SEC Favors Special Interests in New Corporate Elections Rule
Yesterday, the SEC repealed a long-standing rule which allowed brokers to vote shares on behalf of their investors, unless they obtained written directions from each individual investors. While investors have long been able to direct the voting of their shares, many do not take the time to. In these cases, the brokers vote those shares, after all they are the agents of the investors and are hired to act on their behalf.
The direct effect of the rule will be to reduce the voting weight of retail investors, as represented by their brokers. In voting against the rule, SEC Commissioner Kathy Casey raised the point that the rule would skew voting toward large institutional investors and away from little retail investors.
What did the large institutions investors have to say? As reported in today’s Financial Times, Ann Yerger, who represents large pension funds claimed that “counting uninstructed broker votes is akin to stuffing the ballot box for management.” One has to wonder whether the pension funds, which Ms. Yerger represents should have to get written instructions from all the pensioners whose pensions are managed by these funds? Of course not, treating all agents of investors equally would make too much sense for the SEC.
Then one should not be too surprised to see pension funds be allowed to cast their “uninstructed” votes while brokers cannot. The largest pension funds manage the retirement of unionized state and local employees, often with the fund management itself representing the interests of the unions. We witnessed this same favoring of union interests over the common good in the auto bailouts.
The rule once again illustrates that the new bosses in Washington are busy rewarding their allies at the expense of everyone else.
Duncan Balls
It seems U.S. education secretary Arne Duncan and British schools secretary Ed Balls disagree on the merits of national standards. While Duncan has said that homogenizing educational standards nationwide is his single most important goal while in office, Balls has just pulled the plug on the U.K.’s 10 year experiment with national reading and math strategies. He told the media:
I think the right thing for us to do now is to move away from what has historically been a rather central view of school improvement through national strategies to something which is essentially being commissioned not from the centre but by schools themselves.
The problem with saying that every 5th grader in the nation should learn the same things at the same time is that all 5th graders are not created equal. Some are better at math than reading. Some the reverse. Some are quick learners across the board. Some are slower. To deny this is ridiculous, but to acknowledge it is to admit that homogenized standards in a system that groups students rigidly by age is educational malpractice.
Even if kids were all identical automatons, national standards wouldn’t drive excellence. It is the incentive structure of the free enterprise system that has driven progress in all the fields that have actually progressed — not externally-imposed standards.
What America needs for an educational renaissance is to release schools and families from the shackles of monopoly, and re-inject the freedom and incentives that kindle innovation and efficiency. Sitting 50 million Jills and Johnnies down on a conveyor belt that drags them all through their studies at the same pace makes no sense.
Why Fear Leviathan U.?
The Harriet Tubman Agenda – ordinarily a pretty rational blog — takes issue with my recent post expressing unease about a proposal to have Uncle Sam create and furnish free college courses. Accurately noting that American institutions of higher education, including private and for-profit schools, are addicted to government subsidies, the blogger asks what the problem is “if a free curriculum (defined by designated text books and tests), coupled with a competitive market in examination services, reduces the burden on taxpayers”?
Here’s the problem: From the perspectives of both freedom and effectiveness, why would we ever want the federal government creating free college curricula and, potentially, a giant federal university that, thanks to the internet, would not even be bound by the need to have a physical campus? Do we really want both state-run and private institutions, which despite huge subsidies still have to charge tuition and compete with one another, to have to go up against a free, Leviathan University? And why would it matter if the examinations accompanying Leviathan U’s curriculum were created by private companies? If you have to master The Little Red Book — to use an extreme example — does it matter if the testing contract is competitively bid?
The Harriet Tubman Agenda is absolutely right that, engorged with government subsidies, American higher education is grossly wasteful. But replacing it with utterly unconstitutional federal courses that could someday yield a mammoth, federal university? For reasons even more basic than saving taxpayer money, that would be a terrible move.
Washington Push on Executive Pay Has Unintended Consequences
Regulators at the SEC and politicians on Capitol Hill seem to have short memories when it comes to executive compensation. When the SEC years ago decided to make the compensation of top executives public information, it had the all too predictable result of actually increasing average compensation levels. Once a top CEO knew what other CEOs were making, he could argue for a pay hike based upon being “underpaid”. Of course regulators were “shocked” by the resulting “race to the top.”
Similarly Congress was shocked when after deciding to heavily tax salaries over $1 million, that companies shifted away from direct cash pay and toward options and increased bonuses in the form of shares.
And soon Washington will also pretend to be shocked and outraged that the current anger over Wall Street bonuses is leading firms to reduce bonuses, but increase base pay. As illustrated in today’s Wall Street Journal, companies like Morgan Stanley have increased their base pay from $300,000 to $400,000. Even Citibank, essentially a ward of the US government, is increasing its base pay to $300,000 for employees that were previously eligible for bonuses.
The real harm in this is not that Wall Street employees are getting paid more in cash, but that less of their compensation will be tied to their performance, and the performance of their firm. A flat salary, regardless of how hard you work, will encourage shirking. Perhaps even worse, is that more upfront cash, and less long-term stock options, will shift Wall Street’s focus even more toward today, rather than tomorrow. So much for Washington fixing the short term focus of Wall Street, but then one shouldn’t be too surprised given the even more short term focus of Washington.
Too Big to Fail
One of the most pernicious public policies aggravating the financial crisis is that of “too big to fail.” The doctrine states that some banks (now financial institutions generally) are so large that their failure would incur “systemic risk” for the financial system. That sounds terrible and it is intended to. Financial services regulators and Treasury secretaries use it to frighten small children and congressmen. How can an elected official vote to incur systemic risk? He must vote to approve the bank bailout of the day. In fact, people who use the term cannot even agree among themselves as to what it means, much less what causes it and, therefore, what the appropriate response would be. I suggest the reader substitute the phrase “too politically connected to fail” whenever he sees “too big to fail.” What follows will then be rendered intelligible.
Whiskey Tango Foxtrot Moment in Afghanistan
In yesterday’s Washington Post, veteran newsman Bob Woodward recounts a recent meeting between National Security Advisor James Jones and a few dozen Marine officers in Afghanistan’s Helmand province under the command of Marine Brig. Gen. Lawrence D. Nicholson.
The subject on everyone’s mind: force levels. Saying that he was “a little light,” Nicholson hinted that he could use more forces, probably thousands more. “We don’t have enough force to go everywhere,” Nicholson said.
Of course he doesn’t. One senior military commander confided, in Woodward’s telling, ”that there would need to be more than 100,000 troops to execute the counterinsurgency strategy of holding areas and towns after clearing out the Taliban insurgents. That is at least 32,000 more than the 68,000 currently authorized.”
So, Nicholson and other commanders were asking: Can we expect to receive additional troops in Afghanistan any time soon?
Jones’s answer: don’t bet on it.
The retired Marine Corps general reminded his audience in Helmand that Obama has approved two increases already. Going beyond merely an endorsement of the outgoing Bush admiministration’s decision to more than double the force in Afghanistan, Obama accepted the recommendation of his advisers to send an additional 17,000, and then shortly thereafter another 4,000.
Well, Jones went on, after all those additional troops,…if there were new requests for force now, the president would quite likely have “a Whiskey Tango Foxtrot moment.” Everyone in the room caught the phonetic reference to WTF — which in the military and elsewhere means “What the [expletive]?”
Nicholson and his colonels — all or nearly all veterans of Iraq – seemed to blanch at the unambiguous message that this might be all the troops they were going to get.
Nicholson and his Marines should be concerned. But so should all Americans. The men and women in our military have been given a mission that is highly dependent upon a very large number of troops, and they don’t have a very large number of troops. The clear, hold and build strategy is dangerous and difficult – even when you have the troop levels that the military’s doctrine recommends: 20 troops per 1,000 indigenous population. In a country the size of Afghanistan (with an estimated population of 33 million), that wouldn’t be 100,000 troops, that would be 660,000 troops.
Pacifying all of Afghanistan would be nearly impossible with one half that number of troops. It is foolhardy to even attempt such a mission with less than a sixth that many.
So, what gives? (Or, as the military folks might say, “Whiskey, Tango, Foxtrot?”)
The Correct Question for the Supreme Court
Eric Brown poses the correct question here.
The Supreme Court said in Austin v. Michigan Chamber of Commerce that the state of Michigan could indeed ban that particular advertisement.
Filed under: Government and Politics; Law and Civil Liberties
The Failure of Do-Nothing Policies
A news story from today in a slightly alternate universe:
Jobless Rate at 26-Year High
Employers kept slashing jobs at a furious pace in June as the unemployment rate edged ever closer to double-digit levels, undermining signs of progress in the economy, and making clear that the job market remains in terrible shape.
The number of jobs on employers’ payrolls fell by 467,000, the Labor Department said. That is many more jobs than were shed in May and far worse than the 350,000 job losses that economists were forecasting.
Job losses peaked in January and had declined every month until June. The steep losses show that even as there are signs that total economic activity may level off or begin growing later this year, the nation’s employers are still pulling back.
White House press secretary Robert Gibbs said, “President Obama proposed a $787 billion stimulus program to get this country moving again. He tried to save the jobs at GM and Chrysler. But the do-nothing Republicans filibustered and blocked that progressive legislation, and these are the results.”
House Speaker Nancy Pelosi said at a press conference, “We begged President Bush to save Fannie Mae, Merrill Lynch, Bank of America, AIG, the rest of Wall Street, the banks, and the automobile industry. We begged him to spend $700 billion of taxpayers’ money to bail out America’s great companies. We begged him to ignore the deficit and spend more money we don’t have. But did he listen? No, he just sat there wearing his Adam Smith tie and refused to spend even a single trillion to save jobs. And now unemployment is at 9.5 percent. I hope he’s happy.”
Democrats on Capitol Hill agreed that the “do-nothing” response to the financial crisis had led to rising unemployment and a sluggish economy. If the Bush and Obama administrations had been willing to invest in American companies, run the deficit up to $1.8 trillion, and talk about all sorts of new taxes, regulations, and spending programs, then certainly the economy would be recovering by now, they said.
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Immigration and Labor Markets; Tax and Budget Policy
Congress Just Raised Our Credit Card Fees
Technically, it was the companies which raised their fees. But they did so to anticipate new legislative restrictions on fees taking effect. Congress wanted to cut costs for consumers, but ended up costing them instead.
Credit card companies are raising interest rates and fees seven months before new rules go into effect that will limit their ability to do so, much to the irritation of Congress and consumer advocates.
Chase, for instance, will raise the minimum payment required of some of its customers from 2 percent to 5 percent of the statement balance starting in August. Chase and Discover have increased the maximum fee charged for transferring a balance to the card to 5 percent of the amount, up from 3 and 4 percent, respectively. Bank of America last month raised the transaction fee for balance transfers and cash advances from 3 to 4 percent. Card issuers including Bank of America and Citi also continue to cut limits and hike up rates, which they have been doing with more frequency since January.
“This is a common practice and will continue to be common, because issuers can do these things for really no reason until February,” said John Ulzheimer, president of consumer education for Credit.com, which tracks the industry. “It’s what I call the Credit Card Trifecta — lower limits, higher rates, higher minimum payments.”
It’s not just the top card issuers making changes. Atlanta-based InfiBank, for example, will raise the minimum annual percentage rate it charges nearly all of its customers in September “in order to more effectively manage the profitability of our credit card account portfolio in a very challenging economic environment,” said spokesman Kevin C. Langin.
The flurry of activity, which the banks say is necessary to shore up their revenue losses, has irked members of Congress, who passed a new credit card law, which was signed by President Obama in May. The law, among other things, would prevent card companies from raising rates on existing balances unless the borrower was at least 60 days late and would require the original rate to be restored if payments are received on time for six months. The law would also require banks to get customers’ permission before allowing them to go over their limits, for which they would have to pay a fee.
One hates to think of what additional “help” Congress plans on providing for us in the future.
Filed under: Finance, Banking & Monetary Policy; Government and Politics; Regulatory Studies
Obama Adopts the Mikulski Principle
Economists have advanced many theories of taxation. But as usual, the one that seems to explain the policies of the Obama administration best is what I call the Mikulski Principle, the theory most clearly enunciated in 1990 by Sen. Barbara Mikulski (D, Md.):
Let’s go and get it from those who’ve got it.
Just take a look at the myriad taxes proposed or publicly floated by President Obama and his aides and allies:
- Raise the top income tax rates from their current 33 percent and 35 percent rates to 36 percent and 39.6 percent in 2011
- Limit itemized deductions for people paying high rates
- Increase capital gains and dividend taxes by 33 percent for people paying high income tax rates
- Impose a value-added tax (VAT) on all goods and services
- Raise the Social Security tax by lifting the cap
- Raise a variety of business taxes by $353 billion over 10 years, including repeal of LIFO rules, restoring Superfund taxes, seven tax increases on energy companies, and more
- Tax employer-provided health benefits
- Implement a cap-and-trade system for emissions permits, the functional equivalent of a massive new tax
- Tax drivers on their mileage
- Change rules to raise gift taxes
- Restore the estate tax at 45 percent
- Raise cigarette tax by 62 cents a pack
- Raise taxes on beer, wine, liquor, and soda
- Eliminate health savings accounts and flexible savings accounts
- Tax employer-provided cellphones
- Tax AIG employee bonuses
- Raise taxes on overseas corporate earnings
As the links will indicate, not all of these taxes have been formally proposed, and some have already run into sufficient criticism to have become unlikely. But together they illustrate the mindset of an administration and a Congress determined to extract as much money as they can from Americans rather than cut back on expenditures, which have doubled in about eight-and-a-half years.
Indeed, the administration’s programs remind us that today is July 2, the 233rd anniversary of the day on which the Continental Congress voted for American independence, issuing a document that declared, among other things,
He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.
Civil Liberties and President Barack W. Bush?
It’s fair to say that civil liberties and limited government were not high on President George W. Bush’s priorities list. Indeed, they probably weren’t even on the list. Candidate Barack Obama promised “change” when he took office, and change we have gotten. The name of the president is different.
Alas, the policies are much the same. While it is true that President Obama has not made the same claims of unreviewable monarchical power for the chief executive–an important distinction–he has continued to sacrifice civil liberties for dubious security gains.
Civil libertarians recently accused President Obama of acting like former President George W. Bush, citing reports about Mr. Obama’s plans to detain terrorism suspects without trials on domestic soil after he closes the Guantánamo prison.
It was only the latest instance in which critics have argued that Mr. Obama has failed to live up to his campaign pledge “to restore our Constitution and the rule of law” and raised a pointed question: Has he, on issues related to fighting terrorism, turned out to be little different from his predecessor?
The answer depends on what it means to act like Mr. Bush.
As they move toward completing a review of their options for dealing with the detainees, Obama administration officials insist that there is a fundamental difference between Mr. Bush’s approach and theirs. While Mr. Bush claimed to wield sweeping powers as commander in chief that allowed him to bypass legal constraints when fighting terrorism, they say, Mr. Obama respects checks and balances by relying on — and obeying — Congressional statutes.
“While the administration is considering a series of options, a range of options, none relies on legal theories that we have the inherent authority to detain people,” Robert Gibbs, the White House press secretary, said this week in response to questions about the preventive detention report. “And this will not be pursued in that manner.”
But Mr. Obama’s critics say that whether statutory authorization exists for his counterterrorism policies is just a legalistic point. The core problem with Mr. Bush’s approach, they argue, was that it trammeled individual rights. And they say Mr. Obama’s policies have not changed that.
“President Obama may mouth very different rhetoric,” said Anthony D. Romero, executive director of the American Civil Liberties Union. “He may have a more complicated process with members of Congress. But in the end, there is no substantive break from the policies of the Bush administration.”
The primary beneficiaries of constitutional liberties are not terrorist suspects, but the rest of us. The necessary trade-offs are not always easy, but the president and legislators must never forget that it is a free society they are supposed to be defending.
Filed under: Foreign Policy and National Security; Government and Politics; Law and Civil Liberties
New Government of Honduras Takes a Wrong Turn
Facing mounting international pressure to reinstall a would-be despot, the provisional government of Honduras is taking a very wrong turn by asking the National Assembly to temporarily extend curfew powers and limit basic individual liberties.
The government claims that the measures, which will be in place for 72 hours, are justified to prevent any civil unrest given the imminent return of former president Manuel Zelaya to the country. However, the provisional authorities are actually undermining the rule of law and constitutional liberties that they claimed to be protecting when removing Zelaya from power last Sunday.
The individual rights and liberties that would be affected: the inviolability of homes, the right to protest peacefully, the guarantee against being held for more than 24 hours without charges, and the freedom to move around the country undisturbed.
These actions are unjustified. By moving to take away civil liberties from Hondurans, the provisional government undercuts its moral standing vis-à-vis the increasingly autocratic rule of Manuel Zelaya it came to replace. Even if these measures are meant to be temporary, history shows that once a government claims emergency powers, it is very hard to completely relinquish them once the “emergency” is gone.
Moreover, these restrictions do little service to the argument of the new Honduran government that Zelaya’s removal was not a military coup d’état. Having the army policing the streets and curbing the free movement of people and their right to protest peacefully gives the impression that the military is in charge and calling the shots.
The Honduran government should scrap these measures and reassure the population that their individual rights and liberties guaranteed under the Honduran constitution will be fully respected.
Filed under: Foreign Policy and National Security; International Economics and Development
Cap ‘n Trade: The Ultimate Pork-Fest
Some naive people might have been convinced that the U.S. House voted to wreck the American economy by endorsing cap and trade because it was the only way to save the world. But even many environmentalists had given up on the bill approved last Friday. It is truly a monstrosity: it would cost consumers plenty, while doing little to reduce global temperatures.
But the legislation had something far more important for legislators and special interests alike. It was a pork-fest that wouldn’t quit.
As the most ambitious energy and climate-change legislation ever introduced in Congress made its way to a floor vote last Friday, it grew fat with compromises, carve-outs, concessions and out-and-out gifts intended to win the votes of wavering lawmakers and the support of powerful industries.
The deal making continued right up until the final minutes, with the bill’s co-author Representative Henry A. Waxman, Democrat of California, doling out billions of dollars in promises on the House floor to secure the final votes needed for passage.
The bill was freighted with hundreds of pages of special-interest favors, even as environmentalists lamented that its greenhouse-gas reduction targets had been whittled down.
Some of the prizes were relatively small, like the $50 million hurricane research center for a freshman lawmaker from Florida.
Others were huge and threatened to undermine the environmental goals of the bill, like a series of compromises reached with rural and farm-state members that would funnel billions of dollars in payments to agriculture and forestry interests.
Automakers, steel companies, natural gas drillers, refiners, universities and real estate agents all got in on the fast-moving action.
The biggest concessions went to utilities, which wanted assurances that they could continue to operate and build coal — burning power plants without shouldering new costs. The utilities received not only tens of billions of dollars worth of free pollution permits, but also billions for work on technology to capture carbon-dioxide emissions from coal combustion to help meet future pollution targets.
That deal, negotiated by Representative Rick Boucher, a conservative Democrat from Virginia’s coal country, won the support of the Edison Electric Institute, the utility industry lobby, and lawmakers from regions dependent on coal for electricity.
Liberal Democrats got a piece, too. Representative Bobby Rush, Democrat of Illinois, withheld his support for the bill until a last-minute accord was struck to provide nearly $1 billion for energy-related jobs and job training for low-income workers and new subsidies for making public housing more energy-efficient.
Representative Joe Barton, a Texas Republican staunchly opposed to the bill, marveled at the deal-cutting on Friday.
“It is unprecedented,” Mr. Barton said, “but at least it’s transparent.”
This shouldn’t surprise anyone who follows Washington. Still, the degree of special interest dealing was extraordinary. Anyone want to imagine what a health care “reform” bill is likely to look like when legislators finish with it?
Filed under: Energy and Environment; Government and Politics; Tax and Budget Policy
Calling Secretary Napolitano: Arizona to Reject EDLs
Department of Homeland Security Secretary Janet Napolitano has been all over the map on national ID issues. As governor of Arizona, she signed a memorandum of understanding with the Bush DHS to implement “enhanced driver’s licenses” in her state. These are licenses with long-range RFID chips built into them. But then she turned around and signed legislation barring implementation of the REAL ID Act in Arizona.
Now, having taken federal office, she again favors REAL ID — or at least under its new name: PASS ID. (Her efforts to put distance between REAL ID and PASS ID have not borne fruit.)
In some respects, PASS ID is worse than REAL ID. It would give congressional approval to the “enhanced driver’s license” program — invented by DHS and State Department bureaucrats to do long-range (and potentially surreptitious) identification of people holding this type of card. Back home, the Arizona legislature has just passed a bill to prohibit the state from implementing EDLs.
So the former governor of Arizona, who has both supported and rejected national ID programs, now supports a bill to approve the national ID program her home state rejects. Napolitano seems to be taking the national ID tar baby in a loving embrace.
Filed under: Foreign Policy and National Security; Telecom, Internet & Information Policy
Health Care Priorities
As Washington debates a big increase in federal health care spending, I came across these two articles on what a splendid job the government is doing managing its current health programs.
Harvard professor Malcolm Sparrow recently testified that roughly $100 billion or more of Medicare and Medicaid dollars go down the drain each year due to fraud. It’s easy to rip these programs off because of their vast size and electronic claims processing. Medicare processes more than 1 billion of claims each year.
This Washington Post article last year described one particular example of the fraud. A high-school drop-out managed to bilk Medicare out of $105 million by submitting a 140,000 false claims from her laptop computer.
So we’ve got $100 billion or so of taxpayer’s hard-earned money being stolen each year from our current public health care plans. You would think that with today’s giant budget deficit that the highest priority of policymakers would be to reform these programs to reduce the unbelievable and disgusting amounts of graft. But no, many in Congress and President Obama have decided that current government health care works so well that they want to expand it.
President Obama wants to create a new “public health option” to “keep insurance companies honest.” Hey Mr. President, you should do something about the $100 billion of dishonesty in current public health plans, instead of hitting up taxpayers to fund an even more bloated health care budget.
Finally, an Education Muckraker!
I’ve often complained on this blog that there are no education muckrakers – no reporters who will actually go out and investigate the misleading claims so often fed to them by politicians and public school officials. Well, it turns out there’s at least one, and his name is Ron Matus.
After being told countless times that public schools in Florida spend just $7,000 per pupil annually, Matus decided to do what no other ed reporter in the state (so far as I know) has done: check it. In a blog post today, he explains where the $7,000 number comes from, he points out that the actual total is $12,000 per pupil, and he lets readers decide which number is more relevant to them. Way to go, Mr. Matus!
I particularly enjoyed this line: “[Department of Education] officials say it’s fair to roll federal money into a per-pupil spending figure – that money does go to operational costs - but not capital outlay and debt service.”
Apparently schools don’t need buildings anymore! Wonderful news! Now that Floridians no longer have to pay for construction and renovation costs, they’ll save $6 billion a year. That is, they’ll start saving it as soon as the Department of Education gives it back to them. What’s that? They don’t want to give it back even though they say it doesn’t count? Gee. I guess it does count then, doesn’t it?
This public school emperor isn’t just naked, he’s mincing about flamboyantly and daring on-lookers to call him sartorially challenged. Well we dare, pal, we dare. If you want buildings to house all those students, and you want the billions to pay for them, then the St. Pertersburg Times, at least, is going to start counting it.
If there are any other reporters out there who have similarly tracked down the real total per pupil spending numbers, let me know and I’ll cite your work here. Or, if you’d like to try it but don’t know where to start, drop me an e-mail.
Those Who “Serve” Us Celebrate
Those who think that the college-educated, or soon to be so, should have more and more of their education funded by taxpayers – whether those taxpayers themselves attended college or not – are shooting off the fireworks a bit early this year, celebrating increasingly generous federal aid going into effect today.
Perhaps the most galling part of all the increasingly free-flowing aid is how much is being targeted at people who work in “public service.” Ignoring for the moment that the people who make our computers, run our grocery stores, play professional baseball, and on and on are all providing the public with things it wants and needs, to make policy on the assumption that people in predominantly government jobs are somehow selflessly sacrificing for the common good is to blatantly disregard reality.
Consider teachers, as I have done in-depth. According to 2007 Bureau of Labor Statistics data, adjusted to reflect actual time worked, teachers earn more on an hourly basis than accountants, registered nurses, and insurance underwriters. Elementary school teachers – the lowest paid among elementary, middle, and high school educators – made an average of $35.49 an hour, versus $32.91 for accountants and auditors, $32.54 for RNs, and $31.31 for insurance underwriters.
So much for the notion that teachers get paid in nothing but children’s smiles and whatever pittance a cruel public begrudgingly permits them.
How about government employees?
Chris Edwards has done yeoman’s work pointing out how well compensated federal bureaucrats are, noting that in 2007 the average annual wage of a federal civilian employee was $77,143, versus $48,035 for the average private sector worker. And when benefits were factored in, federal employee compensation was twice as large as private sector. But don’t just take Chris’s word and data to see that federal employment is far from self-sacrificial – take the Washington Post’s “Jobs” section!
And it’s not just federal employees or teachers who are making some pretty pennies serving John Q. Public. As a recent Forbes article revealed, it’s people at all levels of government, from firefighters to municipal clerks:
In public-sector America things just get better and better. The common presumption is that public servants forgo high wages in exchange for safe jobs and benefits. The reality is they get all three. State and local government workers get paid an average of $25.30 an hour, which is 33% higher than the private sector’s $19, according to Bureau of Labor Statistics data. Throw in pensions and other benefits and the gap widens to 42%.
Recently, my wife and I have been watching the HBO miniseries John Adams, and I couldn’t help but make the observation: In Adams’ time, many of those who served the public truly did so at great expense to themselves, often risking their very lives and asking little, if anything, from the public in return. Today, in contrast, many if not most of those who supposedly serve the public do so at no risk to themselves – indeed, unparalleled security is one of the great benefits of their employment – but are treated as if their jobs are extraordinary sacrifices. And so, as we head into Independence Day, it seems the World has once again been turned upside down: In modern America, the public works mightily to serve its servants, not the other way around.
Filed under: Education and Child Policy; Tax and Budget Policy
Banks, Bailouts, and Political Pressure
The Washington Post reports:
Sen. Daniel K. Inouye’s staff contacted federal regulators last fall to ask about the bailout application of an ailing Hawaii bank that he had helped to establish and where he has invested the bulk of his personal wealth.
The bank, Central Pacific Financial, was an unlikely candidate for a program designed by the Treasury Department to bolster healthy banks. The firm’s losses were depleting its capital reserves. Its primary regulator, the Federal Deposit Insurance Corp., already had decided that it didn’t meet the criteria for receiving a favorable recommendation and had forwarded the application to a council that reviewed marginal cases, according to agency documents.
Two weeks after the inquiry from Inouye’s office, Central Pacific announced that the Treasury would inject $135 million.
As we’ve said here many times, going back to 1983, when government is in the business of making economic decisions, you inevitably get more lobbying, more campaign spending, and more political influence on economic decision-makers.
Excellent WSJ Column on Health Care Nonsense
By George Newman. A sampling:
“The cost of health care rises two to three times as fast as inflation.”
That’s like comparing the price of hamburger 30 years ago with the price of filet mignon today and calling the difference inflation.
Education Tax Credits Pass in Indiana
Despite the economy and the dogged opposition of powerful Big Ed, education tax credits are surviving and thriving. The latest state to jump into k-12 tax credits is Indiana. From the Friedman Foundation yesterday:
Indiana lawmakers today approved a $2.5 million scholarship tax credit program in the home state of the Friedman Foundation for Educational Choice. The new scholarship program was inserted into the state’s budget and won approval in the late hours of the special legislative session. The bill, which passed the Senate 34-16 and the House 61-36, now goes to the governor who is anticipated to sign it in the coming days.
Unfortunately, the credit is only 50% for each dollar donated, unlike the more powerful ones in PA, FL, and AZ. But I know Friedman, School Choice Indiana and their allies will be fighting hard in coming years to increase the credit amount and program cap.
Sounds like Governor Mitch Daniels deserves kudos for keeping the bill in his budget and pushing for the program. And the word is that around 27 percent of the House Democrats voted for the budget despite the tax credit and virtual charter school programs that the teachers unions opposed. Big Ed ain’t what he used to be.
Hate Crime Legislation: A Shocking Disregard for Federalism
Last week’s Senate Judiciary Committee hearings (video at the link) on the proposed federal hate crimes bill showed the dark underbelly of the Senate. The road to undermining the rule of law is being paved with the best of intentions and casual disregard (if not outright hostility) for the principles of limited government and equality under the law.
I raise some objections to the bill in this podcast:
The bill federalizes violent acts against victims by reason of their actual or perceived race, color, religion, national origin, gender, sexual orientation, gender identity, or disability.
Never mind that these acts are already prosecuted by the states, and that violent crimes of this nature are universally perceived as an affront to justice. Matthew Shepard, the gay man brutally killed in Wyoming, has provided one of the rallying cries for passage of this legislation. His killers both received two consecutive life sentences from a state court. James Byrd, Jr., the African-American man dragged to death behind a truck in Texas, is cited as another reason to pass the law. His killers received death sentences or life imprisonment.
The federal government would also be authorized to prosecute whenever “the verdict or sentence obtained pursuant to State charges left demonstratively unvindicated the Federal interest in eradicating bias-motivated violence.” While this doesn’t violate the letter of the Supreme Court’s Double Jeopardy jurisprudence (the federal and state governments are considered separate sovereigns) it certainly violates its spirit.
The hearing video shows a complete disregard for limitations on federal power. Senator Ben Cardin (D-MD) claims that we need a “uniform” law across the states (82 minute mark). This claim ignores the fact that 45 states have their own hate crime laws and that violence against others is universally unlawful and routinely prosecuted. It also disregards the fact that general police powers belong to the states, not to the federal government.
Senator Charles Schumer (D-NY) then makes a brief appearance (89 minute mark) to slander opponents of the legislation - how could anyone oppose legislation with such a noble goal? He claims that this is tantamount to saying that it is acceptable to harm people because you do not like who they are.
The problem is that a broad array of actions are implicated as “hate crimes.” Virtually all rapes seem to fall under the new law - it is hard to see how the choice of a rape victim would not implicate their sex. Gail Heriot, a member of the United States Commission on Civil Rights (which came out 6-2 against this legislation), testified that when she consulted with Department of Justice attorneys in previous attempts to pass this legislation, they didn’t seem fazed by this prospect.
Don’t expect the application of this legislation to be the rare and exceptional prosecution that Attorney General Holder promises in his testimony. Janet Cohen testified that her upbringing in a racially divided America decades ago justifies passage of this law. She also proposes that prosecutions with the new law will be “wise” on account of Holder’s “brilliance and integrity.”
And to think, we were once a nation of laws, not of men.
This legislation doesn’t promote the rule of law, it undermines it. Prosecutions that favor one group of victims over another mark the destruction of equality before the law.
The worst facet of the legislation is its counterproductive nature. A real true believer, a hardcore racist or homophobe, would want to be prosecuted under a statute that criminalizes his motives. Prosecution under a murder statute makes him a common criminal; prosecution for murdering someone given special status by the government makes him a martyr for his cause and incites those motivated by his brand of hatred and animus.
This is nothing new. The Animal Enterprise Protection Act (AEPA) criminalized harassment, vandalism and violence against companies that test their products on animals. When seven activists from Stop Huntingdon Animal Cruelty tried to intimidate people associated with Huntingdon Life Sciences, a company engaged in animal testing, they weren’t just prosecuted for stalking. They were prosecuted for conspiracy to violate a federal statute enacted at the behest of their target industry. This made martyrs of the “SHAC 7” and highlighted the undue influence that an industry can exert over government. The focus is now on the propriety of the law used to prosecute someone, not the fact that they unlawfully stalked people engaged in lawful commercial activity.
You don’t defeat politically motivated violence by politicizing the laws used to prosecute it.
Murder is always murder most foul. We criminalize rape, assault, vandalism, and criminal threats because they harm a citizen - not a super-citizen held in some special regard by the government.
For more Cato work on hate crime legislation, go here and here.
Why Wal-Mart Supports an Employer Mandate
A couple of years ago, I shared a cab to the airport with a Wal-Mart lobbyist, who told me that Wal-Mart supports an “employer mandate.” An employer mandate is a legal requirement that employers provide a government-defined package of health benefits to their workers. Only Hawaii and Massachusetts have enacted such a law.
I couldn’t believe what I was hearing. Wal-Mart is a capitalist success story. At the time of our conversation, this lobbyist was helping Wal-Mart fight off employer-mandate legislation in dozens of states. Those measures were specifically designed to hurt Wal-Mart, and were underwritten by the unions and union shops that were losing jobs and business to Wal-Mart.
But it all became clear when the lobbyist explained the reason for Wal-Mart’s position: “Target’s health-benefits costs are lower.”
I have no idea what Target’s or Wal-Mart’s health-benefits costs are. Let’s say that Target spends $5,000 per worker on health benefits and Wal-Mart spends $10,000. An employer mandate that requires both retail giants to spend $9,000 per worker would have no effect on Wal-Mart. But it would cripple one of Wal-Mart’s chief competitors.
So yesterday’s news that Wal-Mart is publicly endorsing a “sensible and equitable” employer mandate — i.e., a mandate that hurts Target but not Wal-Mart — didn’t come as a surprise to me. It merely confirmed what I learned in a cab on the way to the airport: Wal-Mart has gone native. That great symbol of the benefits of free-market competition now joins its erstwhile enemies among the legions of rent-seeking weasels who would rather run to government for protection than earn their keep by making people’s lives better.
In 2007, Wal-Mart officially joined the Church of Universal Coverage when it entered one of those countless strange-bedfellows coalitions with the Service Employees International Union. At the time, I criticized Wal-Mart for “self-congratulatory puffery” and “jump[ing] on the big-government bandwagon.” I also criticized then-CEO Lee Scott for spouting economic nonsense. (I later learned that Scott was not amused.)
This is so much worse than that.
Filed under: Cato Publications; Health, Welfare & Entitlements
The European Union Stops Banning Ugly Veggies
The European Union has helped create a continental European market and knock down protectionist barriers, which is good. But it also has created another opportunity for meddling bureaucrats to interfere with people’s lives.
Now consumer protests have led to at least one victory for liberty. Reports London’s Sun newspaper:
Now the European Commission has finally scrapped the 20-year ban on 26 types of fruit and veg including asparagus, celery and aubergines.
They ruled they can now be sold - as long as they are labelled as “intended for processing”.
Sainbury’s spokeswoman Lucy Maclennan said: “We are delighted to have played a part in winning the wonky veg war against these bonkers EU regulations.”
Tesco spokesman Adam Fisher said: “It’s not before time. We welcome this move.”
And last night it was predicted the change could see some prices fall by 40 PER CENT.
A Commission official said: “Times have changed - now household budgets are tighter and there is the problem of wasting food.”
One bad regulation down. Who knows how many to go?
Filed under: International Economics and Development; Regulatory Studies; Trade
Government Motors Gears Up
Mother Goose and Grimm, by Mike Peters, June 30.
War without Killing?
The United States is going to cut back on airstrikes in Afghanistan, according to the new commander there, Gen. Stanley McChrystal. This decision comes on the heels of Central Command’s release (late on a Friday afternoon) of the executive summary of a report on the killing of dozens — at least — of civilians in Farah Province in Western Afghanistan. On May 4, a B-1B providing air support to US and Afghan forces there bombed some buildings, thinking that they contained insurgents. The buildings were apparently full of civilians.
Everyone seems to think this is a wise policy shift. The center of gravity in an insurgency, we’re often told, is the population. You need their support to find and defeat insurgents. Killing people undermines their support for the occupier and the government. You often hear the same thing about airstrikes in Pakistan.
This is a sensible argument, but it has some problems. For one, empirics to support it are hard to come by. Second, it isn’t obvious that people cooperate with occupiers or governments because they like them. Support may come instead from the mix of incentives — coercive and economic — that the population faces. The power to reward and punish behavior probably matters more in generating cooperation than feelings of loyalty, although they are not mutually exclusive.
You might respond that it is simply immoral to kill innocent people, whatever the strategic effects. That takes us to the real trouble with the critique of airstrikes, which is the idea that you can fight clean wars.
The accidental killing of Afghan civilians is a tragedy we should limit (one way to do so might be to simply stop using bombers for close air support). It is also an inevitable consequence of fighting a war in Afghanistan. Troops are going to use plentiful and occasionally indiscriminate firepower to defend themselves. This problem can be mitigated but not solved. You should not support the war in Afghanistan if you cannot support killing innocent people in prosecuting it. As Harvey Sapolsky (my professor at MIT) points out on his new blog, the allies killed 50,000 French civilians in the course of liberating France in World War II. Today precision munitions save many civilians, but, along with euphemistic words like state-building, they threaten to delude us into thinking that we can fight antiseptic wars that adhere to liberal norms. (The situation is even worse in Germany, where they are arguing about whether to call what they are doing in Afghanistan a war).
As Sapolsky puts it:
Air power is our advantage, especially in a country where our forces are spread thin and the distances are large. Precautions have limited greatly the number of weapons dropped and how air power is employed. But only a little deception apparently is needed to put this advantage in jeopardy. Soldiers are still dying in Afghanistan. If there is no will to inflict casualties then there should be no will in absorbing them. Try as we may to avoid it, war kills the innocent.
For the source of this post’s title see the first article (pdf) here.
Mr. Jefferson Regrets
Thomas Jefferson was an advocate of public schooling, after a fashion. He knew that an educated public was the only protection against government abuses, and he assumed that a state-run, state-funded school system would provide that essential education. If he could only see public schooling today.
The Arizona-based Goldwater Institute has just released a study on the civics knowledge of that state’s high school students. Matt Ladner, Goldwater’s head of research, administered the same trivial test that’s given to immigrants applying for citizenship, using the same trivial pass/fail threshold. [I know it's trivial, 'cause I took it a few years ago.] The results of Goldwater’s little experiment… Oh. My. God. Becky:
96.5 percent of AZ public high school students failed
Honestly, why did anyone — especially Thomas Jefferson – ever imagine that a government monopoly would be a good way to educate kids about a democratic republic and protect them from abuses of government power?
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