The Current Budget Crisis Illustrates James Buchanan’s Concerns About Politics

Nobel laureate James Buchanan has been in the news lately, especially because of a book that seeks to link his 7000 pages of economic writing to both Dixiecrat segregationists and Charles Koch’s secret plan “to radically alter our government in ways that will be devastating to millions of people.” The thesis of Democracy in Chains by Nancy MacLean is that public choice economics is a radical plan to “shackle the people’s power,” “to put democracy in chains.” Oddly, she claims (without evidence), he set out on this project because he resented the Supreme Court’s decision in Brown v. Board of Education – which of course used “undemocratic” means to overturn the democratic decisions of legislatures in various states.

Buchanan certainly was concerned with how to achieve justice, efficiency, and “prevention of discrimination against minorities” in the context of majority rule. Throughout his work he explored how to design constitutional rules to bring about optimal outcomes, including a balanced budget requirement, supermajorities, and constitutional protection of individual rights. He worried that both majorities and legislatures would be short-sighted, economically ignorant or inefficient, and indifferent to the imposition of burdens on others.

And today a Washington Post column by Dana Milbank illustrates one of the big problems that Buchanan sought to solve: the temptation of legislatures to spend money with little regard for what two of his students called “deficits, debt, and debasement.” Looking outward from Hurricane Harvey to the upcoming congressional session, Milbank wrings his hands:

Harvey makes landfall in Washington as soon as next week, when President Trump is expected to ask for what could be tens of billions of dollars in storm relief. And paying for storm recovery — probably with few offsetting spending cuts — will be but the first blow to fiscal discipline in what looks to be a particularly active, and calamitous, spending season.

It’s not just disaster relief. The Pentagon is hoping for tens of billions of additional dollars. And Republicans may pivot from “tax reform” to mere tax cuts. It’s easier just to spend money and cut taxes than to reform the flood insurance program, make the tax system more efficient, and focus military spending on actual defense needs, much less to think about the national debt and the next generation.

Trump, who came to power promising to eliminate the $20 trillion debt, or at least to cut it in half, is poised to oversee an exponential increase in that debt. Republicans, who came to power with demands that Washington tackle the debt problem, could wind up doing at least as much damage to the nation’s finances as the Democrats did….

If the red ink rises according to worst-case forecasts, “we’re talking additions to the debt in the trillions,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, tells me. All from actions to be taken in the next few months. “It turns out the Republican-run Congress is not willing to make the hard choices,” she says. “It is a fiscal free-lunch mentality on all sides.”

We’ve heard a lot over the past few years about a “dysfunctional” Congress. Many critics mean that Congress doesn’t pass enough laws. But this is the real dysfunction: a Congress that spends money with little thought to the future. The national debt doubled under President George W. Bush and doubled again under President Barack Obama. President Trump and the Republican Congress are just getting started, but the prospects don’t look good.

Milbank, MacGuineas, and others who worry about the “fiscal free-lunch mentality” should read some Buchanan. As one scholar put it in a reflection on Buchanan’s work, “Perhaps legislatures would do better if supermajorities were required whenever transfers to current recipients will burden future generations.” Perhaps so. And perhaps constitutional guarantees of individual rights, judicial protection of those rights, and limits on the legislature’s free-lunch mentality are all part of what Buchanan called the constitutional political economy of a free society.

Posted on August 31, 2017  Posted to Cato@Liberty

Lobbying in Trump’s Washington: New Names, Old Game

In The New York Times Magazine, Nicholas Confessore writes about the new lobbying stars in Washington. A new president always creates opportunities for new players. When that president is a non-politician without an established Washington entourage, there’s a lot of uncertainty. Who knows the new president? Who knows the people who know the president?

Confessore tells great stories about newly famous Trumpists such as one-time campaign manager Corey Lewandowski and about “Washington backbenchers, B-listers and understudies” who suddenly realized they knew somebody who had been part of the Trump campaign.

USA Today has reported on people close to Vice President Pence who have opened or expanded lobbying businesses this year.

It’s a sordid story of how fixers and their handsome fees survive even in an administration that came in promising to “drain the swamp.” But how much has really changed? As Confessore reviews:

There are about 10,000 registered lobbyists in Washington — roughly 20 for every member of Congress — and thousands more unregistered ones: consultants and ‘‘strategic advisers’’ who are paid to help shape government policy but do not disclose their clients. By whatever name, they are the people companies and countries hire to help roll back regulations, unstick bids, tweak legislation or get meetings. Lobbying is at once Washington’s most maligned, enduring and essential industry. Underpaid young politicos and retiring lawmakers depend on Beltway lobby shops — known as ‘‘K Street’’ after the city boulevard that once housed many of them — for the high-six-figure salaries that will loft them into Washington’s petite aristocracy… .  But the private sector needs lobbyists the most. The modern federal government is so sprawling and complex that it practically demands a specialized class of middlemen and -women.

Over the decades, lobbying has evolved from a niche trade of fixers and gatekeepers to a sleek, vertically integrated, $3-billion-a-year industry.

Total reported spending on lobbying peaked in 2009 and 2010, the first two years of President Barack Obama’s administration, when trillions of dollars were being handed out or moved around by the stimulus package, the omnibus spending bill, the Dodd-Frank financial regulation bill, the Affordable Care Act, and an ultimately unsuccessful 1200-page energy bill stuffed with taxes, regulations, loopholes, and subsidies. The Washington Post found that “more than 90 organizations hired lobbyists to specifically influence provisions of the massive stimulus bill.” Well-connected Democratic lobbyists like former House majority leader Richard Gephardt and Tony Podesta, the brother of Obama transition director John Podesta, did especially well.

And of course it didn’t start with Obama. As federal spending soared under President George W. Bush, the number of registered lobbying firms climbed. In six years the number of companies with Washington lobbyists rose 58 percent. After the Republicans took control of Congress in 1994, party leaders created the “K Street Project” to pressure lobbying firms to replace Democrats with Republicans. They made it clear that lobbyists needed to shift their political contributions toward Republican candidates, or lose their access to Republican policymakers. By 2003, the Washington Post reported, the GOP had in fact placed Republicans in a significant number of the most influential positions at trade associations and corporate government affairs offices—and were getting their contributions. 

Every new administration threatens to shake up some policies, and that creates a demand for lobbyists to get a piece of the new action. It also means opportunities for people who are well connected among the new White House and agency staffs. But the biggest reason that lobbying grows is that federal spending and regulation grow.

As Craig Holman of the Ralph Nader-founded Public Citizen told Marketplace Radio after a report on rising lobbying expenditures during the financial crisis, “the amount spent on lobbying … is related entirely to how much the federal government intervenes in the private economy.”

Marketplace’s Ronni Radbill noted then, “In other words, the more active the government, the more the private sector will spend to have its say… . With the White House injecting billions of dollars into the economy [in early 2009], lobbyists say interest groups are paying a lot more attention to Washington than they have in a very long time.”

Big government means big lobbying. When you lay out a picnic, you get ants. And today’s federal budget is the biggest picnic in history.

The Nobel laureate F. A. Hayek explained the process 70 years ago in his prophetic book The Road to Serfdom: “As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power.”

That’s the worst aspect of the growth of lobbying: it indicates that decisions in the marketplace are being crowded out by decisions made by lobbyists and politicians, which means a more powerful government, less freedom, and less economic growth. 

Posted on August 31, 2017  Posted to Cato@Liberty

David Boaz discusses The Libertarian Mind on Liberty Talk Radio with Joe Cristiano

Posted on August 30, 2017  Posted to Cato@Liberty

Study the Ideas and History of Liberalism with the Encyclopedia of Libertarianism

In these days when liberalism is again under attack from some of its old enemies in new guises, one way to counter authoritarian threats is to educate ourselves on the fundamental ideas of liberalism. The Encyclopedia of Libertarianism, now available online, offers a wealth of information on the ideas, people, and history of liberalism and libertarianism. Historian David M. Hart, director of the Online Library of Liberty, says that the Encyclopedia “provides an excellent survey of the key movements, individuals, and events in the evolution of the classical liberal movement.” And on his own website he outlines a course of study in classical liberalism that includes a curated list of articles in the Encyclopedia for someone who wants to learn about the ideas, movements, and people of liberalism.

Begin, he says, with the survey article by Steve Davies, “General Introduction” (pp. xxv-xxxvii in the print version). Then read any of the following articles. Or, for a logical and chronological course of study, read these articles in this order:

Key Ideas in the Classical Liberal Tradition

Basic Principles:

Grounds for Belief:

Processes for Creating a Free Society:

Political and Legal Freedoms:

Economic Freedoms:

Social Freedoms:

  • Equality under the Law - “Equality” (of rights)
  • Toleration of different Ideas and Behaviour (see Freedom of Speech & Religion above)
  • Acts between Consenting Adults - “Presumption of Liberty”

Key Movements and People in the Classical Liberal Tradition

 

I might add that Chapter 2 of The Libertarian Mind, “The Roots of Libertarianism,” is a very short guide to many of these movements and people. And The Libertarian Reader collects and curates many of the key texts of liberalism and libertarianism.

Posted on August 29, 2017  Posted to Cato@Liberty

David Boaz discusses disaster relief efforts on FBN’s Kennedy

Posted on August 29, 2017  Posted to Cato@Liberty

Libertarianism, Individualism, and Racism

There’s been some talk this week about a few people who once called themselves libertarians and have now turned up in alt-right circles, at the Charlottesville march or elsewhere. As I told the Daily Beast, “People change ideologies all the time. Some libertarians become conservatives, some become welfarist liberals, a few drift into creepy extremes.” And of course it’s not just libertarians. Hillary Clinton says she was a Goldwater Girl, a lot of ex-communists became the original neoconservatives, and Nobel laureates in economics have tended to move toward classical liberalism (libertarianism). But since the topic has come up, let me just agree with Nick Gillespie that “The alt-right—and Trumpism, too, to the extent that it has any coherence—is an explicit rejection of foundational libertarian beliefs in ‘free trade and free migration’ along with experiments in living that make a mess of rigid categories that appeal to racists, sexists, protectionists, and other reactionaries.” And add my own commentary, excerpted from my 2015 book The Libertarian Mind:

The dignity of the individual under libertarianism is a dignity that enhances social well-being. Libertarianism is good not just for individuals but for societies. The positive basis of libertarian social analysis is methodological individualism, the recognition that only individuals act. The ethical or normative basis of libertarianism is respect for the dignity and worth of every (other) individual. This is expressed in the philosopher Immanuel Kant’s dictum that each person is to be treated not merely as a means but as an end in himself.

Of course, as late as Jefferson’s time and beyond, the concept of the individual with full rights did not include all people. Astute observers noted that problem at the time and began to apply the ringing phrases of Locke’s Second Treatise of Government and the Declaration of Independence more fully. The equality and individualism that underlay the emergence of capitalism and republican government naturally led people to start thinking about the rights of women and of slaves, especially African American slaves in the United States. It’s no accident that feminism and abolitionism emerged out of the ferment of the Industrial Revolution and the American and French revolutions. Just as a better understanding of natural rights was developed during the American struggle against specific injustices suffered by the colonies, the feminist and abolitionist Angelina Grimké noted in an 1837 letter to Catherine E. Beecher, “I have found the Anti-Slavery cause to be the high school of morals in our land—the school in which human rights are more fully investigated, and better understood and taught, than in any other.”

The abolitionist movement grew logically out of the Lockean libertarianism of the American Revolution. How could Americans proclaim that “all men are created equal … endowed by their Creator with certain unalienable rights,” without noticing that they themselves were holding other men and women in bondage? They could not, of course, and had they tried, they would have been reminded by people such as the great English scholar Samuel Johnson, who wrote in 1775, “How is it that we hear the loudest yelps for liberty among the drivers of Negroes?” The world’s first antislavery society was founded in Philadelphia that same year. Jefferson himself owned slaves, yet he included a passionate condemnation of slavery in his draft of the Declaration of Independence: “[King George] has waged cruel war against human nature itself, violating its most sacred rights of life and liberty in the persons of a distant people who never offended him.” The Continental Congress deleted that passage, but Americans lived uneasily with the obvious contradiction between their commitment to individual rights and the institution of slavery.

Although they were intimately connected in American history, slavery and racism are not inherently bound together. In the ancient world the act of enslaving another person did not imply his moral or intellectual inferiority; it was just accepted that conquerors could enslave their captives. Greek slaves were often teachers in Roman households, their intellectual eminence acknowledged and exploited.

In any case, racism in one form or another is an age-old problem, but it clearly clashes with the universal ethics of libertarianism and the equal natural rights of all men and women. As Ayn Rand pointed out in her 1963 essay “Racism,”

Racism is the lowest, most crudely primitive form of collectivism. It is the notion of ascribing moral, social or political significance to a man’s genetic lineage … which means, in practice, that a man is to be judged, not by his own character and actions, but by the characters and actions of a collective of ancestors.

In her works Rand emphasized the importance of individual productive achievement to a sense of efficacy and happiness. She argued, “Like every other form of collectivism, racism is a quest for the unearned. It is a quest for automatic knowledge—for an automatic evaluation of men’s characters that bypasses the responsibility of exercising rational or moral judgment—and, above all, a quest for an automatic self-esteem (or pseudo-self-esteem).” That is, some people want to feel good about themselves because they have the same skin color as Leonardo da Vinci or Thomas Edison, rather than because of their individual achievements; and some want to dismiss the achievements of people who are smarter, more productive, more accomplished than themselves, just by uttering a racist epithet.

And as I wrote when a group of newsletters seemed to connect racist ideas to the libertarian movement:

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.

More on libertarianism, individualism and race – and feminism and gay rights – in The Libertarian Mind.

Posted on August 25, 2017  Posted to Cato@Liberty

Is the Encyclopedia of Libertarianism like Wikipedia?

I see that my colleagues are referring to the new online Encyclopedia of Libertarianism as “a Wikipedia for libertarianism.” I suppose that’s sort of true, in that it’s an online encyclopedia. But it’s not exactly Hayekian, as Jimmy Wales describes Wikipedia. That is, it didn’t emerge spontaneously from the actions of hundreds of thousands of contributors. Instead, editors Ronald Hamowy, Jason Kuznicki, and Aaron Steelman drew up a list of topics and sought the best scholars to write on each one – people like Alan Charles Kors, Bryan Caplan, Deirdre McCloskey, George H. Smith, Israel Kirzner, James Buchanan, Joan Kennedy Taylor, Jeremy Shearmur, Leda Cosmides and John Tooby, Norman Barry, Richard Epstein, Randy Barnett, and Vernon L. Smith, along with many Cato Institute experts. In that regard it’s more like the Encyclopedia Britannica of libertarianism, a guide to important topics by top scholars in the relevant field.

The Britannica over the years has published articles by Albert Einstein, Sigmund Freud, Marie Curie, Leon Trotsky, Harry Houdini, George Bernard Shaw, Bertrand Russell, Milton Friedman, Simon Baron Cohen, and Desmond Tutu. They may have slipped a bit when they published articles by Jimmy Carter, Bill Clinton, and Lee Iacocca. And particularly when they chose to me to write their entry on libertarianism.

Posted on August 21, 2017  Posted to Cato@Liberty

Crony Capitalism and Stifled Speech

Was it a typo or a Freudian slip? The Washington Post reports:

As president-elect, for instance, Trump took Boeing to task for cost overruns when he tweeted that the Air Force One program’s $4 billion expenditures were “out of control” and suggested the contract be canceled….

Trump was more complementary on Feb. 17, when he made appearance at a Boeing factory in South Carolina and concluded his remarks by saying, “May God bless you, may God bless the United States of America, and may God bless Boeing.”

The reporters meant “complimentary.” But indeed the point of the article is just how “complementary” big government and its big contractors are. Headlined “Why America’s biggest government contractors balked at criticizing Trump,” the article explores how CEOs started jumping off President Trump’s advisory councils after his disappointing remarks about white supremacists marching in Charlottesville – but not “the four government contractors on the president’s advisory councils — Lockheed Martin, Boeing, Harris Corp. and United Technologies.” After all, 

In many ways, contractors such as Boeing and Lockheed Martin are more dependent on government decision-making than other companies that took part in the councils.

Indeed, if a large part of your business comes from government contracts, you’d better be very careful about criticizing the president of the United States. Especially a president who has little sense of the proper limits of presidential authority:

Those negotiations [over a new fighter plane] were marked by unusually close interactions between Trump and the business executives involved. Bloomberg later reported that Trump allowed Boeing chief executive Dennis A. Muilenburg to listen in on a call with a key government manager for the F-35 program as Trump sought information on the two planes.

President Trump’s tweets, legal problems, chaotic White House management, and other high-profile troubles may have diverted attention from a problem that many of us pointed out before he was elected: his “economic nationalism” that seems to mean in practice protectionism, crony capitalism, and a promise that he’ll personally run the U.S. economy.

Government contractors understand this. Even before he was elected, Trump intervened to “persuade” Carrier to keep a plant open in Indiana. How? Was it the state tax credits? Or something less public? The CEO of Carrier’s parent company United Technologies, Greg Hayes – who was later on the president’s manufacturing council – acknowledged that the deal to keep the plant open probably wasn’t really economic. But:

I was born at night, but it wasn’t last night. I also know that about 10 percent of our revenue comes from the U.S. government.

When companies get in bed with government, that’s the bargain they make. And as we’ve just seen, that bargain not only leads to economic decisions that make us all poorer, it stifles the free speech of those dependent on government decisions. And that’s a problem when government is the biggest landlord, employer, arts patron, and purchaser of goods and services in society.

Posted on August 20, 2017  Posted to Cato@Liberty

Learn the History of Liberty with the Encyclopedia of Libertarianism

The Encyclopedia of Libertarianism, published in 2008 in hard copy, is now available free online at Libertarianism.org. The Encyclopedia includes more than 300 succinct, original articles on libertarian ideas, institutions, and thinkers. Contributors include James Buchanan, Richard Epstein, Tyler Cowen, Randy Barnett, Ellen Frankel Paul, Deirdre McCloskey, and more than 100 other scholars.

A couple of years ago, in an interesting discussion of social change and especially the best ways to spread classical liberal ideas at Liberty Fund’s Online Library of Liberty, historian David M. Hart had high praise for the Encyclopedia: 

The Encyclopedia of Libertarianism provides an excellent survey of the key movements, individuals, and events in the evolution of the classical liberal movement….

One should begin with Steve Davies’ “General Introduction,” pp. xxv-xxxvii, which is an excellent survey of the ideas, movements, and key events in the development of liberty, then read some of the articles on specific historical periods, movements, schools of thought, and individuals.

He goes on to suggest specific articles in the Encyclopedia that are “essential reading” for understanding “successful radical change in ideas and political and economic structures, in both a pro-liberty and anti-liberty direction.” Here’s his guide to learning about the history of liberty in the Encyclopedia of Libertarianism:

  1. The Ancient World
    1. “Liberty in the Ancient World”
    2. “Epicureanism”
    3. “Stoicism”
  2. Medieval Period
    1. “Scholastics - School of Salamanca”
  3. Reformation & Renaissance
    1. “Classical Republicanism”
    2. “Dutch Republic”
  4. The 17th Century
    1. “English Civil Wars”
      1. “The Levellers”
      2. “John Milton” & “Puritanism”
    2. “Glorious Revolution”
      1. “John Locke” & “Algernon Sidney”
      2. “Whiggism”
  5. The 18th Century
    1. 18thC Commonwealthmen - “Cato’s Letters”
    2. The Scottish Enlightenment
      1. “Enlightenment”
      2. “Adam Smith”, “Adam Ferguson” & “David Hume”
    3. The French Enlightenment
      1. “Physiocracy” - “Turgot”
      2. “Montesquieu” & “Voltaire”
    4. “American Revolution”
      1. “Declaration of Independence” - “Thomas Jefferson” & “Thomas Paine”
      2. “Constitution, U.S.” - “James Madison”
      3. “Bill of Rights, U.S.”
    5. “French Revolution”
      1. “Declaration of the Rights of Man and of the Citizen”
  6. The 19th Century
    1. “Classical Liberalism” - the English School
      1. “Philosophic Radicals”
      2. “Utilitarianism” - “Jeremy Bentham”
      3. “Classical Economics” - “John Stuart Mill”
    2. “Classical Liberalism” - the French School
      1. “Jean-Baptiste Say” & “Benjamin Constant”
      2. “Charles Comte” & “Charles Dunoyer”
      3. “Frédéric Bastiat” & “Gustave de Molinari”
    3. Free Trade Movement
      1. “Anti-Corn Law League” - “John Bright” & “Richard Cobden”
    4. “Feminism and Women’s Rights”
      1. “Mary Wollstonecraft”
      2. “Condorcet”
    5. Abolition of Slavery - “Abolitionism”
      1. “William Wilberforce”
      2. “William Lloyd Garrison” & “John Brown”
      3. “Frederick Douglass” & “Lysander Spooner”
    6. [The Radical Individualists]
      1. “Thomas Hodgskin”, “Herbert Spencer”, & “Auberon Herbert”
    7. The “Austrian School of Economics” I
      1. 1st generation - “Carl Menger”, “Eugen von Böhm-Bawerk”
      2. interwar years - “Ludwig von Mises”, “Friedrich Hayek”
  7. Post-World War 2 Renaissance
    1. “Mont Pelerin Society” - “Friedrich Hayek”, “Milton Friedman”, “Karl Popper”, “James Buchanan”
    2. Institute for Economic Affairs (IEA) & “Antony Fisher”
    3. Foundation for Economic Education (FEE) & “Leonard Read”
    4. Institute for Humane Studies & “F.A. Harper”
    5. The Austrian School of Economics II
      1. post-WW2 2nd generation - “Ludwig von Mises”, “Friedrich Hayek”, “Murray N. Rothbard”, “Israel Kirzner”
    6. “Chicago School of Economics” & “Milton Friedman”
    7. “Objectivism” & “Ayn Rand”
    8. “Public Choice Economics” & “James Buchanan”

I could add more essays to his list, but I’ll restrain myself to just one: Along with the essays on the Constitution and James Madison, read “Federalists Versus Anti-Federalists” by Jeffrey Rogers Hummel.

By the way, you can still get the beautiful hardcover edition. Right now it’s half-price at the Cato Store.

Posted on August 17, 2017  Posted to Cato@Liberty

David Boaz discusses NYC public schools versus charter school test scores on FBN’s Kennedy

Posted on August 9, 2017  Posted to Cato@Liberty

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