6 May 2010
Today’s Tabbloid
PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com
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ATR Condemns FCC’s Move to
Regulate the Internet
[Americans for Tax Reform]
MAY 05, 2010 05:56P.M.
[PDF Version] Today, Americans for Tax Reform condemned the Federal
Communications Commission (FCC) for indicating it will attempt to
regulate the Internet under portions of Title II of the Com...
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Behind Every Law Is Force
[Cato at Liberty]
MAY 05, 2010 04:30P.M.
By Tim Lynch
That’s one lesson that this video of a drug raid should drive home.
Warning: Graphic Language and Material
In America today, lawmaking is discussed much too casually. The
consequences are not seriously considered. We allow agencies to issue
regulations without having a formal vote in the legislature. “Too
cumbersome.” Compliance is automatically assumed. Few want to
consider whether the use of brute force can be justified against someone
who resists, or the danger that might be created for the innocent who get
swept up in investigations. We now have thousands of rules and
regulations on the books.
We suffered through the painful lessons of liquor prohibition, but have
been slow to see the parallels in the drug war. A few years ago, Cato
published a report on these paramilitary raids, called Overkill. The
author of that study, Radley Balko, has been vigilant about highlighting
these raids and dispelling the idea that they are just a few “isolated
incidents.”
More on the drug war here.
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Minnesota Supreme Court
Decision: a Blow to Taxpayers
[Americans for Tax Reform]
MAY 05, 2010 03:23P.M.
[PDF Version] Americans for Tax Reform expressed dismay over a 4-3
decision Wednesday by the Minnesota Supreme Court undercutting the
governor’s unallotment authority. Gov. Pawlenty used ...
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The FTC and Those GM Ads
[Cato at Liberty]
MAY 05, 2010 03:11P.M.
By Walter Olson
I’m usually in enthusiastic accord with our friends over at the
Competitive Enterprise Institute, but it seems to me they’ve made a
mistake by petitioning the Federal Trade Commission (FTC) to crack
down on GM’s ridiculous “we repaid our federal loan” ad. Some zealous
enforcers would love for the FTC to do more to regulate speech by
American business on matters of public concern, and it seems to me the
last thing we should do is encourage such a trend.
For those who came in late, General Motors and its CEO Ed Whitmire
were widely and rightly assailed here and elsewhere for asserting (in a
column whose message was repeated in much-played TV ads) that the
company had repaid its bailout loan “in full, with interest, years ahead of
schedule.” Actually, as the inspector general of the government’s TARP
program readily acknowledged, the firm had merely used one pot of
federal money to repay another. Iowa Sen. Charles Grassley helped
expose the dodge, and publications ranging from FoxNews.com to the
New York Times joined in with scathing coverage.
Yesterday CEI announced that it had filed a formal complaint [PDF] with
the FTC urging the commission to investigate the automaker’s ad
campaign as misleading. It alleges that the ad campaign “could unfairly
dupe consumers into a false, renewed confidence in the company” and
that “consumer purchasing decisions can easily be affected by such
considerations.” Nick Gillespie at Reason, CEI general counsel Hans
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com
Bader, and Todd Zywicki at Volokh have more.
There’s a long history of businesses’ responding to public criticism of
their operations or products — and getting in further legal or regulatory
trouble because of that very response. In one early case, the FTC went
after egg producers for asserting, in the midst of a cholesterol scare that
in hindsight appears overblown, that their ovoid wares were not in fact a
menace to cardiac health. Sen. Charles Schumer (D-N.Y.) and the Center
to Prevent Handgun Violence have asked the FTC to prohibit ads that
imply that keeping a loaded weapon on hand will make a family safer. In
Nike v. Kasky, a famous case that reached the Supreme Court [Thomas
Goldstein, Cato Supreme Court Review 2003, PDF], shoemaker Nike
was sued under a California law over the public defense it had put
forward of its labor practices in overseas factories. Environmentalists
have sought to suppress ads claiming that nuclear power is nonpolluting,
and so forth.
Free-market advocates have generally argued that whatever the merits of
laws or regulations banning misleading advertising in garden-variety
commercial contexts, there are special dangers to the First Amendment
and to robust debate generally in letting agencies and courts second-
guess the content of “issue ads” and speech on topics of public
controversy. To begin with, it encourages advocates to turn to the law to
silence disagreeable speech rather than muster their best arguments to
rebut it. In one grotesque example, MoveOn.org and Common Cause
actually petitioned the FTC to institute a complaint against Fox News
over its use of the slogan “Fair and Balanced”, since (they said) the
network was neither.
Despite its current dependence on government, GM is in every relevant
legal sense a private company, so any precedents forged against it will
wind up applying to every other private enterprise that might wish to
advertise on matters of public controversy. Which makes it a concern
that CEI’s complaint cites with seeming enthusiasm broad FTC
interpretations of authority — for example, its authority to suppress
speech that might not be in itself false but could leave a potentially
misleading impression.
If there is a continuum extending from more or less purely commercial
speech (“Our tires last 40,000 miles”) to more or less purely political
speech (“Our business is badly overtaxed”), GM’s ad campaign surely
falls way over toward the “political” side. CEI’s response to this is to
argue that the campaign might influence consumers’ purely economic
calculations (as opposed to the political reasons they have to feel angry at
GM) by making them more likely to see the company as solvent and thus
as capable of making good its warranty promises. The words “strained”
and “makeweight” come to mind to describe this argument. Does CEI
really want to establish the future principle that a company’s over-sunny
talk about its financial prospects will henceforth get it in trouble with
two federal agencies, the FTC and SEC, rather than the SEC alone?
It all seems a rather high price to pay in principle for keeping the GM-
TARP story in the papers for another day or two.
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6 May 2010
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Should We Break Up the Banks?
[Cato at Liberty]
MAY 05, 2010 02:30P.M.
By Mark A. Calabria
When it comes to banking policy, there are few people I respect more
than Jonathan Macey and Arnold Kling; so when these two,
independently, argue that we should be breaking up the largest banks, it
is idea that merits consideration. Yet I still have my doubts.
First, lets start with what we are fairly certain of. There is a large
empirical literature that suggest most US mega-banks are beyond their
efficient size. There is a good survey of the literature by former Fed
Economist Allen Berger . So, at a minimum, the academic literature
suggests the largest banks are beyond a size that is justified by the social
benefits.
However, there is also a small literature that suggests more concentrated
banking systems are more stable, and less prone to crisis. Some of this
literature has grown out of research efforts by the World Bank. While
this literature is largely cross-country comparisons, recalling our own
banking history gives several examples - the savings & loan crisis, the
mass of small banks failures in the 1920s and 1930s, and current day
Georgia – where lots of small bank failures have been associated with
significant economic damage. So, at minimum, there is some question of
whether breaking up the largest banks would give us a more stable, less
crisis-prone system. In fact, there is considerable evidence to suggest
that breaking up the banks would make our financial system more
fragile.
To some extent, the debate over breaking up the large banks is about
reducing political power. The argument is that, because of their vast
resources, these large banks unduly influence and capture our political
system. Undoubtedly, I believe the largest banks have substantial
influence over both our legislative and regulatory systems. However, so
do smaller banks. From my seven years as staff on the Senate Banking
Committee, I would definitely argue that the Independent Community
Banks Association (ICBA), as a group, has far more pull than does say
Bank of America, as a single company. One need only witness the various
exemptions for small banks in the Dodd bill, for instance from the
consumer protection bureau, to illustrate the lobbying power of small
bankers. One could also argue that the economic history of progressive
era legislation, like the Sherman Act, is one of smaller, organized
interests winning against larger sized firms. Despite its appeal, the
assertion that bigger is always better in politics is just an assertion. Yet
this is at heart an empirical argument, and perhaps one that can be
tested. Until then, I still have my doubts.
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com
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Contra Camelot [Cato at
Liberty]
MAY 05, 2010 02:27P.M.
By Gene Healy
My DC Examiner column this week looks at the controversy surrounding
the History Channel’s forthcoming miniseries, “The Kennedys,” starring
Greg Kinnear and Katie Holmes as JFK and Jackie. It’s controversial in
large part because the producer is “24″’s Joel Surnow, who is cigar-
buddies with Rush Limbaugh and an outspoken conservative:
The screenwriter, Stephen Kronish, insists that he’s “not out
to destroy the sacred cow” of the JFK presidency. Too bad: In
an age when Americans still periodically swoon for imperial
presidents, a little sacred-cow tipping would be a public
service.
Robert Greenwald, a left-wing documentarian who read an early version
of the script, is leading the fight to discredit the project. Greenwald
seems especially troubled by the (largely true) allegations about
Kennedy’s Tiger-Woodsish sex life. But I argue that:
More troubling were Kennedy’s routine abuses of power. His
attorney general, brother Bobby, ordered wiretaps on New
York Times and Newsweek reporters, along with various
congressmen and steel executives who’d had the nerve to
raise prices. At JFK’s instigation in 1961, the Internal
Revenue Service set up a “strike force” aimed at groups
opposing the administration. Nixon’s defenders had half a
point when they complained that the sainted Jack had gotten
away with the sort of abuses that brought Nixon’s own
downfall.
Worse still is how the persistent longing for Camelot has distorted
Americans’ views of the presidency’s proper role:
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6 May 2010
Kennedy’s charm and vigor, and the tragic circumstances of
his death, have made it hard to see the man clearly. A 1968
study on “juvenile idealization of the president” quoted a
Houston mother: “When my little girl came out of school she
told me someone killed the president, and her thoughts were
— since the president was dead, where would we get our food
and clothes from?” But “juvenile idealization” isn’t limited to
juveniles.
Presidential biographer James MacGregor Burns, a Kennedy
fan, wrote that “the stronger we make the Presidency, the
more we strengthen democratic procedures.” Even today, far
too many pundits and historians seem to get a Chris
Matthews-style “thrill up [their] leg” when they contemplate
“heroic” presidential activism.
Conservatives aren’t immune to presidential cultishness, of course.
Peggy Noonan called Bush’s post-9/11 address to Congress “a
God-touched moment and a God-touched speech.” Fred
Barnes wrote that “the stage was set for Bush to be God’s
agent of wrath.” National Review Online ran ads for the Bush
“Top Gun” action figure, and an article about how wonderful
it was to have a presidential superhero to complement your
GI Joe collection.
And even the What Would Reagan Do? stuff smacks of the “man on
horseback” dream of the presidency that’s caused us so many problems.
In fact, Surnow, “the Kennedys” producer, seems to have an unhealthy
case of Gipper-worship himself. He told the New Yorker:
“I can hardly think of him without breaking into tears. I just
felt Ronald Reagan was the father that this country needed… .
He made me feel good that I was in his family.”
If more people felt embarrassed to talk about presidents that way, we’d
be well on our way to putting the presidency back in its proper
constitutional place.
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com
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‘The Dumbest Terrorist In the
World’? [‘Cato at Liberty]
MAY 05, 2010 02:14P.M.
By Benjamin H. Friedman
Businessweek has a story quoting a former federal prosecutor in
Brooklyn, Michael Wildes, speculating that Faisal Shahzad, the would-be
Times Square bomber, made so many mistakes (leaving his house keys in
the car, not knowing about the vehicle identification number, making
calls from his cellphone, getting filmed, buying the car himself) that he
may be the “dumbest terrorist in the world.” But Wildes can’t accept the
idea that an al Qaeda type terrorist would be so incompetent and
suggests that Shahzad was “purposefully hapless” to generate
intelligence about the police reaction for the edification of his buddies
back in Pakistan.
Give me a break. This incompetence is hardly unprecedented. Three
years ago Bruce Schneier wrote an article titled “Portrait of the Modern
Terrorist as an Idiot,” describing the incompetence of several would-be
al Qaeda plots in the United States and castigating commentators for
clinging to image of these guys as Bond-style villains that rarely err. It’s
been six or seven years since people, including me, started pointing out
that al Qaeda was wildly overrated. Back then, most people used to say
that the reason al Qaeda hadn’t managed a major attack here since
September 11 was because they were biding their time and wouldn’t
settle for conventional bombings after that success. We are always
explaining away our enemies’ failure.
The point here is not that all terrorists are incompetent — no one would
call Mohammed Atta that — or that we have nothing to worry about.
Even if all terrorists were amateurs like Shahzad, vulnerability to
terrorism is inescapable. There are too many propane tanks, cars, and
would-be terrorists to be perfectly safe from this sort of attack. The same
goes for Fort Hood.
The point is that we are fortunate to have such weak enemies. We are
told to expect nuclear weapons attacks, but we get faulty car bombs. We
should acknowledge that our enemies, while vicious, are scattered and
weak. If we paint them as the globe-trotting super-villains that they
dream of being, we give them power to terrorize us that they otherwise
lack. As I must have said a thousand times now, they are called terrorists
for a reason. They kill as a means to frighten us into giving them
something.
The guys in Waziristan who trained Shahzad are probably embarrassed
to have failed in the eyes of the world and would be relieved if we
concluded that they did so intentionally. Likewise, it must have
heartened the al Qaeda group in Yemen when the failed underwear
bomber that they sent west set off the frenzied reaction that he did.
Remember that in March, al Qaeda’s American-
born spokesperson/groupie Adam Gadahn said this:
4
6 May 2010
Even apparently unsuccessful attacks on Western mass
transportation systems can bring major cities to a halt, cost
the enemy billions and send his corporations into
bankruptcy.
As our enemies realize, the bulk of harm from terrorism comes from our
reaction to it. Whatever role its remnants or fellow-travelers had in this
attempt, al Qaeda (or whatever we want to call the loosely affiliated
movement of internationally-oriented jihadists) is failing. They have a
shrinking foothold in western Pakistan, maybe one in Yemen, and little
more. Elsewhere they are hidden and hunted. Their popularity is waning
worldwide. Their capability is limited. The predictions made after
September 11 of waves of similar or worse attacks were wrong. This
threat is persistent but not existential.
This attempt should also remind us of another old point: our best
counterterrorism tools are not air strikes or army brigades but
intelligence agents, FBI agents, and big city police. It’s true that because
nothing but bomber error stopped this attack, we cannot draw strong
conclusions from it about what preventive measures work best. But the
aftermath suggests that what is most likely to prevent the next attack is a
criminal investigation conducted under normal laws and the intelligence
leads it generates. Domestic counterterrorism is largely coincident with
ordinary policing. The most important step in catching the would-be
bomber here appears to have been getting the vehicle identification
number off the engine and rapidly interviewing the person who sold it.
Now we seemingly gathering significant intelligence about bad actors in
Pakistan under standard interrogation practices.
These are among the points explored in the volume Chris Preble, Jim
Harper and I edited: Terrorizing Ourselves: Why U.S. Counterterrorism
Policy is Failing and How to Fix It — now hot off the presses.
Contributors include Audrey Kurth Cronin, Paul Pillar, John Mueller,
Mia Bloom, and a bunch of other smart people.
We’re discussing the book and counterterrorism policy at Cato on May
24th, at 4 PM. Register to attend or watch online here.
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com 6 May 2010

FISCALLY CONSERVATIVE BLOG FEEDS FISCALLY CONSERVATIVE BLOG FEEDS

Understanding Commodity On CNBC’s Kudlow Report

Derivatives: Unnecessary Tonight [Larry Kudlow’s Money
Regulations for a Politic$]
MAY 05, 2010 12:12P.M.
Misunderstood Product
[Americans for Tax Reform]
MAY 05, 2010 01:09P.M.

Since the financial crisis of 2007, Americans have become more

interested and reliant on complex financial products than perhaps at any
other time in history. The media made quick work lumping toge...

FISCALLY CONSERVATIVE BLOG FEEDS

BREAKING: David Obey to Tonight at 7pm ET:

Retire [The Club for Growth] THE GLOBAL DEBT REVOLT

MAY 05, 2010 01:04P.M.
The POLITICO Obey is a prime example for why we need term limits.
- Steve Forbes, Forbes Chairman and CEO; Forbes Editor-in-Chief;Fmr.
Presidential Candidate; “How Capitalism Will Save Us” Co-Author
- Andy Busch, BMO Capital Markets; CNBC Contributor
- Peter Navarro, “The Coming China Wars” Author; University Of
California - Irvine Business Professor

FISCALLY CONSERVATIVE BLOG FEEDS FIN-REG VOTE : TOO BIG TO FAIL AMENDMENT PASSES

Club for Growth PAC: Absentee SENATE

CNBC chief Washington correspondent John Harwood reports from

Bennett Should Get Back to Washington.

Work [The Club for Growth] U.S. MARKETS

MAY 05, 2010 12:36P.M. - Steve Forbes, Forbes Chairman and CEO; Forbes Editor-in-Chief;Fmr.
Presidential Candidate; “How Capitalism Will Save Us” Co-Author
WASHINGTON S COMMITTEE. 202-955-5500. - Andy Busch, BMO Capital Markets; CNBC Contributor
- Peter Navarro, “The Coming China Wars” Author; University Of
California - Irvine Business Professor

THE FUTURE OF PRINT MEDIA

CNBC’s Julia Boorstin and Steve Forbes will discuss.

SHOULD THE FED BE SUBJECT TO AUDITS?

Washington’s newest odd couple unites.

- Sen. Bernie Sanders (I-VT)

- Sen. Jim DeMint (R-SC)

BP & THE CRISIS ON THE COAST

5
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com
NBC’s Jay Gray Venice, LA.
CONGRESS MEMBERS EXPOSED IN SHORTING FINANCIAL
CRISIS
Politico’s Eamon Javers will join us.
Please join us. The Kudlow Report. 7pm ET. CNBC.
FISCALLY CONSERVATIVE BLOG FEEDS
Utah Convention Includes
Resolution Repudiating Wyden-
Bennett [The Club for Growth]
MAY 05, 2010 12:10P.M.
This is remarkable. S COMMITTEE. 202-955-5500.
FISCALLY CONSERVATIVE BLOG FEEDS
Debt Default & Deflation Is
Heavy in the Air [Larry
Kudlow’s Money Politic$]
MAY 05, 2010 12:10P.M.
The ink was barely dry on the $150 billion EU/IMF bailout of Greece
when world stock markets tanked on two major fears. First, financial
analysts are concerned that the bailout money won’t be enough to cover
Greece’s borrowing needs from its out-of-control budget deficit. Second,
there are fears that the EU/IMF deal will not be approved by the German
parliament in a vote scheduled for Friday.
Additionally, there are new worries that the Greek debt contagion will
spread to Spain and elsewhere in Europe. The looming specter of debt
default and deflation is heavy in the air for investors worldwide.
Making market matters even riskier, German chancellor Angela Merkel
faces key regional elections this Sunday in populous North Rhine-
Westphalia, including the conservative areas of Cologne, Bonn, and
Stuttgart. These cities hate government debt and overspending as much
as the rest of Germany, if not more so.
The great postwar German leader Konrad Adenauer came from Cologne.
He was a conservative Catholic who despised Nazism and Soviet
communism. He also was an inflation fighter. To stop hyperinflation in
the postwar period, Adenauer sponsored the new German mark and
linked it to the dollar, which in those days was as good as gold.
6
6 May 2010
Today, all of Germany still hates inflation. And the Germans are afraid
that the currency printing presses used to buy bad bailout bonds will
return the country to a haunted past. So it’s tricky business for Merkel to
sell the Greek bailout on the eve of local elections that could disrupt her
already thin governing coalition.
Merkel is playing a double game here. She’s telling the Financial Times
and the Wall Street Journal that the bailout must pass in order to save
the euro currency. At the same time, she’s telling folks at home that
Greece’s extravagant social-welfare entitlement system of bankrupt
promises is a disgrace that Germans would never tolerate.
Apparently, credit markets won’t stand for it either. Both around the
world and here in the U.S., credit markets are boycotting massive
government debt creation. The result is that gold is fast becoming a
currency substitute, with strong markets for the yellow metal saying a
pox on all your houses.
Merkel and other European leaders would like the IMF to be the fiscal-
discipline policeman for Greece and the rest of southern Europe. But as
Nobelist Robert Mundell has argued, while the unified and fixed
exchange rate of the euro currency system, along with liberalized trade,
has been good for economic growth, things have broken down with the
failure of the so-called fiscal-stability pact that was never enforced.
With tens of thousands of Greek government union workers marching in
the streets of Athens calling for more general strikes in protest of IMF
austerity measures to cut back on bloated pensions, voters in Germany
and perhaps other EU countries do not believe the bailout conditionality
will ever work. Voters see solvent nations being saddled with more debt
that the European Central Bank may well monetize into higher inflation.
Perhaps the Greeks should consider a privatization asset sale of the
Parthenon, or some of the beautiful Greek islands, as a means of raising
desperately needed cash. Think of it: Greek Thatcherization. Of course,
in addition to privatization, Margaret Thatcher used her budget ax.
That’s something neither Greece nor Spain appears capable of
implementing in a sustained way. Mrs. Thatcher also reminded us that
the problem with socialist governments is that they finally run out of
other people’s cash.
What’s more, while Greece and Spain have moderate 30 percent
business tax rates, lower than rates in the U.S., their combined personal
and VAT tax rates come to about 60 percent. Team Obama take note:
These are anti-growth tax policies.
Indeed, the debt follies of Europe and the bankruptcy of the European
entitlement state should be a lesson for Obama’s Washington, where
overspending and borrowing have reached absurdly grand heights. As a
share of GDP, U.S. debt is projected to move toward 100 percent in the
wake of the new Obamacare entitlements. That’s near the 125 percent
debt ratio of Greece.
And just like Greece, U.S. government union-worker benefits, which run
50 percent above private-sector equivalents, are bankrupting federal,
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com
state, and local budgets. They’re also spawning a massive voter revolt
against big-government debt that will bear fruit this November in the
tea-party midterm elections.
In a vague sort of way, British Tory leader David Cameron is opposing
the spend-and-borrow mess of Gordon Brown’s Labour party that so
resembles Obama’s policies. Consequently, Cameron looks set to win the
U.K. election on Thursday. That’s good news for England. But it could
embolden German legislators to vote against the EU-IMF bailout for
Greece on Friday. And that could create an even bigger stock market
mess, at least in the short run.
Call it a spend-and-borrow debt mess. A pox on all your houses, at least
until financial-market and voter discipline force the dim-witted
politicians to radically change course.
FISCALLY CONSERVATIVE BLOG FEEDS
Primary Night Roundup [The
Club for Growth]
MAY 05, 2010 11:24A.M.
Here are the primary election results by state. No huge surprises,
although Rep. Dan Burton barely won his primary in IN-05. Indiana
North Carolina Ohio
FISCALLY CONSERVATIVE BLOG FEEDS
How the World of Campaign
Finance Is Changing [Cato at
Liberty]
MAY 05, 2010 11:23A.M.
By John Samples
Journalists are looking closely at the DISCLOSE bill, Congress’ response
to Citizens United. CQ says DISCLOSE will loosen independent spending
by the parties on their candidates.
Why is Congress liberalizing party spending? CQ explains:
According to one GOP attorney, opponents of the Supreme
Court’s decision are realizing that they will have a difficult
time challenging the constitutional right of outside groups to
spend money, so this bill is a response to free up the parties
to compete.
Mark that. Citizens United has altered the incentives regarding speech.
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6 May 2010
In the past, Congress tried to suppress speech to win elections. Now
leaders must liberalize in order to compete for votes.
FISCALLY CONSERVATIVE BLOG FEEDS
Citizen Shahzad [Cato at
Liberty]
MAY 05, 2010 10:56A.M.
By Julian Sanchez
Two smart guys on opposite sides of the political spectrum have sound
points about the treatment of suspected Times Square bomber Faisal
Shahzad. First, Orin Kerr points out that investigators have some
flexibility in determining when and whether to read Miranda rights. In
this case, they refrained initially and questioned Shahzad for a while
under the public safety exception. And despite the apparent belief of the
perpetually terrorized that Miranda warnings are some kind of magical
incantation that causes the cone of silence to descend upon
blabbermouths, they determined that he would probably continue
cooperating even after being Mirandized. But as Kerr points out, they
could have proceeded sans Miranda had that seemed
necessary—provided they were willing to waive the ability to introduce
Shahzad’s confession at trial. Given that there appears to be plenty of
other evidence against him, that might well have been a viable option.
Either way, this surely seems like the kind of judgment call best left to
the investigators on the scene, not Monday morning quarterbacks in
Congress like Rep. Peter King (R-NY) who gave us this priceless reaction:
“Did they Mirandize him? I know he’s an American citizen
but still,” King said.
Putting aside that nauseating “but still,” does King really imagine that he
possesses some deep insight into the pernicious effect of Miranda
warnings that the agents on the ground lacked? Again, Shahzad is
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com
apparently still cooperating—maybe they knew what they were doing.
From Steve Benen, meanwhile, we have one of many posts around the
blogosphere pointing out the incoherence of a cowardly proposal mooted
by Joe Lieberman (I-CT) that would revoke the citizenship of Americans
who join foreign terror groups. The blindingly obvious question: By what
process do we determine that a suspected member of a foreign terror
group is really a member of a foreign terror group? As Glenn Greenwald
writes, there’s not much point to having a Bill of Rights if the
government gets to revoke those rights at its whim. But no, Lieberman
wants to assure us that suspects would have a right to challenge the
revocation of their citizenship in a court—a civilian court, one hopes.
Except giving material support to a foreign terror groups is, in fact, a
crime. If there’s enough evidence to persuade a court of law that
someone is a member of such a group—congratulations, there’s enough
evidence to convict them in the civilian system as well! It’s heartening
that there doesn’t seem to be a great deal of support for this odious
proposal, but depressing that a sitting senator would treat the rights of
citizenship so lightly for the sake of a vapid, strutting display of
“toughness.”
FISCALLY CONSERVATIVE BLOG FEEDS
What’s the Future for Supply-
Side Economics? [Cato at
Liberty]
MAY 05, 2010 08:43A.M.
By Daniel J. Mitchell
Kevin Williamson has a long-overdue piece in National Review making
two essential points about supply-side economics and the Laffer Curve.
First, he explains that tax cuts are not the fiscal equivalent of a perpetual
motion machine. Simply stated, too many Republicans have fallen into
very sloppy habits. They oftentimes fail to understand the difference
between “supply-side” tax rate reductions that actually improve
incentives to engage in productive behavior and social-engineering tax
cuts that simply allow people to keep more money, regardless of whether
they create more wealth. This does not necessarily mean the latter form
of tax cuts are bad, but they definitely do not boost economic
performance and generate revenue feedback. Moreover, even when
GOPers are talking about supply-side tax cuts, they frequently
exaggerate the positive effects by claiming that lower tax rates “pay for
themselves.” I certainly think that can happen, and I give real-world
examples in this video on the Laffer Curve (including Reagan’s lower tax
rates on those evil rich people), but self-financing tax cuts are not
common.
Williamson’s second point is that the true fiscal burden is best measured
by looking at how much government is spending. I might quibble with
his description of deficits as a form of deferred taxation since technically
8
6 May 2010
debt can be rolled over in perpetuity, but his main point is right on the
mark. There is no doubt that most forms of government spending —
regardless of the means of financing — harm growth by diverting money
from the productive sector of the economy (technically, the economic
damage occurs because capital and labor are misallocated and incentives
are diminished, but let’s not get too wonky). Here are some excerpts
from Williamson’s article:
Properly understood, there were no Reagan tax cuts. In 1980
federal spending was $590 billion and in 1989 it was $1.14
trillion; you don’t get Reagan tax cuts without Tip O’Neill
spending cuts. Looked at from the proper perspective, we
haven’t really had any tax cuts to speak of — we’ve had tax
deferrals. …even during periods of strong economic growth,
there has been nothing to indicate that our economy is going
to grow so fast that it will surmount our deficits and debt
without serious spending restraint. This should be a shrieking
klaxon of alarm for conservatives still falling for happy talk
about pro-growth tax cuts and strategic Laffer Curve
optimizing. …The exaggeration of supply-side effects — the
belief that tax-rate cuts pay for themselves or more than pay
for themselves over some measurable period — is more an
article of faith than an economic fact. But it’s a widespread
faith: George W. Bush argued that tax cuts would serve to
increase tax revenues. So did John McCain. …It is true that
tax cuts can promote growth, and that the growth they
promote can help generate tax revenue that offsets some of
the losses from the cuts. …The problem with magical supply-
siderism is that it gives Republicans a rhetorical and
intellectual framework in which to ignore spending — just
keep cutting taxes, the argument goes, and somebody else
will eventually have to cut spending. The results speak for
themselves: Tom DeLay and Dennis Hastert and Trent Lott
and Bill Frist all know how to count, but, under their
leadership, Republicans spent all the money the country had
and then some.
Now that we’ve chastised Republicans, it’s time to turn our attention to
the Democrats. We know they are bad on spending (I often joke that
Republicans expand government out of stupidity, while Democrats do it
for reasons of malice), so let’s focus on their approach to Laffer Curve
issues. If the GOP is guilty of being too exuberant, the Democrats and
their allies at the Joint Committee on Taxation (the bureaucracy on
Capitol Hill that estimates the revenue impact of tax policy changes) are
guilty of deliberate blindness. The current methodology used by the JCT
(with the full support of the Democrats) is to assume that changes in tax
policy — regardless of magnitude — have zero impact on economic
performance. If you double tax rates, the JCT assumes the economy is
unaffected and people earn just as much taxable income. If you replace
the IRS with a flat tax, the JCT assumes there is no effect on
macroeconomic performance. Sounds unbelievable, but this video has
the gory details, including when my former boss, Senator Bob Packwood
was told by JCT that revenues would rise year after year even if the
government imposed a 100 percent tax rate.
Today’s Tabbloid PERSONAL NEWS FOR lgn@limitedgovernmentnetwork.com 6 May 2010

Interestingly, the European Central Bank just released a new study

showing that there are substantial Laffer Curve affects and that lower tax
rates generate large amounts of revenue feedback. In a few cases
(Sweden and Denmark), the researchers even conclude that some lower
tax rates would be in that rare category of self-financing tax cuts. But the
key point from this ultra-establishment institution is that changes in tax
rates do lead to changes in taxable income. This means it is an empirical
question to determine the revenue impact. Here’s a key excerpt from the
study’s conclusion:

We show that there exist robust steady state Laffer curves for
labor taxes as well as capital taxes. …EU-14 countries are
much closer to the slippery slopes than the US. More
precisely, we find that the US can increase tax revenues by
30% by raising labor taxes but only 6% by raising capital
income taxes, while the same numbers for EU-14 are 8% and
1% respectively. …We find that for the US model 32% of a
labor tax cut and 51% of a capital tax cut are self-financing in
the steady state. In the EU-14 economy 54% of a labor tax cut
and 79% of a capital tax cut are self-financing. We therefore
conclude that there rarely is a free lunch due to tax cuts.
However, a substantial fraction of the lunch will be paid for
by the efficiency gains in the economy due to tax cuts.

Contrary to over-enthusiastic Republicans and deliberately-dour

Democrats, the Laffer Curve/supply-side economics debate is not a
binary choice between self-financing tax cuts and zero-impact tax cuts.
Yes, there are examples of each, but the real debate should focus on
which types of tax reforms generate the most bang for the buck. In the
1980s, the GOP seems to have the right grasp of this issue, focusing on
lowering tax rates and reducing the discriminatory tax bias against
saving and investment. This approach generated meaningful results. As
Nobel laureate Robert Lucas wrote, “The supply side economists, if that
is the right term for those whose research we have been discussing, have
delivered the largest genuinely free lunch that I have seen in 25 years of
this business, and I believe we would be a better society if we followed
their advice.”

But identifying and advocating pro-growth tax reforms, as Williamson

notes, is just part of the battle. The real test of fiscal responsibility if
controlling the size of government. Republicans miserably failed at this
essential task during the Bush year. If they want to do the right thing for
the nation, and if they want to avert a Greek-style fiscal collapse, they
should devote most of their energies to reducing the burden of
government spending.