Come tomorrow or whatever, the government may not open. (They’re closing down all “non-essential” offices, such as the Department of State: we’ll be leading from way behind. Any office that doles out money will remain open.) Soon in this theater: the debt ceiling, and more needless contretemps. The easy solution comes (as often) from my buddy Alex Pollock. In this case, he cheerfully concedes that the idea wasn’t his but President Eisenhower’s, way back in 1954: In order to keep making payments, the Treasury increased its gold certificate deposits at the Federal Reserve, which it could do from its dollar “profits”…
Archives for September 2013
In my prior post on the Transitional Gains Trap, I discussed how a government program can provide special benefits or rents to a group initially, but then over time not provide any rents to anyone. Even though the program may be inefficient and undesirable, the existing beneficiaries may fight hard to keep it since they will be harmed by its elimination, even thought they are not receiving any rents from it.
If one favors government programs, then transitional gains are a way of making them popular. Social Security and Medicare transferred money from future generations to existing beneficiaries, which is part of the reason why they were popular.
Many people — both advocates and critics of Obamacare — believe that it will soon become popular in the way that Social Security and Medicare have. But if those programs became popular because of transitional gains, then Obamacare will only become popular if it has such gains as well.
All Republicans say they oppose Obamacare and vie to call it bad names. But while some will not vote for any bill that appropriates money for it, the Republican Establishment’s leaders in Congress are poised to vote to save its funding. They call the Republicans committed to de-funding Obamacare worse names than they call Obamacare itself, as do The Wall Street Journal and Fox News.
The current Liberty Law Talk is with Marc DeGirolami on his book The Tragedy of Religious Freedom. Our conversation focuses on the failure of monistic accounts that resolve religious liberty disputes by cosmic appeals to neutrality, equality, or other universal rationales. DeGirolami argues that these accounts fail to consider fully the range of practices, traditions, and meanings at stake in these highly controverted cases. For our feature review this week, Aurelian Craiutu reviews Peter Berkowitz's Constitutional Conservatism: Liberty, Self-Government, and Political Moderation. Don't miss this earlier podcast I did with Peter Berkowitz. Bryan Caplan @Econ Lib: Just give me natalism. This short essay…
Recently, I read for the first time Gordon Tullock’s masterpiece The Transitional Gains Trap, first published in 1975. In the piece, Tullock talks about a tragedy that often results from government regulation or spending. The government takes an action that initially benefits a particular group, although at the expense of imposing an inefficient policy on the public. But over time, even that special interest group will not benefit from the government program. Yet that group will fight hard to prevent the program from being eliminated, since eliminating it will make that group worse off.
For example, a city government may establish a taxi medallion system that, by restricting entry into the taxi business, will provide large benefits to the initial generation of taxi cabs. This medallion, of course, will harm the public, since it restricts competition. But over time, those who purchase the medallions will pay the market rate for them and therefore will not receive any special rents. Yet, they will fight to prevent the medallion system from being eliminated, since these owners will be harmed by such elimination. Thus, the city will be stuck with an inefficient medallion system that will be difficult to eliminate. Eliminating the medallion program will harm existing taxis, many of whom did not lobby for the system in the first place and do not receive supercompetitive profits.
Tullock’s basic recommendation is not to get into these traps, because they are very hard to get out of.
A while ago, I commented on Jim Ceaser’s “Four Heads and One Heart.” Ceaser believes that the four competing intellectual traditions (the heads) that comprise the modern American conservative movement are united by a common loathing of liberalism (the heart). That piece still shapes my thinking, and I still recommend it. But I want to add to Ceaser’s theory by proposing that there’s an intellectual attitude that all four heads share; there’s something on which they all agree.
In the series of debacles that is the situation in and reacting to Syria, one emphatic triumph ought not go unheralded. The antique apparatus known as the Philadelphia Constitution works, which is to say the machinery—when, as rarely, cleaned, oiled, wound and deployed—operates precisely as advertised. In this case, it inhibited a war the people did not support through the mechanism—the House of Representatives—intended to register their views.
My post on the fact that the equality requirement did not apply to the federal government, which was expanding on Mike Ramsey's post, has generated some discussion. See these two posts on the Volokh Conspiracy by Will Baude and by Ilya Somin. One last point. One way that the equality requirement might apply against the federal government is through due process. The Due Process Clause was applied against the federal government in the 5th Amendment in 1791 and against the states in the 14th Amendment in 1868. Thus, if one can find an equality requirement in due process, one might…
My dear friend and former AEI colleague Alex Pollock, a one-time banker and an occasional guest on this site, is a great and learned man. He lives by and teaches hard-acquired wisdoms. Like, “Debts that cannot be paid will not be paid.” Or, apropos financial busts: “It will always happen again.” As my ten-year-old inquired of Alex: “Why does a wise man like you work with my dad?”
Perhaps because we both belong to a lost age. Pollock’s laws don’t encompass the new first law of finance, famously articulated by former Morgan Stanley CEO John Mack: “Your No. 1 client is the government.” Client No. 9 is, or was, Eliot Spitzer. Clients 2-8 are also government agents, such as state Treasurers. Clients 10-100 are trial lawyers. Borrowers, depositors, and investors are not clients; they are cannon fodder.
J.P. Morgan Chase head Jamie Dimon (on all accounts, an exceptionally honest and competent man) learned Mack’s law of finance the hard way. He moped about Dodd-Frank, and so the powers-that-be went after him and his bank. They’re not remotely done.
This next Liberty Law Talk is with Marc DeGirolami on his new book, The Tragedy of Religious Freedom (Harvard University Press, 2013). Central to DeGirolami's argument is the failure of monistic accounts that seek to resolve religious liberty disputes by cosmic appeals to neutrality, equality, or other universal rationales. These fail because they do not consider the range of conflicts, practices, traditions, and meanings that are at stake in these highly controverted cases. Similarly, DeGirolami takes issue with those who deny even the possibility of the concept of religious freedom. Instead, he looks in a Burkean manner to how the practices…