Archive for October, 2009
Dear President Obama: It Will Take True Leadership to Get Us Out of Afghanistan
At a recent town hall meeting, [via Ryan Jaroncyk at The Humble Libertarian], U.S. Rep. Tim Johnson (R-IL) explained why he wants a withdrawal of U.S. troops from Afghanistan:
I’m suggesting to you that there is no end game. I believe that our men and women are there in a mission that is ill-defined… I think we’re losing people by the day, here and over there, with no even indirect relationship to our national security.
Within a couple of weeks, I’m going to be looking at legislation and issuing a definitive statement on my position on Afghanistan, which at this point I would suggest would call for our withdrawal of troops forthwith.
We’ve had a succession from Vietnam to Iraq to Afghanistan, and the net result has been thousands of lives lost, and very little progress made… I’m in favor of doing everything we can to make America secure, to make sure we don’t have another 9/11 or even anything analogous to that, but I’m also convinced that our continued presence in Afghanistan is not serving that role. And we need to seriously re-examine where we’re at.
As I mentioned back in February of this year, “There is immense pressure to infuse greater troops in the region, but there is no objective in mind — and before you deploy the troops, you want to have a strategy.” The Obama administration is still stuck at a crossroads: either send more troops to protect the villages of Afghanistan from the Taliban, or stay at present levels (or decrease U.S. troop commitments) to go after al Qaeda cells in Pakistan.
Incredibly Mild PATRIOT Reform too Much for Dems
At hearings last week on reform and renewal of parts of the PATRIOT Act, Sen. Al Franken (D-MN) made a big show of reading the full text of the Fourth Amendment to Assistant Attorney General David Kris (who, just going out on a limb, had probably seen it). On Thursday, a notably less vocal Franken joined his a bipartisan majority of his Senate Judiciary Committee colleagues in a lopsided vote that torpedoed even the most modest of proposals to introduce elementary civil liberties safeguards into the USA PATRIOT Act.
As I noted in a post earlier this week, there were two main reform proposals on the table: An impressively comprehensive and careful one floated by Sen. Russ Feingold (D-WI), and a much more limited one from Sen. Patrick Leahy (D-VT) that nevertheless would have tightened the rules to require that so-called “pen/trap” surveillance and broad “section 215″ orders for private records only target individuals with at least some plausible connection to terrorists or terrorism. Some of us had nourished a foolish hope that the Committee might see fit to incorporate some of the most important elements of Feingold’s reform into the Leahy bill. Instead, Sen. Dianne Feinstein (D-CA) swooped in at the last minute with substitute legislation that stripped away even the mild but important limitations that were already there. There’s a single bizarre exception for records obtained from libraries, presumably because librarians have long been at the forefront of opposition to PATRIOT and section 215 authority, where the higher standard obtains. So if you surf the Web or check out books from your public library, your activities enjoy greater privacy protection than when you surf the web or order books off Amazon from your home or workplace.
The rationale for this was the fear, articulated by Feinstein, that a higher standard might interfere with an important “ongoing investigation.” First, it should be a little distressing if the current investigative methods in use would be utterly disrupted without the ability to broadly acquire records that don’t pertain to terrorists, nor to suspected activities of terrorists, nor even to people directly in contact with suspected terrorists. Second, even granting that it might be better not to change the rules for investigations currently underway, this explanation doesn’t hold up to scrutiny. The authority under 215 to compel the production of records or other “tangible things” (a blood or DNA sample from your doctor’s office, say) has always had a built-in expiration or “sunset” date, which all the proposals under consideration would have extended for another four years. But the sunset provisions have always included a grandfather clause, allowing the new PATRIOT powers and standards to remain in place for ongoing investigations, even as they expired for new investigations. There’s no reason a similar clause couldn’t have been added to Leahy’s reforms in order to avoid disrupting searches already underway. Finally, Marcy Wheeler of Firedoglake has a guess as to what that “ongoing investigation” entailed, and without going into great detail, it sounds like a sufficiently narrowly tailored order probably should have been available for the kind of investigation Wheeler envisions even under the more stringent standard Leahy had proposed. Back in 2005, incidentally, those slightly stricter standards had won the unanimous acceptance of the Judiciary Committee—so apparent we’ve achieved Change in the level of concern for civil liberties, albeit maybe not the sort for which some of us had Hoped.
But wait, it gets worse.
Dismal Jobs Report
The loss of 263,000 nonfarm jobs is another depressing economic statistic reinforcing the prospects of a jobless and joyless economic recovery. Job losses were widespread, but concentrated in construction, manufacturing, retail trade and government.
Employers want to fire, not hire. The reasons for this lie in Washington, where lawmakers are busy piling on spending, taxes, and mandates. From an employer’s perspective, each new hire is a liability. The Obama administration’s economic recovery plan, which was centered on job creation, is now a manifest failure. The stimulus brew it concocted has proven to be an economic depressant.
In an op-ed in today’s Wall Street Journal, Meredith Whitney highlights another serious economic drag on the economy: a continuing credit crunch. All the Obama Treasury and Fed lending programs have only served to direct credit to large companies, while small business — the engine of economic growth and job creation — has been starved of credit. The Treasury and Fed have a corporatist economic model, in which the favored few are benefited at the expense of the many. Their credit allocation policies have worked as a further drag on job creation.
Fixing Fannie Is Essential
This past week witnessed continued debate in congressional committees over changes to our financial regulatory system. Perhaps catching the most attention was Fed Chairman Ben Bernanke’s appearance before House Financial Services.
Sadly missing from all the noise this week was any discussion over reforming those entities at the center of the housing bubble and mortgage meltdown: Fannie Mae and Freddie Mac.
While many, including Bernanke, have identified the “global savings glut” as a prime force behind the historically low interest rates that drove the housing bubble, often missed in this analysis is the critical role played by Fannie and Freddie as channels of that savings glut. After all, the Chinese Central Bank was not plowing its reserves into Countrywide stock; it was putting hundreds of billions of its dollar reserves into Fannie and Freddie debt. Fannie and Freddie were the vehicle that carried excess world savings into the United States.
Had this massive flow of global capital been invested in productive activities, or even just prime mortgages, it is unlikely tha we would have seen such a large housing bubble. Instead, what did Fannie and Freddie do with its Chinese funds? It invested those funds in the subprime mortgage market. At the height of the bubble, Fannie and Freddie purchased over 40 percent of private-label subprime mortgage-backed securities. Fannie and Freddie also used those funds to lower the underwriting standards of the “prime” whole mortgages it purchased, turning much of the Alt-A and subprime market into what looked to the world like prime mortgages.
Given the massive leverage (at one point Freddie was leveraged 200 to 1) and shoddy credit quality of mortgages on their books, why were the Chinese and other investors so willing to trust their money to Fannie and Freddie? Because they were continually told by U.S. officials that their losses would be covered. At the end of the day, Fannie and Freddie were not bailed out in order to save our housing market; they were bailed out in order to protect the Chinese Central Bank from taking any losses on its Fannie/Freddie investments. Adding insult to injury is the fact that the Chinese accumulated these large dollar holdings in order to suppress the value of their currency, enabling Chinese products to be more competitive with American-made products.
While foreign investors have been willing to put considerable money into Wall Street, without the implied guarantees of Fannie and Freddie, trillions of dollars of global capital flows would not have been funneled into the U.S. subprime mortgage market. As Washington seems intent on continuing to mortgage America’s future to the Chinese, that at minimum it seems that fixing Fannie and Freddie might help insure that something more productive is done with that borrowing.
Pawlenty
I am very fearful that the Republicans will nominate another Bush-style candidate for 2012. With the government running trillion-dollar deficits, the country needs a hard-line budget-cutter as the next president.
Politico reports: “Minnesota Gov. Tim Pawlenty has been quietly assembling the blueprint of a presidential campaign and will announce Thursday the support of a group of high-level political strategists and donors, complemented by a handful of top new media consultants.”
I gave Pawlenty a “B” in my fiscal report card on the governors last year. Here’s what I said about him:
Tim Pawlenty pledged not to raise taxes when he ran for governor, but his tax record in office is more mixed than that. He backed a $200 million tax increase on cigarette consumers in 2005 and a $109 million corporate tax increase in 2008. He has also supported substantial increases in fees and charges. Pawlenty has provided some targeted tax relief and imposed temporary limits on local property tax increases, but he has not focused on pro-growth tax rate reductions. Nonetheless, Pawlenty’s veto record is impressive, including rejecting a gasoline tax increase, a hike in the top personal income tax rate, and various bloated spending bills. Pawlenty has delivered fairly restrained budgets over the years and kept spending growth to modest increases.
This year, Pawlenty has proposed spending restraint and he has vetoed tax increases. He has also called for cutting the state corporate income tax rate. Still, I’m uneasy about him, so I sure hope the party’s fiscal conservatives thoroughly vet the fellow before he advances too far.
The Emperor’s Green Clothes
According to Thursday’s New York Times, “the Obama administration announced on Wednesday that it was moving forward on new rules to regulate greenhouse gas emissions from hundreds of power plants and large industrial facilities.”
President Obama has said that he prefers a comprehensive legislative approach to regulating emissions and stemming global warming, not a piecemeal application of rules, and that he is deeply committed to passage of a climate bill this year.
But he has authorized the Environmental Protection Agency to begin moving toward regulation, which could goad lawmakers into reaching an agreement.
In the book that popularized the phrase “the Imperial Presidency,” historian Arthur Schlesinger Jr. focused overwhelmingly on the vast growth of presidential power in foreign affairs. But as an inveterate New Dealer, Schlesinger had a blind spot where it came to the Emperor’s burgeoning powers at home.
The Supreme Court’s virtual abandonment of the nondelegation doctrine after 1935 paved the way for the modern administrative state, in which Congress all too eagerly cedes legislative power to the executive branch. As the Obama administration’s latest actions on global warming show, the Imperial Presidency comes in green, too. From my column in the Washington Examiner this week:
James Madison believed that there could be “no liberty where the legislative and executive powers are united in the same person.” And yet, here we are, with those powers united in the person of a president who has pledged to heal the planet and stop the oceans’ rise.
From the Oxymoron File: The Neutral Subsidy
Peter Van Doren points me to some revealing passages in a new article in the Journal of Economic Perspectives. In “Subsidizing Creativity through Network Design: Zero-Pricing and Net Neutrality,” Robin S. Lee and Tim Wu caution against tiered pricing for Internet access services, writing:
[U]nless sufficient bandwidth and quality of service can be guaranteed for the “free” Internet, there is a risk that . . . tiering will serve to sidestep de facto prohibition on termination fees. . . . [A] priced-priority system could simply become a de facto fee charged for all content providers if the “free” Internet was of sufficiently poor quality and consumers shifted their usage behavior accordingly. . . . [T]his might dampen the introduction of new content and services and eliminate the subsidy for content innovation currently provided by net neutrality.
Locking in net neutrality by regulation would lock in a subsidy to content providers. Lee and Wu prefer it, and many of us may like the results, but it’s hard to call a subsidy regime “neutral.”
Thursday Links
- Education expert: More government involvement in the college loan business will increase the national debt and leave Americans footing the bill.
- How Congress is cooking the books: When it comes to the health care reform debate honest budgeting is nowhere to be seen.
- More background information on the elimination of the missile defense program in Europe.
- How the “death tax” destroys wealth.
- Podcast: “Knowledge, Power and the Financial Crisis“
Sixty Years On, China Has Prosperity, Still Needs Freedom
China’s rise from an isolated state-controlled economy in 1949 to the world’s third largest economy with a vibrant nonstate sector is something to celebrate on the 60th anniversary of the founding of the People’s Republic of China.
Under Deng Xiaoping, China’s transition from plan to market began in earnest in December 1978. For more than 30 years now, China has gradually removed barriers to a market system and increased opportunities for voluntary exchanges. Special economic zones, the end of communal farming, the rise of township and village enterprises, and the massive increase in foreign trade have enabled millions of people to lift themselves out of abject poverty.
Economic freedom has increased personal freedom, but the Chinese Communist Party has no intention of giving up its monopoly on power. China’s future will depend to a large extent on the path of political reform. Further strengthening of private property rights, including land rights, would create new wealth and a growing voice for limiting the power of government. It is doubtful that in another 60 years there will be single-party rule in China.
Come Hear Uncle Sam’s Band, Playing to the Rising Tide of Debt
A $600,000 federal grant is chump change compared to overall government spending, and I recognize that picking on individual awards generally isn’t worth the effort because there are bigger fish to fry. But every once in a while I think it’s alright to highlight a particularly ridiculous grant award for the purpose of illustrating that the federal government’s ability to spend money on virtually anything it wants has broader negative implications. So when I read this morning that the Institute of Museum and Library Services (an independent federal agency) gave UC Santa Cruz’s library $615,175 to archive Grateful Dead memorabilia online, I just couldn’t help myself.
The title of my post refers to a lyric from the Dead song “Uncle John’s Band.” According to the lyrics, Uncle John’s Band’s motto is “don’t tread on me.” “Don’t tread on me” was a motto of the American patriots during the Revolutionary War and was prominently featured below a coiled rattlesnake on the famous Gadsden flag.
The Gadsden flag, which I proudly own and used to hang in my Senate office, has regained popularity and can now be seen at TEA Party protests around the country. While some would like to dismiss the TEA partiers as racists, the resurgence of the Gadsden flag indicates to me that a healthy number of folks simply recognize the American tradition of being leery of an all-powerful centralized authority. It’s safe to say that those patriots of yesterday could have never imagined that the small, limited federal government they created would turn into the overbearing $3.7 trillion Leviathan it is today. What a long, strange trip it’s been indeed.
A Novel Interpretation of “Green Tariffs”
Here’s a nice follow up to my blog post on Tuesday: firms importing solar panels to the United States face a $70 million bill because of unpaid duties.
It seems to me that a government truly concerned about global warming–putting aside the merits of that position–would want to encourage the adoption of solar panels, including by keeping them as cheap as possible. Nor, I would have thought, is this the time to add more fuel to the fire that is starting to characterize the U.S. trade relationship with China. There’s plenty enough fuel for that already.
Lies Our Professors Tell Us
On Sunday, the Washington Post ran an op-ed by the chancellor and vice chancellor of the University of California, Berkeley, in which the writers proposed that the federal government start pumping money into a select few public universities. Why? On the constantly repeated but never substantiated assertion that state and local governments have been cutting those schools off.
As I point out in the following, unpublished letter to the editor, that is what we in the business call “a lie:”
It’s unfortunate that officials of a taxpayer-funded university felt the need to deceive in order to get more taxpayer dough, but that’s what UC Berkeley’s Robert Birgeneau and Frank Yeary did. Writing about the supposedly dire financial straits of public higher education (“Rescuing Our Public Universities,” September 27), Birgeneau and Yeary lamented decades of “material and progressive disinvestment by states in higher education.” But there’s been no such disinvestment, at least over the last quarter-century. According to inflation-adjusted data from the State Higher Education Executive Officers, in 1983 state and local expenditures per public-college pupil totaled $6,478. In 2008 they hit $7,059. At the same time, public-college enrollment ballooned from under 8 million students to over 10 million. That translates into anything but a “disinvestment” in the public ivory tower, no matter what its penthouse residents may say.
Since letters to the editor typically have to be pretty short I left out readily available data for California, data which would, of course, be most relevant to the destitute scholars of Berkeley. Since I have more space here, let’s take a look: In 1983, again using inflation-adjusted SHEEO numbers, state and local governments in the Golden State provided $5,963 per full-time-equivalent student. In 2008, they furnished $7,177, a 20 percent increase. And this while enrollment grew from about 1.2 million students to 1.7 million! Of course, spending didn’t go up in a straight line — it went up and down with the business cycle — but in no way was there anything you could call appreciable ”disinvestment.”
Unfortunately, higher education is awash in lies like these. Therefore, our debunking will not stop here! On Tuesday, October 6, at a Cato Institute/Pope Center for Higher Education Policy debate, we’ll deal with another of the ivory tower’s great truth-defying proclamations: that colleges and universities raise their prices at astronomical rates not because abundant, largely taxpayer-funded student aid makes doing so easy, but because they have to!
It’s a doozy of a declaration that should set off a doozy of a debate! To register to attend what should be a terrific event, or just to watch online, follow this link.
I hope to see you there, and remember: Don’t believe everything your professors tell you, especially when it impacts their wallets!
Cato on Facebook
Cato on Twitter
Cato on Google+
Cato on YouTube
