Our fiscal policy goal should be smaller government, but here’s a video for folks who think that balancing the budget should be the main objective.

The main message is that restraining the growth of government is the right way to get rid of red ink, so there is no conflict between advocates of limited government and serious supporters of fiscal balance.

More specifically, the video shows that it is possible to quickly balance the budget while also making all the 2001 and 2003 tax cuts permanent and protecting taxpayers from the alternative minimum tax. All these good things can happen if politicians simply limit annual spending growth to 2 percent each year. And they’ll happen even faster if spending grows at an even slower rate.

This debunks the statist argument that there is no choice but to raise taxes.

Last Thursday I left home at 7:50am to do a radio interview. Little did I know that I would not be able to get back to work that day until 3:00pm because the national police would block the main avenues and bridges in my city, Guayaquil, Ecuador.

The police went on a national strike burning tires and openly disobeying the government. Grocery stores, drugstores, banks and other shops were sacked for most of the day as a result. Some disgruntled members of the air force, who sympathized with the police and are in charge of running airports, shut down a few airports including the one in Quito, the capital.

President Rafael Correa was quick to call this a coup d’état attempt. But it was not. All of the military high command expressly supported the President from the beginning. It was a police strike that got out of hand mostly because the authorities with the power to have toned down the situation did the opposite. The policemen were demanding the repeal or reform of a law that reduced their compensation. The President or his ministers could have offered to negotiate the controversial provisions within that law. But the President went to the police barracks and provoked the policemen yelling “If you want to kill the president…here he is … kill him now!”

The policemen physically assaulted the President, throwing a teargas bomb at him among other objects, and he went across the street to the police hospital. There he received treatment and visits from his ministers and top aides, gave cell phone interviews and was at all times protected by his security team. Mary O‘Grady in today’s Wall Street Journal and others credibly point out that the president was never kidnapped as he claims.

The political crisis that led to the police strike did not begin on Thursday. Ecuador has lived in constant political tension since before the year 2000, a situation that only intensified with the arrival of Rafael Correa’s government in January 2007. That year, his government was behind the forcible and illegal removal of the democratically elected opposition in Congress in order to approve a constitutional referendum that would give Correa more power. The press then discovered Correa’s Minister of Government holding a secret meeting with alternate congressmen, who serve in place of elected congressmen in case these cannot serve. After this meeting, with the support of the alternate congressmen, Correa got a majority in Congress that he did not have before.

When the Constitutional Court reinstated the opposition in Congress, Correa encouraged his followers to make the Constitutional Court “understand” the popular will and he ordered the police not to provide security to the Constitutional Court. An angry mob then physically assaulted the members of the court. Nevermind, Correa’s new majority in Congress removed the members of the Constitutional Court as they were in the way of a referendum that was clearly unconstitutional. The referendum asked if Ecuadorians wanted to hold a Constitutional Assembly of “unlimited powers” to draft a new constitution. A sizeable majority voted ‘yes’ and Correa’s majority at the Constitutional Assembly began its use of unlimited power by dissolving Congress in 2008.

After regularly disregarding the Constitution and the law for almost 4 years, it should come as no surprise that the policemen woke up one day thinking that, they too, could disobey the law and demand changes by force.

The 30th of September was a sad day for Ecuadorian democracy. The government ordered all media to broadcast state TV programming. We Ecuadorians were forced to watch government officials and sympathizers most of the day until two TV stations disobeyed the order at 9:00pm to show our military opening fire against our policemen, and rescuing a supposedly “kidnapped” President from the hospital. That day there were almost 300 wounded persons and 8 deaths that, most likely, could have been avoided.

There is nothing to celebrate. There is still no rule of law in Ecuador. While the President was celebrating a “victory for democracy” from the government palace’s balcony, the shooting between the military and policemen continued for 20 more minutes and the order to broadcast state TV was still in force. Naturally, state TV was only showing Correa’s address.

The damage is great. We have lost respect of our policemen and our government authorities, who act as if their power has no limits. The Ecuadorians of my generation have never seen this level of violence. We have also never been subjected to such an extreme state control of information, as we were that day.

The Organization of American States was quick to denounce the police uprising and express its support of democracy. But where have the OAS and other supposed defenders of democracy been when Correa has systematically violated the rule of law and undermined democratic institutions?

The institutional vacuum created by Correa’s government has led our society to unacceptable levels of violence. We hoped that the violent toll of the events on Thursday would have made the government change its authoritarian ways. So far, all evidence points to a radicalization of the government, which was already stigmatizing the opposition and harassing the independent press, and now seems set to exploit the day’s events to further undermine democracy.

What will it take for the OAS to denounce violations of the rule of law under Correa’s government?

The Washington Post recently reported on the federal government’s cash-welfare program, Temporary Assistance for Needy Families. Despite the deep recession, the TANF welfare rolls haven’t seen a dramatic increase. Meanwhile, other federal anti-poverty programs have seen the sizable increases that are to be expected in a recession:

Nationwide, welfare cases grew by 11 percent from the start of the recession through March, according to the Department of Health and Human Services. In contrast, the number of families getting food stamps jumped by 50 percent and the number getting unemployment benefits more than doubled. Medicaid grew by more than 13 percent from late 2007 to late 2009, according to the Kaiser Family Foundation.

As I’ve noted before, TANF’s tighter work and eligibility requirements have made it a less desirable option for those seeking government assistance. Over the past decade, inflation-adjusted spending on all federal anti-poverty programs has increased by 89 percent. Only TANF saw a decrease in spending.

When TANF replaced the federal government’s open-ended entitlement in 1996, it allowed the states great leeway to set benefits. California, which offers more generous benefits than other states, has seen its TANF rolls increase by almost 25 percent since the recession started. In contrast, Michigan and Rhode Island, which have seen a respective 2 percent increase and 10 percent decrease in their welfare rolls, offer less generous TANF benefits.

The variation in TANF enrollment among the states points to the desirability of handing off all responsibility for anti-poverty programs to the states. The beauty of fiscal federalism is that it enables states to pursue policies that better reflect local preferences, while constraining governments because of interstate competition. Federal policymakers should get out of the anti-poverty business as the Constitution intended.

A new Wall Street Journal/NBC News poll would seem to say yes. In a story over the weekend under the headline, “Americans Sour on Trade,” the Journal reports:

more than half of those surveyed, 53%, said free-trade agreements have hurt the U.S. That is up from 46% three years ago and 32% in 1999.

One plausible explanation for the sour mood toward trade is the business cycle. 1999 was near the peak of the long boom of the 1990s, when Americans were feeling good about just about everything. Even three years ago, the stock market was at a record high and unemployment was below 5 percent. In this light, trade is another casualty of the lingering recession, not a cause as many trade critics want to argue.

“Outsourcing” was a major source of anxiety in the poll. Americans overwhelming believe outsourcing of production and manufacturing work to other countries is a reason why the economy is struggling and new jobs are not being created. This collective attitude is more reflective of the complaints people hear in the media than of any hard reality on the ground.

As I document in my 2009 Cato book, Mad about Trade, only about 3 percent of job displacement in the United States can be blamed on trade. (See pp. 31–33.) For every one person in the unemployment line because of imports or outsourcing, there are 30 people who have been displaced from their jobs by technology, domestic competition, changing consumer tastes, or the general business cycle.

Despite the popular worries, outsourcing is more likely to attract business to the United States than send it overseas. Year after year, more direct manufacturing investment flows into the United States than out to other countries. Year after year, Americans sell more “business and professional services” to customers abroad than they buy.

The facts are on the side of expanding the freedom of Americans to trade and invest with people in other countries. What is lacking are political leaders in Washington who will stand up for the broader national interest of our country against the special interests who are exploiting anxiety about the economy to trash trade.

In the latest Cato Policy Report, Cato adjunct scholar Arnold Kling’s essay on the (mis)rule of experts explains why ObamaCare will fail:

Despite the many pages contained in the health care legislation that Congress enacted, the health care system that will result is for the most part to be determined. The design and implementation of health care reform was delegated to unelected bureaucrats, as was done in Massachusetts.

In Massachusetts, the promises of proponents have proven false, and the predictions of skeptics have been borne out. Costs have not been contained; they have shot up. Emergency room visits have not been curtailed; they have increased. The mandate to purchase health insurance has not removed the problem of adverse selection and moral hazard; instead, thousands of residents have chosen to obtain insurance when sick and drop it when healthy. The officials responsible for administering the Massachusetts health care system are no longer talking about sophisticated ways of making health care more efficient.

Instead, they are turning to the crude tactic of imposing price controls.

Once again, we have legislators putting unrealistic demands on experts. This results in the selection of experts with the greatest hubris, shutting out experts who appreciate the difficulty of the problem. When the selected experts find that their plans go awry, they take out their frustrations by resorting to more authoritarian methods of control.

With ObamaCare, that dynamic took hold before the law even took effect.

The legal battle against Obamacare continues. In June, a district court in Richmond denied the government’s motion to dismiss Virginia’s lawsuit (in opposition to which Cato filed a brief). Despite catcalls from congressmen and commentators alike, it seems that there is, after all, a cogent argument that Obamacare is unconstitutional! 

Having survived dismissal, both sides filed cross motions for summary judgment—meaning that no material facts are in dispute and each side believes it should win on the law. Supporting Virginia’s motion and opposing the government’s, Cato, joined by the Competitive Enterprise Institute and Georgetown law professor (and Cato senior fellow) Randy Barnett, expands in a new brief its argument that Congress has gone beyond its delegated powers in requiring that individuals purchase health insurance.

Even the cases that have previously upheld expansive federal power do not justify the ability to mandate that individuals buy a product from a private business. Those cases still involved people that were doing something—growing wheat, running a hotel, cultivating medical marijuana. The individual mandate, however, asserts authority over citizens that have done nothing; they’re merely declining to purchase health insurance. This regulation of inactivity cannot find a constitutional warrant in either the Commerce Clause, the Necessary and Proper Clause, or Congress’s taxing power. Such legislation is not “necessary” to regulating interstate commerce in that it violates the Supreme Court’s distinction between economic activity (which often falls under congressional power as currently interpreted) and non-economic activity (which, to date, never has), it is not “proper” in that it commandeers citizens into an undesired economic transaction. 

Finally, the taxing power claim is a red herring: (a) neither the mandate nor the penalty for not complying with the mandate is a tax, and is not described as such anywhere in the legislation; (b) even if deemed a tax, it’s an unconstitutional one because it’s neither apportioned (if a direct tax) nor uniform (if an excise); (c) Congress cannot use the taxing power to enforce a regulation of commerce that is not authorized elsewhere in the Constitution.

The district court will hear arguments on the cross-motions for summary judgment in Virginia v. Sebelius later this month and we can expect a ruling by the end of the year. 

Obamacare delenda est.

Today is the first Monday in October, the traditional start of the Supreme Court term. While we have yet to see as many blockbuster constitutional cases on the docket as we did last term—which, despite the high profile 5–4 splits in McDonald v. Chicago and Citizens United actually produced fewer dissents than any in recent memory—we do look forward to:

• Two big free speech challenges, one over a statute prohibiting the sale of violent video games to minors, another the offensive protesting of a fallen soldier’s funeral;
• An Establishment Clause lawsuit against Arizona’s tax credit for private tuition funds (an alternative to educational voucher programs);
• Regulatory federalism (or “preemption”) cases involving:
  • safety standards for seatbelts;
  • an Arizona statute regarding the hiring of illegal aliens; and
  • the forbidding of class-arbitration waivers as unconscionable components of arbitration agreements;
• Important ERISA and copyright cases;
• A case examining privacy concerns attending the federal government’s background checks for contractors; and
• A criminal procedure dispute regarding access to DNA testing that may support a claim of innocence.

Cato has filed amicus briefs in several of these cases—and in various others which the Court may decide to review later this year—so I will be paying extra-close attention.

Perhaps more importantly, we again have a new justice—and, as Justice White often said, a new justice makes a new Court. While her confirmation was never in any serious doubt, Elena Kagan faced strong criticism (including from me) on a variety of issues—most importantly on her refusal to “grade” past Court decisions or identify any specific limits to government power. The 37 votes against Kagan were the most ever for a successful Democratic nominee, which is emblematic of a turbulent political environment in which the Constitution and the basic question of where government derives its power figure prominently. 

Given Kagan’s political and professional background, it is safe to assume that she’s not the second coming of Clarence Thomas. And because she replaces the “liberal lion” Justice Stevens, her elevation from “tenth justice” (as the solicitor general is known) to ninth is unlikely to cause an immediate change in issues that most divide the Court—particularly because she is recused from nearly half the cases this term. She could, however, add an interesting and nuanced perspective on a variety of lower-profile issues. Only time will tell what kind of justice Kagan will be now that she is, seemingly for the first time in her ambitious life, unconstrained to speak her mind.

Here’s to another interesting, varied, and (hopefully) liberty-enhancing year!