Morning Bell: Bigger Government Is Not the Solution to Big Government Problems

Posted By Conn Carroll On March 11, 2010

The final details of the financial regulatory reform bill being negotiated by Sens. Chris Dodd (D-CT) and Bob Corker (R-TN) are still being hammered out, but the underlying contours are clear: more government bureaucracy layered on top of our existing impenetrable and unaccountable financial regulatory system. Specifically, the Dodd/Corker plan reportedly [1] still contains these elements:

The Consumer Financial Protection Agency – There is still debate  over whether this new entity will be a stand alone agency, housed in the Department of Treasury, or housed in the Federal Reserve. Wherever the new entity ends up, the bottom line will be the same: a massive new bureaucracy afforded ambiguous grants of almost unlimited power. Although intended to help consumers, the net result of such a move would be to stifle the innovations that would bring them improved, lower-cost financial products.

Permanent TARP – Details are sketchy here, too, but reports are that federal bureaucrats, possibly the FDIC, will be given new “resolution authority” powers backed by a permanent $50 billion slush “resolution fund.” If this new power is given to the FDIC, it would be the first time the FDIC’s authority was extended beyond the banks that it directly insures. But more importantly, these provisions would establish a permanent TARP – the radioactively unpopular $700 billion Wall Street bail out slush fund.

The Agency for Financial Stability – Sold as purely a monitoring and information gathering entity , without the proper limiting language, a new systemic risk agency could essentially draft any financial firm into the federal financial regulatory system and subject it to a wide variety of restrictions that could include compelling large financial firms to sell off portions of themselves, drop lines of business, break up, or otherwise reduce the “risk” that the regulators believe they may impose on the financial system.

Instead of allowing for risky behavior to be properly priced by the marketplace, taken together these new bureaucracies would almost guarantee more big bank bailouts costing taxpayers untold billions of dollars. The new regulators could declare any problem with a major financial institution to be a potential systemic risk and tap into the fund to bail it out.

There is a better solution. Heritage fellow David John explains:

A better approach to preventing another crisis is to modify U.S. bankruptcy law to accommodate the special problems of resolving huge financial firms and to allow the courts to appoint receivers with the specialized knowledge necessary to best deal with their failure. By creating an open process controlled by an impartial judiciary guided by established statutory rules, financial firms, investors, taxpayers, and others would have the advance knowledge that large financial firms that were once known as “too big to fail” can now be closed if necessary without risking disaster. In addition, requiring all larger financial services firms to hold significant amounts of capital to cover losses would greatly reduce the systemic risk that they could pose to the financial system.

Higher capital levels would enable many firms that would fail under today’s capital levels to survive a crisis, saving shareholders and bondholders their investments, employees their jobs, and taxpayers billions of dollars in federal bailouts. Congress and the Administration need to learn and heed the lessons of 2008, or a repeat crisis will just be a matter of time.

The Up or Down Vote Our Country Really Deserves

President Barack Obama is touring the country asking for an up-or-down vote on his health care plan. Forget for a second that Speaker Nancy Pelosi (D-CA) can schedule an up-or-down vote on the Senate health care bill any time she wants, and keep in mind that while Democrats are trying to create the legislative text for President Obama’s “new” health care proposal, Senate Democrats are also pushing to include student lending provisions in the reconciliation bill. What does student lending have to do with health care you might ask? Nothing. But the Senate routinely attaches seemingly unrelated matters to must-pass legislation.

That is what makes Majority Leader Harry Reid’s (D-NV) refusal to honor Sen. Joe Lieberman’s (I-CT) request to offer an amendment funding the D.C. Opportunity Scholarship Program (DCOSP) to the American Workers, State and Business Relief Act so transparently hypocritical. Lieberman has been fighting for months to get an up-or-down vote on the DCOSP and saw a good opportunity with the Business Relief Act. But Reid prevented an up-or-down vote by ruling Lieberman’s amendment “not germane” to the underlying legislation. When has that ever stopped the Senate before?

The reality is that the Obama administration and Senate Democrats want to avoid an up-or-down vote on the DCOSP at all costs. Such a vote would force them to choose between their lofty post-partisan education rhetoric and the cold hard reality of the fact that liberal Democrats are beholden to the interests of the teachers unions. Articulating the official position of the Obama administration, Secretary of Education Arne Duncan wrote in The Wall Street Journal last year: “We must close the achievement gap by pursuing what works best for kids, regardless of ideology. In the path to a better education system, that’s the only test that really matters.” What works. Regardless of ideology. That’s the only test.

Well the tests are in and the evidence is that the DCOSP works. Specifically, the Obama administration’s own Department of Education released a report showing “those offered a scholarship were performing at statistically higher levels in reading—equivalent to 3.1 months of additional learning.” Like previous evaluations, it also found that “the [Opportunity Scholarship Program] had a positive impact overall on parents’ reports of school satisfaction and safety…”

But the DCOSP works by giving parents education vouchers so that they are then empowered to make their own decisions about which schools are best for their children instead of being subject to the government-union-controlled education monopoly. That is why the Democrats and their like-minded teachers unions want to kill the program despite the fact that it helps poor kids. The Washington Post editorializes today:

Unless Congress acts soon or the D.C. government decides to assume responsibility, the voucher program, which has benefited so many students since its inception in 2004, is in grave danger. The Obama administration closed the program to new students; children currently enrolled, while supposedly assured of getting vouchers until they graduate from high school, face uncertainty as the program’s administrator pulls out. This is exactly what the program’s chief antagonists, the teachers unions, want; the National Education Association lobbied fiercely against Mr. Lieberman’s amendment. Given that a rigorous, federally mandated study confirmed the program’s effectiveness and that local leaders such as D.C. Schools Chancellor Michelle A. Rhee have supported it, we understand why Mr. Reid sits on his hands. What possible explanation could Democrats devise for killing something that has been so crucial in the lives of thousands of poor D.C. children? How would it look? No, better to do nothing and hope the issue goes away.

President Obama and his administration are very familiar with the empowering benefits school choice brings to families struggling to educate their children. Growing up in Chicago, Obama’s Secretary of Education Arne Duncan attended a private school. Growing up in Hawaii, President Obama attended a private school. Growing up first in Chicago, and now in Washington, Obama’s two daughters attended and still attend private schools. In fact, two of Obama’s daughter’s classmates are able to attend Sidwell Friends thanks to the D.C. Opportunity Scholarship Program. And the annual Heritage Foundation survey of Congress and school choice shows that 38% of Members of the 111th Congress sent a child to private school at one time. Congress owes D.C. school children an up-or-down vote on their future.

Is Health Care a Right?
by Walter E. Williams

Most politicians, and probably most Americans, see health care as a right. Thus, whether a person has the means to pay for medical services or not, he is nonetheless entitled to them. Let’s ask ourselves a few questions about this vision.

Say a person, let’s call him Harry, suffers from diabetes and he has no means to pay a laboratory for blood work, a doctor for treatment and a pharmacy for medication. Does Harry have a right to XYZ lab’s and Dr. Jones’ services and a prescription from a pharmacist? And, if those services are not provided without charge, should Harry be able to call for criminal sanctions against those persons for violating his rights to health care?

You say, “Williams, that would come very close to slavery if one person had the right to force someone to serve him without pay.” You’re right. Suppose instead of Harry being able to force a lab, doctor and pharmacy to provide services without pay, Congress uses its taxing power to take a couple of hundred dollars out of the paycheck of some American to give to Harry so that he could pay the lab, doctor and pharmacist. Would there be any difference in principle, namely forcibly using one person to serve the purposes of another? There would be one important strategic difference, that of concealment. Most Americans, I would hope, would be offended by the notion of directly and visibly forcing one person to serve the purposes of another. Congress’ use of the tax system to invisibly accomplish the same end is more palatable to the average American.

True rights, such as those in our Constitution, or those considered to be natural or human rights, exist simultaneously among people. That means exercise of a right by one person does not diminish those held by another. In other words, my rights to speech or travel impose no obligations on another except those of non-interference. If we apply ideas behind rights to health care to my rights to speech or travel, my free speech rights would require government-imposed obligations on others to provide me with an auditorium, television studio or radio station. My right to travel freely would require government-imposed obligations on others to provide me with airfare and hotel accommodations.

For Congress to guarantee a right to health care, or any other good or service, whether a person can afford it or not, it must diminish someone else’s rights, namely their rights to their earnings. The reason is that Congress has no resources of its very own. Moreover, there is no Santa Claus, Easter Bunny or Tooth Fairy giving them those resources. The fact that government has no resources of its very own forces one to recognize that in order for government to give one American citizen a dollar, it must first, through intimidation, threats and coercion, confiscate that dollar from some other American. If one person has a right to something he did not earn, of necessity it requires that another person not have a right to something that he did earn.

To argue that people have a right that imposes obligations on another is an absurd concept. A better term for new-fangled rights to health care, decent housing and food is wishes. If we called them wishes, I would be in agreement with most other Americans for I, too, wish that everyone had adequate health care, decent housing and nutritious meals. However, if we called them human wishes, instead of human rights, there would be confusion and cognitive dissonance. The average American would cringe at the thought of government punishing one person because he refused to be pressed into making someone else’s wish come true.

None of my argument is to argue against charity. Reaching into one’s own pockets to assist his fellow man in need is praiseworthy and laudable. Reaching into someone else’s pockets to do so is despicable and deserves condemnation.

Obama and the L-Word
The president’s habit of telling untruths
Matt Welch from the April 2010 issue

Here’s how predictable the president’s slippery relationship with the truth has become: Hours before the State of the Union address, Washington Examiner reporter Timothy P. Carney posted a “pre-emptive fact check” that, among other things, prebutted any presidential claim to have “stopped the revolving door between government and corporate lobbying.” As it happened, that night Barack Obama made an even bolder (read: less truthful) claim: that “we’ve excluded lobbyists from policymaking jobs.”

In fact, more than 40 former lobbyists work in the administration, including such policy makers as Deputy Defense Secretary William J. Lynn (who was lobbying for Raytheon as recently as 2008), Office of the First Lady Director of Policy and Projects Jocelyn Frye (National Partnership for Women and Families), White House Director of Intergovernmental Affairs Cecilia Muñoz (National Council of La Raza), and Treasury Secretary Chief of Staff Mark Patterson (Goldman Sachs).

When Carney confronted a White House spokeswoman with the falsehood, she conceded nothing. “As the President said,” she wrote, “we have turned away lobbyists for many, many positions.” Just not all of them.

As such defiance suggests, this was no isolated slip of the tongue. The president, who promised in both word and style to usher in a “new era” of Washington “responsibility,” routinely says things that aren’t true and supports initiatives that break campaign promises. When called on it, he mostly keeps digging. And when obliged to explain why American voters are turning so sharply away from his party and his policies, Obama pins the blame not on his own deviations from verity but on his failure to “explain” things “more clearly to the American people.”

Take the issue he has explained more than any other: health care. In the State of the Union address, Obama claimed that the Congressional Budget Office (CBO) had estimated that “our approach” to health care reform “would bring down the deficit by as much as $1 trillion over the next two decades.” This is, strictly speaking, not true. The Democrats’ “approach” to health care reform includes a permanent change to the Medicare reimbursement rates for doctors, colloquially known as the “doc fix.” The CBO estimated that the doc fix, when combined with the health care reform legislative package, actually “would increase the budget deficit in 2019 by $23 billion relative to current law, an increment that would grow in subsequent years.” This is why House Democrats stripped out the doc fix from the health care bill, and passed it separately; it made the CBO scores look bad, making it harder for the president to present bogus claims about deficit neutrality.

That bit of mendacity only scratches the surface of how Congress and the administration gamed the system to produce nice-looking numbers. The CBO, by its own rules, has to take Congress at its word when a piece of legislation promises unspecified future “cuts” in spending, even though an overwhelming majority of promised future cuts never come to pass (a fact that the CBO itself has repeatedly warned in supplementary comments). The Senate promised more than $300 billion in such cuts. Furthermore, the CBO scores bills in 10-year windows. So the Senate delayed more than 99 percent of the reform package’s spending until 2014, thus allowing the decade of 2010–2019 to clock in under the magic $1 trillion number. Add to all that chicanery the fact that every major health care entitlement expansion in U.S. history has vastly exceeded initial cost projections, and you have ample reasons for why Americans believed, by a margin of more than 3 to 1, that health care reform would exacerbate rather than improve the deficit.

Even when addressing black-and-white examples of broken promises —such as his vow to televise each and every bit of health care legislative negotiations on C-SPAN—Obama can’t quite resist the temptation to plead gray. When confronted directly on the broken C-SPAN pledge during a January meeting with GOP lawmakers, the president said: “Look, the truth of the matter is that if you look at the health care process—just over the course of the year—overwhelmingly the majority of it actually was on C-SPAN, because it was taking place in congressional hearings in which you guys were participating.”

Presidential defiance, dissembling, and disinformation are nothing new, even if such political perennials are more disappointing coming from someone who still boasts (as he did in the State of the Union address) of “telling hard truths” to the American people and “doing what’s best for the next generation.” Voters pretty much knew that Bill Clinton was a slime ball when they sent him to the White House; Barack Obama held out the promise of being more dignified.

The difference between these two most recent Democratic presidents, substantial to begin with (especially in the crucial area of economic policy), may come into sharper relief in 2010. Clinton’s reptilian relationship with the truth, suffused as it always has been with a catch-me-if-you-can sense of personal preservation, actually turned out to have some uses for the nation when he changed course after the 1994 Republican revolution and began co-opting some of the limited-government policies proposed by his opponents. It’s easier for a chameleon to change his spots.

Obama’s dishonesty, by contrast, seems to spring from a different place. As a man who has spent most of his career wowing people with his words and very little of it converting those words into deeds, he has an activist’s gap between rhetoric and reality and a radio broadcaster’s promiscuous carelessness with cutting rhetorical corners. Sure, it’s not technically true that the administration’s day-one lobbying reforms served “to get rid of the influence of…special interests,” as he claimed in a January radio address (to the contrary: federal lobbying in 2009 set an all-time record), but it’s easy to imagine that the president feels his combination of tighter employment restrictions for ex-lobbyists and stricter disclosure requirements for current ones is, in the context of the Manichean fight between “the people” and “special interests,” good enough for government work. The perfect shouldn’t be the enemy of the good, and the critics who complain are just opportunistic literalists grasping for any club to beat back the march of progress. No need to give them an inch.

But there’s a less charitable explanation too. During the president’s nonstop gabfests before, during, and after the State of the Union speech, he kept repeating the fiction that the medical industry’s “special interests” were significantly to blame for scotching his health care legislation. In fact, the administration and Congress negotiated with those interests every step of the way, receiving crucial buy-in and millions in campaign contributions. Pro-reform lobbyists outspent anti-reform lobbyists on advertising by a factor of 5 to 1. There’s a three-letter word for blaming the defeat of his bill on health care lobbyists, and it rhymes with pie.

And yet it smacks of something worse still. When a politician cannot fathom opposition to his policies except as the manifestation of wicked manipulation by bad guys, remediable only by more thorough “explanations” from the good guys, it indicates an unseemly paternalism. And if he cannot take the hint that Bush-Obama bailout-and-spend economics are deeply and increasingly unpopular, that indicates something immovable about his core economic ideology. With those two factors as backdrop, it’s hard to say which would be worse: if the president didn’t really believe what he said, or if he did.