Suddenly, student loans are nearing the top of the nation's public policy debate. Indeed, President Obama is expected to make a big speech about them on Wednesday. Why the sudden ascendance? Probably because the burden of student loans is one of the few things OWSers are clearly angry about, and that has raised questions ranging from whether such loans should be dischargable in bankruptcy, to whether they help fuel the Saturn V rocket of college price inflation. And last Sunday GOP presidential contender Ron Paul jumped into the fray, suggesting we eliminate the federal student loan program entirely.
Paul is right about phasing out federal student loans. Unfortunately, that's likely the last thing President Obama will propose.
The first reaction to hearing such a proposal is that it's Grinch-level heartlessness, stealing a better future from low-income kids. That is almost certainly what the president would say, and such a reaction would likely poll well. That's why he's expected to propose lowering interest rates, easing repayment, and other borrower-friendly measures. But as I lay out in a Cato Policy Analysis to be released imminently, by most indications federal student aid and other taxpayer-fueled subsidies aren't good for anyone. (Well, anyone not employed by a college or university, the ultimate receiving end of all the forced largesse). By artificially—and hugely—boosting consumption, they ultimately lead to massive tuition inflation, encourage millions of unprepared people to take on studies they never finish, and pour H2O into already watered-down degrees. In other words, student aid—including federal lending—is likely a net loss to both students and society.
But I've already said too much. If you want to get a lot more on this—and more on the many unintended evils of federal college policies—stand by for the release of my study. And if you're in DC, come to Capitol Hill Thursday for a briefing on the subject with me and Rep. Virginia Foxx (R-NC). It should give OWSers, libertarians, conservatives, liberals, and anyone else lots to think about.
The Herman Cain campaign released details of the revenue expected to be collected from his 9-9-9 tax plan. Here are the estimates for 2010:
- $701 billion from the 9 percent personal income tax.
- $753 billion from the 9 percent retail sales tax.
- $863 billion from the 9 percent business VAT.
Yikes! By far the largest tax haul under the Cain plan would be from the business VAT—a tax which would be hidden from most voters.
By the way, the Cain business tax is not a tax on “corporate income,” as some media stories are identifying it. The new revenue data makes it clear that it is a tax on all value added by all businesses in the nation—corporate, partnership, and proprietorship.
Sorry Mr. Cain, I think your tax plan gives the federal government far too much room to grow in coming decades as entitlement cost pressures increase. I’d suggest dropping 9-9-9 and going with my 15-15-15 tax plan. After that, you could move on to proposing a detailed plan for spending cuts, as candidate Ron Paul has delivered.
Presidential Candidate Ron Paul has a decidedly mixed record on trade policy. He often votes against trade agreements because he sees them as "managed trade" and an interference with true free trade. Well, ok, but that' s like voting against income tax cuts because you think the IRS shouldn't exist. I get the point, but c'mon...
In any event, he was the only participant in Thursday night's debate between the Republican presidential candidates who spoke about trade with any sense at all. As Inside US Trade [subscription required] points out, trade policy was not a prominent theme of the debate, but that didn't stop Mitt Romney from (again) spouting nonsense about balanced trade:
Former Massachusetts governor Mitt Romney late last week took a swipe at the trade policies of the Obama administration in a debate of the Republican presidential candidates by implying they are unbalanced in favor of other nations.
As part of a seven-point list of actions to turn around the economy, Romney said the U.S. should “have trade policies that work for us, not just for our opponents,” as the third point...
(I'll just interject here to say that by "opponents" I believe Mr Romney is referring to our trade partners. You know, the folks who sell us stuff and buy stuff from us. But I digress...)
Trade was only raised one other time during the debate. Prompted by a moderator, Rep. Ron Paul (R-TX) defended his earlier criticism of Obama's sanctions against Iran for its nuclear program.
Saying it was “natural” that Iran would pursue nuclear weapons—given that India, Pakistan, China, and Israel also possess them—Paul attacked the sanctions policy as steering the U.S. toward conflict.
“Countries that you put sanctions on, you are more likely to fight them,” he said. “I say a policy of peace is free trade. Stay out of their internal business.”
Paul also suggested it was time for the U.S. to engage in a trading relationship with Cuba and “stop fighting these wars that are about 30 or 40 years old,” an apparent reference to the Cold War. [emphasis added]
(My friend Scott Lincicome has more on the economic illiteracy flowing from the debate here)
Mr Paul is right on this one. He and I no doubt disagree on a few issues, and on trade I have more tolerance than he does for multilateral (and, albeit to a lesser extent, bilateral and regional) trade agreements as the only likely avenues for trade liberalization in the foreseeable future. But the link between trade and peace is an important one, and often overlooked.
Speaking of Ron Paul, the following clip shows Jon Stewart at his devastating best, calling out the mainstream media—and particularly Fox News—for ignoring and/or outright mocking Ron Paul's candidacy. Watch to the very end, you won't regret it. (HT: RadleyBalko)
|The Daily Show With Jon Stewart||Mon - Thurs 11p / 10c|
|Indecision 2012 - Corn Polled Edition - Ron Paul & the Top Tier|
Now that Rep. Ron Paul is again a presidential candidate, his constitutional views will come under increasing scrutiny, as happened yesterday when he was interviewed by Chris Wallace on Fox News Sunday. Not surprisingly, critics immediately leapt on Paul’s “crankish view” that Social Security, Medicare, and other such programs are unconstitutional. Even Wallace seemed taken aback, citing the document’s General Welfare Clause:
The Congress shall have the Power to lay and collect Taxes … to pay the Debts and provide for the common Defence and general Welfare of the United States.
“Doesn’t Social Security come under promoting the general welfare of the United States?” Wallace asked, incredulously.
One does not have to agree with everything Paul has said or stood for over the years to grant that he has a point, and a very important one. It’s a mark of how widespread our constitutional misunderstanding is that so many Americans take it for granted, at least until the Tea Party came along, that most of what the federal government does today is constitutional.
In a nutshell, the Constitution was written and ratified to both authorize and limit the government created through it. It was designed to do the latter not through the Bill of Rights -- that was an afterthought, added two years later -- but through the doctrine of enumerated powers. Article I, section 8, grants the Congress only 18 powers. Nothing for education, or retirement security, or health care: Those responsibilities were left to the states or to the people, as the Tenth Amendment makes clear.
So what about the General Welfare Clause, the first of Congress’s 18 powers? To be sure, the clause was inartfully drafted, like several other provisions in the Constitution. But it was understood by nearly all as granting Congress the power simply to tax (in limited ways: see the full text). The terms “common Defence” and “general Welfare” were meant merely as general headings under which the 17 other specific powers or ends were subsumed.
In fact, the question came up almost immediately, during the ratification debates, and in early Congresses as well, so we have a rich record of just what the General Welfare Clause meant. Here, for example, in Federalist #41, is James Madison, the principal author of the Constitution:
Some, who have not denied the necessity of the power of taxation, have grounded a very fierce attack against the Constitution, on the language in which it is defined. It has been urged and echoed, that the power "to lay and collect taxes, duties, imposts, and excises, to pay the debts, and provide for the common defense and general welfare of the United States," amounts to an unlimited commission to exercise every power which may be alleged to be necessary for the common defense or general welfare. No stronger proof could be given of the distress under which these writers labor for objections, than their stooping to such a misconstruction…. Had no other enumeration or definition of the powers of the Congress been found in the Constitution, than the general expressions just cited, the authors of the objection might have had some color for it…. But what color can the objection have, when a specification of the objects alluded to by these general terms immediately follows, and is not even separated by a longer pause than a semicolon?
Indeed, as was often asked: What was the point of enumerating the 17 other powers if Congress could do anything it wanted under this single power? The Framers could have stopped right there. They didn’t because they meant for Congress to have only certain limited powers, each one enumerated in Article I, section 8. And taxing for the general welfare limited Congress even further by precluding it from providing for special parties or interests.
Nor does it change anything to note, as Wallace did yesterday, that the Supreme Court upheld the Social Security Act in 1937 -- as if that settled the question. As a practical matter it settled things, of course, just as Plessy v. Ferguson settled the “separate-but-equal” issue in 1896, only to be reversed in Brown v. Board of Education in 1954, and Bowers v. Hardwick settled the issue of homosexual sodomy in 1986, only to be reversed in Lawrence v. Texas in 2003. It’s well understood that the 1937 Court, cowed by Franklin Roosevelt’s infamous Court-packing threat, simply reversed 150 years of understanding and precedent concerning the doctrine of enumerated powers. And that removed the Constitution’s main restraint on federal power -- not by constitutional amendment but by judicial fiat.
But it’s not been “extreme liberals” alone, Wallace went on to say, who’ve read the Constitution as the 1937 Court did, noting that conservative Justice Antonin Scalia recently told a congressional gathering: “It’s up to Congress how you want to appropriate, basically.” To be sure, from fear over “judicial activism,” many conservative judges have bought into the New Deal’s constitutional revolution. Perhaps the most that can be said on their side is that the Court cannot alone, this late in the day, reverse these mistakes.
In fact, this unconstitutionality cannot be undone overnight even by the Congress. Here again there are practical concerns, as Paul has recognized. Vast numbers of people have come to rely on these welfare schemes, however unsustainable they are in the long run, as has become increasingly clear. If constitutional fidelity can serve to spur fiscal discipline, however, we may yet slowly work our way out of our present and long-term fiscal dilemma. But that felicitous result will not happen until we admit both our infidelity and our indiscipline -- the two are intimately connected.
By reading the General Welfare Clause in isolation, therefore, Wallace and others turn the Constitution on its head. Rather than a document aimed at limiting government, it becomes a document authorizing unlimited government. And let’s be clear: The basic issue here is nothing more -- nor less -- than legitimacy. Do we live under the Constitution, or don’t we? If Ron Paul’s views on this fundamental question are “cranky,” so too were those of Madison, Jefferson, Washington, and the rest of the Founders we revere.
Michael Gerson’s predictable, reflexive attack on Rep. Ron Paul in his May 10 op-ed in the WaPo for Paul’s sensible stand in favor of ending the futile crusade called the War on Drugs, makes a curious argument. He asserts that there is a “de facto decriminalization of drugs” in Washington, D.C. Curious, because there are few places in the nation where the drug war is waged more vigorously. Doesn’t seem to be working, does it?
Yet Gerson would expand the effort. Never mind that the social pathologies in the District for which Gerson’s compassionate conservative heart bleeds are mainly a result of making drugs illegal: Turf wars with innocents caught in the crossfire; children quitting school to sell drugs because of the artificially high prices prohibition creates; disrespect for the law due to a massive criminal subculture.
Gerson, one of the chief architects of the disastrous Bush II administration, should step away from his obsessive disdain for libertarianism and consider the nationwide decriminalization of drugs undertaken in Portugal in 2001. Drugs use is down, particularly among young people, and drug-related crimes have dropped precipitously. There is a reason hundreds of thousands of Mexicans have taken to the streets to call for the end to the war on drugs there that is tearing apart the fabric of Mexican society. On top of the social aspects of the drug war dystopia, Cato senior fellow and Harvard economist Jeffery Miron estimates that ending the drug war in the U.S. would save $41.3 billion annually. As usual, Ron Paul has it right.
- "Given America’s large-scale, long-term nation-building mission in Afghanistan, another chapter remains unfinished."
- "It doesn’t make a lot of sense to refer to a government whose intelligence service assists military efforts by al Qaeda and the Taliban against U.S. troops in Afghanistan as an 'ally.'"
- "Terrorists are not superhuman."
- "Physicians must either make up for this shortfall by shifting costs to those patients with insurance — meaning those of us with insurance pay more — or treat patients at a loss."
- Is America in a libertarian moment?
- Gary Johnson: the anti-Trump.
- Interventionists to the left.
- Interventionists to the right.
- There ain't no such thing as free... parking.
- Vermont has a new universal health care proposal on the table. Michael Cannon joined WAMU's The Diane Rehm Show (Washington, DC) yesterday to discuss the plan with a panel of other experts: