Category Archives: Political Animals

Putting a Price on Conspiracy Theories, Revisited

Conspiracy theories are back in the news, so it’s a good time to revisit my recent Fortune article about putting prices on conspiracy theories. My argument is that irrationality is the same as any consumer good, such as cars or televisions. When the price of something is low, people consume a lot of it. If the price goes up, they consume less. If you want fewer conspiracy theories, then put a price on them in line with the harm they cause. So far, this theory is holding up well.

Two recent news items show why. First is a development regarding “Release the Kraken” lawyer Sidney Powell. She claimed that the 2020 election was stolen, and that Dominion voting machines used in the 2020 election had design input from former Venezuelan dictator Hugo Chavez, who died in 2013. Her claims were dismissed from several election-related court cases for lack of evidence.

In December, Dominion Voting Systems put a price on Powell’s irrationality when it filed a $1.3 billion defamation lawsuit against her. Powell’s behavior immediately changed. This week, her attorneys said in a court filing in the case that “No reasonable person would conclude that the statements were truly statements of fact.”

That is remarkable, and likely means the end of Powell’s legal career, even if the case is dismissed.

Second, Fox News is now seeing a price increase for its conspiracy-spreading. This week, Dominion sued Fox News for $1.6 billion for defamation. Smartmatic, another voting machine maker, in February sued Fox News, three of its anchors, Powell, and Rudy Giuliani for $2.7 billion. Lou Dobbs, one of the Fox anchors named in that suit, had his show canceled in February, and is no longer making false election claims on air.

These are all normal responses to an increase in price. While media coverage will likely always remain sensationalistic and threat-based for reasons I’ll explore another time, this is one case where a little bit of ECON 101-style price theory can make the news more trustworthy. Or more to the point, make it less harmful.

My original Fortune article is here.

Restoring Separation of Powers and Improving Resilience with the USA Act

Separation of powers is a core principle of American government. But things haven’t gone quite as planned. Congress, the first branch, has increasingly taken a back seat to the second branch, headed by the president. This is not a partisan problem, but a systemic one.

The Framers designed a system of checks and balances in the belief that the different branches of government would compete against each other. They were mistaken. It turned out that it is parties, not branches, that compete against each other. This institution-level problem requires an institution-level fix.

To that end, Rep. Cathy McMorris Rodgers (R-WA) recently reintroduced the Unauthorized Spending Accountability (USA) Act, which seeks to rebalance a tilted scale by reasserting Congress’ power of the purse. It would reengage Congress in policy making, regardless of who runs which branch at any given time.

Only Congress has the power of the purse, yet a long list of unauthorized executive branch programs continue to operate—971 in all as of 2019, at a cost of more than $306 billion. That is roughly a quarter of discretionary federal spending.

The USA Act would automatically cut an unauthorized program’s budget to 90 percent of its previously authorized level in its first unauthorized year, and to 85 percent in the second unauthorized year. Programs would sunset altogether after a third unauthorized year.

The Trump administration displayed less respect for the limits on its power than any previous administration, including the “pen-and-phone” Obama administration. President Biden is unlikely to suddenly show a restraint that no one in his office has in decades. That bodes poorly for the COVID-19 recovery effort, which cannot be planned from Washington, let alone from one individual’s office. Congress needs to reassert itself as a check and a balance on the executive.

The USA Act would require Congress to own up to its budgeting responsibilities, while simultaneously making the executive branch more accountable. The reform is much needed.

As it stands now, there are programs currently operating that Congress has not authorized since the 95th Congress, which was in session from 1977 to 1979. In fact, when Rep. McMorris Rodgers introduced the first version of the USA Act in 2016, entire cabinet-level departments, such as the State Department, had not been congressionally authorized since 2003. The Justice Department was last authorized by Congress in 2009. Other agencies, such as the Bureau of Land Management, have operated for roughly 25 years without congressional authorization.

There is more. The USA Act’s automatic budget cuts and sunsets apply only to programs classified as discretionary spending. Roughly three quarters of federal spending is classified as mandatory, including major programs such as Social Security and Medicare. While Congress has the power to change these programs at any time, they do not require congressional reauthorization, and can continue indefinitely on autopilot.

To address mandatory spending, the USA Act would create a Spending Accountability Commission to examine mandatory spending programs and make them more accountable to Congress. It is especially crucial to make those programs more efficient and fairer, given the coming entitlement crunch. The Commission would also assist Congress in creating a schedule for sunsetting unauthorized programs.

Restoring a proper separation of powers is a tall order. The USA Act is no panacea, but it would mark an important step in crucial area of reform. With a difficult recovery from both COVID-19 and a recession ahead, the time to act is now.

Abraham Lincoln on the Separation of Campaigning and Legislating

Abraham Lincoln, when he was a member of the House of Representatives from the Whig party, supported Zachary Taylor’s 1848 presidential candidacy. This was in part because he thought Taylor would be a weak executive. As David Herbert Donald writes on p. 127 of his 1994 biography Lincoln:

The proper Whig policy ought to be one of “making Presidential elections, and the legislation of the country, distinct matters; so that the people can elect whom they please, and afterwards, legislate just as they please, without any hindrance [from the Chief Executive], save only so much as may guard against infractions of the Constitution, undue haste, and want of consideration.”

Lincoln would change his tune when he became president himself. There is also more to successful executive restraint than this. And there is need for stricter legislative restraints, too. But on the whole, this is a healthier vision of executive power and the president’s proper role than what we have endured over the last few decades.

Agenda for Congress: Regulatory Reform

CEI’s new agenda for Congress is out now. If you’re interested only in certain issues, individual chapters are downloadable here. We also hosted a launch event yesterday featuring Sen. Rand Paul (R-KY).

The first chapter is on regulatory reform. The focus here is not so much on individual rules, but on the rulemaking process itself. If there is a key message, it is that institutions matter. If you want a better game, you need better rules for the game. Effective reforms don’t just treat symptoms; they treat root causes, too.

To that end, here are a few principles for sound reform:

  • If a rule was not needed during the COVID-19 crisis, it was probably never needed in the first place.
  • Getting rid of specific regulations is not enough. Congress must also reform the systems that create those regulations.
  • Congress—not just the executive—needs to be involved in reform.
  • Congress should require agencies to be more transparent about the regulations they issue and their cost.
  • Remember that regulations are made and enforced by the real-world government we have, not the ideal government we want.
  • Introduce reform bills, even if they won’t pass right now. They need to be ready when the moment is right. It is also important to keep reform ideas and conversations alive. Sometimes the most impactful legislation is introduced knowing full well it will not become law.

We also suggest specific reforms based on these principles:

  • Require transparency for “regulatory dark matter.” This includes guidance documents, announcements, and even press releases and blog posts, which agencies use to make policy changes without going through the proper rulemaking process. Rep. Bob Good’s (R-VA) recently introduced Guidance Out of Darkness (GOOD) Act would do this for guidance documents.
  • Require Congress to vote on all new major agency regulations. Agencies often issue regulations that are not in accordance with congressional legislation. This would provide a check against such abuses. The recently reintroduced Reforms from the Executive in Need of Scrutiny (REINS) Act, sponsored by Sens. Todd Young (R-IN) and Rand Paul, would do this. See also my paper on the REINS Act.
  • Annual regulatory report cards for agencies containing important information, such as their major current and planned rules, their cost, and more. Rep. Paul Gosar (R-AZ) introduced a bill last year to implement a version of this idea.
  • A Regulatory Reduction Commission to repeal outdated and harmful rules. I wrote about this idea here and here. The Pandemic Preparedness, Response, and Recovery Act would establish a COVID-focused version of this idea. It was sponsored last Congress by Rep. Virginia Foxx (R-NC) and Sens. James Lankford (R-OK), Ron Johnson (R-WI), and Rob Portman (R-OH).
  • Automatic sunsets for all new regulations. All regulations should automatically expire after 10 years unless Congress votes to reauthorize them. This will make it easier for obsolete rules to stop doing harm.
  • Publish a federal regulatory budget. Congress is required, at least in theory, to create an annual budget for government spending. It should be required to do the same for regulatory costs.

These reforms should apply to independent agencies as well as cabinet-level agencies. Independent agencies, which constitute roughly two thirds of all rulemaking agencies, are currently exempt from many transparency and rulemaking requirements that apply to other agencies. This is bad institutional design, and should be fixed.

For more ideas, see chapter one of Free to Prosper, CEI’s new agenda for Congress. The entire agenda is here.

The Regional Differences Argument against a $15 Minimum Wage

The strongest political argument against increasing the federal minimum wage is the regional differences argument. Basically, while a $15 minimum wage might not be a big deal in an expensive place like New York or San Francisco, the tradeoffs would be much steeper in lower-cost places like small towns and rural areas. That tends to matter to politicians more than the usual economic arguments. Over in The Hill, I explain why the regional differences argument means there should be no federal minimum wage.

House members often represent heavily urban or heavily rural districts, so they don’t have to worry much about regional differences. Senators do, because they represent entire states. They have constituents in expensive big cities and constituents in lower-cost small towns. Something barely felt in downtown Chicago might not play as well in Peoria. This is one reason why minimum wage bills such as the Raise the Wage Act routinely pass the House yet stall in the Senate.

Regional differences are also why President Biden, whose constituency is the entire country, said that it “Doesn’t look like we can do it” about including a $15 minimum wage in the next COVID-19 spending bill.

The regional differences argument is in addition to the other problems with minimum wages. The tradeoff of higher wages is lower no-wage compensation, which includes cheaper insurance, fewer breaks, less vacation time, fewer resources put into better working conditions, and more.

Big companies such as Amazon and Costco already pay $15 minimum wages to their workers, yet favor it for their competitors, too. This is rent-seeking by using government to raise smaller competitors’ costs and lock in their own dominance. Minimum wages often act as a tax increase on lower-income workers. Their total compensation shifts toward higher taxable wages and lower untaxed benefits and perks. Even if their total compensation remains roughly unchanged, those extra taxes can mean a cut in take-home pay.

Read the whole thing here. For more arguments against minimum wage legislation, see my paper “Minimum Wages Have Tradeoffs.”

Event: Reviving America after a Year of Chaos

Yesterday I spoke on a panel discussion hosted by the Pacific Legal Foundation. The topic was opportunities and challenges for enacting sound policy in the year to come. PLF president Steven Anderson moderated, and the other panelists included the State Policy Network‘s Jennifer Butler and Greg Brooks of the Better Cities Project.

The event is viewable on YouTube here.

Economics Can Help Explain Conspiracy Theorists

There is a lot of conspiracy theory garbage floating around. On January 6, it took a violent turn. Five people died in a coup attempt at the U.S. Capitol, over obviously false claims of a stolen election. It is important to understand what causes this behavior in order to prevent future violence, and to prevent a future breakdown of liberal institutions. Over at Fortune, I explain that a little bit of basic price theory can improve our understanding:

If you think of irrationality as a consumer good, much like a car or a television, you can better understand why people sometimes say and do crazy things. Think of it like this: People buy more cars and televisions when they are cheap, and fewer when they are expensive. 

This logic applies to conspiracy theories.

Read the whole thing here. For readers interested in further exploring the economics and evolutionary psychology of conspiracy theories, I recommend Bryan Caplan’s book Myth of the Rational Voter and Michael Shermer’s book The Believing Brain.

Book Review: Bruce Bueno de Mesquita and Alistair Smith – The Dictator’s Handbook: Why Bad Behavior is Almost Always Good Politics

Bruce Bueno de Mesquita and Alistair Smith – The Dictator’s Handbook: Why Bad Behavior is Almost Always Good Politics (New York: Public Affairs, 2011)

The rise in populism over the last decade has birthed a bumper crop in books on dictators, with contributions from Frank Dikötter, Daniel Kalder, and others. Bueno de Mesquita and Smith’s entry is a quality addition. The reigning classic in the genre, though, is Gordon Tullock’s early work on the public choice theory of autocracies, which is collected in The Social Dilemma, which is volume 8 of his Selected Works.

Bueno de Mesquita and Smith work from the discipline of foreign policy, rather than from economics, law, or political science. They belong to the realist school, which is in some ways the current incarnation of Machiavellianism and realpolitik. Foreign policy realists have quite a bit in common with public choice economics—politicians respond to incentives, and tend to behave in self-interested ways.

The Dictator’s Handbook is a popular-level distillation of a larger theory of autocratic behavior Bueno de Mesquita and Smith have explored in numerous academic works. Dictators often show strong ideologies in public. These are often various forms of socialism, nationalism, theocracy, or some mixture of the three. In private, dictators may sincerely believe in their ideology. And it will influence their policy choices. But, just as public choice theory argues, when self-preservation conflicts with the ideology, self-preservation nearly always wins.

This self-preservation instinct explains why so many dictatorships look so similar. Military support is essential to maintaining power, which is why dictatorships often have lavish and showy military budgets, even if they do not have any intention of going to war. Well-paid soldiers are less likely to rebel, especially in poor countries where other career opportunities are limited. A highly visible military projects power, which scares off rebels inside and outside of the palace. And a well-fed and well-feted general is less likely to pursue his own coup.

Gaudy personal styles and decorating styles are another common dictator trait; nearly every dictator’s residence, whether in Belarus or Libya, is almost indistinguishable from Donald Trump’s apartment in Trump Tower. It’s another way of projecting power, if not taste.

A dictator’s inner circle is often unstable. This is both caused and countered with a culture of excessive honorifics and ostentatious wealth—with obvious gradations to signify an official’s place in the hierarchy. Taking privileges away is a sign that someone is falling out of favor.

Dictators rarely have a formal succession plan. This is another reason why they usually have a garish, privileged court culture. Dictatorships are typically in very poor countries. Officials who enjoy a Western standard of living—courtesy of the dictator, they are constantly reminded—are less likely to overthrow the dictator. Moreover, when aspirants are competing against each other, they are not competing against the dictator himself. When generals have a comically large number of lapel pins on their epaulet-laden uniforms, there is a reason for it. They are status signals in their competitive game against each other. They are not just marks of favor from the leader.

Bueno de Mesquita and Smith run a risk of stereotyping by pointing out how alike so many dictators are. But they are well aware that each country, and each dictator, has their own situation and cultural factors in play. At the same time, their commonalities show a kind of convergent evolution: successful dictators stay in power because they have discovered “best practices” that apply widely. Dictators that did not adopt these practices did not stay in power, so the only remaining examples have strong militaries, garish styles, elaborate court cultures, no formal succession plan, and so on. While the world as a whole has been tending towards democratic liberalism since the end of World War II, there are still plenty of illiberal countries. It is important to understand them if their people are to become free.

It is also important to know warning signs when we see them, as the tragedy of President Trump’s late-term coup attempt shows.

Book Review: Carol Leonnig and Philip Rucker – A Very Stable Genius: Donald J. Trump’s Testing of America

Carol Leonnig and Philip Rucker – A Very Stable Genius: Donald J. Trump’s Testing of America (New York: Penguin Press, 2020)

This book, by two Washington Post journalists, is a chronological, personality-based history of the first three years of Donald Trump’s presidency. By keeping a mostly straight tone, it has significant comedy value. It also has instructive value about the intersection of personality and party politics.

Historians will likely have a field day with the Trump presidency. Or at least they will when enough time has passed for partisan passions to cool. Until then, there will likely be more splenetic rants than useful analysis. Leonnig and Rucker do a better job than most about keeping their spleens in check, though they are not perfect about it.

The late Charles Krauthammer viewed the Trump administration as a stress test for America’s liberal institutions. He thought they would remain intact, and the country would learn a few lessons about executive power. So far, so good, though there has been some important damage in the areas of trade, immigration, and diplomacy. The Republican party is also in rough shape, and isn’t quite sure what to do with itself now that the personality by which it is defining itself is no longer in office.

The story of American political institutions, almost from the beginning, has been a slow growth in the executive branch’s political power relative to Congress. Each administration takes on a little bit of new power to fight a war, ward off an economic panic, deal with a disaster, or simply to accomplish a common policy goal. After two centuries of this slow accretion, the presidency has become far too powerful compared to the other two branches. This imbalance makes the country especially vulnerable when the president is corrupt, incompetent, illiberal, or all of the above.

Today, Trump’s fondness for executive power is currently combined with congressional Republicans that will not buck him, and a Democratic opposition that also likes a powerful executive branch, at least when they are in power. The combination is a potent stress test for the separation of powers and limited government.

Trump’s various capers are often humorous—many parts of this book are laugh-out-loud hilarious. Others are damaging, such as placing tariffs against allies such as Canada on national security grounds, or forced family separations at the southern border. In the long run, Trump’s de-glamourizing effect on the presidency may actually do some good. This, however, assumes that people learn their lesson about putting too much power in one office.

As Trump has proven, in America, anyone can become president. This can be dangerous, as he is also proving. While he will not be fatal to America’s liberal institutions, it is important that his precedents do not become prologue for future presidents’ power grabs. Part of that project is not taking him or the presidency too seriously. This book helps very much in that department, such as when it tells the story, with a straight face, of the time Trump told India’s Prime Minister, “it’s not like you have China on your border.”

On the other hand, there is next to no analysis of Trump’s major policy initiatives, from his signature trade and immigration policies to his regulatory policies, foreign policies, and other initiatives. Politics should be about policy. In practice, it is mostly about personality. In that sense, A Very Stable Genius is a very practical book, though one will have to go elsewhere for actual policy content.

Book Review: Casey Mulligan – You’re Hired!: Untold Successes and Failures of a Populist President

Casey Mulligan – You’re Hired!: Untold Successes and Failures of a Populist President (Alexandria, VA: Republic Book Publishers, 2020).

Mulligan was the Chief Economist of President Trump’s Council of Economic Advisers. He is much kinder to Trump than most economists are. While Mulligan pulls a lot of his punches and has some of the unconvincing persecution complex that many Republicans have, he offers credible insights into how Trump and his White House worked. Despite its restraint, You’re Hired has lessons for policy advisers of any political persuasion. Personality matters in politics. Advisers who do not account for that will not get sound policies enacted.

While President Trump is not knowledgeable about policy, he is also not as dumb as many of his critics allege. For example, when he would tweet out good economic news, he would often exaggerate it on purpose, knowing that media reports would instantly go about correcting him—and unintentionally spreading good news they might otherwise have ignored.

Mulligan also praises Trump’s tendency during meetings to intuit many mostly correct economic conclusions even when it is clear he is approaching a given issue for the first time. Mulligan is likely either selective or exaggerating, though, considering Trump’s long pre-presidency track record on issues such as trade, immigration, and industrial policy.

On the negative side, Mulligan’s treatment of opiate policy is at best incomplete. This was one of his primary issues during his CEA tenure; for the most part, Mulligan’s book focuses on issues he personally worked on. On one hand, Mulligan is correct that subsidizing opiates has had negative unintended consequences, and he offers sound policy fixes. On the other hand, Mulligan dismisses ending the criminalization of recreational users or prescribing doctors.

Mulligan is also ok with Washington interfering in doctor-patient relationships involving chronic pain patients—one of whom was my late grandfather, who suffered a great deal of unnecessary pain because of federal policies such as Mulligan endorses.

He also does not address the larger criminal justice problems created by federal drug policy. Mulligan is so narrowly focused on price controls, that while his analysis is correct as far as it goes, he dismisses larger—and politically possible—fixes that lie outside of formal price theory.

While Mulligan writes well, his consistent capitalization is “Federal” is an off-putting stylistic decision. Government documents use the same device. Mulligan’s use of the same honorific does not help his desire to appear independent, even though this is an example of style, not substance.

His lengthy tangent on the lack of collusion in President Trump’s Russia scandal feels out of place, both in they way it copies Trump’s terminology, and because Mulligan had nothing to do with the scandal; “collusion” was not a legal term at issue in the case.

You’re Hired is a useful counter to Trump Derangement Syndrome, which can be almost as harmful as Trumpism. But Mulligan is too sanguine about the administration’s illiberalism. The administration’s policy successes on regulation, education, environmental policy, and assorted other issues do not excuse its deficit spending, its expansive view of executive power, its immigration policies, its poor COVID response, its embarrassing personality cult, embrace of fringe figures and conspiracy theories, its ill-timed stress-testing of liberal political institutions, and its divisive impact on American culture. The administration was neither wholly good nor wholly bad. It had elements of both. Neither should be overlooked.

Mulligan offers pointed criticisms and telling stories of trade adviser Peter Navarro, with whom he crossed paths several times. Since Mulligan also writes at length about immigration policy in the book, he should have done the same to immigration adviser Stephen Miller, who pushed the Trump administration’s family separation policies, casually uses slang terms drawn from white nationalism, frequently cites its literature, and has several personal and online connections to that world. History will not look kindly on Miller; neither should Mulligan.

Mulligan is credible, unlike trashy reality-tv personalities who have surrounded Trump, such as Omarosa Manigault and Michael Cohen. He is also not sycophantic like Sen. Lindsey Graham, Rep. Matt Gaetz, or large swathes of conservative media are. He is also a skilled economist and an unusually clear writer for an academic economist. But Mulligan’s omissions and kid-glove treatments give the impression that he’s holding a lot back.

As fear of a Trump tweet-storm recedes, hopefully Mulligan will be more forthcoming in the future. Future administrations’ policy teams would benefit from this, especially if Trump’s personality and populism remain part of the GOP going forward.

See also a CEI book forum featuring Mulligan. Reading this review over, it is a bit harsh for a book I have a positive opinion of. The book forum balances that out a bit while still asking some pointed questions.