By Jacob Hornberger
The purpose of the Constitution was to call into existence the federal government and, at the same time, to protect us from that government through the grant of very limited powers to the government.
The original Constitution wasn't good enough for the American people, however, who had severe reservations about calling into existence a federal government, one that they were sure would threaten their rights and liberties. Thus, they demanded passage of the Bill of Rights, which was intended to be another express safeguard, on top of the Constitution, against the federal government.
Take a look at the First Amendment. Read it carefully. Does it say anything about gun owners' threat to free speech? About freedom from fear?
No. It says that Congress shall be prohibited from infringing free speech. Now, that's quite clear, isn't it? It's Congress that the First Amendment protects us from. Our American ancestors understood that the federal government, especially Congress, was the threat to people's right to exercise free speech.
And why Congress? Because our ancestors understood that historically government officials don't like people criticizing what they're doing. So, they enact laws to punish people for criticizing government officials.
Why did our American ancestors enact the Second Amendment? Because they understood that without the right to keep and bear arms, the First Amendment becomes worthless. Why? Because if government officials realize that people lack the means to resist tyranny with force, those government officials will simply ignore the constitutional prohibition against freedom of speech by enacting laws that criminalize the criticism of government.
Don't believe me? Take a look at what's happening in Iran and China. Government officials are jailing people for criticizing the government knowing that the risk of violent revolution is virtually nonexistent.
But when the citizenry is armed, government officials have to factor that in to their deliberations when deciding whether to violate the restrictions in the First Amendment.
This is what liberals hate. They place their total trust in democracy. They won't say so expressly but they absolutely hate the idea that people have the right of revolution, which is why they continue to pooh-pooh Jefferson's quotation about watering the tree of liberty. If they were honest, they would just come out and denounce that part of the Declaration of Independence in which Jefferson stated that whenever any government becomes destructive of the ends for which it was formed, it is the right to the people to alter or abolish it and to institute new government.
What about Sirota's belief that the Constitution and the Bill of Rights were intended to protect him from being scared. It's just plain nonsense. The notion originated during the Great Depression, when liberal icon President Franklin Roosevelt used it to implement his socialist and facist program known as the New Deal. Running roughshod over the federal judiciary, which was declaring much of his program unconstitutional, FDR argued that he was just protecting people's "freedom from fear."
But the Constitution doesn't say anything about protecting people from their own internal fears, anxieties, depressions, or other psychological ailments. Those are things that people must conquer on their own. The Constitution and the Bill of Rights protect us from the federal government.
Finally, Sirota makes a false and fallacious assumption about gun control that is common to liberals. He assumes that because a law is passed prohibiting people from carrying guns, prospective murderers will respect it and obey it.
But as libertarians have long pointed out, that's just wishful nonsense. At the risk of belaboring the obvious, if a murderer isn't going to obey a law against murder, then he isn't going to obey a law against possessing a gun.
There is no better place for a murderer to do his dirty deed than in a place that he is sure is a gun-free zone. After all, compare the number of murders in public schools to those that are committed at gun shows.
The right to keep and bear arms protects us from both the federal government and private criminals. For the sake of our safety and our freedom, we can never permit those who live in fear to eviscerate this vitally important fundamental right.
One of the most disturbing things about the current health care debate is that some Republicans are positioning themselves as defenders of Big Government Medicare and against efforts to trim the program’s costs.
Yet the taxpayer costs of Medicare are expected to more than double over the next decade (from $425 billion in 2009 to $871 billion in 2019), and the program will consume an increasing share of the nation’s economy for decades to come unless there are serious cuts and reforms. Even the Obama administration talks about “bending the cost curve” to slow the program’s growth.
Yet Republican National Committee chairman, Michael Steele, takes to the Washington Post today to defend Medicare against any cuts, while at the same time criticizing the Democrats as “left-wing ideologues:”
- “Under the Democrats’ plan, senior citizens will pay a steeper price and will have their treatment options reduced or rationed.”
- “Republicans want reform that should first, do no harm, especially to our seniors.”
- “We also believe that any health-care reform should be fully paid for, but not funded on the backs of our nation’s senior citizens.”
- “First, we need to protect Medicare and not cut it in the name of ‘health-insurance reform.’”
- “Reversing course and joining Republicans in support of health care for our nation’s senior citizens is a good place to start.”
Steele uses the mushy statist phrasing “our seniors” repeatedly, as if the government owns this group of people, and that they should have no responsibility for their own lives.
Fiscal conservatives, who have come out in droves to tea party protests and health care meetings this year, are angry at both parties for the government’s massive spending and debt binge in recent years. Mr. Steele has now informed these folks loud and clear that the Republican Party is not interested in restraining government; it is not interested in cutting the program that creates the single biggest threat to taxpayers in coming years. For apparently crass political reasons, Steele defends “our seniors,” but at the expense of massive tax hikes on “our children” if entitlement programs are not cut.
Steve Forbes
One would have to go back to the 1930s or perhaps the 1970s to find an Administration as hostile to economic innovation and growth as this one is. Franklin Roosevelt clearly thought that the age of great industrial advancement was over and that it was Washington's task to increasingly regulate business while bashing the "selfishness" of "economic royalists" who were running American enterprises. After all, they had caused the Great Depression, hadn't they? The 1970s, especially during Jimmy Carter's presidency, were also antagonistic to commercial risk-taking. Inflation ran rampant, and the capital gains tax was raised to a maximum of almost 50%.
Washington is in a similar mood today (see Current Events, p. 17). One expression of this obtuseness-cum- animosity is a proposal from the Treasury Department to crush venture capital firms with burdensome new regulations as part of the Obama Administration's grand scheme to reform our higgledy-piggledy financial regulatory system.
Even though most venture capital outfits are relatively small and rarely, if ever, use debt, the Treasury wants to apply a bewildering array of rules similar to those for investment advisors and banks. Thus, instead of focusing on funding the next potential Apple ( AAPL - news - people ), Microsoft ( MSFT - news - people ) or Oracle, VCs will have to devote considerable time and resources to filling out disclosure and compliance forms. Treasury Chief Timothy Geithner's lame excuse is that since reform should cover the entire financial industry, leaving out venture capitalists would be a form of discrimination. Alas, there's more at work here than pigheaded logic.
This Administration truly believes that the private sector is a destructive, unguided missile that needs the constant and close supervision of Washington politicians. Without it we'd be subject to more disasters like the current financial crisis. In other words, Washington doesn't like the idea of venture capitalism because VCs and the entrepreneurs they fund create and do things without anyone's permission. Before anybody can invest in anything, Washington, in effect, would like investors to have to go through the equivalent of an environmental impact statement: Entrepreneurs, executives and investors cannot be left to their own devices.
Thus, the capital gains tax will be increased next year by at least one-third, and the personal tax on dividends will probably be doubled. The Administration will do nothing to mitigate the toxicity of the Sarbanes-Oxley Act, which was created in haste in 2002 to prevent corporate fraud and excesses. One harmful side effect of Sarbox is that it disproportionately hurts small businesses by burdening them with relatively huge accounting compliance costs and is therefore a barrier to smallish companies going public.
The Obama Administration's weak-dollar policy, inherited from the Bush Administration, also inhibits productive, robust risk-taking. It's no coincidence that when Ronald Reagan and Paul Volcker ended the Great Inflation of 1968--82 venture capital exploded, and Silicon Valley took off like a rocket. The U.S., and then the global economy, began an extraordinary quarter- century of expansion and breathtaking innovation.
But the Obama-ites think the prosperity of 1982--2007 is suspect and that they must keep business entrepreneurial impulses firmly in check. Thus the howls from VCs and entrepreneurs are music to Washington's ears. Filling out forms will sidetrack venture capitalists. Even if they pick a winner, they'll have difficulty launching an IPO to cash out and redeploy their capital. Successful risk-taking will be punished with higher investment taxes.
Not a pretty picture, is it?
The Obama Administration has successfully killed the fabulous F-22 Raptor fighter aircraft. What a blunder. At a time when Washington has been spending on a scale unparalleled in American history, shooting down this program is supposed to demonstrate the Administration's ultimate deep-down fiscal rectitude--we're spending only to fight the recession--and its determination to bring sanity to defense spending. Instead of the F-22 the military will now have to make do with the F-35, a jet that has yet to go into production. The alleged virtue of the F-35 is that it's an all-purpose plane--there will be versions for the Air Force, the Navy and the Marines, as well as a couple of variations for export. The F-35 shouldn't cost as much as the F-22, and it's more versatile. What's not to like?
The problem is--assuming the F-35 sees the light of day in a timely manner--that this aircraft simply doesn't do the job in air-to-air combat that the F-22 does, nor does it have the F22's ability to penetrate sophisticated defenses. The F-22 is stealthier and faster and has greater range and considerably more firepower than the F-35. No potential enemy will be able to match the F-22.
Moreover, the F-22 is already in production. We will have manufactured 187 before the assembly lines shut down. The original plan was to build 750 of these planes. Killing the F-22 is false economy. While we face no Soviet-style threat today, who's to say what enemy may emerge a decade or so from now? The F-35 can be used for other functions, such as close air support for ground troops. In short, we should produce both types of aircraft. After all, the F-35 won't be in full production for at least another seven years. Doesn't prudence dictate that we continue with what we already have, thereby achieving at least something resembling economies of scale?
And isn't it telling that Japan, Israel and other allies strongly prefer the F-22 to the F-35? Critics say that the F-22 fighter has vastly exceeded its cost estimates. Well, so has the F-35. The profound problems the Air Force--and indeed the entire military--has with weapons development and procurement is a separate issue. The need to reform our procurement systems shouldn't stand in the way of developing the weapons we need now and will need in the future.
Administration officials and others take our superiority in the air for granted and thereby conclude we don't need to make big investments on future weapons systems to maintain that superiority. This is a classic mistake. There's a reason that U.S. ground forces haven't suffered a battlefield casualty from hostile aircraft since 1952, during the Korean War. Even in that conflict North Korean and Chinese aircraft were rarely able to attack our ground forces. We should take no chances with this superiority.
And going ahead with the F-22 shouldn't in any way block development and funding of unmanned vehicles, which are becoming more sophisticated and deadly. The world in which we live requires that we have strong military capabilities in all areas--conventional and unconventional.
New Deal or Raw Deal?: How FDR's Economic Legacy Has Damaged America--by Burton W. Folsom Jr. (Threshold Editions, $27). Following Barack Obama's election victory, Time magazine and others compared Obama with Franklin Roosevelt. The comparison was meant to be highly complimentary; however, it should serve as a serious cautionary note. Contrary to popular myth, FDR's economic policies were a disaster. They prolonged the Depression and made the U.S. an economic laggard compared with other nations during the dreadful 1930s.
Burton Folsom's book hammers home how counterproductive most of Roosevelt's policies were. The League of Nations conducted surveys during this era, comparing the economies of 16 developed countries. Folsom makes searing use of this and other data. In 1929 the U.S. unemployment rate was the lowest in the world. Of the nations surveyed, we ranked number one. Even in 1932--at the pit of the Great Depression, when unemployment in the U.S. reached 25%--we ranked 8 out of those 16 nations. But by 1938, after almost two terms of Roosevelt's destructive programs, unemployment was near 20% and we ranked 13.
Folsom amply documents how FDR's major economic initiatives, such as the National Recovery Administration and the Agricultural Adjustment Act, severely retarded recovery. He convincingly indicts FDR for morally corrupting the office of the President. He shamelessly egged on the Justice Department to prosecute his political opponents. Take Andrew Mellon: To Roosevelt and like-minded others, Mellon symbolized the old regime. Prosecutors told their superiors the case against Mellon was flimsy. Nonetheless, FDR demanded they go ahead and try to destroy Mellon.
The IRS was habitually used for the same purposes. Roosevelt flagrantly used federal recovery programs, which employed millions of people in work relief projects, for blatant partisan purposes. The programs became massive patronage machines. At least in 1939 a disgusted Congress rebelled and enacted legislation barring federal workers from such political activity.
Why is Roosevelt still highly regarded by so many historians? We've been discussing his domestic record, not his war leadership. (To give FDR his due, he foresaw the danger of Nazism and recognized the need to take action against it before most of his countrymen.) The truth is that historians are bewildered by economics; it's an alien subject, even when they study and write about it. Thankfully, Folsom's book and such others as Amity Shlaes' The Forgotten Man and Jim Powell's FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression are convincingly setting the record straight.
President Obama should take note: Roosevelt-like stimulus packages and government intervention in the economy are counterproductive. Magician-like, Franklin Roosevelt could win elections despite his miserable economic performance, something Folsom examines in depth. But Roosevelt was one of a kind. If the current economic recovery is sluggish, President Obama and the Democrats will be hit hard at the ballot box.
Vive Le French Care?
Health Systems: Health care in France is often held up as a model the U.S. might follow. Yet the French have their own problems that show there's no such thing as a free lunch — or a free doctor's visit.
IBD Exclusive Series: Government-Run Healthcare: A Prescription For Failure
Call it the grass-is-greener syndrome. Advocates of national health care, acknowledging the flaws in ObamaCare yet despising the current U.S. system that has the best medicines, the best medical equipment and the shortest waiting lists, have turned their eyes lovingly to places like France.
As City Journal contributing editor Guy Sorman notes, the French would also love to have the low-cost, high-service system some Americans gush about. Unfortunately, they don't. France's system isn't that cheap and is financed by high taxes on labor that have heavy economic consequences.
Sorman notes that a Frenchman making a monthly salary of 3,000 euros has 350 of them deducted for health insurance. Then the employer throws in an additional 1,200 euros. This raises the cost of labor to prohibitive levels and puts a brake on economic growth. This helps explain why French unemployment hovers around 10%.
France imposes an additional tax levy to cover the constant deficits that national health insurance runs.
The French Parliament raises this levy, which applies to all forms of income, every year. Altogether, Sorman writes, "25% of French national income goes toward what's called Social Security, which includes health care and basic retirement pensions for all."
Drugs developed in America at enormous expense do cost less in France, which decides what drugs are to be used and at what prices. American patients in effect subsidize the French, who take the same pills at half the price because American pharmaceutical companies don't want to lose the French market.
French taxpayers fund a state health insurer, Assurance Maladie. Assurance Maladie has run in the red since 1989, and this year's shortfall is expected to be 9.4 billion euros ($13.5 billion) and 15 billion euros in 2010, about 10% of its budget.
Regardless of the cost, does the French system produce better outcomes? Not always. Infant mortality rates are often cited as a reason socialized medicine and single-payer systems are better than what we have here. But according to Dr. Linda Halderman, a policy adviser in the California State Senate, these comparisons are bogus.
Official World Health Organization statistics show the U.S. lagging behind France in infant mortality rates — 6.7 per 1,000 live births vs. 3.8 for France. Halderman notes that in the U.S., any infant born that shows any sign of life for any length of time is considered a live birth. In France — in fact, in most of the European Union — any baby born before 26 weeks' gestation is not considered alive and therefore doesn't "count" in reported infant mortality rates.
France reimburses its doctors at a far lower rate than U.S. physicians would accept.
As David Gratzer, a physician and senior fellow at the Manhattan Institute, wrote in the summer 2007 issue of City Journal: "In France, the supply of doctors is so limited that during an August 2003 heat wave — when many doctors were on vacation and hospitals were stretched beyond capacity — 15,000 elderly citizens died."
After the tragedy, the French parliament released a harshly worded report blaming the deaths on a complex health system, widespread failure among agencies and health services to coordinate efforts, and chronically insufficient care for the elderly.
It's hard to imagine that happening here, where hospitals have enough air-conditioned beds and doctors that aren't on vacation.
Fact is, most Americans like their health care. There are ways to provide expanded coverage at lower cost, such as pushing individually owned health savings accounts, malpractice reform and allowing insurance to be bought across state lines.
We needn't be forced to sacrifice quality for cost. Nor do we need to look to the French for a better solution. They don't have one.
In Defense of 'Flash' Trading
It's no different from selling your house without a real estate listing.
BY CHRIS HYNES DONALD LUSKIN
For the past several weeks, New York Sen. Chuck Schumer has attempted to intimidate the Securities and Exchange Commission into banning so-called flash trading. Eliminating this technique would be a dangerous mistake that would squash competition and automation in equity trading. Flash trading exemplifies the virtues of two decades of innovation that have improved executions for both individual and institutional investors.
What is flash trading? As pioneered by the electronic communications network Direct Edge, it is simply a way for one customer to query other customers to see if they will take the other side of a trade.
Let's say that among all the exchanges, the highest bid for stock XYZ is 10, and the lowest offer is 10.5. Bob enters a flash order to buy 500 shares in between, at 10.25. This order exists in Direct Edge's system for mere milliseconds, but in that time the high-speed computers of other participants might decide to sell Bob the 500 shares he wants to buy. So Bob gets a price better than the best offer, and the seller gets a price better than the best bid. If a trade can't be executed, then Bob can try other markets.
In this example, because the flash trade comes in between the best bid and the best offer, it does not contribute to market volatility. Buyer and seller have entered into a trade in which they both feel they have achieved the best possible deal, or they wouldn't have traded. And the flash order created an opportunity for new liquidity to enter the market.
Flash trading is like offering to sell your house to your neighbor before you officially put it into the real estate listings. For that matter, it's just like what upstairs traders did in the pre-computer era: shopping an order before sending it to the exchange floor. We had no problem with this process, so why would we ban flash trading, which simply makes it more formal and produces an audit trail that the upstairs traders didn't?
Yet according to Mr. Schumer, in flash trading "a privileged group of insiders receives preferential treatment, depriving others of a fair price for their transactions." The truth is that there's no particular privilege involved. Any broker can enter flash orders or respond to them, even when executing on behalf of ordinary individual investors.
Chris Nagy, managing director of routing for TD Ameritrade, a leading retail broker, has said that his company sees flash trading "working so well that we've increased our utilization of it." It's hard to see how anyone is deprived of a fair price, since a flash trade cannot, by SEC rules, trade through pre-existing orders—that is, it cannot be executed below the best bid or above the best offer.
Mr. Schumer also claims that seeing flash orders allows traders to "act on that early information to trade ahead of the pending orders." Yes, a flash order does reveal information. But so does any order. If flash orders entailed a heightened risk of being front run, as Mr. Schumer claims, no one would ever enter into them.
The real issue here is that innovators like Direct Edge are able to use new systems like flash trading to challenge entrenched institutions like the New York Stock Exchange by attracting their own new pools of liquidity. Innovators profit most when trading is internalized within their new pools, drawing market share away from incumbents. The incumbents typically seek self-protective regulation, characterizing the creation of new pools as "fragmentation" of the equity markets.
In fact, trading innovations do not create fragmentation. They expand the market, drawing in entirely new liquidity that wouldn't have otherwise existed.
Since introducing flash trading in 2006, Direct Edge's market share has soared to 12% from 2%. No wonder, then, that Duncan Niederauer, chief executive officer of NYSE Euronext, said in June that "we're spending a lot of time in Washington." And no wonder that Mr. Schumer has suddenly developed an interest in the microstructure of equity markets.
Competition is what makes America's equity trading system the envy of the world. Let's not throttle it by demonizing the innovations that improve it.
Mr. Hynes is the chief executive officer of Hynes Capital. Mr. Luskin is the chief investment officer of Trend Macrolytics LLC. They are the co-creators of Investment Technology Group's POSIT, the first alternative trading system.
Like Your Health Plan? Read This
by Michael D. Tanner
In his most recent weekly radio address, President Barack Obama denounced "willful misrepresentations and outright distortions" in the debate over health care reform. He then went on to repeat one of the most outright distortions in the entire debate: "If you like your private health insurance plan, you can keep your plan. Period."
No, Mr. President. No you can't.
To go straight to the chapter and verse: under Section 59(B)(a) of HR3200, the bill making its way through the House, and Section 151 of the bill that passed out of a Senate committee, every American would be required to buy health insurance.
It is time for the president to stop spreading this particular 'willful misrepresentation and outright distortion.'
And not just any insurance: to qualify, a plan would have to meet certain government-defined standards. For example, under Section 122(b) of the House bill, all plans must cover hospitalization; outpatient hospital and clinic services; services by physicians and other health professionals, as well as supplies and equipment incidental to their services; prescription drugs, rehabilitation services, mental health and substance-abuse treatment; preventive services (to be determined by the Centers for Disease Control and Prevention and the United States Preventive Services Task Force); and maternity, well-baby, and well-child care, as well as dental, vision, and hearing services for children under age 21.
But that's not all. Section 1239(b) of the bill also establishes a federal Health Benefits Advisory Committee, headed by the U.S. surgeon general, which will have the power to develop additional minimum benefit requirements. There is no limit to how extensive those future required benefits may be.
If your current health insurance doesn't meet all those requirements, you won't be immediately forced to drop your current insurance for a government-specified plan. But you would be required to switch if you lose your current insurance or "if significant changes are made to the existing health insurance plan."
More critically, for the 70 percent of us who get our insurance through work, those plans would all have to satisfy the government's benefit requirements within five years.
More likely, your employer will simply find that the increased cost and administrative burden is not worth it, and will dump you into the government-run "public option."
The Lewin Group, an independent actuarial firm, estimates that under the House version of the bill, as many as 89.5 million workers will simply lose their current employer-provided plan and be forced into government-run insurance.
Seniors, too, could lose their current coverage, at least the 10.2 million seniors currently participating in the Medicare advantage program. That program offers many seniors benefits not included in traditional Medicare, including preventive-care services, coordinated care for chronic conditions, routine physical examinations, additional hospitalization, skilled nursing facility stays, routine eye and hearing examinations, and glasses and hearing aids But the House bill cuts payments to the Medicare Advantage program by roughly $156.3 billion over 10 years.
Michael D. Tanner is a Cato Institute senior fellow and co-author of Healthy Competition: What's Holding Back Health Care and How to Free It.
More by Michael D. TannerIn response, many insurers are expected to stop participating in the program, while others increase the premiums they charge seniors. Millions of seniors will likely be forced off their current plan and back into traditional Medicare.
Finally, the bills would all but eliminate Health Savings Accounts (HSAs), currently used by nearly 10 million Americans. Section 122 of the House bill and 311 of the Senate bill set minimum payout levels for any insurance policy. Insurance payouts must cover 70 percent of claims under the House bill and 76 percent under the Senate bill. And the bills also prohibit any deductibles or co-payments for preventive care.
But virtually none of the high-deductible insurance plans in existence today, and required to accompany an HSA, can meet such a standard. They are simply not designed to work that way. The result will be that a plan designed to those specifications would offer few if any advantages over traditional insurance and would not be competitive in today's markets.
As a result, insurers warn they would stop offering high-deductible policies.
Any way you look at it, under the bills currently before Congress, millions of Americans will be forced out of their current health insurance plan, even if they are happy with it. Period.
It is time for the president to stop spreading this particular "willful misrepresentation and outright distortion."
Club for Growth Headquarters
Andrew Roth
I was testing my new camera phone earlier today and here was the result:
My Favorite TV Commercial
Andrew Roth
Several years ago, when eBay was still a young company, people didn't actually believe that an online marketplace would work. If you paid for something, would the other person actually deliver it to you? After all, they could just take the money and run. But they didn't do that. People bought and sold things (a lot of things) on eBay, they developed their online reputations, established trust, and goods moved from where they were least wanted to where they were most cherished. EBay is now a $30 billion company and to show their thanks, a few years ago, they released this TV ad:
If you want to see a free market in action, look at eBay. There are very few "regulations", there's only a nominal "sales tax" in the fee that eBay charges you to sell something, and that's about it. The reason why eBay is so successful is because of their premise that "people are good." The free market works precisely because people want to better themselves through trade. And they know that the best way to do that is through voluntary exchange, not coercion or manipulation. That's a powerful lesson and a beautiful thing.
I'm a big fan of this eBay commercial as well.
Still 'Crazy' -- And Proud of It
Conservatives induce a case of the vapors at the Washington Post.
by P.J. O'Rourke
Us right-wing nuts sure is scary! That's the message from the Washington Post. To put this in language a conservative would understand, the fourth estate has been alarmed once again by the Burkean proclivities of our nation's citizens. The Post is in a panic about (to use its own descriptive terms) "birthers," "anti-tax tea-partiers," and "town hall hecklers."
If, last Sunday, you spent a profitless hour reading the Washington Post (itself not too profitable), you noticed the loud yapping and desperate nipping at those who disagree with liberal orthodoxy. It was as if top management were a toy schnauzer accidentally mistaken for a duster and traumatized by being run back and forth through the venetian blinds. The wise and prestigious broadsheet institution was so barking mad that it sent three (Three! In these times of hardship for the print media! When reporters are being laid off right and left--well, mostly right--and stories are going uncovered from rapidly warming pole to pole! Three!) journalists to do battle with "The Return of Right-Wing Rage."
That was the subtitle of Rick Perlstein's section B leader. The title was "In America, Crazy Is a Preexisting Condition." Perlstein wrote the book Before the Storm: Barry Goldwater and the Unmaking of the American Consensus so you can intuit (or "grok" as Perlstein might put it, given his prose style) the contents of his article. Yes, Rick, right-wing rage has returned. It was up at my place for the weekend. But it's back, and it's not like right-wing rage ever really went away. It didn't, as you would say, Rick, "move on."
Accompanying the Perlstein screed was a sidebar by Alec MacGillis explaining how "health care reform is not that hard to understand, and those who tell you otherwise most likely have an ulterior motive."
All you town hall hecklers, calm down and go home. Never mind that Alec MacGillis is a rat, something that's evident by the sixth sentence of his piece: "Fixing [health care] could be very simple: a single-payer system." And never mind that his writing is more than uninformative, it is informationally subtractive. Read him and you'll know less than you know now about what the government is going to do to you and your doctor. Read him carefully and you'll know nothing.
But calm down and go home, because the Washington Post said so. This is exactly the joke that used to be told in the Soviet Union. An old guy's wife tells him to go to the butcher shop and get some meat. He goes to the butcher shop and stands in line for hours. Finally the butcher says, "We're out of meat." The old guy blows his top. He yells, "I am a worker! I am a proletarian! I am a veteran of the Great Patriotic War! I have fought for socialism all my life, and now you tell me you're out of meat! What kind of a system is this?! You are fools! You are thieves! . . . " A big man in a trench coat comes up to the old guy and says, "Comrade, Comrade, not so loud. In the old days you know what they would do if you said such things." The big man in the trench coat makes a pistol motion with his hand. He says to the old guy, "Calm down and go home." The old guy shrugs and leaves. He comes back empty-handed, and his wife says, "What's the matter, are they out of meat?" "Worse than that," says the old guy, "they're out of bullets."
So there was Rick Perlstein calling everyone to the right of Nikita Khrushchev a candidate for the state psychiatric ward with Alec MacGillis playing his KGB Bozo sidekick, firing blanks and honking his "End-of-life care eats up a huge slice of spending" airhorn. Then, to add idiocy to insult, the Post sent Robin Givhan to observe the Americans who are taking exception to various expansions of government powers and prerogatives and to make fun of their clothes.Givhan writes a column called "On Culture," and this is what passes for culture at the Post: "Of the hundreds of thousands of style guides currently for sale on Amazon, not one . . . was prescient enough to outline the appropriate attire for those public occasions when good citizens decided to behave like raving lunatics and turn lawmakers into punching bags." Meeting with Givhan's scorn were "T-shirts, baseball caps, promotional polo shirts and sundresses with bra straps sliding down their arm."
I've never seen Robin Givhan. For all I know she dolls herself up like Jackie O. But I have seen other employees of the Washington Post and--with the exception of the elegant and, I dare say, cultured, Roxanne Roberts--they look as if they got dressed in the unlit confines of a Planet Aid clothing-donation bin.
Perlstein, for all the highness of his dudgeon, doesn't catch the nuts saying anything very nutty. The closest he gets to a lunatic quote is from a "libertarian" wearing a holstered pistol who declares that the "tree of liberty must be refreshed from time to time by the blood of tyrants and patriots." And those are the words of lefty icon Thomas Jefferson. I myself could point out the absurdity of protestors' concerns about government euthanasia committees. Federal bureaucracy has never moved fast enough to get to the ill and elderly before natural causes do. And what's with those "birthers"? Why their obsession with a nonentity like Obama? How about John Adams with his Alien and Sedition Acts choke-hold on the First Amendment? Or Jefferson? He could tell his Monica Lewinsky, "I own you," and he wasn't kidding. Or John Quincy Adams, pulling the original Blagojevich, buying the presidency from Henry Clay? Or that backwoods Bolshevik Andrew Jackson? Or William Henry Harrison, too dumb to come in out of the rain? Not one of these scallywags was born in the United States of America--look it up.
But Perlstein couldn't be bothered. Instead he resorts to lazy fallacies of post hoc ergo propter hoc and argumentum ad verecundiam to try to prove that the Obama administration is a wise and prestigious political institution because nuts are attacking it the way nuts previously attacked other wise and prestigious political institutions, such as Adlai Stevenson. Even with the force of illogic on his side Perlstein cannot make his case. He tells about Stevenson speaking on United Nations Day in 1963. "Then, when Stevenson was walked to his limousine, a grimacing and wild-eyed lady thwacked him with a picket sign. Stevenson was baffled. 'What's the matter, madam?' he asked. 'What can I do for you?' The woman responded with self-righteous fury: 'Well, if you don't know I can't help you.' "
And I can't help the Washington Post. Why is the paper intimidated by dissent that's tame even by Adlai Stevenson standards? Not that the Post has ever been exactly a "profile in courage." (A little joke there about the propensity to endorse anything with a Kennedy stuck to it.) No doubt it's always alarming to the know-it-alls when ordinary people decide they'd like some say in ordinary life, when regular folk tell the know-it-alls to take their fishwrap and go blog themselves. And the Post has been extra jumpy since it got caught trying to pimp Washington's power elite to K Street lobbyists at a pay-to-play bun fight in the publisher's manse. Personally I thought this was great--the first time the newspaper had shown any respect for the free market system since Eleanor Roosevelt was a pup. But terror, like the Post, is not a thing of reason. Dread lurks in wise and prestigious institutions across the land. Rick Perlstein has a phrase that gives poignant expression to this fear and trembling: "America, where the crazy tree blooms in every moment of liberal ascendency."
Oh, it's a crazy tree. And the taller it grows, the crazier it gets. And I roost upon the tip-top branch. Ye of the Washington Post, Don't park your SmartCar under my perch.
P. J. O'Rourke is a contributing editor to THE WEEKLY STANDARD.
The White House Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) both released updates of their budget estimates for the next 10 years this week. Both reports show staggering deficits for each year during that period. The cumulative deficit between 2010 and 2019, or the total amount added to the national debt, as a result of President Obama's budget will be over $9 trillion—$2 trillion more than estimates earlier this year.[1]
These alarming figures are sure to bring calls by some for higher taxes to close the growing deficit. A close look at the figures, however, shows that spending is the main driver of these deficits. According to President Obama's own assumptions, he and Congress can control the deficit if they limit spending to historical levels.
Tax Revenue Grows Sharply Under Current Policy
Deficits over the next 10 years will average close to $1 trillion a year. But contrary to claims that tax cuts created these burgeoning deficits, close scrutiny of future tax revenue (as estimated by OMB under current policy) shows that tax revenue will increase significantly over the next decade.
If the 2001 and 2003 tax cuts are extended permanently (and all income tax rates, including those on capital gains and dividends, remain at their current levels), the death tax retains its 2009 rates and exemptions, and the Alternative Minimum Tax adjusts annually for inflation, total tax revenue will increase from $2.3 trillion in 2010 to $4.3 trillion in 2019.[2] This 85 percent growth rate means that Congress would have $200 billion more tax revenue to spend each year on average.
Tax Hikes Unnecessary
Tax revenues under current policy are sufficient to keep deficits under control if President Obama and Congress spend in accordance with historical averages. Total tax revenue as a percentage of gross domestic product (GDP)—the measure of all productivity in the economy—averaged 17.9 percent since World War II. If current policy remains law, according to OMB, total tax revenue will also average 17.9 percent of GDP between 2010 and 2019. Similar CBO estimates reach the same conclusion.
Since World War II, spending has averaged 20 percent of GDP. If President Obama and Congress limit spending to 20 percent of GDP, the deficit would equal the postwar average deficit of 1.8 percent of GDP by 2015 and fall below that level in succeeding years.
Progressive Income Tax Increases Deficit
The current deficit would be substantial even without the stimulus and the financial bailouts, because tax revenues decreased sharply because of the recession. A large factor contributing to the decrease is the steeply progressive income tax.[3]
During periods of economic growth, receipts from the progressive income tax surge, but during periods of contraction, receipts decline rapidly. This occurs mostly because much of high earners' income stems from volatile sources, such as capital gains, dividends, business income, and bonuses, and their incomes fall just as sharply during economic downturns as they rose during good economic times and they have less income to tax.[4]
The income tax accounts for about 45 percent of all tax collections, so fluctuations in the revenue it raises are a large factor determining the size of the deficit from year to year. When Congress sets a budget for future years, it relies on estimates of the revenue the income tax will raise in those years. If the economy contracts in the interim, the revenue raised by the income tax falls and larger-than-anticipated deficits result.
For example, in January 2009, the CBO estimated that the income tax would raise $1.2 trillion in 2010.[5] Congress set its 2010 spending levels based on that assumption. However, in the period since January, the economy continued to deteriorate. As a result, the CBO now estimates that the income tax will raise $984 billion in 2010—a decrease of $216 billion in just eight months. In that eight-month span, the CBO raised its projection for the 2010 deficit by $678 billion.[6] A good portion of that increase is attributable to the projected fall in income tax receipts.
While rapidly increasing spending is the main culprit of record-setting deficits, the volatility of income tax receipts is also a large factor. Even if Congress stopped its out-of-control spending, deficits would be considerable because of this volatility.
President Obama's plan to raise the top two income tax rates to their levels prior to the 2001 and 2003 tax cuts would increase the progressivity of the tax code and increase revenue volatility. Congressional plans to slap a 6 percent surtax on top earners to partially fund government-run health care would increase progressivity and revenue volatility even more.
Instead of increasing the progressivity of the income tax with these rate increases, President Obama and Congress should work to make the income tax more like a flat tax. A flat tax would tax all income at one rate, instead of multiple rates for higher levels of income like the current tax code. While not a cure-all for deficits, a flatter income tax would significantly decrease the volatility in revenue and provide a more stable budgeting base for Congress. As an added bonus, it would also not be a disincentive to work, save, and invest like the current progressive income tax.
No Tax Hikes
The recently updated budget figures make clear that a lack of revenue is not causing record deficits, so no tax hikes are necessary to close future budget gaps. Instead, Congress and President Obama can do so by limiting spending to the historical average of 20 percent of GDP by:
- Reforming current entitlement programs like Social Security, Medicare, and Medicaid to make them more efficient and affordable;
- Dropping plans for an expensive takeover of the health care system; and
- Eliminating wasteful and lower-priority programs.
To get further control over future deficits that result from tax revenue volatility, Congress and President Obama should also reduce the progressivity of the income tax by moving to a flatter income tax code.
Curtis S. Dubay is a Senior Analyst in Tax Policy in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.
The Bureau of Economic Analysis has released its annual data on compensation levels by industry (Tables 6.2D, 6.3D, and 6.6D here). The data show that the pay advantage enjoyed by federal civilian workers over private-sector workers continues to expand.
The George W. Bush years were very lucrative for federal workers. In 2000, the average compensation (wages and benefits) of federal workers was 66 percent higher than the average compensation in the U.S. private sector. The new data show that average federal compensation is now more than double the average in the private sector.
Figure 1 looks at average wages. In 2008, the average wage for 1.9 million federal civilian workers was $79,197, which compared to an average $49,935 for the nation’s 108 million private sector workers (measured in full-time equivalents). The figure shows that the federal pay advantage (the gap between the lines) is steadily increasing.
Figure 2 shows that the federal advantage is even more pronounced when worker benefits are included. In 2008, federal worker compensation averaged a remarkable $119,982, which was more than double the private sector average of $59,909.
What is going on here? Members of Congress who have large numbers of federal workers in their districts relentlessly push for expanding federal worker compensation. Also, the Bush administration had little interest in fiscal restraint, and it usually got rolled by the federal unions. The result has been an increasingly overpaid elite of government workers, who are insulated from the economic reality of recessions and from the tough competitive climate of the private sector.
It’s time to put a stop to this. Federal wages should be frozen for a period of years, at least until the private-sector economy has recovered and average workers start seeing some wage gains of their own. At the same time, gold-plated federal benefit packages should be scaled back as unaffordable given today’s massive budget deficits. There are many qualitative benefits of government work—such as extremely high job security—so taxpayers should not have to pay for such lavish government pay packages.
Update: I respond to some criticisms of this post here.
Bill would give president emergency control of Internet
Internet companies and civil liberties groups were alarmed this spring when a U.S. Senate bill proposed handing the White House the power to disconnect private-sector computers from the Internet.
They're not much happier about a revised version that aides to Sen. Jay Rockefeller, a West Virginia Democrat, have spent months drafting behind closed doors. CNET News has obtained a copy of the 55-page draft of S.773 (excerpt), which still appears to permit the president to seize temporary control of private-sector networks during a so-called cybersecurity emergency.
The new version would allow the president to "declare a cybersecurity emergency" relating to "non-governmental" computer networks and do what's necessary to respond to the threat. Other sections of the proposal include a federal certification program for "cybersecurity professionals," and a requirement that certain computer systems and networks in the private sector be managed by people who have been awarded that license.
"I think the redraft, while improved, remains troubling due to its vagueness," said Larry Clinton, president of the Internet Security Alliance, which counts representatives of Verizon, Verisign, Nortel, and Carnegie Mellon University on its board. "It is unclear what authority Sen. Rockefeller thinks is necessary over the private sector. Unless this is clarified, we cannot properly analyze, let alone support the bill."
Representatives of other large Internet and telecommunications companies expressed concerns about the bill in a teleconference with Rockefeller's aides this week, but were not immediately available for interviews on Thursday.
A spokesman for Rockefeller also declined to comment on the record Thursday, saying that many people were unavailable because of the summer recess. A Senate source familiar with the bill compared the president's power to take control of portions of the Internet to what President Bush did when grounding all aircraft on Sept. 11, 2001. The source said that one primary concern was the electrical grid, and what would happen if it were attacked from a broadband connection.
When Rockefeller, the chairman of the Senate Commerce committee, and Olympia Snowe (R-Maine) introduced the original bill in April, they claimed it was vital to protect national cybersecurity. "We must protect our critical infrastructure at all costs--from our water to our electricity, to banking, traffic lights and electronic health records," Rockefeller said.
The Rockefeller proposal plays out against a broader concern in Washington, D.C., about the government's role in cybersecurity. In May, President Obama acknowledged that the government is "not as prepared" as it should be to respond to disruptions and announced that a new cybersecurity coordinator position would be created inside the White House staff. Three months later, that post remains empty, one top cybersecurity aide has quit, and some wags have begun to wonder why a government that receives failing marks on cybersecurity should be trusted to instruct the private sector what to do.
Rockefeller's revised legislation seeks to reshuffle the way the federal government addresses the topic. It requires a "cybersecurity workforce plan" from every federal agency, a "dashboard" pilot project, measurements of hiring effectiveness, and the implementation of a "comprehensive national cybersecurity strategy" in six months--even though its mandatory legal review will take a year to complete.
The privacy implications of sweeping changes implemented before the legal review is finished worry Lee Tien, a senior staff attorney with the Electronic Frontier Foundation in San Francisco. "As soon as you're saying that the federal government is going to be exercising this kind of power over private networks, it's going to be a really big issue," he says.
Probably the most controversial language begins in Section 201, which permits the president to "direct the national response to the cyber threat" if necessary for "the national defense and security." The White House is supposed to engage in "periodic mapping" of private networks deemed to be critical, and those companies "shall share" requested information with the federal government. ("Cyber" is defined as anything having to do with the Internet, telecommunications, computers, or computer networks.)
"The language has changed but it doesn't contain any real additional limits," EFF's Tien says. "It simply switches the more direct and obvious language they had originally to the more ambiguous (version)...The designation of what is a critical infrastructure system or network as far as I can tell has no specific process. There's no provision for any administrative process or review. That's where the problems seem to start. And then you have the amorphous powers that go along with it."
Translation: If your company is deemed "critical," a new set of regulations kick in involving who you can hire, what information you must disclose, and when the government would exercise control over your computers or network.
The Internet Security Alliance's Clinton adds that his group is "supportive of increased federal involvement to enhance cyber security, but we believe that the wrong approach, as embodied in this bill as introduced, will be counterproductive both from an national economic and national secuity perspective."
Update at 3:14 p.m. PDT: I just talked to Jena Longo, deputy communications director for the Senate Commerce committee, on the phone. She sent me e-mail with this statement:
The president of the United States has always had the constitutional authority, and duty, to protect the American people and direct the national response to any emergency that threatens the security and safety of the United States. The Rockefeller-Snowe Cybersecurity bill makes it clear that the president's authority includes securing our national cyber infrastructure from attack. The section of the bill that addresses this issue, applies specifically to the national response to a severe attack or natural disaster. This particular legislative language is based on longstanding statutory authorities for wartime use of communications networks. To be very clear, the Rockefeller-Snowe bill will not empower a "government shutdown or takeover of the Internet" and any suggestion otherwise is misleading and false. The purpose of this language is to clarify how the president directs the public-private response to a crisis, secure our economy and safeguard our financial networks, protect the American people, their privacy and civil liberties, and coordinate the government's response.
Unfortunately, I'm still waiting for an on-the-record answer to these four questions that I asked her colleague on Wednesday. I'll let you know if and when I get a response.
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