The 'Paralyzing Principle' - WSJ.com

 

Review & Outlook: The 'Paralyzing Principle' - WSJ.com

 

The Gulf oil spill is having all sorts of nasty consequences well beyond damage to the regional environment and economy. Not least, the resulting political panic seems to be rehabilitating the thoroughly discredited theory of regulation known as the precautionary principle.

This principle holds that government should attempt to prevent any risk—regardless of the costs involved, however minor the benefits and even without understanding what those risks really are.

[Obama White House regulatory czar] Cass Sunstein's insight is that there are risks on all sides of a question—doing nothing can be dangerous, but acting might be more dangerous—so the only rational way to judge regulation is to quantify the costs and benefits. If the Food and Drug Administration took a harder line in approving new medicines, it might protect the public from a future thalidomide disaster. But it could also deprive the public of cures for disease or expose it to serious peril, like having no recourse in a pandemic.

In a 2002 book, Mr. Sunstein pointed out that the best way to prevent automobile pollution would be to eliminate the internal combustion engine. Should the EPA ban that too? "If these would be ridiculous conclusions—as I think they would be—it is because the costs of the bans would dwarf the benefits. Pollution prevention is not worthwhile as such; it is worthwhile when it is better, all things considered, than the alternatives."

 

 

 

David Souter vs. the Constitution - WSJ.com

This historical example illustrates that law should mean what it says, not what some justices think it should say or mean.  If a law is outdated, than we should change it, not just impose “new realities” thru judicial dictat.

 

John McGinnis and Michael Rappaport: David Souter vs. the Constitution - WSJ.com

 

The former justice's logic would justify Plessy v. Ferguson.

At the recent Harvard commencement, retired Supreme Court Justice David Souter attacked what he regards as the "simplistic" model of giving the Constitution a "fair reading." A judge, he said, must determine which of the conflicting constitutional values should become our fundamental law by taking account of new social realities. His remarks were a thinly veiled assault on those who think the Constitution should be interpreted according to its original meaning.

Justice Souter actually provided a primer on how not to be a judge. He made up a Constitution that never was to justify a kind of judicial power that was never intended.

We should reflect on the great suffering and injustice that a failure to follow the original meaning of the 14th and 15th Amendments caused to so many for almost a century. While we believe that an originalist reading of the Constitution also supports Brown, the salient point here is that Brown would not have had such central importance had the Reconstruction-era amendments been enforced according to their original meaning. The greater economic and voting power that enforcement would have ensured would likely have prevented the caste system of public education in the South.

Justice Souter recognizes that his method of interpreting the Constitution is indeterminate, but he argues that it is necessary to put our trust in justices to reach just results. The historical reality is that this interpretive method permitted justices to create a Constitution of their own contrivance in the service of injustice.

 

 

 

Obama's Political Oil Fund - WSJ.com

Obama's Political Oil Fund - WSJ.com

The BP oil spill is already a calamity for the Gulf Coast ecosystem and economy, but now that Washington is looking to deflect all political blame it could also became a disaster for the rule of law. Exhibit C is the new White House demand that BP pay into an escrow account controlled by government to pay for the economic costs of the spill.

The idea is for BP to turn its assets over to a fund administered by an "independent" trustee who would decide what are legitimate damage claims from Gulf residents and businesses.

The White House knows it has no legal authority to demand such a corporate ATM card, but it is counting on public anger to coerce BP to go along. The White House also knows BP is currently operating under the Oil Pollution Act, a piece of legislation passed in 1990 by a Democratic Congress.

The bill made polluting oil companies responsible for all containment and clean-up costs. The law also established a claims process, which requires that companies compensate businesses or individuals harmed by oil spills.

BP has more than 600 claims personnel working to pay fishermen and others that have suffered economic damage. It has vowed to pay all "legitimate" claims and has worked through 20,000 of 42,000 submitted so far…

By contrast, a government-administered fund more or less guarantees a more politicized payment process. The escrow administrator will be chosen by the White House, and as such would be influenced by the Administration's political goals. Those goals would include payments to those harmed by the Administration's own six-month deep water drilling ban. That reckless policy will soon put thousands of Gulf Coast residents out of work, but the White House knows that BP isn't liable under current law for those claims. The escrow account is an attempt to tap BP's funds by other means to pay the costs of Mr. Obama's own policy blunder.

Offshore drilling, even in shallow water, is coming to a stop as the entire industry considers the additional political risks of operating amid a political panic in which even the President of United States seems oblivious to the rule of law. We hope BP resists Mr. Obama's demands to put a political actor in control of its Gulf payments—both for the sake of legitimate Gulf claims, and to vindicate the U.S. as a nation that doesn't discard the law for the sake of political retribution.

 

 

Are You Smarter Than a Fifth Grader? - WSJ.com

Before you read today’s article, test yourself by answering the following questions AGREE or DISAGREE, based on your understanding of basic economics:

1)      Restrictions on housing development make housing less affordable.

2)      Mandatory licensing of professional services increases the prices of those services

3)      Overall, the standard of living is higher today than it was 30 years ago

4)      Rent control leads to housing shortages

5)      A company with the largest market share is a monopoly

6)      Third World workers working for American companies overseas are being exploited

7)      Free trade leads to unemployment

8)      Minimum wage laws raise unemployment

It’s too bad basic econ isn’t actually taught in 5^th grade, or 12^th grade for that matter.  Perhaps our country would be in a better financial situation if it were.

 

Daniel Klein: Are You Smarter Than a Fifth Grader? - WSJ.com

Who is better informed about the policy choices facing the country—liberals, conservatives or libertarians? According to a Zogby International survey the answer is unequivocal: The left flunks Econ 101.

How did the six ideological groups do overall? Here they are, best to worst, with an average number of incorrect responses from 0 to 8: Very conservative, 1.30; Libertarian, 1.38; Conservative, 1.67; Moderate, 3.67; Liberal, 4.69; Progressive/very liberal, 5.26.

Americans in the first three categories do reasonably well. But the left has trouble squaring economic thinking with their political psychology, morals and aesthetics.

Adam Smith described political economy as "a branch of the science of a statesman or legislator." Governmental power joined with wrongheadedness is something terrible, but all too common. Realizing that many of our leaders and their constituents are economically unenlightened sheds light on the troubles that surround us.

 

 

Does the Internet Make You Smarter? or Dumber? - WSJ.com

A pair of articles today.  I found the implications of both articles worth the time spent reading, and I don’t think they made me dumber.

Does the Internet Make You Smarter? - WSJ.com

Every increase in freedom to create or consume media, from paperback books to YouTube, alarms people accustomed to the restrictions of the old system, convincing them that the new media will make young people stupid. This fear dates back to at least the invention of movable type.

What the 16th-century foes of print didn't imagine—couldn't imagine—was what followed: We built new norms around newly abundant and contemporary literature. Novels, newspapers, scientific journals, the separation of fiction and non-fiction, all of these innovations were created during the collapse of the scribal system, and all had the effect of increasing, rather than decreasing, the intellectual range and output of society.

We are living through a similar explosion of publishing capability today, where digital media link over a billion people into the same network. This linking together in turn lets us tap our cognitive surplus, the trillion hours a year of free time the educated population of the planet has to spend doing things they care about. In the 20th century, the bulk of that time was spent watching television, but our cognitive surplus is so enormous that diverting even a tiny fraction of time from consumption to participation can create enormous positive effects.

 

Does the Internet Make You Dumber? - WSJ.com

The picture emerging from the research is deeply troubling, at least to anyone who values the depth, rather than just the velocity, of human thought. People who read text studded with links, the studies show, comprehend less than those who read traditional linear text. People who watch busy multimedia presentations remember less than those who take in information in a more sedate and focused manner. People who are continually distracted by emails, alerts and other messages understand less than those who are able to concentrate. And people who juggle many tasks are less creative and less productive than those who do one thing at a time.

 

 

 

Storming the School Barricades - WSJ.com

"The Lottery"—an explosive new documentary about the battle over the future of public education opening nationwide this Tuesday.

The Weekend Interview with Madeleine Sackler: Storming the School Barricades - WSJ.com

 

A new documentary by a 27-year-old filmmaker could change the national debate about public education.

Finding out that the teachers union had hired a rent-a-mob to protest on its behalf was "the turn for us in the process." That story—of self-interested adults trying to deny poor parents choice for their children—provided an answer to Ms. Sackler's fundamental question: "If there are these high-performing schools that are closing the achievement gap, why aren't there more of them?"

Some parents in the film do not know what exactly a charter school is. And the truth, as the film implicitly points out, is that such technical designations don't much matter. What these parents know is that they desperately want their children to have the best possible education, and to have opportunities that they themselves could only imagine. Winning a spot in Harlem Success Academy—or another high-performing school—is critical to reaching that goal.

"The public education system is at a crossroads," Ms. Sackler says. "Do we want to go back to the time when children are forced to attend their district school no matter how underperforming it is? Or do we want to let parents choose what's best for their kids and provide a lot of options? Sometimes those options might fail. But . . . I don't see how you could choose to settle for what we've been doing for half a century when it's been systemically screwing over the same kids—over and over and over."

 

 

 

The West's Wrong Turn on Natural Resources - WSJ.com

 

Joseph Sternberg: The West's Wrong Turn on Natural Resources - WSJ.com

 

For all that talk about a new knowledge economy, things still matter a great deal in this world. And whether it's the steel beam holding up the floor of your office, the gasoline you put in your car or the circuitry in your new iPad, "things" mean natural resources. So it's worrying that one of the major policy trends emerging in recent days is that the capitalist West is cutting itself out of the resource game.

The danger is that if [democracies] won't supply minerals to the world on market principles, others—like China—will step into the gap with other ideas.

Without giving too much credence to China alarmists, it is still possible to say the world is better off if resources are in the hands of transparent companies that will trade on market principles free of the risk of excessive government interference. The third and worst alternative is to stay on the current track of crippling Western resource reserves while also blocking capital from the willing investors that remain.

Yes, companies will continue to extract resources in the West even under the taxes (though the outright drilling ban is another story). But those bad policies will make a major difference at the all-important margins of the market, which drive pricing decisions. The choice for Western policy makers now is simple: They can clamp down on their resource industries for domestic political reasons and hand pricing and supply power to nonmarket and nondemocratic governments. Or they can allow their own companies to run a truly global resource market capable of meeting the world's need for things.

 

 

The New Cannery Row - WSJ.com

 

Review & Outlook: The New Cannery Row - WSJ.com

 

Hidden inside the latest Democratic spending bill is an $18 million taxpayer handout to American Samoa. How did that get in there? Read on for another lesson in the uncreative jobs destruction of the minimum wage.

When Democrats in Congress increased the minimum wage in 2007, the U.S. territory of 65,000 in the South Pacific pleaded for its traditional exemption from the wage law to prevent job losses. But Democrats followed union orders and said that if multinational companies like StarKist, one of Samoa's largest employers, could pay its CEO millions it could afford to pay workers $7.25 an hour. So they raised the minimum wage for low-skilled Samoan workers from $3.26 an hour to $5.25 today and by 2015 it will rise to the current U.S. minimum of $7.25.

Job losses have followed the way that any economics 101 student would expect. Last September Chicken of the Sea closed its tuna canning operation in the territory, leaving more than 2,000 Samoans jobless.

Then last month StarKist announced it will lay off as many as 800 workers, bringing its work force there from 3,000 before the minimum wage hike to 1,200 by 2011. StarKist explained that because of the minimum wage hike Samoa is no longer competitive with other tuna canning countries. American Samoa's unemployment rate, which was less than 10% in 2003, has climbed to some 30% or more today. Sorry, Charlie.

We've rarely seen a more devastating real world indictment of the impact of the minimum wage. Congress could simply lower the minimum wage to bring the jobs back, but instead taxpayers get to shell out $18 million to undo the damage that Congress's economic illiteracy has caused. Please remember this the next time a Member of Congress says the minimum wage helps "working families."

 

 

 

Of Politics and Oil - WSJ.com

The Washington panic, and the realities of the Gulf Coast spill.

This oil spill is a reminder—unpleasant for a public raised on fabulous technological advancement, and for an Administration engaged in taking over U.S. health-care and Wall Street—that government is not the Wizard of Oz able to solve every problem.

This Obama finger-pointing has, if anything, backfired politically. The oil spill was an opportunity for Mr. Obama—who campaigned as someone who likes to wrap his mind around "complex" problems—to remind the country that energy exploration and engineering are not error-free disciplines. The U.S. oil industry has a remarkable safety record, even as it has moved into deeper and deeper water to provide the U.S. with affordable oil. But no industry is accident free, and Mr. Obama could have served the public better by explaining the technical challenges of fixing this deep water leak. His decision to pound on BP for not performing immediate miracles has instead fed the public's expectations that this is like plugging a hole in a swimming pool.

Republicans have also done the nation no favors in their political rush to turn this oil spill into Mr. Obama's "Katrina." In an attempt to tie the disaster to the Administration, they've targeted the Minerals Management Service, suggesting agency bureaucrats weren't tough enough on Big Oil.

Never mind that there is zero evidence so far that this blowout resulted from lax regulation or shoddy practices. Never mind, too, that the GOP is targeting one of the few federal agencies that happens to believe in more domestic energy production.

We suppose it is too much to expect today's political class to withhold its game of panic and blame until industry plugs the leak and we learn what really happened and why. But the American people, watching this spectacle while the disaster unfolds, are being given one more reason to doubt the capacities and candor of its political leaders.

Incentives vs. Government Waste - WSJ.com

What if bureaucrats could benefit financially from finding cost savings?

Why are profit-seeking corporations so much more efficient and innovative than bureaucracies? A significant part of the answer to that question lies in the fact that bureaucracies are often hamstrung by legislation, and amending legislation is always a cumbersome and politics-ridden process. But another significant part of the answer lies in the phrase "profit-seeking."

Corporations exist only to create wealth. The more they create, the more their stockholders and employees prosper. Thus it's a corporate manager's job to look for ways to increase profits. More, their personal success depends on doing so. For the employees who come up with the really bright ideas prosper even more than their fellow workers, being rewarded with raises, bonuses and promotions.

But there are only three basic ways to increase profits: raise prices, cut costs or innovate. Raising prices is easy. Just cross out $19.95 and write in $22.95. Unfortunately, in a competitive economy, raising prices is going to cost you market share and is thus self-defeating. So corporate employees have no choice but to pursue the far more difficult second and third options, searching for ways to make the same product cheaper or to create a better product at the same cost. They do this hard work because they are highly incentivized by self-interest to do so.

Bureaucrats, alas, are not. In fact, they are highly disincentivized to increase efficiency and to innovate. In business a penny saved is a penny earned, the savings flowing directly to the all-important bottom line. But in a bureaucracy, a penny saved is a penny likely to be cut from next year's budget. And prestige in a bureaucracy comes not from profit but from the size of one's budget. So even accidental savings are likely to be suppressed with make-work.

[Bureaucrats] can certainly find new ways of doing their jobs that are cheaper and better than the old ways, especially if they are handsomely rewarded for doing so.

Self-interest is an immensely powerful force in human affairs—the very engine behind capitalism's success. Harnessing it to save money and increase innovation in a bureaucracy, just as the Royal Navy harnessed it to capture enemy ships, would be the biggest innovation of all and save the government billions.

The Bankrupting of America - WSJ.com

 

Mortimer Zuckerman: The Bankrupting of America - WSJ.com*

 

The American public feels it is drowning in red ink. It is dismayed and even outraged at the burgeoning national deficits, unbalanced state and local budgets, and accounting that often masks the extent of indebtedness. There is a mounting sense that taxpayers are being taken for an expensive ride by public-sector unions. The extraordinary benefits the unions have secured for their members are going to be harder and harder to pay.

It is galling for private-sector workers to see so many public-sector workers thriving because of the power their unions exercise. Take California. Investigative journalist Steve Malanga points out in the City Journal that California's schoolteachers are the nation's highest paid; its prison guards can make six-figure salaries; many state workers retire at 55 with pensions that are higher than the base pay they got most of their working lives.

What we suffer is a ruinously expensive collaboration between elected officials and unionized state and local workers, purchased with taxpayer money. "Scratch my back and I'll scratch yours."

Public unions organize voting campaigns for politicians who, on election, repay their benefactors by approving salaries and benefits for the public sector, irrespective of whether they are sustainable. And what is happening in California is happening in slower motion in the rest of the country.

The lopsided subsidies for pension and health costs are a large part of the fiscal crises at the state and local levels. The subsequent squeeze on education and infrastructure investment is undermining the very programs that have made it possible for our economy to grow.

City government was developed to serve its citizens. Today the citizenry is working in large part to serve the government. It is always hard to shrink government spending. It is particularly difficult when public-sector unions have such a unique lever of pressure.

We have to escape this cycle or it will crush us.

 

 

 

 

Can Dirt Do a Little Good? - WSJ.com

 

Can Dirt Do a Little Good? - WSJ.com

 

According to the "hygiene hypothesis," first proposed in 1989, exposure to a variety of bacteria, viruses and parasitic worms early in life helps prime a child's immune system, much like sensory experiences program his brain. Without such early instruction, the immune system may go haywire and overreact with allergies to foods, pollen and pet dander or turn on the body's own tissue, setting off autoimmune disorders.

Many of these microorganisms evolved symbiotically with humans over millions of years—the so-called "old friends" theory. But where they've been eradicated, a key part of human development has been thrown off.

Many experts advise common sense. "We don't want to say to children, 'OK, play by the dirty river bank and catch whatever you can,' " says Dr. Weinstock. "But we can say there's nothing wrong with kids playing in the dirt. They don't have to live in total sanitation, and they won't die from eating something off the floor. It's probably more healthy than not."

 

 

 

The We're-Not-Europe Party - WSJ.com

 

Dan Henninger: The We're-Not-Europe Party - WSJ.com

 

For Americans, this has been a two-week cram course in what not to be if you hope to have a vibrant future. What was once an unfocused criticism of Mr. Obama and the Democrats, that they are nudging America toward a European-style social-market economy, came to awful life in the panicked, stricken faces of Europe's leadership…

The state of Europe can be summed up in one word: stagnation… Stagnation isn't death. Economies don't die. Greece proves that. They slow down. Europe's low growth rates allow its populations to pretend that real, productive work is being done somewhere by someone. But new jobs are created slowly, if at all. Younger workers lose heart.  Economic stagnation is a kind of purgatory.

Barack Obama would never say it is his intention to make the U.S. go stagnant by suppressing wealth creation in return for a Faustian deal on social equity. But his health system required an astonishing array of new taxes on growth industries. He is raising taxes on incomes, dividends, capital gains and interest. His energy reform requires massive taxes. His government revels in "keeping a boot on the neck" of a struggling private firm. Wall Street's business is being criminalized.

Economic stagnation arrives like a slow poison. Look at the floundering United Kingdom, whose failed prime minister, Gordon Brown, said on leaving, "I tried to make the country fairer." Maybe there's a more important goal.

A We're-Not-Europe Party would promise the American people to avoid and oppose any policy that makes us more like them and less like us.

 

 

Welfare Wagons - WSJ.com

 

Holman Jenkins: Welfare Wagons - WSJ.com

 

Even if you believe saving gasoline is a holy cause, subsidizing electric cars simply is not a substitute for politicians finding the courage to jack up gas prices. Think about it this way: You can double the fuel efficiency of any car by putting a second person in it. You can increase its fuel efficiency to infinity by refraining from frivolous trips.

These are the incentives that flow from a higher gas price. Exactly the opposite incentives flow from mandatory investment in higher-mileage vehicles. You paid a lot for a car that costs very little to operate—so why not operate it? Why bother to car pool? Why not drive across town for a jar of mayonnaise?

Tax handouts for electric vehicles are emblematic of an alarmingly childish refusal to take account of circumstances. The U.S. government is deeply in debt. In people and nations with their backs to the wall, one looks for signs of rationality. Running up more debt to subsidize electric runabouts for suburbanites is not such a sign.

 

 

 

Blame Obama. Why Not? - WSJ.com

I really liked the picture of Uncle Sam as Jabba the Hut. 

 

Dan Henninger: Blame Obama. Why Not? - WSJ.com

 

The left and the media knee-capped the Bush presidency for not making Hurricane Katrina go away fast enough. So now, like a village feud in ancient Sicily, the right and its media are knee-capping the Obama presidency for not making the Gulf's spilled oil go away fast enough. Boo hoo.

Are we supposed to say that the criticism of Mr. Obama is unfair? Sorry. The permanent smackdown that is now U.S. politics has devolved into a zero-sum proposition whenever anything bad happens in American life—an oil spill, a terrorist bomb in Times Square, a financial meltdown, a mining disaster.

It works like this: If you occupy a position of leadership or responsibility in public or private life… you will get blamed for days on end, no matter what the facts are.

For the longest time, whenever a disaster such as Katrina or this oil spill hit, people have expected the government to step up and move heaven and earth to help. With a big mess, you need big authority to clear a path. The assumption beneath this expectation is that government, if it really wants to, can do just about anything.

In fact, after about 100 years of chowing down responsibilities, Uncle has inflated into something as big, powerful and sloppy as Jabba the Hut, a fat guy who can barely move.

 

 

Elena Kagan and the 'Hollow Charade' - WSJ.com

 

Neomi Rao: Elena Kagan and the 'Hollow Charade' - WSJ.com

 

I think Americans can understand that judges draw on a variety of tools in interpreting the law, and that these tools differ for judges based on their constitutional values.

For example, when a statute is unclear, Justice Antonin Scalia might press harder on the language of the law, look at the context of specific words, and generally seek to understand what the written law means. He seeks to limit his own discretion, in part because the Constitution gives Congress, not the courts, the power to enact laws.

By contrast, Justice Stephen Breyer might focus on the purposes of the law and look to sources outside of the Constitution—including foreign law—to come to a decision. He may consider the outcome that makes the most sense to him because he considers judges to be a part of the democratic process. These are fundamentally different ways of dealing with difficult cases and they reflect two distinct attitudes about the proper role of a judge.

Ms. Kagan and those preparing her face a simple, political problem: "progressive" views of judging are difficult to defend. It may be why no recent nominee has tried. The simple statement that "judges should interpret the law, and not make it" resonates with Americans in a way that "judges should figure out the best answer" does not.

The reality may be more complicated than either of these formulas, but an attitude that emphasizes the rule of law has more appeal not merely because of its simplicity but because it captures the idea that judges are not policy makers. It emphasizes that judges should interpret the language of the law and try, as best they can, not to impose their own personal views of justice or the good when deciding cases.

 

 

 

What Cards Don't Say on Mother's Day - WSJ.com

To Mom. 

 

Amy Henry: What Cards Don't Say on Mother's Day - WSJ.com*

 

So while I hope that my daughter has every choice in life, I also hope that she has the chance to be a mother. And perhaps my task now is to make sure that when she is, no one can make her feel ashamed or diminished by making that choice. I hope to teach her that baking Barbie cakes and reading "Harold and the Purple Crayon" and sitting on her child's bed listening to stories about his day even though her back feels like someone went at her with a two-by-four—are, inconsequential as they seem at first blush, the very warp and woof of a mother's life.

 

But, how exactly do I convey to her that whether or not a mother's seemingly inconsequential, menial tasks 'fulfill' her, nurturing children is innately good and just might surprise her fulfill-o-meter? How can I help her resist the need for affirmation from a culture that will probably never give it to her—and to embrace motherhood not as a second-class citizen, but with the kind of femininity that is paradoxically as strong as nails, as soft as a kiss?

 

I'm not sure. But someday, when the thumbscrews of mothering start to tighten on her, one thing I will do is remind her that despite her momentary exhaustion or discouragement, mothering remains a profoundly worthwhile undertaking, one that Chesterton calls nothing less extraordinary than "the mystery of the making of men."

 

 

 

The Greek Economy Explained - WSJ.com

I still don't get the riots.  Don't they realize they are just making their situation worse?  Gee, our country is broke, so let's go destroy and disrupt. 

 

The Greek Economy Explained - WSJ.com

 

The Greeks are giving the world a good taste of their modern politics. Periclean democracy, meet Athenian mob rule: Tens of thousands are rampaging through the capital and other large cities this week in protest against €30 billion in austerity measures needed to secure the €110 billion bailout for the bankrupt country.

The nationwide strike—led by government-employee unions, which threaten further disruptions after parliament yesterday approved the rescue package—was a timely show for Greece's prospective rescuers in Germany and at the International Monetary Fund. The medicine for Greece's deficit and debt woes won't go down easily in Athens.

In terms of overall ease of doing business, Greece comes in 109 out of 183 countries around the world. It is dead last among the 27 members of the European Union as well as the advanced economies in the OECD. You have to go up 30 slots to find the next worst EU performer, Italy.

 

 

 

A Fannie Mae Political Reckoning - WSJ.com

 

A Fannie Mae Political Reckoning - WSJ.com

 

One sign that the White House financial reform is less potent than its advertising claims is that it doesn't even attempt to reform the two companies at the heart of the housing mania and panic, Fannie Mae and Freddie Mac. So we're glad to see that yesterday GOP Senators John McCain, Richard Shelby and Judd Gregg introduced a Fan and Fred reform amendment that will let Democrats show if they're serious about reducing reckless lending and taxpayer risk.

From the 2008 meltdown through 2020, the toxic twins will cost taxpayers close to $380 billion, according to the Congressional Budget Office's cautious estimate…. Moreover, these taxpayer losses understate the financial destruction wrought by Fan and Fred. By concealing how much they were gambling on risky subprime and Alt-A mortgages, the companies sent bogus signals on the size of these markets and distorted decision-making throughout the system.

In short, the McCain amendment precisely targets the problems that caused the mortgage crisis: If the housing giants are no longer subsidized, they will become small enough to fail. That means they will stop lending money to people who cannot afford to pay them back, and in turn they will stop endangering taxpayers.

This is a genuine anti-bailout vote, and you would think Democrats would be more than happy to go along given their claims that they want to stop bailouts. Yet Republicans aren't even sure that Majority Leader Harry Reid will allow a vote on the McCain measure lest Democrats get pressure from the White House to oppose it. They would then reveal that their reform is less about reducing risk than about giving the political class more control over the financial status quo.

 

 

Arizona's Immigration Mistake - WSJ.com

 

Clarence W. Dupnik: Arizona's Immigration Mistake - WSJ.com

 

My deputies have referred more illegal immigrants to Border Patrol and Immigration and Customs Enforcement than any other state or local law enforcement agency in Arizona. But this new law will pass the burden of immigration enforcement to my county department. This is a responsibility I do not have the resources to implement.

There is a horrible problem with illegal immigration in this country, and it affects the citizens of Pima County every single day. Because of our proximity to the border, our county population demographic is heavily Hispanic (both legal and illegal). That means we must interact with witnesses and victims of crime in their times of need, regardless of their immigration status. Though this legislation states that inquiry into a person's immigration status is not required if it will hinder an investigation, that's not enough to quell the very real fears of the immigrant community.

Law enforcement did not ask for and does not need this new tool. What we do need is assistance from the federal government in the form of effective strategies to secure the border. Additionally, the federal government must take up this issue in the form of comprehensive immigration reform policy. If any good is to come from this firestorm, it is that our legislators will finally recognize that a problem exists and that they are the only ones with the authority to address it.

 

 

 

The Insurance Mandate in Peril - WSJ.com

Do my liberal friends support Congress really having this much power?  Would they like a future conservative Congress to mandate every American buy a gun under similar constitutional logic?

 

Randy E. Barnett: The Insurance Mandate in Peril - WSJ.com

 

The Patient Protection and Affordable Care Act (aka ObamaCare) includes what it calls an "individual responsibility requirement" that all persons buy health insurance from a private company. Congress justified this mandate under its power to regulate commerce among the several states…

In this way, the statute speciously tries to convert inactivity into the "activity" of making a "decision." By this reasoning, your "decision" not to take a job, not to sell your house, or not to buy a Chevrolet is an "activity that is commercial and economic in nature" that can be mandated by Congress.

It is true that the Supreme Court has interpreted the Commerce Clause broadly enough to reach wholly intrastate economic "activity" that substantially affects interstate commerce. But the Court has never upheld a requirement that individuals who are doing nothing must engage in economic activity by entering into a contractual relationship with a private company. Such a claim of power is literally unprecedented.

 

 

 

On Presidential Rhetoric - WSJ.com

 

On Presidential Rhetoric - WSJ.com

 

President Obama came to office promising an era of political comity, but even he has had to concede that his first 15 months in office haven't lived up to his campaign hope of transcending partisan divisions. While it takes two to tangle, we think the hyper-polarization owes more than a little to Mr. Obama's own rhetorical habits. More than any President in memory, Mr. Obama has a tendency to vilify his opponents in personal terms and assail their arguments as dishonest, illegitimate or motivated by bad faith.

Presidents speak to all of America and they best build consensus through argument and persuasion—not by singling out political targets, cultivating resentment, questioning motives and mocking differences of principle or political philosophy. Mr. Obama's bellicosity is no more attractive than Sarah Palin's attempts to pit "the real America" against the big-city slickers. And his rhetorical method seems especially discordant coming from a President who still insists, in between these assaults, that he is striving mightily to change the negative tone of American politics.

If the President and his advisers are wondering why his approval ratings are falling even as the economy is recovering, they might look to his own divisive conduct and the contempt he too often shows for anyone who disagrees with him.

 

 

 

An Economy of Liars - WSJ.com

 

Gerald P. O'Driscoll: Why Government Regulation Fails - WSJ.com

 

Free markets depend on truth telling. Prices must reflect the valuations of consumers; interest rates must be reliable guides to entrepreneurs allocating capital across time; and a firm's accounts must reflect the true value of the business. Rather than truth telling, we are becoming an economy of liars. The cause is straightforward: crony capitalism.

Congressional committees overseeing industries succumb to the allure of campaign contributions, the solicitations of industry lobbyists, and the siren song of experts whose livelihood is beholden to the industry. The interests of industry and government become intertwined and it is regulation that binds those interests together. Business succeeds by getting along with politicians and regulators. And vice-versa through the revolving door.

We call that system not the free-market, but crony capitalism. It owes more to Benito Mussolini than to Adam Smith.

Nobel laureate Friedrich Hayek described the price system as an information-transmission mechanism. The interplay of producers and consumers establishes prices that reflect relative valuations of goods and services. Subsidies distort prices and lead to misallocation of resources. Prices no longer convey true values but distorted ones.

Distorted prices and interest rates no longer serve as accurate indicators of the relative importance of goods. Crony capitalism ensures the special access of protected firms and industries to capital. Businesses that stumble in the process of doing what is politically favored are bailed out. That leads to moral hazard and more bailouts in the future.

 

 

 

 

An Homage to Hummer - WSJ.com

Alternate titles I would have liked: 1) “Freedom to be stupid” 2) “Then They Came for the Pie”

Penn Jillette's Homage to Hummer - WSJ.com

Having a Hummer is stupid. It's stupid to waste that much gas. It's stupid to waste that much money on gas. It's stupid to parade your insecurities on public roads. Hummers are stupid looking. You don't need an attack vehicle for the Krispy Kreme drive through.

Hummers are stupid and wasteful and if they go away because no one wants to buy one, that'll be just a little sad. It's always a little sad to lose some stupid. I love people doing stupid things that I'd never do—different stupid things than all the stupid things I do. It reminds me that although all over the world we humans have so much in common, so much love, and need, and desire, and compassion and loneliness, some of us still want to do things that the rest of us think are bug-nutty. Some of us want to drive a Hummer, some of us want to eat sheep's heart, liver and lungs simmered in an animal's stomach for three hours, some us want to play poker with professionals and some of us want a Broadway musical based on the music of ABBA. I love people doing things I can't understand. It's heartbreaking to me when people stop doing things that I can't see any reason for them to be doing in the first place. I like people watching curling while eating pork rinds.

But if any part of the Hummer going belly-up are those government rules we're putting in on miles per gallon, or us taking over of GM, then I'm not just sad, I'm also angry. Lack of freedom can be measured directly by lack of stupid. Freedom means freedom to be stupid. We never need freedom to do the smart thing. You don't need any freedom to go with majority opinion. There was no freedom required to drive a Prius before the recall. We don't need freedom to recycle, reuse and reduce. We don't need freedom to listen to classic rock, classic classical, classic anything or Terry Gross. We exercise our freedom to its fullest when we are at our stupidest.

There's a lot of bad stupid around. Really bad stupid. But we can't stop the real horror by stopping just-plain-stupid stupid. We're not going to stop overseas wars by stopping people from driving big stupid cars. As long as we think that "nation building" is part of our destiny, no amount of independence from foreign oil is going to stop us from getting into meddling, expensive, immoral foreign wars. As long as we let terrorism fill us with terror, we're not going to get our nonstupid freedoms back. Our government declaring that we need alternative energy sources, and betting our money on who might get a smart idea, is not going to give smart people smart ideas. It's really easy to see stupid all around us, but I don't think we want to be too quick to stop it. We need to protect other people's stupid to save freedom for all of us.

We're all making bad choices all the time, and most of mine are way stupider than driving a Hummer. I love my freedom of stupid. I bumped into Adrien one time and had a great talk with him, we got along great. I know Carrot Top well enough to call him "Scott." I know that they're both a lot thinner than me. They're both in a lot better shape. They eat better than me, and they can do a lot more push-ups and sit-ups. They can run farther and faster than me. So, in the near future, with us all being involved in each other's health care, Adrien and Scott might make up for their wasted gas mileage paying for my high-blood-pressure meds. If we're all getting together to stop the stupidity of driving a Hummer, will we have to stop the stupidity of eating Krispy Kreme doughnuts and pie? Freedom is freedom to be stupid.

They came first for the Hummers.

Then they came for the pie.

'Spreading The Wealth' Isn't Fair - WSJ.com

 

Arthur C. Brooks: 'Spreading The Wealth' Isn't Fair - WSJ.com

 

The president wants to create what he calls "a sense of balance and fairness in our tax code," as he said on the campaign trail, and ensure that well-off Americans "pay their fair share." He famously defended his planned tax hikes to "Joe the Plumber" by saying, "I think when you spread the wealth around it's good for everybody."

If you think spreading money around by force seems like an odd definition of fairness, you're not alone.

Most Americans think tax rates are already unfairly high. A February 2009 Harris poll found that on average, Americans believe the maximum amount anyone should have to pay in total taxes is less than 16% of income.

Nor do Americans believe it is fair to expand the pool of people with no income tax liability at all.  66% of Americans agree with the statement that "Everyone should be required to pay some minimum amount of tax to help fund government." People understand that good citizenship means we all contribute in some way to the national project.

Nobody wants to sound anti-poor, so we too easily concede the notion of fairness to those who define it as redistribution and criticize redistribution only because it leads to economic inefficiency.

This is an error. There is nothing inherently fair about equalizing incomes. If the government penalizes you for working harder than somebody else, that is unfair. If you save your money but retire with the same pension as a free-spending neighbor, that is also unfair.

Real fairness, as most of us see it, does not mean bringing the top down. Yes, free markets tend to produce unequal incomes. We should not be ashamed of that. On the contrary, our system is the envy of the world and should be a source of pride. Generation after generation, it has rewarded hard work and good values, education and street smarts. It has offered the world's most disadvantaged not government redistribution but a chance to earn their success.

That is true fairness, American-style.