The Cost of Flu Fears – and Our Ongoing Vulnerability
The ever-sensible Shaun Waterman has begun to tally the cost of overreaction to the fear outbreak inspired by the H1N1 flu strain. He reports in ISN Security Watch:
Even the precautions that you take against this kind of global flu pandemic could knock about 1.9 [or] 2 percent off global [economic production]. That’s about a trillion dollars,” according to journalist Martin Walker, who cited World Bank figures from a study last year.
The Economist reported last week that the crisis in Mexico was costing Mexico City’s service and retail industries $55m a day – not because of the handful of deaths but because of people’s reactions. And that was even before the national suspension of non-essential public activities called for this week by the authorities there, which was expected to double that cost.
Waterman also cites my joke about moving Vice President Biden to an undisclosed location in future crises – not for his protection or government continuity, but to keep him away from the media.
It’s comedic wrapping on a substantive point: As long as people look to government leaders in times of crises, leaders have a responsibility to communicate carefully, according to a plan, and with message discipline. If they don’t, the damage can be very high.
Even if all Americans knew to dismiss the words of the Vice President as if he’s a “Crazy Uncle Joe” – and they don’t – foreign tourists certainly don’t know that. Biden harmed the country simply by speaking off the cuff.
Here, an outbreak of flu appears to have caused billions of dollars in damage to the world economy. One billion lost to the U.S. economy is about 145 deaths (using the current $6.9 million valuation for a human life). When overreactions restrict economic activity, that reduces wealth and thus health and longevity.
Now, imagine what might happen if the United States encountered a novel, directed threat – some kind of attack that inspires widespread concern. Will Vice President Biden and officials from a half-dozen agencies rush forth with personal observations and speculation? The results could be devastating, especially to a country that is already suffering economically.
People die from poor situation management, and it makes Americans worse off. Political leaders should not get a free pass for failing to communicate well just because it’s hard to do.
The Obama Administration should learn from its many errors in handling the rather benign H1N1 flu situation. It should train up for communicating in the event of a real emergency. If the Obama Administration fails to soothe nerves in the event of some future terrorist attack, that will be a clear failure of leadership.
Quelling Overreaction Is Part of the Job
On Sunday’s Meet the Press, David Gregory pressed a trio of federal officials about how comments on swine flu like Vice President Biden’s have caused overreactions across the country, such as the diversion of a plane because a passenger had flu-like symptoms, the cancellation of a rap concert, and a variety of other dislocations in American life.
Acting director of the Centers for Disease Control Dr. Richard Besser said:
Well, y’know, everybody is going to deal with their concerns in different ways, and that’s the nature of people. What we can do is try and tell them what the risks are – what do we know – share information as we have it, and continue to hit the messages of those things that can be really effective.
Health and Human Services Secretary Kathleen Sebelius lamely used the fact that people are flooding emergency rooms as an opportunity to promote health care reform . . . So that panicked insured people would flood doctors’ offices?
If government officials are going to manage a situation like this – and doubts have been raised that they should – their obligation is not just to report, but to actually manage. Allowing a cacophony of government voices to drive erratic behavior by people across the land is harmful to the country for all the resources it wastes.
The Obama Administration should have a disciplined plan for handling situations like this. The administration’s disorganized response here is a signal of the truly awful reaction we could expect should something serious happen, like a terrorist attack. Terrorism, of course, works by inducing self-injurious overreaction on the part of the victim state, so overreaction must be avoided.
This incident reveals that the country is exceedingly vulnerable to terrorism because communications plans are evidently not in place.
(The administration’s plan for any terrorist attack should prioritize moving Vice President Biden to an undisclosed location. Not for his security or for continuity of government – so he won’t appear in the media!)
Chrysler: Everybody Relax, This Is Exactly What Should Have Happened
A small group of Chrysler debt holders rejected the Obama administration’s restructuring plan last night, leaving Chapter 11 bankruptcy as the most salient option for the company.
The Obama administration accused the investors who walked away of “failure to act…in the national interest.” But it’s not difficult to understand why these secured creditors rejected the government’s offer of essentially 29 cents on their investment dollar. If that is how the Obama administration treats capital markets, how exactly do they expect to spur private investment in American companies, as the White House claims it wants to do?
Bankruptcy reorganization will probably yield a better deal for investors than the government’s plan. It also will imbue the process with more financial sanity than anything the Obama administration cooked up. For instance: the historically overindulged United Auto Workers might be forced to make more “sacrifices” than being handed a 55 percent stake in the company—essentially what the core of the administration’s plan would have accomplished—or reducing their CBA-mandated breaks from 16 minutes to 13 minutes.
Bankruptcy has been the best option all along. That was clear the moment it was determined that new private capital or adequate sales revenues would not be available to fund operations. But once the Bush administration circumvented Congress to throw Chrysler (and GM) a lifeline, and the Obama administration followed suit with implicit backing, uncertainty prevailed and the problem persisted. The bankruptcy process will produce a less politically driven solution.
Transparency for Thee but Not for Me
It appears that the Obama administration is high on transparency for everyone but its own allies. There are a lot of good reasons to reduce federal regulation, but if the Labor Department is going to push coercive unionism, it should require unions to disclose their activities and finances to their members.
Not in today’s world, however. The Obama administration is moving backwards. Reports the Washington Times:
The Obama administration, which has boasted about its efforts to make government more transparent, is rolling back rules requiring labor unions and their leaders to report information about their finances and compensation.
The Labor Department noted in a recent disclosure that “it would not be a good use of resources” to bring enforcement actions against union officials who do not comply with conflict of interest reporting rules passed in 2007. Instead, union officials will now be allowed to file older, less detailed conflict reports.
The regulation, known as the LM-30 rule, was at the heart of a lawsuit that the AFL-CIO filed against the department last year. One of the union attorneys in the case, Deborah Greenfield, is now a high-ranking deputy at Labor, who also worked on the Obama transition team on labor issues.
The only people served by this move are union officials who want less oversight over their use of dues payments, much collected from unwilling workers. The new policy certainly runs counter to the president’s promise to set a new tone in Washington.
Counterterrorism, Torture, and the Law
Over at The Wall Street Journal, Cong. Peter Hoekstra calls for an investigation into “what the Obama administration may be doing to endanger the security our nation has enjoyed because of interrogations and other antiterrorism measures implemented since Sept. 12, 2001.” Hoekstra implies, or at least clearly believes, that Obama’s renunciation of torture has made the country less safe. Rest assured, when the next attack occurs (and there will be another attack), Hoekstra and other supporters of torture will claim vindication, even though they won’t be able to point to direct evidence that torture would have averted the attack. It is equally impossible to prove a negative — why something does not occur — as it is to prove that an action not taken in the past would have prevented something in the present.
Similarly, former Vice President Cheney claims that the use of techniques such as waterboarding, sleep deprivation, stress positions, and cramped confinement enabled the U.S. government to stop future terrorist attacks, and he has asked the Obama administration to declassify the documents that supposedly prove it. Cheney has previously said that President Obama’s renunciation of torture increases the likelihood that future attacks will be successful.
Of course, Cheney has not asked for the declassification of all information obtained by torture. He presumably doesn’t want the American people to know the countless false positives, the fake leads, the purely bogus information offered up by those being tortured in a vain attempt to halt — or merely postpone — their severe discomfort. (Gene Healy documents a few of these in his recent column.)
Nor can Cheney or Hoekstra prove that the few kernels of useful information obtained under torture could only have been acquired under torture, and not by other techniques, techniques that were consistent with our laws, and that we employed in past conflicts. They can’t prove such claims, because they aren’t true.
Tarred by TARP
Government-backed equity was offered to adequately capitalized banks in order to remove the “stigma” from banks receiving TARP funds, and the management of these institutions took the bait and accepted the money.
Surprise, surprise: now they discover that the money came with strings.
Some banks want to pay back the TARP money to extricate themselves from government restrictions on compensation and pressure to make loans the banks view as unprofitable. Treasury Secretary Geithner has made it clear that the decision to pay back the funds early won’t be left to the banks, but to the Treasury: “My basic obligation is to make sure the system as a whole … has the ability to provide the credit that recovery requires.”
The banking system has thus become a tool for the government to further its policies. And the bankers themselves put their institutions in that position. While taxpayers may understandably feel the bankers got their comeuppance, there are at least two major problems with the Bush/Obama policy.
First, Mr. Geithner has misdiagnosed the problem.
We are in recovery from the effects of the bursting of a massive housing and finance bubble funded by debt. That boom in turn financed a consumption binge of monumental proportions.
The only resolution of a spending binge is restraint in the form of saving. Recovery requires not more credit and another boom, but a dose of economic sobriety.
Individuals and firms know that and are de-leveraging – unwinding what they now realize is excessive debt. That will take the rest of this year and the better part of 2010. Overall, credit is down because demand is down.
Second, and even more disturbing: it appears that the Obama Administration wants to control the financial sector in order to gain control over what Lenin called the “Commanding Heights” of the U.S. economy: the major industries and sources of employment. The auto industry is a prime example, and one in which the administration has involved itself directly. It is also pressuring major recipients of TARP funds to ease the terms of the loans they have made to firms such as Chrysler. Treasury is attempting to use the banks to conduct fiscal policy through credit allocation.
The bankers taking TARP funds got their firms into a mess and deserve no sympathy. Anyone believing in free markets, however, must oppose this power grab by the Obama Administration.
Let the banks pay the funds back and let it be a lesson for CEOs and their stockholders: If you take government funds, you have taken on an unreliable business partner.
What’s Wrong With The Title of This Event?
A May 1st Federalist Society lunch will feature William Kristol, Editor of the Weekly Standard speaking on “The Obama Administration and the War on Terror.” Hopefully, it will be a fair-minded inquiry into the utility of the “war” metaphor for combating and suppressing terrorism.
Duncan the Mercenary, Obama the Coward
The Obama administration’s stance on the voucher program is transparently political and insulting. President Obama claims he wants to help the poor and improve education, and yet he has aided and abetted Congress in the murder of the only federal education program with evidence of sustained and increasing achievement gains for participants (and at a quarter of the cost).
From Bloomberg today:
A spending law signed by Obama last month will end a program that gives low-income parents tuition vouchers of as much as $7,500 a year to send their children to private schools. Among 54 participating schools are Sidwell Friends, where Sasha and Malia Obama are students, and Ambassador Baptist Church Christian School, where Sherrise Greene sends her two daughters and had wanted to enroll Marquis.
“I had high hopes that he would be attending with a scholarship with his sisters,” Greene said in an interview. “I’m just really hurt that it’s being ended, because I think it’s a good program.”
Ms. Greene should feel hurt. And she should be angry as well. Many of the scholarship parents are meeting tonight to force Congress and the administration to recognize that they are real people who will be hurt by this payoff to the teachers unions. I look forward to their protests.
The most loathsome character in this sordid story, perhaps . . . it’s difficult to choose . . . is Secretary of Education Arne Duncan. This self-proclaimed “reformer” had this to say to the parents of this wildly popular and proven program:
Duncan said the Education Department findings don’t warrant a continuation of the voucher program, except for children already enrolled. While some students showed “modest gains” in reading, those who had switched to private schools from “low performing” public schools showed no improvement, he said in an e-mailed statement.
How stupid and insignificant do Duncan and Obama think these parents and children are? The whole affair is disgusting.
Week in Review: Successful Voucher Programs, Immigration Debates and a New Path for Africa
Federal Study Supports School Vouchers
Last week, a U.S. Department of Education study revealed that students participating in a Washington D.C. voucher pilot program outperformed peers attending public schools.
According to The Washington Post, the study found that “students who used the vouchers received reading scores that placed them nearly four months ahead of peers who remained in public school.” In a statement, education secretary Arne Duncan said that the Obama administration “does not want to pull participating students out of the program but does not support its continuation.”
Why then did the Obama administration “let Congress slash the jugular of DC’s school voucher program despite almost certainly having an evaluation in hand showing that students in the program did better than those who tried to get vouchers and failed?”
The answer, says Cato scholar Neal McCluskey, lies in special interests and an unwillingness to embrace change after decades of maintaining the status quo:
It is not just the awesome political power of special interests, however, that keeps the monopoly in place. As Terry Moe has found, many Americans have a deep, emotional attachment to public schooling, one likely rooted in a conviction that public schooling is essential to American unity and success. It is an inaccurate conviction — public schooling is all-too-often divisive where homogeneity does not already exist, and Americans successfully educated themselves long before “public schooling” became widespread or mandatory — but the conviction nonetheless is there. Indeed, most people acknowledge that public schooling is broken, but feel they still must love it.
Susan L. Aud and Leon Michos found the program saved the city nearly $8 million in education costs in a 2006 Cato study that examined the fiscal impact of the voucher program.
To learn more about the positive effect of school choice on poor communities around the world, join the Cato Institute on April 15 to discuss James Tooley’s new book, The Beautiful Tree: A Personal Journey Into How the World’s Poorest People Are Educating Themselves.
Obama Announces New Direction on Immigration
The New York Times reports, “President Obama plans to begin addressing the country’s immigration system this year, including looking for a path for illegal immigrants to become legal, a senior administration official said on Wednesday.”
In the immigration chapter of the Cato Handbook for Policymakers, Cato trade analyst Daniel T. Griswold offered suggestions on immigration policy, which include:
- Expanding current legal immigration quotas, especially for employment-based visas.
- Creating a temporary worker program for lower-skilled workers to meet long-term labor demand and reduce incentives for illegal immigration.
- Refocusing border-control resources to keep criminals and terrorists out of the country.
In a 2002 Cato Policy Analysis, Griswold made the case for allowing Mexican laborers into the United States to work.
For more on the argument for open borders, watch Jason L. Riley of The Wall Street Journal editorial board speak about his book, Let Them In: The Case for Open Borders.
In Case You Couldn’t Join Us
Cato hosted a number of fascinating guests recently to speak about new books, reports and projects.
- Salon writer Glenn Greenwald discussed a new Cato study that exa
mines the successful drug decriminalization program in Portugal.
- Patri Friedman of the Seasteading Institute explained his project to build self-sufficient deep-sea platforms that would empower individuals to break free of national governments and start their own societies on the ocean.
- Dambisa Moyo, author of the book Dead Aid, spoke about her research that shows how government-to-government aid fails. She proposed an “aid-free solution” to development, based on the experience of successful African countries.
Find full-length videos to all Cato events on Cato’s events archive page.
Also, don’t miss Friday’s Cato Daily Podcast with legal policy analyst David Rittgers on Obama’s surge strategy in Afghanistan.
New at Cato
Here are a few highlights from Cato Today, a daily email from the Cato Institute. You can subscribe, here
- The new edition of Regulation examines the Employee Free Choice Act (EFCA), the legal drinking age and climate change policies.
- In The Week, Will Wilkinson argues that the Obama administration should rethink its drug policy and that prominent marijuana users should “come out of the closet.”
- Gene Healy points out in the Washington Examiner why the Serve America Act (SAA) is no friend to freedom.
- The Cato Weekly Video features Rep. Paul Ryan discussing the Obama administration’s budget.
- In Wednesday’s Cato Daily Podcast, Patri Friedman discusses seasteading and the prospects for liberty on the high seas.
The Bloom Could Not Survive
“Among several outstanding nominations made by President-elect Obama, I believe Arne Duncan is the best.”
That’s what Senator Lamar Alexander (R-TN) said of now-U.S. Secretary of Education Arne Duncan at his confirmation hearing. Alexander thought that Duncan was a man who truly embraced reform and could work with anybody, and who, like his boss, seemed to really want to get beyond politics.
That was before reality set in.
With the Department of Education’s media-dodging, Friday-afternoon release of a study showing that Washington’s voucher program is outperforming DC public schools at a fraction of the cost, and Duncan’s galling failure to report these results as Congress debated the voucher program’s fate last month, it has become clear that Duncan is far from above playing politics. Of course, he isn’t necessarily calling the shots. He works for President Obama, whom you might recall announced that his children would attend posh, private, Sidwell Friends on a Friday afternoon.
It’s not only on choice that Obama and Duncan are playing the game. They are great at reform-y talk about such things as accountability and high standards, but talk is all they’ve delivered. Oh, that and tens-of-billions of dollars to bail out public schools from which parents should never be allowed to take their kids and money, and which aren’t good enough for the president’s children.
So is the public starting to see that the administration might not be delivering the great change it has promised? It’s hard to tell, but some journalists and education wonks are catching on.
Week in Review: ‘Saving’ the World, Government Control and Drug Decriminalization
G-20 Summit Agrees to International Spending Plan
The Washington Post reports, “Leaders from more than 20 major nations including the United States decided Thursday to make available an additional $1 trillion for the world economy through the International Monetary Fund and other institutions as part of a broad package of measures to overcome the global financial crisis.”
Cato scholars Richard W. Rahn, Daniel J. Ikenson and Ian Vásquez commented on the London-based meeting:
Rahn: “President Obama of the U.S. and Prime Minister Brown of the U.K. will be pressing for more so-called stimulus spending by other nations, despite the fact that the historical evidence shows that big increases in government spending are more likely to be damaging and slow down recovery than they are to promote vigorous economic expansion and job creation.”
Vásquez: “The push by some countries for massive increases in spending to address the global financial crisis smacks of political and bureaucratic opportunism. A prime example is Washington’s call to substantially increase the resources of the International Financial Institutions… There is no reason to think that massive increases of the IFIs’ funds will not worsen, rather than improve, their record or the accountability of the aid agencies and borrower governments.”
Ikenson: “Certainly it is crucial to avoid protectionist policies that clog the arteries of economic recovery and help nobody but politicians. But it is also important to keep things in perspective: the world is not on the brink of a global trade war, as some have suggested.”
Ikenson appeared on CNBC this week to push for a reduction of trade barriers in international markets.
With fears mounting over a global shift toward protectionism, Cato senior fellow Tom Palmer and the Atlas Economic Research Foundation are circulating a petition against restrictive trade measures.
Obama Administration Forces Out GM CEO
President Obama took an unprecedented step toward greater control of a private corporation after forcing General Motors CEO Rick Wagoner to leave the company. The New York Post reports “the administration threatened to withhold bailout money from the company if he didn’t.”
Writing for the Washington Post, trade analyst Dan Ikenson explained why the government is responsible for any GM failure from now on:
President Obama’s newly discovered prudence with taxpayer money and his tough-love approach to GM and Chrysler would both have more credibility if he hadn’t demanded Rick Wagoner’s resignation, as well. By imposing operational conditions normally reserved for boards of directors, the administration is now bound to the infamous “Pottery Barn” rule: you break it, you buy it. If things go further south, the government is now complicit.
Wagoner’s replacement, Fritz Henderson, said Tuesday that after receiving billions of taxpayer dollars, the company is considering bankruptcy as an option. Cato scholars recommended bankruptcy months ago:
Dan Ikenson, November 21, 2008: “Bailing out Detroit is unnecessary. After all, this is why we have the bankruptcy process. If companies in Chapter 11 can be salvaged, a bankruptcy judge will help them find the way. In the case of the Big Three, a bankruptcy process would almost certainly require them to dissolve their current union contracts. Revamping their labor structures is the single most important change that GM, Ford, and Chrysler could make — and yet it is the one change that many pro-bailout Democrats wish to ignore.”
Daniel J. Mitchell, November 13, 2008: ”Advocates oftentimes admit that bailouts are not good policy, but they invariably argue that short-term considerations should trump long-term sensible policy. Their biggest assertion is that a bailout is necessary to prevent bankruptcy, and that avoiding this result is critical to prevent catastrophe. But Chapter 11 protection may be precisely what is needed to put American auto companies back on the path to profitability. Bankruptcy laws specifically are designed to give companies an opportunity — under court supervision — to reduce costs and streamline operations.”
Dan Ikenson, December 5, 2008: “The best solution is to allow the bankruptcy process to work. It will be needed. There are going to be jobs lost, but there is really nothing policymakers can do about that without exacerbating problems elsewhere. The numbers won’t be as dire as the Big Three have been projecting.”
Cato Links
- Is Portugal an example for the future of drug policy? Cato released a new case study this week by Salon writer Glenn Greenwald entitled, “Drug Decriminalization in Portugal: Lessons for Creating Fair and Successful Drug Policies.”
- As the North Atlantic Treaty Organization celebrates its 60th birthday, there are signs of mounting trouble within the alliance and increasing reasons to doubt the organization’s relevance regarding the foreign policy challenges of the 21st century. In a new study, Cato scholar Ted Galen Carpenter argues that NATO’s time is up.
- Should immigration agents target businesses knowingly hiring illegal immigrants? Cato scholar Jim Harper weighs in on a Fox News debate.
- Cato scholar Gene Healy warns, “Beware of the Cult of Obama,” in this week’s Washington Examiner column.
- Sign up today for Cato University 2009: Economic Crisis, War, and the Rise of the State.
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