David Boaz

The New York Times editorializes that if Ron Paul can't separate himself from his unsavory writings and supporters, "he will leave a lasting stain on his candidacy, on the libertarian movement and, very possibly, on the Iowa caucuses." Certainly it's a problem Paul is struggling to deal with. As for the Iowa caucuses, if they could survive strong votes for Pat Robertson and Pat Buchanan and an actual win for Mike Huckabee, I dare say they can survive Ron Paul. But should these things "stain . . . the libertarian movement"? Not in a rational world. Libertarianism is a philosophy of peace, freedom, toleration, and individual rights -- just the opposite of the collectivist racist and homophobic ideas that appeared in newsletters written under Ron Paul's signature. As I wrote in Libertarianism: A Primer, "Libertarianism is the view that each person has the right to live his life in any way he chooses so long as he respects the equal rights of others." Those ideas have played an important role throughout American history, from the American Revolution to abolitionism to the Tea Party. And now Ron Paul is attracting support for his advocacy of the ideas of small government and free enterprise. As the Times notes in a dispatch from Iowa, Paul "is drawing supporters for his libertarian and antiwar views. ...For the students, much of Mr. Paul’s appeal derives from civil libertarian views like ending the federal ban on marijuana and other drugs, as well as his desire to end foreign wars and his small-government credo." That's the message that has moved Ron Paul to the top of the polls in Iowa. Still, he did allow associates of his to write racist and homophobic screeds in "The Ron Paul Political Report" and other newsletters. And that has created a stench around his candidacy. Some people want that stench to envelop and stain the libertarian movement. Jamie Kirchick, the anti-Paul jihadi who brought the newsletters to light in 2008, asks, "Why Don’t Libertarians Care About Ron Paul’s Bigoted Newsletters?" But of course many libertarians have expressed revulsion at the newsletters. Ilya Somin noted at the Volokh Conspiracy (one of the few conspiracies not denounced in the Ron Paul newsletters) that he himself had condemned the newsletters in 2008, as had his co-blogger David Bernstein. And Virginia Postrel, the former editor of Reason, and various current writers at Reason. And a leading Austrian economist, Steven Horwitz. And Ed Crane, the founder and president of Cato. Kirchick identified Conor Friedersdorf of the Atlantic as a libertarian who supported Ron Paul despite the bigotry in the newsletters that bore his name. But in fact Friedersdorf wrote a long and tortured article acknowledging the "egregiously offensive . . . racially bigoted . . . execrable" content of the newsletters. He went on to say that there was still a good case for supporting the only candidate who has consistently opposed the Iraq War, indefinite detention, drone strikes, anti-Muslim bigotry, and the war on drugs. Other libertarians who know about the newsletters are no doubt making similar calculations. And as David Weigel of Slate notes today, many less-engaged voters -- such as American Idol winner Kelly Clarkson -- still haven't heard about the whole issue; they like Ron Paul for the issues he talks about, smaller government, budget cuts, sound money, and noninterventionism. I wrote about "Ron Paul's Ugly Newsletters" in a 2008 Cato-at-Liberty posting:

Those words are not libertarian words. Maybe they reflect “paleoconservative” ideas, though they’re not the language of Burke or even Kirk. But libertarianism is a philosophy of individualism, tolerance, and liberty. As Ayn Rand wrote, “Racism is the lowest, most crudely primitive form of collectivism.” Making sweeping, bigoted claims about all blacks, all homosexuals, or any other group is indeed a crudely primitive collectivism. Libertarians should make it clear that the people who wrote those things are not our comrades, not part of our movement, not part of the tradition of John Locke, Adam Smith, John Stuart Mill, William Lloyd Garrison, Frederick Douglass, Ludwig von Mises, F. A. Hayek, Ayn Rand, Milton Friedman, and Robert Nozick. Shame on them.

The fact is, there's a small band of self-styled "libertarians" who over the past two decades have associated the great ideas of Austrian economics and libertarianism with bigotry, reflexive anti-Americanism, and vitriol directed at everyone from the Trilateral Commission to Cato and Reason. They have very little association with the larger libertarian movement or with such libertarian-inspired movements as the Tea Party, the drug reform movement, or the school choice movement. Virtually their only point of contact with the broader constituency for smaller government is through Rep. Ron Paul, who, for whatever reasons, has unfortunately continued his association with the people who have tarred him and the causes that are drawing many voters to him. Libertarians have been fighting ignorance, superstition, privilege, and power for centuries, and we will continue to do so in the future. Libertarians reject bigotry and advocate equal rights for every individual. Ron Paul's very bad decision to outsource his writing to reprehensible characters doesn't change that.

Two Cato scholars have offered devastating critiques of the Federal Reserve in the op-ed pages of the Wall Street Journal over the last two days. This morning, in "The Fed's Mission Impossible," adjunct scholar John Cochrane takes a look at the latest list of bank regulations under Dodd-Frank. Although the proposal “opens with an eloquent ode to the evils of too-big-to-fail,” he writes, it then “spends 168 pages describing exactly how it's going to stop any large financial institution from ever failing again.” According to Cochrane, the proposal “exemplifies” the core problem withWashington’s heavy hand: “Everything under the sun gets regulated, with no attempt to measure benefits or costs.” This scenario, of course, is nothing new:

For 70 years, our government has sought to stop crises by guaranteeing more and more debts, explicitly with deposit insurance, or informally with predictable too-big-to-fail bailouts. Guaranteeing debts gives obvious incentives to gamble at taxpayer expense, so we try to limit risks with regulation. But big banks still have every incentive to avoid, evade and financial-engineer their way around the rules, and they have lots of lawyers, lobbyists and ex-politicians to pressure regulators to use their wide discretion. The government has lost this arms race time and time again.

Unfortunately, it seems to be taking this arms race across the Atlantic. Yesterday, in "The Federal Reserve's Covert Bailout of Europe," Cato senior fellow Gerald P. O’Driscoll, Jr., examined the Fed’s bailout of European banks through what is called “a temporary U.S. dollar liquidity swap arrangement”—an operation that has gone “largely unnoticed here.” O’Driscoll explains:

Simply put, the Fed trades or "swaps" dollars for euros. The Fed is compensated by payment of an interest rate (currently 50 basis points, or one-half of 1%) above the overnight index swap rate. The ECB, which guarantees to return the dollars at an exchange rate fixed at the time the original swap is made, then lends the dollars to European banks of its choosing.

Why are the two central banks doing this? O’Driscoll explains that they are engaged in this “Byzantine financial arrangement” because “each needs a fig leaf” for past transgressions:

The Fed was embarrassed by the revelations of its prior largess with foreign banks. It does not want the debt of foreign banks on its books. A currency swap with the ECB is not technically a loan. The ECB is entangled in an even bigger legal and political mess. What the heads of many European governments want is for the ECB to bail them out. The central bank and some European governments say that it cannot constitutionally do that. The ECB would also prefer not to create boatloads of new euros, since it wants to keep its reputation as an inflation-fighter intact. To mitigate its euro lending, it borrows dollars to lend them to its banks. That keeps the supply of new euros down. This lending replaces dollar funding from U.S. banks and money-market institutions that are curtailing their lending to European banks—which need the dollars to finance trade, among other activities. Meanwhile, European governments pressure the banks to purchase still more sovereign debt.

Recently Cato scholars Lawrence H. White and George Selgin asked, "Has the Fed Been a Failure?"  Read much more on the Federal Reserve and monetary policy here.

John Stossel takes a look back at 2011 tonight at 10 on Fox Business Network. Jeff Miron and I will be on, along with Nick Gillespie and Katherine Mangu-Ward of Reason, legendary MTV VJs Kurt Loder and Kennedy, and more. Many people think of politics when they think of 2011, but not John Stossel. He's a policy guy. So expect plenty of discussion of Iraq, the Arab Spring, the economy, the Fed, the debt, the nanny state, gay marriage, and more -- but nary a candidate's name. And if you don't get Fox Business, well, call a friend in a different cable monopoly jurisdiction and ask if you can come over.

Newspaper articles on government budgets virtually never tell the reader the two most important facts: What was the budget last year, and what is it this year? Instead, the typical budget article trumpets "cuts" and "austerity," and never actually mentions that the budget is going up by four percent, or six percent, or nine percent in the coming year. So two cheers to the Washington Post for its article on Virginia governor Robert McDonnell's proposed budget, which does—eventually—give you most of that information. Still, the second paragraph (and second sentence) of the article says that McDonnell "proposed saving nearly $1 billion in a variety of ways." You have to wait for the seventh paragraph, on the jump page, before you find out that the proposed budget amounts to $85 billion over two years.  And only in the 20th of 25 paragraphs do you find out that

The two-year budget, which begins July 2012, will be the largest spending plan in Virginia history, growing by about $7 billion.

So two cheers for giving the facts, even if the lead of the story might have led some readers to think that McDonnell was cutting $1 billion from the state's budget. And three cheers for Steve Contorno of the Washington Examiner, who put the basic facts clearly in the third paragraph (and third sentence) of his article:

In an hour-long address to the General Assembly's budget committees, McDonnell laid out an $85 billion spending plan through June 30, 2014, up from $79 billion in 2010-2012.

Please, reporters: when you write about a city, state, or federal budget, please tell us readers and taxpayers how much the budget actually is, and how much it will be next year. With that information, we can figure out for ourselves whether it involves cuts or not.

At the Huffington Post I write about the news that Rick Perry is currently collecting both a salary and a pension from the taxpayers, and about a worse pension claim by a former Maryland governor. But I note that the real problem for taxpayers is not a few governors' pensions but rather unfunded liabilities in the trillions facing state and local governments. And I suggest why legislators let pensions get so out-of-control:

Why do pensions get so lavish? A 2009 study by the Cato Institute argued that in negotiations between elected officials and government unions, nobody really represents the taxpayers. Elected officials are far more responsive to organized interests like unions than to the unorganized citizen-taxpayers. In effect, the principal-agent problem that analysts of the corporation worry about is far worse in government because it is very difficult for taxpayers to control their theoretical agents, the elected officials and appointed managers of government.

Whole thing here.

Vaclav Havel, the playwright who led the Velvet Revolution that ended communism in Czechoslovakia, has died at 75. At a conference in Prague in 1995, Cato research fellow Stanley Kober drew on Havel's writings to discuss civil society, the spirit of humility, and the case for limited government. He quoted Havel on the essential quality of a free government:

I am in favor of a political system based on the citizen, and recognizing all his fundamental civil and human rights in their universal validity, and equally applied. The sovereignty of the community, the region, the nation, the state--any higher sovereignty, in fact--makes sense only if it is derived from the one genuine sovereignty, that is, from human sovereignty, which finds its political expression in civic sovereignty.

Although Havel sometimes found himself at odds with his successor, Vaclav Klaus, on the extent of the market economy, Cato vice president Jim Dorn related Havel's commitment to markets at a conference in Shanghai in 1997:

Though my heart be left of centre, I have always known that the only economic system that works is a market economy, in which everything belongs to someone--which means that someone is responsible for everything. It is a system in which complete independence and plurality of economic entities exist within a legal framework, and its workings are guided chiefly by the laws of the marketplace. This is the only natural economy, the only kind that makes sense, the only one that can lead to prosperity, because it is the only one that reflects the nature of life itself.

Vaclav Havel helped Czechoslovakia make the transition from one of the most repressive Communist regimes to one of the most successful post-Communist countries. RIP.

Earlier today I posted an edited transcript of Christopher Hitchens's talk "Mayor Bloomberg's Nanny State." The only thing better than reading Hitchens is listening to him.  So here's an 8-minute excerpt from his talk:

Christopher Hitchens, a man of great passions and great talents, perhaps the greatest essayist of our age, has died. Among his lesser-known works was a Cato Institute talk, "Mayor Bloomberg's Nanny State," delivered at a seminar in New York City on December 10, 2004. Ten years before that, in his still-thoroughly-leftist era, he offered us this backhanded compliment in the Nation of December 12, 1994:

During the lunacy of the Reagan period, I was impressed by how often it was the Cato Institute that held the sane meeting or published the thoughtful position paper.

Herewith "Mayor Bloomberg's Nanny State":

I often take the train from Washington, D.C., to New York and back. A few years ago they put the smoking car on the end of the train so nonsmokers wouldn't have to go through it to get to other parts of the train. And then the day came when they said, "We're taking that car off the train altogether." And I thought, "Now we've crossed a small but important line." It's the difference between protecting nonsmokers and state-sponsored behavior modification for smokers. And I thought there was insufficient alarm at the ease with which that was done. Because state behavior modification, no matter what its object, should be viewed skeptically at the very least. There's serious danger in the imposition of uniformity---the suggestion that one size must fit all. When the complete ban on smoking in all public places was enacted in California, I called up the assemblyman who wrote the legislation and I said: "I've just discovered that bars are not going to be able to turn themselves into a club for the evening and charge a buck for admission for people who want to have a cigarette. You won't be able to have a private club. You won't even be able to have a smoke-easy, if you will, in California." And he said, "That's right." I said, "Well, how can you possibly justify that?" Read more...

Karl Rove writes in the Wall Street Journal that "the debates have allowed every potentially serious candidate to be seen by large audiences." One thing that has generally made presidential candidates serious is experience in executive office, especially as governor. After voters elected Carter, Reagan, Clinton, and Bush minor over a period of 30 years, it became conventional wisdom that governors make much stronger presidential candidates than senators. After senators swept the field in 2008, and Sen. Barack Obama won, that preference seemed in doubt. But now voices on both left and right are asking whether President Obama's lack of executive experience is indeed a problem. So it's worth asking how much executive experience the Republican candidates have. Here's what I come up with:

Rick Perry                          11 years Gary Johnson                     8 years Jon Huntsman                    5 years Mitt Romney                      4 years Michelle Bachmann             0 Newt Gingrich                    0 Ron Paul                            0 Rick Santorum                    0

So Rove thinks "the debates have allowed every potentially serious candidate to be seen by large audiences." And yet the Republican party and the big media have excluded the candidate with the second-most experience as governor. And so I wonder again, how does the establishment exclude a Republican governor who got elected twice---and served his full terms---in a Democratic-leaning swing state, had a successful record, vetoed more bills than all other governors combined, proposed the boldest policies in the country on both school choice and drug policy reform, and then left the state with a budget surplus? As James Peron wrote at Huffington Post,

Johnson sees himself as socially liberal and fiscally conservative. Most polls show that a large percentage of voters fall into this category. A majority of voters supports depoliticized markets and balanced budgets, a majority supports gay marriage, and half the public wants to legalize marijuana, which is a plurality. A majority thinks sending troops to Iraq was a mistake and wants out. You'd think Gary Johnson would be a natural choice for them.

And you'd think that even Karl Rove would agree that a two-term Republican governor with that potential appeal would be a "potentially serious candidate" who ought to have a chance to debate the other candidates.

The Cato Institute offers lots of great Christmas gifts -- Pocket Constitutions (also a good gift for Bill of Rights Day!), books, apparel, even Cato-branded Lands' End merchandise. But I have my own holiday recommendations that I've made before. I decided one year to give a young colleague a post-graduate course in political science and economics — P. J. O’Rourke’s books Parliament of Whores and Eat the Rich. So I went to my local Barnes & Noble to search for them. Not in Current Affairs. Not in Economics. No separate section called Politics. I decided to try Borders (RIP). But first — to avoid yet more driving around — I went online to see if my local Borders stores had them in stock. Sure enough, they did, in a couple of stores just blocks from the Cato Institute. Checking to see where in the store I would find them, I discovered that they would both be shelved under “Humor–Humorous Writing.” Oh, right, I thought, they’re not books on economics or current affairs, they’re humor. Yes, P.J. is one of the funniest writers around. But what people often miss when they talk about his humor is what a good reporter and what an insightful analyst he is. Parliament of Whores is a very funny book, but it’s also a very perceptive analysis of politics in a modern mixed-economy democracy. And if you read Eat the Rich, you’ll learn more about how countries get rich — and why they don’t — than in a whole year of econ at most colleges. In fact, I’ve decided that the best answer to the question “What’s the best book to start learning economics?” is Eat the Rich. On page 1, P. J. starts with the right question: “Why do some places prosper and thrive while others just suck?” Supply-and-demand curves are all well and good, but what we really want to know is how not to be mired in poverty. He writes that he tried returning to his college economics texts but quickly remembered why he hated them at the time–though he does attempt, for instance, to explain comparative advantage in terms of John Grisham and Courtney Love. Instead he decided to visit economically successful and unsuccessful societies and try to figure out what makes them work or not work. So he headed off to Sweden, Hong Kong, Albania, Cuba, Tanzania, Russia, China, and Wall Street. In Tanzania he gapes at the magnificent natural beauty and the appalling human poverty. Why is Tanzania so poor? he asks people, and he gets a variety of answers. One answer, he notes, is that Tanzania is actually not poor by the standards of human history; it has a life expectancy about that of the United States in 1920, which is a lot better than humans in 1720, or 1220, or 20. But, he finally concludes, the real answer is the collective “ujamaa” policies pursued by the sainted post-colonial leader Julius Nyerere. The answer is “ujaama—they planned it. They planned it, and we paid for it. Rich countries underwrote Tanzanian economic idiocy.” From Tanzania P. J. moves on to Hong Kong, where he finds “the best contemporary example of laissez-faire....The British colonial government turned Hong Kong into an economic miracle by doing nothing.” You could do worse than to take a semester-long course on political economy where the texts are Eat the Rich and Parliament of Whores. So, bookstore owners, leave them in the Humorous Writing section for sure, but also put copies in the Economics, Politics, and Current Affairs sections. Still time to buy them for Christmas and educate all your family and friends while they think they're just being entertained!