Now I’m no fan of the current government created oligopoly we have among the credit rating agencies, but the EU’s recent proposal to ban downgrades on government debt, when the country in question is undergoing a “rescue”, shows why the answer is to deregulate the market for credit ratings. 

Of course the EU claims it wants to eliminate the “conflicts of interest” between the issuers of debt, who often pay for the ratings, and the agencies that provide those ratings. If investors were truly free to decide on the merit of ratings, rather than required by regulation to use them, then this conflict of interest could easily be solved via reputational effects. And while the EU proposal might lessen this problem, it does so at the cost of creating a far bigger one: the conflict of interest between governments and rating agencies. 

As witnessed by S&P’s treatment by the U.S. government, after it downgraded the U.S., having the rating agencies regulated by the very entities they are supposed to rate is a recipe for disaster. Instead of Europe trying to create its own rating agencies, in order to avoid inconvenient truths about European government finances, Europe should do us all a favor by encouraging European-based rating agencies that would be beyond the reach of the U.S. government.

Cato’s Tom Palmer discusses the Occupy Wall Street movement and the Tea Party in a debate with The Nation’s Peter Rothberg at PolicyMic:

The Tea Party has a coherent message: Stop the bailouts, stop the cronyism, and stop swindling today’s voters with empty promises and sinking future generations under mountains of debt…

What caused the crisis, the indebtedness, the unemployment, the stagnation? The culprits are state agencies and enterprises, including our Federal Reserve…

The Occupiers have the wrong address. The subprime crisis was designed in Washington, not New York…

Government debts and printing-press money will harm future generations. It’s unfair. It’s immoral. And it’s going to be solved not by occupying Phoenix, or Wall Street, or Atlanta, but by demanding that spendthrift politicians stop the bailouts and the cronyism, put the brakes on spending, and pay attention to a truly radical concept: arithmetic. Those are sound Tea Party values.

Read the full article: “Who Should Americans Support: the Tea Party or Occupy Wall Street?”

Over at Downsizing the Federal Government, we focused on the following issues this past week:

• Chris Edwards proposes an alternative to Herman Cain’s 9–9‑9 tax reform plan.
• My reaction to Ron Paul’s plan to cut federal spending can be summed up in one word: Hallelujah.
• Chris Edwards wonders if Canada stole the Tenth Amendment to our Constitution.
• Unfortunately, government spending in the United States is 41 percent of GDP.
• The Government Accountability Office throws water on a taxpayer bailout for the U.S. Postal Service.

Follow Downsizing the Federal Government on Twitter (@DownsizeTheFeds) and connect with us on Facebook.

Federal energy subsidies to business are a hot national topic thanks to the Solyndra scandal. Flying below the radar—and deserving more national media attention—are grants and other targeted incentives given to businesses by state governments. There is little doubt in my mind that there are state-subsidized “Solyndras” waiting to be discovered.

The Wall Street Journal took a step in this direction by noting in an editorial that a struggling lithium-ion battery maker subsidized by the Obama administration also received handouts from the State of Indiana. The editorial chides the administration for having “made a habit of investing your cash in their clunkers.” A series of investigations from WTHR-TV in Indianapolis has demonstrated that the administration of Indiana Gov. Mitch Daniels shares that same bad habit (see here).

The Journal editorial’s concluding lines correctly sum up the problem with government subsidies to businesses:

Better to leave commercial financing decisions to private investors and bankers who are likely to take more care with their own money. Politicians write the press releases first and worry about the taxpayer losses later.

As I’ve previously discussed, it was my experience as a state budget official in the Daniels administration that led me to coin the phrase “press release economics” to describe these subsidies. Indeed, WTHR’s investigations of the Indiana Economic Development Corporation showed that the Daniels administration was adept at taking credit for “creating jobs” that never materialized.

It might seem like I’m picking on Daniels, but he’s hardly alone. The Wall Street Journal recently ran an article on similar shenanigans in Texas Gov. Rick Perry’s administration:

In Texas, Mr. Perry in a 2011 report to the legislature credited the Texas A&M Institute for Genomic Medicine with already producing more than 12,000 additional jobs. That’s ahead of the 5,000 promised by 2015.

According to the institute’s director, however, 10 people currently work in its new building. A Houston-area biotech firm that agreed to produce about 1,600 of the project’s jobs has instead cut its Texas staff by almost 400 people, and currently employs 220 people in the state.

What accounts for the discrepancy? To reach their estimate of 12,000-plus jobs created by the project, officials included every position added in Texas since 2005 in fields related sometimes only tangentially to biotechnology, according to state officials and documents provided by Texas A&M. They include jobs in things like dental equipment, fertilizer manufacturing and medical imaging.

Republican governors aren’t the only ones who enjoy playing pretend venture capitalist with taxpayer money. The Mackinac Center for Public Policy’s Capitol Confidential reported this week on state subsidies given to Michigan solar companies by the administration of now-former governor Jennifer Granholm:

Michigan Capitol Confidential took a look back at the nine solar power companies that were approved for state tax credits. Many have fizzled with reports that the companies are laying off employees at a time they were supposed to have been adding jobs.

For example, in 2009 a company from Georgia called Suniva announced it planned to open a $250 million manufacturing plant in Saginaw County. It was to add 500 jobs. Media reports said the company is holding off plans for a Michigan plant after deciding not to pursue a Department of Energy loan.

Energy Conversion Devices and United Solar Ovonics are affiliated companies that have been approved for state tax credits for four different projects that were supposed to add about 5,700 jobs. Both companies announced layoffs this year.

Evergreen Solar opened a solar plant in Midland in 2009. The company announced in August it was filing for bankruptcy.

I’ll end on a (hopefully) positive note. Taxpayers in New York fed up with the state handing out their money to businesses have been fighting a long-running battle to end the practice. The New York State Court of Appeals is currently hearing a lawsuit brought by 50 taxpayers that challenges state grants given to business.

From the Associated Press:

The taxpayer group cited a provision in New York’s constitution that says: “the money of the state shall not be given or loaned to or in aid of any private corporation or association, or private undertaking; nor shall the credit of the state be given or loaned to or in aid of any individual, or public or private corporation or association, or private undertaking.” It has an exception for funds or property used for education and mental health.

Defendants countered that the funding for public purposes through state-designated economic development agencies is supported by law and precedents and doesn’t violate the constitution. “Doesn’t that just invite evasion?” Judge Robert Smith said. “All you’ve got to do is put an intermediary between the state and the recipient?”

Hopefully, Judge Smith’s question foretells a favorable outcome. A win for New York taxpayers could raise the issue’s profile and embolden fed-up taxpayers in other states.

President Obama has just announced that U.S. troops will leave Iraq by the end of this year. Some might wonder if the Obama administration is bluffing, in the hope that Iraqi politicians will relent to U.S. demands.

The key sticking point appears to have been the Iraqis’ unwillingness to afford U.S. servicemen and women the legal protections extended by most other governments around the world. As I argued earlier this week, the United States should not concede to the Iraqis’ demands, which would expose our troops to serious threats to their rights and liberties.

It is possible that the two sides could resume negotiations. There will still be a very large U.S. diplomatic presence, including a sizable number of security personnel. But there will be only about 150 troops.

By that token, I think it increasingly likely that we will be celebrating the end of the Iraq war come January 1, 2012. I’m trying not to be overly optimistic. My hopes have been dashed many times. But the White House is trying to put a positive spin on the story. They are speaking of the progress that the Iraqis have made in the political and security realms. They have suggested that the Iraqis are truly capable of defending themselves and governing themselves. Whether they actually believe that is anyone’s guess, but if the Obama administration carries through on its promise to remove U.S. troops by the end of the year, the president and his national security team will have heeded the wishes of the American people, not to mention abided by their promises, and those of their predecessor.

This costly and counterproductive war—launched under false pretenses, sold to the American people as a cakewalk and an operation that would be paid for by Iraqi oil revenues—may finally, mercifully, be coming to an end. I certainly hope that is the case.

Speaking at a town hall meeting at Morningside College in Sioux City, Iowa yesterday, Republican presidential candidate Mitt Romney backed a national ID system and government pre-approval of all new hires in the country. It’s a stunning amount of power he wants the federal government to have.

Addressing a question about illegal immigration (starting at 30:40 in this video) he said:

You’ve got to crack down on employers that hire people that are illegal, and that means you have to have a system that identifies who’s here legally, with a biometric card that has: this is the person, they’re allowed to work here. You say to an employer, you look at that card, you swipe it in your computer, you type in the number, it instantly tells you whether they’re legal or not.

He’s describing an expanded E‑Verify system, and the biometric national identity system that has been proposed for it. That system would not only be used for controlling employment, of course. Like the Social Security number did when it caught mission creep, the national ID Romney talks about would come to be used to control access to housing, to financial services and credit, gun ownership, health care and medicine, the list goes on and on.

It’s technically possible to have a biometric card that solely indicates one’s qualification to work under federal law, but as I wrote in my paper, “Franz Kafka’s Solution to Illegal Immigration,” there is almost no chance that the government would limit itself this way. E‑Verify requires a national identity system, and Mitt Romney wants that national identity system.

In the last week, we’ve seen another slew of Supreme Court filings regarding the various Obamacare lawsuits. Most notably, the private plaintiffs in the Florida/​Eleventh Circuit case (the NFIB and two individuals)—represented by Mike Carvin and Randy Barnett, among others—filed their response to the government’s cert petition last Friday, two weeks before it was due! 

So, as with the cert petitions themselves at the end of September, the private plaintiffs initiated a “filing cascade” (my phrase, not a legal term of art) and forced the government’s hand. The government then filed its consolidated response (to both the private and state plaintiff petitions) on Wednesday, and the (26) state plaintiffs—represented by former solicitor general Paul Clement—also filed their response to the government’s petition.

Got all that? It basically means that all the necessary filings are in and the case is “ready for distribution” to the justices’ chambers for consideration of the cert petitions, which could happen as early as the Court’s November 10 conference. That means we could see an order about which case(s)/issue(s) the Court is taking as early as November 14.

So that’s the timing. A brief note on substance: As you may recall, the Eleventh Circuit plaintiffs want the Court to review the following issues: whether the individual mandate exceeds federal power, the new Medicaid regulations/​expansion as coercing the states, the mandate that states provide health insurance in their roles as employers, and severability. The government, for its part, wants the Court to review the individual mandate, whether the Anti-Injunction Act makes the suits unripe (it argues that the AIA doesn’t apply but still, oddly, wants the Court to weigh in), and severability. On this last point, the government has reiterated its position that if the individual mandate falls, the guaranteed-issue and community-rating provisions must fall with it—a position that garnered some media attention but is both consistent with its previous arguments and honest lawyering. (It’s disingenuous as a matter of basic economics to argue that the overall reform can survive without the individual mandate, even if that’s the incongruous position that the Eleventh Circuit took rejecting the government’s “concession” on severability.) Of course, the government is also hoping that the idea that striking the individual mandate also means striking the provision requiring coverage of pre-existing conditions will make the Court hesitant to do so.

Note that the government also filed its response to the Liberty University petition and still has time to file a response to Virginia’s cert petition (on the state standing issue), both out of the Fourth Circuit. It argues, as do the Eleventh Circuit plaintiffs, that the Court should hold these petitions (as well as the Thomas More Legal Center’s out of the Sixth Circuit) pending resolution of the Eleventh Circuit case. Finally, the D.C. Circuit has yet to issue its opinion in the Obamacare case argued there a month ago.

For more on both the timing and which issues the Court is likely to take, see Lyle Denniston’s excellent analysis at SCOTUSblog.