Topic: Government and Politics

The Politics of Budget-Cutting

helicopterIn Washington, the symbolic almost always trumps the substantive.  Thus, legislators complain, for good reason, about pork and earmarks, which ran about $35 billion at their maximum, and ignore entitlements, which entail some $100 trillion in unfunded liabilities.

So it is with President Obama.  He continues the endless bailouts, which cumulatively now run around $13 trillion.  He proposed a $3.6 trillion budget and will leave us with a $1.4 trillion deficit next year–and nearly $5 trillion in additional debt on top of the massive deficits already projected over the coming decade.  But he asked his Cabinet officers to chop $100 million in administrative expenses.

And he says he doesn’t need a new helicopter.  Fiscal responsibility in action.

Alas, the helicopter, while costing billions, isn’t an easy budget target.

Reports the New York Times:

At a Washington conference on fiscal responsibility in February, President Obama tried to set the tone by saying he did not need the new costly presidential helicopters that had been ordered by the Bush administration.

“The helicopter I have now seems perfectly adequate to me,” he said to laughter. On a more serious note, he added, “I think it is an example of the procurement process gone amok. And we’re going to have to fix it.”

But the president is learning that in the world of defense contracting, frugality can be expensive. Some lawmakers and military experts warn that his effort to avoid wasting billions of dollars could end up doing just that.

The administration’s plan to halt the $13 billion helicopter program, announced this month, will leave the government with little to show for the $3.2 billion it has spent since the Bush administration set out to create a futuristic craft that could fend off terrorist attacks and resist the electromagnetic effects of a nuclear blast.

Critics say the Pentagon would also spend at least $200 million in termination fees and perhaps hundreds of millions to extend the life of today’s aging fleet. As a result, several influential lawmakers and defense analysts are now calling for a compromise that would salvage a simpler version of the helicopter that is already being tested.

They say it could be a more palatable alternative in tough economic times than seeking new bids for a more advanced craft, which has proved difficult to develop.

No wonder Washington is known as a place where everything about government is permanent.  Once you start spending money on a program, it becomes extremely hard to stop.  Part of that is the political dynamic of interest groups, the problem so well dissected by the Public Choice economists.  And part of it is legal and procedural.  Contracts are let, cancellation fees are due.  It’s bad to waste money on a gold-plated helicopter.  It seems even worse to waste money developing a gold-plated helicopter, and then getting nothing at all by canceling it.

There is, however, an amazingly simple solution, of which Congress and the president apparently are not aware.

Don’t spend the money in the first place.  Eschew new programs.  Say no to special interests.  Let taxpayers keep more of their own money.

This approach would seem to make sense at any time.  But especially today, with the federal government facing a deficit approaching $2 trillion in 2009.

Didn’t Nancy Reagan lecture us to “just say no”?  We should invite her back for a return tour of Washington, only she should talk about federal spending this time.

In Defense of “Libertarian Crusades”

We in the public interest legal community – especially on the libertarian or conservative side – are used to taking slings and arrows from all quarters.  The media doesn’t understand our quaint obsession with following the text of the Constitution.  The so-called progressives seethe at our evil defense of property rights and the freedom of contract.  Even the business community blanches at our refusal to leave their sacred regulatory protections untouched in our attack on statism.

But what we don’t expect is to see federal judges openly and wantonly question our motives – least of all in an actual opinion.  Yet this is precisely what Judge Jacques “Jack” Wiener did last Thursday in dissenting from a Fourth Amendment seizure/Fifth Amendment takings case.  The case, Severance v. Patterson, involves a challenge to a Texas law that caused the seizure of beachfront property after Hurricane Rita pushed the vegetation line landward.  The purpose of the law, the Open Beaches Act, is to ensure public access to the beach regardless of erosion and other natural land migrations (a.k.a. a “rolling easement”).  The Fifth Circuit panel ended up affirming the dismissal of part of the claims and asking the Texas Supreme Court for a ruling on state-law issues implicated in others.

But the legal details aren’t important.  What I want to highlight is Wiener’s dissent, which begins with the following “Context” (a section title not commonly found in judicial opinions; see pages 22-23 here):

Although undoubtedly unintentionally, the panel majority today aids and abets the quixotic adventure of a California resident who is here represented by counsel furnished gratis by the Pacific Legal Foundation. (That non-profit’s published mission statement declares that its raison d’être includes “defend[ing] the fundamental human right of private property,” noting that such defense is part of each generation’s obligation to guard “against government encroachment.”) The real alignment between Severance and the Pacific Legal Foundation is not discernable from the record on appeal, but the real object of these Californians’ Cervantian tilting at Texas’s Open Beaches Act (“OBA”) is clearly not to obtain reasonable compensation for a taking of properties either actually or nominally purchased by Severance, but is to eviscerate the OBA, precisely the kind of legislation that, by its own declaration, the Foundation targets. And it matters not whether Ms. Severance’s role in this litigation is genuinely that of the fair Dulcinea whose distress the Foundation cum knight errant would alleviate or, instead, is truly that of squire Sancho Panza assisting the Foundation cum Don Quixote to achieve its goal: Either way, the panel majority’s reversal of the district court (whose rulings against Severance I would affirm) has the unintentional effect of enlisting the federal courts and, via certification, the Supreme Court of Texas, as unwitting foot-soldiers in this thinly veiled Libertarian crusade. It is within this framework that I shall seek to demonstrate how the panel majority misses the mark and why Severance’s action should be dismissed, once and for all, for her lack of standing to assert either a Fifth Amendment takings claim for reasonable compensation (because Severance has had nothing taken by the State) or a Fourth Amendment unreasonable seizure claim (because that which was putatively seized did not belong to Severance at the time; and even if it had, there was nothing unreasonable about the purported seizure).

 
Apparently in Judge Wiener’s world, it is beyond the pale for an organization to provide pro bono legal services that also advance some larger ideological mission.  Somebody tell the NAACP or ACLU – or the Supreme Court for that matter, which invites amicus briefs from just the kinds of groups Wiener excoriates.  Cato itself routinely files such briefs, of course, and on several occasions has joined with PLF.

Chief Judge Jones pithily dispatches her colleague’s grandiloquence in the majority’s first footnote (see bottom of page 2 here):

Notwithstanding the hyperbolic and unsupported assertions in Part I of the dissent (“Context”), the judges of the court endeavor not to decide appeals based on who the litigants are, who their lawyers are, or what we may believe their motives to be. Whether that rule is observed in light of Part I of the dissent, however, the reader must determine.

And I won’t even get into Wiener’s mixed metaphors and schoolboy Latin – he meant qua, not cum – other than to say “hit the road, Jack.”

(Full disclosure: I clerked on the Fifth Circuit and am familiar with Wiener’s squishy, unreliable jurisprudence; he’s very nice in person, but something happens in chambers – left-wing clerks? – that detracts from his effectiveness.  One caveat: Wiener is a great friend of the taxpayer; the IRS does not win in his courtroom.)

For commentary from the Volokh Conspiracy, see here.  For PLF’s press release, see here.  Hat tip: Cato adjunct scholar Tim Sandefur (whose day job is with PLF, though he did not work on this case).

Robert H. Frank, A 200% Tax Even Socialists Will Hate

In the latest issue of Forbes, Cornell University economist Robert H. Frank is pushing “A Tax Even Libertarians Can Love.” I hope he wasn’t counting on this libertarian’s support.

What he advocates is “replacing the income tax with a progressive tax on spending. …A family’s income minus its savings is its consumption, and that amount minus a large standard deduction – say, $30,000 a year for a family of four – would be its taxable consumption. …Rates would start low, perhaps 20%, then rise gradually with total consumption. …With savings tax-exempt, top marginal tax rates on consumption would have to be significantly higher than current top rates on income.”

His concept of “significantly higher” includes tax rates of 100-200% on marginal income that isn’t saved.  This is about minimizing affluence, not maximizing revenues.  There is ample evidence from Emmanuel Saez and others that the amount of reported income drops sharply as marginal tax rates rise above 25-30% (and even less on capital gains).

In his 2007 book, Falling Behind: How Rising Inequality Harms the Middle Class, Frank suggests marginal tax rates of 50% above $220,000  and rising to 200%.  Since seniors (like me) commonly finance retirement from past savings, Frank’s tax scheme amounts to rapid confiscation of past savings.

For young people, Frank’s tax can’t possibly encourage savings because it discourages earning any income in the first place.  Consumption is, after all, the motive for both earning and saving.   The prospect of facing future consumption taxes of 50-200% would surely discourage saving much, because the rewards from invested savings (namely, future consumption) would be subjected to such prohibitive tax brackets. Under this steeply progressive tax on unsaved income, any income exempt from taxes today would be subject to brutal taxes whenever folks wanted to buy anything of value, like a car or house, or to retire on their accumulated savings.

In another April 25 piece in The New York Times, Mr. Frank shifts from promoting confiscatory taxes on consumption to defending small tweaks to the current tax regime. “The current [tax] system is much fairer than many people believe, and the president’s proposal will make it both fairer and more efficient.” That comment was aimed at the tea parties.  Yet tax party protesters clearly understood, as Frank does not, that the president’s first wave of proposed tax increases come nowhere near paying for his grandiose spending plans.  My estimate of last October, that Obama’s plans would add $4.3 trillion to the deficits over ten years is now looking much too generous, if not wildly optimistic.

In the New York Times piece, Frank argues that income differences are mainly a matter of luck.  As he often does, Frank pretends to possess evidence about this topic that other economists have missed.  He says, “economists have only begun to realize [that] pay differences often vastly overstate differences in performance.”

In his book, whenever Frank alludes to what “the evidence suggests,” his sources are usually suspect, obsolete or invisible. He claims “regulations, like cartoons are data.”  He cites an unpublished master’s thesis, unidentified surveys and “casual impressions.”

Frank  claims “happiness can be measured reliably” by brain waves.  Explaining this better in the Economic Journal in 1997, he noted that people who say they are happy show “greater electrical activity in the left prefrontal region of the brain” which “is rich in receptors for the neurotransmitter dopamine, higher concentrations of which been shown independently to be correlated with positive affect.”  If we accept the amount of dopamine in the brain as the gauge of happiness, however, then the happiest people are those who routinely abuse crack and meth.

In the second chapter of Falling Behind, his first graph lists a Census Bureau URL as the source for household income data from 1949 to 1979.  Click on that link and you will find the data only go back to 1967.   In reality, all of Frank’s income and wealth graphs actually came from Chris Hartman at inequality.org. Hartman is not an economist or statistician, but a “researcher, writer, editor, and graphic designer with experience in politics, higher education, and publishing.”  Hartman’s non-facts used in Robert Frank’s first graph actually came from a 1994 book from the Economic Policy Institute, reflecting the “authors’ analysis…  of unpublished census data.” Frank’s comparison of CEO pay with “average wages” came from Hartman’s flawed calculations for United for a Fair Economy, which were critiqued on page 131 of my textbook Income and Wealth. And Frank’s demonstrably false claim that “asset ownership has become even more heavily concentrated during recent years” is likewise from inequality.org.

In short, Professor Frank often bases his remarkably strong opinions on fragile facts.

Obama’s Transparency Average Drops

On the campaign trail, President Obama promised to post bills online for five days before signing them.

Last week, President Obama signed three new bills into law. None of them received the promised “Sunlight Before Signing” treatment - at least, not as far as our research reveals. (The White House has yet to establish a uniform place on its Web site where the public can look for bills that the President has received from Congress.)

The new bills put today’s podcast on Obama’s five-day pledge slightly out of date. He is not batting .091 on his transparency pledge. He’s batting .071. The substance of the podcast remains true, however: This is still a worse record than the Nationals.

President Obama waited more than five days to sign two of the three bills he passed into law last week. The simple matter of posting them on Whitehouse.gov would have fulfilled the promise as to those bills - and would have brought his average up to .214.

The current list of new laws, with presentment date and signing date, is after the break.

Public Law Date Presented Date Signed Posted (Linked) for Comment? Five Days?
P.L. 111-2, The Lilly Ledbetter Fair Pay Act of 2009 1/28/2009 1/29/2009 1/29/2009 No
P.L. 111-3, The Children’s Health Insurance Program Reauthorization Act of 2009 2/4/2009 2/4/2009 2/1/2009 No
P.L. 111-4, The DTV Delay Act 2/9/2009 2/11/2009 2/5/2009 Yes and No
P.L. 111-5, The American Recovery and Reinvestment Act of 2009 2/16/2009 2/17/2009 2/13/2009 No
P.L. 111-6, Making further continuing appropriations for fiscal year 2009, and for other purposes 3/6/2009 3/6/2009 No n/a
P.L. 111-7, A bill to designate the facility of the United States Postal Service located at 2105 East Cook Street in Springfield, Illinois, as the “Colonel John H. Wilson, Jr. Post Office Building” 2/26/09 3/9/2009 No n/a
P.L. 111-8, The Omnibus Appropriations Act, 2009 3/11/2009 3/11/2009 3/6/2009 No
P.L. 111-9, To extend certain immigration programs 3/18/2009 3/20/2009 No n/a
P.L. 111-10, To provide for an additional temporary extension of programs under the Small Business Act and the Small Business Investment Act of 1958, and for other purposes 3/19/2009 3/20/2009 No n/a
P.L. 111-11, The Omnibus Public Land Management Act of 2009 3/30/2009 3/30/2009 3/30/2009 No
P.L. 111-12, The Federal Aviation Administration Extension Act of 2009 3/24/2009 3/30/2009 No n/a
P.L. 111-13, The Generations Invigorating Volunteerism and Education Act 4/20/2009 4/21/2009 No n/a
P.L. 111-14, To designate the United States courthouse under construction at 327 South Church Street, Rockford, Illinois, as the “Stanley J. Roszkowski United States Courthouse” 4/14/2009 4/23/2009 No n/a
P.L. 111-15, The Special Inspector General for the Troubled Asset Relief Program Act of 2009 4/14/2009 4/24/2009 No n/a

Transparency for Thee but Not for Me

It appears that the Obama administration is high on transparency for everyone but its own allies.  There are a lot of good reasons to reduce federal regulation, but if the Labor Department is going to push coercive unionism, it should require unions to disclose their activities and finances to their members.

Not in today’s world, however.  The Obama administration is moving backwards.  Reports the Washington Times:

The Obama administration, which has boasted about its efforts to make government more transparent, is rolling back rules requiring labor unions and their leaders to report information about their finances and compensation.

The Labor Department noted in a recent disclosure that “it would not be a good use of resources” to bring enforcement actions against union officials who do not comply with conflict of interest reporting rules passed in 2007. Instead, union officials will now be allowed to file older, less detailed conflict reports.

The regulation, known as the LM-30 rule, was at the heart of a lawsuit that the AFL-CIO filed against the department last year. One of the union attorneys in the case, Deborah Greenfield, is now a high-ranking deputy at Labor, who also worked on the Obama transition team on labor issues.

The only people served by this move are union officials who want less oversight over their use of dues payments, much collected from unwilling workers.  The new policy certainly runs counter to the president’s promise to set a new tone in Washington.

(Hat tip to Philip Klein.)

The Sunshine State Lives Up to Its Name

Just when I was getting so jaded by federal education politics that I could have been displayed as part of this exhibit, the Sunshine State comes along and brightens my day.

It’s not just that the Florida Assembly voted to strenghten its k-12 scholarship tax credit program yesterday, it’s that the vote was 94 to 23. In addition to almost universal Republican support, the bill garnered the votes of half the entire state Democratic caucus!

As I wrote on this blog last year, “the [school choice] times they are a changin’.”

Democrats in Washington don’t understand that yet. Perhaps they spend too much time with DC’s NEA lobbyiests. Whatever the reason, the long term health of the Democratic Party depends on its celebration  of its pro-school-choice state-level leaders. If the DNC embraces those state leaders and their policies, it will grow a heart, a brain, and a spine all at once, and secure its viability for the long term.

If they don’t, the national party’s current wretched treatment of poor families and cowtowing to education establishment special interests will drag it down to an ignominy from which it will not soon recover.

And as someone who prefers a balance of power between the two major political parties to the dominance of either, I really don’t want to see the DNC ride the NEA’s bandwagon off a cliff.

Waste, Fraud, and Stimulus

At Capitol News Connection, brought to you each morning by your tax dollars, they reported this morning:

With more than a trillion tax dollars tied up in the Troubled Asset Relief Program and stimulus spending, Congress is trying to figure out how to account for every penny.

Uh-huh. Congress is always on top of our federal dollars.

Coincidentally, just hours after the CNC report, the Government Accountability Office released a report warning about the lack of oversight procedures in the kitchen-sink stimulus bill. And a few days earlier the inspector general for the TARP program reported that Treasury has no real details on how TARP funds are being spent. In fact, IG Neil Barofsky told Congress that there were 20 criminal investigations into possible TARP fraud already underway.

Two months ago Barofsky and the comptroller general had warned of the likelihood of waste in huge new government programs:

Neil Barofsky, the special inspector general for the $700 billion Troubled Asset Relief Program, told a House subcommittee that the government’s experiences in the reconstruction of Iraq, hurricane-relief programs and the 1990s savings-and-loan bailout suggest the rescue program could be ripe for fraud…

Gene Dodaro, acting comptroller general of the U.S., told the subcommittee that a reliance on contractors and a lack of written policies could “increase the risk of wasted government dollars without adequate oversight of contractor performance.”

One of Greg Mankiw’s readers worked on the new Department of Homeland Security and reported recently:

[Y]ou cannot juice up a government agency’s budget by tens of billions (or in the case of the stimulus package, hundreds of billions) and expect them to be able to process the paperwork to contract it out, much less oversee the projects or even choose them with any kind of hope for success. It’s like trying to feed a Pomeranian a 25 lb turkey. It’s madness. It was years before DHS got the situation under control and between the start and when they finally assembled a sufficiently capable team of lawyers, contracting officials, technical experts and resource managers, most of the money was totally wasted.

Linda Bilmes, coauthor with Nobel laureate Joseph Stiglitz of The Three Trillion Dollar War: The True Cost of the Iraq Conflict, analyzes the massive problems in three somewhat smaller government projects — the Iraqi reconstruction effort, Hurricane Katrina reconstruction, and the Big Dig artery construction in Boston — and finds that “in any organization that starts to increase spending very rapidly there are risks of waste, fraud and inefficiency.”

Milton Friedman summed up the basic problem with government waste back in 2002:

When a man spends his own money to buy something for himself, he is very careful about how much he spends and how he spends it. When a man spends his own money to buy something for someone else, he is still very careful about how much he spends, but somewhat less what he spends it on. When a man spends someone else’s money to buy something for himself, he is very careful about what he buys, but doesn’t care at all how much he spends. And when a man spends someone else’s money on someone else, he doesn’t care how much he spends or what he spends it on. And that’s government for you.

Members of Congress can make all the speeches they want about their commitment to ferreting out waste and fraud, but waste and fraud are inevitable in government spending and inevitably large in such massive programs. Some people think that’s fine. At least they’re realistic. But reporters shouldn’t fall for politicians promising to spend unprecedented sums of other people’s money quickly and wisely.