Archive for May, 2010
Afghanistan: Complicated, Confusing, and Tragic
Kabul, Afghanistan—Malou Innocent and I have been interviewing a range of people in Afghanistan’s capital. Getting around isn’t easy. The traffic is horrendous: automobile ownership has grown on roads built for a different era. Street upkeep is not one of the city government’s strong suits. Police checkpoints and traffic barriers dot Kabul.
Arriving at your destination is merely the start. Military bases, government ministries, Western embassies, luxury hotels, and large businesses are fortified with tall walls, barbed wire, concrete barriers, reinforced gates, and guard posts. Armed personnel man entrances and patrol grounds.
As so often is the case, it quickly becomes evident on the ground that foreign conflicts are far more complicated than commonly advertised. Afghanistan is a diverse and complex land. Parts of it are stable and peaceful. Ethnic and tribal divisions run deep, but vary around the country. Although rural illiteracy is high, many urban Afghans are as educated and sophisticated as the Westerners who have flocked to Kabul. And most everyone evinces a desperate desire for peace and security.
An overwhelming sense of tragedy hangs over this beautiful land. The evidence of war and instability is everywhere. The old royal palace still stands, abandoned and wrecked years ago. The casualties of endless conflict are visible—adults and children hobbling along on only one leg, legless beggars by the road. “Poppy palaces,” many constructed with drug money, continue to rise while the streets teem with people struggling to find work. Afghan women covered by burqas walking outside of hotels and restaurants serving alcohol to foreigners. Westerners abound, fighting the war, running NGOs, advising government ministries, and otherwise attempting to re-engineer Afghan society.
Individual stories remind us how blessed we are to live in America. As frustrated as we might grow with U.S. government policy, we live in a nation that is prosperous, peaceful, democratic, stable, and still relatively free. One 27-year-old Afghan, who currently works for a government ministry, told us about how his family decided to flee Kabul after his neighborhood was bombarded as the city was being fought over by various mujahedeen factions. They returned home from Pakistan after the ouster of the Taliban; now he worries about the future.
The overwhelming message that we have heard so far is that the Afghan government is incompetent and corrupt; as such, it is a poor partner to Western nations seeking to create a functioning state. Moreover, Western nations, and especially the U.S., are commonly unrealistic in their assumptions, objectives, and tactics. We have yet to encounter many optimists about allied policy.
Although many foreigners of good intentions are working in Kabul, the flood of money to consultants and NGOs is often wasted or misspent. Afghans themselves have grown cynical after decades of war; many focus on the short-term and are happy to manipulate Western aid agencies and militaries alike. At the same time, those who have come forward to idealistically work for a better future are vulnerable and worry about the consequences of an allied retreat.
Every conversation makes it more evident how little we know and hard it is to understand this complex society and conflict. Malou and I don’t expect our time here to turn us into experts. But we do hope that we will learn enough to better participate in the Washington debate over U.S. and allied policy towards Afghanistan.
Of Butterflies, Tsunamis, and Draconian Recusal Standards
Last October, I blogged about Comer v. Murphy Oil USA, a lawsuit in Mississippi alleging that the defendant oil, coal, utility, and chemical companies emit carbon dioxide, which causes global warming, which exacerbated Hurricane Katrina, which damaged the plaintiffs’ property. Mass tort litigation specialist Russell Jackson called the case “the litigator’s equivalent to the game ‘Six Degrees of Kevin Bacon.’” In a brief that Cato was due to file this week, I framed the operative question as, “When a butterfly flaps its wings, can it be sued for the damage any subsequent tsunami causes?”
The plaintiffs asserted a variety of theories under Mississippi common law, but the main issue at this stage was whether the plaintiffs had standing, or whether they could demonstrate that their injuries were “fairly traceable” to the defendants’ actions. The federal district court dismissed the case but a dream panel (for the plaintiffs) of the Fifth Circuit Court of Appeals held that the plaintiffs could indeed proceed with claims regarding public and private nuisance, trespass, and negligence.
In my blog post, I predicted that the Fifth Circuit would take up the case en banc (meaning before all the judges on the court, in this case 17) and reverse the panel. And this was all set to happen — even though eight judges recused themselves, presumably because they owned shares of defendant companies – with en banc argument slated for May 24. I was planning to head down to New Orleans for it, in part because the judge I clerked for, E. Grady Jolly, was going to preside over the hearing (the only two more senior active judges being recused).
But a funny thing happened on the way to legal sanity. On Friday, not half an hour after I had finished editing Cato’s brief, the court clerk issued a notice informing the parties that one more judge had recused and, therefore, the en banc court lacked a quorum. As of this writing, I still don’t know who this judge is and what circumstances had changed since the granting of the en banc rehearing to cause the recusal. And indeed, by all accounts the Fifth Circuit is still figuring out what to do in this unusual (and, as far as I know, unprecedented) situation where a court loses a quorum it initially had — having already vacated the panel decision.
In short, the court could decide that the vacatur stands and either remand to a (now-confused) district court or rehear the case in a new random panel assignment. More likely, however, the court will now reinstate the terrible, horrible, no good, very bad panel decision — and we’ll tweak our brief to make into one that supports the defendants’ inevitable cert petition.
All in all, an illustration of the absurdity both of litigating climate change politics in the courts and of forcing judges (including Supreme Court justices) to withdraw from cases for owning a few hundred dollars’ worth of stock. If that’s all it takes to corrupt federal judges, we have bigger problems than trial lawyers run amok!
Tax Collection Ain’t Pattycake
And in case you’re wondering, your privacy don’t matter one whit.
Liberty on a Disk
To celebrate its 50th anniversary, Liberty Fund has just produced an amazing item — The Portable Library of Liberty, a single DVD containing the complete texts of more than 1000 books, audio interviews with 26 great scholars, and more. And it’s free for the asking!
Just take a look at what you could be carrying in your laptop:
1,001 full text titles in PDF format, self-contained and searchable. They are organized by titles, subject areas, and topics. Highlights include the complete scholarly editions of the works of Adam Smith, David Ricardo, John Stuart Mill; the collected works of Jefferson, Madison, John Adams, & many others; and 166 full-text books published by Liberty Fund.
works by hundreds of authors from Ancient Sumeria to the present, organized by people, periods, and schools of thought, such as the French Enlightenment, the Founding Fathers, 19th century natural rights theorists, the Austrian School of Economics, and many others.
audio interviews with 26 leading scholars from the Intellectual Portrait Series: Conversations with Leading Classical Liberal Figures of Our Time and 7 lectures on The Legacy of Friedrich Hayek.
a collection of Quotations about Liberty & Power which is a compilation of all the quotes of the week that have appeared on the front page of the Online Library of Liberty since its inception.
My initial response was, if all that stuff is on the web, then why do you need a DVD? And I guess there are two answers to that: First, there are people around the world who have computers but not regular internet access. Liberty Fund officers say that a typical request is something like “I am a masters student in economics at the national university in Bangladesh. Thanks for making this available to me. We do not have these titles in our library. Can I make another copy to give to my friends?”
And second, there are times that all of us could access a DVD but not the internet, such as on flights.
So – at the low, low cost of . . . nothing, it’s truly an amazing deal. Order yours today. Or you could wait for the 6th edition later this year, when all the titles will be in the new ePub format for even easier reading on portable devices. The pace of progress quickens!
More on Schumer and Van Hollen
Last week I contributed a short essay on the DISCLOSE Act to USA Today. The Center for Competitive Politics surveys other responses to the new bill. Predictably the bill favors the coalition that wrote and hopes to pass it.
I like their final take: “Don’t forget what the reform lobby’s new proposal for campaign finance is: ‘All political animals should speak equally, but some political animals should speak more equally than others.’”
The Importance of Institutions: A Bolivian Perspective
Following what has become an ominous tradition during his presidency, Evo Morales celebrated Labor Day (May 1st in most of the world) by expropriating energy companies. Early Saturday, Bolivian troops occupied the facilities of four private electrical utilities, which were owned until then by local and foreign companies.
In explaining his tough-handed modus operandi, Morales shared his views [in Spanish] on the importance of government institutions in solving legal disagreements in Bolivia:
“We made every effort to reach an agreement with the private multinational companies, and if there’s no will to reach an agreement through dialogue, then we have government institutions such as the army and the national police.”
Arizona Republic Leads the Way on Immigration
In a gutsy display for a newspaper, the Arizona Republic in a front-page editorial yesterday castigated the state’s top politicians for a failure of leadership on immigration.
Prompting the editorial was the passage of Arizona’s tough new law making it a crime to be an illegal immigrant in the state. Under the banner headline, “STOP FAILING ARIZONA; START FIXING IMMIGRATION,” the state’s major newspaper fired with both barrels:
We need leaders.
The federal government is abdicating its duty on the border.
Arizona politicians are pandering to public fear.
The result is a state law that intimidates Latinos while doing nothing to curb illegal immigration.
This represents years of failure. Years of politicians taking the easy way and allowing the debate to descend into chaos.
The Arizona Republic has been calling for comprehensive immigration reform continuously since 2002. For a brief time, our congressional delegation led the nation on
this front. But no more.
Now, it seems our elected officials prefer to serve political expediency instead.
The editorial then named ten prominent political leaders from the state, Republicans and Democrats alike, who have either failed to champion real reform for fear of a political backlash, or who have stoked the backlash with inflammatory rhetoric.
2002 was also the year that the Cato Institute made the case for comprehensive immigration reform with my study, “Willing Workers: Fixing the Problem of Illegal Mexican Migration to the United States.” The study argued that enforcement alone will not solve the problem. Immigration law itself must be changed to accommodate the legitimate labor-force needs of a growing U.S. economy.
The Republic editorial put the argument succinctly:
Reform must create a legal pipeline for future workers that is demand-based and temporary. With a legal framework in place, there will be no reason to be in this country without permission. Foreigners who break our laws will be prosecuted, punished and deported.
Comprehensive reform will make the border safer. When migrant labor is channeled through the legal ports of entry, the Border Patrol can focus on catching drug smugglers and other criminals instead of chasing busboys across the desert.
Real leaders will have the courage to say that.
One real newspaper has shown them how.
Don’t BELIEVE the Hype—Though Unformed, the Democrats’ National ID Plan Is Rife With Threats to Privacy and Civil Liberties
Senate Democrats have solidified and given more definition to their plan to create a biometric national ID, the centerpiece of their immigration reform proposal. (For reasons unrelated to the national ID plan, Senator Lindsey Graham (R-SC) has dropped out of the picture for now.) The “Conceptual Proposal for Immigration Reform” they released last week gives much more detail to the sketchy plans I previously reviewed.
In my Cato Policy Analysis, “Electronic Employment Eligibility Verification: Franz Kafka’s Solution for Illegal Immigration,” I wrote about the possibility of a work authorization document limited to that purpose—and my doubts that the government would adopt one.
A credential such as eligibility for employment under [the immigration laws] can be proved without creating a nationwide biometric tracking scheme. In fact, templates already exist. But it is unlikely to see adoption. . . . [I]dentification and tracking . . . shift the risk of error in the card-issuance process from the government to the citizen. . . . [T]racking preserves government power. A work-eligibility and tracking system . . . makes the individual’s employment eligibility subject to revision at a later time, if the government wants to change the rules or adapt the system to new purposes, for example.
Those doubts are validated by this plan, which appears to be a full-fledged national ID and national biometric database. Assurances that it won’t be used for purposes beyond immigration control are not persuasive. This is national identity and surveillance infrastructure that will be “switched on” by later policy changes.
They’re calling it “BELIEVE,” short for “Biometric Enrollment, Locally-stored Information, and Electronic Verification of Employment.” They can call it that. We’ll study it, and give credence to what we learn.
The plan is confusing, disorganized, repetitive, and sometimes contradictory. Summarizing it is a little like trying to piece together the egg when all you have is the omelet, but three themes emerge: First, this summary backs away from an earlier claim that there would not be a biometric national identity database. There will be a national biometric database. Second, repeating the word “fraud-proof” does not make this national ID system fraud proof. Third, this national ID system definitely paves the way for uses beyond work authorization. This is the comprehensive national identity system that people across the ideological and political spectrum oppose.
The national ID part of the Democrats’ proposal begins at the bottom of page eight. It’s a veritable word-cloud, suggesting a violation of the rule of thumb that simple solutions are usually the best. But let’s look at it, line by line.
Failing Banks: Bankruptcy or Receivership?
In today’s Wall Street Journal Stanford Professor John Taylor argues that resolving failing financial institutions via the bankruptcy process rather than a FDIC style receivership process is the only way to really limit bailouts. The heart of the argument is that the government is far more likely to inject funds if the process is controlled by political appointees and bureaucrats, rather than a judge. While this is probably the best reason to use the courts instead of a bureaucratic process, there are many other reasons to consider.
Proponents of administrative receivership often argue that the bankruptcy process is simply too slow to deal with banks and other financial institutions. “Too slow” sounds like an empirical question to me. So what does the data say? An interesting article in the Journal of Finance reports the median time in Chapter 11 to be 28 months and the median time in Chapter 7 to be 22 months. How does this compares to FDIC bank resolutions? Surprisingly, not bad. A Federal Reserve Bank of Chicago study finds the median time for FDIC resolutions to be 28 months, just as long as they typical Chapter 11, but longer than the typical Chapter 7. It could be argued that bankruptcy is actually quicker, as a Chapter 7 liquidation is more compare to an FDIC receivership than is Chapter 11.
Given that there doesn’t seem much of a time advantage to receivership, is there a cost advantage? After all, bankruptcy does require all those lawyers. In regards to bankruptcy, there is good data on costs. The median cost for a Chp 7 is 2.5% of assets, and for Chp 11, 2% of assets. Interestingly, the largest expense in Chp 11 is administering the creditors committee, which would not be needed in a receivership (as creditors go unrepresented). Also of interest is that costs, as a percent of assets, decline with size. For firms above $10 million in assets, median costs are 0.8% of assets.
Unfortunately there is not good public data on the FDIC’s costs. I have been told, however, that despite my initial suspicions, the $50 billion figure in the Dodd bill was calculated as the cost to resolve an entity like Lehman. At the time of its failure, Lehman’s assets were around $600 billion. If we are to take $50 billion as the cost of resolution, that would imply a resolution cost in excess of 8%, considerably above what a comparable Chp 11 would cost. As the Lehman bankruptcy is resolved, we will have better data, yet at least from the various data points we have, the case for FDIC being a cheaper, or faster, alternative than the courts is far from conclusive, with some evidence suggesting the contrary.
Monday Links
- The case for letting Greece default: “Bailing out the troubled nation will only create more problems for it–and for the rest of Europe.”
- How a scholarship program in Florida could produce a new era of school choice.
- John Samples on Congressional efforts to undermine the Citizens United ruling: “The Disclose Act is a cynical partisan ploy that violates the letter and the spirit of the First Amendment.”
- Congressional Budget Office warns that as many as 10 million American workers will lose their current insurance under Obamacare.
- Podcast: “Will Tea Parties Rise above ‘Historical Footnote?’” featuring John Samples.
The Faux Compassion of Club Sarkozy
Shortly after President Obama signed his health care law, French president Nicolas Sarkozy offered this backhanded compliment to the United States: “Welcome to the club of countries that does not dump its sick people.”
In this month’s Diplomat magazine (U.K.), I explain pourquoi c’est fou:
Every member of Sarkozy’s “club” has its stories of sick people who have been “dumped,” in one manner or another, despite laws that officially preclude such things from ever happening. In 2005, Canada’s Supreme Court wrote of its country’s Medicare system: “Access to a waiting list is not access to healthcare…[T]here is unchallenged evidence that in some serious cases, patients die as a result of waiting lists for public health care.” The British, meanwhile, often seem more content to let the National Health Service shortchange its patients than to let an American lecture them about how often it happens.
The checkered history of government guarantees is why so many Americans — a majority, in fact — oppose President Obama’s new law, which they believe will move the United States even further from Sarkozy’s ideal world than it is now.
Presidents Obama and Sarkozy may prefer the false compassion of a government guarantee. I’ll take the real thing.
Repeal the bill.
Forget Freedom. The UK Poll Is All About ‘Fairness’
Britain may have given the world freedom as we understand it (see The Liberty of Ancients Compared with that of Moderns by Benjamin Constant), but you would not know it from the last prime ministerial debate that took place last Thursday. The candidates (Conservative David Cameron, Labour’s Gordon Brown and Liberal Democrat Nick Clegg) used the word “freedom” only 2 times. They said the word “free” 5 times, but all in the context of the supposedly “free” goodies, which they promised to lavish on the electorate. Words “responsible” and “responsibility” fared somewhat better (4 times). But the winning words were “fair” and “fairness” that were mentioned 22 times — almost always in connection with taxing the rich. Here is a typical example:
Brown: “But I come back to the central question about fairness that has been raised by our questioner. How can David [Cameron] possibly justify an inheritance tax cut for millionaires at a time when he wants to cut Child Tax Credits? Let’s be honest. The inheritance tax threshold for couples is £650,000, if your house is worth less than that you pay no inheritance tax. What David [Cameron] is doing is giving 3,000 people, the richest people in the country, he’s going to give them £200,000 each a year. That is simply unfair.”
It was Gordon Brown, the current Prime Minister, who increased the top rate of income tax to 50%. Neither Clegg nor the supposedly business-friendly Cameron have proposed to cut that rate. Indeed, “fairness” in British politics seems to amount to little more than taxing the most productive members of society “until the pipes squeak.” Those words were uttered by Denis Healy who was the Chancellor of the Exchequer in the 1970s. It was under his leadership that the UK ran out of money and had to borrow billions from the IMF. It turns out that when you tax the rich too much, they will work less or leave for a more hospitable jurisdiction. Margaret Thatcher and Ronald Reagan understood it. Messrs Cameron, Clegg and Brown do not.
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