Archive for May, 2009
The Cost of Flu Fears – and Our Ongoing Vulnerability
The ever-sensible Shaun Waterman has begun to tally the cost of overreaction to the fear outbreak inspired by the H1N1 flu strain. He reports in ISN Security Watch:
Even the precautions that you take against this kind of global flu pandemic could knock about 1.9 [or] 2 percent off global [economic production]. That’s about a trillion dollars,” according to journalist Martin Walker, who cited World Bank figures from a study last year.
The Economist reported last week that the crisis in Mexico was costing Mexico City’s service and retail industries $55m a day – not because of the handful of deaths but because of people’s reactions. And that was even before the national suspension of non-essential public activities called for this week by the authorities there, which was expected to double that cost.
Waterman also cites my joke about moving Vice President Biden to an undisclosed location in future crises – not for his protection or government continuity, but to keep him away from the media.
It’s comedic wrapping on a substantive point: As long as people look to government leaders in times of crises, leaders have a responsibility to communicate carefully, according to a plan, and with message discipline. If they don’t, the damage can be very high.
Even if all Americans knew to dismiss the words of the Vice President as if he’s a “Crazy Uncle Joe” – and they don’t – foreign tourists certainly don’t know that. Biden harmed the country simply by speaking off the cuff.
Here, an outbreak of flu appears to have caused billions of dollars in damage to the world economy. One billion lost to the U.S. economy is about 145 deaths (using the current $6.9 million valuation for a human life). When overreactions restrict economic activity, that reduces wealth and thus health and longevity.
Now, imagine what might happen if the United States encountered a novel, directed threat – some kind of attack that inspires widespread concern. Will Vice President Biden and officials from a half-dozen agencies rush forth with personal observations and speculation? The results could be devastating, especially to a country that is already suffering economically.
People die from poor situation management, and it makes Americans worse off. Political leaders should not get a free pass for failing to communicate well just because it’s hard to do.
The Obama Administration should learn from its many errors in handling the rather benign H1N1 flu situation. It should train up for communicating in the event of a real emergency. If the Obama Administration fails to soothe nerves in the event of some future terrorist attack, that will be a clear failure of leadership.
Mortgage ‘Safe Harbor’ Anything But Safe
After the Senate’s rejection last week of allowing bankruptcy judges to re-write mortgage contracts, the so called “cramdown” provisions, it was starting to look as if the Senate cared about respecting private contracts. Sadly, such concern has been short-lived.
Tucked away in the mortgage bill is a provision that gives servicers of mortgages, that is, the entities that collect payments and perform modifications on behalf of the actual investors in mortgages, a “safe harbor” from any litigation by investors if the servicer chooses to follow the interests of the borrower or the government, rather than fulfilling their fiduciary duty to the investors.
Supporters of the safe harbor claim that too many foreclosures have taken place due to contractual restrictions on the ability of servicers to modify mortgages in a manner that would allow borrowers to stay in their homes. Most pooling and servicing agreements allow mortgage modifications without the investors’ approval if the modification increases the net present value of the mortgage. However, if the mortgage modification resulted in a loss to the investor, over what they would recover in a foreclosure, then they are not allowed under current contracts. The safe harbor intends to fix this “problem” by allowing the servicer to impose additional losses on investors, as long as that servicer follows President Obama’s foreclosure plan.
Allowing parties to a contract to ignore their contractual obligations as long as they sign-on to presidential initiatives is a dangerous precedent, and one that will ultimately raise the cost of entering into and enforcing contracts.
As these costs will have to be borne by someone, it is likely in the future that these efforts at undermining contracts in our credit markets will result in higher interest rates for all borrowers.
Pakistan Troops Pour into Swat Valley
The Associated Press reports that Pakistani troops have taken the fight to militants in the Swat valley, ending a three month truce between the government and Taliban forces.
As I argued in the Washington Times almost a year ago, Pakistani government peace deals with militants have a tendency to collapse. Thus, we shouldn’t be too surprised to see the latest “Shariah for peace deal” in Swat already begin to fray.
With this in mind, U.S. policymakers and defense planners must keep in mind the constraints Pakistani leaders are operating under. After 9/11, Pakistan was caught in an unenviable and contradictory position: the need to ally openly with the United States and the desire to discreetly preserve their militant assets as a hedge to Indian influence.
For example, Maulana Fazlur Rahman, who heads Pakistan’s Islamist political party Jamiat Ulema-i-Islam, led large anti-US, anti-Muaharraf, and pro-Taliban rallies in major Pakistani cities after the U.S. began bombing Taliban strongholds in Afghanistan. JUI and other influential Islamist organizations fiercely criticized Musharraf and the military for aligning with the United States and Pervez Musharraf himself was condemned within Pakistan for aligning with America in the war on terror. This dynamic has not gone away.
Counterinsurgency or Counternarcotics?
This clip from NBC Nightly News shows a DEA raid in Afghanistan:
As I have said before, the quickest way to create an insurgent is to burn a man’s livelihood. This may be a competent counternarcotics tactic, but it is an epic failure as a counterinsurgency strategy. We can fight a war against the Taliban or we can fight the war on drugs, but we can’t do both in the same place at the same time.
Related thoughts from Doug Bandow here.
Judge Sonia Sotomayor’s Philosophy of Judging
Judge Sonia Sotomayor of the 2nd Circuit Court of Appeals has been mentioned as a possible Supreme Court nominee. She also has been caught on tape explaining her view of a judge’s role. Reports the Washington Post:
As White House press secretary Robert Gibbs put it, Obama is looking for “somebody who understands how being a judge affects Americans’ everyday lives.”
Congressional conservatives have reacted anxiously to that qualification, fearing that it means a nominee who is more interested in making the law than in interpreting it.
One possible candidate for the seat, Judge Sonia Sotomayor of the U.S. Court of Appeals for the 2nd Circuit, appeared to walk close to that line in a video that emerged yesterday. Sotomayor would be the first Latino and the third woman to serve on the high court.
Speaking at Duke University in 2005, Sotomayor said, “All of the legal defense funds out there, they’re looking for people with court of appeals experience” because “the court of appeals is where policy is made.”
She then sought to soften the statement, adding lightly, “I know this is on tape and I should never say that, because we don’t make law, I know. Um, okay. I know. I’m not promoting it, I’m not advocating it.” The audience laughed as she brushed off the statement, perhaps sarcastically.
Making policy. Yes, it is indisputable that that’s what judges often do. But is that what they are supposed to do?
President Barack Obama seems to think so, when he talks about the importance of “empathy” in judges. (With whom do I empathize in this First Amendment case: the U.S. Attorney General or the New York Times? I vote for the Times!) However, the Senate might want to debate this issue before approving someone to fill Justice David Souter’s vacancy, especially if the nominee shares the president’s apparent view that empathy is a substitute for jurisprudence in interpreting the law and Constitution.
Amazing Coincidences
The coincidences that occur in Washington, D.C. are truly extraordinary. According to the Washington Post:
The headquarters of Murtech, in a low-slung, bland building in a Glen Burnie business park, has its blinds drawn tight and few signs of life. On several days of visits, a handful of cars sit in the parking lot, and no trucks arrive at the 10 loading bays at the back of the building.
Yet last year, Murtech received $4 million in Pentagon work, all of it without competition, for a variety of warehousing and engineering services. With its long corridor of sparsely occupied offices and an unmanned reception area, Murtech’s most striking feature is its owner — Robert C. Murtha Jr., 49. He is the nephew of Rep. John P. Murtha, the Pennsylvania Democrat who has significant sway over the Defense Department’s spending as chairman of the House Appropriations defense subcommittee.
Robert Murtha said he is not at liberty to discuss in detail what his company does, but for four years it has subsisted on defense contracts, according to records and interviews. He said Murtech’s 17 employees “provide necessary logistical support” to Pentagon testing programs that focus on detecting chemical, biological, radiological and nuclear threats, “and that’s about as far as I feel comfortable going.” Giving more details could provide important clues to terrorist plotters, he said.
Murtha said he does not advertise being the nephew of John Murtha and considers it “unfortunate” that some will unfairly assume Murtech received its federal contracts because of his uncle’s influence at the Pentagon.
“If we’re not doing our job well, we wouldn’t be doing our job,” he said. “I’m successful at the work I do because of the skill sets I have. . . . You don’t know how good someone is unless you work with them.”
A spokesman at Murtha’s office did not return calls seeking comment. The lawmaker, a former Marine, has said in the past that he is proud of his family’s service to the military and the government.
Over the years, John Murtha has proudly claimed credit for using his Appropriations Committee seat to steer hundreds of millions in Pentagon work to companies in his district, many of them fledgling enterprises run by campaign contributors. His influence also may be seen in the military improvements at the Johnstown airport that bears his name. The little-used commuter airport doubles as a wartime preparedness facility for the Pentagon after $30 million in improvements.
Murtha’s power has had beneficial effects within his family. His brother, Robert C. “Kit” Murtha, built a longtime lobbying practice around clients seeking defense funds through the Appropriations Committee and became one of the top members of KSA, a lobbying firm whose contractor clients often received multimillion-dollar earmarks directed through the committee chairman.
Of course there is no relationship between Rep. John Murtha’s position and the taxpayer money collected by his relatives. Still, it is amazing how things like this just seem to happen when Capitol Hill gets involved.
Questions for Heritage: REAL ID
The Heritage Foundation’s “The Foundry” blog has a post up called “Questions for Secretary Napolitano: Real ID.”
Honest advocates on two sides of an issue can come to almost perfectly opposite views, and this provides an example, because I find the post confused, wrong, or misleading in nearly every respect.
Let’s give it a brief fisking. Below, the language from the post is in italics, and my comments are in roman text:
One Step Closer to Gambling Online?
Following on from the mildly good news of a few weeks ago, Barney Frank (D, MA) has announced that he will introduce a bill tomorrow to roll back current restrictions on gambling online (the restrictions are made operative by bans on U.S. banks from processing transactions to and from gambling websites). Although the details of the bill are yet to be released, this here article contains some good analysis.
Can You Sue for a “Psychic Offense”?
The City of San Diego leases portions of Balboa Park and Fiesta Island to the San Diego Boy Scouts, which use the land to operate a camp and aquatic center. The Boy Scouts use the leased areas for their own events but otherwise keep them open to the general public — and have spent millions of dollars to improve and maintain facilities on the properties, eliminating the need for taxpayer funding. While the Boy Scouts’ membership policies exclude homosexuals and agnostics, the Scouts have not erected any religious symbols and do not discriminate in any way in administering the leased parklands.
Nevertheless, a lesbian couple with a son and an agnostic couple with a daughter challenged the leases under the Establishment Clauses of the U.S. and California Constitutions. Although none of the plaintiffs has ever tried to use the parklands or otherwise had any contact with the Boy Scouts, the Ninth Circuit found they had standing to proceed with their lawsuit because they were offended at the idea of having to contact Boy Scout representatives to gain access to the facilities. The court denied en banc review over a scathing dissent by Judge Diarmuid O’Scannlain.
The Boy Scouts have asked the Supreme Court to review the case — whose outcome conflicts with other federal courts of appeal — and Cato joined the Individual Rights Foundation in filing a brief supporting that petition. Cato’s brief argues that the Ninth Circuit’s decision dangerously confers standing on anybody wishing to challenge the internal policies of expressive associations having any business with local government; chills public/private partnerships of all kinds for reasons disconnected from the beneficial services civic organizations provide the public; and generally represents a radical extension of standing jurisprudence — opening the courthouse doors to anyone claiming to be subjectively offended by any action and manufacturing litigation out of political debates.
The Supreme Court is likely to decide whether to take up the case of Boys Scouts of America v. Barnes-Wallace before the start of the next term this fall.
Rally to Save DC Vouchers Tomorrow. Why?
Tomorrow afternoon at 1pm, supporters of Washington DC Opportunity Scholarships will be rallying in Freedom Plaza to save the school voucher program. Why? That’s easy: Because a federal Department of Education study shows that parents are overwhelmingly more satisfied with it than they are with DC’s public schools. Because the same study shows that the program is raising student achievement above the level in the public schools. Because the children participating in it feel it is giving them a chance to realize their full potential in life — a chance that will disappear if the program is allowed to die, as they have attested in numerous YouTube videos.
The harder question is why Congress — particularly congressional Democrats led by Sen. Richard Durbin (D., Ill.) — want to kill the vouchers. Their stated reason is that it robs money from needy public schools and gives it to private schools that are already flush from lavish tuition fees.
But the voucher program not only does not take money away from DC public schools, the language of the law actually includes an extra $13 million annually for DC public schools, above their normal funding stream. As for lavish vs. needy schools, it’s true that there’s a huge gap between what is spent per pupil on public education in DC and the average tuition charged at the voucher-accepting private schools: a yawning $20,000 gap. The current year budget for the District of Columbia allocates $26,555 per pupil for k-12 education — up from $24,600 last year. Meanwhile, the Department of Education study linked to above puts the average tuition at voucher schools at $6,620. So vouchers are getting better results at one quarter the cost.
Clearly, Democrats have other reasons for opposing the voucher program, and this letter from the NEA might have a little something to do with it.
Is Aid Killing Africa?
No individual today is more effectively challenging the foreign aid establishment and the harm it inflicts on Africa than Dambisa Moyo, Zambian author of Dead Aid: Why Aid Is Not Working and How There Is Another Way For Africa. She spoke at a recent Cato book forum and has been ubiquitous in the media. For a sense of her views, here’s an interview I recommend that she recently did with the Australian Broadcasting Corporation.
Brother, Can You Spare A Trillion?
With the economy in a deep recession and policymakers turning to massive government intervention in an attempt to create jobs and bolster the financial system—it feels like the 1930s all over again. Today’s new New Deal is rapidly unfolding, with the Obama administration and many lawmakers making it clear that any question of the success of FDR’s New Deal policies was resolved long ago: government intervention worked, and history bears repeating.
However, there are deep disagreements about the New Deal, and whether Roosevelt’s policies deepened the depression and delayed recovery.
Join us at the Cato Institute on June 1 to be a part of a highly informative half-day conference. Recognized national experts will discuss the economic and legal impact of the New Deal, and how its legacy is being used and misused to shape policy responses to current economic hardships.
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