Last week, I highlighted nine ballot initiatives that were worth watching because of their policy implications and/​or their role is showing whether voters wanted more or less freedom. The results, by and large, are very encouraging. Let’s take a look at the results of those nine votes, as well as a few additional key initiatives.

1. The big spenders wanted to impose an income tax in the state of Washington, and they even had support from too-rich-to-care Bill Gates. The good news is that this initiative got slaughtered by a nearly two-to-one margin. I was worried about this initiative since crazy Oregon voters approved higher tax rates earlier this year. In a further bit of good news, Washington voters also approved a supermajority requirement for tax increases by a similar margin.

2. Nevada voters had a chance to vote on eminent domain abuse. This is an initiative that I mischaracterized in my original post. The language made it sound like it was designed to protect private property, but it actually was proposed by the political elite to weaken a property rights initiative that the voters previously had imposed. Fortunately, Nevada voters did not share my naiveté and the effort to weaken eminent domain protections was decisively rejected. This is important, of course, because of the Supreme Court’s reprehensible Kelo decision.

3. California voters were predictably disappointing. They rejected the initiative to legalize marijuana, thus missing an opportunity to adopt a more sensible approach to victimless crimes. The crazy voters from the Golden State also kept in place a suicidal global warming scheme that is driving jobs out of the state. The only silver lining in California’s dark cloud is that voters did approve a supermajority requirement for certain revenue increases.

4. Nearly 90 percent of voters in Kansas approved an initiative to remove any ambiguity about whether individuals have the right to keep and bear arms. Let that be a warning to those imperialist Canadians, just in case they’re plotting an invasion.

5. Arizona voters had a chance to give their opinion on Obamacare. Not surprisingly, they were not big fans, with more than 55 percent of them supporting an initiative in favor of individual choice in health care. A similar initiative was approved by an even greater margin in Oklahoma. Shifting back to Arizona, voters also strongly rejected racial and sexual discrimination by government, but they narrowly failed to approve medical marijuana.

6. Shifting to the local level, San Francisco, one of the craziest cities in America rejected a proposal to require bureaucrats to make meaningful contributions to support their bloated pension and health benefits. On the other hand, voters did approve a proposal to ban people from sleeping on sidewalks. Who knew that was a big issue?

7. Sticking with the ever-amusing Golden State, voters unfortunately eliminated the requirement for a two-thirds vote in the legislature to approve a budget, thus making it even easier for politicians to increase the burden of government spending. The state almost certainly is already on a path to bankruptcy, and this result will probably hasten its fiscal demise. Hopefully, the new GOP majority in the House of Representatives will say no when soon-to-be Governor Brown comes asking for a bailout.

8. The entire political establishment in Massachusetts was united in its opposition to an initiative to to roll back the sales tax from 6.25 percent to 3 percent, and they were sucessful. But 43 percent of voters approved, so maybe there’s some tiny sliver of hope for the Bay State.

9. Louisiana voters approved an initiative to require a two-thirds vote to approve any expansion of taxpayer-financed benefits for government employees. With 65 percent of voters saying yes to this proposal, this is a good sign that the bureaucrat gravy train may finally be slowing down.

At the risk of giving a grade, I think voters generally did a good job when asked to directly make decisions. I give them a solid B.

While most of the election punditry to date has been focused at the national level, major gains by Republicans in states that already have k‑12 education tax credits or school vouchers could lead to the expansion of such programs or the passage of new ones. To see where the action might lie, I offer the chart below, showing post-election party control of the legislative and executive branches of government in school choice states (the height of each bar represents degree of control, with the height of the executive branch = 100%). The states are sorted by the number of branches of government that changed hands (represented on the chart by the yellow circles, which correspond to the axis on the right).

There might be gridlock at the national level, but at the state level we may see some interesting school choice developments over the next 2+ years.

One of the many implications of yesterday’s election is that the new Congress will likely be more friendly toward trade-expanding agreements and less inclined to raise trade barriers.

Trade was not a deciding factor in the election, despite efforts by a number of incumbent Democrats to make it so. Many House and Senate contests were peppered with ads accusing an opponent of favoring trade agreements that gave away U.S. jobs to China. It was a stock line in President Obama’s stump speeches that Republicans favored tax breaks for U.S. companies that ship jobs overseas (a charge I dismantled in an op-ed last week). Yet on Election Day the trade-skeptical rhetoric and ads did not save Democratic seats.

Republicans Pat Toomey, Rob Portman, and Mark Kirk all won Senate seats in the industrial heartland yesterday (Pennsylvania, Ohio, and Illinois, respectively) and all three voted in favor of major trade agreements during their time in the U.S. House. None of them ran away from their records on trade.

The key change for trade policy will be the switch of the House to Republican control in January. Democratic House leaders were generally hostile to trade agreements during their four-year tenure, refusing to allow a vote on the Colombia trade agreement in 2008 even after President Bush submitted it to Congress while allowing a vote this fall on a bill to raise tariffs against imports from China.

In contrast, the incoming GOP House leaders, presumptive Speaker John Boehner of Ohio, Majority Leader Eric Cantor of Virginia, and Ways and Means Committee Chair David Camp of Michigan, have all voted more than two-thirds of the time for lower trade barriers, according to Cato’s trade vote data base. The trade-hostile influence of organized labor, so prominent the past four years, will be greatly diminished.

The new Congress will be more likely to consider and pass pending trade agreements with South Korea, Colombia, and Panama. The Obama administration has endorsed all three in the abstract, but has done little to actually push Congress to approve them. These three agreements offer an opportunity for the White House to work with the new Congress in a bipartisan way to promote exports and deepen ties with friendly nations.

The news is not all positive on the trade front. A more Republican-weighted Congress will probably not be much different when it comes to rewriting the farm bill in 2012. Republicans have shown themselves to be similar to Democrats in supporting subsidies and trade barriers to benefit certain farm sectors such as sugar, rice, cotton, and corn. And Republicans are far more inclined that Democrats to support the failed, 50-year-old trade and travel embargo against Cuba.

Within the Federal Reserve System, there is a tug of war over QE2 (2nd Quantitative Easing). Some, mostly outside the system, are calling for $1 trillion-plus purchases of long-term bonds. Within the Fed, there is little taste for purchases that large. I expect a compromise, with an initial purchase perhaps as low as $100 billion.

There is widespread doubt as to the efficacy of further purchases of long-term bonds. They will supply additional liquidity, but liquidity isn’t what is needed. Businesses and banks are suffering from fear and uncertainty: new taxes, new regulations, new mandates, and, for financial services, the uncertainty of the Dodd-Frank banking bill. 

Lower interest rates on long-term bonds will do nothing to diminish fear and uncertainty. Instead, QE2 will further inflate the bond bubble and the commodities bubbles.

Congratulations to the wave of Republicans who successfully ran on promises to tackle rising government debt and cut the hugely bloated federal budget. On the campaign trail, most candidates were not very specific about how they would cut the budget, but when they come to Washington they will be looking for good reform targets.

Newcomers to Congress can find a wealth of budget-cutting ideas in recent plans by various D.C. think tanks:

• At the Heritage Foundation, Brian Riedl has come up with $343 billion in proposed annual cuts.
• At the Committee for a Responsible Federal Budget, Bill Galston and Maya MacGuineas have proposed $400 billion in annual cuts.
• Esquire magazine assembled four former senators who came up with $476 billion in annual cuts.
• The National Taxpayers Union teamed up with the U.S. Public Interest Research Group to propose $600 billion of cuts over five years.
• Michael Ettlinger and Michael Linden of the Center for American Progress offer one plan that would cut annual spending by $255 billion.

Cato’s website, www​.down​siz​ing​gov​ern​ment​.org, also provides a treasure trove of spending cuts, and I will be publishing a detailed budget-reform plan in coming days. 

Some of the above budget plans include tax increases, but voters gave a resounding message yesterday that they want Congress to focus on cutting spending, not raising taxes.

Out of the starting gate next year, fiscal reformers in Congress should push for an across-the-board cut to discretionary spending for the rest of the current fiscal year. One approach would be for House leaders to propose a continuing resolution that extends spending at last year’s levels, less some substantial percentage cut applied to every program.

For the upcoming fiscal year of 2012, reformers need to carefully target some major program cuts and eliminations. The president and the Democrats in the Senate will likely resist proposed cuts, but the point is to further the national debate that has begun about the proper size and scope of the federal government.

Some initial targets for GOP reformers, with rough annual savings, could include: community development subsidies ($15 billion), public housing subsidies ($9 billion), urban transit subsidies ($9 billion), and foreign development aid ($18 billion). On the entitlement side, initial cuts could include raising the retirement age for Social Security and introducing progressive price indexing to reduce the growth rate of future benefits.

We will not get federal spending under control unless we begin a national discussion about specific cuts. And we won’t get that discussion unless enough members of Congress start pushing for specific cuts. Ronald Reagan was able to make substantial cuts to state grants in the early 1980s because policymakers had discussed such reforms throughout the 1970s. Republicans in the mid-1990s were able to reform welfare because of the extended debate on the issue that preceded it.

The electorate wants spending cuts, and they will support the policymakers who take the lead on cuts if they are pursued in a forthright and serious-minded manner.

As the Federal Reserve Federal Open Market Committee (FOMC) meets today, it is widely expected that the Fed will announce a new round of quantitative easing (QE). The first round began in March 2009, as the Fed started large-scale purchases of Fannie and Freddie debt and MBS. The next round is expected to focus on purchases of long-dated US Treasuries.

The objective of QEII would be to reduce long-term interest rates, with the belief that such a reduction would spur investment and consumption, thus increasing employment. Estimated impacts on rates range from zero to 80 basis points (80/​100s of one percent). 

Given the large excess reserves in the banking system, it is likely that much of the monetary stimulus provided by QEII will simply be added to bank reserves, which would correspondingly have little to no impact on either lending or interest rates. So its likely that we will get very little bang out of QEII.

Even if QEII did lower rates as much as some Fed leaders claim, the impact would still be relatively small, under one percent. Given that mortgage rates have already fallen by that much over the last six months without changing the direction of the housing market, it is hard to see even a 1% decline in rates moving the economy. Quite simply, the major problem facing the economy today is not high interest rates.

The real impact, and the greatest risk, of QEII is that it changes expectations of inflation. It seems pretty clear that the Fed wants higher inflation than we have now. QEII sends the signal that the Fed will do everything possible to create that additional inflation. QEII also runs the real risk that the Fed ends up “monetizing the debt” — both reducing the political pressure to address our fiscal imbalances as well as undermining the dollar. I see these risks as easily outweighing what little bump one might get from a few basis points decline in long-term interest rates.

Building on Ilya Shapiro’s post on the sealed grand jury proceedings against Siobhan Reynolds, founder of the Pain Relief Network, and the sealed Reason Foundation/​Institute for Justice amicus brief, here is some more background on the Wichita witch hunt:

The U.S. Attorney’s Office in Wichita, Kansas, indicted physician Stephen Schneider and his wife, Linda, a nurse, for illegal drug trafficking in December 2007. Reynolds found an eerie parallel between Schneider’s case and the prosecution that denied her husband pain medication, so she took action. Her public relations campaign on behalf of Dr. Schneider so annoyed Assistant U.S. Attorney Tanya Treadway that Treadway sought a gag order to bar Reynolds’s advocacy. The presiding judge denied the gag order.

When the judge denied Treadway’s gag order, Treadway instead subpoenaed Reynolds for records related to Reynolds’s PR campaign against the prosecution of the Scheiders. Ms. Reynolds resisted the subpoena and tried to challenge it in court, but the $200 daily fine intended to ensure compliance with the subpoena has left Reynolds pretty much bankrupt.

This case represents the worst of government excesses in federal overcriminalization and overzealous prosecution. The federal government continues to treat doctors as drug dealers, as Ronald Libby points out in this Cato policy analysis. The grand jury, intended as a check on prosecutorial power, instead acts as an inquisitorial bulldozer that enhances the power of the government. My colleague Tim Lynch examined this phenomenon in his policy analysis A Grand Façade: How the Grand Jury Was Captured by Government.

Cato Adjunct Scholar Harvey Silverglate examined the case of Dr. William Hurwitz in his book, Three Felonies a Day: How the Feds Target the Innocent. The DEA turned a few of Hurwitz’s patients into informants and prosecuted Hurwitz. When Hurwitz shuttered his practice, two of his patients killed themselves because they could not get prescriptions for necessary painkillers. Siobhan Reynolds’s husband, another of Hurwitz’s patients, could not get essential medication and died of a brain hemorrhage, likely brought on by the blood pressure build-up from years of untreated pain.

Ninja bureaucrats continue to treat doctors that prescribe painkillers as tactical threats on par with terrorist safehouses. When the DEA raided the office of Dr. Cecil Knox in 2002, one clinic worker “thought she and her husband, who was helping her in the office that day, would be shot. She looked on in horror as an agent put a gun to his head and ordered, ‘Get off the phone! Now!’” Radley Balko chronicles this unfortunate trend in Overkill: The Rise of Paramilitary Police Raids in America, and the Raidmap has a separate category for unnecessary raids on doctors and sick people (sorted at the link).