Time to Eliminate Corporate Welfare Summer 2008 by bamafun

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									Summer 2007

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Conservative Solutions For Advancing Liberty

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Time to Eliminate the CorporaTE WElfarE STaTE

INSIDE:
Changing Minds on Markets 12 Mobility and Opportunity 14 Fighting Agenda-Driven Attacks 23 Journalism and Public Policy 26 Liberty in State Courts 29

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ow do you change ideas and thus change public policies and institutions? As the contributors for this issue demonstrate, there’s more than one good answer to that question. Many people would agree in the abstract that giving taxpayer money to well-funded

Editor’s notE
businesses to do things they would do anyway is bad public policy. But, as Stephen Slivinski points out in our cover story, members of Congress face institutional incentives to avoid cutting corporate welfare. The institutional solution for this institutional problem, he says, is a corporate welfare reform commission. John Hood offers a different suggestion for limiting government: expose big government’s misdeeds. Hood is President of the John Locke Foundation, which, for over a decade, has used investigative journalism to fight corruption in North Carolina. Hood’s prescription is a complement to Slivinski’s: Investigative journalism reveals the malfeasance that always seems to go hand-in-hand with government largesse. Like Hood, Daniel Benjamin emphasizes the

value of showing rather than telling. Benjamin reviews recent research finding that when people experience secure private property rights for themselves, they become much more inclined to view free markets positively. Sometimes, however, free market critics need to be confronted directly. In his article, public relations consultant Eric Dezenhall says defenders of free enterprise need to recognize and push back against agenda-driven attacks. Marji Ross, meanwhile, reviews the success that Regnery Publishing has had using books to influence public debates. Turning from the front lines of public opinion to those of our judicial system, Clint Bolick argues that the freedom movement needs to seize a neglected opportunity offered by our federalist system: using the protections of state constitutions to advance individual liberty. Also, we offer a timely look at the connection between mobility and opportunity. While the Left sees automobiles as public enemy No. 1, Ted Balaker shows that cars and roads are critical for maximizing opportunities, not just for work, but for play, family, love, and public safety, too. Bridgett Wagner Director of Coalition Relations Alex Adrianson Editor of The Insider and InsiderOnline.org



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Edwin J. Feulner, President • Becky Norton Dunlop, Publisher • Bridgett Wagner, Director, Coalition Relations • Alex Adrianson, Editor, The Insider • Teri Ruddy, Deputy Director • Colin Sharkey, Project Coordinator • Craig Kreinbihl and Julia Rybicki, Interns The Insider is published quarterly by The Heritage Foundation’s Coalition Relations Department. Begun in 1978, The Insider brings together knowledge and news from all parts of the conservative movement. The Coalition Relations Department serves as Heritage’s liaison to a network of some 500 policy groups and over 2,000 leading scholars and activists worldwide. Features for The Insider are picked by the Editor and Director, but studies and other publications can be submitted for consideration and publication on InsiderOnline.org to: The Editor, The Insider, The Heritage Foundation, 214 Massachusetts Avenue, NE, Washington, DC 20002-4999, (202) 546-4400, fax (202) 544-0961, e-mail insider@heritage.org. Interested in advertising with The– Insider? E-mail insider@heritage.org for more information.
Note: Nothing written here is to be construed as necessarily reflecting the view of The Heritage Foundation or as an attempt to aid or hinder the passage of any bill before Congress.

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What We Believe
Time to Eliminate the Corporate Welfare State
By Stephen Slivinski

Who We Are
4 Publishing to Influence: Regnery and the Role of Books
By Marji Ross

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Changing Beliefs About Markets: The Role of Property Rights
By Daniel K. Benjamin

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What We Do
Defending Free Enterprise from Agenda-Driven Attacks
By Eric Dezenhall

Why Mobility Matters to Personal Life
By Ted Balaker

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14

Uncovering the Culture of Corruption
By John Hood

26

Vindicating Freedom in State Courts
By Clint Bolick

29

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Time to eliminate the



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Corporate Welfare State
By Stephen Slivinski

What We Believe

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he federal government spent $92 billion on Business Administration allege that the agency direct and indirect subsidies to businesses provides credit for firms that could not get and private-sector corporate entities—expen- loans in the private capital markets. Research ditures commonly referred to as “corporate on the subject, however, has shown that small welfare”—in fiscal year 2006. Supporters businesses do not face insurmountable obstaof federal subsidies to private industry often cles to finding willing lenders and sources of maintain that government support of busi- credit funding. (See, for example, Veronique ness is in the national interest. For instance, De Rugy’s article “The SBA’s Justification government support is said IOU” in Regulation, Spring to remedy market failure 2007.) The market failure by assisting disadvantaged justification is also used Supporters of government progroups who cannot receive by supporters of programs private funding to establish grams often suggest that corporate geared to funding high-tech new businesses. Supporters subsidy programs are necessary to research, but, as discussed of corporate welfare pro- remedy some sort of market failbelow, the market has not grams also justify business ure. On closer inspection, most of failed to deliver sufficient subsidies as a way to help venture capital to advance those proclaimed market failures maintain the competitiveimportant new technologiness of certain critical indus- simply do not exist. cal discoveries. tries. Yet those justifications Corporate Welfare Prodo not stand up to scrutiny. grams Create an Incestuous There are many reasons why such policies are Relationship Between Business and Governmisguided: ment. In Washington, D.C., industry trade Government Is Ill-Suited to Finding the associations and lobbying firms continually “Next Big Thing.” The function of private pressure lawmakers to give out new business capital markets is to direct investment to subsidies or to protect long-standing handouts. industries and firms that offer the highest That is a natural byproduct of a government potential rate of return. The capital markets, that uses its power to give taxpayer money to in effect, are in the fulltime business of select- favored interests. If there were no possibility ing corporate winners and losers. Yet the that subsidies might be offered, demands for underlying premise of many federal business them would diminish if not disappear. subsidies is that the government can direct the That tendency is nurtured by the problem of limited pool of capital funds just as effectively concentrated benefits and diffuse costs. Subsias, if not better than, markets can. The truth dies are usually given to a few recipients at the is that capital markets are far more agile than expense of many taxpayers. Because there are government and are much better suited to act- such a large number of taxpayers—and each ing on sophisticated market signals than gov- corporate subsidy may cost each taxpayer only ernment ever could be. a few cents or a few dollars—most individual In addition, supporters of government pro- citizens don’t have an interest in lobbying grams often suggest that corporate subsidy against subsidies since the cost of doing so far programs are necessary to remedy some sort outweighs simply paying the taxes. However, of market failure. On closer inspection, most the recipients of those subsidies have a subof those proclaimed market failures simply do stantial interest in making sure they protect not exist. For instance, supporters of the Small the flow of money to them. That leads to a
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Figure 1:

Direct Government Payments to Farmers, 1990–2005
25

20

Billions of Dollars

15

10

5

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Calendar Year
Source: U.S. Department of Agriculture, Economic Research Service, www.usda.gov/data.



great deal of lobbying by special interests but very little lobbying on behalf of taxpayers. In addition, subsidies create a perverse incentive for businesses: If an entrepreneur’s competitors are receiving help from the government, it may appear to be in his or her interest to try to get some of that help, too. That incentive serves only to turn many businesspeople into lobbyists, sidetracking them from their role as entrepreneurs. That, in turn, leads to an overallocation of private resources to pursuing and protecting government subsidies. Corporate Welfare Programs Violate Constitutional Principles. Direct corporate subsidies fall outside the limited enumerated functions of the federal government. Nowhere in the
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Constitution is Congress granted the authority to spend funds to subsidize industry directly, or to enter into joint ventures with automobile companies, or to guarantee loans to favored business owners. Yet, since the New Deal, by applying very expansive readings of the General Welfare Clause, the Supreme Court has allowed Congress to redistribute wealth from taxpayers to favored business interests. CASe STudIeS Agribusiness. The biggest direct subsidy program in the federal budget is crop and farm subsidies. In fiscal year 2006, taxpayers footed the bill for $21 billion in agricultural subsidies. Eleven years ago, Congress voted to phase down farm subsidies through 2001. Instead,

the opposite has occurred: A series of so-called final nail in the coffin of the Freedom to Farm emergency spending bills and the resurrection Act’s commitment to weaning farmers from of a price support program in 2002 have since taxpayer support. Instead of zeroing out farm hiked subsidy levels to near-record highs. subsidies, the legislation created a new version Figure 1 shows the trend of farm subsidy of the old price support program that was estipayments between 1990 and 2005. The years mated to cost taxpayers $99 billion in direct in which farm subsidies were the lowest (1994 subsidies over six years. The four fiscal years through 1997) correspond with two key events: since the enactment of the 2002 farm bill have (1) a rise in commodity prices already seen an estimated and (2) the passage of the $72.9 billion spent on farm Federal Agriculture Improvesubsidies. The United States has prospered ment and Reform Act of Although members of 1996, often referred to as the even while the farm sector has Congress from farm states Freedom to Farm Act. Subsi- shrunk as a percentage of the have an interest in continudy levels before 1996 were set overall economy. Over the past ing to subsidize farmers, the by a formula that triggered 50 years, the number of people United States has prospered an increase in farm subsidies even while the farm sector working and living on farms has when crop prices fell. Starting has shrunk as a percentin 1995, crop prices began to dropped. age of the overall economy. rise, thereby allowing subsidy Over the past 50 years, the levels to drop. number of people workThe Freedom to Farm Act, passed in 1996 ing and living on farms has dropped. Farm when commodity prices were high and demand employment— including farm proprietors as for subsidies was low, ended the price support well as wage and salary workers—makes up program and replaced it with a declining fixed less than 2 percent of total employment in the payment unrelated to market prices. Farm United States. The percentage of Americans subsidies were scheduled to decline from $5.6 who live on farms dropped from 16.6 percent billion in 1996 to $4 billion by 2002. After in 1948 to around 2 percent in just over 40 that, crop subsidies were set to disappear. years. Yet thanks to technological advances, The scheduled phaseout remained intact farm productivity is at a historically high for about two years until Congress reversed level. course in 1998. When crop prices began to Despite what some farm-state politicians decline that year, Congress passed a large might say, farms do not need to compose a “emergency” supplemental appropriation that substantial portion of the economy for the hiked total farm subsidies to $12.4 billion. United States to remain economically strong. Subsequent supplemental legislation spurred A smaller farm sector is not a sign of economic farm subsidies to new heights, amounting to a decline. Quite the contrary: A farm sector that total of over $79.5 billion between 1999 and can produce substantial amounts of food with 2002. That’s $60 billion more than the Free- less capital and fewer workers is a testament dom to Farm Act’s phaseout of crop subsidies to economic progress. would have allowed if subsidies had been cut However, the conventional wisdom continas promised. ues to view federal agricultural programs as In May 2002, President Bush signed into vital to preserving impoverished and belealaw a new six-year appropriation that put the guered family farms in the United States. The
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reality is quite different from Innovative Research prothe popular notions about gram show why governAverage income for farm housefarming in America today. ment is ill-suited to discover Most farmers are relatively holds has exceeded the national and fund the technological average by 5 percent to 17 percent advances that fuel the highwealthy. Average income for farm households has every year since 1996. tech economy. exceeded the national averThe ATP was created in age by 5 percent to 17 per1988 to support technologicent every year since 1996. By contrast, when cal research that had the potential to provide large-scale federal farm subsidies began in the broad-based economic benefits for the nation. 1930s, farmers’ incomes were only half the The presumption was that the program, part national average. As the Department of Agri- of the Commerce Department’s National Insticulture itself reports, “Farm households have tute of Standards and Technology, would give higher incomes, greater wealth, and lower a boost to technologies that were “pre-competconsumption expenditures than do other U.S. itive” or “high risk” and could not get funding households.” on their own in private capital markets. Since Most farmers don’t receive direct subsidies its inception, the program has funded more from the federal government. The taxpayer- than 768 projects at a cost of at least $2.3 bilfinanced handouts go to only about one-third lion in federal matching funds. of the nation’s farmers and ranchers. So where Program supporters suggest that ATP is a does all the taxpayer money spent on farmers funder of last resort for high-tech businesses. actually go? Mainly to large corporate agri- However, a study by the General Accounting businesses and the richest farmers. In 2005, Office (now the Government Accountability the most recent year for which comprehensive Office) found that 63 percent of the compastatistics are available, the richest 10 percent nies that applied for ATP grants didn’t look for of all subsidy recipients received 66 percent of private capital or other sources of investment all subsidies. before they applied for government money. There are a variety of reasons to terminate That raises some serious questions: Are the farm subsidies. There are, however, no defensi- projects that the government funds examples ble reasons to continue them. These programs of promising but overlooked entrepreneurial exist today mainly as a way for politicians to initiatives? Or are they mostly examples of shower taxpayer money on powerful interest how savvy businesses can get the federal govgroups. ernment to underwrite their products’ R&D? High-Tech Companies. The Advanced The evidence seems to indicate the latter. Technology Program and the Small Business A recent GAO study points out that some
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of the biggest ATP expenditures went to tive Research program indicates. The SBIR is research ventures that were already gener- a less high-profile program than ATP, but its ously supported by the private sector. For budget is actually much larger—about $1 bilinstance, the ATP spent $1.2 million in the lion—because it consists of portions of many early 1990s to develop a system to recognize federal agency research budgets. cursive handwriting for pen-based computer Created in 1982, the SBIR’s goal is to inputs, such as those used in handheld devic- stimulate technological innovation. Instead, es today. In fact, this line of research had the result has been a crowding out of pribegun in the private secvate research spending by tor during the late 1950s, firms receiving government and patents for workable money. According to regresIn addition to being duplicative, versions of the technolsion analysis done by Scott ogy were issued five years government funding of research J. Wallsten, for every dollar often ends up simply underwritbefore the start of the ATPof SBIR grant money the funded project. Companies ing other aspects of corporate average company receives, like Apple Computers and operations, as a study of the Small it reduces its own R&D by Motorola were already well a dollar (see “The R&D Business Innovative Research on their way to coming to Boondoggle,” Regulation, market with versions of this program indicates. 23, Winter 2000, pp. 14– technology. Other technolo15). That forgone dollar of gies that were already well R&D money does not disfunded and researched by the private sec- appear. It goes to fund another aspect of the tor were methods to expand the capacity of firm’s operations. The consequence is that, fiber optic cables and technology to regener- instead of contributing to an overall increase ate human tissue and organs. The ATP spent in R&D spending, the federal government roughly $2 million to duplicate funding for finds itself underwriting the profit margins of R&D in those technologies. There is obvi- small businesses and corporations. ously no market failure here. These supposexporters. The mission statement of the edly precompetitive technologies were able Export-Import Bank stipulates that the bank’s to attract substantial funding in the private main purpose is to finance the purchase of sector. U.S. goods in foreign markets. The justifiATP grants have gone to some of the big- cation it provides for its fiscal 2008 budget gest companies in America or their subsidiar- request is more transparent and perhaps more ies—companies that have no trouble funding honest: “to sustain U.S. jobs by financing U.S. their own R&D. Over the last 12 years, many exports.” The Ex-Im Bank does that by using Fortune 500 companies or their subsidiaries taxpayer money to subsidize loans to foreign have received millions of dollars of ATP fund- purchasers of U.S. products and to provide ing. Top beneficiaries of ATP grants over the loans and loan guarantees to U.S. compapast 15 years include IBM, General Electric, nies seeking to enter export markets. It also Honeywell, Xerox, and Dow Chemical. provides insurance for companies investing In addition to being duplicative, govern- overseas. ment funding of research often ends up simply The loans and guarantees that the Ex-Im underwriting other aspects of corporate opera- Bank grants to U.S. companies qualify it as the tions, as a study of the Small Business Innova- underwriter of the sales of some of the biggest
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Fortune 500 companies, none probably because those projof which would have trouble ects simply weren’t ones that Any attempt to terminate business getting funding for worthinvestors found worthwhile, while overseas projects. Boe- subsidy programs will require alter- or because the interest rates ing is the largest corporate ing the incentives of legislators. on those loans were higher beneficiary of Ex-Im Bank than the companies were loan activity, leading many willing to accept. That is not commentators to refer to the Ex-Im Bank as an example of market failure—it is a testament “Boeing’s Bank.” to how well private capital markets work. Supporters of the Ex-Im Bank suggest that government credit is needed to level the play- HoW To elImINATe THe CoRPoRATe ing field for U.S. companies as they compete WelFARe STATe against foreign companies that receive support Any attempt to terminate business subsidy from their governments. Yet the Ex-Im Bank’s programs will require altering the incentives most recent annual Competitiveness Report of legislators. Individual members of Congress points out that fewer than one-third of all its lack the incentive to discipline themselves. If loans and guarantees go to counter subsidized they were successful in saving taxpayer money foreign competition. by defunding a particular program, less absteInstead, most of the Ex-Im Bank’s loan and mious members might be able to use that guarantee portfolio is geared toward providing money to bolster the budget of another favored credit for overseas projects and purchases that program. Also, member A knows that voting the bank says could not receive private fund- for a decrease in member B’s favored program ing. However, 99 percent of capital-intensive might result in future reprisals. For those reaprojects in developed countries are already sons, attempts to defund these programs one financed by private borrowers. The amount by one, or in small groups, during the annual for developing countries is 89.7 percent. The appropriations process are not likely to yield Ex-Im Bank provides a mere 2 percent of the results. An institutional problem of this sort financing for projects in developing countries. requires an institutional solution. Those data do not provide good evidence One way out of this dilemma might be that there is a failure in the credit markets. Pri- a corporate welfare reform commission vate capital markets have been able to provide (CWRC). General guidelines for a bill creatvirtually all of the funding for overseas proj- ing a CWRC could be as follows: ects and acquisitions of U.S. products. If the • The commission would not be composed projects the Ex-Im Bank underwrites were not of sitting members of Congress. It would be able to receive funding in private markets, it’s chosen by bipartisan agreement between the
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President and the leadership of both houses of general understanding that even though the Congress. military base structure then made little sense • The commission would convene for the on the whole, Congress could not bring itself purpose of proposing a list of corporate wel- to close specific bases. According to Kenneth fare programs that should be eliminated. R. Mayer, during the 10 years before BRAC, • The commission would address only “Congress prohibited studies of whether bases spending programs, not tax preferences in the should be closed, required an environmenbudget, and no corporate welfare spending tal impact statement for any proposed cloprograms should be considsure, and attached riders to ered “off the table.” appropriations bills to bar • The commission’s list of the spending of funds to Sunlight is the best disinfectant. recommended program terclose particular bases,” (see minations would be voted on A corporate welfare commission “The Limits of Deregulawould finally allow scrutiny of by both houses of Congress, tion: The Rise and Fall of with no amendments, within those programs in a coordinated BRAC,” Regulation, Fall 60 days of the commission’s public proceeding. That’s not 1999). Although many final report. members of Congress liked something that happens regularly A commission structured the idea of closing military along those lines would solve in Congress today. bases in the abstract, they two main problems: were rarely willing to vote • The special interests for a bill that would close dilemma: Because the members of the commis- a base in their district. Congress was unable, sion would not be incumbent lawmakers, they because of institutional and political biases, to would be far more insulated from political con- downsize the defense budget at a time when cerns. While there would still be special interest doing so was often cited by members of both pressure on the members of the commission, parties as an important goal. that pressure is likely to be much less effective. A final reason to convene such a commis• The collective choice dilemma: Because sion is that sunlight is the best disinfectant. A every program would be terminated by an up- corporate welfare commission would finally or-down vote on an unamendable bill, there allow scrutiny of those programs in a coordiwould be no vote trading on the specifics of the nated public proceeding. That’s not something bill as there is during the normal appropriations that happens regularly in Congress today, and process. The commission would have the abil- it’s long past time for sustained public attention ity to cast a wide net and create a list of pro- to a debate on the merits of the federal governgrams that would hit a larger number of special ment’s role in subsidizing private companies. interest constituencies than any one member of, or group within, Congress would propose. To Mr. Slivinksi is Director of Budget Studies at further enhance the possibility of success, the the Cato Institute. This article is adapted, with commission could present its list of program permission, from his longer paper “The Corterminations to Congress in a nonelection year. porate Welfare State: How the Federal GovThe CWRC has an ancestor in the Base ernment Subsidizes U.S. Businesses,” Cato Realignment and Closure Commission. The Institute Policy Analysis No. 592, May 14, BRAC was created after the collapse of the 2007, available at www.cato.org/pubs/pas/ Soviet Union, at a time when there was a pa592.pdf.
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Can beliefs about fundamental social institutions, such as the market system, change? If so, what can cause such changes?

Even if one replies “yes” to the first question, discerning an answer to the By Daniel K. Benjamin second has been an elusive goal for social scientists. Recent research by Rafael Di Tella, Sebastian Galiani, and Ernesto Schargrodsky presents compelling evidence that the creation of secure property rights within a society actually changes people’s beliefs—to make them much more favorably disposed to the workings of a free market. Di Tella et al. study the formation of beliefs in a squatter settlement on the outskirts of Buenos Aires. More than 20 years ago, hundreds of families occupied an area of wasteland that they thought was owned by the state. In fact, the area was composed of several tracts of land belonging to 13 private owners. Eventually, the state allowed the squatters to stay on the land, offering monetary compensation to the original owners. Many of the owners accepted the offer. The lucky squatters who happened to occupy these tracts received secure, legally defined, and protected property rights to the parcels on which they resided. But more than a third of the owners conReference tested the terms of the monetary settlement, Rafael Di Tella, Sebastian Galiani, and Ernesto Schargrodsky, “The and even today the Argentine courts have Formation of Beliefs: Evidence not resolved this issue. The unlucky squatfrom the Allocation of Land Titles to Squatters,” Quarterly Journal of ters on these parcels have never received Economics, Vol. 122, No. 1 (Februsecure rights to the land they occupy and, ary 2007), pp. 209-241. thus, have lived in legal limbo.
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Changing Beliefs About Markets: The role of Property rights

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As the authors show, the age, education, sex, and other characteristics of the lucky squatters are the same as those of the unlucky squatters. Moreover, the size and physical properties of the lands occupied by each group of squatters are essentially the same. In effect, then, the authors have happened upon a natural experiment in which different property rights structures were imposed on two otherwise identical groups of individuals. In this study, Di Tella et al. have chosen to answer this question: Does the presence of secure property rights affect the beliefs that individuals hold about the world? The authors find that the answer is unequivocally “yes.” Lucky squatters who received secure property rights to their land report much more positive beliefs about the operation of the market system than do those unlucky squatters whose rights remain insecure. To reach their conclusion, the authors randomly selected about 40 percent of the 1,100 squatter families and then evaluated their answers to several key survey questions. For example, squatters were asked whether they thought that individual (as opposed to group) action can yield success in life; whether material success is important in determining individual well-being; whether hard work is likely to be rewarded; and whether one can trust other people. Compared to the unlucky squatters, the lucky ones who received secure property rights concluded in the affirmative in each case; they believe individual actions can yield positive outcomes, that material success is important to personal well-being, that hard work is rewarded, and that other people can be trusted. Di Tella et al. then aggregated the answers to these questions into an index of “market beliefs,” which enabled them to compare the overall attitudes of the two groups of squatters toward the market system. The squatters who received secure property rights are 20 percent

more positive toward the market system than are the unlucky squatters. Indeed, the attitudes of the squatters with secure property rights are just as positive toward the market system as the attitudes of much more affluent Argentinians who are much better educated and have much higher incomes. There is considerable evidence from other research that secure property rights yield improved environmental quality, more efficient resource allocation, and higher wealth. Despite this, many people around the world remain suspicious of market systems and the private property rights essential to their functioning. Such attitudes arguably block the spread of markets, leaving millions of individuals mired in abject poverty. The present study implies that the beliefs held by market skeptics may in fact be subject to change—if the advantages of secure property rights and the operation of free markets can be demonstrated close enough to home. The importance of this study is that it suggests that changes in attitudes are no accident, and that it may be possible, on a broader scale, to overcome the widespread hostility toward market systems. The aphorism that “seeing is believing” is rarely more applicable, for it appears that the creation of private property rights has the potential to change fundamentally how people perceive the world, and thus, perhaps, the institutions and policies they are willing to adopt. For those who believe that environmental quality, individual choice, and personal freedom are important, this is good news indeed. Mr. Benjamin is a senior fellow at the Property and Environment Research Center and Alumni Distinguished Professor at Clemson University. This article is reprinted, with permission, from PERC Reports, Summer 2007.
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The InsIder summer 07

Mobility Matters
to Personal Life
By Ted Balaker

Why

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mericans rightly celebrate freedom of opportunity, but how far would it take us if our movement were severely restricted? How might the lack of mobility affect the kind of jobs we hold, the places we explore, or even the people we marry? The freedom of mobility helps make other freedoms more meaningful. The more mobility we enjoy, the more choices we have. Mobility gives us more of what’s important in life. Imagine that you are in the center of a circle. Call it your opportunity circle.

The space within the circle represents the amount of ground you can get to in a reasonable amount of time, say, one hour. The dots represent all the possible jobs you can apply for. The bigger your opportunity circle, the more jobs you can get to, and the better chance you have of landing the job that is right for you. If your mobility improves, the circle grows and you have more opportunities. If mobility degrades, the circle shrinks and you have fewer opportunities. And the dots need not represent just job opportunities. If you are an employer the dots could represent potential customers or your available labor pool. The dots could actually represent just about anything, from dining opportunities (area restaurants) to opportunities for love (available singles). When we enjoy efficient mobility, we can fill our personal lives with rich and varied activities, thanks to what Reason magazine’s Nick Gillespie calls a “culture boom,” that is, “a massive and prolonged increase in art, music, literature, video, and other forms of creative expression.” Economist Tyler Cowen, in his book In Praise of Commercial Culture, chronicles cultural proliferation: “From 1965 to 1990 America grew from having 58 symphony orchestras to having nearly 300, from 27 opera companies to more than 150, and from 22 non-profit regional theaters to 500.” Since 1990 our culture has continued to boom. Consider, for example, that the American Symphony Orchestra League currently boasts nearly 1,000 member orchestras. And countless other cultural offerings—from restaurants, to health clubs, sports complexes, and art galleries—have also grown more plentiful. The more mobility we enjoy, the more we’re able to take advantage of our cultural bounty. But our ancestors had to make do with smaller opportunity circles and fewer choices. Long ago they had only their feet to rely upon. But new modes of travel—wheeled

The Opportunity Circle

carts, animal-powered carriages, trains, cars, and planes—have allowed us to cover more ground faster. WHAT’S THe BeST WAy To GeT THeRe? The average person can walk about four miles per hour, but cars can easily travel on arterial streets at 30 miles per hour. It’s a substantial increase in speed, but the impact may be even greater than it seems. A person who walks for an hour has access to 50 square miles, but someone who drives at 30 miles per hour for 60 minutes has access to 2,827 square miles. In other words, the driver’s opportunity circle is more than 56 times as large as the walker’s. And when conditions permit, motorists may drive much faster on highways, thus expanding opportunity circles even more. In many cases public transit offers greater mobility than walking and, in some cases, it can also beat driving. But auto travel is generally much faster than taking transit. Other factors, from transfers from one bus or train to another to time spent walking to the transit stop, make a slow transit trip even slower. Even though transit commutes typically cover shorter distances, Department of Transportation data show that it takes the average American transit user about twice as long to get to work as the average car commuter. This holds true in some unexpected
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Table 1: How Long It Takes to Get to Work
Metro Area
New York Chicago San Francisco Washington, DC Boston Philadelphia

Transit
52 minutes 50 minutes 46 minutes 47 minutes 44 minutes 46 minutes

Solo Driving
28 minutes 29 minutes 27 minutes 30 minutes 26 minutes 26 minutes

Source: Nancy McGuckin and Nandu Srinivasan, Journey to Work Trends in the United States and its Major Metropollitan Areas, 1960-2000, U.S. Department of Transportation, Federal Highway Administration, Publication No. FHWA-EP03058, June 3, 2003.

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places. For many New Yorkers transit offers the fastest way to get to work, but, on average, transit commutes take much longer than auto commutes even in the New York metro area. Indeed, New York’s transit commuters endure the longest commutes in the nation (52 minutes each way vs. 28 minutes for solo driving). Transit commuting takes much longer than driving in many other areas with celebrated transit systems (see table). Motorists enjoy additional advantages that push many people toward cars and away from transit. Travelers can reach relatively few destinations directly by transit, but motorists can go from (almost) anywhere to (almost) anywhere. Transit service frequency varies according to schedules, but motorists can travel whenever they like. Their travels are not as restrained by fatigue as are those of walkers and transit users who trek to and from transit stops. Simple conveniences, like trunk-space, make it easier to carry things and additional seating makes it easier to transport small children, the elderly, and the handicapped. The enclosed space of a car can also spare travelers from the rain, snow, heat, and humidity. And although driving brings its own risks, many people feel safer traveling at night or through unfamiliar areas within the confines of a car. Yet, as they have always done, Americans
The InsIder summer 07

will trade in their cars once a superior form of transportation comes along. Telecommuters already outnumber transit commuters in 27 of the top 50 metro areas, and telecommuting has already partially replaced cars for millions of American workers. And why not? Even with no traffic congestion and nothing but green lights, driving to work will never be as fast as the zero-minute commute that telecommuters enjoy. New technology has given us a new kind of mobility. Armed with cell phones, laptops, and PDAs we can “be” almost anywhere without crawling into a car, train, or plane. But that should not diminish the importance of “old-fashioned” mobility—moving people, parts, and products across physical space. Although a growing number of people can work remotely, countless occupations—from hair stylist to dentist to construction worker— remain location-specific. The telecom explosion allows more business to get done over the phone or via e-mail. The falling cost of communication has generated more communication—even across continents—and these interactions routinely result in new plans that require traditional mobility. Physical proximity might matter even more for personal life than it does for business. Even with the growing popularity of online games and shopping, many still find relaxation or

stimulation by experiencing a new location. They look forward to trying a new restaurant across town, taking their kids to the park, or taking dance lessons. So when it comes to enriching our personal lives, traditional mobility does indeed matter. And, for now at least, the car usually offers the best way to stretch our circles as wide as they can be.

tinue to respond to the mobility crisis with a shrug, many more areas will succumb to LAstyle gridlock. David Hartgen and M. Gregory Fields estimate that by 2030, 11 additional urban areas (Chicago; Washington, D.C.; San Francisco; Atlanta; Miami; Denver; Seattle; Las Vegas; Minneapolis–St. Paul; Baltimore; and Portland) will suffer through traffic conditions as bad as or worse PRoGReSS GeTS STuCk than present-day Los AngeIN TRAFFIC les. (See Hartgen and Fields’s When mobility improves, our When mobility improves, paper “Building Roads to our opportunity circles opportunity circles expand and we Reduce Traffic Congestion expand and we have access have access to more of what’s avail- in America’s Cities: How to more of what’s available able not only in our neighborhoods Much and What Cost?” Polnot only in our neighbor- but also in nearby regions. icy Study No. 346, published hoods but also in nearby by the Reason Foundation.) regions. Yet how much a city Eighteen other areas, from offers is quite different from how much any Phoenix to Orlando, will endure a level of conindividual denizen can access. We have come gestion only slightly less severe. so far, but in so many places mobility is no Our elected officials have been slow to longer improving. Mounting traffic congestion address the problem, and for many years few chips away at the progress we have made. people seemed to care. Traffic congestion Today congestion smothers well estab- was long regarded as little more than a minor lished areas (up 183 percent in Washington, annoyance. But times have changed. Former D.C., since 1982, according to the Travel Time U.S. Secretary of Transportation Norman Index) as well as upstart ones (up 475 percent Mineta recently called gridlock “one of the sinin Atlanta). Not only has congestion gotten gle largest threats to our economic prosperity.” much worse in areas where we expect it to be Public opinion has also changed. Silicon Valbad, but it’s also making life increasingly slug- ley CEOs rate traffic congestion as their second gish across the nation, from Portland to Aus- most pressing concern, as do business owners tin to Charlotte. in downtown Portland, Oregon. In its aptly The average urban American now spends titled new study “Growth or Gridlock?” the 47 hours a year stuck in traffic—more than an Partnership for New York City estimates that entire work week—and it’s much worse in our traffic congestion saps the regional economy of big cities. In Los Angeles, the average driver as many as 52,000 jobs each year. According to spends 93 hours sitting in traffic jams on the recent surveys, congestion is among residents’ roads. In 1983, only one urbanized area, Los top concerns in places as different as Denver Angeles, had enough congestion to cause the and Washington, D.C. Residents have placed average driver to spend more than 40 hours congestion atop their list of concerns in Austin, per year stuck in traffic. Just 20 years later, 25 Atlanta, Houston, Portland, Los Angeles, Minareas reached this threshold. neapolis–St. Paul, Sacramento, San Diego, and The future looks bleaker still. Congestion in San Francisco. The longer public officials put Los Angeles is legendary, but if officials con- off dealing with it, the more traffic congestion
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will transform from a minor annoyance into a force that threatens economies and quality of life, dampening our enjoyment of so many of the things that make life fun, varied, exciting, and fulfilling. THe CoST oF CoNGeSTIoN Often officials and planners tout a supposed urban renaissance in which everyone, from singles to empty-nesters, is moving to downtown centers. Although this may be true in some cases, it obscures the bigger picture and real trend: Cities are losing influence. Since 1950, suburbia has accounted for more than 90 percent of the growth in our metropolitan areas. Cities like Baltimore, Detroit, St. Louis, and Philadelphia continue to lose population, and even foreign immigration cannot keep some of our most celebrated urban centers growing. In the first half of the 2000s, Chicago, San Francisco, and Boston lost population. The situation would be less dire if demographic trends simply reflected the preference of Americans to live and work in suburban environments. Indeed the lure of suburbia has much to do with Americans’ preference for distinctly suburban features such as affordable single-family homes and backyards. And although it’s true that suburbia grows more cosmopolitan all the time, cities still offer a greater concentration of cultural offerings, be they restaurants, art galleries, museums, theaters, playhouses, or most anything else. Businesses think it wise to follow all these potential workers to the suburbs, even though a suburban environment is not inherently superior for many of them. Many businesses, families, and singles would love to stay in the city and draw on all the energy offered by agglomeration economies, but they are forced out by a variety of urban headaches, including degraded mobility. Too many elected leaders find comfort in misleading tales of
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urban renaissance and too many assume that our great cities can thrive even as mobility degrades. But improving mobility is essential to ensuring our urban centers’ long-term survival, and if we ignore the mobility crisis our cities will wither. Not only are talented and energetic people increasingly choosing suburbia over city life, but also sluggish urban life is draining some of the talent and energy that remain. As travel becomes more difficult, fewer interactions take place. Vibrant competition has traditionally ensured that city dwellers enjoy the best of the best, but when mobility degrades, a city functions less like a grand urban space and more like a collection of isolated communities. Instead of traversing several neighborhoods to patronize the best establishments, denizens are more apt to resign themselves to whatever’s nearby. First-rate establishments find it more difficult to attract customers, and second-rate operations realize that, with less competition, they face less pressure to improve. Residents are often stuck with fewer choices, higher prices, and inferior service. Downtown cultural institutions fret about traffic-weary would-be patrons steering clear of music, dance, and theater events. And often it’s the offbeat establishments, the very spots that give cities their character, that are particularly vulnerable to congestion. In Commuting in America III, Alan Pisarski suggests that policies that suppress freewheeling travel “are destroying part of what makes a big region a great region.” Although researchers have done their best to explain and quantify how it restrains our lives, a complete assessment of congestion’s costs is hard to come by. The U.S. Department of Transportation estimates that each year traffic congestion costs the American economy about $168 billion. It’s a huge amount—more than the combined value of Yahoo!, Office Depot, Ford, Charles Schwab, and Walt Dis-

ney Co.—yet it still does not of those stricken are saved. include all of congestion’s ill These deaths are particueffects. The figure isn’t just larly tragic because this type incomplete; it’s impersonal. of emergency is particularly Others have attempted to treatable—that is, if medical provide a more complete and care arrives quickly. personal assessment of conIf treatment arrives withgestion’s costs. Researchers in one minute, 90 percent of at the Texas Transportation patients survive. At 5 minInstitute figure that congesutes, survival probability tion costs each big-city residrops to about 35 percent. Each year traffic congestion costs dent $1,000 each year. The At 10 minutes, it’s zero. Even figure is personal but incom- the American economy about $168 relatively modest increases plete, for it only accounts for billion—more than the combined in response time yield subthe loss of wasted gas and value of Yahoo!, Office Depot, stantial benefits. An analysis time. Congestion also robs Ford, Charles Schwab, and Walt of Austin emergency medius of opportunities in more cal services estimates that Disney Co. subtle ways. For example, if response times improved it decreases our job opporby just 30 seconds, 41 lives tunities. Instead of landing a more distant but would be saved each year. higher-paying and more fulfilling job, those livOf course, quick response is not just a ing in the midst of gridlock are more likely to matter of ambulances arriving quickly. Often stick with the jobs they already have. Research- friends and loved ones rush patients to emerers have begun to account for how restricted gency rooms in their own cars. And speed mobility limits our employment opportunities, is crucial not just for this particular medical and one analysis considers how cutting con- emergency—many emergencies, medical and gestion back might enrich workers by match- nonmedical alike, are time sensitive. ing them with better-paying jobs. According to It’s especially difficult to put a dollar figAlan Pisarksi and Wendell Cox, a 90 percent ure on the many other ways congestion interreduction in congestion in the Atlanta area feres with our lives. Consider the toll it takes would put an extra $2,900 into the pocket of on our personal lives—how it keeps parents each area resident. An analysis of metro New away from their kids, stymies would-be love York estimates that—because it limits how connections, and sours us on exploring our many trips they can make—congestion costs surroundings. There’s also the psychological taxi drivers $6,000 per year and repairmen toll: How much is each gridlock-induced gray $7,000 per year. hair worth? The cost of congestion moves beyond dollars and cents when the issue turns to emer- Mr. Balaker is the Jacobs Fellow at the Reason gency response. A prompt response time saves Foundation and editor of Privatization Watch. a life; a sluggish one costs a life. Consider just This article is excerpted, with permission, one type of emergency—sudden cardiac arrest. from his longer paper “Why Mobility Matters Each year this emergency claims roughly to Personal Life,” Reason Foundation Policy 67,000 American lives. In most of our nation’s Brief 62, July 2007, available at www.reason. big cities only about 6 percent to 10 percent org/pb62.pdf.
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Publishing to Influence:
regnery and the role of Books
By Marji Ross
0

D

o books reflect a zeitgeist—or create one? People certainly like to talk about books. And authors, naturally, love to talk about books—mostly their own. (Publishers, too, I must admit.) In fact, there is an entire cable station devoted to books (C-Span’s Book-TV), where you can listen to people talking about books 24 hours a day. And all across America, hundreds of thousands of people meet each month (or so) in reading groups to talk about books. But does all this talk really mean anything? Yes, it probably (but not always) reflects strong sales. It often leads authors to write, and publishers

Who We Are

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to publish, more books in the same vein. But Seminal books like this become embedded how much effect do books actually have on in popular culture. Today, you hear the media public policy? talk about a politician being “swift-boated.” The simple answer is: more than you might Similarly, people have adopted Malcolm think. Gladwell’s paradigm-shifting concept when Take, for instance, the most recent Regn- they refer to the “tipping point” in an issue or a ery book to hit #1 on the New York Times movement. And how many of us have seen the list: Unfit for Command: Swift Boat Veter- bumper stickers calling for a presidential ticket ans Speak Out Against John of “Cheney-Voldemort”? Kerry. That book, and the Most books, we must resulting media tidal wave, acknowledge, suffer the fate The publisher must also underdominated the public debate of the proverbial tree falling during the final three months stand how to turn a book into a in the forest. Good, bad, or megaphone through which the of the 2004 presidential elecindifferent, most books are tion campaign. John Kerry author’s ideas are shouted and never heard of, because it’s had nowhere to turn without broadcast and spread throughout not enough just to write a facing the questions and critgood book. It’s not enough, the land. icisms raised by this book. usually, even to write a great Matt Drudge blazed the book. The publisher must accusations across the Interalso understand how to turn net. Conservative talk radio reverberated with a book into a megaphone through which the the Swift Boat Vets’ stories about John Kerry’s author’s ideas are shouted and broadcast and service in Vietnam and his actions when he spread throughout the land. returned home. Mainstream media vilified the This is not so easy, for a variety of reasons. Swift Boat Vets, Regnery, John O’Neill, and First, there are more than 175,000 new books anyone else they could think of who might published every year. Sadly, as the number of sully John Kerry’s reputation. titles increases, the number of book buyers And everyone was talking about the book. seems to decrease. According to the most recent Correction: Everyone was talking about Census Bureau statistics, bookstore sales have what was in the book. And this is an important fallen every month this year and were down distinction, I believe, for publishers who wish 4.3 percent for the first third of 2007. You’d to influence the debate. At Regnery, we have probably be surprised to discover how small a rule: Our publicity campaigns focus on the the book industry actually is, as a business. The news in the book, not the news of the book. total sum of all book sales in 2006 was about Clearly, Unfit for Command influenced the $20 billion. Well, as they say, “a billion here, a public debate. Many people believe it influ- billion there, pretty soon we’re talking about enced the outcome of the election. In fact, the real money.” But when you consider that in a best thing that the New York Times has prob- single quarter of the last fiscal year, GE sales ably ever said about Regnery Publishing was were $40 billion, you realize that book sales are in their belated (reluctant, I assume) review of a drop in the GDP ocean. Unfit for Command: “If John Kerry loses the And yet, the power of a book can be enorpresidential election, Unfit for Command, by mous. As we have seen, a book can change the John O’Neill and Jerome Corsi, will go down course of a presidential election. It can change as a chief reason.” the course of history. In 1987, Regnery published
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a book called Red Horizons, written by Roma- business. We target the best-seller list as most nia’s former head of foreign intelligence, Ion of our New York competitors do (though we Mihai Pacepa. The book exposed the shocking hit that list at a far higher rate than they do), truth about Communist Romania—and, when but we target the list for its megaphone effect it was picked up and broadcast into Romania as much as its monetary effect. on Radio Free Europe, was credited with inspirSometimes we take on a book even when ing the popular counterrevolution that brought we know that the media attention will far down the regime. outpace the sales potential. There are some Best-selling books can books and some topics (and also push a debate onto the even some authors) who will national stage. Take Berattract hundreds of radio Best-selling books can push a nard Goldberg’s categoryand television interviews— killer book, Bias, which debate onto the national stage. and still not drive people to Take Bernard Goldberg’s catfinally forced the issue of the bookstores. Book sales liberal bias within the media egory-killer book , Bias, which are virtually impossible to into the national spotlight. finally forced the issue of liberal predict in the best of circumOr Charles Murray’s The stances. When you know a bias within the media into the Bell Curve, which ignited book won’t sell, why publish a nationwide debate on the national spotlight. it? At Regnery, our answer is role of race in academic simple: We want to get peoachievement. ple talking. And if the issue So, how can publishers orchestrate certain is truly important, perhaps the achievement of books, in this industry with too few buyers driving the debate, even without the accompaand far too many products to sell, so that they nying sales, is reward enough. actually influence the public debate? At this point, I hear my boss sighing, worOur motto at Regnery has always been to ried about the flood of proposals for “imporpublish “books that challenge the status quo.” tant” books I have just encouraged. So let me So we are looking specifically and deliberately add this one last point: Regnery has built its for books that provoke, books that will stir con- reputation for the past 60 years on publishtroversy, books that people will not just want to ing the nation’s most important and influentalk about but will want to fight about. tial books in current affairs and public policy, And yet, I should rush to point out, Regn- from a conservative point of view. Over the ery is not the Jerry Springer of the book pub- past 10 years, we have also developed a repulishing business. (I think that title was held by tation for selling more copies, per title, of our Judith Reagan, until she died by that particu- current affairs and public policy books than lar sword, at least professionally.) Regnery is any other publisher in the country. both a for-profit business and a mission-based Our books, in the end, are both the causes company. We are publicly and personally dedi- and the echoes of the political and social thuncated to furthering the principles of democra- derclaps reverberating throughout the country. cy, freedom, limited government, and respect With the proper megaphone, a great book can for the rights of the individual upon which our and should be both. country was founded and which our soldiers today serve to protect. Ms. Ross is President and Publisher of Regnery In this way we are unique in the publishing Publishing, Inc.
The InsIder summer 07

Defending Free Enterprise from Agenda-driven

S

ince the collapse of Enron and Worldcom, not to mention the broader avalanche of corporate scandals, it’s open season on free enterprise. Inevitably disguised as crusades for the public good, attacks on businesses and free market think tanks are, in fact, highly orchestrated programs by a well-funded “crisis creation” industry including a loose affiliation of trial lawyers, non-governmental organizations, and select media. One of the tactics du jour is to expose the funding sources of public policy think tanks, the rationale being that corporate support equals malfeasance. The immense wealth of trial attorneys and NGOs is, of course, glossed over in favor of the hardscrab-

Attacks
By Eric Dezenhall

ble—and fundamentally false—positioning of the common man’s David to industry’s Goliath. Don’t be fooled—the crisis creation industry is just that: a strategic business juggernaut looking for growth and self-perpetuation. One of the challenges that businesses and public policy groups face is a naïve and outdated approach to managing crises and attacks on their survival. A brutally realistic look at the new rules of engagement is the first step in effective crisis management. The modern public relations industry’s philosophy of crisis management is anchored in the canard that if Richard Nixon had just “fessed up” to the Watergate break-in and
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cover-up from the get-go, he would never have had to resign in disgrace. Nonsense. He would have been removed from office in a nanosecond. Why? Setting aside the grave legal and moral violations, Watergate was not a “communications problem” lending itself to spindriven solutions. It was a fundamental conflict aggravated by hostile parties who didn’t have the remotest interest in hearing Nixon out. Modern crises are not communications problems as much as they are conflicts that are conceived, financed, and prosecuted by moti-

or not the nation deserves representation is beside the point. What’s noteworthy is that the exposure of advocates and their techniques is now a bona fide reportorial beat. The same holds true of coverage of how enterprises are mismanaging their affairs. During last February’s JetBlue debacle, in which thousands of passengers were stranded during a blizzard, I was interviewed on a cable television show. The interviewer asked me why JetBlue was “getting such bad PR.” I answered: “Because you keep inviting guests

Companies and think tanks under attack must first reject the notion that it is immoral to defend one’s self.
vated adversaries interested in the destruction of their targets. These attackers aren’t seeking to make the world a better place; they are seeking power, money, and the perpetuation of their enterprises. Whether it’s the war on terror or chronic attacks on corporations by plaintiffs’ lawyers, these are not misunderstandings that will be corrected by thoughtful dialogue. Rather, the attacks won’t stop until the attackers perceive that they are at some risk for engaging in concerted efforts to discredit their targets. The height of fashion at the moment is the investigation of PR firms, lobbyists, and think tanks, to which a handful of media have devoted enormous resources. Perhaps the most humorous headline I came across (I wish I had clipped it) announced that Microsoft was hiring a PR firm to influence the media. Well, yeah, that’s what PR firms do. Harper’s Magazine recently ran an expose of the APCO PR firm’s plans to promote the government of Turkmenistan by teaming with Washington think tanks. The twist was that the pitch was set up by a Harper’s reporter posing as an agent of Turkmenistan. Whether
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on your show to ask them why JetBlue is getting such bad PR.” In other words, the media have an active investment in making certain that embattled targets remain embattled. Why? Because otherwise there is no story. This is not a conspiracy as much as it is symbiosis. A loose affiliation of like-minded plaintiffs’ lawyers, issue-specific activists, NGOs, and journalists collaborate to expose the misdeeds of free enterprise. Fair enough. However, there is comparatively little coverage of the crisis creation industry. My firm, which primarily represents businesses under media attack, routinely finds itself battling well-funded “independent” studies by NGOs that inevitably conclude that our clients’ products are endangering the public welfare. These studies are almost universally treated as being credible by the mainstream news media despite the suspicious role that trial lawyers often play in fanning the flames. However, when we retain, say, a toxicologist— for a fraction of the cost of the study—to help refute damaging allegations, our efforts often find themselves on the receiving end of an expose by powerful media seeking to link our

advocacy with malfeasance of some kind. What to do? It’s hard to combat the narrative locomotive equating free enterprise with dirty deeds. It’s especially challenging given the rise of what’s being called “corporate social responsibility,” campaigns whereby corporations demonstrate their commitment to making the world a better place. These are noble efforts in theory, but in practice they often amount to apologies for capitalism, which can backfire. British Petroleum, for example, spent rough-

you opposed to hypocrisy? Are you championing jobs? Are you demanding that your critics receive the same scrutiny that you are? Key audiences want to know the broader reason why they should care about an issue and should not be expected to appreciate the self interests of those under fire. Finally, there’s something to be said for preaching to the choir. Because of the success of the public relations industry’s fundamentally wrong (but appealing) sales pitch that anyone can be spun, attack targets have a strong

Key audiences want to know the broader reason why they should care about an issue.
ly a quarter of a billion dollars to promote the company as being an alternative energy outfit, operating with the motto “Beyond Petroleum.” (BP, get it?) The problem is that BP is, almost exclusively, a petrochemical company. Environmentalists rightly saw through the charade, Greenpeace giving BP a tongue-in-cheek award for “best impression of an environmentalist.” Moreover, its socially responsible pose didn’t do BP much good when crisis after crisis hit the company in 2006 and 2007. Companies and think tanks under attack must first reject the notion that it is somehow immoral to defend one’s self. The whiff of apology that belies modern damage control buys you nothing when professional attackers are at work. After all, when Plato issued his “Apologia” for Socrates, he was engaging in a spirited defense, not saying he was sorry for anything. Enterprises must learn to push back against their critics by taking a page from Ronald Reagan and “wrap every argument in a principle.” No one sympathizes with the plight of an attack target per se; people demand to know what principle supports your self-defense. Are desire to be liked by their adversaries. This is especially true of large corporations, which contribute fortunes to their adversaries in the hope that they will learn to like them. These crisis creators enjoy the funds, but almost never shift their core positions. Nevertheless, such techniques often make companies feel as if they are doing something constructive, which supplants what’s really called for—a vigorous self-defense. The truth is that image overhauls fail far more often than they work. Sometimes one has enemies who can’t be written off in a frenzy of denial as “stakeholders.” When it’s time to engage one’s adversaries, it’s better to have committed allies than wavering “target audiences.” A sober—and disquieting— understanding of how the marketplace of ideas, with all of its prejudices and inequalities, really operates is the first step in defusing attacks. Mr. Dezenhall is CEO of Dezenhall Resources, a crisis communications firm, and co-author of Damage Control: Why Everything You Know About Crisis Management Is Wrong.
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Uncovering the

How Investigative Journalism Complements the Work of a Think Tank
By John Hood

ulture orruption C of C

I



t all started in the supermarket checkout line. It was the day after Christmas, 1996, and the place was packed. I knew I’d have quite a wait, so I picked up a copy of a community newspaper. To my surprise, I was greeted with a glowing story about two local politicians, elected to the state senate the previous month, who had given out $100,000 in “discretionary funds” to several nonprofits in minority neighborhoods. “That’s my Merry Christmas present,” said one of the senators-elect. “[We] are already having a positive effect.” The notion of passing out taxpayer money like Christmas candy was bad enough. But then I started to wonder how someone who had not yet taken office could get his hands on “discretionary funds.” I decided to ask one of my writers at Carolina Journal, the John Locke Foundation’s then-policy magazine, to look into the matter. After a great deal of digging, the writer, Don Carrington, discovered that the money had come from a $21 million slush fund known only to legislative leaders and the governor. The more Carrington asked questions and obtained documents, the more revolting the story became. Legislative insiders and their political consultants doled out the funds with abandon. Several grants were timed to help embattled incumbents cut ribbons a few weeks before an election. In other
The InsIder summer 07

cases, the money appeared to be payback for favors done by rank-and-file lawmakers or wealthy contributors. The grants were hard to justify on policy grounds. Wealthy Pinehurst, home to some of the world’s ritziest golf resorts, got money for a new fire truck. Several senators and representatives steered money to local nonprofits where they served as board members. One state senator attached a state check to a football and threw it across the room to a recipient during a benefit roast. It seems that dispensing taxpayer money had become a game. Founded in 1989, the John Locke Foundation began operations in early 1990 as a typical state-based think tank. We were small, opinionated, and cerebral. We published studies, hosted conferences, distributed newsletters and op-eds, and placed our staffers and affiliated scholars on radio and television. Because I was trained as a journalist and had worked at local newspapers and The New Republic in Washington, D.C., before coming to John Locke, I argued for a regular journalistic product as one of the organization’s main offerings. I envisioned a state version of TNR or National Review, a journal of opinion devoted to North Carolina politics and issues. I didn’t expect to get into the investigative journalism business. But not everything goes according to

plan (a lesson that, alas, too many government policymakers have yet to learn). Carolina Journal’s 1997 expose of the slush fund scandal in the North Carolina General Assembly turned into a series. The more we wrote, the more knowledgeable sources came to us with stories of malfeasance, misappropriation, petty graft, featherbedding, and violations of ethics and campaign finance rules. Another 1997 scoop involved a controversial $100,000 settlement to a former Division of Motor Vehicles employee who had alleged employment discrimination. We obtained an exclusive interview with him and discovered that the real story involved illegal pressure on DMV employees to make political contributions to state politicians. After we published a blockbuster cover package on the scandal, we received additional leads on corruption within the Department of Transportation—politicians leaning on engineers to move low-priority road projects into the queue, DOT board members scratching the backs of their business partners, etc. By this time, other news organizations had gotten into the act, and eventually DOT officials were forced to resign and stripped of their professional licenses. The secretary of transportation ended up in prison on separate corruption charges. In the conservative movement, we’ve all read our Acton. We know intellectually that government funding and regulations distort market decisions and invite rent-seeking, that bright ethical lines and constitutional checks and balances are necessary to constrain political power, and that, human nature being what it is, public office will always tempt politicians with the tantalizing prospect of getting their hands on other people’s money. Policy organizations can and should continue to explain the economics and political science of government corruption, decry wasteful spending in federal and state budgets, and spread the freedom message through opinion pieces and

media appearances. But they should consider adding another arrow to the quiver—investigative journalism. I’m all for persuading misguided politicians to adopt better public policy. There’s something to be said, however, for simply exposing the crooked ones through solid, well-researched investigations and letting them be shamed, removed, or incarcerated as appropriate. Over the years, I’ve beefed up my Carolina Journal reporting team substantially, hiring another full-time reporter, Paul Chesser, and two editors with more than a half-century of combined newspaper experience, Richard Wagner and Jon Ham. CJ itself went from a bimonthly magazine with a few thousand readers to a monthly tabloid distributed directly and as a Parade-like newspaper insert to some 160,000 readers statewide. We’ve broken many big stories and made a substantial contribution, unapologetically, to the prisonovercrowding problem: • CJ exposed the financial shenanigans of a former North Carolina congressman, Frank Ballance, who as a state senator had steered millions of tax dollars into a foundation he controlled and from which he paid himself, his son, his mother, and donors to his political campaigns. He is currently completing his sentence in a federal correctional facility. • After a comprehensive CJ series on a dubious project to start state ferry service across the Pamlico Sound—a service that would have few riders but benefit a politically connected business—one of our sources, a former Ferry Division employee, was found asphyxiated in his home with a bag over his head and his hands tied behind his back. Local authorities claimed it was a suicide. Eventually, federal and state agencies raided the division and its former director was prosecuted for violating environmental-protection laws. The mysterious death remains controversial. • Thanks to tips from appalled parents, CJ
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described radical propaganda being conveyed to participants of a state-run summer program for academically gifted students. • One of our investigations of how North Carolina had misspent the state’s share of the national tobacco settlement revealed that some of the funds had gone to subsidize a tobacco warehouse. • Economic development boondoggles have been particularly juicy targets. We have documented every embarrassing twist and turn in the saga of the Global TransPark, an air cargo facility in Eastern North Carolina that soaked up tens of millions of state and federal tax dollars. Originally sold as an investment in justin-time manufacturing to create 50,000 jobs by 1998, the TransPark has created no net new jobs as of 2007 and has resorted to pitching its largely unused airstrip as a movie set or anti-terrorism training site. • In 2004, politicians used misleading ballot language to persuade voters to amend the constitution to allow North Carolina localities to use a special kind of economic-development bond that doesn’t require a referendum. The first municipality to use the new authority got state approval to issue $21 million in bonds to build a theater named after Dolly Parton’s ever-so-slightly-less-famous brother Randy. His $1.5 million annual “artist fee” will in part be financed with the debt. • Corporate welfare packages are journalistic gold mines. We’ve followed up on numerous job announcements from politicians only to discover that the jobs never materialized or that promises of state assistance came after the company had made its relocation decision. In one case, we disproved the claim that government had induced a wireless firm to a North Carolina city by going to the site and snapping a picture of one of those workplace safety signs touting that it had been an “accident-free construction site” since a date long before the state’s involvement began. We
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also delved deeply into a state-funded economic development group whose leader was demanding equity stakes from the private firms he was simultaneously paid tax dollars to recruit. This same man had set up the aforementioned deal with Randy Parton, for which the two had formed a company called—I kid you not—Moonlight Bandit. • Most recently, CJ had a hand in exposing a wide-ranging conspiracy of bribery, misappropriation, and conflicts of interest led by former Speaker Jim Black—once of the state house, soon to be in the Big House. While dogged reporters at the mainstream dailies deserve a lot of credit for uncovering Black’s crimes— including a bribe to a conservative Republican lawmaker to switch parties to keep Black’s then-minority Democrats in power—CJ got one of the early scoops. We discovered, while investigating another state-funded nonprofit, that one of the contractors was also Black’s closest political aide and appeared to be doing her campaign and lobbying work out of his state office. Staking out possible crime scenes, cultivating sources among government employees and law enforcement agencies, and obtaining secret documents containing evidence of ethical or legal transgressions may not be common activities at the average think tank, but we believe that investigative journalism is an essential element of the John Locke Foundation’s effectiveness. We seek to expand the scope of freedom in North Carolina, and to curb the abuse of government power and limit its fiscal and moral costs. We do lots of traditional policy research. We convene dozens of events a year. We make our case in all the standard ways. But we also ferret out corruption and name names. It works for us. Mr. Hood is Chairman and President of the John Locke Foundation, a public policy think tank in Raleigh, N.C.

Vindicating Freedom in state Courts
By Clint Bolick

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ver the past several decades, a significant pro-freedom public interest law movement has emerged, encompassing such organizations as the Pacific Legal Foundation and the Institute for Justice as well as dozens of other regional or issue-focused entities. Most of their litigation has been waged in federal courts. Together, the litigation groups have scored some impressive victories in such areas as racial preferences, private property rights, freedom of speech, mandatory unionism, economic liberty, federalism, freedom of commerce, religious liberty, and school choice. The freedom movement’s emphasis on federal litigation is understandable. Federal court decisions, particularly in the U.S. Supreme Court, have far greater precedential effects than those of state constitutional decisions. Given finite resources, federal court litigation

offers the prospect of achieving much greater “bang for the buck.” That is especially true when the federal courts are populated by judges who are receptive to arguments grounded in original constitutional intent. But the ardor of the federal judicial counterrevolution seems to have cooled. Toward the end of the Rehnquist era, the U.S. Supreme Court began to retrench, delivering disappointing decisions in many of the areas in which it previously had produced important gains for freedom, including private property rights, racial preferences, and school choice. Whether the Roberts Court will resume its predecessor’s earlier direction remains to be seen. Moreover, it is a bit ironic that a movement that professes fealty to federalism has focused so intensively on federal court litigation, largely ignoring state constitutions. The
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U.S. Constitution’s framers intended that state constitutions, rather than the federal Constitution, would provide the first line of defense for individual liberties. Indeed, the Bill of Rights was patterned after preexisting rights in state constitutions, and the federal protections were not even held applicable to the states until after the 14th Amendment was ratified in the late 19th century. As The Federalist No. 51 explains, a “compound republic” consisting of a federal government and state governments, each with their own protections of individual

tutions more broadly than the national Constitution. Although his articles were a clarion call to pro-government activists, his message ought to resonate just as strongly—if not more so—among pro-freedom organizations. As Brennan proclaimed:
[T]he point I want to stress here is that state courts cannot rest when they have afforded their citizens the full protections of the federal Constitution. State constitutions, too, are a font of individual liberties,

The U.S. Constitution provides only the floor beneath which the protection of liberty may not descend.
liberties, provides a “double security” for the “rights of the people.” Although principles of federalism have been greatly eroded over the years, one rule remains sacrosanct: State courts are not bound to interpret their own constitutions in lockstep with the U.S. Supreme Court, even if the language of the provisions is identical. The sweetest fruit of the federalist system is that the U.S. Constitution provides only the floor beneath which the protection of liberty may not descend. But state courts are free to go beyond federal constitutional protections (or, more to the point, beyond protections recognized by federal courts) in construing their own state constitutions. As is so often the case, the trails of expansive state constitutional interpretation were blazed by groups I will loosely refer to as progovernment. The patron saint of that movement was U.S. Supreme Court Justice William Brennan, who perceived during the 1970s that the activist revolution of the Warren era was beginning to wane. In a pair of seminal law review articles, Brennan extolled the virtue of state courts reading guarantees of state constiThe InsIder summer 07

their protections often extending beyond those required by the Supreme Court’s interpretation of federal law. The legal revolution which has brought federal law to the fore must not be allowed to inhibit the independent protective force of state law—for without it, the full realization of our liberties cannot be guaranteed.

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Brennan noted that Madison had cautioned that state governments, not the federal government, could pose the greatest threat to liberty and, in fact, had proposed explicit constraints on state power within the Bill of Rights. But his suggestion was defeated because, as Brennan recounted, “it was believed that personal freedom could be secured more accurately by decentralization than by express command … . In other words, the states were perceived as protectors of, rather than threats to, the civil and political rights of individuals.” Though Madison’s views ultimately prevailed through the adoption of the 14th Amendment, state courts retain the power to interpret state constitutional rights more broadly than federal constitutional rights.

“As is well known,” Brennan explained, “federal preservation of civil liberties is a minimum, which the states may surpass so long as there is no clash with federal law.” In light of the perceived retrenchment in the interpretation of federal constitutional rights in the 1970s, Brennan called upon state courts to be the primary defenders of individual rights, and they did exactly that. Indeed, by 1984, Brennan counted “over 250 published opinions holding that constitutional minimums set by the United States Supreme Court were insuf-

of federalism, and I am a devout believer, must salute this development in our state courts.” He argued that “those who regard judicial review as inconsistent with our democratic system—a view I do not share—should find constitutional interpretation by the state judiciary less objectionable than activist intervention by their federal counterparts.” In addition to the framers’ intention that the state constitutions protect liberties, Brennan noted that many state judges themselves are subject to democratic processes through popular election

The trend of a more vigorous interpretation of state constitutions is one that the freedom movement should welcome.
ficient to satisfy the more stringent requirements of state constitutional law.” Justice Brennan’s call to state court activism was taken up by pro-government groups across the nation with enormous success in such areas as tort liability, family law, criminal law, and education. The paradigm example is the case of educational equity. In 1973, the U.S. Supreme Court ruled in San Antonio Independent School District v. Rodriguez that the federal Constitution does not provide a right to education, and it rebuffed efforts to hold school funding inequities unconstitutional. Whereupon, liberal activists convinced a number of state courts, beginning in California and New Jersey, to interpret their own constitutions to confer a fundamental right to education and to strike down funding systems that were found to produce educational inequity. Three decades later, funding-equity lawsuits in numerous states have wrested billions of additional tax dollars for public schools. The trend of a more vigorous interpretation of state constitutions is one that the freedom movement should welcome. As Justice Brennan remarked, “Every believer in our concept and that state constitutions typically are more easily amended than the federal Constitution. “This rebirth of interest in state constitutional law should be greeted with equal enthusiasm by all those who support our federal system, liberals and conservatives alike,” Brennan observed, though he quipped tellingly that “[a]s state courts assume a leadership role in the protection of individual rights and liberties, the true colors of purported federalists will be revealed.” Pro-freedom organizations may not like the outcomes of some state court cases, but it is difficult to forestall them when only one side is engaged in the battle. As my Alliance for School Choice colleague Scott Jensen often reminds me, a bedrock rule of contests is that you have to be present to win. Mr. Bolick is director of the Goldwater Institute’s Center for Constitutional Litigation. This article is excerpted from his longer paper “The First Line of Defense: A Blueprint for State Constitutional Litigation to Expand Freedom,” published by the Goldwater Institute, April 2007, and available at www.goldwaterinstitute. org/AboutUs/ArticleView.aspx?id=1504.
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