Weekly Hit & Run Archive 2010 April 22-31

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We'll Take Your Organs, But You Can't Sell Them

New York legislator with a personal understanding of the great need for more efficient and organ-rich organ exchange markets answers the call with a bill that makes drivers license organ-giving declaration the default (requiring active opt-out) rather than an opt-in option. Details from AP via the Star-Telegram.

Not so strangely at all given the weird animus against markets surrounding the organ issue, he does not propose a bill that would help move toward legalizing the sale of organs, which actually would help even out supply and demand. (Would such a bill work on the state level in the face of federal laws against the practice? I haven't done the legal research, but let's try to pass one and find out.)

Kerry Howley's March 2007 Reason magazine classic on why you should be able to sell your own organs and tissues.

Link via the great Rational Review.

How Charlie Lynch Got a One-Year Sentence for a Crime That Injured No One

Last June, U.S. District Judge George Wu sentenced Charlie Lynch, former operator of a medical marijuana dispensary in Morro Bay, California, to one year and one day in prison. Yesterday Wu finally released the memo (PDF) that explains the reasoning behind the sentence. It shows a judge bending over backward to mitigate what he plainly thought was an unjust punishment for a man who strove to comply with state laws allowing patients to use cannabis as a medicine.

To declare Lynch eligible for the "safety valve" provision that let him escape a mandatory five-year sentence, Wu had to conclude that the defendant did not qualify as an "an organizer, leader, manager, or supervisor of others in the offense," despite the fact that Lynch founded Central Coast Compassionate Caregivers and ran it for a year, employing others to help supply marijuana to patients. Wu reasoned that the rationale for making leaders ineligible for the safety valve is that they generally pose a greater threat to the public than underlings or solitary offenders do, which was not true in this case. "Although Lynch did put together CCCC's operations, which had about ten employees," Wu writes, "given the way he ran the CCCC, Lynch did not present any great danger to the public and certainly no greater danger than any of his fellow participants in the CCCC."

And what was "the way he ran the CCCC"? Wu explains:

There can be no doubt that the present case falls outside of the heartland of typical marijuana distribution cases for a number of very obvious reasons including, but not limited to: 1) the passage of California's CUA [Compassionate Use Act] and MMPA [Medical Marijuana Program Act], which decriminalized the cultivation, possession and distribution of marijuana under state law to the extent and for the purposes described in those laws; 2) the objective of the distribution here was (at least in primary part, if not in total) to provide the marijuana for therapeutic reasons to persons with diagnosed medical needs pursuant to California state laws; 3) the Defendant's notifying governmental authorities (including certain law enforcement agencies) of his plans/activities prior to engaging in them; 4) the Defendant's operating publicly in an obvious and known location; 5) the extensive steps which Defendant took to minimize the criminal aspects of the CCCC ( by getting a business license for the marijuana distribution from the City of Morro Bay); and 6) the Defendant's maintaining copious records which completely delineated the details and extent of CCCC's operations, including the names and addresses of its vendors and customers, the amounts of marijuana purchased/distributed, etc.

Still, these factors could not get Lynch out of a one-year statutory minimum for providing more than five grams of marijuana to someone younger than 21 (as some of the patients served by CCCC were). Wu applied that sentence to each of the five counts on which Lynch was convicted but made the terms concurrent. Lynch is free pending an appeal.

From the facts described in Wu's memo, it is not at all clear that Lynch's operation violated state law, as the Justice Department claimed when it said prosecuting him was consistent with its new policy of restraint regarding medical marijuana providers. First, CCCC members designated the dispensary as their "primary caregiver," a status that allows one to grow and possess marijuana intended for a patient, and this was before the 2008 California Supreme Court ruling that said supplying marijuana was not enough to qualify for that label. Second, since Lynch himself was a patient with a doctor’s recommendation, as were most of his employees, the operation arguably qualified as a patient collective/cooperative, with the members who did not work there paying to cover expenses instead, as permitted by California Attorney General Jerry Brown’s guidelines for dispensaries. The guidelines also say dispensaries should not turn a profit, and Lynch said he never did, a claim the government's evidence did not contradict.

In addition to illustrating the unreliability of the president's promise to stop interfering with medical marijuana laws, Wu's memo underlines the general injustice of the drug laws, noting that "there was no evidence that anyone ever suffered any injury of any sort as a result of Lynch's running the CCCC." Wu concludes that "individuals such as Lynch are caught in the middle of the shifting positions of governmental authorities," and "much of the problems could be ameliorated…by the reclassification of marijuana from Schedule I," which would allow doctors to prescribe it. That step is by no means sufficient to address the injustice of punishing people for crimes that do not injure anyone, but it would be a start.

More on the Lynch case (including Reason.tv coverage) here. His supporters have a website here. Brian Doherty recently considered the ambiguities of California's medical marijuana laws in his Reason cover story about L.A.'s dispensaries.

Cape Wind Approved: Ted Kennedy Spinning in His Grave

After nine years of analysis, the Cape Wind offshore project, located in the viewshed of the Kennedy family "compound" at Hyannisport, Massachusetts, has been approved by Secretary of the Interior Ken Salazar. The Washington Post reports NIMBY lawsuits already teeing up:

The Cape Wind project remains hugely controversial, and a coalition of opponents announced Wednesday they would challenge the decision in court. Salazar said he was "confident" the decision, which has come under scrutiny by 17 state and federal agencies, would be upheld.

"While the Obama administration today dealt a blow to all of us who care deeply about preserving our most precious natural treasures, this fight is not over," said Audra Parker, president of the Alliance to Protect Nantucket Sound. "Litigation remains the option of last resort. However, when the federal government is intent on trampling the rights of Native Americans and the people of Cape Cod, we must act. We will not stand by and allow our treasured public lands to be marred forever by a corporate giveaway to private industrial energy developers."

Michael Fry, conservation advocacy director for the American Bird Conservancy, said the project could "reduce prime offshore sea-duck foraging habitat" and data suggest "that loons will likely abandon the area for years to come, and there may be significant impacts to endangered Roseate Terns, which breed in nearby Buzzard's Bay and feed in Nantucket Sound."

Whole Post article here.

Tonya Craft Trial Update: How 'Normal' Becomes 'Very Suspicious'

Yesterday a defense expert effectively rebutted testimony about physical evidence against Tonya Craft, the Chickamauga, Georgia, kindergarten teacher accused of sexually abusing three girls. Based on photographs taken during examinations of the girls, who supposedly were molested during sleepovers at Craft’s house, Nancy Fajman, an associate professor of pediatrics at Emory University, said she saw no evidence of abuse. This is a summary of her testimony from WRCB, the NBC affiliate in Chattanooga:

State expert said two medical exams were "suspicious." Dr Fajman says results of child sex exams are either "normal" or "abnormal."…

Exam state nurse found "very suspicious" is not suspicious at all to Dr. Fajman. She says it's a "normal" result.

In other words, according to Fajman, the state’s witness not only was mistaken; she did not even use the right terminology. WRCB’s report says Fajman “comes across as authoritative, knowledgeable about child sex exams,” and the prosecution did nothing to undermine her credibility during cross-examination. Her testimony seems devastating to the prosecution’s case, especially since one of the alleged victims claimed Craft had put her entire hand inside her, which presumably would have left a detectable injury.

Without physical evidence, the prosecution's case relies on the spotty, inconsistent, self-contradictory, and at times highly implausible testimony of three little girls who show signs of being coaxed or pressured to falsely recall abuse. (Go here for my previous posts on the subject.) Testimony during the last week provided further evidence along those lines. This is from the Chattanooga Times Free Press:

The detective [Tim Deal, the lead investigator] also testified that he conducted both interviews with the second alleged child victim.

In the first interview on May 27, 2008, the child didn’t report any incident involving Ms. Craft touching her inappropriately. It was only when the detective interviewed her a second time in April 2009 that she told him she had been molested by Ms. Craft.

Questioned by Assistant District Attorney Len Gregor after the videos were shown, the detective said that sometimes children don’t reveal sexual abuse right away.

Here is WRCB's description of a videotaped interview with the first child witness, the actress who played an abused girl in a movie (emphasis added):

Girl says Tonya Craft used her fist to hit her for being "bad." First we've heard of Craft hitting girl…

Girl says Tonya Craft would "always" hit her. When asked if it ever left a mark she said, "ummmm, I don't remember."…

This taped interview was 11 months after the first interview with same girl. Girl disclosing a lot that wasn't in 1st interview.

The prosecution argues that gradual recovery of traumatic memories is common. But the contradictions and evolving accounts are also what you would expect if memories of abuse were false, planted in the children’s minds by suggestive questioning, rumors, and/or coaching, as in the McMartin Preschool case and other molestation panics.

The defense is making the case that the accusations against Craft were instigated by adults with grudges, and there is a tangle of divorces, affairs, and soured relationships in Craft's social circle that I will not attempt to unravel. But according to testimony on Monday from Craft's ex-husband, the allegation that Craft abused her own daughter first came from his new wife, who herself had been reported to child services by Craft for regularly showering with the girl (which she admitted doing). During a videotaped interview, the girl said, "My mom [the stepmother, apparently] told me which is which and where they touched me."

The defense has presented witnesses who know Craft well and say they never saw signs of abuse, believe she is innocent, and would continue to trust her with their children. One woman says the mother of the child actress pressured her to report that her own daughter was abused and that police pressed for a second interview after her daughter failed to report abuse during the first one. Other parents who saw no indication their children were abused said police had no interest in talking to them.

The prosecution, meanwhile, is trying to portray Craft as a heavy-drinking, bisexual slut through insinuating questions and hearsay about such irrelevant points as her alleged interest in girl-on-girl porn. I'm hoping the jury sees through this misdirection, because now that the prosecution has rested its case there is no question that it failed to meet its burden of proof.

New at Reason: Peter Suderman on Saving the Internet from the FCC

The Internet is in trouble. And it's all George W. Bush's fault. That's what Net neutrality proponents would have the public believe, anyway. On April 6, a federal appeals court nullified the FCC's censure of Internet service provider Comcast for degrading the bandwidth of some users of the BitTorrent file-sharing protocol. Since then, neutrality nuts have worked themselves into a minor panic. Supporters now say it's up to the FCC to reregulate what the Bush administration deregulated. This would entail changing the classification of broadband from an "information" service under Title I of the 1996 Communications Act to a "telecommunications" service under Title II. But as Associate Editor Peter Suderman writes, Bush isn't to blame—and it's not clear that the FCC actually has the authority to change broadband classification at all.

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Louis XIV's Dinner Vs. Yours

A snazzy little video promoting Matt Ridley's new book, The Rational Optimist, and explaining why your dinner choices are better than Louis XIV's meal plan:

Ridley's The Red Queen: Sex and the Evolution of Human Nature and The Origins of Virtue: Human Instincts and the Evolution of Cooperation are both great primers on complex, controversial subjects. The Rational Optimist promises to be similarly excellent on the subjects of exchange and innovation.

Stay tuned for an essay adapted from the book in the upcoming issue of Reason. Or ask Ridley for all the details in person this winter on the first-ever Reason cruise!

Via Russ Roberts.

Barone: The Election's Winged Chariot Hurries Near Obama

In the Washington Ex, Michael Barone takes a look at President Obama's prioritizing of policy issues vs. strictly election-strategizing issues, and says he's a lot more interested in the latter. This is becoming more clear as the mid-term elections approach and the Democrats' popularity plummets, but Barone explains that Obama's habit of paying "curiously little attention to the substance of the legislation" goes back to his second month in office:

One-third of the stimulus money went to state and local governments -- i.e., to public employee unions -- which helped ensure that the bill would not hold down unemployment to the promised 8 percent. And the health care bill, we now learn from Health and Human Services Department actuaries, is going to increase spending rather than hold it down.

Now Obama seems to be pivoting toward legislative priorities chosen not for policy but for political reasons.

The pivot is apparent from how he has depicted the financial regulation bill before the Senate. No one disputes that some changes in financial regulation are needed. But the Democratic bill Obama is supporting would, contrary to his sound bites, enshrine rather than end the too-big-to-fail status of the giant Wall Street firms.

The bill does little to change the regulation of the ratings agencies that gave AAA imprimaturs to mortgage-backed securities that turned out to be worthless. And it does not explicitly impose higher capital requirements to clamp down on the huge leverage that made so many Wall Street firms billions and then caused them to crash and seek government bailouts.

Democrats need Republican votes to pass a bill, but have refused to make compromises so they can provoke roll call votes that they can use during campaign season to argue that Republicans are soft on Wall Street. Politics over policy.

Whole story. Although Obama's electioneering is also taking in immigration and an effort to reunite the team of "young people, African-Americans, Latinos and women who powered our victory," Barone notes that using policy debates as election-year fodder is not the same as winning elections:

Gallup reports that "very enthusiastic" voters favor Republicans 57 percent to 37 percent in congressional elections. Will attacks on Wall Street, deep-sixing the cap-and-trade bill and getting beaten on immigration change that? The Obama Democrats hope so. But I wouldn't bet heavily on it.

Back in September, Jesse Walker noted that we might be better off if Obama were the firebreathing, red-diapered, bomb-throwing radical his enemies say he is, rather than the entirely political and establishmentarian character he actually is. Obama's doubling down on Bush-era protections for Wall Street has already been covered extensively. For an extended look at the president's continuation of his predecessor's policies on national security, domestic surveillance and indefinite detention, dig the June issue of Reason, on newsstands everywhere.

"The Lighthouse in Economics" Revisited

A privatization you may have missed:

The Coast Guard once owned and maintained all of the nation's lighthouses, but after Sept. 11, when the agency's mission shifted to homeland security, it had neither the funds nor the inclination to keep up these weather-beaten structures. So it began selling them. Most of the lighthouses on [Chesapeake Bay sailor Mike] Richards' tour are privately owned, though Coast Guard officers can stop by any time.

Obama: We Need a Commission Because You Can't Trust Slippery Politicians Like Me to Tell You the Truth

Yesterday President Obama opened the first meeting of his National Commission on Fiscal Responsibility and Reform by decrying "the norm around Washington...when it comes to our finances": Politicians "tell people want they want to hear instead of what they need to know." For too long, Obama said, "folks in Washington [have] deferred politically difficult decisions and avoided telling hard truths about the nature of the problem." He then proceeded to exemplify this phenomenon:

We've had to take emergency measures to prevent the recession from becoming another depression....But the emergency measures have added about $1 trillion to the deficit over the next 10 years. As a result, even as we take these necessary steps in the short term, we have an obligation to future generations to address our long-term, structural deficits, which threaten to hobble our economy and leave our children and grandchildren with a mountain of debt.

In other words, spend now, save later. Toward that end, Obama's offers a gesture of bad faith:

We've been scouring the budget, line by line, identifying more than $20 billion in savings this year alone.

This year alone! This year, when the federal government will spend something like $3.6 trillion, $20 billion is not even big enough to be a rounding error. If that's all that line-by-line scouring yields, we are well and truly screwed. Speaking of which:

I kept my promise to pass a health reform bill without adding a dime to the deficit. In fact, by attacking waste and fraud and promoting better care, reform is expected to bring down our deficits by more than $1 trillion over the next two decades.

Did anyone tell the president that his health care bill passed, so he can stop lying about its fiscal impact? Perhaps he is prepared to defend the literal truth of this oft-repeated statement: Health care reform will not add a single dime to the deficit; once the implausible savings, hidden costs, and overly optimistic projections are taken into account, it will add many, many dimes.

In any event, Obama inadvertently illustrated the argument for the National Commission on Fiscal Responsibility and Reform: We can't trust slippery politicians like him to tell us the truth about the nation's finances, but we can trust his hand-picked advisers (because they're former politicians). Assuming that's true, their recommendations still have to be implemented by those mendacious spendthrifts in Congress and the White House. And since accepting the commission's advice is completely optional, they cannot plausibly deflect responsibility by saying their hands were tied. That does not stop Obama from trying:

It's important that we not restrict the review or the recommendations that this commission comes up with in any way. Everything has to be on the table. And I just met briefly with the commission and said the same thing to them. Of course, this means that all of you, our friends in the media, will ask me and others once a week or once a day about what we’re willing to rule out or rule in when it comes to the recommendations of the commission. That's an old Washington game and it's one that has made it all but impossible in the past for people to sit down and have an honest discussion about putting our country on a more secure fiscal footing.

So I want to deliver this message today: We're not playing that game. I'm not going to say what's in. I'm not going to say what's out. I want this commission to be free to do its work.

As Americans for Tax Reform notes, this is Obama's way of pre-emptively renouncing his pledge not to raise taxes on households earning less than $250,000 a year (a pledge he already has broken repeatedly, while refusing to admit it). The president apparently plans to pretend that he had to break his tax pledge because the panel of advisers he appointed suggested that he do so. Yet he insists he wants "an honest discussion about putting our country on a more secure fiscal footing." OK. You go first.

New at Reason: David Harsanyi on the Democrats' Stale Populist Rhetoric

According to Senate Majority Leader Harry Reid, "A party that stands with Wall Street is a party that stands against families and against fairness." But as David Harsanyi writes, what Reid's words reveal is an ideological disposition that is wholly unconcerned with creating a healthier Wall Street or a Wall Street scrubbed of crony capitalism and government-produced moral hazard.

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Biotech Crops Benefit the Environment

Several new reports being issued today by the U.K.-based agriculture consultancy, PG Economics highlight the benefits of biotech crops to farmers, consumers and the natural environment. The press release accompanying the new studies notes:

Biotech crops have reduced pesticide spraying (1996-2008) by 352 million kg (-8.4%) and as a result decreased the environmental impact associated with herbicide and insecticide use on the area planted to biotech crops by 16.3%;

Herbicide tolerant biotech crops have facilitated the adoption of no/reduced tillage production systems in many regions, especially South America.  This has made important contributions to reducing soil erosion and improving soil moisture levels;

There have been substantial net economic benefits at the farm level amounting to $9.4 billion in 2008 and $52 billion for the thirteen year period.   The farm income gain in 2008 is equivalent to adding 3.65% to the value of global production of the four main biotech crops of soybeans, corn, canola and cotton;

Of the total farm income benefit, 50.5% ($26.25 billion) has been due to yield gains, with the balance arising from reductions in the cost of production.  Two thirds of the yield gain derive from adoption of insect resistant crops and the balance from herbicide tolerant crops;  ...

Since 1996, biotech traits have added 74 million tonnes and 79.7 million tonnes respectively to global production of soybeans and corn.  The technology has also contributed an extra 8.6 million tonnes of cotton lint and 4.8 million tonnes of canola;  

If GM technology had not been available to the (13.3 million) farmers using the technology in 2008,  maintaining global production levels at the 2008 levels would have required additional plantings of 4.6 million ha of soybeans, 3.5 million ha of corn, 2.2 million ha of cotton and 0.3 million ha of canola (emphasis added).  This total area requirement is equivalent to about 6% of the arable land in the US, or 21% of the arable land in Brazil; 

World prices of corn, soybeans and canola would probably be respectively 5.8%, 9.6% and 3.8% higher than 2007 baseline levels if the technology was no longer available to farmers.  Prices of key derivatives (eg, soymeal) would also probably be 5% to 9% higher and prices of related cereals and oilseeds (eg, wheat, barley, sunflower) would be 3% to 4% higher;

Reducing pesticide use, soil erosion, and land use -- what's not to like about biotech crops? Go here to the PG Economics site to see the press release and the related studies.

L.A. Times: "Thank you, Arizona"

The L.A. Times weighs in on Arizona’s controversial new immigration law:

Thank you, Arizona.

Despite our strong condemnation of a new law that will likely promote racial profiling of Latinos in your state, we must acknowledge that you have accomplished what many others — including senators, committed activists and a willing president — have failed to achieve. You put immigration back on the national agenda.

The Cato Institute’s Daniel Griswold makes a similar point:

A silver lining of the Arizona immigration law is that is has turned up the heat on Washington to re-examine federal policy. As I’ve made the rounds of talk radio shows today, one of the questions that keeps coming up is just what changes should be made in federal law to tackle illegal immigration. Glad you asked.

In brief, the single most effective change would be to expand opportunities for legal immigration, including for low-skilled workers who make up the large majority of the illegal population.

Read Reason's immigration coverage here.

What the Administration Knew About the Costs of ObamaCare

On Monday, The Prowler, a pseudonymous writer for The American Spectator, posted an item quoting an anonymous source at the Department of Health and Human Services saying the agency had delayed the release of a report by Medicare actuary Richard Foster noting that overall medical spending would rise under the health reform law.

The HHS has since denied that this is true, telling Post reporter (and Reason contributing editor) Dave Weigel that the article is "completely inaccurate."

The Prowler says his sources are standing by the following facts:

Prior to final passage of the health care reform bill on Sunday, March 21, the Office of the Actuary had provided senior leaders inside HHS with data that indicated the then-bill would increase the cost of health care and impose higher costs on Americans. And that data was not provided to anyone publicly until after the legislation was passed.

It's impossible to know exactly what happened without knowing who the sources are, but it sounds like some data was available prior to passage, though no formal report was ready. The follow-up item also carefully declines to stand by the initial assertion that a report was intentionally suppressed or delayed—saying only that none of the relevant data was released publicly until after the law's passage.

The strange thing about all this is that the report didn't actually indicate much that's genuinely new: A similar report by the CMS actuary on a prior version of the bill was released in November, and it, too, noted that health care costs would go up under the bill, that seniors might see Medicare service cuts, and that the increased demand for care could result in a shortage of care providers. That report might have been glossed over somewhat, but it certainly wasn't suppressed.

On the other hand, the existence of the earlier report means that even if HHS leadership didn't actively attempt to delay the release of the new analysis, they—as did anyone else who was paying attention—knew well in advance of the law's passage that CMS was projecting that ObamaCare would drive overall spending upwards.

The Stab In the Back Theory of German Fiscal Responsibility

Watching German Chancellor Angela Merkel spend months fending off demands that she force her relatively prudent citizens to pay for profligate Greece has been like a doomed love affair. It's been wonderful to experience, but you just know it's going to end in betrayal and heartbreak.

The great disappointment may be coming in less than an hour, as Merkel is scheduled to make some major announcement on the Greek crisis.

But sooner or later, Merkel will fold. The pressure of the macroeconomic consensus is just too great: Greece is paying interest rates almost as high as it deserves to pay on its bonds; the overvalued stock market is starting to lose steam; and in that great nonsensical epidemic metaphor journos love to use about fiscal crises, we're told that the trouble is now "spreading" to the other PIIGS countries.

Meanwhile, for a perfect example of the Keynesian logic that will sooner or later force a tragic end to this tale, read this Spiegel article by Gustav A. Horn, director of the Macroeconomic Policy Institute (IMK) at Germany's Hans-Böckler Foundation:

On the one side there are the Greeks, who clearly still do not have their financial statistics under control and who produce one false report after another about the country's budget deficit. On the other side are the Germans, who delight in hindering a rapid and unambiguous European response to the Greek crisis...

These observers base their verbal radicalism on the noble economic argument that Greece needs to be made "fit for the financial markets" once again. Another, less sophisticated, argument goes that the vast majority of Germans are unwilling, after years of limiting their own consumption, to make financial sacrifices to help out Greece.

Both Greece's calculation errors and the diva-like reluctance of the German government to help Athens are nothing more than an invitation to speculators to bet on the demise of the southern European country. This also explains why risk premiums on Greek government bonds have shot up to previously unimagined heights in recent days...

It is a fact that speculators have access to no more information about Greece than the economic experts in Europe's governments. There are, however, many market players such as hedge funds which derive profits from uncertain events. The more chaotic things are, the more they like it. Their biggest enemy is political clarity, which is why they are delighted when politicians indulge in scaremongering. In the case of Greece, this scaremongering has succeeded extremely well, as the skyrocketing risk premiums show.

The role of rating agencies can also not be forgotten. It was their downgrading of Greece's creditworthiness that triggered waves of speculation....

The populist argument that the majority of the populace is opposed to financial backing for Greece, is also attributable to the German government...

The German government's submissiveness to the financial markets and its cowardice towards the tabloid press (the mass circulation daily Bild, for example, wrote in a headline: "You Greeks Aren't Getting a Thing from Us") could get very expensive for taxpayers. Now the aid will actually have to be paid out. And the fuss the German government continues to make won't change a thing.

So, the "speculators" are not people who want to make money by guessing correctly about economic events (an easy guess in the case of Greece, which will always go deeper into debt and demand more entitlements). Instead, they are agents of chaos seeking to undo the consensus of politicians.

Note also that the consensus of the politicians has nothing to do with the views of the people who elected them. The Greek bailout is overwhelmingly unpopular in France and Germany -- a fact that has nothing to do with politicians or "mass circulation" dailies but with people resenting getting ripped off.

And ripped off to pay for a country that Horn himself acknowledges has repeatedly violated the EU's rules, lied about it in reports, and run up levels of debt and deficit spending that -- under the EU's own charter -- mean it should be expelled from the Euro zone. Nor does any of this behavior have anything to do with the downgrading of Greece's credit status. That's just the fault of the evil rating agencies.

Germany's no-more-Frau-Neissguy talk has been fun to watch, but when the Greek aid package eventually comes through, just remember how little effect the advanced countries have had with their calls for fiscal responsibility. Greek public employees have been on strike since Thursday, to protest the government's proposed austerity measures.

When Will Feds Start Listening? New ABC Poll Finds 56% - constant for 25 years! - Want Smaller Gov't That Costs, Does Less

Via HotAir's Ed Morrissey.

In another vulnerability for the president, Americans by 56-40 percent said they preferred smaller government with fewer services -- almost exactly the average the past 26 years -- but by a vast 77-15 percent thought Obama prefers the opposite, larger government with more services. That, plus concerns about the deficit, seem ripe for a 2010 campaign theme for the Republican Party.

If big government looks like a fruitful GOP theme, however, Obama, and by extension his party, have ammunition of their own. For one, many more Americans chiefly blamed the economy and the federal deficit alike on George W. Bush rather than on Obama, by 59-25 percent on the economy, by an almost identical 60-22 percent on the deficit.

We've said it before: The 21st century has failed to deliver on hovercrafts, jet packs, and smaller government! About the only thing it has delivered on is an increasing number of balding men with giant oversized heads (and even then, where are the silver jumpsuits?).

Read the latest ABC/Wash Post poll and, to paraphrase Jefferson, tremble when you realize your accountant is just. The short version? Obama sucks but he's better than the GOP was or are likely to be.

Is it time for a third party? No, it's way past time.

Reason Morning Links: Fiscal Commission Meets, Chavez Tweets, Voinovich Retreats

New at Reason: Jacob Sullum on The New York Times and the First Amendment

In recent cases, Senior Editor Jacob Sullum notes, The New York Times has been an inconsistent defender of First Amendment rights. Sullum says the distinctions drawn by the Times are hard to justify on constitutional grounds but make more sense if you assume the paper's editorialists are not eager to defend people's rights when they have trouble identifying with them.

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Reason.tv: Peter Diamandis on the X PRIZE, Private Space Flight, Risk, & More

His Zero Gravity Corporation lets the public experience weightlessness during parabolic flight, and his company Space Adventures has taken four tourists to the International Space Station. But space entrepreneur Peter Diamandis may be best known as the Chairman and CEO of the X PRIZE Foundation, which in 2004 awarded the $10 million Ansari X PRIZE to aviation icon Burt Rutan, whose SpaceShipOne was the first private, manned spacecraft to reach suborbital space twice within two weeks.

Diamandis is on a mission to open space for all humanity, and he embraces the risk inherent to such an undertaking. "A true breakthrough requires tremendous levels of risk," says Diamandis. "It's really in the entrepreneurial sector that people are willing to risk their lives, risk their fortunes, their reputations, to do something they fundamentally believe they can do."

Diamandis is now developing X PRIZES in a variety of fields, including education and medicine.

Produced and interviewed by Ted Balaker; filmed by Hawk Jensen and Alex Manning; edited by Jensen and Paul Detrick.

Approximately 10 minutes long. 

Scroll down for downloadable iPod, HD, and audio versions.

Subscribe to Reason.tv's YouTube page and receive automatic notification when new material goes live. 

Successful, Schmuccessful, As Long As It Costs Too Much

I'm not the only one taking issue with The New York Times' wording today. Bill McBride at Calculated Risk, who is usually extremely circumspect about second-guessing his citations, corrects some language in the Times article "Home Tax Credit Called Successful, but Costly."

There is no question this program was very costly. And why is the Treasury confusing activity with accomplishment? Sure sales briefly surged, but were new households formed? How many new jobs were created?


[T]his shows two failures of the tax credit: 1) the high cost, and 2) it was just moving people from apartments to homes and didn't reduce the excess housing inventory (yes, rentals count as housing inventory too).


[T]his has been the policy - support asset prices by limiting the supply (all the foreclosure delays), and pushing demand (low mortgage rates and the tax credit). This has helped the banks significantly, and [Economy.com's Mark] Zandi argues this has boosted confidence. Maybe ... but I'm not convinced that supporting house prices above the market clearing level to help the banks and boost consumer confidence makes sense.

Note that the Times' true-but-misleading headline comes from the copy editors, not from reporter David Kocieniewski, and that Calculated Risk's clarifications are of claims made by the Treasury Department. The actual article is a would-be-funny-if-it-weren't-true tour of a program that essentially gave $8,000 tax breaks to a bunch of people who would have bought houses anyway. And while Kocieniewski does track down a couple of Purdue students who made their purchasing decision based on the credit, the story also details how the program gave a boost to people who didn't even buy a house:

After the number of homes sold in January and February dropped to record lows, sales rose 6.8 percent in March from a year earlier, as buyers raced to cash in before the credit expired. Nearly half of all March home sales involved first-time buyers, according to the National Association of Realtors.

“It’s true that a lot of people who got the credit might have bought without it, but they might have bought in 2012 or 2013,” said Senator Johnny Isakson, a Republican from Georgia, who worked for 30 years as an agent. “This got them to buy in 2009 and 2010, when we needed to shore things up.”

But the program was open to widespread misuse. The first two phases of the credit did not require taxpayers to prove that they had actually bought a house. The Treasury’s inspector general found in October 2009 that the I.R.S. had allowed $139 million in credits to people who had not yet bought homes, and $479 million to taxpayers who were not first-time buyers.

In a sane world, the first-time home buyer tax credit would be a joke, and the tales of waste, fraud and four-year-olds buying homes detailed in this report [pdf] by the Treasury's own inspector general would be told around campfires, by people who are living outdoors because they're waiting for the real estate market to hit bottom sometime in the 24th century.

Reason.tv: DJ Carl Levin's Really Sh*tty Deal

Nobody busts a better beat than Michigan's Senior Senator, a.k.a. DJ Carl Levin, especially when he's grilling Goldman Sachs' big men like a Great Lakes perch. But be warned: This track's got more sh*t going on than Robert Byrd's underpants.

Check it out, why dontcha, and get your faith back in the Fedz. Or not.

Approx. 30 seconds.

Reason on the Radio: Radley Balko To Discuss Obesity, Fast Food, and Advertising on the CBC

Tomorrow at 8 am ET on the CBC, Reason Senior Editor Radley Balko will discuss childhood obesity, fast food, and Santa Clara County, California's decision to ban restuarants from giving out toys with kids' meals.

Listen here.

Where Do They Learn to Write Like This?

"At malls from New Jersey to California, shoppers are snapping up electronics and furniture, as fears of joblessness yield to exuberance over rising stock prices. Tractor trailers and railroad cars haul swelling quantities of goods through transportation corridors, generating paychecks for truckers and repair crews."

That's Los Tiempos de Nueva York's Peter S. Goodman, describing an economic recovery that is showering "golden dust" in "clouds" as "piles of grain" go "spilling into the bellies of giant tankers" from coast to coast. (Read: Goodman had help from stringers in both New Jersey and California.)

As Georges Clemenceau might have said had he lived long enough to see the following MGM newsreel, pro-recovery journalism is to journalism what military music is to music:


So it goes with Goodman's A-1 story. The actual content of the piece is one long to-be-sure paragraph, and as such it makes some useful points that you have read here many times: Much or all of the uptick in spending can be accounted for by people blowing through their savings. The job market "remains weak." The growth rate is about half what it normally is after a recession. And measures of consumer sentiment (a mix of voodoo and hoodoo that I will not defend, but still) are way down, suggesting that America is still lacking the "confidence" that Walter Lantz (the Neil Bush of golden age animation moguls) suggested the country needed in this Oswald the Lucky Rabbit cartoon that is as deceptive about economics as it is about avian anatomy:

You can wash out the taste of that one with a slightly earlier Alice cartoon from Walt Disney, who knew a thing or two about outsmarting agitators and collectivists:

Sadly, there is no such Listerine (or its more reasonably priced store-brand equivalent) for Goodman's purple mountains of majestic prose, in which everybody's feeling "robust" or "bolstered" or "emboldened" or all three.

Consider the discussion of the $800 billion stimulus package, which in Goodman's telling "appears" to have goosed many of the positive indicators he refers to. Now the stimulus may provide the kind of boost that shows up at the intentionally hard to measure level of GDP growth. But unless there's a major iPad component in the ARRA, stimulation is much less apparent at the practical level Goodman is treating here. The National Association for Business Economics, which is optimistic about the recovery, nevertheless notes that a whopping 68 percent of its members believe the stimulus had no impact on job growth. Clearly, these private-sector meanies are shirking their patriotic duty to give a man a job:


On other matters of government intervention, Goodman is even more coy. He notes an uptick in real estate activity, but you will search in vain for any mention of the soon-to-expire home buyer tax credit, the Federal Reserve's negative-interest rate freebasing, or the continuing slide in house prices. Nor will you find the word "inflation" in Goodman's broad vocabulary, though food prices are shooting up at a rate not seen since Ronald Reagan's first term. See how your bolstered and emboldened shoppers like paying half again as much for vegetables with the savings they're not accumulating from the jobs they don't have.

But that's the nut: Though Goodman and his three helpers fill the story with types (Eager Shoppers, Confident Shopkeepers and Optimistic Economists show up in droves) there are no actual characters in this story. Refer to that opening line: Do you know many people, or any people, who are saying to themselves, "I was fearing joblessness, but now I'm exuberant over rising stock prices"?

The recession may or may not be over. But boosterism like this demonstrates something more permanent. Commenters on the Depression-era economic propaganda posted above (which I hope you have enjoyed, and for most of which I have to thank Matt Welch) are fond of noting that today's propaganda is more sophisticated than yesterday's. But it's really not. They just had better choreography in the old days:

New at Reason: Cathy Young on Racism and the Tea Party Movement

Ever since the "Tea Parties" gained national attention, the debate has raged on whether they are a grass-roots protest movement in the proud tradition of American dissent, or a hysterical mob driven by fear, intolerance, and selfishness. Recently, two much-discussed surveys—a CBS/New York Times poll and a multi-state University of Washington poll—have been bandied about as proof that the leftist caricatures of the Tea Partiers as mean-spirited rich white bigots are accurate. Yet as Cathy Young reports, a look at the data suggests that this interpretation is highly skewed by political bias.

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If I Lived in Arizona, They Could Seize My Car

Scanning quickly through the text of Arizona's new immigration law to see how many provisions I have already violated in various jurisdictions, I came upon this:

A.  It is unlawful for a person to:

1.  Transport or move or attempt to transport or move an alien in this state, in furtherance of the illegal presence of the alien in the United States, in a means of transportation if the person knows or recklessly disregards the fact that the alien has come to, has entered or remains in the United States in violation of law. [...]

B.  A means of transportation that is used in the commission of a violation of this section is subject to mandatory vehicle immobilization or impoundment pursuant to section 28-3511.

Coulda lost a lot of crappy cars through that one.

I have also "knowingly employ[ed] an unauthorized alien," and "intentionally employ[ed] unauthorized aliens" (or at least, I had a pretty good idea that the dudes in front of Home Depot had a non-trivial chance of being "unauthorized"). Speaking of which, "unauthorized" is my new favorite illegal/undocumented term of art.

The Arizona law also goes specifically after the Home Depot effect, prohibiting "a person who is unlawfully present in the United States and who is an unauthorized alien to knowingly apply for work, solicit work in a public place or perform work as an employee or independent contractor in this state." Those of us on the demand side, however, are merely forbidden "to hire or hire and pick up passengers for work at a different location if the motor vehicle blocks or impedes the normal movement of traffic," though one could argue that any temp-worker location by definition places the burden of proof on employers to demonstrate that the hired help has the right papers.

Read the whole law, and confess your crimes!

I copped to being both an illegal immigrant and employer thereof in our October 2008 issue, where you can also find the following relevant pieces:

* "The One Man Wall: How a single Arizona legislator's obsession has changed immigration policy for the worse," by Kerry Howley.

* "Get in Line! Will Americans have to prove their right to work via an error-plagued database?", by Kerry Howley.

* "What Part of Legal Immigration Don't You Understand?", by Shikha Dalmia, Mike Flynn, and Terry Colon.

* "Who Killed Real ID? An unlikely coalition wins a post-9/11 victory for civil liberties," by David Weigel. Alas, this last one is feeling more premature by the minute.

Health Care Cost Control? Don't Count On It.

Remember all those cost controls that were supposed to be in the health care bill? The bill that just last month President Obama said was supposed to be about "bringing down the cost of health care for families and businesses and for the federal government?"

Yeah, well, not so much. A.P. reports:

Insurance premiums are likely to keep going up over the next few years. Experts predict that the law's early benefits—such as expanded coverage for children and young adults—could nudge rates a little higher than would otherwise have been the case. Also, insurers and medical providers could try to raise their prices ahead of big shifts set for 2014.

Under the 10-year, $1 trillion plan, 2014 is when competitive insurance markets for individuals and small businesses are expected to open, and tax credits start flowing to help millions of middle-class households now uninsured. Medicaid will expand and pick up millions of low-income people. Most Americans would be required to carry health insurance, except in cases of financial hardship. Insurers no longer could turn away those in poor health.

More than 30 million previously uninsured people would gain coverage quickly—and they'll start going to the doctor for care previously postponed. Increased demand will push up health care spending, putting more pressure on premiums.

The cost controls in the bill are unlikely to provide much of a counterweight. Democrats scrambling to line up votes for the final bill weakened a provision that would have enforced austerity through a hefty tax on high-cost employer coverage.

Other savings in the law—mainly Medicare cuts—may prove politically unsustainable, according to the government's own experts. 

You can't say this is suprising; all along, the strategy on health care reform was "buy now, pay later." Well, we went ahead and bought in. And pretty soon we're going to pay up.

Joe Camel Eats a Happy Meal...in Jail!

First they came for Joe Camel, and I didn't speak up because I wasn't a camel. Or a smoker. Or whatever.

But now they're coming for the plastic crap in McDonald's Happy Meals. It was inevitable, really. The notion of sin being marketed to kids is a powerful one: There are already bans on flavored cigarettes "to deter youths." Likewise on candy cigs, and cartoon cigarette mascots.

So it was only a matter of time before someone applied the principle to fast food. Safe money was on California for this one, and lo and behold our sad tale takes place in Santa Clara county. And what better place to start than with a marketing gimmick that is, for once, actually aimed at kids: The toy in the Happy Meal.

Convinced that Happy Meals and other food promotions aimed at children could make kids fat as well as happy, county officials in Silicon Valley are poised to outlaw the little toys that often come with high-calorie offerings....

Believed to be the first of its kind in the nation, the proposal would forbid the inclusion of a toy in any restaurant meal that has more than 485 calories, more than 600 mg of salt or high amounts of sugar or fat. In the case of McDonald's, the limits would include all of the chain's Happy Meals—even those that include apple sticks instead of French fries.

And the justification? Health care costs, of course:

[Ken Yeager, the Santa Clara County supervisor who is behind the effort,] knows that even if the board passes his proposal, its effect would be small. Even so, he says, it's worth it.

"We're responsible for paying for healthcare in the whole county," Yeager said. "We pay close to $2 billion annually on healthcare, and the costs have done nothing but rise." A big part of the increase, he said, is costs related to obesity.

Government health care: Taking toys from children.

New at Reason: Ronald Bailey on Peak Everything

Ever heard of peak lithium? Peak neodymium? Or peak phosphorus? Like peak oil enthusiasts, some analysts are predicting that the imminent depletion of these non-renewable resources pose big challenges to future economic growth. Reason Science Correspondent Ronald Bailey takes a look and finds that increasing scientific knowledge and technological innovation will likely overcome any limitations to economic growth posed by the depletion of non-renewable resources.

View this article

Blame Hollywood For Underage Drinking?

Business Week reports on a study that names "adult" behavior on the big screen as a culprit in teen drinking:

Children who aren't allowed to watch R-rated movies are much less likely to start drinking alcohol at an early age, a new study suggests.

Researchers questioned nearly 3,600 middle-school children in New England and followed-up about two years later. In that time, 3 percent of the kids who said their parents never allowed them to watch R-rated movies said they had started drinking alcohol, compared with 19 percent of those who were sometimes allowed to watch R-rated movies and 25 percent of those who said they were allowed to watch such movies "all the time."

...Depictions of alcohol consumption appear in about 90 percent of R-rated movies, Sargent said, which may be one reason why children who see such movies are more likely to start drinking at a young age. But he noted that previous studies have suggested that children who watch R-rated movies become more prone to "sensation seeking" and "risk taking."

"We think seeing the adult content actually changes their personality," he added.

Well, that's one theory, but it's not a very good one. Rather than reaching for the dubious big-bad-media-is-warping-their-psyches explanation, researchers might consider the obvious: Children are influenced by their parents. Doesn't it seem far more likely that children raised in permissive households—for example, those in which they are allowed to watch R-rated movies earlier—are more likely to have more lenient parents (the kind who might be less worried about underage drinking) and/or less supervision (giving the kids more opportunities to drink)? It also seems reasonable to assume that permissive parents are more likely to be drinkers themselves, which means a greater chance of access to alcohol in the home.

So you don't need to resort to shaky psychology to explain the link: Permissive parenting makes it easier for children to watch R-rated movies and easier for them to drink. The problem with this explanation, of course, is that it makes it much more difficult to continue obsessing about how Hollywood is corrupting our youth. 

One way to deal with under-21 drinking would be to legalize it for everyone who can vote and be drafted. Here's Reason.tv on why we ought to drop the drinking age to 18:

Arkansas, Indiana, Kansas, Louisiana, Nebraska, Oklahoma, Washington, West Virginia, and Wyoming

....states where you can marry your first cousin, but not your gay partner.

CORRECTION: As John Thacker points out in the comments, I didn't read the linked map correctly. Thes states in the headline don't allow gay marriage or first cousin marriage. Instead, they recognize marriages of first cousins performed in other states, but not the marriages of homosexuals performed in other states. The list of states where you can marry your first cousin but not your gay partner is actually even longer. It includes all of the states in bright red at the linked map except for Vermont, Massachusetts, New Hampshire, and Connecticut.

"What would Arizona’s revered libertarian icon, Barry Goldwater, say?"

Some sharp words about Arizona’s despicable new anti-immigration law from New York Times legal correspondent Linda Greenhouse:

I’m not going back to Arizona as long as it remains a police state, which is what the appalling anti-immigrant bill that Gov. Jan Brewer signed into law last week has turned it into.

What would Arizona’s revered libertarian icon, Barry Goldwater, say about a law that requires the police to demand proof of legal residency from any person with whom they have made “any lawful contact” and about whom they have “reasonable suspicion” that “the person is an alien who is unlawfully present in the United States?” Wasn’t the system of internal passports one of the most distasteful features of life in the Soviet Union and apartheid-era South Africa?

In light of Arizona Sen. John McCain's recent turnaround in favor of his state's harsh new law, it's also worth recalling this observation from McCain biographer and Reason Editor in Chief Matt Welch:

Goldwater was never really warm toward his replacement, which is something McCain, to this day in my judgment, has never properly understood.

The Plight of Baby Emma

The Washington Post's Jerry Markon reports on the sad, infuriating case of "Baby Emma," a little girl born in Woodbridge, Virginia last year. Emma's mother, 20-year-old Emily Colleen Fahland, didn't want the child, and gave her up to a Utah adoption agency. The child was adopted by Utah couple Thomas and Chandra Zarembinski, who have raised her for the last 14 months.

The problem is that Emma's father, 20-year-old John Wyatt, wanted to raise the child. Even Fahland concedes he has never wavered from that. The article mentions no allegation that Wyatt is abusive or ill-fit to be a parent. Yet when she went into labor Fahland cut off contact with Wyatt. The hospital where Emma was born refused to even tell Wyatt whether Fahland had been admitted. The next day, Fahland and the child moved to a motel, where she handed Emma off to the adoption agency.

After learning of Emma's birth (from his lawyer), Wyatt filed custody papers within the time allotted to him by Virginia law. He also filed five days before the Zermbinskis filed adoption papers. That didn't matter. A Utah court, citing that state's adoption laws that favor married couples over single parents, simply ignored a Virginia court's ruling that Wyatt be given custody of his child. Now the Zarembinskis' lawyer argues—apparently with a straight face—that it's in Emma's best interest to stay with the couple, because they "are the only parents this child has ever known."

It isn't clear from the article if the Zarembinskis definitely knew before they adopted Emma that the child's father was claiming custody. But they certainly knew shortly after, and they continued to fight to keep her from her biological parent anyway. It's hard to feel any pity for them. A kidnapper could make the same argument their attorney is making, provided he was able to elude authorities for a sufficiently long period of time.

Speaking of which, I'm trying to figure out how Fahland—and possibly the Utah adoption agency—aren't guilty of kidnapping. I'll concede that I know very little about family law, and perhaps the law is as perverse here as it can be in other areas. But Wyatt is the child's father. Once Fahland gave up her custody rights, one would think that full custody rights reverted to Wyatt. From the article, Fahland and the adoption agency appear to have conspired to make the handoff before Wyatt was even aware his child had been born, and before he could prevent the adoption from happening. If the roles had been reversed, and Wyatt had swiped the kid out of the nursery and rushed her off to an out-of-state adoption agency to, say, prevent himself from having to pay child support, is there any doubt he'd be charged with kidnapping?

Strangely, New York Times "Motherlode" blogger Lisa Balkin presents this case as if it's ethically complicated, even implying that the child should remain with the Zarembinskis.

Who do you think should have custody of “Baby Emma”? The stable married couple who are, as their lawyer says, “the only parents this child has ever known,” or the single 21-year-old nightclub worker who has never seen her, though he certainly has tried?

I guess I'm not seeing the moral complexity, here. And I'm not sure what Wyatt's job or marital status have to do with his parental rights. The child should be returned to her father. Fahland and the adoption agency should pay Wyatt's legal bills. And in a just world, Fahland would be paying Wyatt child support for the next 18 years.

A Utah Court of Appeals will hear the case at the end of next month.

Nick Gillespie on WNYC's Soundcheck at 2PM ET, Discussing Arts Funding. Update: Now With More Nick-is-Like-Hitler Comments!

I'll be on Soundcheck, WNYC's radio show about music, discussing public funding of the arts in the midst of a recession.

Go here for more info, including how to listen via the Interwebs.

Update: Now with Hitler analogies, courtesy of listeners:

Nick's arguments were weak and his general way of expressing his ideas was particularly unpleasant. I wonder how he came to form such distorted views of the role of Art in society,and why if he claims to have dedicated his life to study literature he ends up sounding suspiciously like a frustrated artist.History has shown that failed artists could be very dangerous and bitter towards the rest of humanity.To Hear him was frankly...Scary.

Read the comments here.

Reason.tv: Boobquake, Live from Dupont Circle

On Monday April 26, 2010 at Dupont Circle in Washington, D.C. a group small in number (five to seven participants) but large in heart participated in Boobquake, an event coordinated online through Facebook and Twitter to respond to a Islamic cleric's recent comments that "women dressing immodestly" led to earthquakes.

"Many women who do not dress modestly...lead young men astray, corrupt their chastity and spread adultery in society, which (consequently) increases earthquakes," Hojatoleslam Kazem Sedighi was quoted as saying by Iranian media. Sedighi is Tehran's acting Friday prayer leader. (He is not available for children's parties.)

For the record, there was an earthquake off the coast of Taiwan that was possibly related to Boobquake.

Here's a short video explaining from the event. Approximately 1.36 minutes; shot and edited by Dan Hayes.

Subscribe to Reason.tv's YouTube channel and receive automatic notification when new material goes live.

Legalize It (Immigration Edition)

Ryan Young and Alex Nowrasteh make an essential point about immigration:

What's the right approach to dismantling the black market? Liberalization. The immigration black market only exists...because the government has made the legal market as cumbersome as it can.

True immigration reform makes legal channels more appealing, not less. That means lightening the paperwork and the regulatory burden, and eliminating quotas. The more unattractive legality becomes, the more attractive illegality looks in comparison.

Black markets are anathema to a free society. Murder, theft, smuggling, and even slavery are part and parcel of immigrant black markets. They are also easily avoidable - just shrink the black market by making legal immigration easier.

Liberalization would solve just about every legitimate complaint about illegal immigration, from the trespassing that takes place on private property near the border (which occurs because it's too risky to enter the country through the front door) to the companies that defraud or otherwise abuse their illicit employees (who can't exactly take their bosses to court, and who may face legal risks just seeking work elsewhere). But as with that other source of black markets, the drug laws, the government has responded to the problems it created by doubling down on enforcement, which merely magnifies the problems and molests our civil liberties in the process.

Elsewhere in Reason: "What part of legal immigration don't you understand?"

Elsewhere not in Reason: Hit it, Herb and Chuck:

Time To Hate On Derivatives?

David Frum thinks there ought to be less opposition to derivatives regulation. The real problem with financial regulation, he argues, is the creation of the Consumer Financial Protection Agency. As Reason's Katherine Mangu-Ward has frequently noted, there's plenty to dislike about the CFPA. But do derivatives—financial products in which the value is pegged to another variable—make a good bad guy? I'm not so sure.

Derivatives are often described as bets, and that's not inaccurate. But without context, that terminology can give the impression that using derivatives is the Wall Street equivalent of a drunken Las Vegas dice game. But in many instances, the truth looks a lot less like playing a wild casino game and lot more like adjusting cells inside a spreadsheet.

The first thing to remember is that, despite derivatives' reputation for causing chaos, they have, for decades (at least), helped a variety of basic, boring businesses—from farming to airlines—safely manage their risk. Here's a simple example from the Congressional Research Service:

A firm can protect itself against increases in the price of a commodity that it uses in production by entering into a derivative contract that will gain value if the price of the commodity rises. A notable instance of this type of hedging strategy was Southwest Airlines’ derivatives position that allowed it to buy jet fuel at a low fixed price in 2008 when energy prices reached record highs. When used to hedge risk, derivatives can protect businesses (and sometimes their customers as well) from unfavorable price shocks.

The benefits of this kind of risk management, which allows businesses to lock in prices for crucial resources in volatile markets, are widely recognized, even by derivatives scaremongers. Warren Buffett, for example, has referred to derivatives as "financial weapons of mass destruction," but he is invested in them to the tune of about $63 billion through Berkshire Hathaway. (Which explains why he called for a regulatory exemption on the derivatives he already owns.)

More broadly, derivatives can be used to speed up the identification large-scale risk—and perhaps even the "systemic risk" that's been the subject of so much recent debate. This is when they start looking a little more like bets. One type of derivative known as a credit default swap is essentially an informed wager that a firm or investment will default on its obligations. The side benefit here is that, because informed individuals are putting money on their guesses, they can serve as prediction markets.

And those predictions could be used to ring warning bells about the state of the financial system. In the most recent issue of National Affairs, Harvard's Oliver Hart and the University of Chicago's Luigi Zingales proposed using CDS prices as early warning signals to let us know when big financial firms may be nearing failure.

If one had to predict in August 2007 the five institutions that would go under first on the basis of their CDS rates, one would be correct in four out of five cases. By the end of 2007, the data showed a decisive worsening of the situations of the investment banks and Washington Mutual. In late December, the market put the probability of Washington Mutual's defaulting within a year at 10%. By March 2008, that estimate had risen to 30%—and yet the regulator waited until September 25 to take over the bank.

Derivatives can be quite complex, but it's easy to see how they can serve as checks on the market. As Gordon Crovitz wrote yesterday, "Reducing the opportunity for traders to take advantage of better information means slowing the pace at which better information enters the market." Derivatives, in other words, give us more information, and thus hasten price discovery. There are certainly risks involved in using them, but, in general, the more restrictions we place on their use, the less we're likely to know about what's actually going on in the market.

In 2004, Gene Callahan and Greg Kaza wrote in defense of derivatives.

New at Reason: Shikha Dalmia on GM's Phony Bailout Payback

GM CEO Ed Whitacre announced in a Wall Street Journal column last Wednesday that his company has paid back its government bailout loan "in full, with interest, years ahead of schedule." But as Shikha Dalmia writes, before belting out their victory aria, GM-boosters ought to hear the whole story—not just the fairy tale version about Government Motors' grand comeback that Whitacre is feeding them. In reality, Dalmia notes, the company is simply setting the stage for another taxpayer shakedown.

View this article

Happy Birthday, Herbert Spencer!

Herbert Spencer, the great libertarian philosopher and social theorist, was born on this day in Derby, England in 1820. A classical liberal in the tradition of John Locke and Adam Smith, Spencer championed what he called the “law of equal freedom,” which was the idea that “Every man has the freedom to do all that he wills, provided he infringes not the equal freedom of any other man.”

A brilliant and wide-ranging scholar, Spencer’s writings explored political philosophy, economics, sociology, psychology, and biology. His The Study of Sociology (1873) served as one of the first sociology textbooks used by an American university while his pioneering theories on evolution preceded those of Charles Darwin.

Yet for all his many accomplishments, Spencer is remembered today mostly as a villain, as a heartless and evil “social Darwinist” who believed the rich should feast on the poor. This false portrait is due largely to the slanderous work of Columbia University historian Richard Hofstadter and his first book, Social Darwinism in American Thought (1944). In Hofstadter’s account, Spencer was the driving intellectual force behind the pseudo-scientific use of evolution to justify the harshest forms of racial, social, and economic inequality. And according to Hofstadter, the eugenics movement, which advocated forced sterilization and other violent and coercive measures, "has proved to be the most enduring aspect" of Spencer's "tooth and claw natural selection."

But the truth about Spencer is almost the exact opposite of Hofstadter’s vile caricature. As I wrote in “The Unfortunate Case of Herbert Spencer”:

At the heart of Hofstadter's case is the following passage from Spencer's famous first book, Social Statics (1851): "If they are sufficiently complete to live, they do live, and it is well they should live. If they are not sufficiently complete to live, they die, and it is best they should die."

That certainly sounds rough, but as it turns out, Hofstadter failed to mention the first sentence of Spencer's next paragraph, which reads, "Of course, in so far as the severity of this process is mitigated by the spontaneous sympathy of men for each other, it is proper that it should be mitigated." As philosophy professor Roderick Long has remarked, "The upshot of the entire section, then, is that while the operation of natural selection is beneficial, its mitigation by human benevolence is even more beneficial." This is a far cry from Hofstadter's summary of the text, which has Spencer advocating that the "unfit...should be eliminated."

Similarly, Hofstadter repeatedly points to Spencer's famous phrase, "survival of the fittest," a line that Charles Darwin added to the fifth edition of Origin of Species. But by fit, Spencer meant something very different from brute force. In his view, human society had evolved from a "militant" state, which was characterized by violence and force, to an "industrial" one, characterized by trade and voluntary cooperation. Thus Spencer the "extreme conservative" supported labor unions (so long as they were voluntary) as a way to mitigate and reform the "harsh and cruel conduct" of employers.

In fact, far from being the proto-eugenicist of Hofstadter's account, Spencer was an early feminist, advocating the complete legal and social equality of the sexes (and he did so, it's worth noting, nearly two decades before John Stuart Mill's famous On the Subjection of Women first appeared). He was also an anti-imperialist, attacking European colonialists for their "deeds of blood and rapine" against "subjugated races." To put it another way, Spencer was a thoroughgoing classical liberal, a principled champion of individual rights in all spheres of human life. Eugenics, which was based on racism, coercion, and collectivism, was alien to everything that Spencer believed.

Happy birthday!

The Kennedy Family Business

So, as Radley Balko pointed out this morning, Joe Kennedy may not have a bootlegger after all. Instead, he was an incredibly well-connected transatlantic political insider and business partner with the president's son who obtained exclusive liquor-import contracts from abroad (while noshing with various current and future prime ministers) and medicinal liquor permits at home, using both to make a bundle selling alcohol during Prohibition. Which is just so much better.

Anyhoo, glad to see that the real Kennedy family business is alive and well:

Rep. Patrick Kennedy was spotted doing vodka shots last week at a Capitol Hill bar just hours after he spoke about his history of substance abuse at a charity event.

[A Roll Call] tipster and a pal were sitting at the bar at the Capitol Lounge around 11 p.m. on Tuesday when the Rhode Island Democrat walked in and took a seat between the pair. The tipster's friend asked the Congressman what he was drinking, and when Kennedy replied vodka, the group ordered vodka shots, the tipster tells us.

After slamming down the first round, another was ordered, then a third. Our tipster and his friend stopped doing shots, but Kennedy drank three more until the bartender cut him off, at least from obtaining any more shots, our tipster says.

Our tipster adds Kennedy was in a lively mood, joking with others at the bar and even boasting about President Barack Obama, calling him "the best president ever."

Let's just hope he didn't try to drive this time.

Reason Morning Links: Cops Raid Blogger, GOP Stalls Wall Street Bill, Chicago Pols Want National Guard on City Streets

New at Reason: Andrew Potter on No Logo and the Revenge of the Brands

From our May issue, Andrew Potter reviews the 10th anniversay edition of No Logo, Naomi Klein's frequently infuriating work of agitprop that marries old Marxist prejudices about the market economy to a paranoid and conspiratorial account of the business of advertising. As Potter writes, in its quest to undermine the branded economy and expose the capitalist propaganda that motivates all advertising, No Logo inadvertently served as the most influential marketing manual of the decade.

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Supreme Court to Consider Violent Video Games

Today the Supreme Court agreed to hear California's appeal of a unanimous 9th Circuit decision (PDF) that last year struck down a 2005 state law banning the sale or rental of violent video games to minors. Adapting the test used for obscenity, the law covers any game that depicts "killing, maiming, dismembering, or sexually assaulting an image of a human being" if "a reasonable person, considering the game as a whole, would find [it] appeals to a deviant or morbid interest of minors"; it is "patently offensive to prevailing standards in the community as to what is suitable for minors"; and it lacks "serious literary, artistic, political, or scientific value for minors." Half a dozen states have passed laws imposing restrictions on the distribution of violent video games, but all have been overturned by the courts on First Amendment grounds. To uphold the law, the Court would have to recognize a new category of speech that receives only partial First Amendment protection. The Entertainment Merchants Association thinks that's a bad idea (PDF):

In over fifty years of obscenity jurisprudence, the Court has never applied the obscenity doctrine outside the context of sexual speech. What the State proposes in this case would effect a sea change in the permissible regulation of all media—including books, movies, and television programs—that contain violent content and are accessible to minors.

The 9th Circuit declined "to boldly go where no court has gone before" by treating violent material like obscenity when it is accessible to minors. It also noted that the state had failed to demonstrate "a causal link between minors playing video games and actual psychological or neurological harm"; nor did it show that alternatives to prohibition, such as the industry's rating system and game platforms with content controls, were inadequate to address parents' concerns.

The Court delayed making a decision about the case, Schwarzenegger v. Entertainment Merchants Association, until after it decided U.S. v. Stevens, which raised the related issue of whether videos depicting violent treatment of animals are outside the scope of the First Amendment. The video game case will be argued during the term that begins in October.

Stuf U Learn In Pubic Schools

Terry Hoffman, a language teacher at Des Moines, Iowa's Merrill Middle School, organized a large group of students the other day to protest a spending slowdown, and to demonstrate some of the excellent results the Hawkeye state is getting for its $7,419 per pupil:

Video here. Courtesy of Mish Shedlock, who follows up with other tales of teacher trickery in Rhode Island.

New at Reason: Anthony Randazzo on Michael Lewis' The Big Short

In his new book The Big Short, financial journalist extraordinaire Michael Lewis examines the origins of the current economic crisis. Reason Foundation Director of Economic Research Anthony Randazzo explains what Lewis gets right—and wrong—about the financial meltdown.

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The Washington Post Endorses Goodwin Liu

Yesterday’s Washington Post featured a short, unsigned editorial urging the Senate Judiciary Committee to approve the confirmation of controversial Berkeley law professor Goodwin Liu to a seat on the federal 9th Circuit Court of Appeals:

Mr. Liu is unquestionably qualified; the American Bar Association panel that reviews nominees game him a unanimous "well qualified" rating. Making a judgment about Mr. Liu's judicial philosophy is tougher. His academic works show him to be aggressively liberal. Writing about the courts' role in social welfare cases, he argues that courts may "legitimately foster evolution of welfare rights." He urges courts to determine whether certain benefits and services have become so deeply ingrained in American life as to warrant constitutional protection. This is not entirely new; the Supreme Court in the early 1970s used this approach to invalidate congressional cuts to the food stamps program.

It is impossible to know whether Mr. Liu would abide by his pledge to be "an impartial, objective and neutral arbiter of specific cases and controversies." Others with controversial views or academic records have put aside their political impulses and performed honorably on the bench. Mr. Liu should be given that opportunity.

Read the whole thing here. I discuss Liu’s record and what his hearings reveal about the judicial confirmation process here.

Doom, Doom-Doom Doom!

Writing in Sunday's Washington Post, Joel Achenbach is what the kids used to call "shrill" about the fiscal health of the United States.

The short term looks awful, and the long term looks hideous. Under any likely scenario, the federal debt will continue to balloon in the years to come. The Congressional Budget Office expects it to reach $20 trillion over the next decade -- and that assumes no new recessions, no new wars and no new financial crises. In the doomsday scenario, foreign investors get spooked and demand higher interest rates to continue bankrolling American profligacy. As rates shoot up, the United States has to borrow more and more simply to pay the interest on its debt, and soon the economy is in a downward spiral.

Ouch. Murmurs from the Obama administration are not reassuring:

When I spoke to Peter Orszag, the director of the Office of Management and Budget, he expressed optimism that the administration can balance the primary budget -- not including interest payments -- by 2015. The longer-term deficits are his bigger worry. Asked if the political process in Washington is broken, he answered: "I think it's too soon to know whether the system's broken. The problem is not what happened last year or this year. The real issue is when we move forward in time, something has to give."

Most troubling of all is the way the article ends, with some quotes from one of the stars of Michael Lewis' terrific The Big Short, Michael Burry:

[Burry] believes the federal government is behaving like the companies that lost billions in mortgage-backed securities. He told me he sees the common mistake of focusing on short-term benefits -- whether quarterly earnings or the next election.

The world doesn't want America to go broke, he points out. Americans are the planet's greatest consumers. But if this is a bubble, it will burst with little warning, Burry said.

"Strictly looking at the monthly Treasury statement of receipts and outlays," Burry said, "as an 'investor,' you see a company you might want to short."

God help us.

Link via Veronique de Rugy, whose Reason archive hits on many of the issues Achenbach explores.

More Taxes, Less Drinking: Nice Work 1913!

Fun fact: Regional alcohol prohibition begat national income taxes which begat national prohibition:

In 1913, [with regional alcohol prohibition gaining popularity and dry politicians experiencing a boom] Congress overrode President William Howard Taft’s veto of something called the Webb-Kenyon Act, which outlawed the importation of alcoholic beverages into a dry state....

The override was followed by enactment of a national income tax authorized by the recently ratified 16th Amendment. Until 1913, the federal government had depended on liquor taxes for as much as 40 percent of its annual revenue. “The chief cry against national Prohibition,” the ASL’s executive committee said in a policy statement that April, “has been that the government must have the revenue.” But with an income tax replacing the levy on liquor, that argument evaporated, and the ASL could move beyond its piecemeal approach and declare its new goal: “National Prohibition, [to] be secured through the adoption of a Constitutional Amendment.”

Read all the gory details in the Smithsonian magazine's piece on "the man who turned off the taps."

New at Reason: Radley Balko on the Right to Record the Cops

New technologies are making it easier than ever for citizens to record and document police abuses, and there have been numerous instances where citizen-captured video has showed not only police abuse, but has captured evidence that directly contradicts information later filed in police reports. In most (but not all) states, you usually can't be criminally prosecuted for recording the police while they're on duty. But as Reason Senior Editor Radley Balko writes, two recent incidents in Maryland demonstrate that unless authorities are held accountable when they illegally interfere with someone recording the cops, the right to record law enforcement officials isn't much of a right at all.

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Only Hitler-Enablers Call People Fascist

Writing in Slate, Ron Rosenbaum says something my literalist heart can mostly endorse:

The muddled Tea Party version of history is more than wrong and fraudulent. It's offensive. Calling Obama a tyrant, a communist, or a fascist is deeply offensive to all the real victims of tyranny, the real victims of communism and fascism. The tens of millions murdered.

That's why we shouldn't compare 21st century Americans to 1930s Germans...oh wait:

[I]gnorance of this sort isn't inconsequential. Historical fraudulence is like a disease, a contagious psychosis which can lead to mob hysteria and worse. Consider the role that fraudulent history played in Weimar Germany, where the "stab in the back" myth that the German Army had been cheated of victory in World War I by Jews and Socialists on the home front was used by the Nazis to justify their hatreds.

It's a historical lie, but it caught on, and Hitler rose to power on it, asking Germans to avenge the (nonexistent) stab in the back!

Link via The Corner. More on the logic of only-totalitarians-compare-people-to-totalitarians here.

"Is Daddy Going to Jail?"

“They came in the dark, shining bright flashlights while my family was asleep, keeping me from milking my cows, from my family, from breakfast with my family and from our morning devotions, and alarming my children enough so that the first question they asked my wife was, ‘Is Daddy going to jail?’”

That's Amish farmer Dan Allgyer, describing an early morning visit from FDA agents, U.S. Marshals, and a Pennsylvania state trooper, looking to bust him for selling unpasteurized milk across state lines.

They rooted through his belongings and kept him from milking his cows after showing him a warrant that authorized entry using "reasonable force." Daily Caller staffer and former Reason intern Mike Riggs reports:

Several days later, Allgyer received a letter from the Food and Drug Administration that read, “An investigation by the U.S. Food and Drug Administration has determined that you are causing to be delivered into interstate commerce, selling, or otherwise distributing raw milk in final package form for human consumption.”

The letter does not list the evidence against Allgyer, nor does it name specific violations. In fact, the letter from the FDA says exactly the opposite: “This letter is not intended to provide an all-inclusive list of violations.” Two paragraphs later, the letter instructs Allgyer to report within 15 days “the specific steps you have taken to correct the noted violations.”

If Allgyer doesn't "promptly" address the violations the FDA found, including the ones they haven't bothered to tell him about, it "could result in regulatory action without further notice" including "seizure and injunction.”

More on the increasingly aggressive and occasionally violent raw milk crackdown here and here.

Papers: Not Just for Aliens Anymore

Arizona's controversial new immigration law requires every noncitizen to carry "an alien registration document" and makes failure to do so (already a misdemeanor under federal law) a state crime punishable by up to six months in jail and a $2,500 fine. But because it also instructs police officers to make "a reasonable attempt" to "determine the immigration status of a person...if reasonable suspicion exists that the person is an unlawfully present alien," everyone in Arizona, including U.S. citizens, would be well advised to carry proof of his status to avoid a hassle. The law says "a person is presumed to not be an unlawfully present alien if the person provides...a valid Arizona driver license or nonoperating identification license," "a valid tribal enrollment card or other form of tribal identification," or "a valid U.S. federal, state or local government-issued identification if the entity requires proof of legal presence in the U.S. before issuance." Anyone not carrying one of these IDs runs the risk of being detained while the police verify his citizenship, which will be hard to do without an ID.

While police are prohibited from "solely considering race, color or national origin in implementing the requirement for determining and verifying immigration status," Hispanics obviously are at greatest risk for such encounters. (Likewise, although police are allowed to forgo the immigration check if it would interfere with an investigation, the general rule established by the law will further discourage illegal residents from cooperating with the police, whether as complainants or as witnesses.) Even though the law in effect requires everybody to carry an approved form of ID and present it to police on demand, the authors want us to know that "nothing in this act shall implement or shall be construed or interpreted to implement or establish the REAL ID act," a 2005 federal law that Arizona legislators rebelled against in large part because they feared the scenario they are now trying to achieve.

More on the Arizona law here and here.

Insert "Larry Summers Is Too Big To Fail" Joke Here

National Economic Council director Lawrence Summers should try staying awake during his meetings with the president. Last week the husky, unlikable super-genius revealed a little too much about the administration's view of too-big-to-fail banks in an interview with PBS:

JEFFREY BROWN: The too-big-to-fail issue, why not go further? Why not just limit the size of banks?

LAWRENCE SUMMERS: Jeff, that was the approach America took to banking before the Depression. That was the approach that America took to lending in the thrift sector before we had the S&L crisis.

Most observers who study -- who study this believe that to try to break banks up into a lot of little pieces would hurt our ability to serve large companies and hurt the competitiveness of the United States.

But that's not the important issue. They believe that it would actually make us less stable, because the individual banks would be less diversified and, therefore, at greater risk of failing, because they would haven't profits in one area to turn to when a different area got in trouble.

And most observers believe that dealing with the simultaneous failure of many -- many small institutions would actually generate more need for bailouts and reliance on taxpayers than the current economic environment.

Seeking Alpha has a list of what "observers" are actually saying. HuffPost cites some more. Here's an angry reaction from Alternet, which is kind of dumb -- but when you're an intellect as might as Larry Summers, where are you going to find interlocutors of your caliber?

More serious than Summers' well established habit of citing a fake consensus of experts to support his claims is that these comments embarrass an administration that is trying to promote the fiction that it is seriously interested in ending bailouts for gigantic banks. It might make intuitive sense that regulators would rather deal with a few big, identical institutions than with many diverse ones, but that's not the story the Democrats are using to sell their financial reform plan. So between Thursday and yesterday, somebody must have found a woodshed big enough to take Summers out to. Here's what he had to say on one of the Sunday talk shows:

"We must end too big to fail," he said on Face the Nation. "There is no one associated with the White House who believes "too big to fail" is acceptable, or that it's acceptable for financial institutions to rely on a bailout."

Glad that's squared away.

Last Week's Top 5 Hit & Run Posts

Here's what you were reading last week at Hit & Run:

First They Came For Hitler..., by Tim Cavanaugh (4/21)

Black Tea Party Protesters vs. Keith Olbermann, by Matt Welch (4/19)

Obama: Washington Needs to Be More Like California, by Matt Welch (4/20)

First Annual Everybody Draw Mohammad Day, by Michael C. Moynihan (4/23)

He Ain't Beanbag, But He's My Friedman! by Matt Welch (4/24)

Climategate Update: About That Peer-Reviewed Stuff

Back when the Climategate affair first hit the news, head of the Intergovernmental Panel on Climate Change Rajendra Pachauri angrily defended the IPCC's Fourth Assessment Report (4AR) by asserting that it had been rigorously peer-reviewed. As the Guardian quoted Pachauri:

"The processes in the IPCC are so robust, so inclusive, that even if an author or two has a particular bias it is completely unlikely that bias will find its way into the IPCC report," he said.

"Every single comment that an expert reviewer provides has to be answered either by acceptance of the comment, or if it is not accepted, the reasons have to be clearly specified. So I think it is a very transparent, a very comprehensive process which insures that even if someone wants to leave out a piece of peer reviewed literature there is virtually no possibility of that happening."

The Daily Telegraph is reporting that claims of rigorous peer-review may have been exaggerated:

... a new study put this claim to the test. A team of 40 researchers from 12 countries, led by a Canadian analyst Donna Laframboise, checked out every one of the 18,531 scientific sources cited in the mammoth 2007 report. Astonishingly, they found that nearly a third of them – 5,587 – were not peer-reviewed at all, but came from newspaper articles, student theses, even propaganda leaflets and press releases put out by green activists and lobby groups.

The group auditing the 4AR references was organized by Canadian global warming skeptic Donna Laframboise. You can find the report here and judge its accuracy for yourself.

Reason.tv: We The Living Trailer for 1942 Italian Film Version of Ayn Rand's Novel

"It was made illegally, suppressed by a hostile government, cheered and honored, then banned at the height of its success and forgotten for decades. But, today, the film version of Ayn Rand's WE THE LIVING is back on the screen. The story behind the making of WE THE LIVING, in Italy, in 1942, is almost as interesting as the movie itself...."

Go here for more information about the movie and buying the DVD, restored and released last year, and featuring a special documentary on the making of the movie.

And go here to hear Patrick Reasonover of Duncan Scott Productions discuss the story behind the story behind We The Living.

Shadow Inventory Gets More Shadowy

If you've been trying to keep track of the "shadow inventory" of homes that are destined to be foreclosed and come onto the market within the next few years, you'll be glad to know that the hard-to-determine statistic has been narrowed down: It's either 1.7 million houses or 12 million houses.

That's the skinny from a site called CapitalGainsAndGames.com, which cites some comments made last week by Amherst Securities analyst Laurie Goodman:

Laurie Goodman told the National Economists Club today in D.C. 7.2 million are already in the delinquency pipeline, and 250,000 are going delinquent each month bringing the total to 12 million. "Once you're 60 days delinquent, a foreclosure is highly probable," she said. Goodman is a Senior Managing Director of Amherst Securities and is widely recognized as the best housing finance economist on Wall Street.

She emphasized that negative equity is the main problem, and that any program which doesn't significantly reduce principal won't work. She estimated that under the most optimistic assumptions, President Obama's HAMP program would avert 1.1 million foreclosures. Goodman added that banks aren't renegotiating underwater mortgages in which they hold a second lien, "a huge conflict of interest problem."

She noted that FHA loans are still the whole market and suggested that the homebuyer tax credit, due to expire at the end of this month, and other housing incentives have borrowed so much demand forward that the only way left to stimulate the market would be for FHA to ease its requirements and allow investors to participate.

I hate Goodman's infinite-intervention plan to employ "one modification plan after another until a plan is successful." But I love her dire view of the foreclosure landscape, and her useful debunking of the common belief that unemployment is the main cause of mortgage defaults.

In congressional testimony in December, Goodman had the shadow inventory at 7.2 million properties. I'm not sure how she's getting to 12 million houses, especially when DataQuick says first-quarter notices of default declined more than 4 percent in California, the most populous and one of the most troubled of the delinquency states.

The shadow inventory will be an important drag on house prices for years, which will in turn prompt more efforts to use your money to prop up the sagging market (or as we say in the second quarter of 2010, "spur the recovery"). So it's important to get a handle on how large this inventory is. Best estimate as of this time: One crapload.

New at Reason: Jacob Sullum on How the War on Terrorism Became a War on Free Speech

From our May issue, Senior Editor Jacob Sullum argues that the federal ban on providing "material support" to terrorists was written so broadly that it includes a great deal of speech protected by the First Amendment.

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I Know That Frisco's Expensive, But Jesus Christ!

From the San Francisco Chronicle:

More than 1 in 3 of San Francisco's nearly 27,000 city workers earned $100,000 or more last year - a number that has been growing steadily for the past decade.

The number of city workers paid at least $100,000 in base salary totaled 6,449 last year. When such extras as overtime are included, the number jumped to 9,487 workers, nearly eight times the number from a decade ago. And that calculation doesn't include the cost of often-generous city benefits such as health care and pensions.

Whole investigative bit here. Link via Jack Shafer's Twitter feed. Reason on the public/private sector Class War here.

The Future of Health Care: "Huge taxes and fees are coming."

As part of his ongoing "Ask a CEO" series, the OC Register's Brian Calle spoke with Allergan's David Pyott about how the Affordable Care Act would reshape the country's health care system:

Pyott started our discussion by saying the health care bill was "laudable" because "32 million more people will have access to health care." But Pyott quickly and astutely noted that "someone is going to have to pay for it." A lot of that burden has been placed deliberately upon companies in the pharmaceutical industry.

What that means for the industry, according to Pyott, is that doctors will see downward adjustments to their payments while drugmakers and device manufacturers will face higher taxes and lower sales.

"Huge taxes and fees are coming," Pyott says. The biggest tax will be on pharmaceutical manufacturers. It will cost the industry about $2.3 billion next year. In 2013 an additional excise tax on medical devices of 2.3 percent of sales will kick in.

As if that were not enough, the pharmaceutical industry will also be required to pay a 50 percent rebate to the government to help close the "doughnut hole," the gap in the Medicare prescription drug plan where recipients run out of coverage and must pay out-of-pocket costs before catastrophic care kicks in (the coverage gap falls between $3,000 and $6,000). Let us not forget where Medicare Part D came from.

But if you are not in the pharmaceutical industry why should you care?

Pyott explained, "When huge new taxes are levied, for people like me, who have a global perspective, other markets overseas just became relatively more interesting than the U.S. domestic market, quite clearly."

For a complete picture of the new taxes levied by the health care bill, see this handy timeline from the Tax Foundation.

Jacob Sullum looked at health care reform's tax hikes here.

Hey, Commenters! Here's a Chance to Talk About Tea Parties!

Sean Scallon has a suggestion:

I have written about the possible reaction anti-war activist Cindy Sheehan might possibly receive at a Tea Party. It seems as though Medea Benjamin of Code Pink has gone to a Tea Party and tried outreach on her own.

Well, if one wants to bring forth or at least begin a left-right alliance, then perhaps Sheehan and Benjamin and other members of Code Pink and those on the antiwar Left, should simply declare that they are Tea Partiers too and organize Tea Party events as well.

Why not? Is it against the law? Are there rules or bylaws saying they can't be Tea Partiers? Who are Sarah Palin or Dick Armey to say who can or cannot be Tea Partiers? Political parties have always had Left, Right, libertarian and centrist wings, why not the Tea Party?

Last Week's Top 5 Hits at Reason.com

These were the most popular Reason.com columns last week:

Myths About Capitalism: Confronting the biggest lies about American business, by John Stossel (4/22)

How Immigration Crackdowns Backfire: The trouble with Arizona's draconian new law, by Steve Chapman (4/22)

Down the Health Care Wormhole: How ObamaPelosiCare will saddle future generations with a public policy disaster, by Terry Michael (4/19)

The American Anti-Revolution: Revolutionary violence is as American as an apple pie we threw away, by Brian Doherty (4/23)

The Rise of Decline: Experts say things are collapsing. Maybe they're not collapsing fast enough, by Tim Cavanaugh (4/19)

Is Judge Napolitano a Hater?

Earlier this month, the empirically challenged "hate"-fighters over at the Southern Poverty Law Center put out a hit list of dangerous "patriots," defined as

people who generally believe that the federal government is an evil entity that is engaged in a secret conspiracy to impose martial law, herd those who resist into concentration camps, and force the United States into a socialistic "New World Order"

Included on that list were "The Enablers," of which one was Fox News commentator and author Judge Andrew Napolitano. From the SPLC entry:

[Napolitano] was scheduled to be the keynote speaker this past February at the first annual Tenth Amendment Summit in Atlanta, but was snowed in and never made it. He missed out on rubbing elbows with neo-Confederates, conspiracy theorists and antigovernment Patriot activists.

It seems the TV judge is vying to become a fixture on the far-right lecture circuit. He was also scheduled to address the 2010 New Hampshire Liberty Forum, a gathering of self-described "pro-liberty activists" who are striving to "cut the size and scope of government by about two-thirds or more."

Napolitano has joined other conspiracy theorists in falsely claiming that efforts to expand affordable housing through the Community Reinvestment Act were responsible for the crash of the economy in 2008. He called Sarah Palin's baseless accusation that Obama was trying to set up "death panels" a "legitimate concern." He falsely suggested that Obama bribed a congressman to change his vote on health care by appointing his brother to an appeals court.

Wait, he almost went to a conference about the Bill of Rights? Burn him!!

Anyway, if Napolitano is a big fat hater he should be dancing like Peggy Lee at a cactus farm over the new Mexican-prevention law in Arizona. Um, not quite:

Past Reason interviews with the Judge: Damon Root earlier this month, Brian Doherty in November 2007, Nick Gillespie in March 2005. Read Napolitano's Reason archives here, and watch below as he delivers speech about civil liberties in war time at an October 2007 Reason conference:


If the antidote to terrorism and fundamentalist extremism is to refuse to be terrorized, we may finally be making some progress. Last week, Michael Moynihan blogged about "Everybody Draw Mohammed Day," an appropriately defiant and mocking response to the not-so-veiled threat levied against South Park creators Trey Parker and Matt Stone by an Islamic extremist website.

Now comes Boobquake.

It started as a college student’s snide response to an Iranian cleric’s assertion that scantily clad women cause earthquakes.

But as of Thursday, it had become much, much bigger.

Jen McCreight, a self-described atheist, feminist and geek “trapped in Indiana,” took issue with Hojatoleslam Kazim Sadeghi’s message during Friday prayers in Tehran, the Iranian capital.

The hard-line cleric, who was standing in for Supreme Leader Ayatollah Khamenei, said women who dress provocatively – thereby tempting men – are to blame for the world’s temblors...

McCreight, who is pursuing a double major in genetics and evolution, took to her blog, Blag Hag, on Monday, demanding that the world’s women band together in a scientific experiment to test the merits of Sadeghi’s hypothesis.

“Time for a Boobquake,” she wrote. “On Monday, April 26, I will wear the most cleavage-showing shirt I own. ... I encourage other female skeptics to join me and embrace the supposed supernatural power of their breasts. Or short shorts, if that's your preferred form of immodesty.”

She continued, “With the power of our scandalous bodies combined, we should surely produce an earthquake. If not, I'm sure [Sadeghi] can come up with a rational explanation for why the ground didn’t rumble.”

Boobquake’s Twitter account quickly snared more tweets than a bird sanctuary, and its Facebook page had almost 50,000 “confirmed guests” as of Thursday afternoon.

Rest assured readers, Reason staffers will monitor this story like regulators at the Securities and Exchange Commission.

Reason Writers Around Town: Matt Welch Discusses SEC Porn at CNN.com

Over at CNN's website, Reason Editor in Chief Matt Welch argues that we should not be surprised when the reality of regulation fails to conform to our fantasies. Excerpt:

Try as governing Democrats and their supporters might to convince you of the contrary, there is a moral to this story. It is this: Expecting regulators to do their job well, let alone magically prevent whatever private-sector outcomes we do not like, is as fantastical as the assertion that George W. Bush was a deregulatory president.

Wait, what? Didn't we just read in Time magazine that "From the start, Bush embraced a governing philosophy of deregulation"? That's a comforting narrative for those trying to "restore" regulatory oversight of Wall Street. But it's false.

Read the whole thing here.

Reason Morning Links: Korea, Arizona, and Other Trouble Spots

Tensions mount in Korea.

• The SEIU picks a new president.

• Reports that troops killed three Afghan civilians prompt protestors to destroy NATO supply vehicles.

• Activists organize a trucking boycott of Arizona.

George Bush: The Book.

My Life With Charlie Brown or, Where Have You Gone, Joe Shlabotnik?

In the Wash Post, Fox News' James Rosen reviews the new book My Life With Charlie Brown, a collection of autobiographical essays by Charles Schulz, arguably the most famous artist of all time. Read about it here.

And read Reason on Peanuts and Schulz here.

And on a grim Monday, when the whole world seems to be a kite-eating tree (hang in there baby, Tuesday's comng), read the first strip featuring good ol' Charlie Brown and Shermy, who was unceremoniously disappeared from the strip without so much as a special inquest.

Sadly the series never got better than this. But then, how could it?

New at Reason: Steve Chapman on a Bill of Rights for Airline Passengers

Right now, air travelers have only the same Bill of Rights as everyone else—the one assuring freedom of speech, freedom of religion, the right against self-incrimination, and so on. But as Steve Chapman writes, there's another inalienable right not mentioned in that document: namely, the freedom to spurn any airline they find unsatisfactory and choose one that will serve them better.

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How Much Does Society Owe to People Who Don't Pay Their Debts?

One regular feature in media coverage of the mortgage loan modification process is people who either default or threaten to default, get into a loan modification program, then bellyache that doing so has lowered their credit scores.

Maybe that shouldn't be surprising in this post-shame age, but as is often the case when you look at the landscape of bad borrowing, the penalties for defaulting are not particularly onerous. In fact, you could make the case that they're not onerous enough.

Smarter people seeking loan mods are wary, with good reason, of how the process will impact their credit scores. Banks do take note when you try to change to the terms of your mortgage. But the bulk of the credit damage comes when borrowers stop paying in order to get leverage over the bank. The actual damage to the credit score based on the loan mod is modest and often temporary.

The frequent complaint about FICO damage is that since the HAMP program was set up, at a cost to the taxpayers of hundreds of billions of dollars, to "help" bad borrowers, it's not fair to keep a record of a borrower's non-payment history.

Without defending the cockamamie system of determining credit scores (in which even a default and foreclosure can end up dinging your credit history only a little bit more than a late payment on a store credit card), one thing needs to be clear: The purpose of a credit report is not to decide whether your problems are your own fault or whether you're a good person. It's to give lenders a sense of the probability that if they lend you money, you will pay it back according to the terms you agreed to before God, country and family. The loan modification's federal imprimatur does not change the fact that you are getting away with not honoring the terms of your agreement.

Leave aside that preventing a proven bad borrower from going further into debt is probably the best thing you can do for that person. Exactly how "fair" is it to the vast majority of borrowers, who make their payments on time and on the money, to allow bad borrowers to make consequence-free changes to their mortgages? The credit consequence of deadbeating is already minor considering the gravity of a mortgage default. Debt forgiven under a loan mod is already going untaxed. Hundreds of thousands of mortgage scofflaws are already enjoying years of payment-free living just because banks don't want to foreclose. Should there be no penalty at all for going bad on a loan?

And that's even if you consider a low FICO score a penalty. It's not. It's a number derived from your demonstrated behavior. If a good credit history is that important to you -- and there are plenty of good arguments that it shouldn't be -- all you have to do is change your behavior.

Stephen Hawking: Damn All Aliens!

Legendary physicist Stephen Hawking, apparently still smarting from getting passed over for the role of the guy in the wheelchair in Avatar, says we'd better not be trying to phone E.T. or even text him:

The suggestions come in a new documentary series in which Hawking, one of the world’s leading scientists, will set out his latest thinking on some of the universe’s greatest mysteries.

Alien life, he will suggest, is almost certain to exist in many other parts of the universe: not just in planets, but perhaps in the centre of stars or even floating in interplanetary space.


[M]ost of it will be the equivalent of microbes or simple animals — the sort of life that has dominated Earth for most of its history.

One scene in his documentary for the Discovery Channel shows herds of two-legged herbivores browsing on an alien cliff-face where they are picked off by flying, yellow lizard-like predators. Another shows glowing fluorescent aquatic animals forming vast shoals in the oceans thought to underlie the thick ice coating Europa, one of the moons of Jupiter...

We'll have to wait for the show, but Hawking's extended comments suggest he's paying more attention to Independence Day than to Stanislaw Lem. Without any apparent help, this planet has already produced such inscrutable creatures as the platypus, the coelacanth, and chupacabra. The third solution to Fermi's paradox suggests platform neutrality is not as widespread elsewhere in the Alpha Quadrant as it is here on Earth. Why would a race of superintelligent jellyfish or blue whales even take notice of us, let alone want to conquer us? Hawking is having none of that:

Hawking believes that contact with such a species could be devastating for humanity.

He suggests that aliens might simply raid Earth for its resources and then move on: “We only have to look at ourselves to see how intelligent life might develop into something we wouldn’t want to meet. I imagine they might exist in massive ships, having used up all the resources from their home planet. Such advanced aliens would perhaps become nomads, looking to conquer and colonise whatever planets they can reach.”

He concludes that trying to make contact with alien races is “a little too risky”. He said: “If aliens ever visit us, I think the outcome would be much as when Christopher Columbus first landed in America, which didn’t turn out very well for the Native Americans.”

Should we take Hawking's isolationism seriously, or is he just the Racist In the Year 3000?

Back before the Singularity, Gregory Benford profiled Hawking for Reason. More recently, we've given mixed reviews to the Honorary Fellow of the Royal Society of Arts' plans to save Earth through space travel and applauded his adventures in zero gravity. (And for God's sake, if Stephen Hawking is only an honorary Fellow of the Royal Society, what the hell do you have to do to become a full member? When the Vulcans make first contact -- 53 years from this month! -- let's hope they do something about that oversight.)

That's Some Mighty Authoritarian Tea

Yesterday, Jesse Walker noted that Arizona's Tea Party seems to have rallied around opposition to immigration, and invited the poster thug for overly aggressive law enforcement, Maricopa County Sheriff Joe Arpaio, to keynote the group's Tax Day rally.

In a similar vein, the libertarian writer Jim Bovard visited a Maryland Tea Party on Tax Day, and found little more than a different variety of authoritarianism:

...there is scant evidence that most tea partyers have studied the copies of the Constitution they generously hand out to bystanders.

At a Tax Day tea party in Rockville, Md., the speaking venue was draped with a huge banner: “Tired of Big Government?” Members of the “Tyranny Response Team” stood near the front of the rally with their official blue T-shirts. Giant American flags and ones with “Don’t Tread on Me” (with a coiled rattlesnake) were carried around by men with tri-corn hats. Political campaigns busily sold “9/11 Remembrance” bracelets.

And yet, the crowd of 300 seemed most outraged that the US government is not being sufficiently aggressive in using its power.

Ken Timmerman, the author of “Preachers of Hate: Islam and the War on America” and other hawkish books, declaimed that the US government must take every step to stop Iran from getting nuclear weapons...

Running through a litany of President Obama’s greatest failings, Timmerman denounced him for forcing US agents to “stop using enhanced interrogation methods. Has that made us safer?”

“No!” the crowd hollered indignantly.

Jeffrey Kuhner, a local talk-show host, sneered that Obama “has found his inner Muslim” and raged against his bowing to foreign leaders and kings. He complained that Obama has “taken over college loans,” and warned that illegal immigrants could be “the shock troops of Obama’s socialist revolution.” The crowd ate it up.

One of the MCs gushed about how he and everyone else in the crowd loved the police. There was not a word spoken about the video released earlier that week showing a nearby horrendous police beating of an innocent University of Maryland college student.

The rally featured a string of Republican candidates praising fiscal responsibility and denouncing the national debt. One would have thought that it had been 50 years, rather than 15 months, since the Republicans controlled the White House.

There was almost no dissent from any of the 300 attendees. One 50-something man in a faded green T-shirt walked around with a handmade sign declaring, “Stop the wars in Iraq and Afghanistan – Bring Our Troops Home Now!” He told me that almost no one he’d talked agreed with his message...

Much more in tune with the crowd was the 20-something woman carrying a sign: “PROUD to be the Military Super Power.”...

None of the speakers criticized the warrantless wiretaps that the National Security Agency began during the Bush administration. The feds’ vacuuming up thousands of Americans’ phone calls and e-mails without a warrant seems to be a nonissue for these folks. Perhaps some tea party leaders hope that Republicans will soon be in position to use such powers to surveil the left...

If tea party activists cannot vigorously oppose torture and other high crimes, then counting on them to stalwartly resist any government policy that doesn’t mulct their paycheck is folly.

America needs real champions of freedom – not poorly informed Republican accomplices. Either tea partyers should become more principled or they should ditch their Gadsden flags and wear T-shirts of the lobbying group that organizes the rally they attend.

There's obviously not going to be pure ideological unity at these events, and I'd have no problem if the Tea Parties were merely silent on issues like foreign policy, law enforcement, and the war on terror—that is, if people who disagree on those particular issues had come together for the purpose of rallying against government debt, bailouts, spending, and so on. But it's increasingly looking like the right's favored big government policies are a fairly important part of the agenda of a fairly large portion of the Tea Party crowd. Advocating for more police power, more foreign policy imperialism, and more power for the federal government to detain, torture, and abrogate basic civil liberties sort of misses the entire message of the original Tea Party.

It also makes a mockery of the media narrative that these are gathering of anti-government extremists. Seems like in many parts of the country they're as pro-government as the current administration, just pro-their kind of government.

Reason Writers Around Town: Matt Welch in the New York Post on the VAT Trial Balloon

Writing in America's most lively newspaper, Reason Editor in Chief Matt Welch argues that a U.S. VAT would be the opposite of the fiscal responsibility in whose name it is being proposed. Excerpt:

With the stunning emergence of the consumption-based Value Added Tax (VAT) as a legitimate public policy option, the Obama administration has now all but made it official: There is no European economic idea too extreme for 21st century America. Even if the Europeans themselves are largely headed in the opposite direction. [...]

What's worse for us is that we've pretty much given up trying to address the root problem, which is the decade long spending binge initiated by George W. Bush and then tripled down on by Barack Obama. The VAT isn't a way to streamline a complicated tax code; it's a new spigot to flood money into the pockets of teachers who can't be fired, and securities regulators who can't get enough porn.

Read the whole thing here.

Murray Rothbard On the Ingeniously Destructive Power of VAT

Like locust infestations and cicada spawning, the value added tax proposal is something that comes around every few years but is always treated as some surprising new thing. Take the wayback machine to 1972 -- a remote time when America had a hobbled economy, a lousy president and a war that just kept going on and on -- to hear how the late Murray Rothbard viewed the economic solution that President Obama has either never heard of or is seriously considering

The VAT is essentially a national sales tax, levied in proportion to the goods and services produced and sold. But its delightful concealment comes from the fact that the VAT is levied at each step of the way in the production process: on farmer, manufacturer, jobber and wholesaler, and only slightly on the retailer.

The difference is that when a consumer pays a 7 percent sales tax on every purchase, his indignation rises and he points the finger of resentment at the politicians in charge of government; but if the 7 percent tax is hidden and paid by every firm rather than just at retail, the inevitably higher prices will be charged, not to the government where it belongs, but to grasping businessmen and avaricious trade unions.

While consumers, businessmen, and unions all blame each other for inflation like Kilkenny cats, Papa government is able to preserve its lofty moral purity, and to join in denouncing all of these groups for "causing inflation."

It is now easy to see the enthusiasm of the federal government and its economic advisers for the new scheme for a VAT. It allows the government to extract many more funds from the public — to bring about higher prices, lower production, and lower incomes — and yet totally escape the blame, which can easily be loaded on business, unions, or the consumer as the particular administration sees fit.


But the VAT is in many ways far worse than a sales tax, apart from its hidden and clandestine nature. In the first place, the VAT advocates claim that since each firm and stage of production will pay in proportion to its "value added" to production, there will be no misallocation effects along the way.

But this ignores the fact that every business firm will be burdened by the cost of innumerable record keeping and collection for the government. The result will be an inexorable push of the business system toward "vertical mergers" and the reduction of competition.

Suppose, for example, that a crude-oil producer adds the value of $1,000, and that an oil refiner adds another $1,000, and suppose for simplicity that the VAT is 10 percent. Theoretically, it should make no difference if the firms are separate or "integrated"; in the former case, each firm would pay $100 to the government; in the latter, the integrated firm would pay $200. But since this comforting theory ignores the substantial costs of record keeping and the collection, in practice if the crude-oil firm and the oil refiner were integrated into one firm, making only one payment, their costs would be lower...

Hence, vertical mergers will be induced by the VAT, after which the Antitrust Division of the Department of Justice would begin to clamor that the free market is producing "monopoly" and that the merger must be broken by government fiat.

The costs of record keeping and payment pose another grave problem for the market economy. Obviously, small firms are less able to bear these costs than big ones, and so the VAT will be a powerful burden on small business, and hamper it gravely in the competitive struggle. It is no wonder that some big businesses look with favor on the VAT!


A further crucial flaw exists in the VAT, a flaw which will bring much grief to our economic system. Most people assume that such a tax will simply be passed on in higher prices to the consumer. But the process is not that simple. While, in the long run, prices to consumers will undoubtedly rise, there will be two other important effects: a large short-run reduction in business profits, and a long-run fall in wage incomes.

The critical blow to profits, while perhaps only "short-run," will take place at a time of business recession, when many firms and industries are suffering from low profits and even from business losses. The low-profit firms and industries will be severely hit by the imposition of VAT, and the result will be to cripple any possible recovery and plunge us deeper into recession. Furthermore, new and creative firms, which usually begin small and with low profits, will be similarly crippled before they have scarcely begun.

The VAT will also have a severe, and so far unacknowledged, effect in aggravating unemployment, which is already at a high recession rate. The grievous impact on unemployment will be twofold. In the first place, any firm that buys, say, machinery, can deduct the embodied VAT from its own tax liability; but if it hires workers, it can make no such deduction. The result will be to spur over-mechanization and the firing of laborers.

Secondly, part of the long-run effect of VAT will be to lower the demand for labor and wage incomes; but since unions and the minimum-wage laws are able to keep wage rates up indefinitely, the impact will be a rise in unemployment. Thus, from two separate and compounding directions, VAT will aggravate an already serious unemployment problem.

Hence, the American public will pay a high price indeed for the clandestine nature of the VAT. We will be mulcted of a large and increasing amount of funds, extracted in a hidden but no less burdensome manner, just at a time when the government seemed to have reached the limit of the tax burden that the people will allow. It will be funds that will aggravate the burdens on the already long-suffering average middle-class American. And to top it off, the VAT will cripple profits; injure competition, small business, and new creative firms; raise prices; and greatly aggravate unemployment. It will pit consumers against business, and intensify conflicts within society.

This is a big excerpt, but the full article is essential reading.

In the current issue of Newsweek, Robert J. Samuelson shows how little has changed. Dig the comments for more exciting VAT history.

Reason Writers Around Town: Matt Welch in Politico on John McCain's "Maverick" Persona

As Sen. John McCain (R-Ariz.) fights off a primary challenge in a state convulsing over immigration and other concerns, commentators from Dana Milbank to The New York Times editorial board are expressing chagrin that the man they once admired is turning his back on the "maverick" label. But, as Reason Editor in Chief Matt Welch explains in Politico, history has amply demonstrated that "John McCain will do or say, or undo or unsay, just about anything to win an election." Excerpt:

In this comical flip-floppery he is absolutely no different than 95 percent of all politicians, from Barack Obama to McCain's clownish primary opponent, J.D. Hayworth (whose own political manifesto, after all, is entitled Whatever it Takes). The only reason we're even talking about it as a news story now is that the "maverick" appellation has been one of the most successful acts of political branding in modern history [...]

I hope McCain beats Hayworth. But I hope much more that the press, at long last, starts covering McCain as he is, rather than the memory of what they mistakenly thought he was.

Read the whole thing here.

He Ain't Beanbag, But He's My Friedman!

Last month, with all the subtlety and real-world sophistication of my 21-month-old daughter demanding pasta for breakfast, New York Times columnist Thomas L. Friedman blurted out:

I want my own Tea Party. I want a Tea Party of the radical center.

Today, an anxious Tea Party nation finally received word from a guy they don't like and have nothing in common with about how to make theirs a lasting and powerful political force:

Become the Green Tea Party.

I'd be happy to design the T-shirt logo and write the manifesto.

In crayons, I'm sure.

Along the way, Friedman escalates his usual "win, win, win, win, win" formulation to describe carbon tax with yet a sixth win, quotes T. Boone Pickens as if he was a disinterested observer of energy economics, posits that his fantastical "radical center" is a place populated by John Kerry, Lindsey Graham and Joseph Lieberman; and complains that "the Tea Party is heading to the hard libertarian right." Which is all mere set-up for a closing flourish of telltale Sinophilia/phobia:

In short, the [cap and trade] bill is a step in the right direction toward reducing greenhouse gases and expanding our base of clean power technologies so we can compete with China in this newest global industry. It ain't perfect, but it ain't beanbag. And if we don't start now, every solar panel, electric car and wind turbine we'll have to buy when climate change really hits will come with instructions in Chinese. Go Green Tea Party.

Is there a worse successful columnist in America?

UPDATE: In a telegram from the real world, would-be Green Tea Radical Centrist Lindsay Graham has withdrawn support from the cap-and-trade bill. Some bumper-sticker slogans are apparently not built to last.

Reason Writers on TV: Matt Welch (and John Stossel) Talk About Wall Street Regulation on Fox Business Channel

On the Bulls and Bears show Thursday, Reason Editor in Chief Matt Welch joined John Stossel in making the case that the new proposed financial regulations do not put an end to Too Big To Fail, and continue a decade-long trend in adding more financial regulators.

Just over 4 minutes, below:

Issa Questions SEC's Market Timing

Securities and Exchange Commission's inspector general David Kotz will wind down from revealing government employee porn preferences with an investigation of whether the financial watchdog timed its fraud suit against Goldman Sachs to help the proposed overhaul of financial regulation.

The investigation comes in response to a request from Rep. Darrell Issa (R-California), the man who would be governor of the golden state if not for this country's blatant anti-Lebanese bias.

From Issa's letter [pdf] to Kotz:

The circumstances of the filing and subsequent events fueled suspicion that the Commission, or one or more of its officials or employees, may have engaged in unauthorized disclosure or discussion of Commission proceedings in order to affect the debate over financial regulatory legislation currently pending before the United States Senate.

Issa, lachrymose ranking member of the House Oversight Committee, and seven other Republicans want to know whether the SEC leaked news of the suit to The New York Times, whether it coordinated with President Obama's Organizing for America group and/or the Democratic National Committee, and why the SEC's vote to proceed with the suit split along party lines. If the SEC was looking to time its investigation according to the legislative schedule, that would help explain why it went forward with what looks like a weaker case than the circumstances warrant.

For lefties not versed in the ways of the world, Republicans are standing up for Goldman because they support laissez faire capitalism and unfettered free markets. Inconveniently for that thesis, Goldman has given more than twice as much money to Democrats as to Republicans in this election cycle.

Issa's accusations, which turn on such feeble evidence as a DNC Google ad buy "within hours" of the SEC's announcement, don't look terribly strong. More to the point, this kind of corrupt use of the SEC could just be an example of things working the way they're designed to work. While political timing would go against the "spirit of independence" guidelines in the Code of Federal Regulations, the SEC belongs to the executive branch, and the president's cronies have broad discretion to deploy it as they see fit. If you want to change that, change the structure of financial regulation. Or better yet, get rid of the SEC, a New Deal creation that is as useless in dealing with the financial markets of the 21st century as it was in dealing with the financial markets of the New Deal era.

Reason Writers Around Town: Shikha Dalmia on the GM Bailout

In her latest Forbes column, Reason Foundation Senior Analyst Shikha Dalmia explains why automaker GM should still be known as Government Motors:

Uncle Sam gave GM $49.5 billion last summer in aid to finance its bankruptcy. (If it hadn't, the company, which couldn't raise this kind of money from private lenders, would have been forced into liquidation, its assets sold for scrap.) So when [GM CEO Ed] Whitacre publishes a column with the headline, "The GM Bailout: Paid Back in Full," most ordinary mortals unfamiliar with bailout minutia would assume that he is alluding to the entire $49.5 billion. That, however, is far from the case....

Mr. Whitacre's bailout payback ploy is a desperate attempt to win back the car-buying public deeply disgusted by the spectacle of GM rattling its tin-cup before Uncle Sam. But the fact of the matter is that the company is still deep in the hole.

Read all about it here.

New at Reason: David Osborne on Making State Programs Compete for Funds

California often leads the nation, and the current fiscal crisis is no exception. With its repeated use of borrowing and fiscal sleights of hand, the Golden State has become a poster boy for irresponsibility. But as David Osborne explains, California's elected leaders might consider a new approach, called "Budgeting for Outcomes." It helps leaders rank programs according to how cost-effective they are at achieving the results citizens want, then eliminate the low-ranked activities.

View this article

Arizona ICE Tea

The wild card in the Tea Parties is immigration. It may be true, as many intelligent people have argued, that the libertarian and conservative wings of the movement are able to work together on economic concerns while setting aside their quarrels on social issues and foreign policy. Whatever disagreements the marchers may have when it comes to Iraq or gay marriage, most of their demonstrations have focused on blocking or rolling back bailouts, taxes, spending, and interventions in health care.

Border control is one area, though, where much of the movement wants the authorities to do more rather than less. And while it seems to be a back-burner issue for Tea Partiers in much of the country, the subject has moved to the forefront in Arizona, which just passed a sweeping law cracking down on illegal immigration. This week the Arizona Tea Party Network put out a call for ralliers to come to the capitol to support the new bill. How important is the issue to this corner of the movement? It's important enough that Sheriff Joe Arpaio, infamous for abusing civil liberties in his fight against illicit frontier-crossers (and in other areas too), headlined the April 15 Tea Party in Gilbert, Arizona.

Arpaio isn't just repellent to libertarians. He turns off conservatives who don't let their belief in border controls undermine their support for the rule of law and the Bill of Rights. If you're worried about an ugly element in the Tea Parties, don't fret about militias, Oath Keepers, and the other alleged demons invoked by the movement's establishment critics. Arpaio represents a much more substantial menace: the threat of lawless law enforcement.

Greeks Break the Bailout Dish

Greek Prime Minister George Papandreou, in an emergency accouncement, has officially called on the European Union to bail out his wastrel, spendthrift, socialist failed state. From Los Tiempos de Nueva York:

“The time has come for us to ask our partners in the E.U. to activate the mechanism we formulated together.”

He was referring to an emergency aid package arranged two weeks ago in Brussels. The plan foresees up to €30 billion, or $40 billion, in loans from Greece’s euro-zone partners, and up to €15 billion from the International Monetary Fund.

The activation of the E.U.-I.M.F. rescue plan, Mr. Papandreou said, “will send a strong message to the markets that the E.U. is not playing their game and will not leave its currency at risk.”

Whole article. If by "game," Panandreou means "making rational decisions based on past behavior and future prospects," then he is certainly right: Greece is not playing that game. The case against bailing out Greece is so strong even Old Europe has gotten the message. German Chancellor Angela Merkel, one of the few marginally responsible players in the Great Recession, is still talking tough on the bailout, and as noted here, German voters are hopping mad about the possibility of dumping more money into the Aegean. Why would Germans be acting like such misers? From the Times again:

Other countries like Germany, the Netherlands and Austria have kept deficits down while retaining an edge in global markets, in part of by restraining domestic wage increases. France lies somewhere between the two camps.

Greek bonds have shot up to yields above 8.7 percent, but here's a curiosity: While Portugal, widely considered to be the next of the PIIGS countries in line to default, has also seen its price of debt service climb, it is still running a yield of just 4.8 percent on 10-year bonds. That's less than 1 percent above the current yield on 10-year U.S. Treasury bonds. Now the United States is not exactly setting a shining example of fiscal responsibility, but it appears to be some way from default, and unlike Portugal it has the ability to inflate away its debt. So why isn't the land of Fado, Fatima, and Futbol getting rougher justice in the debt markets?

James Grant: Stick Bankers With the Bill

Grant's Interest Rate Observer editor James Grant gives an old-timey suggestion for making sure bankers behave responsibly: Make them personally liable for the losses that, under the Bush/Obama structure, are being taken by you and me:

The substitution of collective responsibility for individual responsibility is the fatal story line of modern American finance. Bank shareholders used to bear the cost of failure, even as they enjoyed the fruits of success. If the bank in which shareholders invested went broke, a court-appointed receiver dunned them for money with which to compensate the depositors, among other creditors. This system was in place for 75 years, until the Federal Deposit Insurance Corp. pushed it aside in the early 1930s. One can imagine just how welcome was a receiver's demand for a check from a shareholder who by then ardently wished that he or she had never heard of the bank in which it was his or her misfortune to invest.

Nevertheless, conclude a pair of academics who gave the "double liability system" serious study (Jonathan R. Macey, now of Yale Law School and its School of Management, and Geoffrey P. Miller, now of the New York University School of Law), the system worked reasonably well. "The sums recovered from shareholders under the double-liability system," they wrote in a 1992 Wake Forest Law Review essay, "significantly benefited depositors and other bank creditors, and undoubtedly did much to enhance public confidence in the banking system despite the fact that almost all bank deposits were uninsured."

Like one of those notorious exploding collateralized debt obligations, the American financial system is built as if to break down. The combination of socialized risk and privatized profit all but guarantees it. And when the inevitable happens? Congress and the regulators dream up yet more ways to try to outsmart the people who have made it their business in life not to be outsmarted. And so it is again in today's debate over financial reform. From the administration and from both sides of the congressional aisle come proposals to micromanage the business of lending, borrowing and market-making: new accounting rules (foolproof this time, they say), higher capital standards, more onerous taxes. If piling on new federal rules was the answer, we'd long ago have been in the promised land.

I'm not sure how this would prevent investment banks from organizing themselves as corporations rather than partnerships and avoiding this liability, though I guess you could write the regulations in a way that blocks that option. More on the proposal and the study Grant cites.

Axel Leijonhufvud, Professor of Monetary Theory and Policy at the University of Trento, Italy, gives another explanation of how the double liability system would work:

To do this, one would first have to create a special type of equity for bank employees. These E-shares would be subject to double liability. If the bank were to fail, the holders would be liable for a sum equal to the value of their shares on the date that they were originally received. E-shares would be non-marketable but exchangeable one-for-one for ordinary shares at market value five years after the owner has left the employ of the financial institution in question.

The second element of such a liability scheme would regulate the extent to which executive compensation would have to be in the form of E-shares. Lower-level employees who are not among the decision makers of the bank should naturally not be part of the program. So, the first $150,000 – or wherever the poverty line is supposed to go in banking nowadays – would be exempt. Compensation would be entirely in ordinary salary. Starting at some such level part of compensation would have to be in E-shares with the proportion rising to, say, 80% at the CEO and CFO level.

Here's how they were discussing double liability way back in Old '37. Grant says bringing back that system would restore the "fear of God" that Chemical Bank's president referred to back when bankers were known for the their staid sense of responsibility. We could use a little more of that attitude. Say what you will about Milton Drysdale, but he was determined that the Clampetts never lose a penny of their deposit, even if he had to impersonate an Indian chief or dress up like Kaiser Wilhelm to make sure of it:

First Annual Everybody Draw Mohammad Day

Via Dan Savage's blog at The Stranger, some clever chappie (I don't know who) has declared May 20, 2010 "Everybody Draw Mohammad Day," in support of Matt Stone and Trey Parker and in opposition to religious thuggery. Why May 20? I haven't a clue, though it could have something to do with Otto ascending the throne of Greece. Or, more likely, King Sancho IV of Castile's founding of the Study of General Schools of Alcalá.

I will be employing my tremendous skill as an illustrator, of course, and expect that my colleagues will do the same. If they refuse, they will be declared weak-kneed, namby-pamby, quisling infidels and will be shamed on this blog (Though such idle threats rarely work these days; perhaps I could threaten them with a painful death, which seems to do the trick). If readers would like to show their solidarity, please email your Mohammad masterpieces to me here: mmoynihan at reason.com. The best ones will be published on Hit & Run, which, along with the concomitant death threat, is reward enough.

"Eminent domain, no one likes it"

That’s Auburn, New York Mayor Michael Quill talking to Fox News, where he defended his city’s shameful threat to use eminent domain against private property on behalf of a hotel conference center. "We have a responsibility to the entire community," Quill told Fox, "we do not want to hurt an individual property owner or business owner, but we have to look at the long range for the entire community." Think of the community! Fox also turned to Quill’s potential future victims for their thoughts:

"This is abuse, it's one case of eminent domain abuse," says Renee Smith-Ward, owner of a dog grooming salon, Wag'In Tail, that could be plowed down for the hotel's parking lot. "I don't believe it's right to take someone's property away from them for a hotel, for a private developer."  

"These people just want to come in and steal it from you," says property owner Michael Kazanivsky, who says he has dreams to build a family amusement center on what is now a grass and rubble filled lot. "They're trying to take if from me," he says bitterly, "it's not right."

He told Fox News that he put his "heart and soul into it," and now "someone just comes and says 'I want that, give it to me or that's it!.. it's hell."   The plan would put an $11 million, 88 room hotel on what is now a mixture of an abandoned building, and two businesses.

Read the whole thing here.

Tim James Is Making Sense

Wonkette declared this the funniest 30 second spot so far this season. And I'm inclined to agree. Take it away, Alabama gubernatorial candidate Tim James:

James doesn't like it that the state offers drivers license exams in 12 (12!) whole languages. "We're only givin' that test in English, if I'm governor," he promises. Why? To "save money" and because "this is Alabama, we speak English." Take that, legal immigrants who desire to continue follow the rules by paying to obtain a legal license to drive a car but don't know the word for intersection! Shoo!

At the end of the ad he says, "It makes sense." Then there's a long thoughtful(?) piano-filled pause. And then he says, uncertainly, "Does it to you?" Alas, Tim, saying the magical phrase "it makes sense" doesn't make it so.

Four Million New Fines For Declining to Purchase Insurance

Since taking office, President Obama hasn't missed an opportunity to remind voters of how many individuals his health care reform law is projected to cover. But he's talked a lot less about how many people the law would fine for choosing not to purchase insurance. Earlier today, the Congressional Budget Office put out an estimate. The office's guess is that, in 2016, two years after the mandate kicks in, about 4 million individuals will face fines for going without health insurance. Here's the gist:

Among those who are subject to the penalty, many will voluntarily report on their tax returns that they are uninsured and pay the amount owed. However, other individuals will try to avoid making payments. Therefore, the estimates presented here account for likely compliance rates, as well as the ability of the Internal Revenue Service (IRS) to administer and collect the penalty. In total, about 4 million people are projected to pay a penalty because they will be uninsured in 2016 (a figure that includes uninsured dependents who have the penalty paid on their behalf). CBO and JCT estimate that total collections from those penalties will be about $4 billion per year over the 2017–2019 period.

Obama's frequent promise that "if you like your health care plan, you will be able to keep your health care plan" has always been a whopper. It's also been a convenient way to avoid talking about all the individuals who either do opt out of coverage or would like to. What the CBO is saying with this letter is that, each year, millions of people can be expected to opt out, and they'll be required to pay billions in penalties as a result. Expanding choice this is not.

The CBO letter says nothing about the collection process, but given that there's a dollar figure attached to the revenue projections, I suppose we can presume this is the number of people who are expected to actually pay. But with the IRS seeming to lack any significant ability to enforce the mandate, it's not clear how the provision's penalties will actually work in practice.  Some people will likely pay the fine because it's a better deal. Others will likely game the system—hopping on and off of insurance plans in order to get coverage for big expenses without paying in long term. And if that's the case, we could find ourselves in an insurance death spiral, with a shrinking insurance pool and premium prices rising faster than ever. All of which is to say that no matter how the mandate works, or doesn't, the possible outcomes don't look good. 

I wrote about the madness of the mandate here and noted a constitutional case against the provision here

Legalize Pot? No. Treat Pot Like Alcohol? Yes.

Over at The Huffington Post, Reason contributor Ryan Grim argues that press coverage of a recent Roper/CNBC poll understated the public's support for marijuana legalization. The news stories highlighted the fact that 55 percent of respondents said they opposed "the complete legalization of the use of marijuana for any purpose," while only 33 percent said they supported that policy. But when the respondents were asked to think about the legal treatment of alcohol, 56 percent said the regulations for marijuana should either be the same or less strict. Coincidentally, that's the same as the percentage of Californians who recently told SurveyUSA they support an initiative on the November ballot that would legalize pot.

I'm aware of only one other nationwide poll that has found majority support for legalizing pot (as opposed to decriminalizing possession of small amounts): a May 2009 Zogby poll in which 52 percent of respondents backed the idea. As I explained at the time, the sample (which was"weighted to match the 2008 presidential outcome—54 percent Obama voters and 46 percent McCain supporters"), may have been biased in favor of reform, and the setup to the question was slanted against prohibition. The new poll does not seem to have either of those problems.

Here's a result that should interest those who think playing up the tax revenue to be gained by legalizing marijuana is a good strategy: When the respondents were asked how they would feel "if state governments were to tax the sale of marijuana and use it to pay for state programs and services," their support fell quite dramatically, from 33 percent to 14 percent. I myself am not very fond of the tax argument (or of the "programs and services" likely to be funded by new tax revenue), so I rather like that finding. But I have to admit that the 33 percent favoring "complete legalization" may have included a lot of pot smokers who don't want to pay taxes.

The detailed results of the Roper poll are here (PDF). More on pot polling here. Reason.tv recently offered three reasons to legalize pot.

[Thanks to Tom Angell at LEAP for the tip.]

New at Reason: Brian Doherty on the New Militia Scare

Last spring, University of Hartford historian Robert Churchill released a new book about "libertarian political violence and the origins of the militia movement," To Shake Their Guns in the Tyrant’s Face. He should have waited a year, writes Senior Editor Brian Doherty. This past week the book's subject matter came roaring back to the forefront of American politics, as politicians and their friends in the media policed the acceptable limits of dissent in a democratic republic.

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Relax, It Can Always Get Worse, Chapter XXXIV, Featuring The Smurfs in 3D

Given the release date, the promised destruction of the world in 2012 comes too late.

"The Smurfs" Begins Production in New York

Principal photography began Friday, March 26, in New York on Columbia Pictures'/Sony Pictures Animation's hybrid live-action and animated family comedy, The Smurfs, it was announced today by Bob Osher, president of Sony Pictures Digital Productions, Hannah Minghella, president of Sony Pictures Animation and Doug Belgrad, president of Columbia Pictures.

Audiences everywhere are in for a Smurfy good time as the Smurfs make their first 3D trip to the big screen.  When the evil wizard Gargamel chases the tiny blue Smurfs out of their village, they tumble from their magical world and into ours - in fact, smack dab in the middle of Central Park. Just three apples high and stuck in the Big Apple, the Smurfs must find a way to get back to their village before Gargamel tracks them down.  The film is set for release August 3, 2011.

Thrill again to the sites and sounds and smells of The Smurfs getting Nagasakied in this UNICEF anti-war ad. To paraphrase Oscar Wilde, you'd need to have a heart of stone not to laugh at this:

One Child Policy Update

Back in December, Financial Post editor-at-large Diane Francis wrote a column in which she forthrightly declared:

The "inconvenient truth" overhanging the UN's Copenhagen conference is not that the climate is warming or cooling, but that humans are overpopulating the world.

A planetary law, such as China's one-child policy, is the only way to reverse the disastrous global birthrate currently, which is one million births every four days....

China has proven that birth restriction is smart policy.

So what does government control of family sizes look like? Earlier this week, the Times (London) reported:

Doctors in southern China are working around the clock to fulfil a government goal to sterilise — by force if necessary — almost 10,000 men and women who have violated birth control policies. Family planning authorities are so determined to stop couples from producing more children than the regulations allow that they are detaining the relatives of those who resist.

About 1,300 people are being held in cramped conditions in towns across Puning county, in Guangdong Province, as officials try to put pressure on couples who have illegal children to come forward for sterilisation.

The 20-day campaign, which was launched on April 7, aims to complete 9,559 sterilisations in Puning, which, with a population of 2.24 million, is the most populous county in the province.

A doctor in Daba village said that his team was working flat out, beginning sterilisations every day at 8am and working straight through until 4am the following day.

Instead of tying tubes or snipping vas deferens, it turns out that there is something constructive that governments can do to reduce population growth -- establish economic freedom. As I reported in my column, "The Invisible Hand of Population Control":

In 2002, Seth Norton, a business economics professor at Wheaton College in Illinois, published a remarkably interesting study on the inverse relationship between prosperity and fertility. Norton compared fertility rates of over 100 countries with their index rankings for economic freedom and another index for the rule of law. "Fertility rate is highest for those countries that have little economic freedom and little respect for the rule of law," wrote Norton. "The relationship is a powerful one. Fertility rates are more than twice as high in countries with low levels of economic freedom and the rule of law compared to countries with high levels of those measures."

Norton found that the fertility rate in countries that ranked low on economic freedom averaged 4.27 children per woman while countries with high economic freedom rankings had an average fertility rate of 1.82 children per woman. His results for the rule of law were similar; fertility rates in countries with low respect for the rule of law averaged 4.16 whereas countries with high respect for the rule of law had fertility rates averaging 1.55.

So rather than enforce a one child policy, why not enforce contracts and property rights instead? Governments will get the same or even better population results (and without all those messy surgeries).

Reason Foundation's Anthony Randazzo Tells Congress to Ditch GSEs Already; Special Appearance by Rep. Barney Frank

Reason Foundation's Anthony Randazzo testified before the House Committee on Financial Services at an April 14, 2010 hearing to discuss reforming the regulatory framework for housing finance.

Randazzo argued that government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac played a significant role in creating the housing bubble, and that current U.S. policy is perpetuating a cycle of boom-and-bust in the housing market. He also argued that before there can be a genuine, sustainable recovery, Congress will have to eliminate the GSEs and open more of the mortgage market to the private sector.

Approximately 12 minutes. Go to Reason.tv for downloadable versions of this and all other Reason.tv vids.

GM Pays Back TARP Loans With...TARP Loans!

Have you driven a Ford lately? That might be a good idea, as it seems that GM's claims to have repaid its TARP loans in full and ahead of schedule are, well, bullshit. Sen. Charles Grassley (R-Iowa) has sent a letter to Treasury Secretary Tim Geithner pointing out that GM has apparently paid back its TARP money with...more TARP money. Here's some of Grassley's query:

During his testimony [Inspector General for TARP Neil] Barofsky addressed GM’s recent debt repayment activity, and stated that the funds GM is using to repay its TARP debt are not coming from GM earnings. Instead, GM seems to be using TARP funds from an escrow account at Treasury to make the debt repayments. The most recent quarterly report from the Office of the Special Inspector General for TARP says "The source of funds for these quarterly [debt] payments will be other TARP funds currently held in an escrow account."...

Therefore, it is unclear how GM and the Administration could have accurately announced yesterday that GM repaid its TARP loans in any meaningful way. In reality, it looks like GM merely used one source of TARP funds to repay another. The taxpayers are still on the hook...

The bottom line seems to be that the TARP loans were "repaid" with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and the Administration have claimed in their speeches, press releases and television commercials. When these criticisms were put to GM’s Vice Chairman Stephen Girsky in a television interview yesterday, he admitted that the criticisms were valid:

Question: Are you just paying the government back with government money?

Mr. Girsky: Well listen, that is in effect true, but a year ago nobody thought we’d be able to pay this back.

Girsky, you magnificent bastard! If you managed to say that line without laughing, you deserve all the unsold Pontiacs in North America.

Whole thing here. Via Real Clear Politics via Reason stalwart Manny Klausner.

And, needless to say, Grassley isn't even raising the massively important issue of whether the freaking bailout via TARP funds was legal. Spoiler alert: It wasn't.

But don't worry, GM loses money hand over fist and is poised to lose even more money when the market rebounds and they start selling more units. That's what happened in 2007, a record-setting year for GM when it sold 9.4 million cars worldwide and lost $38 billion. Check it out, why don't you?:

This post, incidentally, was written by a very satisfied owner of a used Buick.

Update: Fox News reports that TARP IG Barofsky told them on Wednesday: "I think the one thing that a lot of people overlook with this is where they got the money to pay back the loan. And it isn't from earnings.... It's actually from another pool of TARP money that they've already received...I don't think we should exaggerate it too much. Remember that the source of this money is just other TARP money."

Fox News unconvincingly hypothesizes "the TV spot [touting its early payback of loans] may land GM in hot water with the Federal Trade Commission over its truth-in-advertising laws, which prohibit ads that are 'likely to mislead consumers.'"

Stevens the Censor v. Stevens the Freedom Fighter

Over at the First Amendment Center, David L. Hudson gathers John Paul Stevens' 10 worst opinions related to freedom of speech. The list includes several cases I mentioned in my column on Stevens last week.

At the top, quite appropriately, is FCC v. Pacifica, the 1978 decision that upheld regulation of broadcast "indecency" on the grounds that TV and radio were "uniquely pervasive." We are still living with the consequences of Stevens' half-baked opinion, which has created an arbitrary distinction between programming based on whether it arrives over the air, in which case its content can be censored, or through wires, in which case channels are free to show whatever their customers want to see. (Satellite TV and radio also fall into the latter category, although their signals travel through the air too; go figure.) From the perspective of the typical consumer, who flips from one channel to another without regard to the mode of distribution, the distinction makes no sense. But regulation of broadcast indecency was never really about helping consumers, who after all are quite capable of voting with their remote controls. It was about placating professional moralists while letting paternalistic busybodies at the FCC dictate matters of taste. The FCC's enforcement actions in this area have become so laughable that the current Court (which reportedly takes "a robustly libertarian view" of the First Amendment) may finally repudiate Stevens' weak and increasingly obsolete reasoning, though continued incoherence would be preferable to a consistency achieved by letting bureaucrats meddle with cable and satellite programming.

The same year he wrote the majority opinion in Pacifica, upholding content-based regulation of TV and radio, Stevens wrote the majority opinion in Young v. American Mini Theatres, upholding content-based regulation of movies. Stevens said restricting the locations of businesses offering adult entertainment was constitutionally permissible becauses those businesses have "secondary effects." The decision is an interesting contrast to Stevens' 1997 majority opinion in Reno v. ACLU, which overturned the Communications Decency Act, a ham-handed attempt to prevent minors from seeing inappropriate material on the Internet. The comparison not only suggests that Stevens' thinking evolved over the years but also highlights how dramatically the distribution of sexually explicit material has changed. Online distribution makes pornography less obtrusive, obviating the concerns that motivated the zoning that the Court upheld in 1978. At the same time, it makes pornography more accessible and pervasive, raising concerns about age restrictions and exposing distributors to obscenity prosecutions anywhere in the country, including conservative jurisdictions where "contemporary community standards" make conviction easier.

Hudson also notes that Stevens voted to uphold a ban on flag desecration, though he does not mention that he did so twice. Congress responded to the the first decision, overturning a Texas law, by passing its own ban, rushing to save Old Glory with the same constitutionally reckless urgency it would later show in the Terri Schiavo case. The Supreme Court promptly overturned it, and Stevens dissented again.

Two other cases are striking: Hudson reminds us that Stevens dissented from the 2000 decision that said freedom of association means the Boy Scouts have a right to insist on heterosexual troop leaders and from a 1984 decision that overturned a law prohibiting nonprofit educational radio stations from airing editorials. In the latter case, Stevens' rationale is not at all surprising coming from a justice who this year insisted that election-related speech by powerful interests must be censored for the sake of democracy: "The quality of the interest in maintaining government neutrality in the free market of ideas—of avoiding subtle forms of censorship and propaganda—outweigh[s] the impact on expression that results from this statute."

For the sake of balance, have a look at Hudson's list of "Stevens' Top 10 in First Amendment Jurisprudence," which includes several cases where Stevens sided with freedom. Despite his anti-corporate rhetoric in cases like Citizens United, Stevens has been willing to overturn restrictions on commercial speech. He wrote the majority opinion in the 1996 case 44 Liquormart v. Rhode Island, which struck down a state ban on advertising the alcohol content of beverages. "Precisely because bans against truthful, nonmisleading commercial speech rarely seek to protect consumers from either deception or overreaching, they usually rest solely on the offensive assumption that the public will respond 'irrationally' to the truth," he said. "The First Amendment directs us to be especially skeptical of regulations that seek to keep people in the dark for what the government perceives to be their own good." I'm not sure how to reconcile this Stevens with the one who thinks the average American cannot be trusted to assess political ads or change the channel when he's offended by dirty words.

Reason Writers Around Town: Air Travel and Volcanoes

At The New York Times' Room for Debate blog, Reason co-founder Robert Poole weighs in on aviation's importance to the world economy:

The disruptions to air travel caused by a hasty overreaction to the volcano eruption in Iceland illustrate how our global economy depends on aviation.

Nearly one-third, by value, of all world trade moves by air. Components for BMW’s South Carolina auto plant arrive daily by air. Summer fruit from Chile reaches our supermarkets all winter by air and flowers from Kenya reach the whole world by air via The Netherlands. Global tourism, made possible by aviation, is by some measures the world’s largest industry.

Airlines lost nearly $2 billion in revenues from the European shutdown, European Union airports an additional $400 million, and air traffic control providers another $160 million.

All had a stake in reopening airspace as rapidly as possible — but they were stymied by confused and panicked government policymakers. Officials relied on generic computer models rather than sending up test planes from day one to more precisely map the ash cloud in real time.

Poole's full column.

Recently at Reason.tv: Welcome to Oaksterdam! Epicenter of the Marijuana Legalization Movement

Located in the pot-friendly "Oaksterdam" section of Oakland, California, Oaksterdam University aims to teach its students the fundamentals of growing and marketing marijuana.

The curriculum covers everything from law and politics to business and horticulture. The university also provides training for entrepreneurs in the pot industry as well as several dispensaries, a Bulldog Coffeeshop, and a gift shop. University founder Richard Lee tells Reason.tv that he and other Bay Area activists were inspired by the example of Amsterdam, a city with some of the most liberal marijuana policies in the world. As he put it, "We went to Amsterdam and said you know, hey, we can do this here; it shows it can work.”

Oaksterdam University is one of the major sponsors of the “Tax and Regulate” initiative that will be on the ballot in California this November. If passed, marijuana would be legalized and regulated like alcohol.

Produced by Paul Feine; shot by Alex Manning, edited by Hawk Jensen and Alex Manning.

Approximately 8 minutes long. 

Go to Reason.tv for downloadable iPod, HD and audio versions of this and all our videos.

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There He Goes Again

Now that the world is belatedly waking up to the fact that President Obama lied his face off about the fiscal impacts of health care reform, maybe it's an appropriate time to point out that he's lying his face off about financial reform as well:

The goal is to make certain that taxpayers are never again on the hook because a firm is deemed "too big to fail."

Now, there's a legitimate debate taking place about how best to ensure taxpayers are held harmless in this process. And that's a legitimate debate, and I encourage that debate. But what's not legitimate is to suggest that somehow the legislation being proposed is going to encourage future taxpayer bailouts, as some have claimed. That makes for a good sound bite, but it's not factually accurate. It is not true.

Not legitimate, not factually accurate, not true. Those are pretty strong words to describe National Public Radio, Mr. President!

Take, for example, "too big to fail" -- the idea that if one of the largest banks in the country gets into trouble, the government will save it with taxpayer money.

"A vote for reform is a vote to put a stop to taxpayer-funded bailouts," Obama said in his speech in New York on Thursday.

I cannot find any experts -- of any party -- who are willing to agree with Obama on this one.

"We're not seeing a very forceful step on the too-big-to-fail-problem," said Carmen Reinhart, an economist at the University of Maryland. "If there's any doubt that the crisis may be systemic, we will bail out again."

So, if a major bank says, "Hey, save us or the economy will go under," the government's going to save the bank. Full stop.

We did find one expert, Doug Elliott of the Brookings Institution, who is actually a huge fan of the regulatory reform bills. He says they bring a bunch of changes that make our economy safer.

But they don't end too big to fail, he said. The only way to do that is to break them up so that "they're so small that we don't care" if they fail.

Note: This report is from NPR's Adam Davidson, who has done some of the most thorough reporting out there on the financial crisis.

Link via Tim Carney's great Twitter feed.

New at Reason: Katherine Mangu-Ward Reviews The Cartel

The Cartel is a first film for Bob Bowdon, a TV journalist and occasional on-screen reporter for the satirical Onion News Network. As you might expect from an Onion reporter, Bowdon has a keen eye for the ridiculous—and the public school monopoly offers him a lot of material to work with. Focusing on New Jersey, which spends more per pupil than any other state, The Cartel contains the usual litany of massive spending, academic failure, administrative bloat, and corruption, plus a few "Life Imitates the Onion" moments. Senior Editor Katherine Mangu-Ward reviews the documentary, which opens in today in Boston, Chicago, Denver, Minneapolis, San Francisco, Washington D.C., Philadelphia, and St. Louis.

View this article

ObamaCare to Cost More Than Expected? Where Have I Heard This Before?

Today, as Nick Gillespie noted earlier, Washington is shocked, SHOCKED to learn that the Affordable Care Act might not be as easy to pay for as promised. According to an AP summary, a new report "found that the law falls short of the president's twin goal of controlling runaway costs, raising projected spending by about 1 percent over 10 years. That increase could get bigger, since Medicare cuts in the law may be unrealistic and unsustainable, the report warned."

But didn't budget-hottie Peter Orszag warn us not to be swayed by such obviously false charges? After all, ObamaCare is fiscally responsible! What clan of knee-jerk critics could have produced such a report? The libertarians at Cato? The conservatives at Heritage? The neocons at AEI? The socialists at Physicians for a National Health Plan?

Try again: This is the word straight from the Obama administration's Health and Human Services Department, the agency assigned to manage the reforms at the federal level.

Nor did the report's bad news stop there. It also "projected that Medicare cuts could drive about 15 percent of hospitals and other institutional providers into the red, 'possibly jeopardizing access' to care for seniors."  So when the President told AARP members that "nobody is talking about reducing Medicare benefits," presumably he meant nobody but, um, Medicare's chief actuary. But that doesn't really count, does it?

Of course, at this point, if we discount the claims of any agency or news organization that has expressed caution or concern that the law might not work as promised, we have to throw out the Congressional Research Service, the Joint Committee on Taxation, the New York Times, the L.A. Times, and The Hill, just to name a few. In the days since the Affordable Care Act's passage, reports from government agencies and mainstream news organizations have started to ask many of the same questions—and come to many of the same conclusions—that were asked by critics of the law in the year before it was passed.

Just look at the New York Times. Since the law's passage, the Grey Lady has reported that New York state's efforts to regulate insurance companies drove premiums through the roof and destroyed the market—and an individual mandate, which the state lacked, is a theoretical fix at best. The paper of record also reported that the law may not actually bring down costs for the sick, that the law was hastily and confusingly written (enough that it may deprive Congressional representatives and their staffs of health care coverage), that it may not help all the tough-luck cases it was supposed to resolve, and that health insurers may soon be turned into de facto public utilities.

The details vary somewhat, but cumulative picture is one that's broadly in line with what critics have been arguing since the first legislative drafts became available (at least). Rather than offer true reform for our country's health care system, ObamaCare takes a dysfunctional mess and makes it even more dysfunctional, and at greater cost.

I noted the failure of state regulations here, expressed skepticism about the law's cost estimates here, and looked at the dire fiscal effects of state coverage expansions here.

David Brooks: It's a Pity We Didn't Drive a Stake Through Barry Goldwater's Dead Heart When We Had the Chance

The Last Honest Man in American politics is also, apparently, the Last Moderate:

In these columns I try to give voice to a philosophy you might call progressive conservatism. [...]

This general philosophy puts me to the left of where the Republican Party is now, and to the right of the Democratic Party. It puts me in that silly spot on the political map, the center, or a step to the right of it.

The center has been losing political power pretty much my entire career. [...]

Politics is more polarized than ever. The two parties have drifted further to the extremes. The center is drained and depressed. [...]

These shifts in the electorate have had predictable effects on the two parties. During periods when the government war is at full swing, the libertarian/Goldwater-esque tendency in the Republican Party becomes dominant and all other tendencies become dormant. That has happened now. [...]

This is a disappointing time. The Democrats have become the government party and the Republicans are the small government party. The stale, old debate is back with a fury. The war, as always, takes control.

In case you didn't get the message that the Brooksian position represents intellectual curiosity while the "libertarian/Goldwater-esque tendency" is a dog-whistle of "predictable" groupthink, the columnist calls the Government War a "theological debate," " a "social script," "playing out just as you'd expect it to," with "everybody [falling] into their preassigned roles," "strengthening those with pure positions and leaving those of us in the middle in the cross-fire."

Like President Obama and his festival of "false choices" and "tired debates," Brooks' exasperation at the "stale, old debate" is masquerading as above-it-all pragmatism and honesty, when in fact it's an expression of frustration that the opposing side of the argument hasn't had the good manners to declare defeat. David Brooks didn't think the debate over the size of government was stale and old in 2004; he thought that was a particularly bully time to celebrate "the death of small-government conservatism," and pronounce that his then-ascendant "progressive conservatism" was the blueprint for the GOP "to become the majority party for the next few decades." No wonder he's depressed: Not only was he terribly wrong on both policy and politics, but Republican (and Tea Party) upswings have come as a direct result of at long last rejecting Brooks' advice.

Recently at Reason.tv: 3 Reasons to Legalize Pot Now!

As the United States enters its 72nd year of marijuana prohibition, it's time to consider legalizing pot once and for all, for at least three reasons:

1. The tax revenue and savings in law enforcement costs. A 2005 cost-benefit analysis done by Harvard economist Jeffrey Miron found that legalizing marijuana and taxing it similar to alcohol would generate over $6 billion in new revenue and save nearly $8 billion in direct law enforcement costs. Pot is already the biggest cash crop in many states; bringing it into the open market would pump all sorts of energy into the economy.

2. It's going to happen anyway, so why delay the inevitable? Increasing numbers of Americans realize that pot prohibition is an ineffective and costly policy. A 2009 poll by Zogby found that 52 percent of Americans agreed that marijuana should be taxed and regulated like booze. A Field Poll last year of California residents, who will vote on a legalization ballot initiative in the fall, found that 56 percent wanted legalization. Other polls show historically high percentages favoring legalization. In a world of busted budgets, it's crystal clear that spending time and energy policing marijuana is not worth it.

3. Keep Your Laws Off Our Bodies. Never mind that by virtually every measure, pot is safer and less than disruptive than booze. Pot prohibition in the 1930s was the result of hysteria, not serious threats to society. We own our bodies and should be free to eat, drink, and smoke what we want. And to take responsibility for our actions, whether we're straight or we're stoned.

Approximately 2.30 minutes long. Written and produced by Meredith Bragg and Nick Gillespie, who also hosts.

Go to Reason.tv for downloadable versions.