Week in Review: Health Care Battles, Pay Caps and North Korean Prisoners
Will Obama Raise Middle-Class Taxes to Fund Health Care?
President Obama is promoting an expansion in federal health care spending, and Democratic leaders are scrambling to find ways to pay for it. The plan is expected to cost about $1.5 trillion over the next decade, but the administration has promised that health care legislation won’t add to already huge federal budget deficits. In a new paper, Cato scholars Michael D. Tanner and Chris Edwards argue that expanding government health care will likely involve huge tax increases on the middle class.
Tanner warns of “Obamacare” to come, saying that Obama’s new health care plan will give “government control over one-sixth of the U.S. economy, and over some of the most important, personal, and private decisions in Americans’ lives.” Don’t miss Tanner’s in-depth analysis of the new health care plan that is making its way through Congress, which “would dramatically transform the American health care system in a way that would harm taxpayers, health care providers, and — most importantly — the quality and range of care given to patients.”
A part of the plan would include “public option” (read: government-run) health care, which would allow the government to compete against private health care providers. Tanner says it would be the first step toward wiping out the private insurance market as we know it:
Regardless of how it is structured or administered, such a plan would have an inherent advantage in the marketplace because it would ultimately be subsidized by taxpayers. It could, for instance, keep its premiums artificially low or offer extra benefits, then turn to the U.S. Treasury to cover any shortfalls. Consumers would naturally be attracted to the lower-cost, higher-benefit government program.
…It is unlikely that any significant private insurance market could continue to exist under such circumstances. America would be firmly on the road to a single-payer health care system with all the dangers that presents. That would be a disaster for American taxpayers, physicians, and—most importantly—patients.
Treasury Seeks to Control Executive Pay Across the Private Sector
Fox Business reports, “The Treasury Department on Wednesday took new steps to rein in executive compensation, saying the Obama Administration would introduce legislation that could create stricter limits on pay; it also appointed an official to head up efforts on the issue.”
In a 2008 Policy Analysis Ira T. Kay and Steven Van Putten explain the misconceptions many people have about executive pay, and why the market is a better arbiter than any bureaucrat in Washington:
Such populist sentiments are often based on misunderstandings about the role of corporate executives in the economy and the vigorous competition that exists for these highly skilled leaders. In the past, federal regulatory efforts based on such misunderstandings have generated unintended consequences, which have damaged the economy and hurt the ability of the market for executives to self-regulate over time.
The labor market for executives and the associated pay levels are already subject to high levels of regulation. Indeed, U.S. corporations are subject to more stringent executive pay disclosure requirements than corporations anywhere else in the world. Before additional regulatory and legislative efforts are unleashed, policymakers should examine the rationale for current pay structures and the strong links between executive pay and corporate performance.
In a Washington Times op-ed, Alan Reynolds says efforts to cap executive pay are wholly misguided:
Congressional hearings to barbecue Wall Street executives are as fun as a circus, but with more clowns. Presidential politics is now taking such political distractions to a lower level.
…Most top executives who were actually in charge during the craze of overinvestment in mortgage-backed securities have been fired. Executives who are fired are not in a position to be “giving themselves” anything.
In reality, top executives are mainly paid by accumulating a big stockpile of company stock and stock options. Estimates of annual CEO pay that Congress and the press have been focusing on look as high as they do only because of the high value of restricted stock or stock options at the time.
Writing in 2007 (before the first round of major bailouts), Cato scholars Jerry Taylor and Jagadeesh Gokhale took it a step further: “Pay Bosses More!”:
Excessive executive compensation harms no one but perhaps the stockholders who put up with it. And stockholders put up with it because there’s good reason to believe that sizable CEO compensation packages help — not harm — corporate performance, which redounds to their benefit, and that of the firms’ workers.
Companies pay workers what they must to deliver their products and services to the market, and supply and demand establishes executive compensation packages the same way it establishes consumer prices. Any overcompensation comes out of the firm’s bottom line — at a loss to the shareholders, not the workers.
North Korea Sentences Two U.S. Journalists to 12 Years Hard Labor
Two American journalists were convicted of entering North Korea illegally while on assignment, and exhibiting “hostility toward the Korean people.” This week, a North Korean court sentenced them to 12 years in a labor prison.
Cato scholar Doug Bandow comments:
Washington should publicly downplay the controversy and present the issue to the Kim regime as a humanitarian matter. The Obama administration should indicate its willingness to open a broader dialogue with North Korea, but indicate that positive results will be possible only if Pyongyang responds with cooperation instead of confrontation. Releasing the two journalists obviously would provide evidence of the former.
Regrettably, Laura Ling and Euna Lee are political pawns. As such, Washington’s best strategy to achieve their release is to simultaneously reduce their perceived value to Pyongyang and ease tensions between the U.S. and North Korea. Patience may be the Obama administration’s highest virtue and Ling’s and Lee’s greatest hope.
In a Cato Daily Podcast, Bandow discusses what can be done for the American prisoners, and how the U.S. government should react.
Who’s Blogging about Cato
Here’s your weekly roundup of bloggers who are writing about Cato research and commentary:
- Liberty Maven blogger Mike Miller cites Jim Harper in a post about the effort to impose a national ID card on American citizens.
- W.E. Messamore, AKA The Humble Libertarian, interviews Cato health analyst Michael D. Tanner about Obama’s plan to overhaul the health care system.
- Insider Online blogger Alex Adrianson covers Cato’s standoff with Hugo Chavez supporters and government agents during a pro-free market conference in Venezuela.
- Writing for Real Clear World’s Compass blog,
- At Red State, Ryan Ellis uses Michael Cannon’s research in a post about a market-based alternative to government-run health care.
- Blogging for Young Americans for Liberty, Jeff Hubbard and Elliot Engstrom write about Cato University and Ilya Shapiro’s CNN commentary on Sonia Sotomayor.
- Blogger David Kirkpatrick cites Daniel J. Ikenson’s analysis of the GM bankruptcy.
Let us know if you’re blogging about Cato via email or Twitter.
New at Cato
For a weekly roundup of news and commentary from the Cato Institute, subscribe now to the Cato Weekly Dispatch.
- Marian Tupy examines the failure of government-to-government aid to Africa in The Financial Times.
- In The Wall Street Journal, John Hasnas asks whether “compassion and empathy” are really characteristics we want in a judge.
- In the South China Morning Post, Ted Galen Carpenter examines why North Korea ignores international calls for nuclear disarmament.
- Richard W. Rahn reports on the extreme changes about to occur in the British government in The Washington Times.
- In Monday’s Cato Daily Podcast, Mark Calabria weighs in on “shadow banking” and the effort to regulate it.
Week in Review: Sotomayor, North Korean Nukes and The Fairness Doctrine
Obama Picks Sotomayor for Supreme Court
President Obama chose federal Judge Sonia Sotomayor on Tuesday as his nominee for the U.S. Supreme Court, the first Hispanic Latina to serve on the bench.
On Cato’s blog, constitutional law scholar Roger Pilon wrote, “President Obama chose the most radical of all the frequently mentioned candidates before him.”
Cato Supreme Court Review editor and senior fellow Ilya Shapiro weighed in, saying, “In picking Sonia Sotomayor, President Obama has confirmed that identity politics matter to him more than merit. While Judge Sotomayor exemplifies the American Dream, she would not have even been on the short list if she were not Hispanic.”
Shapiro expands his claim that Sotomayor was not chosen based on merit at CNN.com:
In over 10 years on the Second Circuit, she has not issued any important decisions or made a name for herself as a legal scholar or particularly respected jurist. In picking a case to highlight during his introduction of the nominee, President Obama had to go back to her days as a trial judge and a technical ruling that ended the 1994-95 baseball strike.
Pilon led a live-chat on The Politico’s Web site, answering questions from readers about Sotomayor’s record and history.
And at The Wall Street Journal, Cato senior fellow John Hasnas asks whether “compassion and empathy” are really characteristics we want in a judge:
Paraphrasing Bastiat, if the difference between the bad judge and the good judge is that the bad judge focuses on the visible effects of his or her decisions while the good judge takes into account both the effects that can be seen and those that are unseen, then the compassionate, empathetic judge is very likely to be a bad judge. For this reason, let us hope that Judge Sotomayor proves to be a disappointment to her sponsor.
North Korea Tests Nukes
The Washington Post reports, “North Korea reportedly fired two more short-range missiles into waters off its east coast Tuesday, undeterred by the strong international condemnation that followed its detonation of a nuclear device and test-firing of three missiles a day earlier.”
Writing in the National Interest online, Cato scholar Doug Bandow discusses how the United States should react:
Washington has few options. The U.S. military could flatten every building in the Democratic People’s Republic of Korea (DPRK), but even a short war would be a humanitarian catastrophe and likely would wreck Seoul, South Korea’s industrial and political heart. America’s top objective should be to avoid, not trigger, a conflict. Today’s North Korean regime seems bound to disappear eventually. Better to wait it out, if possible.
On Cato’s blog, Bandow expands on his analysis on the best way to handle North Korea:
The U.S. should not reward “Dear Leader” Kim Jong-Il with a plethora of statements beseeching the regime to cooperate and threatening dire consequences for its bad behavior. Rather, the Obama administration should explain, perhaps through China, that the U.S. is interested in forging a more positive relationship with [the] North, but that no improvement will be possible so long as North Korea acts provocatively. Washington should encourage South Korea and Japan to take a similar stance.
Moreover, the U.S. should step back and suggest that China, Seoul, and Tokyo take the lead in dealing with Pyongyang. North Korea’s activities more threaten its neighbors than America. Even Beijing, the North’s long-time ally, long ago lost patience with Kim’s belligerent behavior and might be willing to support tougher sanctions.
Cato Media Quick Hits
Here are a few highlights of Cato media appearances now up on Cato’s YouTube channel:
- Ted Galen Carpenter discuss the North Korean missile tests on WOR radio.
- On Fox News, Chris Edwards disputes the idea of a federal sales tax.
- Gene Healy comments on the future of Guantanamo detainees on BBC.
- On CNBC, Dan Mitchell explains why California is like the “France of America.”
- In Friday’s Cato Daily Podcast, John Samples discusses how at least three presidents used the Fairness Doctrine to squelch dissenting speech.
Troublesome North Korea Strikes Again
The North Koreans have been busy, testing a nuclear weapon and shooting off missiles. It seems that nothing upsets North Korea more than being ignored.
President Barack Obama expressed the usual outrage:
These actions, while not a surprise given its statements and actions to date, are a matter of grave concern to all nations. North Korea’s attempts to develop nuclear weapons, as well as its ballistic missile program, constitute a threat to international peace and security.
However, this really is all old news. Although the nuclear test reinforces the North’s irresponsible reputation, the blast has little practical importance. North Korea has long been known to be a nuclear state and tested a smaller nuclear device a couple years ago. The regime’s missile capabilities also are well-known.
Contrary to the president’s excited rhetoric, the North has little ability to project force beyond the Korean peninsula. So Washington should treat the North’s latest offense as an opportunity to reprogram the latter’s negotiating formula.
The U.S. should not reward “Dear Leader” Kim Jong-il with a plethora of statements beseeching the regime to cooperate and threatening dire consequences for its bad behavior. Rather, the Obama administration should explain, perhaps through China, that the U.S. is interested in forging a more positive relationship with North, but that no improvement will be possible so long as North Korea acts provocatively. Washington should encourage South Korea and Japan to take a similar stance.
Moreover, the U.S. should step back and suggest that China, Seoul, and Tokyo take the lead in dealing with Pyongyang. North Korea’s activities more threaten its neighbors than America. Even Beijing, the North’s long-time ally, long ago lost patience with Kim’s belligerent behavior and might be willing to support tougher sanctions.
Washington should offer to support this or other efforts to reform North Korean policy. But without Chinese backing there is little else the U.S. can do. War on the peninsula would be disastrous for all, and Washington has few additional sanctions to apply. Beijing has the most leverage on Pyongyang, but whether even that is enough to moderate North Korea’s behavior is anyone’s guess.
North Korea is a problem likely to be long with us. The U.S. has limited ability to influence the North. Washington should offer the prospect of improved relations as a reward for improved North Korean behavior, but should let the North’s neighbors, most notably China, take the lead in managing this most difficult of states.
Haass: Defining ‘Success’ Down
Richard Haass’s op ed in today’s Post is worth a read. Sure, it amounts to a well-placed advertisement for his new book, War of Necessity, War of Choice. And it’s not like Haass, current president of the Council of Foreign Relations, and former director of policy planning at the State Department, lacks for exposure. But while I would quibble with his characterization of the first Gulf War as “necessary”, it is refreshing for a man so firmly fixed in the foreign policy establishment to focus not on the United States’ supposed capacity for refashioning the global order, but rather on the limits of our power.
He urges President Obama to resist the impulse to expand our objectives in Afghanistan, and should not dedicate far more resources to the effort if we appear to be falling short of a few modest goals. He wisely counsels that the United States is unlikely to convince Iran to forego nuclear enrichment or North Korea to give up its weapons, and we should therefore focus on the more essential and achievable tasks of intrusive inspections of Iran’s nuclear facilities and pressure on North Korea (in concert with China) to prevent material and technology from being diverted to others.
He concludes:
Some will argue that defining success down is defeatist. And certainly, one can imagine an Afghanistan or an Iraq that becomes a Jeffersonian democracy and an Iran or a North Korea that gets out of the nuclear business. But such outcomes are improbable at best and more likely fantasy. Moreover, far greater involvement and investment would still fail to bring them about.
The alternatives are outcomes that are good enough and commensurate with interests and costs. The moment calls for defining success down. The United States is stretched economically and militarily. Better partial success we can afford than expensive failures we cannot.
Les Gelb, CFR’s former president, makes similar arguments in his latest book, Power Rules.
Few people in Washington rise through the ranks by talking about what we can’t or shouldn’t do, which partly explains why the voices of restraint are almost always drowned out by the vocal few calling for action. (For more on this point, see Steve Walt’s recent commentary at FP.com and Justin Logan’s observations on this blog.)
Republicans Tell America: Trust Us with Your National Security Again
The Republican Party hasn’t been doing well as of late. A botched governing majority, a lost reputation, two lost legislative elections, two lost congressional majorities, a lost presidential election, a lost Pennsylvania senator, and no relief in sight. So what does the GOP congressional leadership do? Play the national security card.
Stymied in so many of their efforts to put President Obama and Democrats on the defensive, Republicans are returning to national security, an issue that has served the purpose well for them in the past.
Trying to raise doubts about Mr. Obama’s ability to protect the nation, they have raised the specter of terror suspects transferred from the detention facility at Guantánamo Bay, Cuba, to prisons in American communities, issued warnings that the release of memorandums detailing secret interrogation methods has put Americans at risk, and presented a video montage ending with the Pentagon in flames on Sept. 11, 2001, and the question, “Do you feel safer?”
“I think what I’m trying to do here,” Representative John A. Boehner of Ohio, the Republican leader, said in defending the video he and fellow Republicans have been circulating, “is push the administration to tell us, What is the overarching strategy to take on the terrorists and defeat them and to help keep America safe?”
I have a lot of bad things to say about both parties on foreign as well as domestic policy. But it’s hard for me to imagine the previous eight years of Republican governance as a golden era for national security. First there was 9/11. Perhaps it is too much to expect the Bush administration to have prevented the terrorist atrocity, but the administration did nothing over the Clinton administration to improve American defenses to prevent such attacks.
Then there was diverting troops and attention from Afghanistan before that war was finished, to invade Iraq. The Iraq debacle occupies a category all its own. Policy towards North Korea was spectacularly misguided and incompetent: refusing to talk to the North for years as it generated nuclear materials, before rushing to embrace Pyongyang while offering few immediate benefits to entice the North to change its behavior. The results of this strategy were, unsurprisingly, negligible.
Obama’s First 100 Days: Mixed Record on Foreign Policy
Cato foreign policy experts weigh in on President Obama’s record in his first 100 days:
Christopher Preble, Director Foreign Policy Studies:
President Obama deserves credit for making a few modest changes in U.S. foreign and defense policy, and he has signaled a desire to make more fundamental shifts in the future. Some of these may prove helpful, while others are likely to encounter problems. In the end, however, so long as the president is unwilling to revisit some of the core assumptions that have guided U.S grand strategy for nearly two decades — chief among these the conceit that the United States is the world’s indispensable nation, and that we must take the lead in resolving all the world’s problems — then he will be unable to effect the broad changes that are truly needed.
Ted Galen Carpenter, Vice President Defense & Foreign Policy Studies; Christopher Preble:
On the plus side, Obama moved quickly to fulfill his most important foreign policy promise: ending the war in Iraq. That said, the policy that his administration will implement is consistent with the agreement that the outgoing Bush administration negotiated with the Iraqis. Given that the war has undermined U.S. security interests, and our continuing presence there is costly and counterproductive, Obama should have proposed to remove U.S. troops on a faster timetable.
Malou Innocent, Foreign Policy Analyst:
The jury is still out on the other major, ongoing military operation, the war in Afghanistan. That mission is directly related to events in neighboring Pakistan, which is serving — and has served — as a safe haven for Taliban supporters for years. President Obama deserves credit for approaching the problem with both countries together, and also in a regional context, which includes Iran, as well as India. Still unknown is the scope and scale of the U.S. commitment. President Obama has approved a nearly 50 percent increase in the number of U.S. military personnel in Afghanistan. Some have suggested that still more troops are needed, and that these additional troop numbers might prevail for 10-15 years. That would be a mistake. The United States should be looking for ways to increase the capacity of both Afghanistan and Pakistan to confront the extremism in their countries, and should not allow either to grow dependent upon U.S. military and financial support.
Christopher Preble and Ted Galen Carpenter:
On Iran, President Obama made the right decision by agreeing to join the P5 + 1 negotiations, but that is only a first step. The two sides are far apart and President Obama has not signaled his intentions if negotiations fail to produce a definitive breakthrough. Sanctions have had a very uneven track record, and are unlikely to succeed in convincing the Iranians to permanently forego uranium enrichment. If the Iranians are intent upon acquiring nuclear weapons, military action would merely delay Iran ’s program, and would serve in the meantime to rally support for an otherwise unpopular clerical regime, and a manifestly incompetent president.
Doug Bandow, Senior Fellow; Christopher Preble:
A related problem is North Korea‘s ongoing nuclear program, an area where the president and his team seem to be grasping for answers. President Obama was mistaken if he believed that that the UN Security Council would render a meaningful response to Pyongyang’s provocative missile launch. It was naive, at best, for him to believe that even a strong rebuke from the UNSC would have altered Kim Jong Il’s behavior. The president must directly engage China, the only country with any significant influence over Kim. The North’s reckless and unpredictable behavior does not serve Beijing’s interests.
Benjamin Friedman, Research Fellow; Christopher Preble:
Obama and Defense Secretary Robert Gates are correct to apply greater scrutiny to bloated Pentagon spending, and to terminating unnecessary weapon systems, but the budget will actually grow slightly, at a time when we should be looking for ways to trim spending. If President Obama decided to avoid Iraq-style occupations, we could cut our ground forces in half. If we stopped planning for near-term war with China or Russia, the Air Force and Navy could be much smaller. Unless we commit to a grand strategy of restraint, and encourage other countries to provide for their own defense, it will be impossible to make the large-scale cuts in military spending that are needed.
Jim Harper, Director of Information Policy Studies; Benjamin Friedman; Christopher Preble:
Two other quick points. President Obama has moved away from some of the overheated rhetoric surrounding counterterrorism and homeland security, including dropping the phrase ‘War on Terror”. This was the right approach. The language surrounding the fight against terrorism is as important — if not more important — than the actual fight itself. Equally useful is his pledge to close the detention facility at Guantanamo Bay and his renunciation of the use of torture and other illegal means in the first against al Qaeda. These steps send an important message to audiences outside of the United States who cooperation is essential.
Ian Vasquez, Director, Center for Global Liberty & Prosperity; Juan Carlos Hidalgo, Project Coordinator for Latin America.
President Obama has signaled a slight change on US-Cuba policy by softening some travel and financial restrictions. It is not as far as we would have liked, but it is a step in the right direction — toward greater engagement, as opposed to more isolation, which was the approach adopted by the Bush administration.
For more research, check out Cato’s foreign policy and national security page.
Yes We Can!
Congratulations are in order to Kim Jong IL on his unanimous re-election as Supreme Leader of North Korea.
I didn’t realize we’d translated the Cato Constitution into Korean.
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