Defense Spending and “Global Public Goods”

Matt Yglesias picks up on a discussion between Will Wilkinson and Joseph Heath about American conservatives’ curious enthusiasm for providing “global public goods” (GPGs) in the form of enormous military spending to attempt to secure sea lines of communication (SLOCs) and do other things that are dubbed GPGs.

I think Matt is onto something bigger when he writes that

a considerable portion of American defense spending is genuinely wasteful. If we didn’t do it, it just wouldn’t be done. After all, it’s important to understand that excess capacity in military equipment is about as close as you can get to a real-world example of entirely wasteful public sector activity.

The economists tell us that one of the main properties of public goods is that they ought to be under-provided.  As Matt writes, it seems like we’re over-providing what are being called “public goods” here.  To my mind, this strongly implies that they aren’t public goods.

(Then again, if we’re going to accept that the entire globe is the jurisdiction to which the U.S. government is supposed to be providing public goods, you’re back to public goods – that is, we’re under-supplying the GPG of global security.)

While I’m not sure what my views are on traditional GPGs like a stable monetary or trading order, I’m very skeptical that anything related to security can be dubbed a GPG.  The two key properties of public goods are nonrivalrousness and nonexcludability.  Nonrivalrousness means that my consumption of the good doesn’t conflict with yours.  Nonexcludability refers to the idea that if you’re living within the jurisdiction of the provider of the public good, it’s impossible to opt out of consuming it.

Economists teach defense as the example of the quintessential public good.  For two people living in a country, one’s consumption of defense doesn’t conflict with the other’s and neither can be excluded from its benefits.

But I’m pretty sure you can’t move from the idea of a bounded jurisdiction like that of a state to the entire globe and still have public goods in a meaningful sense.  For example, the Japanese will recall from their experience in the 1930s that the control of SLOCs is very much excludable.  Our inability to supply truly global security means that we have to pick and choose to whom we allocate resources.  Our provision to one country of a formal alliance, for example, is very much rivalrous with neighboring countries’ security.

More generally, in the context of the defense budget at home, I’m more inclined to think that a big chunk of U.S. defense spending constitutes a public bad: transfer payments from taxpayers to defense companies.  Think about it for yourself; what is the marginal benefit to you of an extra F-22?  An extra nuclear warhead?  To whom is the social surplus (or more accurately, rents) allocated?

As is probably clear, my views aren’t terribly well formed here, but the problem is an interesting one.  Chris Preble discusses GPGs in The Power Problem, and a case against the defense budget as a pure public good is Jeffrey Rogers Hummel and Don Lavoie’s “National Defense and the Public-Goods Problem,” in Robert Higgs, ed., Arms, Politics, and the Economy (New York: Holmes & Meier, 1990), pp. 37-60.

Economist, Mark Your Words

The current (May 7th) edition of The Economist observes that Arne Duncan’s results as secretary of education will determine “whether it is worth continuing with moderate education reforms — for if these reforms cannot succeed with $100 billion and a golden boy at the helm, they never will.”

It would be nice if they remember those words four or eight years from now. It would be even nicer if they realized that it is unnecessary to reserve judgment for that long. In Cato’s 2009 Handbook on Policy, I point out that the federal government has spent $1.85 trillion on education since the mid 1960s, with precious little to show for it. Duncan’s $100 billion is pocket change by comparison.

The Economist is also mistaken, as I was in March, in thinking that Duncan or Obama might save the D.C. voucher program. They have done no such thing. They merely seek to kill it by attrition rather than abolishing it outright. The program’s best bet now is for the District of Columbia to take it over.

Civil Liberties Surge

There’s encouraging news in recent polls about two civil liberties issues — marriage equality and marijuana legalization — and it’s got some observers talking about “tipping points” and “a bandwagon effect.”

Take marijuana: A poll released yesterday by Zogby and the O’Leary Report found that 52 percent of respondents would favor legalizing marijuana, with 37 percent opposed. That’s the first poll I’ve seen that found a majority in favor. (The poll was released in a full-page ad in The Hill newspaper on May 6 and does not appear to be online. It had a sample of 3,937 voters from the 2008 election, weighted to reflect the election outcome. Presumably it was an online poll, but if it had any bias it appears to be in a conservative direction: other results included 57 percent support for the “tea parties,” 71 percent opposition to new gun control laws, 57 percent opposition to cap-and-trade, and 53 percent opposition to legislation that would pressure radio stations to provide “diversity.” Of course, it’s kind of scary that only 53 percent of respondents opposed ideological censorship of radio.)

Whatever you think of that poll, it’s not the only one. In February, Nate Silver posted a chart of polls on legalization, showing a slow but steady rise, up to about 40 percent. A Field poll in April showed that 56 percent of Californians support legalizing and taxing marijuana, the first time Field had ever found a majority in favor. The poll was largely on budget issues, and voters may have been desperately searching for new revenue sources other than general tax hikes. Also in April an ABC News/Washington Post poll found 46 percent of respondents in favor of legalizing the use of small amounts of marijuana, an all-time high in that poll.

The New York Times points to other signs of change on the marijuana front: Pot has become essentially legal for anyone in California who can tell a medical marijuana clinic that it would make him feel better. Attorney General Eric Holder has said that the federal government would back off its attempt to enforce the federal laws against medical marijuana in the 13 states that have legalized medical use. The threats to prosecute Michael Phelps for a bong hit were widely ridiculed. These developments have led Andrew Sullivan and CBS News to speculate about a “tipping point” for change — at last — in marijuana prohibition. Just this week, California governor Arnold Schwarzenegger said there should be a major study of the possibility of legalization.

Meanwhile, TPM and AOL’s PoliticsDaily also see a tipping point for marriage equality. A majority of New Yorkers now join Gov. David Paterson in supporting same-sex marriage. That same ABC News/Washington Post poll finds that “in 2004, just 32 percent of Americans favored gay marriage, with 62 percent opposed. Now 49 percent support it versus 46 percent opposed — the first time in ABC/Post polls that supporters have outnumbered opponents.”

Over the past decade many states have passed bans on gay marriage, a fairly redundant exercise since none of those states had or were about to have marriage equality. But suddenly, since the narrow victory for California’s Proposition 8 in the 2008 election, and really within the past month, same-sex marriage is picking up steam. The Iowa Supreme Court ruled unanimously that excluding same-sex couples from marriage violates the Iowa Constitution’s equal protection guarantee.  The Vermont legislature passed marriage over the governor’s veto. The Connecticut legislature and Republican governor Jodi Rell affirmed the state court’s ruling for marriage equality. Maine governor John Baldacci signed into law a freedom-to-marry bill overwhelmingly approved by the Senate and House. The D.C. Council voted 12-1, with only well-known marriage defender Marion Barry in opposition,  to recognize same-sex marriages from states that approve them. Both houses of the legislature in crusty libertarian New Hampshire have passed a gay marriage bill, which now awaits a decision by Democratic governor John Lynch. Marriage advocates are optimistic in New Jersey.

Some of these laws may be overturned by Congress or by popular vote. And some 30 states have constitutional bans on gay marriage, limiting the opportunity for progress in most of the country. But one of the striking things about the rapid succession of votes is the lack of public opposition. Conservatives have been remarkably silent, perhaps because some of them genuinely do feel less outrage about legislative action than about ”judicial tyranny,” and perhaps because opposition to gay marriage is getting to be embarrassing among educated people. My former colleague Ryan Sager, best known for his book The Elephant in the Room: Evangelicals, Libertarians and the Battle to Control the Republican Party, argues in his new Neuroworld column “that we may be starting to see a ‘bandwagon effect’ that will significantly increase support for gay marriage in the next few years.” He cites Nate Silver’s chart on rising poll support for marriage equality and notes that support for gay marriage is rising much faster than support for interracial marriage did in an earlier era. Zogby asks the same question: Has the tide turned for same-sex marriage?

One striking point in all these polls, of course, is the age difference. That ABC News/Washington Post poll “showed just how much of the movement is occuring among younger voters. Support for gay marriage has grown somewhat among voters over age 65, from 15 percent to 28 percent, but six in 10 remain strongly opposed. Among those under 35, though, two-thirds support it, up from 53 percent in 2006, and nearly half support it strongly.” And “[s]upport for legalizing small amounts of marijuana for personal use is nearly twice as high among young adults (57 percent of those under 30) as seniors (30 percent), with middle-aged Americans split about evenly.” Obama carried young voters by 2 to 1. If the Republicans get out front on opposing marriage equality and marijuana reform, they can make that a permanent Democratic majority.

By the way, that much-discussed ABC/Post poll also showed declining support for gun control. Trapped in the liberal-conservative paradigm, ABC discusses that point this way: “Other views tilt more to the right. Just 51 percent in this poll support the general principle of “stricter gun control laws,” about the same as last September (50 percent) and down sharply from its peak, 67 percent in mid-2000. The 48 percent now opposed to gun control is the most in polls dating to 1989, and the number “strongly” opposed, at 36 percent, its highest in that time. ” Those of us who have escaped the liberal-conservative paradigm recognize that the right to bear arms is also a civil liberty, and it’s entirely consistent to support marriage equality, marijuana legalization, and the Second Amendment.

The “shift to the left” that we seem to observe on economic policy is depressing to libertarians. But that’s mostly crisis-driven. When the results of more spending, more taxes, more regulation, and more money creation begin to be visible, we may see the kind of reaction that led to Proposition 13 and the election of Ronald Reagan at the end of the 1970s. Meanwhile, this cultural “shift to the left” is far more encouraging. And don’t forget, at 90 days into the Obama administration, Americans preferred smaller government to “more active government” by 66 to 25 percent.

Supreme Speculation

With no hard news to report and the Supreme Court not in session — they’ll release opinions in the remaining cases on successive Mondays (plus the Tuesday after Memorial Day) beginning May 18 — Washington is abuzz with speculation over potential high court nominees.  While Senator Orrin Hatch earlier this week said he expected an announcement this week, the White House is far more likely to take its time vetting candidates, with no real pressure to announce a pick until the Court recesses at the end of June. 

Nobody other than the president himself really knows who’s favored, but ABC News’s Jan Crawford Greenburg — who will be contributing to this year’s Cato Supreme Court Review and speaking at our Constitution Day conference September 17 — has some fascinating scuttlebutt:

No clear favorite has emerged, but the pick has prompted an internal struggle between legal and political officials within the administration, sources say.

Political officials like Chief of Staff Rahm Emanuel are favoring Sotomayor, who would be an historic pick as the Court’s first Hispanic justice.

Obama, the thinking goes, could score huge points with Hispanics, an important and increasingly powerful constituency, by nominating Sotomayor or another Latino. Sotomayor has a compelling life story, moving from the projects to the nation’s most elite educational institutions and then onto the federal bench.

But Sotomayor has not dazzled or distinguished herself on the appeals court as a forceful theoretician or writer — something Obama, the former constitutional law scholar who will drive this decision, is likely to want in his Supreme Court nominee, sources close to the process said. Moreover, she’s also been criticized for abrasiveness — which could be problematic on the high court.

Legal officials in the Administration want Obama to tap a candidate who would be a more obvious force on the Court, bringing both intellectual prowess and a proven ability to build coalitions. They favor either Kagan or Wood — prospects who could be considered judicial rock stars capable of going toe to toe with Scalia and Roberts.

I would expect Senators Claire McCaskill (D-MO) and/or Amy Klobuchar (D-MN) also to be on the shortlist — more likely the former because she was one of Obama’s first supporters in the Senate (and whose replacement would be appointed by a Democratic governor).  Senators have historically been fairly easy to confirm because of the courtesy extended to them by their erstwhile colleagues.  Still, we haven’t had such a nominee — or anyone other than sitting appellate judges — in the poisonous post-Bork world, so all bets are off.

Were it not for Ricci v. DeStefano, Sotomayor would be a shoe-in on the simple formula of Princeton+Yale Law+Second Circuit+Hispanic woman.  Now, and also for the reasons Jan cites, that is looking less likely.  I still favor Wood because she has a proven judicial temperament, sterling qualifications in technical fields like antitrust and trade regulation, and would be no worse — and quite possibly better — than the other contenders on constitutional issues.  If I were putting money on it, however, I would have to go with Kagan precisely because she was so recently vetted and confirmed (61-31, with Arlen Specter voting ”no” under Scottish law because he felt she hadn’t sufficiently answered his questions).

Shifting Trade Winds

In 2008, major public opinion surveys revealed record-high levels of skepticism about trade and record-low support for trade agreements among Americans. In 2009, results of those same surveys from Gallup, the Pew Research Center, CNN/Opinion Research, and CBS News/New York Times all suggest that American attitudes toward trade have lightened up considerably and are more in line with public opinion in years past. What explains this turnaround?

In a new Cato analysis, Scott Lincicome and I argue that America’s growing skepticism toward trade in recent years derives mostly from the perpetuation and persistence of three myths: 

  1. U.S. manufacturing is in decline. 
  2. The U.S. trade deficit means that America is losing at trade.
  3. Past administrations have been unwilling to enforce trade agreements.

Popularization of these myths by campaigning politicians has been abetted by mainstream media that have become fixated on selling information in dramatic, provocative, scary, and too-often misleading sound bites. When one considers the facts about the impact of trade on our lives, the degree of skepticism is inexplicable unless the impact of “bad press” is considered.

Too many Americans benefit from trade on a daily basis and too few have been adversely affected by trade for the survey results to reflect personal experiences or legitimate worries. After all, the Council of Economic Advisers reports that less than 3 percent of U.S. job loss is attributable to import competition or outsourcing, which means that most Americans don’t even know anyone who can attribute his woes to increased trade.

During the incredibly long election campaign of 2007–2008, antitrade rhetoric was rampant on the campaign trail. In most presidential debates (Republican and Democratic) leading into and during the primaries, trade was disparaged by one or more of the candidates on the stage. In February 2008, in the Democratic presidential debate at Cleveland State University, before millions of American television viewers, the late Tim Russert extracted promises from candidates Obama and Clinton to force Mexico and Canada to reopen NAFTA to fix its allegedly flawed and unfair provisions. If it wasn’t already by then, the word “trade” became an expletive in households across the country. And the public opinion polls cited above all bear that out.

But since the end of the political campaigns in November 2008, the imperative of politicians to disparage trade and demonize trade partners has dissipated (for the time being, at least). And a few other things have happened too. Without the constant buzz of antitrade political rhetoric filling the airwaves, Americans have had the opportunity to actually think about trade in the context of the current recession — and perhaps make some connections.

For example, the economy has been shrinking and unemployment has been rising, while imports and the trade deficit have been declining, too. When imports and the trade deficit were rising, the economy was growing and creating jobs, and unemployment was low. That is at odds with the stories politicians tell about how imports take our jobs away and that the trade deficit means that we’re losing at trade. Americans may be reckoning that higher levels of imports aren’t quite so bad, and that they even reflect a healthy, growing economy. After all, U.S. producers account for the majority of U.S. import value — mostly raw materials, components, and capital equipment purchases used to make things here — and, lo and behold, manufacturing exports are way down over the past year as well. Maybe more trade isn’t such a bad idea.

In addition to the decline in antitrade rhetoric and the linkage that Americans can more readily draw between trade and economic growth, there is the fact that the trade rhetoric has actually turned favorable since President Obama assumed office. Avoiding protectionism and growing our economy out of recession through trade have been thematic in Obama’s early trade policy articulations. That is not to say that there haven’t been incidences of protectionism since January 20. There have been a few and there continues to be consideration of measures that would further limit the freedom of Americans to transact with whomever and as they see fit. But in the preferred political rhetoric of this administration, trade is no longer the bad guy. And protectionism, quite appropriately, in the current dialogue is being linked successfully with policies that turned the recession in the 1930s into the Great Depression.

This set-up is laying the foundation for an Obama trade policy that is likely to be far more accommodating and liberalizing, and far less provocative and restricting, than many had feared. And I can’t say that I’m not looking forward to watching chagrined protectionist constituencies come to terms with the fact that their moment appears to have passed.


Photos From D.C. Opportunity Scholarship Rally

On Wednesday, more than 1,000 parents and students gathered in Freedom Plaza in Washington, D.C. to voice their opposition to President Obama’s decision to end the D.C. Opportunity scholarship, which gives poor children the chance to attend private schools in the area. Watch the parents in the video below and browse the pictures — these are the people that congressional Democrats and President Obama think are worth less than the financial and political support of teacher union leaders.




The top photo is from Dan Lipps from the Heritage Foundation. The bottom two are from Mary Katharine Ham at The Weekly Standard blog.

About the President’s Proposed Budget Cuts …

That didn’t take long.  Tad DeHaven yesterday took a look at the president’s truly pitiful half percent cut (I hesitate to even use the word) from $3.4 trillion in planned spending.  But the administration isn’t likely to get even that.  Alas, no one seems to have talked to congressional Democrats first.

Reports the Washington Post:

President Obama’s modest proposal to slice $17 billion from 121 government programs quickly ran into a buzz saw of opposition on Capitol Hill yesterday, as an array of Democratic lawmakers vowed to fight White House efforts to deprive their favorite initiatives of federal funds.

Sen. Dianne Feinstein (D-Calif.) said she is “committed” to keeping a $400 million program that reimburses states for jailing illegal immigrants, a task she called “a total federal responsibility.”

Rep. Mike Ross (D-Ark.) said he would oppose “any cuts” in agriculture subsidies because “farmers and farm families depend on this federal assistance.”

And Rep. Maurice D. Hinchey (D-N.Y.) vowed to force the White House to accept delivery of a new presidential helicopter Obama says he doesn’t need and doesn’t want. The helicopter program, which cost $835 million this year, supports 800 jobs in Hinchey’s district. “I do think there’s a good chance we can save it,” he said.

The news releases began flying as Obama unveiled the long-awaited details of his $3.4 trillion spending plan, including a list of programs he wants to trim or eliminate. Though the proposed reductions represent just one-half of 1 percent of next year’s budget, the swift protest was a precursor of the battle Obama will face within his own party to control spending and rein in a budget deficit projected to exceed $1.2 trillion next year.

Oh well.  Billions, trillions, quadrillions.  As a buddy of mine says:  “It’s only money!”