Yes They Did
The other day I saw a bumper sticker with an Obama logo and the words YES WE DID. This was hardly a surprise, as Obama got 67 percent of the vote in my neighborhood and 72 percent in my county, home to lobbyists and bureaucrats. And the embattled Republicans don’t flaunt their dissidence on their bumpers. But I began to wonder just what the driver was proud of.
Yes we did increase the national debt by $4 trillion? Yes we did create a national health insurance program passed in such haste that it’s full of gross errors and requires restrictions on telling the media about it? Yes we did continue the wars a lot longer than we promised? Yes we did launch a third war in the Middle East without congressional authorization? Yes we did exercise presidential power more aggressively than George W. Bush? Yes we did laugh at the very idea of not arresting people for smoking pot? Yes we did ratchet up regulatory costs in a weak economy? Yes we did create the slowest recovery in postwar history?
Soon even my Republican neighbors may be sporting bumper stickers reading YES YOU DID.
The Weinstein Marketing Team Understands Margaret Thatcher’s Appeal Better than the Writer and Director of “The Iron Lady” Do
The reviewers warned me — don’t see The Iron Lady, the new movie starring Meryl Streep as Margaret Thatcher. Kelly Jane Torrance of the Washington Examiner mourns, “The climax of this movie about one of the most important people — not just women, but people — of the 20th century comes when Margaret Thatcher decides to throw out her dead husband’s clothes.” James Verniere of the Boston Herald asks, “Mamma mia! Why would you turn the story of Margaret Thatcher into a tale of a sweet, dotty old lady having a love affair with her beloved late husband?” Virginia Postrel excoriates the filmmakers: “These supposedly feminist filmmakers could have portrayed Thatcher as an ambitious woman who had nothing to feel guilty about. Instead they chose to inject guilt where it did not belong. They obscured Thatcher’s public accomplishments in a fog of private angst. The portrait of dementia isn’t the problem. The way the film uses old age to punish a lifetime of accomplishment is.”
Even the Washington Post, the New York Times (“You are left with the impression of an old woman who can’t quite remember who she used to be and of a movie that is not so sure either.”), and the New Yorker wonder why you would make a movie about one of the most influential and controversial political figures, the first woman to lead a Western country, the woman who arguably saved Great Britain and helped Ronald Reagan win the Cold War, and then spend half the film depicting her as a confused old lady with hallucinations.
Nevertheless, Thatcher is indeed a compelling figure, and the commercials and trailers showed Streep portraying her as a leader of conviction and strength. So I ignored the critics and bought a ticket. And the film was slightly better than I expected. It absolutely wastes about 40 percent of its time on the imagined scenes of a confused old lady. How much more rewarding it would have been to see a great actress play a pioneering political figure rising to power, leading her country, and facing opposition from both friends and enemies. Instead, we get a few vignettes of that, about half the film’s running time. So it wasn’t terrible, just a lost opportunity.
Interestingly, the marketing team at Weinstein Company seems to understand the appeal of a film on Margaret Thatcher far better than the writer and director. They know what the audience wants. Take a look at the trailer:
You’ll notice that there’s not a single shot of the old-lady part of the movie. Instead, it’s two fast minutes of Margaret Thatcher in action. Including a final scene (“Gentlemen, shall we join the ladies”) that harks back to an earlier scene of Thatcher on her way up, dramatizes her uniqueness — and is actually not in the film.
So I have a suggestion: Often the DVD of a film will include the film as released to theaters and also a “Director’s Cut” that reflects the director’s own artistic choices that the studio may have blocked. I recommend that the DVD of The Iron Lady include a “Marketer’s Cut” that omits all the old-lady scenes and just shows us Margaret Thatcher the political figure. And if there’s good material like the “join the ladies” scene left on the cutting-room floor, then the marketers could add that back in. In that case, I’d buy the DVD. In fact, someone should start a Facebook campaign: “Put a Marketer’s Cut of The Iron Lady on the DVD.”
By the way, Mitt Romney should not want Republicans to watch this movie: It will remind them of what it means to be inspired by a political leader.
Obama Proposes New Department of Corporate Welfare
Contrary to what various news outlets are reporting, President Obama is NOT proposing to cut government. The administration is proposing to take four independent federal agencies that specialize in corporate welfare – along with the Office of the U.S. Trade Representative – and combine them with corporate welfare programs at the Department of Commerce to form what would I would argue should be called the Department of Corporate Welfare.
According to reports, this rearranging of the deck chairs would save $300 million a year. That’s peanuts. Worse, those alleged savings will be of no consequence to taxpayers as there is nothing to suggest that the president intends to cut overall spending for the agencies comprising the new bureaucracy. That portends bigger government, not smaller. The president is trying to sell the American taxpayer a false bill of goods.
The president’s proposal is also an attempt to counter the perception – an accurate one – that the administration’s policies are detrimental to commerce. But corporate welfare is detrimental to commerce because the market distortions it creates hinder economic output. Making it easier for select businesses to help themselves to taxpayer-financed subsidies would only perpetrate the same sort of crony capitalist schemes that gave us Solyndra and the Chevy Volt.
Of course, no transparent attempt to appear “business friendly” would be complete without a bone toss to the Small Business Administration. The “bone” this time is the president’s intention to elevate the head of the SBA to the Cabinet. As I discuss in a Cato essay on the SBA, rather than helping small businesses compete against big businesses, the SBA’s loan guarantees mainly help a tiny share of small businesses compete against other small businesses. In reality, the biggest beneficiary of the SBA is the banks, which reap the profits from the loans guaranteed by the agency.
Finally, Republican policymakers talk a good game about cutting government, but they often hide behind calls for making the federal government “more efficient.” Now that the president has seized a political opportunity to sing from the GOP’s hymnal, it’ll be interesting – if not entertaining – to see how Republican policymakers respond. To avoid embarrassment, I recommend offering specific spending cuts.
Commerce Clause Issues in the Regulation of Non-Bank Financials
If you believe that the Constitution’s Commerce Clause empowers Congress to do pretty much anything it wants (that is, if you believe that me scratching my nose impacts interstate commerce), then you can stop reading now—you’re beyond help.
If, however, one follows both the history of banking law and the wording of the Commerce Clause, which in Article I, Section 8 in listing the powers of Congress reads “To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes,” then there arises the possibility that Congress lacks the authority to regulate non-bank financials, such as payday lenders, in the manner envisioned by the Consumer Financial Protection Bureau (CFPB), as created by the Dodd-Frank Act.
After you spend over a decade reading federal consumer finance laws, as I have, you notice a trend. Terms like “federally related mortgage loan,” which appears in, among other places, the Real Estate Settlement Procedures Act, or “national bank,” which appears in lots of places, like the Home Owners’ Loan Act or the Federal Deposit Insurance Act, or “housing creditor” as defined under the Alternative Mortgage Transaction Parity Act, appear repeatedly. The commonality of these terms? They always tie back to deposit insurance or some sort of federal guarantee, such as those made by the Federal Housing Administration or Fannie Mae and Freddie Mac.
The structure of federal consumer finance laws has historically gotten around the Commerce Clause by tying said laws to the acceptance of some federal benefit. In the case of banks, the bargain is, Banks get deposit insurance, which is ultimately backed by the taxpayer, and in exchange they get stuck with a whole host of regulations, some relating to safety and soundness, many others not. This scheme has been expanded by trying similar restrictions to the ability to sell a loan to Fannie or Freddie.
While I think this arrangement has been a Faustian bargain for the banks, the fact is they don’t have to take deposit insurance or ask for any other type of bailout.
What is truly revolutionary (in a bad way) about the CFPB’s new powers over non-banks is that they go beyond this traditional framework. I assume, and hope, we aren’t going to start bailing out payday lenders or check-cashers or give them any sort of federal insurance scheme. So if there is no “bargain” here, as there is with federal depositories, then where exactly is the federal nexus? The vast majority of payday loan transactions, for instance, do not cross state lines. The states already have full power to regulate these activities, and already do. There’s no national marketplace for most of these products.
So if non-bank financials lack a federal nexus (due to the absence of any federal guarantee) and are not interstate commerce, then where exactly is the authority (or the need) to regulate them?
Now, I’m not a lawyer, but it’s hard for me to see how the regulation of activities like payday lending meet the three categories spelled out in United States v. Lopez. So in addition to the Appointments Clause challenges to the CFPB, I wouldn’t be surprised to also see a Commerce Clause challenge.
Setting the Record Straight on Military Spending Levels
As David Boaz recently demonstrated, the jeremiads emanating from Washington over proposed cuts in military spending are unfounded. Howard P. “Buck” McKeon’s op-ed in today’s Washington Post is only the latest to decry the “damaging blow to our military” that will be done by “massive defense cuts.”
Not only is Pentagon spending not at its lowest level in 60 years, as the Heritage Foundation claimed, it will not fall to such a level even if the Budget Control Act’s sequestration spending caps are implemented. David shows that charts can obscure the relevant facts or contribute to poor arguments.
But charts can also help shed light on the truth. For example, in the first chart below, prepared by my colleague Charles Zakaib, one might conclude that the reductions being contemplated as an outgrowth of President Obama’s strategic review (the brown line) would represent a dramatic cut in the Pentagon’s base budget. The automatic sequester cuts (the red line at the bottom) appear even more draconian.
The Supremes vs. the Supremes
Corporations, corporate speech, and the 2010 Supreme Court decision in Citizens United v. Federal Elections Commission are a new Mason/Dixon line in American politics. In late December, in true antebellum fashion, the Montana Supreme Court, in Western Tradition Partnership, Inc. v. Attorney General of Montana, tried to nullify the case by ruling that Citizens United doesn’t apply to Montana’s “unique” electoral system. Because the Montana Supreme Court’s actions were in blatant disregard of the Citizens United decision, the Supreme Court will likely overturn the opinion summarily—that is, without briefing or argument. Montana will not be a First Amendment-free zone for long.
Some who vehemently oppose the Citizens United decision have come out against the Western Tradition Partnership opinion as unsupportable judicial overreaching. Ian Millhiser of the Center for American Progress writes that, just as “it is wrong when Newt Gingrich plots a campaign of massive resistance against judges he disagrees with… Montana’s justices act no less illegitimately when they fail to follow a binding Supreme Court precedent.” Absolutely.
Mr. Millhiser is also correct in citing Justice James C. Nelson’s vigorous dissent as an admirable example of judicial modesty. While Nelson is very clear that he does not support Citizens United, he is even clearer in admonishing the majority of the court for ignoring binding precedent from the highest court in the land. The issue for Justice Nelson is clear, and it does not hinge on whether he disagrees with the Supreme Court’s opinion. Instead the question is simple: “Has the State of Montana identified a compelling state interest, not already rejected by the Supreme Court, that would justify the outright ban on corporate expenditures for political speech?” “Having considered the matter,” Justice Nelson writes, “I believe the Montana Attorney General has identified some very compelling reasons for limiting corporate expenditures in Montana’s political process. The problem, however, is that regardless of how persuasive I may think the Attorney General’s justifications are, the Supreme Court has already rebuffed each and every one of them.”
Another Pyrrhic Victory in Mexico’s Drug War
After months of not releasing official data on the number of drug-related killings, the Mexican government announced yesterday that in the first nine months of 2011, 12,903 people died in episodes of drug violence. The Mexican authorities, struggling to find a silver lining, noted positively that the figure reveals “a significant decrease” in the growth of the murder rate from previous years.
This tactic is similar to Washington’s creative accounting when it comes to spending “cuts:” spending continues to increase, but at a smaller percentage than previously planned. Thus, spending has been “cut.” Similarly, the number of people killed in Mexico’s drug war continued to rise in 2011, but at a lower pace than 2010. Thus, the murder rate has declined. Moreover, the 11 percent increase in murders in 2011 follows a record setting number in 2010.
* BBC estimate.
Source: Mexico’s Federal Attorney General’s office.
According to an estimate from the BBC, the total number of drug deaths in 2011 is approximately 16,700. That means over 51,000 people have been killed in Mexico since president Felipe Calderón launched a war on drug cartels in December 2006. And the number may be higher.
As Mexico’s former foreign minister Jorge Castañeda said last November at the Cato conference “Ending the Global War on Drugs,” the number killed in Mexico’s war on drugs will soon equal the number of U.S. deaths in Vietnam. And let’s remember that Mexico’s population is a third of the United States’ and the Vietnam conflict lasted twice as long as Calderón’s drug offensive.
The main worry for 2012 is not that drug killings stabilize at a high rate—although that would be terrible—but that violence engulfs other areas of the country that have remained relatively peaceful, such as Mexico City. If that happens, Mexican authorities will find it even more difficult to identify “victories” in their war against cartels.
97% of Obama Nominations in 2011 Were Confirmed by the Senate
One of the rationales oft heard for Obama’s recent “recess” appointments is that the Senate is not “doing its job” or that Republicans have blocked his nominees and that our government “cannot function.” Putting aside the absurdity of the argument that somehow if Congress fails to “do its job” that empowers the President to take over its job, the simple fact is that the vast majority of Obama nominations have actually been confirmed by the Senate.
Between January 5, 2011, the beginning of the 1st session of the 112th Congress, and December 30,2011, the Senate received 20,517 nominations from the Obama Administration. Of those, 19,815 were confirmed by the Senate, which rounds up to 97 percent. And this ignores the fact that some nominations, like those to the National Labor Relations Board, were not received until December, hardly giving the Senate any time to consider and confirm said nominations.
One can argue that not all nominations are equal. For instance the majority of nominations are military positions. You can decide for yourself whether a general or admiral is equal to an assistant secretary or bureau director. If one wants to produce a “quality-adjusted” nominations index, they are free to do so. None of this changes the basic fact: President Obama has had the majority of his nominations confirmed by the Senate. Claims to the contrary are simply false.
How Good Are Government Deficit Forecasts?
In just a few weeks Washington enters that alternative universe called “budget season,” when the President delivers his budget proposal to Congress and Congress begins constructing its budget for the coming fiscal year (at least in normal years, don’t expect much budget action in 2012). Underlying the budget process will be government projections of the deficit. Such projections will be given considerable weight, both in Washington and among the press. So if said projections are way off, then budgeting decisions by Washington will also miss the mark.
Just in time to help frame this debate is a new paper from economists at the Federal Reserve Bank of St. Louis. The entire paper is well worth a read, and accessible to the general public. Below is a chart, reproduced from the paper, that expresses the basic point.
On the X axis is the Congressional Budget Office’s projected 5 year budget surplus/deficit, as a percent of GDP. The Y axis plots the actual budget surplus/deficit. An easy way to read the chart is that points below the 45 degree line are instances of where CBO was too optimistic. Points above the 45 degree line are where CBO was too pessimistic. If CBO’s errors were random, then the number of points below and above the 45 degree line would be about equal. As you can see, however, CBO’s errors were not randomly distributed. They were biased in the direction of being too optimistic. So when you see the next round of CBO budget forecasts, take them with a huge grain of salt. The truth is likely to be much worse.
Promises Unfulfilled? What Next, Federal Education Failure?
On Sunday we marked the tenth birthday of the No Child Left Behind Act by reviewing its decade of futility and explaining why federal education adventuring is basically doomed to failure. (Enjoy some of our extensive coverage here, here, and here.) This week we got yet more evidence that federal policy is always big on promises, itty-bitty on results. According to the latest reports, most of the winners of President Obama’s $4.35-billion “Race to the Top” competition are well off pace to fulfill the promises they made to get the dough. Well off schedule, that is, except for adopting the laughably dubbed “state-led and voluntary” national curriculum standards that the federal Race to the Top essentially demanded they use.
It’s just as I warned back in 2009, when Race to the Top was all the transformative rage in both left and right edu-policy circles:
Have plans for reform? Sure. Break down a few barriers that could stand in the way of decent changes? That’s in there, too. But that’s about it. And the money is supposed to be a one-shot deal – once paper promises are accepted and the dough delivered, the race is supposed to be over.
In light of those things, how is this more appropriately labeled the Over the Top Fund than the Race to the Top Fund? Because while not requiring anything, it tries to push unprecedented centralization of education power. It calls for state data systems to track students from preschool to college graduation. It calls for states to sign onto “common” – meaning, ultimately, federal – standards. It tries to influence state budgeting.
To be fair, the feds could still hold states accountable and keep the RTTT dough if and when the states break their promises. But that would still be another failure, and all the money states and Washington will have spent on RTTT will have gone for naught. But, then, spending for naught is something we should be very much used to by now.
Capital Confusions over Bain Capital
Today POLITICO Arena asks:
Are Romney’s GOP rivals smart to continue their attacks on capitalism that have so far fallen flat? Would this theme be any more effective for the Obama campaign?
My response:
The Gingrich and Perry attacks on Mitt Romney’s work at Bain Capital are appalling. We expect that from Obama — as in yesterday’s “insourcing” press conference — because his understanding of how markets work is so slim and everything, for him, is politics. Those in the party that purports to stand for free markets should never stoop to such shameless pandering.
Steven Rattner’s piece in POLITICO this morning nicely summarizes the facts surrounding Romney’s work at Bain Capital. And yesterday my colleague Steve H. Hanke pointed to a more detailed study issued recently by the National Bureau of Economic Research, “Private Equity and Employment.” As Rattner puts it, Bain Capital’s record “was extraordinary, among the best in the business.” Yes, restructuring companies may cost jobs. Letting them fail does too — but also costs those who’ve invested in them, many of whom are or will be small retirees. At least Romney did it with private funds, not with taxpayer money or regulatory protections. That’s how capitalism works, for the benefit of all of us.
Mueller Right; Terror Experts Wrong
John Mueller was right and everyone else was wrong. (Well, not everyone else…)
That’s Cato senior fellow John Mueller. He noted on the National Interest blog last week that 79 per cent of top terrorism experts queried in 2006 thought it was likely or certain that there would be another major terrorist attack in the United States by the end of 2011. They got it wrong.
When the survey came out, it touted these experts as the “very people who have run America’s national-security apparatus over the past half century.” Mueller lampoons them thus:
The Very People’s 79 percent error rate is especially impressive because, although there had been quite a bit of terrorist activity in Iraq and elsewhere during the four-and-a-half years between 9/11 and when the survey was conducted, none of these attacks even remotely approached the destruction of the one on September 11. Nor, for that matter, had any terrorist attack during the four-and-a-half millennia previous to that date. In addition, although terrorist plots have been rolled up within the United States, none of the plotters threatened to wreak destruction on anything like the scale of 9/11, except perhaps in a few moments of movieland-fantasy musings.
Mueller was one of few suggesting in 2006—and well before—that 9/11 might be more of an aberration than a harbinger.
Mueller’s studied correctness so far is not proof of what the future holds, of course. If you want to, it is certainly possible to cling to the threat of terrorism and the metastasis of policies that purport to address your fears. Part of terrorism’s design is its operation on fear to produce cognitive errors like probability neglect, for example.
But thanks to Mueller, terrorism is holding fewer and fewer people in thrall. It is a serious, but manageable security threat. Those still transfixed by terrorism may add another fear to their long list: They may be mocked by the man who knows the subject matter better.
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