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Archive for the ‘Regulation’ Category

When debating and discussing the 2008 financial crisis, there are two big questions. And the answers to these questions are important because the wrong “narrative” could lead to decades of bad policy (much as a mistaken narrative about the Great Depression enabled bad policy in subsequent decades).

  1. What caused the crisis to occur?
  2. What should policy makers have done?

In a new video for Prager University, Nicole Gelinas of the Manhattan Institute succinctly and effectively provides very valuable information to help answer these questions. Particularly if you want to understand how the government promoted bad behavior by banks and created the conditions for a crisis.

Here are some further thoughts on the issues raised in the video.

Deregulation didn’t cause the financial crisis – Nicole explained that banks got in trouble because of poor incentives created by previous bailouts, not because of supposed deregulation. As she mentioned, their “risk models” were distorted by assumptions that some financial institutions were “too big to fail.”

But that’s only part of the story. It’s also important to recognize that easy-money policies last decade created too much liquidity and that corrupt subsidies and preferences for Fannie Mae and Freddie Mac steered much of that excess liquidity into the housing sector. These policies helped to create the bubble, and many financial institutions became insolvent when that bubble burst.

TARP wasn’t necessary to avert a meltdown – Because the video focused on how the “too big to fail” policy created bad incentives, there wasn’t much attention to the topic of what should have happened once big institutions became insolvent. Defenders of TARP argued that the bailout was necessary to “unfreeze” financial markets and prevent an economic meltdown.

But here’s the key thing to understand. The purpose of TARP was to bail out big financial institutions, which also meant protecting big investors who bought bonds from those institutions. And while TARP did mitigate the panic, it also rewarded bad choices by those big players. As I’ve explained before, using the “FDIC-resolution” approach also would have averted the panic. In short, instead of bailing out shareholders and bondholders, it would have been better to bail out depositors and wind down the insolvent institutions.

Bailouts encourage very bad behavior – There’s a saying that capitalism without bankruptcy is like religion without hell, which is simply a clever way of pointing out that you need both profit and loss in order for people in the economy to have the right set of incentives. Bailouts, however, screw up this incentive structure by allowing private profits while simultaneously socializing the losses. This creates what’s known as moral hazard.

I’ve often used a simple analogy when speaking about government-created moral hazard. How would you respond if I asked you to “invest” by giving me some money for a gambling trip to Las Vegas, but I explained that I would keep the money from all winning bets, while financing all losing bets from your funds? Assuming your IQ is at least room temperature, you would say no. But our federal government, when dealing with the financial sector, has said yes.

Good policy yields short-run pain but long-run gain – In my humble opinion, Nicole’s most valuable insight is when she explained the long-run negative consequences of the bailouts of Continental Illinois in 1984 and Long-Term Capital Management in 1998. There was less short-run pain (i.e., financial instability) because of these bailouts, but the avoidance of short-run pain meant much more long-run pain (i.e., the 2008 crisis).

Indeed, this “short termism” is a pervasive problem in government. Politicians often argue that a good policy is unfeasible because it would cause dislocation to interest groups that have become addicted to subsidies. In some cases, they’re right about short-run costs. A flat tax, for instance, might cause temporary dislocation for some sectors such as housing and employer-provide health insurance. But the long-run gains would be far greater – assuming politicians can be convinced to look past the next election cycle.

Let’s close by re-emphasizing a point I made at the beginning. Narratives matter.

For decades, the left got away with the absurd statement that the Great Depression “proved” that capitalism was unstable and destructive. Fortunately, research in recent decades has helped more and more people realize that this is an upside-down interpretation. Instead, bad government policy caused the depression and then additional bad policy during the New Deal made the depression longer and deeper.

Now we have something similar. Leftists very much want people to think that the financial crisis was a case of capitalism run amok. They’ve had some success with this false narrative. But the good news is that proponents of good policy immediately began explaining the destructive role of bad government policy. And if Nicole’s video is any indication, that effort to prevent a false narrative is continuing.

P.S. The Dodd-Frank bill was a response to the financial crisis, but it almost certainly made matters worse. Here’s what Nicole wrote about that legislation.

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When one thinks about all the Obamacare lies, it’s difficult to identify the worst one.

In other words, just about everything we were told was a fib. Even the tiny slivers of good news resulting from Obamacare were based on falsehoods.

So I almost feel like I’m guilty of piling on by writing about another big Obamacare lie.

But Charles Krauthammer has such a strong critique of Obamacare’s mandate for electronic health records that I can’t resist. He starts by pointing out that doctors are unhappy about this costly new mandate.

…there was an undercurrent of deep disappointment, almost demoralization, with what medical practice had become. The complaint was not financial but vocational — an incessant interference with their work, a deep erosion of their autonomy and authority…topped by an electronic health records (EHR) mandate that produces nothing more than “billing and legal documents” — and degraded medicine.

Not just unhappy. Some of them are quitting and most of them are spending less time practicing actual health care.

Virtually every doctor and doctors’ group I speak to cites the same litany, with particular bitterness about the EHR mandate. As another classmate wrote, “The introduction of the electronic medical record into our office has created so much more need for documentation that I can only see about three-quarters of the patients I could before, and has prompted me to seriously consider leaving for the first time.” …think about the extraordinary loss to society — and maybe to you, one day — of driving away 40 years of irreplaceable clinical experience.

Then Krauthammer exposes the deceptions we were fed when Obamacare was being debated.

The newly elected Barack Obama told the nation in 2009 that “it just won’t save billions of dollars” — $77 billion a year, promised the administration — “and thousands of jobs, it will save lives.” He then threw a cool $27 billion at going paperless by 2015. It’s 2015 and what have we achieved? The $27 billion is gone, of course. The $77 billion in savings became a joke. Indeed, reported the Health and Human Services inspector general in 2014, “EHR technology can make it easier to commit fraud,” as in Medicare fraud, the copy-and-paste function allowing the instant filling of vast data fields, facilitating billing inflation.

A boondoggle on the back of taxpayers. Flushing $27 billion is bad enough, but the indirect costs also are large.

That’s just the beginning of the losses. Consider the myriad small practices that, facing ruinous transition costs in equipment, software, training and time, have closed shop, gone bankrupt or been swallowed by some larger entity. …One study in the American Journal of Emergency Medicine found that emergency-room doctors spend 43 percent of their time entering electronic records information, 28 percent with patients. Another study found that family-practice physicians spend on average 48 minutes a day just entering clinical data.

Here’s the bottom line.

EHR is health care’s Solyndra. Many, no doubt, feasted nicely on the $27 billion, but the rest is waste: money squandered, patients neglected, good physicians demoralized.

Not much ambiguity in that sentence. To put it bluntly, “EHR” is the kind of answer you get when you ask a very silly question.

But on a more serious note, now read what Dr. Jeffrey Singer wrote about electronic health records. Simply stated, this is like Solyndra, but much more expensive. Instead of wasting a few hundred million on cronyist handouts to Obama campaign donors, EHR is harming an entire sector of the economy.

The only thing I’ll add is that neither Krauthammer nor Singer contemplated the possible risks of amassing all the information contained in EHRs given the growing problem of hacking and identity theft.

P.S. On another topic, I’ve written several times about the excessive pay and special privileges of bureaucrats in California.

Now, thanks to Reason, we can read with envy about another elitist benefit for that gilded class.

…a little-known California state program designed to protect police and judges from the public disclosure of their home addresses had expanded into a massive database of 1.5 million public employees and their family members… Because of this Confidential Records Program, “Vehicles with protected license plates can run through dozens of intersections controlled by red light cameras and breeze along the 91 toll lanes with impunity,” according to the Orange County Register report. They evade parking citations and even get out of speeding tickets because police officers realize “the drivers are ‘one of their own’ or related to someone who is.”

You may be thinking that the law surely was changed after it was exposed by the media.

And you would be right. But if you thought the law would be changed to cut back on this elitist privilege, you would be wrong.

…the legislature did worse than nothing. It killed a measure to force these plate holders to provide their work addresses for the purpose of citations — and expanded the categories of government workers who qualify for special protections. This session, the legislature has decided to expand that list again, never mind the consequences on local tax revenues, safety and fairness. …Given the overwhelming support from legislators, expect more categories to be added to the Confidential Records Program — and more public employees and their families being free to ignore some laws the rest of us must follow.

This is such a depressing story that I’ll close today with this bit of humor about bureaucracy in the Golden State.

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When I write about columns in the New York Times, I’m normally pointing out silly examples of bias or exposing absurd mistakes (with Paul Krugman deserving his own special category for sloppiness, as seen here, here, here, here, here, herehere, here, here, here, here, and here).

But every so often, there’s an insightful piece that is worth sharing rather than worth mocking. And that’s the case with a column by Claire Cain Miller on the unintended negative consequences of policies that ostensibly are supposed to help women but actually hurt them.

In Chile, a law requires employers to provide working mothers with child care. One result? Women are paid less. In Spain, a policy to give parents of young children the right to work part-time has led to a decline in full-time, stable jobs available to all women — even those who are not mothers. Elsewhere in Europe, generous maternity leaves have meant that women are much less likely than men to become managers or achieve other high-powered positions at work.

Why all these bad results, which seemingly are contrary to the intentions of lawmakers?

…these policies often have unintended consequences. They can end up discouraging employers from hiring women in the first place, because they fear women will leave for long periods or use expensive benefits.

Amen. You don’t make workers more attractive to employers with laws and regulations that increase the real and/or potential costs of employing those workers.

The column cites some research on the impact of the Family and Medical Leave Act in the United States. As well as the harmful effect of similar laws in other nations.

Women are 5 percent more likely to remain employed but 8 percent less likely to get promotions than they were before it became law, according to an unpublished new study by Mallika Thomas, who will be an assistant professor of economics at Cornell University. …These findings are consistent with previous research by Francine Blau and Lawrence Kahn, economists at Cornell. In a study of 22 countries, they found that generous family-friendly policies like long maternity leaves and part-time work protections in Europe made it possible for more women to work — but that they were more likely to be in dead-end jobs and less likely to be managers.

The bottom line is that government intervention is not a recipe for helping people, especially once you factor in the effect of unintended consequences.

Speaking of which, I made the same argument when looking at a government proposal to help those struggling with long-run unemployment.

All of which tells us that you must have asked a very silly question if the answer is more government.

P.S. My favorite articles and columns from the New York Times are the ones that accidentally show the superiority of small government and free markets.

P.P.S. Since I wrote the other day about the wisdom of allowing successful foreigners to emigrate to the United States, here’s a related graphic.

Maybe I’m missing something, but doesn’t this suggest we should welcome more Indians to America?

After all, the economy isn’t a fixed pie and sensible folks understand that the rest of us benefit when there are more rich and successful people.

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If I had to pick a government policy that would be most upsetting to our Founding Fathers, I’d be tempted to pick the income tax. Or maybe some useless agency, such as the Department of Housing and Urban Development.

After all, surely the Founders didn’t envision – or want – today’s Leviathan government in Washington.

But I also know I’m biased since I work on fiscal policy issues.

So upon further reflection, I think the policy that would be most horrifying to the Founding Fathers is so-called civil asset forfeiture, a.k.a., theft by government.

You may think I’m joking or exaggerating, but theft is the right word when you look at how citizens (such as the Dehko family and Lyndon McClellan) have had their bank accounts seized even though they were never even charged with a crime, much less ever committed a crime.

And now we have a new example that would have the Founders rolling in their graves, but also should get every decent person angry.

Reason has a report with the odious details.

…the Drug Enforcement Administration (DEA), is snatching the life savings of a young black male for the crime of being alone on a train. The man, Joseph Rivers, 22, was traveling from Michigan to Los Angeles by train with $18,000 in cash to pay for a music video. In Albuquerque, DEA agents boarded the train and started asking people questions. They got to Rivers, who told him he was going to shoot a music video and agreed to let them search his stuff.

Now put yourself in the mind of Mr. Rivers. You’re not committing a crime. You’re not in possession of any drugs or other illicit substances.

Agents ask to search your stuff as part of their snooping on the train and you figure being cooperative is the best way of allaying suspicion (regardless of whether the DEA used profiling).

And what’s your reward for being cooperative?

The Reason report then shares some very ugly passages from a story in the Albuquerque Journal.

Rivers was the only passenger singled out for a search by DEA agents – and the only black person on his portion of the train… In one of the bags, the agent found the cash, still in the Michigan bank envelope.

Mr. Rivers explained why he had the money, but it didn’t do any good.

“I even allowed him to call my mother, a military veteran and (hospital) coordinator, to corroborate my story,” Rivers said. “Even with all of this, the officers decided to take my money because he stated that he believed that the money was involved in some type of narcotic activity.” Rivers was left penniless.

Here’s perhaps the most disturbing part of the story is the way government bureaucrats openly admit that they can take money without any criminal charges, much less a conviction for any crime.

“We don’t have to prove that the person is guilty,” Waite said. “It’s that the money is presumed to be guilty.”

Just imagine how the Founding Fathers, if they were still around, would react to the statements of this bureaucrat?

Imagine what they would think of a policy that gave bureaucrats arbitrary powers to take money from citizens?

By the way, I’m not asking these rhetorical questions because I have some inside knowledge that Mr. Rivers is a stand-up guy. Maybe his story was fake and he actually was going to buy illegal drugs.

So what?

I’m tempted to point out at this point the foolishness of the Drug War, but that’s the point I want to make today. Heck, we can assume he had $18,000 because he intended to commit a real crime. Perhaps he was going to pay a hit man to kill someone.

At the risk of being repetitive, so what?

Our Constitution was set up to constrain the powers of government and protect citizens from abuse by government. We have a 4th Amendment to protect us from unreasonable search and seizure and we have the presumption of innocence so that we can’t be punished unless that’s the outcome of a proper legal proceeding.

Needless to say, allowing agents to steal money from train passengers is not what the Founding Fathers had in mind.

In a just society, there shouldn’t be shortcuts which trample people’s rights. Real police work should be used to amass evidence of real crimes, which then should be used in real courts where a jury can decide on guilt.

Let’s close with a few more passages from the Albuquerque story.

Rivers, 22, wasn’t detained and has not been charged with any crime since his money was taken last month. That doesn’t matter. Under a federal law enforcement tool called civil asset forfeiture, he need never be arrested or convicted of a crime for the government to take away his cash, cars or property – and keep it. Agencies like the DEA can confiscate money or property if they have a hunch, a suspicion, a notion that maybe, possibly, perhaps the items are connected with narcotics. Or something else illegal.Or maybe the fact that the person holding a bunch of cash is a young black man is good enough. …Meanwhile, Rivers is back in Michigan, dreaming, praying. “He’s handed this over to God,” his attorney said. Which seems infinitely safer than handing over anything further to government agents.

Amen.

I’ll make one final point.

In the absence of some evidence to the contrary, I’m not going to accuse the DEA agents of racial profiling. After all, government agents have stolen money from plenty of white people.

But I strongly suspect there was economic profiling. If Mr. Rivers was a 50-year old white guy in a business suit, the DEA probably wouldn’t have confiscated the money.

That doesn’t mean, by the way, that 50-year old white guys should rest easy. When government bureaucrats get away with stealing money from young people without power and connections, it’s probably just a matter of time before others get victimized as well.

Just keep in mind that slippery slopes are very slippery when government is involved.

P.S. Also keep in mind that asset forfeiture has become such an abusive nightmare that the first two heads of that division of the Justice Department now say the policy should be abolished.

P.P.S. I don’t know what’s riskier, riding trains while black or banking while Russian?

P.P.P.S. On a separate matter, the good people at the Competitive Enterprise Institute periodically measure the overall cost of regulation and red tape on the American economy. Their latest version of Ten Thousand Commandments was just released and it is very depressing reading.

Here are two charts (out of many) from the study. The first looks at the annual cost of federal rules.

The second chart looks at how the regulatory burden has grown over time.

As I said, very depressing. No wonder Santa Claus wasn’t happy with the end-of-year gifts he received last year from the Obama Administration.

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Civil disobedience is a powerful and traditional way for Americans to resist bad government policy.

The most famous example is the way civil rights leaders used disobedience (and armed self defense) to help end the Jim Crow laws imposed by state governments.

It’s also encouraging that gun owners have no intention of obeying bad gun control laws, with evidence of massive resistance to bad laws in states such as Connecticut, Colorado, and New York.

And motorists ended the use of speed (i.e., revenue) cameras in Arizona in part by simply ignoring the fines that arrived in the mail (folks in Houston needed to use a referendum).

These are encouraging stories, but we also need to be realistic about the fact that most Americans meekly comply with lots of other bad laws and regulations imposed by greedy and overbearing governments.

The regulatory burden in the United States has become absurd, for instance, but it’s difficult to envision a successful strategy to resist various bureaucratic impositions.

Until now.

The great scholar Charles Murray has a column in the Wall Street Journal about fighting back against the regulatory state.

He begins with a very depressing assessment.

America is no longer the land of the free. We are still free in the sense that Norwegians, Germans and Italians are free. But that’s not what Americans used to mean by freedom. It was our boast that in America, unlike in any other country, you could live your life as you saw fit as long as you accorded the same liberty to everyone else. …with FDR’s New Deal and the rise of the modern regulatory state, our founding principle was subordinated to other priorities and agendas. What made America unique first blurred, then faded, and today is almost gone.

In some sense, we’ve been buried by red tape.

…consider just the federal government. The number of federal crimes you could commit as of 2007 (the last year they were tallied) was about 4,450, a 50% increase since just 1980. A comparative handful of those crimes are “malum in se”—bad in themselves. The rest are “malum prohibitum”—crimes because the government disapproves.

This is something that we’ve already discussed. I made the distinction just the other day between real crimes (which involve an infringement on someone else’s life, liberty, and property) and innocent behavior that is criminalized by government.

But it’s even worse when folks have no idea how to be compliant.

Everyone knows how to obey the laws against robbery. No individual can know how to “obey” laws such as Sarbanes-Oxley (810 pages), the Affordable Care Act (1,024 pages) or Dodd-Frank (2,300 pages). We submit to them. The laws passed by Congress are just the beginning. In 2013, the Code of Federal Regulations numbered over 175,000 pages.

Especially when constitutional protections are weakened.

It gets worse. If a regulatory agency comes after you, forget about juries, proof of guilt beyond a reasonable doubt, disinterested judges and other rights that are part of due process in ordinary courts. The “administrative courts” through which the regulatory agencies impose their will are run by the regulatory agencies themselves, much as if the police department could make up its own laws and then employ its own prosecutors, judges and courts of appeals.

And the insult to injury is that many regulations make no sense.

Regulations that waste our time and money are bad enough. Worse are the regulations that prevent us from doing our jobs as well as we could—regulations that impede architects from designing the most functional and beautiful buildings that would fit their clients’ needs, impede physicians from exercising their best judgment about their patients’ treatment, or impede businesses from identifying the best candidates for job openings. …Public-school teachers typically labor under regulatory regimes that prescribe not only the curriculum but minutely spell out how that curriculum must be taught—an infantilization of teachers that drives many of the best ones from the public schools.

So what’s the solution?

You can fight these bureaucrats in their kangaroo courts, or maybe even force the case into a real court.

But Murray acknowledges that this is prohibitively expensive.

…when the targets of the regulatory state say they’ve had enough, that they will fight it in court, the bureaucrats can—and do—say to them, “Try that, and we’ll ruin you.”

Charles has an idea of how to overcome this problem.

…the regulatory state is the Wizard of Oz: fearsome when its booming voice is directed against any single target but, when the curtain is pulled aside, revealed as impotent to enforce its thousands of rules against widespread refusal to comply. And so my modest proposal: Let’s withhold that compliance through systematic civil disobedience. Not for all regulations, but for the pointless, stupid and tyrannical ones.

More specifically.

…it should be OK to ignore the EPA when it uses a nonsensical definition of “wetlands” to forbid you from building a home on a two-thirds-acre lot sandwiched between other houses and a paved road…there’s no reason for the government to second-guess employer and employee choices on issues involving working hours and conditions that don’t rise to meaningful definitions of “exploitation” or “unsafe.” …Let’s just ignore them and go on about our lives as if they didn’t exist.

That’s sounds nice, but how does one overcome the risk of discriminatory and abusive prosecution and persecution by miffed bureaucrats?

Here’s the clever proposal Charles has for the private sector.

Let’s treat government as an insurable hazard, like tornadoes. …let’s buy insurance that reimburses us for any fine that the government levies and that automatically triggers a proactive, tenacious legal defense against the government’s allegation even if—and this is crucial—we are technically guilty. Why litigate an allegation even if we are technically guilty? To create a disincentive for overzealous regulators. The goal is to empower citizens to say, “If you come after me, it’s going to cost your office a lot of time and trouble, and probably some bad publicity.”

People presumably will be willing to fight if they have some free talent coming to their defense.

I propose…a legal foundation functioning much as the Legal Services Corporation does for the poor, except that its money will come from private donors, not the government. It would be an altruistic endeavor, operating exclusively on behalf of the homeowner or small business being harassed by the regulators. The foundation would pick up all the legal costs of the defense and pay the fines when possible.

Here’s the bottom line.

The measures I propose won’t get the regulations off the books, nor will they improve the content of those regulations, but they will push the regulatory agencies, kicking and screaming, toward a “no harm, no foul” regime. They will be forced to let the American people play.

And if you want to see this strategy in the form of a picto-graph, this is a very helpful depiction.

I mentioned yesterday that I was in Poland for a Liberty Fund conference.

After the conference, I had the opportunity to visit the Solidarity Museum, which commemorated the 1980 protests against communism at the Gdansk shipyards.

Here’s an image that warmed my heart. One of the rooms had a tape of Poland’s communist dictator announcing martial law. Here’s a screen capture of him saying there’s no turning back from socialism.

Gee, that didn’t turn out to be the case.

Indeed, Poland is now a reasonably good example of how markets enable higher living standards.

And that speech should be a permanent memorial about the evil of communism. And if you want further reminders, click here, here, and here.

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The Internet has made all of our lives better, in part because there’s been an accidental policy of benign neglect from Washington.

But that’s about to change.

Even though our economy already is burdened by record amounts of regulation and red tape, the FCC is pushing forward with a plan to turn the Internet into a moss-covered public utility.

This almost leaves me at a loss for words. It’s truly remarkable – in a bad way – that the bureaucrats at the Federal Communications Commission think that the Internet can be improved by a big dose of 1930s-era regulation and control.

My Cato colleague, Jim Harper, summarized the issue last month.

Do you want your Internet service provider to operate like the water company or the electric company?… the FCC has sought for years now to regulate broadband Internet service providers…like it used to regulate AT&T, with government mandated terms of service if not tariffs and price controls. This doesn’t fit the technical environment of the Internet, which allows for diverse business models. Companies that experiment with network management, pricing, internal subsidy, and so on can find the configurations that serve widely varying consumers and their differing Internet needs the best.

But the FCC apparently doesn’t like innovation, diversity, and experimentation and instead wants to impose centralized rules. And to justify its power grab, FCC regulators are reclassifying the Internet as “telecommunications carriers” rather than an “information service.”

Title II, which applies to “telecommunications carriers,” allows common carrier regulation of the type the FCC is trying to impose….This is so it can have more control over the business decisions made by Internet service providers. …”Net neutrality” is a good engineering principle, but it shouldn’t be a legal mandate. Technology and markets surpassed any need for command-and-control regulation in this area long ago. But regulators don’t give up power without a fight.

But maybe mockery is the best way to win this issue.

Here’s a new video from the folks at Protect Internet Freedom (the some people who put together the second video in this post).

If you’ve ever been at hold at the Department of Motor Vehicles or some other bureaucracy, this may cause uncomfortable and painful flashbacks.

And here’s another video, put together by Senator Cruz’s office.

Very well done, just like the humor Cruz’s office has deployed against Obamacare.

And speaking of humor, here are some new cartoons on the topic.

Though this next cartoon is my favorite because it so effectively captures my feelings.

The Internet has been a huge success, so why on earth would anybody think it will be better if a bunch of regulators can second-guess the free market?!?

If you want more cartoons on Internet regulation, here’s a collection that I shared last year.

P.S. Shifting to another topic, here’s a story that belongs in the category of “great moments in lobbying.”

Here are some excerpts from a story published by the Raleigh News and Observer.

Sex between lobbyists and government officials who are covered under North Carolina’s ethics laws does not constitute a gift that must be listed in disclosure reports, the State Ethics Commission said Friday. …The opinion was in a response to an inquiry from the Secretary of State’s lobbying compliance director, Joal H. Broun, in a letter on Dec. 15. …Broun’s request also wanted to know if that activity falls within the definition of “goodwill lobbying,” which is an indirect attempt to influence legislation or executive action, such as the building of relationships, according to state law, and is also considered lobbying.

I’m sure there are some serious points to be made, but I confess that my immediate reaction was to think about this cartoon.

Whether any “goodwill” is being created is a topic for another day.

That being said, you’ll be happy to know that actually procuring hookers is against the rules.

However, providing a prostitute to a legislator or other covered official would constitute a gift or item of value and would have to be reported on disclosure forms – which, of course, would also be evidence of a crime, the opinion says.

The good news is that this rule, if properly enforced, will protect a vulnerable group people from being morally corrupted.

But enough about the need to protect prostitutes from being contaminated by close proximity to politicians.

I want to close on a serious point. As I wrote the other day, the best way to reduce lobbying is to reduce the size and scope of government.

P.P.S. Actually, hookers and politicians have something in common.

P.P.P.S. If you liked my quip about protecting prostitutes from politicians, you’ll appreciate this Craig Ferguson joke.

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Last year, I shared some libertarian humor relating to Valentine’s Day.

This year, we’re going to be a bit more on the wonky side.

Using roses as an example, we’re going to explore how the invisible hand of the market produces amazing results.

Here’s a great new video from Marginal Revolution University. Narrated by Professor Alex Tabarrok of George Mason University’s economics department, it explains how consumers have amazing access to millions of roses even though (actually because) there’s no agency or department in charge of Valentine’s Day.

And here’s a related video from MRU elaborating on the role of the price system.

The moral of the story in these videos is that a free and unfettered market is far and away the best method of allocating resources.

And the flip side of that lesson is that you get very bad results when politicians replace the invisible hand of the market with the visible foot of government.

Here’s some of what I wrote, for instance, when discussing proposals to give politicians power over wage levels.

…what’s really at stake is whether we want resources to be allocated by market forces instead of political edicts. This should be a no-brainer. If we look at the failure of central planning in the Soviet Union and elsewhere, a fundamental problem was that government officials – even assuming intelligence and good intentions – did not have the knowledge needed to make decisions on prices. And in the absence of a functioning price system, resources get misallocated and growth suffers. So you can imagine the potential damage of giving politicians, bureaucrats, and courts the ability to act as central planners for the wage system.

And here are some excerpts from a post about the damaging impact of subsidies to higher education.

Interfering with the price system is an especially pernicious form of intervention. When functioning properly, prices enable the wants and needs of consumers to be properly channeled to producers and suppliers in a way that promotes prosperity and efficiency. Unfortunately, governments hinder this system with all sorts of misguided policies such as subsidies and price controls. One of the worst manifestations of this type of intervention is the system of third-party payer, which occurs when government policies artificially reduce the perceived prices of goods and services.

And I could cite lots of other examples on issues such as the minimum wage, health care, housing, and agriculture.

Simply stated, you get all sorts of perverse results when politicians interfere with prices.

And that means lower living standards over time as the economy operates less efficiently.

Especially if a government really goes overboard and tries to regulate and control the entire economy rather than “just” interfere with a few sectors. Let’s look at the case of Venezuela. I’ve already written about how first Chavez and now Maduro have turned that nation into an economic hellhole.

It’s so bad that even the establishment media are taking notice.

Here are some passages from Matt O’Brien’s Wonkblog column in the Washington Post.

Venezuela…has the largest oil reserves in the world. It should be rich. But it isn’t, and it’s getting even poorer now, because of economic mismanagement on a world-historical scale. The problem is simple: Venezuela’s government thinks it can have an economy by just pretending it does. That it can print as much money as it wants without stoking inflation by just saying it won’t. And that it can end shortages just by kicking people out of line. It’s a triumph of magical thinking that’s not much of one when it turns grocery-shopping into a days-long ordeal that may or may not actually turn up things like food or toilet paper.

The government is trying to paper over its incompetence by printing money.

…the Bolivarian regime is to blame. The trouble is that while it has tried to help the poor, which is commendable, it has also spent much more than it can afford, which is not. Indeed, Venezuela’s government is running a 14 percent of gross domestic product deficit right now, a fiscal hole so big that there’s only one way to fill it: the printing press. But…paying people with newly printed money only makes that money lose value, and prices go parabolic. It’s no wonder then that Venezuela’s inflation rate is officially 64 percent, is really something like 179 percent, and could get up to 1,000 percent, according to Bank of America, if Venezuela doesn’t change its byzantine currency controls. Venezuela’s government, in other words, is playing whac-a-mole with economic reality.

And there’s also a pervasive system of price controls.

Venezuela’s government wants to wish away the inflation it’s created, so it tells stores what prices they’re allowed to sell at. These bureaucrat-approved prices, however, are too low to be profitable, which is why the government has to give companies subsidies to make them worthwhile. Now when these price controls work, the result is shortages, and when they don’t, it’s even worse ones. …it’s not profitable for the unsubsidized companies to stock their shelves, and not profitable enough for the subsidized ones to do so, either.

In the ultimate triumph of big government, Venezuela is even imposing controls on rationing!

…shortages, which had already hit 30 percent of all goods before the central bank stopped keeping track last year, have gone from being a fact of life to the fact of life. …People have lined up for days to try to buy whatever they can, which isn’t much, from grocery stores that are even more empty than usual. The government has been forced to send the military in to these supermarkets to maintain some semblance of order, before it came up with an innovative new strategy for shortening the lines: kicking people out of them. Now they’re rationing spots in line, based on the last digit of people’s national ID cards.

But you won’t be surprised to learn that all the problems are the fault of the private sector.

It’s a man-made tragedy, and the men who made it won’t fix it. Maduro, for his part, blames the shortages on the “parasitic” private sector.

It goes without saying, of course, that Maduro and the rest of the political elite avoid the consequences of bad economic policy. They all enjoy luxurious lifestyles, financed at the expense of ordinary Venezuelans. Moreover, I’m sure that Maduro and his cronies all have big bank accounts in New York or London.

So I can understand why they like the current system.

I’m genuinely mystified, though, why there are still people who think statism is better than capitalism.

I guess it’s mostly naiveté, a triumph of good intentions over real-world results.

Even though most of these leftists presumably would go crazy if they had to live without the products made possible by capitalism.

Just as portrayed in this video. And this satirical image.

Those of us who reside in the real world, by contrast, already understand the difference between capitalism and statism.

P.S. Venezuela is an economic basket case, but that apparently means it ranks higher than the United States on the “happy planet index” put together by some clueless statists.

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