Archives: 08/2012

Some Perspective on Campaign Spending in 2012

Many people lament spending on elections. I am not certain why they do: more money means more information for voters. However, their laments foster headlines like “presidential campaign the most expensive ever!”

The Campaign Legal Center has just published a study with a similar headline: the 2012 presidential elections will be “the most expensive on record.” They estimate spending will be 7 percent above spending in 2008.

I recalled that a seminal paper on campaign finance concluded, “From 1912 to 2000, presidential campaigns have accounted for approximately the same, small fraction of GDP.” Americans on the whole seem to spend a fixed and small part of national wealth on campaign spending.

How about now? Have current outlays grown as fast as GDP?

The data at the Bureau of Economic Analysis indicate GDP has grown 8.1 percent from the second quarter of 2008 to the second quarter of 2012.

In sum, campaign spending in 2012 seems likely to shrink as a share of overall national wealth compared to 2008. That conclusion is compatible with spending rising to record in absolute dollars. Indeed, spending is likely to set such records in every presidential election unless the economy contracts over a four year period.

Amid all the complaints about “record spending” shouldn’t at least one person in the media point out that campaign spending is lower, maybe much lower, than history would have led us to expect?

Air Traffic Control Screwups

The Washington Post today describes the latest near-miss disaster at National Airport, apparently the result of screw-ups by our government-run air traffic control (ATC) system. The Post notes that this near-accident is one of many troubling incidents in recent years:

…the near-collision was another among several thousand recorded errors by air traffic controllers nationwide in recent years. National has been the site of some of the most notable incidents, including one revealed last year in which the lone controller supervisor on duty was asleep and didn’t respond when regional controllers sought to hand off planes to National for the final approach.

News of the sleeping controller at National last year led to the revelation that controllers on overnight shifts at several other airports were napping on the job.

Is our ATC system is so troubled because it is

  • a government bureaucracy,
  • a monopoly that doesn’t face competitive pressures to improve quality, or
  • a union-dominated organization?

I don’t know the answer; maybe it’s all three. But news stories like the one today usually don’t mention the role of the unions, and newspaper readers may just conclude that the fault is simply one of a bumbling Federal Aviation Administration (FAA) bureaucracy.

However, I coincidentally received a letter in the mail today from an anonymous FAA official who points to some of the problems caused by the militant National Air Traffic Controllers Association (NATCA). He or she says that the “NATCA union holds the FAA management hostage and little is done to correct the problems … The NATCA union is too powerful and management is too intimidated to do their jobs.”

The letter writer may or may not have all his or her facts straight–the letter is here [PDF] so you can judge for yourself. However, I do think that the media could do a better job probing the role of unionization in the FAA’s substandard performance. People remember Ronald Reagan’s battle with the air traffic controllers, but that was just a blip in a much longer story. Unions have been creating problems for the ATC system since the 1960s, as I mention in this essay.

Civil Egalitarianism

This morning’s newspaper brings news of government officials seeking to punish individuals who provided relevant information to the public. In this case, the officials are seeking individuals who leaked secret information about national security issues.

Here’s the problem with these investigations: disclosing the source of the leaks will lead to retaliation by government officials against the leaker which in turn will lead to fewer leaks in the future and less information for the public. As the New York Times puts it, “Investigations into Security Leaks is Casting Chill on Coverage.”

Yet the editorial board of that same newspaper has long supported public disclosure of the sources of campaign spending which can lead to retaliation from government officials against the source of the spending, thereby discouraging future spending on speech and in the end, less information for the public.

Why the differences in perspective? The cynical among us might think the costs of disclosing the sources of national security leaks fall on the media (above all, the New York Times) while the costs of disclosing campaign spending fall on people who compete with the media for public attention. But I am not so cynical to think the media are so narrowly self-interested.

Media folks may also think that retaliation is much more likely from national security officials than from officials concerned about winning elections. But why? The incentives seem at least equally strong in both cases. If anything, suppressing speech seems more directly related to election outcomes than keeping official secrets. How many votes did Wikileaks cost the Obama administration in 2010?

A “business model” explanation also comes up short. The media does depend on national leakers for information to repackage and sell. So they are protecting their inputs. The media also repackage disclosed campaign spending information. But such information would be much more valuable to the media if it were secret in the first place. Has anyone received a Pulitzer for writing yet another story about SuperPACs?

Consider this alternative explanation for the difference. Egalitarianism is the view that politics should be about helping the oppressed and harming the oppressor. In the national security context, the oppressor class comprises military and national security officials. They are icons of inequality working as they do in hierarchical organizations wasting public money that could be redistributed to the truly deserving. In campaign finance, the oppressors are business people - i.e. “the rich and powerful” - who have unequal wealth. Disclosing sources in the national security case helps the oppressor and increases inequality. Not disclosing sources in the campaign finance case has the same effect. The question is not what the government does but rather its effect on equality.

I conclude we should not call use the broad term “civil libertarian” to refer to everyone concerned about government limiting information to the public. Instead, we should focus on the purposes and values that inform political action. Media folks are largely “civil egalitarians.” Those concerned about liberty from government are properly called “civil libertarians.”

Why does this matter? Naturally I would be happy if “civil egalitarians” would become, by my lights, more consistent and thus, “civil libertarians.” Even if they do not, both sides should keep in mind when working together on politics that theirs is coalition of circumstances and not a coalition of common purpose.


George Leventhal Should Teach Paul Krugman about Public Finance and the Economics of Taxation

Montgomery County in Maryland is not exactly a hotbed of free market thinking or a bastion of limited government.

It’s one of the richest counties in the nation, but not because of entrepreneurship and wealth creation. Instead, it’s a bedroom community filled with over-paid bureaucrats, corrupt lobbyists, fat-cat contractors, and other ne’er-do-wells who commute into Washington and live off the blood, sweat, and tears of people in the economy’s productive sector.

To give you an idea of its political leanings, Obama won 72 percent of the vote in Montgomery County in 2008 and all nine members of the County Council are Democrats.

So you wouldn’t think this is a place where lawmakers ever have anything sensible to say about tax policy. But, lo and behold, one Councilman recognizes that there’s no Berlin Wall surrounding the County. As such, higher tax rates may not generated additional tax revenue if people vote with their feet.

You can listen to George Leventhal by clicking here, but here’s the relevant quote.

We may be reaching a tipping point with tax rates. There’s a point beyond which you can keep raising the tax rates, but you won’t get more revenue because if people leave the county or if new businesses don’t start you’re not getting new revenue.

For the uninitiated, Leventhal is talking about…gasp…the Laffer Curve.

Folks like Paul Krugman would like you to believe that the Laffer Curve is a twisted fantasy concocted by stooges for the rich. He writes that it is “junk economics” to consider the relationship between tax rates, taxable income, and tax revenue.

In the real world, though, at least some left-leaning lawmakers realize that higher tax rates backfire if the geese that lay the golden eggs fly away (as has happened in Italy, France, and the United Kingdom).

Maybe we can take up a collection and hire Mr. Leventhal to do a bit of economics tutoring for a certain Nobel laureate?

P.S. Just in case you’re not convinced by the experiences of a local politician, there is lots of empirical evidence for the Laffer Curve.

Government Can’t Censor Book Promotion

This blogpost was co-authored by Cato legal associate Kathleen Hunker.

There’s a fine line between protecting the public from fraud and censoring unorthodox opinions—a line across which the government often stumbles. That was the case in September 2007, when the Federal Trade Commission filed a contempt motion against Kevin Trudeau, author of the best-selling book The Weight Loss Cure “They” Don’t Want You to Know About.

The FTC alleged that Trudeau had misrepresented the contents of his book in several “infomercials” by describing it as “easy” and claiming that dieters, by the end of the regimen, could eat anything they wanted without gaining weight. Despite the fact that Trudeau merely quoted the book when making these statements, the district court upheld the FTC’s findings and smacked Trudeau with a staggering $37.6 million fine. The court also imposed a rare “prior restraint” on speech, demanding that Trudeau post a $2 million bond before running any future infomercials.

The district court imposed these sanctions even though the FTC never proved that Trudeau misled a single consumer or violated any part of the FTC Act. On appeal, the Seventh Circuit affirmed the district court’s decision and ruled that Trudeau’s book promotion constituted misleading commercial speech and was therefore not entitled to any constitutional protection. If left unchallenged, the Seventh Circuit’s ruling would have a dire chilling effect on authors trying to promote their work and could give government officials broad censorial power, in effect permitting the FTC to tax fine through the backdoor what it could never regulate directly (sound familiar?).

Cato has thus filed an amicus brief supporting Trudeau’s request that the Supreme Court take the case and establish a constitutional standard that allows the FTC to protect consumers from fraud while respecting the First Amendment. We argue that courts should apply strict scrutiny to any government actions that restrict or punish advertisements that merely quote and summarize parts of a book (which enjoys full constitutional protection), as Trudeau’s infomercials did.

We note that the Supreme Court has held that commercial speech inextricably intertwined with otherwise protected speech deserves a high degree of First Amendment protection. Moreover, it is well-established that falsity alone may not remove speech from the shelter of the First Amendment.

Free speech loses its vitality when confronted with overzealous regulation; strict scrutiny of would-be government censors would give authors the necessary “breathing space” to publicize their work without the threat of exorbitant fines.

The Supreme Court will decide this fall whether to take the case of Trudeau v. FTC.

Intolerant Politicians

Today POLITICO Arena asks:

Are politicians getting too involved in the Chick-fil-A controversy? Has the debate resulted in any positive developments for either side?

My response:

Let’s take this chronologically. Chick-fil-A CEO Dan Cathy told Baptist Press that he supported “the biblical definition of the family unit.” That was too much for Chicago Mayor Rahm Emanuel, Boston Mayor Thomas Menino, and others, Emanuel saying he’d block a new Chick-fil-A location in the city, Menino warning that “if they need licenses in the city, it will be very difficult — unless they open up their policies.” That led to Mike Huckabee’s call for a Chick-fil-A “appreciation day” and yesterday’s massive show of support for CEO Cathy.

So to today’s questions. Are politicians getting too involved in this controversy? Absolutely. It’s one thing for them to express their opinions – they’re free to do that, just as Dan Cathy is. But they go over the line when they threaten to use their power to punish Cathy for expressing his opinion. Emanuel and Menino are bully boys, plain and simple. Cathy’s views may be narrow and intolerant. I’m of the view, for example, that people ought to be free to associate as they wish, as long as they respect the rights of others, and others ought to be free to respect those associations, or not. Government, however, cannot pick and choose which associations to respect. It belongs to all of us.

We don’t know whether Cathy would support banning same-sex marriage – or at least I haven’t seen evidence of that. We do know, however, that Emanuel and Menino would punish Cathy for speaking his mind. That’s intolerance not simply of action but of speech. So, to today’s second question, to the extent that the mayors’ intolerance has been condemned, that’s a good thing.

The Long and the Short on Internet Tax

Last week, Steve Titch gave you a thorough run-down on the TechLiberationFront blog. Now Tim Carney has a quick primer on the push by big retailers to increase tax collection on goods sold online.

S. 1832, the Marketplace Fairness Act is Big Retail’s effort to increase tax collection obligations on their smaller competitors, increasing the taxes you pay along the way.