Archive for June, 2010
Save Us, Dave Petraeus
Stanley McChrystal is out as head of U.S. forces in Afghanistan, to be replaced by his nominal boss David Petraeus. Some might see this as a demotion for Petraeus. Others might try to paint this as an inspired pick. Some cynics could claim that politics are a factor.
It was a logical pick. A safe pick. Afghanistan is the de facto center of gravity in the CENTCOM area of responsibility, and Petraeus understands the details as well as anyone. He also knows the military officers who can populate positions vacated by McChrystal’s deputies. And he has demonstrated a knack for working with civilians on the ground in Iraq, though whether that will translate into a similar working relationship with Amb. Eikenberry remains to be seen.
But changing commanders in Afghanistan doesn’t address the deeper problems with the strategy there that have been brought to light over the past few days (and that I’ve addressed here and here). The sad commentary is that the President of the United States shouldn’t have to rely on Rolling Stone magazine for strategic insight. If his vaunted Afghan review(s) over the past year haven’t revealed these inconsistencies, then either the reviews aren’t very vaunted, or he isn’t paying attention.
Protectionist Shipping Law Hinders Gulf Clean Up
Oil continues to spew into the Gulf of Mexico from the site of the BP oil rig, yet the Obama administration refuses to relax a protectionist U.S. shipping law known as the Jones Act that makes it more difficult for foreign-owned ships to help contain the damage.
According to an article in the Daily Caller this week by our former Cato colleague Chris Moody, foreign-owned ships have offered to assist the American-owned fleet in skimming oil and other tasks. But some of the foreign ships have hesitated to enter U.S. waters because of the 1920 law that reserves inter-coastal shipping to vessels that are built, owned, and crewed by Americans.
Although cloaked in terms of national security, the act is really a protectionist measure designed to insulate U.S.-based shipbuilders, ship operators, and their unionized crews from global competition.
Three GOP senators representing Gulf states have introduced legislation to temporarily suspend the Jones Act in the region of the spill. So far, President Obama has refused to act, despite his assurances that he is doing all he can to contain the damage.
The Jones Act is such an egregious trade barrier, I devote a whole page in my 2009 Cato book Mad about Trade describing the damage it imposes on the U.S. economy. The Jones Act is most costly during times of war or other emergencies. As I write on page 163:
Defenders of the Jones Act claim it promotes national security by maintaining a merchant marine fleet in case of war. But Jones Act ships tend to be old and of limited use in times of real emergencies. In fact, during the 1991 Gulf War, only one Jones Act ship actually went to war; President George H. W. Bush suspended the law because it was interfering in the efficient transfer of goods. President George W. Bush again suspended the law in 2005 so that fuel and other needed supplies could more quickly reach New Orleans after Hurricane Katrina. What is an expensive indulgence for domestic shippers during peacetime becomes an intolerable liability for the nation during time of emergency.
President Obama should suspend the Jones Act now, followed by a vote in Congress to repeal it permanently.
A Life-Saving Approach to Transplantable Organs
Raymond Raad, physician and coauthor of the Cato study, “Bending the Productivity Curve: Why America Leads the World in Medical Innovation,” has an oped at the Daily Caller arguing that the United States could save thousands of lives per year by allowing individuals (or insurance companies, or the government) to pay people who agree to give their organs to patients who need them.
Raad cites the experience of Iran, which has eliminated its waiting list for transplantable organs. (The United States has 83,000 people waiting for kidneys alone. Forty percent will die waiting, and those who do receive a kidney die sooner because their health deteriorates while waiting.) He also cites the three main criticisms of compensating donors/sellers — “One, the prospect of payment can be so tempting that it blinds donors to the risks involved; second, it may lead only poor people to donate; third, it may turn altruistic donors away” — and shows that recent polling data contradicts all three.
Raad concludes:
Since this is the best data we have, and with 5,000 people expected to die this year on the waiting list, we owe ourselves at least a geographically limited experiment in monetary incentives for kidneys.
For more on how eliminating this government-imposed price controls would save lives, read Arthur Matas’ Cato study, “A Gift of Life Deserves Compensation: How to Increase Living Kidney Donation with Realistic Incentives,” and Healthy Competition: What’s Holding Back Health Care, and How to Free It.
Hey, UK: Meet the New Boss, Same as the Old Boss
As the chart below indicates, the United Kingdom has a large budget deficit solely because government spending has increased to record levels (OECD data). Unfortunately, the new Tory-Liberal coalition government has decided that taxpayers should be punished for all the over-spending that occurred when the Labor government was in charge.
The Telegraph reports that the top capital gains rate will jump to 28 percent, up from 18 percent (the new government foolishly thinks this will result in more revenue). But the biggest change is that the value-added tax will increase to 20 percent. According to Business Week, the Chancellor of the Exchequer (the British equivalent of Treasury Secretary) actually bragged that the VAT increase was good since it would generate “13 billion pounds we don’t have to find from extra spending cuts.” Here are some further details from Business Week about the disappointing fiscal news from London.
British Chancellor of the Exchequer George Osborne increased the value-added tax rate to 20 percent from 17.5 percent in the first permanent change to the levy on sales of goods and services in almost two decades. “The years of debt and spending make this unavoidable,” Osborne told Parliament in London in his emergency budget today as he announced a package of spending cuts and tax increases to cut the U.K.’s record deficit. …“We understand that the budget deficit needs to be tackled but we think the focus needs to be cutting public spending over tax rises,” Krishan Rama, a spokesman for the industry lobby group, the British Retail Consortium, said in a telephone interview yesterday. …VAT has remained at 17.5 percent in every year except one since 1991, when John Major’s Conservative administration raised the rate from 15 percent to help plug a deficit.
The one tiny glimmer of good news from the budget is that the corporate tax rate is being reduced from 28 percent to 24 percent, which is probably a reflection of the strong and virtuous tax competition that is forcing greedy governments to lower tax rates in order to attract and/or retain business activity. There also is a two-year pay freeze for government bureaucrats, but this is hardly good news since a 30-percent pay cut is needed to bring compensation down to private sector levels.
In Iowa, They Know Why We Fight
Why do public schools create lots of conflict? Because, as I labored to explain in my Policy Analysis Why We Fight: How Public Schools Cause Social Conflict, they force people with diverse views to support a single system of schools, making battles over whose values the schools will teach almost inevitable. Well, in Shenandoah, Iowa — where the people are in a huge row over sex ed – district superintendent Dick Profit summarized the problem much more colorfully, and effectively, than I have:
It’s a political hot potato; it’s a religious hot potato; it’s a parental hot potato…It’s all of these things that cause a crack in the system between society, parents and schools, and we’re still required to do it.
Diane Ravitch, give Mr. Profit a call.
ObamaCare’s Unlimited-Coverage Mandates Will Increase Some Premiums by 7 Percent (or More)
Among the many ways ObamaCare will increase the cost of health insurance, it will require all Americans to purchase unlimited annual and lifetime coverage. The latter requirement takes effect this September. The former will require consumers with non-grandfathered health plans (i.e., about half of the market) to purchase coverage with an annual limit on claims of no less than $2 million by 2014, and unlimited annual coverage thereafter.
In interim final regulations and a “fact sheet” released this week, the Obama administration claims that the mandate to purchase unlimited annual coverage will increase the cost of employment-based and individually purchased coverage by an average of about 0.1 percent. That average glosses over the fact that these mandates will have zero effect on consumers who already purchase the required coverage. Consumers who are actually affected by the mandates will see larger premium increases.
For example, the regulations indicate that the phased-in mandate to purchase unlimited annual coverage will increase premiums for the 18 million Americans affected by a weighted average of 0.15-0.18 percent. Even that weighted average hides the fact that this mandate will cause premiums to rise as much as 6.6 percent for 278,000 Americans. This mandate will increase premiums by even more — and for more people — once it is fully implemented. But the administration did not include an estimate of the premium impact beyond 2014.
The Obama administration also estimates that the mandate to purchase unlimited lifetime coverage, when spread across all insured workers, will increase premiums by about 0.5 percent. Yet that requirement would not affect the 40 percent of insured workers who already purchase unlimited lifetime coverage. When spread across the 93.6 million affected workers, the average premium increase rises to 0.8 percent. The increase will be greater than that for the 26.5 million workers with lifetime coverage limits at or below $2 million, and greatest for the 1.5 million workers with limits at or below $1 million. But the administration offers no estimates for these workers.
Spread across the entire individual market, the unlimited-lifetime-coverage mandate would increase premiums by an average of 0.75 percent, according to the administration. But since the mandate won’t affect 11 percent of that market, the average impact on the 8.7 million people affected will also be 0.8 percent. Again, the 300,000 consumers in that market with lifetime limits at or below $2 million will face larger premium increases. And again, the administration provides no estimates specific to these consumers. Which is a shame, because — aside from the uninsured — it is these consumers on whom ObamaCare will place the greatest burdens.
All told, ObamaCare’s unlimited-coverage mandates will increase the premiums of affected consumers by an average of about 1 percent, and as much as 7 percent for some consumers. Or maybe more: the administration acknowledges that a “paucity of data” about the impact of these mandates means that there is “tremendous,” “substantial,” and “considerable” uncertainty about the mandates’ costs.
Stossel: New Topic, New Time
John Stossel’s weekly show has a new time: 9 p.m. and midnight every Thursday on the Fox Business Network, plus Fridays at 10 p.m., Saturdays at 9 p.m. and 12 midnight, and Sundays at 10 p.m. (Don’t get Fox Business? Tell your cable company you want Stossel!)
On this week’s show Stossel will interview 76-year-old Otis McDonald about his lawsuit seeking the right to protect himself with a gun, which is now before the Supreme Court. He’ll also talk to John Lott about the new edition of his book More Guns, Less Crime.
While you’re waiting for Thursday night, check out Stossel’s show on Milton Friedman, which featured interviews with Johan Norberg, Tom Palmer, and me. Or indeed his classic ABC special on politics and limited government, where I got even more air time!
The Problem Is Bigger than McChrystal
Following up on my post from last night, I encourage you to read this news analysis by C.J. Chivers in the New York Times. Chivers focuses on the inherent tension within counterinsurgency doctrine that too many COIN advocates have neglected or ignored. The Rolling Stone article touches on these themes, but much of that story gets lost in the narrative surrounding McChrystal and his staff. Chivers is not so easily distracted. Here are a few excerpts:
…the counterinsurgency doctrine [which] has assumed an almost unchallenged supremacy in the ranks of the American military’s career officers…rests on core assumptions, including that using lethal force against an insurgency intermingled with a civilian population is often counterproductive.
Since General McChrystal assumed command, he has been a central face and salesman of this idea, and he has applied it to warfare in a tangible way: by further tightening rules guiding the use of Western firepower — airstrikes and guided rocket attacks, artillery barrages and even mortar fire – to support troops on the ground.
[...]
The rules have shifted risks from Afghan civilians to Western combatants. They have earned praise in many circles, hailed as a much needed corrective to looser practices that since 2001 killed or maimed many Afghan civilians and undermined support for the American-led war.
But the new rules have also come with costs, including a perception now frequently heard among troops that the effort to limit risks to civilians has swung too far, and endangers the lives of Afghan and Western soldiers caught in firefights with insurgents who need not observe any rules at all.
Chivers notes the extraordinary measures that our troops take to justify the use of superior firepower and readily available air cover, “including decisions by patrol leaders to have fellow soldiers move briefly out into the open to draw fire once aircraft arrive, so the pilots might be cleared to participate in the fight.”
“Moments like those,” Chivers continues,
bring into sharp relief the grand puzzle faced by any outside general trying to wage war in Afghanistan. An American counterinsurgency campaign seeks support from at least two publics – the Afghan and the American. Efforts to satisfy one can undermine support in the other.
Does McChrystal Rhyme with MacArthur?
Apparently not. Unlike Douglas MacArthur, Stanley McChrystal has tendered his resignation. President Obama should accept it, and move swiftly to put this unfortunate incident behind him.
This story moved so quickly that I wasn’t able to keep up. In the early morning, we learned that McChrystal had been called to Washington for face-to-face meetings with President Obama (aka The Commander in Chief), and Robert Gates (the SecDef who has built a reputation for sacking generals). McChrystal’s press aide was fired. By early afternoon, others, including those sympathetic to the general, were predicting that he would step down, or that he should be fired if he did not (Eliot Cohen “This is a firing offense”; Peter Feaver “This is clearly a firing offense”).
I won’t repeat what Justin Logan, Malou Innocent, and I said in our statements this morning. It is obvious that Gen. McChrystal showed very poor judgment, and this is not the first time. When his assessment of what was required in Afghanistan (More Forces or “Mission Failure”) was leaked before the president had settled on a strategy, the White House was furious. They felt that he was trying to bully them. Strike one. When he challenged the chain of command with his remarks in London in October, dismissing Vice President’s Biden’s preferred counterterrorism approach as “shortsighted,” Obama summoned him for a private meeting on Air Force One. Strike two. There was more than enough material in the Rolling Stone story to constitute strike three. And four, five, and six.
I urge people to read the story. It might be remembered as the article that put an end to Stanley McChrystal’s storied career. I wonder if the article might serve a broader purpose: undermining the already wavering support for COIN. Look past McChrystal, a man who has given his life to the military, and has much to show for it. Look at the enlisted guys who are just beginning their careers, or the NCOs or junior officers who are in the third or fourth tours (in either Iraq or Afghanistan). They’re growing frustrated. They’re in an impossible situation. They are fighting a war that depends upon strong support here in the United States, and that aims to boost support for a government that no one believes in. And while they understand COIN as preached by McChrystal, they struggle with the rules of engagement that COIN requires.
One soldier shows me the list of new regulations the platoon was given. “Patrol only in areas that you are reasonably certain that you will not have to defend yourselves with lethal force,” the laminated card reads. For a soldier who has traveled halfway around the world to fight, that’s like telling a cop he should only patrol in areas where he knows he won’t have to make arrests. “Does that make any [expletive] sense?” asks Pfc. Jared Pautsch. “We should just drop a [expletive] bomb on this place. You sit and ask yourself: What are we doing here?”
I give up. What are we doing there?
Obama’s Gulf Moratorium Blocked
The New York Times is reporting that U.S. District Judge Martin Feldman this afternoon issued a preliminary injunction blocking enforcement of the Obama administration’s May 28 order imposing a six-month moratorium on all floating offshore drilling projects in more than 500 feet of water and preventing the government from issuing new permits for such activity.
The injunction was sought by numerous businesses affected by the order. And the office of Louisiana Gov. Bobby Jindal filed a brief in support of blocking the moratorium.
A quick review of Judge Feldman’s 22-page opinion indicates that the injunction was granted, under the Administrative Procedures Act, because the plaintiffs “would likely succeed in showing that the [Interior Department’s] decision was arbitrary and capricious. An invalid agency decision to suspend drilling of wells in depths of over 500 feet simply cannot justify the immeasurable effect on the plaintiffs, the local economy, the Gulf region, and the critical present-day aspect of the availability of domestic energy in this country.”
Judge Feldman took particular note of the Interior secretary’s May 27 Report, from which its moratorium order followed: “Much to the government’s discomfort and this Court’s uneasiness, the Summary also states that ‘the recommendations contained in this report have been peer-reviewed by seven experts identified by the National Academy of Engineering.’” As has been widely reported, those “experts” never signed off on any such moratorium.
As the court went on to say, “After reviewing the Secretary’s Report, the Moratorium Memorandum, and the Notice to Lessees, the Court is unable to divine or fathom a relationship between the findings and the immense scope of the moratorium. …[T]he blanket moratorium, with no parameters, seems to assume that because one rig failed and although no one yet fully knows why, all companies and rigs drilling new wells over 500 feet also universally present an imminent danger.”
Needless to say, the Obama administration is filing an immediate appeal. But for now, its sweeping moratorium is on hold.
Re. Ezra Klein: Did State and Local Anti-stimulus Nullify Federal Stimulus?
A recent Washington Post column by Ezra Klein dreamed up a new excuse for the conspicuous failure of Obama’s so-called stimulus plan. Klein argues that the stimulus of federal spending has been offset by the “anti-stimulus” of fiscal austerity by state and local governments. For proof he quotes Bruce Bartlett, who is fast becoming the favorite go-to guy for liberals seeking conservative allies in their endless quest for more spending and taxes.
Bartlett says, “When the history of the current crisis is written, much of the blame will be placed on the sharp fiscal contraction of state and local governments. I think economists will view this as a preventable error equivalent to the Fed’s passive shrinkage of the money supply in the early 1930s.”
A historian himself, Bartlett imagines this to be a question that will have to be pondered by historians in the distant future. But it is easy to identify each sector’s direct contribution to the overall growth rate of real GDP from a St. Louis Fed publication, “National Economic Trends.”
State and local government spending was rising during the first three quarters of the recession, and the drop in the fourth quarter of 2008 accounted for just 0.25% of the 5.37% annualized decline in GDP. In the first quarter of 2009, state and local spending subtracted just 0.19% from real GDP, but federal spending subtracted more (0.33%) due to cuts in defense spending. Government obviously made only a minor contribution to the 6.4% drop in overall GDP.
In the second quarter of 2009, state and local spending was way up (by 0.48%), as was federal spending (0.85%). But the private economy did not begin expanding until the third quarter – when government spending stopped diverting so many resources to unproductive uses.
The table shows that government spending on goods and services had nothing to do with the recovery (transfer payments don’t contribute to GDP).
As a matter of simple accounting, the state and local sector has been a very minor negative force −scarcely comparable to the Fed’s inaction in 1930-32.
Federal purchases, whether for heavily-subsidized ”green jobs” or shovel-ready pork, have been virtually irrelevant during the last two quarters.
Contributions to Real GDP Growth
…………………….. 3rd…… 4th…… 1st qtr
Real GDP 2.2 5.6 3.0%
Private 1.6 5.8 3.4
Federal 0.6 0.0 0.1
State & Local -0.1 -0.3 -0.5
New Report: DC Voucher Program Still a Success
The latest and final scheduled report on the DC voucher program is out.
Conclusion?
Even a tiny, restricted program that’s only been around for six years increases graduation rates, has a positive impact on at least some groups of students, harms no groups of students, and does this for less than a third of what the DC Public Schools spend.
DCPS spends around $28,000 per student. The last report pegged the average voucher at just $6,620. The maximum voucher cost is just $7,500.
Huge sums of money saved, student performance increased, parents happier . . . why is this program being killed?
Oh, right.
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