Topic: Government and Politics

Private Sector Guts and Growth

The Wall Street Journal has an article today for people who think that we need government to thrust itself into the economy because major projects, like energy and technology projects, are too big or risky for private businesses. The article focuses on Chevron’s offshore oil development:

Chevron is leasing the Clear Leader, which floats in 4,300 feet of water in the Gulf of Mexico, to drill for oil through nearly five miles of rock. Big Oil never wanted to be here, in 4,300 feet of water far out in the Gulf of Mexico, drilling through nearly five miles of rock…

It is an expensive way to look for oil. Chevron Corp. is paying nearly $500,000 a day to the owner of the Clear Leader, one of the world’s newest and most powerful drilling rigs. The new well off the coast of Louisiana will connect to a huge platform floating nearby, which cost Chevron $650 million to build. The first phase of this oil-exploration project took more than 10 years and cost $2.7 billion – with no guarantee it would pay off….

“This is technology capable of going to the moon,” says Robin West, chairman of consulting firm PFC Energy, involving “extraordinary uncertainty, immense levels of information processing, staggering amounts of capital.” …

“What has enabled us to do that is technology,” says David Rainey, BP’s head of exploration for the Gulf of Mexico. “We have been pushing the limits of seismic-imaging technology and drilling technology.”…

The push into deeper water hasn’t always been smooth sailing. Offshore projects are expensive, time-consuming and prone to failure. Chevron boasts of a 45% exploration overall success rate in recent years, a remarkable run by industry standards, but one that also means the company has spent billions on projects that haven’t panned out.”

Bravo for gutsy and aggressive American capitalism! Chevron is taking huge investment risks, making remarkable technological advances, creating jobs, and finding new energy supplies to keep our homes bright and warm.

Political leaders in Washington should be encouraging such private business activities to pull the nation out of its slump. So rather than trying to hike taxes on multinational corporations and oil companies – as the Obama administration proposed in its budget last year – policymakers ought to be cutting corporate tax rates and making other pro-investment changes in federal tax and regulatory policies.

H&R Block and the IRS: An Unholy Alliance to Ransack Taxpayers

The late George Stigler, winner of the Nobel Prize in economics, is famous in part because of his work on “regulatory capture,” which occurs when interest groups use the coercive power of government to thwart competition and undeservedly line their own pockets. A perfect (and distasteful) example of this can be found in today’s Washington Post, which reports that the IRS plans to impose new regulations dictating who can prepare tax returns. Not surprisingly, the new rules have the support of big tax preparation shops such as H&R Block and Jackson Hewitt, which see this as an opportunity to squeeze smaller competitors out of the market. The IRS and the big firms claim more regulations are needed to protect consumers from shoddy work, but this is the usual rationale for licensing laws and other government-imposed barriers to entry and the Institute for Justice has repeatedly shown such rules are designed to benefit insiders rather than consumers.

Tax preparers do make many mistakes, to be sure, but that is a reflection of a nightmarish tax code, and the annual tax test conducted by Money magazine showed that even the most-skilled professionals – such as CPAs, tax lawyers, and enrolled agents – were unable to figure out how to correctly fill out a hypothetical family’s tax return. But since the IRS routinely makes major mistakes as well, perhaps the moral of the story is that we need fundamental tax reform, not IRS rules to create a cartel for the benefit of H&R Block and other big firms. Would any of this be an issue if we had a flat tax or national sales tax?

Can the GOP Recover Its Principles?

Today, Politico Arena asks:

How helpful is it to the GOP to have its chairman say the party’s “credibility snapped” while in power and it became “just another party of Big Government?”

My response:

If GOP chairman Michael Steele means it, it’s very helpful for him to say that the party’s “credibility snapped” while in power and it became “just another party of Big Government?”  You first have to recognize a problem if you want to solve it.

For better or worse, we’ve had two major parties for most of our history, and that’s not likely to change any time soon.  At least since the New Deal, the Democratic Party has been the party of government, especially over economic affairs.  By contrast, since the Goldwater revolution of 1964, the Republican Party has claimed to be the party of individual liberty and limited government, although that claim was often undermined by calls for restricting certain personal liberties, and the party was slow, as were parts of the Democratic Party, in supporting the civil rights movement.  But broadly speaking, in our recent history the two parties have been distinguished, nominally, by their different conceptions of the proper role of government.

At no time was that contrast more sharply drawn than during the Reagan administration.  Yet even then there were internal struggles between the Reagan people and the Bush people.  Recall that when Bush ‘41 became president, he called for a “kinder and gentler nation,” which was a slap at Reagan’s limited government principles.  And eventually, of course, he broke his “no new taxes” pledge.

After Bush lost the presidency, the Gingrich “Contract with America,” leading to the Republican take-over of Congress for the first time in 40 years, was supposed to return the party to a principled, limited government path.  It did so briefly, in those heady days of 1995, but by the end of the year the siren song of government power was calling and the party started its slow slide, at the end of which it was barely distinguishable from the Democratic Party.

Thus, it was no accident that in 2000 the party selected as its standard-bearer George W. Bush, who had been utterly absent from the intellectual ferment of the Goldwater-Reagan years.  Not unlike his father, Bush ‘43 stood for “compassionate conservatism,” a slogan ripe with promise for government programs.  And the Republican Congress, now rudderless, was anxious to supply them.  If the party stood for anything, it was incumbency protection.  What better example than the McCain-Feingold campaign finance “reform” bill, which Bush signed while saying he thought it was unconstitutional.  What’s the Constitution among friends?

But rudderless, unprincipled government could not go on forever, and so in time it came crashing down upon the Republican time-servers – and the real party of government took over.  Immutable principles, however, such as you can’t get something for nothing, favor no party, and so Democrats too are facing, or will soon face, the harsh realities that flow from abandoning political and economic discipline.  If the Republican Party can recover the fundamental principles that are captured in the nation’s founding documents, and take them to the people, it will then fall to us to decide what we want.  And if we too believe in something for nothing, we will have no one to blame but ourselves for the consequences that follow.  But at least we will have had a choice, which we have not had in recent years.  So, yes, Mr. Steele’s call for a return to principle is helpful.

Congress Chooses the Low Road. Again.

In 2009, congressional Democrats fashioned their health care legislation out of public view.  That enabled them to avoid some public intra-party spats; to hide maybe 60 percent of the cost of the legislation and otherwise game the Congressional Budget Office’s scoring rules; to deny the public enough time to learn about how the legislation would work; and to cram the legislation through the Senate the day before Christmas.  Senate Majority Leader Harry Reid’s backroom negotiations are rightfully infamous.

Now comes word that, rather than follow the usual conference procedure that we all learned about as children, House and Senate Democrats will conduct informal negotiations – behind closed doors, all by themselves, with no C-SPAN cameras – in the hope of crafting the bill that can command 218 votes in one chamber and 60 votes in the other.

Let me be clear that Democrats are not violating any rules of which I am aware.  But one senses that the object here is not the sort of good government or open government that the Left claims to seek.  Rather, the object is power.  As my colleague Will Wilkinson writes, “They seem interested primarily in how a temporary majority can do more, faster, now.”  And a key tactic is to hide from the public as much of the process as possible.

Great Moments in Government Waste, the European Version

While American politicians are experts when it comes to squandering money, they may not be the world’s most profligate group of lawmakers. To be sure, American politicians sometimes give big piles of other people’s money to bail out Fannie Mae and Freddie Mac, but the politicians at the European Commission in Brussels engage in similar forms of corporate welfare with their Emissions Trading Scheme.

The overall burden of government is heavier in Europe, so that certainly suggests that there are greater opportunities to waste money, but what makes the European Commission special is that it is insulated from democratic accountability and there is no system of checks and balances. So even though the actual amount of money spent by Brussels is small compared to what is wasted by national governments in Europe, the outcomes are especially obscene. Here’s a story from the UK-based Daily Mail, reporting on a program (no joke) to fund activities such as basket weaving and siestas:

British taxpayers are helping to fund basket-weaving and slapstick acting workshops for young people across Europe. The projects, which include meetings about folk dancing and even a scheme to promote afternoon siestas, are part of an £800million EU programme to help people aged 13-30 ‘feel European’. …Another venture in Finland received thousands to support a coffee house which offered ‘everyone the chance to have a sleep for free’. It aimed to encourage afternoon naps to reduce stress. ‘Youth exchange participants’ also flocked to Macedonia last year for a meeting entitled Stories And Legends, receiving £18,000 to explore storytelling. …An EC spokesman said the projects were about exposing young people to other cultures and increasing their participation in  society. He added: ‘I don’t see anything wrong with basket-weaving or music-making if it encourages young people to meet other Europeans and learn a new skill from another part of Europe.’

Readers may be thinking this is no big deal. After all, American politicians fund pork projects all the time. But here’s the clincher. The UK’s Daily Telegraph reports that the European Commission is subsidizing a ski trip for…drum roll, please… the children of European politicians, and that the subsidies even go to households with income equivalent to about $175,000:

Taxpayers will heavily subsidise a skiing holiday in the Italian Alps for the children of MEPs and European Parliament officials in February. …The eight-day skiing trip for 80 children aged between eight and 17 is timed to begin over the weekend of St Valentine’s Day, providing some romantic time off from parenting for officials.  Costs, the holiday is priced at 920 euros (£822), are generously subsidised by the parliament’s budget. Households receive different levels of subsidy depending on their monthly income but even those on a income of over £108,000 get a discount. There is reduction of up to 52 per cent for officials earning £69,620 a year and an MEP, earning £86,000, is eligible for a subsidy of 45 per cent. …The children will enjoy full board in a three-star hotel in the beautiful village of Spiazzi. The trip includes “workshops” in a “multilingual environment” on the themes of “the mountain, its snow, its nature”. …The parliament’s spokesman declined to comment on the holiday.

Perhaps I’m not paying close enough attention, but I can’t think of anything the crowd in Washington has done that rivals this odious example of self-serving by lawmakers. Can anybody come up with an example that tops this?

Should Republicans Have Compromised to Produce a Less-Bad Healthcare Bill?

Writing for Forbes, Bruce Bartlett puts forth an interesting hypothesis that healthcare legislation could have been made better (hopefully he meant to write “less destructive”) if the GOP had been willing to compromise with Democrats:

Democrats desperately wanted a bipartisan bill and would have given a lot to get a few Republicans on board. This undoubtedly would have led to enactment of a better health bill than the one we are likely to get. But Republicans never put forward an alternative health proposal. Instead, they took the position that our current health system is perfect just as it is.

Bruce makes several compelling points in the article, especially when he notes that it will be virtually impossible to repeal a bad bill after 2010 or 2012, but there are good reasons to disagree with his analysis. First, he is wrong in stating that Republicans were united against any compromise. Several GOP senators spent months trying to negotiate something less objectionable, but those discussions were futile. Also, I’m not sure it’s correct to assert Republicans took a “the current system is perfect” position. They may not have offered a full alternative (they did have a few good reforms such as allowing the purchase of insurance across state lines), but their main message was that the Democrats were going to make the current system worse. Strikes me as a perfectly reasonable position, one that I imagine Bruce shares.

Let’s explore Bruce’s core hypothesis: Would compromise have generated a better bill? It’s possible, to be sure, but there are also several reasons why that approach may have backfired:

1. It’s not clear a policy of compromise would have produced a less-objectionable bill. Would Senate Democrats have made more concessions to Grassley and Snowe rather than Lieberman and Nelson (much less whether the “concessions” would have been good policy)? And even if Reid made some significant (and positive) concessions, is there any reason to think those reforms would have survived a conference committee with the House? Yet the compromising Republicans probably would have felt invested in the process and obliged to support the final bill — even if the conference committee produced something worse than the original Senate Democrat proposal.

2. A take-no-prisoners strategy may be high risk, but it can produce high rewards. In the early 1990s, the Republicans took a no-compromise position when fighting Bill Clinton’s health plan (aka, Hillarycare), and that strategy was ultimately successful. We still don’t know the final result of this battle (much less how events would have transpired with a different strategy), but if the long-term goal is to minimize government expansion, a no-compromise approach is perfectly reasonable.

3. A principled opposition to government-run healthcare will help win other fights. The Democrats ultimately may win the healthcare battle, but the leadership will have been forced to spend lots of time and energy, and also use up lots of political chits. Does anyone now think they can pass a “climate change” bill? The answer, almost certainly, is no.

4. A principled approach can be good politics, which can eventually lead to good policy. Democrats wanted a few Republicans on board in part to help give them political cover. The aura of bipartisanship would have given Democrats a good talking point for the 2010 elections (“My opponent is being unreasonable since even X Republicans also supported the legislation”). That fig leaf does not exist now, which makes it more likely that Democrats will pay a heavy price during the midterm elections. It is impossible to know whether 2010 will be a 1994-style rout or whether the newly-elected Republicans will quickly morph into Bush-style big-government conservatives (who often do more damage to liberty than Democrats), but at least there is a reasonable likelihood of more pro-liberty lawmakers.

When all is said and done, Bruce’s strategy is not necessarily wrong, but it does guarantee defeat. Government gets bigger and freedom diminishes. For reasons of principle and practicality, Republicans should do the right thing.

It’s the End of 2009. Where Are Our Troops?

This is not the change we hoped for. President Obama rose to power on the basis of his early opposition to the Iraq war and his promise to end it. But after a year in the White House he has made both of George Bush’s wars his wars.

Speaking of Iraq in February 2008, candidate Barack Obama said, “I opposed this war in 2002. I will bring this war to an end in 2009. It is time to bring our troops home.” The following month, under fire from Hillary Clinton, he reiterated, ”I was opposed to this war in 2002….I have been against it in 2002, 2003, 2004, 5, 6, 7, 8 and I will bring this war to an end in 2009. So don’t be confused.”

Indeed, in his famous “the moment when the rise of the oceans began to slow” speech on the night he clinched the Democratic nomination, he also proclaimed, “I am absolutely certain that generations from now we will be able to look back and tell our children that … this was the moment when we ended a war.”

Now he has doubled down on the war in Afghanistan and has promised to keep the war in Iraq going for another 19 months, after which we will have 50,000 American troops in Iraq for as far as the eye can see. If McCain had proposed this sort of minor tweaking of the Bush policy, I think we’d see antiwar rallies in 300 cities. Calling the antiwar movement!

President Obama’s promises are becoming less credible. He says that after all this vitally necessary and unprecedented federal spending, he will turn his attention to constraining spending at some uncertain date in the future. And he says that he will first put more troops into Afghanistan, and then withdraw them at some uncertain date in the future (“in July of 2011,” but “taking into account conditions on the ground”). Voters are going to be skeptical of both these promises to accelerate now and then put on the brakes later.

The real risk for Obama is becoming not JFK but LBJ – a president with an ambitious, expensive, and ultimately destructive domestic agenda, who ends up bogged down and destroyed by an endless war. Congress should press for a quicker conclusion to both wars – and should also remember the years of stagflation and slow growth that followed President Johnson’s expansion of the welfare state.