Topic: Government and Politics

Reid’s Accomplishment

Including a Fannie Med with a “state opt-out” provision in the Senate Democrats’ health care bill accomplishes only this: it helps Majority Leader Harry Reid (D-NV) survive as majority leader by appeasing his left wing.  It doesn’t make it any more (or less) likely that Fannie Med will survive.

(Cross-posted at Politico’s Health Care Arena.)

The Real Story Behind the Chrysler Bankruptcy

If you worry about the abuse of executive power and declining respect among elected officials for the rule of law, you should watch this eloquent illumination of what really went down in the Chrysler bankruptcy earlier this year. The speaker is Richard Mourdock, Treasurer of the state of Indiana. The setting is a Cato Institute policy forum on October 15 about the “sordid details of the Bush/Obama auto industry intervention.”

As state treasurer, Mourdock is the person responsible for investment decisions concerning Indiana’s state employee pension funds, some of which owned a small share of Chrysler’s $6.9 billion in secured debt and some of which opposed the administration’s offer of $.29 on the dollar for that debt. Though these small secured holders were publicly castigated by President Obama as “unpatriotic” and unwilling to sacrifice for the greater good, Mourdock led the effort to stop the “sale” of Chrysler all the way to the U.S. Supreme Court.

Mourdock’s presentation gives a flavor for the tactics employed by the  Obama administration to “encourage” senior, priority creditors to back off their claims so that chosen parties could take priority—tactics that included backroom reminders that some of those creditors had received and might seek more TARP funding, threats of bringing the full weight and measure of the White House press office to bear down on dissenters, public condemnation, and other forms of arm-twisting most Americans would find unseemly for a U.S. presidential administration.

At the Cato event, Mr. Mourdock was joined by University of Pennsylvania Law School professor and corporate law expert David Skeel, who demonstrated quite clearly that the “sale” of Chrysler, as orchestrated by the Obama administration under cover of Chapter 11 bankruptcy reorganization, was indeed a sham sale. Skeel’s presentation begins at 20:15 of this video.

If you want to have a better sense of what’s going on in Washington (or to affirm your worries), I recommend you watch Mourdock here, listen to Mourdock here, read the Indiana Pensioners’ petition for Writ of Certiorari (appeal to the Supreme Court), and read the Cato Institute’s amicus brief in support of the Indiana pensioners here.

German Masochists

A handful of guilt-ridden wealthy Germans are asking to pay more tax according to a BBC report. They could just give their money to the state, of course, but they want to impose their self-loathing policies on all successful Germans. The amusing part of the story is that these dilettantes were puzzled that so few people showed up to their protest. Maybe next time they could do some real redistribution and announce that they will be tossing real banknotes in the air:

A group of rich Germans has launched a petition calling for the government to make wealthy people pay higher taxes. The group say they have more money than they need, and the extra revenue could fund economic and social programmes…

Simply donating money to deal with the problems is not enough, they want a change in the whole approach.

…The man behind the petition, Dieter Lehmkuhl, told Berlin’s Tagesspiegel that there were 2.2 million people in Germany with a fortune of more than 500,000 euros. If they all paid the tax for two years, Germany could raise 100bn euros to fund ecological programmes, education and social projects, said the retired doctor and heir to a brewery. Signatory Peter Vollmer told AFP news agency he was supporting the proposal because he had inherited “a lot of money I do not need”. He said the tax would be “a viable and socially acceptable way out of the flagrant budget crisis”. The group held a demonstration in Berlin on Wednesday to draw attention to their plans, throwing fake banknotes into the air. Mr Vollmer said it was “really strange that so few people came”.

But not all tormented rich people live in Germany. A few months ago, I had a chance to debate an American version of this strange subspecies.

Fact-checking Drug Czar Barry McCaffrey

I appeared on the CNN program Lou Dobbs Tonight last Thursday (Oct. 22) to discuss the medical marijuana issue and the drug war in general.  There were two other guests: Peter Moskos from John Jay College and the organization Law Enforcement Against Prohibition (LEAP) and Barry McCaffrey, retired General of the U.S. Army and former “Drug Czar” under President Bill Clinton.

I was really astonished by the doubletalk coming from McCaffrey.  Watch the clip below and then I’ll explain two of the worst examples so you can come to your own conclusions about this guy.

Doubletalk: Example One:

Tim Lynch: “Some states have changed their marijuana laws to allow patients who are suffering from cancer and AIDS–people who want to use marijuana for medical reasons–they’re exempt from the law. But there’s a clash between the laws of the state governments and the federal government. The federal government has come in and said, ‘We’re going to threaten people with federal prosecution, bring them into federal court.’ And what the [new memo from the Obama Justice Department] does this week is change federal policy. Basically, Attorney General Eric Holder is saying, ‘Look, for people, genuine patients–people suffering from cancer, people suffering from AIDS–these people are now off limits to federal prosecutors.’ It’s a very small step in the direction of reform.”

Now comes Barry McCaffrey: “There is zero truth to the fact that the Drug Enforcement Administration or any other federal law enforcement ever threatened care-givers or individual patients. That’s fantasy!”

Zero truth? Fantasy?  This report from USA Today tells the story of several patients who were harassed and threatened by federal agents. Excerpt:  ”In August 2002, federal agents seized six plants from [Diane] Monson’s home and destroyed them.”

This report from the San Francisco Chronicle tells the story of Bryan Epis and Ed Rosenthal.  Both men, in separate incidents, were raided, arrested, and prosecuted by federal officials.  The feds called them “drug dealers.”  When the cases came to trial, both men were eager to inform their juries about the actual circumstances surrounding their cases–but they were not allowed to convey those circumstances to jurors.  Federal prosecutors insisted that information concerning the medical aspect of marijuana was “irrelevant.”   Both men were convicted and jailed.

This report from the New York Times tells readers about the death of Peter McWilliams.  The feds said he was a “drug dealer.”  McWilliams also wanted to tell his story to a jury, but pled guilty when the judge told him he would not be allowed to inform the jury of his medical condition.  Excerpt:  “At his death, Mr. McWilliams was waiting to be sentenced in federal court after being convicted of having conspired to possess, manufacture and sell marijuana…. They pleaded guilty to the charge last year after United States District Judge George H. King ruled that they could not use California’s medical marijuana initiative, Proposition 215, as a defense, or even tell the jury of the initiative’s existence and their own medical conditions.”  The late William F. Buckley wrote about McWilliams’ case here.

Imagine what Diane Monson, Bryan Epis, Ed Rosenthal, and Peter McWilliams (and others) would have thought had they seen a former top official claim that federal officials never threatened patients or caregivers?!

Doubletalk: Example Two:

Tim Lynch: “After California changed its laws to allow the medical use of marijuana, [General Barry McCaffrey] was the Drug Czar at the time and he came in taking a very hard line. The Clinton administration’s position was that they were going to threaten doctors simply for discussing the pros and cons of using marijuana with their patients. That policy was fought over in the courts and [the Clinton/McCaffrey] policy was later declared illegal and unconstitutional for violating the free speech of doctors and for interfering with the doctor-patient relationship. This was the ruling by the Ninth Circuit Court of Appeals in a case called Conant – “C-O-N-A-N-T.”

Lou Dobbs: “The ruling stood in the Ninth Circuit?”

Tim Lynch: “Yes, it did.”

Now comes Barry McCaffrey: “That’s all nonsense!”

Nonsense?  Really?

Go here to read the New York Times story about McCaffrey’s hard-line policy.

The Conant ruling can be found here.  The name of the case was initially Conant v. McCaffrey, but as the months passed and the case worked its way up to the appeals court, the case was renamed Conant v. Walters because Bush entered the White House and he appointed his own drug czar, John Walters, who maintained the hard line policy initiated by Clinton and McCaffrey.

I should also mention that Conant was not an obscure case that McCaffrey could have somehow ”missed.”  Here’s a snippet from another New York Times report:  “The Supreme Court, in a silent rebuff on Tuesday to federal policy on medical marijuana, let stand an appeals court ruling that doctors may not be investigated, threatened or punished by federal regulators for recommending marijuana as a medical treatment for their patients.”  The point here is that the case was covered by major media as it unfolded.

When our television segment concluded, Lou Dobbs asked me some follow-up questions and asked me to supply additional info to one of his producers, which I was happy to do.

Whatever one’s view happens to be on drug policy, the historical record is there for any fair-minded person to see – and yet McCaffrey looked right into the camera and denied  past actions by himself and other federal agents.  And he didn’t say, “I think that’s wrong” or “I don’t remember it that way.”  He baldly asserted that my recounting of the facts was “nonsense.”   Now I suppose some will say that falsehoods are spoken on TV fairly often–maybe, I’m not sure–but it is distressing that this character held the posts that he did and that he continues to instruct cadets at West Point!

My fellow panelist, Peter Moskos, has a related blog post here and he had a good piece published in the Washington Post just yesterday.  For more Cato scholarship on drug policy, go here.

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Bruce Bartlett’s VAT Delusions

I’ve known and liked Bruce Bartlett for more than 20 years, so you can imagine my dismay that he is now arguing for a value-added tax (VAT). I’m not sure whether his mind has been captured as part of a remake of Invasion of the Body Snatchers or if he’s just been hanging around Washington for too long, but his implication that it is possible to be a pro-market conservative while supporting a huge new tax to finance bigger government is absurd.

Conservatives (not counting the big spenders who call themselves “compassionate conservatives”) share the libertarian goal of smaller government. And trying to achieve smaller government by raising taxes is akin to treating alcoholics by giving them keys to a liquor store.

The VAT is a particularly bad idea because it would be a huge new source of revenue, as Bartlett acknowledges in an article for Forbes.com:

Based on the experience in other countries, I estimate that a U.S. VAT could realistically tax about a third of the gross domestic product (GDP), which would raise close to $50 billion per percentage point. If we adopted Europe’s average VAT rate of 20%, we could raise $1 trillion per year in 2009 dollars.

He makes the point that a VAT does not do as much damage, per dollar raised, as the personal or corporate income tax, but so what? That would only be a compelling argument if the VAT was used to eliminate other taxes. At the risk of pointing out the obvious, that’s not what he’s proposing.

Interestingly, even though his core argument is that we should adopt a VAT to give the government additional revenue, Bartlett tries to be all things to all people by mentioning that a VAT could replace other taxes:

Replacing the corporate tax with a VAT would unquestionably improve the competitiveness of all U.S. exporters.

Even here, though, his argument is misleading. A VAT would have no impact on U.S. exporters. All the benefits would occur only because the corporate income tax would disappear. Not that this matters since Bartlett is not advocating for that position.

He then continues to muddy the waters by citing Senator DeMint’s legislation, presumably to make it seem as if his plan is good by association.

Sen. Jim DeMint, R-S.C., introduced legislation (S. 1240) to establish a business consumption tax that is, in essence, a VAT.

There is a gigantic difference, of course, between Bartlett and DeMint. The senator proposes to replace the internal revenue code, whereas Bartlett wants to augment it.

He then complains that supporters of limited government attack his plan for facilitating bigger government, but he offers no refutation. That is no surprise since Bartlett is throwing in the towel, saying we should have a VAT since it is hopeless to fight against growing government:

[W]henever I suggest the idea of a VAT for the U.S., I am attacked by supply-siders and assorted right-wingers. The other day my friend Larry Kudlow criticized me for wanting to “Europeanize the American economy.” Their concern is that the VAT is a money machine that will lead to higher taxes and bigger government precisely because it is such a “good” tax. I myself held this same view for many years. But eventually I decided that it was stupid to oppose something because of its virtues. Opposing a VAT because it’s too good is like breaking up with your girlfriend because she is too beautiful.

The last line is clever, but ridiculous. The more appropriate analogy is that you are married to the Creature from the Black Lagoon, and Bartlett wants you to take the Wicked Witch of the West as a second wife.

If you want the real story on the VAT, watch this video.

Attending to Business

In today’s Politico Arena, the editors ask:

Is Obama “dithering” on Afghanistan (Cheney) or fulfilling his “solemn responsibility” (Gibbs)?

My response:

President Obama got some adult criticism this week from Dick Cheney, none too soon.  While the risk to American troops in Afghanistan grows, Obama dithers, unable to decide whether to get in or get out — whether to be the one thing the Constitution authorizes him to be, Commander in Chief.  Yet he finds time to fly off to Copenhagen to promote Chicago for the Olympics, to insinuate himself in local political campaigns, to go on “Fox hunts,” yesterday excluding Fox News from the White House pool allowed to interview his executive pay czar, and now, we learn, to slash executive salaries at companies not only partially owned but simply regulated by the government.  Are there no limits to the man’s hubris?

Even the Washington Post this morning, no bastion of free-market fervor, noted that this “represents a signal moment in the history of the American economic experiment,” moving us ever closer to the European model.  But it was Arena contributor Allan Meltzer who yesterday hit the nail on the head:  ”All the noise about pay and pay cuts is part of an effort to divert the public’s attention from the main cause of the mortgage fiasco — the role that Congressman Frank and others had in creating the mortgage crisis by refusing to limit the activities of Fannie Mae and Freddy Mac after 2003.”  That these regulators will be able to calculate the salary that is appropriate to discourage excessive risk-taking is simply comical.

And so we have here a textbook example of modern government:  Obama fails to do or do well what he is authorized to do, yet he strides into matter far beyond his authority — or competence.  He seems not to understand the Constitution he once taught, and more recently promised to uphold.

Neoconservatism and Militarism

Matt Yglesias identifies a puzzle, comparing Cold War/Irving Kristol neoconservatism to today’s Weekly Standard Wilsonianism:

[E]ven though the high-level theoretical content of the realpolitiker 70s version of neoconservatism and the Wilsonian 2000s version of neoconservatism seem very different, the operational content is extremely similar. You have support for higher defense budgets, a tendency toward threat-inflation and hysteria, a belief in an aggressive military posture and extensive saber-rattling, hostility to negotiations, and hostility to international law both in theory and in practice. This was initially presented to the world as a “realistic” alternative to lefty critiques of US support for anti-communist dictators and more recently appeared as an “idealistic” critique of lefty reluctance to launch wars, but the continuity between the views is enormous.

What Matt doesn’t say is why the policy outcomes stayed largely the same despite shifting theoretical sands.  I think this piece by Brian Schmidt and Michael Williams can help shed some light on the problem.

Irving Kristol's Medal of Freedom Award (Paul Hosefros/The New York Times)Irving Kristol’s Medal of Freedom Award (Paul Hosefros/The New York Times)

Irving Kristol’s Medal of Freedom Award (Paul Hosefros/The New York Times)

A social order based purely on narrowly egoistic interests, neoconservatives argue, is unlikely to survive — and the closer one comes to it, the less liveable and sustainable society will become. Unable to generate a compelling vision of the collective public interest, such a society would be incapable of maintaining itself internally or defending itself externally. As a consequence, neoconservatism regards the ideas at the core of many forms of modern political and economic rationalism — that such a vision of interest can be the foundation for social order — as both wrong and dangerous. It is wrong because all functioning polities require some sense of shared values and common vision of the public interest in order to maintain themselves. It is dangerous because a purely egoistic conception of interest may actually contribute to the erosion of this sense of the public interest, and the individual habits of social virtue and commitment to common values that sustain it.

In this context consider the worshipful treatment of men like Teddy Roosevelt and Rudy Giuliani by neoconservatives, and neoconservatives’ utter contempt for libertarians and individualism.  For neocons, the higher defense budgets and militarism, the aggressive military posture and extensive saber-rattling, the nationalism, were in some sense ends in themselves rather than rationally calculated means to defend the country.  Without an enemy and a grand national project — note in the article to which Matt points Kristol’s admonition that “statesmen should, above all, have the ability to distinguish friends from enemies” — the society would descend into a variety of individual pursuits — family, profit, local community, learning — that provide no unifying politics.  Again, for Kristol, “a nation whose politics turn on the cost of false teeth is a nation whose politics are squalid.”  A grand national project, be it a global proxy war against the Soviet Union, a crusade to end terrorism, or even a recurring fetish for space travel, provides unifying substance for the country.

The trouble, as Matt rightly observes, is that you can’t explicitly just go around glomming onto whatever rationale provides the best argument for militarism and nationalism today. The citizens of the country seem unlikely to support costly and destructive policies based on the idea that it’s all for their own good.  I am reminded of Ed Crane and Bill Niskanen’s apt reference to neoconservatism as “a movement with a head but no body,” meaning that it lacked indigenous support at the grassroots level.  So the obvious play for neocons was to sew the neoconservative head onto the conservative nationalist body.  To justify endless war, the idea of “real America” being under siege by both an insular and tweedy academy (in Schmidt and Williams’ story, the scientific-rationalist realists) and an array of foreign devils allowed a group of radical ideas to strike a conservative pose:

In foreign policy as in domestic policy, neoconservatism claims to represent the majority of real Americans, to speak on their behalf, and to defend the validity of their beliefs in their virtues and values (and their place as the basis for the national interest of the United States), just as vociferously as it has represented those values against the depredations of elites in the culture wars. Although a high proportion of neoconservatives are intellectuals — and are often part of what would be considered an academic elite by any standards — they are able to represent themselves as outsiders shunned and victimized by liberal (and realist) intellectuals in precisely the same way that real people are, and for the same reasons — for expressing what the people really know in an elite cultural environment dominated by self-interested, self-righteous, and yet culturally decadent liberal elites.

In this reading, trying to ground the policy outcomes in a coherent theory of international politics is bound to be fruitless.  The policy outcomes themselves are designed to provide a centripetal counter to the polity’s natural tendency to fly apart.  On this point Schmidt and Williams cite Midge Decter (“domestic policy was foreign policy, and vice-versa”) and Robert Kagan (“there can be no clear dividing line between the domestic and the foreign”).  I think there’s something to this.