Volume 14, Issue 16: April 17, 2012
- No Evidence That AIG Bailout Prevented a Meltdown
- Gender Fairness Requires Tax Reform
- Drug War Dispatch
- Pentagon Procurement Perfidy: A Weapon against Taxpayers
- New Blog Posts
1) No Evidence That AIG Bailout Prevented a Meltdown
Ben Bernanke has squandered opportunities to thoroughly justify some of the most activist Federal Reserve policies in recent memory: the financial bailouts of 2008. At a recent lecture at George Washington University, for example, the Fed chairman discussed the AIG bailout but failed to explain precisely why policymakers believed that a collapse of the insurance giant would have triggered a financial Armageddon. The reason for Bernanke’s failure isn’t a lack of motivation; it’s a lack of hard evidence. The bailout bureaucrats had no clear-cut methodology to guide their decision-making; all available evidence indicates that they relied on seat-of-the-pants analyses saturated with arbitrary assumptions, according to Vern McKinley of the Independent Institute and Tom Fitton of Judicial Watch.
“The fact is that they guessed their way through the bailouts and cannot point to any cogent analysis of the costs of ‘inaction,’” McKinley and Fitton write in the Washington Times. “We know this because we asked. But don’t expect these facts to get in the way of Mr. Bernanke’s fairy tale.”
If Bernanke’s tale of federal agencies rescuing a financial system teetering on a precipice were not make-believe, then the Federal Reserve, the Treasury Department, and the Federal Deposit Insurance Corporation would eagerly brandish page after page of internal documents showing that the bailouts prevented a system-wide financial collapse. Instead, the agencies have held their cards close to their chests. Even when lawsuits have compelled them to disclose their memos, they have redacted significant portions that could shed much light on why they bailed out some institutions but left others to founder. Regarding AIG, McKinley and Fitton write: “We continue to this day to press the Obama administration to release details related to this bailout ‘success story.’”
Bernanke’s Fairy Tale Recession Story for Kids, by Vern McKinley and Tom Fitton (The Washington Times, 4/11/12)
Financing Failure: A Century of Bailouts, by Vern McKinley
Vern McKinley at the American Enterprise Institute (4/16/12). Full video will be posted within 24 hours of the event.
Vern McKinley at the Cato Institute (4/30/12).
2) Gender Fairness Requires Tax Reform
Despite the mass entry of women into the labor market over the past 60 years, the U.S. tax code is designed as if husbands are a household’s sole breadwinners. Consider. A wife who enters the workforce is taxed at her husband’s rate, even if she earns the minimum wage. If a wife enters the workforce after the premature death of her husband, the combination of new taxes and loss of Social Security benefits means she will pay a 75 percent effective marginal tax rate. If she goes on welfare, her explicit taxes and loss of benefits effectively put her in a 79 percent marginal tax bracket. These and other inequities merit an overhaul of the tax code, according to Independent Institute Research Fellow John C. Goodman.
“Many changes are needed to bring aging institutions into sync with the way people are living their lives in the 21st century,” Goodman writes in Roll Call, Capitol Hill’s newspaper of record since 1955. Goodman calls for changing the treatment of spouses under Social Security, reforming unemployment insurance, and overhauling federal welfare programs. Among other proposals, he offers the following:
“We need flexibility in labor law, making it easier for workers (especially parents with young children) to choose alternatives to the traditional 40-hour work week,” Goodman writes. “We need a flexible employee benefit system that makes it easier for dual-earner couples to obtain higher wages rather than unneeded, duplicate benefits; and for part-time workers to accept lower wages in return for more valuable health and retirement benefits.”
How Conservatives Can Erase the Gender Gap, by John C. Goodman (Roll Call, 4/16/12)
3) Drug War Dispatch
Independent Institute Senior Fellow Benjamin Powell provides a disheartening update on the war on drugs. “The number of annual drug-related deaths in Mexico quadrupled from 2,300 in 2007 to 11,000 in 2010, largely as a result of the Mexican government’s stepped-up enforcement efforts,” he writes in the Daily Caller. “Those efforts have also increased the number of drug-related deaths in neighboring Guatemala, where many Mexican drug cartels have sought refuge from the Mexican police. Now, the leaders of both countries are saying that the only way to end the violence is to legalize drugs.”
Although Vice President Joe Biden reaffirmed the White House’s commitment to the drug war during his recent visit to Mexico, drug legalization would bring profound benefits, Powell argues, including an end to most drug violence and substantial improvements for the public purse. Legalizing drugs would save $44 billion in annual law-enforcement costs and yield an estimated $33 billion in annual tax revenue, according to Powell.
Legalization would also create economic incentives for suppliers to improve the safety of recreational drugs, Powell argues. Dope peddlers would invest in creating better reputations for their brands. Also, economic pressures to sell high-potency drugs that are optimal for smuggling and concealment would diminish. Powell concludes: “With Mexico on the verge of legalizing drugs, perhaps it’s time for the U.S. to seriously consider the benefits of a legal drug market as well.”
Time to End Our Unwinnable Drug War, by Benjamin Powell (The Daily Caller, 4/11/12)
Drug War Crimes: The Consequences of Prohibition, by Jeffrey A. Miron
4) Pentagon Procurement Perfidy: A Weapon against Taxpayers
A recent report from the Government Accountability Office exposes deceptions emanating from the Pentagon and its loudest shills. The GAO’s annual review of major weapons acquisitions showsburied way back in Appendix IIthat Defense Secretary Leon Panetta and his Republican allies in Congress were guilty of gross hyperbole when they cried that it would be “catastrophic” for defense spending to face the budget-cutting axe of sequestration, the across-the-board spending reductions that are supposed to take place because the deficit-reduction committee couldn’t reach an agreement. In fact, sequestration would have been avoided had the Pentagon not gone on a $74 billion spending spree for R&D and procurement last year, according to Independent Institute Research Fellow Winslow T. Wheeler.
“Even if its data are a few months stale, it’s a good thing the GAO analysis is available,” Wheeler writes. “It helps to counter some of the baloney from the [Department of Defense].” As Wheeler explains, the GAO reports that the Pentagon is adding 16 new weapons programs. However, the congressional watchdog agency fails to note that the Defense Department is merely exploiting loopholes created by Congress. Thus, the GAO provides insights, but it also presents a false picture of Defense acquisitions. “There will be improvement when the numbers show improvement; not when important data is left out or when glib management types try to put lipstick on a pig,” Wheeler concludes.
Last week, Ivan Eland, director of the Independent Institute’s Center on Peace & Liberty, offered a complementary analysis of recent Pentagon acquisitions. His conclusion: “[A] much leaner, defensively oriented military could better safeguard the nation’s security during a time of economic and fiscal crisis, especially if the looming budget sequestration at the beginning of 2013 actually occurs. During the national fiscal calamity, everyone and every institution must make sacrifices; the military is no exception.”
Lies, Damned Lies, and the Pentagon’s Latest Budget Numbers, by Winslow T. Wheeler (Time, 4/9/12)
Putting Defense Back into US Defense Policy, by Ivan Eland (4/12/12)
No War for Oil: U.S. Dependency and the Middle East, by Ivan Eland
5) New Blog Posts
From The Beacon:
Why Do Politicians Pander? Because it Works.
Mary Theroux (4/16/12)
Randall Holcombe (4/16/12)
Yet Another Case of Overzealous Prosecution
Anthony Gregory (4/16/12)
Heroes and Libertarian Ethics in Literature, Part 2
Sam Staley (4/15/12)
American Pie 2.2, or, The Lament of a Self-Made Misesian
Robert Higgs (4/15/12)
If Politicians’ Honesty Set the Standard for Others
Robert Higgs (4/13/12)
In the Name of Stopping Terror
Anthony Gregory (4/13/12)
Will Justice Be Served in Zimmerman’s Trial?
Anthony Gregory (4/12/12)
The Failure of Industrial Policy
Peter Klein (4/11/12)
From MyGovCost News & Blog:
How Much Money Can Government Bureaucrats Waste?
Craig Eyermann (4/16/12)
Washington Hires the Most Expensive Gardener Known to Man
Stephanie Freedman (4/13/12)
The Budget Crisis and the Fiscal Gap
Craig Eyermann (4/12/12)
You can find the Independent Institute’s Spanish-language blog here.