January 2012

CEI in Europe: Travelblog 4–Sulejow, Poland

by Drew Tidwell on September 14, 2010 · 1 comment

in CEI Projects, Coalitions & Outreach, International

On our way to the Language of Liberty campsite in Sulejow, Poland, we were told that religion is the greatest antidote to government power. Our guide, Konrad, is from the Polish-American Foundation for Economic Research Education (PAFERE). He was kind enough to take us on the hour-long bus ride from the industrial city of Lodz (pop. 780,000) to Sulejow, a tiny town surrounded by farms and forests.

Konrad told us that Catholicism is what keeps the people of Poland together. He said, the government is afraid of the church, because the church is more powerful than the government. Later, at the camp, we had a beer with a Polish businessman who was here to give a guest lecture on entrepreneurship. He agreed with Konrad. “Even if you don’t believe in God,” he said, “the Ten Commandments give us values. There is a God-value in life, and it is separate from government.”

The Catholicism of the Polish students is interesting. The Catholic Church almost acts like a government itself, yet unlike governments, membership in the Church is voluntary. In a sense, there is competition in Poland between the Church and the State. Almost everyone in Poland is Catholic, thus giving the church great power and influence. Because of this, the church and its members keep government power in check. Even the most skeptical agnostic and atheist libertarians might see some value in this.

This division of power is not a new concept for Poland. For nearly 1,000 years, the Catholic Church, royalty (government), and szlachta (nobility/property owners) were powerful political forces in Poland. Poland has spent much of its history fighting off larger neighboring powers. When the people weren’t being terrorized by Russia, they were being brutalized by Germany. The only constant throughout all of this was the Catholic Church. One student said, “When the communists ruled Poland, the Catholic Church was the center of the resistance. The priests were leaders of the resistance and the churches were the meeting places.”

The communists were fearful of the Catholic Church of its power. When I asked why the communists didn’t abolish the Church, another student smiled and said, “Abolishing the religion was impossible, everyone in the country was a Catholic and you can’t do that.”

Many priests and resistance members were killed by the communists, but the resistance movement was too big to eradicate. The Catholic Church was the main force behind the Solidarity movement and Pope John Paul II (born in Poland) was a huge supporter of Solidarity. The businessman who lived under communist rule in Poland said, “When the Pope visits, it gave us much hope for the Solidarity movement.”

The result of this history is a unique Polish brand of libertarianism. The Polish students at the Sulejow Language of Liberty camp are largely anti-government and believe in the liberating power of capitalism. Unlike the students in Portugal, these students are not interested in political careers. They’re interested in entrepreneurship. They’re interested in money as a medium that improves exchange and thus their lives and their country’s place in the world. Their voluntary membership in the Catholic Church is not only for religious guidance, but also an organization that will resist oppressive and tyrannical government.

Shifting the Burden of Explanation

by Ryan Young on September 14, 2010

in Economy, Personal Liberty, Politics as Usual

A lot of people get angry when somebody suggests privatizing some or other government service. For example, someone who opposes government-run schools is accused of opposing all education, period. Not a rigorous line of thought. But it’s common.

Why do some people propose privatization? It’s not because they’re against the service. It’s because they think the private sector will do a better job providing that service.

If anything, because theory and data usually side with privatizers, the burden of explanation actually lies on those who favor government provision of many services. Why support more expensive and less effective schools, or mail service, or health care, or rail travel?

Mises briefly touches on that disconnect in his short 1927 book Liberalism (that is, liberalism as the word originally meant):

If I am of the opinion that it is inexpedient to assign to the government the task of operating railroads, hotels, or mines, I am not an “enemy of the state” any more than I can be called an enemy of sulphuric acid because I am of the opinion that, useful though it may be for many purposes, it is not suitable either for drinking or for washing one’s hands.

-Ludwig von Mises, Liberalism: The Classical Tradition, p. 18.

Obama to Insurers: Stop Telling the Truth

by Michelle Minton on September 13, 2010 · 4 comments

in Insurance, Odds & Ends

During the fight for health insurance reform earlier this year, opponents of the bill (aka Obamacare) claimed that the proposal would increase the cost of insurance in the U.S. The bill passed and low and behold premiums are on the rise. Rather than own up to the fact that their policies are going to cost Americans more money, the Obama administration is threatening insurers who raise premiums and blame Obamacare.

Late last week the The Wall Street Journal reported that Health and Human Services Secretary Kathleen Sebelius sent a letter warning  insurers that the federal government wouldn’t sit “idly by”  while insurance companies raised premiums and blamed the hikes on new regulations:

She warned that bad actors may be excluded from new health insurance markets that will open in 2014 under the law. They’d lose out on a big pool of customers, as many as 30 million people nationwide.

Though some insurers are raising rates by as much as 9 percent in a year, the insurance lobby claims the hikes are justified by the new costs associated with the requirements of Obamacare, as well as increasing costs due to other factors such as a poor economy and increasing medical care costs.

Although the law’s big expansion of coverage under the law won’t take place until 2014, several new benefits go into effect starting later this month. Lifetime dollar caps on coverage are abolished, and plans must allow parents to keep their children on the policy up to age 26. Many plans will also have to guarantee coverage for children regardless of a medical condition, and provide preventive care with no cost-sharing for the patient.

Really, the Obama administration doesn’t seem to take offense at the increasing costs, but they are angry that insurance companies are blaming the increasing premiums on, among other things, Obamacare — what Sebelius calls “misinformation.” This opinion piece in The Wall Street Journal hit the nail on the head calling the Obama administration’s admonition of the insurance industry an attempt to distance their policies from the real-world results.

This method of reality denial has been employed in several other scenarios around the country with almost exclusively disastrous results. In Florida, politicians prevented insurance companies from charging adequate rates as well as creating a government property insurer to compete. The result was a mass exodus of private insurance companies from the Florida property insurance market (which put more pressure on the state insurer). In Michigan auto insurance companies are required to sell unlimited personal insurance protection with each policy; the result is Michigan having the second highest premium rates in the nation.

The Obama administration can deny it and even force insurance companies to cover it up, but the reality is that increasing services will necessarily increase costs. It could also result in increased premiums unless the government prevents companies from charging the rates they need to in order to provide the services they are contracted for… but that will simply result in fewer insurance companies. Eventually, we could be left with only one insurance company; the government-run health insurance company, which will not be cost effective.

If we want more services at a lower cost we need to get government out of the way and let insurance companies operate at their highest efficiency level while customers can choose the options that fit their lives and budgets.

Two Health Care Unions Battle Each Other for Members

by Ivan Osorio on September 13, 2010 · 2 comments

in Economy, Employment, Labor

Voting began today in one of the most disputed union elections in recent years. The contest pits the powerful Service Employees International Union (SEIU) against the upstart National Union of Healthcare Workers (NUHW), which was created last year by former officials of a SEIU affiliate in Oakland, California. At stake are 44,000 at Kaiser Permanente health care facilities throughout Northern California.

SEIU’s national leadership placed its Oakland affiliate, United Healthcare Workers-West (UHW), in trusteeship in January 2009, alleging “financial wrongdoing” by then-UHW President Sal Rosselli. In response, Rosselli accused then-SEIU President Andrew Stern of using trusteeship to forcibly seize his local and merge it with a scandal-ridden Los Angeles-based local, whose president, Tyrone Freeman, had stepped down amid serious corruption allegations.

SEIU suffered a loss to NUHW in Southern California in January, so the current contest is major test for SEIU’s new national president, Mary Kay Henry, who took over from her notorious predecessor Andy Stern last May. Henry seems committed to this fight, and for good reason. She worked alongside Stern during his tenure as president, and helped to implement some of his more controversial policies, including his efforts to create a handful of giant mega-locals, through mergers such as the one imposed on SEIU’s California health care affiliates.

Union power struggles are nothing new, and, as in most, the dispute between SEIU and NUHW has its share of egos. But this fight also centers on the future of unionism in the private sector, where organized labor is a fading force. To revive unions’ sagging private sector numbers, SEIU, under Stern’s leadership, has pursued a strategy of increasing union “density,” which entails increasing the number of union members in the overall workforce to gain greater clout in negotiations. This often has meant compromising on contract terms to lessen employer resistance.

Rosselli, by contrast, has preferred to drive a hard bargain to gain the best contract terms for existing members, even while trying to organize new ones. Throughout this conflict, Henry worked alongside Stern to pursue the goal of greater “density,” which Rosselli has derided as “organizing workers for the sake of numbers.”

Whichever strategy wins out, it’s safe to say that the leaders of SEIU and NUHW can agree on at least one thing: support for the so-called Employee Free Choice Act (EFCA), which can help both their goals. EFCA’s card check provision would both allow unions to organize members more easily by effectively eliminating the secret ballot in organizing elections, while its binding arbitration provision would allow union negotiators to drive a harder bargain in the expectation that after 120 days a federally appointed arbitrator could step in to impose an agreement that is bound to be no worse for the union than management’s final offer.

Voting ends on October 4 and the vote count begins two days later. This is a contest well worth watching.

For more on SEIU, see here, here, here, and here.

Study: Cash for Clunkers Didn’t Work

by Ryan Young on September 13, 2010 · 1 comment

in Deregulate to Stimulate, Economy, Stimulus to Nowhere

A new NBER working paper from Atif Mia and Amir Sufi finds that the Cash-for-Clunkers program didn’t work. Here’s part of the abstract:

We find that the program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 – only seven months after the program ended. The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.

In other words, cash for clunkers didn’t change how much people spent. It only changed when they spent. Sales were higher than normal during the program, and lower than normal after.

As the data come in, they are proving what theory predicts: fiscal stimulus doesn’t work. President George W. Bush tried Keynesian stimulus in 2001. It didn’t work. He tried again in 2003. It didn’t work then, either. President Obama’s stimulus programs aren’t faring any better. It’s time for a different approach.

Obama Aides Cheat on Taxes, as Obama Administration Raises Taxes and Violates Constitution

by Hans Bader on September 10, 2010 · 1 comment

in Politics as Usual

Forty-one aides to President Obama owe $831,000 in back taxes.   Meanwhile, as noted earlier, unpaid taxes have risen 37 percent among Capitol Hill staff, to $9.3 million.  Taxes, it seems, are only for the little people, not their liberal overlords.  Even the Treasury secretary, who oversees the IRS, has cheated on his taxes.

At Reason, Peter Suderman describes seven false promises made to push Obamacare through Congress.  In passing Obamacare, the president broke his promise not to raise taxes on anyone making less than $250,000 a year, by raising taxes on middle-class patients and the uninsured.

Obama’s HHS secretary is now seeking to gag insurers that disclose how Obamacare’s mandates are increasing the cost of health insurance, even though such speech is clearly protected by the First Amendment.  Previously, the Obama administration attempted to gag insurers from disclosing how Obamacare harms Medicare Advantage participants, drawing criticism from First Amendment experts like constitutional-treatise author Professor Eugene Volokh.

CEI in Europe: Travelblog 3–Porto, Portugal

by Nicole Ciandella on September 10, 2010

in CEI Projects, Coalitions & Outreach, International

Some things at the Porto Language of Liberty camp are lost in translation.

One problem is political labels. They call us “liberals,” meaning classical liberals. The teachers call themselves libertarians. In lectures, some of the teachers criticize “liberals,” meaning leftists. The politically-active students told us they belonged to the equivalent of a Republican Youth group, but their group is Juventude Social Democrata—Social Democrats. They’re the right-wing of Portugal, and they thought we’d understand that better by thinking of them as Republicans. In truth, most of them would be considered moderate Democrats in America. They are right-wing because the rest of the country is far left.

But they are looking for solutions to their country’s problems, and are interested what the teachers at Language of Liberty have to say. In a workshop about education reform, an argument breaks out. Some of the students say that Portuguese schools are failing. They believe the system—in which the best students go to public universities and the worst go to private—is not encouraging the Portuguese youth to be productive and accountable for themselves.

The recurring question this week has been how to make the Portuguese less dependent on the government and more focused on individual economic achievement. One student has said several times that Portugal suffers because the government treats the people like children. Now education reform may be a matter of economic survival for the country. Portugal’s public debt is currently 80 percent of their GDP. The future of Portugal depends on the productivity and independence of their youth.

One student in the workshop says Portugal should reform education by adopting a Swedish model of school choice. But a group of students—who speak softly in rapid Portuguese until the teacher forces them to speak in English—say that a Swedish model may not work for Portugal. “We’re a different culture,” one student says firmly.

A 17-year-old student, the youngest at the camp, agrees. “For example, if you told Swedish students to come to a Language of Liberty lecture at 9:30 am, they’d come at 9:30 am,” he says dryly.

Everyone laughs. The big joke at the camp has been about the Portuguese concept of time. When the lectures are scheduled for 9:30 am, the students come at 10:15; if we schedule at 10, they come at 10:30. “It’s normal,” one student told Glenn Cripe on the first day when Glenn wondered why everyone was late.

Now, the students are half-serious when they talk self-deprecatingly about “Portuguese time.”

“We’re soft,” one student jokes.

“We’re a Latin country,” another amends.

“We need a more disciplined education system.”

“A Fascist system!”

People laugh and start speaking in Portuguese again. The student who first suggested implementing the Swedish school choice model speaks up.

“The reality is we need to change our culture when we change education and change the government. And people will suffer at first. But in the long run, Portugal will be better off.”

Obama Administration Mandates More of the Risky Loans That Spawned the Mortgage Crisis

by Hans Bader on September 10, 2010 · 5 comments

in Bailout Watch, Economy, Employment, Legal, Politics as Usual, Regulation, Sanctimony, Zeitgeist

The federal government is now expanding the affordable-housing mandates that helped spawn the mortgage crisis by goading mortgage giants Fannie Mae and Freddie Mac to buy up (and create a market for) risky mortgage loans.  Edward Pinto explains in an article at Bloomberg News entitled “Subprime 2.0 Is Coming Soon to a Suburb Near You.”

Affordable-housing mandates adopted under the Clinton administration led to the mortgage meltdown, by encouraging lenders to lend money to people with poor credit even without any substantial down payment, and giving Fannie Mae and Freddie Mac a powerful incentive to buy up the resulting risky loans.  But the Obama Administration has learned nothing from this.  As Pinto notes, “in early September 2010,” it “finalized affordable housing mandates that are likely to prove more risky than those that led to Fannie and Freddie’s taxpayer bailout. . . these new goals almost exclusively relate to very low- and low- income borrowers. Meeting these goals will necessitate a return to dangerous minimal down-payment lending, along with other imprudent lending standards.”  Moreover, over Republican objections, the Dodd-Frank financial “reform” bill, “signed in July 2010 by the president, omitted both an adequate down payment and a good credit history from the list of criteria indicating a lower risk of default as regulators sought to define a qualified residential mortgage.”

(Dodd-Frank does nothing to reform Fannie Mae and Freddie Mac, admits Obama’s Treasury Secretary, Timothy Geithner, even though he admits that “Fannie and Freddie were a core part of what went wrong in our system.” As Government-Sponsored Enterprises, Fannie and Freddie were exempt from the capital requirements that apply to private banks, so they did not have enough reserves to cover their losses when their risky mortgages started defaulting.)

In the long run, we will all pay a price for this foolish policy of getting rid of prudent lending standards. As Pinto notes, “Not only will borrowers who lack a down payment, steady income, employment and a good credit history probably get into trouble – surprise! — but too much irresponsible lending also creates artificial demand for houses, driving prices into the stratosphere and, as we have just experienced, puts all homeowners at risk.”

Getting rid of prudent lending standards was partly the result of politically-correct claims that requiring a down payment or decent credit history was racially discriminatory.  As economics professor Stan Liebowitz notes, in the 1990s, there was an “intentional loosening of underwriting standards—done in the name of ending discrimination, despite warnings that it could lead to wide-scale defaults.”  This preoccupation with race continues in the Obama administration today, where the Obama Administration’s HAMP program “requires lenders to guess the races of clients who refuse to classify themselves.  Mortgage servicers are now expected to record the race of all their clients — including those expressly unwilling to provide one.” The federal government recently also took the position that it is racially discriminatory for employers to refuse to hire felons — even if the employer evenhandedly excludes all felons regardless of race.

America Declines in Property Rights, Rule of Law

by Hans Bader on September 9, 2010 · 1 comment

in Bailout Watch, Economy, International, Labor, Legal, Politics as Usual, Regulation, Zeitgeist

The World Economic Forum says that property rights are deteriorating in the United States, to the point where America ranks behind third-world countries like Gambia and Jordan.  The U.S. ranks 40th in the world; last year, it ranked 30th.

Contract and property rights have taken a beating from the Obama administration.  For example, it ripped off bondholders in the government takeovers and bailouts of General Motors and Chrysler, harming pension funds, non-union retirees and others.

Capitol Hill employees have run up record amounts of overdue and unpaid taxes — a 37 percent increase over 2007.  That’s true even as the Congress they work for has passed a multitude of new tax increases on investors, patients, manufacturers, and others.   And Treasury Secretary Geithner cheated on his taxes.

Meanwhile, a Virginia congressman admits, “If you don’t tie our hands, we’ll keep stealing.”

CEI Podcast: Alex Nowrasteh on Birthright Citizenship

by Ryan Young on September 9, 2010

in International, Personal Liberty, Podcast

In the latest CEI Podcast, Policy Analyst  Alex Nowrasteh talks about why the recent push to repeal birthright citizenship for undocumented immigrants  is misguided.

Have a listen here. Length: 4:49.

Alex recently wrote an article on the issue for Fox News.

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