Interstate Protectionism and the Dormant Commerce Clause

All 50 states ban the direct sales of motor vehicles from manufacturers to consumers. The politics of this regrettable policy are clear: auto dealers are powerful political players in every state, while only a few states actually have manufacturing facilities. Banning direct manufacturer sales benefits dealers while hurting manufacturers and consumers.

State governments continue to insert themselves into the contractual relationships between car manufacturers and dealers, typically to the ostensible benefit of the latter. The New Hampshire Senate recently passed a bill regulating the terms and conditions of dealer contracts with manufacturers, prohibiting manufacturers from requiring dealers to alter the appearance of their showrooms, for instance. (Disturbingly, the state director of Americans for Prosperity in New Hampshire supports the bill.) The bill is actually unlikely to change any “balance of power” between automakers and auto dealers. Automakers will simply respond by vetting potential dealerships far more closely and perhaps charging higher franchise fees. The onus of this response is likely to fall more on new dealerships than on incumbents. So the real losers from the bill are going to be potential entrants into the car dealer industry and, of course, consumers.

These are not the only examples of “state protectionism,” in which state governments adopt laws meant to reduce competition from out-of-state businesses for the benefit of local incumbents. Some states still prohibit certain out-of-state direct-to-consumer wine shipments. Regulatory barriers can accomplish the same ends. States have widely varying regulations on insurance products, making regulatory compliance a huge barrier for a company trying to market a standard policy in multiple states. For a long time, major life insurance companies lobbied Congress to adopt a national life insurance regulatory regime, pre-empting state laws. They were opposed by local life insurance agents, for whom knowledge of and compliance with distinctive state regulations were a significant source of competitive advantage. In the end, no national legislation materialized, but Congress authorized the formation of an interstate compact, essentially a contract among consenting states that sets up a single insurance regulator. More than 40 states have joined the Interstate Insurance Product Regulation Commission, which regulates life insurance and annuities.

Such state protectionism potentially runs afoul of the so-called “dormant commerce clause” of the U.S. Constitution. The commerce clause allows Congress to regulate trade among the several states. By implication, then, states are presumptively prohibited from burdening interstate trade, unless authorized by Congress. Unfortunately, courts have been reluctant to scrutinize state economic regulations that have an essentially protectionist character, although especially blatant discrimination against out-of-state imports has been overturned.

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Affirmative Action: Unequal Protection?

The Economist has come out against race-based affirmative action in the United States, a surprising (to me) move given the magazine’s socially left-of-center outlook (e.g., for legalizing drugs and banning handguns). Indeed, the way in which affirmative action as currently practiced discriminates against Asians even more than against whites is difficult to justify. (I argued here that state-sponsored affirmative action is not inherently unjust.) Moreover, the paternalist case against affirmative action cannot be dismissed out of hand:

[After California banned affirmative action, t]he number of blacks and Hispanics enrolled fell, particularly at the flagship schools, Berkeley and UCLA.

What was more surprising was that in the entering class of 2000 a record number of black students graduated on time. Mr Sander and Mr Taylor argue that previously low black graduation rates were a result of the mismatch which occurs when a student granted preferential admission winds up at an institution for which he is not academically suited. He begins at a marked relative disadvantage and falls behind quickly. His grades get lower and lower and in the worst cases he loses confidence and fails to graduate.

Mr Sander and Mr Taylor attribute a host of bad outcomes to mismatch. For example, more black than white high-school seniors aspire to science and engineering careers, but once in college twice as many black students as white abandon those challenging fields.

Note that if you buy this argument against affirmative action, you should also oppose “legacy” preferences in affirmative action (and rational parents would not oppose the move, leaving no apparent constituency on the other side of the question).

Nevertheless, affirmative action in the United States is not as noxious as ethnic and racial preferences in many other parts of the world. In Sri Lanka, ethnic Sinhalese university applicants receive large preferences relative to ethnic Tamils. The reason seems to be nothing other than that Sinhalese are the majority in the country, and they will damned well discriminate against minorities however they please. (Such is the reality of democracy in the developing world.) In Malaysia, Malays and other bumiputera receive wide-ranging preferences in education and business. (For instance, firms must have at least 40% Malay ownership.) Chinese and Indians suffer.

So in most of the world, “affirmative action” just means that politically dominant ethnic groups get to repress the politically subordinate. But in the United States, affirmative action does not mean the translation of the ethnic majority’s political power into other spheres of social life. Blacks in the U.S. remain a small minority of the population and thus suffer from collective political disadvantage (due in part as well to their overwhelming support for one political party, which leads politicians to take their votes for granted). Eliminating all educational and economic advantages for blacks will alienate most of them. Of course, many African-Americans oppose affirmative action — but most still support it and see a role for it. The Supreme Court should be reluctant to impose a judicial solution to a sensitive political problem. A sweeping ruling constitutionally prohibiting virtually all racial preferences in all walks of life is more likely to increase racial tension than diminish it. The justices should apply the law but do so humbly, with the understanding that nine justices cannot foresee all future political contingencies.

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Congress and the Affordable Care Act: File under Revealed Preferences

John Bresnahan and Jake Sherman (Politico) report (unsurprisingly) that those who brought us the Affordable Care Act are scurrying to create exemptions for Capitol Hill. The big concern: the costs of insurance on the exchanges will lead to the rapid exodus of legislative aides—a policy-induced brain drain.

The talks — which involve Senate Majority Leader Harry Reid (D-Nev.), House Speaker John Boehner (R-Ohio), the Obama administration and other top lawmakers — are extraordinarily sensitive, with both sides acutely aware of the potential for political fallout from giving carve-outs from the hugely controversial law to 535 lawmakers and thousands of their aides.

They continue:

The problem stems from whether members and aides set to enter the exchanges would have their health insurance premiums subsidized by their employer — in this case, the federal government. If not, aides and lawmakers in both parties fear that staffers — especially low-paid junior aides — could be hit with thousands of dollars in new health care costs, prompting them to seek jobs elsewhere. Older, more senior staffers could also retire or jump to the private sector rather than face a big financial penalty. Plus, lawmakers — especially those with long careers in public service and smaller bank accounts — are also concerned about the hit to their own wallets.

Nancy Pelosi famously assured her audience “we have to pass the bill so that you can find out what is in it.” Now that lawmakers have found out what is in it, it appears they are not too pleased.  Or should we interpret their actions differently?

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The Political Costs of Reform

President Obama’s budget proposal supports entitlement reform, in part, through the introduction of the chained CPI (rather than the current CPI-W) for calculating cost-of-living adjustments. This change has been part of various reform proposals over the years, although it has often been discussed as part of progressive indexing (i.e., maintaining the CPI-W for low wage workers, thereby increasing their Social Security payments relative to those with higher incomes).  This proposal has usually attracted the ire of those on the left, who view it as a cut in Social Security rather than a reduction in the trajectory of growth.

You would think that the President’s proposal would attract the unified support of the GOP. After all, many Republicans have made this proposal before, seeing it as one of several reforms that could address the long-term entitlement problem. But with the 2014 midterm elections quickly approaching, some Republicans may see the short-term political benefits of blocking reform to be irresistible.  Consider National Republican Congressional Committee Chairman Greg Walden (R-OR), who has presented the chained CPI as Obama “trying to balance this budget on the backs of seniors.”   A piece by Alex Roarty (National Journal provides an extended quote from Walden’s interview on CNN:

“When you’re going after seniors the way he’s already done on Obamacare, taken $700 billion out of Medicare to put into Obamacare and now coming back at seniors again, I think you’re crossing that line very quickly here in terms of denying access to seniors for health care in districts like mine certainly and around the country,” Walden said. “I think he’s going to have a lot of pushback from some of the major senior organizations on this and Republicans as well.”

Although the Club for Growth is not pleased with Walden’s critique, at least he has gained the support of the AFL-CIO, as the National Journal reports.

“Walden’s quote underscores what we knew,” said Mike Podhorzer, the AFL-CIO’s political director. “Obama’s chained CPI proposal is terrible policy that only makes political sense to Washington insiders who don’t get outside the Beltway often enough. Obama beat Romney because working people care more about jobs and fairness than the deficit, and Democrats risk losing their political edge on the issue if they stick with this Beltway gambit.”

The GOP leadership may discipline Walden. But if Walden’s comments signal the GOP’s intention of opposing reform in hopes of winning some additional seats in 2014 and undermining the Democratic Party’s claim of protecting seniors, one can predict that entitlement reform will be kicked down the road once again.

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Rand Paul Changes Americans’ Minds

As I argued, this is what he set out to do with his filibuster:

A year ago, as the presidential race was taking shape, The Washington Post’s pollster asked voters whether they favored the use of drones to kill terrorists or terror suspects if they were “American citizens living in other countries.” The net rating at the time was positive: 65 percent for, 26 percent against.

Today, after a month of Rand Paul-driven discussion of drone warfare, Gallup asks basically the same question: Should the U.S. “use drones to launch airstrikes in other countries against U.S. citizens living abroad who are suspected terrorists?” The new numbers: 41 percent for, 52 percent against.

The lede of the poll is even kinder to Paul, finding as high as 79 percent opposition to targeted killing in the United States. But that’s a new question. On the old question, we’ve seen a real queasy swing of public opinion.

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Rand Paul at CPAC

The media has covered Paul’s CPAC address by playing a simple sound byte: “The GOP of old has grown stale and moss-covered. I don’t think we need to name any names here, do we?”  Yes, that is in the speech, but there is much more. You can read the full transcript here. A few selections:

On drones:

Eisenhower wrote, “How far can you go without destroying from within what you are trying to defend from without?” If we destroy our enemy but lose what defines our freedom in the process, have we really won? If we allow one man to charge Americans as enemy combatants and indefinitely detain or drone them, then what exactly is it our brave young men and women are fighting for?

On the future of the GOP:

The Republican Party has to change—by  going forward to the classical and timeless ideas enshrined in our Constitution. When we understand that that power corrupts and absolute power corrupts absolutely, then we will become the dominant national party again. It is time for us to revive Reagan’s law: For liberty to expand, government must now contract. For the economy to grow, government must get out of the way.

The address is rather casual and has the feel of a stump speech. One can only wonder if Senator Paul is getting serious about seeking the GOP nomination for 2016. If so, does he stand a fighting chance?

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In which everyone decides I’m heartless and insensitive

Several of my progressive Facebook friends posted about Gabrielle Giffords’ testimony before Congress about gun legislation, editorializing that we/they should pay close attention because of her personal experience as a victim of violence. Now, I understand why some criminal courts allow victim-impact statements: before deciding what sort of punishment should be meted out, it’s relevant to see how the crime has had an impact on the victim. But Congress isn’t in the business of punishing particular offenders – its function is to create legislation for the good of the country. (Yes, I’m rolling my eyes too, but let’s stipulate this arguendo.) So the relevance of victim-impact statements in this context is…what? This strikes me as legislating the ad misericordiam fallacy, using raw emotion as a substitute for rational analysis. But what’s especially irritating is that the last big example of this was when the other party was in power, and the party in power always has a predictably selective memory. After 9/11, emotions were pretty raw. A lot more pain and suffering that day than after any of the recent mass shootings. What was the result? A decade-long war in Afghanistan. Rampant abuse of executive power. Indefinite detention without trial. Lost privacy rights. The TSA. Kill lists. Mass shootings are to the left what terrorist attacks are to the right: emotional outcry by the public leading to grandstanding by whichever party is in power, and increased erosion of liberty. This is what happens when you legislate based on raw emotions, and disregard both the Constitution and the very idea of rational analysis. Let’s not keep making the same mistake.

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The Second Term Begins

Today is the inauguration and the beginning of President Obama’s second term in office.

Ralph Nader, for one, isn’t impressed with inaugurations. As he noted Sunday:

“Tomorrow I’ll watch another rendition of political bulls—- by the newly reelected president, full of promises that he intends to break just like he did in 2009.”

Nader might be a bit harsh in his evaluation. I doubt that President Obama assumed office in 2009 with the intention to break his promises. More likely, he issued his promises to build a coalition and did so before he fully understood the intrinsic complexities of the issues and the limitations of the office.  In the end, there are distinct limits to what a president can achieve given our system of separate institutions sharing powers.  Certainly, President Obama seems to have had distinct difficulties with Congress, even when there was unified Democratic control (e.g., health care, Dodd-Frank, climate change). Whether this was a product of his inexperience or his management style is the subject of ongoing debate. Certainly, things have only become more difficult in the post-2010 period with the GOP in charge of the House. The sluggishness of the recovery (in part a product of public policy and regime uncertainty) has imposed its own set of constraints.

This weekend, Ed O’Keefe provided his assessment of the past four years (WaPo), comparing the campaign promises of 2008 with the performance record. His assessment:

1. Afghanistan: partially achieved
2. Iraq: achieved
3. Climate change: incomplete
4. Health care overhaul: partially achieved
5. Guantanamo Bay: failed
6. The economy: failed
7. Transparency/government openness: partially achieved
8. Making government “cool again”: incomplete
9. United States’ standing in the world: partially achieved
10. Financial overhaul: partially achieved
11. Breaking the partisan logjam: failed
12. Supreme Court appointments: achieved

I would issue a somewhat harsher evaluation of Afghanistan, climate change, transparency and the financial overhaul.  Beyond these items, I would make more of the expansive use of drones and the carnage it has created for civilian populations (apparently, we mourn only the innocent children killed within our own borders).

Looking to the future, my guess is that some of the promises of the past will be recycled. Others (gun control, immigration) will rise to the top. The constraints imposed by our fiscal problems and the economy will continue to impose limits, both in terms of new spending programs and their crowding out other items on the policy agenda.  All in all, I can’t imagine that there will be much of a legacy emerging out of the next four years.

Do any Pileus readers want to issue their own assessment of the past four years?

Any predictions of what the next four years will hold?

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New Hampshire Supports Legalizing Marijuana

An interesting new poll from Public Policy Polling shows strong support for marijuana reform in New Hampshire:

For legalization (taxing and regulating marijuana like alcohol, with licensed stores): 53%. Opposed: 37%.
For decriminalization (replacing criminal penalties for possession of less than an ounce with a fine): 62%. Opposed: 27%.
For medical marijuana (allowing seriously or terminally ill patients to use marijuana if their doctors recommend it): 68%. Opposed: 26%.

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Should State Parties Change Their Names?

In Canada, provincial parties are totally organizationally independent of federal parties and may not even have the same names. Thus, the British Columbia Liberal Party has generally been right-of-center, and British Columbia Liberals tend to vote Conservative at the federal level. Quebec Liberals have generally been more Quebec-nationalist/decentralist than the federal Liberals. Most provinces have parties named “Progressive Conservative,” even though there is no longer any federal Progressive Conservative Party. And so on.

Of course, it doesn’t work that way in the U.S. State (and even local) elections feature Republican and Democratic candidates, except in Nebraska, where state legislative elections are nonpartisan. As a result, state election results are driven by national trends. Surprisingly, political scientists had not formalized this insight until recently. Here is a paper from Steven Rogers:

State legislative elections are not referendums on state legislators’ own performance but are instead dominated by national politics. Presidential evaluations and the national economy matter much more for state legislators’ elections than state-level economic conditions,  state policy outcomes, or voters’ assessments of the legislature. Previous analyses of  state legislative elections fail to consider which party controls the state legislature and whether voters know this information. When accounting for these factors, I discover that even when the legislature performs well, misinformed voters mistakenly reward the minority party. Thus, while state legislatures wield considerable policy-making power, elections are ineffective in holding state legislative parties accountable for their own performance and lawmaking.

Tyler Cowen calls this “the problem with federalism.” But it isn’t a problem with federalism as such. It’s a problem with U.S. federalism. In Canada, you can’t send a message to the federal government by voting against the incumbent federal party at the provincial level. (In fact, provincial elections are not held on the same days as federal elections.) Changing the perverse accountability dynamic of U.S. state legislatures may require something as simple as changing the names of state parties.

State parties may even have an incentive to do this. For instance, the Republican Party in New Hampshire could change its name to something like “New Hampshire Conservative Party” or “New Hampshire Party.” By doing so, it could help to insulate itself from the partisan swings at the national level that are beyond its control.

In the last election, New Hampshire Republicans lost majorities in the state house and the executive council. The reason for this was the

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Is the United Kingdom Independence Party Libertarian?

They’re riding high in the polls, passing the Liberal Democrats in some of them, but is the United Kingdom Independence Party philosophically libertarian? Alex Massie says no. Ed West says yes.

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Catalan Election Results

Today’s election results from Catalonia are in, and the verdict is: status quo. Turnout increased dramatically from 58.8% to 69.6%, but there was little change in the overall position of pro-independence and anti-independence forces. Explicitly pro-independence parties received 74 of 135 seats, down two from the previous parliament. However, if the pro-independence referendum quasi-nationalist Catalan Greens are included, the pro-referendum forces won 87 seats, up one from the previous parliament.

The biggest shift came within each camp, as there was growing polarization along the independence-centralism dimension. The most moderate pro-independence party, CiU lost 12 seats, from 62 to 50. The more radical and left-wing ERC went from 10 to 21 seats. Meanwhile, the most radically anti-independence party, Citizens, went from 3 to 9 seats, while the most moderately anti-independence party, the Catalan Socialists, went from 28 to 20 seats.

So the bottom line is that the apparent surge in independence support we heard so much about apparently came exclusively within the camp that was already nationalist, as reflected in CiU’s adoption of independence — or more properly, “statehood,” as their objective. Moreover, while a full analysis will have to wait until exit poll details are known, it is possible that among the Catalan-born there was a shift from non-nationalist parties to nationalist parties. The reason is that in most regional elections the Catalan born participate at much higher rates than immigrants. The big increase in turnout most likely reflects mobilization by immigrants, who are overwhelmingly anti-independence. Hence the status quo result, which will be somewhat disappointing for the pro-independence side. Nevertheless, independentists did win a clear majority of seats and will easily be able to push through a bill on a referendum if they decide to do so.

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Yet More on Catalonia

I don’t think Catalan secession is an easy issue. There are good arguments on both sides (that is, to the desirability of secession, not whether Catalans should have the right to decide their future status). Precisely because it is a complex issue without easy answers, the haughty dismissal of Catalan independence from Anglo-American elites rubs me the wrong way. Here’s the latest example from The Economist:

At first blush, it is hard to object to what Catalan nationalists call the “right to decide”. In fact, there are many reasons why Catalans should not waste their energy trying to break away from Spain. Start by recalling Orwell’s definition of nationalism as “power-hunger tempered by self-deception”.

Nationalism always involves popular self-deception and power hunger from elites who cater to it. But that is just as true of status quo nationalism (Spanish nationalism) as it is of minority (Catalan) nationalism.

Under Spain’s constitution of 1978, Catalonia enjoys more self-government than almost any other corner of Europe. It runs its own schools, hospitals, police, prisons and cultural institutions. It lacks only tax-raising powers and the Ruritanian trappings of statehood, which nationalist politicians appear to be hungry for.

It runs schools, hospitals, police, jails, and museums? Why, Catalonia seems to have as much autonomy as an American township! Complete with limited tax-raising powers. Even so, Catalonia enjoys far less autonomy than, say, Appenzell Ausser-Rhoden (or an American state).

The argument that Catalans should not subsidise feckless Andalusians is a dangerous one: apply that more widely and the euro zone would fall apart.

Catalonia on net subsidizes the rest of Spain to the tune of 8% of GDP, far, far beyond what any EU member state contributes to common institutions in aggregate, let alone on net.

Indeed, far from welcoming Catalonia as an independent member, the euro zone’s leaders hardly yearn for an extra nation-state.

The “timing is bad” argument is one of the best ones against independence — but it’s hardly a trump. It all depends on your discount factor.

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Catalonia Update

The Monkey Cage is carrying an interesting update on the Catalonia situation from Duke political scientist Laia Balcells. Catalonia is heading to elections, called by the premier Artur Mas, from the Convergence and Unity (CiU) party, a moderate Catalan nationalist party on the center-right. The CiU has always favored a “right to self-determination” for Catalonia, but now they favor holding a referendum on independence, unless Spain agrees to a new fiscal pact giving Catalonia broader powers.

She lays out three possible post-election scenarios:

1. A secessionist process scenario: a combination of Catalan nationalist parties (e.g. CiU ERC; CiUERC+SI) obtains a majority of the seats. Mas calls for a referendum. Despite the fact that the referendum is not likely to be recognized by Spain, it gives democratic legitimacy to the self-determination process. The medium-term outcome of this path is highly unpredictable at this point: Rajoy is not Cameron, and the PP government is making threats to deter Mas from the referendum (e.g. declaring it illegal). Some members of the Spanish military have even mentioned armed intervention in Catalonia to defend the “inviolable unity of the Spanish State”. The EU, on its end, delivers ambiguous messages regarding the permanence of Catalonia in the union if there is a breakup.

2. A fiscal pact scenario: CiU obtains a majority of the seats. Mas makes a credible threat of a self-determination referendum to Rajoy, who concedes on an agreement that improves Catalania’s fiscal capacities. CiU then renounces its secessionist demands, and ERC and other minority parties remain as the only ones asking for independence.

3. A stalemate/centralization scenario: Catalan nationalists do not obtain sufficient support in the elections and things remain at a standstill. Mas has a hard time governing given the economic and political gridlock. This scenario would probably imply asking for another bailout to the Spanish state and new attempts at centralization. (Given the results of the polls, this is however the least likely scenario)

Let’s look down the game tree to see what is likely to happen.

I think we can rule out 3 as a likely scenario, if the polls are right. Apparently 57% of poll respondents now say they would vote “yes” in an independence referendum and only 20% no. That’s a dramatic increase in secessionist sentiment even over the last few months. Catalan nationalist parties have frequently won significant majorities in the past, and I see no reason why they would not in the upcoming election with the radical turn in Catalan opinion.

So what happens after the election if nationalists win a majority? I think it likely that

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Why New Hampshire Should Give Its Electors to the National Popular Vote Winner

New Hampshire’s status as a swing state has had several negative consequences for its residents:

• Its politics have been nationalized, and so the national political mood determines the partisan composition of the winning state legislative candidates.
• Its residents have to put up with avalanches of political advertising and campaigning by national candidates.
• There are controversies over voter eligibility. Some Republicans like to tell dark tales of voters being “bussed in” from Massachusetts to cast presidential votes, taking advantage of same-day registration. I don’t buy these claims — extraordinary claims require extraordinary evidence — but there has indeed been a serious controversy over whether college students from other states ought to be able to vote in N.H. The only serious argument I can see against their being allowed to vote in N.H. is that they are unfamiliar with the needs and problems of the state and their town and tend therefore to cast less informed votes in N.H. than they could in their home state (absentee). That makes sense to me. When I was a college student, I voted absentee in Houston because I knew the issues, not Virginia where I was going to school. But the courts have said that college students must be allowed to vote in N.H. if they want to. Most of them do want to, because New Hampshire is a swing state.
• The third-party vote always gets squeezed because of tactical voting.

These problems go away if New Hampshire passes a law requiring New Hampshire’s electoral votes to go to the national popular vote winner. “But New Hampshire would be ignored by the presidential candidates!” Yes — good. I can’t imagine that New Hampshire has meaningfully benefited from presidential candidates’ attention. There’s not a single program or project that I can think of that New Hampshire benefits from because of a presidential promise made to the state’s voters during a general election. New Hampshire’s first-in-the-nation primary already gives it plenty of influence in the presidential selection process, and I don’t suggest giving that up.

The college-student problem, if it is one, goes away if New Hampshire is not a swing state. College students will vote wherever they feel they have a greater stake and better information, which is exactly as it should be. The avalanche of advertising stops, allowing voters to think harder about state and local issues and candidates. People will be more willing to vote sincerely in the presidential election, rather than for the lesser of two evils.

So why not, New Hampshire? You can take yourself off the table as an electoral college prize and regain some sanity and democratic autonomy for your state.

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Puerto Rico Status Referendum

Media are reporting the results of the Puerto Rico status referendum as if the statehood option had won. Now, it may indeed be the case that the resident commissioner will present legislation of accession to the Union in the House of Representatives, but only an oddly structured ballot devised by the pro-statehood party allowed the referendum to “succeed.” In fact, a majority of Puerto Ricans voted against statehood.

The ballot asked two questions. The first question asked voters, “Do you agree to maintain current territorial political status?” The “no” option received 54% of the vote, 934,238 votes of 1,730,245 valid votes. The second question asked voters to choose among three status options: statehood, associated free state, and independence. Statehood received 61.15% of the valid votes, 802,179 votes in all.

But note two things. First, many voters who opposed statehood in favor of, say, independence would have voted “no” on the first question. Second, 25% of the ballots on the second question were left blank, apparently out of protest at a question the pro-status quo party regarded as unfair. If you add blank ballots to the total on the second question, the statehood option received less than 45% of the vote.

This is a good example of how political leadership tries to use a cyclical majority to secure its favored alternative.

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The “New Hampshire Advantage”: Nearly Killed Off in 2009-10

Here is what my coauthor William Ruger and I wrote about New Hampshire in the 2011 edition of Freedom in the 50 States: Index of Personal and Economic Freedom:

New Hampshire is by our count the freest state in the country. Depending on weights, however, it really shares the slot with South Dakota. New Hampshire does much better on economic than personal freedom and on fiscal than regulatory policy. Under unified Democratic control in 2007-8, the state saw a respectable increase in freedom. A smoking ban was enacted, but so were same-sex civil unions. Taxes, spending, and fiscal decentralization remain over a standard deviation better than average, and government debt actually went down slightly.

We are going to write something very different in the 2013 edition, coming out early next year. The 2009-10 legislature, also under unified Democratic control, went on a spending and tax-hiking binge. They did this even as states like North and South Dakota were already strengthening market-friendly policies in many areas. As a result, New Hampshire will no longer be the freest state in the country — not by a long shot.

In fiscal year (FY) 2000, New Hampshire’s state and local tax burden (excluding motor fuel, severance, alcohol, and tobacco taxes) stood at 7.5% of personal income, not only the best in the country but only seriously approached by Tennessee. Government consumption and subsidies made up only 7.3% of personal income. By the end of FY 2006, with Republicans having controlled the legislature in the interim, those figures had edged up, to 7.9% and 8.1%, respectively. But by the end of FY 2010, government consumption and subsidies made up 9.1% of income, a nearly two-percentage-point increase over a decade, while the tax burden stood at 8.0% of income. State and local debt was at 18.8% of income, compared to 16.7% a decade earlier.

In the mean time, Alabama, Montana, North Dakota, Oklahoma, South Dakota, and Tennessee have all passed New Hampshire for lower taxes. We don’t yet have the local data to measure whether FY 2012 saw a return to public thrift under the new Republican legislature elected in November 2010, but when New Hampshire voters go to the polls Tuesday, they should remember where their state was two years ago.

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From the Department of Backhanded Compliments

Apparently NH lefties are passing around this lengthy condemnation of the Free State Project. Much of it, though, reads like something that could be put in an FSP recruiting brochure:

Free Staters in NH are generally intelligent, focused and diligent people, who are sincerely interested in promoting personal responsibility in its broadest meaning. They are committed to discussion and action on the issues and problems they see facing New Hampshire and the nation.

And:

The migration of Free Staters to New Hampshire has dramatically changed the political discussion here.

And:

Here is an alternative perspective on the FSP from the same Foster’s article, which the passage of time has shown to be more accurate than the others in it:

“Dave Corbin, a University of New Hampshire political science instructor, said the Free Staters could accomplish many of their goals even if only a fraction of the proposed 20,000 moved here. ‘Those who are analyzing the potential effects of the group on the basis of numbers alone are not looking at the situation deeply enough’, he said.

‘Let’s say only 4,000 of them move here. You wouldn’t just say ‘What’s 4,000? That’s only a drop in the electoral bucket.’ That’s not looking at the situation properly . . . When you talk about those people who are politically active in New Hampshire, you’re only talking about 5,000 people; those are the people political candidates target. If you have (only) 1,000 people (from the Free State Project) coming here to make a difference, they will,’ Corbin said.

Corbin pointed out how important activists are to any political campaign, as an index of the influence Free Staters could eventually achieve. Each individual activist represents not just one person, but all the people they will persuade. ‘Any time you have a campaign and you have an activist, you know you have 20 or 30 times the number of votes as activists,’ he said. (emphasis original)

But then there’s the scaremongering (all-bolded!) conclusion:

More New Hampshire residents need to wake up to the reality of the Free State Project.

We can’t wait for the Union Leader and NH Public Radio to fill us in on how expansive the Free State Project’s plans are for New Hampshire, – and how this plan is playing out now on the ground. We need to find out for ourselves, and we need to tell others.

We need to confront Free Staters in our towns, and at all levels of government. And then we need to force them, as proper citizens, to have endless conversations with their fellow residents about New Hampshire’s future. We cannot let them make over the State of New Hampshire in their own libertarian image.

Of course, partisan hacks (and yes, they exist on the right too) would rather resort to scare tactics than honest and open dialogue, and that attitude is always wearisome wherever one finds it, but at the same time, it is encouraging that the FSP has moved beyond the “first, they ignore you” stage to the “then they fight you” stage.

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Cowen on Catalonia

At MR, Tyler Cowen has a rather strong reaction against an economist who supports Catalan secession:

He taught me Ph.d Micro I at Harvard, so it’s too bad he wants to wreck both Spain and Europe, and for so little in return. Didn’t one of his theorems suggest this was a bad idea? It’s not as if Catalonia is treated like Tibet.

Would Tyler also say the Velvet Divorce “wrecked” the Czech Republic and Slovakia?

As an aside, if only peoples treated like Tibet are granted a moral right to secede, then in fact no one will secede permissibly, for governments that treat Tibet like Tibet don’t let Tibet secede.

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Scottish Referendum Deal Reached

British Prime Minister David Cameron and Scottish First Minister Alex Salmond have reached a deal on the upcoming Scottish independence referendum. It looks as if the SNP have gotten what they wanted in several respects:

• 16- and 17-year-olds will be allowed to vote.
• The referendum will be held in late 2014.
• While the Electoral Commission will advise on the question, it will ultimately be up to the Scottish Parliament, controlled by the SNP.

The SNP have dropped plans to include a third option in the referendum, which would presumably have been “devo-max” or full fiscal autonomy with political union. As I have noted before, I think this is a missed opportunity for holding a ranked-ballot referendum and selecting the Condorcet winner. However, with no political party actually advocating the devo-max option, it was always unlikely that the referendum would include it. (And apparently the SNP was interested only as a way of splitting the anti-independence vote, i.e., not allowing ranked ballots.)

Reactions from around the UK:

1. Guardian, “Scottish people would have voted for ‘devo-max.’ That’s why it’s not an option”
2. Telegraph, “Alex Salmond ‘will have to defy history’ to win Scottish independence referendum”
3. Politics.co.uk, “Scottish independence: Overconfident London could rue the day”
4. Better Nation, “The Edinburgh Agreement”

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The Economist on Catalan Independence

A pro-secession protest in Catalonia on September 11th brought out 8% of the region’s entire population, The Economist reports. Opinion polls have support for independence at about half of the electorate, possibly more. The moderate nationalists in power in Catalonia have even radicalized their platform. In the past, Convergence and Unity was a moderate nationalist, center-right party coalition dedicated to greater autonomy for Catalonia and a recognized right to self-determination. While refusing to rule out independence in the long run, they rejected secession as attainable or desirable in the near term. Now, they explicitly advocate eventual sovereignty (effectively, independence within the European Union).

In addition to Convergence and Unity, there has been, since the mid-1980s, a significant independentist strain within Catalan nationalism. The Catalan Republican Left (ERC) has been the main exponent of this current. In the early 2000′s, ERC actually formed the regional administration along with the regional Socialists. They helped put together Catalonia’s new autonomy statute that, among other things, defines Catalonia as a “nation” rather than a “nationality” for the first time. (Yes, this sort of symbolism seems to matter to nationalist voters.) Over time, ERC support has been growing, and so has broader support for independence. Thus, this most recent outbreak is nothing new, rather the last expression of an upwelling of  “fed-up nationalism” that has been going on for at least a decade.

In one sense, Catalan nationalism is easily explicable as the

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Further Unpacking Ron Paul’s State-by-State Performance

Per commenter FreeDem’s request, here are some other ways to interpret Ron Paul’s primary performances in each state, building on the statistical models estimated here.

The first exercise is to simulate what Paul’s percentage of the vote would have been in each state had they all voted at the same time with the same “institutions” (candidates on the ballot, primary vs. caucus, closed vs. open, and so on). For this exercise, I assumed that all calendar and institutional characteristics were at the median for the nation as a whole. Thus, I assume a primary not a caucus, a closed primary rather than an open or semi-open one, three other candidates on the ballot, a ballot date after Mitt Romney had built substantial momentum with his Michigan victory on Feb. 28 — but before his virtual mathematical clinching on Apr. 2, and no home state advantage for any candidate.

Under these conditions, Paul would have obtained 13.9% of the vote in the average state. Here is how he would be forecast to do in each state, in alphabetical order:

State	pred12
Alabama	7.39%
Alaska	15.37%
Arizona	8.70%
Arkansas	13.77%
California	12.17%
Colorado	10.81%
Connecticut	15.94%
Delaware	12.48%
District of Columbia	12.17%
Florida	10.14%
Georgia	12.20%
Hawaii	12.30%
Idaho	11.53%
Illinois	9.68%
Indiana	15.93%
Iowa	19.70%
Kansas	13.73%
Kentucky	14.82%
Louisiana	10.51%
Maine	19.48%
Maryland	13.58%
Massachusetts	17.73%
Michigan	16.80%
Minnesota	12.71%
Mississippi	6.53%
Missouri	12.76%
Montana	14.80%
Nebraska	11.26%
Nevada	10.09%
New Hampshire	31.74%
New Jersey	11.75%
New Mexico	12.29%
New York	17.28%
North Carolina	12.63%
North Dakota	15.54%
Ohio	12.80%
Oklahoma	16.45%
Oregon	15.12%
Pennsylvania	26.43%
Rhode Island	27.08%
South Carolina	16.29%
South Dakota	15.40%
Tennessee	13.42%
Texas	15.57%
Utah	5.39%
Vermont	31.41%
Virginia	24.61%
Washington	15.81%
West Virginia	12.54%
Wisconsin	13.85%
Wyoming	13.27%

The rank order of states here is of course exactly the same as in the table of residuals from my earlier post, but the presentation of the numbers is perhaps more intuitive.

The next analysis looks at why Paul improved from 2008 so much in some states and little if any in others. In my last post I found that Paul’s electoral performance in 2012 is predicted by state opinion ideology, with more left-wing states giving more support to Paul. However, 2008 LP support is not at all correlated with Paul support in 2012. I inferred that Paul received a great deal of support from voters who would otherwise go Democratic and from liberal Republicans and independents, particularly since the association between ideology and Paul support strengthened conditional on an open primary.

However, I did not control for how “pro-Ron Paul” a state was in 2008. FreeDem reports seeing some odd state-level differences between Paul’s 2008 success and 2012 success when eyeballing the data. Using my analysis of the 2008 returns, I now try formally testing whether Ron Paul’s support in 2008 was correlated with his support in 2012. I regress the log of Paul support in 2012 on the institutional variables, Democratic-Green vote share in 2008, and the log of institution-corrected Paul vote share in 2008. Here are the results:

. regress lnrp caucus12 open12 closed12 ocb clinch home demgr08 lnrp08

Number of obs =      49
F(  8,    40) =    9.67
Prob > F      =  0.0000
R-squared     =  0.6592
Adj R-squared =  0.5911
Root MSE      =  .31484

------------------------------------------------------------------------------
        lnrp |      Coef.   Std. Err.      t    P>|t|     [95% Conf. Interval]
-------------+----------------------------------------------------------------
    caucus12 |   .5744784   .1465334     3.92   0.000     .2783233    .8706335
      open12 |   .0946405   .1444686     0.66   0.516    -.1973414    .3866224
    closed12 |  -.1744016   .1367005    -1.28   0.209    -.4506836    .1018805
         ocb |  -.1192173   .0418184    -2.85   0.007    -.2037355   -.0346991
      clinch |  -.1881422   .1700441    -1.11   0.275    -.5318141    .1555297
        home |   .0832717   .2090593     0.40   0.693     -.339253    .5057963
     demgr08 |   .0091053    .004799     1.90   0.065    -.0005938    .0188044
      lnrp08 |   .4681954   .1376803     3.40   0.002     .1899331    .7464578
       _cons |  -.5945686   .6079726    -0.98   0.334    -1.823327    .6341899
------------------------------------------------------------------------------

Now I do find evidence that Paul’s support in 2012 depended on the strength of the Paul constituency in 2008, controlling for everything else. Although the statistical significance is strong, the substantive import is in a sense strikingly low. Since the dependent and independent variable are both in logs, we can interpret the coefficient on Ron Paul support in ’08 — 0.468 — as an elasticity. In other words, for every 1% more votes Paul got in 2008, he got just 0.5% more votes in 2012. That tells us that while Ron Paul’s base turned out again for him in 2012, his additional success was probably not related to picking up a bunch of semi-libertarian marginal voters who might have gone with him had his campaign been stronger in 2008. Instead, he reached a whole new constituency. Paul more than doubled his vote share between 2008 and 2012. That mostly did not come from mobilizing more libertarians. He got the libertarians to vote for him again, but most of his new votes came from people we would not normally think of as libertarians.

Who exactly were these new Paul voters? We can find out more, I think, by looking at individual states where Paul improved or did not improve between elections. Here are some states where Paul did badly in both years (adjusted vote shares from 2008 and 2012 in parentheses): Alabama (2.9%/7.4%), Utah (3.0%/5.4%), Mississippi (1.9%/6.5%), Arizona (4.4%/8.7%), and Illinois (5.4%/9.7%). These are states without many libertarians and also without many social and foreign policy moderates and liberals. We could throw in West Virginia (2.9%/12.5%), Florida (3.8%/10.1%), New Jersey (4.9%/11.8%), Delaware (4.2%/12.5%), and California (6.3%/12.2%) as also being of this type.

Then we have states like Idaho (10.8%/11.5%), D.C. (7.8%/12.2%), Montana (7.8%/14.8%), North Dakota (7.1%/15.5%), South Dakota (8.6%/15.4%), and Washington (8.2%/15.8%), where Paul did well in 2008 but did not improve much in 2012. He seemed to hit a ceiling in places like these. My hypothesis is that these states have a lot of libertarians but not many social and foreign policy moderates who are willing to take a Republican ballot. In all the states I just mentioned except perhaps D.C., social conservatives tend to dominate the state Republican party. Washington may be a partial exception, but only a partial one. Washington certainly does not have the tradition of moderate Republicanism that, say, Massachusetts and Connecticut do.

Then there are states where Paul underperformed in 2008 and then improved significantly in 2012: Connecticut (4%/15.9%), Indiana (4%/15.9%), Iowa (3.8%/19.7%), Kentucky (3.8%/14.8%), Massachusetts (3%/17.7%), Oklahoma (4%/16.5%), Rhode Island (6.1%/27.1%), South Carolina (4.3%/16.3%), and Vermont (6.4%/31.4%). New York (6.7%/17.3%) is a state where Paul went from slightly above average to well above. What at least some of these states have in common is a lot of former Republicans and independents who are moderate to liberal on social and foreign policy issues. (I can’t explain Oklahoma, but South Carolina’s improvement might have to do something with a bounce from New Hampshire, and Kentucky with Rand Paul’s prominence.) In Vermont, especially, I will bet my bottom dollar that most Ron Paul voters were centrists or even progressives ticked off at wars, banker bailouts, and civil liberty infringements, but not necessarily signing onto Paul’s whole economic program. His outstanding improvement there may also have something to do with spillover from New Hampshire.

Finally, there are only a few states where Paul did very well in both years: Maine (6.9%/19.5%), Michigan (7.2%/16.8%), New Hampshire (11.2%/31.7%), and Pennsylvania (7.8%/26.4%). These seem like states with both quite a few libertarians and lots of moderates and progressives willing to take a Republican ballot. While economic insecurity might be another hypothesis for the increase in Paul support, that wouldn’t explain why Paul did so poorly in Nevada (10.1% adjusted), New Jersey (11.8% adjusted), or Georgia (12.2% adjusted), all of which have suffered more than the national average from the bursting of the housing bubble.

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Understanding Ron Paul’s 2012 Presidential Primary Performance

After the 2008 primary season, I analyzed Ron Paul’s performance in each state to see how institutional factors such as caucus and primary form affected his electoral success. This exercise turned out to be useful for estimating the size of the pro-liberty electorate in each state. In this post, I do the same with the 2012 results.

The dependent variable in this analysis is the percentage of the vote obtained in each state’s statewide primary or caucus. If a state held both a primary and a caucus or convention, I used the primary results. The independent variables are as follows. (All variables were taken from Dave Leip’s Atlas of U.S. Presidential Elections.)

First, I use a dummy variable for whether the state had a caucus or convention versus a primary. As an outsider candidate with a committed band of activist supporters, Paul tended to do much better in caucuses than primaries.

Next, I also included dummy variables for who is eligible to vote: a dummy for an open caucus/primary, in which all voters are allowed to vote, and a dummy for a closed caucus/primary, in which only registered Republicans are allowed to vote. The excluded category consists of “modified-open” elections, in which independents and Republicans are allowed to vote. Since Paul was more popular among self-identified independents than among self-identified Republicans, it stands to reason that he would do best in open primaries and worst in closed primaries.

I also tried variables for the number of other candidates running active races and appearing on the ballot. In this regard, I counted only “significant” candidates that might have had a chance of winning, that is, the following six (other than Paul): Mitt Romney, Rick Santorum, Newt Gingrich, Rick Perry, Jon Huntsman, and Michele Bachmann. Bachmann dropped out of the race after Iowa and Perry and Huntsman after New Hampshire. Thereafter, Santorum withdrew only after the April 10 primaries and Gingrich held on until May 2. However, in many states – almost entirely primary states – candidates that had withdrawn remained on the ballot and often received significant support. We should expect both of these variables to have a negative influence on Paul’s vote share (for instance, in Virginia, where only Romney and Paul were on the ballot, Paul benefited from tactical voting by supporters of other candidates and received 40%), but in fact the number of candidates in the race had a statistically significant, positive association with Paul’s support (candidates on the ballot has the expected negative association, as shown below). This result is theoretically implausible and apparently simply captures Paul’s otherwise unexplained success in Iowa and New Hampshire. Therefore, in the estimations reported here, I have included solely the variable for number of non-Paul candidates on the ballot.

Next, I included a three-point variable for the extent to which Mitt Romney had clinched the Republican nomination when the primary in question was held. After February 28, it became very unlikely that Romney would lose, as Nate Silver noted here. After April 3, it became a near mathematical certainty that Romney would win. Therefore, the “clinching” variable takes on values of 0.5 for contests held after February 28 through April 3 and values of 1.0 for contests held after April 3.

Finally, I include a variable intended to capture home-state effects for active candidates. It is coded zero for all states except Massachusetts, Georgia, and Texas. For the former two, home states of Romney and Gingrich, respectively, it is coded -1, and for the last, Paul’s home state, it is coded 1. (Santorum dropped out of the race before the Pennsylvania vote, for which reason it is coded zero.)

The dependent variable is rather skewed, as the following histogram shows:

As a result, statistical analysis with this variable revealed the presence of heteroskedasticity, which violates the assumptions necessary for Ordinary Least Squares regression. Therefore, I transformed the variable using the natural log, which gave it a roughly normal distribution and eliminated heteroskedasticity in the regression analysis:

The results of the regression analysis are reported below the fold:

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Democratic Retreat on Civil Liberties

At Mother Jones, Adam Serwer details the Democratic Party’s platform’s ratification of the Obama Administration’s wholesale retreat on civil liberties. When stacking this sort of thing alongside the GOP’s attempt to become the Defenders of Medicare, I not only find it difficult to care who wins the next presidential election, but to understand why anyone else would.

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Agenda 21 and Our Precious Bodily Fluids

“You know about Agenda 21, right?” It’s always said in a tone approaching a hushed whisper. If I can manage to nod and smile, at least, rather than rolling my eyes, I will be admitted into the club: a club of knowing, Alex Jones-listening “true conservatives” or “patriots.” Because I — we — know what They are Really Doing.

Agenda 21 is the latest bugbear for conspiracy-minded right-wingers. The Economist recently reported on how jogging and biking trails were opposed by elected Republican officials on the grounds that they would advance the United Nations’ sinister Agenda 21, as part of a grand plan to abrogate American sovereignty.

In case you’re wondering what Agenda 21 actually is, here’s the Wikipedia page. This is just another feel-good, do-nothing UN statement of Things That We Like that has no legal force anywhere — from 20 years ago. (It’s interesting how the bêtes noirs du jour that conspiracy theorists seize on are so… arbitrary.)

My ire was raised on this topic this morning when reading on the New Hampshire Union-Leader‘s website that the former chair of the NH GOP (before he was forced out by sensible folk), Jack Kimball, has endorsed a maverick sheriff candidate on the grounds that he’s anti-Agenda 21:

Kimball said that Szabo is “not only aware of Agenda 21, but was prepared to stop it, if elected Sheriff. Frank is truly a breath of fresh air and it is good to know that we have a true Constitutional Candidate for Sheriff.”

I suspect conservatives like to resort to conspiracy theories because it is all too easy to ascribe evil intent to one’s political adversaries, and because it provides a “short cut” of sorts to development of one’s issue positions. Instead of actually learning about transportation issues, let’s just take our stance from the fact that the other side wants to usher in the Antichrist.

Conservative activists, you might want to try actually learning how to communicate how conservative policies benefit the average American (if they do), rather than wallowing in paranoia. The swing voter is not impressed.

And no, I’m not a member of the Council on Foreign Relations or the Trilateral Commission.

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Building Good Will and the Financial Crisis

There is an interesting piece by John Bresnahan (Politico) on Countrywide Financial’s VIP Program, which provided loans to members of Congress, staffers, and executive branch officials who were responsible for shaping regulatory legislation.

More than a half a dozen current and former lawmakers, including Senate Budget Committee Chairman Kent Conrad (D-N.D.) and House Armed Services Committee Chairman Buck McKeon (R-Calif.), obtained mortgages through the Countrywide VIP program, in some cases saving thousands of dollars, according to the Issa report, set for release Thursday….

Other lawmakers who received Countrwide VIP loans include former Sen. Christopher Dodd (D-Conn.), Rep. Edolphus Towns (D-N.Y.), Rep. Pete Sessions (R-Texas), Rep. Elton Gallegly (R-Calif.) and former Rep. Tom Campbell (R-Calif.). Dodd, who chaired the Senate Banking Committee, was identified as a Countrywide VIP going back to 1999, and he even referred an aide to a former GOP senator to the same program, Issa’s probe found.

No real surprises here for anyone acquainted with public choice, but the piece is nonetheless worth a read, particularly for those interested in how Countrywide worked with the GSEs to shape (and derail) reform legislation that might have limited the magnitude of the collapse and the subsequent contagion.

Thankfully, many of the recipients of Countrywide’s munificence were involved in framing Dodd-Frank.

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Eurozone Crisis & Obama Reelection/Cross-National Economic Voting Bleg

One keeps hearing that the euro crisis could doom Obama’s chances for reelection. (Because, after all, that’s the reason we should be concerned about the economy: its effects on politics.) I’m not so sure. Voters are hardly well informed, but if the Eurozone goes into deep recession and the U.S. into a mild one, won’t voters discount economic performance a great deal by looking at the cross-national difference? U.S. GDP growth of about 2% (annualized) right now is mediocre, but compared to Eurozone growth of about zero, it looks pretty good. Powell and Whitten (1993) and Whitten and Palmer (1999) find just this in their cross-national analyses of economic voting: the models do better when you assume that voters deduct OECD growth from national growth when assessing incumbents. No one in the U.S. presidential forecasting game seems to talk about these papers.

So here’s the bleg: Has anyone actually tried doing standard-issue presidential forecasting models with a cross-national growth adjustment? If so, what are the results? I’d find it hard to believe that U.S. voters are all that different from European voters in this respect. If no one’s looked at this, it seems to me that we need to put a firm thumb on the scale in favor of Obama when assessing the forecasts being released now.

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Walker, Republicans Dominate in Wisconsin Recall (Updated)

As I write this, Republican Scott Walker is flirting with a 60-40% landslide victory over Democrat Tom Barrett in the Wisconsin recall election. The GOP state senators up for recall are also all leading by 20%+ margins. While the counting is early yet and those margins may come down (even though the races have been called), the county-level results are showing Walker almost uniformly outperforming his 2010 showing, which was of course a very Republican year. What accounts for this overwhelming victory, which seems to defy much of the polling (although one late poll had Walker up 12) as well as the CNN exit polling?

We can discard one possible explanation right away: low turnout. In fact, the election had very high turnout, about 60% of the eligible electorate, which is normally thought of as favoring Democrats. It is possible that Republicans were more motivated than Democrats and turned out in particularly high numbers, and indeed Walker was more likely to outperform his 2010 performance in counties that were Republican to begin with. So differential turnout remains a strong possibility, but merely invites a further question: Why did pro-Walker voters turn out in greater force?

Another possibility is that Walker is quite popular and that the median voter strongly favors his collective bargaining reforms. This is likely part of the explanation, as polls show majority approval of Walker’s job performance and his collective bargaining reforms, but he still seems to be outperforming even these polls in the recall election.

The third piece of the puzzle may be that some people who oppose Walker and his reforms actually voted for him because they did not believe in using the recall process. The exit polls, flawed as they apparently were, show a strong majority in favor of the view that recall elections should be used only in cases of official misconduct. However, I remain skeptical that very many voters would actually cast a vote in favor of a candidate to which they were opposed. Ideology almost always trumps process concerns for voters. What may have happened is that the process concerns kept moderate Walker opponents home disproportionately, thus contributing to the GOP turnout advantage.

UPDATE: Despite the apparent county-level improvements over 2010 for Walker in the early counting and huge leads for the Republican senators, the final count ended up much closer than the early results. In fact, one of the Republican senators was defeated. The early precincts to report must have been overwhelmingly Republican across the state. The closer final count makes me think that the “process” issues were a lot less relevant to voters than the media spin would have it.

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The Limits of Congressional Gridlock…and Reform?

It seems that all we have heard of late is about the sharp partisan battles in Congress that have placed it in a gridlock and prevented it from working in a bipartisan fashion to “do the nation’s business.” Yes, the “do nothing Congress.”

But there are exceptions to this description.  Given the depth and severity of the financial collapse, it is good to see bipartisanship in addressing the issue of financial regulation, or more correctly, providing exemptions when there are mutually beneficial exchanges to be made.

As John Bresnahan reports, the prospects look good for a “one sentence bill worth $300 million to a bank owned by a politically connected family that has doled out hundreds of thousands of dollars in campaign donations.”

The bill would allow Emigrant Bank to avoid meeting the requirements for Tier 1 capital by allowing it to base capital requirements on what its assets were on March 31, 2010, before it broke the Dodd-Frank threshold of $15 billion. Of course, the argument is that the bank only broke the $15 billion mark for a brief period of time. By tweaking Dodd-Frank, Congress could allow the bank to free up funds, thereby allowing it to make additional loans, largely in New York.

Although the bill was sponsored by a Republican (Rep. Michael Grimm, R-NY), it has strong bipartisan support from members of the Financial Services Committee (success in the Senate remains uncertain). Why the support? Howard Milstein, owner of Emigrant Bank, was “a bundler for President Barack Obama’s 2008 campaign.”  Bresnahan provides some additional details on Milstein:

He is a force in New York state politics. Aside from his fundraising for Obama four years ago, Milstein has been a prominent financial backer of Gov. Andrew Cuomo. The Democrat tapped Milstein last year to head the New York State Thruway Authority despite complaints by watchdog groups that having a real estate mogul run the agency would be a conflict of interest.

Even Diana Cantor, wife of House Majority Leader Eric Cantor (R-Va.), worked for a Milstein-owned trust that catered to the needs of high-income customers.

The Milsteins, along with business associates and other family members, have donated hundreds of thousands of dollars to both GOP and Democratic lawmakers over the past decade. Along with Grimm, New York Democratic Reps. Carolyn Maloney, Carolyn McCarthy and Gregory Meeks — all co-sponsors of the bill — have received $11,500 in donations from the Milsteins this cycle.

According to a statement by Emigrant Bank, “H.R. 3128 is all about credit availability in underserved communities throughout New York City.” Perhaps. But one might also note that so many of the poor decisions leading up to the recent collapse (e.g., regarding relaxed underwriting standards, securitization, and the GSEs pumping liquidity into the low and moderate income segments of the market) were given the same justification, often by members of the House Financial Services Committee.

There is a powerful public choice argument regarding some of the factors that contributed to the financial collapse. In the election cycles leading up to the financial collapse, the securities and investment industry and real estate industry contributed tens of millions of dollars to the campaign chests of the Financial Services Committee and its Senate counterpart. Regardless of the party in control, the committee members prevented and/or gamed any attempts to impose regulatory reforms that might have had lessened the severity of the impending financial collapse. Certainly Congress responded in the aftermath of the collapse, albeit it ways that were far from sufficient.

But now that attention has turned elsewhere, normal practices appear to have resumed. The days of reform have run their course and Congress appears ready to return to its standard mud farming, imposing new regulations only to relax when a mutually advantageous deal can be struck.

At least we know that in 2012, gridlock has its limits and bipartisanship is still a possibility.

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NH Legislature Passes School Choice by Veto-Proof Majority

The New Hampshire House and Senate have overwhelmingly approved a bill that would give businesses tax credits for contributing to scholarship funds, which could make payments on behalf of students attending private schools. Even if the governor vetoes, the bill should pass into law. According to the Ruger-Sorens database of state policies, New Hampshire will join Arizona, Florida, Illinois, Iowa, Minnesota, and Pennsylvania in offering tax credit or deduction programs for private education.

(Nota bene: The New Hampshire Supreme Court has previously ruled that giving tax relief to parents for sending children to religious schools would violate the establishment clause of the state constitution. Thus, this sort of program is the only way that full school choice that includes religious schools can be enacted in New Hampshire.)

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Identify the Speaker

The press is quite pleased with President Obama’s proclamations on gay marriage. The evolutionary process appears to have finally come to a conclusion. Yet, it might be useful to place the President’s epiphany in historical context. To assist in the process, I have placed several quotes from past and present elected officials on the issue of gay rights, civil unions and marriage. Lets see how many readers can correctly identify the speaker (answers below…no cheating)

Quote Number 1

The big thing is to make this country, along with every other country in the world with a few exceptions, quit discriminating against people just because they’re gay. You don’t have to agree with it, but they have a constitutional right to be gay. And that’s what brings me into it.

Quote Number 2

Well, I think that freedom means freedom for everyone. … I think people ought to be free to enter into any kind of union they wish. Any kind of arrangement they wish. The question of whether or not there ought to be a federal statute that governs this, I don’t support. I do believe that historically the way marriage has been regulated is at the state level. It has always been a state issue, and I think that’s the way it ought to be handled today, that is on a state-by-state basis. Different states will make different decisions. But I don’t have any problem with that. I think people ought to get a shot at that.

Quote Number 3

 I believe that marriage is the union between a man and a woman. Now, for me as a Christian — for me — for me as a Christian, it is also a sacred union. God’s in the mix…. . I am not somebody who promotes same-sex marriage, but I do believe in civil unions. I do believe that we should not — that for gay partners to want to visit each other in the hospital for the state to say, you know what, that’s all right, I don’t think in any way inhibits my core beliefs about what marriage are. I think my faith is strong enough and my marriage is strong enough that I can afford those civil rights to others, even if I have a different perspective or different view.

Quote Number 4

I don’t think we should deny people rights to a civil union, a legal arrangement, if that’s when a state chooses to do so. … I view the definition of marriage different from legal arrangements that enable people to have rights. And I strongly believe that marriage ought to be defined as between, a union between a man and a woman.

Quote Number 5.

I’ve just concluded that– for me personally, it is important for me to go ahead and affirm that– I think same-sex couples should be able to get married. Now– I have to tell you that part of my hesitation on this has also been I didn’t want to nationalize the issue. … I continue to believe that this is an issue that is gonna be worked out at the local level, because historically, this has not been a federal issue, what’s recognized as a marriage.

Answers:

1. Barry Goldwater, July 1994 (source)

2. Dick Cheney, July 2009 (source)

3. Barack Obama, August 2008 (source)

4. George W. Bush, October 2004 (source)

5. Barack Obama, May 2012 (source)

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Greece Update

My go-to guy on Greece these days is Harris Mylonas, a fellow Yalie from a few years back, now teaching at GW. Here’s his latest take on coalition negotiations in Greece. Bottom line: new elections in a few weeks are looking increasingly likely, and the result might yield something more stable. Also check out his book.

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Why “Vote GOP for the Court” Cuts No Ice with Me

I’ve never voted for a Democrat or Republican for president at a general election. I’ve always voted for a Libertarian (in 2008 I voted for George Phillies, who was on the ballot as a Libertarian in New Hampshire in addition to the official candidate, Bob Barr), and I’ve never had reason to regret my vote. Throughout my adult life (I first voted in 1996), every U.S. president has been worse than the one before, and the major-party candidates they defeated would almost certainly have been just as bad.

One common argument I hear from Republicans is that libertarians should vote for Republican presidential candidates because of the Supreme Court. And indeed, libertarians generally share conservatives’ enthusiasm for the prospect of the Supreme Court’s overturning at least part of the PPACA. However, the recent 5-4 Supreme Court decision authorizing invasive strip searches of all arrestees shows us the other side of the coin: the Supreme Court’s conservatives are disturbingly willing to defer to the executive branch on issues of non-economic personal liberties. Most of the politically controversial cases with which the federal judiciary deals have to do with civil liberties and civil rights. Major Commerce Clause cases come around only once every few years — and even there, Scalia and Kennedy are unreliable.

How will the current Court

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An Advantage of Incumbency…

…Making taxpayers foot the bill for your campaign events.

Obligatory disclaimer: Republican presidents did this too, I’m sure.

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NH GOP Kills Gay Marriage Repeal

The New Hampshire House, dominated 3-to-1 by Republicans, has just voted by an approximately 2-to-1 majority to kill a bill that would have repealed same-sex marriage and reinstate civil unions. Along with passage of marijuana decriminalization (by a single vote), this vote helps to demonstrate the increasingly libertarian, live-and-let-live character of the New Hampshire GOP.(*)

Meanwhile, the NH Senate just passed a bill to give businesses tax credits for funding private and out-of-district public school scholarships.

(*) I am of two minds on same-sex marriage. I support it on a personal level, as I do not see any good reason for government or anyone else to discriminate against same-sex couples. At the same time, I recognize that some people have deeply held religious objections to same-sex unions and object to having their tax dollars pay for government endorsement of these unions. For that reason, I favor getting government out of marriage licensing altogether.

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New Hampshire Liberty-Related Bills

Here is a convenient, occasionally updated source on liberty-related legislation that has been enacted into law in New Hampshire this session. There have been a number of changes since the Republican sweep in 2010, some of them despite vetoes from the populist Democratic governor. Most of these changes are minor, but the cumulative effect of the spending and tax cuts, in particular, will be significant.

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NH Liberty Forum Report

I’ve recently returned from the New Hampshire Liberty Forum, held February 23-26 in Nashua, NH and sponsored by the Free State Project. The two evening keynote speakers were libertarian free-range farmer Joel Salatin and investor and recent U.S. Senate candidate Peter Schiff. In addition, session speakers included school-choice economist Angela Dills, former Libertarian Pennsylvania gubernatorial candidate Ken Krawchuk, jailed marijuana activist Marc Emery’s wife Jodie, economist John Lott, Institute for Justice litigator Clark Neily, libertarian-anarchist feminist Sharon Presley, and Laissez-Faire Books publisher and former Mises.org editor Jeffrey Tucker.

Unfortunately, I had to help take care of a sick child, and I missed most of the talks, including Joel Salatin’s Saturday-night address. However, I did get to hear Jodie Emery, Ken Krawchuk, and Peter Schiff, and, perhaps more importantly, to catch up with many New Hampshire friends. The event received a good bit of local press coverage. Some examples:

Wire NH:

Events like this and their annual summer Porcupine Freedom Festival not only serve to promote the Libertarian mindset, but also create conversation that Free State Project president Carla Gericke says is of the utmost importance to the group’s goals.

“We are striving to live as free as possible,” Gericke said. “With freedom comes great responsibility. Sometimes, when I think about the movement, it’s almost like a form of localization on steroids.”

Gericke believes the Free State Project is attractive to people because the idea of collecting Libertarians to make a difference in government is a practical one. She added that, since her election as Free State Project president in 2011—three years after her own move to New Hampshire—she has been less focused on getting signatures on the statement of intent.

“Some of my focus has actually moved toward attracting people to move,” she said. “It’s great that they signed the pledge, but in terms of things on the ground, the more bodies we have here, the more we can actually accomplish.”

Nashua Telegraph:

The forum, in its fifth year, is the annual meeting for the New Hampshire Free State Project. Free Staters already living in New Hampshire and those thinking about moving here make up most of the participants, but everyone is invited, said Chris Lawless, a Hopkinton resident and the Free State Project’s forum organizer.

“We want people to come meet us, see we don’t have horns growing out of our heads,” Lawless said.

Nashua Telegraph #2:

Freedom to live as one chooses is a powerful ideal, and a conference exploring the concept was worth the drive from New Jersey for Marcus Connor, 37.

“Liberty is dying every day in the United States,” Connor said.

The government is killing it, he said.

That view was espoused in speeches throughout the morning. It was the drumbeat that would sound throughout the various programs of the forum.

One of the day’s first speakers, John Bush, talked of the need to abandon the U.S. Constitution, which he said was written to protect the interests of the nation’s founding fathers, who were “the privileged elite at the time.”

Bush represented Agora 21, described as “a counter-economic approach to building a free society in the 21st century.”

Bush acknowledged the Constitution marked civilization’s best achievement toward limiting government, but added, “I think we can do better. I think we can do much better.”

Patch.com:

Keynote speaker Friday is economist Peter Schiff, CEO of Connecticut-based Euro Pacific Capital Inc., who will talk about the current economic business cycle (a sham), what mistakes have been made (too many to count), what to expect next (something worse than the last collapse), and what you can do to prepare (buy gold, vote for Ron Paul, invest in foreign currency).

As you may have guessed, if you’re looking for someone to paint a rosy picture of the country’s gradual economic recovery since 2008, Schiff is not your guy.

“The future is bleak,” said Schiff in a recent phone interview with Nashua Patch.

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Could a Scottish Secession Referendum Bring About Salutary Decentralization?

For all the usual association of independence movements with violence and “separatism,” the fact is that secessionist movements in liberal democracies usually pursue their aims peacefully, through the democratic process, and central governments resolve not to use military force to prevent secession authorized by a democratic vote (imagine that!). Such is the case in Scotland, where a referendum on independence is to be held within the next three years.

Given that sending Her Majesty’s Armed Forces north of Hadrian’s Wall is simply not on offer, responsible politicians from all British unionist parties are starting to mull openly significant powers for Scotland. The Prime Minister himself has promised a semi-federal union for Scotland if they rejected independence, and business-funded think-tank Reform Scotland and Labour politician Alistair Darling are also on record as supporting substantial fiscal powers for Scotland. The reason such decentralization might be salutary is not only that it might preserve the union (if one believes that should be a goal), but that it moves the UK closer to the principle that each level of government should pay its own way: true fiscal federalism. Of course, for fiscal federalism to work as it ought, you need more than an autonomous Scotland (and Wales and Northern Ireland). You need English local governance to be comprehensively reformed as well.

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Revisiting My Primary Forecasts

My original forecasts for Ron Paul’s primary performances are here. Those forecasts were based simply on the Iowa result, so it was quite possible that there would substantial error, and indeed there has been. Paul significantly overperformed his forecast in New Hampshire and South Carolina, the forecast was dead on in Florida, and then Paul underperformed significantly in Nevada. In yesterday’s elections, Paul did significantly worse than expected in Colorado, slightly worse than expected in Minnesota, and slightly better than expected in Missouri. In general, he seems to be doing worse than expected since Florida.

Why is that? It could be that my forecast model was an unbiased model at the time, but that circumstances have changed unfavorably for Paul’s candidacy. Certainly, recent good economic news probably doesn’t help an antiestablishment candidate like Paul. Perhaps his poor Florida performance, although it should have been anticipated, demoralized some of his supporters. On the other hand, my forecast model could have been wrong, particularly in assuming that Paul’s vote shares would continue to feature overdispersion. It’s possible that with a broadening voter base, Paul’s caucus advantage has declined. Thus, Paul should improve on his 2008 performances everywhere, but not in a manner proportionate to his 2008 performances: there will be some apparent regression to the mean.

To see how Paul’s 2012 performances are stacking up against his 2008 performances, I ran a regression on the states with results so far. First, I regressed 2012 performance against 2008 performance linearly. Here are the results:

Call:
lm(formula = vote12 ~ vote08)

Residuals:
    Min      1Q  Median      3Q     Max 
-5.0465 -3.8563  0.8463  2.0316  6.8799 

Coefficients:
            Estimate Std. Error t value Pr(>|t|)  
(Intercept)   6.9290     3.4156   2.029   0.0888 .
vote08        1.1807     0.3632   3.251   0.0175 *
---
Signif. codes:  0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1 

Residual standard error: 4.444 on 6 degrees of freedom
Multiple R-squared: 0.6378,     Adjusted R-squared: 0.5775 
F-statistic: 10.57 on 1 and 6 DF,  p-value: 0.01745

These results suggest that for every 1% in 2008 vote share in a state, Paul is now receiving 1.2% in 2012, in addition to a base of 6.9% everywhere – so getting 5% in a 2008 primary would be associated with a forecast of about 12.9% in 2012. With these eight data points, the simple model explains 63.8% of the variance in 2012 performance.

Next, I turn to a log-linear model, which would be more appropriate if Paul’s performances continue to experience overdispersion. Here are the results:

Call:
lm(formula = lnvote12 ~ lnvote08)

Residuals:
     Min       1Q   Median       3Q      Max 
-0.36483 -0.22250  0.06901  0.15519  0.35117 

Coefficients:
            Estimate Std. Error t value Pr(>|t|)   
(Intercept)   1.5376     0.3628   4.238  0.00545 **
lnvote08      0.6086     0.1768   3.442  0.01377 * 
---
Signif. codes:  0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1 

Residual standard error: 0.2805 on 6 degrees of freedom
Multiple R-squared: 0.6638,     Adjusted R-squared: 0.6078 
F-statistic: 11.85 on 1 and 6 DF,  p-value: 0.01377

Although the coefficient estimate is not so easily interpreted, this model actually does a slightly better job than the simple linear model. (I also test various transformations of the independent variable to get at other nonlinearities, but none of those models improves significantly over this one.) So I use these estimates to get new forecasts of the remaining contests. Here they are:

State	Date	Forecast
Maine	11-Feb	27.2%
Arizona	28-Feb	11.3%
Michigan	28-Feb	14.2%
Washington	3-Mar	15.8%
Alaska	6-Mar	26.4%
Georgia	6-Mar	8.9%
Idaho	6-Mar	32.0%
Massachusetts	6-Mar	8.4%
North Dakota	6-Mar	29.9%
Ohio	6-Mar	12.2%
Oklahoma	6-Mar	9.7%
Tennessee	6-Mar	13.3%
Vermont	6-Mar	15.4%
Virginia	6-Mar	11.6%
Kansas	10-Mar	20.2%
Alabama	13-Mar	8.6%
Mississippi	13-Mar	10.9%
Illinois	20-Mar	12.5%
Louisiana	24-Mar	13.1%
District of Columbia	3-Apr	16.6%
Maryland	3-Apr	13.8%
Wisconsin	3-Apr	12.0%
Texas	3-Apr	12.5%
Connecticut	24-Apr	10.9%
Delaware	24-Apr	11.2%
New York	24-Apr	14.4%
Pennsylvania	24-Apr	25.1%
Rhode Island	24-Apr	15.1%
Indiana	8-May	16.1%
North Carolina	8-May	15.5%
West Virginia	8-May	12.4%
Nebraska	15-May	22.2%
Oregon	15-May	23.8%
Arkansas	22-May	12.1%
Kentucky	22-May	14.9%
California	5-Jun	12.9%
Montana	5-Jun	17.6%
New Jersey	5-Jun	12.1%
New Mexico	5-Jun	23.2%
South Dakota	5-Jun	25.7%
Utah	26-Jun	8.9%

In general, these new forecasts are lower for Paul in his best states and higher in his worst states. (So yes, his support is less overdispersed this time around, suggesting that his new support is less enthusiastic than his core support – not really surprising.) With the new forecasts, it’s looking unlikely that Paul will win any states outright, although Idaho, North Dakota, and Maine present possibilities.

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How to Solve the Scottish Referendum Question Controversy

Scotland’s upcoming independence referendum has been in the news in Britain. The Scottish government wants to hold the referendum in 2014, but UK Prime Minister David Cameron has said that Westminster holds ultimate control over the wording and timing of any legally binding referendum and wants to hold the referendum sooner.

Another point of contention is whether the referendum question should include two or three options. The SNP government in Scotland is open to a three-question (status quo, independence, or “devo max“) referendum, while the Conservative-Liberal Democrat coalition government in the UK wants a two-question (in or out) referendum. The apparent worry from Westminster is that a three-option referendum could split the unionist vote and allow independence to win with a bare plurality (say, 40% for independence and 30% each for status quo and devo max). Here is a debate among British political prognosticators about what will happen.

The solution to the problem is simple:

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