USAID Assists in Aftermath of Liberia's Caterpillar Infestation
USAID, February 6, 2009
Washington, D.C. - The U.S. Agency for International Development (USAID) is providing assistance after a caterpillar infestation in Liberia has destroyed crops, contaminated water supplies, and temporarily forced residents from homes and farms in three counties in northern and central Liberia, particularly Bong County.
In response to the infestation, USAID is providing $100,000 for pest-control activities and water and sanitation programs in areas contaminated by caterpillar excrement. In addition, two USAID experts arrived in Monrovia on February 2 to conduct an environmental assessment of the infestation.
"The American people are standing by Liberians in their time of need," said U.S. Ambassador Linda Thomas-Greenfield. "We will work closely with the Liberian government's task force to help meet immediate needs, and we will look for longer term solutions to minimize effects of future pest infestations."
According to international media reports, the infestation has affected more than 500,000 people residing in approximately 100 villages. The Government of Liberia reported that the current infestation is the country's worst in three decades, and dispatched pest-control experts and insecticide-spraying teams to affected areas. On February 4, the U.N. Food and Agriculture Organization (FAO) reported that although caterpillars had affected agriculture, the infestation had not damaged staple crops, such as maize, rice, sorghum, and millet. On January 26, the President of Liberia declared a nationwide state of emergency and requested international assistance.
USAID will continue to monitor the situation in conjunction with humanitarian partners and is prepared to provide additional assistance should it be necessary.
For more information about USAID's emergency programs, please visit: http://www.usaid.gov/our_work/humanitarian_assistance/disaster_assistance/.
The U.S. Agency for International Development has provided economic and humanitarian assistance worldwide for nearly 50 years.
Friday, February 6, 2009
To improve the economy, eliminate the corporate income tax
Economic Change We Can Believe In. By Jeffrey A. Miron
To improve the economy, eliminate the corporate income tax
Reason, February 6, 2009
President Barack Obama's stimulus proposal entails an awkward tradeoff between spending and efficiency. Fiscal stimulation suggests large, rapid increases in spending, while efficiency means cautious, modest increases. Similarly, Obama's plan favors tax cuts for low-income families, since they are most likely to spend rather than save, yet the drive for efficiency means cutting marginal tax rates on high-income consumers.
One policy change, however, can stimulate both the economy in the short-run and enhance efficiency in the long-run: repeal of the corporate income tax, which collects up to 35% of the difference between revenues and costs of incorporated businesses.
From the efficiency perspective, the corporate income tax has never been sensible policy. Economic theory holds that an efficient tax system should not tax capital income, since this distorts the incentives to save and invest. Even if the tax base includes capital income, corporate income taxation is overkill. All income earned by corporations accrues to households as dividends or capital gains, and this income is then taxed by the personal income tax system.
Proponents argue that the corporate income tax makes sense because high-income taxpayers own corporations at a disproportionate rate. This desire to redistribute income can still be achieved using the personal tax system. That approach is better targeted than taxing corporate income, since many low and moderate income households own corporations via their pensions and 401(k)s. The true burden of corporation taxation falls not just on stockholders, but on employees through lower wages and on consumers through higher prices. Thus corporate taxation hits taxpayers across the income spectrum.
Corporate income taxation has other negatives. It requires a complicated set of rules and regulations, over and above the personal income tax system, generating compliance costs. Special interests ensure that corporate tax systems favor specific industries or activities, further distorting private investment decisions. Along those lines, corporation taxation reduces financial transparency, making it harder for investors to monitor corporate behavior.
So repeal of the corporate income tax is good policy independent of the state of the economy and would provide short-run stimulus.
Repeal means higher stock prices and improved cash flow. Corporations would respond to this change by investing in plant and equipment, and by hiring additional workers. These investments would be more productive than the ones funded by stimulus projects, since corporations respond to market forces, not to political influence. Since corporations could more easily invest out of retained earnings, repeal would also circumvent many banks' reluctance to lend.
The budgetary impact of a corporate income tax repeal—roughly $300-350 billion per year—might seem daunting, but this amount falls well short of the Obama fiscal package. The long-run impact will be less than what is implied by current revenues, since repeal will expand economic activity and therefore increase other kinds of tax revenue.
The stimulus impact of a corporate income tax repeal is likely to be substantial. Recent estimates by Christina Romer, the head of Obama's Council of Economic Advisers, suggest that tax cuts have a multiplier of three, meaning that repeal would increase GDP by roughly $1 trillion. By comparison, the administration's assumption that the government spending multiplier is about 1.5 suggests that the $500 billion in the Obama stimulus package would increase GDP by about $750 billion.
Elimination of the corporate income tax is a no-brainer. It benefits the economy in both the short-run and the long-run, with modest implications on the government budget.
The broader lesson here is that policymakers should attempt to improve the economy by eliminating currently existing bad policies, not just by adding new layers of government. By focusing equally on efficiency and stimulus, policymakers can set the stage for a sustained and healthy recovery.
Jeffrey A. Miron is a senior lecturer in economics at Harvard University.
To improve the economy, eliminate the corporate income tax
Reason, February 6, 2009
President Barack Obama's stimulus proposal entails an awkward tradeoff between spending and efficiency. Fiscal stimulation suggests large, rapid increases in spending, while efficiency means cautious, modest increases. Similarly, Obama's plan favors tax cuts for low-income families, since they are most likely to spend rather than save, yet the drive for efficiency means cutting marginal tax rates on high-income consumers.
One policy change, however, can stimulate both the economy in the short-run and enhance efficiency in the long-run: repeal of the corporate income tax, which collects up to 35% of the difference between revenues and costs of incorporated businesses.
From the efficiency perspective, the corporate income tax has never been sensible policy. Economic theory holds that an efficient tax system should not tax capital income, since this distorts the incentives to save and invest. Even if the tax base includes capital income, corporate income taxation is overkill. All income earned by corporations accrues to households as dividends or capital gains, and this income is then taxed by the personal income tax system.
Proponents argue that the corporate income tax makes sense because high-income taxpayers own corporations at a disproportionate rate. This desire to redistribute income can still be achieved using the personal tax system. That approach is better targeted than taxing corporate income, since many low and moderate income households own corporations via their pensions and 401(k)s. The true burden of corporation taxation falls not just on stockholders, but on employees through lower wages and on consumers through higher prices. Thus corporate taxation hits taxpayers across the income spectrum.
Corporate income taxation has other negatives. It requires a complicated set of rules and regulations, over and above the personal income tax system, generating compliance costs. Special interests ensure that corporate tax systems favor specific industries or activities, further distorting private investment decisions. Along those lines, corporation taxation reduces financial transparency, making it harder for investors to monitor corporate behavior.
So repeal of the corporate income tax is good policy independent of the state of the economy and would provide short-run stimulus.
Repeal means higher stock prices and improved cash flow. Corporations would respond to this change by investing in plant and equipment, and by hiring additional workers. These investments would be more productive than the ones funded by stimulus projects, since corporations respond to market forces, not to political influence. Since corporations could more easily invest out of retained earnings, repeal would also circumvent many banks' reluctance to lend.
The budgetary impact of a corporate income tax repeal—roughly $300-350 billion per year—might seem daunting, but this amount falls well short of the Obama fiscal package. The long-run impact will be less than what is implied by current revenues, since repeal will expand economic activity and therefore increase other kinds of tax revenue.
The stimulus impact of a corporate income tax repeal is likely to be substantial. Recent estimates by Christina Romer, the head of Obama's Council of Economic Advisers, suggest that tax cuts have a multiplier of three, meaning that repeal would increase GDP by roughly $1 trillion. By comparison, the administration's assumption that the government spending multiplier is about 1.5 suggests that the $500 billion in the Obama stimulus package would increase GDP by about $750 billion.
Elimination of the corporate income tax is a no-brainer. It benefits the economy in both the short-run and the long-run, with modest implications on the government budget.
The broader lesson here is that policymakers should attempt to improve the economy by eliminating currently existing bad policies, not just by adding new layers of government. By focusing equally on efficiency and stimulus, policymakers can set the stage for a sustained and healthy recovery.
Jeffrey A. Miron is a senior lecturer in economics at Harvard University.
Soviet incentives
Soviet economy, by Eric S. Weisman, Former Assistant to the US. Executive Director, International Monetary fund
In: "Some Comments upon the Retirement of Professor Vladimir G. Treml", Duke University, Economics Dept, Fall 2001
Vlad loves to tell stories of how perverse incentive structures in the Soviet Union led to seemingly bizarre, but in fact entirely rational, economic decision-making. The story I like the best is the one about the used light bulb market. For most of us, it is hard to fathom the rationale for a market in burnt-out light bulbs. But in the scarcity-driven Soviet economy, the market was entirely reasonable. Light bulbs were rarely available to individual consumers, but were obtainable for state-sponsored activities. Thus, it would be difficult to purchase a light bulb for a new lamp in one's home, while burnt-out bulbs in state-run offices or factories were routinely replaced. So if someone purchased a new lamp and needed a bulb, he would buy a used light bulb for a small fee and replace a functioning bulb at work with the dud. He would then take the functioning bulb home for the new lamp, while the burnt-out bulb at the office/factory would be replaced with a new functioning bulb. Meanwhile, the maintenance person at the office/factory would take the used bulb and sell it on the used light bulb market.
In: "Some Comments upon the Retirement of Professor Vladimir G. Treml", Duke University, Economics Dept, Fall 2001
Vlad loves to tell stories of how perverse incentive structures in the Soviet Union led to seemingly bizarre, but in fact entirely rational, economic decision-making. The story I like the best is the one about the used light bulb market. For most of us, it is hard to fathom the rationale for a market in burnt-out light bulbs. But in the scarcity-driven Soviet economy, the market was entirely reasonable. Light bulbs were rarely available to individual consumers, but were obtainable for state-sponsored activities. Thus, it would be difficult to purchase a light bulb for a new lamp in one's home, while burnt-out bulbs in state-run offices or factories were routinely replaced. So if someone purchased a new lamp and needed a bulb, he would buy a used light bulb for a small fee and replace a functioning bulb at work with the dud. He would then take the functioning bulb home for the new lamp, while the burnt-out bulb at the office/factory would be replaced with a new functioning bulb. Meanwhile, the maintenance person at the office/factory would take the used bulb and sell it on the used light bulb market.
President's remarks on the Economic Recovery Advisory Board
Advice from "beyond the echo chamber"
White House, Friday, February 6th, 2009 at 12:55 pm
We just learned the economy lost another 600,000 jobs last month. It's a staggering number, and it underscores just how deep this crisis is – and, as the President pointed out this morning, it’s accelerating.
That's why he created the Economic Recovery Advisory Board -- to solicit ideas from "beyond the echo chamber of Washington, DC."
"I’m not interested in groupthink, which is why the Board reflects a broad cross-section of experience, expertise, and ideology," he said. "We’ve recruited Republican and Democrats; veterans of government and the private sector; advocates for business and labor. Not everyone is going to agree with each other, and not all of them are going to agree with me – and that’s precisely the point. Because we want to ensure that our policies have the benefit of independent thought and vigorous debate."
Before the President signed the executive order officially creating the board, he addressed the jobs numbers and brought home the individual pains behind those almost incomprehensibly large numbers.
"Somewhere in America, a small business has shut its doors; a family has said goodbye to their home; a young parent has lost their livelihood, and doesn’t know what’s going to take its place," the President said.
Read the rest of his remarks below -- along with those of PERAB chairman Paul Volcker -- and the list of board members below that.
--------------------------------------------------------------------------------
REMARKS BY THE PRESIDENT ON THE ESTABLISHMENT OF THE ECONOMIC RECOVERY ADVISORY BOARD
East Room, The White House
February 6, 2009
THE PRESIDENT: Thank you. Thank you. Please have a seat. (Applause.) Good morning, everybody.
AUDIENCE: Good morning.
THE PRESIDENT: I have just had the opportunity to welcome the members of my Economic Recovery Advisory Board. And I'm grateful that I will have the counsel of these extraordinarily talented and experienced men and women in the challenging months to come.
If there's anyone, anywhere, who doubts the need for wise counsel and bold and immediate action, just consider the very troubling news we received just this morning. Last month, another 600,000 Americans lost their jobs. That is the single worst month of job loss in 35 years. The Department of Labor also adjusted their job loss numbers for 2008 upwards, and now report that we've lost 3.6 million jobs since this recession began.
That's 3.6 million Americans who wake up every day wondering how they are going to pay their bills, stay in their homes, and provide for their children. That's 3.6 million Americans who need our help.
I'm sure that at the other end of Pennsylvania Avenue, members of the Senate are reading these same numbers this morning. And I hope they share my sense of urgency and draw the same, unmistakable conclusion: The situation could not be more serious. These numbers demand action. It is inexcusable and irresponsible for any of us to get bogged down in distraction, delay, or politics as usual, while millions of Americans are being put out of work.
Now is the time for Congress to act. It's time to pass an Economic Recovery and Reinvestment Plan to get our economy moving.
This is not some abstract debate. It is an urgent and growing crisis that can only be fully understood through the unseen stories that lie underneath each and every one of those 600,000 jobs that were lost this month. Somewhere in America a small business has shut its doors; somewhere in America a family has said goodbye to their home; somewhere in America a young parent has lost their livelihood -- and they don't know what's going to take its place.
These Americans are counting on us, all of us in Washington. We have to remember that we're here to work for them. And if we drag our feet and fail to act, this crisis could turn into a catastrophe. We'll continue to get devastating job reports like today's -- month after month, year after year. It's very important to understand that, although we had a terrible year with respect to jobs last year, the problem is accelerating, not decelerating. It's getting worse, not getting better. Almost half of the jobs that were lost have been lost just in the last couple of months.
These aren't my assessments -- these are the assessments of independent economists. If we don't do anything, millions more jobs will be lost. More families will lose their homes. More Americans will go without health care. We'll continue to send our children to crumbling schools, and be crippled by our dependence on foreign oil. That's the result of inaction. And it's not acceptable to the American people.
They did not choose more of the same in November. They did not send us to Washington to get stuck in partisan posturing, to try to score political points. They did not send us here to turn back to the same tried and failed approaches that were rejected, because we saw the results. They sent us here to make change, with the expectation that we would act.
Now, I have repeatedly acknowledged that, given the magnitude and the difficulties of the problem we're facing, there are no silver bullets and there are no easy answers. The bill that's emerged from Congress is not perfect, but a bill is absolutely necessary. We can continue to improve and refine both the House and Senate versions of these bills. There may be provisions in there that need to be left out; there may be some provisions that need to be added. But broadly speaking, the package is the right size, it is the right scope, and it has the right priorities to create 3 to 4 million jobs and to do it in a way that lays the groundwork for long-term growth -- by fixing our schools, modernizing our health care to lower costs, repair our roads and bridges and levees and other vital infrastructure, move us towards energy independence. That is what America needs. It will take months, even years, to renew our economy, but every day that Washington fails to act, that recovery is delayed.
Now, we also know that no single act can meet the challenges of this moment. This process is just the beginning of a long journey back to progress and growth and prosperity. Given the scope of this crisis, we'll need all hands on deck to figure out how we are going to move forward. And I'm pleased to have an extraordinary team of folks in my administration -- Tim Geithner at Treasury, Larry Summers, Christina Romer, Peter Orszag -- they're all here in the White House. I also want to be sure that we're tapping a broad and diverse range of opinion from across the country, because a historic crisis demands a historic response. And that's why we took the unique step of creating the new institution whose members have gathered here today.
Put simply, I created this board to enlist voices to come from beyond the Washington echo chamber, to ensure that no stone is unturned as we work to put people back to work and get our economy moving.
Within this group, you've got leaders of manufacturing and leaders of finance. You've got labor and you've got management. You've got people who work in small businesses and people who work in large businesses. You've got some economists and some folks who think they're economists. (Laughter.) By the way, these days everybody thinks they're an economist. (Laughter.) We will meet regularly so that I can hear different ideas and sharpen my own, and seek counsel that is candid and informed by the wider world.
The board is headed by Paul Volcker -- not only because he's the tallest among us -- (laughter) -- but because, by any measure, he is one of the world's foremost experts on the economy; one of the most experienced and insightful economic minds that we have. He's advised me for many months. He has helped steer the American economy through many twists and turns. Probably prior to this one, the worst economic crisis we had back in the early '80s, it was Paul Volcker who helped restore confidence and pull us out of that extraordinarily difficult time.
So I'm glad that Paul has decided to continue his public service at this critical moment. Assisting Paul and the rest of the board will be Austan Goolsbee, who's been one of my closest economic advisors, one of the finest young economists that we have in the country. He's going to ensure that we are making the best possible use of this unique resource.
I'm not interested in groupthink, which is why the board reflects a broad cross-section of experience and expertise and ideology. We've recruited Republicans and Democrats, people who come out of the government as well as the private sector. Not everyone is going to agree with each other, and not all of them are going to agree with me -- and that's precisely the point, because we want to ensure that our policies have the benefit of independent thought and vigorous debate.
And we're also going to count on these men and women to serve as additional eyes and ears for me as we work to reverse this downturn. Many of them have ground-level views of the changes that are taking place, as they work across different sectors of the economy and different regions of the country, and they can help us see the trends that are not fully formed, the trouble that may be on the horizon, and the opportunities that have yet to be seized. I look forward to relying on their input and recommendations on specific questions as we jumpstart job creation and pursue strong and stable economic growth.
This new institution should send a signal of how seriously I take the responsibility of building an economic recovery that is broad and enduring. These are extraordinary times. For far too many Americans, the future is filled with unanswered questions: Can I get a job? Will my family be able to stay in their home? Will I be able to retire with dignity, and see my children lead a better life? And these are the questions that we will answer affirmatively during the course of this administration.
We are going to create the jobs that our people need and the future that this great nation deserves. Those are the challenges that I've put before my economic team, and these distinguished advisors will be tackling those same issues in the months and years to come.
So I'm grateful to them. And before I officially sign this executive order, I would like Paul just to say a quick word.
MR. VOLCKER: Well, thank you, Mr. President. I will say a very quick word. You've spoken about the variety of experience and talent you brought together. One thing I am sure they all share, we all share, is a sense of urgency, that you alluded to and emphasized. The figures this morning simply reenforce that. And I can't imagine that the Congress won't share this sense of urgency and you can get on the road toward the kind of program you want.
But thank you for the confidence that you've shown in all of us. We hope to help.
THE PRESIDENT: Thank you, Paul. All right, let me get over there.
(The executive order is signed.) (Applause.)
The President's Economic Recovery Advisory Board
Chairman Paul Volcker
Staff Director and Chief Economist Austan Goolsbee
Members
William H. Donaldson, Chairman, SEC (2003-2005)
Roger W. Ferguson, Jr., President & CEO, TIAA-CREF
Robert Wolf, Chairman & CEO, UBS Group Americas
David F. Swensen, CIO, Yale University
Mark T. Gallogly, Founder & Managing Partner, Centerbridge Partners L.P.
Penny Pritzker, Chairman & Founder, Pritzker Realty Group
Jeffrey R. Immelt, CEO, GE
John Doerr, Partner, Kleiner, Perkins, Caufield & Byers
Jim Owens, Chairman and CEO, Caterpillar Inc.
Monica C. Lozano, Publisher & Chief Executive Officer, La Opinion
Charles E. Phillips, Jr., President, Oracle Corporation
Anna Burger, Chair, Change to Win
Richard L. Trumka, Secretary-Treasurer, AFL-CIO
Laura D'Andrea Tyson, Dean, Haas School of Business at the University of California at Berkeley
Martin Feldstein, George F. Baker Professor of Economics, Harvard University
White House, Friday, February 6th, 2009 at 12:55 pm
We just learned the economy lost another 600,000 jobs last month. It's a staggering number, and it underscores just how deep this crisis is – and, as the President pointed out this morning, it’s accelerating.
That's why he created the Economic Recovery Advisory Board -- to solicit ideas from "beyond the echo chamber of Washington, DC."
"I’m not interested in groupthink, which is why the Board reflects a broad cross-section of experience, expertise, and ideology," he said. "We’ve recruited Republican and Democrats; veterans of government and the private sector; advocates for business and labor. Not everyone is going to agree with each other, and not all of them are going to agree with me – and that’s precisely the point. Because we want to ensure that our policies have the benefit of independent thought and vigorous debate."
Before the President signed the executive order officially creating the board, he addressed the jobs numbers and brought home the individual pains behind those almost incomprehensibly large numbers.
"Somewhere in America, a small business has shut its doors; a family has said goodbye to their home; a young parent has lost their livelihood, and doesn’t know what’s going to take its place," the President said.
Read the rest of his remarks below -- along with those of PERAB chairman Paul Volcker -- and the list of board members below that.
--------------------------------------------------------------------------------
REMARKS BY THE PRESIDENT ON THE ESTABLISHMENT OF THE ECONOMIC RECOVERY ADVISORY BOARD
East Room, The White House
February 6, 2009
THE PRESIDENT: Thank you. Thank you. Please have a seat. (Applause.) Good morning, everybody.
AUDIENCE: Good morning.
THE PRESIDENT: I have just had the opportunity to welcome the members of my Economic Recovery Advisory Board. And I'm grateful that I will have the counsel of these extraordinarily talented and experienced men and women in the challenging months to come.
If there's anyone, anywhere, who doubts the need for wise counsel and bold and immediate action, just consider the very troubling news we received just this morning. Last month, another 600,000 Americans lost their jobs. That is the single worst month of job loss in 35 years. The Department of Labor also adjusted their job loss numbers for 2008 upwards, and now report that we've lost 3.6 million jobs since this recession began.
That's 3.6 million Americans who wake up every day wondering how they are going to pay their bills, stay in their homes, and provide for their children. That's 3.6 million Americans who need our help.
I'm sure that at the other end of Pennsylvania Avenue, members of the Senate are reading these same numbers this morning. And I hope they share my sense of urgency and draw the same, unmistakable conclusion: The situation could not be more serious. These numbers demand action. It is inexcusable and irresponsible for any of us to get bogged down in distraction, delay, or politics as usual, while millions of Americans are being put out of work.
Now is the time for Congress to act. It's time to pass an Economic Recovery and Reinvestment Plan to get our economy moving.
This is not some abstract debate. It is an urgent and growing crisis that can only be fully understood through the unseen stories that lie underneath each and every one of those 600,000 jobs that were lost this month. Somewhere in America a small business has shut its doors; somewhere in America a family has said goodbye to their home; somewhere in America a young parent has lost their livelihood -- and they don't know what's going to take its place.
These Americans are counting on us, all of us in Washington. We have to remember that we're here to work for them. And if we drag our feet and fail to act, this crisis could turn into a catastrophe. We'll continue to get devastating job reports like today's -- month after month, year after year. It's very important to understand that, although we had a terrible year with respect to jobs last year, the problem is accelerating, not decelerating. It's getting worse, not getting better. Almost half of the jobs that were lost have been lost just in the last couple of months.
These aren't my assessments -- these are the assessments of independent economists. If we don't do anything, millions more jobs will be lost. More families will lose their homes. More Americans will go without health care. We'll continue to send our children to crumbling schools, and be crippled by our dependence on foreign oil. That's the result of inaction. And it's not acceptable to the American people.
They did not choose more of the same in November. They did not send us to Washington to get stuck in partisan posturing, to try to score political points. They did not send us here to turn back to the same tried and failed approaches that were rejected, because we saw the results. They sent us here to make change, with the expectation that we would act.
Now, I have repeatedly acknowledged that, given the magnitude and the difficulties of the problem we're facing, there are no silver bullets and there are no easy answers. The bill that's emerged from Congress is not perfect, but a bill is absolutely necessary. We can continue to improve and refine both the House and Senate versions of these bills. There may be provisions in there that need to be left out; there may be some provisions that need to be added. But broadly speaking, the package is the right size, it is the right scope, and it has the right priorities to create 3 to 4 million jobs and to do it in a way that lays the groundwork for long-term growth -- by fixing our schools, modernizing our health care to lower costs, repair our roads and bridges and levees and other vital infrastructure, move us towards energy independence. That is what America needs. It will take months, even years, to renew our economy, but every day that Washington fails to act, that recovery is delayed.
Now, we also know that no single act can meet the challenges of this moment. This process is just the beginning of a long journey back to progress and growth and prosperity. Given the scope of this crisis, we'll need all hands on deck to figure out how we are going to move forward. And I'm pleased to have an extraordinary team of folks in my administration -- Tim Geithner at Treasury, Larry Summers, Christina Romer, Peter Orszag -- they're all here in the White House. I also want to be sure that we're tapping a broad and diverse range of opinion from across the country, because a historic crisis demands a historic response. And that's why we took the unique step of creating the new institution whose members have gathered here today.
Put simply, I created this board to enlist voices to come from beyond the Washington echo chamber, to ensure that no stone is unturned as we work to put people back to work and get our economy moving.
Within this group, you've got leaders of manufacturing and leaders of finance. You've got labor and you've got management. You've got people who work in small businesses and people who work in large businesses. You've got some economists and some folks who think they're economists. (Laughter.) By the way, these days everybody thinks they're an economist. (Laughter.) We will meet regularly so that I can hear different ideas and sharpen my own, and seek counsel that is candid and informed by the wider world.
The board is headed by Paul Volcker -- not only because he's the tallest among us -- (laughter) -- but because, by any measure, he is one of the world's foremost experts on the economy; one of the most experienced and insightful economic minds that we have. He's advised me for many months. He has helped steer the American economy through many twists and turns. Probably prior to this one, the worst economic crisis we had back in the early '80s, it was Paul Volcker who helped restore confidence and pull us out of that extraordinarily difficult time.
So I'm glad that Paul has decided to continue his public service at this critical moment. Assisting Paul and the rest of the board will be Austan Goolsbee, who's been one of my closest economic advisors, one of the finest young economists that we have in the country. He's going to ensure that we are making the best possible use of this unique resource.
I'm not interested in groupthink, which is why the board reflects a broad cross-section of experience and expertise and ideology. We've recruited Republicans and Democrats, people who come out of the government as well as the private sector. Not everyone is going to agree with each other, and not all of them are going to agree with me -- and that's precisely the point, because we want to ensure that our policies have the benefit of independent thought and vigorous debate.
And we're also going to count on these men and women to serve as additional eyes and ears for me as we work to reverse this downturn. Many of them have ground-level views of the changes that are taking place, as they work across different sectors of the economy and different regions of the country, and they can help us see the trends that are not fully formed, the trouble that may be on the horizon, and the opportunities that have yet to be seized. I look forward to relying on their input and recommendations on specific questions as we jumpstart job creation and pursue strong and stable economic growth.
This new institution should send a signal of how seriously I take the responsibility of building an economic recovery that is broad and enduring. These are extraordinary times. For far too many Americans, the future is filled with unanswered questions: Can I get a job? Will my family be able to stay in their home? Will I be able to retire with dignity, and see my children lead a better life? And these are the questions that we will answer affirmatively during the course of this administration.
We are going to create the jobs that our people need and the future that this great nation deserves. Those are the challenges that I've put before my economic team, and these distinguished advisors will be tackling those same issues in the months and years to come.
So I'm grateful to them. And before I officially sign this executive order, I would like Paul just to say a quick word.
MR. VOLCKER: Well, thank you, Mr. President. I will say a very quick word. You've spoken about the variety of experience and talent you brought together. One thing I am sure they all share, we all share, is a sense of urgency, that you alluded to and emphasized. The figures this morning simply reenforce that. And I can't imagine that the Congress won't share this sense of urgency and you can get on the road toward the kind of program you want.
But thank you for the confidence that you've shown in all of us. We hope to help.
THE PRESIDENT: Thank you, Paul. All right, let me get over there.
(The executive order is signed.) (Applause.)
The President's Economic Recovery Advisory Board
Chairman Paul Volcker
Staff Director and Chief Economist Austan Goolsbee
Members
William H. Donaldson, Chairman, SEC (2003-2005)
Roger W. Ferguson, Jr., President & CEO, TIAA-CREF
Robert Wolf, Chairman & CEO, UBS Group Americas
David F. Swensen, CIO, Yale University
Mark T. Gallogly, Founder & Managing Partner, Centerbridge Partners L.P.
Penny Pritzker, Chairman & Founder, Pritzker Realty Group
Jeffrey R. Immelt, CEO, GE
John Doerr, Partner, Kleiner, Perkins, Caufield & Byers
Jim Owens, Chairman and CEO, Caterpillar Inc.
Monica C. Lozano, Publisher & Chief Executive Officer, La Opinion
Charles E. Phillips, Jr., President, Oracle Corporation
Anna Burger, Chair, Change to Win
Richard L. Trumka, Secretary-Treasurer, AFL-CIO
Laura D'Andrea Tyson, Dean, Haas School of Business at the University of California at Berkeley
Martin Feldstein, George F. Baker Professor of Economics, Harvard University
What Michael Phelps Should Have Said
What Michael Phelps Should Have Said, by Radley Balko
Smoking pot shouldn't be a crime. Or the public's business.
Reason, February 2, 2009
Dear America,
I take it back. I don’t apologize.
Because you know what? It’s none of your goddamned business. I work my ass off 10 months a year. It’s that hard work that gave you all those gooey feelings of patriotism last summer. If during my brief window of down time I want to relax, enjoy myself, and partake of a substance that’s a hell of a lot less bad for me than alcohol, tobacco, or, frankly, most of the prescription drugs most of you are taking, well, you can spare me the lecture.
I put myself through hell. I make my body do things nature never really intended us to endure. All world-class athletes do. We do it because you love to watch us push ourselves as far as we can possibly go. Some of us get hurt. Sometimes permanently. You’re watching the Super Bowl tonight. You’re watching 300 pound men smash each while running at full speed, in full pads. You know what the average life expectancy of an NFL player is? Fifty-five. That’s about 20 years shorter than your average non-NFL player. Yet you watch. And cheer. And you jump up spill your beer when a linebacker lays out a wide receiver on a crossing route across the middle. The harder he gets hit, the louder and more enthusiastically you scream.
Yet you all get bent out of shape when Ricky Williams, or I, or Josh Howard smoke a little dope to relax. Why? Because the idiots you’ve elected to make your laws have, without a shred of evidence, beat it into your head that smoking marijuana is something akin to drinking antifreeze, and done only by dirty hippies and sex offenders.
You’ll have to pardon my cynicism. But I call bullshit. You don’t give a damn about my health. You just get a voyeuristic thrill from watching an elite athlete fall from grace–all the better if you get to exercise a little moral righteousness in the process. And it’s hypocritical righteousness at that, given that 40 percent of you have tried pot at least once in your lives.
Here’s a crazy thought: If I can smoke a little dope and go on to win 14 Olympic gold medals, maybe pot smokers aren’t doomed to lives of couch surfing and video games, as our moronic government would have us believe. In fact, the list of successful pot smokers includes not just world class athletes like me, Howard, Williams, and others, it includes Nobel Prize winners, Pulitzer Prize winners, the last three U.S. presidents, several Supreme Court justices, and luminaries and success stories from all sectors of business and the arts, sciences, and humanities.
So go ahead. Ban me from the next Olympics. Yank my endorsement deals. Stick your collective noses in the air and get all indignant on me. While you’re at it, keep arresting cancer and AIDS patients who dare to smoke the stuff because it deadens their pain, or enables them to eat. Keep sending in goon squads to kick down doors and shoot little old ladies, maim innocent toddlers, handcuff elderly post-polio patients to their beds at gunpoint, and slaughter the family pet.
Tell you what. I’ll make you a deal. I’ll apologize for smoking pot when every politician who ever did drugs and then voted to uphold or strengthen the drug laws marches his ass off to the nearest federal prison to serve out the sentence he wants to impose on everyone else for committing the same crimes he committed. I’ll apologize when the sons, daughters, and nephews of powerful politicians who get caught possessing or dealing drugs in the frat house or prep school get the same treatment as the no-name, probably black kid caught on the corner or the front stoop doing the same thing.
Until then, I for one will have none of it. I smoked pot. I liked it. I’ll probably do it again. I refuse to apologize for it, because by apologizing I help perpetuate this stupid lie, this idea that what someone puts into his own body on his own time is any of the government’s damned business. Or any of yours. I’m not going to bend over and allow myself to be propaganda for this wasteful, ridiculous, immoral war.
Go ahead and tear me down if you like. But let’s see you rationalize in your next lame ONDCP commercial how the greatest motherfucking swimmer the world has ever seen...is also a proud pot smoker.
Yours,
Michael Phelps
Smoking pot shouldn't be a crime. Or the public's business.
Reason, February 2, 2009
Dear America,
I take it back. I don’t apologize.
Because you know what? It’s none of your goddamned business. I work my ass off 10 months a year. It’s that hard work that gave you all those gooey feelings of patriotism last summer. If during my brief window of down time I want to relax, enjoy myself, and partake of a substance that’s a hell of a lot less bad for me than alcohol, tobacco, or, frankly, most of the prescription drugs most of you are taking, well, you can spare me the lecture.
I put myself through hell. I make my body do things nature never really intended us to endure. All world-class athletes do. We do it because you love to watch us push ourselves as far as we can possibly go. Some of us get hurt. Sometimes permanently. You’re watching the Super Bowl tonight. You’re watching 300 pound men smash each while running at full speed, in full pads. You know what the average life expectancy of an NFL player is? Fifty-five. That’s about 20 years shorter than your average non-NFL player. Yet you watch. And cheer. And you jump up spill your beer when a linebacker lays out a wide receiver on a crossing route across the middle. The harder he gets hit, the louder and more enthusiastically you scream.
Yet you all get bent out of shape when Ricky Williams, or I, or Josh Howard smoke a little dope to relax. Why? Because the idiots you’ve elected to make your laws have, without a shred of evidence, beat it into your head that smoking marijuana is something akin to drinking antifreeze, and done only by dirty hippies and sex offenders.
You’ll have to pardon my cynicism. But I call bullshit. You don’t give a damn about my health. You just get a voyeuristic thrill from watching an elite athlete fall from grace–all the better if you get to exercise a little moral righteousness in the process. And it’s hypocritical righteousness at that, given that 40 percent of you have tried pot at least once in your lives.
Here’s a crazy thought: If I can smoke a little dope and go on to win 14 Olympic gold medals, maybe pot smokers aren’t doomed to lives of couch surfing and video games, as our moronic government would have us believe. In fact, the list of successful pot smokers includes not just world class athletes like me, Howard, Williams, and others, it includes Nobel Prize winners, Pulitzer Prize winners, the last three U.S. presidents, several Supreme Court justices, and luminaries and success stories from all sectors of business and the arts, sciences, and humanities.
So go ahead. Ban me from the next Olympics. Yank my endorsement deals. Stick your collective noses in the air and get all indignant on me. While you’re at it, keep arresting cancer and AIDS patients who dare to smoke the stuff because it deadens their pain, or enables them to eat. Keep sending in goon squads to kick down doors and shoot little old ladies, maim innocent toddlers, handcuff elderly post-polio patients to their beds at gunpoint, and slaughter the family pet.
Tell you what. I’ll make you a deal. I’ll apologize for smoking pot when every politician who ever did drugs and then voted to uphold or strengthen the drug laws marches his ass off to the nearest federal prison to serve out the sentence he wants to impose on everyone else for committing the same crimes he committed. I’ll apologize when the sons, daughters, and nephews of powerful politicians who get caught possessing or dealing drugs in the frat house or prep school get the same treatment as the no-name, probably black kid caught on the corner or the front stoop doing the same thing.
Until then, I for one will have none of it. I smoked pot. I liked it. I’ll probably do it again. I refuse to apologize for it, because by apologizing I help perpetuate this stupid lie, this idea that what someone puts into his own body on his own time is any of the government’s damned business. Or any of yours. I’m not going to bend over and allow myself to be propaganda for this wasteful, ridiculous, immoral war.
Go ahead and tear me down if you like. But let’s see you rationalize in your next lame ONDCP commercial how the greatest motherfucking swimmer the world has ever seen...is also a proud pot smoker.
Yours,
Michael Phelps
Survey of Life Scientists' Views on 'Dual Use' Research and Bioterrorism
Survey Samples Life Scientists' Views on 'Dual Use' Research and Bioterrorism; Some Respondents Already Taking Action to Avert Misuse of Research
National Academies, Feb 05, 2009
WASHINGTON -- Rapid advances in the biological sciences over the last several decades have yielded great benefits such as medical therapies and vaccines. But some of these same scientific advances could also be used for malicious purposes, a threat that has become more salient to the science and policy communities since the terrorist attacks of 2001.
The National Research Council and the American Association for the Advancement of Science (AAAS) surveyed a sample of AAAS members in the life sciences to assess their awareness of and attitudes toward such "dual-use" research – studies undertaken for beneficial purposes that could also have harmful applications such as bioterrorism. The survey also explored actions the scientists might support to reduce the risk of misuse of research, as well as steps that scientists may already be taking in response to these concerns. The results of the survey, conducted in 2007, are summarized in a new report from the Research Council, which includes recommendations for next steps.
The survey yielded some of the first empirical data on U.S. life scientists' views about biosecurity and the potential misuse of legitimate scientific research. The survey results offer insights and generate hypotheses that can be tested in future efforts, said the committee that wrote the report. However, a low response rate and uncertainties about whether the sample reflects the broader life sciences community limit the ability to generalize from the responses about the full U.S. life sciences community. Nevertheless, even with this limitation, the survey results are useful and informative, noted the committee.
The results suggest that survey respondents perceive a potential but not overwhelming risk of a bioterror attack in the next five years, a risk they believe is greater outside the U.S. Most respondents do not believe it is likely that dual-use knowledge, tools, or techniques will facilitate a bioterror attack in that time period.
Survey results also indicate that some respondents -- more than the committee had expected -- have been so concerned about dual-use issues that they have already taken action to try to avert misuse of research in the life sciences, even in the absence of guidelines or government restrictions. Some respondents reported that they had broken collaborations, not conducted some research projects, or not communicated research results.
Many of respondents' precautionary actions were taken during design, collaboration, and initial communication stages of research, before reaching the publication stage, the report notes. Of particular interest and concern to the committee, a few respondents offered comments about foreigners as potential security risks, which may be reflected in the reported avoidance of some collaborations.
"The fact that some scientists are changing their research activities may indicate that the life sciences community is responsibly responding to reduce the risk of misuse of science," said committee chair Ronald Atlas, professor of biology and public health at the University of Louisville. "But it is also possible that some scientists are overreacting to the perceived threat, for example by breaking collaborations and excluding foreigners from their laboratories. Our committee feels that it's important to further investigate how research activity is being changed in response to dual-use concerns."
With regard to future actions that the life sciences community would support to reduce the threat of misuse of research, the survey results indicate that life scientists in the U.S. may be more willing to consider mechanisms to reduce risks if they are developed and implemented by the scientific community itself. Most respondents favor their professional societies prescribing a code of conduct to help prevent misuse of life science research, for example, while a minority supported greater federal oversight. Among possible government restrictions, respondents were more supportive of restrictions on access to biological agents and certification of researchers than of any control of scientific knowledge generated from the research.
In addition, respondents showed support for mandatory training by institutions for practicing life scientists regarding dual-use concerns, as well as education materials and lectures for students.
The survey results also highlight the need to better define the scope of research that is of concern, the report notes. Fewer than half the respondents who reported carrying out dual-use research activities felt that their work falls into one of the seven categories of research of concern identified by the National Science Advisory Board for Biosecurity, which was created in 2004 to advise federal agencies about dual-use research.
Based on the survey results, the committee urged further exploration of ways to provide guidance to the life sciences community about appropriate actions that could protect against misuse of dual-use research. The committee also recommended further research to examine the effectiveness of educational programs on these topics and find ways to enhance them.
In addition, the report recommends surveys and interviews that can reach additional life scientists or begin to probe more deeply into life scientists' attitudes. And surveys of scientists outside the U.S. would increase knowledge and help facilitate international discussions of potential measures to address concerns about dual-use research.
The report was sponsored by the Carnegie Corporation of New York, the Alfred P. Sloan Foundation, and the National Academies' Presidents' Circle Communications Initiative.
National Academies, Feb 05, 2009
WASHINGTON -- Rapid advances in the biological sciences over the last several decades have yielded great benefits such as medical therapies and vaccines. But some of these same scientific advances could also be used for malicious purposes, a threat that has become more salient to the science and policy communities since the terrorist attacks of 2001.
The National Research Council and the American Association for the Advancement of Science (AAAS) surveyed a sample of AAAS members in the life sciences to assess their awareness of and attitudes toward such "dual-use" research – studies undertaken for beneficial purposes that could also have harmful applications such as bioterrorism. The survey also explored actions the scientists might support to reduce the risk of misuse of research, as well as steps that scientists may already be taking in response to these concerns. The results of the survey, conducted in 2007, are summarized in a new report from the Research Council, which includes recommendations for next steps.
The survey yielded some of the first empirical data on U.S. life scientists' views about biosecurity and the potential misuse of legitimate scientific research. The survey results offer insights and generate hypotheses that can be tested in future efforts, said the committee that wrote the report. However, a low response rate and uncertainties about whether the sample reflects the broader life sciences community limit the ability to generalize from the responses about the full U.S. life sciences community. Nevertheless, even with this limitation, the survey results are useful and informative, noted the committee.
The results suggest that survey respondents perceive a potential but not overwhelming risk of a bioterror attack in the next five years, a risk they believe is greater outside the U.S. Most respondents do not believe it is likely that dual-use knowledge, tools, or techniques will facilitate a bioterror attack in that time period.
Survey results also indicate that some respondents -- more than the committee had expected -- have been so concerned about dual-use issues that they have already taken action to try to avert misuse of research in the life sciences, even in the absence of guidelines or government restrictions. Some respondents reported that they had broken collaborations, not conducted some research projects, or not communicated research results.
Many of respondents' precautionary actions were taken during design, collaboration, and initial communication stages of research, before reaching the publication stage, the report notes. Of particular interest and concern to the committee, a few respondents offered comments about foreigners as potential security risks, which may be reflected in the reported avoidance of some collaborations.
"The fact that some scientists are changing their research activities may indicate that the life sciences community is responsibly responding to reduce the risk of misuse of science," said committee chair Ronald Atlas, professor of biology and public health at the University of Louisville. "But it is also possible that some scientists are overreacting to the perceived threat, for example by breaking collaborations and excluding foreigners from their laboratories. Our committee feels that it's important to further investigate how research activity is being changed in response to dual-use concerns."
With regard to future actions that the life sciences community would support to reduce the threat of misuse of research, the survey results indicate that life scientists in the U.S. may be more willing to consider mechanisms to reduce risks if they are developed and implemented by the scientific community itself. Most respondents favor their professional societies prescribing a code of conduct to help prevent misuse of life science research, for example, while a minority supported greater federal oversight. Among possible government restrictions, respondents were more supportive of restrictions on access to biological agents and certification of researchers than of any control of scientific knowledge generated from the research.
In addition, respondents showed support for mandatory training by institutions for practicing life scientists regarding dual-use concerns, as well as education materials and lectures for students.
The survey results also highlight the need to better define the scope of research that is of concern, the report notes. Fewer than half the respondents who reported carrying out dual-use research activities felt that their work falls into one of the seven categories of research of concern identified by the National Science Advisory Board for Biosecurity, which was created in 2004 to advise federal agencies about dual-use research.
Based on the survey results, the committee urged further exploration of ways to provide guidance to the life sciences community about appropriate actions that could protect against misuse of dual-use research. The committee also recommended further research to examine the effectiveness of educational programs on these topics and find ways to enhance them.
In addition, the report recommends surveys and interviews that can reach additional life scientists or begin to probe more deeply into life scientists' attitudes. And surveys of scientists outside the U.S. would increase knowledge and help facilitate international discussions of potential measures to address concerns about dual-use research.
The report was sponsored by the Carnegie Corporation of New York, the Alfred P. Sloan Foundation, and the National Academies' Presidents' Circle Communications Initiative.
When Is a Lobbyist Not a Lobbyist?
When Is a Lobbyist Not a Lobbyist? By Andrew C. McCarthy
When he’s up for a job in the Obama administration.
NRO, February 06, 2009, 4:00 a.m.
In Chicago, Barack Obama’s M.O. was to talk the talk of a reformer and walk the walk of an old-school machine politician. When he got called on it, he did what machine politicians do: He waxed eloquent about his commitment to transparency even as he stonewalled, obfuscated, and lied.
That is how convicted fraudster Tony Rezko was transformed, before our very eyes, from a guy Obama barely knew to a contributor who may have helped Obama’s political campaigns, then to a bundler who’d actually raised more than $250,000 (some five times the amount claimed in Obama’s initial admission), to a developer who won contracts with Obama’s assistance, to a fixer who helped Obama buy a pricey home the future president couldn’t afford on his own—an ethical lapse Obama finally had to acknowledge was “boneheaded.”
Obama began his administration promising the toughest ethical standards ever imposed by any White House—and, on his first day, issued an executive order restricting the familiar practice of filling government jobs with lobbyists that have private interests in how policy is shaped. The president’s directive is self-consciously reflective of candidate Obama’s scathing condemnation of traditional Washington-style insider-dealing.
Obama would have us believe the order closes the “revolving door” between government and lobbying, whereby the politically connected achieve progressively more influential and lucrative positions by moving frequently between the public and private sectors. In fact, that door remains wide open. Transparency being the order of the day, President Obama’s order is transparently designed to make voters believe he’s going to put the brakes on the gravy train. And to do so he’s dispatching his two top lawyers: tasking the White House counsel and the attorney general with the interpretation and enforcement of the new, stringent guidelines. If you’re keeping score at home, those would be Gregory Craig and Eric Holder, each of whom has been deeply enmeshed in unsavory influence-peddling.
As National Review’s Byron York has reported, Craig has an extensive history of representing leftist regimes hostile to the United States, which led him to lobby the Justice Department on behalf of one Pedro Miguel González, an alleged terrorist. Since 1992, González has been evading an indictment for murdering a U.S. army sergeant in Panama City. When pressed about his client during the campaign, Craig—a lawyerly lawyer if ever there was—explained that he hadn’t really “undertaken to represent” González in legal “proceedings.” You wouldn’t even really call it lobbying. Instead, Craig explained, he had merely sought “to open up a path of communications” between the fugitive and the Justice Department.
Which is to say, the principal interpreter and enforcer of Obama’s celebrated lobbying rules does not believe that a lawyer’s arranging negotiations between an international fugitive and the federal government constitutes “representing” that fugitive or acting as his agent. Just call him a Good Samaritan. The Obama administration’s response to questions about González has been that familiar rallying cry of openness and transparency: “No comment.”
No discussion of lobbying on behalf of international fugitives should get very far without turning to the case of Eric Holder. Beginning in 1999, when he was deputy attorney general, Holder allowed himself to be lobbied on behalf of Marc Rich (at that time, one of the FBI’s most wanted fugitives) by an influential Democratic lawyer, Jack Quinn. Until 1997, Quinn had been the Clinton White House counsel, i.e., Clinton’s Greg Craig. He then left for private practice and, by late 1999, had started his own lobbying firm.
Lobbying Holder put Quinn in violation of President Clinton’s own good-government executive order. Like Obama’s order, Clinton’s was announced with great fanfare on the first day of his presidency. It was duly lauded by the press—especially for the five-year lobbying ban it purported to impose on former administration officials. But in Quinn’s view, that ban didn’t apply to him because—try to follow this—he was not so much lobbying an administration official as he was representing a client in a “judicial proceeding.” This was transparently specious: The Justice Department is not a court and a pardon is not a judicial proceeding—to the contrary, a pardon is an executive exercise designed to undo judicial proceedings. But the hocus-pocus reasoning was good enough for Quinn, and that meant it was plenty good enough for Holder, who helped get Rich his pardon.
So Obama’s guidelines will be interpreted and enforced by these two guys. This should prove fruitful for the many lawyers who inevitably drift from the new administration back into more lucrative endeavors: If they’d prefer their legal representation to be low-balled as something less than lobbying, they can go to the White House counsel; if they’d rather dress up their lobbying as legal representation, the attorney general is their man.
Not every lobbyist is a lawyer—though some non-lawyers, such as Tom Daschle, manage to get themselves paid more than a million dollars a year by top law firms. For what? Certainly not for lobbying. At the well-connected firm of Alston and Bird, known in Washington parlance as a “lobbying firm” because it represents lots of lobbyists, Daschle was retained as a “special policy adviser.”
But if you are paid by the legal agents of lobbyists to instruct lobbyists in lobbying, aren’t you, in fact, a lobbyist? Especially considering the fact that the top asset you bring to the table is your Rolodex? Obama thinks not, since Daschle never legally registered as a lobbyist.
“If you’re not registered to lobby, you can’t be a lobbyist.” Thus decreed Obama White House press secretary Robert Gibbs, a man who is starting to make Scott McClellan sound like Elmer Gantry (a fictional character who, unlike most Obama administration figures, only seems to have worked in the Clinton administration). Gibbs’s kindly diagnosis of Daschle brings us to the fine print of the executive order. To “lobby,” the president says, “shall mean to act or have acted as a registered lobbyist.” Presto: no registration, no lobbyist; no lobbyist, no problem—unless you don’t pay your taxes on the millions you’ve earned not lobbying.
But now that we’ve narrowed it down to registered lobbyists, does that mean that we’ve discovered one category of Washington insiders that is, in fact, banned by the ethical standards Gibbs describes as the “strongest that any administration in the history of our country has had”? Not exactly. The order provides that these very stringent rules can be ignored whenever the scrupulous interpreting authorities decide it is in the public interest. Don’t be alarmed: The administration says waivers will only be approved for extraordinarily qualified officials.
Have you ever heard of an administration that did not portray its appointees as extraordinarily qualified? Already we have the extraordinarily qualified William J. Lynn III, the nominee for deputy defense secretary, who got a waiver despite being, up until recently, a lobbyist for the military contractor Raytheon. William Corr will serve as the No. 2 official at the Department of Health and Human Services regardless of the last year he spent as a lobbyist. And then there’s Mark Patterson. He’s now chief of staff to Timothy Geithner, this ethics-obsessed administration’s tax-cheating Treasury secretary, even though Patterson used to be a lobbyist for Goldman Sachs—the outfit that could have patented the revolving door even before scoring $10 billion in TARP money.
Obama says he’s come to Washington to bring change. So far, he’s changing it into Chicago.
National Review’s Andrew C. McCarthy is the author of Willful Blindness: A Memoir of the Jihad (Encounter Books, 2008).
When he’s up for a job in the Obama administration.
NRO, February 06, 2009, 4:00 a.m.
In Chicago, Barack Obama’s M.O. was to talk the talk of a reformer and walk the walk of an old-school machine politician. When he got called on it, he did what machine politicians do: He waxed eloquent about his commitment to transparency even as he stonewalled, obfuscated, and lied.
That is how convicted fraudster Tony Rezko was transformed, before our very eyes, from a guy Obama barely knew to a contributor who may have helped Obama’s political campaigns, then to a bundler who’d actually raised more than $250,000 (some five times the amount claimed in Obama’s initial admission), to a developer who won contracts with Obama’s assistance, to a fixer who helped Obama buy a pricey home the future president couldn’t afford on his own—an ethical lapse Obama finally had to acknowledge was “boneheaded.”
Obama began his administration promising the toughest ethical standards ever imposed by any White House—and, on his first day, issued an executive order restricting the familiar practice of filling government jobs with lobbyists that have private interests in how policy is shaped. The president’s directive is self-consciously reflective of candidate Obama’s scathing condemnation of traditional Washington-style insider-dealing.
Obama would have us believe the order closes the “revolving door” between government and lobbying, whereby the politically connected achieve progressively more influential and lucrative positions by moving frequently between the public and private sectors. In fact, that door remains wide open. Transparency being the order of the day, President Obama’s order is transparently designed to make voters believe he’s going to put the brakes on the gravy train. And to do so he’s dispatching his two top lawyers: tasking the White House counsel and the attorney general with the interpretation and enforcement of the new, stringent guidelines. If you’re keeping score at home, those would be Gregory Craig and Eric Holder, each of whom has been deeply enmeshed in unsavory influence-peddling.
As National Review’s Byron York has reported, Craig has an extensive history of representing leftist regimes hostile to the United States, which led him to lobby the Justice Department on behalf of one Pedro Miguel González, an alleged terrorist. Since 1992, González has been evading an indictment for murdering a U.S. army sergeant in Panama City. When pressed about his client during the campaign, Craig—a lawyerly lawyer if ever there was—explained that he hadn’t really “undertaken to represent” González in legal “proceedings.” You wouldn’t even really call it lobbying. Instead, Craig explained, he had merely sought “to open up a path of communications” between the fugitive and the Justice Department.
Which is to say, the principal interpreter and enforcer of Obama’s celebrated lobbying rules does not believe that a lawyer’s arranging negotiations between an international fugitive and the federal government constitutes “representing” that fugitive or acting as his agent. Just call him a Good Samaritan. The Obama administration’s response to questions about González has been that familiar rallying cry of openness and transparency: “No comment.”
No discussion of lobbying on behalf of international fugitives should get very far without turning to the case of Eric Holder. Beginning in 1999, when he was deputy attorney general, Holder allowed himself to be lobbied on behalf of Marc Rich (at that time, one of the FBI’s most wanted fugitives) by an influential Democratic lawyer, Jack Quinn. Until 1997, Quinn had been the Clinton White House counsel, i.e., Clinton’s Greg Craig. He then left for private practice and, by late 1999, had started his own lobbying firm.
Lobbying Holder put Quinn in violation of President Clinton’s own good-government executive order. Like Obama’s order, Clinton’s was announced with great fanfare on the first day of his presidency. It was duly lauded by the press—especially for the five-year lobbying ban it purported to impose on former administration officials. But in Quinn’s view, that ban didn’t apply to him because—try to follow this—he was not so much lobbying an administration official as he was representing a client in a “judicial proceeding.” This was transparently specious: The Justice Department is not a court and a pardon is not a judicial proceeding—to the contrary, a pardon is an executive exercise designed to undo judicial proceedings. But the hocus-pocus reasoning was good enough for Quinn, and that meant it was plenty good enough for Holder, who helped get Rich his pardon.
So Obama’s guidelines will be interpreted and enforced by these two guys. This should prove fruitful for the many lawyers who inevitably drift from the new administration back into more lucrative endeavors: If they’d prefer their legal representation to be low-balled as something less than lobbying, they can go to the White House counsel; if they’d rather dress up their lobbying as legal representation, the attorney general is their man.
Not every lobbyist is a lawyer—though some non-lawyers, such as Tom Daschle, manage to get themselves paid more than a million dollars a year by top law firms. For what? Certainly not for lobbying. At the well-connected firm of Alston and Bird, known in Washington parlance as a “lobbying firm” because it represents lots of lobbyists, Daschle was retained as a “special policy adviser.”
But if you are paid by the legal agents of lobbyists to instruct lobbyists in lobbying, aren’t you, in fact, a lobbyist? Especially considering the fact that the top asset you bring to the table is your Rolodex? Obama thinks not, since Daschle never legally registered as a lobbyist.
“If you’re not registered to lobby, you can’t be a lobbyist.” Thus decreed Obama White House press secretary Robert Gibbs, a man who is starting to make Scott McClellan sound like Elmer Gantry (a fictional character who, unlike most Obama administration figures, only seems to have worked in the Clinton administration). Gibbs’s kindly diagnosis of Daschle brings us to the fine print of the executive order. To “lobby,” the president says, “shall mean to act or have acted as a registered lobbyist.” Presto: no registration, no lobbyist; no lobbyist, no problem—unless you don’t pay your taxes on the millions you’ve earned not lobbying.
But now that we’ve narrowed it down to registered lobbyists, does that mean that we’ve discovered one category of Washington insiders that is, in fact, banned by the ethical standards Gibbs describes as the “strongest that any administration in the history of our country has had”? Not exactly. The order provides that these very stringent rules can be ignored whenever the scrupulous interpreting authorities decide it is in the public interest. Don’t be alarmed: The administration says waivers will only be approved for extraordinarily qualified officials.
Have you ever heard of an administration that did not portray its appointees as extraordinarily qualified? Already we have the extraordinarily qualified William J. Lynn III, the nominee for deputy defense secretary, who got a waiver despite being, up until recently, a lobbyist for the military contractor Raytheon. William Corr will serve as the No. 2 official at the Department of Health and Human Services regardless of the last year he spent as a lobbyist. And then there’s Mark Patterson. He’s now chief of staff to Timothy Geithner, this ethics-obsessed administration’s tax-cheating Treasury secretary, even though Patterson used to be a lobbyist for Goldman Sachs—the outfit that could have patented the revolving door even before scoring $10 billion in TARP money.
Obama says he’s come to Washington to bring change. So far, he’s changing it into Chicago.
National Review’s Andrew C. McCarthy is the author of Willful Blindness: A Memoir of the Jihad (Encounter Books, 2008).
Andrew Napolitano's Imaginary Constitution
Andrew Napolitano's Imaginary Constitution, by Matthew J. Franck
Bench Memos/NRO, Friday, February 06, 2009
Today's Wall Street Journal features an exchange on whether the government should cap executive compensation in companies receiving federal assistance. Harvard law professor Lucian Bebchuk is for 'em—he thinks, indeed, that they should be more stringent than the administration proposes—and former New Jersey judge Andrew Napolitano is agin 'em. Napolitano would have the better argument if he would stick to what's really wrong with compensation caps—that they're economically counterproductive, politically unwise, and morally objectionable as a species of envy-driven vindictiveness.
But Napolitano can't leave well enough alone. He adds the argument that compensation caps are unconstitutional. Why? "[B]ecause freedom of contract is protected by the Constitution." Oh, really? Where? For about 40 years, from the 1890s to the 1930s, the Court protected (inconsistently, to be sure) something it called "freedom of contract," but it was based on an illegitimate reading of the due process clauses that was cut from the same "substantive due process" cloth that gave us the protection of slavery in the Dred Scott case and of abortion in Roe v. Wade. You don't have to be a fan of the New Deal to recognize how right the Supreme Court got this one when it gave up on this line of reasoning in 1937, with Chief Justice Hughes saying, "What is this freedom? The Constitution does not speak of freedom of contract."
Napolitano doesn't even attempt to defend his remark about "freedom of contract," but instead moves immediately to saying that compensation caps "also constitute a taking" prohibited by the Fifth Amendment. It has been a hardy perennial in the imaginary constitutional garden of the libertarians to say that all manner of taxes and regulations are "takings" without "just compensation" ever since Richard Epstein of the University of Chicago published his book Takings in the 1980s. But this reading of the Constitution is as insupportable as "freedom of contract" under "substantive" due process, and invites rampant judicial activism—only substituting conservative activism for the liberal variety. All sorts of government regulations of the economy favor some behaviors over others, impinge on people's earning power, and thus in some extremely remote sense "take" resources people would otherwise acquire or keep. The Epstein-Napolitano version of the Constitution would sweep like a scythe through good regulations and bad ones, blatant ones and subtler ones, and without any basis in the original understanding of the document.
The idea of executive compensation caps is a very bad one on all sorts of policy grounds. It is also unjust. But injustice and unconstitutionality are not the same thing, try as Napolitano may to equate them.
Bench Memos/NRO, Friday, February 06, 2009
Today's Wall Street Journal features an exchange on whether the government should cap executive compensation in companies receiving federal assistance. Harvard law professor Lucian Bebchuk is for 'em—he thinks, indeed, that they should be more stringent than the administration proposes—and former New Jersey judge Andrew Napolitano is agin 'em. Napolitano would have the better argument if he would stick to what's really wrong with compensation caps—that they're economically counterproductive, politically unwise, and morally objectionable as a species of envy-driven vindictiveness.
But Napolitano can't leave well enough alone. He adds the argument that compensation caps are unconstitutional. Why? "[B]ecause freedom of contract is protected by the Constitution." Oh, really? Where? For about 40 years, from the 1890s to the 1930s, the Court protected (inconsistently, to be sure) something it called "freedom of contract," but it was based on an illegitimate reading of the due process clauses that was cut from the same "substantive due process" cloth that gave us the protection of slavery in the Dred Scott case and of abortion in Roe v. Wade. You don't have to be a fan of the New Deal to recognize how right the Supreme Court got this one when it gave up on this line of reasoning in 1937, with Chief Justice Hughes saying, "What is this freedom? The Constitution does not speak of freedom of contract."
Napolitano doesn't even attempt to defend his remark about "freedom of contract," but instead moves immediately to saying that compensation caps "also constitute a taking" prohibited by the Fifth Amendment. It has been a hardy perennial in the imaginary constitutional garden of the libertarians to say that all manner of taxes and regulations are "takings" without "just compensation" ever since Richard Epstein of the University of Chicago published his book Takings in the 1980s. But this reading of the Constitution is as insupportable as "freedom of contract" under "substantive" due process, and invites rampant judicial activism—only substituting conservative activism for the liberal variety. All sorts of government regulations of the economy favor some behaviors over others, impinge on people's earning power, and thus in some extremely remote sense "take" resources people would otherwise acquire or keep. The Epstein-Napolitano version of the Constitution would sweep like a scythe through good regulations and bad ones, blatant ones and subtler ones, and without any basis in the original understanding of the document.
The idea of executive compensation caps is a very bad one on all sorts of policy grounds. It is also unjust. But injustice and unconstitutionality are not the same thing, try as Napolitano may to equate them.
The Fierce Urgency of Pork
The Fierce Urgency of Pork. By Charles Krauthammer
WaPo, Friday, February 6, 2009; A17
"A failure to act, and act now, will turn crisis into a catastrophe." -- President Obama, Feb. 4.
Catastrophe, mind you. So much for the president who in his inaugural address two weeks earlier declared "we have chosen hope over fear." Until, that is, you need fear to pass a bill.
And so much for the promise to banish the money changers and influence peddlers from the temple. An ostentatious executive order banning lobbyists was immediately followed by the nomination of at least a dozen current or former lobbyists to high position. Followed by a Treasury secretary who allegedly couldn't understand the payroll tax provisions in his 1040. Followed by Tom Daschle, who had to fall on his sword according to the new Washington rule that no Cabinet can have more than one tax delinquent.
The Daschle affair was more serious because his offense involved more than taxes. As Michael Kinsley once observed, in Washington the real scandal isn't what's illegal, but what's legal. Not paying taxes is one thing. But what made this case intolerable was the perfectly legal dealings that amassed Daschle $5.2 million in just two years.
He'd been getting $1 million per year from a law firm. But he's not a lawyer, nor a registered lobbyist. You don't get paid this kind of money to instruct partners on the Senate markup process. You get it for picking up the phone and peddling influence.
At least Tim Geithner, the tax-challenged Treasury secretary, had been working for years as a humble international civil servant earning non-stratospheric wages. Daschle, who had made another cool million a year (plus chauffeur and Caddy) for unspecified services to a pal's private equity firm, represented everything Obama said he'd come to Washington to upend.
And yet more damaging to Obama's image than all the hypocrisies in the appointment process is his signature bill: the stimulus package. He inexplicably delegated the writing to Nancy Pelosi and the barons of the House. The product, which inevitably carries Obama's name, was not just bad, not just flawed, but a legislative abomination.
It's not just pages and pages of special-interest tax breaks, giveaways and protections, one of which would set off a ruinous Smoot-Hawley trade war. It's not just the waste, such as the $88.6 million for new construction for Milwaukee Public Schools, which, reports the Milwaukee Journal Sentinel, have shrinking enrollment, 15 vacant schools and, quite logically, no plans for new construction.
It's the essential fraud of rushing through a bill in which the normal rules (committee hearings, finding revenue to pay for the programs) are suspended on the grounds that a national emergency requires an immediate job-creating stimulus -- and then throwing into it hundreds of billions that have nothing to do with stimulus, that Congress's own budget office says won't be spent until 2011 and beyond, and that are little more than the back-scratching, special-interest, lobby-driven parochialism that Obama came to Washington to abolish. He said.
Not just to abolish but to create something new -- a new politics where the moneyed pork-barreling and corrupt logrolling of the past would give way to a bottom-up, grass-roots participatory democracy. That is what made Obama so dazzling and new. Turns out the "fierce urgency of now" includes $150 million for livestock (and honeybee and farm-raised fish) insurance.
The Age of Obama begins with perhaps the greatest frenzy of old-politics influence peddling ever seen in Washington. By the time the stimulus bill reached the Senate, reports the Wall Street Journal, pharmaceutical and high-tech companies were lobbying furiously for a new plan to repatriate overseas profits that would yield major tax savings. California wine growers and Florida citrus producers were fighting to change a single phrase in one provision. Substituting "planted" for "ready to market" would mean a windfall garnered from a new "bonus depreciation" incentive.
After Obama's miraculous 2008 presidential campaign, it was clear that at some point the magical mystery tour would have to end. The nation would rub its eyes and begin to emerge from its reverie. The hallucinatory Obama would give way to the mere mortal. The great ethical transformations promised would be seen as a fairy tale that all presidents tell -- and that this president told better than anyone.
I thought the awakening would take six months. It took two and a half weeks.
WaPo, Friday, February 6, 2009; A17
"A failure to act, and act now, will turn crisis into a catastrophe." -- President Obama, Feb. 4.
Catastrophe, mind you. So much for the president who in his inaugural address two weeks earlier declared "we have chosen hope over fear." Until, that is, you need fear to pass a bill.
And so much for the promise to banish the money changers and influence peddlers from the temple. An ostentatious executive order banning lobbyists was immediately followed by the nomination of at least a dozen current or former lobbyists to high position. Followed by a Treasury secretary who allegedly couldn't understand the payroll tax provisions in his 1040. Followed by Tom Daschle, who had to fall on his sword according to the new Washington rule that no Cabinet can have more than one tax delinquent.
The Daschle affair was more serious because his offense involved more than taxes. As Michael Kinsley once observed, in Washington the real scandal isn't what's illegal, but what's legal. Not paying taxes is one thing. But what made this case intolerable was the perfectly legal dealings that amassed Daschle $5.2 million in just two years.
He'd been getting $1 million per year from a law firm. But he's not a lawyer, nor a registered lobbyist. You don't get paid this kind of money to instruct partners on the Senate markup process. You get it for picking up the phone and peddling influence.
At least Tim Geithner, the tax-challenged Treasury secretary, had been working for years as a humble international civil servant earning non-stratospheric wages. Daschle, who had made another cool million a year (plus chauffeur and Caddy) for unspecified services to a pal's private equity firm, represented everything Obama said he'd come to Washington to upend.
And yet more damaging to Obama's image than all the hypocrisies in the appointment process is his signature bill: the stimulus package. He inexplicably delegated the writing to Nancy Pelosi and the barons of the House. The product, which inevitably carries Obama's name, was not just bad, not just flawed, but a legislative abomination.
It's not just pages and pages of special-interest tax breaks, giveaways and protections, one of which would set off a ruinous Smoot-Hawley trade war. It's not just the waste, such as the $88.6 million for new construction for Milwaukee Public Schools, which, reports the Milwaukee Journal Sentinel, have shrinking enrollment, 15 vacant schools and, quite logically, no plans for new construction.
It's the essential fraud of rushing through a bill in which the normal rules (committee hearings, finding revenue to pay for the programs) are suspended on the grounds that a national emergency requires an immediate job-creating stimulus -- and then throwing into it hundreds of billions that have nothing to do with stimulus, that Congress's own budget office says won't be spent until 2011 and beyond, and that are little more than the back-scratching, special-interest, lobby-driven parochialism that Obama came to Washington to abolish. He said.
Not just to abolish but to create something new -- a new politics where the moneyed pork-barreling and corrupt logrolling of the past would give way to a bottom-up, grass-roots participatory democracy. That is what made Obama so dazzling and new. Turns out the "fierce urgency of now" includes $150 million for livestock (and honeybee and farm-raised fish) insurance.
The Age of Obama begins with perhaps the greatest frenzy of old-politics influence peddling ever seen in Washington. By the time the stimulus bill reached the Senate, reports the Wall Street Journal, pharmaceutical and high-tech companies were lobbying furiously for a new plan to repatriate overseas profits that would yield major tax savings. California wine growers and Florida citrus producers were fighting to change a single phrase in one provision. Substituting "planted" for "ready to market" would mean a windfall garnered from a new "bonus depreciation" incentive.
After Obama's miraculous 2008 presidential campaign, it was clear that at some point the magical mystery tour would have to end. The nation would rub its eyes and begin to emerge from its reverie. The hallucinatory Obama would give way to the mere mortal. The great ethical transformations promised would be seen as a fairy tale that all presidents tell -- and that this president told better than anyone.
I thought the awakening would take six months. It took two and a half weeks.
Smart Grid: It makes no sense to throw $4.5 billion at electric power infrastructure
What's So Smart About Investing in the Smart Grid? By Ronald Bailey
It makes no sense to throw $4.5 billion at electric power infrastructure
Reason, February 3, 2009
Smart grid technology is all the rage. General Electric just paid $2.4 million for a Superbowl ad featuring an animated scarecrow singing "If I Only Had a Brain" to promote its smart grid initiatives. IBM, meanwhile, is running full page "Smarter power for a smarter planet" ads in major newspapers like the New York Times. These corporations are in perfect sync with the new administration in Washington.
Earlier this month, President Barack Obama promised to retrofit America by "updating the way we get our electricity, by starting to build a new smart grid that will save us money, protect our power sources from blackout or attack, and deliver clean, alternative forms of energy to every corner of our nation." To that end, the House version of the American Recovery and Reinvestment Act authorizes the Department of Energy to spend $4.5 billion dollars to stimulate the deployment of smart grid technologies.
The Energy Information Administration (EIA) describes the current national power grid as the "largest interconnected machine on earth." The U.S. electric power infrastructure is worth over $1 trillion. It consists of more than 9,200 electric generating units with more than 1 million megawatts of generating capacity connected to more than 300,000 miles of high voltage transmission lines and 5.5 million miles of distribution lines. Utility companies have only the most rudimentary ability to monitor this vast grid. More often than not, utility companies only learn about a local power outage when customers call to complain.
Creating a smart grid means computerizing the current electric grid using advanced wireless two-way information and communications equipment, deploying an array of sensors to monitor activity, and developing the software to control and track in real time all aspects of electricity generation, transmission, and consumption. The smart grid would also more easily integrate supplies from decentralized renewable energy suppliers and enable consumers to better manage their energy consumption.
Modernization would certainly help the current transmission network, which is so overburdened that blackouts are now bigger, lengthier, and more common. The EIA estimates that outages currently cost the economy as much as $150 billion per year. Even as demand for electricity has grown, transmission capacity has been lagging. In addition, Americans are projected to use about 30 percent more electricity by 2030. The Electric Power Research Institute (EPRI), the think tank of the utility industry, estimates that smart grid technologies could potentially lower projected annual energy consumption in 2030 by 1.2 to 4.3 percent. This would mean that fewer power plants and transmission lines would need to be built in the future.
For many proponents, however, the chief reason to create a smart grid is that it promotes energy conservation. For example, the smart grid concept envisions smart meters in homes or businesses allowing consumers to fine tune their energy consumption, such as setting dishwashers or washing machines to turn on at night when electric power is relatively cheap and more plentiful. And consumers could also grant utility companies permission to send signals that lower the temperatures on residential hot water heaters or reduce air conditioning when the grid is threatened with an overload on hot summer days. Some pilot projects report that consumers using this technology have cut their energy bills by an average of 10 percent.
But why is there such a push to conserve energy, especially electricity? After all, the U.S. has plenty of coal, natural gas, and uranium to generate power and, if promoters of renewable fuels are right, there'll be plenty of those, too. The answer, of course, centers on concerns about man-made global warming. About 50 percent of our electricity is produced using coal and 20 percent more is generated by burning natural gas, both of which emit carbon dioxide that contributes to raising the earth's average temperature.
If the goal is reducing carbon dioxide emissions rather than achieving energy efficiency for its own sake, then the simplest and most effective policy would be to place a price on carbon dioxide emissions. Pricing carbon would push generators and consumers to switch to low and no-carbon fuels while encouraging innovators to develop such fuels. Proponents of the smart grid often liken it to the Internet. And that's actually a pretty good analogy. No central computer distribution company created the Internet by installing a desktop in every home, after all. So why should we jigger electricity rate regimes in order to push utility companies to install smart meters or appliances? As higher carbon prices cause electric bills to increase, consumers themselves will start installing smart meters and appliances while seeking out relatively cheaper low-carbon power.
Here's another question: Why haven't utility companies and electric generation companies already started invested in a smart grid? One word: incentives. The chief problem is that power companies make more money when they sell more electricity to consumers. Building a smart grid means utilities would pay for infrastructure that could reduce the amount of electricity they sell. In other words, given the current regulatory system, utilities would be spending money so that they would make even less money. Obviously, this incentive scheme won't work.
The leading proposal to change the incentive structure is called decoupling. Instead of earning money by selling more electricity, a utility's profits are decoupled from the amount of electricity it sells. Regulators guarantee that a utility's fixed costs, including a profit margin, can be recovered no matter how much energy it sells through a rate adjustment formula. So if a utility sells less than was forecasted, the rates to consumers are adjusted to make up the difference. Generally speaking, such adjustments have amounted to an additional 2 to 3 percent on consumers' bills.
The House stimulus bill contains provisions that require states to consider decoupling as a condition for applying for $3.4 billion in energy efficiency grants. Some free marketers dislike decoupling because consumers could perversely see their energy use go down while their bills remain the same or even go up. Some progressives also reject decoupling on the grounds that it provides windfall profits to utilities.
While decoupling removes the incentive for utilities to sell more power, it doesn't provide much impetus for utilities to boost energy efficiency. One proposed fix for this problem is shared savings. If a utility invests in some type of energy efficiency—say the installation of smart meters or better insulation in houses—the utility shares the energy savings with the consumers. How? Consumers get lower utility bills because they use less energy and regulators award the utility with higher rates to pay back its investment in energy efficiency. For example, California utilities get rate hikes that amount to between 9 and 12 percent of the energy efficiency savings. But again, why rig electricity markets so that utility companies end up in charge of insulating houses, paying for energy efficient appliances, and installing energy management systems? Instead, utilities need to create an open information exchange network that both consumers and power generators can tap into.
In 2004, the Electric Power Research Institute calculated that it would cost $165 billion over the next 20 years—about $8 billion per year—to build out the smart grid. And one of the first challenges is mobilizing sufficient investment. But that problem won't be solved by throwing $4.5 billion at the electric grid as a sop to the environmental lobby—even if it does stimulate the bottom lines of favored corporations.
Ronald Bailey is Reason magazine's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.
It makes no sense to throw $4.5 billion at electric power infrastructure
Reason, February 3, 2009
Smart grid technology is all the rage. General Electric just paid $2.4 million for a Superbowl ad featuring an animated scarecrow singing "If I Only Had a Brain" to promote its smart grid initiatives. IBM, meanwhile, is running full page "Smarter power for a smarter planet" ads in major newspapers like the New York Times. These corporations are in perfect sync with the new administration in Washington.
Earlier this month, President Barack Obama promised to retrofit America by "updating the way we get our electricity, by starting to build a new smart grid that will save us money, protect our power sources from blackout or attack, and deliver clean, alternative forms of energy to every corner of our nation." To that end, the House version of the American Recovery and Reinvestment Act authorizes the Department of Energy to spend $4.5 billion dollars to stimulate the deployment of smart grid technologies.
The Energy Information Administration (EIA) describes the current national power grid as the "largest interconnected machine on earth." The U.S. electric power infrastructure is worth over $1 trillion. It consists of more than 9,200 electric generating units with more than 1 million megawatts of generating capacity connected to more than 300,000 miles of high voltage transmission lines and 5.5 million miles of distribution lines. Utility companies have only the most rudimentary ability to monitor this vast grid. More often than not, utility companies only learn about a local power outage when customers call to complain.
Creating a smart grid means computerizing the current electric grid using advanced wireless two-way information and communications equipment, deploying an array of sensors to monitor activity, and developing the software to control and track in real time all aspects of electricity generation, transmission, and consumption. The smart grid would also more easily integrate supplies from decentralized renewable energy suppliers and enable consumers to better manage their energy consumption.
Modernization would certainly help the current transmission network, which is so overburdened that blackouts are now bigger, lengthier, and more common. The EIA estimates that outages currently cost the economy as much as $150 billion per year. Even as demand for electricity has grown, transmission capacity has been lagging. In addition, Americans are projected to use about 30 percent more electricity by 2030. The Electric Power Research Institute (EPRI), the think tank of the utility industry, estimates that smart grid technologies could potentially lower projected annual energy consumption in 2030 by 1.2 to 4.3 percent. This would mean that fewer power plants and transmission lines would need to be built in the future.
For many proponents, however, the chief reason to create a smart grid is that it promotes energy conservation. For example, the smart grid concept envisions smart meters in homes or businesses allowing consumers to fine tune their energy consumption, such as setting dishwashers or washing machines to turn on at night when electric power is relatively cheap and more plentiful. And consumers could also grant utility companies permission to send signals that lower the temperatures on residential hot water heaters or reduce air conditioning when the grid is threatened with an overload on hot summer days. Some pilot projects report that consumers using this technology have cut their energy bills by an average of 10 percent.
But why is there such a push to conserve energy, especially electricity? After all, the U.S. has plenty of coal, natural gas, and uranium to generate power and, if promoters of renewable fuels are right, there'll be plenty of those, too. The answer, of course, centers on concerns about man-made global warming. About 50 percent of our electricity is produced using coal and 20 percent more is generated by burning natural gas, both of which emit carbon dioxide that contributes to raising the earth's average temperature.
If the goal is reducing carbon dioxide emissions rather than achieving energy efficiency for its own sake, then the simplest and most effective policy would be to place a price on carbon dioxide emissions. Pricing carbon would push generators and consumers to switch to low and no-carbon fuels while encouraging innovators to develop such fuels. Proponents of the smart grid often liken it to the Internet. And that's actually a pretty good analogy. No central computer distribution company created the Internet by installing a desktop in every home, after all. So why should we jigger electricity rate regimes in order to push utility companies to install smart meters or appliances? As higher carbon prices cause electric bills to increase, consumers themselves will start installing smart meters and appliances while seeking out relatively cheaper low-carbon power.
Here's another question: Why haven't utility companies and electric generation companies already started invested in a smart grid? One word: incentives. The chief problem is that power companies make more money when they sell more electricity to consumers. Building a smart grid means utilities would pay for infrastructure that could reduce the amount of electricity they sell. In other words, given the current regulatory system, utilities would be spending money so that they would make even less money. Obviously, this incentive scheme won't work.
The leading proposal to change the incentive structure is called decoupling. Instead of earning money by selling more electricity, a utility's profits are decoupled from the amount of electricity it sells. Regulators guarantee that a utility's fixed costs, including a profit margin, can be recovered no matter how much energy it sells through a rate adjustment formula. So if a utility sells less than was forecasted, the rates to consumers are adjusted to make up the difference. Generally speaking, such adjustments have amounted to an additional 2 to 3 percent on consumers' bills.
The House stimulus bill contains provisions that require states to consider decoupling as a condition for applying for $3.4 billion in energy efficiency grants. Some free marketers dislike decoupling because consumers could perversely see their energy use go down while their bills remain the same or even go up. Some progressives also reject decoupling on the grounds that it provides windfall profits to utilities.
While decoupling removes the incentive for utilities to sell more power, it doesn't provide much impetus for utilities to boost energy efficiency. One proposed fix for this problem is shared savings. If a utility invests in some type of energy efficiency—say the installation of smart meters or better insulation in houses—the utility shares the energy savings with the consumers. How? Consumers get lower utility bills because they use less energy and regulators award the utility with higher rates to pay back its investment in energy efficiency. For example, California utilities get rate hikes that amount to between 9 and 12 percent of the energy efficiency savings. But again, why rig electricity markets so that utility companies end up in charge of insulating houses, paying for energy efficient appliances, and installing energy management systems? Instead, utilities need to create an open information exchange network that both consumers and power generators can tap into.
In 2004, the Electric Power Research Institute calculated that it would cost $165 billion over the next 20 years—about $8 billion per year—to build out the smart grid. And one of the first challenges is mobilizing sufficient investment. But that problem won't be solved by throwing $4.5 billion at the electric grid as a sop to the environmental lobby—even if it does stimulate the bottom lines of favored corporations.
Ronald Bailey is Reason magazine's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.
A Better Way to Generate and Use Comparative-Effectiveness Research
A Better Way to Generate and Use Comparative-Effectiveness Research, by Michael F. Cannon
Cato, Feb 06, 2009
President Barack Obama, former U.S. Senate majority leader Tom Daschle, and others propose a new government agency that would evaluate the relative effectiveness of medical treatments. The need for "comparative-effectiveness research" is great. Evidence suggests Americans spend $700 billion annually on medical care that provides no value. Yet patients, providers, and purchasers typically lack the necessary information to distinguish between high- and low-value services.
Advocates of such an agency argue that comparative- effectiveness information has characteristics of a "public good," therefore markets will not generate the efficiency-maximizing quantity. While that is correct, economic theory does not conclude that government should provide comparative- effectiveness research, nor that government provision would increase social welfare.
Conservatives warn that a federal comparative- effectiveness agency would lead to government rationing of medical care—indeed, that's the whole idea. If history is any guide, the more likely outcome is that the agency would be completely ineffective: political pressure from the industry will prevent the agency from conducting useful research and prevent purchasers from using such research to eliminate low-value care.
The current lack of comparative-effectiveness research is due more to government failure than to market failure. Federal tax and entitlement policies reduce consumer demand for such research. Those policies, as well as state licensing of health insurance and medical professionals, inhibit the types of health plans best equipped to generate comparative-effectiveness information.
A better way to generate comparative-effectiveness information would be for Congress to eliminate government activities that suppress private production. Congress should let workers and Medicare enrollees control the money that purchases their health insurance. Further, Congress should require states to recognize other states' licenses for medical professionals and insurance products. That laissez-faire approach would both increase comparative-effectiveness research and increase the likelihood that patients and providers would use it.
Cato, Feb 06, 2009
President Barack Obama, former U.S. Senate majority leader Tom Daschle, and others propose a new government agency that would evaluate the relative effectiveness of medical treatments. The need for "comparative-effectiveness research" is great. Evidence suggests Americans spend $700 billion annually on medical care that provides no value. Yet patients, providers, and purchasers typically lack the necessary information to distinguish between high- and low-value services.
Advocates of such an agency argue that comparative- effectiveness information has characteristics of a "public good," therefore markets will not generate the efficiency-maximizing quantity. While that is correct, economic theory does not conclude that government should provide comparative- effectiveness research, nor that government provision would increase social welfare.
Conservatives warn that a federal comparative- effectiveness agency would lead to government rationing of medical care—indeed, that's the whole idea. If history is any guide, the more likely outcome is that the agency would be completely ineffective: political pressure from the industry will prevent the agency from conducting useful research and prevent purchasers from using such research to eliminate low-value care.
The current lack of comparative-effectiveness research is due more to government failure than to market failure. Federal tax and entitlement policies reduce consumer demand for such research. Those policies, as well as state licensing of health insurance and medical professionals, inhibit the types of health plans best equipped to generate comparative-effectiveness information.
A better way to generate comparative-effectiveness information would be for Congress to eliminate government activities that suppress private production. Congress should let workers and Medicare enrollees control the money that purchases their health insurance. Further, Congress should require states to recognize other states' licenses for medical professionals and insurance products. That laissez-faire approach would both increase comparative-effectiveness research and increase the likelihood that patients and providers would use it.
Cutting Emissions While Increasing Them
Cutting Emissions While Increasing Them. By Roger Pielke, Jr.
Prometheus, February 6th, 2009
Here is a remarkable display of incoherence. According to a report commissioned by Greenpeace and discussed by The Christian Science Monitor, the economic stimulus package now under debate by the U.S. Congress will reduce greenhouse gas emissions.
What does the report mean by “reduce”? It means that some future emissions that might have occurred will be avoided. Emissions will therefore increase, just not as much as under some other scenario. The difference between that other scenario and the scenario implied by the stimulus package represents a “reduction” in emissions. Yes, you are reading that right.
The great thing about this approach to emissions reductions is that it is an infinite resource. For instance, I just decided not to buy a Hummer and reduced my future emissions by an enormous amount. You can do the same, and if we all pitch in, maybe it will solve the problem. Or as the head of resaerch for Greenpeace observes:
The fact of the matter is that the goal of the stimulus bill is to stimulate the economy. Absent a reduction in the ratio of carbon dioxide emissions to GDP, emissions will go up in the real world, regardless of silly accounting tricks. Of course, silly accounting tricks on emissions are to be expected by those seeking to present BAU as progress, but I’m really surprised that it is Greenpeace that is engaging in such shenanigans.
Prometheus, February 6th, 2009
Here is a remarkable display of incoherence. According to a report commissioned by Greenpeace and discussed by The Christian Science Monitor, the economic stimulus package now under debate by the U.S. Congress will reduce greenhouse gas emissions.
What does the report mean by “reduce”? It means that some future emissions that might have occurred will be avoided. Emissions will therefore increase, just not as much as under some other scenario. The difference between that other scenario and the scenario implied by the stimulus package represents a “reduction” in emissions. Yes, you are reading that right.
The great thing about this approach to emissions reductions is that it is an infinite resource. For instance, I just decided not to buy a Hummer and reduced my future emissions by an enormous amount. You can do the same, and if we all pitch in, maybe it will solve the problem. Or as the head of resaerch for Greenpeace observes:
The fact that the federal government could spend so much money and actually help
slow global warming means we’ve really turned the page as a country,” said Kert
Davies, Greenpeace’s Research Director, in a press release.. “This is a real
sign that we’re starting to move beyond the era of fossil fuels.”
The fact of the matter is that the goal of the stimulus bill is to stimulate the economy. Absent a reduction in the ratio of carbon dioxide emissions to GDP, emissions will go up in the real world, regardless of silly accounting tricks. Of course, silly accounting tricks on emissions are to be expected by those seeking to present BAU as progress, but I’m really surprised that it is Greenpeace that is engaging in such shenanigans.
Napolitano on executive pay caps: They Violate Good Sense and the Constitution
. . . They Violate Good Sense and the Constitution. By Andrew P Napolitano
The government cannot condition benefits on the nonassertion of rights.
WSJ, Feb 06, 2009
The executive compensation caps that President Barack Obama and Treasury Secretary Tim Geithner summarily announced this week violate both the Constitution and Economics 101.
I have argued on this page that the Troubled Asset Relief Program for the banks is itself inherently and profoundly unconstitutional for several reasons. It promotes only short-term private benefit, rather than the general welfare as the Constitution commands of all federal spending. It evades the constitutional requirement of equal protection by saving some businesses and letting others that are similarly situated simply expire. And it delegates to the secretary of the Treasury the power to spend taxpayer dollars as he sees fit, in violation of the express constitutional grant of the nondelegable spending power to the Congress.
Now the federal government wants to interfere with private employment contracts already entered into -- and regulate those not yet signed -- in order to satisfy the perceived populist instincts of the electorate. To do so, it demands salary caps as a condition to the receipt of public assistance.
Salary caps are unconstitutional because they violate the well-grounded doctrine against unconstitutional conditions. Simply stated, the government may not condition the acceptance of a governmental benefit on the non-assertion of a constitutional liberty. The government cannot say to individual welfare recipients that they may not criticize the Congress or their welfare checks will be cut off, because the right to criticize the government is a constitutionally protected liberty. It similarly may not condition corporate welfare on the prohibition of contracts with employees above an arbitrary salary amount, because freedom of contract is protected by the Constitution as well.
The salary caps also constitute a taking. High ranking executives are corporate assets with experience and knowledge unique to their employers' businesses. By arbitrarily reducing their salaries to serve the government's political needs, deflating their worth to their employers, incentivizing them to work less, or chasing them away, the government has stripped these individuals of their personal value and of their value to employers without just compensation. Such a taking is prohibited by the Fifth Amendment.
Moreover, government-mandated salary caps will impede economic progress. We can presume that the senior executives of the banks that have received TARP funds who are paid more than $500,000 annually are worth at least that much to their employers. Otherwise the employers would be violating their fiduciary duties to their shareholders by paying those salaries. These employers are banks which the government has "rewarded for failure," to use the president's phrase, by investing money from taxpayers who would not voluntarily invest their own money there.
So, not only are these banks in distress, not only do they seek federal dollars in order to stay afloat, but under these salary caps they cannot go out and get the best talent to run them. The government that is trying to save them, the government that has forced taxpayer dollars into them, has denied them the freedom of contract necessary to assure their salvation. Why would underpaid executives stay with a bailed out bank when their true worth will be compensated elsewhere?
The government can't run a business. Just look at the Post Office, which loses $6 billion a year and has salary caps. Is this what's coming to the banks? If the government can evade the Constitution and violate the basic laws of economics what will it do to free enterprise next?
Mr. Napolitano, who was on the bench of the Superior Court of New Jersey between 1987 and 1995, is the senior judicial analyst at the Fox News Channel. His latest book is "A Nation of Sheep" (Nelson, 2007).
The government cannot condition benefits on the nonassertion of rights.
WSJ, Feb 06, 2009
The executive compensation caps that President Barack Obama and Treasury Secretary Tim Geithner summarily announced this week violate both the Constitution and Economics 101.
I have argued on this page that the Troubled Asset Relief Program for the banks is itself inherently and profoundly unconstitutional for several reasons. It promotes only short-term private benefit, rather than the general welfare as the Constitution commands of all federal spending. It evades the constitutional requirement of equal protection by saving some businesses and letting others that are similarly situated simply expire. And it delegates to the secretary of the Treasury the power to spend taxpayer dollars as he sees fit, in violation of the express constitutional grant of the nondelegable spending power to the Congress.
Now the federal government wants to interfere with private employment contracts already entered into -- and regulate those not yet signed -- in order to satisfy the perceived populist instincts of the electorate. To do so, it demands salary caps as a condition to the receipt of public assistance.
Salary caps are unconstitutional because they violate the well-grounded doctrine against unconstitutional conditions. Simply stated, the government may not condition the acceptance of a governmental benefit on the non-assertion of a constitutional liberty. The government cannot say to individual welfare recipients that they may not criticize the Congress or their welfare checks will be cut off, because the right to criticize the government is a constitutionally protected liberty. It similarly may not condition corporate welfare on the prohibition of contracts with employees above an arbitrary salary amount, because freedom of contract is protected by the Constitution as well.
The salary caps also constitute a taking. High ranking executives are corporate assets with experience and knowledge unique to their employers' businesses. By arbitrarily reducing their salaries to serve the government's political needs, deflating their worth to their employers, incentivizing them to work less, or chasing them away, the government has stripped these individuals of their personal value and of their value to employers without just compensation. Such a taking is prohibited by the Fifth Amendment.
Moreover, government-mandated salary caps will impede economic progress. We can presume that the senior executives of the banks that have received TARP funds who are paid more than $500,000 annually are worth at least that much to their employers. Otherwise the employers would be violating their fiduciary duties to their shareholders by paying those salaries. These employers are banks which the government has "rewarded for failure," to use the president's phrase, by investing money from taxpayers who would not voluntarily invest their own money there.
So, not only are these banks in distress, not only do they seek federal dollars in order to stay afloat, but under these salary caps they cannot go out and get the best talent to run them. The government that is trying to save them, the government that has forced taxpayer dollars into them, has denied them the freedom of contract necessary to assure their salvation. Why would underpaid executives stay with a bailed out bank when their true worth will be compensated elsewhere?
The government can't run a business. Just look at the Post Office, which loses $6 billion a year and has salary caps. Is this what's coming to the banks? If the government can evade the Constitution and violate the basic laws of economics what will it do to free enterprise next?
Mr. Napolitano, who was on the bench of the Superior Court of New Jersey between 1987 and 1995, is the senior judicial analyst at the Fox News Channel. His latest book is "A Nation of Sheep" (Nelson, 2007).
Attempt to establish non-market prices: The Athenian Grain Merchants, 386 B.C.
Cold Case Files: The Athenian Grain Merchants, 386 B.C. By Wayne R. Dunham
Cato Journal, Vol. 28, No. 3 (Fall 2008). Feb 2009
Food price increases have always been politically sensitive. Price spikes like those that have occurred recently create the demand for action on the part of government to alleviate the problem. Yet, government intervention can often do more harm than good. This article examines one such example of a counterproductive response that occurred in 388 B.C. in Athens, Greece. In response to a negative supply shock to the grain market, regulators encouraged grain importers to form a buyers' cartel (monopsony), hoping that it would reduce retail prices by first lowering wholesale grain prices. In reality, the decrease in wholesale prices resulted in a decrease in the willingness of producers in other regions to supply grain to Athens, and retail grain prices increased substantially. Grain importers soon found themselves on trial for their lives in what is probably the earliest recorded antitrust trial. This article uses the information presented at that trial and other contemporary sources to evaluate the grain merchants. actions. More generally, it analyses the impact of a buyer's cartel or monopsony on prices and consumption.
Cato Journal, Vol. 28, No. 3 (Fall 2008). Feb 2009
Food price increases have always been politically sensitive. Price spikes like those that have occurred recently create the demand for action on the part of government to alleviate the problem. Yet, government intervention can often do more harm than good. This article examines one such example of a counterproductive response that occurred in 388 B.C. in Athens, Greece. In response to a negative supply shock to the grain market, regulators encouraged grain importers to form a buyers' cartel (monopsony), hoping that it would reduce retail prices by first lowering wholesale grain prices. In reality, the decrease in wholesale prices resulted in a decrease in the willingness of producers in other regions to supply grain to Athens, and retail grain prices increased substantially. Grain importers soon found themselves on trial for their lives in what is probably the earliest recorded antitrust trial. This article uses the information presented at that trial and other contemporary sources to evaluate the grain merchants. actions. More generally, it analyses the impact of a buyer's cartel or monopsony on prices and consumption.
Subscribe to:
Posts (Atom)
Posts
