January 2012

Stimulus Bill Triggers Legislative Logjams, Perpetuates Credit Crisis

by Hans Bader on January 27, 2009 · 1 comment

in Bailout Watch, Economy, Politics as Usual, Stimulus to Nowhere

Obama’s stimulus package is the problem, not the solution. No one wants to make any hard decisions until they see what goodies they may get from Obama’s trillion-dollar stimulus package, which many economists oppose for good reason. The result is a deepening credit freeze that makes it difficult for small businesses to meet their payrolls, and delays passage of state budgets.

All the talk of a stimulus is resulting in a logjam in state legislatures as legislators put off hard choices in the hope that Washington will bail them out, delaying passage of state budgets. In Virginia, for example, the Washington Post reports that “Legislators from both parties are guilty of assuming that President Obama will come to the aid of states with a stimulus package, and they aren’t taking the budget gap as seriously as they should.” Meanwhile, Maryland’s big-spending government, which pushed through record tax increases last year, is drawing up an extravagant wish list of new spending proposals it hopes will be funded by Obama’s budget-busting stimulus package. Obama’s package has sent a “thrill” though wasteful local officials, who even the Post has criticized for allowing public-employee pensions and benefits to skyrocket out of control.

The stimulus package is also contributing to the credit-freeze that left some businesses unable to borrow from banks to meet payrolls. Banks are reluctant to lend money without knowing who will be the winners and losers from provisions buried in the stimulus package, which has already grown to more than 600 pages. And the money in the stimulus package will be spent mostly in future years — like 2010, an election year — not this year, when economic relief is most needed.

The same perverse thing happened last year, during the debate over the Wall Street bailout. Credit markets froze, partly because trust had broken down in financial markets, but also partly because it was hard to tell where opportunities for profit lay, without first knowing who would be propped up by the bailout, and who wouldn’t. All the talk of a bailout actually aggravated the freeze. Who wants to look like a sucker?

The stimulus plan will suck money out of productive sectors of the economy, emulate Japan’s failed borrow-and-spend strategy of the 1990s, and cost at least $300,000 for each government-sponsored job it artificially creates.

My brother, a hedge-fund manager, has been appalled by the often arbitrary way that the financial-system bailout money has been used, to prop up irresponsibly managed banks, while allowing more responsible ones to go out of existence in forced mergers (precisely because they took action to rein in their risky loan portfolios, making their potential failure cheaper to the taxpayer). The arbitrary way the government has picked winners and losers — like propping up a failing lender tied to Housing banking committee chairman Barney Frank — has made players in the financial system even more reluctant to take risks that may be needed to restore liquidity to the economy.

Eventually, the economy will recover, no thanks to Obama’s stimulus plan. The economy always recovers after a recession, as part of the business cycle. When it does, Obama will take credit for it, even though he will have as little to do with the recovery as he does with the sun rising.

White House Distorts Ledbetter v. Goodyear Ruling, in Backing Lilly Ledbetter Fair Pay Act

by Hans Bader on January 27, 2009 · 2 comments

in Legal, Politics as Usual

The White House is making false claims about the Supreme Court’s Ledbetter v. Goodyear decision. In that case, the Supreme Court enforced the 180-day deadline for bringing pay discrimination claims contained in the federal discrimination law with the shortest deadline, Title VII. (Other laws, like the Equal Pay Act, have much longer deadlines, like 3 years).

The White House claims that “The Court ruled that employees subject to pay discrimination like Lilly Ledbetter must file a claim within 180 days of the employer’s original decision to pay them less . . . even if the employee did not discover the discriminatory reduction in pay until much later (check out Justice Alito’s arguments in the Court’s opinion).”

This is misleading, and perhaps knowingly so, since the White House links to the very court decision it distorts. First, the Court never said there was a rigid deadline that bars claims by employees who “did not discover” discrimination “until much later.” Ledbetter never argued that the deadline should be suspended based on her employer concealing discrimination against her, because she in fact knew for years about the pay disparity she later sued over. If she truly had been in the dark about the alleged discrimination, she could have sought to take advantage of exceptions to the deadline that suspend it, like waiver, estoppel, and equitable tolling, under the Supreme Court’s decision in Zipes v. Trans World Airlines, 451 U.S. 385, 398 (1982). But she never made that argument, because, as she testified in her deposition, she had been told many years earlier that she was being paid less than the men she later claimed ought to have been paid the same as her.

Nor did she argue that the outcome of her case would have been changed if the Supreme Court recognized an even broader extension to the deadline for employees who are unaware of the discrimination against them, the so-called discovery rule. As the Supreme Court specifically noted in footnote 10 of its opinion, “we have previously declined to address whether Title VII suits are amenable to a discovery rule. . . .Because Ledbetter does not argue that such a rule would change the outcome in her case, we have no occasion to address this issue.” In short, since Ledbetter had long known of the facts underlying her discrimination claim, relaxing the deadline for employees who “did not discover” the discrimination until much later would have done her no good.

Thus, it is wrong for the White House to suggest that the Supreme Court sought to bar claims irrespective of whether “the employee did not discover the discriminatory reduction in pay until much later.”

Second, the Supreme Court expressly noted that the plaintiff could have pressed her claim instead under the Equal Pay Act, which has a longer deadline for suing (usually 3 years) and perhaps more generous accrual rules. But her lawyer foolishly failed to preserve that claim, which was a mistake, as he admitted to the Supreme Court. The Supreme Court responded by noting that “Petitioner, having abandoned her claim under the Equal Pay Act, asks us to deviate from our prior decisions in order to permit her to assert her claim under Title VII.”

The Obama campaign and state democratic parties spent much of the 2008 election season attacking the Supreme Court for supposedly creating a rigid 180-day deadline for pay discrimination claims. Those claims were false.

The fact that the Supreme Court rejected Ledbetter’s claim as untimely should not have been a shock to anyone, given that she waited until shortly before she retired to sue, after the supervisor she accused of discrimination had died.

Stimulus to Hunger

by Iain Murray on January 27, 2009 · 4 comments

in Agriculture, Economy, Energy, Environment, International, Sanctimony, Stimulus to Nowhere

Great. Now USDA head Tom Vilsack is saying the US ethanol industry needs to be protected in the borrow-and-spend bill, and beyond:

“The ethanol industry is under particular strain,” Vilsack said in a
conference call with reporters.

Loan guarantees for the industry, distributed by the USDA as part of the
2008 Farm Bill, “can help more of these companies stay in business,” Vilsack
said, though he warned that “there will be a premium on ethanol producers who
can stay efficient,” a clear warning that there is overcapacity in the US
industry.

Vilsack expected more aid to the industry would be forthcoming in a later
energy package, though he said that aid from the Farm Bill provisions for the
ethanol industry “would be the first step in stimulating the economy.” The
grant program guarantees loans up to $250 million, the USDA said.

Hang on, if there’s overcapacity, doesn’t that mean that some firms need to go under or all firms need to cut back? So there should be less spending, not more, on ethanol. It’s not as if they haven’t got a bundle of mandates subsidies already.

But the stark fact is that every bit of public money that goes into supporting the ethanol industry artificially raises the price of corn, which in turn artificially raises the price of food around the world, which in turn artificially raises the level of hunger in the world. This isn’t stimulus, it is close to murder.

UPDATE: Note also Jonathan Tolman’s post below about taking farmland out of production, and his noting that the bill also includes relief to the elderly on account of rising food prices. There is plainly no “joined-up thinking” going on in the drafting of this pathetic bill.

Land of Liberty? No Longer in Belmont, California

by Doug Bandow on January 27, 2009 · 3 comments

in Culture, Legal, Nanny State, Personal Liberty, Politics as Usual

I’ll confess that I’ve quietly applauded the spread of no smoking establishments.  I don’t believe the government should ban smoking in restaurants, bars, and airplanes, but I’ve enjoyed the new smoke-free atmosphere.

Nevertheless, it should not be a matter of the law.  The health argument misses the larger point:  people should be free to make choices, and that includes not only smoking, but smoking in restaurants, bars, and airplanes so long as the owners will let them do so.  People who don’t like smoke can go (and work) elsewhere.

There’s no reason that every business must have the same rules.  Why, for instance, in California, a state of 37 million people, is it illegal for even one bar in one city to allow smoking?  This is fascism with a human face, the demand that everyone else submit to one’s personal preferences, never mind what everyone else desires.

Now a town in California, naturally, has taken neo-prohibition one step further:  apartment buildings.

Reports the New York Times:

During her 50 years of smoking, Edith Frederickson says, she has lit up in restaurants and bars, airplanes and trains, and indoors and out, all as part of a two-pack-a-day habit that she regrets not a bit. But as of two weeks ago, Ms. Frederickson can no longer smoke in the one place she loves the most: her home.

Ms. Frederickson lives in an apartment in Belmont, Calif., a quiet Silicon Valley city that is now home to perhaps the nation’s strictest antismoking law, effectively outlawing lighting up in all apartment buildings.

“I’m absolutely outraged,” said Ms. Frederickson, 72, pulling on a Winston as she sat on a concrete slab outside her single-room apartment. “They’re telling you how to live and what to do, and they’re doing it right here in America.”

And that the ban should have originated in her very building — a sleepy government-subsidized retirement complex called Bonnie Brae Terrace — is even more galling. Indeed, according to city officials, a driving force behind the passage of the law was a group of retirees from the complex who lobbied the city to stop secondhand smoke from drifting into their apartments from the neighbors’ places.

“They took it upon themselves to do something about it,” said Valerie Harnish, the city’s information services manager. “And they did.”

Public health advocates are closely watching to see what happens with Belmont, seeing it as a new front in their national battle against tobacco, one that seeks to place limits on smoking in buildings where tenants share walls, ceilings and — by their logic — air. Not surprisingly, habitually health-conscious California has been ahead of the curve on the issue, with several other cities passing bans on smoking in most units in privately owned apartment buildings, but none has gone as far as Belmont, which prohibits smoking in any apartment that shares a floor or ceiling with another, including condominiums.

“I think Belmont broke through this invisible barrier in the sense that it addressed drifting smoke in housing as a public health issue,” said Serena Chen, the regional director of policy and tobacco programs for the American Lung Association of California. “They simply said that secondhand smoke is no less dangerous when it’s in your bedroom than in your workplace.”

Again, the obvious answer is to let apartment owners set their own rules.  Over time I suspect that some apartment complexes would cater to nonsmokers and others to smokers, if nothing else by creating nonsmoking and smoking floors.

This sort of prohibition is far more offensive than the ban on smoking in restaurants and bars, since it invades the home, which traditionally is accorded the greatest privacy.  And imagine what enforcement will inevitably entail:  apartment raids to check the smell if not catch residents “in the act.”

It becomes ever more difficult to refer to America as “the land of the free.”  Unfortunately, that phrase increasingly has come to mock America’s former heritage of liberty.

The Thrilling Feeling of Spending Other People’s Money

by Doug Bandow on January 27, 2009 · 2 comments

in Bailout Watch, Economy, Politics as Usual, Stimulus to Nowhere

There’s nothing quite like using someone else’s credit card. No wonder the Washington Post headlined a front-page article today: “Stimulus Bill Sends Thrill Through Region.” It’s enough to give a local pol or bureaucrat the chills! Just think of the fun of wasting cash provided by people around the country for local boondoggles that your own taxpayers would never pay for!

Reports the Post:

As Congress prepares legislation to pump more than $800 billion into the economy, governments in the Washington region are lining up for their share: dollars that could mobilize stalled projects to mend water mains, repave roads and rebuild schools, as well as plug other budgetary holes.

Maryland Gov. Martin O’Malley (D) said yesterday that a stimulus bill pending on Capitol Hill would bring the state as much as $2.9 billion over 27 months for Medicaid, education programs, worker training and “fiscal stabilization” and an additional $1 billion for transit, school construction and clean-water projects.

Virginia officials said the state could be eligible for as much as $800 million for highway projects alone.

“There are many, many projects that are ready to go as soon as we know the criteria and how much money we’re getting,” said Gordon Hickey, a spokesman for Virginia Gov. Timothy M. Kaine (D).

The stimulus plan is viewed in the two states and the District as something of a bailout. But it remains unclear how much money local governments will get and how many items on their wish lists will be funded, given the vagaries of funding formulas and the evolving nature of the legislation.

Governors and members of Congress are being deluged with inquiries and wish lists from local governments, which see the American Reinvestment and Recovery Plan as deliverance from a fiscal nightmare.

I live in Virginia.  Instead of taking my money and giving it away to local politicians in, say, California and Colorado, how about letting me keep it and fight with my own elected officials about how much they get to seize?  Me thinks they would be a lot more careful since I can vote against them in the next election.

Which is precisely the point of the expensive boondoggle moving through Congress.  And why the mammoth spending bill sends a “thrill” through not just the Washington, D.C. region, but through city halls, county commission buildings, and gubernatorial mansions across the country.

Stay Put, Now Go

by Ivan Osorio on January 27, 2009

in Culture, Environment, Mobility, Sanctimony

Today, Spiked Online features two worthwhile pieces on two different ways in which environmental correctness can be deployed to disguise class snobbery — against two different segments of the great unwashed.

Brendan O’Neill on how green elitists want the traveling masses to stay put:

Under the heading ‘Chav-Free Activity Holidays’, AA [travel agency Activities Abroad] said: ‘…Children with middle-class names such as Duncan and Catherine are eight times more likely to pass their GCSEs than children with names such as Wayne and Dwayne. This got us thinking. Are there names you are likely to encounter and not encounter on an Activities Abroad holiday?’ (1) It did some quickfire research and discovered that on an AA trip you are unlikely to encounter people called ‘Britney, Kylie-Lianne, Dazza, Chardonnay, Chantelle and Candice’ (in short, thugs and slags), and are far more likely to run in to people called ‘Sarah, Alice, Lucy, Charlotte, James and Joseph’ (in short, middle class and mild)….

AA’s anti-chav advertising tactics are disturbing, and more than a little dumb, but are they really so shocking? Poisonous snobbery towards ‘chavvy’ and working-class holidaymakers is rife today – only it tends to be expressed in code, in underhand concerns about CO2 emissions, trails of noxious gases in the blue sky, the dangers of cheap flights, and the denigration of foreign cultures by unthinking Brits. AA’s mistake was to forget the coded lingo and state out loud the prejudices that underpin new forms of oh-so-superior eco-travel. Perhaps it has done us a crude service, then, by revealing for all to see the naked loathing of the young and horizon-exploring working classes that motivates much of the contemporary debate on tourism.

And James Heartfield on how they want to make those who want to stay put move:

Last week, the travellers living at Dale Farm in Basildon, England, lost their appeal against the eviction that the Tory Basildon Council is demanding. Gypsies have lived at Dale Farm by Crays Hill in Essex for many years, building homes and forging a community, and over the past decade their numbers have swelled to 300. The evictions seem like one more episode in the unlovely fight between councils and travellers, over the number of sites travellers can occupy, when they should be moved on, and so on.

However, there is one big difference in the Dale Farm evictions. The gypsies at Dale Farm are not squatting land. They own it. In 2002, Ray Bocking sold the land that the council now wants to recover to John Sheridan for £120,000.

The law that the Basildon Council is upholding is the law that protects the so-called ‘Green Belt’, which is supposed to stop our towns and cities from sprawling over the unspoilt countryside. Sheridan and his fellow travellers have not taken anyone else’s land; they have built their own homes on their own land. But they are being punished because they have sinned against the sacred cow that is the English Countryside.

Britain’s Green Belt dates back to the Town and Country Planning Act of 1947. Many homes were destroyed in the Second World War and there was a lot of pressure for new building. But Tory MPs made sure that development plans would keep their rural shires free from too many lower-class oiks, by creating a new ‘planning’ regime that meant that even if you owned the land, you could not build on it without planning permission. They earmarked land around towns as ‘Green Belt’ with the express purpose of stopping the sprawling masses from spoiling their precious countryside.

Of course, such anti-sprawl elitism is terribly common in America, as well. For more on the elitist nature of anti-sprawl measures, see here.

Geithner confirmed — but with bipartisan “nays”

by John Berlau on January 26, 2009

in Bailout Watch, Politics as Usual, Stimulus to Nowhere

The U.S. Senate voted to confirm Timothy F. Geithner tonight, but the vote was closer than expected with more “nays” than any previous nominee of President Barack Obama. The 60-34 confirmation was also the first nomination vote of the Obama administration with any Democrat voting no.

Because of the nagging questions remaining about Geithner’s failure to pay four years worth of self-employment taxes and his role in designing the Troubled Asset Relief Program, four members of the Democratic caucus joined with 30 Republicans in opposing Geithner’s nomination. (10 Republicans unfortunately voted for him). Those four are Tom Harkin of Iowa, Russ Feingold of Wisconsin, Robert Byrd of West Virginia and Bernie Sanders of Vermont, the independent self-proclaimed socialist who usually caucuses with Democrats.

“Had he not been nominated for treasury secretary, it’s doubtful that he would have ever paid these taxes,” Byrd said, according to the Associated Press report. Harkin asked during the Senate floor debate how someone of Geithner’s supposed “financial sophistication” could have made such careless mistakes, and not corrected them for all the years he made the errors until Obama nominated him. “How can Mr. Geithner speak with any credibility or authority?” Harkin said.

A Rasmussen poll late last week found that 41 percent of Americans oppose Geitner’s nomination and two-thirds think that his confirmation would show that different standards and rules apply to powerful people. This impression was confirmed by statements such as that of Sen. Kent Conrad, D-N.D., that “in normal times, that would be enough to cause me to oppose his nomination, but these are not normal times.” The perception that both corporations and individuals can be “too big to fail” because of their supposed importance undermines the very credibility needed to restore confidence in our financial system.

While his serious tax infractions should have still disqualified him from heading a department that enforces the nation’s tax laws, there are steps Geithner can take to assuage these concerns. He can call for an end to government policies that prop up failing institutions with taxpayer dollars. The failures could be orderly and arranged to minimize damage to the financial systems, but big corporations must be allowed to fail, just as small businesses do every day. That would send a message that no business or individual plays by a different set of rules.

And given his own serious breach of the tax laws, which he only corrected completely after being chosen as Treasury Secretary nominee, Geithner should show sympathy with the difficulties of individuals and small businesses in dealing with the complexities of taxes and regulations. New financial regulations from the Treasury Department should be carefully thought out so that they don’t hinder small investors and entrepreneurs. If Geithner reflects on and learns from his personal and policy errors, he can be a more effective Treasury Secretary.

Apparent Hold on Solis Nomination

by Ivan Osorio on January 26, 2009 · 2 comments

in Deregulate to Stimulate, Economy, Labor

The confirmation of Rep. Hilda Solis (D-Calif.) as Labor Secretary has run into an unexpected delay, as an unidentified Republican senator appears to have placed a hold on her nomination. That may not prevent her nomination, since presidents get fairly wide latitude in cabinet appointments. Still, as a Las Vegas Review-Journal editorial notes today, Republican senators are right to ask more questions:

Sen. Mike Enzi of Wyoming, ranking Republican on the Senate Health, Education, Labor and Pensions Committee, has been outspoken in his criticism of Rep. Solis’ testimony in her confirmation hearing, focusing his criticism on her responses concerning the “card check” bill that would allow unions to bypass secret ballot elections in their attempts to win recognition as collective bargaining agents — a change which organized labor has made a high priority.

Asked Thursday whether he was satisfied with the answers given to date by Rep. Solis — who voted for the so-called Employee Free Choice Act in the House in 2007 — Sen. Enzi replied, “What answers? She doesn’t even recognize her own record when giving the answers.”

The Los Angles Times, in its story on Solis’s hearing, features video of her handling of the EFCA question. That Solis would support President Obama’s positions — which unions largely support — does not disqualify her from the position. But her record does put some burden on her to demonstrate that she will not act as a mere advocate for organized labor within the federal government. Moreover, as the Review-Journal‘s editors note, lawmakers should also ponder the consequences of the Obama labor agenda on the broader economy.

President Obama has said repeatedly that fast action is needed to shore up a teetering economy. Frankly, much that has been proposed — blocking asset transfers from failed firms to new entrepreneurs more likely to create productive, long-term jobs, instead seizing more private wealth to fund government make-work boondoggles — is as unwise now as it was in 1933.

But in this economic climate, with each week producing a new empty parking lot with plywood on the windows, do the geniuses in Washington really mean to create a situation where business owners already struggling to stay afloat can without warning be handed their “last straw” — a stack of cards adorned with the message, “You’re now a union shop; here are our demands”?

For more on card check, see here and here.

John Berlau on the Geithner Confirmation

by Cord Blomquist on January 26, 2009 · 5 comments

in Bailout Watch, Economy, Features, Politics as Usual, Zeitgeist

As Timothy Geithner receives 34 No votes on his confirmation, John Berlau reflects on how Geithner can right his wrongs.  Geithner can start by calling for an end to government policies that prop up failing institutions with taxpayer dollars.

John Berlau, Director of CEI’s Center for Investors and Entrepreneurs, released this statement today on the confirmation of Tim Geithner:

It looks as if Timothy F. Geithner will be confirmed tonight, but with nagging questions remaining about his failure to pay four years worth of self-employment taxes and his role in designing the Trouble Asset Relief Program. A Rasmussen poll finds that 41 percent of Americans oppose his nomination and two-thirds think that his confirmation would show that different standards and rules apply to powerful people. This impression was confirmed by statements such as that of Sen. Kent Conrad, D-N.D., that “in normal times, that would be enough to cause me to oppose his nomination, but these are not normal times.” The perception that both corporations and individuals can be “too big to fail” because of their supposed importance undermines the very credibility needed to restore confidence in our financial system.

While his serious tax infractions should still disqualify him from heading a department that enforces the nation’s tax laws, there are steps that Geithner can take to assuage the concerns. He can call for an end to government policies that prop up failing institutions with taxpayer dollars. The failures could be orderly and arranged to minimize damage to the financial systems, but big corporations must be allowed to fail, just as small businesses do every day. That would send a message that no business or individual plays by a different set of rules.

And given his own serious breach of the tax laws, which he only corrected completely after being chosen as Treasury Secretary nominee, Geithner should show sympathy with the difficulties of individuals and small businesses in dealing with the complexities of taxes and regulations. New financial regulations from the Treasury Department should be carefully thought out so that they don’t hinder small investors and entrepreneurs. If Geithner reflects on and learns from his personal and policy errors, he can be a more effective Treasury Secretary.

CNN has news of the final vote tally.

Krugman is Wrong – Again!

by Iain Murray on January 26, 2009 · 3 comments

in Energy, Environment, Global Warming, Mobility, Nanny State, Personal Liberty, Politics as Usual, Sanctimony

Boy, that wacky Paul Krugman. The newly-crowned Nobel laureate (they should be allowed to wear a laurel wreath everywhere they go, so we’d know of their brilliance), fresh from revealing how little he understands the history – or purpose – of liberalism, shows he knows diddly-squat about Air Traffic Control.

In today’s column he argues, plonkingly,

Here’s how to think about this argument: it implies that we should shut down the air traffic control system. After all, that system is paid for with fees on air tickets — and surely it would be better to let the flying public keep its money rather than hand it over to government bureaucrats. If that would mean lots of midair collisions, hey, stuff happens.

Unfortunately for Krug, the fact is that the public sector does a pretty poor job of Air Traffic Control. Not because of large numbers of accidents – that doesn’t happen anywhere much these days – but in terms of waste and inefficiency. American ATC is based on a system of beacons from the early days of air transport. Those have long since been superseded in safety terms by GPS and other innovations, but the system is still based on them. Liberalizing ATC actually makes a huge amount of sense, which is why plenty of governments around the world have done it, without seeing mid-air collisions, erm, explode. As I say in the new Agenda for Congress:

Liberalize Air Travel. … Privatization and modernization of the air traffic control system not only would allow faster flights and less delay at airports but save up to 400,000 barrels of oil per day, and reduce greenhouse gas emissions accordingly. And there is no need to reinvent the wheel. Canada’s successful air traffic control privatization offers a useful model.

You can only really object to that if you’re a socialist dogmatist, or your thinking is stuck in the 1930s. I’m not sure which is the case with El Krug.

For a broader picture, Jon Henke does a great job of commenting on the entire column over at The Next Right.

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