Archive for November, 2009
The Odd Couple
Well, here’s an interesting pair. Today’s Washington Post contains an op-ed on climate change and trade, written jointly by Fred Bergsten, director of the Peterson Institute of International Economics, and Lori Wallach, director of Global Trade Watch at Public Citizen.
The authors readily admit, quite early in the piece, that they are usually on opposing sides of the trade debate. The Peterson Institute scholars are well-known and well-respected advocates of freer international trade. Global Trade Watch, and Wallach in particular? Not so much. She has called NAFTA a “disastrous experiment” and has a special section on her website calling on people to Take Action! on trade (example: by hosting a house party to celebrate the tenth anniversary of ” the historic 1999 Seattle protest victory of people power over corporate rule.”)
Yet here they are, claiming to agree on “a suprising number of aspects of the climate change debate and on the related need to overhaul global trade negotiations.” I am still trying to make sense of the op-ed, because it lurches around a bit, and to work out exactly how deep the agreement of these strange bedfellows really is. But for now, let me comment briefly on what I think is the main thrust of their op-ed: a proposal for launching a new round of trade talks.
The authors point out that a new treaty on global warming would “require new trade rules in intellectual property, services, government procurement and product standards.” So, hey, why not combine that into trade talks?The Obama Round (as if Obama-worship has not gone far enough) “would include, as a centerpiece, addressing these potential commercial and climate trade-offs and updating the negotiating agenda.”
That, quite frankly, would be fatal for the World Trade Organization. Developing countries, now in the majority in the WTO, are in general very resistant to the idea of bringing extraneous issues into its agenda (witness constant struggles over linking trade to labor and environment issues, to name just two). More to the point, we already have a round in progress. The Doha round has been struggling over old-fashioned trade concerns like tariffs and subsidies (remember them?) since launching in 2001. The risks of overburdening the WTO agenda are, in my opinion, far greater than the possible benefits. It’s fairly clear to me why Wallach would advocate a new round full of poison pills, but not so clear why Bergsten would put his name to such a suggestion.
We’re Looking for a Few Good Geeks
Take comfort, college and grad students: No longer need you settle for spending next summer backpacking around Europe having adventures. Instead, apply for a Google Policy Fellowship, and come work on tech policy issues with Jim Harper and myself in scenic Washington, DC.
The extremely competitive ten-week program comes with a $7,000 stipend, and is a chance to do serious policy work on issues like privacy and surveillance, telecommunications regulation, and other things you read about on Slashdot. Applications are due December 28, so get cracking!
The Hubris of the Trillion-Dollar Man
Former President George W. Bush
said Thursday that America must resist the “temptation” to allow the government to take over the private sector, taking a subtle shot at his Democratic successor by warning that too much state intervention and protectionism will squelch the economic recovery…
“As the world recovers, we will face a temptation to replace the risk-and-reward model of the private sector with the blunt instruments of government spending and control. History shows that the greater threat to prosperity is not too little government involvement, but too much,” said Mr. Bush.
Um, what? The president who
- expanded federal spending by more than a trillion dollars a year, before his disastrous last hundred days
- federalized education
- laid out “a smorgasbord of handouts and subsidies for virtually every energy lobby in Washington.”
- protected the steel, agriculture, and textile industries from foreign competition
- backed farm bills with lavish subsidies for producers
- created the biggest new entitlement since Lyndon Johnson
- bailed out Bear Stearns, Fannie Mae, Freddie Mac, AIG, Bank of America, Citigroup, and dozens of other banks
- provided government support for mortgages, credit cards, auto loans and other consumer debt, and
- bailed out Chrysler and General Motors in direct defiance of Congress’s refusal to do so
now says that his successor is about to “replace the risk-and-reward model of the private sector” with “too much government involvement”? Shouldn’t President Bush be doing penance in a monastery somewhere, rather than embarrass the free-market cause by pretending that he wasn’t the biggest-government president in decades?
Government Housing Adventures
The Wall Street Journal is reporting that Fannie Mae and Freddie Mac, which have already consumed $112 billion in taxpayer bailouts, may have additional losses if they can’t recoup claims from struggling private mortgage insurers.
From the Journal:
Fannie Mae has about $109.5 billion of mortgage-insurance coverage in force, which represents 4 percent of all single-family home loans it owns or guarantees. Freddie Mac had $63.4 billion in mortgage insurance and $12.2 billion in bond insurance. Private mortgage insurance is required for any home loan with less than a 20 percent down payment, and the policies typically cover 12 percent to 35 percent of losses in the event of a default, according to HSH Associates, a financial publisher. Mortgage insurers have been forced to pay up as loan defaults escalate.
Escalating loan defaults are also likely to bite taxpayers through the Federal Housing Administration, which covers 100 percent of losses. The FHA is in deep trouble:
The reduction in private insurance coverage has contributed to the rise in the volume of loans backed by the Federal Housing Administration, a government mortgage insurer that backs loans with as little as 3.5 percent down payments. It could be required to ask for a federal subsidy for the first time in its 75-year history if the housing market deteriorates further.
Who is looking out for taxpayers here?
More on ‘Race to the Top’
Andrew Coulson has already touched on this, but I thought I’d throw in my two cents. “Race to the Top Fund” guidelines were released today and they should please no reformers. They are simultaneously too weak, and way too much.
They are too weak because they don’t require states to actually do anything of substance. Have plans for reform? Sure. Break down a few barriers that could stand in the way of decent changes? That’s in there, too. But that’s about it. And the money is supposed to be a one-shot deal – once paper promises are accepted and the dough delivered, the race is supposed to be over.
In light of those things, how is this more appropriately labeled the Over the Top Fund than the Race to the Top Fund? Because while not requiring anything, it tries to push unprecedented centralization of education power.It calls for state data systems to track students from preschool to college graduation. It calls for states to sign onto “common” – meaning, ultimately, federal – standards. It tries to influence state budgeting.
In other words, it attempts to further centralize power in the hands of ever-more distant, unaccountable bureaucrats rather than leaving it with the communities, and especially parents, the schools are supposed to serve — exactly what’s plagued American education for decades. And, of course, it does this with huge gobs of federal money taxpayers have no choice but to supply.
A Georgian Constitution of Economic Liberty
The former Soviet Republic of Georgia is a late economic reformer, having started such liberalization after the Rose Revolution in 2004. But it is one of the most successful post-Soviet reformers, and it may be the country that has implemented the largest range of serious market reforms in the shortest period of time. Its growth rate from 2004 through 2008 averaged 7.6 percent per year (which includes the comparatively low 2.1 percent rate of 2008 that resulted from the global financial crisis and the war with Russia).
Last month, the government submitted a draft act to Parliament that calls for amending the country’s constitution so that it would safeguard various elements of economic freedom. The amendments would put caps on public debt, spending and deficits; and ban any kind of price controls, state ownership of banks and financial institutions and restrictions on currency convertibility, and any kind of control over the movement of capital. New taxes or increases in tax rates would require approval through a national referendum.
With the possible partial exception of Hong Kong’s Basic Law, I’m not aware of any other constitution that explicitly enshrines economic freedom. I’m told by Georgian colleagues that prospects for passage of the law looks good, with the constitution being amended as early as next month.
Thursday Links
- The War on Terrorism ends; and the winner is… China.
- Fairness Doctrine 2.0: How the government is finding new ways to regulate media.
- Don’t miss Cato’s 27th annual Monetary Conference Thursday, November 19th.
- New Hampshire state government guaranteeing loans to help bail out a local newspaper.
- Podcast: “Atomic Obsession:” When threats are exaggerated, what’s the cost? John Mueller, author of Overblown: How Politicians and the Terrorism Industry Inflate National Security Threats, and Why We Believe Them, comments.
Good Night, Lou Dobbs
In his CNN swan song last night, Lou Dobbs told his loyal if shrinking audience that important national issues
are now defined in the public arena by partisanship and ideology rather than by rigorous empirical thought and forthright analysis and discussion. I will be working diligently to change that as best I can.
I would argue that his very act of resigning from his prime-time perch is probably the best contribution he’s made yet to advancing “rigorous empirical thought.”
Since he launched his program “Lou Dobbs Tonight” in 2003, the CNN anchor has been engaged in one long rant against immigration, free trade, and other populist bugaboos. His approach was anything but rigorous and empirical.
In a review of his 2004 book, Exporting America, I critiqued his flabby reasoning and questionable facts. (My new Cato book, Mad about Trade, is a painless, one-shot antidote to everything Dobbs has said about free trade, manufacturing, and the middle class.) The New York Times, “60 Minutes” and other mainstream news outlets have exposed such outrageous whoppers from Dobbs as his claim that immigrants have caused an explosion of leprosy cases and crime.
Dobbs was vague about his plans for the future last night, but there is some speculation that he will run for office, perhaps for president in 2012. I hope he does. It would be an interesting test of just how popular his sentiments really are among Main Street Americans.
Arne Duncan, Secretary of Wheel Reinvention
The final guidelines for the Administration’s “Race to the Top” education reform program have now been released. It’s a system that stimulates competition between the states to produce results that the customer (Secretary Duncan) wants, using financial incentives. Déjà vu, anyone?
It’s as though Arne Duncan recognizes the merits of free market forces, but rather than faithfully reproducing them in the field of education, he’s decided to give us his own reimagining of them.
Here’s the problem. There are already 25 years of scientific research comparing real free education markets to traditional public school systems. It overwhelmingly finds that markets do a better job of serving families. But we have no evidence at all that Secretary Duncan’s newly invented system will do anyone any good.
So why go to all this trouble to reinvent the wheel, when the Secretary’s own Department of Education has found that an on-going federal private school choice program—which gets much closer to a genuine education marketplace—is raising students’ reading ability by two grade levels after just 3 years of participation?
Public Housing for the Dead
The HUD Inspector General’s Office released an audit earlier this week on the department’s progress in making sure local public housing agencies aren’t subsidizing the deceased. According to the report, local “agencies made an estimated $15.2 million in payments on behalf of deceased tenants that they should have identified and corrected.”
The audit found the following “significant weaknesses:”
- HUD and local agencies did not have effective policies related to deceased tenants.
- Local agencies did not provide accurate and reliable information to HUD.
- HUD and local agencies did not safeguard assets to ensure correct assistance payments.
This report is a small illustration of the fundamental problems with the federal government subsidizing local governments. The local public housing agencies are supposed to be monitoring how money is spent and reporting to HUD. HUD is supposed to be monitoring the local public housing agencies. But no one does a very good monitoring job, despite the piles of regulations and paperwork that every level of government has to deal with for such subsidies. The muddled web of responsibilities also makes it easy for fraud artists to take advantage.
Last week, HUD’s IG reported that the department is sending $220 million in stimulus funds to local agencies already known to misspend taxpayer dollars.
The government is sending millions of dollars in stimulus aid to communities and housing agencies that federal watchdogs have concluded are unable to spend it appropriately, increasing the risk that the money will be wasted.
Since July, auditors working for the Department of Housing and Urban Development’s inspector general have scrutinized at least 22 cities, counties and housing authorities in 15 states and Puerto Rico to measure whether they can handle stimulus funds effectively. Only six, they found, could do so.
The rest — in line to receive more than $220 million in stimulus aid — had shortcomings ranging from poor management to inadequate staffing that threatened their ability to spend the money quickly and appropriately, a series of audit reports show.
According to a HUD spokesperson, the department is “spending millions of dollars to help local officials spend stimulus money effectively.” Maybe that’s true, but all monitoring help is a pure loss to taxpayers and the private sector economy.
Even when the federal oversight does find problems, the money often keeps flowing anyway. As the article notes:
USA TODAY reported in April that HUD planned to send $300 million in stimulus money to public housing authorities that had been repeatedly faulted by outside auditors for mishandling other forms of federal aid. Congress gave the Obama administration permission to withhold stimulus money from some of those agencies, but HUD opted earlier this year not to do so.
For more on fraud and abuse in federal programs, including housing subsidies, see this essay.
A Lesson for Young Journalists, Courtesy of Justice Kennedy
A high school newspaper in Manhattan recently added a new and prestigious editor to its staff: Supreme Court Justice Anthony Kennedy. Adam Liptak of the New York Times reports:
It turns out that Justice Anthony M. Kennedy, widely regarded as one of the court’s most vigilant defenders of First Amendment values, had provided the newspaper, The Daltonian, with a lesson about journalistic independence. Justice Kennedy’s office had insisted on approving any article about a talk he gave to an assembly of Dalton high school students on Oct. 28.
Kathleen Arberg, the court’s public information officer, said Justice Kennedy’s office had made the request to make sure the quotations attributed to him were accurate.
The justice’s office received a draft of the proposed article on Monday and returned it to the newspaper the same day with “a couple of minor tweaks,” Ms. Arberg said. Quotations were “tidied up” to better reflect the meaning the justice had intended to convey, she said.
I’m all for being tidy — and, for all his faults, Kennedy has indeed been friendly to the First Amendment (if not to student speech rights in the “Bong Hits for Jesus” case, Morse v. Frederick) – but public figures don’t usually get to change a story to “better reflect” the intent of their words.
…Frank D. LoMonte, the executive director of the Student Press Law Center, questioned the school’s approach. “Obviously, in the professional world, it would be a nonstarter if a source demanded prior approval of coverage of a speech,” he said. Even at a high school publication, Mr. LoMonte said, the request for prepublication review sent the wrong message and failed to appreciate the sophistication of high school seniors.
While this is hardly a major scandal — and it’s not unusual for justices to exclude the press entirely from public appearances — Kennedy’s use of a judicial editor’s pen does support the general feeling that students don’t always get a fair shake when it comes to their constitutional rights. As I said about an unrelated case in which Cato filed a brief last week (quoting the landmark Tinker case), students shouldn’t have to “shed their constitutional rights to freedom of speech… at the schoolhouse gate” — especially when a man charged with protecting those rights comes to talk to them about the importance of law and liberty.
H/T: Jonathan Blanks
Fort Hood: Reaction, Response, and Rejoinder
Commentary on the Fort Hood incident can be categorized three ways: reaction, response, and rejoinder (commentary on the commentary).
Reactions generally consist of pundits pouring their preconceptions over what is known of the facts. These are the least worthy of our time, and rejoinders like this one from Stephen M. Walt of Harvard University in the Fort Hood section of The Politico‘s Arena blog dispense with them well:
Of course [Fort Hood] is being politicized; there is no issue that is immune to exploitation by politicians and media commentators. The problem is that there are an infinite number of “lessons” one can draw from a tragic event like this — the strain on our troops from a foolish war, the impact of hateful ideas from the fringe of a great religion (and most religions have them), the individual demons that drove one individual to a violent and senseless act, etc., — and so no limits to the ways it can be used by irresponsible politicians (is that redundant?) and pundits.
My favorite response—by “response,” I mean careful, productive analysis—was written last year as a general admonition about events like this (which at least has terrorist connotations):
Above all else is the imperative to think beyond the passions of those who are hurt, frightened or angry. Policymakers who become caught up in the short-term goals and spectacle of terrorist attacks relinquish the broader historical perspective and phlegmatic approach that is crucial to the reassertion of state power. Their goal must be to think strategically and avoid falling into the trap of reacting narrowly and directly to the violent initiatives taken by these groups.
That’s Audrey Kurth Cronin, Professor of Strategy at the U.S. National War College in her monograph, Ending Terrorism: Lessons for Defeating al-Qaeda.
But I want to turn to a critique leveled against my recent post, ”The Search for Answers in Fort Hood,” which discussed how little Fort Hood positions us to prevent similar incidents in the future. (I hope it was response and not reaction, but readers can judge for themselves.)
A thoughtful Cato colleague emailed me suggesting that there may have been enough indication in Nidal Hasan’s behavior—in particular, correspondence with Anwar al-Awlaki—to stop him before his shooting spree.
There may have been. Current reporting has it that his communications with al-Awlaki were picked up and examined, but because they were about a research paper that he was in fact writing, he was deemed not to merit any further investigation.
This can only be called error with the benefit of hindsight. And it tells us nothing about what might prevent a future attack, which was my subject.
If humans were inert objects, investigators could simply tweak the filter that caused this false negative to occur. They could not only investigate the people who contact known terrorists as they did Nidal Hassan, they could know to disregard claimed academic interests. Poof! The next Nidal Hassan would be thwarted at a small cost to actual researchers.
But future attacks are not like past attacks. Tweaking the filter to eliminate this source of false negatives would simply increase false positives without homing in on the next attacker. Terrorists and terrorist wannabes will change their behavior based on known and imagined measures to thwart them. Nobody’s going to be emailing this al-Awlaki guy for a while.
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