Alcohol taxes and the Overton window

We boozehounds on Twitter were abuzz today about a proposed California ballot initiative that would drastically increase taxes on all forms of potable alcohol:

A new initiative that would increase the tax on alcohol was cleared for signature gathering today by the Secretary of State’s Office. And it’s not a modest tax increase, it’s huge. Tax on a six-pack of beer would increase from 6-cents to $6.08. And say goodbye to two-buck chuck–a tax on a 750 ml bottle of wine would go from 4-cents to $5.11. And the tax on a 750 ml bottle of distilled spirits would increase from from 65-cents to $17.57.

I find it hard to believe that this would pass in a state that has so much riding on its alcohol industry and I think that’s sort of the point. Consider the idea of the Overton window:

The Overton Window is a concept in political theory, named after its originator—Joe Overton—former vice president of the Mackinac Center for Public Policy. It describes a “window” in the range of public reactions to ideas in public discourse, in a spectrum of all possible options on an issue. […]

Overton described a method for moving that window, thereby including previously excluded ideas, while excluding previously acceptable ideas. The technique relies on people promoting ideas even less acceptable than the previous “outer fringe” ideas. That makes those old fringe ideas look less extreme, and thereby acceptable. The idea is that priming the public with fringe ideas intended to be and remain unacceptable, will make the real target ideas seem more acceptable by comparison.

Now it’s possible that the sponsors of this initiative, Josephine and Kent Whitney, truly believe this is a reasonable tax increase. But I doubt that winning the vote is the only goal of this initiative. The aim is to get lots of news coverage for their far-out idea and thereby make smaller tax increases seem reasonable by comparison. So if you don’t want them to succeed, don’t take them too seriously.

Additional note: The Overton window is often described in a very cynical, manipulative context. In contrast, the late Joe Overton’s peers at the libertarian Mackinac Center use it to explain how think tanks can change public policy for the better. They see shifting the window as the noble aim of libertarians working in a world often hostile to free markets and individual liberty. As Nathan Russel wrote for the Center:

A long-term focus on shifting the Overton window allows a think tank to follow its ideals and perform a genuinely positive public service, instead of being constrained to merely advocating those policies that are currently possible. When the window of political possibilities is moved along the political spectrum, the impossible becomes desirable and the simply desirable becomes imperative. This is the true influence of a think tank — shaping the political climate of future legislative and legal debates by researching, educating, involving and inspiring.

[Hat tip to Rumdood, who tweets, “Look, I’m OK with a modest increase in taxes on booze, but from $.65 to $17.57 for a 750mL bottle of rum is insane.” Manipulation of the Overton window in action? See also Jeff Woodhead and Chad Wilcox on the Overton window and health care reform.]


Health care reform’s tanning tax

To minimize the penalties you may suffer under health care reform, withdraw from your HSA now and spend the money on some indoor tanning. From this helpful timeline [.pdf] detailing what’s in the reform bill:

Indoor Tanning Services Tax. Imposes a ten percent tax on amounts paid for indoor tanning services in lieu of the tax on cosmetic surgery. Indoor tanning services are services that use an electronic product with one or more ultraviolet lamps to induce skin tanning. The tax would be effective for services on or after July 1 , 2010.

I dislike indoor tanning as much as anyone who’s had “Jersey Shore” intrude into their cultural lexicon but I don’t know why taxing it should be part of health care reform, why this is a logical substitute for taxing cosmetic surgery, or why we were thinking about taxing cosmetic surgery in the first place. Thankfully I tan the natural way, from the glow of my computer monitor.

[Link via Arnold Kling.]


Public choice and BPA

This week the Oregon Senate is considering a bill to ban Bisphenol-A, or BPA, from use in products intended for children under the age of four. BPA is a common chemical in plastic containers. There is some fear that it causes harm by leaking into food and drink products. I am skeptical, as I am of most such scares, but I haven’t done enough research on the topic to have a firm opinion either way.

Writing at Blue Oregon, Kari Chisholm is sure that we should pass the ban. In fact he’d like to ban it in all food containers, not just the ones intended for children. Some of his reasoning is based on scientific research but the rest is biased towards what’s good for legislators. Here’s one of his arguments:

Smart legislators will vote for SB 1032. It’s the right thing to do, but it’s entirely possible that it could become a political issue in upcoming campaigns. When our son was born, I had never heard of BPA. But hanging around with a bunch of new parents, I quickly learned about it – and this is a major worry with young families. (Legislators who don’t have young children of their own would be smart to check in with some new parents — they may be surprised how deep the concern runs about BPA. Entire businesses have been built to help parents avoid this chemical.)

Given a choice between protecting the health and well-being of Oregon children – and protecting a bunch of out-of-state (and overseas) chemical and plastics manufacturers – I think the choice is clear. You can imagine what the attack ads will look like for those who vote against the bill.

This also isn’t about jobs. No one in Oregon produces BPA or the products affected by SB 1032.

This might all be true, but there’s nothing praiseworthy in the provincial idea that we should go ahead with the ban because the only people who would be hurt by it are non-Oregonian Americans or foreigners who are likely economically worse off than we are. It’s expedient for legislators to think that way but it’s not a principle we should encourage. (If Oregon was home to a BPA plant, would Chisholm want legislators to ignore science to protect their political prospects?)

Then he updates with this:

Over at the OLCV blog, Jon Isaacs notes that the Bisphenol-A baby-bottle ban is an opportunity for a big bipartisan accomplishment, at a time when there’s been a lot of partisan bickering and stonewalling.

I don’t even know what the point of this is supposed to be. Bipartisanship is only good if the laws that are being passed are good. It’s not good for it’s own sake. If all it does is give politicians something to point to when they’re running for re-election and cover from lobbying groups then I don’t see the value. The same blog post he links to notes that 90% of the bottles for sale in Oregon are already BPA-free anyway, suggesting that concerned parents and retailers are handling the alleged problem reasonably well on their own.

There might be good reasons to ban BPA in bottles, but after reading this Blue Oregon post I’m less convinced than ever that the decision will be based on sound science rather than on the self-interest of legislators.

Update 2/16/10: The bill failed.


Thanks for the ride

I’d like to thank all my readers living outside of Portland for buying me a streetcar:

Peter Rogoff, administrator of the Federal Transit Administration, today signed a contract dedicating $75 million in federal money for the Portland Streetcar eastside loop extension and promised similar federal efforts across the nation.

The contract guarantees the money Portland-area agencies have been anticipating for the project, which started construction during the summer. As The Oregonian has reported, the money was delayed for years by the Bush administration, which funded bus rapid transit projects but blocked streetcars. […]

[U.S. Rep. Earl] Blumenauer praised the eastside loop project, which will extend from the Pearl District, across the Broadway Bridge to the Lloyd Center Mall, and south along Grand Avenue and Martin Luther King Boulevard to the Oregon Museum of Science and Industry.

They’re not paying for it but local politicians are quick to claim credit:

“It’s an important down payment on our future in Portland, creating over 1,300 high wage jobs, spurring development and helping jump start the economy for the entire state,” Blumenauer said.

And to hand out contracts to favored constituents:

United Streetcar, a unit of Clackamas-based Oregon Iron Works, Inc., has a contract to build the streetcars needed for the new line.

U.S. Rep. Peter DeFazio, a Springfield Democrat, wrote legislation that made it nearly impossible for anyone but United Streetcar to bid on the work.

DeFazio and the Obama administration see domestic production of streetcars as a way to shore up the nation’s heavy manufacturing employment while creating more walkable, mixed use neighborhoods.

This street car line would run right by my current apartment, though by the time it’s built I hope to live somewhere else. Will it be an efficient use of resources? Possibly, but given the political incentives at work it would be a huge leap for me to believe so. Streetcars are grand, sexy projects. They give politicians a great deal to take credit for. Buses aren’t sexy. However they are cheap and adaptable to changing traffic patterns. If Oregonians paid for their own transit we might be funding those. But since the rest of you are paying, sure, let’s build a streetcar!

Transit contrarian Randal O’Toole takes on this sort of thing in his Cato paper “A Desire Named Streetcar.” His analysis seems apt for the current situation.

I’ve had only two experiences with the Portland streetcar. When I first moved here I enjoyed a gin-company sponsored ride around town with Pegus in hand. Last week I almost wrecked my bike slipping a wheel into its rails. Aesthetics aside, I don’t know what purpose the streetcar fulfills that couldn’t be served equally well by buses driving the same route.


Shunning Mackey

I hadn’t planned on writing anything about John Mackey’s health care op/ed in the Wall Street Journal, but Radley’s response to the resulting boycott of Whole Foods is worth quoting:

[…] I also think the general premise is ridiculous. I shop at Costco. A lot. If the CEO of Costco wrote an op-ed calling for a single payer health care system, I’d shrug, maybe write a blog post about why I think he’s wrong, and then I’d probably go to Costco this weekend to buy some dog food, some meat, and to try to eat my membership dues in free samples. Now, if the CEO of Costco wrote an op-ed calling for genocide against redheads, then yeah, I’d stop shopping there. But calling for a boycott of a conscientious company over its CEO endorsing proven ideas like HSAs and mainstream policies like tort reform is an attempt to push good ideas you disagree with to the fringe. It’s a way of zoning your opponents best arguments out of the realm of civilized debate. In other words, it’s a way to marginalize your opponents without actually having to debate them.

This is exactly right. Many of my friends on the left have lamented the state of debate on health care reform. We’d all like to see it move beyond death panels and keeping government’s hands off our Medicare. So it’s disappointing that when a CEO expresses cogent opinions about the matter and presents serious alternative policy proposals he is treated to such a harsh backlash. The response I’ve seen from many on the left is to dismiss him as a corporate shill or refuse to patronize his stores without giving serious consideration to his arguments.

The first response is irrelevant to the correctness of his ideas, even if the accusation is true (though I don’t doubt that Mackey truly believes what he writes). The second is counterproductive to the goal of achieving a better discourse. Is opposition to the public option really so evil as to deserve a boycott?

Reasonable people can disagree about the wisdom of the public option. Even if you support it, the only way to be sure of one’s position is to test it against the best challengers. The response to Mackey’s op/ed has demonstrated an unwillingness to do this and with it a tendency for the left to become as closed-minded on this issue as the right is currently perceived on others.


The problem of progressive arrogance

Rich Rodgers had a post at Blue Oregon this weekend lamenting the fact that some people stubbornly refuse to get on board with the public option for health insurance. He suggests that in the face of such irrationality there’s nothing to do now but agree to disagree. Maybe he’d have more luck convincing his opponents if he treated them with a little more respect. Here’s his opening:

Free market economists use models that assume that people are given complete information and make rational decisions. How absurd. No one has complete information, most people have terribly unreliable information, and people make stupid decisions all the time. Witness the election of George W. Bush in 2004.

There are many intelligent people who describe themselves as free market economists. One or two of them have probably noticed that in the real world people don’t have perfect information. Yet those silly economists persist in their crazy beliefs! Perhaps that’s because they realize that simplified models are often useful starting points for understanding the world. The arguments of free market economists don’t depend on perfectly informed buyers and sellers any more than the designs of engineers depend on perfectly frictionless surfaces.

If Rodgers bothered to look into what libertarian economists actually think he’d see that it’s often the absence of perfect information that drives them to support markets. If knowledge was easily obtainable there’d be little reason not to hand over power to enlightened planners; we’d just figure out what’s efficient and do it. Unfortunately no one person or agency has that much information, so we use markets and price signals to coordinate the dispersed and incomplete knowledge of market actors.

At the risk of being overly generous, I’m assuming that Rodgers doesn’t think we should set up public options to pay for our groceries, our oil changes, our TV sets, or any of countless other goods we consume on a daily basis. We manage to handle these transactions fairly well on our own despite our lack of omniscience. In some arenas, at least, the free market model works pretty well. It’s possible that health care isn’t one of them, but Rodger’s opening canard doesn’t provide any reason for thinking so.

Ironically, one of the leading arguments against free market health care is that consumers have too much information, causing adverse selection and the unraveling of insurance markets. That’s a challenging point! Alas, it’s not the sort you bother making when you start from the assumption that your opponents are stupid.

(It’s also telling that Rodgers’ example of uninformed, stupid decision-making was the election of George W. Bush, a decision that was political, not economic. In the political sphere people are free to make stupid choices because the personal cost of being wrong is virtually nil. This is a reason to be skeptical of further politicizing health care.)

But that’s just the first paragraph. After Rodgers unfairly dismisses free market arguments he goes on to say that people who oppose the public option are dupes of the insurance companies:

The insurance industry is massively funding the campaign against health care reform, especially reform that includes an option for publicly administered insurance. They want to keep making a lot of money, so they prefer to keep things the way they are. The industry is abetted by its mouthpieces on Fox News, talk radio, and in the op-ed pages of the Wall Street Journal. Their teams of strategists are rolling out some rabid crusaders to try to stop the conversation, apparently encouraging them to use tactics as close to brute force as the law will allow (and then some).

This illogical outrage and outrageous behavior obviously didn’t spring up overnight, it’s been cultivated for years by political strategists and interest groups on the right. The rabid dogs know what they’re doing–they know their role, even if they can’t control themselves. If you sat these birthers and screamers and Glenn Beck fans down and asked them to explain how the universe is put together, the story you heard would be scary and wrong, but they would believe every word of it.

While it rests uneasily on an old foundation of philosophical principles, the right’s current ‘platform’ on health care is a twisted-up mess of distortions and opportunity-driven sound bites. It makes very little sense for an ordinary working person to adopt a stance against public health insurance–what exactly is so great about private health insurance?–but rational decision-making has nothing to do with this. People are committed to being on a team, and they will fight for the team.

It’s great sport to mock the fringe elements of one’s ideological opponents — and the conservative movement certainly deserves some mocking right now — but picking on the nutjobs is no substitute for engaging with actual arguments. And if Rodgers looked beyond FOX News he’d find that arguments do exist. Free market economists have a coherent perspective on health care that’s in fact deeply critical of the current system. And the reforms they suggest, such as expanding HSAs, shifting the tax exemption for health insurance from employers to consumers, and eliminating barriers to competition among states, are logical extensions of that perspective, not cover for the interests of insurance companies.

Does Rodgers consider those arguments? Or does he instead suggest that his opponents are a bunch of country rubes? If you guessed the latter, you’re correct!

The current debate in DC has focused on 1) a national public option for everyone or 2) state-by-state decisions on whether a public option is available. Neither of these approaches successfully take into account the reality that people are bitterly divided on the issue, and will stay that way. One answer to the dilemma might be to create a national public health insurance option, but give local communities the choice to opt in or out. Union County can vote in or out. Multnomah County, same choice. Equity can be ensured via the tax code.

It’s a foregone conclusion that the major urban areas will all opt in. Both coasts will be in. In parts of the country where the political divide is intense, communities will have their say; e.g. rural Georgia will probably be out, and Atlanta will opt in. With most cities in, the population base will be plenty large enough to ensure maximum bargaining power. And the conservative communities that are whipped into a frenzy can sit this one out.

I’m picking on Rodgers here, but only because his post exemplifies the tendency I’ve seen in many progressives to ignore the best arguments of their opponents, focus on the extremes, and assume that ordinary people who disagree with them are victims of their own ignorance. This is its own kind of tribalism and with that attitude it’s no wonder disagreement seems so intractable.

I’m not writing this post to defend any particular perspective on health care. I obviously lean to the libertarian side, but this isn’t an area in which I claim any expertise. All I’m suggesting to progressives is that if they want to win over skeptics like me, demonstrating that they’ve engaged with free market arguments would be a better place to start than insulting our intelligence.


Chavez is no Lovejoy

The Portland City Council has voted unanimously to rename 39th Avenue NE in honor of Cesar Chavez, resolving a two-year debate in the city. I, for one, am deeply offended. Not because I have anything against Chavez, about whom I know very little and assume was a swell chap. I’m offended that we pay the members of our city council salaries of more than $90,000 a year to pat themselves on the back for doing things like renaming 39th Avenue.

Prediction: Decades from now, Portlanders will take more pride in having “Simpsons” characters named after their streets than in having streets named after historical figures. And I’ll drink a Duff to that!


Denied again

It took them two months to get back to me, but I finally got a response to my letter asking for stimulus money to open a crappy vodka bar from Senator Ron Wyden’s office. Just like Earl Blumenauer, Wyden completely ignores the substance of my arguments to launch into some standard chatter about the economy. He stresses that he does not “take spending $787 billion of taxpayer dollars lightly.” Whew, that’s a relief! I’m glad to know the burden of spending other people’s money weighs so heavily on his shoulders.

I’m still waiting to hear from Jeff Merkley. Don’t let me down, Jeff! You’re my last hope for making Crazy Jake’s Discount Cocktail Barn a reality.

Full text of the boring letter below the break.
Continue reading “Denied again”


Who is John Galt?

There’s been a lot of talk lately about free market types “going Galt” to protest current economic policies. This provokes my friend Jeff, and many others, to say “Go ahead, be my guest.” They’re right that few productive people are really going to venture off into the wilderness and watch the rest of the world descend into chaos, and that adolescent power fantasy is undeniably part of Atlas Shrugged’s appeal. But there’s a more sophisticated reading than that, one that’s relevant to current debates. Jason Kuznicki puts it very well in the third item of this post:

Ayn Rand hated F. A. Hayek, but in a weird way, the Hayekian idea of the entrepreneur — a little guy who happens to stumble onto a tiny, useful bit of knowledge, and who finds himself free to employ it — is a better fit to the relatively more sophisticated view of Rand’s work, which holds that Atlas is just a metaphor, not a blueprint for world takeover. Schumpeter’s heroic entrepreneur is, I think, empirically wrong, but better suited to a literal reading of Atlas.

Who is John Galt? An ephemeral process. And if you could follow that, well, you get the libertarian gold star for today.

I won’t pretend to have any great insight into how current policies will affect that process; Jim Manzi takes a stab at it here, arguing that they could be very detrimental to entrepreneurship. Even if, like Jeff, you’re not concerned about losing talent, losing investment capital and reducing the rewards to innovation should be a significant concern.

A fascinating paper from Tyler Cowen is worth contemplating here (“Caring About the Distant Future: Why It Matters and What It Means,” [pdf]). He makes the underappreciated point that economic growth isn’t simply cumulative; growth provides the fuel for further growth in an exponential process. To oversimplify, a few years delay in getting Edison’s bulb to market is a few years in which other entrepreneurs toil less productively in the dark. From the paper:

Just as the present appears remarkable from the vantage point of the past, our future may offer comparable advances in benefits. Continued progress might bring greater life expectancies, cures for debilitating diseases, and cognitive enhancements. Millions or billions of people could have much better and longer lives. Many features of modern life might someday seem as backward as we now regard the large number of women who died in childbirth for lack of proper care. It is a simple failure of imagination to believe that human progress has run its course. […]

The importance of the growth rate increases the further into the future we look. If a country grows at 2 percent, as opposed to growing at 1 percent, the difference in welfare in a single year is relatively small. But over time the difference becomes very large. For instance, had America grown 1 percentage point less per year between 1870 and 1990, the America of 1990 would be no richer than the Mexico of 1990. At a growth rate of 5 percent per annum, it takes just over 80 years for a country to move from a per capita income of $500 to a per capita income of $25,000, defining both in terms of constant real dollars. At a growth rate of 1 percent, such an improvement takes 393 years.

Robert Lucas put it succinctly: “The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about [exponential growth], it is hard to think about anything else.”

Again, I’m not bringing this up with regard to any particular policy. But we are living in a time in which drastic measures are being taken in response to an immediate economic crisis, the costs of which will be felt for decades to come. The impact these policies will have on the ephemeral process of market production deserves attention. Conservatives and libertarians threatening to “go Galt” aren’t merely expressing selfish frustration at having to pay more taxes; they’re calling our attention to the vital moral imperative of considering long-term growth.


A reply!

I admit I felt a very slight pang of guilt when I sent that letter to my congressmen proposing sending me stimulus money to invest in my terrible bar idea. That’s because the letter would never actually get to the politicians. I knew it was going to be some poor overworked aide who’d have to read my letter, figure out if I’m being earnest or not, and send me a reply. I didn’t feel too guilty, obviously, because if you sign up to work in Congress I figure you deserve all the BS that gets thrown at you. But still, some of them are genuinely nice people, despite what one might conclude after to going to a few happy hours on Capitol Hill.

One of those nice people was visiting Portland this weekend, so I asked her what she’d do if she’d received my letter. She said she’d get annoyed at having to waste time on me and fire off some boilerplate jibber jabber about the stimulus bill. Whoever works in Representative Earl Blumenauer’s office thinks the same way and replied to me this morning. On the off chance you want to read through the whole thing (not recommended), it’s below the break.
Continue reading “A reply!”



Selected tweets from my friends in the last 24 hours:

Discussions of Obama being “Good for a beer” and regular White house cocktail parties makes me happy on many, many levels.

ZOMG. Obama says he’d “go for a beer with Hannity”. Obama’s like 500000% better a person than I could ever be.

Has a man crush on Obama

These soon after the administration cited state secrets to block the Binyam Mohamed case. Obama’s a swell guy and all, but he’s not a better person than you. He wouldn’t go for a beer with Hannity because he’s so wonderful. He’d do it because that kind of glad-handing chumminess is what makes a person appeal to more than 50% of American voters. You, my friends, couldn’t put up with two years of that campaign bullshit. You wouldn’t try to cover up the previous administration’s complicity in rendition cases either. That’s why I like you. Snap out of it.


The honeymoon is over

I have nothing to add to what Greenwald, Sullivan, and Thoreau have written, but I think the Obama Administration’s invocation of state secrets to cover up torture cases deserves the widest possible coverage. It’s unfortunate that the stimulus debate will likely overshadow it. To those of you who enthusiastically supported Obama for his promise of change: Are you going to accept this?


Untouched by foreign human hands

If you’re into food policy you’ve certainly heard by now about the Bush Administration’s last minute decision to slap a punitive 300% tariff on Roquefort cheese. Because it’s, uh, French and stuff. Still, I thought this email from the owner of Cheesetique in Alexandria, VA was worth reprinting (the whole thing’s at Crispy):

I was shocked and awed not by that cavalier attack on our broad free-trade liberties, but by the specific violation featured prominently on the front page (albeit below the fold): little old Roquefort is under attack! That sublime product of lactation, coagulation, and fermentation has always held a special place in my heart, despite its high price tag and limited availability. Not only do I have a particular affection for Roquefort, but so do Cheesetique’s discerning customers, who marvel at its romantic story of creation, rustic approach to production even today, and exclusive availability. Your love of raw milk Roquefort has made it a staple in many of my cheese classes and one of the most popular and consistent sellers at Cheesetique. Since opening our doors more than four years ago, we have never been without Roquefort Papillon (I prefer this brand above others, though we have also carried Carles, which is outstanding). We have sold hundreds of pounds of Roquefort despite its title as the most expensive cheese consistently carried at Cheesetique. […]

Why do I focus today on this seemingly insignificant example of protectionism at it worst when there are such large-scale issues to consider in our tumultuous time? For that reason exactly. There are so many huge examples of economic policies gone awry, totaling billions and trillions of dollars, and for that very reason, I point out this easily identifiable, but no less extreme violation of the American ways of free choice and trade.

As our own form of culinary protest, Cheesetique will continue to carry Roquefort until it is no longer available, which I assure you, will only be a matter of time. Not only will we continue to carry it, but its price will never exceed that which we pay for it. We encourage those of you that might have shied away from this pricey perfection in the past to come in and pick up a piece of one of the most historically significant and perfectly created foods in the world – at $20.00 per pound. Yes, you read correctly. $20 per pound.

Remember: Protectionism is bad. Roquefort is good. Long live the latter!

It’s a good thing our new cosmopolitan rulers are above such petty anti-foreign sentiment. Oh, wait:

Washington souvenirs worth $100,000 — including images of the Capitol dome and printings of the U.S. Constitution — are locked in storage, blocked from sale in the new U.S. Capitol Visitors Center because the items are made in China.

Rep. Bob Brady, D-Pennsylvania, chairman of the House Administration Committee, said he warned operators of the visitors center not to purchase merchandise made outside the United States, but they did it anyway.

Although the center has the goods in hand, Brady said, “I’m not allowing them to sell those products.”

His Administration Committee oversees operations in the House of Representatives, including the House restaurant, parking facilities and the Capitol Visitors Center. A spokesman for the committee said other House gift shops also are under restrictions on items made outside the United States.

Brady, whose district includes Philadelphia, insists that it’s wrong for tourists to return home with a souvenir from the nation’s capital that bears a “‘Made in China’ sticker.”

And it’s not just the little stuff, either:

The stimulus bill passed by the House last night contains a controversial provision that would mostly bar foreign steel and iron from the infrastructure projects laid out by the $819 billion economic package.

A Senate version, yet to be acted upon, goes further, requiring, with few exceptions, that all stimulus-funded projects use only American-made equipment and goods.

Proponents of expanding the “Buy American” provisions enacted during the Great Depression, including steel and iron manufacturers and labor unions, argue that it is the only way to ensure that the stimulus creates jobs at home and not overseas.

Stimulus advocates are fond of comparing our current situation to the Great Depression. Though the scale of the recession and the trade restrictions are nothing compared to that period yet, the comparison should give them pause. Dan Ikenson writes:

For all practical purposes there is no difference between the Smoot-Hawley tariff bill of 1930 and the “Buy American” provisions in the $819 billion spending bill that passed the House Wednesday.

Smoot-Hawley was the catalyst for a pandemic of tit-for-tat protectionism around the world, which helped deepen and prolong the global depression in the 1930s. “Buy American” provisions will no doubt inspire similar trade barriers abroad and will have the same effect of reducing global trade—and therefore prospects for economic recovery. It is not unreasonable to say that U.S. policymakers are on the verge of taking us down that same disastrous path.

The first acts of Obama’s presidency impressed even skeptics like me, but if we continue down this path McCain’s principled free trade policies are going to be sorely missed.


No disagreement?

Damn. Cato took out full page ads this week in The New York Times, Washington Post, and Roll Call objecting to Obama’s claim that “There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy.” The ad is signed by some 200 economists and reads:

With all due respect Mr. President, that is not true.

Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policy makers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

On the other hand, Obama’s plan persuaded Cato to inject much-needed revenues into the struggling print journalism industry, so he’s got that going for him.


Credit where due

I’m still catching up on the news, but Radley’s impressed with Obama’s self-limiting first acts in office:

Yes, it’s only been one day. But this is mighty impressive. Obama’s top priority upon taking office was to sign orders rolling back his predecessor’s expansion of executive power. Put another way, Obama’s top priority upon taking office was to institute limits on his own power.

Check Radley’s post for specifics. Keep in mind too that this is all just a week after AG nominee Eric Holder had no expectation of reversing course on the telecom immunity Obama initially opposed but eventually caved and voted in favor of. But still, bravo for a good beginning.


The right perspective on Warren

I didn’t watch this morning’s festivities since I think they represent far too much political worship and because I haven’t bothered to actually plug in my TV since moving to Portland. But if I had viewed it I would have wanted to do so on New Zealand’s TV One:

In any event, the coverage was unexpectedly good. The best comedic moment came when they decided to skip coverage of the invocation, which was dismissed as “Someone is saying a prayer now” and that they would return to coverage of the event when something important happened. Of all the ways to not have to hear Rick Warren’s awful accent this was a good one.



Good news and bad news on SCHIP

One of Obama’s first acts in office is likely to be approving an expansion of the State Children’s Health Insurance Program. Since SCHIP is “for the children” and will be funded by taxing unpopular smokers, passage in Congress is a sure bet, as is Obama’s signature.

Full details of the House bill won’t be available until tomorrow (Tuesday), but according to George Edmonson at Stogie Guys a potentially devastating blow to small businesses has probably been dodged: the floor tax that might have applied to current stocks of cigars held by tobacco shop owners. Additionally, there’s speculation that the cap on taxing individual cigars will drop from the $3 per stick that was vetoed by George Bush last year, which was itself down from an original $10 proposed cap. Read George’s post for details.

That’s the good news. The bad news is that taxes on tobacco are still going to rise, making cigars more expensive and significantly increasing the price of cigarettes. The latter is a consumption tax that will fall disproportionately on the poor, marking a painfully regressive start for the incoming administration. See Jacob Sullum on this point here.

Regardless of SCHIP’s merits, it shouldn’t be funded by additional taxes on tobacco. As Tom Firey and I wrote for the Cato Institute last year:

Smoking in the United States is already declining significantly — largely as a result of public awareness of its dangers, not higher taxes. The declining number of smokers makes cigarette tax revenue unstable. Congress’s Joint Committee on Taxation projects that if the new tax rate is implemented next year, tobacco revenues will fall nearly 10 percent over the next decade…

SCHIP’s advocates believe the program is critical to providing healthcare to children. That’s debatable. But if Congress and the president decide to expand the program, they should cover its new costs with general tax revenues, not taxes on smokers alone. Higher tobacco taxes are unfair, unadvisable, and unlikely to bring in enough money.

I don’t have any special insight into SCHIP as health policy. For a critique and some alternative approaches, see Michael Cannon.