Law Students: Use Your Deferment to Work for Liberty!
Many law firms continue to ask their incoming first-year associates to defer their start dates (from a few months to a full year) and are offering stipends to these deferred associates to work at public interest organizations. The Cato Institute has been running a successful deferred associates program and we always consider applications on a rolling basis.
We invite third-year law students and others facing firm deferrals to apply to work at our Center for Constitutional Studies. This is an opportunity to assist projects ranging from Supreme Court amicus briefs to policy papers to the Cato Supreme Court Review. Start and end dates are flexible. Interested students and recent graduates should email a cover letter, resume, transcript, and writing sample, along with any specific details of their deferment (timing, availability of stipend, etc.) to Jonathan Blanks at jblanks@cato.org.
Please feel free to pass the above information to your friends and colleagues. For information on Cato’s programs for non-graduating students, contact Joey Coon at jcoon@cato.org.
Jay Greene on Barack Obama on Education
In the current City Journal, political scientist Jay Greene observes that “the test that seems to guide the Obama administration’s education priorities is not whether a policy works, but whether it serves a political constituency.”
The president’s actions have forced me to conclude the same thing.
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- Will Obama’s deficits turn out to be as low-balled as Bush’s?
- Obama blames Bush for his problems, but his new budget is worse.
- Obama’s budget would kill the Constellation program, but his budget still goes to the moon.
- The Federal Housing Administration bailout watch continues.
- There’s nothing “fiscally responsible” about Sen. Kent Conrad.
- The government is creating jobs — federal government jobs.
Grading Agencies’ High-Value Data Sets
I wrote here a few weeks ago about the “high-value data sets” — three per agency — that the federal government would soon be releasing at Data.gov. They were released on January 22nd, and we’ve been poring over them ever since. More on that below.
Tomorrow, agencies are supposed to have their “open government” sites put up — sites where they make their data feeds available and easily findable for the public. There are a couple of different sites monitoring when those sites are going up.
Data, data, data — that means more direct oversight of the government by more people. We talked about all this at our December 2008 policy forum, Just Give Us the Data!
When I wrote recently about the release of agencies’ high-value data sets, though, I worried:
Rather than substantive insight into government management, deliberations, and results, we might get a lot of data-oriented play-toys… [P]ublic choice economics predicts that the agencies will choose the data feeds with the greatest likelihood of increasing their discretionary budgets or the least likelihood of shrinking them.
So I decided to grade them:
To help focus agencies on releasing the data that is high-value for genuine government transparency, I plan to examine the three data-streams each agency releases and grade the agencies on whether their releases provide insight into agency management, deliberations, or results.
With the help of Cato interns Solomon Stein and Sasha Davydenko, I assigned three points to each feed that had to do with management, deliberation, or results. The resulting numerical scores — 9, 6, 3, or 0 — translate into grades: A, B, C, or D respectively. F was reserved for agencies that didn’t produce feeds.
The results follow these few comments:
Filed under: Government and Politics; Telecom, Internet & Information Policy
Is Obama Failing? The Rebuttals
At the Economist’s online debate, Elaine Kamarck and I have posted rebuttals to the opening statements. I say, among other things:
One question here is how do you measure a politician’s failure. Is it, for instance, a failure to get his policies enacted, or his success in enacting bad policies? Surveys of historians always give high marks to presidents who expanded government or fought wars. Washington’s most-quoted political scientist, Norman Ornstein, recently defended the productivity of the current Congress; his article illustrated that to the Washington establishment the very definition of a productive Congress is the spending of more taxpayers’ money, the creation of new agencies and bureaucracies, and the concentration of more power in the hands of federal regulators. Citizens might prefer a government that kept us out of war, let the economy grow, and left us alone…
Some analysts note that Ronald Reagan had low ratings at this point in his term, and a bad midterm election, but came back strong. As it turns out, tax cuts, spending restraint, deregulation and sound money tend to create strong economic recoveries. Threats of tax hikes, unprecedented levels of deficits, a wave of new regulations and fears about Fed monetisation may not.
Has Mr Obama failed, a year into his term? Of course not. But that’s the direction he’s headed.
The vote is now 53 percent against the proposition that Obama is failing. If you agree with the proposition “This house believes that Barack Obama is failing,” I encourage you to cast your vote.
The Government IS Creating Jobs
Federal government jobs that is. According to the president’s new budget, federal civilian employment in the executive branch will be 15 percent higher in 2011 than it was in 2007:
*I subtracted out the Department of Commerce because it’s temporary hiring of workers for the 2010 Census skews the chart.
Private sector unemployment remains high despite the the administration’s claim that massive deficit spending was necessary to return the economy to health. Instead of fostering private sector growth, the administration is fostering government growth at the expense of the private sector.
Political Alchemy, Part I: Turning Spending Increases into Tax Cuts
Politicians in Washington have come up with something far more impressive than turning lead into gold or water into wine. Using self-serving budget rules, they can increase the burden of government spending and say they are cutting taxes instead.
This bit of legerdemain is made possible, thanks to the convolutions of the personal income tax, by adopting or expanding refundable tax credits. But in this case, “refundable” does not mean the government is returning money to taxpayers. Instead, it means that money is being redistributed to people who do not earn enough to be subject to the income tax.
This is hardly a trivial issue. According to the Congressional Budget Office, the amount of income redistribution being laundered through the tax code is now so large that the bottom 40 percent of the population has a negative “effective” income tax rate. In simple terms (though perhaps with profound political implications), the income tax is a revenue generator for a big share of the population.
And the problem is going to get worse if the President’s budget is approved. Buried in the fine print, on pages 188-189 of the Analytical Perspective of the Budget, you will see that the President is proposing to increase this hidden form of spending by more than $152 billion over the next 10 years.
It is worth noting that proponents argue that it is OK to classify this new spending as tax cuts because it somehow offsets other tax payments, especially the payroll tax. I’m sympathetic to lower taxes on everybody, including the poor, but surely it is better to be honest and simply cut the taxes that people pay. The current methodology, by contrast, is open to abuse. Heck, I’m surprised politicians don’t classify other forms of spending as tax cuts. Maybe corporate welfare can be reclassified as a corporate tax cut. (I better stop lest I give the political class any ideas.)
Defenders also assert that some so-called refundable tax credits, particularly the earned income tax credit, are designed to encourage work. That is partly true, but credits like the EITC are withdrawn as income climbs, and this means poor people face punitive marginal tax rates, so the overall effect on hours worked may be negligible.
The right approach, of course, is to get the federal government out of the racket of redistributing income.
Filed under: Health, Welfare & Entitlements; Tax and Budget Policy
Obama’s Big Tax Hike on U.S. Multinationals Means Fewer American Jobs and Reduced Competitiveness
The new budget from the White House contains all sorts of land mines for taxpayers, which is not surprising considering the President wants to extract another $1.3 trillion over the next ten years. While that’s a discouragingly big number, the details are even more frightening. Higher tax rates on investors and entrepreneurs will dampen incentives for productive behavior. Reinstating the death tax is both economically foolish and immoral. And higher taxes on companies almost surely is a recipe for fewer jobs and reduced competitiveness.
The White House is specifically going after companies that compete in foreign markets. Under current law, the “foreign-source” income of multinationals is subject to tax by the IRS even though it already is subject to all applicable tax where it is earned (just as the IRS taxes foreign companies on income they earn in America). But at least companies have the ability to sometimes delay when this double taxation occurs, thanks to a policy known as deferral. The White House thinks that this income should be taxed right away, though, claiming that “…deferring U.S. tax on the income from the investment may cause U.S. businesses to shift their investments and jobs overseas, harming our domestic economy.”
In reality, deferral protects American companies from being put at a competitive disadvantage when competing with companies from other nations. As I explained in this video, this policy protects American jobs. Coincidentally, the American Enterprise Institute just held a conference last month on deferral and related international tax issues. Featuring experts from all viewpoints, there was very little consensus. But almost every participant agreed that higher taxes on multinationals will lead to an exodus of companies, investment, and jobs from America. Obama’s proposal is good news for China, but bad news for America.
Filed under: General; Government and Politics; International Economics and Development; Tax and Budget Policy
Kent Conrad and Fiscal Federalism
Senator Kent Conrad (D-ND) has a reputation for being a “deficit hawk.” But the bar is apparently so low in Washington that merely paying lip service to “fiscal responsibility” is enough to earn you the hawk title in the press. In reality, Conrad is a tax and spender as a story in today’s Wall Street Journal demonstrates.
These examples illustrate Sen. Deficit Hawk’s commitment to deficit reduction and fiscal responsibility:
- “Like many in Congress, he is conflicted. He boasts a 23-year record of looking after North Dakota voters with ample farm subsidies, aid for drought-hit ranchers, defense spending and scores of pet projects. He has done little to help rein in Medicare and Social Security expenses—the U.S.’s biggest budget busters.”
Thursday Links
- Why the Tea Partiers should not date the GOP: “This movement is simply saying: ‘We are fine without you, Washington. Now for the love of God, go attend a reception somewhere, and stop making health care and entrepreneurship more expensive than they already are.’”
- Why President Obama should be open to cutting military spending: “A real test of a leader’s wisdom and strength would recognize that more spending does not equal greater security.”
- A growing disconnect: “A nasty spat has erupted between Washington and Beijing over the Obama administration’s arms sales to Taiwan….The bulk of the evidence suggests that storm clouds are building in the US-China relationship.”
- Podcast: “Obama’s Permanent Bailouts” featuring Mark Calabria.
Filed under: Foreign Policy and National Security; General; Government and Politics
Obama Ringing the Pell
As part of his ill-considered credentialing-to-compete initiative, President Obama wants to greatly increase both the size and availablity of Pell Grants. Under his proposed FY 2011 budget, the total pot of Pell aid would rise from $28.2 billion in 2009 to $34.8 billion in 2011; the maximum award would go from $5,350 to $5,710; and the number of students served would rise by around 1 million.
A critical question, of course, is whether increasing Pell will ultimately make college more affordable or self-defeatingly fuel further tuition inflation. The New York Times took that up in yesterday’s Room for Debate blog.
Economist Richard Vedder has long educated people about the inflationary effect of student aid, and does so again with great clarity. It’s higher-ed analyst Art Hauptman, however, whom I think best captures what likely occurs when Pell is combined with all the cheap loans and other aid furnished by Washington, states, and schools themselves:
Read the rest of this post »
Filed under: Education and Child Policy; Finance, Banking & Monetary Policy
Charles Krauthammer, Rocket Scientist
Last evening on FoxNews, host Bret Baier reported that the Iranians had launched a rocket carrying ”a mouse, two turtles, and a can of worms” into space. He asked the panelists to speculate on the implications.
Charles Krauthammer inveighed “if you can put a mouse into space, you can put a nuke in New York, in principle.” Given that they are clearly developing the technological capabilities that would allow them to nuke New York, Krauthammer concluded, “our only hope on the nuclear issue or any other is a revolution and to help that revolution ought to be our task.”
Well.
To her credit, Jennifer Loven of the AP wasn’t having any of it. “It’s an incredibly large leap,” she pointed out, ”between a mouse in space and a nuke in New York….[I]t’s a…ginormous gap.”
How “ginormous”? The analogies are imperfect, but I can throw a football a fair distance. In principle, I could start in the Super Bowl.
More seriously, there are modest parallels to the subject of my first book — the mythical missile gap of the late 1950s. The missile gap was precipitated by the launch of the Sputnik satellite in October 1957. Millions of Americans became convinced that the beeping silver sphere orbiting the earth signified that the Soviets could, in principle, drop a nuclear weapon on any city in the United States. This misconception was helped along by some opportunistic fearmongering by, chiefly, Democrats who delighted in embarassing President Dwight Eisenhower. And the ploy worked. The Dems rolled up huge victories in the mid-term election of 1958, and John F. Kennedy capitalized on the missile gap to help get elected president in 1960.
The actual missile gap — in the U.S. favor — was irrelevant. It would have been equally irrelevant if the roles were reversed, with the Soviets in possession of hundreds of ICBMs, and the U.S. with only a handful of shorter range weapons. Even if the Soviets had perfected the ability to throw a nuclear warhead onto U.S. territory, what ultimately prevented them from doing so was not technological but psychological — they were deterred by our vast arsenal. And they continued to be so deterred for decades until the entire edifice of Soviet power came crashing down, from within, without any significant assistance from the United States.
Would Krauthammer contend that Eisenhower’s refusal to overthrow the Soviet regime in 1958 was “an embarassing failure?” The Soviets did, after all, actually have nuclear weapons, many of them. The Iranians have none, and have not even mastered the enrichment cycle, let alone the long process toward weaponization. By implying that the only thing that stops the Iranians from immediately nuking New York is their technical capabilities, Krauthammer demonstrates a shocking ignorance of some of the most basic principles of international relations, beginning with deterrence. This makes him a horrible political scientist.
But as a rocket scientist, he’s even worse.
A Perfect Storm of Regulatory Ignorance
Does the government know what it’s doing, can it know what it’s doing, in financial regulation? In the latest issue of Cato Policy Report, Jeffrey Friedman doubts it:
You are familiar by now with the role of the Federal Reserve in stimulating the housing boom; the role of Fannie Mae and Freddie Mac in encouraging low equity mortgages; and the role of the Community Reinvestment Act in mandating loans to “subprime” borrowers, meaning those who were poor credit risks. So you may think that the government caused the financial crisis. But you don’t know the half of it. And neither does the government….
Omniscience cannot be expected of human beings. One really would have had to be a god to master the millions of pages in the Federal Register — not to mention the pages of the Register’s state, local, and now international counterparts — so one could pick out the specific group of regulations, issued in different fields over the course of decades, that would end up conspiring to create the greatest banking crisis since the Great Depression. This storm may have been perfect, therefore, but it may not prove to be rare. New regulations are bound to interact unexpectedly with old ones if the regulators, being human, are ignorant of the old ones and of their effects….
This premise would be questionable enough even if we started with a blank legal slate. But we don’t. And there is no conceivable way that we, the people — or our agents in government — can know how to solve the problems of modern societies when our efforts have, in fact, been preceded by generations of previous efforts that have littered the ground with a tangle of rules so thick that we can’t possibly know what they all say, let alone how they might interact to create another perfect storm.
Read the whole thing — about moral hazard, banking regulations, and the “perfect storm of ignorance” that happened and will happen again — here in PDF. Less attractive HTML version here. Jeffrey Friedman is editor of Critical Review and of Causes of the Financial Crisis, forthcoming from the University of Pennsylvania Press.
Filed under: Cato Publications; Finance, Banking & Monetary Policy; General
Need a Mortgage? Your Papers, Please . . .
In case you need any evidence that the federal background check system would expand to cover many more things than employment, that process is already underway. H.R. 4586 would require someone seeking modification of a home mortgage loan held by Fannie Mae or Freddie Mac to be verified under the E-verify program. (Same would go for modifying mortgages insured under the National Housing Act.)
Filed under: Finance, Banking & Monetary Policy; Telecom, Internet & Information Policy
Obama Commands the Impossible
Today’s New York Times reports that President Obama has “ordered the rapid development of technology to capture carbon dioxide emissions from the burning of coal,” as well as mandating the production of more corn-based ethanol and financing farmers to produce “cellulosic” ethanol from waste fiber.
You’ve got to like the president’s moxie. Faced with his inability to pass health care reform and cap-and-trade, he now chooses to command the impossible and the inefficient.
Most power plants are simply not designed for carbon capture. There isn’t any infrastructure to transport large amounts of carbon dioxide, and no one has agreed on where to put all of it. Corn-based ethanol produces more carbon dioxide in its life cycle than it eliminates, and cellulosic ethanol has been “just around the corner” since I’ve been just around the corner.
However, doing what doesn’t make any economic sense makes a lot of political sense in Washington, because inefficient technologies require subsidies–in this case to farmers, ethanol processors, utilities, engineering and construction conglomerates, and a whole host of others. Has the president forgotten that his unpopular predecessor started the ethanol boondogle (his response to global warming) and drove up the price of corn to the point of worldwide food riots? Hasn’t he read that cellulosic ethanol is outrageously expensive? Has he ever heard of the “not-in-my-backyard” phenomenon when it comes to storing something people don’t especially like?
Yeah, he probably has. But the political gains certainly are worth the economic costs. Think about it. In the case of carbon capture, it’s so wildly inefficient that it can easily double the amount of fuel necessary to produce carbon-based energy. What’s not to like if you’re a coal company, now required to load twice as many hopper cars? What’s not to like if you’re a utility, guaranteed a profit and an incentive to build a snazzy, expensive new plant? And what’s not to like if you’re a farmer, gaining yet another subsidy?
Filed under: Energy and Environment; Government and Politics
Stossel on Demand
As I hope you know by now, John Stossel is on the Fox Business Network every Thursday night at 8 p.m. Don’t miss it. But if you do, there are rebroadcasts at 10 p.m. Friday, 7 p.m. Saturday, and 11 p.m. Sunday.
But some people complain that their local cable station doesn’t carry the Fox Business Network. Well, contact them and tell them you want Stossel! (I’ll wait while you do that.) And now, since the cable company won’t add the network instantly, you should also know that clips and full shows are also available at Hulu.com. Just go to http://www.hulu.com/stossel for lots of recent shows — on health care, global warming, Ayn Rand, Whole Foods, and more.
Holder on the Hot Seat
Today Politico Arena asks:
Terror suspects: Eric Holder’s defense (nothing new here)–agree or disagree?
My response:
Filed under: Foreign Policy and National Security; General; Law and Civil Liberties
Raising an Eyebrow at LaHood’s Toyota Remarks
In response to the large recalls affecting several Toyota models, Transportation Secretary Ray LaHood yesterday advised Americans to “stop driving” their Toyotas. In testimony before the House Appropriations subcommittee on transportation, LaHood said:
My advice to anyone who owns one of these vehicles is stop driving it, and take it to the Toyota dealership because they believe they have the fix for it.
Later in the day, he elaborated:
I want to encourage owners of any recalled Toyota models to contact their local dealer and get their vehicles fixed as soon as possible. NHTSA will continue to hold Toyota’s feet to the fire to make sure that they are doing everything they have promised to make their vehicles safe. We will continue to investigate all possible causes of these safety issues.
As Transportation Secretary in an administration that is politically vested in the success of General Motors (recall how taxpayers were forced to take a 60% stake in GM for $50 billion+), was LaHood exploiting an opportunity to tip the scales further in GM’s favor? I guess we’ll never know for sure, but as long as GM remains nationalized, any comments by administration officials on matters affecting the auto industry should be viewed skeptically and through this prism, as they can irresponsibly move markets.
Filed under: Government and Politics; Trade and Immigration
The Pentagon Shouldn’t Get a Pass
Today’s Politico includes an op ed that I co-authored with Heather Hurlburt of the National Security Network. It was the first time that the two of us collaborated, and I was very pleased with the end result. Most of the clever turns of phrase are Heather’s including the title, “The Wrong Manhood Test.” And I’m grateful to Harrison Moar and Charles Zakaib for helping me on Monday to sift through the gargantuan defense budget, and pull out the relevant facts.
Heather and I don’t agree on everything. We faced off at Bloggingheads.tv several months ago to discuss my book, The Power Problem, and I’m sure that we’ll continue to spar from time to time in the future. But the bottom line from the op ed is this:
…because our national security rests on our economic health as well as on the strength of our military, a liberal and a libertarian can agree that the Pentagon should no longer get a pass. Congress must stop funding projects to satisfy parochial domestic interests. The Pentagon must stop buying weapons systems that are already outdated, unworkable or both. And the administration must carefully define our vital security interests, reshape our grand strategy to more equitably distribute the burdens of policing the globe and reduce the occasions when our military will be called on to fight.
There is more than enough blame to go around. Congress is already girding for battle over some pet projects singled out for elimination or cut backs, including the C-17 transport and the additional engine for the F-35 Joint Strike Fighter. The Pentagon continues to plan for contingency operations around the world, and assumes that the U.S. security umbrella will remain open over Europe and East Asia for the indefinite future. And the White House has signaled (they have yet to formally produce a national security strategy) that while it would like the allies to help out, it doesn’t want them to get too capable. (See, most recently, Secretary Clinton’s remarks re: European defense.)
The governing assumption, therefore, is that, as the just-released QDR explains,
America’s interests and role in the world require armed forces with unmatched capabilities and a willingness on the part of the nation to employ them in defense of our interests and the common good.
The time for finger pointing over the Pentagon’s budget is over. If we can’t address the obvious inefficiencies and waste in military procurement, then when can we? If we can’t today envision a time in the future when other countries will play a larger role in their own defense, then will we ever? “If the Department of Defense can’t figure out a way to defend the United States on a budget of more than half a trillion dollars a year,” in Bob Gates’s immortal words, “then our problems are much bigger than anything that can be cured by buying a few more ships and planes.” (h/t Justin Logan)
Amen to that. So let’s stop defining our security by the number of ships and planes that we buy, and start thinking about ways to responsibly contain, and ultimately bring down, military spending.
Socialists Shouldn’t Have to Admit Libertarians Into Their Club
Hastings College of the Law, a public law school in California, has a policy prohibiting discrimination on the basis of “race, color, religion, national origin, ancestry, disabilities, age, sex or sexual orientation.” In 2004, the Christian Legal Society, a religious student organization at the school, applied to become a “recognized student organization” — a designation that would have allowed CLS to receive a variety of benefits afforded to about 60 other Hastings groups. While all are welcome to attend CLS meetings, CLS’s charter requires that its officers and voting members abide by key tenets of the Christian faith and comport themselves in ways consistent with its fundamental mission, which includes a prohibition on “unrepentant” sexual conduct outside of marriage between one man and one woman.
Hastings denied CLS registration on the asserted ground that this charter conflicts with the school’s nondiscrimination policy. CLS sued Hastings, asking for no different treatment than is given to any registered student group. The district court granted Hastings summary judgment and the Ninth Circuit affirmed. The Supreme Court granted certiorari to determine whether Hastings’s refusal to grant CLS access to student organization benefits amounted to viewpoint discrimination, which is impermissible under the First Amendment.
Yesterday Cato filed an amicus brief supporting CLS — authored by preeminent legal scholar Richard Epstein – in which we argue that CLS’s right to intimate and expressive association trump any purported state interest in enforcing a school nondiscrimination policy. While Hastings may impose reasonable restrictions on access to limited public forums, it should not be allowed to admit speakers with one point of view while excluding speakers who hold different views. Our brief also discredits Hastings’s assertion that its ability to exclude the public at large from school premises renders their content-based speech restrictions constitutional.
We urge the Court to safeguard public university students’ right to form groups – which by definition exclude people – free from government interference or censorship. (Of course, our first choice would be for the government to get out of the university business and our second choice would be to stop forcing taxpayers to pay for student clubs, but given those two realities — as in the case at hand – freedom of association is the way to go.)
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