op-eds & articles

Dodd’s Main Street Punishment Bill

John Berlau — Tue, 16 Mar 2010 00:00:00 -0700

With the focus this week on health care’s “home stretch” and concerns about government limiting the ability of ordinary Americans to make choices about medical treatment, another threat to freedom is accelerating that could harm Americans’ abilities to start a business, invest for retirement, and get affordable home and auto insurance policies. On Monday, after abruptly shutting down earnest negotiations between Senate Republicans, Senate Banking Committee Chairman Chris Dodd wannounced a partisan so-called financial regulatory reform bill that he will try to ram through his committee within a week.

And this 1336-page bill will do nothing to put restrictions on two entities that were proximate causes of the housing bubble, the government-sponsored Fannie Mae and Freddie Mac, and instead hit Main Street businesses and entrepreneurial firms that had nothing to do with the crisis. The bill’s specific provisions would penalize the corporate structure of public companies from Google to Warren Buffett’s Berkshire Hathaway, tax prudent banks stable home and auto insurers and their policy holders to pay for the bailout of the next Lehman or AIG, depress revenues from incorporation fees in Sen. Harry Reid’s Nevada and Vice President Biden’s Delaware by federalizing corporate governance laws, and put thousands of retailers who issue gift cards or even offer layaway plans under a new Federal Reserve bureaucracy to regulate credit.

Here are the highlights of some of most destructive provisions for the freedom of entrepreneurs, investors and consumers.

1. The shareholder rights jujitsu with “proxy access” and other corporate governance mandates.

According to Politico, so-called “proxy access” language was one of the main issues “not resolved.” There is good reason for it not being resolved. This is because proxy access has nothing to do with complex financial products and everything to do with empowering shareholder groups on the Left, such as union pension funds and foundations backed by Leftie donors like George Soros, to pressure public companies to bow to their various agendas.

For more than 150 years, state law has governed the director nomination and election process for corporations and their shareholders. In states such as Delaware and Nevada, where many companies are incorporated, any shareholder can nominate a candidate for the board, but that candidate has to pay for the campaign out of his or her own pocket. Under Dodd’s bill, the federal government would force the companiesand other shareholders to subsidize the campaigns of dissident shareholders and include their candidates in a company’s own proxy materials.

But as I have written in BigGovernment.com, subsidizing certain shareholders to let them run director candidates on the cheap opens the floodgates to special interest agendas that hurt the bottom line for ordinary shareholders. “Groups from unions to animal rights groups could run their own candidate for corporate directors and promote their special interest agendas at the company’s (and ultimately other shareholders) expense,” I wrote.

And leaders of 17 groups representing a broad spectrum of the center-right coalition — from my Competitive Enterprise Institute and Americans for Tax Reform to the Christian Coalition of America – recently sent a letter to members of the Senate Banking Committee pointing out that with proxy access: “Everything on the anti-market political wish list from cap-and-trade carbon restrictions, to animal rights activism, to interfering with defense contractors to advance foreign policy objectives would be possible. These initiatives, whatever their merits, belong in the political arena, not in corporate boardrooms where the focus should be on maximizing shareholder value.”

The bill also takes the unwise step of coercing companies into cookie-cutter corporate governance procedures such as separating the chairman and CEO. Some corporate governance activists have flagged this as a bad practice, but there is no empirical evidence that it harms shareholder returns. In fact, shareholders of Google and Berkshire Hathaway seem quite pleased with their CEOs – Eric Schimidt and Warren Buffett, respectively (both of whom supported Obama) – also serving as chairmen, and would be quite angry if the government were to penalize this practice that had been so effective for these companies’ growth and profitability.

In the meantime, as I have noted in the New York Daily News, Citigroup’s having a separate chairman and CEO throughout most of the last decade did nothing to prevent that firm’s financial implosion that resulted in taxpayer bailouts. Different governance structures may work better for different firms, as an entrepreneurial startup may opt for a close-knit board and a more established company may want to separate these positions. Regardless, shareholders are perfectly capable of deciding on things like whether the chairman and CEO should be separate, and that these matters shouldn’t be dictated to them by the government.

Finally, the one-size fits all corporate governance procedures would greatly reduce the competitiveness of Delaware and Nevada in attracting firms from all over the world incorporating their because of the variety of corporate structures the states allow that work both for entrepreneurs and investors.

Dodd’s bill does NOT end “Too Big To Fail”; establishes $50 billion permanent bailout fund and taxes the prudent.

“Never again should the American taxpayer be asked to write a check because of an implicit guarantee that the federal government will bail out a company.” Dodd said at a news conference unveiling the bill on Monday. But Dodd’s bill not only doesn’t prevent taxpayer bailouts of failing financial firms, it ensures that they will continue. What the bill’s supporters call a “prefunded resolution authority” can be more simply defined a permanent bailout fund with a specific tax to subsidize the failure of any reckless firm.

Dodd’s bill summary puts great weight on the bailout fund’s “costs to financial firms, not taxpayers.” As the summary states, the bill “charges the largest financial firms $50 billion for an upfront fund, built up over time, that will be used if needed for any liquidation.” Similar to the Obama administration’s justifications for the bank tax or “financial crisis responsibility fee,” Dodd’s summary explains that “industry, not the taxpayer, will take a hit for liquidating large, interconnected financial companies.

How reassuring, not! Both of the explanations for the Obama bank tax and the Dodd “upfront fund” amount to a distinction without a difference. Unless taxpayers never open a bank account, borrow money, nor engage in any economic transaction whatsoever, the cost of the tax on financial firms will fall on them. And the failure is still not borne by the imprudent actor, but by the industry as a whole and its customers and shareholders. And an “upfront fund” will encourage more risky behavior, or what economists call “moral hazard,” by forcing prudent firms to set aside billions of dollars to essentially prefund the high-rollers risky bets.

This is particularly true given the fact that this fee will most likely include not just large banks, but home and auto insurers such as Geico (a subsidiary of Buffet’s Berkshire Hathaway holding company), Allstate, and State Farm. These relatively stable firms had virtually nothing to do with risky bets that led to the financial crisis. The one exception among insurers was American International Group, and the major issue there was their exotic financial products, such as mortgage derivatives, not their traditional lines of insurance.

So you, the reader, may be getting an insurance policy hike, higher borrowing costs, and less interest on your bank account to pay for an upfront bailout for the next AIG, Lehman Brothers, or Countrywide (where you may remember, even if the media have forgotten, Dodd got a sweet mortgage deal). And you may also be getting reduced dividends or a lower shareholder return due to the “proxy access” mandates that empower progressive shareholders in the companies in which you invest to build your retirement portfolio.

In part II, we will talk about how the Federal Reserve will provide unlimited funding to a powerful new bureaucracy that will limit your ability to get credit and financing. Aren’t you glad the politicians are finally standing up for you? Or, should that be, standing upon you?!

ObamaCare's Enormous Cost is Hidden by Dishonest Gimmicks, Admits pro-Obama New York Times Columnist David Brooks

Hans Bader — Mon, 15 Mar 2010 00:00:00 -0700

New York Times columnist David Brooks, like other columnists at that staunchly liberal newspaper, supported Obama in the 2008 election. But even he can now see that Obama’s health care plan is full of dishonest gimmicks that hide its enormous cost and the fact that it will drive up the deficit and health-care costs:

“They’ve stuffed the legislation with gimmicks and dodges designed to get a good score from the Congressional Budget Office but don’t genuinely control runaway spending.

“There is the doc fix dodge. The legislation pretends that Congress is about to cut Medicare reimbursements by 21 percent. Everyone knows that will never happen, so over the next decade actual spending will be $300 billion higher than paper projections.

“There is the long-term care dodge. The bill creates a $72 billion trust fund to pay for a new long-term care program. The sponsors count that money as cost-saving, even though it will eventually be paid back out when the program comes on line.

“There is the subsidy dodge. Workers making $60,000 and in the health exchanges would receive $4,500 more in subsidies in 2016 than workers making $60,000 and not in the exchanges. There is no way future Congresses will allow that disparity to persist. Soon, everybody will get the subsidy.

“There is the excise tax dodge. The primary cost-control mechanism and long-term revenue source for the program is the tax on high-cost plans. But Democrats aren’t willing to levy this tax for eight years. The fiscal sustainability of the whole bill rests on the naïve hope that a future Congress will have the guts to accept a trillion-dollar tax when the current Congress wouldn’t accept an increase of a few billion.

“There is the 10-6 dodge. One of the reasons the bill appears deficit-neutral in the first decade is that it begins collecting revenue right away but doesn’t have to pay for most benefits until 2014. That’s 10 years of revenues to pay for 6 years of benefits, something unlikely to happen again unless the country agrees to go without health care for four years every decade.

“There is the Social Security dodge. The bill uses $52 billion in higher Social Security taxes to pay for health care expansion. But if Social Security taxes pay for health care, what pays for Social Security?”

Earlier, health care cost expert James C. Capretta explained how “Obamacare Is A Budgetary Disaster” that will cost at least $1.4 trillion more than promised.

The Congressional Budget Office, which refused to question Obama’s gimmicks to lowball the cost of his health care plan, nevertheless admits that “President Obama’s policies would add more than $9.7 trillion to the national debt over the next decade.”

There are $3,000,000,000,000 in tax increases in Obama’s budget. But he’s spending money at such a furious pace that the deficit will skyrocket anyway: “The president’s budget would borrow 42 cents for each dollar spent in 2010,” and “double the national debt over the next decade.”

Obama’s healthcare plan will further increase deficits, as even Democrats have admitted. ObamaCare would reduce medical innovation, raise taxes, drive up insurance premiums, break campaign promises, and increase state deficits. It would cut the quality of care, while imposing restrictions that failed when tried at the state level. It ignores advice from experts about how to cut costs.

Obama recently ran up the largest budget deficit in history, by a huge margin.

Don't Buy Hype on Plastic Baby Bottles

Angela Logomasini — Sun, 14 Mar 2010 00:00:00 -0800

Imagine your infant tossing a glass baby bottle. It shatters and you try to clean it up before your child crawls across the floor. Now imagine a plastic bottle falling — no worry. That is why babies have been tossing break-proof plastic bottles for decades — we value safety. Yet now, environmental activists are urging us to go back to glass, and they have convinced some lawmakers to consider banning the plastic.

Greens say a chemical — bisphenol A, or BPA — used to make plastic baby bottles and many other products is dangerous to humans because high doses are dangerous to rats. Yet humans metabolize and pass BPA quickly before it can have any health impact. Rodents do not. This is true for many substances, such as chocolate and peanuts, which are toxic to rodents but safe for humans.

Moreover, the best available science reveals that consumer exposure to BPA is most likely 100 to 1,000 times lower than EPA's estimated safe exposure levels, for both infants and adults. In fact, there isn't any research showing adverse effects on consumers after 60 years of BPA use. Not surprisingly, panels around the world — in Japan, the EU, Canada, Norway, France and more — have not been able to link BPA to any public health ills and have ruled that BPA is safe at current exposure levels.

Still, greens claim BPA is dangerous because it may be weakly "estrogenic," which they suggest impacts human development. Yet the simple fact that a substance might have weak estrogenic qualities is not cause for alarm or bans. If it were, we would need to ban soy, peas, beans and a host of healthy foods. These foods contain so-called "endocrine mimicking" substances similar to BPA but at much higher levels. According to data from the National Academy of Sciences, exposure to natural "endocrine mimicking" chemicals is 100,000 to 1 million times higher than exposure to similar substances found in BPA. It appears that BPA is less dangerous than a few tablespoons of soy milk. And that's pretty darn safe, even for a baby.

No one can blame parents for becoming alarmed about plastics, since all we hear is misinformation and hype. But we can blame our politicians when they fall for hype, fail to do any homework, and force the rest of us to use less safe or inferior products.

Real Competition Among Health Plans

John Berlau — Thu, 11 Mar 2010 12:41:27 -0800

The flash point of last year’s health care debate was the public option. The proposal, which calls for a government-created health insurer to compete with private insurers, was praised by President Barack Obama and its liberal supporters as a way of “keeping insurance companies honest.” Conservatives criticized it as a slippery slope to a government-run single-payer system.

The public option appeared to be dead when Senate leaders decided not to include it in their health care reform bill. But prominent liberals have recently called for the Senate to add it to the new reform proposal. More than 100 House Democrats, 37 Senate Democrats and major progressive groups like MoveOn.org and the Progressive Change Campaign Committee have urged that the public option be added through reconciliation.

The public option now has “a new pulse,” says the liberal website Talking Points Memo.

So far, arguments have been largely theoretical. Or they refer — positively or negatively — to government-run health care systems in foreign countries.

A better comparison, however, might be to a “public option” Washington created in another part of the insurance industry.

Since September 2008, the government has infused billions into an insurer that provides coverage for cars, homes and business assets. Once this insurer got government funding, it began slashing premiums for many of the insurance policies it sells. Its private-sector competitors have cried foul, but new customers keep signing up.

Chances are that most readers have heard of this insurer — just not referred to as a “public option.” Rather, it is known by its initials: AIG.

Though the primary argument for the government to pour more than $180 billion into American International Group’s coffers was to save the financial system from the company’s bad mortgage bets, the infusions have given the company an advantage over its rivals in its daily businesses.

In the months after the bailout, The Wall Street Journal reported, “AIG at times has slashed insurance prices — by more than 30 percent in some cases — to fend off rivals and to keep or win contracts.”

AIG cut premiums by 34 percent, for example, to underbid three other firms and win renewal of a policy with the U.S. Olympic Committee, the Journal reported. It pried away a rival’s contract covering the city-owned airport in Mesa, Ariz., by bidding about 30 percent less. The company assuaged concerns about safety and soundness by pointing directly to the government infusion that, it says, “strengthens [AIG’s] capital positions.”

Rival insurers have complained loudly. So have trade groups like the American Insurance Association. But AIG’s competitors aren’t the only ones concerned.

The Government Accountability Office and the insurance department of Pennsylvania are investigating whether the company has been charging inadequate amounts for the risks involved in its policies since it received bailout money.

In a preliminary report, the GAO said it had not “drawn any final conclusions about how the assistance has impacted the overall competitiveness” of the market but did find that “AIG’s insurance companies have likely received some indirect benefit” from not having the parent company’s credit rating downgraded.

On the liberal website The Huffington Post, Don McNay, a personal finance columnist, decried AIG’s apparent use of its subsidies to distort the insurance market. “Undercutting the market,” he wrote, “is a bigger issue than the $165 million in bonuses. If AIG loses millions, or billions, in the future due to its ‘overly aggressive pricing,’ we are going to be picking up the tab.”

Indeed, liberals often complain about companies that use an advantage to allegedly engage in “predatory pricing,” even if it results in short-term benefits for consumers. They claim that airlines, discount retailers and other businesses that slash prices will drive out smaller competitors.

Though the Supreme Court concluded, in 1986, that “there is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful,” it is a different story when the government gives one firm a direct subsidy or regulatory advantage.

Yet liberals have abandoned their fears of underpricing driving out competitors when it comes to a public option in health insurance. Another Huffington Post contributor, Sahil Kapur, argued that “if private insurers don’t survive” competition from the government plan, “it’s because they were ripping off customers or operating inefficiently.”

A concern about unfair competition, he declared, “implicitly prioritizes the well-being of providers over consumers.”

Yet everyone eventually loses when the game is rigged through a subsidized insurance competitor — whether it’s AIG or the public option. Private insurers folding or leaving the market for a particular type of insurance means less innovation in pricing and risk prevention, leading to fewer options and higher costs for most consumers.

And if a price war engendered by subsidized competition meant premiums were inadequate to cover risk, the government might be faced with a bigger insurance tab. The quality of coverage could also suffer. Choice, in turn, would be limited even more.

Of course, competition isn’t the end goal of some public option advocates, who most likely see the public option as a way station for a single-payer system like Canada’s. But if that’s the case, why not have an honest debate, as Washington Post economist Robert Samuelson suggests, between single payer and “genuine competition among health plans over price and quality”?

To bring real competition, let customers buy health insurance across state lines and remove provisions of the tax code favoring employer-based health insurance.

But let’s not bring the “too big to fail” model, which proved such a disaster for the financial industry, into our health care system, under the guise of the public option.

Obama Runs Up Largest Budget Deficit in U.S. History

Hans Bader — Thu, 11 Mar 2010 00:00:00 -0800

“The Obama Administration has run up the largest budget deficit in American history in February of 2010, a whopping total of $220.9 Billion in just one month. February 2010’s unprecedented total is more than most year-long budget deficits in American history, including 2007’s year-long total of $161 Billion.”

“President Obama’s policies would add more than $9.7 trillion to the national debt,” the Congressional Budget Office said. That’s roughly fifteen times the cost of the Iraq and Afghanistan Wars combined.

The president’s healthcare proposals will add still more to the national debt, which he is attempting to conceal through budget gimmicks. Even Democrats have expressed alarm about their unaffordable cost. The true cost of his healthcare plan, experts say, is at least $2.3 trillion, dramatically increasing the budget deficit. ObamaCare would reduce medical innovation, raise taxes, drive up insurance premiums, break campaign promises, and increase state deficits. It would cut the quality of care, while imposing restrictions that failed when tried at the state level. It ignores advice from experts about how to cut costs.

In the 2008 campaign, Obama promised a “net spending cut,” but as soon as he was elected, he proposed massive spending increases.

Economists and real estate experts say that a mortgage bailout program the Obama administration spent $75 billion on has backfired and harmed the real estate market.

The Washington Post today reports that the administration has no plans to reform Fannie Mae and Freddie Mac. Those mortgage giants are receiving huge bailouts (more than $125 billion and rapidly rising) to enable them to carry out Obama’s policy of giving billions of dollars in handouts to deadbeat mortgage borrowers, some of whom have high incomes, and lived beyond their means.

Obama Wants to Tax Good Banks, Protect Bad Ones

Charles Huang — Thu, 11 Mar 2010 00:00:00 -0800

The Obama administration wants to increase taxes on productive banks that are self-supporting, while exempting the mortgage giants and other companies that got massive taxpayer bailouts. For more details, click on this graph, “Bank-robbing tax lets ‘bad guys’ go free,” courtesy of a Washington think-tank, the Heritage Foundation. It shows that the mortgage giants Fannie Mae and Freddie Mac are exempt and will never have to pay a dime, despite being bailed out by taxpayers at a cost of more than $200 billion, while Bank of America and Wells Fargo, which are solvent and returned all their TARP money, would be forced to pay billions under the administration’s proposed tax.

General Motors and Chrysler won’t have to pay a dime, either, even though the government claimed they were “financial institutions” just like banks in order to use bank bailout money to bail them out at a cost of at least $70 billion (a bailout that would not even have been needed to save the companies if they had simply been reformed to make them competitive, and received relief from burdensome red tape, like poorly-drafted CAFE and global-warming regulations that may backfire. Instead, the Obama administration effectively gave the companies, at taxpayer expense, to the UAW, a powerful union opposed to much-needed reforms).

In other news, economists and real estate experts say that a mortgage bailout program the Obama administration spent $75 billion on has backfired and harmed the real estate market.

Obama recently expanded the bailout of mortgage giants Fannie Mae and Freddie Mac and lavished money ($42 million) on their CEOs.

Under the Bush administration, federal regulators took over Fannie and Freddie in the name of stopping their risky practices. But the Obama administration has increased their purchases of risky mortgages in a vain attempt to inflate the economy. Worse, it forced them to run up to tens of billions in losses to bail out deadbeat and at-risk mortgage borrowers, and then tried to conceal those losses, in conduct reminiscent of Enron. But their management hasn’t objected, because the costly requirements are accompanied by massive taxpayer bailouts and lavish pay for the mortgage giants’ CEOs.

Fannie and Freddie helped spawn the mortgage crisis by acting as loan toilets, buying up risky mortgages and thus creating an artificial market for junk. “From the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime.”

Why did they buy these risky loans? They put up with Clinton-era affordable-housing regulations that required them to buy up lots of risky loans, in order to curry favor on Capitol Hill and thus retain their annual $10 billion in tax and other special privileges (which they possessed owing to their status as “Government-Sponsored Enterprises” or GSEs). They paid their CEOs millions in the process, and engaged in massive accounting fraud — $6.3 billion at Fannie Mae alone — to increase the size of their managers’ bonuses. As GSEs, they were exempt from the capital requirements that apply to private banks, so they did not have enough reserves to cover their losses when their mortgages started defaulting.

At the direction of the Obama administration, Freddie Mac is now running up $30 billion in losses to bail out mortgage borrowers, some of whom have high incomes. Federal regulators sought to make Freddie Mac hide the resulting losses from the SEC and the public.

Under Obama’s proposed financial “reforms,” banks will be pressured to make even more risky, low-income loans. Obama has sent to Congress his proposal to create a politically correct entity called the Consumer Financial Protection Agency, tasked with enforcing the Community Reinvestment Act. Government pressure on banks to make low-income loans was a key reason for the mortgage meltdown and the financial crisis. Yet Obama’s proposals would empower the new agency to enforce the Community Reinvestment Act, which was a key contributor to the financial crisis, without regard for banks’ financial safety and soundness.

Moreover, Obama’s proposed financial rules do absolutely nothing to reform Fannie Mae and Freddie Mac, admits Treasury Secretary Timothy Geithner, even though he admits that “Fannie and Freddie were a core part of what went wrong in our system.”

Meanwhile, a new law backed by the Obama administration, the CARD Act of 2009, has effectively forced responsible credit-cardholders to subsidize irresponsible people, leading to the return of annual fees on many credit cards, and the elimination of many cash-back and rewards programs. My wife, who has an excellent credit rating, was recently informed that one of her cards will now have an annual fee — of $60! (She promptly canceled the card).

The Corker-Dodd-Alinsky Bill? : Center-Right Coalition Letter Warns about “Proxy-Access”

John Berlau — Wed, 10 Mar 2010 00:00:00 -0800

Capitol Confidential and Jim Hoft have done an excellent job laying out concerns with the potential “compromise” bill that comes out of Sen. Bob Corker’s negotiations with Chris Dodd. But when it comes to the destructive provisions that could come out of a Dodd-Corker deal, they may have just scratched the surface.

In addition to the troubling new powers for a new nanny-state consumer agency and possibly the Federal Reserve added to the prospect of billions more in bailouts for reckless financial firm, the bill may also contain the sneaky “proxy access” power grab for unions, radical environmentalists, and other groups on the Left. This rule, inspired by Saul Alinsky’s Rules for Radicals, is contained in Dodd’s “discussion draft” bill from late last year.

As I detailed in BigGovernment last week, “proxy access would federalize and override decades of state law governing the structure of corporations and force publicly-traded companies to put shareholders’ nominees for a board of directors on a company’s proxy ballot along with the firm’s own nominees for those positions.” Many shareholder groups that are pushing this are union pension funds, the radical Tides Foundation, and other progressive groups — from animal rights to anti-Israel — who place their own political agenda items at the expense of ordinary shareholders.

Even if these groups’ nominees do not get elected as directors, they could use the threat of a campaign – which the company and other shareholders would be forced to subsidize – “as a lever to force U.S. companies to bow to the Left’s wish list on every policy from “card check” that would end secret ballot for union elections to cap-and-trade rationing of electricity to a silencing of conservative voices by small group of ideological shareholders who would have veto power over the content of a media company.” Indeed, proxy access could also serve as a type of Fairness Doctrine-rule in which progressive shareholders of media companies attempt to block conservative content, as now-disgraced New York Comptroller Alan Hevesi did when Sinclair Broadcasting was going to air the “Stolen Honor” documentary critical of John Kerry.

As I documented in the article, proxy access has its roots in the “proxy tactic” that community organizer Alinksy outlined in his Rules for Radicals. In that handbook, Alinsky called for progressive groups to utilize shareholder proxies as “the razor to cut through the golden curtain that protected the so-called private sector from facing its public responsibilities.” Alinsky admitted that this tactic “will result in diminished dividends” for middle-class investors, but said that it was necessary to fool the middle class to “build power for change.”

But on the debate on health care and other issues pushed by progressives, the middle-class is showing that it isn’t fooled as easily as Alinsky and his followers though they could be. It remains to be seen, though, whether the proxy tactic will fool Corker, or whether he will be educated on this and other forms of “corporate jujitsu”(Alinksy’s own words) by the legions of savvy middle-class investors and entrepreneurs.

On that note, I am happy to report that leaders of 17 groups representing a broad spectrum of the Center-Right coalition — from my organization Competitive Enterprise Institute and Americans for Tax Reform to the Christian Coalition of America — have sent a letter to Dodd, Banking Committee Ranking Member Richard Shelby (R-Ala.) and Corker expressing objections to proxy access. Such a rule, the letter states, “would benefit special interests with political agendas at the expense of ordinary shareholders” and “would allow … activists to achieve through the board nomination process what they have been unable to accomplish through the political process.” The letter is printed below and also available here.

5 Reasons Why America Should Steer Clear of a National ID Card

Alex Nowrasteh — Tue, 9 Mar 2010 00:00:00 -0800

The Senate is working toward a ghastly compromise on immigration reform that includes a biometric national identification card for all Americans. The stated purpose of this national ID, which an employee must present before getting a job, is to prevent undocumented workers from being employed. Back in December I warned that a national ID is the inevitable conclusion of the anti-immigration movement. The failure of E-Verify to catch 54% of undocumented workers is only accelerating the call for a national ID.

A national ID hurts American workers while pretending to help them.

First, every worker would have to ask permission from the federal government to get a job. American workers shouldn’t have to beg or plead to anybody to get permission to work. Being employed should be a private agreement between an employer and employee. Period. The government should get out of the way.

Second, carrying around government papers with biometric identification on it conjures up images of a more technologically savvy Oceania or East Germany. No thanks.

Third, the system will exclude millions of legal workers by accident and fail to catch the majority of undocumented immigrants. For instance, if E-Verify were instituted nation-wide 3.6 million Americans would be denied employment each year and have to visit the Social Security Administration to correct their records. The employer either fires them or delays training. Will a biometric ID card make this system better? How does that help American workers?

Fourth, it will cost businesses up to $800 to buy a scanner. Or as Senator Chuck Schumer says, employers can just go down to the DMV. Senator Schumer doesn’t know squat about running a business. The last thing an employer wants to do is spend time at the DMV when he could be spending it improving his business. And all this during an economic slump!

Fifth, it would treat every American like a criminal by requiring them to enter their most intimate and personal data into a government database. One of the benefits of not having committed any crimes is that my information is not in a government record office. I’d like to keep it that way.

Has the very notion of liberty been so diluted in this great nation that no-one is willing to decry this as the naked government power grab that it is? Must every American now ask government permission to get a job? Think what you will about undocumented immigration, is ending it so important that every single American must be entered into a massive government database and given an ID they must present when applying for a job?

It most emphatically is not.

Avoid Land Grabs while Downsizing Detroit

Marc Scribner — Tue, 9 Mar 2010 00:00:00 -0800

If history is any guide, Mayor Dave Bing’s recent announcement that he intends to pursue aggressive central planning to shrink Detroit is bad news. For a city notorious for eminent domain abuse and corruption, Detroit residents should be vigilant about Bing’s plan.

The reason that the mayor wants to downsize the city is understandable. Many people and businesses have departed, leaving huge swaths of the city where the city provides police, fire and garbage services for very few residents. By forcing some residents to move, the city can consolidate neighborhoods, save money as well as put together coherent tracts of property for sale to potential developers.

But many of the areas in question are sparsely populated by mostly low-income residents or dilapidated to the point where the city has a reasonable case designating the properties as public nuisances. Because of these two facts, the city should neither forgo the normal bargaining process nor condemn the dilapidated parcels through eminent domain.

Normal bargaining to buy property would likely be relatively cheap given the small, lower-income population. And if property is truly blighted, it would be a public nuisance and could be seized through traditional police authority granted to government without using eminent domain—and without compensating the owners at all.

Detroit residents are more protected than many Americans from eminent domain abuse, but they are by no means immune. Bing and city government may face constraints on manipulating takings compensation settlements, but there are still opportunities for abuse.

Officials have strong incentives to systematically undervalue property when determining “market value.” Even if the city were to pay 125 percent of “market value” plus additional relocation costs, as required by the state Constitution, the odds of the owner getting anywhere close to the property’s actual subjective value—the price at which the owner would willingly sell—are slim.

The law ought to reflect the reality that officials cannot know how much owners value their property, which is what makes the bargaining process superior to takings in the first place.

But Detroiters aren’t alone; eminent domain abuse remains a serious problem across the nation.

Five years ago in its Kelo v. New London ruling, the U.S. Supreme Court upheld the city of New London, Conn.’s authority to condemn homes to transfer the parcels to a wealthy private developer. The Takings Clause of the Fifth Amendment to the U.S. Constitution—“nor shall private property be taken for public use, without just compensation”—was interpreted to permit property seizures for a “public purpose”—in this case, the city’s expected increase in tax revenue following redevelopment.

Many were outraged that homeownership had essentially been rendered meaningless in the name of corporate welfare. According to polls, nearly 90 percent of Americans opposed the decision.

Moreover, the entire takings process tends to be heavily biased against lower-income businesses and households. Poorer areas are far more likely to be declared “blighted” for spurious reasons and targeted for economic redevelopment, so eminent domain takings can kill off wealth creation there before it even begins.

A classic example is the razing of Detroit’s Poletown neighborhood. Then-Mayor Coleman Young conspired with General Motors to seize and demolish historic working-class Poletown to build a new auto plant. In addition to the 1,300 homes and six churches slated for destruction, 140 businesses stood in the way of this unholy alliance of government and big business.

Neighborhood groups filed lawsuits, staged sit-ins and held rallies to oppose the development plan. In the end, this was not enough, the Michigan Supreme Court gave Young and GM the victory they needed, and the once-thriving immigrant neighborhood was soon demolished.

Thankfully, the Michigan Supreme Court later reversed its decision. The Poletown plant is still in operation, but the vast majority of the razed property now consists of parking lots and green space.

And thanks to the passage of a 2006 ballot initiative, Michigan residents now enjoy some of the strongest protections against eminent domain abuse in the nation.

Detroit city government already has a bad reputation from its past land grabs. That’s why Bing and other Detroit officials should pursue downsizing through normal parcel purchases instead of politically charged land takings.

Green Jobs Mirage

William Yeatman — Tue, 9 Mar 2010 00:00:00 -0800

The Department of Energy has spent just 7 percent of the $37 billion it received from the stimulus for clean-energy subsidies, and already the Obama administration is pushing for another billion-dollar bailout for "green" industries. Last week in Georgia, the president unveiled a $6 billion "cash for caulkers" program, which would defray the cost of energy-efficiency retrofits in homes and businesses. He said the program is a good idea because these "green jobs" can't be outsourced. To illustrate his point, Mr. Obama claimed, "It's very hard to ship windows from China."

It's not as hard as the president thinks. With a simple Google search, I quickly found the Guang Zhou Hans Building Materials Technology Co. Ltd., Zhongshan Good Life Sun Sheet Co. Ltd. and Zehao Windows Manufactory Ltd., all of which export energy-efficient windows for the international market.

This wouldn't be the first time the Obama administration used taxpayer money to send green jobs overseas. According to a recent report from the American University's Investigative Reporting Workshop, 1,219 of the 1,807 wind turbines funded by the stimulus were manufactured in foreign countries. The report prompted four Democratic senators to send a letter last week to the Obama administration demanding a cessation of the wind-energy grants.

The Senate Energy and Natural Resources Committee held a hearing Thursday to investigate the slow pace of stimulus spending on green energy. Patricia Denton, testifying on behalf the Government Accountability Office, told the senators that the backlog in DOE's environmental outlays was caused by - wait for it - environmental regulations.

Matthew Rogers, a senior adviser to the department, defended its stimulus spending by noting that it had saved 20,300 jobs. The department's Web site reports that it has spent almost $2.5 billion of its stimulus share, which means each job cost about $125,000.

That's a lot of money, and it's a sound investment only if you think government is good at picking and choosing winners in the energy industry. History suggests it isn't. Congress has thrown billions of dollars at dead-end energy startups such as the Clinch River Breeder Reactor and the Synthetic Fuels Corp.

There is evidence that green-energy subsidies are even worse than a waste. Money spent by the government on green energy cannot otherwise be allocated by the free market, and the difference in wealth creation is palpable. According to a study by Gabriel Calzada, professor at the King Juan Carlos University, green-energy subsidies in Spain have eliminated 2.2 real jobs for every green job created.

That's a sobering statistic, especially in light of the fact that the Obama administration could create millions of jobs in the energy industry without spending a dime of taxpayer money. Last month, the National Association of Regulatory Utility Commissioners released a report showing that the government could produce 13 million jobs and generate more than $2 trillion in national wealth just by expanding access for oil and gas drilling on federal lands.

If the president is serious about his jobs agenda, there's an easy two-step solution: (1) Drop wasteful green energy subsidies and (2) drill, baby, drill.