This Week in Government Failure
Over at Downsizing the Federal Government, we focused on the following issues this week:
- HUD community development programs illustrate what happens when the federal government severs the relationship between local officials and local taxpayers.
- Republicans should package their spending reforms as worth undertaking even if the government had a surplus.
- The sclerosis at the U.S. Postal Service is a reflection of the sclerosis in Congress.
- Promises to hold down future discretionary spending levels and partial program trims are not real spending cuts.
- The president’s high-speed rail plan is probably dead. Unfortunately, fiscal federalism isn’t faring much better.
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•Data on Military Compensation
There is an interesting article posted over at the blog Hegemonic Obsessions discussing the need to reform military pay and benefits. One need not agree with the author’s suggestion that the U.S. Army might go the way of General Motors to understand his broader point: personnel expenses are consuming a larger and larger share of the DoD’s budget. Indeed, this has been one of Defense Secretary Robert Gates’ leading complaints for years.
The article provides some of the details:
The Defense Business Board estimates the average cost of a military member at $80,004 per year. Thankfully the military is made up mostly of junior enlisted personnel who leave the service well before they are eligible for a pension. There are, however, 1.9 million military retirees receiving an average of $47,000 per year in pension payments. This does not include their healthcare benefits.
And, just as was true for the pre-bankruptcy auto industry, there are more military retirees than soldiers, sailors, airmen, and marines on active duty. While it may be unpleasant to hear, the system is unsustainable. The military may very well collapse under its own personnel costs. In part, reform has stalled because any voice that questions military pay and benefits is tarred and feathered as unpatriotic.
Americans are understandably proud of the men and women who serve in our military. They endure enormous hardships, including long periods of separation from their families and exposure to all manner of hostile environments. They represent many of the finest attributes of this country. No wonder that the military is regularly cited as the most respected institution in national polls. I’m a little embarrassed to be counted a “veteran” — which is technically true — when many of the men and women with whom I graduated, or served, have stayed in the military for 20 years or more. At least one friend didn’t come home. They are the real heroes.
But while we can and should be proud, we shouldn’t be stupid. The author is right: the system is unsustainable. If we are going to get a handle on rising personnel costs, we must either reform the manner in which pay and benefits are distributed, or reduce the number of personnel. If we are to do the latter (and I think that we should) then we need to rethink roles and missions, and ask less, not more, of the men and women who remain in the service. (See Gen. Raymond Odierno’s recent comments on that score.)
If we succeed in restraining Washington’s interventionist impulses, and draw down the number of active-duty personnel to levels that prevailed in the late 1990s, the end result might be an even more elite force than the one that we have today. The future force would include individuals earning salaries that are competitive with the private sector, which is essential for maintaining the all-volunteer force. And that force would be more than sufficient to protect us from the real but manageable threats of the next few decades.
•House Approps Strips TSA of Strip-Search Funds
The fiscal 2012 Department of Homeland Security spending bill is starting to make its way through the process, and the House Appropriations Committee said in a release today that “the bill does not provide $76 million requested by the President for 275 additional advanced inspection technology (AIT) scanners nor the 535 staff requested to operate them.”
If the House committee’s approach carries the day, there won’t be 275 more strip-search machines in our nation’s airports. No word on whether the committee will defund the operations of existing strip-search machines.
Saving money and reducing privacy invasion? Sounds like a win-win.
•The National Equalization of Opportunity Board
The National Labor Relations Board filed a complaint last month to stop Boeing from building its new 787 in South Carolina rather than Washington State. As Arthur Laffer and Stephen Moore explain in today’s Wall Street Journal, the Board’s action stems from Boeing’s declaration that it cannot “afford a work stoppage every three years” as has been happening in Washington. The New York Times seems to endorse the NLRB complaint, implying that the federal government must force companies to do business in agency-shop states like Washington, because otherwise they couldn’t compete with more efficient right-to-work states like South Carolina.
Laffer and Moore claim that the NLRB’s move is unprecedented, but it is actually highly reminiscent of the “Equalization of Opportunity Bill.” The EOB forbade entrepreneurs from owning more than one business, in order to allow less efficient, less capable entrepreneurs to compete with them. The EOB is, of course, a measure enacted by the United States Government in Ayn Rand’s Atlas Shrugged.
Yet more evidence that the Obama administration is not only conversant with Rand’s classic, it is using the book as a policy model. It’s just a little confused as to which characters were the heroes and which the bad guys.
•The 2011 Social Security Trustees Report — Harbinger of Bad News
The just-released 2011 annual report of the Social Security Trustees shows a significant worsening of the program’s finances.
Last year we were told that we would see payroll tax surpluses over benefit expenditures for a few more years — until 2015. That won’t happen according to the 2011 report; the program will now add to federal deficits in every future year — and increasingly so, which will ramp-up financial pressure to downsize other federal programs, increase taxes, or create yet more debt.
Note that both Republicans and Democrats negotiating over how to reduce federal deficits and the national debt have resolved to leave Social Security untouched for now. That leaves the program’s finances to fester and worsen — increasing the costs of future adjustments and burdens on future generations.
Many people, especially those who favor early reforms, say that the Social Security trust funds “don’t matter.” Note, however, that they lock up future federal revenues for Social Security benefit payments — on par with future dedicated payroll taxes.
The lock-up effect of the Social Security trust funds is demonstrated by the fact that the program’s cash flow deficits today are not forcing any benefit cuts or payroll tax increases. This can continue until the year 2036 according to the 2011 report.
But if we allow the situation to continue for that long, fixing the program will require a permanent benefit cut of at least 25 percent or a payroll tax increase of at least 40 percent of payrolls in 2036 and beyond.
•Is Housing Holding Back Inflation?
Today the Bureau of Labor Statistics released the consumer price index (CPI) numbers for April, which generally gives us the best picture of inflation. The headline number is that between April 2010 and April 2011, consumer prices increased 3.2 percent, as measured by the CPI. Obviously this is well above 2 percent, the number Ben Bernanke defines as “price stability.” Setting aside the reasonableness of that definition, there is definitely some mild inflation in the economy.
Also of interest in the April numbers is that if you subtract housing, which makes up over 40% of the weight of the CPI, then prices increased 4.2 percent — twice Bernanke’s measure of stability. What has always been problematic of the housing component is that its largest piece is an estimate of what owners would pay themselves if they rented their own residence. This estimate makes up about a fourth of the CPI. As the chart below demonstrates, for much of 2010, the direction in this number was actually negative, which held down CPI over the last year. The current annualized figure for owner’s rent is 0.9 from April 2010 to April 2011. Oddly enough, this is below the actual increase in rents, which was 1.3. For most homeowners, the real cost of housing — their mortgage payment — has likely been flat, not decreasing. So whatever benefit there has been to declining housing costs, most consumers are unlikely to feel any benefit from those declines, if they are actually real.
While the primary driver of CPI has been energy costs, food prices have also garnered considerable attention. Excluding food from the CPI does not change the headline number, although this is due to the fact that the cost of eating out has been rising considerably slower than the cost of eating at home. So as along as you’ve been eating out every night, you’ve apparently been fine. This touches upon what is one of the less recognized features of current inflation trends: the regressive nature of these prices increases. If you rent, then you’ve seen costs increase more than if you own. If you mostly eat at home, then you’ve seen prices increase more than if you dine out a lot. If you have a lot of leisure time, the you’ve gained by the decrease in reaction prices. While I don’t think one’s position on inflation should be driven purely by distributional concerns, the fact that working middle-income households have been hit harder by recent inflation trends than higher-income households should cut against the claims that inflation is somehow good for the poor or working class.
•As a Matter of Fact, the Baltic Nations Are a Success Story
I got a few cranky emails after my post suggesting the United States should copy the Baltic nations and implement genuine spending cuts. These emailers were upset that I favorably commented on the fiscal discipline of Estonia, Lithuania, and Latvia while failing to reveal that these nations were suffering from high unemployment.
From the tone of this correspondence, my new friends obviously think this is a “gotcha” moment. The gist of their messages is that the economic downturn that hit the Baltic nations is proof that the free-market model has failed, and that I somehow was guilty of a cover-up.
That’s certainly a strange interpretation, especially since I specifically noted that the three nations had suffered from an economic downturn. There’s no questioning the fact that unemployment spiked upwards because of the global financial crisis, which was especially damaging to the Baltics since they all had real estate bubbles.
But let’s deal with the bigger issue, which is whether this downturn is proof that the free market failed (and, for the sake of argument, let’s assume that all three Baltic nations are free market even though only Estonia gets high scores in the Economic Freedom of the World rankings).
If you look at the IMF’s World Economic Outlook Database, it does show that the Baltic nations had serious economic downturns. Indeed, if we look at the data from 2008 to the present, the recession was far deeper in those nations than in Western Europe and North America.
So at first glance, it seems my critics have a point.
But what happens if you look at a longer period of data? The IMF has data for all three Baltic nations going back to 1999. And if we look at the entire 12-year period, it turns out that Estonia, Latvia, and Lithuania have enjoyed comparatively strong growth. Indeed, as seen in the chart below the jump, they even surpass Hong Kong.
•FTC Advert: Cut Our Budget!
An insert that ran in the Washington Times this week didn’t say directly that the Federal Trade Commission’s budget should be cut. But a few short steps get you there.
The FTC-produced insert—a 16-page, color brochure appearing in a number of papers—is titled: “Living Life Online.” It’s aimed at teaching children how to use the Internet, with articles titled: “Sharing Well With Others” and “Minding Your Manners.” An ad on the back points kids to an FTC Web site about advertising called Admongo.gov, and little smart-phone insets contain factoids like:
DID YOU KNOW? Teens text 50 messages a day on average, five times more than the typical adult (who sends or receives 10 text messages a day).
Well, I have some factoids to share, too:
DID YOU KNOW? The U.S. Constitution provides for a federal government of limited, enumerated powers (and teaching kids about the Internet is not one of them).
Here’s another:
DID YOU KNOW? The federal government has had massive deficit spending in recent years, of $459 billion in FY2008, $1.4 trillion in FY2009, $1.3 trillion in FY2010, and $1.5 trillion in FY2011 (which is a huge damper on economic recovery).
It’s time to make serious budget cuts, and a government agency that seeks to replace parenting with government propagandizing to children is a great opportunity to do that.
Cato’s Downsizing Government project has been making its way through the major agencies, but don’t overlook the little ones. President Obama’s budget called for the FTC to spend $321 million in fiscal 2012. Zeroing that out would save a bunch, not only in direct expenses but in the dead-weight loss to the economy and consumer welfare symbolized by the FTC’s awful “Man Restraining Trade” statues.
•A Life of One’s Own
Since Tuesday’s oral arguments in Virginia v. Sebelius—the first Obamacare challenge to reach the circuit court level, and one in which Cato also filed an amicus brief—the legal blogosphere has been discussing the Fourth Circuit panel’s incredulity concerning the activity/inactivity distinction at the heart of our arguments against Obamacare. As Ilya Shapiro explains, we contend that if Congress’s power to regulate “interstate commerce” reaches the inactivity of not buying health insurance, then there is nothing it does not reach. The Supreme Court will eventually have to grapple with this question and decide whether the distinction is constitutionally meaningful.
As Volokh conspirator Jonathan Adler points out, the activity/inactivity distinction is long-standing. At common law, there was no legally enforceable duty to rescue. In other words, if you didn’t act to create the danger, you would not be liable for your inactivity in not helping. To put it bluntly: you would have no legal liability if you ignored a drowning child.
Legal philosophers have grappled with the meaning of “act” and “omission” for centuries. While there are some difficult issues to ponder, there is also an element of navel-gazing in the question and the Supreme Court may have to gaze long at their navels to answer it. But it is worth remembering why the act/omission distinction matters in a free society. At the risk of getting too philosophical, I will add some thoughts of my own.
Anyone who has been to law school has likely had long conversations, probably in torts class, over whether the act/omission distinction is both meaningful and moral. If your torts class was like mine, your professor lamented the “no duty to rescue” rule as evidence of our individualistic and selfish society. Many law professors believe our slavish adherence to the act/omission distinction not only allows us to let children drown, but that it is just another “Western” belief that holds back a robust welfare state.
The aversion to mandating action, however, is not about letting children drown. I wouldn’t let a child drown and I imagine you wouldn’t either. The extreme hypothetical helps gloss over a meaningful principle for normal, run-of-the-mill cases. Just as bad facts make bad law, bad hypotheticals can blur vital principles. The act/omission distinction helps delineate, albeit imperfectly, the personal sphere of control and the governmental sphere of control.
•Friday Links
- Despite GM’s recent profitability, the auto bailout was a bad idea.
- A parent fixing a nutritious lunch is a better way to combat childhood obesity than the school taking pictures of what children eat.
- Spending cuts for an increase in the debt ceiling are a step in the right direction — but they need to be real spending cuts.
- Please join us Tuesday, May 17, 2011 for a Book Forum on Peddling Protectionism: Smoot-Hawley and the Great Depression, featuring the author Douglas A. Irwin, Professor of Economics, Dartmouth College; with comments by Daniel Griswold, director of Cato’s Herbert A. Stiefel Center for Trade Policy Studies. Complimentary registration is required by noon, eastern, Monday May 16, 2011. We hope you can join us in person, or online.
A Race against Time or a Race to Civil War?
The drawdown of U.S. forces from Afghanistan will start this July, with a complete withdrawal of “combat troops” by the end of 2014. The newly emerging conventional wisdom, however, is that Afghan security forces are not ready to take over responsibility, since serious efforts to strengthen those forces only really began in 2009. But rather than validate an open-ended mission to build national institutions in Afghanistan, looming problems in the hand-off from foreign to indigenous forces epitomize the flawed process of state building.
The 285,000-strong Afghan army and police, under the authority of the Ministries of Defense and Interior, respectively, are expected to increase to a total of 305,000 by this October. However, numbers tell only part of the story.
In a new report entitled “No Time to Lose,” British charity Oxfam and three other NGOs warn that the army and police, collectively known as the Afghan National Security Forces (ANSF), account for a substantial portion of harm inflicted on Afghan civilians. “At least 10 percent of Afghan civilians killed in the conflict in 2010 were killed by their own security forces,” according to the report. Aside from casualties, violations of human rights, including sexual abuse of children, mistreatment of detainees, and cruelty inflicted on villagers by local police, who many Afghans consider criminal gangs, illustrate the full extent of the problem.
Even worse, while the justice systems function swimmingly for those with “political connections,” the vast majority of Afghans have little recourse to stop such abuses because, “There is no satisfactory mechanism by which an individual can lodge a complaint against the ANSF.”
As the saying goes, “no justice, no peace.” And, as I learned during a trip to Afghanistan last year, many Afghans, especially those living in rural subsistence areas, seek redress for communal disputes by turning to their local district mullah. He provides basic security and rudimentary justice and, more often than not, doubles as a Taliban operative. Because the national government is either profoundly incompetent or entirely absent in many areas, those classified as “insurgents” by U.S. forces pick up the slack and provide for the practical needs of local people.
•Obama’s GM Quagmire
Media are reporting this morning that the Treasury has decided to hold off on selling any of its remaining 500 million shares of General Motors stock until at least July. The Obama administration had hoped to divest as soon as possible after May 22, but GM’s stock price hasn’t been cooperating.
As much as the president doesn’t want the odor of nationalization following him on the campaign trail, the administration is equally concerned about having to explain why it took a $10 billion to $20 billion direct loss by divesting when it did. By deferring sales until July, the administration presumably is hoping for a stock price boost from second quarter earnings. But that is unlikely for several reasons, which I explained in the Daily Caller yesterday. Here’s the gist in a few passages from that op-ed:
•The soonest the U.S. Treasury can sell the remaining 500 million shares (according to terms of the initial public offering) is May 22, but the administration would also like to “make the taxpayers whole.” The problem for the president on that score is that the stock price — even in the wake of this week’s earnings report — isn’t cooperating. As of this morning’s opening bell, GM stock was valued at $31.07 per share. If all of the 500 million remaining publicly-owned shares could be sold at that price, the Treasury would net less than $16 billion. Add that to the $23 billion raised from the initial public offering last November, and the “direct” public loss on GM is about $11 billion — calculated as a $50 billion outlay minus a $39 billion return.
To net $50 billion, those 500 million public shares must be sold at an average price of just over $53 — a virtual impossibility anytime soon. Why? The most significant factor suppressing the stock value is the market’s knowledge that the largest single holder of GM stock wants to unload about 500 million shares in the short term. That fact will continue to trump any positive news about GM and its profit potential, not that such news should be expected.
Projections about gasoline prices vary, but as long as prices at the pump remain in the $4 range, GM is going to suffer. Among major automakers, GM is most exposed to the downside of high gasoline prices. Despite all of the subsidies and all of the hoopla over the Chevy Volt (only 1,700 units have been sold through April 2011) and the Chevy Cruse (now subject to a steering column recall that won’t help repair negative quality perceptions), GM does not have much of a competitive presence in the small car market. Though GM held the largest overall U.S. market share in 2010, it had the smallest share (8.4%) of the small car market, which is where the demand will be if high gas prices persist. GM will certainly have to do better in that segment once the federally mandated average fleet fuel efficiency standards rise to 35.5 miles per gallon in 2016.
Deservedly reaping what it sowed, the administration finds itself in an unenviable position. It can entirely divest of GM in the short term at what would likely be a $10-to-$15 billion taxpayer loss (the stock price will drop if 500 million shares are put up for sale in a short period) and face the ire of an increasingly cost- and budget-conscious electorate. Or the administration can hold onto the stock, hoping against hope that GM experiences economic fortunes good enough to more than compensate for the stock price-suppressing effect of the market’s knowledge of an imminent massive sale, while contending with accusations of market meddling and industrial policy.
Or, the administration can do what it is going to do: First, lower expectations that the taxpayer will ever recover $50 billion. Here’s a recent statement by Tim Geithner: “We’re going to lose money in the auto industry… We didn’t do these things to maximize return. We did them to save jobs. The biggest impact of these programs was in the millions of jobs saved.” That’s a safe counterfactual, since it can never be tested or proved. (There are 225,000 fewer jobs in the auto industry as of March 2011 than there were in November 2008, when the bailout process began.)
Second, the administration will argue that the Obama administration is only on the hook for $40 billion (the first $10 billion having come from Bush). In a post-IPO, November 2010 statement revealing of a man less concerned with the nation’s finances than his own political prospects, President Obama asserted: “American taxpayers are now positioned to recover more than my administration invested in GM, and that’s a good thing.” (My emphasis).
The administration should divest as soon as possible, without regard to the stock price. Keeping the government’s tentacles around a large firm in an important industry will keep the door open wider to industrial policy and will deter market-driven decision-making throughout the industry, possibly keeping the brakes on the recovery. Yes, there will be a significant loss to taxpayers. But the right lesson to learn from this chapter in history is that government interventions carry real economic costs.
By ‘No Federal Control’ We Mean ‘Yes, Federal Control’
People are starting to fight back against the sneaky push for nationalized curricula, and folks at the Thomas B. Fordham Institute are revealing their true colors in response.
Yesterday, Fordham President Chester Finn and Executive VP Michael Petrilli responded to the national standards “counter-manifesto” released on Monday, and they were none too happy with its signatories, accusing them of peddling “half truths, mischaracterizations, and straw men.” What seemed to aggravate them most of all was the assertion that “common” standards would lead to de facto federal curricula, something they say neither they nor their national-standards loving friends — including the Obama administration — want.
At this point, who’s buying this? True, it’s possible that Fordham and friends might really not want a federal curriculum — I can’t read minds – but the federal government through Race to the Top has already bribed states into adopting the Common Core standards; Washington is paying for the development of national tests; and the Obama administration’s “blueprint” for reauthorizing No Child Left Behind would make national standards the law’s accountability backbone. So even if you don’t want this to lead to a federal curriculum, that is exactly what you are going to get. If the feds use money taken from taxpayers to force states to adopt national standards and tests, and if Washington rewards or punishes states based on those tests, then you have a federal curriculum. I mean, if it walks like a duck…
The good news in Fordham’s response, perhaps, is that they appear to have responded to my challenge to loudly renounce any federal funding for national standards and related material if they really want this to be voluntary. Unfortunately, they’ve responded with a resounding “no”: Finn and Petrilli write that “we have no particular concern with the federal government…helping to pay” for the creation of curricular guides and other material and activities to go with national standards.
This happiness to keep the feds paying pretty much puts the final rip in the tissue-thin “voluntarism” ruse. But if you’re not satisfied with my analysis, try this post over at Jay Greene’s blog, in which Jay reproduces a terrific fill-in-the-blanks analysis of Fordham’s tricky prose by Charles Miller, former chair of the Board of Regents of the University of Texas and a very astute observer of education politics. Let’s just say, he writes what I suspect everyone who is familiar with the federal government — and Fordham – is thinking.
•Righting the Balance
In 1913, the Seventeenth Amendment cut an important tie in the Constitution between state legislatures and the Congress. In the original Constitution, states were empowered to choose the senators who would represent them in Congress. The result? Senators had an allegiance to the state government as much as the people of the state they represented.
Why does this matter? Well, today—with direct, popular election of senators—there isn’t much of anyone looking after state legislatures in Congress. Accordingly, the federal government continually tries to turn states into administrative outposts of the federal government rather than respecting them as the independent political powers they’re supposed to be.
In program after program, remote federal officials set policy and raise taxes, then require states to administer the programs. When things go a-mess, people don’t know whether it’s the federal government or the state government they need to talk to. Political accountability suffers, contributing to the big morass of government in the United States today.
Now, it wasn’t all sweetness and light before the Seventeenth Amendment rejiggered our governmental system, but it isn’t sweetness and light now either.
So yesterday, constitutional amendments were introduced in both the House and Senate to right the balance. House Joint Resolution 62 and Senate Joint Resolution 12 would propose an amendment to the Constitution giving states the right to repeal federal laws and regulations. Under the amendments, when two-thirds of the states ratify repeal of a federal mandate, it would come off the books.
The idea is to again right the balance between the states and the federal government. Most of its effect would be upstream: the Congress would be a lot more circumspect, knowing that the states could reject its laws if they went too far. But occasionally states would get a head of steam and lop out a federal law that they find disagreeable. The federal legislature would have to be a little more humble.
The federal government and its officials are pretty remote from the people compared to state legislators. Some way to right the balance would be good, whether it’s this specific idea, repeal of the Seventeeth Amendment, or some other. The “Madison Amendment” would work toward the same end by empowering states to propose constitutional amendments the way the Congress now does.
In this modern era of national transportation, high-speed communications, and global markets, many people believe that it’s natural for regulation to gravitate to the national level (often not considering that the logical end is global regulation). But technological change has not altered the rule that government closer to the people—or self-rule by the people themselves—is best. We pay a high price every day in this country for having cut a tendon in the constitutional structure with the Seventeenth Amendment and direct election of senators. It’s good to see efforts out there to right this balance.
•The Defense Authorization Bill Is Awful
If you like bloated nuclear arsenals, executive discretion to wage endless war, large checks to countries that aid our enemies, and institutionalizing hostility toward gays in the military, you will love the defense authorization bill passed yesterday by the House Armed Services Committee. Below are the lowlights. For slightly better news from the Appropriations Committee on homeland security spending, skip to the end.
- The bill contains a provision replacing the 2001 Authorization for Use of Military Force against the perpetrators of the 9/11 attacks and their hosts. The Committee evidently found that legislation, which the last two administrations have used to justify all manner of power grabs, insufficiently open-ended. They add groups “affiliated” with al Qaeda and the Taliban to the list of certified enemies. Though disinterested in authorizing the war in Libya, the Congress may now give the President new authority to start new ones. Somewhere John Yoo is ruefully imagining all the creative ways he could have affiliated bombing targets with al Qaeda and Taliban. Certainly Pakistan would qualify, given its barely hidden support for elements of the Taliban and the suspicion that some of its intelligence agents have a “don’t ask, don’t tell” policy on the whereabouts of al Qaeda leaders.
- Nonetheless, the bill authorizes all $1.1 billion in military aid requested for Pakistan. An amendment intended to trim it failed.
- Speaking of Don’t Ask Don’t Tell, the Committee’s Republicans are determined to prevent its repeal from letting homosexuals feel comfortable in uniform. The bill outlaws gay marriage on military facilities. It also defines “marriage” in military regulations as the union of a man and a woman. The aim is to deny marriage benefits to gay couples. The bill also includes a provision sponsored by San Diego Republican Duncan Hunter that would keep Don’t Ask Don’t Tell in place until all four service chiefs agree that it will not impair combat effectiveness. That last provision will not become law, but it sends unfortunate messages. Beyond its implication that gays undermine military effectiveness, it reflects a tendency to defer to the wishes of the force on issues of its composition and use, at least rhetorically. That tendency erodes the traditional U.S. view of civil-military relations, driving a wedge between the military and the society it serves.
- The bill contains several measures that will prevent future cost savings. It would block the executive branch from reducing nuclear weapons force levels in various ways unless the secretaries of defense and energy certify that the White House makes good on its offer of increased nuclear weapons modernization funding. Incidentally, the administration promised those funds in exchange for New START treaty votes that Senator Jon Kyl (R-Arizona) did not deliver, including his own. The bill would buy the Army more Abrams tanks than it wants, to keep the production line open. It requires the government to remain prepared to build the Joint Strike Fighter’s second engine and would reopen competition between the two engines should the administration request more funds for the first (Pratt & Whitney) engine, which seems likely.
- The Committee made a modest effort to control government health care costs by mildly increasing annual premiums for retired military of working age. That’s progress. Premiums have not increased in 15 years. They are low enough that many retirees keep Tricare, the Military Health System coverage, rather than getting private health care via their new employer, thus shifting costs onto the taxpayer. But the Committee rejected the administration’s effort to peg future premium increases to medical costs rather than general inflation.
The full House or Senate will likely eliminate most of the damage. The taxpayer will get no relief from the House Appropriations Committee, however, which just released its planned spending levels for FY2012. Defense will grow by about $17 billion from FY 2011, not including the wars, Department of Energy nuclear weapons spending, and military construction. No surprise there.
House appropriators deserve credit, however, for keeping the bloated Department of Homeland Security budget on the cutting board. The National Journal reports that appropriators would give the department $40.6 billion—$1.1 billion less than last year and $2.7 less than it requested. The bulk of the cuts come by providing less than half ($1.7 billion) of the requested spending for local security grants. The grants would now be distributed at the department’s discretion rather than requiring them to go to certain subcategories (e.g., ports) and using a formula to insure that every state get a taste.
Hopefully this is a step toward eliminating federal homeland security grants, which have grown into a seemingly permanent subsidy even for regions where the terrorism threat is wildly remote. If states think it worth sacrificing something to buy local counterterrorism capabilities, they ought to pay for it with their own budgets. Federalization of the spending takes those decisions from those in the best position to weigh local priorities and encourages states and cities to chase federal dollars by exaggerating their peril.
•Boehner’s Price for Increasing the Federal Debt Limit
House Speaker John Boehner, in his speech to the Economic Club of New York on Monday night, was very clear about the conditions for which he would support an increase in the federal debt limit:
… Without significant spending cuts and reforms to reduce our debt, there will be no debt limit increase. And the cuts should be greater than the accompanying increase in debt authority the president is given.
We should be talking about cuts of trillions, not just billions.
They should be actual cuts and program reforms, not broad deficit or debt targets that punt the tough questions to the future.
And with the exception of tax hikes — which will destroy jobs — everything is on the table.
Congress is institutionally incapable of formulating and approving a large responsible package of spending cuts in the next month or two, even if there were the basis for an agreement in the longer run. The most likely outcome of this condition is that Congress would approve an increase in the debt limit for the next year or two with no significant amendments. John Boehner would be the major loser from this outcome, for having talked tough and promised too much, without delivering anything to his party base.
Another possible outcome of this condition is that an increase in the debt limit would be deferred indefinitely. This would lead to a period of fiscal anarchy in which total federal spending would have to be reduced to federal revenues on a month-by-month basis, and non-interest spending would have to be reduced about 40 percent with no political guidance on what activities are paid how much.
The House Republicans are better advised to sort out their priority budget changes in the longer run. I suggest that it is desirable to maintain a commitment against any increase in tax rates but to consider major reductions in what is now roughly one trillion dollars of off-budget tax preferences; such reductions would increase both revenue and economic growth. Finally, I suggest that reductions in the defense budget should also be considered. In a world in which the United States now faces no major power military threat, total real (inflation-adjusted) annual national security spending is now over twice that during the Ford and Carter administrations and over 40 percent of the total national security spending by all governments.
For the most part, I suggest, the Republican fiscal priorities are correct, but it will take better preparation and a longer time to implement these priorities.
•Support for the Eternal Federal Welfare State Is Bipartisan
George Will makes a good point in his latest column: Democrats maintain a peculiar “conviction that whatever government programs exist should forever exist because they always have existed.” Will’s observation centers around the shameless Democratic attacks on Rep. Paul Ryan’s (R-WI) proposal to reform Medicare and Medicaid.
According to Will, “Ryan’s plan would alter Medicare. But Medicare has existed in its current configuration for only 46 of the nation’s 235 years.” Actually, “current configuration” isn’t quite accurate. For example, Medicare’s prescription drug component added by Republicans, which Ryan voted for, went into effect only five years ago.
Regardless, I agree with Will that so-called “progressives” have a “constricted notion of the possibilities of progress”:
The hysteria and hyperbole about Ryan’s plan arise, in part, from a poverty of today’s liberal imagination, an inability to think beyond the straight-line continuation of programs from the second and third quarters of the last century. It is odd that “progressives,” as liberals now wish to be called, have such a constricted notion of the possibilities of progress.
Yes, Ryan’s plan displays “imagination” and I would add that it took political guts to suggest the reforms knowing that the left would nail him to the cross. However, let’s not forget that Ryan’s plan would also further cement these twin pillars of the federal welfare state. For all the silly accusations that Ryan is proposing to “privatize” Medicare, his plan repeatedly states that his aim is to “save” it:
Letting government break its promises to current seniors and to future generations is unacceptable. The reforms outlined in this budget protect and preserve Medicare for those in and near retirement, while saving and strengthening this critical program so that future generations can count on it to be there when they retire.
I wasn’t born yesterday, so I understand Ryan’s assurance to “those in and near retirement” that Medicare as they know it won’t be touched. However, I can’t square Ryan’s reference at the outset of his plan to the “timeless principles of American government enshrined in the U.S. Constitution – liberty, limited government, and equality under the rule of law” with his intention to strengthen “this critical program so that future generations can count on it be there when they retire.”
Now that Ryan’s plan has taken its inevitable beating from demagoguing Democrats, the GOP appears to be upping the “save Medicare for future generations” rhetoric.
Here’s tea party favorite Sen. Marco Rubio (R-FL) as reported by Politico:
‘I understand the benefits that Medicare brings to America. It should be a part of our country,’ Rubio added. ‘I want Medicare to exist in a way that is unchanged for people that are in Medicare now. I want Medicare to exist when I retire. I want Medicare to exist when my children retire. And I don’t want Medicare to bankrupt itself for our country. And Medicare, as it’s currently structured, will go bankrupt.’
If that’s what Rubio, Ryan, and the rest of the congressional Republicans desire, then thank you for being honest. But please stop wrapping the intention to maintain for eternity a gigantic federal welfare state in the mantle of individual liberty, limited government, and the Constitution.
•Romney: Individual Mandate = ‘What I Believe Is Right’
In his much-heralded health care address in Michigan today, former Massachusetts governor (and Republican presidential hopeful) Mitt Romney made news by offering… absolutely nothing new.
Rather than admit that RomneyCare was a mistake, Romney once again defended the individual mandate he imposed in Massachusetts, calling it “what I believe is right for Massachusetts.” Why? Because Massachusetts had a free-rider problem. Never mind that all states have a free-rider problem. (So why is it not the solution for other states, too?) Never mind the indications that Massachusetts’s free-rider problem is getting worse, not better, under RomneyCare. His defense of his individual mandate was indistinguishable from those delivered by countless ObamaCare zombies.
It’s almost as if Mandate Mitt is keeping the hypocrisy alive because he’s afraid no one will pay attention to him once it’s gone.
The only novelty I saw was when he admitted that RomneyCare has become a political liability. Not enough of one, evidently. So here we go again:
•Activity vs. Inactivity
The challenge to the constitutionality of the individual mandate — Obamacare’s central feature, without which the whole regulatory scheme collapses (practically speaking, though I agree with Judge Vinson that it also can’t be severed as a matter of law) – boils down to whether, under modern constitutional doctrine regarding what Congress can do under the guise of regulating interstate commerce, the government can force “inactive” people into a particular action, namely buying health insurance.
That is, while cases like Wickard (Congress can force farmer to meet quota and bring crops to market) and Raich (Congress can stop wholly intrastate growth and consumption of marijuana) — moving from wheat to weed — are disconcerting for those of us who see limits on federal power, there is a qualitative difference between regulating or prohibiting existing economic activity and mandating that someone engage in such activity. When Randy Barnett (who argued Raich) first articulated that distinction and labeled the new assertion of federal power “unprecedented,” that’s what he meant: Congress has never forced people to engage in economic activity. Not during the New Deal – nobody had to become a farmer or buy wheat — nor during the Civil Rights Era — if you didn’t want to serve blacks, you could shut down your restaurant or hotel.
The “activity/inactivity” distinction thus becomes the last straw holding back a general federal police power that would allow Congress to require anything of the citizenry so long as it was part of a national regulatory scheme. No enumerated power to require people to buy Chevys? No problem, we’ll have a full-scale auto bailout that only works if people have to buy Chevys. No enumerated power to require people to take out Fannie Mae mortgages? No problem, we’ll have a “National Housing Market Recovery Act” that only works if people have to do just that. You don’t have to invoke broccoli or asparagus to make the point; the “broccoli mandate” is used so often only because, if anything, requirements to buy healthy foods and join gyms would be more closely connected to the goal of reducing taxpayer spending on health care than the individual health insurance mandate.
In any case, I won’t go on about activity vs. inactivity because you can read all about it in our latest brief and also in a fascinating Volokh Conspiracy debate among Orin Kerr, Jon Adler — both of whom will be contributing to this year’s Cato Supreme Court Review — and Randy Barnett:
- Orin notes that the Fourth Circuit judges were “baffled” by the activity/inactivity distinction;
- Jon replies that he’s baffled that anybody could be baffled by that;
- Randy offers a different take on the judges’ concerns;
- Orin discusses a possible analogy of the definition of “activity” to its common-law equivalent, the “actus reus”;
- Randy issues a rejoinder to Orin’s analysis;
- Orin clarifies the issue.
Fascinating stuff, and a discussion that will continue — and not just on the VC.
•Thursday Links
- Is saving 1,315 people 12 minutes a day worth $196.5 million?
- You don’t need a PLAN when you have Twitter.
- The EPA, the price of copper, and the car you drive.
- GM has had a few profitable quarters. The federal government still needs to divest from the auto industry, even if taxpayers take an immediate hit.