David Boaz

The Washington Post reports that Ron Paul "is enjoying a surge in support and the most high-profile campaign of his life. "

Paul’s unwavering ideals of small government and free markets, which rendered him a quirky sideshow for decades, have gained traction amid concerns about rising government debt. His longtime opposition to the existence of the Federal Reserve, income tax and foreign aid is now shared by many in his party.... [Ron] Christie noted that Perry and former House speaker Newt Gingrich have been pushing anti-Federal Reserve stances in recent television debates. Other strategists observe that all the candidates have started peppering their speeches with references to the Constitution. Paul’s years of insistence on small government are widely considered to have paved the way for the emergence of the tea party movement.

Over the past few months various reporters have asked me about Ron Paul's greater prominence this year as compared to 2007, and I've generally told them something like this: In 2007 (which is when he got the most attention in the last cycle) Ron Paul warned that an economy based on debt and cheap money from the Federal Reserve was not sustainable, but the economy was booming and nobody wanted to listen. After the crash, they started listening. In 2007 he said we should replace the Federal Reserve and fiat money with the gold standard, and even some libertarians said things like, “What’s the beef with the Fed?  They’ve dramatically reduced the volatility of the business cycle while achieving low, reasonably constant inflation.” Nobody's scoffing at criticism of the Fed now. In 2007 Ron Paul criticized excessive federal spending, but with a Republican in the White House Republicans weren't so interested. With even more excessive spending by a Democratic president, that's become a central issue of the era. In 2007 Ron Paul criticized endless military intervention, but most Republicans were content to repeat, "The surge is working." Now even Republicans are getting weary of war. In 2007 Ron Paul said that Congress and the president should not act outside their powers under the Constitution, but Republicans didn't want to hear about unconstitutional acts by a Republican president. Now, after the bailouts and the health care takeover and the unauthorized war in Libya, all the Republican candidates are talking about restoring the Constitution. It's not that Ron Paul has moved closer to the center but rather that the center of American political discussion has moved closer to him. Like many libertarians, I've had my differences with Ron Paul on trade policy, immigration, gay rights and federalism, and the unsavory company he keeps. But as long as he keeps recruiting people, especially young people, to the cause of limited constitutional government, sound money, and non-intervention, I'm glad to see him making an impact.

[caption id="attachment_38839" align="alignright" width="277" caption="Richard Sulik, the father of Slovakia’s flat tax reform, gets his copy of Losing Ground autographed by Charles Murray at Cato's May 2010 conference in Bratislava."][/caption]Richard Sulik, who participated in a Cato Institute conference on economic reform in Slovakia in 2010, just before the elections that made him speaker of parliament, is making headlines this week as an opponent of the European bailout plan. Modest-sized Slovakia can play an outsize role in the debate because "under the rules governing the 17 nations that share the euro, an expanded rescue fund for Europe’s ailing nations and troubled big banks must be approved by the parliaments of every country in the currency union." The Washington Post notes:

European leaders, for instance, did not count on one Richard Sulik, a dapper 43-year-old who is the speaker of parliament in this quaint capital nestled in the foothills of the Carpathian Mountains. Sulik’s Freedom and Solidarity Party calls the plan an unfair bailout of profligate Greeks and fat-cat German and French bankers that poor Slovaks can’t afford.

The Financial Times calls Sulik "one of the last of central Europe’s true believers in economic liberalism."  The Wall Street Journal describes him as the father of Slovakia's flat-rate tax and a "free-market libertarian" and says that his party

won 22 seats in the Slovak 150-member parliament, making it the legislature’s third-largest party. It got there after campaigning for low taxes, a lean government, legalization of soft drugs, marihuana in particular, allowing same-sex civil unions and abolishing fees levied on all owners of television sets to finance the public broadcaster STV.

The Washington Post reports that the financial projections for a government-funded arts center, Artisphere, in Arlington, Virginia, don't seem to have panned out. Do they ever? The Post story sounds like all the previous stories about what happened after influential interest groups persuaded the taxpayers' representatives to give them money on the basis of reams of economic projections:

The Arlington County-funded arts center, which opened Oct. 10 last year in the Newseum’s former space, projected it would have 300,000 visitors in its first year. As of the end of last month, it had hosted about 90,000. And the venue for art, theater, film, music and more, whose build-out cost $6.7 million, had to request an additional $800,000 to supplement the $3 million appropriated for its first annual operating budget. “Our original business plan had very aggressive projections,” says Executive Director Jose Ortiz....“In terms of those expectations, no, we didn’t make those.” “One of the projections was that every performance was going to be at capacity,” he says. “For a brand-new facility, that’s impossible.”

Deja vu for sure. These economic projections for subsidized stadiums are always vastly overstated. And the Cato Institute has published a number of studies over the years looking at the issue, mostly with respect to athletic stadiums. Dennis Coates and Brad Humphreys wrote in a 2004 Cato study criticizing the proposed subsidy for Nationals Park in the District of Columbia, “The wonder is that anyone finds such figures credible.” In “Sports Pork: The Costly Relationship between Major League Sports and Government,” Raymond Keating finds:

The lone beneficiaries of sports subsidies are team owners and players. The existence of what economists call the “substitution effect” (in terms of the stadium game, leisure dollars will be spent one way or another whether a stadium exists or not), the dubiousness of the Keynesian multiplier, the offsetting impact of a negative multiplier, the inefficiency of government, and the negatives of higher taxes all argue against government sports subsidies. Indeed, the results of studies on changes in the economy resulting from the presence of stadiums, arenas, and sports teams show no positive economic impact from professional sports — or a possible negative effect.

In Regulation magazine, (.pdf) Dennis Coates and Brad Humphreys found that the economic literature on stadium subsidies comes to consistent conclusions:

The evidence suggests that attracting a professional sports franchise to a city and building that franchise a new stadium or arena will have no effect on the growth rate of real per capita income and may reduce the level of real per capita income in that city.

And in that 2004 study, “Caught Stealing: Debunking the Economic Case for D.C. Baseball,” Coates and Humphreys looked specifically at the economics of the new baseball stadium in Washington, D.C., and found similar results:

Our conclusion, and that of nearly all academic economists studying this issue, is that professional sports generally have little, if any, positive effect on a city’s economy. The net economic impact of professional sports in Washington, D.C., and the 36 other cities that hosted professional sports teams over nearly 30 years, was a reduction in real per capita income over the entire metropolitan area.

And yet millionaire owners and mayors with Edifice Complexes keep commissioning these studies, and council members and editorial boards keep falling for them. The Artisphere project was approved by the Arlington County Board in July of 2009. Was the county flush with money at the time? Well, not surprisingly, county officials were wringing their hands about the need to make cuts in late 2008, including "A detailed review of every service to determine what is mandated, what is essential to the community and what is discretionary." In February 2009 the Post reported budget cuts, including police positions. Maybe the next time Arlington County -- or any other state or municipality -- needs to cut its budget, it might think about cutting subsidies for money-losing venues before going after police officers, firefighters, and math teachers.

The all-too-early death of Steve Jobs was reported on the day that President Obama made another defense of his so-called jobs bill. Which one actually benefited (or would benefit) Americans and the American economy? Lots of people have talked about the way Steve Jobs changed technology, changed business, changed the world. And I trust there'll be no more churlish complaints about his alleged lack of philanthropy. As Dan Pallotta definitively pointed out,

What a loss to humanity it would have been if Jobs had dedicated the last 25 years of his life to figuring out how to give his billions away, instead of doing what he does best.... [T]he world has no greater philanthropist than Steve Jobs. If ever a man contributed to humanity, here he is.

Two years ago Portfolio magazine did a great graphic on "The Steve Jobs Economy," trying to assess just how much value he himself had created for the economy. The conclusion: Jobs's personal wealth at the time was estimated at $5.7 billion. But he was generating $30 billion a year in revenue for Apple, its partners, and its competitors (who were spurred to get better). Here's the analysis (sorry for the imperfect tear sheet): Click image to enlarge. And for text but not graphics at Portfolio, click here. According to Portfolio and the experts it consulted, Jobs was producing $30 billion a year in value for various companies. And of course that means that consumers believed they were getting at least that much value themselves, or they wouldn't buy the products. That's a wealth creator. And that number pales in comparison to this one: After returning to Apple in 1997, Jobs took the total value of the company from about $2 billion to $350 billion. How much value is the Post Office creating this year? Or Amtrak? Or Solyndra? And if you point out that the Post Office does create value for its customers even though it loses money every year, I would ask, how much more value might its competitors create, if it allowed competition? Instead of another bag of taxpayers' money for state and local governments and politically favored businesses, a real jobs program would encourage the next Steve Jobs to create value. What would that involve? Keep taxes on investment and creativity low. Reduce the national debt and its threat of huge tax hikes to come. Ease the burdens of regulation, especially regulations that make it difficult to open a business, hire and keep the best employees, and develop new ideas. Open the huge, stagnant postal and schooling businesses to competition, innovation, and entrepreneurship. Repeal some of the licensing laws that now afflict 1,100 occupations. Renew progress toward free trade. Make it smart for businesses to invest their time, money, and brainpower in productive activity, not lobbying.

Jane Mayer of the New Yorker, fresh from her expose of the nefarious Koch Brothers' conspiracy to reduce taxes and regulation, has found a new target: James Arthur (Art) Pope, chairman and CEO of Variety Wholesalers and a major contributor to free-market and Republican causes, especially in North Carolina. As she details, his perfidy knows no bounds: He is "spending millions in an attempt to change the direction of American politics"! He attends "secret planning summits" with political allies! He funds groups that run ads accusing Democrats of raising taxes! He's an ideologue! He has made his money by selling necessities inexpensively to "low-income patrons"! He has funded free-market speakers at North Carolina State University, outraging a professor of English! Even a guy whose grandfather was a backer of Jesse Helms doesn't like him! And perhaps most tellingly, he "credits a summer program run by the Cato Institute, to which he has since given money, for immersing him in the writings of conservative icons such as Friedrich August Hayek and Ayn Rand"! If you think you've never seen F. A. Hayek's name rendered that way before, you're right.  And it's odd conservative icons who wrote "Why I Am Not a Conservative" (Hayek) and "Conservatism: An Obituary" (Rand). Well, fair enough. People who give millions of dollars to ideas and politics can expect some criticism. As a First Amendment absolutist, I think Art Pope has a right to use his money to support candidates he favors, and the New Yorker has a right to use its money to accuse the voters of North Carolina to be dumb enough to vote for whoever a businessman tells them to vote for. 'Cause, you know, it couldn't have been a general national swing against the Democratic agenda that caused voters to turn out Democratic majorities in the North Carolina legislature. But I wonder: If money in politics is so bad, where is the scathing Jane Mayer article on billionaire George Kaiser, the major fundraiser for Barack Obama who also was the major investor in Solyndra, which defaulted on a $535 loan from the Obama administration (and almost got "a second taxpayer loan of $469 million last year, even as the company’s financial situation grew increasingly dire")? Or where is the story on Herb and Marion Sandler, who made billions in subprime loans, sold out just before the crash, and have spent tens of millions on MoveOn.org, ACORN, the Center for American Progress headed by John Podesta, liberal journalism projects, Democratic Party groups, and Democratic candidates? Aren't they bigger fish than little ol' Art Pope of Raleigh? Or compare Mayer's affectionate portrait of George Soros's political activities with her takedown of Charles and David Koch. Apparently opposing a president who supports fiscal irresponsibility, the Patriot Act, the war on drugs, and secret wars is a lot more commendable if that president is a Republican. Meanwhile, we can all be glad that the free market is vigorous enough to fund these pieces of time-consuming investigative journalism through the lush full-page ads from Cartier, Bottega Veneta, Goldman Sachs, Chevron, T. Rowe Price, HBO, Cadillac, Citibank, Louis Roederer, Air France, BMW, U.S. Trust/Bank of America Private Wealth Management, Credit Suisse, RBC Wealth Management, and various exotic travel destinations.

All of us at the Cato Institute are saddened to announce the passing of David H. Padden, one of our original Board members, at the age of 84. Dave took Emeritus Director status a couple of years ago, but for our entire 34 years he was closely involved in Cato's activities, as director, contributor, and constant reminder of the principles on which we were founded. Ed Crane, Cato's co-founder and president, often called him "the conscience of the Cato Institute." Dave was a Chicago businessman, the president and founder of Padden and Co. and Padco Lease Corp. A onetime conservative, he saw the light in the 1970s and became a radical and devoted libertarian. He created the Loop Libertarian League, a group that met monthly at the Union League Club in downtown Chicago to discuss politics and philosophy. At various times he was a director of Citizens for a Sound Economy, the Acton Institute, the Bionomics Institute, the Foundation for Economic Education, and the Center for Libertarian Studies. Besides his long service with Cato, he was best known as the founder of the Heartland Institute, where he served as chairman from 1984 to 1995. Dave graduated from Loyola University in Chicago and received an MBA from Harvard. And while he devoted a great deal of time to studying liberty and helping build institutions to protect it, he knew that politics isn't all of life. He was married to Joan for 61 years, a father of 7, a devoted grandfather and great-grandfather, a director of St. Xavier College and the Epilepsy Foundation, and a lifelong supporter of the Lyric Opera of Chicago. R.I.P.

In a column on what Jane Jacobs would have thought of the Wall Street protests, Sandy Ikeda quotes a line from her book Systems of Survival:

[W]e have two distinct ways of making a living, no more no less. . . . First, we’re able to take what we want – simply take, depending of course, on what’s available to be taken. That’s what all other animals do. . . . But in addition, we human beings are capable of trading – exchanging our services for other goods and services, depending, again, on what’s available, but in this case what’s available for exchange rather than taking. [51-2]

And that reminded me of a cartoon from 2002 that I found last week in moving my office (upstairs to the Cato Institute's beautiful new seventh floor): Ikeda goes on to urge the Wall Street protesters to follow Jane Jacobs's advice:

The “commercial moral syndrome” that underlies free markets and trade counsels: “shun force, come to voluntary agreements, be honest, collaborate easily with strangers and aliens, compete, respect contracts, use initiative and enterprise, be open to inventiveness and novelty, be efficient, promote comfort and convenience, dissent for the sake of the task, invest for productive purposes, be industrious, be thrifty, and be optimistic.” On the other hand, the “guardian moral syndrome” that underlies government and forced takings counsels: “shun trading, exert prowess, be obedient and disciplined, adhere to tradition, respect hierarchy, adhere to tradition, be loyal, take vengeance, deceive for the sake of the task, make rich use of leisure, be ostentatious, dispense largesse, be exclusive, show fortitude, be fatalistic, and treasure honor.” Which of these best fits the personality profile of the young, iconoclastic but peaceful, ideologically driven protesters with their iPhones, Twitter, and leaderless organization? Now which of these best fits their enemy?

They really are the two choices that have faced us throughout history. And fortunately, as Deirdre McCloskey and Steven Pinker have pointed out in very different recent books, human life has been enhanced by the fact that people have perceived that making and trading are better than taking.

In the New York Times my old friend Tyler Cowen writes:

Another conservative economist and Nobel laureate, James M. Buchanan, emeritus professor of economics at George Mason University,...

I guess Tyler has never read Buchanan's 2005 book, Why I, Too, Am Not a Conservative, reviewed here by another distinguished economist, William A. Niskanen.

Cato Mencken Fellows Penn Jillette and Teller launch a new hour-long show, "Penn & Teller Tell a Lie," on the Discovery Channel this Wednesday at 10 p.m. Eastern and Pacific Time. Discovery says:

Penn & Teller bring their unique vision of the world in a new interactive series with a twist. In each episode, Penn & Teller make up to seven outrageous claims. While most of the wildly unbelievable stories are absolutely, positively true - one of them is a BIG FAT LIE. It will be up to viewers to spot the fake and VOTE LIVE  online or with the new GUESS THE LIE app.

They'll put lots of scientific claims and myths through rigorous testing, continuing their longstanding interest in science, truth, and skepticism. If you have a DVR, note that Showtime is rebroadcasting an episode of their former series, this one a skeptical look at the environmental movement, at the exact same time: 10:30 p.m. Wednesday. And if you can't wait till Wednesday, listen to Cato's podcast with Penn Jillette recorded a few weeks ago.