Effective Development Assistance Through Competition. By Clifford F. Zinnes, Senior Fellow, IRIS Center, Department of Economics and Affiliate Faculty, Maryland School of Public Policy at the University of Maryland
The Brookings Institution
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July 2009 — Introduction
I is now generally accepted that development interventions can only be successful and sustainable if they are accepted by stakeholders and implemented in accordance with local institutions, culture and norms. “Tournament Approaches to Policy Reform—Making Development Assistance more Effective,” by Clifford Zinnes (Brookings Press, 2009), identifies a new class of emerging development intervention designs fitting this mold. In these designs the intervention is approached as a “game” with players, predefined—and, therefore, prospective—rules and payoff s, strategies, and beliefs in which players must compete to achieve the best implementation. “Winning” is based on scores on preannounced purpose-built indicators. Rewards are the sponsor’s aid. While players can be individual organizations (such as schools or even water companies), they are typically jurisdictions (from countries down to villages) so the underlying class of incentive mechanism is called “prospective inter-jurisdictional competition” (PIJC).
This brief summarizes an evaluation of past PIJC applications running from reducing red tape, youth unemployment, and pollution through to increasing literacy, public services, and governance. It asks how successful and sustain able they have been across a variety of situations and whether the approach merits replication and scaling up, particularly for improving the effectiveness of development assistance
Thursday, July 30, 2009
Can the Fed Identify Bubbles Before They Happen?
Can the Fed Identify Bubbles Before They Happen? By DONALD L. LUSKIN
The New York Fed’s president says it can. If only it were that easy.
WSJ, Jul 30, 2009
President Barack Obama proposed last month that the Fed act as an overall “systemic risk” regulator, with consolidated supervisory responsibility over “large, interconnected firms whose failure could threaten the stability of the system.” Now William C. Dudley, the ex-Goldman Sachs economist just appointed president of the New York Federal Reserve, has upped the ante. He thinks the Fed should be responsible for identifying and preventing asset-price bubbles. Considering that the Fed’s track record reveals more skill at causing bubbles than preventing them, this is a very dangerous idea.
In a speech in late June in Switzerland, Mr. Dudley said, “I think that this crisis has demonstrated that the cost of waiting to clean up asset bubbles after they burst can be very high. That suggests we should explore how to respond earlier.” Mr. Dudley claims that “Asset bubbles may not be that hard to identify—especially large ones” and suggests “additional policy instruments”—that is, new regulatory powers for the Fed to “more directly influence risk premia.” Because risk premia are a key element in determining asset prices, Mr. Dudley is effectively asking for the power to control asset prices.
Fed Chairman Ben Bernanke and former Chairman Alan Greenspan both disagree. Mr. Greenspan once said that he doubted “that bubbles, even if identified early, could be pre-empted short of the central bank inducing a substantial contraction in economic activity—the very outcome we would be seeking to avoid.” According to Mr. Bernanke, even if the Fed “could identify bubbles, monetary policy is far too blunt a tool for effective use against them.” For these experienced central bankers, policy is a matter of risk-management under uncertainty; they don’t imagine that they are wise enough to detect every problem and solve it.
Mr. Dudley seems surer of himself. He notes confidently, by way of example, that “the housing bubble in the United States had been identified by many by 2005.” Well, that’s true. But it is only true in retrospect. It offers no justification for a leap toward government control of asset prices.
If the housing bubble hadn’t burst, the “many” who identified it in 2005 would have been wrong. The reality is that at all times in markets there are multiple opinions. There can be no assurance that those who hold the correct ones about what is or is not a bubble will end up at the Fed, where they can make prescient policy decisions.
Consider Mr. Dudley himself. In a 2006 speech at a conference of the National Bureau of Economic Research, when he was still with Goldman Sachs, Mr. Dudley listed “five bubbles that one could reasonably have identified in real time.” He said that he’d “tried to speculate against three of the five bubbles” but confessed his speculations met only “with limited success.”
Second, Mr. Dudley’s claim that the housing bubble had been identified in 2005 is a red herring, because by then the bubble was already well advanced (the peak in home prices came in May 2006). To do any good, the Fed would have to identify bubbles before they even happen.
But by 2005, Alan Greenspan had already begun gradually raising interest rates a year earlier, referring to “signs of froth in some local markets.” Mr. Dudley is asking for new regulatory powers based on faulting the Fed for not having or acting on insights that it, in fact, did have and did act on. He has not adduced an example of a bubble that could have been identified and prevented before it happened.
More broadly, there’s little reason to expect the Fed can deal effectively even with a bubble identified well before the fact, or that it might not do more harm than good trying. While John Maynard Keynes and Milton Friedman didn’t agree on much, they did agree that the Great Depression was caused less by the stock market crash of 1929 than by the Fed’s tight-money policies aimed at curbing stock speculation (which those policies failed to do).
It seems unproductive, as we try to extract lessons from the present recession, to go back to the regulatory policies that caused the Great Depression—and to put them on steroids with “additional policy instruments.”
In the end all these concerns, however urgent, are merely pragmatic. The overarching philosophical concern is whether we ought to empower the Federal Reserve to determine asset prices. If so, then on what basis?
In the case of oil, many argue that its price is too high because of speculation. Yet many also say it’s too low, because markets aren’t pricing the negative externalities of carbon emissions.
Which bubble should the Fed prevent—with arbitrary leverage restrictions, position limits, transaction taxes, and who knows what else—the speculation bubble or the carbon bubble?
And if we don’t want the Fed controlling asset prices, then how do we tell the central bank where to stop once we’ve given it a new mandate (on top of the many it already has) to prevent asset bubbles? If the Fed is to determine the price of the overall housing market, or stock market, or oil market, how is that different in principle from having it determine the price of every individual item at Wal-Mart, or the salary of every individual who works there?
This brings us back to politics. The issues involved with bubbles are of more than merely philosophical concern.
Mr. Bernanke’s term as Fed chairman expires in January. Based on his track record, he’s likely a shoo-in for reappointment. But in politics, the winner is often the candidate who makes the biggest promises. So perhaps we’ll be hearing more about preventing bubbles from Mr. Dudley.
Mr. Luskin is chief investment officer at Trend Macrolytics LLC.
The New York Fed’s president says it can. If only it were that easy.
WSJ, Jul 30, 2009
President Barack Obama proposed last month that the Fed act as an overall “systemic risk” regulator, with consolidated supervisory responsibility over “large, interconnected firms whose failure could threaten the stability of the system.” Now William C. Dudley, the ex-Goldman Sachs economist just appointed president of the New York Federal Reserve, has upped the ante. He thinks the Fed should be responsible for identifying and preventing asset-price bubbles. Considering that the Fed’s track record reveals more skill at causing bubbles than preventing them, this is a very dangerous idea.
In a speech in late June in Switzerland, Mr. Dudley said, “I think that this crisis has demonstrated that the cost of waiting to clean up asset bubbles after they burst can be very high. That suggests we should explore how to respond earlier.” Mr. Dudley claims that “Asset bubbles may not be that hard to identify—especially large ones” and suggests “additional policy instruments”—that is, new regulatory powers for the Fed to “more directly influence risk premia.” Because risk premia are a key element in determining asset prices, Mr. Dudley is effectively asking for the power to control asset prices.
Fed Chairman Ben Bernanke and former Chairman Alan Greenspan both disagree. Mr. Greenspan once said that he doubted “that bubbles, even if identified early, could be pre-empted short of the central bank inducing a substantial contraction in economic activity—the very outcome we would be seeking to avoid.” According to Mr. Bernanke, even if the Fed “could identify bubbles, monetary policy is far too blunt a tool for effective use against them.” For these experienced central bankers, policy is a matter of risk-management under uncertainty; they don’t imagine that they are wise enough to detect every problem and solve it.
Mr. Dudley seems surer of himself. He notes confidently, by way of example, that “the housing bubble in the United States had been identified by many by 2005.” Well, that’s true. But it is only true in retrospect. It offers no justification for a leap toward government control of asset prices.
If the housing bubble hadn’t burst, the “many” who identified it in 2005 would have been wrong. The reality is that at all times in markets there are multiple opinions. There can be no assurance that those who hold the correct ones about what is or is not a bubble will end up at the Fed, where they can make prescient policy decisions.
Consider Mr. Dudley himself. In a 2006 speech at a conference of the National Bureau of Economic Research, when he was still with Goldman Sachs, Mr. Dudley listed “five bubbles that one could reasonably have identified in real time.” He said that he’d “tried to speculate against three of the five bubbles” but confessed his speculations met only “with limited success.”
Second, Mr. Dudley’s claim that the housing bubble had been identified in 2005 is a red herring, because by then the bubble was already well advanced (the peak in home prices came in May 2006). To do any good, the Fed would have to identify bubbles before they even happen.
But by 2005, Alan Greenspan had already begun gradually raising interest rates a year earlier, referring to “signs of froth in some local markets.” Mr. Dudley is asking for new regulatory powers based on faulting the Fed for not having or acting on insights that it, in fact, did have and did act on. He has not adduced an example of a bubble that could have been identified and prevented before it happened.
More broadly, there’s little reason to expect the Fed can deal effectively even with a bubble identified well before the fact, or that it might not do more harm than good trying. While John Maynard Keynes and Milton Friedman didn’t agree on much, they did agree that the Great Depression was caused less by the stock market crash of 1929 than by the Fed’s tight-money policies aimed at curbing stock speculation (which those policies failed to do).
It seems unproductive, as we try to extract lessons from the present recession, to go back to the regulatory policies that caused the Great Depression—and to put them on steroids with “additional policy instruments.”
In the end all these concerns, however urgent, are merely pragmatic. The overarching philosophical concern is whether we ought to empower the Federal Reserve to determine asset prices. If so, then on what basis?
In the case of oil, many argue that its price is too high because of speculation. Yet many also say it’s too low, because markets aren’t pricing the negative externalities of carbon emissions.
Which bubble should the Fed prevent—with arbitrary leverage restrictions, position limits, transaction taxes, and who knows what else—the speculation bubble or the carbon bubble?
And if we don’t want the Fed controlling asset prices, then how do we tell the central bank where to stop once we’ve given it a new mandate (on top of the many it already has) to prevent asset bubbles? If the Fed is to determine the price of the overall housing market, or stock market, or oil market, how is that different in principle from having it determine the price of every individual item at Wal-Mart, or the salary of every individual who works there?
This brings us back to politics. The issues involved with bubbles are of more than merely philosophical concern.
Mr. Bernanke’s term as Fed chairman expires in January. Based on his track record, he’s likely a shoo-in for reappointment. But in politics, the winner is often the candidate who makes the biggest promises. So perhaps we’ll be hearing more about preventing bubbles from Mr. Dudley.
Mr. Luskin is chief investment officer at Trend Macrolytics LLC.
The bipartisan Senate negotiators are leaning toward proposing a health-care Fannie Mae
Fannie Med. WSJ Editorial
The bipartisan Senate negotiators are leaning toward proposing a health-care Fannie Mae.
The Wall Street Journal, p A16, Jul 30, 2009
The details of the Senate Finance Committee’s hush-hush health talks aren’t fully known, but leaks suggest that one all-but-certain highlight will be new federally created health “cooperatives” to compete against private insurers. The onus is on Republican negotiators Chuck Grassley and Mike Enzi to explain why this isn’t merely the House “public option” in a better suit.
North Dakota Democrat Kent Conrad floated the co-op concept last month, to attract Republicans who oppose President Obama’s state-run plan. According to Mr. Conrad, these nonprofits—modeled on local electricity or rural farm co-ops—fulfill the liberal goal of competing against private insurers, yet avoid “government control,” since they will be member-owned. Presto, a Beltway splitting of the political baby.
And in theory, health-care co-ops needn’t be destructive. Blue Cross and Blue Shield began as nonprofit health insurers, and some state Blues still are. Organizations like the Group Health Cooperative of Puget Sound are consumer-owned and compete with private plans.
But the Senate is talking about government-sponsored co-ops, and that means multiple devils are in the details. Mr. Conrad confirmed this week that the current plan is to have the feds provide $6 billion in start-up cash, then appoint an “interim” national board to set policies for a network of state or regional co-ops. Mr. Conrad said this new network could attract 12 million people, making it the third-largest health insurer in the country.
Here’s where the trouble starts. At least with the public option, Washington acknowledges that taxpayers are subsidizing public plans. With co-ops, the government role is more subtle, if nearly as corrosive. Start with Mr. Conrad’s $6 billion in “seed money,” which is more than the total annual revenue of all but 20 of the nation’s private plans. This would provide a lower cost of capital than private firms and an implicit claim on any other money the co-ops need. The feds may also exempt co-ops from the taxes that private insurers pay, which average about 1.2% of premiums. This would let co-ops offer lower prices and poach customers with government-subsidized premiums.
The Senators may also exempt co-ops from the state mandates that now drive up the cost of private policies. We’ve long wanted the feds to let individuals or groups (such as the National Federation of Independent Business) form risk pools and buy insurance across state lines free of these costly requirements. But liberals have killed attempts at such Association Health Plans, which suggests their goal in exempting these “government-sponsored health enterprises” from state mandates is merely to give them another pricing edge.
Mr. Conrad suggests the federal board overseeing this network would be temporary, meaning at some point government appointees would be replaced by elected private directors. Mr. Grassley is said to be resisting federal control, but even if he succeeds for now, neither he nor Mr. Conrad can bind a future Congress. When was the last time government supervision became less onerous over time, especially in health care?
All of which makes these co-ops sound a lot like a health-care Fannie Mae and Freddie Mac, which Congress created because there was supposedly no secondary mortgage market. The duo proceeded to use their government subsidy to dominate the market and drive out private competitors.
And all of this is before Congressional liberals get their hands on these co-ops. “We’re going to have some type of public option, call it ‘co-op,’ call it what you want,” Senate Majority Leader Harry Reid said earlier this month. New York’s Chuck Schumer wants $10 billion to seed a single, nationwide co-op that will be governed by a federal board and have the authority to impose price controls. At the very least, liberals will demand to load up co-ops with the minimum-coverage mandates they’ve already included in the House and rival Senate legislation—from maternity care to government-funded abortion.
Messrs. Grassley and Enzi and Maine’s Olympia Snowe are under great pressure to agree to a deal, as Democrats grow more desperate to get political cover for reform that is sinking fast in the polls. The co-op idea might have begun as a benign proposal, but it is likely to become a mini-me public option. Senate Republicans can best serve the cause of bipartisan reform and fiscal sanity by opposing any form of new government health care, and urging Mr. Baucus to turn to the Plan B of helping the uninsured with tax credits.
The bipartisan Senate negotiators are leaning toward proposing a health-care Fannie Mae.
The Wall Street Journal, p A16, Jul 30, 2009
The details of the Senate Finance Committee’s hush-hush health talks aren’t fully known, but leaks suggest that one all-but-certain highlight will be new federally created health “cooperatives” to compete against private insurers. The onus is on Republican negotiators Chuck Grassley and Mike Enzi to explain why this isn’t merely the House “public option” in a better suit.
North Dakota Democrat Kent Conrad floated the co-op concept last month, to attract Republicans who oppose President Obama’s state-run plan. According to Mr. Conrad, these nonprofits—modeled on local electricity or rural farm co-ops—fulfill the liberal goal of competing against private insurers, yet avoid “government control,” since they will be member-owned. Presto, a Beltway splitting of the political baby.
And in theory, health-care co-ops needn’t be destructive. Blue Cross and Blue Shield began as nonprofit health insurers, and some state Blues still are. Organizations like the Group Health Cooperative of Puget Sound are consumer-owned and compete with private plans.
But the Senate is talking about government-sponsored co-ops, and that means multiple devils are in the details. Mr. Conrad confirmed this week that the current plan is to have the feds provide $6 billion in start-up cash, then appoint an “interim” national board to set policies for a network of state or regional co-ops. Mr. Conrad said this new network could attract 12 million people, making it the third-largest health insurer in the country.
Here’s where the trouble starts. At least with the public option, Washington acknowledges that taxpayers are subsidizing public plans. With co-ops, the government role is more subtle, if nearly as corrosive. Start with Mr. Conrad’s $6 billion in “seed money,” which is more than the total annual revenue of all but 20 of the nation’s private plans. This would provide a lower cost of capital than private firms and an implicit claim on any other money the co-ops need. The feds may also exempt co-ops from the taxes that private insurers pay, which average about 1.2% of premiums. This would let co-ops offer lower prices and poach customers with government-subsidized premiums.
The Senators may also exempt co-ops from the state mandates that now drive up the cost of private policies. We’ve long wanted the feds to let individuals or groups (such as the National Federation of Independent Business) form risk pools and buy insurance across state lines free of these costly requirements. But liberals have killed attempts at such Association Health Plans, which suggests their goal in exempting these “government-sponsored health enterprises” from state mandates is merely to give them another pricing edge.
Mr. Conrad suggests the federal board overseeing this network would be temporary, meaning at some point government appointees would be replaced by elected private directors. Mr. Grassley is said to be resisting federal control, but even if he succeeds for now, neither he nor Mr. Conrad can bind a future Congress. When was the last time government supervision became less onerous over time, especially in health care?
All of which makes these co-ops sound a lot like a health-care Fannie Mae and Freddie Mac, which Congress created because there was supposedly no secondary mortgage market. The duo proceeded to use their government subsidy to dominate the market and drive out private competitors.
And all of this is before Congressional liberals get their hands on these co-ops. “We’re going to have some type of public option, call it ‘co-op,’ call it what you want,” Senate Majority Leader Harry Reid said earlier this month. New York’s Chuck Schumer wants $10 billion to seed a single, nationwide co-op that will be governed by a federal board and have the authority to impose price controls. At the very least, liberals will demand to load up co-ops with the minimum-coverage mandates they’ve already included in the House and rival Senate legislation—from maternity care to government-funded abortion.
Messrs. Grassley and Enzi and Maine’s Olympia Snowe are under great pressure to agree to a deal, as Democrats grow more desperate to get political cover for reform that is sinking fast in the polls. The co-op idea might have begun as a benign proposal, but it is likely to become a mini-me public option. Senate Republicans can best serve the cause of bipartisan reform and fiscal sanity by opposing any form of new government health care, and urging Mr. Baucus to turn to the Plan B of helping the uninsured with tax credits.
Workers will pay for the new health-care payroll levy
The Pelosi Jobs Tax. WSJ Editorial
Workers will pay for the new health-care payroll levy.
The Wall Street Journal, page A16, Jul 30, 2009
Even many Democrats are revolting against Speaker Nancy Pelosi’s 5.4% income surtax to finance ObamaCare, but another tax in her House bill isn’t getting enough attention. To wit, the up to 10-percentage point payroll tax increase on workers and businesses that don’t provide health insurance. This should put to rest the illusion that no one making more than $250,000 in income will pay higher taxes.
To understand why, consider how the Pelosi jobs tax works. Under the House bill, firms with employee payroll of above $250,000 without a company health plan would pay a tax starting at 2% of wages per employee. That rate would quickly rise to 8% on firms with total payroll of $400,000 or more. A tax credit would help very small businesses adjust to the new costs, but even a firm with a handful of workers is likely to be subject to this payroll levy. As we went to press, Blue Dogs were taking credit for pushing those payroll amounts up to $500,000 and $750,0000, but those are still small employers.
So who bears the burden of this tax? The economic research is close to unanimous that a payroll tax is a tax on labor and is thus shouldered mostly if not entirely by workers. Employers merely collect the tax and then pass along its costs in lower wages or benefits. This is the view of the Democratic-controlled Congressional Budget Office, which advised on July 13: “If employers who did not offer health insurance were required to pay a fee, employee’s wages and other forms of compensation would generally decline by the amount of that fee from what they otherwise would have been.”
To put this in actual dollars, a worker earning, say, $70,000 a year could lose some $5,600 in take home pay to cover the costs of ObamaCare. And, by the way, this is in addition to the 2.5% tax that the individual worker would have to pay on gross income, if he doesn’t buy the high-priced health insurance that the government will mandate. In sum, that’s a near 10-percentage point tax on wages and salaries on top of the 15% that already hits workers to finance Medicare and Social Security.
Even Democrats are aware that his tax would come out of the wallets of the very workers they pretend to be helping, so they inserted a provision on page 147 of the bill prohibiting firms from cutting salaries to pay the tax. Thus they figure they can decree that wages cannot fall even as costs rise. Of course, all this means is that businesses would lay off some workers, or hire fewer new ones, or pay lower starting salaries or other benefits to the workers they do hire.
Cornell economists Richard Burkhauser and Kosali Simon predicted in a 2007 National Bureau of Economic Research study that a payroll tax increase of about this magnitude plus the recent minimum wage increase will translate into hundreds of thousands of lost jobs for those with low wages. Pay or play schemes, says Mr. Burkauser, “wind up hurting the very low-wage workers they are supposed to help.” The CBO agrees, arguing that play or pay policies “could reduce the hiring of low-wage workers, whose wages could not fall by the full cost of health insurance or a substantial play-or-pay fee if they were close to the minimum wage.”
To make matters worse, many workers and firms would have to pay the Pelosi tax even if the employer already provides health insurance. That’s because the House bill requires firms to pay at least 72.5% of health-insurance premiums for individual workers and 65% for families in order to avoid the tax. A Kaiser Family Foundation survey in 2008 found that about three in five small businesses fail to meet the Pelosi test and will have to pay the tax. In these instances, the businesses will have every incentive simply to drop their coverage.
A new study by Sageworks, Inc., a financial consulting firm, runs the numbers on the income statements of actual companies. It looks at three types of firms with at least $5 million in sales: a retailer, a construction company and a small manufacturer. The companies each have total payroll of between $750,000 and $1 million a year. Assuming the firms absorb the cost of the payroll tax, their net profits fall by one-third on average. That is on top of the 45% income tax and surtax that many small business owners would pay as part of the House tax scheme, so the total reduction in some small business profits would climb to nearly 80%. These lower after-tax profits would mean fewer jobs.
To put it another way, the workers who will gain health insurance from ObamaCare will pay the steepest price for it in either a shrinking pay check, or no job at all.
Workers will pay for the new health-care payroll levy.
The Wall Street Journal, page A16, Jul 30, 2009
Even many Democrats are revolting against Speaker Nancy Pelosi’s 5.4% income surtax to finance ObamaCare, but another tax in her House bill isn’t getting enough attention. To wit, the up to 10-percentage point payroll tax increase on workers and businesses that don’t provide health insurance. This should put to rest the illusion that no one making more than $250,000 in income will pay higher taxes.
To understand why, consider how the Pelosi jobs tax works. Under the House bill, firms with employee payroll of above $250,000 without a company health plan would pay a tax starting at 2% of wages per employee. That rate would quickly rise to 8% on firms with total payroll of $400,000 or more. A tax credit would help very small businesses adjust to the new costs, but even a firm with a handful of workers is likely to be subject to this payroll levy. As we went to press, Blue Dogs were taking credit for pushing those payroll amounts up to $500,000 and $750,0000, but those are still small employers.
So who bears the burden of this tax? The economic research is close to unanimous that a payroll tax is a tax on labor and is thus shouldered mostly if not entirely by workers. Employers merely collect the tax and then pass along its costs in lower wages or benefits. This is the view of the Democratic-controlled Congressional Budget Office, which advised on July 13: “If employers who did not offer health insurance were required to pay a fee, employee’s wages and other forms of compensation would generally decline by the amount of that fee from what they otherwise would have been.”
To put this in actual dollars, a worker earning, say, $70,000 a year could lose some $5,600 in take home pay to cover the costs of ObamaCare. And, by the way, this is in addition to the 2.5% tax that the individual worker would have to pay on gross income, if he doesn’t buy the high-priced health insurance that the government will mandate. In sum, that’s a near 10-percentage point tax on wages and salaries on top of the 15% that already hits workers to finance Medicare and Social Security.
Even Democrats are aware that his tax would come out of the wallets of the very workers they pretend to be helping, so they inserted a provision on page 147 of the bill prohibiting firms from cutting salaries to pay the tax. Thus they figure they can decree that wages cannot fall even as costs rise. Of course, all this means is that businesses would lay off some workers, or hire fewer new ones, or pay lower starting salaries or other benefits to the workers they do hire.
Cornell economists Richard Burkhauser and Kosali Simon predicted in a 2007 National Bureau of Economic Research study that a payroll tax increase of about this magnitude plus the recent minimum wage increase will translate into hundreds of thousands of lost jobs for those with low wages. Pay or play schemes, says Mr. Burkauser, “wind up hurting the very low-wage workers they are supposed to help.” The CBO agrees, arguing that play or pay policies “could reduce the hiring of low-wage workers, whose wages could not fall by the full cost of health insurance or a substantial play-or-pay fee if they were close to the minimum wage.”
To make matters worse, many workers and firms would have to pay the Pelosi tax even if the employer already provides health insurance. That’s because the House bill requires firms to pay at least 72.5% of health-insurance premiums for individual workers and 65% for families in order to avoid the tax. A Kaiser Family Foundation survey in 2008 found that about three in five small businesses fail to meet the Pelosi test and will have to pay the tax. In these instances, the businesses will have every incentive simply to drop their coverage.
A new study by Sageworks, Inc., a financial consulting firm, runs the numbers on the income statements of actual companies. It looks at three types of firms with at least $5 million in sales: a retailer, a construction company and a small manufacturer. The companies each have total payroll of between $750,000 and $1 million a year. Assuming the firms absorb the cost of the payroll tax, their net profits fall by one-third on average. That is on top of the 45% income tax and surtax that many small business owners would pay as part of the House tax scheme, so the total reduction in some small business profits would climb to nearly 80%. These lower after-tax profits would mean fewer jobs.
To put it another way, the workers who will gain health insurance from ObamaCare will pay the steepest price for it in either a shrinking pay check, or no job at all.
Revenge of the ‘Shoe Bomber’ - The terrorist sues to resume his jihad from prison, the Fed Gov't caves in
Revenge of the ‘Shoe Bomber’. By DEBRA BURLINGAME
The terrorist sues to resume his jihad from prison. The Obama administration caves in.
WSJ, Jul 30, 2009
Last May at the National Archives, President Barack Obama warned that “more mistakes would occur” if Congress continued to politicize terrorist detention policy and the closure of Guantanamo Bay. “[I]f we refuse to deal with those issues today,” he predicted, “then I guarantee you, they will be an albatross around our efforts to combat terrorism in the future.”
On June 17, at the Administrative Maximum (ADX) penitentiary in Florence, Colo., one of those albatrosses, inmate number 24079-038, began his day with a whole new range of possibilities. Eight days earlier, the U.S. Attorney’s office in Denver filed notice in federal court that the Special Administrative Measures (SAMs) which applied to that prisoner—Richard C. Reid, a.k.a. the “Shoe Bomber”—were being allowed to expire. SAMs are security directives, renewable yearly, issued by the attorney general when “there is a substantial risk that a prisoner’s communications, correspondence or contacts with persons could result in death or serious bodily injury” to others.
Reid was arrested in 2001 for attempting to blow up American Airlines Flight 63 from Paris to Miami with 197 passengers and crew on board. Why had Attorney General Eric Holder decided not to renew his security measures, kept in place since 2002?
According to court documents filed in a 2007 civil lawsuit against the government, Reid claimed that SAMs violated his First Amendment right of free speech and free exercise of religion. In a hand-written complaint, he asserted that he was being illegally prevented from performing daily “group prayers in a manner prescribed by my religion.” Yet the list of Reid’s potential fellow congregants at ADX Florence reads like a Who’s Who of al Qaeda’s most dangerous members: Ramzi Yousef and his three co-conspirators in the 1993 World Trade Center bombing; 9/11 conspirator Zacarias Moussaoui; “Millennium bomber” Ahmed Ressam; “Dirty bomber” Jose Padilla; Wadih el-Hage, Osama Bin Laden’s personal secretary, convicted in the 1998 U.S. Embassy bombing that killed 247 people.
In December 2008, the Department of Justice filed a motion to dismiss Reid’s lawsuit. It cited the example of ADX inmate Ahmed Ajaj as an illustration of “the dangers inherent in permitting a group of inmates, of like mind in their opposition to the United States, to congregate for a prayer service conducted in a language not understood by most correctional officers.”
While imprisoned for passport fraud in 1992, Ajaj assisted in the plans to destroy the World Trade Center on Feb. 26, 1993, making phone calls to Ramzi Yousef and speaking in code to elude law enforcement monitoring. Ajaj tried to get his “training kit” to Yousef, which included videotapes and notes he had taken on bomb-making while attending a terrorist camp on the Pakistan-Afghanistan border.
Reid’s own SAMs on correspondence had been tightened in 2006 after the shocking discovery that three of the 1993 World Trade Center bombers at ADX, not subject to security directives, had sent 90 letters to overseas terrorist networks, including those associated with the Madrid train bombing. The letters, exhorting jihad and praising Osama bin Laden as “my hero of this generation,” were printed in Arabic newspapers and brandished like trophies to recruit new members.
When setting restrictions on inmate religious practice, the Bureau of Prisons need only meet a reasonableness standard, a very low bar in the case of Muslim terrorists. Justice would easily have prevailed against Reid’s lawsuit; nevertheless it dropped the security measures on Reid after he missed 58 meals in a hunger strike that required medical intervention and forced feeding in April.
On July 6, Justice Department lawyers informed the court that Reid will be given a “new placement” in a “post-SAMs setting.” Whether that entails stepped down security in a different unit or transfer to a less secure facility, the Bureau of Prisons won’t say, and Justice refuses to comment.
Mr. Obama likes to observe that “no one has escaped from supermax,” but if Reid is moved from ADX Florence, he will be the first convicted terrorist to use the First Amendment to sue his way out.
What drove the Obama administration’s decision to cave in to Reid’s demands? The president after all has repeatedly pitched supermax and the federal prison system as a secure alternative to Guantanamo, citing the fact that it handles “all manner of violent and dangerous criminals.” Yet the last thing he needs, as his administration engages in its hasty effort to shut Gitmo down by a fast-approaching deadline, is for lawyers and human-rights activists to use a hunger-striking, near-death prisoner to launch a propaganda campaign fashioned right out of the Gitmo detainees’ playbook. Lawyers who shamelessly compared Gitmo to Nazi concentration camps would think nothing of casting supermax as the next “symbol of America’s shame” and a “rallying cry for our enemies.”
From the outset of his administration, Mr. Obama has been trying to thread the needle between national security policy and his ideological affinity with civil liberties lawyers and human-rights activists, meeting with and consulting them prior to making detainee-related decisions. Though his executive order shutting Guantanamo closely followed the blueprint provided by Human Rights First, leaders of key organizations were stunned when he revealed in an awkward, off-the-record meeting the day before his public announcement at the National Archives that he planned to continue President George W. Bush’s policy of preventive detention.
Michael Ratner, whose human rights organization, the Center for Constitutional Rights, filed the first successful detainee lawsuit in 2002, called Mr. Obama’s proposed U.S. detention scheme a “road to perdition” and nothing more than a plan to “repackage Guantanamo.” Leaders of the so-called Gitmo bar appear poised to launch a flurry of legal challenges the moment the last departing detainee’s feet touch U.S. soil.
In January, the American Civil Liberties Union (ACLU) of Colorado issued a statement saying that conditions at supermax are “simply another form of torture” worse than Gitmo which “make a mockery of ‘innocent until proven guilty.’” Last month, the ACLU filed a civil lawsuit mirroring Reid’s religious rights claim on behalf of two terrorism inmates held at the Communications Management Unit inside a medium security prison in Terre Haute, Ind.
One of those inmates is Enaam Arnaout, a Syrian-born U.S. citizen serving a 10-year sentence for diverting Muslim charity money to militant Islamic groups in Bosnia and Chechnya. The other, Randall Royer, is serving 20 years for his role recruiting young Muslims in the “Virginia Jihad Network,” a group that used paintball games in 2000-2001 to train for holy war.
Mr. Obama has repeatedly suggested that the security challenge of bringing more than 100 trained and dangerous terrorists onto U.S. soil can be solved by simply installing them in an impenetrable fortress. This view is either disingenuous or naïve. The militant Islamists at Guantanamo too dangerous to release believe that their resistance behind the wire is a continuation of holy war. There is every reason to believe they will continue their jihad once they have been transported to U.S. soil where certain federal judges have signaled a willingness to confer upon them even more rights.
The position of civil rights activists with regard to these prisoners is plain. “If they cannot be convicted,” says ACLU lawyer Jameel Jaffer, “then you release them.”
Meanwhile, in order to appease political constituencies both here and abroad, the Obama administration is moving full steam ahead, operating on the false premise that giving more civil liberties to religious fanatics bent on destroying Western civilization will make a difference in the Muslim world. In a letter sent to his father as he began his hunger strike, Reid provided a preview of how he will exercise his newly enlarged free speech rights, calling Mr. Obama a “hypocrite” who is “no better than George Bush.” His lawsuit remains active while the Department of Justice works out a settlement that satisfies the man who declared, “I am at war with America.”
Ms. Burlingame, a former attorney and a director of the National September 11 Memorial Foundation, is the sister of Charles F. “Chic” Burlingame III, the pilot of American Airlines Flight 77, which was crashed into the Pentagon on Sept. 11, 2001.
The terrorist sues to resume his jihad from prison. The Obama administration caves in.
WSJ, Jul 30, 2009
Last May at the National Archives, President Barack Obama warned that “more mistakes would occur” if Congress continued to politicize terrorist detention policy and the closure of Guantanamo Bay. “[I]f we refuse to deal with those issues today,” he predicted, “then I guarantee you, they will be an albatross around our efforts to combat terrorism in the future.”
On June 17, at the Administrative Maximum (ADX) penitentiary in Florence, Colo., one of those albatrosses, inmate number 24079-038, began his day with a whole new range of possibilities. Eight days earlier, the U.S. Attorney’s office in Denver filed notice in federal court that the Special Administrative Measures (SAMs) which applied to that prisoner—Richard C. Reid, a.k.a. the “Shoe Bomber”—were being allowed to expire. SAMs are security directives, renewable yearly, issued by the attorney general when “there is a substantial risk that a prisoner’s communications, correspondence or contacts with persons could result in death or serious bodily injury” to others.
Reid was arrested in 2001 for attempting to blow up American Airlines Flight 63 from Paris to Miami with 197 passengers and crew on board. Why had Attorney General Eric Holder decided not to renew his security measures, kept in place since 2002?
According to court documents filed in a 2007 civil lawsuit against the government, Reid claimed that SAMs violated his First Amendment right of free speech and free exercise of religion. In a hand-written complaint, he asserted that he was being illegally prevented from performing daily “group prayers in a manner prescribed by my religion.” Yet the list of Reid’s potential fellow congregants at ADX Florence reads like a Who’s Who of al Qaeda’s most dangerous members: Ramzi Yousef and his three co-conspirators in the 1993 World Trade Center bombing; 9/11 conspirator Zacarias Moussaoui; “Millennium bomber” Ahmed Ressam; “Dirty bomber” Jose Padilla; Wadih el-Hage, Osama Bin Laden’s personal secretary, convicted in the 1998 U.S. Embassy bombing that killed 247 people.
In December 2008, the Department of Justice filed a motion to dismiss Reid’s lawsuit. It cited the example of ADX inmate Ahmed Ajaj as an illustration of “the dangers inherent in permitting a group of inmates, of like mind in their opposition to the United States, to congregate for a prayer service conducted in a language not understood by most correctional officers.”
While imprisoned for passport fraud in 1992, Ajaj assisted in the plans to destroy the World Trade Center on Feb. 26, 1993, making phone calls to Ramzi Yousef and speaking in code to elude law enforcement monitoring. Ajaj tried to get his “training kit” to Yousef, which included videotapes and notes he had taken on bomb-making while attending a terrorist camp on the Pakistan-Afghanistan border.
Reid’s own SAMs on correspondence had been tightened in 2006 after the shocking discovery that three of the 1993 World Trade Center bombers at ADX, not subject to security directives, had sent 90 letters to overseas terrorist networks, including those associated with the Madrid train bombing. The letters, exhorting jihad and praising Osama bin Laden as “my hero of this generation,” were printed in Arabic newspapers and brandished like trophies to recruit new members.
When setting restrictions on inmate religious practice, the Bureau of Prisons need only meet a reasonableness standard, a very low bar in the case of Muslim terrorists. Justice would easily have prevailed against Reid’s lawsuit; nevertheless it dropped the security measures on Reid after he missed 58 meals in a hunger strike that required medical intervention and forced feeding in April.
On July 6, Justice Department lawyers informed the court that Reid will be given a “new placement” in a “post-SAMs setting.” Whether that entails stepped down security in a different unit or transfer to a less secure facility, the Bureau of Prisons won’t say, and Justice refuses to comment.
Mr. Obama likes to observe that “no one has escaped from supermax,” but if Reid is moved from ADX Florence, he will be the first convicted terrorist to use the First Amendment to sue his way out.
What drove the Obama administration’s decision to cave in to Reid’s demands? The president after all has repeatedly pitched supermax and the federal prison system as a secure alternative to Guantanamo, citing the fact that it handles “all manner of violent and dangerous criminals.” Yet the last thing he needs, as his administration engages in its hasty effort to shut Gitmo down by a fast-approaching deadline, is for lawyers and human-rights activists to use a hunger-striking, near-death prisoner to launch a propaganda campaign fashioned right out of the Gitmo detainees’ playbook. Lawyers who shamelessly compared Gitmo to Nazi concentration camps would think nothing of casting supermax as the next “symbol of America’s shame” and a “rallying cry for our enemies.”
From the outset of his administration, Mr. Obama has been trying to thread the needle between national security policy and his ideological affinity with civil liberties lawyers and human-rights activists, meeting with and consulting them prior to making detainee-related decisions. Though his executive order shutting Guantanamo closely followed the blueprint provided by Human Rights First, leaders of key organizations were stunned when he revealed in an awkward, off-the-record meeting the day before his public announcement at the National Archives that he planned to continue President George W. Bush’s policy of preventive detention.
Michael Ratner, whose human rights organization, the Center for Constitutional Rights, filed the first successful detainee lawsuit in 2002, called Mr. Obama’s proposed U.S. detention scheme a “road to perdition” and nothing more than a plan to “repackage Guantanamo.” Leaders of the so-called Gitmo bar appear poised to launch a flurry of legal challenges the moment the last departing detainee’s feet touch U.S. soil.
In January, the American Civil Liberties Union (ACLU) of Colorado issued a statement saying that conditions at supermax are “simply another form of torture” worse than Gitmo which “make a mockery of ‘innocent until proven guilty.’” Last month, the ACLU filed a civil lawsuit mirroring Reid’s religious rights claim on behalf of two terrorism inmates held at the Communications Management Unit inside a medium security prison in Terre Haute, Ind.
One of those inmates is Enaam Arnaout, a Syrian-born U.S. citizen serving a 10-year sentence for diverting Muslim charity money to militant Islamic groups in Bosnia and Chechnya. The other, Randall Royer, is serving 20 years for his role recruiting young Muslims in the “Virginia Jihad Network,” a group that used paintball games in 2000-2001 to train for holy war.
Mr. Obama has repeatedly suggested that the security challenge of bringing more than 100 trained and dangerous terrorists onto U.S. soil can be solved by simply installing them in an impenetrable fortress. This view is either disingenuous or naïve. The militant Islamists at Guantanamo too dangerous to release believe that their resistance behind the wire is a continuation of holy war. There is every reason to believe they will continue their jihad once they have been transported to U.S. soil where certain federal judges have signaled a willingness to confer upon them even more rights.
The position of civil rights activists with regard to these prisoners is plain. “If they cannot be convicted,” says ACLU lawyer Jameel Jaffer, “then you release them.”
Meanwhile, in order to appease political constituencies both here and abroad, the Obama administration is moving full steam ahead, operating on the false premise that giving more civil liberties to religious fanatics bent on destroying Western civilization will make a difference in the Muslim world. In a letter sent to his father as he began his hunger strike, Reid provided a preview of how he will exercise his newly enlarged free speech rights, calling Mr. Obama a “hypocrite” who is “no better than George Bush.” His lawsuit remains active while the Department of Justice works out a settlement that satisfies the man who declared, “I am at war with America.”
Ms. Burlingame, a former attorney and a director of the National September 11 Memorial Foundation, is the sister of Charles F. “Chic” Burlingame III, the pilot of American Airlines Flight 77, which was crashed into the Pentagon on Sept. 11, 2001.
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