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InsiderOnline Blog: December 2008

Government “Investment” and the Rule of Law

Columnist Jonathan Weil thinks Bernard Madoff’s ponzi scheme “wasn’t much different than the business models at some of the nation’s largest failed financial institutions”—the ones now rewarded with a chunk of the taxpayers’ wallets.

Back in May, four months before it collapsed, American International Group Inc. increased its dividend at the same time it unveiled plans to raise $12.5 billion in capital. Later, when its cash ran out, AIG got a government bailout, the size of which has expanded to about $150 billion.

Whether you call that a Ponzi scheme or something less sinister, AIG was paying old investors with money raised from new investors. The same could be said of many banks that blew through billions of dollars in freshly raised capital the past couple of years, continuing to pay large dividends even as their balance sheets quietly imploded.

In a December 4 speech, SEC commissioner Christopher Cox identified the problem:

When the government becomes both referee and player, the game changes rather dramatically for every other participant. Rules that might be rigorously applied to private-sector competitors will not necessarily be applied in the same way to the sovereign who makes the rules.

“Tyrone” has some related thoughts at Marginal Revolution:

What about that guy who set up the phony investment company? Can the Treasury make a new one of those, only bigger? He took money away from people and gave it to charities and the needy and the arts and higher education. That sounds like stimulus so why are we sending him to jail? Wasn’t he ahead of the curve?

Why don’t we increase the tax deduction for donations to any charity which manages to expand its spending on overhead or is the word infrastructure? For every dollar given, let the donor deduct more than a dollar from taxes. That’ll get the money out of the banks of those rich people and into the hands of real Americans. Still, it’s not as good as the phony guy who’s been doing this for twenty years. I guess we’re all trying to catch up to him. 

Posted on 12/18/08 04:05 PM by Alex Adrianson

Innovation in Higher Education Financing

An alternative to government-subsidized student loans may be coming soon to the United States. Rebecca Tuhus-Dubrow reports for the Dallas Morning News that the company Lumni plans to begin selling human capital contracts very soon. In a human capital contract, investors finance a student’s education in exchange for a percentage of the student’s future income for a period of time—in essence a bond backed by the performance of the student. Loans place all of the risk of getting a college degree on the student: If the student flunks out or the market for his chosen profession falls, the student is still obligated to repay the loan. Shifting from debt to equity shifts some of that risk to investors. Investors might lose if the student’s future income is lower than expected, but they also might earn more than they would under a traditional loan agreement. Such contracts are already being used throughout Europe and in several Latin American countries.

It seems likely, in the long run at least, that bringing professional investors into higher education financing can only induce a better system of accountability for institutions of higher education. Since investors care about long-run returns, they will want to know a lot more about how much particular institutions will increase the earning potential of the students they invest in. That scrutiny is likely to be better than those of students left to their own devices, many of whom may be focused only on where the next party is.

Via Daily Policy Digest

Posted on 12/18/08 03:11 PM by Alex Adrianson

How Will the Economy Impact Fundraising?

This month’s Development Exchange at the Koch Foundation features The Heritage Foundation’s John Von Kannon discussing the impact of bad economic news on charitable giving. The event begins at noon on Friday (tomorrow), December 19 at the Koch Foundation’s new offices in Arlington, Va. If you are interested in attending, RSVP to Kevin Gentry, (By the way, Kevin also produces a fine weekly e-mail on fundraising tips that you can receive just by asking him.)

Those who can’t make it in person can dial in to participate. The toll-free call-in number is (866) 430-2984, and the participant code is 77022207.  The international dial-in is (660) 422-4899.  

Posted on 12/18/08 10:39 AM by Alex Adrianson

Paul Weyrich, R.I.P.

Longtime conservative leader Paul Weyrich died early this morning. Weyrich was the founder of the Free Congress Foundation, and was well-known as the host of a weekly meeting where leaders of conservative organizations hashed out strategies for implementing conservative ideas. In spite of declining health, Weyrich continued to host those meetings right up until last week. Paul Weyrich was also the first President of The Heritage Foundation and a friend to many in the conservative movement. He will be missed.

Throughout the day, we’ll collect comments from around the conservative movement as people reflect on Paul Weyrich’s life.

Here is a sampling of comments on Paul Weyrich’s life:

Richard Viguerie:

Weyrich, along with Barry Goldwater, Bill Buckley, and Ronald Reagan, were the four people most responsible for the launching and the success of the conservative movement.

Without Paul’s strategic brilliance, his determination, his character, and his leadership, many conservatives’ political, legislation, and public policy victories would have been lost.

Through Paul’s mentoring and encouragement, thousands of conservatives became active in politics.

Before Paul, there was no one who played his role and there is no one who can replace Paul.

L. Brent Bozell III:

Years ago I was attending a weekend conference of the Conspiracy in a swank getaway resort. During one session an elected official spoke up, telling us how she’d been targeted for defeat by the Left and explaining in great detail how she was now fighting for her life. It was a troubling report. She was a strong supporter of the movement and a friend of many in the room. Her defeat would be devastating. When she finished others spoke up, one by one giving her words of encouragement, offering their support, etc. Then Paul Weyrich stood up. He would have none of it. “If things are that bad, what in the world are you doing here? Why aren’t you in your district working?” The lips were pursed, the eyes were piercing, the voice boomed., and the elected official quickly sat down, thoroughly chastised.

That will be the Paul Weyrich I will always remember: principled, committed, courageous and honest to a fault.

Myron Ebell:

Conservatives still have a lot to learn from Paul’s action-oriented grassroots organizing. Some people accused him of being too rigid and demanding too much ideological purity. In fact, Paul was tactically flexible, but he understood that the tendency of Republicans in office to capitulate pre-emptively could not be a winning strategy.

Paul was a patriot. He believed in our founding principles of liberty and limited government embodied in the Constitution. And he was fearless in standing up for those principles and in speaking truth to power, especially when it was the powerful people on his side who were the ones cutting corners. The fact that his dedication to principle often came at significant personal disadvantage didn’t bother him.

Lee Edwards:

He was never patient with fools or garrulous politicians. Many’s the time when he cut off a pompous pol in mid-speech to demand, “What can we do to stop this bill?”

Paul may have had the fastest wit in Washington. Right after the operation to remove his two legs, he was visited by a delegation of young men from his church where he served as deacon. Looking at their long faces, he looked up from his bed and said, “Well, I’ve been trying to think of something cheerful to say, but frankly I’m stumped.”

Ed Feulner:

Inventor of the phrase “moral majority,” Paul’s focus on principle and his insistence on the centrality of family helped bring millions of Christians into the political process and broadened the mainstream conservatism to include a vibrant wing dedicated to resolving social issues.

As a public figure, Paul was one of the great architects of the modern conservative movement.  At a personal level, he was a good friend, a visionary leader, a man of unbending principle and unfailing courage. Rest in peace, old friend.

Phyllis Schlafly:

Paul Weyrich made the conservative pro-family movement into a fighting brigade instead of just a collection of naysayers. We are grateful to him for his extraordinary vision and leadership, and he never disappointed us. Paul was a man of integrity, courage, perseverance and political smarts. We are proud to have stood by his side for so many years.

James Pinkerton:

Paul’s real genius was organization: He could see a better way to do politics, keeping faith with his ideals, but also with the practical realities of getting things done. Back in the 70s, Paul was present at the creation of the Committee for the Survival of a Free Congress, which was one of the first ideologically minded political action committees. And he was also a driving force in the creation of the National Conservative Political Action Committee, and the Moral Majority, followed by, in the 80s, the Christian Coalition. All of these groups were controversial in their time, and some eventually went out of existence, but in each case, Paul’s emphasis was on creating nimble organizations that were faithful to conservative thinking.

Becky Norton Dunlop:

Others will have great stories to tell about great political victories that changed the world in which Paul Weyrich was a central figure. So, I will add a personal note that this man, this principled conservative leader who lived the last years of his life in enormous physical pain, was to the end, still a leader who took time to continue mentoring and counseling on matters of importance to the conservative community. We talked of vision, and strategy and discipline and integrity and courage in recent weeks. His wisdom and guidance will continue to guide conservative action for years to come because he invested so much of himself into so many leaders in the cause of freedom. He has now been called home by His Heavenly Father who has undoubtedly greeted him with the words, “Well done, thou Good and Faithful Servant…enter thou into the joy of thy lord.” We will miss you but we will not forget the lessons you taught us. May God bless Paul’s family and give them a peace that passes all understanding.

Lots of commenting going on at The Foundry and The Corner, too.

Posted on 12/18/08 10:21 AM by Alex Adrianson

Letting Companies Fail Creates Jobs

Proponents of propping up failing automakers at taxpayer expense so that they can continue to pay out on overly generous union contracts should take note: That policy has been tried before. The British government did it in the late 1970s, when the company British Leyland ran into trouble because it failed to make cars people actually wanted to buy. Despite government “investment” of more than £1.4 billion into the company between 1979 and 1983, British Leyland was eventually broken up and sold off. The government had feared the loss of employment that would result from British Leyland’s collapse, but Iain Murray’s coda to the story suggests that the best employment policy is to let the market find the most profitable use of resources:

Ironically, today the most productive car plant in Europe is in my home town of Sunderland, where 5000 workers build 330,000 Nissan cars a year. There are still around 250,000 people employed in the design and manufacture of vehicles in the UK, more than BL employed in Mrs Thatcher’s time.

SEE ALSO: “Does Detroit Really Need a Bailout? Lessons from Britain,” by Nigel Hawkins, The Heritage Foundation, November 20, 2008.

Posted on 12/17/08 03:50 PM by Alex Adrianson

Second Amendment Book Bomb Update

David Theroux of the Independent Institute sends word that the group’s Second Amendment Book Bomb is definitely having an impact on the sales of Stephen P. Halbrook’s, The Founders’ Second Amendment: Origins of the Right to Bear Arms

At, the book now ranks first in the categories of law, civil rights and liberties, constitutions, constitutional law, and revolutionary and Founding history. It also ranks 12th in history, 11th in professional and technical and 26th in the overall nonfiction category. The book’s overall ranking at is 169, while at Barnes & Noble, it ranks 134.

How high can it go? If you want to help demonstrate that Second Amendment rights are important, visit Second Amendment Book Bomb and pledge to buy the book.

Posted on 12/16/08 03:09 PM by Alex Adrianson

Do You Know Your Bill of Rights?

You probably already know that today is Bill of Rights Day, the day we celebrate the first 10 amendments to the Constitution. But did you know that the words “Bill of Rights” appear nowhere in those ten amendments? Do you know why?

If you don’t know (or even if you do), then you should read Joe Postell’s short little history of the Bill of Rights, Securing Liberty: The Purpose and Importance of the Bill of Rights.

Posted on 12/15/08 09:51 PM by Alex Adrianson

Does Keynesianism Work?

Is there any evidence that Keynesian-style fiscal stimulus policies work? Dan Mitchell argues no:

Posted on 12/15/08 04:59 PM by Alex Adrianson

A Contract for Efficiency?

Ford’s UAW contract:

Via Marginal Revolution

Posted on 12/15/08 04:40 PM by Alex Adrianson

Second Amendment Book Bomb

Today is Bill of Rights Day, the anniversary of the ratification of the first 10 amendments to the Constitution. The Independent Institute is marking the occasion by calling attention to the importance of the Second Amendment. The Oakland-based think tank has created a Second Amendment Book Bomb Web site. The goal of the site is to get enough people to pledge to buy Stephen P. Halbrook’s recent book, The Founders Second Amendment: The Right to Keep and Bear Arms, that the book makes it onto the New York Times bestseller list.

The site encourages visitors:

Let’s make the Second Amendment Book Bomb a publishing phenomenon so great that even the mainstream media will have to take notice. Let’s spread The Founders’ Second Amendment so far and wide that Americans across the political spectrum, and all walks of life, will be discussing the Second Amendment in every possible venue.

In June, the Supreme Court ruled in Heller v. District of Columbia that the Second Amendment does protect an individual right to own guns. Based on that decision, additional challenges to overly restrictive state gun control laws are being planned. Could there be a more important time to bone up on your history of the Second Amendment?

Posted on 12/15/08 02:57 PM by Alex Adrianson

Coming Up – Week of December 15, 2008

A few events that caught our eye:

• CELEBRATE the Bill of Rights, ratified on December 15, 1791.
• LEARN how official measurements of income and poverty understate the economic well-being Americans have achieved in the past 25 years. American Enterprise Institute hosts Christian Broda and David E. Weinstein, authors of Prices, Poverty, and Inequality: Why Americans Are Better Off Than You Think.
• DISCOVER how to win minds with mass media. The John Locke Foundation hosts Max Borders, executive editor at Free to Choose Network.

• ASSESS the future of U.S.-Africa relations. Host: Heritage Foundation.

• FIND OUT whether government spending and tax rebates stimulate economic growth. Dan Mitchell of the Cato Institute and Stephen Entin of the Institute for Research on the Economics of Taxation offer their views at a Capitol Hill forum.

For more events, see InsiderOnline’s conservative calendar.

Posted on 12/12/08 11:29 AM by Alex Adrianson

How Far Free Markets Have Come

With all the talk of bailouts, nationalizations, and international regulations, it’s easy to forget how many countries have taken significant strides to free their economies in the past few decades. For a review of those successes, and for lessons on how those reforms were achieved, check out the new book, How To Do It: Lessons from Successful Reforms in CEE. Topics covered include cutting corporate taxes, establishing flat tax systems, privatizing state assets, and creating stable currencies. The book is published by Germany’s Friedrich Naumann Foundation, and includes contributions from the Lithuanian Free Market Institute, F.A. Hayek Foundation (Slovakia), Estonian Free Society Institute, Liberalni Institute (Czech Republic), and the Institute for Market Economics (Bulgaria).

HAT TIP: Atlas Foundation.

Posted on 12/12/08 11:24 AM by Alex Adrianson

An Infinitely Malleable Bailout?

Last night, efforts to pass a bailout for automakers collapsed in the Senate. This morning comes word that the Bush administration is considering giving automakers some of the funding that Congress had authorized in October for a bailout of Wall Street. Is that even legal? Andrew Grossman thinks not, pointing out that, however ill-defined were the limits on the authorities given to the Secretary of the Treasury, the Troubled Assets Relief Program was definitely limited to financial institutions, which the law defines as any institution, including, but not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company ... 

As Grossman points out, an auto-making company just isnt like any of those things.  

Posted on 12/12/08 11:02 AM by Alex Adrianson

The Real Che

Why does Hollywood celebrate a man who murdered artists?

For the rest of the story on Communism’s crimes, be sure to check out the online Global Museum on Communism, which is planned to launch in early 2009.

Posted on 12/12/08 10:21 AM by Alex Adrianson

Who Pays Taxes?

It is fashionable in certain quarters to think the country needs to spread the wealth around a little more. The Heritage Foundation has a nice chart reminding us how the federal government already depends on the wealthiest for much of its revenue.

Posted on 12/11/08 04:26 PM by Alex Adrianson

Global Warming Skepticism

At Senator James Inhofe’s blog, there is a roundup of all the news this year that might make one skeptical of man-made global warming, including a report that there are now over 650 international scientists who can be counted as doubters themselves.

Posted on 12/11/08 04:01 PM by Alex Adrianson

He Who Does Not Obey, Shall Not Eat at the Public Trough

David Boaz observes that the slippery slope from economic planning to political repression appears to be getting a bit more slippery thanks to the idea of attaching conditions to an automaker bailout:

The bill currently bars the car companies from pursuing lawsuits against California and other states trying to implement tougher tailpipe emissions standards. Jonathan Cohn of the New Republic suggests taking that concept further and requiring General Motors to fire a vice chairman who has expressed skepticism about the catastrophic effects of global warming.

This ought to scare any genuine liberal. Congress is going to use our money to censor political dissent? Usually libertarians warn that if you take government money, you’ll eventually find yourself subject to government restrictions on your freedoms. In this case, there’s no phase-in, no “eventually.” Congress wants to tell private companies, private individuals, that once they take government money, they will shut up and toe the government’s line.

If economics isn’t a good enough reason to oppose this bailout, preserving independent thought ought to be.

Posted on 12/11/08 03:10 PM by Alex Adrianson

Respect Donor Intent

Nonprofits should always respect the intent of donors, as a recently settled lawsuit involving Princeton University makes clear. In 2002, the heirs of Marie Robertson sued Princeton, alleging that the university had failed to use Ms. Robertson’s $35 million gift as she had instructed it be used. Ms. Robertson, an heir to the A&P grocery fortune, had made the donation to Princeton in 1961 for the Woodrow Wilson School of Public and International Affairs to prepare students for government careers in international affairs. The Robertson family claimed that Princeton had ignored the instruction that came with the gift to prepare students for careers in government.

Yesterday, in what is believed to be the biggest settlement yet in a donor intent case, Princeton agreed to pay $50 million for the establishment of a new foundation dedicated to preparing students for government careers in international affairs. In addition, Princeton will pay $40 million in legal fees incurred by the Robertson family. The balance of the funds from the Robertson Foundation, estimated at $700 million, will be transferred to Princeton to continue funding the Woodrow Wilson School of Public and International Affairs.

William Robertson, lead plaintiff and son of Marie Robertson, said: “This settlement is more than a slap on the wrist. This is a message to nonprofit organizations of all kinds and throughout our country that donors expect them to abide by the terms of designated gifts or suffer the consequences.”

Posted on 12/11/08 12:11 PM by Alex Adrianson

Promoting Transparency in the Big Sky State

The Montana Policy Institute is aiming to make Montana the next state to embrace fiscal transparency. The group has launched a new Web site devoted solely to promoting the idea that citizens should be able to look up online how their government is spending their money. Check out the great use of graphics and sound at  

Posted on 12/10/08 05:51 PM by Alex Adrianson

Get Your Union Data Now

Starting next year, union members will have an even better picture of how their union dues are being spent. The Department of Labor has recently finalized new rules requiring union-controlled trusts to file financial disclosure forms. The disclosures for union-controlled trusts complement the disclosure requirements already established for unions.

How will union transparency fare with a new Congress and incoming Obama administration? One of the major accomplishments of the Department of Labor under Secretary Elaine Chao was to create, an easy-to-use online database of spending by unions.

At, you can learn, for instance, that the Service Employees International Union gave Planned Parenthood $10,000 in 2007.

While rolling back reporting requirements is unlikely, there is no guarantee that adequate funding will be provided for the Web site to continue. Without the Web site it would be harder to get the data from the union’s financial disclosure forms. The department is working hard to make sure it has a strong audience for, which would make it harder to kill the project.

If you are interested in union accountability, you might want to grab as much data as you can, while the site is still up. Also, increasing traffic for the site wouldn’t hurt the case for continuing the effort.

Posted on 12/10/08 05:18 PM by Alex Adrianson

Two Stories about the Same Thing

December 8, 2008: Illinois Gov. Rod Blagojevich (D) orders state agencies to stop doing business with Bank of America until it reinstates a line of credit for the company Republic Windows and Doors to either keep operating or provide severance and vacation pay to employees. On December 2, the company had announced it was shutting down, and the workers subsequently occupied the plant in protest.

December 9, 2008: Illinois Gov. Rod Blagojevich (D) is arrested for allegedly attempting to leverage the appointment of a U.S. Senator for personal financial gain, and for allegedly attempting to induce a purge of critical editorial writers by withholding state assistance to the Tribune Company for Wrigley Field.

One instance of “pay to play” involves allegations of illegality; the other is just politics. But aren’t they both forms of corruption?

Posted on 12/09/08 10:52 AM by Alex Adrianson

Detroit’s Fanciful Estimates

Detroit’s big three automakers claim that unless they get $34 billion in assistance from the taxpayers, 3.3 million workers will be out of a job. According to a new report from the Heritage Foundation’s Center for Data Analysis, that estimate is about seven times too big.

The claim of the automakers is based on a study by the Michigan-based Center for Automotive Research that estimates how a complete shutdown of automaker operations would ripple throughout the economy. In the CDA paper, Karen Campbell and Paul Winfree point out a number of unrealistic assumptions of the model used by the CAR. The most obvious problem is that a Chapter 11 bankruptcy does not mean a complete shutdown of operations. In Chapter 11, the automakers would still continue to make cars. The CAR report also fails to incorporate realistic assumptions about how consumers would react to fewer—or, as the CAR report assumes, no—domestically produced cars. Some consumers, for instance, would buy in the used car market, and that would create jobs in body shops and in producing parts for the aftermarket. Also, increased imports of foreign cars would put downward pressure on the dollar which would increase exports of other U.S. goods and services and jobs gains in those sectors would offset some of the jobs lost in the auto making sector.  

Using an alternative model—The Global Insight Short Term U.S. Macroeconomic model—that uses more realistic assumptions, Campbell and Winfree estimate that chapter 11 for all three automakers would lead to 453,000 jobs being lost in the first year. That’s about 86 percent less that the estimate being thrown around by the automakers.

Posted on 12/08/08 06:58 PM by Alex Adrianson

Second-Worst Inflation Ever

Since 2001, employment at Zimbabwe’s central bank has increased from 618 to 1,360, yet the bank still cannot calculate the inflation rate in Zimbabwe. Cato Institute scholar Steven Hanke has developed a measure based on market prices, and he calculates that Zimbabwe’s inflation rate now stands at 80 billion percent per month. That means prices in Zimbabwe are doubling every 24.7 hours. But that only makes Zimbabwe’s hyperinflation the second worst of all-time. The worst hyper-inflation of all time occurred in Hungary in 1946 when the inflation rate hit 13 quadrillion percent per month. Hanke thinks Zimbabwe may overtake that rate within a month or two.

Will Zimbabwe’s dictator, Robert Mugabe, last that long? The economic collapse has led to an epidemic of cholera, and that may give South Africa and other African nations reason to consider intervening forcefully in the political struggle between Mugabe and opposition leader Morgan Tsvangirai. According to South African authorities, the Limpopo River is now ridden with cholera. The Limpopo forms the border between Zimbabwe and South Africa, and flows east from Zimbabwe into Mozambique.

By the way, in 2008, Zimbabwe had the third worst score in the world on the Heritage Foundation/Wall Street Journal Index of Economic Freedom, ahead of only Cuba and North Korea.

Posted on 12/08/08 04:06 PM by Alex Adrianson

Transit Follies

The U.S. government’s transportation spending reflects considerable ignorance of how Americans actually get around. Since 1970, the U.S. government has allocated $1 trillion (in 2005 dollars) for mass transit systems, yet the percentage of commuters using mass transit has fallen from 8.5 percent in 1970 to 4.9 percent in 2007. Carpooling, on the other hand, is practiced by 10.4 percent of commuters, though carpooling gets very little in the way of federal subsidy. Today 20 percent of federal surface transportation spending is devoted to mass transit, and some want to make that allocation even bigger. If the response to high gas prices is any guide, we shouldn’t expect additional subsidies to increase the demand for transit very much. According to, consumers responded to higher gas prices by traveling almost 25 billion fewer miles per passenger on urban roadways in the second quarter of 2008. Despite that decline, transit usage increased by less than a billion passenger miles.

FOR MORE INFORMATION, SEE: “Transportation Policy: Getting the Facts Straight,” by Wendell Cox and Ronald D. Utt, The Heritage Foundation, December 3, 2008.

Posted on 12/08/08 03:12 PM by Alex Adrianson

Economic Freedom Still the Key to Prosperity

The performance of national stock markets does not support the thesis that a lack of regulation is to blame for world economic turmoil. Just the opposite, in fact. According to data compiled by Kevin Hassett of the American Enterprise Institute, higher scores on the Fraser Institute’s Economic Freedom of the World index are associated with smaller declines in national stock markets over the past year, as the chart below shows.

Posted on 12/08/08 02:44 PM by Alex Adrianson

Coming Up – Week of December 8, 2008

A few events that caught our eye:

• FIND OUT why, despite the crash in house prices, housing remains unaffordable to many Americans. American Enterprise Institute hosts Edward L. Glaeser and Joseph Gyourko, authors of Rethinking Federal Housing Policy: How to Make Housing Plentiful and Affordable.

• EXAMINE Russia’s economic crisis. Host: American Enterprise Institute.

• ASSESS the prospects for improving government transparency during an Obama administration. Host: Cato Institute.

LEARN about the traditions of liberty and limited government that were nurtured in a Christian culture that predated the Magna Carta. Professor William Campbell delivers the second in The Heritage Foundation’s Portrait of Liberty Lecture Series.
ASSESS the entrepreneurial environment in China. Host: Hudson Institute.
• EXPLORE how the New Deal still impacts American politics today. Heritage hosts Burton Folsom, Jr.

For more events, visit InsiderOnline’s Conservative Calendar.

Posted on 12/05/08 11:08 AM by Alex Adrianson

Classic Wisdom: What Would Hayek Say About a Federal Health Board?

In his book, Critical: What We Can Do About the Health-Care Crisis, Secretary of Health and Human Services designate Tom Daschle proposes creating a Federal Health Board to manage the 45 percent of the health care sector that is financed by government. The board would be given the power to make a number of decisions—such as which treatments are covered by federal insurance programs—that currently are made through the lawmaking powers of Congress. According to Daschle, getting good health care policy requires that decision makers be insulated from politics. “Congress is just not capable of being the manager of a health care system,” Daschle told the Kaiser Foundation earlier this year. “It hasn’t worked for the last 50 years. It’ll work even less in the next 50.”

It seems likely that Friedrich Hayek would not have been at all surprised by the push to remove political pressures from the task of planning nearly half of the health care sector. In chapter five of The Road to Serfdom, Hayek argued that comprehensive economic plans presume more agreement than can usually be found through the operation of democratic institutions. “The conviction grows,” he wrote, “that if efficient planning is to be done, the direction must be ‘taken out of politics’ and placed in the hands of experts—permanent officials or independent autonomous bodies.” But, he noted, the lack of agreement is not a result of any defect of democratic institutions, but is simply a reality of pluralistic societies. Discussing the problem of finding one plan for an entire economy, Hayek wrote:  

It is not difficult to see what must be the consequences when democracy embarks on a course of planning which in its execution requires more agreement than in fact exists. The people may have agreed on adopting a system of directed economy because they have been convinced that it will produce great prosperity. In its discussions leading to the decision, the goal of planning will have been described by some such term as “common welfare,” which only conceals the absence of real agreement on the ends of planning. Agreement will in fact exist only on the mechanism to be used. But it is a mechanism which can be used only for a common end; and the question of the precise goal toward which all activity is to be directed will arise as soon as the executive power has to translate the demand for a single plan into a particular plan. Then it will appear that the agreement on the desirability of planning is not supported by agreement on the ends the plan is to serve.

This analysis suggests that there is a huge difference between support for the idea of reforming government health programs through an unelected Federal Health Board, and support for the particular decisions that such a board will end up making. An agreement on the means of reform should not be confused with agreement on what the reforms should be. Indeed, a Federal Health Board with the power to decide what benefits will be covered by public insurance programs, how health care providers should be reimbursed, how best practices should be determined, whether malpractice courts should be set up, and whether tax exclusions should be linked to a standardized benefits package is a body with great potential to disappoint a lot of people. The greater the number of discrete decisions that must be made by such a body, the more likely it is that the resulting system will be satisfactory to no one. As Hayek put it:

The effect of the people’s agreeing that there must be central planning, without agreeing on the ends, will be rather as if a group of people were to commit themselves to take a journey together without agreeing where they want to go: with the result that they may all have to make a journey which most of them do not want at all.

Posted on 12/04/08 05:38 PM by Alex Adrianson

Follow Flat Tax News

Alvin Rabushka, who along with Robert Hall laid the intellectual foundations for the flat tax, has created a blog tracking developments on the flat tax. Perusing the postings reveals that many governments around the world are giving the flat tax a try. Hopefully, U.S. policymakers will note these developments, too.

Posted on 12/03/08 11:17 AM by Alex Adrianson

Buckley’s Framework and Modern Realities

Bill Buckley wrote these words about 50 years ago, but they seem like timely advice for conservatives today, don’t they?

I will not cede more power to the state. I will not willingly cede more power to anyone, not to the state, not to General Motors, not to the CIO. I will hoard my power like a miser, resisting every effort to drain it away from me. I will then use my power, as I see fit. I mean to live my life an obedient man, but obedient to God, subservient to the wisdom of my ancestors; never to the authority of political truths arrived at yesterday at the voting booth. That is a program of sorts, is it not?

It is certainly program enough to keep conservatives busy, and liberals at bay. And the nation free.

That is the conclusion to Buckley’s Up from Liberalism, an excerpt of which can be found in the book The March of Freedom and online.

Posted on 12/02/08 11:11 AM by Alex Adrianson

Myths About “Tax Havens”

“Tax havens” are often painted as shady, ill-governed jurisdictions that allow scofflaws and criminals to avoid taxation. Critics further claim that tax havens lead to higher taxes on honest citizens and distorted economies. In his latest video, Cato’s Dan Mitchell argues that these ideas are a set of myths created by politicians and bureaucrats who fear that the existence of low-tax jurisdictions will make it difficult for them to maintain higher tax rates in their own jurisdictions. In other words, they don’t want tax competition. Watch to see the myths debunked:

Posted on 12/02/08 10:47 AM by Alex Adrianson

Reason Turns 40

A significant outlet for free market thinking marks a milestone this month. Reason magazine turns 40 years old. For some fun history of how it all got started, read Brian Doherty’s oral history of the magazine. In interviews with Bob Poole, Tibor Machan, Manny Klausner, and others, Doherty teases out the story of how the magazine survived for the first ten years with virtually no resources. The first issues were a one-man show produced with a mimeograph machine. Then it became a part-time project of Poole, Machan, and Klausner, produced out of Poole’s home.

The magazine never had more than one paid staff member until 1978. Poole notes: “The most we ever paid for an article was $25 in the days before the Reason Foundation, and a lot of times not anything. So lots [of what we published] was whatever came over the transom that was less bad than other things would be.”

Doherty’s piece also reveals how many different visions there were and still are of what Reason magazine should be—a serious forum for addressing policy issues, a vehicle of the libertarian movement, a countercultural voice, an outlet for investigative journalism. Reason’s success, perhaps, offers the lesson that there are many ways of influencing politics and the broader culture, and that those different models can live comfortably under the same roof.

The piece fittingly concludes with some helpful thoughts from Bob Poole on the task of changing minds:

I learned you don’t have to convert everyone to being libertarians to get important free market changes implemented. I think our ideas are better than centralized, collectivist ideas, and to the extent that’s true and we can demonstrate it, people don’t have to buy the whole package. We’ve seen successes in selling things like road pricing, privatization, on the terms that they offer real benefits and people can adopt them without sharing our views on other things. But it takes a combination; it’s still important to do that sort of mind changing, but you don’t have to change the whole culture to make a positive difference.

I’m surprised how many people quietly tell me, “I’m really libertarian; I love that magazine of yours.” It’s also definitely true I encounter lots of people in the policy world who know the magazine and read it but don’t think of themselves as libertarians. Part of the measure of our success is we can reach people even if they don’t buy the whole package.

Posted on 12/01/08 07:48 PM by Alex Adrianson

Event Coming Up: Religious Practice in America: What the Research Says

Don’t forget the annual conference, Religious Practice in America: What the Research Says, is coming up on Wednesday. The conference explores the very interesting topic of the impact of religious practice on health, civic engagement, and family relationships. This year’s conference focuses on health.

If you can’t make it in person but are still interested, you should consider registering to view the event live via Webcast. The Webcast option allows viewers to submit questions to the speakers.

Posted on 12/01/08 04:58 PM by Alex Adrianson

Missing the Smoke?

Does banning smoking in bars reduce heart attacks? Contrary to previously reported estimates, hospital emissions data from Scotland say no:

ACS = Acute Coronary Syndrome

HAT TIP: Adam Smith Institute blog.

Posted on 12/01/08 03:31 PM by Alex Adrianson

Piracy Funding Terrorists?

Tim Sullivan of the American Enterprise Institute points to some evidence that the pirates operating off the coast of Somalia have been giving a cut of their loot to a Somali-based Islamist militant organization called al-Shabaab, which has ties to Al Qaeda:

Reports indicate that elements of the Al-Shabaab militia—which, among Somalia’s many armed groups, has achieved a position of dominance—have in the past received a portion of the pirates’ booty in return for allowing the brigands to pursue their illicit trade undisturbed. As analysts have noted, it is not uncommon for terrorist groups to ally with more conventional criminal networks as a means of funding their ideological enterprises. One can only imagine the causes Al-Shabaab’s leaders—some of whom, according to the State Department, have trained and fought in Afghanistan—have been dedicating these funds to, beyond their immediate effort to overthrow the internationally-backed TFG. In one recent instance, following the pirates’ capture of a Ukrainian transport ship carrying Russian-made tanks, rocket-propelled grenades, and anti-aircraft guns en route to Mombasa, the Islamists immediately demanded access to the weapons on board. By that point, the pirates had already attracted international scrutiny from their recent spate of high-profile attacks, and foreign forces were already on the scene; under other circumstances, a portion of the ship’s goods might have ended up in the hands of Al-Shabaab militants.

While the recent seizure of the Sirius Star, which contains roughly $100 million worth of oil, has reportedly pitted elements of Al-Shabaab against the pirates, the rift between the groups seems only to be a function of the booty at stake. Last week, an Al-Shabaab spokesman condemned the pirates’ hijacking of the Muslim-owned vessel as a violation of Islamic law, insisting that the militants would liberate the ship by force, if necessary. Reports indicate that insurgents are massing in the coastal city of Haradheere, a hub of piracy, and that a clash between the pirates and the Islamists is imminent. But residents of the region are skeptical about the militants’ true motivations. According to one clan elder quoted in the London Telegraph, “There are many militiamen who have arrived in the town and they want to get a share from the pirates if the ransom is paid.”

The pirates are reported to have agreed to return a Ukrainian ship carrying 33 military tanks within days in exchange for a ransom of $3 million. How much of that will end up funding militants working to re-establish hard-line Islamist rule in Somalia?

Posted on 12/01/08 02:38 PM by Alex Adrianson

Saving the Banks that Love Government

Are some corporations really too big to fail? Perhaps they are merely too good at donating to favored political causes to be allowed to fail. Matthew Vadum reports that Citibank is “a Big Government lovers’ bank that funds just about every trendy left-wing cause in America.”

Long before it started drowning in red ink, the poster child for so-called corporate social responsibility was a longtime donor to left-wing pressure groups such as Jesse Jackson’s Rainbow/PUSH Coalition and Henry Paulson’s Nature Conservancy. In tax year 2003, Citigroup’s foundation gave 20 times more money to groups on the left than to groups on the right, according to Capital Research Center’s 2006 study of Fortune 100 foundation giving. (Foundation Watch, August 2006.)

Citigroup’s foundation has given a staggering $1.4 million to the alarmist World Resources Institute, as well as $509,000 to ACORN in recent years. The ACORN funding included a $500,000 grant to ACORN’s American Institute for Social Justice, which offers Saul Alinsky-style training in community organizing. Other donations to liberal groups include the Aspen Institute ($762,500), Rainbow/PUSH ($750,000), Nature Conservancy ($380,000), Rainforest Alliance ($200,000), and the Council on Foreign Relations ($50,000).

Posted on 12/01/08 02:07 PM by Alex Adrianson

Economic Czars Do as They Do

A recent Cato podcast with Robert Levy explains why the Wall Street bailout is unconstitutional:

What is the intelligible principle underlying this bailout? There is none. “Making things better” is not an intelligible principle. And yet that is all that Congress has said to Henry Paulson. We are now having daily hearings trying to extract from Henry Paulson what it is he is going to do. After all, why hasn’t Congress told him what he is to do? He is the official to implement the laws of Congress, not to tell Congress what he is about to undertake.

Posted on 12/01/08 01:28 PM by Alex Adrianson

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