Voice For Liberty

Category: Regulation

  • Regulation has not lessened, instead it has harmed us

    Last week’s Wichita Eagle featured an op-ed by Brad Beachy, who is co-chairman of Wichita Democracy for America. Several of the claims made by Beachy deserve examination. In particular, Beachy blames free markets as the cause of our current economic problems: “The Great Recession we’re in now started in late 2007, after several years of deep tax cuts and major repeals of government regulation in the financial market.”

    Let’s look at regulation. Not everyone agrees with Beachy’s claim of major repeals of regulation in recent years. The liberal Time Magazine wrote this assessment of George W. Bush’s regulatory legacy about a year ago:

    The only major piece of regulatory legislation enacted during the Bush years was the Sarbanes-Oxley Act, which dramatically increased regulation of corporate financial disclosures. The really big regulatory changes being pointed to now as possible culprits for the crisis date back to Bush’s predecessors: Bill Clinton, Ronald Reagan, even Jimmy Carter and Gerald Ford. So the popular Democratic refrain that “Bush-era deregulation” is to blame for our troubles is a little hard to square with the evidence. What is true is that most Bush-era financial regulators were less than enthusiastic about the very act of regulating, and that Bush’s “ownership society” push glossed over a lot of potential dangers. Bush didn’t cause the financial regulatory breakdown, but he didn’t jump in to fix it either.

    The housing crisis played a large, perhaps dominant role in the current recession. So let’s look at what were the causes of that to see if deregulation played a role.

    Last October John A. Allison, chairman and former CEO of BB&T Corporation, the nation’s 10th largest financial-holding company, presented a lecture at the 30th annual Economic Outlook Conference at Century II, produced by the Center for Economic Development and Business Research (CEDBR) at Wichita State University. His lecture, titled “The Financial Crisis: Causes and Possible Cures” provided valuable insight into the causes of the problem we’re in.

    Allison said “Only government can make a mistake of this magnitude possible.” Government and its regulators, in this case the Federal Reserve System, the Federal Deposit Insurance Corporation, the housing policymakers Freddie Mac and Fannie Mae, and the Securities and Exchange Commission, were the proximate cause of the problem, and prevented natural market corrective forces to work.

    At the Federal Reserve, management of our nations’ money supply is a problem. “The huge level of federal debt we have today would not be practical if the government did not own the monetary system,” Allison said.

    FDIC insurance of bank deposits leads people to invest in banks without regard to the risk the banks take. It also made the “pick-a-payment” mortgage possible, where each month a homeowner may owe more than the month before.

    Freddie Mac and Fannie Mae exist to promote housing ownership, and they promoted it far above the natural rate of home ownership. Their actions also made the subprime mortgage possible.

    The credit rating agencies sanctioned by the SEC — S&P, Moody’s, and Fitch — are given a monopoly over the issuance of ratings, and they failed in their duty.

    Before the innovations of Freddie Mac and Fannie Mae, savings and loan banks would originate mortgages locally and then hold them locally. Now, the model is “originate and sell,” Allison said. These government regulations made the mortgage broker origination model viable, and led to huge profits, until the bubble burst.

    So when Beachy asks “Why does the unseen hand of the marketplace, in its infinite wisdom, give million-dollar bonuses to the CEOs of mortgage institutions who drive their companies into bankruptcy” we have to answer it’s not the marketplace that did this. It was government policy and regulation, developed over the last few decades, that led to this situation. Our financial system operates in nothing resembling a free market environment.

    By the way, Beachy starts his op-ed questioning the motives of those he criticizes, in this case the Americans For Prosperity Foundation: “Billionaire David H. Koch presides on the foundation’s board of directors and has funded the organization with millions of dollars.” If motives are reason for criticism, we ought to note that Beachy — an employee at a government-owned and run institution — has a self-interest in keeping the government spending gravy train flowing.

  • An inept Kansas smoking analogy

    From last March.

    In today’s Wichita Eagle, Wichita busybody Charlie Claycomb makes another inept analogy in an attempt to press his anti-smoking agenda statewide.

    A while back he tried to compare a smoking section in a restaurant with a urinating section in a swimming pool. This is ridiculous to the extreme, as I show in the post It’s not the same as pee in the swimming pool.

    Now in today’s letter in the Eagle, Claycomb says that although the United States Constitution gives us the right to bear arms, since that right is heavily regulated, government has license to regulate smoking, as smoking isn’t mentioned at all in the Constitution.

    Here’s why this is another ridiculous analogy (without conceding whether the regulations on arms are justified or effective): A person in, say, a bar that’s carrying a gun can’t be detected as you enter the bar. You just can’t tell upon entering an establishment whether someone has a concealed gun and intends to cause harm to patrons. This is the case even if there’s a law prohibiting carrying guns into bars, and even if the bar has a “no guns” sign.

    But you sure can tell if people are smoking.

    Smoking ban supporters might argue that since there may be smoking in some establishments, my rights are being infringed since I can’t patronize those places without exposing myself to harmful smoke.

    That’s true, except about rights being violated. There’s definitely no right in the Constitution to be able to go everywhere you want on your own terms.

    “Mankind are greater gainers by suffering each other to live as seems good to themselves, than by compelling each to live as seems good to the rest.” — John Stuart Mill

    “Whenever we depart from voluntary cooperation and try to do good by using force, the bad moral value of force triumphs over good intentions.” — Milton Friedman

  • Why Obama is wrong about net neutrality

    “Net neutrality” sounds like a noble concept, doesn’t it? But it’s another example of one political position co-opting language in a way that mislabels the underlying agenda.

    In this case, net neutrality is a struggle over who should control the Internet. Some describe the contest as between government and free markets, while some think it’s between two competing set of corporate interests.

    It shouldn’t be a surprise as to who President Obama believes should control the Internet.

    Other resources on this topic:

    Save the Internet
    ‘Net Neutrality’ Is Socialism, Not Freedom
    The Durable Internet: Preserving Network Neutrality without Regulation
    AT&T, Google Battle Over Web Rules
    Net Neutrality: A Brief Primer

  • It’s not the same as pee in the swimming pool

    A repeat of a column from 2008. Mark McCormick no longer writes for the Wichita Eagle. Recently that newspaper concluded that because Wichita’s smoking ban caused no economic harm, it was a good thing to do. Let’s hope this regulatory zeal doesn’t spread to other areas.

    In a column in the February 27, 2008 Wichita Eagle (“Smoking ban issue not one to negotiate”), columnist Mark McCormick quotes Charlie Claycomb, co-chair of Tobacco Free Wichita, equating a smoking section in a restaurant with “a urinating section in a swimming pool.”

    This is a ridiculous comparison. A person can’t tell upon entering a swimming pool if someone has urinated in it. But people can easily tell upon entering a restaurant or bar if people are smoking.

    Besides this, Mr. McCormick’s article seeks to explain how markets aren’t able to solve the smoking problem, and that there is no negotiating room, no middle ground. There must be a smoking ban, he concludes.

    As way of argument, McCormick claims, I think, that restaurants prepare food in sanitary kitchens only because of government regulation, not because of markets. We see, however, that food is still being prepared in unsanitary kitchens, and food recalls, even in meat processing plants where government inspectors are present every day, still manage to happen. So government regulation itself is not a failsafe measure.

    Despite the doubts of nanny-state regulators, markets — that is, consumers — exert powerful forces on businesses. If a restaurant serves food that makes people ill, which do you think the restaurant management fears most: a government fine, or the negative publicity? Restaurants live and die by their reputation. Those that serve poor quality food or food that makes people ill will suffer losses, not as much from government regulation as from the workings of markets.

    But I will grant that McCormick does have a small point here. Just by looking at food, you probably can’t tell if it’s going to make you ill. Someone’s probably going to need to get sick before the word gets out.

    But you easily can tell if someone’s smoking in the bar or restaurant you just entered.

    The problem with a smoking ban written into law — rather than reliance on markets and individual choice — is that everyone has to live by the same rules. Living by the same rules is good when the purpose is to keep people and their property safe from harm, as is the case with laws against theft and murder. But it’s different when we pass laws intended to keep people safe from harms that they themselves can easily avoid, just by staying out of those places where people are smoking.

    For the people who value being in the smoky place more than they dislike the negative effects of the smoke, they can make that decision. McCormick and Claycomb want to deny people that choice.

    This is not a middle-ground position. It is a position that respects the individual. It lets each person have what they individually prefer, rather than having a majority — no matter how lop-sided — make the same decision for everyone. Especially when that decision, as Claycomb stated in another Wichita Eagle article, will “tick off everybody.” Who benefits from a law that does that?

  • Kansas can’t afford a cigarette tax hike

    This is a repost from 2008. The issues are the same, except this time it is Kansas Governor Mark Parkinson recommending an increase in cigarette taxes, and it is $.55 per pack instead of $.75.

    Research & Commentary: Kansas Can’t Afford A Cigarette Tax Hike
    By John Nothdurft, Legislative Specialist at The Heartland Institute

    The Kansas Health Policy Authority’s recommendation to use a 75-cent cigarette tax increase to pay for health costs should be worrisome — not only to smokers, but also to non-smokers and fiscally responsible legislators as well.

    The approach may seem appealing at first, but such tax increases are notoriously unpredictable and regressive. Funding a high-profile need such as health care with a cigarette tax increase is particularly hazardous because it ties an inherently unstable tax to an increase in government spending.

    A big question mark hovers over how much revenue the proposed cigarette tax hike would actually bring into the state’s coffers. According to the Center for Policy Research of New Jersey, since that state’s cigarette tax was raised 17.5 cents two years ago, the state has actually lost $46 million in tax revenue.

    Many other states have seen lower-than-projected revenue returns after cigarette tax hikes were put in place. This is a result of the general decline in tobacco use nationwide, cross-border shopping, Internet sales, smuggling, and other factors that are causing cigarette tax revenue streams to flatten.

    If Kansas legislators were to hike cigarette taxes to fund health care programs, they soon would be stuck having to choose between rolling back the funding for health care or raising other taxes. A recent National Taxpayers Union study found legislators usually do the latter. “Taxpayers face a seven out of 10 chance of seeing another net annual tax hike within two years of a tobacco tax hike,” the group reported.

    Cigarette tax increases also unduly burden low-income taxpayers and punish local businesses.

    The following articles offer additional information on cigarette tax hikes.

    Cigarette Tax Hikes Burn Hole in State Coffers
    Gregg M. Edwards, president of the Center for Policy Research of New Jersey, an independent nonprofit organization that addresses public policy issues facing New Jersey, reports how his organization found that New Jersey brought in less revenue after its cigarette tax hike than was coming in before it was implemented.

    Debunking the “Tax Thee, But Not Me” Myth: Five Reasons Why Non-Smokers Should Oppose High Tobacco Taxes
    According to the National Taxpayers Union, “the per-capita state and local tax burden in high-tobacco tax states is 8 percent above the national average, while the general tax bill for residents of low-tobacco tax states is 15 percent below the national average.”

    Poor Smokers, Poor Quitters, and Cigarette Tax Regressivity
    Dr. Dahlia Remler, with the Department of Health Policy and Management at Columbia University, rebuts the argument that cigarette taxes are not regressive.

    Tax Hikes Often Fail to Generate Expected Revenues
    Economists warn tobacco taxes are an unpredictable source of revenue.

    Six Reasons Not to Raise Tobacco Taxes
    Economist Dr. William Anderson of the Oklahoma Council of Public Affairs outlines six pitfalls of higher cigarette taxes.

    Tobacco: Regulation and Taxation through Litigation
    Professor Kip Viscusi breaks down the social costs of smoking, taking into consideration a wide array of factors including health costs, sick leave, and the lower pension and nursing home care costs incurred by smokers.

    Cigarette Tax Burns the Poor
    David Tuerck, professor of economics and executive director of the Beacon Hill Institute at Suffolk University, outlines how cigarette taxes unfairly burden low-income earners.

    Cigarette Taxes Are Fueling Organized Crime
    Patrick Fleenor, chief economist for the Tax Foundation, shows high cigarette taxes have fueled organized crime and a profitable black market in New York.

    Cigarette Tax Burnout
    Last year Maryland increased its cigarette tax to $2 a pack in order to fund health care … but now the state’s budget is facing a billion-dollar shortfall. This article outlines the budget mess that always results when states rely on cigarette tax revenues even as smoking rates decline.

  • Smoking is healthier than fascism

    There’s a Facebook group named Vote NO on Statewide Smoking Ban (Smoking is healthier than fascism). Started by Wichita activist Wendy Aylworth, the description of the group starts with the rallying cry “We must stop this tyranny of the majority!”

    Yes, we must.

    I’m tempted to tell you — like many people do when discussing matters of public policy — whether I smoke cigarettes. But does that matter?

    It shouldn’t, because if it does, we shift the basis of policy decisions from “what is right and just and promotes freedom and liberty” to “what is my personal preference.” And there’s too much of that going on.

    Smoking bans are only the start of increased government regulation of more and more aspects of our lives. These things can backfire. As government control becomes more pervasive, smoking ban busybodies may well find themselves coming under onerous regulation that they don’t like. Once started, it’s hard for government to stop.

    We ought to remember the words of C.S. Lewis: “Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience.”

    For more articles from this site on smoking bans and the harm they cause, click here.

  • The myth of the smoking ban ‘miracle’

    Supporters of comprehensive bans on smoking often point to research findings that heart attacks decrease when smoking bans are implemented. But is this true? Christopher Snowdon reports in Spiked online:

    Tales of heart attacks being “slashed” by smoking bans have appeared with such regularity in recent years that it is easy to forget that there is a conspicuous lack of reliable evidence to support them. It is almost as if the sheer number of column inches is a substitute for proof.

    Later on he concludes:

    What is abundantly clear in each case is that the number of heart attack admissions has been falling for some time. Far from causing further dramatic cuts in heart attack rates, the bans had no discernible effect.

    If we’re going to cite public health as a reason for smoking bans, let’s make sure we’re working with complete and reliable scientific evidence. Snowdon’s full article is The myth of the smoking ban ‘miracle’.

  • Citizen lawsuits won’t enhance chemical safety

    Legislation currently under consideration in Congress will allow citizens to sue the Department of Homeland Security if they believe that chemical plants are not in compliance with new regulations.

    The new regulations — IST, or Inherently Safer Technology — are troubling enough, in that they may actually work against their stated goal of safety. Allowing citizens to bring lawsuits based on these regulations will create many problems.

    In a Washington Times piece, two Washington lawmakers explain the risks and dangers that this law will bring about:

    • “… civil lawsuits would necessitate DHS diverting its limited resources from its core mission — protecting American lives from terrorists.”
    • “… civil lawsuits, and the discovery process involved, could very well lead to the public disclosure of sensitive — even classified — security information about U.S. chemical facilities and DHS’ assessments of those facilities.”
    • “To allow civil lawsuits against DHS in this area has the real potential to make the American people less safe. DHS itself has warned Congress of the potential consequences.”

    The Endangered Species Act contains provisions that allow for citizen lawsuits. The result? The authors write: “As a result, biologists then divert their attention away from protecting species to responding to the lawsuit and reacting to any judicial decisions. In 2002, this brought the Fish and Wildlife Service to a standstill.”

    Let’s not saddle the Department of Homeland Security with the same burden.

  • Chemical plant security should be based on technology, not politics

    As Congress considers legislation that would force our nation’s chemical plants to make expensive changes in their processes and technologies, we need to make sure that we don’t cripple our economy just to appease a small group of environmental activists — all in the name of purportedly greater safety.

    That’s the danger we face from IST, or Inherently Safer Technology. What could be wrong with a law that contains such a noble goal as safety? It has to do with the complexity of a modern industrial economy providing the backdrop on which unintended consequences develop. A recent article in The Hill explains:

    IST is governed by the laws of physics and engineering, not the laws of politics and emotion. A reduction in hazard will result in a reduction in risk if, and only if, that hazard is not displaced or replaced by another hazard. Even if it were possible to simply switch from one chemical to another, switching often results in the mere transfer of risk from the chemical plant to some other entity, perhaps the surrounding community, with no actual risk-reduction registered. For example, a government mandate that forces a company to reduce the amount of a particular chemical at a facility could very well result in an increase in transportation and safety risk. The company still has to maintain the same level of production capacity and the only way to maintain current capacity is to increase the number of shipments — through the community — going into the chemical plant.

    The article also states that there’s no objective way to measure the notion of “inherently safer.” But there is an objective way to measure the costs that IST will impose on manufacturers and our economy. It’s a huge cost, both in terms of dollars and lost jobs. Even the Wichita water treatment plant is on a list of facilities targeted by environmental extremists as dangerous.

    Chemical manufacturers, says the author, aren’t opposed to safety. In fact, the industry places great emphasis on safety and has spent billions on plant security since 9/11.