Reason Magazine - Staff

Either a Borrower or a Lender Be

jsullum@reason.com (Jacob Sullum) — Wed, 15 Oct 2008 07:00:00 EDT

John McCain calls his promise to help millions of Americans with their mortgages the McCain Resurgence Plan. Ostensibly, the "resurgence" has something to do with home values, but his poll numbers are what he really has in mind.

This desperate ploy, unveiled at last week's presidential debate, speaks volumes about McCain's readiness to forsake his avowed principles and his supposed commitment to candor. Meant to bribe swing voters with taxpayers' money, it should repel anyone who considers its rationale, its fairness, and its fiscal implications.

Responding to a debate question about the economic insecurity of "retired and older citizens and workers," McCain said: "Home values of retirees continue to decline, and people are no longer able to afford their mortgage payments. As president...I would order the secretary of the treasury to immediately buy up the bad home loan mortgages in America and renegotiate...at the diminished value of those homes and let people be able to make...those payments and stay in their homes."

McCain thus conflated two distinct issues: declining home values and foreclosures. If a home you bought for $300,000 can now fetch only $200,000, that in itself does not affect your ability to make your monthly payment. You may not like paying off a loan that's higher than the current market value of your house, but that's the chance you took when you invested in this particular asset.

If you used an adjustable-rate mortgage to buy the house and the rate has risen, you may now have difficulty making your payments. But that's the chance you took when you picked a lower initial rate over a higher but stable rate.

McCain says he would "buy up the bad home loan mortgages." Bad from whose perspective? Does he mean mortgages that exceed the current value of the homes they were used to buy (which are bad from the borrowers' perspective) or mortgages on which the homeowners have started to miss payments (which are also bad from the lenders' perspective)?

Since preventing foreclosures is one of McCain's aims, you might think he has the latter sort of loan in mind. But according to The New York Times, McCain's chief economic adviser "noted that about 10 million Americans had mortgages that exceeded their homes' value." He said "literally millions of people" could benefit from McCain's plan, adding, "The question is how many people pick up the phone."

That suggests anyone with negative equity would be eligible, regardless of his financial position or payment history. If so, a multimillionaire whose mansion is worth less than it was when he bought it could get a fixed-rate, 30-year mortgage at 5 percent, with the principal based on the home's current value.

That's better than my mortgage, and I bet it's better than yours (especially the part where you can reduce the principal you owe). Can you get in on this deal? Only if your purchase and/or financing decisions were particularly ill-advised.

Under McCain's plan, neither the borrowers nor the lenders bear the cost of their risky choices. Taxpayers do, to the tune of $300 billion or so—his estimate of the difference between what the government will pay to buy mortgages at their face value and what it will get back at the McCain-discounted value, assuming borrowers who have already shown themselves to be bad credit risks pay off their new loans.

McCain concedes his plan will be "expensive" but says it's necessary to "stabilize home values in America." Somehow McCain knows the market price for homes is not the correct price, so he plans to artificially prop up the value of these assets, benefiting one group of Americans at the expense of others. The straight-talking maverick thereby abandons any pretense of fiscal conservatism, devotion to free market principles, or opposition to pork barrel politics—all to restore "some trust and confidence back to America."

You know, I do feel a resurgence coming. But I think it's my breakfast.

Economic Anxiety Leads to Smoking, Especially in Casinos

jsullum@reason.com (Jacob Sullum) — Mon, 13 Oct 2008 17:08:00 EDT

Atlantic City's ban on smoking in casinos takes effect this week, but only for a week. "In a last-minute change," the Press of Atlantic City reports, the city council "voted 5-4 on Wednesday to delay the smoking ban for at least a year to give the casino industry time to recover from the nation's economic woes. The final vote on that delay won't come, however, until the next regularly scheduled council meeting [on] Oct. 22." A.P. says the move was "due to the economic crisis and fear of massive casino losses and layoffs." But it reports that "four casinos owned by Harrah's Entertainment say they will go smoke-free on the gambling floor anyway on Wednesday, and stay that way, offering patrons ventilated smoking lounges." In the absence of government mandates, it seems, consumers get a diversity of options. But apparently this is the sort of thing that can be allowed only during economic crises.

[Thanks to an unidentified reader for the tip.]

McCain's First Priority: Repealing the Law of Supply and Demand

jsullum@reason.com (Jacob Sullum) — Mon, 13 Oct 2008 15:22:00 EDT

In his latest radio address, John McCain responds to Barack Obama's criticism of his mortgage plan (emphasis added):

It's critical that we stabilize mortgages, or else the housing market won't stabilize and homeowners across our country face troubles even greater than they face now. The housing market faces distortion by a glut of low-priced, foreclosed homes. And this would lead to a crash in the value of the number one asset of a majority of Americans. With so much on the line, the moment requires that government act—and as President I intend to act, quickly and decisively.

Where McCain sees "distortion" I (with a mere bachelor's degree in economics) see the interaction of supply and demand. Other things being equal, it's natural that a glut of homes would reduce home prices. The distortion occurs when the government uses taxpayers' money, as McCain proposes, to buy the mortgages on these homes at face value and turn them into fixed-rate, 30-year loans at 5 percent, reducing the size of the principal based on the decline in the value of the homes. Assuming this plan works as McCain intends, the government will be artificially propping up the price of these assets, based on his judgment that market prices are too low.

If there were no principles at stake, I'd love to take advantage of the McCain Resurgence Plan by reducing the principal and interest rate on my mortgage, or at least benefit from the higher sales price he is promising. For that matter, what about the glut of low-priced journalists who are distorting the market for my services, thereby depressing my income?

Spying on Innocents Abroad

jsullum@reason.com (Jacob Sullum) — Fri, 10 Oct 2008 19:42:00 EDT

Two former military intercept operators, both Arab linguists, have independently told ABC News that the National Security Agency routinely listens to the telephone conversations of innocent Americans in the Middle East, including soldiers, aid workers, and journalists, when they call people in the United States. "These were just really everyday, average, ordinary Americans who happened to be in the Middle East, in our area of intercept and happened to be making these phone calls on satellite phones," one said. She described the conversations as "personal, private things [involving] Americans who are not in any way, shape or form associated with anything to do with terrorism." The other whistleblower said intercept operators would often share especially risqué or amusing conversations, including calls to spouses and girlfriends, with each other. "Hey, check this out," he said colleagues at the NSA center in Fort Gordon, Georgia, would tell him, "there's good phone sex or there's some pillow talk, pull up this call, it's really funny, go check it out. It would be some colonel making pillow talk." As ABC notes, this sort of idle snooping is rather different from the sort of by-the-book professionalism that Bush administration officials have repeatedly insisted characterizes the so-called Terrorist Surveillance Program:

"There is a constant check to make sure that our civil liberties of our citizens are treated with respect," said President Bush at a news conference this past February....
In testimony before Congress, then-NSA director Gen. Michael Hayden, now director of the CIA, said private conversations of Americans are not intercepted.
"It's not for the heck of it. We are narrowly focused and drilled on protecting the nation against al Qaeda and those organizations who are affiliated with it," Gen. Hayden testified.
He was asked by Senator Orrin Hatch (R-UT), "Are you just doing this because you just want to pry into people's lives?"
"No, sir," General Hayden replied.

In June I noted that Barack Obama supported the legislation that gave the executive branch permission to monitor Americans' international communications at will, while John McCain seems to think the president did not need Congress' permission.

[Thanks to Tricky Vic for the tip.]

'Barack Obama Supports Gun Rights'

jsullum@reason.com (Jacob Sullum) — Wed, 08 Oct 2008 12:53:00 EDT

Barack Obama has another ad, this one a TV spot featuring a life member of the NRA, attesting to his support for Second Amendment rights. CBS reports that the ad is running in Ohio, Pennsylvania, and North Carolina. "Barack Obama supports gun rights, our right to defend ourselves, the Second Amendment," the narrator says. "That's the truth."

Is it? Obama's reading of the Second Amendment is so narrow that he sees no constitutional problem with the Washington, D.C., gun ban that was overturned by the Supreme Court or a similar law in Chicago. Maybe he supports the right to own a disassembled rifle and the right to defend ourselves with pointy sticks, but in practice his position is pretty much the same as that of gun controllers who continue to insist that the Second Amendment protects no rights the government need respect.

Meanwhile, the NRA is stepping up its anti-Obama ad campaign, which I discuss here and here.

[via Trey Garrison]

You Can't Go Home, So You Have to Stay Here

jsullum@reason.com (Jacob Sullum) — Wed, 08 Oct 2008 11:36:00 EDT

Yesterday a federal judge in Washington, D.C., ordered the release of 17 men, all Uighur Muslims from China, who have been held at Guantanamo Bay for six years as "enemy combatants." The Pentagon has given up trying to justify that classification but still does not want to let the men go. It says the detainees, who were captured in Afghanistan, cannot be returned to China because they would be persecuted there, and no other country is willing to take them. U.S. District Judge Richard Urbina says they therefore should be freed to live in the United States, where supporters have arranged lodging in Washington and Tallahassee, Florida. The Justice Department says Urbina, who was responding to a habeas corpus lawsuit, does not have the authority to issue such an order, since the executive branch is in charge of immigration matters. If the Uighurs are brought to the U.S., it warns, they could be detained again, this time by the Department of Homeland Security.

I discussed the Uighurs' predicament in a 2006 column.

Pick Your Populism

jsullum@reason.com (Jacob Sullum) — Wed, 08 Oct 2008 07:00:00 EDT

Casting about for an explanation of the baffling resistance among Republicans in the House of Representatives to the $700 billion Wall Street bailout that every well-informed, sensible person in the country supported, The New York Times settled on populism. The Republican Party "is increasingly populist," reporter Jackie Calmes averred, and "populists do not favor bailouts of Wall Street."

Evidently that assessment was meant as a put-down, since Calmes described the House Republicans' recalcitrance as a "rigidly ideological stance at a time of economic crisis." Yet in mainstream American politics nowadays, populism is less an ideology than an attitude, a rhetorical style pitting regular people against powerful elites, and it can be adapted to diametrically opposed political causes.

While the anti-bailout movement did have a populist flavor, there were reasons to be wary of this massive economic intervention (including concerns about its cost, its fairness, its effectiveness, and the precedent it sets) that went beyond antipathy toward Wall Street fat cats. Furthermore, supporters of the Treasury Department plan to buy up mortgage-backed securities also cast their position in populist terms.

At last week's vice presidential debate, Republican nominee Sarah Palin, while paying lip service to "personal responsibility," said the "Joe Six Pack[s]" and "hockey moms" who took out mortgages they could not afford were "exploited and taken advantage of" by "predator lenders." She said "the corruption and the greed on Wall Street" created the "toxic mess" that the government must now clean up at taxpayers' expense—not to help special interests but to protect "the Main Streeters like me" who would otherwise be hurt by tight credit resulting from the degraded assets of financial institutions.

Palin also tried to put a populist spin on John McCain's tax policies, saying the government should "lessen the tax burden on our families and get out of the way and let the private sector and our families grow and thrive and prosper." She thereby obscured a point emphasized by Joe Biden, her Democratic rival: The biggest direct beneficiaries of McCain's tax cuts would be rich people.

By the same token, Biden obscured an important reason for that: Rich people pay a lot more taxes to begin with. In 2005, according to the Tax Foundation, the top 1 percent of American earners received a fifth of total income but paid two-fifths of federal income taxes. In Biden's view, making that burden even more disproportionate is "simple fairness."

It will always be easier to make a populist case for taking from the rich and giving to the "middle class" than it is to make a populist case for letting the rich keep more of their own money. But other policies that traditionally have been seen as populist, including protectionism, farm subsidies, and maintaining Social Security in its current form, can plausibly be portrayed as favoring special interests at the expense of a less affluent and less influential majority.

The relevant question is not whether a policy benefits an elite but whether the elite is thereby unjustly enriched. Whatever your political perspective, then, there are good and bad kinds of populism. But one variety we should all agree to oppose is the mindless, anti-intellectual populism to which Biden and Palin resorted during their debate.

If you want "a good barometer" for the economy's health, according to Palin, you shouldn't look at statistics or consult economists; you should "go to a kid's soccer game on Saturday, and turn to any parent there on the sideline and ask them, 'How are you feeling about the economy?'" If you want a detailed comparison of McCain's economic, educational, health care, and foreign policies with those of the Bush administration, according to Biden, you shouldn't pick up a newspaper or do research online; you should "walk into Home Depot with me" and "ask anybody in there." This is the sort of populism that insults voters' intelligence while trying to flatter it.

Economic Populists for Lower Corporate Taxes

jsullum@reason.com (Jacob Sullum) — Tue, 07 Oct 2008 19:13:00 EDT

The puzzling political analysis of New York Times national correspondent Jackie Calmes continues with a "Congressional Memo" contending that "on the economy" the Republican Party "is increasingly populist." That explains resistance to the Wall Street bailout by Republicans in the House, Calmes says, because "populists do not favor bailouts of Wall Street." For Calmes, the alleged increase in Republican economic populism is of a piece with an increase in "social conservatism," including "opposition to abortion, gay rights and liberalized immigration policies," that has alienated "voters from families that have been Republican for generations." These socially conservative, economically populist Republicans are "less affluent and less educated—and more suspicious of big business—than mainstream Republicans of days past."

But what about all the House Republicans who said they opposed the bailout because it constitutes excessive government intervention in the economy? Calmes quotes Rep. Jeb Hensarling (R-Texas), for example, who condemned the Treasury Department's plan as "the slippery slope to socialism." Is socialism the opposite of economic populism? Calmes concedes that "nearly all of the Republican opponents insisted they were upholding the party's principles and its 'brand' by opposing big-government intervention in what should be free markets." Yet somehow she divines that what really motivated them was hostility toward big business.

"To get the [presidential] nomination," Calmes writes, John McCain "made accommodations to the conservatives dominant in the party by his rightward turns on tax cuts and other issues." Do economic populists push a lower corporate tax rate?

Calmes understands that Republican critics of the bailout see themselves as upholding Ronald Reagan's legacy, but she's having none of it:

Republican figures from the Reagan years say these conservatives misread their idol's record of bipartisan compromises. Amid the current financial crisis, several recalled that after the 1987 market crash, Mr. Reagan and the Democratic leaders in Congress negotiated a budget compromise of spending cuts and revenue-raisers to signal to markets that the government was serious about reducing the deficits.
"Ronald Reagan would not be comfortable as a House Republican today. Ronald Reagan was the ultimate pragmatist and fiscal conservative," said Kenneth M. Duberstein, a White House chief of staff to Mr. Reagan.

So Ronald Reagan's fiscal conservatism (overrated, but that's another story) means he would have supported the Treasury Department's plan to spend $700 billion in taxpayers' money on the worst investments it can find?

I realize Calmes' main aim is to shake her head at what she calls the House Republicans' "rigidly ideological stance at a time of economic crisis." But she could at least get the ideology right.

An Inconsistent Originalism Beats 'Politics by Another Name'

jsullum@reason.com (Jacob Sullum) — Mon, 06 Oct 2008 15:44:00 EDT

In a recent FindLaw essay, the Cato Institute's Robert Levy notes that John McCain has promised to appoint judges who "understand that there are clear limits to the scope of judicial power, and clear limits to the scope of federal power." That much is encouraging, he says, but McCain's avowed preference for "strict constructionists" and believers in "original intent" is troubling, assuming the Republican nominee understands how those terms are used by constitutional scholars. Levy prefers originalism, a.k.a. textualism:

Originalists interpret the Constitution in accordance with its meaning when the underlying textual provisions were ratified. Sometimes originalists are called "textualists" because they assign great importance to the words actually in the Constitution. As the term implies, originalists insist that the text be interpreted as it was originally understood by those who first wrote and read it—not the meaning that would necessarily be derived from a modern reading of the text.
Originalism is not, however, synonymous with "original intent"—a distinct interpretive tool, supposedly favored by conservatives, that focuses on the values and objectives of the drafters and ratifiers when they enacted a particular provision. As Justice Antonin Scalia has written, "It's the law that governs, not the intent of the lawgiver."...
Just as textualism is not the same as original intent, neither should it be equated to strict constructionism....
Strict constructionism is often identified with more conservative legal scholars. Yet Scalia has carefully distinguished it from his own preference for textualism: "Strict constructionism...is a degraded form of textualism that brings the whole philosophy into disrepute. I am not a strict constructionist, and no one ought to be....A text should not be construed strictly, and it should not be construed leniently; it should be construed reasonably, to contain all that it fairly means."

Levy worries that if McCain is elected and really does appoint disciples of original intent or strict constructionism, they will be insufficiently inclined to pursue "his professed goal to rein in federal power." Even an avowed commitment to textualism, of course, is no guarantee that a judge's decisions will serve that goal. As I've argued, Scalia has been on the side of liberty more often than is commonly appreciated. He broke with strict constructionists by reading the First Amendment to cover flag burning, for example, and insisted on enforcing the plain meaning of the Suspension Clause with respect to "enemy combatants" captured in the United States. His positions on eminent domain, infrared searches, and the federal sentencing guidelines likewise show how applying the original understanding of the text to modern conditions can help curtail the government's power. Most recently, in D.C. v. Heller, he strove to illuminate the meaning of the Second Amendment "as it was originally understood by those who first wrote and read it." At the same time, Scalia somehow managed to read the power to regulate interstate commerce as an excuse to prevent AIDS and cancer patients in California from growing an herbal remedy authorized by state law.

Notably, though, so did the Supreme Court's "liberal" members, and there's little reason to believe Obama's appointees would be any more inclined to enforce the principle that Congress has only those powers specifically enumerated in the Constitution. Furthermore, Levy argues, based on Obama's preference for judges with "empathy" toward members of disadvantaged groups and his belief that "our courts should stand up for social and economic justice," his appointees probably would favor one version or another of "living Constitution" doctrine, which holds that the meaning of the text changes with the times. "When the text of our written Constitution is trumped by evolving societal needs," Levy warns, "then the judicial function is just politics by another name." His Cato colleague Roger Pilon warns that "a 'living constitution,' interpreted to maximize political discretion, can be worse than no constitution at all, because it preserves the patina of constitutional legitimacy while unleashing the political forces that a constitution is meant to restrain."

In an August column, I noted that McCain joins Scalia in making a marijuana exception to the principles of federalism.

He Should Have Known He Needed a Prescription for an OTC Drug

jsullum@reason.com (Jacob Sullum) — Fri, 03 Oct 2008 15:06:00 EDT

When Gary Schinagel's niece told him she had seen his name in a local newspaper story about a drug investigation, he decided to go down to the sheriff's office and straighten out what was obviously a misunderstanding. Instead Schinagel, a 47-year-old senior investment associate at Principal Financial Group in Mason City, Iowa, was arrested for violating a 2005 state law that aims to curtail methamphetamine production by limiting the amount of pseudoephedrine, a meth precursor, an individual may purchase. Buyers of cold and allergy remedies containing the chemical have to present ID and sign a log (a requirement that has since been imposed throughout the country by federal law), which allows police to track who is buying how much. Schinagel, who has suffered from chronic nasal congestion since childhood, was not using the pseudoephedrine to cook meth, and he says he's not even sure which rule he broke: the one against buying more than 3.6 grams (120 Sudafed tablets) in a 24-hour period or the one against buying more than 7.5 grams of pseudoephedrine (250 tablets) in a month. The latter offense is a "serious misdemeanor" that can get you up to a year in jail and a $1,500 fine.

The law does allow someone in Schinagel's medical situation to exceed the pseudoephedrine limits, but only with a prescription. "It is a sinking feeling to be placed under arrest," Schinagel, who is free on bail, told the Mason City Globe Gazette. "I've tried all my life to avoid situations like I find myself in now. And I still don't know which line I crossed."

I bemoaned the Sudafed crackdown in a 2005 column.

[via The Drug War Chronicle]

Please, Mr. Lender, Exploit Me Some More

jsullum@reason.com (Jacob Sullum) — Fri, 03 Oct 2008 13:17:00 EDT

In last night's vice presidential debate, Sarah Palin attacked "predator lenders," which made it sound like she was opposed to the sharing of lions and tigers among zoos. Judging from the context, I'm pretty sure she meant "predatory lenders":

Moderator Gwen Ifill: The next question is...about the subprime lending meltdown. Who do you think was at fault? I start with you, Gov. Palin. Was it the greedy lenders? Was it the risky home buyers who shouldn't have been buying a home in the first place? And what should you be doing about it?
Palin: Darn right it was the predator lenders, who tried to talk Americans into thinking that it was smart to buy a $300,000 house if we could only afford a $100,000 house. There was deception there, and there was greed and there is corruption on Wall Street. And we need to stop that.
Again, John McCain and I, that commitment that we have made, and we're going to follow through on that, getting rid of that corruption.
One thing that Americans do at this time, also, though, is let's commit ourselves, just everyday American people, Joe Six Pack, hockey moms across the nation, I think we need to band together and say never again. Never will we be exploited and taken advantage of again by those who are managing our money and loaning us these dollars. We need to make sure that we demand from the federal government strict oversight of those entities in charge of our investments and our savings and we need also to not get ourselves in debt. Let's do what our parents told us before we probably even got that first credit card. Don't live outside of our means. We need to make sure that as individuals we're taking personal responsibility through all of this. It's not the American people's fault that the economy is hurting like it is, but we have an opportunity to learn a heck of a lot of good lessons through this and say never again will we be taken advantage of.

Despite the nod toward "personal responsibility" in that last paragraph, this is a very strange take on the situation, especially coming from a self-identified conservative who supposedly believes in free markets. Exactly what is a predatory lender, and how does he profit by lending money to people who can't pay him back? That sounds more like a stupid lender. What about the predatory borrower, who takes out a loan and breaks his promise to pay it back? If anyone is getting ripped off here (aside from the taxpayers who have to pay for the bailout Palin and her running mate support), isn't it the lender? Evidently not. In Palin's topsy-turvy world, you are being "exploited and taken advantage of" when you take the money and run.

The Drug Warrior's Best Friend

jsullum@reason.com (Jacob Sullum) — Thu, 02 Oct 2008 19:47:00 EDT

Back in 2005, when the U.S. Supreme Court said police officers may use drug-sniffing dogs at will during routine traffic stops, it assumed that such dogs can reliably detect and signal the presence or absence of contraband. But as one of the dissenters, Justice David Souter, noted, "the infallible dog...is a creature of legal fiction." Souter cited examples from court cases of dogs with error rates of up to 38 percent. A recent report in The Tampa Tribune suggests he was being generous:

Talon, who worked for the Palmetto Police Department, smelled drugs on every single vehicle during a four-month period and drugs were found less than half the time.
Circuit Judge Debra Johnes Riva said in a ruling that she had no choice but to throw out evidence in a drug case because of that track record.

Yet a different circuit judge later admitted evidence discovered in a car search that was based on an "alert" from Zuul, a dog with a track record very similar to Talon's. Local police were relieved by the latter ruling. The sergeant who oversees the K-9 division of the Sarasota sheriff's office told the Tribune that if other courts followed Riva's reasoning, it could be "catastrophic to the way we've been doing business." If Talon and Zuul are at all representative, the way they've been doing business is to search pretty much any vehicle they please, using the dogs' reactions as a cover for their hunches. Given the animals' accuracy, police might as well replace them with coins or magic eight balls. At least they'd save taxpayers some money.

[via The Drug War Chronicle]

Does Social Conservatism Explain Opposition to the Bailout?

jsullum@reason.com (Jacob Sullum) — Thu, 02 Oct 2008 17:30:00 EDT

According to a New York Times "news analysis," Monday's House vote against the Wall Street bailout "captured just how much the Republican Party has changed from its 19th-century roots as the party of business and economic stewardship." Reporter Jackie Calmes continues:

The party's base has shifted to the more socially conservative and populist South and West, and away from its historic roots in the Northeast, including Wall Street. House Republicans, most of them in districts purposely drawn to be packed with like-minded conservative voters, reflect that shift.*

While opposition to a taxpayer-funded bailout of Wall Street fat cats clearly has a populist aspect to it, I'm not sure what role social conservatism plays. Weirdly, Calmes does not mention anti-statism or free market principles as a motivation for Republican opponents of the bill, although she closes her piece by quoting the Brookings Institution's Thomas Mann, who says, "This is a function of a group of House Republicans who are philosophically opposed to doing anything like this bailout." The philosophical opposition to which Mann alludes is not rooted in populism or social conservatism.

Calmes is right to call the 19th-century GOP "the party of business and economic stewardship," if by that she means to suggest that the party of Lincoln was more inclined toward economic intervention than the party of Reagan, and in certain respects more pro-business than pro-market. The most conspicuous example of the Republican Party's departure from laissez faire was its support for high tariffs, a policy that is pro-business in the sense that it benefits certain domestic businesses but certainly not pro-market. Protectionism does have a populist appeal, however, and it seems implausible that increasing populism explains the GOP's embrace of free trade, or of free market economics generally. In short, I'm not sure what Calmes is driving at here, unless she is simply insinuating that opponents of the bailout are backward, insular, and irrational.

[*This is the text as it appears in my copy of the paper; the online version is somewhat different.]

Does It Take a Panic to Stop a Panic?

jsullum@reason.com (Jacob Sullum) — Wed, 01 Oct 2008 07:00:00 EDT

"Without immediate action by Congress," President Bush warned last week, "America could slip into a financial panic." Instead Bush wanted a political panic. The only way to avert "a long and painful recession" in which "millions of Americans could lose their jobs," he said, was to send the Treasury Department on an unprecedented Wall Street buying spree.

But Treasury Secretary Henry Paulson was premature in thinking the administration's scaremongering had produced "a bipartisan consensus for an urgent legislative solution." A bailout bill that reached Congress on Monday, just 10 days after Paulson first proposed using taxpayer money to relieve financial institutions of their bad investments, was narrowly defeated in the House. Still, the specter of blind bipartisanship, which may yet prevail, should give pause to anyone who hopes electing a Republican president will curb the excesses of a Democratic Congress.

The issue has hurt John McCain in more obvious ways as well. The Wall Street bailout focused voters' attention on the economy, an area where, rightly or wrongly, they trust Barack Obama more.

McCain looked like a grandstanding doofus when, trying to gain a political advantage, he melodramatically "set politics aside" and rushed to Washington, where he vainly sought to broker a bailout deal. After saying Friday night's presidential debate would have to be postponed, for the good of the country, until an agreement had been reached, he discovered the country could spare him for a few hours after all and flew to Mississippi, where he achieved the bipartisanship that had eluded him in Washington.

"We are going to have to intervene; there's no doubt about that," said Obama. "We have to move swiftly." McCain sounded even more panicky, saying there's "no doubt about the magnitude of this crisis." Unless Congress does something to "fix the greatest fiscal crisis...in our time," he said, we will see "failures on Main Street, and people who will lose their jobs, and their credits, and their homes."

McCain added that "the first thing we have to do is get spending under control in Washington." Right after letting the Treasury Department spend $1 trillion on the crappiest assets it can find. (Rounding the number up seems reasonable given the arbitrariness of the official $700 billion estimate. "It's not based on any particular data point," a Treasury Department spokeswoman told Forbes. "We just wanted to choose a really large number.")

Neither candidate wondered whether government officials spending other people's money can realistically be expected to do a better job of valuing mortgage-backed securities than myriad investors with their own money on the line. Neither worried that government ownership of so many securities, including stock in financial institutions, would create conflicts of interest and encourage politically motivated market manipulation.

Neither said it was dangerous to rescue Wall Street firms from their own mistakes instead of letting the market punish them, or unfair to make taxpayers pick up the tab. Neither mentioned the problem of moral hazard, where the expectation of a bailout leads people to take risks they otherwise would avoid. Most fundamentally, neither questioned the premise that Congress had to choose between a recklessly rushed "solution" and economic catastrophe.

More than 100 economists signed a September 23 open letter warning Congress "not to rush," saying "a subsidy to investors at taxpayers' expense" is morally and economically problematic. "Fundamentally weakening [credit] markets in order to calm short-run disruptions is desperately short-sighted," they said. Three days later, 44 economists led by former House Majority Leader Dick Armey said the bailout plan "poses a significant threat to taxpayers while failing to address fundamental problems."

Instead of heeding these warnings, Obama and McCain listened to the likes of White House spokesman Tony Fratto, who said failing to approve the bailout by the end of last week was "unthinkable." "We have to get something done," one of the candidates insisted on Sunday. "The option of doing nothing is simply not an acceptable option," the other declared.

Who said what? Does it matter?

What's $7 Billion When You're Ready to Blow 100 Times As Much?

jsullum@reason.com (Jacob Sullum) — Fri, 26 Sep 2008 18:39:00 EDT

As Rep. Jeff Flake (R-Ariz.) notes, "This all may seem a little trivial in a week [when] we may approve $700 billion," but the $630 billion omnibus spending bill Congress is finishing up includes some $6.6 billion in earmarks. The biggest pork puller in the Senate is the indicted Alaska Republican Ted Stevens, who will be going out with a bang if he's convicted of illegally hiding corporate gifts and is forced from office. According to Taxpayers for Common Sense, Stevens is responsible for 39 earmarks totaling $239 million. In the House, The New York Times reports, Rep. John Murtha (D-Pa.) leads with "30 items totaling $111 million, including $24.5 million for the National Drug Intelligence Center in Johnstown, his hometown." That's $1.5 million more than his last earmark proposal for the intelligence center, which presumably is the main reason drug warriors are so smart.

While Flake, a leading fiscal consrervative, regrets the way the pending Wall Street bailout has defined congressional profligacy up (or is it down?), many of his colleagues welcome it:

Mr. Murtha told reporters that earmarks were just a tiny fraction of "what the administration wants to bail out those rich guys in New York."
Other lawmakers said the earmarks were a way of tossing a few bones to Main Street, before the Treasury pours hundreds of billions of dollars onto Wall Street.

As I predicted in January, earmark sponsors easily circumvented President Bush's executive order telling agencies to ignore spending instructions not included in the body of legislation. According to Times, "the omnibus spending bill says that the lists of earmarks, though not included in the bill, 'are hereby required by law to be carried out' by federal agencies, just as if they were in the bill."

Critiques of FactCheck's Critique of the NRA

jsullum@reason.com (Jacob Sullum) — Fri, 26 Sep 2008 12:44:00 EDT

reason contributor Dave Kopel calmly and thoroughly dissects FactCheck.org's critique of the NRA's anti-Obama ads, which I mentioned in my column this week but did not have the space to address in detail. As Kopel notes, FactCheck's main conclusion, that the NRA's ad campaign "distorts Obama's position on gun control beyond recognition," is way too strong. (John Lott notes that a co-author of the FactCheck critique, Brooks Jackson, went even further in an interview with Fox News, calling the NRA ads "one of the worst examples of lying" he had "ever seen.") While the NRA can be faulted for taking certain liberties—e.g., a flyer presenting inferences based on positions Obama has taken over the years as his "10 Point Plan to 'Change' the Second Amendment"—the specific claims in its TV spots are all documented. And the general thrust of its argument, that Obama reads the Second Amendment to allow almost every form of gun control under the sun, is hard to deny.

Granted, FactCheck is in a difficult position when it tries to assess someone's claim about what a candidate really believes, as opposed to what he's saying to get elected. That sort of argument can't be rated true or false in the same way as an assertion about a politician's experience or voting record. And the NRA did not go out of its way to help. According to FactCheck, the NRA's public affairs director "declined to speak to us except to say that the claims are based on Obama's voting record and statements he has made in the media."

But FactCheck was excessively credulous in accepting the Obama campaign's rhetoric at face value and insufficiently curious about the basis for the NRA's claims, some of which hinge on dueling interpretations of legislation. As Kopel shows, FactCheck repeatedly suggests that Obama's general statements of support for the Second Amendment somehow cancel out his specific positions in favor of gun control, all but one of which he has never repudiated. And while Obama claims he never favored banning handguns, the evidence, which includes not just a disputed 1996 candidate questionnaire but recent statements in support of local handgun bans, strongly suggests otherwise. The Democratic platform itself includes Obama's comment about "what works in Chicago"—i.e., a handgun ban.

Speaking of dueling legislative interpretations, Kopel addresses the NRA's claim that Obama has supported a ban on ammunition used for hunting. He notes that in 2005 the senator voted for an amendment prohibiting rifle ammunition "designed or marketed as having armor piercing capability." While manufacturers do not market their ammunition as useful in killing cops, Kopel notes that "almost all rifle ammunition used for hunting deer or larger animals will penetrate a bullet-resistant vest" and therefore could be viewed as "designed" for that purpose, notwithstanding assurances to the contrary from the bill's sponsors. Lott adds that another part of the amendment would have banned "ammunition that 'may be used in a handgun' and can penetrate the 'minimum,' type 1, level of body armor," which would cover rifle ammunition that also can be used in handguns. Furthermore, in 2003 Obama said he supported "banning the sale of ammunition for assault weapons." Lott notes that "the rifles banned under the so-called assault weapons ban used such standard ammunition as .223 and .308 caliber bullets, the same ammunition used commonly in hunting rifles." In this case, as in his quip about deer in bullet-proof vests, Obama seems to have conflated the "assault weapon" and "armor-piercing bullet" issues.

Revenge of the Bitter Gun Owners

jsullum@reason.com (Jacob Sullum) — Wed, 24 Sep 2008 07:00:00 EDT

Last spring, after the U.S. Supreme Court ruled that the Second Amendment guarantees an individual right to arms, Democrats hoped the decision would neutralize the gun issue. Instead the ruling, by inviting debate over which kinds of gun control are constitutional, has made the issue more salient.

That's bad news for Barack Obama, who the National Rifle Association says "would be the most anti-gun president in American history." The Democratic nominee pays lip service to Second Amendment rights while calling for "commonsense," "reasonable" restrictions. But Obama's sense of what's reasonable, while common among the left-liberal politicians and activists inside his comfort zone, may seem decidedly unreasonable to the pro-gun voters the NRA is trying to mobilize against him.

Since these voters made a decisive difference in the 2000 presidential election and arguably in 2004 as well, this is a threat Obama ignores at his peril. The NRA plans to spend $15 million urging voters in battleground states of the Midwest and Mountain West to "Defend Freedom" and "Defeat Obama." Meanwhile, the Obama campaign is running radio spots in swing states such as Michigan, Ohio, Pennsylvania, and West Virginia that promise "Barack Obama and John McCain will both make sure we keep our guns."

Although Factcheck.org faults the NRA for distorting Obama's record, every falsifiable claim in its TV spots has a factual basis. In one ad, a Virginia hunter complains that Obama supports "a huge new tax on my guns and ammo," referring to a position Obama took in 1999. He adds that the Illinois senator voted to "ban virtually all deer-hunting ammunition," a reference to his 2005 vote for a federal ban on rifle ammunition "designed or marketed as having armor piercing capability," phrasing that arguably covered deer-hunting ammunition.

Finally, the hunter complains that Obama wants to ban shotguns and rifles used for hunting, alluding to his support for reinstating the federal "assault weapon" ban. That law arbitrarily prohibited firearms based mainly on cosmetic features that made them look scary to gun-naïve politicians.

In another NRA ad, an Iraq war veteran from Wisconsin complains that "Barack Obama opposes my right to own a handgun for self-defense." In a 1996 questionnaire, Obama's state Senate campaign said he supported a handgun ban. Today Obama says that was a mistake, but the questionnaire bears his handwriting, so he clearly saw it without changing the supposedly erroneous answer.

As a state legislator, Obama voted against a bill shielding people who use handguns for self-defense in their homes from prosecution for violating local gun registration rules. Most tellingly, Obama has repeatedly expressed support for local handgun bans such as the District of Columbia's, which the Supreme Court overturned, and Chicago's, which faces a constitutional challenge.

"What works in Chicago may not work in Cheyenne," Obama says. The line, meant to reassure gun owners, highlights his peculiar view that the extent of an American's constitutional rights depends on where he lives.

The specifics of Obama's views may turn out to be less important than the sense that he's an urban sophisticate who is unfamiliar with firearms and does not even understand the gun control laws he supports. In a 2004 debate, Obama explained the rationale for the "assault weapon" ban this way: "Unless you're seeing a lot of deer out there wearing bullet-proof vests, then there is no purpose for many of the guns." He thereby conflated the "assault weapon" and "armor-piercing bullet" issues, apparently not realizing that ordinary hunting ammunition can penetrate "bullet-proof vests."

The NRA ads seek to reinforce the impression of Obama's cluelessness. "Where is this guy from?" asks the hunter. "He's probably never been hunting a day in his life." Two of the ads allude to Obama's notorious comment that working-class voters in Pennsylvania and the Midwest "get bitter" during hard economic times and "cling to guns or religion." What will Obama cling to when voters question his commitment to the Second Amendment?

Ted Stevens on Trial

jsullum@reason.com (Jacob Sullum) — Mon, 22 Sep 2008 17:23:00 EDT

As Sen. Ted Stevens' trial begins in Washington, ABC News reviews the allegations against the Alaska Republican, who is accused of concealing some $250,000 in gifts from VECO Corp., an oil services company based in his state. Although Stevens is not charged with accepting bribes, federal prosecutors nevertheless plan to delve into the favors he allegedly has done for VECO over the years. Stevens' lawyers say the government should stay away from that area unless it is prepared to provide evidence of a quid pro quo. Prosecutors say the help VECO got from Stevens is relevant in explaining his motive for concealing the gifts, which consisted mainly of renovations to his home in Girdwood, Alaska.

But as I argued in a recent column, even if you take the charges at face value, Stevens' relationship with VECO did far less damage to the Treasury than the perfectly legal assistance he has rendered his constituents during his four decades in Congress. Add up all the alleged favors for VECO, and the amount of taxpayer money actually spent totals maybe $35 million. That's probably something like one-thousandth of the money that Stevens has proudly funneled to Alaska during his career. Federal spending there totaled $9 billion in 2006 alone.

I mentioned in my column that Republicans may be stuck with a convicted felon on the ballot in Alaska, since Stevens stands for re-election just a few weeks after his trial is expected to end. Should he win re-election even after losing the trial, The New York Times notes, Stevens' colleagues will be stuck with a convicted felon in Congress unless and until he resigns or his fellow senators vote to force him out.

Teaching Men to Fish Sustainably

jsullum@reason.com (Jacob Sullum) — Mon, 22 Sep 2008 15:44:00 EDT

Reviewing the track records of 11,135 fisheries over half a century, three researchers conclude in the latest issue of Science that privatization promotes sustainable fishing practices. "Implementation of catch shares halts, and even reverses, the global trend toward widespread collapse," they write. "Institutional change has the potential for greatly altering the future of global fisheries." As The New York Times notes, the findings (which should not surprise anyone familiar with the tragedy of the commons) are consistent with earlier research in this area.

The Reason Foundation (which publishes reason and reason online) explained the advantages of transferable fishing rights in a 2004 paper. reason Science Correspondent Ron Bailey explored the subject in a 2006 column.

[Thanks to Paul Rako for the tip.]

Warning: This Drug May Cause a Very Gentle Relaxing

jsullum@reason.com (Jacob Sullum) — Fri, 19 Sep 2008 13:09:00 EDT

Last week The New York Times ran a surprisingly sane story about Salvia divinorum, the psychedelic herb that's been banned or restricted in 13 states. The lead departs from the usual approach of ~~anti-drug propaganda~~ drug policy journalism by describing a salvia trip that features "convulsive laughter" provoked by a vision of "little green men" in a boat, as opposed to psychosis, murder, self-mutilation, blindness from staring at the sun too long, or an accidental plunge from a multistory building. Another salvia user is "transported into a dream state..as if drifting down a rain forest river" with "a beatific smile spread lightly across his face." He describes the experience as "just a very gentle letting go, a very gentle relaxing." The Times is appropriately skeptical of claims that salvia can lead to suicide and sums up the drug's risks this way:

Though research is young and little is known about long-term effects, there are no studies suggesting that salvia is addictive or its users prone to overdose or abuse. Indeed, a salvia experience can be so intense, and at times so unsettling, that many try it just once, and even devotees use it sparingly.
Reports of salvia-related emergency room admissions are virtually nonexistent, likely because its effects typically vanish in just a few minutes.

The article, by Kevin Sack and Brent McDonald, notes that scientists are worried about legal restrictions on salvia, which could impede "promising research into its possible medical uses," such as "treatment of addiction, depression, and pain." Except for the obligatory reference to salvia's alleged street names ("Sally D and Magic Mint"), the piece is quite different from what we've come to expect when mainstream news outlets cover drug fads.

In May I noted another refreshingly calm salvia article in Newsweek. Other reason coverage of salvia here, here, and here.

The Freedom to Say Stupid Things About Marijuana

jsullum@reason.com (Jacob Sullum) — Thu, 18 Sep 2008 15:53:00 EDT

District attorneys in Massachusetts are gearing up to oppose Question 2, an initiative on the November ballot that would make possession of up to an ounce of marijuana by an adult a citable offense akin to a traffic violation. They call their group the Coalition for Safe Streets, because God knows what would happen if all those vicious pot smokers were allowed to remain at large. But the Question 2 campaign, a.k.a. the Committee for Sensible Marijuana Policy (CSMP), says the prosecutors broke the law in their eagerness to defend it:

The Campaign Finance Law prohibits a ballot question committee from accepting any contribution or making any expenditure until it files a statement of organization with the Office of Campaign and Political Finance....The Coalition for Safe Streets did not file for organization until Sept. 5, 2008, but they started accepting contributions in July 2008 and started spending funds with an expenditure of $21,000 to [the P.R. firm] O'Neill and Associates on Aug. 21, 2008.

CSMP's Whitney Taylor tells the Boston Herald, "This was an attempt to keep their organization as covert as they could for as long a possible." Which is probably true, and it would be nice if law enforcement officials followed the law and played by the rules that constrain their opponents. But I'm not a big fan of using campaign finance restrictions to beat up on people for exercising their freedom of speech, so I have trouble cheering CSMP's demand for a criminal investigation. Even more problematic is the committee's claim that the Massachusetts District Attorney Association violated a state law that says "no person shall publish or cause to be published in any letter, circular, advertisement, poster or in any other writing any false statement in relation to any question submitted to the voters, which statement is designed to affect the vote on said question." Again, it would be nice if both sides in a campaign told the truth, but it's hard to see how a law against misrepresenting a ballot initiative can be squared with the First Amendment (or with the Massachusetts Constitution's promise that "the right of free speech shall not be abridged").

These allegations should in any case be unnecessary, given how lame the arguments mustered by Question 2's opponents are:

"This is not your father's marijuana of 20 or 30 years ago," [Cape and Islands District Attorney Michael O'Keefe] said. He said marijuana now is far more potent, and contains substances designed to addict the user.

Such as? Note that O'Keefe is implicitly conceding that THC, marijuana's main active ingredient, is not addictive by itself. So it's a bit of a puzzle why he's so concerned about increased potency.

I noted the decriminalization initiative last fall. (Marijuana expert Lester Grinspoon, who had qualms about the initiative back then, is now on board as a supporter.) I addressed the not-your-father's-marijuana argument in a column last June.

'Mickey Mouse Should Be Killed in All Cases'

jsullum@reason.com (Jacob Sullum) — Thu, 18 Sep 2008 14:51:00 EDT

Sheikh Muhammad Munajid, a Muslim cleric and former Saudi diplomat with a show on Iqra TV, deplores the influence of cartoon mice such as Mickey and Jerry, who encourage children to believe the filthy rodents are benign and lovable:

According to Islamic law, the mouse is a repulsive, corrupting creature. How do you think children view mice today—after Tom and Jerry?
Even creatures that are repulsive by nature, by logic, and according to Islamic law have become wonderful and are loved by children. Even mice.
Mickey Mouse has become an awesome character, even though according to Islamic law, Mickey Mouse should be killed in all cases.

Don't even get him started on Porky Pig.

Is this the real reason Farfour had to go? If so, what should we make of the fact that he was "beaten to death by an actor posing as an Israeli official trying to buy Farfour's land"? Perhaps fictional rodent eradication is a cause that can unite Muslims and Jews.

Maybe Next Time He'll Think Twice Before Recycling

jsullum@reason.com (Jacob Sullum) — Thu, 18 Sep 2008 14:25:00 EDT

Tony Richard, a 17-year-old senior at Blaine High School in Blaine, Minnesota, works 20 hours a week at a local grocery store, where he uses a retractable razor blade to break down boxes for recycling. One day after work, he tossed the box cutter into his car, which he later drove to school. Anyone familiar with "zero tolerance" insanity can already guess where this story is heading: Richard was suspended from school, and may be expelled, for bringing a "weapon" onto campus. School officials say their hands were tied:

The policy flatly says any student found in violation will be immediately suspended, and expulsion proceedings will be launched automatically.
Tony has spent his entire high school career at Blaine, and the sum total of his behavioral mishaps until now were three marks for being tardy. That had no bearing on the school's decision to banish him.
The staff at Blaine High, Schwartz explained, has no leeway in such matters once a weapon is found on school property. These cases are referred directly to the school board regardless of circumstances.

[Thanks to Mark Lambert for the tip.]

'Gratuitous Insults Must Be Punished'

jsullum@reason.com (Jacob Sullum) — Wed, 17 Sep 2008 15:49:00 EDT

A prosecutor is threatening Italian comedian Sabina Guzzanti with a five-year prison term for telling a joke about Pope Benedict XVI in Hell, "tormented by great big poofter devils," at an anti-government rally in July. According to the London Times, Rome prosecutor Giovanni Ferrara claims Guzzanti violated the Mussolini-era Lateran Treaty between Italy and the Vatican, which "stipulates that an insult to the Pope carries the same penalty as an insult to the Italian President." (I gather that Italians also can go to prison for insulting their president, currently a former senator named Giorgio Napolitano.) Ferrara has to get permission from the Ministry of Justice for the prosecution, which Guzzanti's father, a member of Parliament, called "a return to the Middle Ages." One of his colleagues, Christian Democrat Luca Volonte, either disagrees or pines for the days of the Inquisiton, saying "gratuitous insults must be punished." The pope, meanwhile, already has forgiven Guzzanti, or so a Jesuit scholar speculates.

[via The Freedom Files]

We Won't Tell You What It Is; Just Don't Do It

jsullum@reason.com (Jacob Sullum) — Wed, 17 Sep 2008 15:07:00 EDT

Yesterday the House Financial Services Committee approved a bill that would require federal regulators to define "unlawful Internet gambling" before demanding that financial institutions block transactions related to it. The Payments System Protection Act, sponsored by committee Chairman Barney Frank (D-Mass.), would delay the imposition of regulations required by the Unlawful Internet Gambling Enforcement Act of 2006. That law left the legal status of various kinds of online gambling ambiguous, and when payment processors asked the Treasury Department for guidance, they were told that had to figure out what was legal on their own. Testifying before the House Judiciary Committee in November, professional poker player Annie Duke summed up the situation this way:

The posture of the federal government is, "We are going to create a new federal crime, but we will not tell you what it is." In the proposed rule, the regulators explain their refusal to resolve this by saying that to do so would require them to examine the laws of the federal government and all 50 states with respect to every gaming modality, and that this would be unduly burdensome. Yet that is exactly what they are requiring the general counsel of every bank in the country to do.

Frank, who is also sponsoring a bill that would explicitly legalize (and regulate) online gambling, closes out my June reason article about the online gambling crackdown with a ringing defense of the freedom to engage in "recreational activities" that "human beings enjoy" (a category in which he also includes pot smoking).