Center for American Progress

No, Wisconsin’s Budget Deficit Wasn’t “Manufactured” by Walker and the GOP

by Hans Bader on February 23, 2011 · 2 comments

in Economy, Employment, Labor, Regulation

Post image for No, Wisconsin’s Budget Deficit Wasn’t “Manufactured” by Walker and the GOP

Wisconsin is one of the most heavily taxed states in the country, and its government employees are paid much better than the state’s taxpayers. Like many states, it’s facing a substantial budget deficit. But when the state’s newly elected Republican governor, Scott Walker, attempted to place reasonable limits on government-employee pay and collective bargaining, liberal commentators such as Rachel Maddow falsely claimed that the state’s budget crisis was manufactured, and that Wisconsin actually had a projected budget surplus.

This claim has now been debunked by the Milwaukee Journal-Sentinel, which endorsed Obama in 2008 and John Kerry in 2004: “Our conclusion: Maddow and the others are wrong. There is, indeed, a projected deficit that required attention, and Walker and GOP lawmakers did not create it.” Maddow blamed the state’s current deficit on business tax breaks supported by the governor, but those cuts are a tiny drop in the bucket compared to the state’s overall budget; and as the Journal-Sentinel noted, “the cuts are not even in effect yet, so they cannot be part of the current problem.”

[click to continue…]

A Bizarre Defense of High-Speed Rail

by Marc Scribner on November 3, 2010

in Economy, Mobility, Stimulus to Nowhere

Perhaps “bizarre” is not the appropriate word, as Matthew Yglesias is employed by the Obama administration’s barely unofficial think tank/PR shop Center for American Progress, which supports wasteful spending on high-speed rail — surprise! — just like the Obama administration. “Nonsensical” is probably a better adjective. Anyway, government-subsidy shill Yglesias took issue with Cato’s Tad DeHaven’s Cato @ Liberty post on Robert Samuelson’s excellent debunking of high-speed rail, but couldn’t really refute any of it. Instead, he claims $1 trillion isn’t that big of a deal:

Currently, the government needs to pay 4.1% interest on a thirty year bond. And according to the handy dandy amortization-calc.com to amortize a 30 year loan of $1 trillion at an interest rate of 4.1% per year would cost $57.99 billion a year for thirty years. Note that’s in fixed, nominal terms, so while it’s a fair amount of money in the short term by the 2030s it’ll be a joke relative to our Nominal GDP. Contrast that to the $708 billion FY 2011 budget request the Obama administration submitted. It seems to me that an 8.1 percent reduction in defense expenditures in order to create a transformative nationwide new infrastructure program would be a no-brainer.

Yglesias doesn’t consider whether or not high-speed rail makes sense from a cost/benefit perspective. It doesn’t. Nor does he address the inconvenient truth that many of the so-called “high-speed” rail corridors aren’t high-speed by developed-world standards. In fact, he doesn’t even make a case for high-speed rail; rather, he compares subsidies for his preferred project to defense spending. And that’s about it.

Cato’s Randal O’Toole posted a thoughtful response here.  It continues to amaze me that progressives, supposed champions of more egalitarian outcomes through heroic central planning, would support a government program that would primarily benefit wealthy urban elites. But when you consider the fact that most of them, including Dalton-Harvard alum Matthew Yglesias, are wealthy urban elites, things begin to make a little more sense.

Administration Allies Float Trillion Dollar Bailout to Offset Rising Savings Rate

by Hans Bader on November 1, 2010

in Bailout Watch, Economy, Stimulus to Nowhere

Alarmed by the rising savings rate, which liberal Keynesian economic theory views as potentially bad in a weak economy, intellectuals with close ties to the Obama administration, such as Matthew Yglesias, and liberal commentators such as Noam Scheiber, are floating the idea of a trillion-dollar bailout at taxpayer expense, using government-controlled mortgage giants Fannie Mae and Freddie Mac. The bailout would involve Fannie and Freddie writing off part of the mortgage balances of many people who are perfectly capable of making their mortgage payments, not in order to prevent defaults, but just in order to increase borrowers’ purchasing power so that they can spend more money. (The bailout would not cover all Americans, only many of the loans held by Fannie and Freddie.)

The cost of this bailout — perhaps a trillion dollars — would be borne by taxpayers, since Fannie and Freddie are already insolvent, and are expected to need as much as $363 billion more in taxpayer bailouts, even if this massive bailout proposal is not adopted.  (Democrats in Congress blocked GOP proposals to reform Fannie and Freddie or wind them down in May.)

This entire proposal, like many of the administration’s stimulus proposals, is based on the faulty assumption that weak consumer demand is the primary reason for the slow recovery. In fact, personal consumption has resumed rising, while private investment has fallen and remains low. Private investment is way down compared to past recoveries, driven partly by lack of confidence in the administration (a well-deserved lack of confidence given the administration’s anti-business policies).  The savings rate has only increased slightly and remains lower in the U.S. than in most of the world.

Matt Yglesias of the Center for American Progress (CAP) is one of the people floating this proposal. CAP is widely credited with “shaping the agenda of the new Obama administration.”

Yglesias concedes that this proposal may not even be legal, and that “there are real doubts as to whether the Housing and Economic Recovery Act of 2008 actually authorizes this.”  But legalities are unlikely to stand in the way for this administration, which showed little reluctance to take actions in the past that were deemed illegal by many commentators, like the multi-billion dollar auto bailouts, which were criticized for flouting federal bankruptcy laws, the TARP statute, and the Constitution.

Behind such radical proposals are the false assumption that we are in a recession due to “a collapse” in private consumption.  But as Mark Calabria notes, “private personal consumption” is “actually up and higher than at any point during the boom, after reaching bottom in the Spring of 2009.”  Meanwhile, “unlike consumption, which has largely rebounded, investment today is about 20% below its peak.” It’s investment that needs to increase dramatically, not consumption.

There is no reason to think this proposal would help the economy even in the short run.  As Yglesias concedes, this proposal would not be costless even under liberal assumptions: “if the US government deliberately takes on a trillion dollars in additional debt, that may lead the interest rate the US government needs to pay on its debt to rise. Rising interest rates on treasuries will increase interest rates throughout the economy and hurt growth.””

Other bailout proposals have ended up harming rather than helping the economy.  A $75 billion Obama mortgage bailout program is actually harming the economy, the housing market, and the construction industry, economists and real estate experts say.  Many other Obama administration jobs programs have backfired, like a biofuels program that wiped out jobs, and a green-jobs program in the stimulus package that ended up funneling money mostly to foreign firms.  The stimulus package wiped out jobs in America’s export sector, and even the Congressional Budget Office, which claims it will help the economy in the short run, admits it will reduce the size of the economy in the long run.

There are additional problems with the trillion-dollar bailout proposal that its floaters don’t recognize.  The increased national debt it produces would lead to higher taxes and interest payments in the future — crowding out private investment in the future, and thus shrinking the economy in the long run.  And most of the bailout might be saved rather than spent by its recipients, preventing it from increasing consumption in the short run.

Building Height Restrictions: Where I Agree with Matthew Yglesias

by Marc Scribner on October 19, 2010

in Economy, Property Rights, Regulation

Matthew Yglesias of the Center for American Progress links to a Washington Post article that notes that office rents in downtown D.C. are now higher on average than office rents in Manhattan. He correctly points out that Washington, D.C.’s building height restrictions are largely responsible:

Normally what happens when you get high rents is that people respond with bigger buildings. Which is why Manhattan has such big office buildings. DC office buildings, by contrast, are quite short. So are developers working on responding to the high demand by building taller buildings? Of course not! Taller buildings are illegal in Washington DC.

Consequently, instead of building up real estate developers in the DC area build “out,” putting more and more jobs in the suburbs.

By no means am I anti-suburb. Nor do I believe that minimum parking requirements and “free parking” are the evils Yglesias and Donald Shoup claim they are (that said, just like maximum parking limits, these distortionary regulations should be eliminated). But I do not support arbitrary aesthetic justifications for limiting urban development, which unfairly make the suburbs more attractive  to developers. Density and land-use patterns should be natural byproducts of development, rather than planning goals. If property owners wish to meet demand for leased space by building taller buildings, so be it.

Firing Blanks on FOIA Part II

by Iain Murray on September 17, 2009

in Economy, Energy, Environment, Global Warming, International, Regulation

In his update to his post, Declan McCullagh notes an objection by the Center for American Progress:

The fourth objection is the most compelling. The Center for American Progress writes: “The potential benefits of clean energy legislation far outweigh the modest costs.” That’s a reasonable cost vs. benefit calculation, and it includes the claim that even with the extra taxes, cap and trade is so vital to America, it’s still worth it.

That’s the right approach to take: it would be a very good thing if all federal regulation were subject to a cost vs. benefit analysis. For example, if rising temperatures are significantly harming the planet, and cap and trade would reduce greenhouse gases enough to slow the rise, that would be a real benefit. But the Center for American Progress never actually makes that argument, and as CEI senior fellow Christopher Horner says: “Nobody has ever said this will change the temperature. It won’t.”

Well, we’ve already covered that one.  Even taking the most favorable analysis to WaxKey, the costs to Americans massively outweigh the benefits to them.  Here’s my post from a week ago:

There’s a new cost:benefit study from New York University Law School’s Institute for Public Integrity that, its authors claim, shows that, “From almost any perspective and under almost any assumption, H.R. 2454 [Waxman-Markey] is a good investment for the United States to make in our own economic future and in the future of the planet.”  A good investment for the US? Really?

The authors recognize that the benefits they find are global, while the costs are located in the US.  So let’s see what benefits accrue to US citizens and at what cost. (I am working with the authors’ figures here, which derive from the EPA, and are significantly different from the figures provided by such groups as the Heritage Foundation or the American Council for Capital Formation, which find much, much higher costs.)

Highest possible benefit = $5.2 trillion / 6 billion people = benefits of $866 per person

Cost to US citizen = $660 billion / 300 million people = cost of $2200 per citizen

That means a best possible benefit to cost ratio for a US citizen of 0.4:1.

The report talks about thinking of the Waxman-Markey costs as a “highly effective, highly leveraged form of foreign aid.”  One has to doubt that, given that the benefits that accrue to the developing world do so mostly in the far future, while the developing world is in desperate need of greater wealth – and better access to energy – today.  Even if it were true, however, one wonders whether the American public will accept a de facto tax increase of around $1300 per person, or $400 billion total, to pay for such climate aid.

Yet that’s assuming that the “high end” benefits scenario is what occurs.  The global low end benefits are actually far outweighed by the American costs, leading to a benefit:cost ratio to America of something in the order of 0.05:1 (or a cost:benefit ratio of 20:1).

And, of course, there’s no guarantee that a reduction in American emissions will amount to a reduction in global emissions.  We have seen the response to European cap-and-trade schemes being the relocation of facilities to other jurisdictions.  If so, the effective foreign aid program of Waxman-Markey might actually be a loss of American jobs to be replaced by developing world jobs, with no emissions reduction at all.  That would be very generous of us, but not quite what the authors of this study have in mind.

To summarize, the authors of the study have conclusively demonstrated that the Waxman-Markey bill is actually a very bad deal for the United States, and their attempts to claim otherwise are just spin.

Inept Liberal Lobbyists Refute Their Own Claims: the bungling Center for American Progress

by Hans Bader on September 11, 2009 · 1 comment

in Politics as Usual, Precaution & Risk, Sanctimony

Many falsehoods were uttered by the President in his health care speech, as even liberal newspapers and Obama advisers have made clear. But the inept, George Soros-funded liberal lobbyists at the Center for American Progress (CAP) attempted to demonize ObamaCare’s critics anyway.

CAP recently shot itself in the foot by refuting its own claims in its September 11 “Progress Report.”

For example, it wrote that critics of big government and ObamaCare “include the Heartland Institute and the Competitive Enterprise Institute, corporate front groups that claim smoking is good for you.”  But if you click on the very link for their false claim that CEI believes that “smoking is good for you,” it takes you to a CEI web page, www.controlabuseofpower.org, in which CEI not only makes no such claims, but does just the opposite, noting “the health risks of smoking” in the course of criticizing the $240 billion tobacco Master Settlement Agreement.

Indeed, the top post on that page, by CEI’s Ashley Jacobs, starts its last sentence about the tobacco settlement by explicitly “acknowledging the health risks of smoking.”

(The tobacco settlement has been defended in court by big tobacco companies that use it to squelch competition from smaller competitors, by forcing them to make costly escrow deposits on every cigarette they sell, under discriminatory laws states adopted as a condition of the settlement.  If CEI actually were a corporate front group, it would have defended the tobacco settlement, instead of attacking it, since its attack on the settlement dried up the small fraction of CEI’s funding that it once received from big tobacco companies).

There are many blog posts at OpenMarket saying that discriminatory regulation aimed at smokeless tobacco is bad precisely BECAUSE smoking kills, meaning that smokeless tobacco, which has far fewer health risks, should be allowed to trumpet its health-advantage over cigarettes so that smokers will stop smoking and switch to smokeless tobacco.  This public health benefit is, sadly, blocked by legislation backed by Philip Morris, the nation’s largest tobacco company, and, apparently, the Center for American Progress, which collects donations from corporations seeking to obtain corporate welfare and curry favor with the Obama Administration. (“Some open government groups, such as the Sunlight Foundation and the Campaign Legal Center, criticize the Center’s failure to disclose its contributors, particularly since it is so influential in appointments to the Obama administration,” as Politico has noted).

You can find three of my own blog posts discussing the dangers of smoking here, here, and here.

At the web sites of CEI and the Examiner, I have described cigarettes as “lethal” and “hazardous to your health” and written that “Every year, millions of smokers like my wife try and fail to quit . . . Many later die of smoking-related illnesses, which are caused by the smoke, not the nicotine.”

Buffett Opposes Card Check, but Don’t Forget Binding Arbitration

by Ivan Osorio on March 9, 2009

in Economy, Labor

Rumors of the so-called Employee Free Choice Act (EFCA) being introduced in the current Congress have come and gone — and will come again. Yet the Washington rumor mill being so active on this shows just how big an issue this is. For the unions, it is their number one priority, since they see it as a tool to reverse decades of membership decline. For the business community, it would impose yet another dead-weight cost in the middle of a severe economic slowdown.

EFCA would replace secret ballot union elections with a process known as card check, in which union organizers ask employees to sign union cards out in the open, exposing employees to the kind of high-pressure tactics secret ballots are designed to avoid. Public opposition began to turn against EFCA as this became known among the public. Now Senator Claire McCaskill (D-Mo.) says that Senate Democrats may not have the votes to break a Republican-led filibuster. And former Senator George McGovern has been joined by another prominent Democrat in his opposition to card check, Warren Buffett, who has President Obama’s ear (as the anger in a Center for American Progress response would indicate).

That protecting secret ballots should be popular is no surprise. But that’s not all there is to this bill. As former Labor Department officials Loren Smith and Vincent Vernuccio note, card check isn’t the only noxious element of EFCA. Binding arbitration, which has not received nearly as much attention, would essentially empower federally appointed arbitrators to impose a contract on any newly unionized business.

Once a business is unionized, management and the union have to come to terms on a contract for the unionized workers. This can take months or years as the two parties hammer out their differences.

Under EFCA’s proposed binding arbitration provision, the government would step in after 90 days and “work with” the two parties. All that is needed is one party to “request” the process. After another 30 days, the government would assign the case to an arbitrator (the rules for which would be written by the Obama administration) who would impose wage and benefit terms for the company for the next two years.

Arbitrators generally take a split the baby approach and try to come to a middle ground between the two parties. This means the union can make outrageous demands then stonewall an employer knowing they may not get everything in arbitration but they can, with the help of the government, force the employer into concessions that may not be economically feasible for the company. An example would be a new car company — instead of a regular negation process a union could make outrageous demands and wait for an arbitrator to decide the terms of a contract. Understandably the arbitrator would not want to reinvent the wheel so he would look to other existing contracts in the industry. Soon this company would be shackled with the same type of crippling contract as the Big Three and the UAW.

So, Smith and Vernuccio (correctly) warn, EFCA opponents need to be vigilant of efforts to break up the bill’s component parts into separate bills, which could then pass much more quietly than the highly controversial EFCA.

For more on card check, see here and here.

When it Comes to Climate Change, Errors Abound

by William Yeatman on February 24, 2009 · 5 comments

in Environment, Global Warming

“A Matter of Fact,” a new report from the Center for American Progress Action Fund, challenges the Washington Post to correct George F. Will’s “Dark Green Doomsayers” column, published February 15th. The report, by CAP’s Brad Johnson, asserts that George Will made three factual errors:

  • Current “global sea ice levels” equals those of 1979
  • There hasn’t been warming in “more than a decade”
  • “Global cooling” joins a list of well publicized “planetary calamities that did not happen.”

Will’s column is not perfect, and Johnson raises some valid questions. For the sake of intellectual honesty, however, Johnson should broaden his fact-checking scope to incorporate misstatements on both sides of the global warming debate—including his own fudging of the truth.

But first, let’s address CAP’s critique of Will’s column.

Error 1. It seems that Will is guilty of delay. On the one hand, the University of Illinois Arctic Climate Research Center, the source of his assertion that global sea ice levels haven’t changed in 30 years, publically disavowed Will’s claims. On the other, ACRC reported on January 1, 2009 that global sea ice levels were “near or slightly lower than those observed in late 1979.” Will’s column appeared 45 days later, during which the discrepancy between current levels and 1979 levels grew by 8%.  If anything, this demonstrates the perils of reporting on an ever-changing global climate.

Error 2. CAP and George Will have it wrong. Will wrote that it hasn’t warmed in “more than a decade,” while Brad Johnson claims that “global warming is continuing.” According to data from the University of Alabama in Huntsville, compiled by NASA’s Dr. Roy Spenser, there has been no statistical warming of lower atmosphere temperatures over the past seven years, despite the fact that global greenhouse gas emissions have increased.

Error 3. Will is right and CAP is wrong. Johnson notes that there was never a “scientific consensus” on global cooling, but that’s not what Will claimed. He only wrote that some scientists and media outlets warned of global cooling, which is true.

I am an unabashed global warming “denier,” but I nonetheless applaud Brad Johnson’s efforts. On the topic of global warming, misrepresentations of the science abound, and we in the energy/global warming policy community should root them out and expose them with vigilance.

With that in mind, I have a “Matter of Fact” list of my own:

Fiction: Al Gore claims in his documentary, An Inconvenient Truth, that “there is one relationship that is more powerful than all the others and it is this. When there is more carbon dioxide, the temperature gets warmer ….”

Fact: It hasn’t warmed in 7 years, despite a steady increase in global greenhouse gas emissions. Where’s the Warming, Al?

Fiction: Dr. James Hansen, ultra-alarmist, has suggested that a 2-3 degree warming would cause sea levels to rise by 80 feet. Hansen then lowered his estimation to 20 feet. His most recent estimate is “at least” 3.2 to 6.4 feet.

Fact: The preeminent body of climate scientists, the Intergovernmental Panel on Climate Change, suggests that a 2-3 degree warming would cause sea levels to rise 7 to 23 inches.

Fiction: In 1986, Dr. John P Holdren, President Barack Obama’s choice to become White House Science Adviser, is quoted as having said that global warming could cause the deaths of 1 billion human beings by 2020. During his confirmation hearing two weeks ago, Holdren was questioned about this claim, and said that “it is still possible.”

Fact: To fulfill Holdren’s alarmist warning, climate change would have to kill twice as many people as died in World War Two, each year, for the next ten years.

Fiction: The Center for American Progress’s Brad Johnson last summer reported that the death of two Boy Scouts in Iowa was “evidence” of “the consequences” of global warming.

Fact: As recently noted on Roger Pielke Jr’s Prometheus, the Center for Research on the Epidemiology of Disasters cautions that “justifying the upward trend in hydro-meteorological disaster occurrence and impacts essentially through climate change would be misleading.”

Neither carrots nor sticks

by Ivan Osorio on October 6, 2008 · 1 comment

in International

Few things are as exasperating as watching two sides argue — and neither rise above being half-right, at best. Still, the resulting exchange in this case is thought-provoking.

Today, the left-liberal Center for American Progress responded to a Washington Post editorial calling for a tougher stance on the part of Washington against Latin American autocrats like Hugo Chavez and his cronies in Nicaragua, Bolivia, and Ecuador. While the Post editorial is right on more counts than is the CAP piece, they both seem to buy into the notion that the internal policies of Latin American countries are any of American policy makers’ business.

Yes, the United States wields enormous influence in the region as the biggest economic and political player, but the biggest contributions it can make to the well-being of Latin America  countries are — and should be — limited to maintaining open trade and immigration policies (I know, easier said and done) and changing America’s Sisyphean drug policy.

CAP author Stephanie Miller rightly mentions “drug consumption” in the U.S. as an important factor affecting Latin America, but she fails to develop even this important point. Moreover, she doesn’t even identify it properly — it is drug prohibition that is driving Latin America’s rising crime wave. No amount of drug laws can ever kill off demand itself. Moreover, drug prohibition is causing great damage in Latin America, but the enormous damage it is already causing in the U.S. is enough reason to change policy, independently of any foreign policy implications.

Regarding the Post editorial, it rightly emphasizes the importance of trade. However it seems to imply that trade preferences for countries with hostile regimes somehow constitute “subsidies,” even though trade preferences usually entail the removal of trade barriers (however selectively).

Meanwhile, CAP’s Miller argues that, “Trade is important, but it is clearly not the magic bullet that promoters of the Washington consensus of the 1990s believed it would be.” Magic bullet? This is clearly a straw man. It’s a big jump to go from saying that trade is crucial — which it is — to it being a panacea to societies’ ills — which it is clearly not. Many development factors are necessary; none are sufficient on their own.

Finally, regarding what American policy should be, both the Post and CAP argue for interventions of different sorts. Miller argues that, “the United States must very proactively engage with civil societies in all of these countries at the grassroots level.” The Post contends that, “Sooner or later [Latin Americans] must be forced to choose between Mr. Chávez’s half-baked socialism and the democracy of the 21st century.”

What about just stepping back and let Latin American countries solve their own problems — and deal with the consequences of their own decisions? Contra Miller, development in foreign countries is not something the American government is well suited to promote. And contra the Post, the U.S. cannot save people in other countries from themselves, no matter how bad their choices.