The Senate has voted 63-to-37 to confirm Elena Kagan as the next Supreme Court justice. Click here for details. The vote was largely along party lines, with one Democrat (Ben Nelson of Nebraska) voting against her, and five Republicans voting for her. (Swing votes like Scott Brown and George Voinovich voted against Kagan.) I give my personal perspective on the vote here. Kagan’s confirmation margin was the third-smallest margin in the last 50 years. In other news, a trial judge in California struck down the state’s ban on gay marriage, in a ruling that may reach the Supreme Court in the next few years.
January 2012
Elena Kagan Confirmed, 63-37, for Supreme Court; Divided Senate Approves Nomination in Partisan Vote
At the 1986 White House Conference on Small Business, President Ronald Reagan offered these famous remarks about politicians’ views on business in the 1970s. Reagan said, “Back then, government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
Amazingly, in that speech nearly 25 years ago, Reagan also summed up perfectly the Obama administration’s view of the economy in the present. Today, President Obama announced that the government is providing a loan guarantee of $250 million to Ford Motor Co. from the Export-Import Bank. In making the announcement, at a Ford assembly plant in Chicago, Obama also defended billions of dollars in TARP bailouts to Ford rivals, General Motors and Chrysler, that he continued from the Bush administration.
Not mentioned by Obama, and not picked up in media coverage of the new $250 million loan, is a new regulatory measure signed into law by Obama just three weeks ago, which nearly stopped a $1 billion bond offering by Ford
Just days after Obama signed the Dodd-Frank so-called financial reform bill (here is my general overview of the Dodd-Frank monstrosity), Ford found that it couldn’t issue a bond and create more credit for its customers. The reason, as reported by AOL Daily Finance, is that Dodd-Frank “fixed” the problem of poorly researched credit ratings by designating the three big rating agencies as “experts” subject to the same liability as professionals such as auditors. Since the Securities and Exchange Commission requires that bond offerings have a credit rating, Ford’s venture became a no-go.
The SEC fixed this problem temporarily by allowing Ford and other companies to issue bonds without rating for six months. But after that, according to experts quoted in the article, the trouble will resume unless there is a fix to Dodd-Frank’s “fixing” of the credit rating system.
It is not known if Ford’s decision to take this government money – after honorably refusing a TARP bailout when it was offered two years ago — is related to expected regulatory troubles in the bond market.
But what is predictable is the more frustrating the obstacles the government puts in front of businesses , the more that some firms will come crawling to the government for bailouts – and the more that firms will cowtow to the prevailing government’s agenda and be politically-connected, should they ever need this lifeline.
The Dodd-Frank provisions were only the latest of government regulations that have needlessly damaged the American auto industry. In December 2008, around the time GM and Chrysler received the first of the bailouts, the Competitive Enterprise Institute’s Iain Murray wrote a six-point plan for relief from regulations holding the auto industry back, including Corporate Average Fuel Economy (CAFE) standards and anti-trust rules that prevent beneficial mergers and joint ventures among the auto companies.
As for the credit rating agencies, one good solution would be to make the SEC’s waiver allowing companies to issue bonds without a credit rating permanent. That would both give more flexibility to companies seeking credit and large investors seeking a return, as well as send a message that investors must do the due diligence they failed to perform on mortgage securities, and not use credit ratings as a crutch.
As I wrote in an overview of the mortgage bubble in Stock, Futures and Options magazine, “rather than existing as one of many tools to evaluate the creditworthiness of a security, credit ratings today—because they are embedded in regulatory capital requirements—serve as a barrier to independent financial judgment.”
But don’t expect this administration or this Congress to make this liberalizing legislative fix or any other ones that would reduce the government’s role in the economy. The tax-it, regulate-it, then-subsidize-it system that Reagan described pays too many political dividends for them.
CEI Research Associate Andrew Kwiatkowski contributed to this post.
Nobel Laureate Vernon Smith criticizes the Obama Administration’s stimulus package and skyrocketing deficit spending, saying that deficit-financed stimulus is “the problem, not the solution.”
So what has been the government’s response in the current crisis? Besides spending stimulus, it was tax incentives for new home buyers and cash for clunkers if you bought a new car. All three are programs for borrowing output, homes and cars from future production and sales. Using subsidies to pump up home sales beyond what people could afford was the problem that led to the crisis. Now the problem is touted as the solution.
The stimulus package is now going to cost $75 billion more than the Obama Administration estimated, and foolish provisions in it wiped out thousands of jobs.
Undaunted by its record of failure, the Obama Administration recently persuaded the Senate to approve borrowing even more money, billions more, to bail out public employee unions, and subsidize bloated and mismanaged school systems. The House is expected to pass the measure soon.
Months ago, the Congressional Budget Office already estimated that Obama’s polices would add $9.7 trillion to the national debt.
Earlier, another Nobel Prize winning economist, Gary Becker, said that Obama’s policies were delaying an economic recovery.
I’m scheduled to be the lead guest on Neil Cavuto on the Fox Business Channel at 6pm tonight.
Subject: The news that NHTSA is withholding exculpatory evidence regarding “alleged death” Toyota sudden acceleration accidents. And perhaps the guy in Michigan convicted of manslaughter who is the first to use “The Toyota Defense,” that he hit the brakes and therefore the car accelerated. I’ve written about the “I’m sure I hit the brakes!” issue previously, in my piece, “Why Do Toyotas Hate the Elderly?
That’s the headline from the Associated Press. A Baltimore mother got nothing more than a suspended sentence for starving her 1-year-old son to death. The story raises disturbing questions about judicial gullibility, double standards, and other problems in the criminal justice system. Here’s my personal perspective as a lawyer on this sad story.
[youtube:http://www.youtube.com/watch?v=RxO3bPNyWzo 285 234]
Manuel Ayau, known by his many friends and admirers as “Muso,” passed away early this morning, in his native Guatemala — a country he loved and to which he dedicated his life to make a freer and more prosperous place. He faced quite a challenge. Guatemala, like most of Latin America, has a long history of economic interventionist policies and government-corporate cronyism. It has also endured violent Marxist insurgencies, which sought to replace that whole system with something far worse.
In that environment, Muso founded an institution that would promote not any political faction or public policy, but ideas — Universidad Francisco Marroquin (UFM). A full-fledged university, since its founding in 1971, UFM sought not only to eschew the Marxist economic theories that were in fashion then (even more than today, and especially in Latin America), but to revive the study of the great classical liberal thinkers. As its mission statement says, UFM works “to teach and disseminate the ethical, legal and economic principles of a society of free and responsible persons.” UFM faced long odds. As Don Boudreaux of George Mason University noted on the occasion on Muso’s 8oth birthday:
With four other universities in Guatemala—most of which charged little or no tuition because they were funded generously by the government or the Catholic church—any new university would be at a real disadvantage.
One person’s disadvantage, however, is another person’s challenge. Muso was aware of the difficulties in starting a university from scratch, but he also realized that a key to its success lay in the very reason he sought to start it—namely, all the existing universities were dens of dogmatic statism, including the then – fashionable liberation theology, in which critical thinking had been supplanted by uncritical emoting.
So Muso came to see that his lack of experience in academia was no handicap. His inexperience in this area, in fact, was likely a plus. Because so many lifelong academics, then as now, seemed irresistibly drawn toward top-down coercive “solutions” to all problems, Muso’s nonacademic background might well insulate him and his fledgling university from the statist tendencies that are so prominent in the academy.
Still, by any objective reckoning, the odds were against the success of a new, private university in Guatemala. The odds were wrong.
Muso helped effect some direct policy changes as well. Boudreaux notes that in his first visit to Guatemala in 2000, he noticed that there were no customs agents going through people’s luggage. “I pushed for that. For years I pushed for that. Finally I won,” Muso told him. “When I first brought Mises to Guatemala back in the ’60s, I of course met his flight when it landed. I was standing next to him as a customs agent searched the contents of his luggage. Mises leaned over to me and remarked, ‘They’re making sure that I’m bringing no wealth into your country.’ I determined then and there that I would work to put an end to that nonsense.” Also, today, Guatemala has one of the world’s most liberal telecommunications regulations. (Apparently costs have come down so much that a hotel where I stayed gave cell phones to all its guests.)
I’m lucky to have been to UFM on several occasions, to participate in various conferences (including one co-sponsored by CEI and UFM), and to have had a chance to talk with Muso about UFM’s early days, many of which were difficult. He said that at the height of Guatemala’s civil war, he would need to have someone go look around the block before venturing out into the street. Having lived in Nicaragua as a kid during part of the civil war there, I understood the danger of the situation he described.
Things in Guatemala have gotten a lot better since then. The collapse of the Soviet Union brought an end to many of the “national liberation” movements it backed — and for which Latin America was a favorite target. But after that, it has been up to individual countries to make their way forward. For Guatemala, that way forward will surely owe much to Muso and to UFM.
UPDATE: For UFM President Giancarlo Ibarguen’s tribute to Manuel Ayau, see here.
“Missouri voters on Tuesday overwhelmingly rejected a federal mandate to purchase health insurance, rebuking President Barack Obama’s administration and giving Republicans their first political victory in a national campaign to overturn the controversial health care law passed by Congress in March.” The referendum passed easily by a 3-to-1 margin, with nearly 73 percent of the vote.
On Monday, a federal judge let Virginia’s attorney general challenge ObamaCare as unconstitutional, refusing to dismiss a lawsuit challenging its mandate to buy health insurance. The Obama Administration says it can force people to buy insurance or other products under the federal government’s power to regulate interstate commerce, and punish them with tax and other penalties if they do not. Under Obama’s logic, every American could be forced to buy a car in order to spur interstate commerce in automobiles. The judge was skeptical of this logic, noting that “never before has the Commerce Clause . . . been extended this far,” and “no reported case” has ever “extended the Commerce Clause or Tax Clause” to punish “a person’s decision not to purchase a product.”
Obama’s health care law will reduce lifesaving medical innovation, raise taxes, drive up insurance premiums, break many campaign promises, and increase state budget deficits. It will jeopardize the quality of medical care, while imposing restrictions that failed when tried at the state level. It ignores advice from doctors and federal experts, and lessons from countries with universal health care, about how to keep costs down.
It imposes many middle-class tax increases, such as taxes on uninsured individuals, on cosmetic surgery, on medical devices, and on certain health care plans. It also increases taxes on many investors and imposes marriage penalties.
It also contains many penny-wise, pound-foolish provisions. It spends money on frills like “cultural competency,” while cutting spending on crucial things like anesthesia.
The health care legislation also contains potentially unconstitutional racial preferences for minority applicants, and lower standards for treatment of patients in predominantly-minority institutions. These drew criticism from the Civil Rights Commission.
Richard Morrison and Marc Scribner welcome special guest John Vaught LaBeaume to Episode 104 of the LibertyWeek podcast. We tackle Arizona’s immigration prospects, school reform efforts in D.C., the future of offshore drilling, why you have the right to remain French and the stormy waters of congressional ethics investigations.
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