now.
  • $500 billion in cuts and a $500 billion debt increase would certainly be better than Senator McConnell’s chicken-out plan.

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Two Pictures that Perfectly Capture the Rise and Fall of the Welfare State

In my speeches, especially when talking about the fiscal crisis in Europe (or the future fiscal crisis in America), I often warn that the welfare state reaches a point of no return when the people riding in the welfare wagon begins to outnumber the people pulling the wagon.

To be more specific, if more than 50 percent of the population is dependent on government (employed in the bureaucracy, living off welfare, receiving public pensions, etc.), it becomes difficult for taxpayers to form a majority coalition to fix the mess. This may explain why Greek politicians have resisted significant reforms, even though the nation faces a fiscal death spiral.

But you don’t need me to explain this relationship. One of our Cato interns, Silvia Morandotti, used her artistic skills to create two images (click pictures for better resolution) that show what a welfare state looks like when it first begins and what it eventually becomes.

The welfare state starts with small programs targeted at a handful of genuinely needy people. But as  politicians figure out the electoral benefits of expanding programs and people figure out that they can let others work on their behalf, the ratio of producers to consumers begins to worsen.

Eventually, even though the questionable beneficiaries should realize that it’s not in their interest to over-burden the people pulling the wagon, the entire system breaks down.

Then things get really interesting. Small nations like Greece can rely on bailouts from bigger countries and the IMF, but sooner or later, as larger nations begin to go bankrupt, that approach won’t be feasible.

I often conclude my speeches by joking with the audience that it’s time to stock up on canned goods and bottled water. Many people, I’m finding, don’t think that line is very funny.

Debt-Limit Deal: $500 Billion Cut Option

Charles Krauthammer is absolutely right that Republicans must call President Obama’s bluff on the debt-limit vote. I suggested that the House GOP pass $2 trillion in cuts tied to a $2 trillion debt increase, thus handing the matter over to the Senate and the president and refusing to budge.

Krauthammer has the same idea, but with $500 billion in cuts and a $500 billion debt increase. That would certainly be better than Senator McConnell’s chicken-out plan, and it would have the advantage of being so modest in size that I think it would ultimately get large support in the Senate from moderates.

The cuts–small “trims” really–could be taken right from Obama’s own Fiscal Commission report. The table below illustrates how modest and limited are the reforms needed to hit $500 billion in savings over 10 years. Indeed, the data from the commission only covers a nine-year period and includes just some of the proposed entitlement savings.

Obama Fiscal Commission Entitlement Trims $Billions
Trim Health Care Subsidies
Reduce subsidies for medical education $60
Expand Medicare cost sharing $110
Enact tort reform $17
Reduce Medicaid tax gaming $44
Reform Tricare $38
Trim Social Security Growth
Increase benefits by chained CPI $89
Trim Growth in Other Entitlements
Increase other entitlements by chained CPI $43
Reform federal retirement benefits $73
Reduce farm subsidies $10
Reduce student loan interest subsidies $43
Total Trims, 2012-2020 $527

It would be blindingly obvious to most voters that Obama would be responsible for a debt default if he couldn’t bring himself to sign such modest cuts that were proposed by his own fiscal commission. Then, when the government runs up against the debt limit again five months from now, the GOP should have another package of cuts ready to be passed. This next time they could perhaps focus on discretionary program terminations, some of which I’ve proposed here.