Freedom Line Blog

This week, the Heritage Foundation and The Wall Street Journal released the 2011 edition of their Index of Economic Freedom.

Once again, the facts speak for themselves:  Economic freedom means not only more prosperity, but also greater overall wellbeing.  In calculating economic freedom and ranking the world’s economies, the Index examines 10 criteria:  business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom.  The correlation between economic freedom and living standards is once again made clear:

Despite varying degrees of economic freedom across the regions, the relationship between economic freedom and prosperity remains constant within the regions.  Per capita incomes are much higher in countries that are economically free.  Not surprisingly, overall human development also thrives in an environment that is economically free…  Higher economic freedom induces greater overall human development as measured by the United Nations Human Development Index, which assesses the combined progress of life expectancy, literacy, education, and the standard of living.”

The good news is that 117 of the world’s economies improved over the past year, whereas only 58 declined.  For Americans, the bad news is that we fell from 8th to 9th.  On that front, note the Index’s comments about the  importance of reducing government spending:

Countries that reduced government spending had economic growth rates almost two percentage points higher in 2009 than countries whose government spending scores worsened, and countries with the highest rates of government spending had gross domestic product (GDP) growth rates 4.5 percentage points lower on average than countries where government spending was best contained.”

Will the new 112th Congress help reverse that decline?  As we approach the 2012 elections, that will prove a critical question.

Believe it.  In an op-ed for BusinessWeek, the scourge of concentrated wealth and power sees a lot to love in the new, Tea Party-infused legislators walking around Capitol Hill.  Specifically, Nader isolates five issues that could bring the movement’s limited government mantra into conflict with establishment Republicans.

(1)   Ron Paul’s fight to curb the power of the Federal Reserve

(2)   Heightened criticism for corporate welfare programs (e.g. everything from ethanol subsidies for biofuel to “green” initiatives designed to get federal tax dollars)

(3)   Trimming the military budget (Apparently, Defense Secretary Robert Gates already got the memo; sort of)

(4)   Renewal and expansion of the World Trade Organization, NAFTA, etc.

(5)   Whistleblower protection for bureaucrats and corporate workers

The limited government foundations of the Tea Party movement will make predicting voting outcomes this session iffier than when Republicans could be assumed to oppose any Democrat plan.  If necessary, we’ll see how many of the new Constitutionalists in Congress are ready to buck convention and vote their principles instead of their party.

In October 2003, tough-talking optimist Arnold Schwarzenegger unseated bland public union yes-man Gray Davis as Governor of California in a revolutionary special recall election.  Today, Schwarzenegger departs with a depressed 22% approval rating that serves as a warning for Republican newcomers in Congress and across the 50 states against the perils of go-along-to-get-along “bipartisanship.”

During his first two years in office, Schwarzenegger maintained a confrontational demeanor that California desperately needed as it hurtled toward its current disastrous state.  In March 2004, for instance, he famously ridiculed California’s milquetoast political class as “girlie-men.”

Unfortunately, four common-sense and ultimately necessary ballot initiatives that he supported failed in November 2005.  Instead of sticking to principles, Schwarzenegger opted for “bipartisan” political expediency and personal survival.  What followed was a shameful litany of global warming bills, ObamaCare-like proposals, lack of leadership and tax hikes.  His capitulation provided a short-term payoff via reelection in 2006, but ultimately proved disastrous for himself and the state.  Today, despite Schwarzenegger’s early promise, California is in even worse shape than when he entered office.  And jaded voters witnessed yet another sad example of a politician who promised to change the political culture, only to allow the political culture to change him.

Schwarzenegger’s failure, however, provides a helpful cautionary guide for incoming Republicans this new year.  Namely, sacrificing the principles that got you elected at the tempting altar of “bipartisanship” will only deepen our nation’s current difficulties and eventually doom you politically.

It was embarrassing enough when the Government Accountability Office (GAO)  recently withdrew its defective “undercover study” issued last summer as part of the Obama Education Department’s campaign against for-profit colleges.  Readers will recall how the GAO sent undercover “students” to several schools to capture information as evidence for the Education Department and a Senate committee.  This was all part of their larger effort to justify the proposed “Gainful Employment” rule targeting for-profit career colleges that provide critical training and education to struggling Americans.  Worse, this came on the heels of a letter from Senators Tom Coburn (R – Oklahoma) and Richard Burr (R – North Carolina) seeking investigation into allegations of insider trading within the Education Department relating to its campaign to cripple career colleges.

Now comes a report providing greater detail on just how malignant that the defective GAO “undercover” report was.  According to Frederick Hess and Andrew Kelly, fully 16 of the report’s 28 findings required revision.  Tellingly, every single one of those “findings” skewed the same direction – casting for-profit career colleges negatively.  The statistical likelihood of all 16 randomly tilting the same way, according to Mr. Hess and Mr. Kelly, is 1 in 65,536.

That doesn’t suggest extreme coincidence.  It suggests intentional malfeasance.

Amid persistent unemployment and intense global competition, for-profit colleges provide important alternatives for education and job skills.  That is why CFIF has formally petitioned Chairman-Elect Darrell Issa (R – California) of the House Committee on Oversight and Government Reform  to investigate this matter.  It is also important that supporters and activists across the nation contact their Senators and Representatives to help stop the Obama Administration’s unjustifiable scheme.

On this date in 1773, Samuel Adams and his Sons of Liberty hosted their original tea party in Boston Harbor.  Two hundred thirty-six years later, CNBC’s Rick Santelli refreshed the movement from the floor of the Chicago Board of Trade, and its momentum continues.  So happy birthday, Tea Party – federal judge Henry Hudson provided a fitting gift by declaring ObamaCare’s core mandate unconstitutional based on your underlying principles.

This week, CFIF formally petitioned House Committee on Oversight and Government Reform Chairman-Elect Darrell Issa (R – California) to investigate the Obama Education Department’s continuing campaign against for-profit colleges.

Career colleges have flourished because of their ability to nimbly respond to our evolving economy, offer an education focusing on hands-on occupational training, and excel at serving non-traditional students who often have children, are working, are typically older and are more diverse than their peers at traditional schools.  This is particularly important during the current period of job scarcity and worldwide economic competition.  The Obama Education Department, however, seeks to foist a proposed “Gainful Employment” rule that would declare academic programs ineligible for federal aid if some specified proportion of their graduates failed to meet an arbitrary income-to-loan payment ratio.

The natural consequence of such a rule:  vital for-profit career colleges would be eliminated.

The need for Congressional investigation became even more obvious this week.  The Government Accountability Office (GAO) withdrew, then revised and republished a defective study originally released last summer in which it sent undercover “students” to several schools to capture information on recruiting policies, promises of post-graduation pay, federal and other funds for tuition and expenses, and more.  That GAO report had been cited as vital evidence for the Education Department and a Senate committee as they prepare to promulgate the Gainful Employment rule, and even the Washington Post (whose parent company owns one of the largest for-profit schools) ran an article exposing that defective report.  The GAO’s numerous revisions are all clearly slanted in one direction – the original report inaccurately cast career colleges in an unfavorable light, while the revisions indicate that the GAO’s undercover students may have intended to entrap career college admissions personnel.  By the GAO’s own estimate, only 1 percent of reports are corrected, so an inquiry into the reasons behind this particular revision – with its original report clearly biased – is justified.

That news comes on the heels of allegations that Education Department officials communicated with short-sellers to inform them of their intentions, providing certain traders with inside information potentially allowing for illegal financial advantage.  The cooperation, however, was allegedly a two-way street.  According to media accounts, these same short-sellers may have concocted elaborate schemes to cast a negative light on career colleges, helping them rationalize the proposed rule.   These allegations are sufficiently serious that Senators Tom Coburn (R – Oklahoma) and Richard Burr (R – North Carolina) have formally sought an investigation.

At a minimum, an alarming pattern has emerged that points to the Department of Education specifically working to inflict economic harm upon career colleges, while possibly collaborating in the shadows with the very short-sellers on Wall Street who would most likely benefit from such activity.

Remember how ObamaCare was furiously crafted behind locked doors, despite Obama’s assurances it would be “on C-Span?”  The public revolted against those tactics, but Obama’s Federal Communications Commission (FCC) apparently thought it all went pretty well.  Look no further than its secrecy in concocting its latest “Net Neutrality” draft, despite FCC Commissioner Julius Genachowski’s own promises of “transparency.”

In this way, “Net Neutrality” imitates ObamaCare beyond the broader fact that it seeks to commandeer 1/6 of the American economy.  Like ObamaCare, it is strongly opposed by the public and judicially suspect, and proponents know that exposing its manufacturing process to the sunlight would only help doom it.  Accordingly, Chairman Genachowski appears intent on concealing his “Net Neutrality” proposal as long as possible before dumping it on the public later this month.

Why all the secrecy?  What do Chairman Genachowski and “Net Neutrality” proponents fear so much?  Instead of secrecy, they should follow Commissioner Meredith Attwell Baker’s call to immediately make the draft public.  Apply the same “openness” that you claim to desire for the Internet, Chairman Genachowski.

Yes, the Show-Me State is virtually always an important bellwether of which way the presidential election is headed. But in 2012, it may say a lot about the future of the senate as well.

Freshman Democrat Claire McCaskill will be standing for reelection in 2012. She’s a canny political operator and a fairweather moderate — both of which are necessary in this most swinging of swing states.

The Missouri GOP looks to have a full bench — Jim Talent, the mainstream Republican who McCaskill defeated in 2006 is said to be mulling a comeback attempt. Yet the most interesting development may be that South Carolina Senator Jim DeMint — the conservative senate leader who is apparently not content to let any grass grow under his feet — is already feeling out an alternative candidate.

That candidate is Sarah Steelman, the former Missouri State Treasurer who was nearly the Republican gubernatorial nominee in 2008. Steelman is smart, articulate, accomplished, attractive and (best of all) an erstwhile economics professor. If you start to hear her name more often, it’s a good leading indicator that 2012 may follow the 2010 trend and bring another class of exceptional Tea Party candidates to the upper chamber.

Sign of the times from today’s New York Daily News:  “Federal Workers Rage Over President Obama’s Two-Year Wage Freeze.”

Let’s see…  Federal employment has grown 17% since 2007, and federal employees’ total compensation has risen 37% in the past decade (compared to 9% for private sector employees), according to The Wall Street Journal and USA Today.  Further, average federal employee compensation reached $123,000 in 2009, more than twice the $61,000 earned by the average private employee.

So in what moral universe are federal workers justified in reacting to a very modest two-year wage freeze proposal with “rage” and by labeling it a “slap” when they haven’t faced the brutal layoffs, salary reductions and cuts in health coverage their private counterparts must endure?  A majority of Americans surveyed favor federal workforce reductions and salary cuts, so perhaps they should behave less like spoiled Greek, French and English rioters and instead express gratitude to American taxpayers who continue to subsidize their relative good fortune.

For-profit colleges provide an invaluable tool for everyday Americans to climb the ladder and improve their skills, particularly during a period of high unemployment when every little advantage matters.  That’s one reason why, according to estimates, enrollment at for-profit colleges has increased over 20% even since the recession began.  Despite this, such colleges find themselves in the crosshairs of the Obama Administration, whose Education Department seeks to impose suffocating restrictions on loans to students who wish to attend them.

Stop for a moment and imagine the outcry if the Bush Administration had pursued such targeted restrictions, which hit poorer and minority enrollees disproportionately hard.

Now, however, there’s even more disturbing news.  Senators Tom Coburn (R – Oklahoma) and Richard Burr (R – North Carolina) sent a letter to the Education Department last week citing public documents indicating that it “may have leaked the proposed regulations to parties supporting the Administration’s position and investors who stand to benefit from the failure of the proprietary school sector.”  The Senators’ letter comes on the heels of a lawsuit whose evidence includes emails between Education Department advisers and short-sellers.

The Obama Administration’s mindless attack against these important colleges for working Americans is bad enough, but allegations of corruption and insider trading obviously exacerbate that looming disaster.  We’ll be following these alarming developments in coming days, as should anyone who cares about the American workforce maintaining its edge amid fierce global competition.

Rep. Michele Bachmann’s (R-MN) recent failure to win the chairmanship of the House Republican Conference Committee is an important reminder for the wave of new GOP congress members coming into office in January.  If you spend more time courting a movement outside Congress, don’t be surprised when those inside it promote from within.

Such is the case of Michele Bachmann.  Widely considered the highest profile Tea Party leader inside the federal government, Bachmann’s loss to Rep. Jeb Hensarling (R-TX) for the chairmanship is linked to her cultivated outsider status.  She may be brilliant with red meat speeches and raising money, but she is presumed to be light on policy details.  Moreover, the time she spent promoting the Tea Party were moments taken away from building the kinds of relationships with fellow members that lead to endorsements and favorable chairmanship votes.  That, more than anything else, explains the reason Bachmann lost to Hensarling.

But it isn’t just Bachmann that needs to consider how to parlay her grassroots support into actual results as a member of Congress.  The GOP leadership too needs to weigh carefully how to grow her brand while enhancing its own appeal to Tea Party voters.  Perhaps the latter consideration is what led House Republicans to create a new leadership position for the incoming class.  Ironically, the Republican congress member most deserving of representing the views of this Tea Party-flavored class is Bachmann herself.  Too bad the position is only open to freshmen.

A survey of Democratic 2010 campaign operatives shows 64% of those polled said the Tea Party was a source of enthusiasm for the GOP, not division.  Perhaps now the politicians and pundits trying to blame tea partiers for everything from falling short of a GOP Senate majority to racism will now find a new hobby.

The limited government movement continues to pick up steam as the newly empowered congressional Republicans aim to rein in federal spending.  But while Tea Party members may favor GOP candidates, don’t be surprised if failing to make progress on spending reform leads to more contested GOP primaries in 2012.

H/T: Politico

Every so often, someone captures the proverbial lightning in a bottle.  Today, it was Wall Street Journal columnist Bret Stephens and his commentary entitled “Obama’s Air Guitar.” Stephens’s weekly commentaries are always a must-read, but today’s perfectly portrays the growing sense among the American electorate, more sober observers and now world leaders that Barack Obama is simply in over his head:

His administration has now been chastised or belittled by everyone from the Supreme Leader of Iran to the finance minister of Germany to the president of France to the dictator of Syria.  What does it mean for global order when the world figures out that the U.S. president is someone who’s willing to take no for an answer?  The answer is that the United States becomes Europe.  Except on a handful of topics, like trade and foreign aid, the foreign policy of the European Union, and that of most of its constituent states, amounts to a kind of diplomatic air guitar: furious motion, considerable imagination, but neither sound nor effect.  When a European leader issues a stern demarche toward, say, Burma or Russia, nobody notices. And nobody cares.”

Since he first began flirting with a White House campaign, Obama has long created the impression that he considers the presidency a video game, or a pickup game of hoops with himself at point guard taking a three-pointer on every possession.  But now we have a description that perhaps captures the Age of Obama better than any other to date:  Obama as air guitarist.

Our Liberty Update, CFIF’s weekly e-newsletter, this week includes the commentary “A Balanced Budget Amendment Doesn’t Have to Mean Higher Taxes – CFIF’s ‘One More Vote’ Proposal Doesn’t.” In that column, we note that the White House deficit commission’s fundamental flaw is that it takes for granted 2010 federal spending levels as its baseline:

The overriding problem with the commission’s plan is that it accepts the 2010 fiscal year as its spending base, thereby locking in the alarming spending increases of the Obama-Pelosi-Reid regime.  That includes the failed “stimulus” that attempted to spend our way to prosperity, the bailouts, the pet projects and everything else they’ve heaped into our budget.  Since 2008, federal spending has surged from approximately $25,000 per household to $30,000 per household, and jumped during that two-year span from its historical average of 20% of gross domestic product (GDP) to approximately 25% of GDP.  Richard Rahn points out that, “Federal government spending and revenues in 1968 as a percentage of gross domestic product (GDP) were almost identical to the levels in 2008.”

Unfortunately, it’s actually even worse than that.  The commission also leaves in place ObamaCare, which is already driving up healthcare costs and adding to the deficit (despite promises that it would have the opposite effect).  As James Capretta from National Review Online observes, we shouldn’t be surprised given the commission’s composition:

None of this is all that surprising, given how the commission was formulated.  It’s not really a bipartisan commission at all; it’s an Obama commission.  It was created by the president and stacked with Democratic appointees.  Two-thirds of the 18 members were picked by the president or Democratic congressional leaders. Only six were appointed by Rep. John Boehner and Sen. Mitch McConnell.  The president says the public doesn’t want to “re-litigate” the health care war.  He’s wrong.  As last Tuesday’s exit polls make clear, a strong plurality wants exactly that.  The American people know that the ill-advised law was railroaded through Congress and is a colossal mistake.   The fundamental problem here is that it is not possible build a bipartisan budget framework on a foundation that includes a partisan health-care plan with sweeping implications for future spending levels.

Americans cannot be asked to accept the commission’s findings when they take as a given current spending levels and an ObamaCare atrocity that must be replaced.

Today, the Labor Department announced that the unemployment rate remained at 9.6% for the third consecutive month.  When President Obama signed his nearly $1 trillion “stimulus” in February 2009, the unemployment rate stood at 8.2%.  In the 20 months since that date, the rate has increased to 9.6% despite White House projections that it would top out at 8% fully one year ago.

Once again, a comparison to the Reagan recovery is profoundly instructive.  In the same 20 month span following the effective date of the Reagan tax cuts in January 1983, unemployment plummeted from 10.4% to 7.3%.  Also instructive is the following headline from today’s Wall Street Journal:  “European Central Bank Parts Ways With U.S. on More Stimulus.” It is a sad state of affairs when even the spendthrift Europeans are providing economic guidance to Obama.

Liberal Keynesians have had almost two years to prove the validity of their economic agenda.  It has failed, their rationalizations have grown stale, and their desperate efforts to resist corrective action will only prolong the nation’s misery.

By all accounts, American voters have regained sobriety and will deliver resounding victories for conservatives today.  This date in history, however, provides a cautionary tale for anyone even thinking of not voting because they assume that victory is in the bag.

Today in 1948, political pundits were so certain of a Thomas Dewey victory over Harry Truman that the Chicago Tribune prematurely published its infamous “Dewey Defeats Truman” headline.  Need another cautionary tale?  How about the 2008 Minnesota Senate race between Norm Coleman and Al Franken?  There, Franken and his election attorneys somehow contorted an election night deficit into a narrow recount victory, possibly with the help of felon voters.  Nobody’s laughing now that the chronically unfunny Franken routinely makes a mockery of his Senate seat.

So don’t take anything for granted.  Too many people have fought and died to protect your right to affect this nation’s course, and too many people have worked too hard to provide alternatives to the bland “same ol’, same ol'” choice.  You don’t want to be kicking yourself tomorrow.

A group calling itself the “Progressive Change Campaign Committee,” which sounds so 2008 and even employs the same font and shade of blue as Obama’s “Organizing for America” page, is attempting to portray a false consensus in favor of new federal Internet regulation.

The group trumpets its success in getting 95 Democratic House and Senate candidates to sign a pledge favoring Internet regulation via so-called “Net Neutrality.”  But notice an interesting thing about those 95 candidates.  Namely, not a single one is in a race labeled “Solid Democrat,” “Likely Democrat” or even “Lean Democrat” by the Cook Political Report.  Not one.  Of the 95, 79 are in races labeled “Solid Republican,” with 11 in either “Likely Republican” or “Lean Republican,” and only five in races even labeled “Toss Up” by Cook.

In other words, this pledge is a “Hail Mary” by desperate candidates and Internet regulation advocates.  It also reflects the fact that significant majorities of Americans surveyed oppose new Internet regulation by the federal government.  The last thing the Internet needs right now is for the federal government to turn it into the tech version of ObamaCare, and voters shouldn’t be deceived by this sort of silly season antic.

Today, the U.S. Commerce Department reported disappointing 2.0% gross domestic product (GDP) growth for the third quarter of 2010.  Not only is that number below the expected 2.2% rate, it’s also below the rate needed to substantively reduce our 9.6% unemployment rate.  This now means that GDP growth rates for the five quarters of our current “recovery” have been 1.6%, 5.0%, 3.7%, 1.7% and now 2.0%.

Here’s how that compares to the Reagan recovery, which focused instead on cutting taxes and reducing government regulation.  In the five quarters following implementation of the Reagan tax cuts in January 1983, we posted remarkable growth rates of 5.1%, 9.3%, 8.1%, 8.5% and 8.0%.

So remind us again:  Who is the one blinded to “facts and science,” Mr. President?

Consistent with his vision of himself as point guard directing the entire universe, Barack Obama has repeatedly scolded his German counterpart Angela Merkel to pursue more of the Keynesian “stimulus” he prefers.

Today, however, employment data provided the latest vindication of Germany’s rejection of Obamanomics.  Despite the worldwide economic malaise, German unemployment has now fallen to its lowest level in almost 20 years.  Its unemployment rate is now 7.5%, and its total number of jobless fell below the 3 million threshold for the first time since 1992.  Here in the U.S., meanwhile, we’ve now seen the unemployment rate rise from 8.2% when Obama signed his $814 billion “stimulus” in February 2009 to 9.6% today.

Obama loves to lecture campaign crowds that those opposing his agenda are blind to “facts and science,” but this latest data once again proves that he’s the one refusing to acknowledge hard reality.

Dwight M. Jaffee, professor of finance and real estate at the University of California, Berkeley, points out in The Wall Street Journal that “Today 90% of the $14 trillion in outstanding residential mortgages is controlled by the Federal Housing Administration (FHA), the Department of Veterans Affairs, or Fannie Mae and Freddie Mac – with the latter two under government conservatorship.”

Ninety percent?  Wait a minute…  Doesn’t every dizzy big-government leftist from Barack Obama to Paul Krugman tell us that “deregulation” of the housing sector caused our economic difficulties?  The fact is that the housing finance market is one of the most regulated, not least regulated, sectors of the entire economy.  Thanks to Professor Jaffee, we are reminded of the sheer scale of that regulation, as well as the left’s efforts that fed the housing bubble.