November 2011

November 23, 2011 10:17AM

Should Thomas or Kagan Recuse Themselves Over ObamaCare?

Today POLITICO Arena asks:

Should either Justices Thomas or Kagan recuse themselves from the ObamaCare case?

My response:

Justice Thomas is the easier case, because he had no involvement in the ObamaCare legislation or legal strategy, nor did his wife. As Tevi Troy commented in yesterday’s POLITICO, citing “alumni of the White House Counsel’s Office from several administrations,” Thomas’s “wife’s activities would come into play only if she had a financial interest at stake in the case, which she does not.” And as Marcia Coyle and Tony Mauro noted in Monday’s National Law Journal, citing DePaul Law School’s Jeffrey Shaman, “Twenty‐​five years ago, they might have said judges should control their wives. But she has a right to her own life.”

Justice Kagan is a closer call. We already know her sentiments about ObamaCare from her breathless email to Harvard Law’s Laurence Tribe: “I hear they have the votes, Larry!!” But the real question is how closely she was involved in developing the legal strategy for defending the law – as head of the Justice Department office charged with that responsibility. As The Hill reported yesterday, “Emails show that Kagan’s office mounted an early and aggressive effort to prepare for legal challenges to the individual insurance mandate, but the records released so far do not contradict Kagan’s statement that she was not directly involved in the planning.” The operative words are “so far,” which is why House Judiciary Committee Chairman Lamar Smith, as POLITICO reported yesterday, “has asked the Obama administration to provide documents and internal correspondence on … Kagan’s role in defense of the health reform law.”

In the end, of course, recusal is the justice’s call. But especially in a case as important as this, the public deserves to know the facts.

November 23, 2011 9:22AM

What Have the Politicians in Washington Given Us?

So far Occupy Wall Street and its imitators across the country have directed their rage at Wall Street and the rich in general. But they would be better served if they aimed their criticism at the true authors of this country’s problems: the politicians in Washington.

Obviously there are unscrupulous businessmen, and some on Wall Street behaved unethically, if not dishonestly taking advantage of lax oversight and bailouts to make fortunes while the rest of the economy suffered. But, if you look at the one percent that OWS is denouncing, most of them got rich by giving us things that makes us better off, or at least things that we want. Of the top one percent of earners, roughly a third are entrepreneurs or managers of nonfinancial businesses. Nearly 16 percent are doctors or other medical professionals. Lawyers, engineers, scientists, and computer professionals make up another 15 percent. In fact, fewer than 14 percent are involved in the financial industry at all. And even those much reviled bankers provide valuable services, including generating the capital that enables businesses to start, expand, and hire workers. At the same time, the rich are paying a disproportionate share of the taxes and contributing more than $150 billion annually to charity.

On the other hand, what have the politicians in Washington given us?

Many of the students taking part in the OWS protests are reportedly concerned about the cost of their student loans. Since the average student who graduates this year will do so with a debt of more than $25,000, that concern is understandable, though there is ample reason to believe that government is more responsible for that debt than the rich or even the banks. But, as bad as that debt is, worse is the $48,000 that each of those students owes because the politicians in Washington can’t stop spending. That’s each student’s share of our $15 trillion national debt.

And that doesn’t even take into account the unfunded liabilities of Social Security and Medicare. If one counted the full indebtedness of the U.S. government, each of those students owes more than $196,000.

And, if they are worried about jobs, well the blame for that can also be laid at the feet of big‐​spending politicians in Washington. The International Monetary Fund looked at the relationship between federal debt levels and economic growth and concluded that from 1890–2000, those countries with high debt levels consistently experienced slower economic growth than those with low debt levels. Similarly, Carmen Reinhardt of the University of Maryland and Kenneth Rogoff of Harvard concluded that countries with a debt totaling more than 90 percent of GDP have median growth rates 1 percent lower than countries with a lower debt, and average growth rates nearly 4 percent lower.

And, it’s not just debt; it is also the size of government. Numerous academic studies show that when government grows too large, costly, and intrusive, it acts as an economic anchor. For example, a pair of studies by Harvard’s Robert Barro found that “public consumption spending is systematically inversely related to economic growth” and that there is a “significantly negative relation between the growth of real GDP and the growth of the government share of GDP.” Similarly, an empirical analysis of 23 OECD countries by Florida State University economist James Gwartney and his colleagues found that a ten percentage point increase in government consumption as a share of GDP reduced the growth rate of real GDP by one percent. In other words, as government spending goes up, economic growth goes down.

In fact, even the current economic crisis has its roots in Washington. The housing bubble and the crash which followed were driven in large part by government policies that discouraged old‐​fashioned lending criteria such as down payments, as well as government‐​run institutions such as Fannie Mae and Freddie Mac, whose implicit government guarantee encouraged speculation on mortgage‐​backed securities. Meanwhile, other government policies deliberately targeted housing loans to low‐​income buyers who were far more likely to default.

There are certainly more than a few bad apples on Wall Street. But for all their faults, we are generally better off with the rich than without them. Can anyone say the same for big government?

This article originally appeared in a PolicyMic debate with Demos co‐​founder David Callahan.

November 23, 2011 8:02AM

Things to Be Thankful For

Not long ago a journalist asked me what freedoms we take for granted in America. Now, I spend most of my time sounding the alarm about the freedoms we’re losing. But this was a good opportunity to step back and consider how America is different from much of world history — and why immigrants still flock here.

If we ask how life in the United States is different from life in most of the history of the world — and still different from much of the world — a few key elements come to mind.

Rule of law. Perhaps the greatest achievement in history is the subordination of power to law. That is, in modern America we have created structures that limit and control the arbitrary power of government. No longer can one man — a king, a priest, a communist party boss — take another person’s life or property at the ruler’s whim. Citizens can go about their business, generally confident that they won’t be dragged off the streets to disappear forever, and confident that their hard‐​earned property won’t be confiscated without warning. We may take the rule of law for granted, but immigrants from China, Haiti, Syria, and other parts of the world know how rare it is.

Equality. For most of history people were firmly assigned to a particular status — clergy, nobility, and peasants. Kings and lords and serfs. Brahmans, other castes, and untouchables in India. If your father was a noble or a peasant, so would you be. The American Revolution swept away such distinctions. In America all men were created equal. Thomas Jefferson declared “that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride them legitimately, by the grace of God.” In America some people may be smarter, richer, stronger, or more beautiful than others, but “I’m as good as you” is our national creed. We are all citizens, equal before the law, free to rise as far as our talents will take us.

Equality for women. Throughout much of history women were the property of their fathers or their husbands. They were often barred from owning property, testifying in court, signing contracts, or participating in government. Equality for women took longer than equality for men, but today in America and other civilized parts of the world women have the same legal rights as men.

Self‐​government. The Declaration of Independence proclaims that “governments are instituted” to secure the rights of “life, liberty, and the pursuit of happiness,” and that those governments “derive their just powers from the consent of the governed.” Early governments were often formed in the conquest of one people by another, and the right of the rulers to rule was attributed to God’s will and passed along from father to son. In a few places — Athens, Rome, medieval Germany — there were fitful attempts to create a democratic government. Now, after America’s example, we take it for granted in civilized countries that governments stand or fall on popular consent.

Freedom of speech. In a world of Michael Moore, Ann Coulter, and cable pornography, it’s hard to imagine just how new and how rare free speech is. Lots of people died for the right to say what they believed. In China and Africa and the Arab world, they still do. Fortunately, we’ve realized that while free speech may irritate each of us at some point, we’re all better off for it.

Freedom of religion. Church and state have been bound together since time immemorial. The state claimed divine sanction, the church got money and power, the combination left little room for freedom. As late as the 17th century, Europe was wracked by religious wars. England, Sweden, and other countries still have an established church, though their citizens are free to worship elsewhere. Many people used to think that a country could only survive if everyone worshipped the one true God in the one true way. The American Founders established religious freedom.

Property and contract. We owe our unprecedented standard of living to the capitalist freedoms of private property and free markets. When people are able to own property and make contracts, they create wealth. Free markets and the legal institutions to enforce contracts make possible vast economic undertakings — from the design and construction of airplanes to worldwide computer networks and ATM systems. But to appreciate the benefits of free markets, we don’t have to marvel at skyscrapers while listening to MP3 players. We can just give thanks for enough food to live on, and central heating, and the medical care that has lowered the infant mortality rate from about 20 percent to less than 1 percent.

A Kenyan boy who managed to get to the United States told a reporter for Woman’s World magazine that America is “heaven.” Compared to countries that lack the rule of law, equality, property rights, free markets, and freedom of speech and worship, it certainly is. A good point to keep in mind this Thanksgiving Day.

This article originally appeared in the Washington Times in 2004 and was included in my book The Politics of Freedom.

November 22, 2011 9:49PM

Fun with Grammar

Juliet Eilperin at the Washington Post writes:

Less than a week before U.N. negotiators convene in South Africa for a new round of talks aimed at forging a global climate pact, a hacker has released an apparent second round of e‐​mails from the University of East Anglia in Britain that seek to portray climate scientists in a negative light.

Now let’s break that sentence down. Could it really be the e‐​mails from the climate catastrophists that “seek to portray [themselves] in a negative light”? Surely not. Rather, it appears that the sentence was intended to read something like this:

…a hacker believes that the apparent second round of e‐​mails from the University of East Anglia that he released today portray climate scientists in a negative light.

If there’s any embarrassment to the writers of the e‐​mails, after all, surely it was not intended. In any case, it’s not the release of the e‐​mails that might “portray [some] climate scientists in a negative light,” it’s the e‐​mails themselves.

More on the original Climategate here. Ongoing posts at this climate‐​skeptic website. And as you hear terms like “skeptics,” “deniers,” and so on, remember what Pat Michaels wrote in the 2009 Cato Handbook for Policymakers:

Leading politicians and media figures are insisting that Congress make
global warming a very high priority. Global warming is indeed real, and human activity has been a contributor since 1975.

But global warming is also a very complicated and difficult issue that
can provoke very unwise policy in response to political pressure. In 2005, for instance, Congress clearly made a very bad decision about climate change when it mandated accelerated production of ethanol. Critics had argued then that corn‐​based ethanol would actually result in increased carbon dioxide emissions. An increasing body of science has since verified this position. Further, corn‐​based ethanol is responsible in part for the skyrocketing price of corn, soybeans, rice, and wheat since the mandates began.

Although there are many different legislative proposals for substantial
reductions in carbon dioxide emissions, there is no operational or tested suite of technologies that can accomplish the goals of such legislation. Fortunately, and contrary to much of the rhetoric surrounding climate change, there is ample time to develop such technologies, which will require substantial capital investment by individuals.

He’s a skeptic about the predictions of catastrophic and imminent threats, not about the existence of modest global warming.

November 22, 2011 3:20PM

Palestine To Adopt Chilean Private Pension Model

Hashim Shawa, the head of the Bank of Palestine, says that in 2012 Palestine will adopt the private pension system that Chile pioneered 30 years ago and has exported throughout the world. As you can see from the map below, it will become the second Arab territory after Egypt to do so. Of course, the devil is in the details, and for the reform to be as successful as it has been in Chile, Palestine should introduce a whole set of complimentary economic reforms. But if done right, at least in this regard Palestinians will be ahead of almost all of their neighbors, including Israel.

November 22, 2011 2:40PM

We’ve Had Enough Government ‘Stimulation’

After three years and $4 trillion in combined deficit spending, unemployment remains stubbornly high and the economy sluggish. That people are still asking what the government can do to stimulate the economy is mind‐​boggling.

That the Keynesian‐​inspired deficit spending binge did create jobs isn’t in question. The real question is whether it created any net jobs after all the negative effects of the spending and debt are taken into account. How many private‐​sector jobs were lost or not created in the first place because of the resources diverted to the government for its job creation? How many jobs are being lost or not created because of increased uncertainty in the business community over future tax increases and other detrimental government policies?

Don’t expect the disciples of interventionist government to attempt an answer to those questions any time soon. It has simply become gospel in some quarters that massive deficit spending is necessary to get the economy back on its feet.

The idea that government spending can “make up for” a slow‐​down in private economic activity has already been discredited by the historical record—including the Great Depression and Japan’s recent “lost decade.”

Our own history offers evidence that reducing the government’s footprint on the private sector is the better way to get the economy going.

Take for example, the “Not‐​So‐​Great Depression” of 1920–21. Cato Institute scholar Jim Powell notes that President Warren G. Harding inherited from his predecessor Woodrow Wilson “a post‐​World War I depression that was almost as severe, from peak to trough, as the Great Contraction from 1929 to 1933 that FDR would later inherit.” Instead of resorting to deficit spending to “stimulate” the economy, taxes and government spending were cut. The economy took off.

Similarly, fears at the end of World War II that demobilization would result in double‐​digit unemployment when the troops returned home were unrealized. Instead, spending was dramatically reduced, economic controls were lifted, and the returning troops were successfully reintegrated into the economy.

Therefore, the focus of policymakers in Washington should be on fostering long‐​term economic growth instead of futilely trying to jump‐​start the economy with costly short‐​term government spending sprees. In order to reignite economic growth and job creation, the federal government should enact dramatic cuts in government spending, eliminate burdensome regulations, and scuttle restrictions on foreign trade.

The budgetary reality is that policymakers today have no choice but to drastically reduce spending if we are to head off the looming fiscal train wreck. Stimulus proponents generally recognize that our fiscal path is unsustainable, but they argue that the current debt binge is nonetheless critical to an economic recovery.

There’s no more evidence for this belief than there is for the existence of the tooth fairy.

Not only has Washington’s profligacy left us worse off, our children now face the prospect of reduced living standards and crushing debt.


This article originally appeared in a PolicyMic debate between the Cato Institute’s Tad DeHaven and Demos senior fellow Lew Daly. Check out Daly’s piece here.

November 22, 2011 1:46PM

Grand Jury Reform Needed

The National Association of Criminal Defense Lawyers has just released a new report calling for reform of the federal grand jury system. Here’s an excerpt from the foreword to that report:

The same respect that the founding fathers had for the grand jury has faded in the modern criminal process. Undeniably, few institutions written into the U.S. Constitution manifest such disparity between design and practice as the federal grand jury. For an accusatory process that on its face emphasizes the role of the citizen, the grand jury is a patently un‐​democratic body. Indeed, the 94 federal grand juries across the country function more like feudal duchies, in which federal prosecutors exercise virtually unchecked power to indict. I say this having sought countless indictments before grand juries and having overseen the Justice Department’s work to promulgate uniform rules for federal prosecutions, including grand jury proceedings. Simply put, the federal grand jury exists today, for the most part, as a rubber stamp for prosecutors. This means that the grand jury no longer protects citizens from unfounded charges, government overreaching, and miscarriages of justice.

Those are the words of Larry Thompson, a former top ranking official in the Department of Justice who oversaw the work of federal prosecutors between 2001–2003. A link to the full report can be found here.

For Cato scholarship on this subject, go here.