Friday, January 29, 2010

A Paralyzing Presidency

The U.S. economy ought to be flying out of recession. Yet bank lending is sluggish. Companies refuse to hire. Business is going elsewhere to raise capital: China last year outstripped the U.S. as a center for initial public offerings. The market gyrates on Washington's latest political drama.

A venture capitalist recently remarked to me that the uncertainty the administration has created is "nothing short of paralyzing." Nobody will invest in an industry that might be the next to be overtaxed, overregulated, or publicly disemboweled.

Add to that uncertainty the administration's new populist bent, and it's a recipe for a continued capital freeze. "People in the economy are thinking about whether to invest or take risks when what they are seeing are early signs of Hugo Chávez economics," says Wisconsin GOP Rep. Paul Ryan. . . .

It seems to me this is a reasonable observation. Investing in the creation of new productive economic activities is a risky business. Uncertainty about what Congress and the President might do that would further burden business means that creative new productive economic activities looks even more risky. By the time someone is able to realize in some future moment the fruits of a commitment today to new economic activities, the opportunity to earn a profit may have been burdened away by new actions and new policies of the President and the Congress.

Thursday, January 28, 2010

Climate Science. . .Trust Us?

"The University of East Anglia breached the Freedom of Information Act by refusing to comply with requests for data concerning claims by its scientists that man-made emissions were causing global warming."
who can we trust? Oh, I know. . . . .politicians. I almost forgot.

Alternative SOTU

Jeffrey Miron suggests an interesting 10-point libertarian state of the union.

Wednesday, January 27, 2010

A Thousand Central Planners

MATT WELCH & NICK GILLESPIE write to President Obama:
"A thousand central planners before you have learned it the hard way: Prosperity isn't something the government creates, it's something the government, in the best case, can enable, mostly by establishing a set of simple rules and getting the hell out of the way."
Wise advice, don't you think?

Health Care Reform Constitutional?

Are the health care reform bills passed recently passed by the House and the Senate constitutional? AKHIL REED AMAR argues yes, while ROB NATELSON argues no. Here is Natelson:
"I do not share the writer’s confidence that national health care mandates are constitutional even under the modern Supreme Court’s altered version of the Constitution — but I recognize that legal scholars differ on this question. However, the claim that the Founding Fathers would have thought the Constitution allows Congress to impose health care mandates is little short of absurd."
If you are interested in this issue, I recommend reading at least the piece by Natelson. Why? Because I think his analysis is the better analysis.

But, for myself, the constitutional issue should be much easier to answer. I suggest whenever you see an argument, like Amar's in this case, which goes on and on with this and that justification, you should be wary of the conclusion of constitutionality. The conceptual foundation of the Constitution does not require a long list of reasons to suppose any action by Congress is constitutional. In fact, I think the conceptual foundation of the Constitution requires just the opposite to argue an action is constitutional.

The Constitution is a document which grants specific and enumerated powers to Congress. The conceptual foundation of the document is the idea that unless there is a specific power granted to Congress that is directly written into the language of the Constitution, then the Congress does not, constitutionally, have the power to act as it wishes.

The enumerated powers of the Constitution can be found in Article 1, Section 8. There is a simple test of the constitutional question with respect to the health care reform bills, at least as far as I can understand the meaning of our Constitution. To see this consider some of the language in the enumerated powers clause of our Constitution:

The Congress shall have the Power . . .
  • To borrow money . . . .
  • To coin Money . . .
  • To establish Post Offices and post Roads. . .
  • To raise and support Armies. . . .
  • To provide and maintain a Navy. . . .
So, when I ask whether the bills passed by the House and the Senate regarding health care reform are constitutional I'm going to read Article 1, Section 8 looking to find something that would be like the following: "Congress shall have the power to provide health care services or health care insurance." I think the constitution issue should be this simple and this straight forward. And, if the proponent of the conclusion of constitutionality has to offer more than this kind of straight forward analysis, then the conclusion of constitutionality should probably, in my view, be seen as incorrect.

Of course, the health care reform bills passed by the House and the Senate could become constitutional. How? The Constitution could be amended to say that Article 1, Section 8 now includes the following: "Congress shall have the power to provide health care services or health care insurance." Of course, Congress seems not to be interested in doing health care reform the constitutional way (to paraphrase Justice Oliver Wendell Holmes).

Pretty Picture

Isn't this a pretty picture, eh? The lines depict the national government's revenues and outlays as a percentage of gross domestic product (GDP). This is from a report by the Congressional Budget Office. The CBO's analysis suggests that the deficit, the amount the national government chooses to borrow this budget year, will again represent about 10% of GDP. Check out the dotted lines which depict average revenues and outlays, and which suggest over the past 4 decades a deficit, on average, of about 2-3% of GDP. It looks a bit like something has changed. Have the preferences of the voters has changed?

Monday, January 25, 2010

Latest Index of Economic Freedom

The latest INDEX OF ECONOMIC FREEDOM is out. It reflects a downward trend over the past year for 8 of the top 10 countries with the greatest economic freedom. Only Switzerland and New Zealand, among the top 10, show an upward trend in economic freedom over the past year. The United States fell to #8 and is no longer characterized as "free" but only "mostly free." I'm not surprised.

TERRY MILLER offers commentary and this summary of the reasons for the decrease in economic freedom in the United States:
The U.S. lost ground on many fronts. Scores declined in seven of the 10 categories of economic freedom. Losses were particularly significant in the areas of financial and monetary freedom and property rights. Driving it all were the federal government's interventionist responses to the financial and economic crises of the last two years, which have included politically influenced regulatory changes, protectionist trade restrictions, massive stimulus spending and bailouts of financial and automotive firms deemed "too big to fail." These policies have resulted in job losses, discouraged entrepreneurship, and saddled America with unprecedented government deficits.

Wednesday, January 13, 2010

The Bonuses Problem

Jonathan Macey writes about bank bonuses and politics:
"There is only one way to resolve the bonus problem. We should continue to let shareholders pay their managers whatever and however they want. But we must get out of the business of guaranteeing against failure. The bankers and the shareholders who enjoy the rewards of risk-taking should be made to act like real capitalists: They should be required to assume the risks that go along with the banks' business activities."
Maybe another way to look at the issues here would be that we should not see executive bonuses as a problem. Without government policy that protects banks and other financial corporations from failure, costly risk taking by executives will not be rewarded with bonuses because such risk taking will turn out to be unprofitable.

But, given a government policy that says a bank or financial corporation is too big to fail, otherwise costly risk taking is turned into a return or revenue that comes from Uncle Sam and the taxpayers. Costly risk taking is turned into a idea with no reality for the protected from failure banks and financial corporations. Even otherwise costly risk taking by executives becomes an opportunity to turn a "profit," and from the government-is-my-protector corporation's perspective profits from any source are worthy of reward.

It seems to me we should not think that there is a bonuses problem. Instead we should see, if we see clearly, that there is a government policy problem.

Wednesday, January 06, 2010

A Liberty Lover's Top Ten List

Atlas Economic Research Foundation offers a list of the Top Ten Pro-Liberty Books of the Decade. How many have you read?

A Healthy Corruption?

Instead of appointing a formal conference committee to reconcile the House and Senate health bills, a handful of Democratic leaders will now negotiate in secret by themselves. Later this month, presumably white smoke will rise from the Capitol Dome, and then Nancy Pelosi, Harry Reid and the college of Democratic cardinals will unveil their miracle. The new bill will then be rushed through both chambers with little public scrutiny or even the chance for the Members to understand what they're passing.

Evading conference has become standard operating procedure in this Congress, though you might think they'd allow for the more open and thoughtful process on what Mr. Obama has called "the most important piece of social legislation since the Social Security Act passed in the 1930s and the most important reform of our health-care system since Medicare passed in the 1960s."
Does this Congress seem ever more corrupt? Or, perhaps it is tyrannical?