NPR reports:

Black-market cigarettes are costing many states hundreds of millions of dollars a year in lost tax revenue. And the lucrative, illicit trade is attracting violent criminal gangs that can be lethally ruthless.

The rewards, and the risks, of dealing in contraband cigarettes became quite clear recently in northern Virginia, says Capt. Dennis Wilson of the Fairfax County Police Department.

Undercover investigators working with his department “had two cases where contacts that we were working with had asked us to murder their competition,” Wilson says.

The problem is that exorbitant taxes in New York state and especially New York City can add as much as $60 to the cost of a carton of cigarettes. No wonder criminals including “organized crime groups with ties to Vietnam, Russia, Korea and China” are getting into the business of buying cigarettes in lower-taxed states and driving trailers full of them to the high-tax states.

A Cato Policy Analysis warned about the problem of black markets and crime back in 2003, when the New York City tax was only $3.00 a pack ($30.00 a carton):

The failure of New York policymakers to consider the broader effects of high cigarette taxes has been a mistake repeated across the country in the stampede to maximize tax revenue from this demonized product. Too often, policymakers do not consider these effects in the erroneous belief that people do not respond to government-created economic incentives. The negative effects of high cigarette taxes in New York provide a cautionary tale that excessive tax rates have serious consequences–even for such a politically unpopular product as cigarettes.

Lots of the criticisms of the tea party movement as “extremist” assume that the movement is some sort of “American Taliban” — theocratic, censorious, antigay. The reality is that the highly decentralized tea party movement has done a remarkable job of staying focused on a specific agenda that is nothing like that. The Tea Party Patriots website proclaims its mission as “Fiscal Responsibility, Limited Government, Free Market.” Many tea partiers say that “tea” stands for Taxed Enough Already. Toby Marie Walker, lead facilitator for the Waco [not Wacko] Tea Party, told NPR Thursday, “Well, we focus around three main issues, is constitutionally limited government, free markets and fiscal responsibility.”

In fact, some social conservative activists are annoyed that President Obama’s big-government agenda and the robust tea party response have focused the country’s attention on the issues of spending, debt, and the size of government rather than cultural war. On that same NPR interview Bryan Fischer of the American Family Association complained that “the leadership of the Tea Party movement is at a fundamentally different place … when it comes to social issues” and demanded that the movement “send a clear note on the culture of conservative issues.” Walker explained that the tea party isn’t opposed to social conservatism, it just doesn’t take a position on those issues: “It would be like asking the NRA to take up an abortion issue. That’s not what the NRA is about. They’re about gun rights.” As she said:

I think that the Tea Party movement is more of a Libertarian movement. I think that that’s one of the things that has been like a myth out there, that it’s a Republican-based. But not all of us are Libertarians. You know, we have Republicans, Democrats, independents, all over the spectrum. And that’s why we stick to the issues that brought us together.

In the Washington Times social conservatives complain about the tea party movement’s emphasis on fiscal issues:

“There is suspicion among our social-conservative base that the new tea party/​libertarian Republicans might soon view restrictions on abortion as they would any government proscription of private conduct,” said former Oklahoma Gov. Frank A. Keating. [Not clear if this is also the position of his current employer, the American Council for Life Insurance.]

“Some of my law enforcement friends have expressed similar views about a worrisome second look at drug laws,” Mr. Keating added. “Perhaps it is fringe thinking and a fringe worry, but it is still a worry.”

In fact, many libertarian-minded Republicans — among them Senate nominee Rand Paul of Kentucky — have raised questions about the wisdom of the country’s strict laws on drug use.

Saturday’s Wall Street Journal quotes me in a discussion of the Values Voter Summit and social conservatives’ griping about the tea party:

[Christine] O’Donnell’s appearance at the Values Voter Summit in Washington put a spotlight on the challenge facing social conservatives, prominent in GOP politics earlier in the decade, as they try to hitch themselves to the fiscal insurgents of 2010. They may be ideological soul mates, but that doesn’t mean they’d govern the same way.

“My sense of the average tea party-endorsed candidate this year is that what motivates them is their concern over spending and the national debt,” said David Boaz, executive vice president of the libertarian Cato Institute. “If a gay-marriage ban came before Congress, they’d probably vote for it, but that’s not what motivates them.”

Mr. Boaz predicted tea-party congressional freshmen would push for a balanced-budget amendment to the Constitution, not an amendment to ban gay marriage. “I don’t think there’s likely to be a lot of social activism coming out of them,” he said.…

A Wall Street Journal/​NBC News poll conducted in June found that just 2% of those identified as tea partiers put social issues such as abortion and same-sex marriage at the top of their priority lists for federal action. 

The tea party is not a libertarian movement, but (at this point at least) it is a libertarian force in American politics. It’s organizing Americans to come out in the streets, confront politicians, and vote on the issues of spending, deficits, debt, the size and scope of government, and the constitutional limits on government. That’s a good thing. And if many of the tea partiers do hold socially conservative views (not all of them do), then it’s a good thing for the American political system and for American freedom to keep them focused on shrinking the size and cost of the federal government.

Liberals spend too much of their time being deathly afraid of the religious right. Brink Lindsey described contemporary American politics as a “libertarian consensus that mixes the social freedom of the left with the economic freedom of the right” in his book The Age of Abundance. Over the past 50 years, social conservatism has lost its battles against civil rights, against feminism, against sexual freedom, against gay rights. It hasn’t even managed to reduce the illegitimacy rate. The real challenge in American politics today is to constrain and reverse the past decade’s accumulation of money and power in Washington. And in that effort the tea party movement is on the front lines.

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

• There’s more corruption at Amtrak, but Congress probably won’t hold any “show trials” for Amtrak management since it’s not a private business.
• A new study find that the government’s “cash for clunkers” program had no long-run effect on auto purchases. It’s hard to believe this clunker of a program still has defenders.
• Federal payments to individuals as a share of the economy has reached an all-time high after 70 years of steady growth. Unfortunately, all those free lunches aren’t actually “free.”
• The battle over the administration’s plan for a national system of high-speed rail is heating up.
• The head of the Federal Housing Finance Agency throws cold water on the horrible idea of having the federal government explicitly back most mortgages.

This week’s congressional hearings on China’s currency generated a lot of heat but almost no light. Winning the prize among tough competition for the most irresponsible sound bite was Sen. Charles Schumer, D‑N.Y. At a Senate hearing Thursday that featured Treasury Secretary Tim Geithner, Schumer tossed out this grenade:

At a time when the U.S. economy is trying to pick itself up off the ground, China’s currency manipulation is like a boot to the throat of our recovery. This administration refuses to try and take that boot off our neck.

The implication of the senator’s remark is that Americans would be enjoying a robust economic recovery right now if only China were to allow its currency to appreciate by 20 to 40 percent. But is that a reasonable charge?

Granted, China’s currency, the yuan, probably is priced in dollars below what it would be were its value freely determined in global currency markets. And an undervalued currency will make Chinese imports to the United States more affordable, and U.S. exports to China somewhat more expensive. But “a boot to the throat of our recovery”? Let’s get real.

The Chinese market has been one of the bright spots for American exporters. China’s economic growth has been so robust that its growing demand for U.S. goods has swamped any negative effect of its currency. In the first seven months of 2010, according to the most recent monthly report from the U.S. Commerce Department, exports of U.S. goods to China are up 36 percent compared to the same period last year. That is a 50 percent faster growth rate than U.S. exports to the rest of the world.

Meanwhile, U.S. imports from China so far this year have been growing more slowly than exports to China, and more slowly than imports from the rest of the world. As a result, while our trade deficit with China in 2010 has grown by $22 billion, our trade deficit with the rest of the world has grown by $64 billion. But it is much easier these days to demonize China than other trading partners with whom Americans run a trade deficit, such as Canada, Japan, and the European Union.

One of the bright spots of the U.S. economy has been the manufacturing sector, which is supposedly taking the brunt of China’s “currency manipulation.” According to the latest report from the Federal Reserve, U.S. manufacturing output is up about 8 percent from a year ago.

The chief obstacle to America’s recovery is not China’s currency regime, but a housing market that remains depressed, soaring government spending and debt, looming tax increases, and grandstanding politicians who refuse to remove those very large boots from the neck of the American economy.

Ten years ago, the American Indian Charter School scored last among Oakland’s public middle schools. Today it’s the top-scoring public middle school in all of California, according to the state’s own Academic Performance Index ranking.

What changed? It wasn’t the school’s demographics. American Indian’s enrollment is still almost all low income and minority, and contrary to almost everyone’s expectations, these inner-city kids now outperform their age-mates in even the wealthiest districts in California. And the school accepts all applicants, so, no, they don’t cherry-pick. The only cherry-picking that happens at American Indian is when elite East-Coast boarding schools recruit their middle-school graduates, offering them full board and tuition–perhaps a way of diversifying their socio-economic makeup while also raising their academic performance.

The success of American Indian is due to the no-holds-barred management and academic culture created by its former principal, Ben Chavis, and now perpetuated by the principals to whom he passed the baton following his retirement in 2007. Ben brought this school from last in Oakland to 4th in the state, and his successors have raised it to #1.

There are no cell-phones, no jewelry, no pants-saggin’. Show up late and you have to come to school on Saturday… and you’ll be expected to WORK. Assiduous effort is expected always and from every student, and the teachers and principals will do everything conceivable to encourage that effort.

The students come to feel–rightly–that they belong to something exceptional and important. They develop ties to one another and to the school, and work not only for their own success but to ensure they don’t let down their comrades. It’s impossible to really describe this in a blog post, but the story is powerfully-captured in the book Crazy Like a Fox.

It is a model that is replicable, but one that will only be replicated on a massive scale if we allow the free enterprise system to take hold in American education. When entrepreneurs have the freedoms and incentives to scale-up great schools, just as they now have the freedoms and incentives to scale up great coffee shops and cell-phones, we will see educational greatness proliferate. Until then, most of the children who would thrive in schools like Ben’s won’t have access to them. And that’s a tragedy.

On September 17, 1787, the Framers of the Constitution of the United States of America, having completed their work over that long hot summer, sent the document out to the states with the hope that conventions in the states, pursuant to Article VII, would see fit to ratify it. Nine months later, on June 21, 1788, New Hampshire became the ninth state to do so, making the Constitution effective between those states. Shortly thereafter, three more states ratified the document; and Rhode Island, the last, did so on May 29, 1790.

The Constitution was not perfect – what human creation is? – not least in its oblique recognition of slavery, believed necessary to ensure union. But it provided for amendment, as with the addition of the Bill of Rights in 1791 and the Civil War Amendments several decades later, which ended slavery and brought the Bill of Rights to bear upon the states. All things considered, especially when we look at the rest of the world, the Constitution has served us well, enabling us to prosper in greater freedom than most have ever enjoyed.

Over the past century, however, we’ve allowed governments at all levels to grow far more than the Framers ever would have imagined the Constitution allowed, until today the modern redistributive and regulatory state is everywhere upon us. James Madison, the principal author of the Constitution, wrote in Federalist 45 that the powers of the new government would be “few and defined,” leaving us largely free to plan and live our own lives. If we’re to restore that Constitution of limited government, it will take more than courts and “politics as usual” to do so. We’ve got to take the Constitution seriously not just on Constitution Day but on every day. Fortunately, there are stirrings in the nation today that suggest that ever more Americans are doing so. Thomas Jefferson said it best: “Eternal vigilance is the price of liberty.”

Back in August of 2007, I issued a challenge to Jesse Larner, who blogs at HuffingtonPost. One week later, Larner took up my challenge in a post that I’ve just finished reading.

Larner very graciously admitted to a couple of misstatements, and I must reciprocate. I wrote, “I challenge Larner to show where a Cato scholar … describes America’s as a ‘free-enterprise system of health care.’ ” Sure enough, Larner found an oped where one of my colleagues wrote, “I live in a country with a free-market health-care system.” Obviously, I disagree with that claim. But Larner was right, and I will have to look into this.

A few remaining areas of disagreement:

• I wrote that Larner “claims that people don’t die on waiting lists in Canada’s health care system.” Larner responds: “Actually, that’s not what I claimed. I claimed that people don’t often die on waiting lists.” Canada’s Supreme Court writes that “in some serious cases, patients die as a result of waiting lists for public health care.” Is some as many as often? I hope not.
• Larner: “the Canadian system has problems … [but] it worked better before a series of conservative provincial governments began to de-fund it.” This isn’t the first time that advocates of socialized medicine have blamed its shortcomings on politicians who (supposedly) oppose socialized medicine. But it is an inherent feature of such systems that they will inevitably fall into the hands of whatever viable political parties exist in that nation. As I explained to Paul Krugman, “Unless you have a plan to abolish Republicans, they’re part of your plan.”
• Larner writes: “a public health care plan is a public good.” Public good is an economic term with a specific meaning. A public health care plan is not a public good.
• Larner: “is Cannon saying that we do not have rationing in the US?” Hardly.
• Larner: “In a free-market system, what mechanisms would prevent insurers from cherry-picking their customers, and denying coverage to those who are likely to require expensive treatment?” The question presumes that insurance should do something that insurance cannot do: insure the uninsurable. In this chapter of the Cato Handbook on Policy, I explain the (amazing) things that health insurance can accomplish, and why “health insurance markets are completely justified in not covering preexisting conditions.”
• “So here’s my challenge to Cannon: show me a way that a true free-market system can provide decent coverage to everyone, regardless of ability to pay, without rationing.” Elsewhere in his post, Larner acknowledges this is an impossible task. In this magazine article, I explain that there is no way to reform health care that can guarantee that no patients will fall through the cracks. In this Cato paper, I explain how a free market would minimize the number of people who do.
• “Cannon is not in favor of universal coverage as a social right.” True, that. “As a libertarian, he doesn’t even recognize the concept of social rights.” I believe it was Friedrich Hayek who said there’s no better way to strip a word of its meaning than to place the word “social” in front of it. Try it yourself . I suggest using words like security, contract, justice, responsibility…