January 2012

George McGovern on Card Check

by Ivan Osorio on March 7, 2009

in Economy, Labor

Former Democratic Senator and presidential candidate George McGovern continues to speak out against the so-called Employee Free Choice Act, which he has described as an effort to undermine workplace democracy, because it would replace secret ballot elections with a process known as “card check,” whereby union organizers ask employees to sign union cards out in the open. Video below.

For more on card check, see here and here.

As Washington frets over “behavioral advertising”…

by Wayne Crews on March 7, 2009

in Odds & Ends

…My local CVS, even though I’m eyebrows-deep in their ExtraValue coupons and they probably even have my DNA and all that, gave me a 5-bucks-off offer on Futuro Compression Hosiery.

And, yes, Wayne is my middle name.

90 Percent Tax Rate Proposed

by Hans Bader on March 7, 2009 · 7 comments

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

Congressman Jerry McNerney (D-California) has advocated raising marginal tax rates to 90 percent. Such a tax increase on the wealthy would be necessary, but not sufficient, to pay for the vast spending increases proposed by the Obama Administration, if it is to keep its promise not to raise taxes on those making less than $250,000 per year. Indeed, it would not raise enough money, since there simply are not enough wealthy people to pay for all the proposed spending.

In the National Journal, the disillusioned centrist Stuart Taylor, who once praised Obama, notes that Obama’s budget projections are based on bogus accounting, and would result in mushrooming deficits as far as the eye can see unless taxes are raised radically. Obama, he writes, “has been deceptive in basing his deficit projections on phantom expenditure cuts and wildly optimistic revenue estimates.” Moreover,

“The numbers don’t add up — and still won’t if and when, as seems almost certain, Obama ratchets up his so-far-fairly-modest new taxes on the top 2 percent. ‘A tax policy that confiscated 100 percent of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue,’ according to a February 27 editorial in The Wall Street Journal. ‘That’s less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable ‘dime’ of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.’

As for the budget’s $2 trillion in projected net “savings,” Obama’s budget director, Peter Orszag, admitted in testimony on Tuesday under questioning by Rep. Paul Ryan, R-Wis., that $1.6 trillion comes from phantom cuts of the money that would be needed to sustain the troop surge in Iraq for another decade — money that nobody ever intended to spend.

Other supposed savings — especially from Medicare — seem unlikely to materialize absent benefit cuts, which Obama has not proposed. And the cost of any health care legislation — to be drafted largely by a Congress that is allergic to the kind of cost-cutting necessary to make universal care sustainable — is likely to be two or three times the $634 billion over 10 years that Obama has budgeted.”

Ironically, even as Obama advocates raising taxes on families making more than $250,000 per year, he bails out irrresponsible, high-income mortgage borrowers, even if their current mortgage payments are not high. His $75 billion-plus mortgage bailout, announced last week, reduces borrowers’ mortgages even if they have big homes (covering mortgages up to $729,750) — and even if their mortgage payment is not high (they can qualify if their mortgage, plus property taxes and insurance, amounts to as little as 32 percent of income — less than many responsible homeowners have long paid on their mortgage).

Obama’s bailouts reward the irresponsible rich, even as his proposed tax increases would punish thrifty high-income households by increasing their capital gains and income taxes, and raise taxes on the small businesses that create most of America’s jobs. Bush launched a war on terror. Obama has launched a war on thrift and American investors.

Since Obama signed the bloated $800 billion stimulus package into law, the stock market, a leading economic indicator, has plunged like a stone. (The Congressional Budget Office predicts the “stimulus” will actually shrink the economy in the long-run). Investors are spooked, as Stanford University economist Michael Boskin notes in his Wall Street Journal column, “Obama’s Radicalism Is Killing the Dow.” Another commentator notes, “In less than 50 days, Obama has spent more than three times the cost of the entire Iraq War so far. This year, he will more than triple the largest deficit of the Bush era.”

The 5% Bailout: Jeb Hensarling Trashes TARP

by Seth Bailey on March 6, 2009 · 1 comment

in Bailout Watch, Economy

The Congressional Oversight Panel (COP), which oversees the spending of TARP funds,  released its March report today entitled “Foreclosure Crisis: Working Toward a Solution.”

But are we actually facing a foreclosure crisis?  The left chastises “deregulation” as the evil at hand when the Government Sponsored Entities Fannie Mae and Freddie Mac purchased the majority of subprime loans.  This in turn forced private banks to enter the market in order to compete with Fannie and Freddie.

As Rep. Rep. Jeb Hensarling writes, subsidizing foreclosures creates a moral hazard (emphasis added):

[I]t is a fact even admitted by the majority report that some loan modifications are simply not economical and thus some foreclosures are inevitable.

So the government is going to bailout everyone.  Thank you.  The next question becomes much more difficult: where should the line be drawn?  Rep. Hensarling writes in his alternative view (emphasis in original):

Without a doubt, in any loan mitigation program there will be some otherwise eligible borrowers who can pay their mortgages but who choose not to pay them or not to make the difficult decisions to sacrifice on other things because they want to get relief.

However, this has been “nearly universally omitted” from government plans.

According to a Comptroller of the Currency and Office of Thrift Supervision report, the rate of delinquency after loan modification has increased from the first to second quarter of 2008: jumping to slightly over 40%.

So, if loan modification is largely not working in over half of the scenarios, why should we spend $100 billion dollars?  Then again, government is used to throwing money at programs that have massive failure rates.

If you think this is bad news, look at the statistics of who’s really having loan problems now.  A Mortgage Bankers Association report found that second homes accounted for about a fifth of foreclosures in 2007.

Then the fun begins.  According to a U.S. Census Bureau survey, only 46% of the population actually has a mortgage: the other 54% have paid off their mortgage or rent.

But the federal government is involved in the supposed mortgage problem because it is a problem that affects our country at large, right?  Wrong.  Only nine states have foreclosure rates above the national average.

The delinquency statistics: loans over due by 30 days account for a mere 7.29% of loans and those in foreclosure, a minuscule 2.97%.  So about 10% of loans are late.  This number alone creates a mystery to the hysteria, however, when combined with the fact that less the half of Americans have a mortgage the number reduces by half: 5%.

Rep. Hensarling asks (again, emphasis in original):

Is it fair to expect 19 out of every 20 people to pay more in taxes to help the 20th person maintain their current residence?

As a lover of liberty and limited government, the answer is clearly no.

“Make Mine Freedom”

by Cord Blomquist on March 6, 2009

in Video

[youtube:http://www.youtube.com/watch?v=4uYt7K7udXI 285 234]

Obama Bails Out Rich, Irresponsible People With LOW Mortgage Payments

by Hans Bader on March 6, 2009 · 9 comments

in Bailout Watch, Politics as Usual, Stimulus to Nowhere

Yesterday, I wrote about how high-income people with $700,000 homes, who are in no danger of becoming homeless, would benefit from the Obama Administration’s massive taxpayer-financed mortgage-bailout plan, and how it would harm the economy in the long-run.

But now, it has become clear that I massively understated the case. The bailout would reduce borrowers’ payments to far below what many borrowers have long paid, with no difficulty whatsoever — reducing the payments of some to 15 or 20 percent of their income! In some regions of the country, much of the population will be eligible for a bailout.

As the New York Times explains, “To qualify, your monthly housing payment needs to exceed more than 31 percent of your gross monthly income (that means before any payroll deductions are made). Keep in mind that your “payment” includes more than just your mortgage’s principal and interest. It also includes real estate taxes” and other charges.

So if you pay 16 percent of your income in mortgage payments, and another 16 percent in real estate taxes, and the total adds up to just over 31 percent, you can have your mortgage payments cut under the bailout!

At the time I took out my mortgage in 2004, my combined mortgage and real estate tax payments were over 40 percent of my income (32 percent mortgage, 8 percent property tax). I had no difficulty paying that, since I was thrifty. But people who pay far less of their income than I did will receive a bailout, provided they didn’t save any money (other than in their retirement plan). Why? Because if they have no non-retirement savings, they can claim (as is sufficient to qualify for the bailout) that they “do not have enough liquid assets to pay [their] mortgage at its existing level. [Their] retirement assets are not included in that equation.”

All of this unfairness might be tolerable if the plan had any hope of spurring an economic recovery. But it doesn’t. The stock markets have fallen like a stone since the Obama Administration pushed through its bailout and stimulus packages. And investors are spooked, as Stanford University economist Michael Boskin notes in his Wall Street Journal column, “Obama’s Radicalism Is Killing the Dow.”

Undeserving high-income households will benefit. “Homeowners with loans as large as $729,750 could see their interest rates temporarily cut to as low as 2 percent under the program,” and in some cases, have their mortgage balances reduced, according to yesterday’s Washington Post. Thus, American taxpayers — including low-income renters — will subsidize the affluent. The American public opposes mortgage bailouts, which are likely to impede economic recovery.

Bailouts and stimulus plans actually shrink the economy in the long run, while exploding government debt, as happened in Japan in the 1990s. Even the Congressional Budget Office admits that the $800 billion stimulus package signed by President Obama will slightly reduce the economy’s size in the long-run, although it claims it will increase the economy modestly in the short run (i.e., by the next election).

As one commentator notes, “In less than 50 days, Obama has spent more than three times the cost of the entire Iraq War so far. This year, he will more than triple the largest deficit of the Bush era.” His policies have not reassured international investors, either. Obama’s fiscal policies have been described as a “$4 Trillion Poker Game” in the London Times.

At the same time, Obama has also clung tenaciously to some of “most destructive policies of the Bush administration,” such as its counterproductive accounting regulations.

Schadenfreude “Two-Fer”

by Greg Conko on March 6, 2009 · 1 comment

in Agriculture, Environment, Nanny State, Personal Liberty, Precaution & Risk, Regulation

The New York Times reported this week that the Peanut Corporation of America plants in Texas and Georgia that were shipping salmonella contaminated peanut products were not just any old kind of food companies; they were certified organic. Furthermore, it was a Texas state employee who was responsible for granting the organic certification of at least one plant, despite the fact that it didn’t have state health certificate. And it was a private-sector certification firm that blew the whistle on this malfeasance.

Remaining ‘Swiss’ No Longer An Option

by Gary Howard on March 6, 2009 · 1 comment

in Economy, International, Personal Liberty

In a running theme, I again cover the topic of the U.S. government’s heavy-handed dealings with swiss bank UBS.  A nod to my colleague John Berlau, whose letter in today’s Financial Times gives a nod to former ambassador Faith Whittlesey and her commentary in FT expressing concern over the Obama administration demanding the names of 52,000 Americans who do business with UBS.  As I stated in previous posts on this issue, these actions by federal authorities are setting a bad precedent for the privacy of American citizens.  As usual, I am left at the end my post with questions: When the government can demand to know every detail of your financial life, what is there to stop it from exerting control over it?

New Study Shows Job Loss Data under Card Check

by Ivan Osorio on March 5, 2009

in Economy, Employment, Labor

This week, Dr Anne Layne-Farrar, an economist with the Law and Economics Consulting Group, published a new study in which she analyzes the likely economic effects of the so-called Employee Free Choice Act if it were to be enacted, especially on employment. EFCA would replace secret ballots in union organizing elections with a process known as card check, whereby union organizers ask employees to sign union cards out in public, thus exposing workers to high-pressure tactics which secret ballots are designed to avoid. Labor unions see this as a way to revive their declining number. The summary of Layne-Farrar’s findings includes:

[P]assing EFCA would likely increase the US unemployment rate and decrease US job creation substantially. The precise effect on unemployment will depend on the degree to which EFCA increases union density, but for every 3 percentage points gained in union membership through card checks and mandatory arbitration, the following year’s unemployment rate is predicted to increase by 1 percentage point and job creation is predicted to fall by around 1.5 million jobs. Thus, if EFCA passed today and resulted in an increase in unionization from the current rate of about 12% to 15%, then unionized workers would increase from 15.5 to 19.6 million while unemployment a year from now would rise by 1.5 million, to 10.4 million. If EFCA were to increase the percentage of private sector union membership by between 5 and 10 percentage points, as some have suggested, my analysis indicates that unemployment would increase by 2.3 to 5.4 million in the following year and the unemployment rate would increase by 1.5 to 3.5 percentage points in the following year.

As Layne-Farrar explained in a press conference call today, she analyzed the experience of Canada with both card check and secret ballots. Union organizing in Canada is set at the provincial, rather than federal level, so different provicial policies allow for contrast. As she explained, several provinces have moved from card check to secret ballots, while one went the other way. To control for other factors, she said she did a regression going back 22 years.

Study available for download here.

For more on card check, see here.

Yes, “Botch” is the right word.

by Greg Conko on March 5, 2009 · 2 comments

in Healthcare, Legal, Personal Liberty, Precaution & Risk, Regulation

I certainly take Alex’s point that libertarians can disagree about the appropriateness of federal preemption of state tort law. Indeed, Justice Thomas’s concurring opinion lays out a strong textual case against implied preemption of state law in all cases. However, there are a few points I was not able to make in yesterday’s post that better elucidate why preemption is better policy given the narrow facts presented in Wyeth v. Levine. And, Justice Alito’s dissenting opinion — after pointing out a few misleading statements of fact in Justice Stevens’s majority opinion — shows why, if one accepts the current state of implied preemption caselaw, the Court’s majority decision is bad law.

Stevens’s majority opinion asserts that, regardless of FDA’s regulation, “the manufacturer bears responsibility for the content of its label at all times.” It further argues that, FDA can’t keep track of all safety issues that arise after a drug is approved, that the agency never specifically made a determination regarding the safety of IV-push administration, and that Wyeth could have changed its label without FDA’s pre-approval after receiving information regarding the risk of arterial injection of Phenergan.

However, as Justice Alito’s dissent makes clear, FDA repeatedly and intensively investigated this exact question after cases of severe tissue damage connected to the use of Phenergan began to emerge after the drug’s approval in 1955, and the agency approved several changes to the drug’s label that boosted the warnings accordingly. Indeed, Levine and her attorneys conceded that, in 1988, Wyeth proposed a label change that “if followed, would have prevented the inadvertent administration of Phenergan into an artery,” but the FDA rejected that language. Further, no new evidence of Phenergan’s risks has emerged in decades.

The Court majority nevertheless concluded that there was some other conceivable way for Wyeth to have ramped up its warning short of Levine’s preferred route of ruling out IV-push injection altogether, which the FDA rejected. Thus, FDA regulation is a “floor” below which state law cannot fall, but that the agency’s drug labeling regulation should not preempt state tort laws that require a more strict approach.

Unfortunately, that conflicts with reasonable and long-standing Court precedent regarding implied conflict pre-emption of state laws elucidated most recently in Geier v. American Honda. As Justice Alito’s dissent makes clear, “the ordinary principles of conflict pre-emption turn solely on whether a State has upset the regulatory balance struck by the federal agency.” That is exactly what has happened here.

There is no such thing as a perfectly safe drug, but on balance most drugs offer more benefit than harm. Congress established the FDA and enacted the Food, Drug and Cosmetics Act and subsequent amendments giving the agency statutory authority over questions of safety and efficacy because it believed that a federal expert body could most effectively balance the benefits and risks of new medicines. FDA made a decision that permitting IV-push injection provides greater benefits than could be achieved with the alternative of deep tissue injection, and that those benefits outweighed the risks. Permitting state tort law to over-ride that determination upsets the regulatory balance struck by FDA.

Thus, contrary to Alex’s suggestion, allowing Ms. Levine’s claim here would in effect act as a ban – not one that removes the drug from the market, but one that removes one “safe and effective” use of the drug from its label. And, while physicians may prescribe a drug for an “off-label” use, if a use is not identified on the label, the manufacturer can’t tell anyone about it. That restricts the ability of doctors to receive information about possible uses, and it means that some patients will not be able to benefit from some drugs.

Finally, it is relevant, as Alex notes, that the existence of FDA regulation as a legal floor means that the tort system acts as a check on FDA decision-making, but only in one direction: toward greater regulation. Alex is right. “This IS one of these questions about what to do in the real world, where first-best solutions just aren’t politically possible” (emphasis added). So, I think it’s reasonable for we libertarians to support the less bad position that, if our society is going to create a regulatory gatekeeper for drugs and empower it to make risk-benefit balancing decisions on our behalf, then we should not permit lay juries to ratchet up that regulation in circumstances in which all reasonably available information about risks and benefits is internalized into the system.

← Previous Entries

Next Entries →