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National

We Must Do Better

There has been no shortage of opposition to the hastily proposed $700 Billion Gift Card (Chris Suellentrop provides a nice rundown) – unfortunately little of the real opposition comes from members of Congress. Our own Senator Bennett has flipped from being wary to being supportive because, as every elected official knows, foolish action is better than rational inaction where re-election is concerned.

We are lucky right now to have a divided government – at least there is an initial reaction of shock from the Democrats at the lack of thought that has gone into the initial proposal. Democrats want to add in a few more dubious provisions, but at least they also want to provide some oversight in the process as well. The Republican leadership does not want any delay:

"When there’s a fire in your kitchen threatening to burn down your home, you don’t want someone stopping the firefighters on the way and demanding they hand out smoke detectors first or lecturing you about the hazards of keeping paint in the basement," Senator Mitch McConnell of Kentucky, the Republican leader, said in a speech on the Senate floor. "You want them to put out the fire before it burns down your home and everything you’ve saved for your whole life."

That analogy fits the goals of the administrations and their MO but it misses the actual situation. The truth is that a few houses have already burned down and others are smoldering in the neighborhood. In response, this fire department is proposing to break the dam above the town to quickly douse the neighborhood without considering the extra flood damage that may result and the fact that their action could weaken or destroy properties that are not currently in danger. They are so busy trying to look heroic by taking drastic action that they have failed to consider any minimal rational restraint in their proposal.

For those who are not afflicted by D.C. Myopia, the holes in the plan are gaping (Jay Evensen and Jason Linkins) and there are many better options being presented in short order. Paul Krugman astutely asks:

The premise of the Paulson plan– though never stated bluntly — is that these assets are hugely underpriced, so that Uncle Sam can buy them at prices that help the financial industry a lot, without big losses for taxpayers. Are you prepared to bet $700 billion on that premise?

I’m not – I wouldn’t bet $10 on that.

Sebastian Mallaby is generous enough to illustrate two alternative proposals by academics that carry lower risks and higher potential returns for taxpayers.

Within hours of the Treasury announcement Friday, economists had proposed preferable alternatives. Their core insight is that it is better to boost the banking system by increasing its capital than by reducing its loans. Given a fatter capital cushion, banks would have time to dispose of the bad loans in an orderly fashion. Taxpayers would be spared the experience of wandering into a bad-loan bazaar and being ripped off by every merchant.

Raghuram Rajan and Luigi Zingales of the University of Chicago suggest ways to force the banks to raise capital without tapping the taxpayers. First, the government should tell banks to cancel all dividend payments. . . Second, the government should tell all healthy banks to issue new equity. Again, banks resist doing this because they don’t want to signal weakness. . . A government order could cut through these obstacles.

Meanwhile, Charles Calomiris of Columbia University and Douglas Elmendorf of the Brookings Institution have offered versions of another idea. The government should help not by buying banks’ bad loans but by buying equity stakes in the banks themselves. Whereas it’s horribly complicated to value bad loans, banks have share prices you can look up in seconds . . . The share prices of banks that recovered would rise, compensating taxpayers for losses on their stakes in the banks that eventually went under.

Mallaby also points out the difference between the Paulson Proposal and the Resolution Trust Corporation that it might be compared to:

The RTC collected and eventually sold off loans made by thrifts that had gone bust. The administration proposes to buy up bad loans before the lenders go bust. This difference raises several questions.

The first is whether the bailout is necessary. In 1989, there was no choice. The federal government insured the thrifts, so when they failed, the feds were left holding their loans; the RTC’s job was simply to get rid of them. But in buying bad loans before banks fail, the Bush administration would be signing up for a financial war of choice.

Despite the widespread opposition to this knee-jerk reaction in Washington (I’ve only linked to 5 examples) I fear that the bill that gets passed all too quickly will look almost exactly like the one Secetary Paulson proposed. I think government is the only institution that can consistently be efficient where they should be deliberative and inefficient in all other things.

Please take the time to contact your Congressional representatives to encourage them to slow down on this and avoid a few of the gaping potholes before them.

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National

Enumerated Powers Act

If the United States is truly a nation that is ruled by law then the Enumerated Powers Act should be a no-brainer. When the Constitution was adopted it laid out the specific powers of the various branches of government. As the supreme law of the land and the document defining what Congress is meant to do, it should be a simple thing to require that each bill cite the section of the Constitution granting authority for the bill in question. The Constitution is short enough that our congressional representatives should be able to quickly find the applicable section. If the authority is not specified in the Constitution there is a means in place to acquire that authority if it is warranted – that is the amendment process. This limitation to the codified law was so important to our founders that they specified in the Bill of Rights that any power not specified in the Constitution was to be reserved to the states.

When Congress felt it was necessary to levy an income tax the appropriate steps were taken to amend the Constitution to allow for such a tax. That is an example of the rule of law. Unfortunately, most of our Congressional leaders do not care if they have the authority to do what they are doing – they only care if doing what they are doing will jeopardize their chance for re-election. Maybe Congress should try to repeal the Tenth Amendment.

If the Enumerated Powers Act were passed it would enable people to verify the authority of Congress on any bill they passed and it would highlight any passages of the Constitution that were being used to justify excessive or undesireable legislation. If such passages were identified, the people have the ability to clarify those specific passages of the Constitution – through the amendment process.

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National

One Subject at a Time

Today I would like to introduce DownsizeDC.org’s “One Subject at a Time Act”

Most Americans probably believe a bill has to have majority support in Congress before it can become the law of the land. Sadly, this common sense expectation is totally wrong. Congressional leaders routinely pass laws that a majority opposes. DownsizeDC.org believes every bill should have to stand or fall on its own merits. Toward this end we have crafted the “One Subject at a Time Act” (OSTA).

One thing that i like about the Downsize DC approach is that most of the legislation they promote is written as a regulation for Congress and not for the people of the United States at large. OSTA is no exception. This bill recognizes the smoke and mirrors effect perpetrated by congressional representatives when they are allowed to bundle or misrepresent pieces of legislation in order to pass them.

The premise of OSTA is that if a piece of legislation is not able to pass on its own merits then the bill does not deserve passage. There may be good bills that generate opposition, but more often there are bad bills that are slipping under the public radar by being passed under the shadow of a deceptive title or hiding behind bills that do deserve the support of congress.

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National

GOOOH – Elect Regular People

I’m always interested in ways to open up government to the average voter so I was interested when I learned about GOOOH (Hat Tip – Mark Towner). Their mission is to change the way we elect representatives and try to make those representatives more accountable to their constituents.

Because GOOOH is a process for selecting representatives (not an agenda-based party platform) we expect a very liberal candidate to be selected in San Francisco and a very conservative one in Colorado Springs — but it will be up to the GOOOH members in each district to decide.

They obviously recognize that some of their ideas will generate some friction:

The most controversial part of GOOOH is that the founder, Tim Cox, has proposed excluding politicians, actively prosecuting attorneys, and individuals with family assets over $11.5 million (250 times the median income) from the process. They are excluded not because they are bad people, but because they are overly represented in government today and, generally speaking, no longer seem to represent the common man.

Personally, as I have spent lots of time thinking and discussing the issue of term limits, I also have a problem with their current stance of promoting a limit of two terms (4 years) in the House -that seems excessively strict to me. On the other hand, it sparked an idea that I would like to explore sometime about the possible ramifications of having a bicameral legislature where one house is term limited and the other is not – allowing voters to be the term limiters in one house and forcing voters to seek fresh faces regularly in the other.

So I like the general idea and I figure that if I want to have any impact in massaging the positions of the group now is the time to act. In any case it’s worth looking into and I would recommend that anyone who is interested in improving our government should go have a look and decide if this is worthy of their support.

Categories
National State

Fortune 535

Check out the Sunlight Foundation’s Fortune 535. It gives numbers of the net worth of each member of Congress based on congressional reporting requirements. Some of the numbers won’t be very surprising, but others will probably make you take a second look. In any case, make sure you do more than just look at the final number. For example – I looked at the Utah congressional delegation and saw that Sen. Bennett was the richest of the 5 ($5 million) and Rep. Bishop was the poorest ($16,000). Another glance shows that there’s more to the story. Rep. Bishop started his congressional career 6 years ago with a net worth of negative $55,000 and Sen. Bennett has seen his net worth drop by $43 million over the last decade (losing nearly 90% of his original worth).

I’m not trying to argue who is a good guy, or a bad guy. Nor am I trying to stir up pity for either of them. They just make a good illustration of the need to look deeper than any one number to get a better picture of the intersection of money and political figures.

Categories
National State

A Timely Request

Kip, at the Wide Middle, invites others to share Questions for the Candidates. This comes the very day that I have a question that I would ask any congressional candidate.

What part, or parts of the Change Congress movement would you pledge to support (if any). The four principles of the movement are that:

  1. Candidates and congressmen should accept no money from lobbyists or PACs
  2. Congress should vote to end earmarks
  3. Candidates should agree to run publicly-financed campaigns
  4. Congress should support reform to increase Congressional transparency

Candidates and citizens can pledge to support any combination of the above principles and citizens should hold candidates responsible for their campaign promises (this pledge and others).