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February 27, 2014 4:07PM

Chairman Murray’s Memo: More of the Same

Today, Senate Budget Chairman Patty Murray sent her caucus a memo on the country’s fiscal outlook. She details the “$3.3 trillion in deficit reduction put in place over the last few years;” a likely refrain in President Obama’s budget next week. However, Chairman Murray’s memo leaves much to be desired.

The first section of Murray’s memo highlights the various ways that the deficit has been reduced over the last several years by Congress and the President. The bulk of savings are from the discretionary spending caps put into place by the Budget Control Act (BCA) of 2011. Another large share of deficit reduction came from $727 billion in tax increases over the last several years. All told, Murray counts $3.3 trillion in deficit reduction. This is an incredibly small step to tackling our $4 trillion budget.

But after detailing all of the great things this fiscal restraint is doing for the country, Chairman Murray completely turns course. Instead of detailing additional ways to cut spending and continue these marginal improvements, she starts a laundry list of needed government “investments”—spending programs. She calls for more spending on infrastructure, jobs programs, a minimum wage increase, and increased funding for research and development.

Also notably, she also does not include future sequester cuts in her numbers; an implicit acknowledgement that she does not plan to keep those promised cuts.

Chairman Murray’s memo also fails to acknowledge the impending fiscal crisis. According to the most recent Congressional Budget Office (CBO) report, the country’s debt and deficit are stable for the next few years, but by 2017 they increase dramatically again. CBO expects the deficit to rise to 4% of GDP by the end of the decade. Even though, revenues as a percent of GDP will be close to historical levels, Chairman Murray calls for more tax hikes, ignoring the real driver of our fiscal issues: spending.

The refrain from many over the last year has been that the deficit is back under control, and that Congress should go back to wildly spending. Chairman Murray’s memo follows that path. It fails to acknowledge the need for fiscal restraint and sets the stage for next week’s release of the President’s budget.

February 27, 2014 4:04PM

Free Trade in Doctors

I wish I knew more about the medical system, so that I could write more intelligently about domestic and international trade issues in this area. With the caveat that there is a lot I don't know here, I'm excited by the following development that will hopefully allow more inter-state trade in medical services:

A significant barrier to the interstate practice of telehealth is closer to being broken down. The Federation of State Medical Boards (FSMB) has completed and distributed a draft Interstate Medical Licensure Compact, designed to facilitate physician licensure portability that should enhance the practice of interstate telehealth.  Essentially, the compact would create an additional licensing pathway, through which physicians would be able to obtain expedited licensure in participating states.  As the FSMB notes in its draft, the compact “complements the existing licensing and regulatory authority of state medical boards, ensures the safety of patients, and provides physicians with enhanced portability of their license to practice medicine outside their state of primary licensure.”  This is a potentially significant development because burdensome state licensure requirements have been a major impediment to the interstate practice of telehealth. A physician practicing telehealth is generally required to obtain a medical license in the state where the patient—not the physician—is located.  As a consequence, physicians wishing to treat patients in multiple states need to obtain a license in each of those states in order to practice medicine lawfully, a lengthy and expensive process.

Thinking even bigger, the same idea could be applied internationally.

February 27, 2014 11:10AM

Does Occupational Licensing Make Sense?

The standard argument for occupational licensing - government-imposed limits on who can supply medical, legal, plumbing, and other services - is that such laws protect the public from low-quality provision of these services.

This argument is not convincing on its own: licensing limits the quantity of services provided, raising price, and thus harming consumers. A necessary condition for licensing to make sense, therefore, is that any improvements in service quality outweight the losses from higher prices.

A new study, however, finds that when de-regulation allows nurse practioners to perform more tasks without doctor supervision, the price of well-child medical exams declines (as implied by standard economics), with no "changes ... in outcomes such as infant mortality rates."

In at least this case, therefore, licensure is all cost and no benefit.

February 27, 2014 10:55AM

Bulgaria’s Currency Board versus Ukraine’s Chaos

When Communism inevitably and finally collapsed, Bulgaria’s economy was a basket case – behind almost all other communist basket cases, including Ukraine’s. Indeed, Bulgaria defaulted on its debt in 1990. By February 1991, Bulgaria had broken out in a bout of hyperinflation, with the inflation rate at 123% per month. And in February 1997, Bulgaria experienced the agonies of hyperinflation again, with the inflation rate reaching 242% per month. 

As he looked into the abyss, President Petar Stoyanov decided against taking the plunge and appointed me as his advisor in January 1997. I immediately prescribed a currency board system to put an end to Bulgaria’s malady, something I had laid out for Bulgaria back in 1991 (Steve H. Hanke and Kurt Schuler, Teeth for the Bulgarian Lev: A Currency Board Solution. Washington, D.C.: International Freedom Foundation, 1991.).

Bulgaria installed a currency board in July 1997. The lev was backed 100% by German marks and traded freely at a fixed rate of 1000 leva to 1 mark. Inflation and interest rates fell like stones. The economy stabilized, and the Bulgarians learned that, even though stability might not be everything, everything is nothing without stability. Discipline at last.

Yes, the main feature of a currency board is the fiscal and financial discipline that it provides. No more running to the central bank for a fiscal bailout. A currency board ties the hands of those meddlesome monetary authorities. And forget the silly theoretical and obscure arguments made by economists who don’t embrace fixed exchange rates. A currency board regime is all about discipline.

As we watch Ukraine melt down once again, we can see what could have been (and what could be) if Ukraine would have only embraced a system of discipline (read: currency board) – like Bulgaria did in 1997. The following table tells the tale:


Bulgaria versus Ukraine


Country


GDP per Capita (USD)


Fiscal Balances %GDP


Current Account Balances %GDP


General Govt. Gross Debt %GDP


Gross Borrowing Needs %GDP


Import Coverage Ratio (FX Reserves / Imports)


W.B. Ease of Doing Business 2014 Rank


Bulgaria


$7,623


-1.9%


1.5%


16.0%


2.6%


6.7


58


Ukraine


$4,011


-8.7%


-8.9%


42.8%


11.0%


1.9


112

Sources: Bulgarian National Bank, National Bank of Ukraine, J.P. Morgan (Emerging Markets Research), International Monetary Fund (IFS), World Bank (Doing Business). 

Prepared by Prof. Steve H. Hanke, The Johns Hopkins University.
February 27, 2014 10:32AM

Obama Administration Rips Off Middle Class and Threatens Elephants

As I’ve written before, the Obama administration plans to effectively ban the sale of all ivory in America, even if purchased or inherited legally years ago. If you can’t prove its age, you can be arrested and have your property confiscated—unless you are well-connected and exempted.

Elephants are being killed for their ivory. Activists unable to protect the animals now are targeting Americans who followed the law in buying and selling legal old ivory objects. 

But as I point out my latest piece in the American Spectator:

advocates of banning antique sales seem more interested in punishing people who bought and sold ivory legally because they bought and sold ivory, not because doing so would prevent poaching.  It is an exercise in moral vanity and political posturing, not practical conservation.

Some ban proponents complain of the difficulty of distinguishing between new and old ivory. Actually, European carving disappeared decades ago. Asian carving continues, but old and new differ in character, subject, wear, age, coloring, quality, and more. 

Nor do collectors of and dealers in antiques seek out poached ivory. Punishing people who followed the law and invested in legal objects might make a few extremists feel good, but won’t save a single elephant today.

Ivory entered America legally until 1989. Antiques with proper certification could be imported after that. But in mid-February the administration announced that if you had followed the law, it planned to render your collection or inventory essentially valueless.

The new guidance from the U.S. Fish and Wildlife Service indicated that most every auctioneer, collector, and dealer—and anyone else who has purchased or received something made of ivory—better hire a lawyer before selling their ivory possessions. 

The prospective rules are biased against average folks. If you represent the non-profit cultural establishment, you’ll get around the rules.

Point one, no “commercial” imports even of antiques will be allowed. However, the rules apparently will exempt “museum and educational specimens.” According to the administration’s reasoning, non-profit institutions will have a unique right to continue driving elephants to extinction.

Point two, exports are banned, except antiques in what the government calls “exceptional circumstances.” But “certain noncommercial items” will be allowed, so people with friends in government likely will be able to hurdle any new burdens in a single bound. Everyone else better hire a lawyer or lobbyist.

Point three, only antiques, proved through “documented evidence” will be eligible for sale across state lines. How many antiques in America have “documented evidence” attesting to their age? At least a wealthy collector with a valuable item can try to find an expert and procure a CITES certificate. Of course, museum transfers likely won’t be considered commercial and non-profits may be able to engage in low-key extortion: “Donate it to us and we can ensure a generous appraisal to get you a substantial tax deduction.”

Point four, only documented old ivory, imported before 1990, can be sold even within a state. Say you acquired a bunch of ivory items over the years and retired in, say, Bozeman, Montana. Got notarized certificates for everything? See what you can get for your collection in Helena. 

More likely, of course, you won’t have any documentation when items were brought to America. Then you can’t even take the objects—legally, at least—to a local flea market. Not that people would pay you more than a pittance there.

The administration emphasizes it will still allow legal sales. That’s only if you are friends with the Interior Secretary, or a congressman feared by the Interior Secretary. Or find a broker, well-connected but discreet antique dealer, or private collector network. Otherwise, tough.

Ironically, the new policy will reduce genuine conservation efforts. The Fish and Wildlife Service will have to shift resources away from those linked to the killing of elephants and toward thousands of Americans who’s only mistake was to follow the law.

The administration should reverse course to focus on poaching. If not, Congress should block implementation and enforcement of the rules.  Punishing average Americans for lawful behavior isn’t fair to them—or helpful to elephants. 

February 27, 2014 9:15AM

Freedom on Film

It's Oscar time again, and once again there are some Best Picture nominees of special interest to libertarians. Dallas Buyers Club is a terrific movie with a strong libertarian message about self-help, entrepreneurship, overbearing and even lethal regulation, and social tolerance. 12 Years a Slave is a profound and painful movie about the horrors of slavery in a country conceived in liberty. Philomena is a tender personal story that sharply attacks the Catholic church and its censorious attitude toward sex, themes that would resonate with some libertarian viewers. This wasn't the best year for libertarian movies -- 2000 was pretty good -- but libertarians will have some rooting interest Sunday night.

As I told Washington Post film critic Ann Hornaday in 2005, "America is basically a libertarian country, so Americans are going to put libertarian themes into the art they create, and sometimes it's more explicit and sometimes it's less so. But it's not a big surprise to see individualism, anti-totalitarianism and fighting for freedom and social tolerance showing up in American art." Here are some of my favorite examples (and of course they're not all American):

Shenandoah, a 1965 film starring Jimmy Stewart, is often regarded as the best libertarian film Hollywood ever made. Stewart is a Virginia farmer who wants to stay out of the Civil War. Not our fight, he tells his sons. He refuses to let the state take his sons, or his horses, for war. Inevitably, though, his family is drawn into the war raging around them, and the movie becomes very sad. This is a powerful movie about independence, self-reliance, individualism, and the horrors of war. (There's also a stage musical based on the movie that's worth seeing, or you could listen to the antiwar ballad "I've Heard It All Before" here.)

War may be the most awful thing men do, but slavery is a close contender. Steven Spielberg’s Amistad (1997) tells a fascinating story about a ship full of Africans that turned up in New England in 1839. The question: Under American law, are they slaves? A long legal battle ensues, going up to the Supreme Court. Libertarians like to joke about lawyers. Sometimes we even quote the Shakespeare line, “The first thing we do, let’s kill all the lawyers” — not realizing that that line was said by a killer who understood that the law stands in the way of would-be tyrants. Amistad gives us a picture of a society governed by law; even the vile institution of slavery was subject to the rule of law. And when the former president, John Quincy Adams, makes his argument before the Supreme Court, it should inspire us all to appreciate the law that protects our freedom.

Lawyers play an important role in two other fine libertarian films. The Castle was produced in Australia in 1997 but reached the United States in 1999. It’s a very funny film about a character who thinks that living near the airport is just great. He even likes looking up at the massive power lines near his house because they remind him of what man can accomplish. Shades of Ayn Rand! Anyway, a man’s home is his castle, and the protagonist is shocked when the airport decides to seize his property to extend its runway. He fights the system to no avail until a smooth, well-dressed lawyer — way out of the lead character’s league — shows up and offers to take his case. Again we see powerful interests forced to defend themselves in a law-governed society. A nice defense of private property, and very funny to boot.

That same season in 1999 I also enjoyed The Winslow Boy, a David Mamet remake of a Terrence Rattigan play/movie from 1948. Despite a very different atmosphere — a stuffy, bourgeois family in Victorian England vs. a comic contemporary Australian family — it has two things in common with The Castle: a proud father who will do anything to defend his home and family, and a distinguished British lawyer who comes to the family’s aid. Mr. Winslow’s teenage son is expelled from the Naval Academy. Convinced his son is innocent, Winslow challenges the expulsion. When the Academy refuses any sort of due process, Winslow exhausts his life savings in a fight through the courts. The theme is the right of every person in a decent society to justice.

So Big (1953) stars Jane Wyman as a wealthy young woman suddenly delivered into poverty. She becomes a teacher, marries a farmer, has a son, loses her husband, and must run the farm on her own, at a time when women didn’t do that. It’s an inspiring story of self-reliance, and the disappointment she feels when her son chooses money and society over the architecture he loves. Based on a novel by Edna Ferber, the screenplay sounds almost Randian at times. Don’t see the 1932 version starring Barbara Stanwyck; it’s flat and boring. The difference is unbelievable.

The Palermo Connection (1990) is an odd Italian-made movie (but in English) cowritten by Gore Vidal. New York city councilman Jim Belushi runs for mayor on a platform to legalize drugs and take the profits out of the drug trade. The Mafia isn’t happy. His life is threatened. So he decides to go on a honeymoon, in the middle of his campaign — to Sicily. I said it was odd. But interesting, and very pointed.

Pacific Heights (1990) is a thriller that is almost a documentary on the horrors of landlord-tenant law. A young couple buys a big house in San Francisco and rents an apartment to a young man. He never pays them, and they can’t get him out, and then things get really scary. The lawyer lectures the couple — and the audience — on how “of course you’re right, but you’ll never win.” I just knew this happened to someone — maybe the screenwriter or someone he knew. Sure enough, when Cato published William Tucker’s book Rent Control, Zoning, and Affordable Housing, and I asked Pacific Heights director John Schlesinger for a jacket blurb, he readily offered “If you thought Pacific Heights was fiction, you need to read this book"; and he told me that the screenwriter had a relative who had gone through a tenant nightmare.

Finally, I’ll mention My Beautiful Laundrette, made for British television in 1985. What’s interesting about this film is that novelist/screenwriter Hanif Kureishi thought he was making a savage indictment of Thatcherite capitalism. But to me, the good characters in the movie — white and Pakistani, gay and straight — are the ones who work for a living, and the bad characters are clearly the whining socialist immigrant intellectual, who doesn’t like his son opening a small business, and the British thugs who try to intimidate the young Pakistani businessman. My favorite line: The enterprising brother of the layabout intellectual takes a young working-class Briton (Daniel Day-Lewis) with him to evict some deadbeat tenants. The young Brit suggests that it’s surprising the Pakistani businessman would be evicting people of color. And the businessman says, “I’m a professional businessman, not a professional Pakistani. There is no question of race in the new enterprise culture.” I think Kureishi thinks that’s a bad attitude. The joke’s on him.

If you'd like more film recommendations, I’m delighted to report that Miss Liberty’s Guide to Film is available again—on Kindle. It offers more than 250 short reviews of movies with libertarian themes.

February 27, 2014 9:01AM

Political Poster Week Continues: “Safety First”

Art Deco prohibition poster, traffic "Safety First"Countless gorgeous posters, many of them French, promote the consumption of alcohol, but few achieve high style while arguing the Prohibitionist cause. Anti-saloon campaigners were better known for sketches of sentimentally drawn children, drunks in gutters, and pinstriped tycoons in top hats raking in bucks from the liquor traffic (imagery that reminds us of the close affinity between that and other Progressive-era anti-business movements). 

So where'd this Art Deco gem come from? It's not immediately clear. It would be easy to mistake it for a simple traffic-safety poster, until you notice that as the vehicles whiz past each other in their Futurist way, the red diagonal that keeps them separate is labeled "PROHIBITION." My online quest for its origins came up blank: among the few clues is the artist signature "LEW" at lower left, which also appears on this almost equally striking poster for the anti-alcohol cause. The latter poster includes the phrase "Outlawed or Legalized," and the use of "z" rather than "s" in "Legalized" suggests American rather than British origin. 

In retrospect, of course, we know the traffic-safety message was to prove far more effective as an impetus to legal restriction of alcohol than most of the others. It would seem strange today for public officials to lecture us against enjoying a glass of Merlot based on moral disapproval or concern for our family responsibilities, but few flinch when the police chief of Austin proposes criminalizing driving on a meager 0.05 blood alcohol, with a Texas state senator explaining: "Some people shouldn’t be driving after one drink."