President Obama’s “Regulatory Review” executive order, issued this week, has no effect on the regulatory environment that I can discern. It essentially encourages agencies to continue doing the thinking and analysis they are doing so poorly under existing law and executive decree. I called it “a cosmetic, symbolic effort” in the Washington Examiner and—you’ll get the backstory here—also speculated that it’s an effort to change the subject. “Regulatory review” has briefly turned the press away from the government’s huge, ongoing spending spree, and the pall of uncertainty that President Obama has cast over the economy with projects like his re-design of the American health care system.

But don’t take that as an endorsement of the Republican program. Yesterday, House Ways and Means Social Security Subcommittee Chairman Sam Johnson (R‑TX) issued a statement endorsing the E‑Verify program, which deputizes large and small businesses into a federal government document-checking program. You’d think that clearing out regulatory underbrush and getting people to work would be part of the Republican program, but Johnson said, “I will work with my colleagues and key stakeholders to design a verification system that prevents illegal employment while safeguarding the jobs, identities and privacy of U.S. citizens.” Can’t be done.

If you want to get a taste of the complexity, privacy consequence, and cost of E‑Verify as it struggles through its nascent stages, take a look at this truly excellent summary of a recent GAO report. The system now prohibits the employment of around 26 people for every thousand potential new hires, down from 80—and that’s the good news!

There’s much bad news. (The always-understated Government Accountability Office says “significant challenges.”) Identity fraud and employer noncompliance are (predictably) growing, so U.S. Citizen and Immigration Services is negotiating to get access to driver’s license data from state Departments of Motor Vehicles. Along with state bureaucrats, federal bureaucrats are (predictably) weaving together the national identity infrastructure that the American states and people rejected with the REAL ID Act.

And then there are costs. The last thing we need is more government overspending, right? So USCIS and the Social Security Administration are hiding it. Says the ever-accomodating GAO:

USCIS’s cost estimates do not reliably depict current E‑Verify cost and resource needs or cost and resource needs for mandatory implementation. While SSA’s cost estimates substantially depict current E‑Verify costs and resource needs, SSA has not fully assessed the extent to which its workload costs may change in the future.

This is the intrusive, costly program that the House Republican majority is falling in line behind, a clear sign that business-as-usual is business-as-usual for both parties. It’s a record-setting rejection of the Tea Party zeitgeist that put them in power. Where does it say in the Constitution that every employment decision in the country can be run past the federal government for approval?

I’m not a big fan of central banks, and I definitely don’t like multilateral bureaucracies, so I almost feel guilty about publicizing two recent studies published by the European Central Bank. But when such an institution puts out research that unambiguously makes the case for smaller government, it’s time to sit up and take notice. And since these studies largely echo the findings of recent research by the International Monetary Fund, we may have reached a point where even the establishment finally understands that government is too big.

The first study looks at real-world examples of debt reduction in 15 European nations and investigates the fiscal policies that worked and didn’t work. Entitled “Major Public Debt Reductions: Lessons From The Past, Lessons For The Future,” the report unambiguously concludes that spending restraint is the right way to reduce deficits and debt. Tax increases, by contrast, are not successful. The study doesn’t highlight this result, but the data clearly show that “revenue increases do not seem to have induced debt reductions, whereas cuts in primary expenditure seem to have contributed significantly in the case of major debt reductions.”

Here’s a key excerpt:

[T]his paper estimates several specifications of a logistic probability model to assess which factors determine the probability of a major debt reduction in the EU-15 during the period 1985–2009. Our results are three-fold. First, major debt reductions are mainly driven by decisive and lasting (rather than timid and short-lived) fiscal consolidation efforts focused on reducing government expenditure, in particular, cuts in social benefits and public wages. Revenue-based consolidations seem to have a tendency to be less successful. Second, robust real GDP growth also increases the likelihood of a major debt reduction because it helps countries to “grow their way out” of indebtedness. Here, the literature also points to a positive feedback effect with decisive expenditure-based fiscal consolidation because this type of consolidation appears to foster growth, in particular in times of severe fiscal imbalances.

The last part of this passage is especially worth highlighting. The authors found that reducing spending promotes faster economic growth. In other words, Obama did exactly the wrong thing with his so-called stimulus. The U.S. economy would have enjoyed much better performance if the burden of spending had been reduced rather than increased. One can only hope the statists at the Congressional Budget Office learn from this research.

Equally interesting, the report notes that reducing social welfare spending and reducing the burden of the bureaucracy are the two most effective ways of lowering red ink:

The estimation results indicate that expenditure-based consolidation which mainly concentrates on cuts in social benefits and government wages is more likely to lead to a major debt reduction. A significant decline in social benefits or public wages vis-a-vis the overall decline in the primary expenditure will increase the probability of a major debt reduction by 31 and 26 percent, respectively.

The other study takes a different approach, looking at the poor fiscal position of European nations and showing what would have happened if governments had imposed some sort of cap on government spending. Entitled “Towards Expenditure Rules And Fiscal Sanity In The Euro Area,” this report finds that restraining spending (what the study refers to as a “neutral expenditure policy”) would have generated much better results. 

Here are the main findings:

[T]he study assesses the impact of the fiscal stance on primary expenditure ratios and public debt ratios and, thus, provides a measure of prudence or imprudence of past expenditure policies. The study finds that on the basis of real time rules, expenditure and debt ratios in 2009 for the euro area aggregate would not have been much different with neutral expenditure policies than actually experienced.

…Primary expenditure ratios would have been 2–3½ pp [percentage points] of GDP lower for the euro area aggregate, 3–5pp of GDP for the euro area without Germany and up to over 10 pp of GDP lower in certain countries if expenditure policies had been neutral.

There’s a bit of academic jargon in that passage, but the authors are basically saying that some sort of annual limit on the growth of government spending is a smart fiscal strategy. And such rules, depending on the country, would have reduced the burden of government spending by as much as 10 percentage points of GDP. To put that figure in context, reducing the burden of government spending by that much in the United States would balance the budget overnight.

There are several ways of achieving such a goal. The report suggests a spending limit rule based on the growth of the overall economy, which is similar to a proposal being developed in the United States by Senator Corker of Tennessee. But it also could mean something akin to the old Gramm-Rudman-Hollings law, but intelligently revised to focus on annual spending rather than annual deficits. Some sort of limit on annual spending, perhaps based on population plus inflation like the old Taxpayer Bill of Rights (TABOR) in Colorado, also could be successful.

There are a couple of ways of skinning this cat. What’s important is that there needs to be a formula that limits how much spending can grow, and this formula should be designed so that the private sector grows faster than the public sector. And to make sure the formula is successful, it should be enforced by automatic spending cuts, similar to the old Gramm-Rudman-Hollings sequester provision.

The Michigan Supreme Court yesterday heard a case involving Dr. Dre, Eminem and the importance of being able to record cops on duty (h/​t Radley Balko):

The court plans to hear arguments today in a lawsuit by a Detroit councilman and others who say they were illegally videotaped backstage at a 2000 concert at Joe Louis Arena.

Gary Brown was a police official at the time. He warned concert organizers that power would be turned off if they showed a sexually explicit video. The confrontation was taped and later included in a DVD of the “Up In Smoke” tour, featuring Eminem and others.

Brown says his privacy was violated by the video. Dr. Dre lawyer Herschel Fink says there’s no privacy when police are doing their job. Dr. Dre is a defendant but won’t be attending the Supreme Court arguments.

There’s no better time to revisit the arguments made by David Rittgers, Clark Neily and Radley Balko on why citizens and police themselves will be better served by allowing citizens (and requiring police) to record the most intense police/​citizen interactions.

A new House rule requires that every new bill or joint resolution introduced in the House include a statement citing the specific powers in the Constitution granted to Congress to enact the proposed law. In the absence of such a statement, the clerk of the House will not accept the bill and it will be returned to the sponsor.

This new rule may have two potentially valuable effects:

• For some time, this rule may have a valuable educational effect, reminding new House members, returning members, and the public that Article 1, Section 8 of the Constitution authorizes only 18 federal powers – far fewer than the powers that the federal government has assumed, especially during the past 75 years.
• The constitutional citations for House bills that are approved would be part of the legislative record that the Supreme Court may consider in subsequent litigation bearing on the constitutionality of Acts of Congress.

This rule, however, is also likely to have two potentially negative effects:

• This rule, by limiting new legislation to federal activities for which there is express or implied authority in the Constitution, would severely limit the potential of Congress to exercise legislative authority over the many current federal activities for which there is no such authority.
• In the absence of authority in the Constitution for many types of current federal activities or others that Congress may wish to approve, Congress – like the Supreme Court – is likely to rationalize their judgments by elastic interpretations of the general welfare clause, the interstate commerce clause, or the necessary and proper clause.

An alternative interpretation of this new rule, however, would maintain its potentially valuable effects, maintain the potential for Congress to exercise legislative authority over federal activities for which there is no authority in the Constitution, and avoid the equivocation that is characteristic of statements about the powers of the federal government for which there is no authority in the Constitution: A new bill should be cleared for a vote when accompanied by a statement that identifies either the constitutional authority for the federal activities addressed by the bill or the lack thereof. In the latter case, a statement such as the following should be sufficient for the House clerk to clear a bill for a vote:

There is no authority in the Constitution for the federal activities addressed by this bill. For such time as any relevant constitutional issues are not resolved and the measures addressed by this bill remain in force as positive law, we accept the responsibility to assure that this activity is administered efficiently and fairly and to propose changes that would better serve the American people.

This alternative interpretation of the new rule would increase the opportunity for members of Congress to express their views about the constitutional issues bearing on the powers of the federal government but would maintain their potential to legislate. It is important to maintain an effective separation of powers within the federal government. Congress does not have an impressive record as a legislature, but it would be a lousy constitutional court.

It’s enviro vs. enviro in Washington’s most “progressive” suburb, Takoma Park. Indeed, the Washington Post reports, “a potentially bough-breaking debate between sun-worshipers and tree-huggers.” That is, which is more environmentally desirable, solar power or tree cover?

The modest gray house in Takoma Park was nearly perfect, from Patrick Earle’s staunchly environmentalist point of view. It was small enough for wood-stove heating, faced the right way for good solar exposure and, most important, was in a liberal suburb that embraces all things ecological.

Or almost all. When Earle and his wife, Shannon, recently sought to add solar panels to the house, which they have been turning into a sustainability showplace, the couple discovered that Takoma Park values something even more than new energy technologies: big, old trees.

When they applied to cut down a partially rotten 50-foot silver maple that overshadowed their roof, the Earles ran into one of the nation’s strictest tree-protection ordinances. Under the law, the town arborist would approve removing the maple only if the couple agreed to pay $4,000 into a city tree-replacement fund or plant 23 saplings on their own.

So now the rival environmentalists are squaring off in front of the city council:

Takoma Park City Council members, who are considering revising the 1983 tree-protection law, listened Monday night as otherwise like-minded activists vied to claim the green high ground.

Tree partisans hailed the benefits of the leafy canopy that shades 59 percent of the town: Trees absorb carbon, take up stormwater, control erosion and provide natural cooling.…

Solar advocates at the hearing said that they are tree lovers, too, but that scientific studies support the idea of poking select holes in the tree cover to let a little sun power through.

Being an environmentalist homeowner can become a full-time job:

But even some veteran solar users don’t like the idea of trading trees for panels. Mike Tidwell, founder of the Chesapeake Climate Action Network, installed solar panels on his Takoma Park house 10 years ago. As the trees have grown, the panels’ effectiveness has diminished, and Tidwell now buys wind power credits to supplement them.

Still, he said, “I don’t believe you should cut down trees for solar.” Rather, he thinks neighbors should work together to place shared panels on the sunniest roofs.

The city’s “official arborist” turned down Earle’s application to tear down one rotting tree to accommodate his solar panels. Now the council is debating the issue.

The Earles’ council member, Josh Wright, said he was sympathetic to their plight. He said it should remain hard to cut down a tree, but he’d like to see a break for people installing solar power. Wright also wants all homeowners to get credit for trees they may have planted in the years before they remove a tree.

It all sounds very complicated. And who knows what the right answer is? Or if there is a right answer? Or if the right answer might change next year?

And that’s where property rights come in. They allocate both jurisdiction and liability over scarce resources, like roofs, trees, and access to sunlight. A little “law and economics” can help to understand the Takoma Park Tree Tussle. Nobel Laureate in Economics Ronald Coase, who just turned 100, brought law and economics together to study the way that people externalize costs (make others pay for them) or internalize them (take them into account when making decisions). When property rights are well defined and legally secure, and rights can be exchanged at low cost, resources will be directed to their most highly valued use. In fact, the initial allocation of property rights doesn’t affect the allocation of resources, if the transfers are freely and easily negotiable.

That, unfortunately, is no longer the case in Takoma Park, where instead of a fairly straightforward transaction (facilitated by a purchase), there is a tussle over ill-defined rights and obligations that have little or no legal security, in a very expensive and costly process of negotiation that will almost certainly consume more wood pulp for memos than is contained in the tree in question. Well-defined and legally secure property rights save us the rather substantial trouble of sitting down like the Takoma Park City Council and trying to judge the advisability of every proposed purchase, all the while consuming large amounts of paper and exuding large amount of hot air.

Today is the 50th anniversary of President John F. Kennedy’s inaugural address, where he implored, “Ask not what your country can do for you, ask what you can do for your country.” People are commemorating the anniversary in various ways. Google is paying tribute to JFK’s address in its logo:

I thought it might be worth reprinting Milton Friedman’s assessment of JFK’s memorable line, taken from the introduction to Friedman’s 1962 book, Capitalism and Freedom:

IN A MUCH QUOTED PASSAGE in his inaugural address, President Kennedy said, “Ask not what your country can do for you — ask what you can do for your country.” It is a striking sign of the temper of our times that the controversy about this passage centered on its origin and not on its content. Neither half of the statement expresses a relation between the citizen and his government that is worthy of the ideals of free men in a free society. The paternalistic “what your country can do for you” implies that government is the patron, the citizen the ward, a view that is at odds with the free man’s belief in his own responsibility for his own destiny. The organismic, “what you can do for your country” implies that government is the master or the deity, the citizen, the servant or the votary. To the free man, the country is the collection of individuals who compose it, not something over and above them. He is proud of a common heritage and loyal to common traditions. But he regards government as a means, an instrumentality, neither a grantor of favors and gifts, nor a master or god to be blindly worshipped and served. He recognizes no national goal except as it is the consensus of the goals that the citizens severally serve. He recognizes no national purpose except as it is the consensus of the purposes for which the citizens severally strive.

The free man will ask neither what his country can do for him nor what he can do for his country. He will ask rather “What can I and my compatriots do through government” to help us discharge our individual responsibilities, to achieve our several goals and purposes, and above all, to protect our freedom? And he will accompany this question with another: How can we keep the government we create from becoming a Frankenstein that will destroy the very freedom we establish it to protect? Freedom is a rare and delicate plant. Our minds tell us, and history confirms, that the great threat to freedom is the concentration of power. Government is necessary to preserve our freedom, it is an instrument through which we can exercise our freedom; yet by concentrating power in political hands, it is also a threat to freedom. Even though the men who wield this power initially be of good will and even though they be not corrupted by the power they exercise, the power will both attract and form men of a different stamp.

It’s now official: 28 states are challenging the constitutionality of Obamacare in the courts. For those of you keeping score, the following six joined the Florida-led lawsuit: Ohio, Wisconsin, Iowa, Kansas, Wyoming and Maine. Then of course Virginia is pursuing its own suit, and now Oklahoma is about to file its own separate lawsuit based on its voters’ approval in November of a Health Care Freedom Act similar to Virginia’s.

Sadly — if I’m allowed to stop being hard-headed and just shake my head in an “o tempore o mores” sort of way — the government opposed Florida’s motion to add the six states to its lawsuit. There was no basis for this opposition: the newcomers are for these purposes similarly situated to the existing plaintiff states and raise no new legal arguments.

The district judge, Roger Vinson — who is expected to release an opinion shortly striking down at least parts of Obamacare — saw through the government’s cynical ploy. He granted the simple joinder motion the day after it was filed and without waiting for a formal reply from the Department of Justice, saying “…I can imagine no prejudice that could inure to the defendants in granting the plaintiffs’ motion, as the second amended complaint changes nothing in the case except for the caption and style, and will not delay its resolution. Indeed, because of this, I will relieve the defendants of the obligation to file an answer to the new complaint and will regard their previously-filed answer as an answer to the new complaint as well.”

This train is picking up steam, folks. But at least one political question remains: Why hasn’t New Jersey Governor Chris Christie, darling of the Tea Parties and all who like plain-speaking politicians, climbed aboard?