Is big government the answer?
September 26, 2008 | By Nathaniel Ward
As presidential candidates call for a "bipartisan" effort to rescue the economy and as Congress debates a deal on a $700 billion bailout for Wall Street, Heritage Foundation President Ed Feulner reminds us that free enterprise, not ever-bigger government, is the real long-term solution.
"As a rule, Congress is good at two things: (1) Doing nothing at all. (2) Overreacting," Feulner writes in the Washington Times.
The government already intervenes heavily in the economy, he explains, and every step toward free enterprise is a step in the right direction. In fact, "Washington could encourage growth on the Street just by getting out of the way."
"The long-term answer isn't more federal control, it's a return to free-market principles," Feulner argues. The bailout needs to be small—both to minimize taxpayer liability and to ensure company managers and stockholders "suffer the consequences of their bad investments."
Furthermore, the bailout legislation should not be "loaded up with goodies for special interests" like a bailout for homeowners who made bad investments. "It shouldn't be a federal concern whether or not someone owns a home."
Congress should repeal the heavy-handed regulation they passed after the Enron scandal, Feulner continues. These counterproductive rules not only failed to prevent the current crisis, but they continue to drive investors overseas just when the economy needs them most.
Feulner also encourages businesses to voluntarily change the way they pay their managers to reward long-term performance instead of risky deals that prop up the bottom line in the short run. "This, of course, should be done by management, not by federal regulation," explained Feulner.
Meanwhile, Heritage's Conn Carroll reports that the left continues to play political games with the bailout, insisting on support from conservatives while "pushing for expanded government power to rewrite mortgage contracts and diverting taxpayer revenue from the sale of distressed assets into a housing slush fund."
—David Talbot
Keeping the bailout constitutional
The draft bailout legislation is deeply troubling from a constitutional perspective, Heritage legal scholars Todd Gaziano and Andrew Grossman write.
They outline four principal constitutional concerns:
- Congress's enumerated power—or lack thereof—to intervene with private markets in the manner contemplated;
- The lack of meaningful standards to guide the extremely broad grant of discretion to the Treasury secretary (the "legislative delegation" problem);
- Limitations on judicial review over the exercise of that almost limitless discretion; and
- Related separation of powers concerns.
Instead of "employ[ing] narrow legalistic arguments" to bypass the Constitution, Gaziano and Grossman argue, lawmakers must be cautious and ensure they think through these very serious questions.
"To satisfy the substantial constitutional and policy concerns," they explain, "the draft legislation must cabin the scope and character of the Treasury secretary's discretion, connect the exercise of that discretion to legitimate government purposes, and allow Americans adversely affected to seek meaningful judicial review."
Other Heritage work of note
- Entrepreneurship. "America should take the lead in establishing a Global Economic Freedom Forum" that would advance free enterprise around the world, Heritage Vice President Kim Holmes writes in this week's "What's the Big Idea" column in the Washington Times. "Each year, they could hold a summit to come up with common solutions to such problems as international debt, weak financial institutions and poverty in developing nations." "What's the Big Idea," which runs every Thursday, highlights new policy work by experts at The Heritage Foundation and other organizations around the country.
- Protect America. On Monday, the New York Times' widely-read Freakonomics blog cited a recent military demographics study by Heritage experts Shanea Watkins and James Sherk. "The report measures the demographics of military personnel against the general U.S. population in four areas: household income, education level, racial and ethnic background, and regional origin," blogger Stephen Dubner said in a post about campaign rhetoric about the military.
- Protect America. During the Cold War, the United States threatened nuclear war if the Soviet Union attacked one of our allies. Heritage's Baker Spring explains that this doctrine, known as "extended deterrence," needs to be updated for the 21st century. First, he argues that deterrence today is "about convincing the enemy that he is unlikely to achieve the political and military purposes behind an attack." Second, America ought to rely less on a single agreement like NATO to protect its allies and more on "layered" commitments, such as a NATO alliance and a bilateral agreement.
- Protect America. A new interactive online presentation from The Heritage Foundation cuts through the complexity of the missile defense issue to bring you the facts. Heritage expert James Carafano collaborated with Chris Taylor from the Missile Defense Agency to produce the animation, which explains how serious the missile threat is and how we could defend ourselves against this threat were our current missile defense system brought up to speed. Next year, The Heritage Foundation will release its feature-length documentary on missile defense, 33 Minutes: Protecting America in the New Missile Age.
In other news
- Good news on energy: Congress' liberal leadership is expected to allow the ban on offshore energy exploration to expire.
- The House of Representatives has passed a massive $25 billion bailout for the auto industry. (U.S. News comments that "in Washington these days, an 11-figure expenditure barely attracts notice.") Heritage experts have argued that this massive bailout is bad news for taxpayers and the economy.
- North Korea is about to restart its nuclear program, in violation of agreements with the United States.
- The United Nations is using the economic slowdown as an excuse to call for more government spending to curb global poverty.
Coming up at Heritage
To attend these or any other events at Heritage please RSVP at Heritage's website. Or you can view these events live online. All times are Eastern.
- On Thursday, October 2 at 1:00 p.m., Kenneth Wainstein, Assistant to the President for Homeland Security and Counterterrorism, will discuss the Bush administration's efforts to combat terrorism and what must be done to defeat future threats.
- On Wednesday, October 8 at 2:00 p.m., a panel of experts looks at China's recent successes in space and explores whether America is losing this new space race.
Nathaniel Ward is the Editor of MyHeritage.org—a website for members and supporters of The Heritage Foundation. David Talbot contributed to this report.
