March 31, 2008 1:23 PM
The Fed has cut interest rates to ridiculously low levels to try to bail out mortgage borrowers and prop up the U.S. economy. But that has led to a "vicious cycle." The Fed's cutting rates has led to a severe "credit crunch" and "flight from the dollar" in foreign currency exchanges, notes Stanford Professor Ronald McKinnon in the Wall Street Journal. In reaction, "Fed responds to the credit crunch by cutting interest rates" further, and as a result, "capital flies out of the country" even faster. Mortgage bailouts in general are not only a bad idea, but unpopular in public opinion polls, as we previously noted.
March 31, 2008 12:01 PM
The Supreme Court turned away the Justice Department's appeal of a ruling that will make it harder to prosecute New Orleans Congressman William Jefferson, who was caught red-handed with $90,000 in bribe money in his freezer. (While I found Jefferson's arguments challenging his prosecution on a technicality wholly unpersuasive, an appeals court was partly persuaded by them, restricting the use of certain evidence against him).
March 31, 2008 10:50 AM
Recently, the Virginia Supreme Court struck down regional taxes to pay for transportation improvements, such as the perverse grantor's tax on homeowners, based on the principle of no taxation without representation. Virginia lawmakers are now considering imposing new taxes to replace the invalidated taxes. They should keep two principles in mind. First, they should not revive the regional grantor's tax, which was widely criticized as economically irrational and unreliable, unfair, and unduly burdensome. Second, if they levy any replacement taxes, they should use the revenue first to preserve the Metro subway system.
March 31, 2008 10:46 AM
Business incubators have long been a place where small companies can get help that makes them grow to the next level. A non-profit in Hyderabad is now applying that method to the most precarious phase of growth for a plant biotechnology start up: the field trials.
International Crops Research Institute for the Semi Arid Tropics are starting up is starting up research facility that will enable smaller firms to outsource field trials. It is a novel approach to business incubating, and it will be interesting to see the results of this project. It might be a smart business model that we can apply to speed up the second green revolution.
March 31, 2008 10:22 AM
Yahoo Finance discusses how mortgage bailout measures turn Aesop's fable about the ant and the grasshopper on its head, rewarding irresponsibility and punishing thrift and prudence. Mortgage bailout proposals are proliferating, even though bailing out irresponsible borrowers and banks is a stupid idea, and is unpopular with the silent majority of Americans, as public opinion polls make clear. A revised, politically-correct version of Aesop's fable is available here.
March 31, 2008 7:06 AM
FDA commissioner Andrew von Eschenbach put on his best "Mom, Dad, I don't get enough allowance! whine" at a conference in DC last week.
"FDA might fail," he said. "Peril exists!"
He was of course fishing for more funds for his agency. Last time the agency got a huge increase in 1993, they almost doubled the staffing from 1,400 to 2,100, which temporarily led to a more efficient permit approval process before it dropped back down below pre expansion levels.
In order to protect US citizens from FDA's tendency to be overcautious in approving drugs, we should remove their veto power. We should be very clear that nothing, and no body could make US citizens safe. The responsibility to evaluate the risk and benefits of a medication belongs to the patient and the doctor who is treating the patient.
FDA should continue with their evaluation as they do today, but the bureaucratic overcaution the agency is displaying to avoid bad press and political examination is delaying important medications. People are dying while waiting for the bloated bureaucracy to approve medications.
Eschenback does not need more funds; he needs a more efficient agency. More funds will bloat it further.
March 30, 2008 2:05 PM
One of the most ignorant and gratingly common complaints about American politics is that of their being bland, uninteresting, and failing to engage large segments of the population.
To anybody who would say such a thing, it's worth asking, "What do you actually want from politics?" Naturally, people who see political engagement as a sign of civic virtue and who believe that more choices in a democracy (regardless of what those choices are) are always a good thing are likely to respond with stale bromides about...political engagement being a sign of civic virtue and more choices in a democracy being a good thing.
Thus, real-world examples of very interesting politics can act as a better defense of America's gloriously dull -- by world standards -- politics. Take your pick: Kenya, Sudan, Lebanon, Iraq. Say what you will about any of these countries, you can't call their politics dull!
However, politics being "interesting" isn't always bad. There is a bad kind of dullness to American politics that comes from the excessive reverence often accorded to American politicians. (I wonder how many American reporters who must endure covering the stuffy U.S. Senate envy their British counterparts who cover the boisterous House of Commons.)
For that reason, it's refreshing to see interesting politics of the good kind -- that of politics playing out as a spectacle in which the politicians act like buffoons, with the end result that any person with common sense would be embarrassed to show reverence to them. Which brings me to Italy.
March 30, 2008 1:07 PM
In his latest column, former CEI Warren Brookes Fellow Tim Carney looks at how rent-seeking opportunities based on feel-good environmental campaigns, which are currently in vogue among some large corporations, can backfire, hurting shareholders, in this case those of Pepsi.
Last spring, PepsiCo bought “renewable energy certificates” covering all the energy consumed in its manufacturing, distribution and corporate facilities. In effect, Pepsi is indirectly paying someone, anywhere, to generate electricity from windmills or solar panels.
But Pepsi is not just changing it's behavior — it's trying to use government to change everyone else's too. Last May, PepsiCo joined the United States Climate Action Partnership, a coalition of environmental pressure groups and corporations united to lobby the federal government to impose regulations that curb greenhouse gas emissions in the form of a “cap-and-trade” scheme....
PepsiCo may think it can make a profit from these restrictions: The firm can seek CO2 credits for the renewable energy certificates it has bought; also the company outsources its bottling, including some to other countries that have no greenhouse restrictions. At the same time, new CEO Indra Nooyi is hoping the public image of Pepsi as an environmentally friendly company will generate good will and thus business.
But Pepsi is learning that the environmental game — both on its PR front and its lobbying front — is full of pitfalls. Pepsi has firmly come down in support of the notion that industrial activity contributes to harmful climate change — the very argument that lies behind the current crusade against bottled water products.
March 29, 2008 12:06 PM
Bailing out mortgage borrowers is a bad idea that most Americans oppose. Yet the "Bush administration is finalizing details of a plan," "backed by public funds," that would bail out "borrowers who owe their banks more than their homes are worth because of plummeting prices," by encouraging "lenders to forgive a portion of those loans and issue new, smaller mortgages in exchange for the financial backing of the federal government."
"The plan is similar to elements in legislation proposed two weeks ago by Barney Frank (D-Mass.)," legislation that is dangerous, costly, and fundamentally unfair, and would both reward irresponsibility and discourage investment and prudent lending.
March 28, 2008 5:57 PM
"U.S. capital markets again lost ground against global competitors last year, highlighting the need to streamline regulation and crack down on excessive securities litigation, industry experts said on Wednesday. The United States received only 6.9 percent of the funds raised in global initial public offerings in 2007 and did not participate in any of the top 20 global IPOs."
Lawsuits aren't the only reason capital is fleeing America for better investment opportunities elsewhere. Another reason is the devastatingly costly Sarbanes-Oxley law Congress passed in 2002 in the wake of the Enron bankruptcy. That law's burdensome bureaucratic requirements and regulations have cost the stock market $1.4 trillion in value, and imposed an additional $35 billion in annual compliance costs on American business, while doing nothing to prevent another Enron, as recent mortgage losses at Countrywide Financial show.
CEI is assisting a court challenge to provisions of that law that violate the Appointments Clause of the Constitution and separation-of-powers safeguards. A challenge to those provisions will be heard by the D.C. Circuit Court of Appeals on April 15 in the case of Free Enterprise Fund v. Public Company Accounting Oversight Board (FEF v. PCAOB).