Archives: 06/2012

State/Local Bond Debt Tops $3 Trillion

Whoops! Federal Reserve economists looked in the shoe closet recently and discovered more than half a trillion dollars of government bond debt that they hadn’t previously counted.

It turns out that state and local governments in the United States are not $2.5 trillion in debt as previously reported, but $3 trillion in debt. That’s $25,000 for every household in the nation. That debt is on top of the trillions of dollars of other liabilities that politicians have piled on us and our kids, including federal bond debt, federal “entitlement” obligations, and state/local pension and health obligations.

The Fed started using a new data vendor for its state/local bond information, and this vendor apparently has more complete coverage of the thousands of state and local government agencies and their debt issuance. (See note 16 here).

The old Fed data (Table D.3) show state/local debt growing from $1.2 trillion in 2000 to $2.5 trillion in 2010. The new data (Table D.3) show debt hitting $3.1 trillion in 2010 and then falling a bit to $3.0 trillion in 2011. By the way, Census data show that state/local government debt grew from $1.5 trillion in 2000 to $2.7 trillion in 2009.

There are two lessons here: 1) State/local debt has risen rapidly over the last decade, adding to the many other burdens that taxpayers will have to deal with in coming years, and 2) While assembled by highly skilled experts, government data (inflation, GDP, income levels, and much else) are not carved in stone.

The chart shows the old debt time series and the new one. The new series includes data only back to 2004.


Uruguay Aims to Legalize Marijuana: The Good, The Bad and The Ugly

The good: José Mujica, Uruguay’s president, announced that he will send a bill to Congress to legalize the production and sale of marijuana. Consumption was already decriminalized in the South American nation. If the bill is approved, and it seems to have enough support in Congress to pass, Uruguay would become the first country to fully legalize marijuana.

The bad: The bill stipulates that the government will be in charge of the production and sale of marijuana. Even though having a marijuana state-owned monopoly is better than prohibition, it would be far better to have the private sector run the business under an appropriate tax and regulatory regime. Governments should not be involved in the drug business.

The ugly: Marijuana users who want to legally purchase the drug would have to register with the government. Moreover, they would be limited in the number of cigarettes they can buy per month. However, there are good reasons to believe that not many people will rush to a government agency to register as a marijuana user. And imposing a limit on the amount of joints that a person can buy legally just means that any extra consumption will by provided by illegal sources. Thus, I doubt that in practice the bill will be very effective at achieving its goals of getting rid of the black market and fighting street crime.

Technically Correct, but not ‘Effin’ Brilliant’

While not “effin’ brilliant,” to paraphrase Bono in one of incidents at issue in the “fleeting obscenities” case, the Supreme Court’s overly narrow opinion in FCC v. Fox is correct as far as it goes. Levying millions of dollars of fines based on an after-the-fact policy change and a few ambiguous words from a 1960s regulatory statement clearly fails constitutional fair notice requirements.

Still, the Court missed a wonderful opportunity to expound on free speech over the airwaves and put broadcasters on the same level with respect to the First Amendment as cable companies, internet service providers, and other players on the telecommunications field. The Court also, as Justice Ginsburg noted in her concurrence, missed a golden opportunity to reconsider its unworkable Pacifica precedent. This ruling is not something Paris Hilton should sniff at, but Court watchers expected more.

Major Victory for Workers’ Rights

Today’s Supreme Court decision in Knox v. SEIU is a major victory for individual liberties and workers’ right not to be coerced by government or unions. Those workers who choose not to join unions should not be forced to fund the unions’ political activities. The Court’s decision for the worker to opt-in to paycheck deductions for political activities rather than opt-out of these payments restores the proper protection for the individual’s freedom of speech and conscience. Justice Alito wrote for the majority, “Courts do not presume acquiescence in the loss of fundamental rights.”

Campaign Finance Freedom Checks Presidential Pandering

Today POLITICO Arena asks:

 Given that May reports show that Romney raised more money than Obama, does the president still have a shot at victory even though he’ll likely be outspent, and is there no chance that his record could speak louder than cash?

My response:

Given Obama’s power to pander to special interests, it’s a good thing that Romney’s raising more money than Obama. Yet if zealots for campaign finance “reform” had had their way – and the Supreme Court hadn’t stood up for the First Amendment – both candidates might well today be receiving equal “public” funding for their campaigns. All of which illustrates, once again, that “reform” is not about preventing corruption but about incumbency protection.
Student loans, gay marriage, the DREAM Act, countless middle-class “entitlements” – how’s a challenger going to be able to compete against an incumbent who can dole out such favors right up to the election unless he’s able to raise more money than the incumbent and get his message out, including criticisms about such rank, election-year pandering? The implication that Romney’s cash may speak louder than Obama’s record and “buy” the election for him thus misses the point. What more cash buys is more speech, which challengers need if they’re going to be able to compete against the inherent, and often abused, power of incumbents.

Taking a Stand against Nanny Grants

More than a few of the adventurous initiatives of today’s nanny state emerge from federal-local partnerships in which Washington ships federal tax money to selected local governments for the purpose of launching new campaigns or ordinances against things that are bad for us. Thus it has been with Michael Bloomberg’s anti-food and -drink activism, which the Obama Administration persistently subsidizes by way of grants from the Centers for Disease Control and other agencies.

As Michael Greve points out in his new book The Upside-Down Constitution, arrangements of this sort epitomize some of the most dysfunctional aspects of our system of federalism. They hide political accountability, since the favored local governments need not make a case to their own budgetary decision-makers for the expenditure as the highest and best use of scarce funds (hey, this is free federal money, why turn it down?). At the same time, the amounts involved are small enough in relation to the vast sea of overall federal spending that they generally escape close scrutiny in Congress. They allow federal incumbents to develop politically fruitful alliances with like-minded local political elites. And they often result in splashy, news-making local initiatives which go farther than Washington could politically permit itself to go: for example, given the importance of farm-state votes, the Obama administration has prudently avoided head-on vilification of the American diet, even as it funnels money to mayoral allies in farm-free Gotham and other cities to engage in just such vilification.

Fortunately, some in Congress are seeing through the charade. As The Hill reports, and Marc Scribner relates in more detail at CEI “Open Market,” some House members are determined to block a nascent grant program in which uber-Nanny Ray LaHood, Secretary of Transportation, would be empowered to send money to states to bribe them into taking steps against “distracted driving.” As we have argued in this space before, decentralized state and local rulemaking – un-distorted by a federal thumb on the scales – is the most promising way of figuring out which regulatory approaches to driver cellphone use genuinely improve safety at an acceptable cost in convenience, expense and other factors. Constitutionally and otherwise, it is simply not the role of the federal government to arm-twist states on their policies regarding driving on local streets and roads far from any Interstate.

Rep. Diane Black (R-Tenn.) is reportedly offering a motion to instruct conferees to stand fast on the House’s disapproval of the grant program, which will be argued today. This would make a good place to draw the line against the continued expansion of the centrally directed nanny state.

Congress vs. Obama/Holder on Fast & Furious

The House Government Oversight Committe has voted, on party lines, to hold Attorney General Eric Holder in contempt for failing to turn over documents related to the bizarre “Fast and Furious” gun sting operation (which program/issues Dave Kopel helpfully summarizes).  The committee, headed by Rep. Darrell Issa (R-CA), took this action despite President Obama’s assertion of executive privilege over the documents.

Now, I haven’t been following the Fast and Furious scandal that closely – seems like a dumb idea to give guns to criminal gangs, but what do I know about law enforcement? – but this latest development, raising the Holder-Issa impasse to a constitutional battle between the executive and legislative branches, is worth noting.  I can’t add much to the excellent and concise analysis provided by the Heritage Foundation’s Todd Gaziano (a member of the U.S. Commission on Civil Rights who formerly served in the DOJ’s Office of Legal Counsel and also as chief counsel to the House Oversight Committee), but I will highlight three points:

  1. Executive privilege is a qualified, not absolute, doctrine that is meant for certain circumscribed purposes – such as to allow the president to receive candid advice from his advisers – not a blanket protection of anything in the executive branch the president wants not to be disclosed.  (And it certainly can’t be invoked to shield wrongdoing.)   Because it is qualified, the president must identify the documents not disclosed and provide a description of the privilege asserted, what attorneys call a “privilege log.”  This has not been done here.
  2. For executive privilege to apply here, the documents at issue have to be related to something the president is involved in, most likely in this context communications to/from the president regarding the Fast & Furious policy.  If Obama knew nothing about F & F, I have trouble seeing the basis for the privilege. 
  3. If the president did know something, let alone have a hand in the decision making, Congress is entitled to learn at least something about it.  Even when there’s a sound basis for invoking executive privilege, the American people’s need for information often outweighs whatever presidential interest is at issue.  As Todd puts it, “the President is required when invoking executive privilege to try to accommodate the other branches’ legitimate information needs in some other way. For example, it does not harm executive power for the President to selectively waive executive privilege in most instances, even if it hurts him politically by exposing a terrible policy failure or wrongdoing among his staff. The history of executive–congressional relations is filled with accommodations and waivers of privilege. In contrast to voluntary waivers of privilege, Watergate demonstrates that wrongful invocations of privilege can seriously damage the office of the presidency.”  (The mention of Watergate is doubly fitting because this past Sunday marked 40 years since the break-in that ultimately brought down the Nixon presidency.)

I doubt that President Obama’s assertion of privilege in this episode has yet risen to Nixonian standards of contempt for the rule of law, but it is a dangerous bit of political gamesmanship designed to delay and push back on the Oversight Committee/Congress’s demand for documents.  As the committee showed in its vote today, however, both sides are ready to play this high-stakes game of chicken. 

Holder’s contempt citation now goes to the floor of the House, where I’m sure many Republican members are salivating at the chance to score political points against an unpopular president and attorney general.   (Recall that the House found former White House counsel Harriett Miers and Chief of Staff Josh Bolten in contempt of Congress for failing to answer questions regarding the firing of U.S. attorneys during the Bush administration.)  We may also see a lawsuit regarding the executive privilege claim, and even, if no agreement on document-production is reached, articles of impeachment drawn up against the attorney general.

Suffice it to say, what began as a head-scratchingly bad policy that cost many lives (including border patrol agent Brian Terry) has now become a large stonewalling and possibly coverup operation.  As with Watergate, Iran-Contra, the Clinton-Lewinsky affair, and so many other presidential scandals, the obstructive aftermath seems to be eclipsing the initial wrongdoing in legal and political importance.