How Fannie and Fed Caused the Crash
Economist John B. Taylor reviews Reckless Endangerment by Gretchen Morgenson and Joshua Rosner:
The book focuses on two agencies of government, Fannie Mae and the Federal Reserve. The mutual support system is better explained and documented in the case of Fannie, the government-sponsored enterprise that supported the home mortgage market by buying mortgages and packaging them into marketable securities which it then guaranteed and sold to investors. The federal government supported Fannie Mae — and the other large government-sponsored enterprise, Freddie Mac — by implicitly backing up those guarantees and by providing favorable regulatory treatment and protection from competition. These benefits enabled Fannie to rake in excess profits — $2 billion in excess, according to a 1995 study by the Congressional Budget Office.
The book then gives examples where Fannie’s executives — Jim Johnson, CEO from 1991 to 1998 [and also top aide to Vice President Walter Mondale, campaign manager for Mondale, head of vice presidential selection for both John F. Kerry and Barack Obama, and chairman of both the Kennedy Center and the Brookings Institution], is singled out more than anyone else — used the excess profits to support government officials in a variety of ways with plenty left over for large bonuses: They got jobs for friends and relatives of elected officials, including Rep. Barney Frank, who is tagged as “a perpetual protector of Fannie,” and they set up partnership offices around the country which provided more jobs. They financed publications in which writers argued that Fannie’s role in promoting homeownership justified federal support. They commissioned work by famous economists, such as Nobel Prize-winner Joseph Stiglitz, which argued that Fannie was not a serious risk to the taxpayer, countering “critics who argued that both Fannie and Freddie posed significant risks to the taxpayer.” They made campaign contributions and charitable donations to co-opt groups like the community action organization ACORN, which “had been agitating for tighter regulations on Fannie Mae.” They persuaded executive branch officials — such as then Deputy Treasury Secretary Larry Summers — to ask their staffs to rewrite reports critical of Fannie. In the meantime, Countrywide, the mortgage firm led by Angelo Mozilo, partnered with Fannie in originating many of the mortgages Fannie packaged (26 percent in 2004) and gave “sweetheart” loans to politicians with power to affect Fannie, such as Sen. Chris Dodd of Connecticut. The authors write that “Countrywide and Fannie Mae were inextricably bound.”
But don’t ignore the role of the Fed:
Early on the authors take on the Boston Fed, and in particular its research director Alicia Munnell, for using a study documenting racial discrimination in mortgage lending to justify the relaxation of credit standards, even though the study’s findings were found to be flawed by other researchers. And they criticize the very low interest rate set by the Fed when Alan Greenspan was chairman and Ben Bernanke was a Fed governor, saying it “contributed mightily to the mortgage lending craze,” adding that “with the Fed on a rate-cutting rampage, demand for adjustable-rate mortgages with relatively low initial interest costs had become incendiary.”
If you watched the HBO movie Too Big to Fail, you wouldn’t get much sense that government actions — easy money, the homeownership mania, HUD and Fannie’s push to lend to non-creditworthy borrowers — played a major role in the housing bubble and subsequent financial crisis. Sounds like this book would make good supplemental reading for viewers, along with Johan Norberg’s Financial Fiasco.
Obama as Reluctant Deregulator: Four Months Later
When President Obama, following his midterm “shellacking” at the polls, announced his belated conversion to the cause of regulatory relief, I was skeptical. I noted that, despite the reputation of OIRA chief Cass Sunstein as a brilliant scholar with an openness to cost-benefit analysis rare on the Left, the first two years of the Obama administration had been marked by a tremendous ramping up of regulatory burdens on the economy, both in areas of new legislation (ObamaCare, Dodd-Frank) and in new agency rulemakings gearing up from the “ultras” — ardently pro-regulatory appointees like Margaret Hamburg at FDA, Lisa Jackson at EPA, and David Michaels at OSHA. I also observed that in boasting of its deregulatory accomplishments, the administration chose an exceedingly minor example (saccharin’s reclassification as not being a hazardous waste) in which no one important seemed to have been pushing on the opposite side. That suggested that the Obama White House might lack the stomach to press deregulation when doing so might actually offend pro-regulation constituencies.
Yesterday the administration announced the results of its comprehensive review in which more than two dozen agencies looked at existing regulations to identify areas where burdens could be reduced [WaPo, AEI Enterprise, Wayne Crews/CEI]. As Cary Coglianese notes at the Penn Program on Regulation’s RegBlog,
[M]any of the initial rules agencies have proposed to put under the microscope seem underwhelming. Frequently they are what might be considered “paperwork” rules, with agencies hoping to find ways to streamline reporting and make more information available online. The Treasury Department, for example, plans to review an Internal Revenue Service regulation so as to correct instructions about where to file for a tax refund or credit. The Commerce Department’s plan identifies, among other things, the rule governing the “application number” and “filing date” for patents.
There’s nothing wrong with streamlining paperwork, of course, but it’s a cause that even “ultras” can get behind. Indeed, one of the largest line-item claims of savings comes from an OSHA plan “to finalize a proposed rule that would harmonize U.S. hazard classifications and labels with those used by other nations, which is expected to result in an annualized $585 million in estimated savings for employers.” As Coglianese notes, “few of the rules listed in the plans as targets for review are the salient regulatory issues of the day.” Tellingly, one of the most significant retreats on a regulatory issue in recent weeks — the EPA’s decision to pull back expensive new regulations on boiler emissions — is not boasted about, perhaps because the retreat is intended to be only temporary.
I do note with a ripple of “great minds think alike” satisfaction that Sunstein did advance, as one of his central examples of a new administration accomplishment, the EPA’s very belated recognition that spills of milk on dairy farms are not “oil spills” requiring elaborate containment and remediation measures. I had been writing about that one in this space for a while, and had specifically cited it in January as an example of the sort of craziness the Obamanauts should be trying to address if they want to be taken seriously on the issue of deregulation.
Raw Onions Served As Snack in D.C. Schools
Fifty-three elementary schools in the District of Columbia take part in the federal government’s Fresh Fruit and Vegetable Program, a recently ramped-up federal initiative that dishes out millions to local schools to get them to use raw produce as snacks. According to the Washington Examiner, it was by inadvertence that students at Turner Elementary School were given raw green onions (scallions) as a snack the other day when they were supposed to be given zucchini slices instead. Children were observed making “yuck” faces before throwing the offerings in the trash or, in some cases, resourcefully tucking them into their bags to take home for their parents to cook.
Are we sure this is the best way to keep students from sneaking Doritos into the building?
On a less tear-inducing note, the school board in the town of Darien, Conn. has unanimously voted to pull out of the federal school lunch program. Finance director Richard Huot cited current and forthcoming federal mandates that, among other things, ban chocolate milk, discourage reliance on refillable sports water bottles, and require schools to push salads in preference to longtime favorites such as fruit. The regulations also drive up labor costs, Huot said, and make the lunch program more complex to run generally. “The children in this town are savvy consumers,” Huot said. “You put a lousy product on the table; they are not going to buy it.”
As a famously affluent suburb, Darien can afford to turn down the bribes — sorry, subsidies — that come with doing it Washington’s way. Isn’t it a shame so many other communities feel they have no real financial choice but to go along?
“If He Approve, He Shall Sign It…”
The Patriot Act extension passed by Congress this week did not become the law of the land. It is void and without effect.
So may argue some future defendant whose conviction rests on evidence gotten under Patriot Act powers during the extended period Congress sought to establish in the bill it passed this week.
President Obama is at a meeting in Europe, so he had the bill signed by auto-pen. Representative Tom Graves (R-GA) has written a letter inquiring of the president whether he was presented the bill and truly intended to sign it.
Article I, Section 7 of the Constitution says:
Every Bill which shall have passed the House of Representatives and the Senate, shall, before it become a Law, be presented to the President of the United States; If he approve he shall sign it, but if not he shall return it…
Is presentment and signing a quaint formality? Something to put aside in light of modern technology and time-constraints? Or is it an important step in the law-making process, to be executed quite literally without deviation from past practice?
The answer lies mostly in consideration of what a signature is, and what it does. I looked into signatures, among many other identifiers and security techniques in my book, Identity Crisis.
Wikipedia has a definition of “signature” that’s good enough: “A signature is a handwritten (and sometimes stylized) depiction of someone’s name, nickname, or even a simple ‘X’ that a person writes on documents as a proof of identity and intent.” Key words: identity and intent.
Atlas Bugged: Why the “Secret Law” of the Patriot Act Is Probably About Location Tracking
Barack Obama’s AutoPen has signed another four-year extension of three Patriot Act powers, but one silver lining of this week’s lopsided battle over the law is that mainstream papers like The New York Times have finally started to take note of the growing number of senators who have raised an alarm over a “secret interpretation” of Patriot’s “business records” authority (aka Section 215). It would appear to be linked to a “sensitive collection program” referenced by a Justice Department official at hearings during the previous reauthorization debate—one that would be disrupted if 215 orders were restricted to the records of suspected terrorists, their associates, or their “activities” (e.g., large purchases of chemicals used to make bombs). Naturally, lots of people are starting to wonder just what this program, and the secret interpretation of the law that may be associated with it, are all about.
All we can do is speculate, of course: only a handful of legislators and people with top-secret clearances know for sure. But a few of us who closely monitor national security and surveillance issues have come to the same conclusion: it probably involves some form of cellular phone geolocation tracking, potentially on a large scale. The evidence for this is necessarily circumstantial, but I think it’s fairly persuasive when you add it all up.
First, a bit of background. The recent fiery floor speeches from Sens. Wyden and Udall are the first time widespread attention has been drawn to this issue—but it was actually first broached over a year ago, by Sen. Richard Durbin and then-Sen. Russ Feingold, as I point out in my new paper on Patriot surveillance. Back in 2005, language that would have required Section 215 business record orders to pertain to terror suspects, or their associates, or the “activities” of a terror group won the unanimous support of the Senate Judiciary Committee, though was not ultimately included in the final reauthorization bill. Four years later, however, the Justice Department was warning that such a requirement would interfere with that “sensitive collection program.” As Durbin complained at the time:
The real reason for resisting this obvious, common-sense modification of Section 215 is unfortunately cloaked in secrecy. Some day that cloak will be lifted, and future generations will ask whether our actions today meet the test of a democratic society: transparency, accountability, and fidelity to the rule of law and our Constitution.
Those are three pretty broad categories of information—and it should raise a few eyebrows to learn that the Justice Department believes it routinely needs to get information outside its scope for counterterror investigations. Currently, any record asserted to be “relevant” to an investigation (a standard so low it’s barely a standard) is subject to Section 215, and records falling within those three categories enjoy a “presumption of relevance.” That means the judges on the secret Foreign Intelligence Surveillance Court lack discretion to evaluate for themselves whether such records are really relevant to an investigation; they must presume their relevance. With that in mind, consider that the most recent report to Congress on the use of these powers shows a record 96 uses of Section 215 in 2010, up from 22 the previous year. Perhaps most surprisingly though, the FISC saw fit to “modify” (which almost certainly means “narrow the scope of”) 42 of those orders. Since the court’s discretion is limited with respect to records of suspected terrorists and their associates, it seems probable that those “modifications” involved applications for orders that sweep more broadly. But why would such records be needed? Hold that thought.
Fast forward to this week. We hear Sen. Wyden warning that “When the American people find out how their government has secretly interpreted the Patriot Act, they will be stunned and they will be angry,” a warning echoed by Sen. Udall. We know that this surprising and disturbing interpretation concerns one of the three provisions that had been slated for sunset. Lone Wolf remains unused, so that’s out, leaving roving wiretaps and Section 215. In the context of remarks by Sens. Feingold and Durbin, and the emphasis recently placed on concerns about Section 215 by Sen. Udall, the business records provision seems like a safe bet. By its explicit terms, that authority is already quite broad: What strained secret interpretation of it could be surprising to both legislators and the general public, but also meet with the approval of the FISC and the Office of Legal Counsel?
Punish Me? I Didn’t Do Anything—and Johnny’s Guilty, Too!
It’s hard to pin down what’s more frustrating about Michael Petrilli’s response to my recent NRO op-ed on national standards: the rhetorical obfuscation about what Fordham and other national-standardizers really want, or the grade-school effort to escape discipline by saying that, hey, some kids are even worse!
Let’s start with the source of aggravation that by now must seem very old to regular Cato@Liberty readers, but that has to be constantly revisited because national standardizers are so darned disciplined about their message: The national-standards drive is absolutely not “state led and voluntary,” and by all indications this is totally intentional. Federal arm-twisting hasn’t just been the result of ”unforced errors,” as Petrilli suggests, but is part of a conscious strategy.
There was, of course, Benchmarking for Success: Ensuring Students Receive a World-class Education, the 2008 joint publication of Achieve, Inc., the National Governors Association, and the Council of Chief State School Officers that called for Washington to implement “tiered incentives” to push states to adopt “common core” standards. Once those organizations formed the Common Core State Standards Initiative they reissued that appeal while simultaneously — and laughably — stating that “the federal government has had no role in the development of the common core state standards and will not have a role in their implementation [italics added].”
Soon after formation of the CCSSI, the Obama administration created the “Race to the Top,” a $4.35-billion program that in accordance with the CCSSI’s request — as opposed to its hollow no-Feds “promise” — went ahead and required states to adopt national standards to be fully competitive for taxpayer dough.
The carnival of convenient contradiction has continued, and Fordham — despite Petrilli’s assertion that “nobody is proposing” that “federal funding” be linked “to state adoption of the common core standards and tests” — has been running it. Indeed, just like President Obama’s “blueprint” for reauthorizing the Elementary and Secondary Education Act — better known as No Child Left Behind — Fordham’s ESEA “Briefing Book” proposes (see page 11) that states either adopt the Common Core or have some other federally sanctioned body certify a state’s standards as just as good in order to get federal money. So there would be an ”option” for states, but it would be six of one, half-dozen of the other, and the Feds would definitely link taxpayer dough to adoption of Common Core standards and tests.
‘Wait and Hurry Up’ in Debate over Patriot Act
If Senate leaders believed that expiring portions of the Patriot Act constituted an immediate increase in the risk of terrorism, it’s amazing that they waited until now to even nod toward debating the law’s renewal. A few thoughts from Cato Research Fellow Julian Sanchez on the current Patriot Act debate ripped from today’s podcast:
… Democrats have had no interest in pointing out how closely President Obama has followed the playbook written by George (W.) Bush. And of course Republicans are the ones who helped write that playbook, so they don’t have much interest in revisiting it.
On Section 215 of the Patriot Act:
It seems extremely likely from what we know so far that this business records authority has been transformed into a large-scale people-tracking authority. … It strikes me as extraordinarily subject to abuse. It strikes me as a dangerous power to grant, even in this most vital task.
Listen to the whole thing. And subscribe (iTunes).
State Officials Needn’t Heed Feds’ Threats
Federal officials blitzed Texas this week to fight a bill pending in Austin that would control TSA groping of air travelers in that state, reports Forbes’ “Not-So-Private Parts” blogger Kashmir Hill.
Federal government officials descended on the Capitol to hand out a letter … from the Texas U.S. Attorney letting senators know that if they passed the bill, the TSA would probably have to cancel all flights out of Texas. As much as they love their state, the idea of shutting down airports and trapping people in Texas was scary enough to get legislators to reconsider their support for the groping bill…
The federal government’s threat to shut down air travel is serious, but empty. As we’ve seen time and again with the REAL ID Act, the federal government does not have the political will to attack passenger air travel in the name of increasing surveillance and intrusion.
In fact, earlier this year, the Department of Homeland Security didn’t even bother to threaten any repurcussions for states before it once again pushed back a May 2011 (false) deadline for REAL ID compliance. (Previous instances noted here and here.) The REAL ID Act allows the federal government to refuse licenses and ID cards from non-complying states at airport checkpoints, but it’s just not going to happen.
The DHS announcement notes $175 million in spending on REAL ID so far. That waste continues to accrue so long as Congress appropriates money for the national ID program, which will never be implemented.
While we’re on the subject of empty threats from federal officials—and do see Julian Sanchez’s post hitting the same subject—it has been more than four years since then-Secretary of Homeland Security Michael Chertoff said about the REAL ID Act:
If we don’t get it done now, someone is going to be sitting around in three or four years explaining to the next 9/11 Commission why we didn’t do it.
Secretary Chertoff was wrong—factually wrong on the imminence and nature of the terror threat, and ethically wrong to tout terror threats in an attempt to defeat the will of our free people.
With our stubborn insistence on freedom, the American people and state leaders have done a better job of assessing the threat environment than the Secretary of Homeland Security. As I said when I testified on this topic to the Pennsylvania legislature, state leaders should continue to recognize that they are as equipped, if not better equipped, than federal officials to judge what is right for their people. Counterterrorism and airport security are not an exception to that, though federal imperiousness in these areas remains at a high.
Don’t Cut Red Tape, Shut Down the Factory
In the Wall Street Journal today, Cass Sunstein—the administrator of the Office of Information and Regulatory Affairs and erstwhile Harvard Law School professor—wants us to know what he and the Obama Administration are up to. In an op-ed that seems more like an advertisement (“the Office of Information and Regulatory Affairs, accept no substitute!”), Sunstein describes the “unprecedented government-wide review of regulations already on the books so that we can improve or remove those that are out-of-date, unnecessary, excessively burdensome or in conflict with other rules.”
Sunstein discusses OSHA eliminating “1.9 million annual hours of redundant reporting burdens on employers,” the Department of Health and Human Services “reconsidering burdensome regulatory requirements, including paperwork burdens, now placed on hospitals and doctors to ask whether those requirements actually benefit patients,” and the Department of the Interior “reviewing cumbersome, outdated regulations under the Endangered Species Act to clarify and expedite procedures for approval of conservation agreements.”
Also on the chopping block are “regulations that require the use of outdated technologies” and a regulation that defines milk as “oil” and subjects it “to costly rules designed to prevent oil spills.” Lost in the discussion are the obvious questions: how did these admittedly useless and burdensome regulations ever get adopted in the first place? What sort of backward organization would require 1.9 million hours of redundant reporting? Has anyone in the EPA ever cleaned up spilled milk before? What’s to keep all this from happening again?
“Cutting government waste” is the mantra for those politicians who regard certain government programs as sacred cows. President Obama hopes to pay for a sizeable part of his health care overhaul by eliminating “waste, fraud, and abuse” in Medicare. Speaking at Cato yesterday, former Minnesota governor Tim Pawlenty said he wouldn’t cut defense spending, but he would try to make defense “more efficient.”
These sacred cows, however, have a severe eating disorder. The binge and purge cycle that politicians occasionally put them through does nothing to eliminate the underlying disease. Governmental agencies are inherently inefficient and wasteful because they have few reasons not to be. Searching out government waste is a chimerical mission that should raise fundamental questions about the nature of government, not about whether milk is oil.
More Fifth Column than Fourth Estate
Citing new Census figures, the New York Times claims that “public school districts spent an average of $10,499 per student on elementary and secondary education in the 2009 fiscal year.” But according to the most recent issue of the Digest of Education Statistics, expenditures haven’t been that low for over a decade. In the last year reported, 2007-08, total expenditures per pupil in average daily attendance were already $12,922 (in 2008-09 dollars). Adjusting for inflation, that’s about $13,500 in today’s dollars. (Looking at spending per student enrolled, rather than per student actually taught, lowers the total figure, but not by that much).
So what gives? How can the Times claim that public school “spending” is $3,000 lower than it actually is?
They simply exclude a huge swath of expenditures in the number that they call “spending,” without telling readers they have done so. Specifically, they ignore spending on things like… buildings. Correct me if I’m wrong, but I don’t think American public schools have returned to Plato’s practice of holding lessons in an olive grove. Until they do, they will use buildings. Buildings cost money. They aren’t erected, for free and fully furnished, from the mind of Zeus.
Not only does this arbitrary and unjustifiable exclusion of capital expenditures from the reported “spending” figures wildly mislead the public about what schools are really costing them, it also misleads the public about the trends in spending. As my colleague Adam Schaeffer reveals in the chart below, spending on physical facilities has increased at a far faster rate than other expenditures (remember those Taj Mahal schools?). So by channeling David Blaine and making capital spending disappear, the Times also misrepresents real spending growth. In so doing, they undermine the public’s and lawmakers’ ability to make sound policy decisions regarding education. If the Times prominently corrects this glaring error I will be utterly shocked.
Manufactured Panic over Patriot Act
To judge by the hysterical statements issuing from elected officials—not to mention the breathless press coverage—you’d think the three little-used Patriot Act provisions set to expire unless reauthorized today are like the doomsday timer from the TV show Lost: Fail just once to keep pushing the reset button and some unspecified catastrophe is sure to result! Under the headline “Patriot Act Battle Could Hinder Investigators,” the New York Times quotes an alarmed anonymous official calling it “unprecedented” and warning that “no one could predict what the consequences of a temporary lapse might be.” The Washington Post agrees with the need for reform, but editorializes that “[at] this late hour, it is most important to ensure that the provisions do not lapse.” The Hill uncritically quotes Senate leaders’ assertion that any lapse “would cause a major disruption to the ability of law enforcement officials to fight terrorism.”
This is not just wrong, it is rolling-on-the-floor-laughing ridiculous. A lapse of these provisions for a few days—or a few weeks—would have no significant effect. First, they’re all covered by a grandfather clause. And contrary to what the New York Times implies, that doesn’t just mean that orders or warrants already issued under these authorities remain in effect. Rather, as the Congressional Research Service explains (using the sunset deadline from prior to a short-term extension):
Pawlenty Understands Incentives, Except When It Comes to Defense
Former Minnesota governor Tim Pawlenty’s brief visit to Cato yesterday elicited some snide commentary in the blogosphere, especially this piece by the Huffington Post’s Jon Ward. Ward notes how the just-declared presidential candidate has been pretty adept at annoying audiences with his answers to questions. This one rankled the questioner, and a number of others in the auditorium.
I’m not one who is going to stand before you and say we should cut the defense budget.
[...]
I’m not for shrinking America’s presence in the world. I’m for making sure that America remains the world leader, not becoming second or third or fourth in the list.
One can sort of forgive a governor for not knowing much about foreign policy, although governors who aspire to be president should probably know that the U.S. government could cut military spending in half and still spend more than our next two potential rivals, combined.
The average governor, however, should know that people don’t feel obligated to pay for things that you are willing to give them for free. And Pawlenty does understand this when it comes to domestic spending. Check out his comments about the difference between a cash bar and an open bar at a wedding reception, via the Daily Caller:
If people have the impression that things are free, and they get to consume it endlessly, and the provider has the only incentive to provide on volume, and the myth or the lie is created that the bill goes somewhere else and that a third party pays for it, that is a system that I can tell you is doomed to failure and inefficiency. And that’s much of our government, unfortunately.
But the same principle applies in military spending. Our European and East Asian allies are consumers of the security provided by the U.S. military, and all Americans are the third party payers. As my colleague Ben Friedman likes to say, we agree to defend our allies, and they agree to let us. We shouldn’t blame them for under-providing for their own defense; it’s our fault for agreeing to do it for them.
Cato President and Founder Ed Crane’s quick take on Pawlenty’s view on defense military spending is worth repeating:
There is a difference between military spending and defense spending. The Constitution provides for a military to defend the U.S—not to democratize the world. One would hope that presidential candidates would consider America’s commitments overseas very seriously before endorsing those commitments.
Cato scholars have been out in front for years making the case for a principled, constitutional view of “defense” that does not include defending others who can and should defend themselves. If we adopted a strategy of restraint, we could responsibly make significant cuts in military spending, deliver the savings to American taxpayers, and remain the safest and most secure country on the planet. Yesterday, Tim Pawlenty took the opposite tack. He argued that the U.S. military should continue to serve as the world’s policeman/armed social worker, allow other countries to free ride, and require U.S. taxpayers to foot the bill.
Although that might be popular elsewhere in Washington, I can’t imagine it will sell in Cedar Rapids, Iowa, or Manchester, New Hampshire.
NATO: Theater of the Absurd
I don’t know what the right word is here, but there is something remarkable about the fact that the United States is currently borrowing money from China to buy precision-guided munitions to give to the Europeans to drop on Libya, isn’t there?
At AEI on Tuesday, Defense Secretary Robert Gates responded to a question about removing U.S. troops from Europe by saying that bringing them back home and having to build facilities to base them here actually would be about a wash, money-wise. That’s probably correct, but the real question is why we shouldn’t bring them home and disband their units. On that logic, Gates remarked that Europe “is one of the places where an American presence has a significant impact on our allies, on our friends, and on everybody for that matter.”
He’s right. It does have a significant impact on our allies: it encourages European countries to let their defenses atrophy to the point where they aren’t even capable of beating up on a third-rate military like Libya’s without our help. The irony here is that this phenomenon is something Gates has whined about previously. But until an American defense policymaker can put two and two together and figure out that if we defend Europe, Europeans won’t, we’re going to be stuck in this ridiculous feedback loop.
Race to the Cradle
Yesterday, Education Secretary Arne Duncan and Health and Human Services Secretary Kathleen Sebelius announced how $700 million in new Race to the Top money will be employed: $200 million to get close-loser states in the last RTTT to once again jump through hoops and grovel before their federal overloards, and $500 million for a new “early-learning” obedience contest.
The first part of this is irksome in large part because many congressional GOP members — the people who are supposed to be reining in unconstitutional, out-of-control federal adventuring — voted for the continuing resolution containing this expansion of the simultaneously worthless but dictatorial Race to the Top. The potential rewards for winning states are much smaller than the first go-round — $10 million to $50 million, versus $20 million to $700 million — so the bribery might be less powerful. But it is unconstitutional, politically charged bribery nonetheless, and it most certainly did not need to happen. No one, as far as I know, was clamoring for it, except maybe for a few people in the Obama adminsitration.
More troubling, though, is the expansion — and new focus — of RTTT into pre-kindergarten education. Apparently, Race to the Top has proven so effective in elementary and secondary education – of course, it hasn’t proven anything – that it’s clearly time to drill down even closer to the cradle. And drill it will. While the regs for the program haven’t been written yet, the legislation that created the thing stipulates that to win money states must:
- Increase the number and percentage of low-income and disadvantaged infants, toddlers, and preschoolers who are enrolled in high-quality early learning programs;
- Design and implement an integrated system of high-quality early learning programs and services; and
- Ensure that any use of assessments is consistent with the recommendations of the National Research Council’s reports on early childhood.
If this isn’t a recipe for ultimate federal control of pre-K, I don’t know what is (other than an effort involving even more taxpayer dough). I mean, having the Feds define “high quality” through regulation? Mandates for states to create “integrated” pre-K systems? Dictating parameters for assessing success? What next? Babysitter-in-Chief Obama himself administering the milk and cookies — er, fat-free milk and broccoli – at snack time?
That this new RTTT exists — and made it through a GOP-majority House – sure isn’t a good sign for things to come, either in education or beyond.
Thursday Links
- Former Minnesota governor Tim Pawlenty received an “A” grade from Cato in 2010 (PDF) for his fiscal record in Minnesota, but in terms of national fiscal policy, he hasn’t gone far enough on ethanol subsidies.
- Regarding North Korea, “the United States should indicate its willingness to rethink its commitment to nonproliferation if the North continues its nuclear program. Maybe it would be better if South Korea and Japan were able to defend themselves than keeping them forever reliant on the United States and keeping America forever entangled.”
- Why is the federal government involved in state and local transportation issues?
- “Regulating, restricting, or eliminating [oil futures markets] would not bring prices down or make them more predictable.”
- Tim Pawlenty also sides with law enforcement on the medical marijuana issue. It’s too bad he doesn’t seem to side with taxpayers.
Ratko Mladic Arrested
The arrest of Ratko Mladic is a welcome development that should remove the last major obstacle to closer relations between Serbia and the United States and the EU nations. For too long, the Western powers have placed an excessive emphasis on his apprehension as a condition (explicit or implicit) for Serbia’s full inclusion in the Western community.
If the objections now continue, Serbs will understandably conclude that the Mladic issue was little more than a convenient excuse that Western governments used to justify a less-than-friendly policy toward Belgrade. An expected improvement in relations now that Mladic has been apprehended is especially pertinent with respect to Serbia’s path toward membership in the European Union.
The arrest will have little substantive impact on prospects for reconciliation in Bosnia-Herzegovina or anywhere else in the former Yugoslavia, however. The trend in Bosnia over the past year or so is toward renewed tensions rather than reconciliation, and that trend is being driven by factors that have little to do with the Mladic issue.
On the Politics of Deficits and Debt
Today POLITICO Arena asks:
How will yesterday’s largely symbolic Senate vote rejecting the Ryan FY 2012 budget plan affect the 2012 political fortunes of Republicans, especially those facing possible Tea Party-fueled primary challenges?
My response:
Yesterday’s Senate vote was simply an effort by Democrats to capitalize on the outcome of Tuesday’s NY-26 election. It changed nothing on the ground. Responding to that election, most congressional Republicans, far from deserting the Ryan plan, have only rallied more strongly behind it.
And well they should, because there’s nothing worse in politics than disarray, as wayward moderate Republicans will likely discover in 2012. What 2010 showed was that deficits and debt are dominating our politics like never before. Democrats haven’t come to grips with that. Like Sen. Jeanne Shaheen (D-N.H.) yesterday, they castigate the Ryan plan for ending Medicare “as we know it.” Yet they have no plan of their own.
One can criticize the Ryan plan from a number of perspectives, but at least it’s moving in the right direction. If Republicans stay on course, they should do well in 2012. Columnists like the Post‘s E.J. Dionne may continue to delude themselves into thinking that NY-26 marked the end of the Tea Party. I doubt it. But if he’s right, we’re really in trouble.
Notice of Court Orders Is Important in Death Penalty Cases
The representation of prisoners accused of capital crimes is unique in its difficulty — and in the consequences — when that representation is inadequate. Maples v. Thomas, which will be argued before the Supreme Court this fall, exposes some of the serious cracks in the system charged with representing indigent defendants in such cases.
Cato takes no position on the merits of the death penalty other than that the Constitution does not prohibit it and that our justice system is responsible for, at the very least, ensuring that prisoners receive fair notice of orders on which their lives depend. Both the courts and counsel failed Cory Maples here.
Maples was convicted of capital murder and sentenced to death for killing two companions. After a series of state court appeals which affirmed his conviction, Maples filed a petition for post-conviction relief, which was ultimately dismissed.
Maples never received notice of this deadline-triggering order because his pro bono lawyers left their big-firm jobs and a court clerk did nothing when the letter containing the order was consequently returned unopened. Because Maples did not receive notice of the deadline, he did not timely file an appeal and his claims were procedurally defaulted. The Eleventh Circuit affirmed the district court’s denial of Maples’s subsequent federal habeas petition because Maples “cannot establish cause for his default because there is no right to post-conviction counsel.”
Cato has now joined The Constitution Project to file an amicus brief supporting Maples and arguing that the Supreme Court should excuse his default because the state failed to notify him of an order that could result in his death. Moreover, if the default is not excused, the state’s inaction will deny Maples his constitutional right of meaningful access to the courts.
The Eleventh Circuit relied on the rule that because “there is no constitutional right to an attorney in state post-conviction proceedings, a petitioner cannot claim constitutionally ineffective counsel in such proceedings.” But Maples’s habeas claim does not involve the ineffectiveness of his post-conviction counsel; his underlying claim is that his trial counsel provided ineffective assistance. Indeed, his post-conviction counsel provided no assistance whatsoever when it was time to appeal.
Finally, there is cause to excuse Maples’s default because this case is ultimately governed by principles of equity and basic fairness. Few if any reasonable observers would conclude that it is fair or equitable to put a man to death without allowing the least consideration of appellate claims that could save his life simply because his lawyers left their jobs, a firm mailroom returned letters to them unopened, and the court clerk’s office did nothing when it discovered that crucial notice was never received.
Again, the case is Maples v. Thomas and you can read Cato’s brief here.
Agriculture Cuts to Usher in the Apocalypse
Harold Camping is “flabbergasted” that the world did not end on May 21st as he had predicted. I think it’s because he didn’t account for the devastation that will be wrought by Republican budget cuts for fiscal 2012, which doesn’t begin until October 1st. Therefore, Camping’s new predication that the world will end on October 21st is much more plausible.
Yesterday the House Appropriations Committee’s subcommittee that deals with agriculture and nutrition programs passed its bill, which will now be considered by the full committee. According to the committee’s numbers, discretionary funding for these programs in 2012 would be $17.2 billion – a $2.7 billion reduction versus 2011.
According to a statement released by the subcommittee’s ranking member, Sam Farr (D-CA), the four horsemen are readying their saddles:
Farmers will be broken. Jobs will be lost. Ag economies will crumple.
Wow, even though “the farm economy [is] booming”? I half expect to see Rep. Farr waving a “The End is Near!” sign from a street corner in early October.
The Associated Press reports that “hunger advocates” are particularly upset by an 11 percent funding reduction for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). (“Hunger advocates” is the AP’s bizarre term for advocates of federal welfare programs.) The AP cites an estimate from a group of “hunger advocates” that the cuts could deny benefits to 475,000 people otherwise eligible for WIC.
If you’re looking for Republicans to defend the cuts on the basis that there’s nothing “progressive” about depending on a federal bureaucracy for sustenance then you’re going to be disappointed:
Republicans who wrote the bill said the cuts in domestic food programs are taken from excess dollars in those accounts, and participants won’t see a decrease in services.
Subcommittee chairman Jack Kingston (R-GA) basically says that the cuts are about making the federal government more efficient:
This subcommittee has begun making some of the tough choices necessary to right the ship. We have taken spending to below pre-stimulus, pre-bailout levels while ensuring USDA, FDA, CFTC, and other agencies are provided the necessary resources to fulfill their duties. Our members have worked to root out waste and duplication and, where they have strayed from their core mission, we rein in agencies so they may better focus on the responsibilities for which they are intended. In doing so, we balance the urgent need for fiscal restraint with the necessity to provide an abundant food supply, robust trade, prudent conservation measures, and strong rural communities.
Sorry, congressman, but if the media is going to uncritically report the “women and children will suffer” argument, the “root out waste and duplication” counter-argument isn’t going to win the heart of the average American who probably thinks WIC is something that comes out of a candle.
For all the angst over cuts to discretionary spending, I don’t see much discussion over the fact that, according to Republicans, mandatory spending for agriculture and nutrition programs will increase by $3 billion – from $105 to $108 billion. Spending on food stamps, which unlike WIC, is basically on auto-pilot, would increase by almost $6 billion. I’m guessing that the “hunger advocates” didn’t plug that number into their equation.
I’ll end on a positive note by pointing out that Cato’s Downsizing the Federal Government website has essays on why it would be truly “progressive” to eliminate farm subsidies, rural subsidies, food subsidies, and other federal welfare programs.
Antidumping and Bedroom Furniture from China: The Real Story
The Washington Post ran a story in yesterday’s print edition about the U.S. antidumping order against Wooden Bedroom Furniture from China—a case I described seven years ago as the “Poster Child for [Antidumping] Reform” because its sordid details explode the myths upon which rest the rationalizations for the law’s existence.
Those details are nowhere to be found in the WP article, which was published, presumably, to make a few other points. One such point—the only one with which I agree—is that antidumping duties aren’t very effective at restoring or preserving U.S. jobs. As the article demonstrates, since the imposition of AD duties on Chinese furniture beginning in 2005, imports from Vietnam, Indonesia, and other countries not subject to the AD restrictions have emerged to fill the vacuum created by declining imports from China. Not much news in that, though. This kind of trade diversion is a typical consequence of antidumping restrictions. Likewise, furniture production and the jobs it used to support has not undergone a renaissance in the United States – despite that being the rallying cry of the domestic producers who brought the case in 2004. (More on that in a moment.)
But the article—beginning with its title (“Chinese Make a Run Around U.S. Tariffs”)—leads readers to the faulty conclusion that those cunning Chinese are at it again, looking for ways to prosper at the expense of innocent, upstanding U.S. producers and their workers. A pretty good tip-off that an article about China and trade is going to miss the mark, mislead, and misinform is when the author describes trade as a contest between two countries with the trade account characterized as a scoreboard.
The United States and China have exchanged accusations of dumping for years and imposed tit-for-tat duties. All along, though, China has generally come out on top: Its trade surplus with the United States rose to $273 billion in 2010…more than three times the level of a decade earlier.
Is the reader to conclude, then, that more antidumping measures against Chinese products are integral to reducing the trade deficit and, ultimately, “com[ing] out on top”? That conclusion doesn’t really dovetail with the point about how antidumping does nothing to restore U.S. production. But I digress.
The main problem with the article is that it escorts readers to the incorrect conclusion that it was Chinese furniture producers who initiated efforts to get around the U.S. antidumping duties. Implied throughout the article is that a man named Lawrence Yen, president of a Chinese furniture company, was the architect of some crafty plan to avoid U.S. duties. It reports that during a meeting of Chinese furniture makers in Dongguan: “[Yen] told them [he] would set up a factory in Vietnam,” which was presented in the article as though it were the idea’s genesis. The caption to the inset chart of furniture imports in the article reads:
To avoid a 2005 U.S. tariff on Chinese-made wooden bedroom furniture, Chinese furniture companies moved operations to other Asian countries, thwarting U.S. efforts to curb “dumping,” the export of goods at unfairly low prices.
This presentation of events may serve the clichéd theme that Americans are in a pitched battle with the Chinese, who are willing to stretch and break the rules to “win,” but it fails to give readers critical parts of the story. The fact is that this strategic tariff aversion plan, which is as legal and common as off-the-shelf tax minimization software at Best Buy, was the brainchild of the U.S. domestic furniture industry before it filed the case in 2004.
