United Liberty

Written by Tad DeHaven, a budget analyst at the Cato Institute. Posted with permission from Cato @ Liberty.

When it comes to reporting on the Small Business Administration, it seems to me that most journalists simply assume that if a government agency exists to “help” small businesses then it must be good. So I was pleased to read a weekend piece from two investigative journalists with the Dayton Daily News that challenges the conventional wisdom on the SBA.

As the reporters explain, the SBA’s main job is to back loans issued by private lenders to small businesses that couldn’t get financing on market terms. The result is that taxpayers end up holding the bag when these naturally riskier loans go bad.

And quite a few go bad as this Cato essay on the Small Business Administration explains.

Lenders have little skin in the game so for them it’s heads they win, tails they win. Thus it was shocking – absolutely shocking – that a representative from the SBA and the head of the Ohio Bankers Association provided the reporters with the most favorable quotes.

The entire piece is worth reading, but the authors did a particularly good job of turning the spotlight on the racket that exists between the SBA, lenders, and national franchisors:

Written by Julian Sanchez, a research fellow at the Cato Institute. Posted with permission from Cato @ Liberty.

As I wrote on Thursday, I’m not really losing sleep over the prospect of domestic targeted killing, mostly because it seems as though it would be so manifestly politically radioactive even within the intelligence community that I doubt it could be done secretly, and would almost certainly provoke a constitutional crisis if it became public. That said, as Marcy Wheeler notes, if we look closely at the precise wording of Attorney General Eric Holder’s response to Sen. Rand Paul disavowing any such presidential prerogative, it’s actually phrased in a way that seems calculated to preserve a fair amount of wiggle room:

It has come to my attention that you have now asked an additional question. “Does the President have the authority to use a weaponized drone to kill an American not engaged in combat on American soil?” The answer to that question is no.

Written by Tad DeHaven, a budget analyst at the Cato Institute. Posted with permission from Cato @ Liberty.

Sheldon Richman and I spent a lot of time last week running through numbers from the Congressional Budget Office in order to gauge sequestration’s effect on federal spending. In the resulting column, Richman lays out the numbers and asks a pertinent question: How the $#!?% is the average voter supposed to have a clue about this stuff?

From Richman’s column:

I subjected myself to this pain because I’m a professional masochist. I’m paid to do it. How many people who are not so rewarded are likely to search for, locate, and download CBO spreadsheets to see the numbers for themselves? Very few, I’ll bet. And who can blame those who won’t? They have families, friends, communities, and jobs to attend to — matters they actually affect through their actions. But if most people don’t have time or incentive to learn the facts about this one issue (never mind all the others) — and if the news media can’t be counted on to tell the plain story — how can Americans fill the role of “informed voters” that democracy in theory requires?

Next year there will be congressional elections. If a voter doesn’t know the facts about the budget, she won’t be able to judge the sequestration issue. And if she can’t do that, how can she intelligently decide which congressional candidate to vote for?

Written by Christopher Preble, Vice President for Defense and Foreign Policy Studies at the Cato Institute. Posted with permission from Cato @ Liberty.

Will sequestration undermine U.S. national security? Hardly. Today, the Cato Institute released a new infographic putting these minor cuts in perspective.

Military spending will remain at roughly 2006 levels—$603 billion, higher than peak U.S. spending during the Cold War. Meanwhile, we live in a safer world. The Soviet Union has been dead for more than two decades; no other nation, or combination of nations, has emerged since that can pose a comparable threat. We should have a defense budget that reflects this reality.

To be clear, sequestration was no one’s first choice. But the alternative—ever-increasing military spending detached from a legitimate debate over strategy—is worse. We should have had such a debate, one over the roles and missions of the U.S. military, long before this day of reckoning. And politicians could have pursued serious proposals to prudently reduce military spending. Instead, they chose the easy way out, avoiding difficult decisions that would have allowed for smarter cuts.

Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.

Writing for the New York Times, Paul Krugman has a new column promoting more government spending and additional government regulation. That’s a dog-bites-man revelation and hardly noteworthy, of course, but in this case he takes a swipe at the Cato Institute.

The financial crisis of 2008 and its painful aftermath…were a huge slap in the face for free-market fundamentalists. …analysts at right-wing think tanks like…the Cato Institute…insisted that deregulated financial markets were doing just fine, and dismissed warnings about a housing bubble as liberal whining. Then the nonexistent bubble burst, and the financial system proved dangerously fragile; only huge government bailouts prevented a total collapse.

Upon reading this, my first reaction was a perverse form of admiration. After all, Krugman explicitly advocated for a housing bubble back in 2002, so it takes a lot of chutzpah to attack other people for the consequences of that bubble.

But let’s set that aside and examine the accusation that folks at Cato had a Pollyanna view of monetary and regulatory policy. In other words, did Cato think that “deregulated markets were doing just fine”?

The gun control debate has brought out the crazy. This issue always brings out the passionate opinions from both sides. For those who oppose the Second Amendment and wanted to extensive gun control measures enacted by Congress or in various state legislature, they’re forgetting one basic thing — criminals don’t obey laws. That’s why they’re criminals.

The Second Amendment provides a means for Americans to protect their life, liberty, and property from those who would do them harm — and they do so millions of times each year. But don’t tell that to State Rep. Joe Salazar, a Colorado Democrat. He doesn’t think women need guns for self-defense. In his opinion, they would be better off calling the police or using a rape whistle to alert of an attack.

“It’s why we have call boxes, it’s why we have safe zones, it’s why we have the whistles,” State Rep. Salazar said on the floor of the House. “Because you just don’t know who you’re gonna be shooting at. And you don’t know if you feel like you’re gonna be raped, or if you feel like someone’s been following you around or if you feel like you’re in trouble when you may actually not be, that you pop out that gun and you pop…pop a round at somebody.”

Here’s the video:

Written by Jim Harper, Director of Information Policy Studies at the Cato Institute. Posted with permission from Cato @ Liberty.

A year ago, almost to the day, I blogged about a legislative package on cybersecurity being proposed in the Senate. “Soviet-Style Cybersecurity,” I called it, because of the “centralizing and deadening effect” it would have on the many and varied efforts to respond to the many problems lumped together as “cybersecurity.” President Obama’s new executive order, titled “Improving Critical Infrastructure Cybersecurity,” has similar, if slightly more sinister, qualities.

To understand my thinking in this area, you must first understand the concepts in a superlative law review article I first read when I was doing oversight of the regulatory process as a congressional staffer. “Administrative Arm-Twisting in the Shadows of Congressional Delegations of Authority” is by University of Flordia law professor Lars Noah. In it, he described the administrative practice of imposing sanctions or withholding benefits in order to elicit “voluntary compliance” from regulated entities. The upshot? There is no “voluntary” when businesses are repeat players or under ongoing supervision of an agency.

The cybersecurity executive order has arm-twisting all over it.

Last night during a joint session of Congress, President Barack Obama gave his fifth the State of the Union address where he laid out his agenda for the next year. As was anticipated, the speech carried over the Leftist themes of last month’s inaugural address and was more aggressive in tone.

Despite recent GDP numbers showing that the economy contracted in the last quarter of 2012, President Obama started off the hour long speech by repeat a familiar line, explaining that “[t]ogether, we have cleared away the rubble of crisis, and can say with renewed confidence that the state of our union is stronger.”

After a couple of shots at Congress, President Obama spent a few minutes discussing the sequester, claiming that “both parties have worked together to reduce the deficit by more than $2.5 trillion – mostly through spending cuts, but also by raising tax rates on the wealthiest 1 percent of Americans.” Obama claimed, “we are more than halfway towards the goal of $4 trillion in deficit reduction that economists say we need to stabilize our finances.”

If only that were true. In Cato Institute’s response to the State of the Union address, Michael Tanner explained, “Let’s be absolutely clear — there have been no spending cuts under this President.”

In 2010, the first year that this President was responsible for the budget, the federal government spent $3.4 trillion,” noted Tanner. “Last year, the federal government spent $3.5 trillion, and for the first four of last year, we’re spending at a fast pace than the first four months of last year.”

Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.

What’s the worst thing about Delaware?

No, not Joe Biden. He’s just a typical feckless politician and the butt of some good jokes.

Instead, the so-called First State is actually the Worst State because almost exactly 100 years ago, on February 3, 1913, Delaware made the personal income tax possible by ratifying the 16th Amendment.

Though, to be fair, I suppose the 35 states that already had ratified the Amendment were more despicable since they were even more anxious to enable this noxious levy.

But let’s not get bogged down in details. The purpose of this post is not to re-hash history, but to instead ask what lessons we can learn from the adoption of the income tax.

The most obvious lesson is that politicians can’t be trusted with additional powers. The first income tax had a top tax rate of just 7 percent and the entire tax code was 400 pages long. Now we have a top tax rate of 39.6 percent (even higher if you include additional levies for Medicare and Obamacare) and the tax code has become a 72,000-page monstrosity.

But the main lesson I want to discuss today is that giving politicians a new source of money inevitably leads to much higher spending.

Written by Doug Bandow, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.

The confirmation hearings on Chuck Hagel’s nomination to head the Pentagon are mercifully over. His wobbly performance earned derision among neoconservatives, but he responded as they intended to an interrogation that was all about politics, not policy.

As I have noted before, Hagel is under fire because he disputed neoconservative nostrums to speak unpleasant truths to the Republican Party. He was an orthodox conservative, including on foreign policy. However, he was an Eisenhower, not a Dubya, Republican: Hagel criticized the debacle in Iraq, urged negotiation to forestall Iran from developing nuclear weapons, and backed reductions in today’s bloated military budget. General turned President Dwight Eisenhower could not have put it better.