Last Build Date: Thu, 02 Apr 2009 00:00:00 -0600Copyright: Copyright 2009
Thu, 02 Apr 2009 00:00:00 -0600
And that's exactly what people are thinking, largely because of the government's ham-handed, imprudent and (quite possibly) unconstitutional attempt to retroactively tax perfectly legal bonuses. These bonuses, paid to executives at AIG, were specifically authorized by language in the massive "stimulus" bill passed in February. The bonuses are infuriating, to be sure -- but so are the actions of many lawmakers.
Let's look back at how the whole mess started.
Last fall, members of both parties in Congress and the Bush administration decided to prop up AIG. So far, taxpayers have poured $173 billion into the insurance giant. The federal government owns 80 percent of the company.
In mid-March, the company detailed its spending. Not surprisingly, a tiny amount of the cash went toward routine bonuses. Yet when that news came out, first the public, then lawmakers and, soon, even President Obama himself howled in protest.
"They should voluntarily return [the bonuses]," fumed Sen. Charles Schumer, D-N.Y., on the Senate floor. "If they don't, we plan to tax virtually all of it." House members swiftly passed a bill to do just that.
Unfortunately, this doesn't appear to square with the Constitution.
Our government charter bars both the federal and state governments from passing what it calls a "bill of attainder." That's a measure aimed at punishing a specific person or group.
The Supreme Court long ago developed a three-part test to determine whether a law is a bill of attainder. Such legislation "specifies the affected persons (even if not done in terms within the statute), includes punishment and lacks a judicial trial."
Our courts will make the final decision, of course. But it certainly seems that a congressional measure to "tax" the AIG bonuses would violate the Constitution. As Schumer (and other lawmakers) have made clear, they're targeting a specific group of people, and taking their property without benefit of a trial.
Some may cheer this form of punishment. But it takes our country onto dangerous ground. Without a ban on bills of attainder, Congress could interfere freely in virtually anyone's economic affairs. And that would have long-lasting ramifications.
Consider Treasury Secretary Timothy Geithner's plan to create a partnership between Washington and private businesses to buy up "toxic assets" -- bad loans banks need to get off their balance sheets as soon as possible. To succeed, this plan would require the cooperation of the private sector.
Yet after watching lawmakers turn AIG executives into punching bags, why would anyone want to do business with the federal government?
Policymakers clearly expect to be allowed to micro-manage financial firms. As Rep. Barney Frank, D-Mass., and members of the Obama administration have said, they'd like to impose increased oversight of executive pay for Wall Street firms -- whether those firms took federal bailout money or not.
Furthermore, private individuals have every reason to expect that, if they invest in toxic assets and end up making those assets profitable again, lawmakers will demand they return most or all of those profits in the interest of "fairness." So, again, why would they sign on?
The more the federal government tries to run the economy, the more likely it is that debacles like the attempted AIG clawback will erupt. The financial markets are sluggish, but they are functioning. It's time to wind down the bailouts -- and get the federal government out of the way.
Fri, 27 Mar 2009 00:00:00 -0600
At a March 3 hearing, Sanders asked Federal Reserve Chairman Ben Bernanke, "Will you tell the American people to whom you lent 2.2 trillion of their dollars?" Seems like a reasonable request. Yet Bernanke's answer was "no."
The Fed chair tried to add that identifying the banks in question could stigmatize them and discourage them from borrowing from the central bank. Sanders cut him off, though, later adding that, "given the size of these commitments, it is incomprehensible that the American people have not received specific details about them."
Amen to the sentiment, if not the impolite way it was offered. Americans deserve to know where their tax dollars are going. This is especially true when that money is being borrowed by lawmakers today and will have to be repaid with interest by future taxpayers.
Just two years ago, then-Sen. Barack Obama seemed to understand this. He worked with conservative Sen. Tom Coburn, R-Okla., to pass the Federal Funding Accountability and Transparency Act of 2006. The bill created a federal database to allow anyone to find out where federal money is being spent.
By law, the government is supposed to tell taxpayers who gets federal money, how much, what the money is for and where it will be spent. "This bill is a small but significant step toward changing the culture in Washington," Coburn said then. "Only by fostering a culture of openness, transparency and accountability will Congress come together to address the mounting fiscal challenges that threaten our future prosperity."
Added Obama at the time: "By helping to lift the veil of secrecy in Washington, this database will help make us better legislators, reporters better journalists, and voters more active citizens." Unfortunately, President Obama has yet to meet the standard he set as a senator.
A major problem with emergency spending programs such as the AIG bailout and the Troubled Assets Relief Program is that the true depth of the threat to our economy hasn't been clearly defined. Taxpayers aren't being told what their money is accomplishing, let alone what it's supposed to accomplish.
The transparency problem extends to the general budget process. As a presidential candidate, Obama promised to promote openness by posting the contents of any bill for at least five days before it would become law. If he'd remained true to that pledge, bloggers, journalists and the general public would have had time to comb through the near-trillion dollar "stimulus" package lawmakers passed in February.
It's entirely possible that someone could have seen the Dodd amendment (and how the Treasury had changed it) that ended up allowing insurance company AIG to pay some employees huge bonuses. Our country could have avoided the political circus we've seen in recent days.
It doesn't seem like too much to ask for members of Congress to read the bills they pass. If they won't voluntarily, we need to embarrass them into it by reviewing their handiwork and criticizing it before it becomes law.
Transparency is critical to an honest budget and responsible spending. Indeed, it's the only way we can hold policymakers and bureaucrats accountable for what they do with our money.
Tue, 24 Feb 2009 11:04:24 -0600
As a candidate, Obama vowed that "when there's a bill that ends up on my desk as president, you, the public, will have five days to look online and find out what's in it before I sign it, so that you know what your government's doing."
Well, there were three days between this "emergency" legislation passing Congress and Obama signing it at a political-style rally in Denver. But that doesn't tell the tale of how swiftly the measure was passed.
Lawmakers had only a few hours between when the final bill was presented and when it was voted on -- late on a Friday night, of course. The bill came in at more than 1,000 pages, and lawmakers should have taken Obama's suggested five days (at least) to review it. That would also have allowed journalists and bloggers to identify problems with the bill. Once the passed bill is sitting on the president's desk, there's nothing he can do to improve it.
Meanwhile, Obama clearly violated the spirit of his promise of openness. The original House measure, for example, contained no money for high-speed rail lines. The measure the Senate passed a few days later contained $2 billion for such projects.
By the time the final bill passed, it contained $8 billion for high-speed rail. That's some compromise. Did most lawmakers even realize the extra $6 billion was there? Probably not. As Sen. Frank Lautenberg, D-N.J., told CNSNews.com. "I don't think anyone will have the chance to [read the entire bill]."
Meanwhile, a few days before the bill passed, Obama held a news conference to announce, "It also contains an unprecedented level of transparency and accountability so that every American will be able to go online and see where and how we're spending every dime." Not only did Americans not know what we were getting, lawmakers didn't know what they were giving us.
"What [the bill] does not contain," Obama added, "is a single pet project, not a single earmark." The rail example alone casts doubt on that claim, but there were others. Columnist Michelle Malkin identified a number of pet projects, including $2 billion for a power plant in Illinois, $300 million for low-emission golf carts for federal employees, and $65 million for digital TV coupons.
The irony is that, during his brief Senate career, Obama was a powerful voice for open government. "We can all agree that government ought to spend money efficiently. If government money can't withstand public scrutiny, then it shouldn't be spent," he said, sensibly, in 2006 while pushing for the Federal Funding Accountability and Transparency Act.
That law, proposed by Obama and Sen. Tom Coburn, R-Okla., demanded the creation of a Google-style search engine to allow anyone to track more than $1 trillion in federal contracts, grants and earmarks. It was an important step toward open government.
But such steps are easily derailed when lawmakers race to meet false deadlines and do their work behind closed doors. The sad fact is that a bill to spend $787 billion flew through Congress in just days with virtually no public input and no real "adult supervision" from the White House.
"Sin in haste, repent at leisure," the saying goes. Well, our government just acted in haste. And American taxpayers will be repenting that action for years to come.
Thu, 12 Feb 2009 09:48:04 -0600That Lincoln is widely embraced today in American culture and society -- on both the left and the right -- reminds us that our 16th president has permanent resonance and meaning in our country, indeed, in the world. But what is that meaning? In his Lyceum Address of 1838, the young state senator from Illinois wondered what posed the greatest threat to the perpetuation of our liberty. We were in possession of a great land, rich in resources, and living under political institutions conducing "to the ends of civil and religious liberty, than any of which the history of former times tells us." At what point is the approach of danger to be expected? "If it ever reach us," Lincoln answered his own question, "it must spring up amongst us. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide." Already by the time of Lincoln's day, we had suffered much from the silent artillery of time. If we are to prevent the republic from falling, he warned, we must constantly shore up the foundations that maintain liberty. How are we to do that? Lincoln's words, true then, speak to us just as much today: "Let every American, every lover of liberty, every well wisher to his posterity, swear by the blood of the Revolution, never to violate in the least particular, the laws of the country; and never to tolerate their violation by others. As the patriots of '76 did to the support of the Declaration of Independence, so to the support of the Constitution and Laws, let every American pledge his life, his property, and his sacred honor." Like any great historical figure, there is debate about Lincoln's place in our pantheon. Liberals claim Lincoln as one of their own, as the father of the modern state, centralizing government and overcoming constitutional barriers to free America from the shackles of its outdated past. Such is the teaching of many mainstream historians. Among conservatives, there has long been a bit of trepidation about Lincoln, mostly because we don't like the centralization and unlimited government of the modern state. But those things come out of the transformation wrought by the progressive liberalism that rose up after the Civil War -- when progressive intellectuals looked to European thinkers for guidance -- and not from Lincoln, who took his guidance from the Constitution and the Declaration of Independence. For us conservatives, while we have our debates -- and we will continue to have our debates -- when it comes to the refounding of America by modern liberalism, Lincoln is on our side: the side of fundamental equal rights of every individual grounded in human nature, of limited constitutional government grounded in the rule of law, of economic liberty grounded on the fruit of honest labor, and human liberty grounded on the idea that all men everywhere have the right to be free. There is no confusion on this. As for me, I'll take my cue from Russell Kirk, the sage of Mecosta. He considered Lincoln "a conservative statesman of a high order" who, "knowing that there is a Truth above the advantage of the hour, argued from definition." Arguing from definition means arguing from principle. Kirk went on to say: "He knew that what moved him was a power from without himself; and, having served God's will according to the light that was given him, he received the reward of the last full measure of devotion." At Gettysburg, President Lincoln called for "a new birth of freedom," for the renewal of government of the people, by the people and for the people. This was not a call for constant change, remaking America over and over again from the ground up. His was a call to recover our principles, and to revive them in the context of the time. In thinking of the future of America in the modern world, progressives then and now look ahead to open-ended possibilities. Lincoln first looked back to our beginnings for guidance and inspiration, back to Amer[...]
Wed, 04 Feb 2009 08:22:41 -0600
True to form, Congress has loaded the American Recovery and Reinvestment Act of 2009 with hundreds of billions in wasteful spending. The bill includes $650 million for digital TV coupons, $140 million to study the atmosphere and $50 million for the National Endowment for the Arts.
None of these proposals would create jobs or boost our economy. They're just old-fashioned waste. And that's a problem. Crying "stimulus," Congress intends to spend money it doesn't have to accomplish things that don't need to be done on a scale never before seen. If signed into law, this leviathan would be the largest single spending bill ever passed, adding at least $819 billion (before interest) to the national debt.
If lawmakers had decided to borrow the money for this stimulus plan directly from Americans, the average family would have to fork over $10,520 this year. That's more than what that same family will spend on food, clothing and health care for the entire year.
If lawmakers were honest about what they're doing (spending borrowed money) they'd have to admit that they're asking hard-pressed American families to loan the government more this year than those families will otherwise spend on essentials.
Of course, the government won't borrow directly from Americans. It'll attempt to raise the money on the international bond market, meaning our country will go deeper into debt to foreign lenders, especially Japan and China.
And what will this spending accomplish? Not much.
The Congressional Budget Office studied the "stimulus" package, and found only about half the money lawmakers want to spend will be used this year or next. In other words, it's not a jolt to the economy, it's pointless as stimulus, and the lawmakers who voted for it must know that.
Their real goal seems to be to expand the government. This bill includes some $140 billion for education -- almost twice what the Education Department spent all of last year. It also aims to pump $35 billion extra into the Department of Energy, a stunning sum since DOE's current annual budget is $23.8 billion.
Once these bureaucracies expand, good luck trimming them back. They're apt to be as temporary as the New Deal "Rural Development Utilities Programs." Its mission to electrify rural America was completed decades ago, yet it still exists.
Politicians think they can palm most anything off as "stimulus." An early version of the bill, for example, included hundreds of millions for contraceptives. "The family planning services reduce cost," House Speaker Nancy Pelosi explained while defending the plan on ABC, "to the states and to the federal government." That's arguable at best.
Still, even if that were true, reducing the birthrate would be a pretty slow-motion way of reducing federal costs. It would be faster and more efficient to axe a department or two instead.
Luckily, the contraception spending was axed once people became aware of it. That proves that, when the public pays attention -- and complains -- lawmakers will do the right thing.
Hopefully it's the beginning of a trend.
Tue, 30 Sep 2008 00:32:59 -0600
Every number in India seems staggering. More than 100,000 new engineers, for example, graduate from its educational system every year, and there are 120,000 Indian students studying in the United States.
By 2020, India's total population is expected to exceed China's, making it the world's most populous nation. In the early 1990s it launched critical economic reforms, and subsequent governments have endorsed those reforms, speeding their country into the modern era.
As The Heritage Foundation's "Index of Economic Freedom" shows each year, more economic freedom (an open economy operating under the rule of law) generates more economic growth. That, in turn, means a higher income for the average person. This is exactly what's happening in India.
No, I wasn't dazzled by the high-tech centers of Hyderabad and Bangalore because I didn't have time to even visit them. But I did hear from private bankers, business leaders, educators and government officials. Their universal commitment to pushing reforms and investing further in the Indian economic miracle impressed me. For half a dozen years now, India has had a 7 percent to 9 percent real economic growth rate.
Yes, India faces daunting challenges. Almost half the population still relies on subsistence farming for its livelihood. Grinding poverty still afflicts the majority of its citizens. The caste system remains. But plenty of articulate, able and principled parliamentarians are shaking up the system.
India is a better place to do business than China, says U.S. Ambassador David Milford. It's true that the notorious Indian bureaucracy remains a stumbling block. But continuing reforms and the rule of law is making the country more business friendly and supportive of individual rights.
Those are just a few reasons why the United States is now India's largest trading partner ($42 billion last year alone) and the largest foreign investor in India. Meanwhile, Indian firms are now becoming worldwide companies.
The Tata Group, planning to produce a mass-market car to sell at $2,500, bought the Land Rover and Jaguar automobile lines from Ford. And Tata has also opened up two "call centers" in Ohio and Florida. That's right -- an Indian firm is hiring Americans to man the phones.
India's education system needs greater input from international colleges and universities, but that's illegal. And the financial structure is monopolistic and noncompetitive. Still other reforms are required across the board. Hopefully, pending bills before Parliament will lead to reform in all of these critical areas.
After a week in India, I can claim only a superficial set of impressions about this complex society, and the important bilateral relationship between the U.S. and India. But it's enough to convince me that if India continues on its reform path, it will become a very important player on the international scene -- and a vital advocate for freedom around the globe.
Tue, 23 Sep 2008 00:31:33 -0600
But as lawmakers debate buying up hundreds of billions in assets, they should realize that the government's aggressive meddling in financial decision-making is what got our economy into this mess in the first place. The long-term answer isn't more federal control, it's a return to free-market principles.
One way to do so is to make sure that any bailouts are as limited as possible. If a private firm is so integral to the financial operations of the economy that it requires assistance, so be it. But in that case, the taxpayers' should be investing as little as possible, and company employees and stockholders should suffer the consequences of their bad investments.
Also, lawmakers should avoid turning the rescue package into a Christmas tree, loaded up with goodies for special interests. One proposal in a Senate bill would require 20 percent of any profitable transaction to be deposited into a special fund that pays for low-income housing. That's a silly idea that would, in the long run, only serve to make things worse.
Consider one of the root causes of today's problems: the collapse of the sub-prime mortgage market.
A big reason for that failure is federal policies aimed at increasing home ownership. Getting more people into homes was a stated goal of the Bush administration and lawmakers of both parties, many of whom received massive campaign contributions from government-sponsored enterprises Fannie Mae and Freddie Mac.
Fannie and Freddie played up their status as GSEs, telling shareholders they were a safe place to invest. Now they've been absorbed by the government, meaning investors may indeed be safe, but taxpayers are at risk. Washington needs to get out of the housing business. It shouldn't be a federal concern whether or not someone owns a home.
Also, Wall Street firms should consider changing how they compensate their investment bankers. Many earn the lion's share of their pay in bonuses, a policy that tends to encourage bankers to make risky deals to prop up the short-term bottom line at the expense of long-term planning. Firms should revise their compensation packages, paying bonuses based on a 3-5 year rolling average. This, of course, should be done by management, not by federal regulation.
Similar shady accounting was occurring at Fannie Mae, by the way.
The Office of Federal Housing Enterprise Oversight, the regulator charged with keeping an eye on Fannie and Freddie, reported two years ago that, "Between 1998 and 2004, Fannie Mae's senior management deliberately and intentionally manipulated accounting methodologies to hit earnings targets and help executives maximize their bonuses." That's why former executives were able to cash out millions of dollars and stick taxpayers with the bill.
Finally, lawmakers should repeal Sarbanes-Oxley, the regulation-heavy law it passed after Enron collapsed a few years ago. Sarbox, as it's known, hasn't worked. It didn't protect our economy from the current crisis, for example. But it has helped drive entrepreneurs to invest overseas (where regulations are lighter) instead of here at home. Washington could encourage growth on the Street just by getting out of the way.
As a rule, Congress is good at two things: 1) doing nothing at all. 2) overreacting.
Lawmakers appear ready to prove that rule with a massive overreaction. They would be better off letting free-market principles guide any rescue package. Otherwise, who's going to bail out taxpayers?