Archive for September, 2009
So Much for Making Money on the Bailout
The federal government is unlikely to recoup all of the billions of dollars that it has invested in General Motors and Chrysler, according to a new congressional oversight report assessing the automakers’ rescue.
The report said that a $5.4 billion portion of the $10.5 billion owed by Chrysler is “highly unlikely” to be repaid, while full recovery of the $50 billion sunk into GM would require the company’s stock to reach unprecedented heights.
“Although taxpayers may recover some portion of their investment in Chrysler and GM, it is unlikely they will recover the entire amount,” according to the report, which is scheduled to be released Wednesday.
Well, it’s only money. And with the taxpayers facing more than $100 trillion worth of unfunded liabilities, what’s a few more wasted dollars?!
Sticking Around Afghanistan Forever?
I’ll confess one of the arguments that I’ve never understood is the claim that the U.S. “abandoned” Afghanistan after aiding the Mujahadeen in the latter’s battle against the Soviet Union. Yet Secretary of Defense Robert Gates apparently is the latest proponent of this view.
Defense Secretary Robert M. Gates said in an interview broadcast this week that the United States would not repeat the mistake of abandoning Afghanistan, vowing that “both Afghanistan and Pakistan can count on us for the long term.”
Just what does he believe we should have done? Obviously, the Afghans didn’t want us to try to govern them. Any attempt to impose a regime on them through Kabul would have met the same resistance that defeated the Soviets. Backing a favored warlord or two would have just involved America in the ensuing conflict.
Nor would carpet-bombing Afghanistan with dollar bills starting in 1989 after the Soviets withdrew have led to enlightened, liberal Western governance and social transformation. Humanitarian aid sounds good, but as we’ve (re)discovered recently, building schools doesn’t get you far if there’s little or no security and kids are afraid to attend. And a half century of foreign experience has demonstrated that recipients almost always take the money and do what they want — principally maintaining power by rewarding friends and punishing enemies. The likelihood of the U.S doing any better in tribal Afghanistan as its varied peoples shifted from resisting outsiders to fighting each other is a fantasy.
The best thing the U.S. government could do for the long-term is get out of the way. Washington has eliminated al-Qaeda as an effective transnational terrorist force. The U.S. should leave nation-building to others, namely the Afghans and Pakistanis. Only Afghanistan and Pakistan can confront the overwhelming challenges facing both nations.
Research Shows $100 Billion Ed. Stimulus Likely Hurting Economy
Tomorrow morning, the president’s Council of Economic Advisers will release a report assessing the short and long-term effects of the stimulus bill on the U.S. economy. As with previous iterations, this report will attempt to forecast overall effects of the stimulus across its many different components and the different economic sectors it targets. In doing so, it ignores the clearest research findings available pertaining to a key portion of the stimulus: k-12 education.
The president has committed $100 billion in new money to the nation’s public school systems, and required that states accepting the funds promise not to reduce their own k-12 spending. The official argument for this measure is that higher school spending will accelerate U.S. economic growth. But a July 2008 study in the Journal of Policy Sciences finds that, to the authors’ own surprise, higher spending on public schooling is associated with lower subsequent economic growth. Spending more on public schools hurts the U.S. economy.
How is that possible? There is little debate in academic circles that raising human capital — improving the skills and knowledge of workers — boosts productivity. So an obvious interpretation of the JPS study is that raising public school spending must not increase human capital. While this possibility surprised study authors Norman Baldwin and Stephen Borrelli, it is consistent with the data on U.S. educational productivity over the past two generations.
Since 1970, inflation adjusted public school spending has more than doubled. Over the same period, achievement of students at the end of high school has stagnated according to the Department of Education’s own long term National Assessment of Educational Progress. Meanwhile, the high school graduation rate has declined by 4 or 5%, according to Nobel laureate economist James Heckman. So the only thing higher public school spending has accomplished is to raise taxes by about $300 billion annually, without improving outcomes.
The fact that more schooling without more learning is not a recipe for economic growth is confirmed by the independent empirical work of economists Eric Hanushek and Ludger Woessmann. Their key finding is that academic achievement, not schooling per se, is what matters to economic growth.
Based on this body of research, the president’s decision to pump $100 billion into existing public school systems is likely slowing the U.S. economic recovery.
Cato Health Care Experts Live-Blogging Obama’s Address
Cato health care policy experts offered live-commentary to President Obama’s address to Congress on Wednesday night. To review their comments, click the replay button below.
The video player has the speech in full.
Visit msnbc.com for Breaking News, World News, and News about the Economy
What Principle is Guiding Obama’s Honduras Policy?
The Obama administration is threatening not to recognize the result of Honduras’ presidential election in late November unless Manuel Zelaya returns to the presidency beforehand.
The presidential poll was already scheduled prior to Zelaya’s (constitutional) removal from office last June. The candidates had already been selected by their parties through an open primary process. The current civilian interim president, Roberto Micheletti, is not running for office and plans to step down in January as stipulated by the Constitution. Both major presidential candidates supported the ouster of Zelaya. The political campaign is playing out in an orderly manner, and there’s a significant chance that the candidate from the opposition National Party will win the presidency. The independent Electoral Tribunal is overseeing the process.
And yet the U.S. Department of State is signaling that it won’t recognize the result of the poll in the name of defending Zelaya’s return to power. However, the administration’s defense of ousted leaders seems to have some caveats.
Last July, The Economist reported that Mauritania’s General Muhammad Ould Abdelaziz, the head of the military junta who led the coup that overthrew that country’s first democratically-elected president, got himself elected as civilian president after an election that the opposition called an “elected coup.” However, despite “a certain number of irregularities,” Washington recognized Abdelaziz’s election as a reflection of the “will of the Mauritanian people” and stated its willingness to work with his government.
Why is it that the election in Mauritania—with its many blatant flaws—passed the Obama administration’s legitimacy litmus test but the one in Honduras already seems set to fail it? What foreign policy principle is the administration applying in Honduras? Certainly not respect for democracy or the rule of law, both of which Zelaya was trying to subvert when he was removed from office.
We’re Terribly Czarry
My former colleague Dave Weigel makes the excellent point that the supposed explosion of “Czars” under this administration is, in significant part, a function of journalists trying to make the same old “deputy undersecretary” sound sexier. Which is a shame, since it means that the pernicious and the benign get lumped together under the same sensationalist label — one whose public effect is to normalize the idea of unaccountable individuals within the executive branch given sweeping powers to solve specific problems, whether or not that picture is accurate.
I don’t know how much it can be attributed to the Czarmania, but I’m especially puzzled by the apparent emergence of legal scholar and prospective OIRA Adminstrator Cass Sunstein as the new hot bogeyman for conservatives. The Office of Information and Regulatory Affairs, which Sunstein’s been tapped to head, was created in 1980 and is precisely the sort of agency conservatives should love — tasked with catching inefficient and excessively burdensome regulations before they go into effect. It has, unsurprisingly, been most active under conservative presidents, and is one of the few offices where fans of limited government should want a vigorous, influential, and intellectually formidable director at the helm.
Now, Cass Sunstein is not somebody I agree with on a great number of things. On the day he’s tapped for a seat on the Supreme Court bench, I’ll break out in hives. But it’s awfully hard to imagine any realistic alternative — anyone Obama might actually have appointed — who would be better in the OIRA post from a limited government perspective. (I considered some of the specific concerns being raised about Sunstein back in the spring and found that they ranged from exaggerated to simply mendacious.) That’s one reason hardcore progressives have, in fact, been freaking out over his nomination. They must be pinching themselves now that it seems Glenn Beck is out to do their work for them. Say what you will about the tenets of “libertarian paternalism,” but at least it’s an ethos that would demand a far lighter touch on markets than the unreconstructed technocracy of your average regulator.
President’s Campaign Speech to Kids
There are numerous reasons to take issue with the President’s address to kids, several of which I hit here. Just one is that this speech is essentially a big campaign stop for President Obama. As I watch the speech, this only seems more blatantly clear. Cheering crowds. Panning across the admiring throngs. “MY EDUCATION, MY FUTURE” backdrop. Powerful stories about President Obama’s life. It’s all there.
Of course, this is just about the kids…
What’s Wrong with the President’s Speech?
The controversy over the president’s speech to school kids has focused on the official curriculum guidance — which in its original form seemed to assume that American schoolchildren would have the same response to presidential addresses as Chris Matthews.
As I write on Forbes.com today, there is an entirely different aspect to the speech that some may find much more troubling.
If I Only Had a Crisis
Bloomberg News points out that President Obama needs a health-care crisis in order to impose a health-care “solution”:
President Barack Obama returns to Washington next week in search of one thing that can revive his health-care overhaul: a sense of crisis….
“At the moment, except for the people without insurance, we’re not in a health-care crisis,” said Stephen Wayne, a professor of government at Georgetown University in Washington. “You do need a crisis to generate movement in Congress and to help build a consensus.”
This administration has used Naomi Klein’s book The Shock Doctrine as a manual. Klein said in an interview that
The Shock Doctrine is a political strategy that the Republican right has been perfecting over the past 35 years to use for various different kinds of shocks. They could be wars, natural disasters, economic crises, anything that sends a society into a state of shock to push through what economists call ‘economic shock therapy’ – rapid-fire, pro-corporate policies that they couldn’t get through if people weren’t in a state of fear and panic.
Whether or not that’s true about the “right-wing” policies that she purported to analyze, the Obama admininstration has taken it to heart. Rahm Emanuel said, “You never want a serious crisis to go to waste. And this crisis provides the opportunity for us to do things that you could not do before” such as taking control of the financial, energy, information and healthcare industries. Vice President Joe Biden, Secretary of State Hillary Clinton, and the president himself all echoed Emanuel’s exultation about the opportunities presented by crisis.
The financial crisis turned out to be shocking enough to let the federal government extend the power of the Federal Reserve, nationalize two automobile companies, spend $700 billion on corporate bailouts and another $787 billion on pork and “stimulus,” and inject a trillion dollars of inflationary credit into the economy. But now people are balking at further expansions of government, and the administration is longing for just a little more crisis to serve as a further opportunity.
Tuesday Links
- How unions are becoming irrelevant to the average American worker in the private sector.
- Is the president’s speech part of a sinister plan to create a socialist Obama Youth movement? Hardly. However, let us not forget that our Constitution’s framers thought schooling was too important to be left to a federal government.
- The Supreme Court will rule Wednesday on whether the government can ban political speech during election time. Here’s the back story.
- The 10-year budget deficit is now projected to be nine trillion dollars. Paul Krugman says it’s no big deal. James Dorn thinks otherwise and explains why Krugman is mistaken.
- Podcast: The real problem with Obama’s speech to schoolchildren.
Mr. President, Here Is Our Answer
President Obama continues to portray the debate over health care reform as a choice between his plan for a massive government-takeover of the US healthcare system and “doing nothing.” Those who oppose his plan are said to be “obstructionist” or in favor of the status-quo. Yesterday, the President again said, “I’ve got a question for all those folks [who oppose his plan]: What are you going to do? What’s your answer? What’s your solution?”
Well, I can’t speak for all his critics, but the Cato Institute has a long record of supporting health care reform based on free-markets and competition. If the President wanted to know more he might have read my recent op-ed in the Los Angeles Times or Michael Cannon’s piece in Investors Business Daily. He could have read our book, Healthy Competition. Or he might have just gone to healthcare.cato.org and read our plan:
- Let individuals control their health care dollars, and free them to choose from a wide variety of health plans and providers.
- Move away from a health care system dominated by employer-provided health insurance. Health insurance should be personal and portable, controlled by individuals themselves rather than government or an employer. Employment-based insurance hides much of the true cost of health care to consumers, thereby encouraging over-consumption. It also limits consumer choice, since employers get final say over what type of insurance a worker will receive. It means people who don’t receive insurance through work are put at a significant and costly disadvantage. And, of course, it means that if you lose your job, you are likely to end up uninsured as well.
- Changing from employer to individual insurance requires changing the tax treatment of health insurance. The current system excludes the value of employer-provided insurance from a worker’s taxable income. However, a worker purchasing health insurance on their own must do so with after-tax dollars. This provides a significant tilt towards employer-provided insurance, which should be reversed. Workers should receive a standard deduction, a tax credit, or, better still, large Health Savings Accounts (HSAs) for the purchase of health insurance, regardless of whether they receive it through their job or purchase it on their own.
- We need to increase competition among both insurers and health providers. People should be allowed to purchase health insurance across state lines. One study estimated that that adjustment alone could cover 17 million uninsured Americans without costing taxpayers a dime.
- We also need to rethink medical licensing laws to encourage greater competition among providers. Nurse practitioners, physician assistants, midwives, and other non-physician practitioners should have far greater ability to treat patients. Doctors and other health professionals should be able to take their licenses from state to state. We should also be encouraging innovations in delivery such as medical clinics in retail outlets.
- Congress should give Medicare enrollees a voucher, let them choose any health plan on the market, and let them keep the savings if they choose an economical plan. Medicare could even give larger vouchers to the poor and sick to ensure they could afford coverage.
- The expansion of “health status insurance” would protect many of those with preexisting conditions. States may also wish to experiment with high risk pools to ensure coverage for those with high cost medical conditions.
Mr. President, the ball is back in your court.
Picture Don Draper Stamping on a Human Face, Forever
Last week, a coalition of 10 privacy and consumer groups sent letters to Congress advocating legislation to regulate behavioral tracking and advertising, a phrase that actually describes a broad range of practices used by online marketers to monitor and profile Web users for the purpose of delivering targeted ads. While several friends at the Tech Liberation Front have already weighed in on the proposal in broad terms — in a nutshell: they don’t like it — I think it’s worth taking a look at some of the specific concerns raised and remedies proposed. Some of the former strike me as being more serious than the TLF folks allow, but many of the latter seem conspicuously ill-tailored to their ends.
First, while it’s certainly true that there are privacy advocates who seem incapable of grasping that not all rational people place an equally high premium on anonymity, it strikes me as unduly dismissive to suggest, as Berin Szoka does, that it’s inherently elitist or condescending to question whether most users are making informed choices about their privacy. If you’re a reasonably tech-savvy reader, you probably know something about conventional browser cookies, how they can be used by advertisers to create a trail of your travels across the Internet, and how you can limit this. But how much do you know about Flash cookies? Did you know about the old CSS hack I can use to infer the contents of your browser history even without tracking cookies? And that’s without getting really tricksy. If you knew all those things, congratulations, you’re an enormous geek too — but normal people don’t. And indeed, polls suggest that people generally hold a variety of false beliefs about common online commercial privacy practices. Proof, you might say, that people just don’t care that much about privacy or they’d be attending more scrupulously to Web privacy policies — except this turns out to impose a significant economic cost in itself.
The truth is, if we were dealing with a frictionless Coaseian market of fully-informed users, regulation would not be necessary, but it would not be especially harmful either, because users who currently allow themselves to be tracked would all gladly opt in. In the real world, though, behavioral economics suggests that defaults matter quite a lot: Making informed privacy choices can be costly, and while an opt-out regime will probably yield tracking of some who would prefer not to be under conditions of full information and frictionless choice, an opt-in regime will likely prevent tracking of folks who don’t object to tracking. And preventing that tracking also has real social costs, as Berin and Adam Thierer have taken pains to point out. In particular, it merits emphasis that behavioral advertising is regarded by many as providing a viable business model for online journalism, where contextual advertising tends not to work very well: There aren’t a lot of obvious products to tie in to an important investigative story about municipal corruption. Either way, though, the outcome is shaped by the default rule about the level of monitoring users are presumed to consent to. So which set of defaults ought we to prefer?
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