Archives: 01/2012

Setting the Record Straight on Military Spending Levels

As David Boaz recently demonstrated, the jeremiads emanating from Washington over proposed cuts in military spending are unfounded. Howard P. “Buck” McKeon’s op-ed in today’s Washington Post is only the latest to decry the “damaging blow to our military” that will be done by “massive defense cuts.”

Not only is Pentagon spending not at its lowest level in 60 years, as the Heritage Foundation claimed, it will not fall to such a level even if the Budget Control Act’s sequestration spending caps are implemented. David shows that charts can obscure the relevant facts or contribute to poor arguments.

But charts can also help shed light on the truth. For example, in the first chart below, prepared by my colleague Charles Zakaib, one might conclude that the reductions being contemplated as an outgrowth of President Obama’s strategic review (the brown line) would represent a dramatic cut in the Pentagon’s base budget. The automatic sequester cuts (the red line at the bottom) appear even more draconian.

What is not shown, however, is the context in which such cuts would occur. In the next chart, those projections are compared to defense spending since 1989. As you can see, the sequestration cuts would return military spending to no less than the spendthrift days of 2007, as others have noted in the past.

Should sequestration occur, defense spending will remain at historically high levels relative to the last post-war drawdown and not approach the low of 1998, much less a 60-year low.

* Thanks to Charles Zakaib with his assistance on this research and this post.

The Supremes vs. the Supremes

Corporations, corporate speech, and the 2010 Supreme Court decision in Citizens United v. Federal Elections Commission are a new Mason/Dixon line in American politics. In late December, in true antebellum fashion, the Montana Supreme Court, in Western Tradition Partnership, Inc. v. Attorney General of Montana, tried to nullify the case by ruling that Citizens United doesn’t apply to Montana’s “unique” electoral system. Because the Montana Supreme Court’s actions were in blatant disregard of the Citizens United decision, the Supreme Court will likely overturn the opinion summarily—that is, without briefing or argument. Montana will not be a First Amendment-free zone for long.

Some who vehemently oppose the Citizens United decision have come out against the Western Tradition Partnership opinion as unsupportable judicial overreaching. Ian Millhiser of the Center for American Progress writes that, just as “it is wrong when Newt Gingrich plots a campaign of massive resistance against judges he disagrees with… Montana’s justices act no less illegitimately when they fail to follow a binding Supreme Court precedent.” Absolutely.

Mr. Millhiser is also correct in citing Justice James C. Nelson’s vigorous dissent as an admirable example of judicial modesty. While Nelson is very clear that he does not support Citizens United, he is even clearer in admonishing the majority of the court for ignoring binding precedent from the highest court in the land. The issue for Justice Nelson is clear, and it does not hinge on whether he disagrees with the Supreme Court’s opinion. Instead the question is simple: “Has the State of Montana identified a compelling state interest, not already rejected by the Supreme Court, that would justify the outright ban on corporate expenditures for political speech?” “Having considered the matter,” Justice Nelson writes, “I believe the Montana Attorney General has identified some very compelling reasons for limiting corporate expenditures in Montana’s political process. The problem, however, is that regardless of how persuasive I may think the Attorney General’s justifications are, the Supreme Court has already rebuffed each and every one of them.”

With criticisms like this coming from ideological compatriots, one has to wonder what the five justices in the majority were thinking. When reading the opinion, however, what they were thinking is abundantly clear: they wanted to register their dissent with Citizens United as well as cling to a distant hope that the Supreme Court might review the scope of their decision. Unfortunately for them, because of the method in which they chose to do so, coupled with the recentness of Citizens United and a blistering dissent that catalogs their errors, the Supreme Court will not seriously examine their reasoning.

The only remaining question is whether the Supremes will unanimously vote to reverse the Montana court and thus resolutely affirm the status of SCOTUS within the judicial hierarchy. There remains a possibility, however, that one or more of the justices who disagree with Citizens United (and recall that Justice Kagan argued the case before the Court as solicitor general) will use the case to voice their opposition to the decision. This would be unwise, and it would only contribute to the perception of the Court’s fractured nature. The justices should not be fractured on condemning a lower court that blatantly ignores controlling precedent.

Yet the opinion is still worth reading for anyone interested in campaign finance law generally or in Citizens United itself. Not only does the majority opinion make a woefully inadequate attempt to distinguish Montana’s “unique” situation from facts already addressed by the Supreme Court, but it highlights fundamental differences in political philosophy that Citizens United has brought to the surface.

Contrary to popular opinion, including the opinion of President Obama voiced in his 2010 State of the Union address, Citizens United did not overturn a “century of law” or dramatically break with existing First Amendment doctrine. Instead, the Court merely logically extended what it said in the foundational campaign finance case of Buckley v. Valeo (1976): the government’s only compelling interest in regulating campaign finance comes from preventing the corruption or the appearance of corruption of elected officials. “Corruption” here means quid pro quo corruption—that is, “you give money to my campaign and I’ll vote the way you want me to, a way that I wouldn’t have voted otherwise.” It does not mean “corrupting” the supposed purity of the campaign process by letting one speaker have a louder voice than other speakers. Nor is it “corruption” for representatives to respond to the demands of their constituency. That’s democracy. The Court in Buckley ruled that the dangers of quid pro quo corruption are only substantially present when direct contributions are given to candidates. Those dangers are not as present when parties do not give money directly to the candidate but instead spend money independently of the campaign. Citizens United merely extended this reasoning to corporations.

This intuitively compelling distinction is consistently ignored by critics of Citizens United. Throughout the majority opinion, the Montana Supreme Court also ignores this distinction (which it is legally bound to enforce) and instead uses the term “corruption” to describe both bribery and disproportionate influence. In one particularly telling passage, the court explains how a corporation “willing to spend even hundreds of thousands of dollars, much less millions, on a Montana judicial election could effectively drown out all other voices.” This idea—the idea that the government should regulate the electoral marketplace of ideas in order to ensure that voices are not drowned out by louder voices—is not just wholly repugnant to the First Amendment, it is a dangerous power to give to government officials who depend on elections to keep their jobs.

Perhaps no one has put this idea better than Justice Scalia in the opening lines to his dissent in Austin v. Michigan Chamber of Commerce, which Citizens United overruled:

“Attention all citizens. To assure the fairness of elections by preventing disproportionate expression of the views of any single powerful group, your Government has decided that the following associations of persons shall be prohibited from speaking or writing in support of any candidate: ___.” In permitting Michigan to make private corporations the first object of this Orwellian announcement, the Court today endorses the principle that too much speech is an evil that the democratic majority can proscribe. I dissent because that principle is contrary to our case law and incompatible with the absolutely central truth of the First Amendment: that government cannot be trusted to assure, through censorship, the “fairness” of political debate.

Instead of focusing on quid pro quo corruption, the Montana court’s central worry is that corporate speech will be effective, that is, that people might actually believe it. It’s hard not to see some measure of paternalism in this idea, as well as an implicit assumption that corporations only try to deceive and brainwash rather than inform. Thus, a majority of Montana’s Supreme Court would empower the government to ensure that citizens are protected from these devious forces by benevolent officials who will in no way try to control the process for their own ends. This much faith should never be placed in elected officials. Thankfully, a majority of the Supreme Court of the United States agrees.

Another Pyrrhic Victory in Mexico’s Drug War

After months of not releasing official data on the number of drug-related killings, the Mexican government announced yesterday that in the first nine months of 2011, 12,903 people died in episodes of drug violence. The Mexican authorities, struggling to find a silver lining, noted positively that the figure reveals “a significant decrease” in the growth of the murder rate from previous years.

This tactic is similar to Washington’s creative accounting when it comes to spending “cuts:” spending continues to increase, but at a smaller percentage than previously planned. Thus, spending has been “cut.” Similarly, the number of people killed in Mexico’s drug war continued to rise in 2011, but at a lower pace than 2010. Thus, the murder rate has declined. Moreover, the 11 percent increase in murders in 2011 follows a record setting number in 2010.

* BBC estimate.
Source: Mexico’s Federal Attorney General’s office.

According to an estimate from the BBC, the total number of drug deaths in 2011 is approximately 16,700. That means over 51,000 people have been killed in Mexico since president Felipe Calderón launched a war on drug cartels in December 2006. And the number may be higher.

As Mexico’s former foreign minister Jorge Castañeda said last November at the Cato conference “Ending the Global War on Drugs,” the number killed in Mexico’s war on drugs will soon equal the number of U.S. deaths in Vietnam. And let’s remember that Mexico’s population is a third of the United States’ and the Vietnam conflict lasted twice as long as Calderón’s drug offensive.

The main worry for 2012 is not that drug killings stabilize at a high rate—although that would be terrible—but that violence engulfs other areas of the country that have remained relatively peaceful, such as Mexico City. If that happens, Mexican authorities will find it even more difficult to identify “victories” in their war against cartels.

97% of Obama Nominations in 2011 Were Confirmed by the Senate

One of the rationales oft heard for Obama’s recent “recess” appointments is that the Senate is not “doing its job” or that Republicans have blocked his nominees and that our government “cannot function.”  Putting aside the absurdity of the argument that somehow if Congress fails to “do its job” that empowers the President to take over its job, the simple fact is that the vast majority of Obama nominations have actually been confirmed by the Senate.

Between January 5, 2011, the beginning of the 1st session of the 112th Congress, and December 30,2011, the Senate received 20,517 nominations from the Obama Administration.  Of those, 19,815 were confirmed by the Senate, which rounds up to 97 percent.  And this ignores the fact that some nominations, like those to the National Labor Relations Board, were not received until December, hardly giving the Senate any time to consider and confirm said nominations.

One can argue that not all nominations are equal.  For instance the majority of nominations are military positions.  You can decide for yourself whether a general or admiral is equal to an assistant secretary or bureau director.  If one wants to produce a “quality-adjusted” nominations index, they are free to do so.  None of this changes the basic fact:  President Obama has had the majority of his nominations confirmed by the Senate.  Claims to the contrary are simply false.

How Good Are Government Deficit Forecasts?

In just a few weeks Washington enters that alternative universe called “budget season,” when the President delivers his budget proposal to Congress and Congress begins constructing its budget for the coming fiscal year (at least in normal years, don’t expect much budget action in 2012).  Underlying the budget process will be government projections of the deficit.  Such projections will be given considerable weight, both in Washington and among the press.  So if said projections are way off, then budgeting decisions by Washington will also miss the mark. 

Just in time to help frame this debate is a new paper from economists at the Federal Reserve Bank of St. Louis.  The entire paper is well worth a read, and accessible to the general public.  Below is a chart, reproduced from the paper, that expresses the basic point.

On the X axis is the Congressional Budget Office’s projected 5 year budget surplus/deficit, as a percent of GDP.  The Y axis plots the actual budget surplus/deficit.  An easy way to read the chart is that points below the 45 degree line are instances of where CBO was too optimistic.  Points above the 45 degree line are where CBO was too pessimistic.  If CBO’s errors were random, then the number of points below and above the 45 degree line would be about equal.  As you can see, however, CBO’s errors were not randomly distributed.  They were biased in the direction of being too optimistic.  So when you see the next round of CBO budget forecasts, take them with a huge grain of salt.  The truth is likely to be much worse.


Promises Unfulfilled? What Next, Federal Education Failure?

On Sunday we marked the tenth birthday of the No Child Left Behind Act by reviewing its decade of futility and explaining why federal education adventuring is basically doomed to failure. (Enjoy some of our extensive coverage here, here, and here.)  This week we got yet more evidence that federal policy is always big on promises, itty-bitty on results. According to the latest reports, most of the winners of President Obama’s $4.35-billion “Race to the Top” competition are well off pace to fulfill the promises they made to get the dough. Well off schedule, that is, except for adopting the laughably dubbed “state-led and voluntary” national curriculum standards that the federal Race to the Top essentially demanded they use.

It’s just as I warned back in 2009, when Race to the Top was all the transformative rage in both left and right edu-policy circles:

Have plans for reform? Sure. Break down a few barriers that could stand in the way of decent changes? That’s in there, too. But that’s about it. And the money is supposed to be a one-shot deal – once paper promises are accepted and the dough delivered, the race is supposed to be over.

In light of those things, how is this more appropriately labeled the Over the Top Fund than the Race to the Top Fund? Because while not requiring anything, it tries to push unprecedented centralization of education power. It calls for state data systems to track students from preschool to college graduation. It calls for states to sign onto “common” – meaning, ultimately, federal – standards. It tries to influence state budgeting.

To be fair, the feds could still hold states accountable and keep the RTTT dough if and when the states break their promises. But that would still be another failure, and all the money states and Washington will have spent on RTTT will have gone for naught. But, then, spending for naught is something we should be very much used to by now.

Capital Confusions over Bain Capital

Today POLITICO Arena asks:

Are Romney’s GOP rivals smart to continue their attacks on capitalism that have so far fallen flat? Would this theme be any more effective for the Obama campaign?

My response:

The Gingrich and Perry attacks on Mitt Romney’s work at Bain Capital are appalling. We expect that from Obama – as in yesterday’s “insourcing” press conference – because his understanding of how markets work is so slim and everything, for him, is politics. Those in the party that purports to stand for free markets should never stoop to such shameless pandering.

Steven Rattner’s piece in POLITICO this morning nicely summarizes the facts surrounding Romney’s work at Bain Capital. And yesterday my colleague Steve H. Hanke pointed to a more detailed study issued recently by the National Bureau of Economic Research, “Private Equity and Employment.” As Rattner puts it, Bain Capital’s record “was extraordinary, among the best in the business.” Yes, restructuring companies may cost jobs. Letting them fail does too – but also costs those who’ve invested in them, many of whom are or will be small retirees. At least Romney did it with private funds, not with taxpayer money or regulatory protections. That’s how capitalism works, for the benefit of all of us.