Archive for April, 2010
Oil Import Make Believe
A conversation with documentarian Robert Stone regarding Earth Day is featured today in The New York Times’s “Dot Earth” online column. In the course of his conversation with the Times’s Andrew Revkin, Mr. Stone — who is quite alarmed about our reliance on foreign oil — asks: “How many Americans know that we send about $800 billion to the Middle East every year for oil?”
Hopefully, not many. According to the U.S. Department of Commerce, the U.S. spent $95.4 billion on crude oil imports from OPEC sources in 2009. But not all OPEC members are from the Middle East. That $95.4 billion includes dollars spent on oil originating from Algeria ($6.3 billion), Angola ($9 billion), Ecuador ($3.4 billion), Nigeria ($17.7 billion), and Venezuela ($23.4 billion) – none of which are in the Middle East. Subtract out that oil and we arrive at $35.6 billion spent on Middle Eastern crude oil (a figure rounded from the original nominal counts. I have used the customs value – that is, the estimated value — of the oil being imported rather than the figures that include additional costs for insurance and transportation because money being spent on insurance and shipping goes to third parties that are not for the most part located in the Middle East. But if one wants to use those slightly higher figures, it won’t change the numbers very much at all).
For what it’s worth, the total amount of dollars Americans sent abroad for crude oil from all sources was $188.5 billion last year.
Even if the figure were $800 billion, so what? No one is forcing refineries to buy crude oil from foreign suppliers. They presumably believe that the oil at issue is more valuable than the money that must be offered to secure said oil and that oil from other sources is more expensive than oil from the Middle East. Hence, they buy. This is by definition a wealth creating transaction for American business enterprises. Foreign trade, Mr. Stone, is a good thing.
The implicit claim, of course, is that there are negative externalities associated with foreign oil consumption. This, however, is faith masquerading as fact (an argument also well made by Cato adjunct scholar Richard Gordon).
Regardless, Mr. Stone overstates the alleged problem by orders of magnitude.
An Actual Example of “Cyberwarfare”
The good thing about this review of the book “Cyber War” by Richard Clarke and Robert Knake is that it actually mentions attacks on computing and communications during warfare.
Messrs. Clarke and Knake are convinced that an Israeli air strike in 2007 against a secret North Korean-designed nuclear facility being constructed in the Syrian desert was a textbook case of cyber-aided warfare. Israeli computers “owned” Syria’s elaborate air defenses, the authors say, “ensuring that the enemy could not even raise its defenses.”
That might actually be “cyberwarfare.”
The rest of the review, and presumably the book, is threat exaggeration and distortion, wrongly characterizing the wide variety of security issues pertaining to computers, communications, and data as having to do with “war.”
“Papers, Please” in Arizona
The Arizona legislature recently sent Senate Bill 1070 to the governor.
According to this summary from the Arizona legislature, the bill would require Arizona officials and agencies to determine the immigration status of any person with whom they have “lawful contact” where reasonable suspicion exists regarding the immigration status of the person. Any person arrested in Arizona would also have to have their immigration status established and verified with the federal government before they were released.
The documents that can be used to prove legal immigration status under the bill include a valid Arizona driver license, a valid Arizona nonoperating identification license, a valid tribal enrollment card or other tribal identification, or a valid federal-, state- or local-government-issued identification, if the issuing entity requires proof of legal presence before issuance.
If the governor signs the bill, what creates “reasonable suspicion” about immigration status is a question that will have lawyers busy for years.
I’m interested in how well practiced Arizonans and Arizona government officials will become at checking the papers of people in their state. I have little to worry about, of course, because I’m not an illegal immigrant.
UCSB history professor Harold Marcuse maintains a fascinating web page about Martin Niemöller’s famous quotation. There are many versions of it in its long history, and there may yet be more.
Earth Day Links
Today is the 40th anniversary of Earth Day, a time to highlight and discuss ways to work toward a cleaner planet. Cato’s energy and environment research promotes policies that would help protect the environment without sacrificing economic liberty, goals that are mutually supporting, not mutually exclusive.
- Why we should thank capitalism for environmental gains: “It is businessmen — not bureaucrats or environmental activists — who deserve most of the credit for the environmental gains over the past century and who represent the best hope for a Greener tomorrow.”
- Finding the right balance: “Today, America’s environment is cleaner—and Earth Day has indeed helped ensure that. …We should renew our promise to keep the environment clean—without adding to human misery or stalling improvements in the human condition.”
- Want clean air? Try this.
- Is high-speed rail really an environmentally friendly alternative to driving and air travel? “Planners have predicted that a proposed line in Florida would use more energy and emit more of some pollutants than all of the cars it would take off the road.”
Three Steps to Comprehensive Immigration Reform
Congress can and should pass comprehensive immigration reform in 2010. Any legislation worthy of the name would:
1) offer legalization to undocumented workers who have been here for several years, pass a security check, and pay a reasonable fine and back taxes;
2) create a temporary-visa program sufficient to meet future labor needs of a growing economy; and
3) enforce the law against those who still insist on working outside the system, but in a way that does not restrict the freedom of American citizens.
Reform would reduce illegal immigration by offering a legal alternative. It would tighten border security by allowing U.S. agents to focus on intercepting real criminals and terrorists, not dishwashers and gardeners. And it would expand output, investment, and job opportunities for middle-class Americans. Polls show a majority of Americans will accept the three-fold approach to reform. Recent elections confirm that support for reform is a modest plus with swing voters, and a huge plus with Hispanics.
This is an issue where both major parties can work together to fix our immigration system in a way that boosts the economy, enhances security, and expands liberty.
For more, see Cato’s research on immigration.
Ms. Weaver Goes to Washington
Today in Washington: actress Sigourney Weaver testifies before the Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard of the Senate Committee on Commerce, Science and Transportation Committee on the topic of ocean acidification. Because, you know, she played an environmental scientist in Avatar. It’s the best fit since Jane Fonda, Jessica Lange, and Sissy Spacek — all of whom had played farm women — testified on America’s agricultural crisis.
Congress doesn’t have time to vote on presidential nominations. It doesn’t bother engaging in serious oversight of presidential power and civil liberties abuses. It looks at the ceiling and whistles as the national debt approaches Greek levels. But members of Congress have time to listen to an actress discuss the topic of ocean acidification.
This seems like a topic for “Really!?! with Seth and Amy” on Saturday Night Live. Really, Senate Commerce Committee? You think Sigourney Weaver has important information that you need to know? Really? And you’re not just doing this to get yourselves on television? Really!?! And you think the most important thing members of Congress could be doing today is getting their pictures taken with Sigourney Weaver? Really!?!
Of course, this is not just a one-day thing for Sigourney Weaver. She also traveled this month to Brazil to try to stop the construction of a dam. Because who would know better than a Hollywood-Manhattan actress how to make tradeoffs between energy needs and environmental risks in Brazil?
Now let me just say that I’m not arguing that ocean acidification isn’t an important topic. And I’m not criticizing Avatar or its defense of property rights. I’m just questioning whether Sigourney Weaver, Sissy Spacek, Jeff Daniels, Nick Jonas, and the Backstreet Boys have the kind of expertise that Congress ought to draw on in deciding how to run my life. Or then again, maybe planning the economy and running other people’s lives is farce at best, and Congress should just hold hearings with Will Ferrell and John Cleese.
Making Sense of New TSA Procedures
Since they were announced recently, I’ve been working to make sense of new security procedures that TSA is applying to flights coming into the U.S.
“These new measures utilize real-time, threat-based intelligence along with multiple, random layers of security, both seen and unseen, to more effectively mitigate evolving terrorist threats,” says Secretary Napolitano.
That reveals essentially nothing of what they are, of course. Indeed, “For security reasons, the specific details of the directives are not public.”
But we in the public aren’t so many potted plants. We need to know what they are, both because our freedoms are at stake and because our tax money will be spent on these measures.
Let’s start at the beginning, with identity-based screening and watch-listing in general. A recent report in the New York Times sums it up nicely:
The watch list is actually a succession of lists, beginning with the Terrorist Identities Datamart Environment, or TIDE, a centralized database of potential suspects. . . . [A]bout 10,000 names come in daily through intelligence reports, but . . . a large percentage are dismissed because they are based on “some combination of circular reporting, poison pens, mistaken identities, lies and so forth.”
Analysts at the counterterrorism center then work with the Terrorist Screening Center of the F.B.I. to add names to what is called the consolidated watch list, which may have any number of consequences for those on it, like questioning by the police during a traffic stop or additional screening crossing the border. That list, in turn, has various subsets, including the no-fly list and the selectee list, which requires passengers to undergo extra screening.
The consolidated list has the names of more than 400,000 people, about 97 percent of them foreigners, while the no-fly and selectee lists have about 6,000 and 20,000, respectively.
Wednesday Links
- Who are these centrist, independent-minded voters some say will be crucial in the 2010 elections? They’re not conservative. Many of them may be libertarian — fiscally conservative but socially liberal or tolerant. For more on this group, read about the libertarian vote in the age of Obama.
- Clear and simple: It is unconstitutional for the federal government to force people to buy a private product.
- Prepare for a new era of crony capitalism.
- A job killer: How Sen. Dodd’s financial reform will will hurt Main Street.
- Podcast: “Ending (or Entrenching) Bailouts” featuring Mark A. Calabria
Nostalgia Used to Be Better
Julian Simon often wrote about the persistence of the belief that life was better in the past or that things are steadily getting worse. It takes many forms: people used to be more polite, the media used to be more literate, life is more dangerous today, we’re running out of natural resources. Simon pointed out in many books and articles that, at least since the industrial revolution, life on earth is in fact getting longer, healthier, more comfortable, and less dangerous. Or, as the title of one of his books put it, It’s Getting Better All the Time.
He was mostly right. But in a review of a new collection of H. L. Mencken’s writings, I found an exception: Nostalgia itself, the longing for a lost golden age, was at least more eloquent when Mencken was writing it back in the 1920s. Jonathan Yardley of the Washington Post quotes these eulogies for old Baltimore:
Mencken was born in Baltimore in 1880 and lived almost his entire life in the house on Hollins Street where he grew up. “The Baltimore of the 80′s had a flavor that has long since vanished,” he wrote in a 1925 Evening Sun piece reprinted here. “The town is at least twice as big now as it was then, and twice as showy and glittering, but it is certainly not twice as pleasant, nor, indeed, half as pleasant. The more the boomers pump it up, the more it comes to resemble such dreadful places as Buffalo and Cleveland.”…
Mencken believed, as he wrote in 1930, that the great fire of 1904 was what killed the old Baltimore that he knew so intimately and loved so deeply: “The new Baltimore that emerged from the ashes was simply a virtuoso piece of Babbitts. It put in all the modern improvements, especially the bad ones. It acquired civic consciousness. Its cobs climbed out of the alleys behind the old gin-mills and began harassing decent people on the main streets.”…
“I am glad I was born long enough ago to remember, now, the days when the town had genuine color, and life here was worth living. I remember Guy’s Hotel. I remember the Concordia Opera House. I remember the old Courthouse. Better still, I remember Mike Sheehan’s old saloon on Light street — then a mediaeval and lovely alley; now a horror borrowed from the boom towns of the Middle West. Was there ever a better saloon in this world? Don’t argue: I refuse to listen! The decay of Baltimore, I believe, may be very accurately measured by the distance separating Mike’s incomparable bar from the soda-fountains which now pollute the neighborhood — above all, by the distance separating its noble customers (with their gold watch-chains and their elegant boiled shirts) from the poor fish who now lap up Coca-Cola.”
Man, you just don’t get nostalgia like that any more!
SEC vs. Goldman Sachs: Legislation by Demonization
The Obama administration thinks it has discovered the perfect formula to cram legislation through in a hurry: Demonize some prominent firm within an industry you plan to redesign, and then pass a law that has nothing to do with the accusation against the demonized firm. They did this with health insurance and now they’re trying it with finance.
With health insurance, the demon was Anthem Blue Cross Blue Shield of California, which Obama accused of raising premiums by “anywhere from 35 to 39 percent.” Why didn’t some curious reporter interview a single person who actually paid 39% more, or quote from a letter announcing such an increase? Because it didn’t happen. Insurance premiums are regulated by the states, and California wouldn’t approve such a boost. Yet the media’s uncritical outrage over that 39% rumor helped to enact an intrusive, redistributive health bill that has nothing to do with health insurance premiums (which remain regulated by the states).
Today, the new demon de jour is Goldman Sachs, a handy scapegoat to promote hasty financial rejiggering schemes The SEC’s suspiciously-timed civil suit against Goldman looks as flimsy as the last month’s health insurance story. It also looks unlikely to win in court.
As Washington Post columnist Sebastian Mallaby explains, “This is a non-scandal. The securities in question, so-called synthetic collateralized debt obligations, cannot exist unless somebody is betting that they will lose value.” In such a zero-sum contest, big investors who went long knew perfectly well that other investors had to be taking the other side of the bet. Goldman lost $90 million by betting this CDO would go up; John Paulson went short.
Columnists have moralized about the unfairness of the short investor (Paulson) negotiating the terms of this deal with a long investor, ACA Management, which had the last word. This too, notes Mallaby, “is another non-scandal. An investor who wants to bet against a bundle of mortgages is entitled to suggest what should go into the bundle. The buyer is equally entitled to make counter-suggestions. As the SEC’s complaint states clearly, the lead buyer in this deal, a boutique called ACA that specialized in mortgage securities, did precisely that.”
Like the earlier fuming about Anthem California, this new SEC publicity stunt is likewise irrelevant to the pending legislation. Congress hopes to get standardized derivatives traded on an exchange. But synthetic collateralized debt obligations dealing with a customized bundle of securities could not possibly be traded on an exchange, and would therefore be untouched by reform.
Losses sustained by a few financial speculators on one exotic derivative had nothing to do with starting a global recession in December 2007 or the related financial crisis of September 2008. The core of the latter crisis was mortgage-backed securities per se, yet Goldman was only the 12th largest private MBS issuer in 2007. Fannie Mae and Freddie Mac were and are the biggest risk; any reform that excludes them is a fraud.
The SEC’s dubious civil suit against Goldman is a wasteful diversion at best. It has nothing to do with the Obama administration’s suicidal impulse to impose more tough regulations and taxes on banks to encourage them to lend more.
It’s Not the Crime, It’s the Cover-Up
Secrecy breeds suspicion, and little in the intellectual property area has garnered more suspicion than ACTA, the Anti-Counterfeiting Trade Agreement.
ACTA is a multilateral trade agreement that has been under negotiation since 2007. But the negotiations haven’t been public, and access to key documents has only been provided to people willing to sign a non-disclosure agreement.
It is inconsistent with the U.S. public’s expectations to have government officials negotiate public policies without providing public access to the deliberations and the documents. There are some limitations and exceptions to this principle. Generic diplomatic relations probably develop best in an environment where candor can prevail. Issues related to national security may require secret negotiations. But intellectual property issues affect all Americans’ communications, commerce, entertainment, expression, access to knowledge, medical care, privacy, and more.
The good news is that a text of the current draft agreement has now been released. According to James Love of Knowledge Ecology International, ACTA “goes way beyond counterfeiting and copyright piracy, into several categories of intellectual property rights, including patents, semi conductor chip designs, pharmaceutical test data and other topics.”
Public debate on ACTA can now begin, but it begins with doubts surrounding it, doubts that were sown by the non-public process in which ACTA has developed so far.
This Is Sparta!
…Sparta, New Jersey that is. Like their fellow citizens in 54 percent of school districts across the state, the people of Sparta rejected their local district’s proposed budget yesterday. That’s the highest rate of school budget rejections since 1976, according to the New Jersey Star Ledger. Why? Taxpayers are tired of the relentlessly increasing per-pupil cost of public schooling at a time when their own household budgets are under pressure. It helped that popular new governor Chris Christie recommended that voters reject their districts’ budgets unless the teachers unions agreed to a one year salary freeze. [HT: Instapundit]
If this keeps up, voters might just decide to dump the government monopoly approach to schooling in favor of an education system that offers families far more choices while dramatically reducing costs.
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