Archive for August, 2009
Pakistani Taliban Commander Dead
While American officials have yet to confirm his death, Baitullah Mehsud, the leader of Tehrik-e-Taliban Pakistan (TTP), which operates as Pakistan’s version of the Taliban, may have been killed Wednesday in an American missile attack in South Waziristan. Pakistan viewed Mehsud as its top internal threat. He was blamed for a wave of attacks that killed nearly 2,000 people in the past two years. He was also suspected of killing former prime minister Benazir Bhutto, and of having connections to al Qaeda.
Three things:
Number one, Mehsud’s death may or may not be a big blow to the TTP. Other deputies can easily take his place. In fact, shortly after Mehsud’s purported death, the Taliban Shura (an advisory council meeting) convened to elect a new TTP chief. (Among those being considered are Hakimullah Mehsud, Azmatullah Mehsud and Waliur Rehman Mehsud. The successor might be announced after Friday evening prayers). Any of these new leaders could quickly pick up where Baitullah left off, which means that picking off high-value targets in any insurgency does not guarantee that jihadists will melt away. We could only hope that a leadership void creates a power struggle among rival factions of the group, but that seems unlikely.
Number two, the drone operation shows improved coordination between the United States and Pakistan, which is welcome news. But the strike exemplifies the binary nature of the discussion surrounding the use of aerial drones: On the one hand, U.S. officials point to the successful killing of high-level al-Qaeda militants, such as Abu Laith al-Libi in January 2008, and chemical weapons expert Abu Khabab al Masri in July 2008. On the other hand, drone strikes have triggered collective armed action throughout the tribal agencies and have added more fuel to violent religious radicalism in this unstable, nuclear-armed country. One U.S. military official, who spoke on the condition of anonymity to McClatchy Newspaper correspondent Jonathan Landay, called drone operations “a recruiting windfall for the Pakistani Taliban.”
Number three, Pakistan might continue the same policy as before, differentiating between the “good Taliban” (those who attack U.S. and NATO forces in Afghanistan) and “bad Taliban” (those who attack the Pakistani military and the government). At the strategic level, Pakistan and the United States are still not on the same page.
The Real Cost of a Government Takeover of Health Care
The Congressional Budget Office estimates that current health care “reform” legislation could cost around a trillion dollars over the coming decade. But that number likely is low.
Stephen T. Parente of HSI Network LLC says the CBO did not use the most current data. HSI figures the cost could be double the CBO estimate.
The biggest player in the health-care debate right now isn’t Nancy Pelosi, Harry Reid, or even President Obama. It’s the Congressional Budget Office, which is responsible for estimating the costs of proposed legislation. After the director of the CBO testified on July 16 that none of the health-reform bills in the House or Senate would reduce the rate of increase in federal spending on health care, congressional efforts fell into disarray. Many policymakers began searching for a way to get costs below the CBO’s frightening estimate of $1.1 trillion over ten years. Others attacked the CBO, calling its estimates irresponsible.
The CBO is actually being kind to the would-be reformers. Its analysis likely understates — by at least $1 trillion — the true costs of expanding health coverage as current Democratic legislation contemplates. Over the last few months, my colleagues and I at the consulting firm Health Systems Innovations have provided cost estimates of health-care reform to both Republican and Democratic members of Congress, and we’ve posted these estimates on our website as well. We believe that the Democratic bills currently under consideration in the House and Senate would cost $2.1 trillion and $2.4 trillion, respectively — much higher than CBO’s figures.
Too Risky to Continue
The profits being reported so far this year by the major financial firms appear to be driven by proprietary trading (trading for their own account, as opposed to those of their customers). The recent $3.44 billion profit of Goldman Sachs in the second quarter is a dramatic case in point.
Proprietary trading is a high-risk activity and signals the financial sector is returning to its bad old ways. Returns cannot be systematically high unless risk is correspondingly high.
None of this would matter if it were just private capital at stake. But Goldman, along with other major financial firms, is being guaranteed under the dubious doctrine that it is too-big-to-fail. Better there were no government guarantees. As long as these guarantees are in place, however, high-risk activity must be curtailed.
The simplest solution is that a firm should not be permitted to take insured deposits and operate what amounts to a hedge fund within the institution. Goldman is a difficult case because it is not currently relying on deposits (even though it has a bank charter). It should be told to return to a private partnership.
A firm too big-to-fail is too-big-to-exist (as a federally insured entity).
AARP Members Not Buying Obama Health Care Plan
In Dallas, at least, the AARP staff found it tough going attempting to explain to the organization’s members why the elderly would be better off with Obama-like “reform.” These people obviously were having trouble with the line, “I’m from the government and I’m here to help you.” And they were quite vocal in stating their concerns. But they were acting well within the American political tradition, which seems to be what has spooked advocates of a government medical takeover speaking breathlessly of “mobs” — presumably like the one in Dallas — opposing “reform.”
(H/T to Mark Tapscott of the Washington Examiner.)
It’s All Voluntary But the Taxes
Chester Finn, president of the national-curricular-standards-pushing Thomas B. Fordham Foundation, has a piece on Forbes.com today saying that our colleges would do much better if our K-12 schools gave them better prepared students to work with. I have no problem with that. I also, surprisingly, don’t have much of a problem with Finn suggesting that national standards, in particular those under development by the Common Core State Standards Initiative, could help get students college ready. That’s because he couches the assertion in numerous qualifications — which are most certainly called for – acknowledging that the resulting standards could very well be garbage or evaded.
So what do I have a problem with? This single — but critical — sentence about national standards :
They’ll be voluntary, to be sure, and not every state will embrace them.
No, they will not be voluntary! At least, they’ll be no more voluntary than complying with No Child Left Behind, speed limits, or anything else that states do to get some of their citizens’ involuntarily turned over federal tax dollars back. Indeed, though the official first draft of the CCSSI standards hasn’t even been released yet, states are being told that signing onto them will greatly improve their chances of getting a piece of the U.S. Secretary of Education’s $4.35 billion “Race to the Top” fund. Secretary Duncan has also said that the feds would consider spending up to $350 million on a national test to go with “voluntary” national standards. And No Child Left Behind hasn’t been reauthorized yet – what are the chances that forces in Washington will try to link much of the law’s funding to states signing on to national standards and tests?
In answer to that question I’d say, to be sure, the chances are pretty good; certainly much better than allowing truly voluntary adoption of national standards and tests.
The Twelve-Minute ID Card Hack
Several people today have sent me the article in the Daily Mail (UK) discussing the twelve-minute hack on a UK identity card. Security consultant/hacker Adam Laurie was apparently able to rewrite the data on the card in very short order.
This would imply that making a more secure card is an improvement. But more security in a national ID card almost inevitably means less security for the individual in terms of privacy and autonomy.
We don’t want a highly secure national ID card. We want a diverse and competitive identity and credentialing system. In such a system, governments may serve as identity providers. But that is not necessary and, given their powers, not desirable.
“Gov’t Insurance Would Allow Coverage for Abortion”
So reports the Associated Press:
For years, abortion rights supporters and abortion opponents have waged the equivalent of trench warfare over restrictions on federal funding. Abortion opponents have largely prevailed, instituting restrictions that bar federal funding for abortion, except in cases of rape and incest or if the mother’s life would be endangered….
But the health overhaul would create a stream of federal funding not covered by the restrictions.
The new federal funds would take the form of subsidies for low- and middle-income people buying coverage through the health insurance exchange. Subsidies would be available for people to buy the public plan or private coverage. Making things more complicated, the federal subsidies would be mixed in with contributions from individuals and employers. Eventually, most Americans could end up getting their coverage through the exchange.
The Democratic health care legislation as originally introduced in the House and Senate did not mention abortion. That rang alarm bells for abortion opponents.
Since abortion is a legal medical procedure, experts on both sides say not mentioning it would allow health care plans in the new insurance exchange to provide unrestricted coverage.
Sotomayor Confirmed, Constitutional Debate Continues
All Americans should take pride in seeing our first Hispanic Supreme Court justice (not counting Benjamin Cardozo). While this moment should have belonged to Miguel Estrada—who was denied even a vote by an unprecedented Democratic filibuster—we should nevertheless celebrate Sonia Sotomayor’s rise from very humble beginnings to reach the highest court in the land. Although her selection represents the very worst of racial politics—she is not a leading light of the judiciary and would not have been considered had she not been a Hispanic woman—her career achievements show that the American Dream endures.
What makes the American Dream possible, however, is the rule of law, which in this country is ultimately guaranteed by the Constitution. The Constitution provides for a very specific government structure, with checks on each branch’s powers designed to maximize liberty and eliminate arbitrary and capricious rule. To that end, officers of the judicial branch—judges—are to make their decisions irrespective of the race, religion, or riches of those who come before them. And judges are to interpret the Constitution as written text. If they set aside the text and rule based on their own notions of fairness, then they act as unelected legislators or, worse, extra-constitutional amenders of our founding document.
Nominee Sotomayor knew all this, which is why the testimony she gave at her confirmation hearings disclaimed many of her previous speeches and writings, even going so far as to reject President Obama’s “empathy” standard—the idea that a judge applies the law differently when a litigant is sympathetic in some politically correct way. While she was evasive most of the time—reason enough to vote against her—when she did say something about judicial philosophy, it was often indistinguishable from the words of John Roberts or Samuel Alito (as evidenced by the frustration of left-wing commentators). And for good reason: in poll after poll, the American people overwhelmingly support a vision of the judicial role as one of enforcing the law as written, not of imposing their own policy preferences or vision of justice.
Kudos from this exercise go to those Republicans whose hard questions and thoughtful statements elevated the discussion of the Constitution beyond mere abstractions, so Americans could better understand the significance of ideological differences over the judicial role, or the use of foreign law in interpreting the Constitution, or property rights, or employment discrimination. In walking away from so many controversial positions, Sonia Sotomayor established a new standard to which all future nominees will at least have to pay lip service. While confirmation was almost a foregone conclusion from the start because of the Democrats’ strong Senate majority, the Republicans played well the cards they had been dealt by engaging in a serious discussion about constitutional interpretation and jurisprudential philosophy.
Costa Rica’s Social Security System Will Go Bankrupt in 14 Years
An independent audit—the first ever—of Costa Rica’s social security system has found that the system will start eating up its reserves in just 6 years, and will see its finances “compromised” (read “go bust”) in only 14 years [story in Spanish here].
Just as in the United States, Costa Rica has a government-run Ponzi scheme called social security that sooner or later was going to become unsustainable due to demographic changes. However, the seriousness of the situation was hidden throughout the years by Enron-like accountability tricks that have been exposed by the external audit. For example, official records reported income to the system from public enterprises that never took place. It also estimated the sustainability of the pension fund based on unrealistic salary projections.
The consequences for Costa Rican workers are all too grave. This not only compromises the retirement of young workers, but also of those who are a few years from retiring. If we had only followed the example of countries like Chile or El Salvador that privatized their social security systems years ago….
A Want Ad for God
The press is still abuzz over Tim Geithner’s behind-closed-doors tirade against critics of the Obama administration plan to tighten financial regulation. As Mark Calabria writes below, Geithner offered a simple message to Fed chair Ben Bernanke, FDIC chair Sheila Bair, and others: “[Y]ou’ve been heard, so you were ‘included,’ now shut up.”
But while Bernanke, Bair, et al. quibble over details of the Obama plan, Geithner should be more concerned about the glaring flaw at its center: the idea that government can conjure up a “systemic risk monitor” that will identify and avoid future market bubbles.
Many of the great bubbles in financial history grew out of some belief that “everyone” (including financiers, politicians, and regulators) was confident was true, yet it turned out to be wrong (either because it was always wrong, or conditions changed in some unforseen way). Some examples:
- The supply of Dutch admiral tulip bulbs was constrained though they were in heavy demand, so the 17th-century tulip mania was good investing.
- The supply of land in the South Seas and the Mississippi Valley was fixed, so the 18th-century land-buying mania was good investing.
- The emergence of a nationwide U.S. marketplace in the early 20th century was a watershed event, so the post-WWI stock frenzy was good investing.
- The emergence of the Internet marketplace, combined with path dependency and network effects, was another watershed event, so buying “dotcom” stock was good investing.
- And of course, until the last few years,”everyone knew” that investing in real estate and mortgages was “safe as houses.”
That last bullet wasn’t just the belief of “greedy investment banks,” but also of government officials and regulators. My colleagues Peter Van Doren and Jagadeesh Gokhale have a forthcoming paper that notes, in part, that despite the populist rhetoric now being bandied around, banking is heavily regulated under international rules. However, those rules assume that investment in mortgages and mortgage-backed securities is low-risk (and indeed the rules push money toward those investments).
The paper also quotes numerous top-tier economists who claimed the soaring house prices of the past decade were supported by “the fundamentals,” or that a bubble wouldn’t threaten the broader economy. (Their paper doesn’t mention — but could — that Fannie Mae and Freddie Mac, along with their bureaucratic and congressional overseers, believed those firms’ investments in riskier mortgages were “safe as houses.”)
Everyone “knew” housing was a sound investment. It just turned out that everyone was wrong.
Tauzin on the $80-Billion PhRMA-Obama Deal
This post by my friend Ben Zycher, at NRO’s The Corner, reminds me that we still don’t know if the drugmakers are going to be net losers or net winners under the secretive deal that PhRMA made with President Obama. To wit…
A week or so ago, I was at a National Journal salon dinner, which assembled a bunch of Nearly Important People to discuss health reform. The dinner was “on the record,” so you can imagine how frank and interesting the conversation was.
So after dinner, I asked PhRMA head Billy Tauzin how much his member companies would make in excess of their $80 billion contribution to health care reform. Tauzin said they would make less than $80 billion. (PhRMA is volunteering to make less money! A net contribution to health reform! How civic-minded!)
If that’s true, I asked, then why isn’t he being replaced with a better lobbyist? Tauzin said the reason is that this deal prevents a much worse deal, which might allow reimportation, or apply Medicaid’s price controls to dual eligibles in Medicare Part D, etc.
Since his member companies would be losing money on the deal, I continued, why not release the data so we could see each company’s net contribution? Tauzin said he can’t do that for his member companies. Why not encourage them to do it? Can’t do that, he said. Besides, all the data are publicly available, so anyone could crunch the numbers themselves. Not as well as the member companies can, I observed. “Awww, sure you could!” he smiled.
So I should just trust the head of the pharmaceutical lobby that his members won’t be making money on this deal, I asked? All the data are publicly available, he replied.
A reporter friend commented, “In Tauzin We Trust? Seems like a stretch.”
Filed under: Cato Publications; General; Government and Politics; Health Care
That’s Edutainment
I recently watched the Pacific Research Institute’s documentary “Not as Good as You Think,” about the woes of a middle-class suburban public school district, the myth of universally good middle class public schools, and the Swedish alternative of private school choice.
As with all of PRI’s policy products, the viewer gleans a lot of important information. It’s a quality piece. What’s really great about it, though, is how entertaining it is to watch. Putting myself in the place of someone not working in education policy, I can still imagine watching this flick purely to follow the story it tells. It’s definitely worth a look.
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