Soak the Rich, Lose the Rich. By Arthur Laffer and Stephen Moore
Americans know how to use the moving van to escape high taxes.
WSJ, May 18, 2009
With states facing nearly $100 billion in combined budget deficits this year, we're seeing more governors than ever proposing the Barack Obama solution to balancing the budget: Soak the rich. Lawmakers in California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, New York and Oregon want to raise income tax rates on the top 1% or 2% or 5% of their citizens. New Illinois Gov. Patrick Quinn wants a 50% increase in the income tax rate on the wealthy because this is the "fair" way to close his state's gaping deficit.
Mr. Quinn and other tax-raising governors have been emboldened by recent studies by left-wing groups like the Center for Budget and Policy Priorities that suggest that "tax increases, particularly tax increases on higher-income families, may be the best available option." A recent letter to New York Gov. David Paterson signed by 100 economists advises the Empire State to "raise tax rates for high income families right away."
Here's the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.
And the evidence that we discovered in our new study for the American Legislative Exchange Council, "Rich States, Poor States," published in March, shows that Americans are more sensitive to high taxes than ever before. The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.
Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.
Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies -- old and new -- have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.
Martin Feldstein, Harvard economist and former president of the National Bureau of Economic Research, co-authored a famous study in 1998 called "Can State Taxes Redistribute Income?" This should be required reading for today's state legislators. It concludes: "Since individuals can avoid unfavorable taxes by migrating to jurisdictions that offer more favorable tax conditions, a relatively unfavorable tax will cause gross wages to adjust. . . . A more progressive tax thus induces firms to hire fewer high skilled employees and to hire more low skilled employees."
More recently, Barry W. Poulson of the University of Colorado last year examined many factors that explain why some states grew richer than others from 1964 to 2004 and found "a significant negative impact of higher marginal tax rates on state economic growth." In other words, soaking the rich doesn't work. To the contrary, middle-class workers end up taking the hit.
Finally, there is the issue of whether high-income people move away from states that have high income-tax rates. Examining IRS tax return data by state, E.J. McMahon, a fiscal expert at the Manhattan Institute, measured the impact of large income-tax rate increases on the rich ($200,000 income or more) in Connecticut, which raised its tax rate in 2003 to 5% from 4.5%; in New Jersey, which raised its rate in 2004 to 8.97% from 6.35%; and in New York, which raised its tax rate in 2003 to 7.7% from 6.85%. Over the period 2002-2005, in each of these states the "soak the rich" tax hike was followed by a significant reduction in the number of rich people paying taxes in these states relative to the national average. Amazingly, these three states ranked 46th, 49th and 50th among all states in the percentage increase in wealthy tax filers in the years after they tried to soak the rich.
This result was all the more remarkable given that these were years when the stock market boomed and Wall Street gains were in the trillions of dollars. Examining data from a 2008 Princeton study on the New Jersey tax hike on the wealthy, we found that there were 4,000 missing half-millionaires in New Jersey after that tax took effect. New Jersey now has one of the largest budget deficits in the nation.
We believe there are three unintended consequences from states raising tax rates on the rich. First, some rich residents sell their homes and leave the state; second, those who stay in the state report less taxable income on their tax returns; and third, some rich people choose not to locate in a high-tax state. Since many rich people also tend to be successful business owners, jobs leave with them or they never arrive in the first place. This is why high income-tax states have such a tough time creating net new jobs for low-income residents and college graduates.
Those who disapprove of tax competition complain that lower state taxes only create a zero-sum competition where states "race to the bottom" and cut services to the poor as taxes fall to zero. They say that tax cutting inevitably means lower quality schools and police protection as lower tax rates mean starvation of public services.
They're wrong, and New Hampshire is our favorite illustration. The Live Free or Die State has no income or sales tax, yet it has high-quality schools and excellent public services. Students in New Hampshire public schools achieve the fourth-highest test scores in the nation -- even though the state spends about $1,000 a year less per resident on state and local government than the average state and, incredibly, $5,000 less per person than New York. And on the other side of the ledger, California in 2007 had the highest-paid classroom teachers in the nation, and yet the Golden State had the second-lowest test scores.
Or consider the fiasco of New Jersey. In the early 1960s, the state had no state income tax and no state sales tax. It was a rapidly growing state attracting people from everywhere and running budget surpluses. Today its income and sales taxes are among the highest in the nation yet it suffers from perpetual deficits and its schools rank among the worst in the nation -- much worse than those in New Hampshire. Most of the massive infusion of tax dollars over the past 40 years has simply enriched the public-employee unions in the Garden State. People are fleeing the state in droves.
One last point: States aren't simply competing with each other. As Texas Gov. Rick Perry recently told us, "Our state is competing with Germany, France, Japan and China for business. We'd better have a pro-growth tax system or those American jobs will be out-sourced." Gov. Perry and Texas have the jobs and prosperity model exactly right. Texas created more new jobs in 2008 than all other 49 states combined. And Texas is the only state other than Georgia and North Dakota that is cutting taxes this year.
The Texas economic model makes a whole lot more sense than the New Jersey model, and we hope the politicians in California, Delaware, Illinois, Minnesota and New York realize this before it's too late.
Mr. Laffer is president of Laffer Associates. Mr. Moore is senior economics writer for the Wall Street Journal. They are co-authors of "Rich States, Poor States" (American Legislative Exchange Council, 2009).
Monday, May 18, 2009
Netanyahu and Obama Have a Shared Interest in Iran
Netanyahu and Obama Have a Shared Interest in Iran. By R M Gerecht
The success of both men depends on stopping the mullahs from getting the bomb.
WSJ, May 18, 2009
Can the United States and its European allies peacefully prevent Iran from developing nuclear weapons? And if not, would Israel try to do so militarily, even if doing so greatly angered President Barack Obama? Israeli Prime Minister Benjamin Netanyahu is in Washington today. These questions could well make or break his premiership and Mr. Obama's presidency.
With increasing vigor and resources, the clerical regime has advanced a massive -- and until 2002 clandestine -- program for producing fissile material. It's a good bet that the Europeans have never really believed that Iran could be deterred from developing a bomb by either engagement or sanctions acceptable to all of the EU's members. Nevertheless, the Europeans have tried, offering generous trade and credit terms while psychologically stroking the Islamic Republic.
Yet as Thérèse Delpech, a leading nonproliferation expert at France's Atomic Energy Commission, warned last October at a Brookings Institution lecture, "We [the Europeans] have negotiated during five years with the Iranians . . . and we came to the conclusion that they are not interested at all in negotiating, but . . . [only] in buying time for their military program." In those five years, she also noted, Tehran never implied that if only the Americans were at the table the clerical regime would be amenable to compromise.
We shouldn't be surprised if the Israelis reach a conclusion at odds with Washington's near-consensus against pre-emptive strikes on Iran's nuclear facilities. In 1981, Jerusalem certainly surmised that a raid against Iraq's Osirak nuclear reactor could make Saddam Hussein furious and that he possessed conventional and unconventional means of getting even. But they went ahead and destroyed the reactor.
The consensus in Israel is just as widespread about the correctness of last year's strike against the secret North Korean-designed reactor at Dir A-Zur in Syria -- a project that may well have had Iranian backing. Prime Minister Ehud Olmert ordered the attack although the Bush administration opposed it. And in 1967, Israelis believed that pre-emptive action saved their nation from an Arab-initiated, multifront offensive that could have proved lethal.
For the Israelis today, Iran has become an unrivalled threat. Although anti-Semitism has been widespread in the Middle East since the 1930s, the strain among Tehran's ruling elite is akin to what European Jews observed in Austria, Germany and Russia in the early 20th century.
Americans and Europeans don't like to dwell on the problem of anti-Semitism in the region, preferring to see it as tangential to geopolitics and economics and treatable by the creation of a Palestinian state. But Israelis are acutely conscious that unrelenting anti-Semitism and anti-Zionism are important factors in the Shiite Islamic Republic's increasing popularity among Arab Sunni fundamentalists -- especially in Egypt, where the Muslim Brotherhood would probably triumph in a free election. In Iran, the anti-Jewish passion among the revolutionary elite appears to have actually increased as ordinary Iranians have soured on theocracy and state-sanctioned ideology.
Never before have the Israelis had to confront a rabidly anti-Semitic enemy with nuclear weapons and a long track record of supporting deadly killers such as Hezbollah and Hamas. Americans and Europeans can seem to Israelis all-too-nonchalant about the challenge they face -- and Western counsel to calm down and get used to the idea of mullahs with nukes doesn't sit well with a people who have already lived through the unthinkable.
The Western advice may be sage: The threat of an Israeli retaliatory nuclear strike might be a sufficient threat to discourage Tehran's mullahs from using a nuclear weapon directly, or from leveraging its protective nuclear umbrella indirectly to more aggressively support anti-Israeli jihadists. But Iran's penchant for terrorism, its extensive ties to both radical Sunnis and Shiites, its vibrant anti-Semitism, and the likelihood that Tehran will become more aggressive (as has Pakistan in Kashmir) with an atom bomb in its arsenal doesn't reinforce the case for patience and perseverance.
Consider: If Saddam Hussein had had a nuke in 1990, would George H.W. Bush have risked war? Consider as well the near certainty that ultra-Sunni Saudi Arabia will go nuclear in response to a Shiite Persian bomb. The prospect of another virulently anti-Semitic Arab state -- deeply permeated with supporters of al Qaeda -- possessing an atomic weapon cannot comfort Jerusalem. A pre-emptive strike offers Israel a chance that this nuclear contagion can be stopped.
A tidal wave of Western sanctions might convince the Israelis that the Americans and Europeans are finally serious about countering Tehran. Sanctions against Iran's importation of gasoline -- the country lacks sufficient refining capacity -- could shock the regime. The bipartisan Iran Refined Petroleum Sanctions Act, recently introduced in Congress, gives the White House the authority to make foreign companies choose between doing business with the U.S. or exporting gasoline to Iran. A European effort to cripple Iran's production and transport of liquefied gas -- an enormous future financial reservoir for Iran given its reserves -- could cause a political earthquake in Tehran. The mullahs just might suspend uranium enrichment.
But the Obama administration appears deeply conflicted about using "sticks." Is it willing to coerce the Europeans into implementing economy-strangling energy sanctions if the Europeans prove unwilling to punish Iran severely? The administration appears to be entertaining a German- and British-backed idea of allowing Tehran to proceed with uranium enrichment -- in return for which sanctions against the regime would be cancelled -- if it is "monitored." Yet even if Iran would agree to intrusive monitoring, the Israelis -- and others in the region -- would surely view such a concession as one big step closer to an Iranian bomb.
Mr. Obama has repeatedly described Iran's nuclear ambitions as "unacceptable" and warned against the threat that a nuclear-armed clerical regime poses to the world. Yet the administration has tried to keep Iran, and its Iran point man Dennis Ross, out of the headlines. One suspects that this is not because the administration is devising an all-encompassing grand bargain, but because it cannot get the clerical regime to meaningfully engage.
One can sympathize with the reluctance of this administration, like its predecessor, to confront the mullahs. But whether the Israelis strike or not, another storm is gathering in the Middle East. It could prove far more tumultuous than the earlier ones in Iraq.
Mr. Gerecht, a former Central Intelligence Agency officer, is a senior fellow at the Foundation for Defense of Democracies.
The success of both men depends on stopping the mullahs from getting the bomb.
WSJ, May 18, 2009
Can the United States and its European allies peacefully prevent Iran from developing nuclear weapons? And if not, would Israel try to do so militarily, even if doing so greatly angered President Barack Obama? Israeli Prime Minister Benjamin Netanyahu is in Washington today. These questions could well make or break his premiership and Mr. Obama's presidency.
With increasing vigor and resources, the clerical regime has advanced a massive -- and until 2002 clandestine -- program for producing fissile material. It's a good bet that the Europeans have never really believed that Iran could be deterred from developing a bomb by either engagement or sanctions acceptable to all of the EU's members. Nevertheless, the Europeans have tried, offering generous trade and credit terms while psychologically stroking the Islamic Republic.
Yet as Thérèse Delpech, a leading nonproliferation expert at France's Atomic Energy Commission, warned last October at a Brookings Institution lecture, "We [the Europeans] have negotiated during five years with the Iranians . . . and we came to the conclusion that they are not interested at all in negotiating, but . . . [only] in buying time for their military program." In those five years, she also noted, Tehran never implied that if only the Americans were at the table the clerical regime would be amenable to compromise.
We shouldn't be surprised if the Israelis reach a conclusion at odds with Washington's near-consensus against pre-emptive strikes on Iran's nuclear facilities. In 1981, Jerusalem certainly surmised that a raid against Iraq's Osirak nuclear reactor could make Saddam Hussein furious and that he possessed conventional and unconventional means of getting even. But they went ahead and destroyed the reactor.
The consensus in Israel is just as widespread about the correctness of last year's strike against the secret North Korean-designed reactor at Dir A-Zur in Syria -- a project that may well have had Iranian backing. Prime Minister Ehud Olmert ordered the attack although the Bush administration opposed it. And in 1967, Israelis believed that pre-emptive action saved their nation from an Arab-initiated, multifront offensive that could have proved lethal.
For the Israelis today, Iran has become an unrivalled threat. Although anti-Semitism has been widespread in the Middle East since the 1930s, the strain among Tehran's ruling elite is akin to what European Jews observed in Austria, Germany and Russia in the early 20th century.
Americans and Europeans don't like to dwell on the problem of anti-Semitism in the region, preferring to see it as tangential to geopolitics and economics and treatable by the creation of a Palestinian state. But Israelis are acutely conscious that unrelenting anti-Semitism and anti-Zionism are important factors in the Shiite Islamic Republic's increasing popularity among Arab Sunni fundamentalists -- especially in Egypt, where the Muslim Brotherhood would probably triumph in a free election. In Iran, the anti-Jewish passion among the revolutionary elite appears to have actually increased as ordinary Iranians have soured on theocracy and state-sanctioned ideology.
Never before have the Israelis had to confront a rabidly anti-Semitic enemy with nuclear weapons and a long track record of supporting deadly killers such as Hezbollah and Hamas. Americans and Europeans can seem to Israelis all-too-nonchalant about the challenge they face -- and Western counsel to calm down and get used to the idea of mullahs with nukes doesn't sit well with a people who have already lived through the unthinkable.
The Western advice may be sage: The threat of an Israeli retaliatory nuclear strike might be a sufficient threat to discourage Tehran's mullahs from using a nuclear weapon directly, or from leveraging its protective nuclear umbrella indirectly to more aggressively support anti-Israeli jihadists. But Iran's penchant for terrorism, its extensive ties to both radical Sunnis and Shiites, its vibrant anti-Semitism, and the likelihood that Tehran will become more aggressive (as has Pakistan in Kashmir) with an atom bomb in its arsenal doesn't reinforce the case for patience and perseverance.
Consider: If Saddam Hussein had had a nuke in 1990, would George H.W. Bush have risked war? Consider as well the near certainty that ultra-Sunni Saudi Arabia will go nuclear in response to a Shiite Persian bomb. The prospect of another virulently anti-Semitic Arab state -- deeply permeated with supporters of al Qaeda -- possessing an atomic weapon cannot comfort Jerusalem. A pre-emptive strike offers Israel a chance that this nuclear contagion can be stopped.
A tidal wave of Western sanctions might convince the Israelis that the Americans and Europeans are finally serious about countering Tehran. Sanctions against Iran's importation of gasoline -- the country lacks sufficient refining capacity -- could shock the regime. The bipartisan Iran Refined Petroleum Sanctions Act, recently introduced in Congress, gives the White House the authority to make foreign companies choose between doing business with the U.S. or exporting gasoline to Iran. A European effort to cripple Iran's production and transport of liquefied gas -- an enormous future financial reservoir for Iran given its reserves -- could cause a political earthquake in Tehran. The mullahs just might suspend uranium enrichment.
But the Obama administration appears deeply conflicted about using "sticks." Is it willing to coerce the Europeans into implementing economy-strangling energy sanctions if the Europeans prove unwilling to punish Iran severely? The administration appears to be entertaining a German- and British-backed idea of allowing Tehran to proceed with uranium enrichment -- in return for which sanctions against the regime would be cancelled -- if it is "monitored." Yet even if Iran would agree to intrusive monitoring, the Israelis -- and others in the region -- would surely view such a concession as one big step closer to an Iranian bomb.
Mr. Obama has repeatedly described Iran's nuclear ambitions as "unacceptable" and warned against the threat that a nuclear-armed clerical regime poses to the world. Yet the administration has tried to keep Iran, and its Iran point man Dennis Ross, out of the headlines. One suspects that this is not because the administration is devising an all-encompassing grand bargain, but because it cannot get the clerical regime to meaningfully engage.
One can sympathize with the reluctance of this administration, like its predecessor, to confront the mullahs. But whether the Israelis strike or not, another storm is gathering in the Middle East. It could prove far more tumultuous than the earlier ones in Iraq.
Mr. Gerecht, a former Central Intelligence Agency officer, is a senior fellow at the Foundation for Defense of Democracies.
WSJ Editorial Page: Your latest donation to the IMF
What's Another $108 Billion? WSJ Editorial
Your latest donation to the IMF.
WSJ, May 18, 2009
Ah, transparency. Perhaps you've read that the new era of candor in government spending has arrived. Except, apparently, when it comes to the $750 billion that the Obama Administration and other nations have agreed to provide the International Monetary Fund. In this case, it's all opacity all the time.
At the G-20 meeting in April, the world's big shots promised to provide $500 billion under credit lines to the IMF known as "new arrangements to borrow." The U.S. share was said to be $100 billion, which last week we learned is actually $108 billion. The Obama Administration is now asking Congress to appropriate the cash, except that the Congressional Budget Office is only scoring the cost at $5 billion. How so? Because the transaction is being called an "exchange of assets," which means the U.S. gives the IMF the $108 billion and the IMF gives the U.S. a promissory note. Which raises a question: If it costs so little, why not make it $200 billion. Or a trillion? It's free!
Of course it is not. The loan carries risk and that risk may be higher than in the past. IMF rules have long been clear that the IMF's "new arrangement" funds can only be used in an emergency that threatens the stability of the "international monetary system." There has also been an understanding that the money will be repaid in short order.
But in April the G-20 announced that the credit line is to be "expanded and more flexible." An IMF spokesman says the idea of increasing flexibility is that the "money becomes part of the general resources of the fund and if the managing director decides that the fund needs to step in somewhere, it can." This makes it less like an emergency credit line and more like a general contribution to the IMF's overall money pot.
But look on the bright side: At least there's a chance this money will be repaid. Not so with the other big commitment President Obama made in London. We refer to the U.S. portion of the eight-fold increase in the IMF's special drawing rights, or SDRs. SDRs are IMF credit allocations redeemable for subsidized loans from hard-currency fund countries. These loans are almost never repaid.
Prior to last week, there were about $32 billion in SDRs, the U.S. portion of which costs American taxpayers more than $300 million a year. For 12 years Congress has refused to go along with an IMF request to double the SDR account, but Mr. Obama swept all that debate under the carpet in London and agreed to take the total to $250 billion. The U.S. exposure? A cool $40 billion. And since all IMF members are eligible, Iran, Zimbabwe, Sudan, Venezuela and Burma are all candidates for Mr. Obama's generosity.
Speaking of inmates running the asylum, certain "emerging-market" members -- such as China, Brazil, Russia and India -- announced they would not join the U.S. in providing more IMF resources via credit lines for countries in crisis. Instead, they want the fund to issue short-term notes to finance their "contribution," which they could later oh-so-conveniently off-load in the secondary market. These notes will have the implicit guarantee of the U.S., adding one more liability to Washington's balance sheet.
The wheels are greased in Congress to pass this before the public notices, but South Carolina Republican Jim DeMint is trying to force a Senate floor vote on the $108 billion. He'll lose, but at least he's honoring Mr. Obama's pledge of transparency.
Your latest donation to the IMF.
WSJ, May 18, 2009
Ah, transparency. Perhaps you've read that the new era of candor in government spending has arrived. Except, apparently, when it comes to the $750 billion that the Obama Administration and other nations have agreed to provide the International Monetary Fund. In this case, it's all opacity all the time.
At the G-20 meeting in April, the world's big shots promised to provide $500 billion under credit lines to the IMF known as "new arrangements to borrow." The U.S. share was said to be $100 billion, which last week we learned is actually $108 billion. The Obama Administration is now asking Congress to appropriate the cash, except that the Congressional Budget Office is only scoring the cost at $5 billion. How so? Because the transaction is being called an "exchange of assets," which means the U.S. gives the IMF the $108 billion and the IMF gives the U.S. a promissory note. Which raises a question: If it costs so little, why not make it $200 billion. Or a trillion? It's free!
Of course it is not. The loan carries risk and that risk may be higher than in the past. IMF rules have long been clear that the IMF's "new arrangement" funds can only be used in an emergency that threatens the stability of the "international monetary system." There has also been an understanding that the money will be repaid in short order.
But in April the G-20 announced that the credit line is to be "expanded and more flexible." An IMF spokesman says the idea of increasing flexibility is that the "money becomes part of the general resources of the fund and if the managing director decides that the fund needs to step in somewhere, it can." This makes it less like an emergency credit line and more like a general contribution to the IMF's overall money pot.
But look on the bright side: At least there's a chance this money will be repaid. Not so with the other big commitment President Obama made in London. We refer to the U.S. portion of the eight-fold increase in the IMF's special drawing rights, or SDRs. SDRs are IMF credit allocations redeemable for subsidized loans from hard-currency fund countries. These loans are almost never repaid.
Prior to last week, there were about $32 billion in SDRs, the U.S. portion of which costs American taxpayers more than $300 million a year. For 12 years Congress has refused to go along with an IMF request to double the SDR account, but Mr. Obama swept all that debate under the carpet in London and agreed to take the total to $250 billion. The U.S. exposure? A cool $40 billion. And since all IMF members are eligible, Iran, Zimbabwe, Sudan, Venezuela and Burma are all candidates for Mr. Obama's generosity.
Speaking of inmates running the asylum, certain "emerging-market" members -- such as China, Brazil, Russia and India -- announced they would not join the U.S. in providing more IMF resources via credit lines for countries in crisis. Instead, they want the fund to issue short-term notes to finance their "contribution," which they could later oh-so-conveniently off-load in the secondary market. These notes will have the implicit guarantee of the U.S., adding one more liability to Washington's balance sheet.
The wheels are greased in Congress to pass this before the public notices, but South Carolina Republican Jim DeMint is trying to force a Senate floor vote on the $108 billion. He'll lose, but at least he's honoring Mr. Obama's pledge of transparency.
Tax Audits Are No Laughing Matter - WSJ.com
Tax Audits Are No Laughing Matter - WSJ.com
A president shouldn't even joke about abusing IRS power
At his Arizona State University commencement speech last Wednesday, Mr. Obama noted that ASU had refused to grant him an honorary degree, citing his lack of experience, and the controversy this had caused.
After this, the Federal President said: "President [Michael] Crowe and the Board of Regents will soon learn all about being audited by the IRS."
A president shouldn't even joke about abusing IRS power
At his Arizona State University commencement speech last Wednesday, Mr. Obama noted that ASU had refused to grant him an honorary degree, citing his lack of experience, and the controversy this had caused.
After this, the Federal President said: "President [Michael] Crowe and the Board of Regents will soon learn all about being audited by the IRS."
O'Grady: Finally, a Real Revolution - WSJ.com
O'Grady: Finally, a Real Revolution - WSJ.com
A civil-society movement emerges in Central America
A civil-society movement emerges in Central America
Sunday, May 17, 2009
WaPo: Mr. Obama's War? No, it's America's war
Mr. Obama's War? WaPo Editorial
No. Like it or not, it's America's war.
Sunday, May 17, 2009
PRESIDENT OBAMA'S clashes with the liberal base of his party are the kind of sporting event that Washington loves. But what Mr. Obama is confronting is less his party and more a stubborn reality that many in his party are unwilling to accept: There are forces in the world that continue to wage war against the United States and its allies, whether or not the United States wants to acknowledge that war.
Mr. Obama's recent decisions on paying for Afghanistan, reviving military tribunals and withholding photos of detainee abuse, among others, all reflect this reality. Although we disagreed with his conclusion on the photos, we sympathize with his concern that it might harm Americans fighting in Iraq and Afghanistan. His announcement Friday that he had reversed his opposition to trying some enemy detainees in military commissions reflects, again, the fact of a nation at war; the federal courts will not be the proper venue for every al-Qaeda member captured by U.S. forces. (In a separate editorial we offer some views on how to improve the commissions further.) His commitment to fighting al-Qaeda and its allies in Afghanistan and Pakistan recognizes that pretending a threat does not exist will only increase the danger to America.
That's what is worrying about the modest but gathering opposition to Mr. Obama's policies within his party. Rep. Donna F. Edwards (D-Md.), who represents parts of Montgomery and Prince George's counties, was one of 51 Democrats to vote against funding for the Afghan war on Thursday. In a statement, Ms. Edwards hailed "the passion and commitment of our servicemen and women" that she witnessed on a recent trip to the embattled nation as well as "the commitment and courage of Afghan women to build a future for their country." But Ms. Edwards said that she could not support funding, because Mr. Obama lacks "a strategy for leaving Afghanistan." In a similar vein, Rep. David R. Obey (D-Wis.), chairman of the Appropriations Committee, told the New York Times that he would give Mr. Obama's strategy one year to work before moving into opposition.
Mr. Obama understands that the only safe strategy for leaving Afghanistan is to beat back radical Islamist forces and build Afghan capacity to continue that fight. It's an effort that will require soldiers and civilians, military battles and economic development. Of course it will take more than a year; Gen. David H. Petraeus, who oversees the military effort, has been entirely candid about that.
What's discouraging is how quickly many Americans seem to forget the peril of half-finishing wars. Once before this country abandoned the battlefield in central Asia; Osama bin Laden moved into the vacuum. Today, he and like-minded terrorists continue to conspire in Pakistan, Afghanistan, Somalia, Yemen and elsewhere. Confronted by this unpleasant truth and the difficult challenge it poses, too many politicians lapse into the wishful-thinking school of making policy. We worry that there remains a touch of that in Mr. Obama's Iraq timetables and lean defense budget. But for the most part, having accepted the responsibility of keeping America safe, he has recognized that America can't always choose its enemies or its battlefields. His realism deserves support.
No. Like it or not, it's America's war.
Sunday, May 17, 2009
PRESIDENT OBAMA'S clashes with the liberal base of his party are the kind of sporting event that Washington loves. But what Mr. Obama is confronting is less his party and more a stubborn reality that many in his party are unwilling to accept: There are forces in the world that continue to wage war against the United States and its allies, whether or not the United States wants to acknowledge that war.
Mr. Obama's recent decisions on paying for Afghanistan, reviving military tribunals and withholding photos of detainee abuse, among others, all reflect this reality. Although we disagreed with his conclusion on the photos, we sympathize with his concern that it might harm Americans fighting in Iraq and Afghanistan. His announcement Friday that he had reversed his opposition to trying some enemy detainees in military commissions reflects, again, the fact of a nation at war; the federal courts will not be the proper venue for every al-Qaeda member captured by U.S. forces. (In a separate editorial we offer some views on how to improve the commissions further.) His commitment to fighting al-Qaeda and its allies in Afghanistan and Pakistan recognizes that pretending a threat does not exist will only increase the danger to America.
That's what is worrying about the modest but gathering opposition to Mr. Obama's policies within his party. Rep. Donna F. Edwards (D-Md.), who represents parts of Montgomery and Prince George's counties, was one of 51 Democrats to vote against funding for the Afghan war on Thursday. In a statement, Ms. Edwards hailed "the passion and commitment of our servicemen and women" that she witnessed on a recent trip to the embattled nation as well as "the commitment and courage of Afghan women to build a future for their country." But Ms. Edwards said that she could not support funding, because Mr. Obama lacks "a strategy for leaving Afghanistan." In a similar vein, Rep. David R. Obey (D-Wis.), chairman of the Appropriations Committee, told the New York Times that he would give Mr. Obama's strategy one year to work before moving into opposition.
Mr. Obama understands that the only safe strategy for leaving Afghanistan is to beat back radical Islamist forces and build Afghan capacity to continue that fight. It's an effort that will require soldiers and civilians, military battles and economic development. Of course it will take more than a year; Gen. David H. Petraeus, who oversees the military effort, has been entirely candid about that.
What's discouraging is how quickly many Americans seem to forget the peril of half-finishing wars. Once before this country abandoned the battlefield in central Asia; Osama bin Laden moved into the vacuum. Today, he and like-minded terrorists continue to conspire in Pakistan, Afghanistan, Somalia, Yemen and elsewhere. Confronted by this unpleasant truth and the difficult challenge it poses, too many politicians lapse into the wishful-thinking school of making policy. We worry that there remains a touch of that in Mr. Obama's Iraq timetables and lean defense budget. But for the most part, having accepted the responsibility of keeping America safe, he has recognized that America can't always choose its enemies or its battlefields. His realism deserves support.
Puff piece on Diane Wood in WaPo
Wooden Praise, by Ed Whelan
Bench Memos/National Review Online
This puff piece in today’s Washington Post on Supreme Court candidate Diane Wood somehow manages to discuss her 2001 ruling in NOW v. Scheidler without mentioning her outrageous defiance of the Court’s 8-1 reversal of that ruling. Wood’s willful lawlessness triggered a second Supreme Court reversal—that time unanimous—and is powerful evidence that she is unfit to serve on the Supreme Court.
The Post article quotes lavish praise of Wood from “Chicago lawyer Fay Clayton”:
Bench Memos/National Review Online
This puff piece in today’s Washington Post on Supreme Court candidate Diane Wood somehow manages to discuss her 2001 ruling in NOW v. Scheidler without mentioning her outrageous defiance of the Court’s 8-1 reversal of that ruling. Wood’s willful lawlessness triggered a second Supreme Court reversal—that time unanimous—and is powerful evidence that she is unfit to serve on the Supreme Court.
The Post article quotes lavish praise of Wood from “Chicago lawyer Fay Clayton”:
She's as bright as Posner and Easterbrook and really holds her own, and I think she would hold her own with the great intellects on the high court as well…. Everything she does is based on precedent and statutory construction and the facts.Although you won’t learn it from the Post article, Fay Clayton was—you guessed it?—counsel for the National Organization for Women in NOW v. Scheidler.
Message from the CIA Director on Pelosi's Controversy
Message from the Director: Turning Down the Volume
Statement to Employees by Director of the Central Intelligence Agency Leon E. Panetta
CIA, May 15, 2009
There is a long tradition in Washington of making political hay out of our business. It predates my service with this great institution, and it will be around long after I’m gone. But the political debates about interrogation reached a new decibel level yesterday when the CIA was accused of misleading Congress.
Let me be clear: It is not our policy or practice to mislead Congress. That is against our laws and our values. As the Agency indicated previously in response to Congressional inquiries, our contemporaneous records from September 2002 indicate that CIA officers briefed truthfully on the interrogation of Abu Zubaydah, describing “the enhanced techniques that had been employed.” Ultimately, it is up to Congress to evaluate all the evidence and reach its own conclusions about what happened.
My advice—indeed, my direction—to you is straightforward: ignore the noise and stay focused on your mission. We have too much work to do to be distracted from our job of protecting this country.
We are an Agency of high integrity, professionalism, and dedication. Our task is to tell it like it is—even if that’s not what people always want to hear. Keep it up. Our national security depends on it.
Leon E. Panetta
Posted: May 15, 2009 02:46 PM
Last Updated: May 15, 2009 02:46 PM
Last Reviewed: May 15, 2009 02:46 PM
Statement to Employees by Director of the Central Intelligence Agency Leon E. Panetta
CIA, May 15, 2009
There is a long tradition in Washington of making political hay out of our business. It predates my service with this great institution, and it will be around long after I’m gone. But the political debates about interrogation reached a new decibel level yesterday when the CIA was accused of misleading Congress.
Let me be clear: It is not our policy or practice to mislead Congress. That is against our laws and our values. As the Agency indicated previously in response to Congressional inquiries, our contemporaneous records from September 2002 indicate that CIA officers briefed truthfully on the interrogation of Abu Zubaydah, describing “the enhanced techniques that had been employed.” Ultimately, it is up to Congress to evaluate all the evidence and reach its own conclusions about what happened.
My advice—indeed, my direction—to you is straightforward: ignore the noise and stay focused on your mission. We have too much work to do to be distracted from our job of protecting this country.
We are an Agency of high integrity, professionalism, and dedication. Our task is to tell it like it is—even if that’s not what people always want to hear. Keep it up. Our national security depends on it.
Leon E. Panetta
Posted: May 15, 2009 02:46 PM
Last Updated: May 15, 2009 02:46 PM
Last Reviewed: May 15, 2009 02:46 PM
Friday, May 15, 2009
WaPo Editorial On Stimulus Dollars
Stimulus Dollars. WaPo Editoral
Starting to trickle ever so slowly into the economy
WaPo, Friday, May 15, 2009
YOU MAY RECALL President Obama urging Congress to pass the stimulus bill immediately because the economy so desperately needed money. The massive recovery bill was passed, and, recently, a few "green shoots" have been popping up -- indicating that, perhaps, the worst may be over. Is it a result of the stimulus? Tough to say, but, given the amount of money that has actually gone out the door, probably not.
Government agencies have thus far spent $29 billion of the $787 billion stimulus package, and less than that has gone out in tax cuts. What has been spent has mostly gone to Medicaid and unemployment insurance -- real "shovel-ready" programs in that they are already in place. It is true that just knowing that money has been authorized ($88 billion so far) can allow projects to get started and jobs to be created. Nonetheless, of the $20 billion approved for spending so far for the Education Department, for instance, 97.2 percent remains unspent. Of the $10 billion approved for the Transportation Department, a full 99.7 percent is still left to be spent.
The challenge of getting government money out the door fast is one reason that some economists challenge the value of Keynesian stimulus policies. By the time checks are being written, they argue, an economic recovery is often underway. The result can be an inflationary waste of money.
That risk was heightened in this case because the administration decided against a traditional package, one based on the three Ts: timely, temporary and targeted. Instead, it opted for a more ambitious, long-lasting package; one quarter of the funds are not even slated to be spent until 2011 or beyond. That decision had both economic and political rationales. Because the recession looked likely to be a long one, a longer-lasting package seemed sensible. It also provided Mr. Obama an opportunity to get started on many of his campaign promises, from improving health information technology to advancing alternative energy. The administration argued that this spending, even if not so stimulative, would help the economy grow in a healthier way once growth did resume.
Economics being what it is, we'll never know with certainty whether this package was optimal. The administration is ramping up arguments that millions of jobs are being saved or created, but it is impossible to gauge what would have happened without the stimulus package or with a more targeted one. The Federal Reserve Board has found that money for the most part is going to states with the greatest need. However, an Associated Press study found that within states, stimulus dollars are more likely to be misdirected to localities with better employment situations. A "transformational" investment stimulus package may turn out to be a good fit for this deep recession, and we hope most of the dollars will be spent productively. But as the economy limps along, it would be nice to get the money out a bit faster.
Starting to trickle ever so slowly into the economy
WaPo, Friday, May 15, 2009
YOU MAY RECALL President Obama urging Congress to pass the stimulus bill immediately because the economy so desperately needed money. The massive recovery bill was passed, and, recently, a few "green shoots" have been popping up -- indicating that, perhaps, the worst may be over. Is it a result of the stimulus? Tough to say, but, given the amount of money that has actually gone out the door, probably not.
Government agencies have thus far spent $29 billion of the $787 billion stimulus package, and less than that has gone out in tax cuts. What has been spent has mostly gone to Medicaid and unemployment insurance -- real "shovel-ready" programs in that they are already in place. It is true that just knowing that money has been authorized ($88 billion so far) can allow projects to get started and jobs to be created. Nonetheless, of the $20 billion approved for spending so far for the Education Department, for instance, 97.2 percent remains unspent. Of the $10 billion approved for the Transportation Department, a full 99.7 percent is still left to be spent.
The challenge of getting government money out the door fast is one reason that some economists challenge the value of Keynesian stimulus policies. By the time checks are being written, they argue, an economic recovery is often underway. The result can be an inflationary waste of money.
That risk was heightened in this case because the administration decided against a traditional package, one based on the three Ts: timely, temporary and targeted. Instead, it opted for a more ambitious, long-lasting package; one quarter of the funds are not even slated to be spent until 2011 or beyond. That decision had both economic and political rationales. Because the recession looked likely to be a long one, a longer-lasting package seemed sensible. It also provided Mr. Obama an opportunity to get started on many of his campaign promises, from improving health information technology to advancing alternative energy. The administration argued that this spending, even if not so stimulative, would help the economy grow in a healthier way once growth did resume.
Economics being what it is, we'll never know with certainty whether this package was optimal. The administration is ramping up arguments that millions of jobs are being saved or created, but it is impossible to gauge what would have happened without the stimulus package or with a more targeted one. The Federal Reserve Board has found that money for the most part is going to states with the greatest need. However, an Associated Press study found that within states, stimulus dollars are more likely to be misdirected to localities with better employment situations. A "transformational" investment stimulus package may turn out to be a good fit for this deep recession, and we hope most of the dollars will be spent productively. But as the economy limps along, it would be nice to get the money out a bit faster.
Thursday, May 14, 2009
The U.S. Should Lead On Congo
The U.S. Should Lead On Congo. By Cindy McCain
This is about a choice to save lives.
WSJ, May 14, 2009
America is being tested this year in ways we could not have imagined a year ago. Now I bring you another challenge: to continue our national tradition of aiding the world's poor by helping the people of eastern Congo.
A few weeks ago, I visited the eastern Democratic Republic of Congo to see how the United Nations World Food Programme was faring in its attempt to feed more than a million people. I was in this region 15 years ago as genocide tore through neighboring Rwanda and 300,000 refugees flooded across the border. Unfortunately, despite tremendous efforts by the U.N., the situation today is the same as -- or worse than -- in 1994.
This isn't a simple case of drought-induced famine. The eastern Congo's moderate climate, abundant rainfall, rich soil and huge lakes make it a virtual Garden of Eden. But it's also an area where armed militias plunder, rape, terrorize and murder. On occasion, the official army of the Democratic Republic of Congo does the same as its unpaid soldiers try to live off the land. In short, this is a country without the security, infrastructure or resources to deal with its massive problems.
Only the international community and the struggling government of the Democratic Republic of Congo can restore real order to the country. But until then, the United States -- the single largest contributor of food aid to these people -- must make a choice. Will we walk away and let hundreds of thousands die of slow starvation, or will we push our aid package even harder?
Since mid-January, more than 250,000 people have been displaced in areas of North and South Kivu provinces due to fighting between the Congolese rebels and the army. The northeastern corner of the country, near the Sudanese border, is even worse off. There the violent militiamen of the Lord's Resistance Army burn homes, murder civilians and kidnap children to turn them into slaves or child soldiers.
In the northeast region alone, the World Food Programme has launched an emergency operation to feed 154,000 people -- a tall order during the rainy season, when roads become deep, mud-filled trenches and even airstrips are turned into quagmires. Of all the aid organizations on the ground, it is the biggest and most diversified. In addition to providing food, it is the lead agency for logistics, delivering vital goods such as medicines, blankets and agricultural tools on behalf of other aid groups.
The World Food Programme also supports programs to help rehabilitate former child soldiers and their families. It improves school enrollment and attendance by providing food to children in primary schools, especially in areas where displaced people are returning home. And it supplies food to the spurned and abandoned: the thousands of women who have been raped and those with HIV/AIDS.
As the world tries to figure out how to cope with the economic downturn, we Americans are presented with the challenge of giving even more. The price of cornmeal has risen by 35% in the last year, and the World Food Programme faces a 2009 funding shortfall of $77 million for its operations in the eastern Congo.
In 1994, in the city of Goma in eastern Congo, I watched as a Danish nurse attempted to feed a baby who obviously was not going to make it. Tears streamed down her face. I held my composure until I got back to my car and then wept, too. That day, I vowed to do all I can to prevent such needless deaths.
I hope that my country chooses to save lives in the Congo by continuing to support the World Food Programme as it strives to provide more aid to the orphans, the sick, and those torn from their homes.
Mrs. McCain, the wife of Sen. John McCain, sits on the board of the HALO Trust, which removes landmines, and Operation Smile, which treats children with cleft palates.
This is about a choice to save lives.
WSJ, May 14, 2009
America is being tested this year in ways we could not have imagined a year ago. Now I bring you another challenge: to continue our national tradition of aiding the world's poor by helping the people of eastern Congo.
A few weeks ago, I visited the eastern Democratic Republic of Congo to see how the United Nations World Food Programme was faring in its attempt to feed more than a million people. I was in this region 15 years ago as genocide tore through neighboring Rwanda and 300,000 refugees flooded across the border. Unfortunately, despite tremendous efforts by the U.N., the situation today is the same as -- or worse than -- in 1994.
This isn't a simple case of drought-induced famine. The eastern Congo's moderate climate, abundant rainfall, rich soil and huge lakes make it a virtual Garden of Eden. But it's also an area where armed militias plunder, rape, terrorize and murder. On occasion, the official army of the Democratic Republic of Congo does the same as its unpaid soldiers try to live off the land. In short, this is a country without the security, infrastructure or resources to deal with its massive problems.
Only the international community and the struggling government of the Democratic Republic of Congo can restore real order to the country. But until then, the United States -- the single largest contributor of food aid to these people -- must make a choice. Will we walk away and let hundreds of thousands die of slow starvation, or will we push our aid package even harder?
Since mid-January, more than 250,000 people have been displaced in areas of North and South Kivu provinces due to fighting between the Congolese rebels and the army. The northeastern corner of the country, near the Sudanese border, is even worse off. There the violent militiamen of the Lord's Resistance Army burn homes, murder civilians and kidnap children to turn them into slaves or child soldiers.
In the northeast region alone, the World Food Programme has launched an emergency operation to feed 154,000 people -- a tall order during the rainy season, when roads become deep, mud-filled trenches and even airstrips are turned into quagmires. Of all the aid organizations on the ground, it is the biggest and most diversified. In addition to providing food, it is the lead agency for logistics, delivering vital goods such as medicines, blankets and agricultural tools on behalf of other aid groups.
The World Food Programme also supports programs to help rehabilitate former child soldiers and their families. It improves school enrollment and attendance by providing food to children in primary schools, especially in areas where displaced people are returning home. And it supplies food to the spurned and abandoned: the thousands of women who have been raped and those with HIV/AIDS.
As the world tries to figure out how to cope with the economic downturn, we Americans are presented with the challenge of giving even more. The price of cornmeal has risen by 35% in the last year, and the World Food Programme faces a 2009 funding shortfall of $77 million for its operations in the eastern Congo.
In 1994, in the city of Goma in eastern Congo, I watched as a Danish nurse attempted to feed a baby who obviously was not going to make it. Tears streamed down her face. I held my composure until I got back to my car and then wept, too. That day, I vowed to do all I can to prevent such needless deaths.
I hope that my country chooses to save lives in the Congo by continuing to support the World Food Programme as it strives to provide more aid to the orphans, the sick, and those torn from their homes.
Mrs. McCain, the wife of Sen. John McCain, sits on the board of the HALO Trust, which removes landmines, and Operation Smile, which treats children with cleft palates.
WSJ Editorial Page: Obama's Photo Epiphany
Obama's Photo Epiphany. WSJ Editorial
Why make it harder for the U.S. to defend itself?
WSJ, May 14, 2009
President Obama yesterday put American soldiers and national security ahead of political braying from his campaign allies on the left. What a pleasant reversal.
The White House said it will now seek to block the release of photographs collected as part of military probes into accusations of prisoner abuse in Afghanistan and Iraq. The Pentagon had agreed last month to release the images by May 28, acceding to an American Civil Liberties Union request under the Freedom of Information Act.
"The President strongly believes that the release of these photos, particularly at this time, would only serve the purpose of inflaming the theaters of war, jeopardizing U.S. forces, and making our job more difficult in places like Iraq and Afghanistan," a White House official said, echoing arguments made on these pages. So the Administration will renew its legal appeals, including all the way to the Supreme Court if need be.
Mr. Obama thus took the advice of Defense Secretary Robert Gates and his leading generals that the photos would complicate their efforts to win over Muslim allies for America's antiterror mission. Release of the photos would also serve no public interest since they were collected as evidence in cases that have been investigated, and adjudicated when appropriate. Our guess is that Mr. Obama's political advisers also wanted to distance him from the decision to release the photos -- the better to shield him from any nasty fallout. Now the fault will lie with the ACLU.
Mr. Obama's change of heart was quickly denounced as akin to the "stonewalling tactics and opaque policies of the Bush administration" (the ACLU) and for "reneging on its legal obligation to release the torture photos" (Amnesty International). The President is learning, albeit slowly, that secrecy has its uses in wartime, and that the real goal of his allies on the left is to make it harder for the U.S. to defend itself.
Why make it harder for the U.S. to defend itself?
WSJ, May 14, 2009
President Obama yesterday put American soldiers and national security ahead of political braying from his campaign allies on the left. What a pleasant reversal.
The White House said it will now seek to block the release of photographs collected as part of military probes into accusations of prisoner abuse in Afghanistan and Iraq. The Pentagon had agreed last month to release the images by May 28, acceding to an American Civil Liberties Union request under the Freedom of Information Act.
"The President strongly believes that the release of these photos, particularly at this time, would only serve the purpose of inflaming the theaters of war, jeopardizing U.S. forces, and making our job more difficult in places like Iraq and Afghanistan," a White House official said, echoing arguments made on these pages. So the Administration will renew its legal appeals, including all the way to the Supreme Court if need be.
Mr. Obama thus took the advice of Defense Secretary Robert Gates and his leading generals that the photos would complicate their efforts to win over Muslim allies for America's antiterror mission. Release of the photos would also serve no public interest since they were collected as evidence in cases that have been investigated, and adjudicated when appropriate. Our guess is that Mr. Obama's political advisers also wanted to distance him from the decision to release the photos -- the better to shield him from any nasty fallout. Now the fault will lie with the ACLU.
Mr. Obama's change of heart was quickly denounced as akin to the "stonewalling tactics and opaque policies of the Bush administration" (the ACLU) and for "reneging on its legal obligation to release the torture photos" (Amnesty International). The President is learning, albeit slowly, that secrecy has its uses in wartime, and that the real goal of his allies on the left is to make it harder for the U.S. to defend itself.
Congress and Waterboarding: Nancy Pelosi was an accomplice to enhaced interrogation
Congress and Waterboarding. WSJ Editorial
Nancy Pelosi was an accomplice to 'torture.'
WSJ, May 14, 2009
Someone important appears not to be telling the truth about her knowledge of the CIA's use of enhanced interrogation techniques (EITs). That someone is Speaker of the House Nancy Pelosi. The political persecution of Bush administration officials she has been pushing may now ensnare her.
Here's what we know. On Sept. 4, 2002, less than a year after 9/11, the CIA briefed Rep. Porter Goss, then House Intelligence Committee chairman, and Mrs. Pelosi, then the committee's ranking Democrat, on EITs including waterboarding. They were the first members of Congress to be informed.
In December 2007, Mrs. Pelosi admitted that she attended the briefing, but she wouldn't comment for the record about precisely what she was told. At the time the Washington Post spoke with a "congressional source familiar with Pelosi's position on the matter" and summarized that person's comments this way: "The source said Pelosi recalls that techniques described by the CIA were still in the planning stage -- they had been designed and cleared with agency lawyers but not yet put in practice -- and acknowledged that Pelosi did not raise objections at the time."
When questions were raised last month about these statements, Mrs. Pelosi insisted at a news conference that "We were not -- I repeat -- were not told that waterboarding or any of these other enhanced interrogation methods were used." Mrs. Pelosi also claimed that the CIA "did not tell us they were using that, flat out. And any, any contention to the contrary is simply not true." She had earlier said on TV, "I can say flat-out, they never told us that these enhanced interrogations were being used."
The Obama administration's CIA director, Leon Panetta, and Mr. Goss have both disputed Mrs. Pelosi's account.
In a report to Congress on May 5, Mr. Panetta described the CIA's 2002 meeting with Mrs. Pelosi as "Briefing on EITs including use of EITs on Abu Zubaydah, background on [legal] authorities, and a description of the particular EITs that had been employed." Note the past tense -- "had been employed."
Mr. Goss says he and Mrs. Pelosi were told at the 2002 briefing about the use of the EITs and "on a bipartisan basis, we asked if the CIA needed more support from Congress to carry out its mission." He is backed by CIA sources who say Mr. Goss and Mrs. Pelosi "questioned whether we were doing enough" to extract information.
We also know that Michael Sheehy, then Mrs. Pelosi's top aide on the Intelligence Committee and later her national security adviser, not only attended the September 2002 meeting but was also briefed by the CIA on EITs on Feb. 5, 2003, and told about a videotape of Zubaydah being waterboarded. Mr. Sheehy was almost certain to have told Mrs. Pelosi. He has not commented publicly about the 2002 or the 2003 meetings.
So is the speaker of the House lying about what she knew and when? And, if so, what will Democrats do about it?
If Mrs. Pelosi considers the enhanced interrogation techniques to be torture, didn't she have a responsibility to complain at the time, introduce legislation to end the practices, or attempt to deny funding for the CIA's use of them? If she knew what was going on and did nothing, does that make her an accessory to a crime of torture, as many Democrats are calling enhanced interrogation?
Senate Judiciary Chairman Pat Leahy wants an independent investigation of Bush administration officials. House Judiciary Chairman John Conyers feels the Justice Department should investigate and prosecute anyone who violated laws against committing torture. Are these and other similarly minded Democrats willing to have Mrs. Pelosi thrown into their stew of torture conspirators as an accomplice?
It is clear that after the 9/11 attacks Mrs. Pelosi was briefed on enhanced interrogation techniques and the valuable information they produced. She not only agreed with what was being done, she apparently pressed the CIA to do more.
But when political winds shifted, Mrs. Pelosi seems to have decided to use enhanced interrogation as an issue to attack Republicans. It is disgraceful that Democrats who discovered their outrage years after the fact are now braying for disbarment of the government lawyers who justified EITs and the prosecution of Bush administration officials who authorized them. Mrs. Pelosi is hip-deep in dangerous waters, and they are rapidly rising.
Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.
Nancy Pelosi was an accomplice to 'torture.'
WSJ, May 14, 2009
Someone important appears not to be telling the truth about her knowledge of the CIA's use of enhanced interrogation techniques (EITs). That someone is Speaker of the House Nancy Pelosi. The political persecution of Bush administration officials she has been pushing may now ensnare her.
Here's what we know. On Sept. 4, 2002, less than a year after 9/11, the CIA briefed Rep. Porter Goss, then House Intelligence Committee chairman, and Mrs. Pelosi, then the committee's ranking Democrat, on EITs including waterboarding. They were the first members of Congress to be informed.
In December 2007, Mrs. Pelosi admitted that she attended the briefing, but she wouldn't comment for the record about precisely what she was told. At the time the Washington Post spoke with a "congressional source familiar with Pelosi's position on the matter" and summarized that person's comments this way: "The source said Pelosi recalls that techniques described by the CIA were still in the planning stage -- they had been designed and cleared with agency lawyers but not yet put in practice -- and acknowledged that Pelosi did not raise objections at the time."
When questions were raised last month about these statements, Mrs. Pelosi insisted at a news conference that "We were not -- I repeat -- were not told that waterboarding or any of these other enhanced interrogation methods were used." Mrs. Pelosi also claimed that the CIA "did not tell us they were using that, flat out. And any, any contention to the contrary is simply not true." She had earlier said on TV, "I can say flat-out, they never told us that these enhanced interrogations were being used."
The Obama administration's CIA director, Leon Panetta, and Mr. Goss have both disputed Mrs. Pelosi's account.
In a report to Congress on May 5, Mr. Panetta described the CIA's 2002 meeting with Mrs. Pelosi as "Briefing on EITs including use of EITs on Abu Zubaydah, background on [legal] authorities, and a description of the particular EITs that had been employed." Note the past tense -- "had been employed."
Mr. Goss says he and Mrs. Pelosi were told at the 2002 briefing about the use of the EITs and "on a bipartisan basis, we asked if the CIA needed more support from Congress to carry out its mission." He is backed by CIA sources who say Mr. Goss and Mrs. Pelosi "questioned whether we were doing enough" to extract information.
We also know that Michael Sheehy, then Mrs. Pelosi's top aide on the Intelligence Committee and later her national security adviser, not only attended the September 2002 meeting but was also briefed by the CIA on EITs on Feb. 5, 2003, and told about a videotape of Zubaydah being waterboarded. Mr. Sheehy was almost certain to have told Mrs. Pelosi. He has not commented publicly about the 2002 or the 2003 meetings.
So is the speaker of the House lying about what she knew and when? And, if so, what will Democrats do about it?
If Mrs. Pelosi considers the enhanced interrogation techniques to be torture, didn't she have a responsibility to complain at the time, introduce legislation to end the practices, or attempt to deny funding for the CIA's use of them? If she knew what was going on and did nothing, does that make her an accessory to a crime of torture, as many Democrats are calling enhanced interrogation?
Senate Judiciary Chairman Pat Leahy wants an independent investigation of Bush administration officials. House Judiciary Chairman John Conyers feels the Justice Department should investigate and prosecute anyone who violated laws against committing torture. Are these and other similarly minded Democrats willing to have Mrs. Pelosi thrown into their stew of torture conspirators as an accomplice?
It is clear that after the 9/11 attacks Mrs. Pelosi was briefed on enhanced interrogation techniques and the valuable information they produced. She not only agreed with what was being done, she apparently pressed the CIA to do more.
But when political winds shifted, Mrs. Pelosi seems to have decided to use enhanced interrogation as an issue to attack Republicans. It is disgraceful that Democrats who discovered their outrage years after the fact are now braying for disbarment of the government lawyers who justified EITs and the prosecution of Bush administration officials who authorized them. Mrs. Pelosi is hip-deep in dangerous waters, and they are rapidly rising.
Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.
Target: Intel, and Competition
Target: Intel, and Competition. WSJ Editorial
Team Obama adopts the European model on antitrust.
WSJ, May 14, 2009
The world is returning to the 1970s on most economic policies, so why not antitrust too? Judging by events this week, antitrust enforcement in the U.S. and Europe is in for a major comeback, whether or not consumers benefit.
Yesterday in Brussels, the European Commission imposed a record antitrust fine of $1.45 billion on Intel for the heinous crime of discounting computer chips in its fierce and long-running competition with AMD. Meanwhile on Monday, President Obama's new antitrust chief, Christine Varney, issued a radical revision of the Department of Justice's own antitrust enforcement standards. Ms. Varney's ambition seems to be nothing less than bringing Europe's corporatist approach to competition policy to the U.S. To succeed, she will have to flout or overturn decades of Supreme Court precedent on the limits of U.S. antitrust law.
But Ms. Varney can be sure of a friendly ear in Brussels, which has never let go of the idea that competition is best when there isn't much of it. The Commission's attitude is on full display in the fining of Intel for allegedly abusing its dominant position in the market for computer processors. For years, Intel and AMD have been essentially the only game in town for computer CPUs. The Commission's complaint amounts to little more than a whinge that Intel won more of this business than the Commission would prefer.
This is couched in dark-sounding talk about Intel paying computer makers not to buy AMD chips. But remember there is only so much demand and there are only two major market players. So any order won by Intel by offering a discount or a rebate is, by definition, an order lost by AMD. And yet the Commission bizarrely claims that "millions of Europeans" have been harmed by this price war.
Intel has been able to sell enough chips cheaply enough to maintain an overall market share that has hovered between 75% and 80% for years. And those lower prices help drive down the price of a computer, which is good for consumers. A less competitive market for chips, or one in which Intel is barred from offering discounts to its biggest customers, would mean higher consumer prices. The Commission also suggests that Intel may have sold some chips below its cost, but Intel denies this and claims it can prove it if the Commission would deign to consider its evidence.
The Commission is, as ever, more focused on preserving competitor welfare above consumer welfare, and Ms. Varney at Justice seems to be promoting a similar approach. The American left likes to advertise itself as pro-consumer. But the curious reality about the left's view of antitrust in both Europe and America is that it is often used to assist big business by dampening competition. This corporatist notion seems to be that companies should compete, so long as no one really loses. Ms. Varney paid lip service to the dangers of protecting competitors when she criticized the National Industrial Recovery Act, ushered in by FDR during the Great Depression. That odious piece of industrial policy blessed price collusion between big firms in exchange for a commitment to keep people employed and share some of the collusive profits with labor.
But in her speech, Ms. Varney tries to cast this anticompetitive act as a form of deregulation. In fact, the NIRA was regulation of the worst sort, protecting competitors from competitive harm in the name of some greater good. True deregulation aims at greater competition, while European (and Rooseveltian) corporatism dampens it. This historical obfuscation allows Ms. Varney to argue that it would be good for competition to adopt something like Europe's "abuse of dominant position" standard in place of the consumer-harm test that currently prevails in the U.S.
Europe's Intel case makes the importance of these different tests very clear. By any reasonable application of a consumer-harm test, the antitrust claim that Intel is driving down prices -- and so making computers less expensive -- would be laughed out of U.S. court. The only harm here is to a competitor that can't match Intel's prices. And even at that, AMD isn't exactly going out of business. At times its market share for consumer desktop CPUs has been as high as 50%, and at its most successful the upper bound has been determined as much by AMD's own manufacturing capacity as by Intel's behavior.
When she announced the judgment against Intel Wednesday, European Competition Commissioner Neelie Kroes praised Ms. Varney's new approach to antitrust. And no wonder. Regulators love company, and European regulators in particular love it when their American counterparts help them hamstring the most efficient U.S. companies. Why President Obama should want to punish U.S. multinationals is harder to figure since his political success hangs on economic recovery and a revival in business profits and hiring. But perhaps we should conclude that this is merely one more example of the ways in which this Administration is seeking to remake American capitalism in the image of Continental Europe.
Team Obama adopts the European model on antitrust.
WSJ, May 14, 2009
The world is returning to the 1970s on most economic policies, so why not antitrust too? Judging by events this week, antitrust enforcement in the U.S. and Europe is in for a major comeback, whether or not consumers benefit.
Yesterday in Brussels, the European Commission imposed a record antitrust fine of $1.45 billion on Intel for the heinous crime of discounting computer chips in its fierce and long-running competition with AMD. Meanwhile on Monday, President Obama's new antitrust chief, Christine Varney, issued a radical revision of the Department of Justice's own antitrust enforcement standards. Ms. Varney's ambition seems to be nothing less than bringing Europe's corporatist approach to competition policy to the U.S. To succeed, she will have to flout or overturn decades of Supreme Court precedent on the limits of U.S. antitrust law.
But Ms. Varney can be sure of a friendly ear in Brussels, which has never let go of the idea that competition is best when there isn't much of it. The Commission's attitude is on full display in the fining of Intel for allegedly abusing its dominant position in the market for computer processors. For years, Intel and AMD have been essentially the only game in town for computer CPUs. The Commission's complaint amounts to little more than a whinge that Intel won more of this business than the Commission would prefer.
This is couched in dark-sounding talk about Intel paying computer makers not to buy AMD chips. But remember there is only so much demand and there are only two major market players. So any order won by Intel by offering a discount or a rebate is, by definition, an order lost by AMD. And yet the Commission bizarrely claims that "millions of Europeans" have been harmed by this price war.
Intel has been able to sell enough chips cheaply enough to maintain an overall market share that has hovered between 75% and 80% for years. And those lower prices help drive down the price of a computer, which is good for consumers. A less competitive market for chips, or one in which Intel is barred from offering discounts to its biggest customers, would mean higher consumer prices. The Commission also suggests that Intel may have sold some chips below its cost, but Intel denies this and claims it can prove it if the Commission would deign to consider its evidence.
The Commission is, as ever, more focused on preserving competitor welfare above consumer welfare, and Ms. Varney at Justice seems to be promoting a similar approach. The American left likes to advertise itself as pro-consumer. But the curious reality about the left's view of antitrust in both Europe and America is that it is often used to assist big business by dampening competition. This corporatist notion seems to be that companies should compete, so long as no one really loses. Ms. Varney paid lip service to the dangers of protecting competitors when she criticized the National Industrial Recovery Act, ushered in by FDR during the Great Depression. That odious piece of industrial policy blessed price collusion between big firms in exchange for a commitment to keep people employed and share some of the collusive profits with labor.
But in her speech, Ms. Varney tries to cast this anticompetitive act as a form of deregulation. In fact, the NIRA was regulation of the worst sort, protecting competitors from competitive harm in the name of some greater good. True deregulation aims at greater competition, while European (and Rooseveltian) corporatism dampens it. This historical obfuscation allows Ms. Varney to argue that it would be good for competition to adopt something like Europe's "abuse of dominant position" standard in place of the consumer-harm test that currently prevails in the U.S.
Europe's Intel case makes the importance of these different tests very clear. By any reasonable application of a consumer-harm test, the antitrust claim that Intel is driving down prices -- and so making computers less expensive -- would be laughed out of U.S. court. The only harm here is to a competitor that can't match Intel's prices. And even at that, AMD isn't exactly going out of business. At times its market share for consumer desktop CPUs has been as high as 50%, and at its most successful the upper bound has been determined as much by AMD's own manufacturing capacity as by Intel's behavior.
When she announced the judgment against Intel Wednesday, European Competition Commissioner Neelie Kroes praised Ms. Varney's new approach to antitrust. And no wonder. Regulators love company, and European regulators in particular love it when their American counterparts help them hamstring the most efficient U.S. companies. Why President Obama should want to punish U.S. multinationals is harder to figure since his political success hangs on economic recovery and a revival in business profits and hiring. But perhaps we should conclude that this is merely one more example of the ways in which this Administration is seeking to remake American capitalism in the image of Continental Europe.
Wednesday, May 13, 2009
On the Stern Review on the Economics of Climate Change and Discount Rates
Discounting the Future. By Indur M Goklany
Is it equitable to favor tomorrow’s wealthier generations over today’s poorer generations?
Cato "Regulation" - May 2009
[Full article at the link above]
One of the difficulties of analyzing climate change policies is that the costs of greenhouse gas emission reductions would be near-term while any benefits from those reductions would be delayed because of the inertia of the climate system.How should we compare costs and benefits that occur at different times? This, of course, isn.t a new problem. It is inherent to any investment that provides less than instant gratification, but it becomes a critical issue if an investment -and its associated benefits- are spread out over several years. It is precisely to deal with such problems that economists developed discounting.
Discounting recognizes that both individuals and societies prefer to get benefits sooner and to postpone any costs untillater. Discounting gives lesser weight to benefits and costs that occur in future years. Thus, for each year that eithercosts or benefits are delayed, their value is reduced by the annual discount rate.
Because this reduction is compounded, a benefit of $1 trillion obtained in the year 2100 would be valued much lower today. The higher the discount rate, the lower the present value of either costs or benefits occurring in the future. Thus a trillion-dollar benefit in the year 2100 would be valued today at only $1.2 billion if the annual discount rate is 7 percent, but at $52 billion if the discount rate is 3 percent.
Many people argue that if we value future generations. welfare, then we are ethically bound to employ a lower discount rate for future benefits that stem from global warming control policies enacted today. In contrast, use of a high discount rate for future benefits reduces the likelihood that carbon emission constraints today would pass a benefit-cost test, which, it is claimed, could put the welfare of future generations at risk. Some analysts such as Nicholas Stern, who conducted the Stern Review on the Economics of Climate Change, while emphasizing intergenerational equity, would use a near-zero discount rate (adjusted for the probability that a catastrophe might wipe out the human race and for the possibility that future generations may be wealthier than us). But the underlying premise behind using a low discount rate is that climate change, unless reduced sufficiently, could or would leave future generations worse off than current generations. This contrasts with the standard practice of using a market discount rate for both costs and benefits, so as to better consider the opportunity costs and avoid hurting both current and future generations by depriving them of the benefits flowing from current investments.
In this article, I address the threshold question of whether future generations would in fact be worse off than we are if climate change is allowed to occur and is uncontrolled. I compare current and future welfare per capita after accounting for the costs of climate change. To do this, I will reduce estimates of future welfare per capita in the absence of climate change by estimates of the welfare losses from climate change. For those downward adjustments, I use the Stern Review.s estimates of the costs of climate change from market effects, non-market (i.e., public health and environmental) effects, and the risk of catastrophe, even though several researchers have characterized the Stern Review.s estimates as excessive. I show that through 2200, at least, future generations will be much better off than present ones even after accounting for the costs of climate change.
Is it equitable to favor tomorrow’s wealthier generations over today’s poorer generations?
Cato "Regulation" - May 2009
[Full article at the link above]
One of the difficulties of analyzing climate change policies is that the costs of greenhouse gas emission reductions would be near-term while any benefits from those reductions would be delayed because of the inertia of the climate system.How should we compare costs and benefits that occur at different times? This, of course, isn.t a new problem. It is inherent to any investment that provides less than instant gratification, but it becomes a critical issue if an investment -and its associated benefits- are spread out over several years. It is precisely to deal with such problems that economists developed discounting.
Discounting recognizes that both individuals and societies prefer to get benefits sooner and to postpone any costs untillater. Discounting gives lesser weight to benefits and costs that occur in future years. Thus, for each year that eithercosts or benefits are delayed, their value is reduced by the annual discount rate.
Because this reduction is compounded, a benefit of $1 trillion obtained in the year 2100 would be valued much lower today. The higher the discount rate, the lower the present value of either costs or benefits occurring in the future. Thus a trillion-dollar benefit in the year 2100 would be valued today at only $1.2 billion if the annual discount rate is 7 percent, but at $52 billion if the discount rate is 3 percent.
Many people argue that if we value future generations. welfare, then we are ethically bound to employ a lower discount rate for future benefits that stem from global warming control policies enacted today. In contrast, use of a high discount rate for future benefits reduces the likelihood that carbon emission constraints today would pass a benefit-cost test, which, it is claimed, could put the welfare of future generations at risk. Some analysts such as Nicholas Stern, who conducted the Stern Review on the Economics of Climate Change, while emphasizing intergenerational equity, would use a near-zero discount rate (adjusted for the probability that a catastrophe might wipe out the human race and for the possibility that future generations may be wealthier than us). But the underlying premise behind using a low discount rate is that climate change, unless reduced sufficiently, could or would leave future generations worse off than current generations. This contrasts with the standard practice of using a market discount rate for both costs and benefits, so as to better consider the opportunity costs and avoid hurting both current and future generations by depriving them of the benefits flowing from current investments.
In this article, I address the threshold question of whether future generations would in fact be worse off than we are if climate change is allowed to occur and is uncontrolled. I compare current and future welfare per capita after accounting for the costs of climate change. To do this, I will reduce estimates of future welfare per capita in the absence of climate change by estimates of the welfare losses from climate change. For those downward adjustments, I use the Stern Review.s estimates of the costs of climate change from market effects, non-market (i.e., public health and environmental) effects, and the risk of catastrophe, even though several researchers have characterized the Stern Review.s estimates as excessive. I show that through 2200, at least, future generations will be much better off than present ones even after accounting for the costs of climate change.
'A Blatant Extortion': the DBPC case in Nicaragua and Dole Food
'A Blatant Extortion.' WSJ Editorial
A judge slams plaintiffs lawyers' torts-for-import game.
WSJ, May 13, 2009
Court cases get dismissed all the time, but rarely are dismissals as significant as the two lawsuits against Dole Food and other companies that were tossed recently by a California judge. Among other good things, the ruling is a setback for tort lawyers who troll abroad seeking dubious claims to bring in U.S. courts.
The allegations against Dole, the world's largest fruit and vegetable producer, involved banana plantation workers in Nicaragua who alleged that exposure to the pesticide DBPC in the 1970s left them sterile. The only problem is that most of the plaintiffs had not worked at plantations and weren't sterile. In fact, there's no evidence that farm workers at Dole facilities were exposed to harmful levels of the chemical -- which was legal and widely used at the time -- or that the level of exposure they did experience even causes sterility.
"What has occurred here is not just a fraud on the court, but it is a blatant extortion of the defendants," said Los Angeles Superior Court Judge Victoria Chaney in her oral ruling. More than 40 related cases involving thousands of plaintiffs from Honduras, Costa Rica, Guatemala, Panama and the Ivory Coast are pending in her court. And the ruling puts in doubt some $2 billion in judgments that plaintiffs lawyers have already obtained in Nicaragua.
Judge Chaney dismissed the cases "with prejudice" to prevent the plaintiffs from filing again on the same claims, and she denounced the lawyers who hatched the scheme. "This is a very sad day for me to be presiding over such a horrific situation," said the judge, who described a "pervasive conspiracy" involving U.S. plaintiffs lawyers and corrupt Nicaraguan judges.
Judge Chaney said she heard evidence of U.S. attorneys colluding with judges, lab technicians and local officials in Nicaragua to suborn perjury and doctor medical reports. Ten thousand men were rounded up and coached to make false claims of sterility in hope of reaping billions of dollars from companies like Dole, Dow Chemical and Amvac. Anyone who revealed the ruse was threatened with violence, as were the U.S. investigators hired by the defendants.
"There have been groups of medical personnel providing sham laboratory reports indicating sterility where none really exists; groups of fathers denying paternity of their own children, posing as lonely men coming into the court, saying that they had no solace in their old age because they have no children," said the judge.
Plaintiffs attorney Juan Dominguez of Los Angeles was singled out for alleged behavior that Judge Chaney said has "criminal overtones." At a hearing last week, she announced that she was referring Mr. Dominguez to federal prosecutors for investigation of perjury, obstruction of justice, defrauding the court and conspiring to defraud a U.S. company. Mr. Dominguez didn't show at Judge Chaney's hearing and is thought to be somewhere in Nicaragua.
The plaintiffs were also represented by the Sacramento firm of Miller, Axline & Sawyer. The judge said she didn't believe the Miller Axline lawyers were in on the conspiracy but added that they should have been suspicious. "I would have thought that a bit of vigilance would have suggested to plaintiff's counsel that something was awry," she said.
The ruling is especially useful as a rebuke to the torts-for-import business, whereby U.S. tort lawyers travel abroad, join with local lawyers to manufacture claims, and then engage in client recruitment practices that are blatantly illegal in the U.S. In essence, the tort bar's goal is to import lawsuits from foreign countries where it's nearly impossible to challenge claims on factual grounds because evidence is hard to come by. In a related case involving Dole, the Texas plaintiffs firm Provost Umphrey is asking a federal judge in Miami to enforce a $98.5 million judgment obtained by banana farm workers in Nicaragua. Never mind that the Nicaraguan judge who made the initial ruling is the same one cited by Judge Chaney for allegedly taking bribes and fixing cases against U.S. firms.
Judge Chaney's actions are a welcome act of legal hygiene and an example for other judges of how to police false legal claims.
A judge slams plaintiffs lawyers' torts-for-import game.
WSJ, May 13, 2009
Court cases get dismissed all the time, but rarely are dismissals as significant as the two lawsuits against Dole Food and other companies that were tossed recently by a California judge. Among other good things, the ruling is a setback for tort lawyers who troll abroad seeking dubious claims to bring in U.S. courts.
The allegations against Dole, the world's largest fruit and vegetable producer, involved banana plantation workers in Nicaragua who alleged that exposure to the pesticide DBPC in the 1970s left them sterile. The only problem is that most of the plaintiffs had not worked at plantations and weren't sterile. In fact, there's no evidence that farm workers at Dole facilities were exposed to harmful levels of the chemical -- which was legal and widely used at the time -- or that the level of exposure they did experience even causes sterility.
"What has occurred here is not just a fraud on the court, but it is a blatant extortion of the defendants," said Los Angeles Superior Court Judge Victoria Chaney in her oral ruling. More than 40 related cases involving thousands of plaintiffs from Honduras, Costa Rica, Guatemala, Panama and the Ivory Coast are pending in her court. And the ruling puts in doubt some $2 billion in judgments that plaintiffs lawyers have already obtained in Nicaragua.
Judge Chaney dismissed the cases "with prejudice" to prevent the plaintiffs from filing again on the same claims, and she denounced the lawyers who hatched the scheme. "This is a very sad day for me to be presiding over such a horrific situation," said the judge, who described a "pervasive conspiracy" involving U.S. plaintiffs lawyers and corrupt Nicaraguan judges.
Judge Chaney said she heard evidence of U.S. attorneys colluding with judges, lab technicians and local officials in Nicaragua to suborn perjury and doctor medical reports. Ten thousand men were rounded up and coached to make false claims of sterility in hope of reaping billions of dollars from companies like Dole, Dow Chemical and Amvac. Anyone who revealed the ruse was threatened with violence, as were the U.S. investigators hired by the defendants.
"There have been groups of medical personnel providing sham laboratory reports indicating sterility where none really exists; groups of fathers denying paternity of their own children, posing as lonely men coming into the court, saying that they had no solace in their old age because they have no children," said the judge.
Plaintiffs attorney Juan Dominguez of Los Angeles was singled out for alleged behavior that Judge Chaney said has "criminal overtones." At a hearing last week, she announced that she was referring Mr. Dominguez to federal prosecutors for investigation of perjury, obstruction of justice, defrauding the court and conspiring to defraud a U.S. company. Mr. Dominguez didn't show at Judge Chaney's hearing and is thought to be somewhere in Nicaragua.
The plaintiffs were also represented by the Sacramento firm of Miller, Axline & Sawyer. The judge said she didn't believe the Miller Axline lawyers were in on the conspiracy but added that they should have been suspicious. "I would have thought that a bit of vigilance would have suggested to plaintiff's counsel that something was awry," she said.
The ruling is especially useful as a rebuke to the torts-for-import business, whereby U.S. tort lawyers travel abroad, join with local lawyers to manufacture claims, and then engage in client recruitment practices that are blatantly illegal in the U.S. In essence, the tort bar's goal is to import lawsuits from foreign countries where it's nearly impossible to challenge claims on factual grounds because evidence is hard to come by. In a related case involving Dole, the Texas plaintiffs firm Provost Umphrey is asking a federal judge in Miami to enforce a $98.5 million judgment obtained by banana farm workers in Nicaragua. Never mind that the Nicaraguan judge who made the initial ruling is the same one cited by Judge Chaney for allegedly taking bribes and fixing cases against U.S. firms.
Judge Chaney's actions are a welcome act of legal hygiene and an example for other judges of how to police false legal claims.
A bipartisan commission says we still need a strong deterrent
The Nuclear Realists. WSJ Editorial
A bipartisan commission says we still need a strong deterrent.
ArticleWSJ, May 13, 2009
A bipartisan Congressional commission on U.S. nuclear strategy released its report last week, and it deserved more attention than it got. It delivered a candid message that not many want to hear: We're a long way from a nuclear-free world.
Led by former Defense Secretaries William Perry and James Schlesinger, the commission is blunt on this point: "The conditions that might make possible the global elimination of nuclear weapons are not present today and their creation would require a fundamental transformation of the world political order." Until then, the report says, the U.S. must have a strong and credible nuclear deterrent.
To do so, the U.S. must maintain its triad of nuclear-delivery systems -- bombers, missiles and submarines -- a course of action that will require some "difficult investment choices." It also calls for modernization of the U.S. nuclear stockpile and the "transformation" of the aging physical and intellectual capital of the national nuclear laboratories.
The commission doesn't directly endorse the now-canceled Reliable Replacement Warhead program -- a political hot potato that President Obama rejects and Defense Secretary Robert Gates supports. But it does so indirectly by countering two of the arguments against it -- that it might lead to the need for nuclear testing and that it might undermine U.S. credibility on nonproliferation. The commission finds both risks to be minimal.
The commission warns that "we may be close to a tipping point" as more countries seek to go nuclear, in part because they may not have confidence in the reliability of U.S. nuclear weapons or that the U.S. would be willing to use them. It supports a "strengthening" of the international treaty system, including the Nuclear Nonproliferation Treaty, as well as nontreaty efforts such as the Proliferation Security Initiative. It also endorses a strong missile defense -- including against more "complex" threats, such as technologies that help incoming missiles penetrate U.S. defenses. It couldn't reach a consensus on the Comprehensive Test Ban Treaty, which Mr. Obama wants the Senate to ratify.
The commission's recommendations provide a welcome dose of nuclear realism. The Administration and Congress ignore them at the nation's peril.
A bipartisan commission says we still need a strong deterrent.
ArticleWSJ, May 13, 2009
A bipartisan Congressional commission on U.S. nuclear strategy released its report last week, and it deserved more attention than it got. It delivered a candid message that not many want to hear: We're a long way from a nuclear-free world.
Led by former Defense Secretaries William Perry and James Schlesinger, the commission is blunt on this point: "The conditions that might make possible the global elimination of nuclear weapons are not present today and their creation would require a fundamental transformation of the world political order." Until then, the report says, the U.S. must have a strong and credible nuclear deterrent.
To do so, the U.S. must maintain its triad of nuclear-delivery systems -- bombers, missiles and submarines -- a course of action that will require some "difficult investment choices." It also calls for modernization of the U.S. nuclear stockpile and the "transformation" of the aging physical and intellectual capital of the national nuclear laboratories.
The commission doesn't directly endorse the now-canceled Reliable Replacement Warhead program -- a political hot potato that President Obama rejects and Defense Secretary Robert Gates supports. But it does so indirectly by countering two of the arguments against it -- that it might lead to the need for nuclear testing and that it might undermine U.S. credibility on nonproliferation. The commission finds both risks to be minimal.
The commission warns that "we may be close to a tipping point" as more countries seek to go nuclear, in part because they may not have confidence in the reliability of U.S. nuclear weapons or that the U.S. would be willing to use them. It supports a "strengthening" of the international treaty system, including the Nuclear Nonproliferation Treaty, as well as nontreaty efforts such as the Proliferation Security Initiative. It also endorses a strong missile defense -- including against more "complex" threats, such as technologies that help incoming missiles penetrate U.S. defenses. It couldn't reach a consensus on the Comprehensive Test Ban Treaty, which Mr. Obama wants the Senate to ratify.
The commission's recommendations provide a welcome dose of nuclear realism. The Administration and Congress ignore them at the nation's peril.
Tuesday, May 12, 2009
NATO Intelligence: A Contradiction in Terms - Report dated in 1985
NATO Intelligence: A Contradiction in Terms. By Edward B. Atkeson
CIA, Center for the Study of Intelligence > Studies in Intelligence > Vol 53 No 1 > From the Archives-1984: Design for Dysfunction
CIA, Center for the Study of Intelligence > Studies in Intelligence > Vol 53 No 1 > From the Archives-1984: Design for Dysfunction
US Derivatives Sector Riled By Treasury Tax Plan
US Derivatives Sector Riled By Treasury Tax Plan. By Jacob Bunge
Dow Jones Newswires, May 12, 2009 14:41
CHICAGO -(Dow Jones)- A U.S. Treasury plan to end a preferential tax treatment for the derivatives industry could drive away market liquidity, according to opponents of the move.
The Treasury's 2010 revenue proposal release Monday would see banks, hedge funds, proprietary trading firms and other market makers would lose their so- called 60/40 tax treatment.
The move is the latest in long-running efforts to boost taxes on the derivatives sector, and would raise an estimated $2.5 billion over the next 10 years.
The futures and options industry, fresh from a scare that the administration would revive plans for a trading tax, immediately moved on the offensive.
Susan Milligan, senior vice president of government relations for the Options Clearing Corp., said the move would hit individuals and partnerships involved in market-making, who benefit from the blended capital gains and ordinary income tax rate.
Market makers are key to the efficiency of the markets by standing ready to buy or sell contracts.
"If individuals leave the market making profession because of [the tax increase], that has an impact on market quality," Milligan said.
The 60/40 tax treatment dates from 1981 when then-Rep. Dan Rostenkowski, (D- Ill.), pushed through a provision allowing derivatives market makers to pay 60% of their income tax at the capital-gains rate and the remaining 40% at the ordinary tax rate.
The treatment provides a blended tax rate of around 23%, according to industry estimates.
The 2010 budget proposal would tax 100% of these entities' income from futures and options trade at the ordinary tax rate, which currently tops out at 35%, but could rise to 39.6% in 2011.
"There is no reason to treat dealers in commodities, commodities derivatives dealers, dealers in securities and dealers in equity options differently than dealers in other types of property," Treasury officials wrote in a document explaining tax proposals for 2010, released Monday.
"Increasing taxes on players in the financial services industry is in vogue right now," said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, which represents the banking sector and plans to argue against the budget proposal.
Officials at Chicago-based CME Group Inc. (CME) were reviewing the proposal Tuesday, and the Chicago Board Options Exchange was preparing its own response, according to officials.
The International Securities Exchange, an electronic U.S. options platform owned by Deutsche Boerse (DB1.XE), said in a statement that events of the past year have highlighted the role of transparent, regulated markets.
"This is not the time to alter the tax treatment - and ultimately the health of - the very markets that our nation's regulators are attempting to drive business towards." Treasury representatives did not respond to requests for comment.
The financial services industry has successfully defeated challenges to the 60/40 rule in the past.
In 2003, the Senate was on the verge of repealing the provision before a lobbying campaign by exchanges and derivatives industry groups won a reprieve, arguing that elimination of the 60/40 tax treatment would hurt U.S. markets and investors.
-By Jacob Bunge, Dow Jones Newswires (Sarah N. Lynch contributed to this report.)
05-12-09 1441ET
Dow Jones Newswires, May 12, 2009 14:41
CHICAGO -(Dow Jones)- A U.S. Treasury plan to end a preferential tax treatment for the derivatives industry could drive away market liquidity, according to opponents of the move.
The Treasury's 2010 revenue proposal release Monday would see banks, hedge funds, proprietary trading firms and other market makers would lose their so- called 60/40 tax treatment.
The move is the latest in long-running efforts to boost taxes on the derivatives sector, and would raise an estimated $2.5 billion over the next 10 years.
The futures and options industry, fresh from a scare that the administration would revive plans for a trading tax, immediately moved on the offensive.
Susan Milligan, senior vice president of government relations for the Options Clearing Corp., said the move would hit individuals and partnerships involved in market-making, who benefit from the blended capital gains and ordinary income tax rate.
Market makers are key to the efficiency of the markets by standing ready to buy or sell contracts.
"If individuals leave the market making profession because of [the tax increase], that has an impact on market quality," Milligan said.
The 60/40 tax treatment dates from 1981 when then-Rep. Dan Rostenkowski, (D- Ill.), pushed through a provision allowing derivatives market makers to pay 60% of their income tax at the capital-gains rate and the remaining 40% at the ordinary tax rate.
The treatment provides a blended tax rate of around 23%, according to industry estimates.
The 2010 budget proposal would tax 100% of these entities' income from futures and options trade at the ordinary tax rate, which currently tops out at 35%, but could rise to 39.6% in 2011.
"There is no reason to treat dealers in commodities, commodities derivatives dealers, dealers in securities and dealers in equity options differently than dealers in other types of property," Treasury officials wrote in a document explaining tax proposals for 2010, released Monday.
"Increasing taxes on players in the financial services industry is in vogue right now," said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, which represents the banking sector and plans to argue against the budget proposal.
Officials at Chicago-based CME Group Inc. (CME) were reviewing the proposal Tuesday, and the Chicago Board Options Exchange was preparing its own response, according to officials.
The International Securities Exchange, an electronic U.S. options platform owned by Deutsche Boerse (DB1.XE), said in a statement that events of the past year have highlighted the role of transparent, regulated markets.
"This is not the time to alter the tax treatment - and ultimately the health of - the very markets that our nation's regulators are attempting to drive business towards." Treasury representatives did not respond to requests for comment.
The financial services industry has successfully defeated challenges to the 60/40 rule in the past.
In 2003, the Senate was on the verge of repealing the provision before a lobbying campaign by exchanges and derivatives industry groups won a reprieve, arguing that elimination of the 60/40 tax treatment would hurt U.S. markets and investors.
-By Jacob Bunge, Dow Jones Newswires (Sarah N. Lynch contributed to this report.)
05-12-09 1441ET
'Thought Crimes' Bill Advances
'Thought Crimes' Bill Advances. By Nat Hentoff
This article appeared in the Metro West Daily News on May 11, 2009.
Cato
Why is the press remaining mostly silent about the so-called "hate crimes law" that passed in the House on April 29? The Local Law Enforcement Hate Crimes Prevention Act passed in a 249-175 vote (17 Republicans joined with 231 Democrats). These Democrats should have been tested on their knowledge of the First Amendment, equal protection of the laws (14th Amendment), and the prohibition of double jeopardy (no American can be prosecuted twice for the same crime or offense). If they had been, they would have known that this proposal, now headed for a Senate vote, violates all these constitutional provisions.
This bill would make it a federal crime to willfully cause bodily injury (or try to) because of the victim's actual or perceived "race, color, religion, national origin, gender, sexual orientation, gender identity or disability" - as explained on the White House Web site, signaling the president's approval. A defendant convicted on these grounds would be charged with a "hate crime" in addition to the original crime, and would get extra prison time.
The extra punishment applies only to these "protected classes." As Denver criminal defense lawyer Robert J Corry Jr. asked (Denver Post April 28): "Isn't every criminal act that harms another person a 'hate crime'?" Then, regarding a Colorado "hate crime" law, one of 45 such state laws, Corry wrote: "When a Colorado gang engaged in an initiation ritual of specifically seeking out a "white woman" to rape, the Boulder prosecutor declined to pursue 'hate crime' charges." She was not enough of one of its protected classes.
Corey adds that the state "hate crime" law - like the newly expanded House of Representatives federal bill - "does not apply equally" (as the 14th Amendment requires), essentially instead "criminalizing only politically incorrect thoughts directed against politically incorrect victim categories."
Whether you're a Republican or Democrat, think hard about what Corry adds: "A government powerful enough to pick and choose which thoughts to prosecute is a government too powerful."
But James Madison, who initially introduced the First Amendment to the Constitution, had previously written to Thomas Jefferson on the passage of the Virginia Statute on Religious Freedom: "We have in this country extinguished forever ... making laws for the human mind." No American, he emphasized later, would be punished for his "thoughts."
However, doesn't the House "Hate Crimes Bill" state that nothing in the legislation shall "prohibit any expressive conduct protected from legal prohibition" - or speech "protected by the free speech or free exercise clauses in the First Amendment"?
Remember, however, as Kathleen Gilbert notes (LifeSiteNews.com) that "free speech advocates have pointed out that under current U.S. law, any action that 'abets, counsels, commands (or) induces a perceived 'hate crime' shares in the guilt of that crime and is therefore punishable."
But doesn't this new bill slip in an insistence that "evidence or expression or association of the defendant may not be introduced as evidence at trail unless the evidence specifically relates to that offense"?
In the definitive constitutional analysis of James B. Jacobs and researcher Kimberly Potter (Oxford University Press 1998, still in print), it is documented in "Hate Crimes: Criminal Law and Identity Politics" that "In Grimm v. Churchill the arresting officer was permitted to testify that the defendant had a history of making racial remarks. Similarly, in People v. Lampkin, the prosecution presented as evidence racist statements the defendant had uttered six years before the crime for which he was on trial," as specifically relating to the offense.
As for the 14th Amendment's essential requirement that no person be denied "the equal protection of the laws," there is carved above the entrance to the Supreme Court: "Equal Justice Under Law."
This legislation, certain to be passed by the Senate, will come to the Supreme Court. I hope the Justices will look up at the carving as they go into the building.
They should also remember that the Fifth Amendment makes clear: "nor shall any person be subject for the same offence to be twice put in jeopardy." But the House "hate crime" bill allows defendants found innocent of that offense in a state court to be tried again in federal court because of insufficiently diligent prosecutors; or, as Attorney General Eric Holder says, when state prosecutors claim lack of evidence. It must be tried again in federal court!
Imagine Holder as the state prosecutor in the long early stages of the Duke University Lacrosse rape case!
What also appalls me, as the new federal bill races toward a presidential signature, is that for years, and now, the American Civil Liberties Union approves "hate crimes" prosecutions!
I have long depended on the ACLU's staff of constitutional warriors to act persistently against government abuses of our founding documents. And these attorneys and analysts have been especially valuable in exposing the results of executive-branch lunges against the separation of powers in the Bush-Cheney years, and still under Obama.
Is there no non-politically correct ACLU lawyer or other staff worker or anyone in the ACLU affiliates around the country or any dues-paying member outraged enough to demand of the ACLU's ruling circle to at last disavow this corruption of the Constitution?
And the president, former senior lecturer in that document at the University of Chicago, should at least take it with him on Air Force One, where there are fewer necessary distractions, and familiarize himself with what the Constitution actually says.
This article appeared in the Metro West Daily News on May 11, 2009.
Cato
Why is the press remaining mostly silent about the so-called "hate crimes law" that passed in the House on April 29? The Local Law Enforcement Hate Crimes Prevention Act passed in a 249-175 vote (17 Republicans joined with 231 Democrats). These Democrats should have been tested on their knowledge of the First Amendment, equal protection of the laws (14th Amendment), and the prohibition of double jeopardy (no American can be prosecuted twice for the same crime or offense). If they had been, they would have known that this proposal, now headed for a Senate vote, violates all these constitutional provisions.
This bill would make it a federal crime to willfully cause bodily injury (or try to) because of the victim's actual or perceived "race, color, religion, national origin, gender, sexual orientation, gender identity or disability" - as explained on the White House Web site, signaling the president's approval. A defendant convicted on these grounds would be charged with a "hate crime" in addition to the original crime, and would get extra prison time.
The extra punishment applies only to these "protected classes." As Denver criminal defense lawyer Robert J Corry Jr. asked (Denver Post April 28): "Isn't every criminal act that harms another person a 'hate crime'?" Then, regarding a Colorado "hate crime" law, one of 45 such state laws, Corry wrote: "When a Colorado gang engaged in an initiation ritual of specifically seeking out a "white woman" to rape, the Boulder prosecutor declined to pursue 'hate crime' charges." She was not enough of one of its protected classes.
Corey adds that the state "hate crime" law - like the newly expanded House of Representatives federal bill - "does not apply equally" (as the 14th Amendment requires), essentially instead "criminalizing only politically incorrect thoughts directed against politically incorrect victim categories."
Whether you're a Republican or Democrat, think hard about what Corry adds: "A government powerful enough to pick and choose which thoughts to prosecute is a government too powerful."
But James Madison, who initially introduced the First Amendment to the Constitution, had previously written to Thomas Jefferson on the passage of the Virginia Statute on Religious Freedom: "We have in this country extinguished forever ... making laws for the human mind." No American, he emphasized later, would be punished for his "thoughts."
However, doesn't the House "Hate Crimes Bill" state that nothing in the legislation shall "prohibit any expressive conduct protected from legal prohibition" - or speech "protected by the free speech or free exercise clauses in the First Amendment"?
Remember, however, as Kathleen Gilbert notes (LifeSiteNews.com) that "free speech advocates have pointed out that under current U.S. law, any action that 'abets, counsels, commands (or) induces a perceived 'hate crime' shares in the guilt of that crime and is therefore punishable."
But doesn't this new bill slip in an insistence that "evidence or expression or association of the defendant may not be introduced as evidence at trail unless the evidence specifically relates to that offense"?
In the definitive constitutional analysis of James B. Jacobs and researcher Kimberly Potter (Oxford University Press 1998, still in print), it is documented in "Hate Crimes: Criminal Law and Identity Politics" that "In Grimm v. Churchill the arresting officer was permitted to testify that the defendant had a history of making racial remarks. Similarly, in People v. Lampkin, the prosecution presented as evidence racist statements the defendant had uttered six years before the crime for which he was on trial," as specifically relating to the offense.
As for the 14th Amendment's essential requirement that no person be denied "the equal protection of the laws," there is carved above the entrance to the Supreme Court: "Equal Justice Under Law."
This legislation, certain to be passed by the Senate, will come to the Supreme Court. I hope the Justices will look up at the carving as they go into the building.
They should also remember that the Fifth Amendment makes clear: "nor shall any person be subject for the same offence to be twice put in jeopardy." But the House "hate crime" bill allows defendants found innocent of that offense in a state court to be tried again in federal court because of insufficiently diligent prosecutors; or, as Attorney General Eric Holder says, when state prosecutors claim lack of evidence. It must be tried again in federal court!
Imagine Holder as the state prosecutor in the long early stages of the Duke University Lacrosse rape case!
What also appalls me, as the new federal bill races toward a presidential signature, is that for years, and now, the American Civil Liberties Union approves "hate crimes" prosecutions!
I have long depended on the ACLU's staff of constitutional warriors to act persistently against government abuses of our founding documents. And these attorneys and analysts have been especially valuable in exposing the results of executive-branch lunges against the separation of powers in the Bush-Cheney years, and still under Obama.
Is there no non-politically correct ACLU lawyer or other staff worker or anyone in the ACLU affiliates around the country or any dues-paying member outraged enough to demand of the ACLU's ruling circle to at last disavow this corruption of the Constitution?
And the president, former senior lecturer in that document at the University of Chicago, should at least take it with him on Air Force One, where there are fewer necessary distractions, and familiarize himself with what the Constitution actually says.
AEI fellow on how federal president's care proposals will affect physicians
How ObamaCare Will Affect Your Doctor. By Scott Gottlieb
Expect longer waits for appointments as physicians get pinched on reimbursements.
WSJ, May 12, 2009
At the heart of President Barack Obama's health-care plan is an insurance program funded by taxpayers, administered by Washington, and open to everyone. Modeled on Medicare, this "public option" will soon become the single dominant health plan, which is its political purpose. It will restructure the practice of medicine in the process.
Republicans and Democrats agree that the government's Medicare scheme for compensating doctors is deeply flawed. Yet Mr. Obama's plan for a centrally managed government insurance program exacerbates Medicare's problems by redistributing even more income away from lower-paid primary care providers and misaligning doctors' financial incentives.
Like Medicare, the "public option" will control spending by using its purchasing clout and political leverage to dictate low prices to doctors. (Medicare pays doctors 20% to 30% less than private plans, on average.) While the public option is meant for the uninsured, employers will realize it's easier -- and cheaper -- to move employees into the government plan than continue workplace coverage.
The Lewin Group, a health-care policy research and consulting firm, estimates that enrollment in the public option will reach 131 million people if it's open to everyone and pays Medicare rates, as many expect. Fully two-thirds of the privately insured will move out of or lose coverage. As patients shift to a lower-paying government plan, doctors' incomes will decline by as much as 15% to 20% depending on their specialty.
Physician income declines will be accompanied by regulations that will make practicing medicine more costly, creating a double whammy of lower revenue and higher practice costs, especially for primary-care doctors who generally operate busy practices and work on thinner margins. For example, doctors will face expenses to deploy pricey electronic prescribing tools and computerized health records that are mandated under the Obama plan. For most doctors these capital costs won't be fully covered by the subsidies provided by the plan.
Government insurance programs also shift compliance costs directly onto doctors by encumbering them with rules requiring expensive staffing and documentation. It's a way for government health programs like Medicare to control charges. The rules are backed up with threats of arbitrary probes targeting documentation infractions. There will also be disproportionate fines, giving doctors and hospitals reason to overspend on their back offices to avoid reprisals.
The 60% of doctors who are self-employed will be hardest hit. That includes specialists, such as dermatologists and surgeons, who see a lot of private patients. But it also includes tens of thousands of primary-care doctors, the very physicians the Obama administration says need the most help.
Doctors will consolidate into larger practices to spread overhead costs, and they'll cram more patients into tight schedules to make up in volume what's lost in margin. Visits will be shortened and new appointments harder to secure. It already takes on average 18 days to get an initial appointment with an internist, according to the American Medical Association, and as many as 30 days for specialists like obstetricians and neurologists.
Right or wrong, more doctors will close their practices to new patients, especially patients carrying lower paying insurance such as Medicaid. Some doctors will opt out of the system entirely, going "cash only." If too many doctors take this route the government could step in -- as in Canada, for example -- to effectively outlaw private-only medical practice.
These changes are superimposed on a payment system where compensation often bears no connection to clinical outcomes. Medicare provides all the wrong incentives. Its charge-based system pays doctors more for delivering more care, meaning incomes rise as medical problems persist and decline when illness resolves.
So how should we reform our broken health-care system? Rather than redistribute physician income as a way to subsidize an expansion of government control, Mr. Obama should fix the payment system to align incentives with improved care. After years of working on this problem, Medicare has only a few token demonstration programs to show for its efforts. Medicare's failure underscores why an inherently local undertaking like a medical practice is badly managed by a remote and political bureaucracy.
But while Medicare has stumbled with these efforts, private health plans have made notable progress on similar payment reforms. Private plans are more likely to lead payment reform efforts because they have more motivation than Medicare to use pay as a way to achieve better outcomes.
Private plans already pay doctors more than Medicare because they compete to attract higher quality providers into their networks. This gives them every incentive, as well as added leverage, to reward good clinicians while penalizing or excluding bad ones. A recent report by PriceWaterhouse Coopers that examined 10 of the nation's largest commercial health plans found that eight had implemented performance-based pay measures for doctors. All 10 plans are expanding efforts to monitor quality improvement at the provider level.
Among the promising examples of private innovation in health-care delivery: In Pennsylvania, the Geisinger Clinic's "warranty" program, where providers take financial responsibility for the entire episode of care; or the experience of the Blue Cross Blue Shield plans in Pennsylvania, Michigan and Virginia, where doctors are paid more for delivering better outcomes.
There are plenty of alternatives to Mr. Obama's plan that expand coverage to the uninsured, give them the chance to buy private coverage like Congress enjoys, and limit government management over what are inherently personal transactions between doctors and patients.
Rep. Nydia Velazquez (D., N.Y.) has introduced a bipartisan measure, the Small Business Cooperative for Healthcare Options to Improve Coverage for Employees (Choice) Act of 2009, that would make it cheaper and easier for small employers to offer health insurance. Mr. Obama would also get bipartisan compromise on premium support for people priced out of insurance to give them a wider range of choices. This could be modeled after the Medicare drug benefit, which relies on competition between private plans to increase choices and hold down costs. It could be funded, in part, through tax credits targeted to lower-income Americans.
There are also measures available that could fix structural flaws in our delivery system and make coverage more affordable without top-down controls set in Washington. The surest way to intensify flaws in the delivery of health care is to extend a Medicare-like "public option" into more corners of the private market. More government control of doctors and their reimbursement schemes will only create more problems.
Dr. Gottlieb, a former official at the Centers for Medicare and Medicaid Services, is a fellow at the American Enterprise Institute and a practicing internist. He's partner to a firm that invests in health-care companies.
Expect longer waits for appointments as physicians get pinched on reimbursements.
WSJ, May 12, 2009
At the heart of President Barack Obama's health-care plan is an insurance program funded by taxpayers, administered by Washington, and open to everyone. Modeled on Medicare, this "public option" will soon become the single dominant health plan, which is its political purpose. It will restructure the practice of medicine in the process.
Republicans and Democrats agree that the government's Medicare scheme for compensating doctors is deeply flawed. Yet Mr. Obama's plan for a centrally managed government insurance program exacerbates Medicare's problems by redistributing even more income away from lower-paid primary care providers and misaligning doctors' financial incentives.
Like Medicare, the "public option" will control spending by using its purchasing clout and political leverage to dictate low prices to doctors. (Medicare pays doctors 20% to 30% less than private plans, on average.) While the public option is meant for the uninsured, employers will realize it's easier -- and cheaper -- to move employees into the government plan than continue workplace coverage.
The Lewin Group, a health-care policy research and consulting firm, estimates that enrollment in the public option will reach 131 million people if it's open to everyone and pays Medicare rates, as many expect. Fully two-thirds of the privately insured will move out of or lose coverage. As patients shift to a lower-paying government plan, doctors' incomes will decline by as much as 15% to 20% depending on their specialty.
Physician income declines will be accompanied by regulations that will make practicing medicine more costly, creating a double whammy of lower revenue and higher practice costs, especially for primary-care doctors who generally operate busy practices and work on thinner margins. For example, doctors will face expenses to deploy pricey electronic prescribing tools and computerized health records that are mandated under the Obama plan. For most doctors these capital costs won't be fully covered by the subsidies provided by the plan.
Government insurance programs also shift compliance costs directly onto doctors by encumbering them with rules requiring expensive staffing and documentation. It's a way for government health programs like Medicare to control charges. The rules are backed up with threats of arbitrary probes targeting documentation infractions. There will also be disproportionate fines, giving doctors and hospitals reason to overspend on their back offices to avoid reprisals.
The 60% of doctors who are self-employed will be hardest hit. That includes specialists, such as dermatologists and surgeons, who see a lot of private patients. But it also includes tens of thousands of primary-care doctors, the very physicians the Obama administration says need the most help.
Doctors will consolidate into larger practices to spread overhead costs, and they'll cram more patients into tight schedules to make up in volume what's lost in margin. Visits will be shortened and new appointments harder to secure. It already takes on average 18 days to get an initial appointment with an internist, according to the American Medical Association, and as many as 30 days for specialists like obstetricians and neurologists.
Right or wrong, more doctors will close their practices to new patients, especially patients carrying lower paying insurance such as Medicaid. Some doctors will opt out of the system entirely, going "cash only." If too many doctors take this route the government could step in -- as in Canada, for example -- to effectively outlaw private-only medical practice.
These changes are superimposed on a payment system where compensation often bears no connection to clinical outcomes. Medicare provides all the wrong incentives. Its charge-based system pays doctors more for delivering more care, meaning incomes rise as medical problems persist and decline when illness resolves.
So how should we reform our broken health-care system? Rather than redistribute physician income as a way to subsidize an expansion of government control, Mr. Obama should fix the payment system to align incentives with improved care. After years of working on this problem, Medicare has only a few token demonstration programs to show for its efforts. Medicare's failure underscores why an inherently local undertaking like a medical practice is badly managed by a remote and political bureaucracy.
But while Medicare has stumbled with these efforts, private health plans have made notable progress on similar payment reforms. Private plans are more likely to lead payment reform efforts because they have more motivation than Medicare to use pay as a way to achieve better outcomes.
Private plans already pay doctors more than Medicare because they compete to attract higher quality providers into their networks. This gives them every incentive, as well as added leverage, to reward good clinicians while penalizing or excluding bad ones. A recent report by PriceWaterhouse Coopers that examined 10 of the nation's largest commercial health plans found that eight had implemented performance-based pay measures for doctors. All 10 plans are expanding efforts to monitor quality improvement at the provider level.
Among the promising examples of private innovation in health-care delivery: In Pennsylvania, the Geisinger Clinic's "warranty" program, where providers take financial responsibility for the entire episode of care; or the experience of the Blue Cross Blue Shield plans in Pennsylvania, Michigan and Virginia, where doctors are paid more for delivering better outcomes.
There are plenty of alternatives to Mr. Obama's plan that expand coverage to the uninsured, give them the chance to buy private coverage like Congress enjoys, and limit government management over what are inherently personal transactions between doctors and patients.
Rep. Nydia Velazquez (D., N.Y.) has introduced a bipartisan measure, the Small Business Cooperative for Healthcare Options to Improve Coverage for Employees (Choice) Act of 2009, that would make it cheaper and easier for small employers to offer health insurance. Mr. Obama would also get bipartisan compromise on premium support for people priced out of insurance to give them a wider range of choices. This could be modeled after the Medicare drug benefit, which relies on competition between private plans to increase choices and hold down costs. It could be funded, in part, through tax credits targeted to lower-income Americans.
There are also measures available that could fix structural flaws in our delivery system and make coverage more affordable without top-down controls set in Washington. The surest way to intensify flaws in the delivery of health care is to extend a Medicare-like "public option" into more corners of the private market. More government control of doctors and their reimbursement schemes will only create more problems.
Dr. Gottlieb, a former official at the Centers for Medicare and Medicaid Services, is a fellow at the American Enterprise Institute and a practicing internist. He's partner to a firm that invests in health-care companies.
Schumer's Shareholder Bill Misses the Mark
Schumer's Shareholder Bill Misses the Mark. By Martin Lipton, Jay W Lorsch and Theodore N Mirvis
Corporate managers need to be able to take the long view.
WSJ, May 12, 2009
This week New York Sen. Chuck Schumer is expected to introduce the Shareholder Bill of Rights Act of 2009. The stated goal of the legislation -- "to prioritize the long-term health of firms and their shareholders" -- is commendable.
The trouble is that its provisions actually encourage the opposite. In its current form, the bill would require annual votes by stockholders on executive compensation. It would grant stockholders a new right to include their own director nominees in the corporation's proxy statement. The bill would put an end to staggered boards at all companies (the traditional option of electing one-third of the board each year). And it would require that all directors receive a majority of votes cast to be elected. Public companies would be forced to split the CEO and board chair positions.
Excessive stockholder power is precisely what caused the short-term fixation that led to the current financial crisis. As stockholder power increased over the last 20 years, our stock markets also became increasingly institutionalized. The real investors are mostly professional money managers who are focused on the short term.
It is these shareholders who pushed companies to generate returns at levels that were not sustainable. They also made sure high returns were tied to management compensation. The pressure to produce unrealistic profit fueled increased risk-taking. And as the government relaxed checks on excessive risk-taking (or, at a minimum, didn't respond with increased prudential regulation), stockholder demands for ever higher returns grew still further. It was a vicious cycle.
Thoughtful observers of corporate governance have recognized the direct causal relationship between the financial meltdown and the short-term focus that drove reckless risk-taking.
One key observer, the International Corporate Governance Network, issued a statement about the global financial crisis on Nov. 10, 2008. It spelled out the problem of shareholder power: "[i]t is true that shareholders sometimes encouraged companies, including investment banks, to ramp up short-term returns through leverage." It further declared that "[i]nstitutional shareholders must recognize their responsibility to generate long term value on behalf of their beneficiaries, the savers and pensioners for whom they are ultimately working." It recommended that pension funds and others seeking to hire fund managers "should insist that fund managers put sufficient resources into governance that delivers long term value."
If government really wants to encourage stability and profitability, the Schumer bill must call for measures that would promote the long-term value perspective. Providing long-term shareholders a greater number of votes per share should become a permissible option. Quinquennial rather than annual or triennial elections of corporate board members should be considered. Institutions should discontinue the practice of compensating fund managers based on quarterly performance. And corporations should follow the lead of General Electric by discontinuing the practice of issuing quarterly earnings.
The stockholder-centric view of the current Schumer bill simply cannot be the cure for the disease it spawned. Though the short-term focus benefited shareholders for a time, when the meltdown happened shareholders weren't the only people hit. Employees who devoted their lives to building stockholder value felt the pain acutely. Communities, suppliers and creditors -- indeed, the whole range of constituencies who support the creation and maintenance of stock value -- were impacted. They have a legitimate stake in this debate.
Let's use the opportunity for fresh thinking that this crisis presents and restore the ability of boards and managers to run America's companies for our long-term best interest. Hopefully, the astounding losses we have witnessed over the past months will steer us back to responsibility.
Messrs. Lipton and Mirvis are partners of the New York law firm Wachtell, Lipton, Rosen and Katz. Mr. Lorsch is a professor at Harvard Business School.
Corporate managers need to be able to take the long view.
WSJ, May 12, 2009
This week New York Sen. Chuck Schumer is expected to introduce the Shareholder Bill of Rights Act of 2009. The stated goal of the legislation -- "to prioritize the long-term health of firms and their shareholders" -- is commendable.
The trouble is that its provisions actually encourage the opposite. In its current form, the bill would require annual votes by stockholders on executive compensation. It would grant stockholders a new right to include their own director nominees in the corporation's proxy statement. The bill would put an end to staggered boards at all companies (the traditional option of electing one-third of the board each year). And it would require that all directors receive a majority of votes cast to be elected. Public companies would be forced to split the CEO and board chair positions.
Excessive stockholder power is precisely what caused the short-term fixation that led to the current financial crisis. As stockholder power increased over the last 20 years, our stock markets also became increasingly institutionalized. The real investors are mostly professional money managers who are focused on the short term.
It is these shareholders who pushed companies to generate returns at levels that were not sustainable. They also made sure high returns were tied to management compensation. The pressure to produce unrealistic profit fueled increased risk-taking. And as the government relaxed checks on excessive risk-taking (or, at a minimum, didn't respond with increased prudential regulation), stockholder demands for ever higher returns grew still further. It was a vicious cycle.
Thoughtful observers of corporate governance have recognized the direct causal relationship between the financial meltdown and the short-term focus that drove reckless risk-taking.
One key observer, the International Corporate Governance Network, issued a statement about the global financial crisis on Nov. 10, 2008. It spelled out the problem of shareholder power: "[i]t is true that shareholders sometimes encouraged companies, including investment banks, to ramp up short-term returns through leverage." It further declared that "[i]nstitutional shareholders must recognize their responsibility to generate long term value on behalf of their beneficiaries, the savers and pensioners for whom they are ultimately working." It recommended that pension funds and others seeking to hire fund managers "should insist that fund managers put sufficient resources into governance that delivers long term value."
If government really wants to encourage stability and profitability, the Schumer bill must call for measures that would promote the long-term value perspective. Providing long-term shareholders a greater number of votes per share should become a permissible option. Quinquennial rather than annual or triennial elections of corporate board members should be considered. Institutions should discontinue the practice of compensating fund managers based on quarterly performance. And corporations should follow the lead of General Electric by discontinuing the practice of issuing quarterly earnings.
The stockholder-centric view of the current Schumer bill simply cannot be the cure for the disease it spawned. Though the short-term focus benefited shareholders for a time, when the meltdown happened shareholders weren't the only people hit. Employees who devoted their lives to building stockholder value felt the pain acutely. Communities, suppliers and creditors -- indeed, the whole range of constituencies who support the creation and maintenance of stock value -- were impacted. They have a legitimate stake in this debate.
Let's use the opportunity for fresh thinking that this crisis presents and restore the ability of boards and managers to run America's companies for our long-term best interest. Hopefully, the astounding losses we have witnessed over the past months will steer us back to responsibility.
Messrs. Lipton and Mirvis are partners of the New York law firm Wachtell, Lipton, Rosen and Katz. Mr. Lorsch is a professor at Harvard Business School.
WSJ Editorial Page on Geithner: He concedes that monetary policy was 'too loose too long'
Geithner's Revelation. WSJ Editorial
He concedes that monetary policy was 'too loose too long.'
WSJ, May 12, 2009
He concedes that monetary policy was 'too loose too long.'
WSJ, May 12, 2009
Iraq: Hold And Build, Or Lose
Iraq: Hold And Build, Or Lose. By Anthony H. Cordesman
WaPo, Tuesday, May 12, 2009
Despite the violence of the past few weeks, it is Iraq that now risks becoming the "forgotten war." Iraq has become both a perceived "victory" and a war that many Americans and members of Congress would like to forget. As a result, we may rush toward the "exit" without a strategy -- and lose both the ongoing war and the peace that could follow.
It is all too easy to forget that we "won" in Vietnam. We left having defeated the Viet Cong, having forced North Vietnam to halt its offensives -- and having gotten a Nobel Prize for the settlement. We created something approaching a functioning democracy, a reasonable level of development, and Vietnamese forces that seemed able to defend both without our support. It only took a few years, however, to show how costly an exit without a strategy can be.
There are limits to what we can do in Iraq. We cannot force Iraqis into political accommodation. We cannot develop their economy for them. And we cannot act as a lasting substitute for effective Iraqi forces or the creation of local security and a rule of law. But there are steps we can and should take to complete the "clear, hold and build" strategy that has changed the war so dramatically since 2007.
First, we need to ensure that Iraq can finish "winning" and continue to "hold." We should make clear that we will be flexible about the speed and level of our withdrawal of U.S. forces if an elected Iraqi government needs a limited amount of added help to defeat al-Qaeda and establish national security. We should also make clear that U.S. military advisory teams, including the embedded advisers necessary to make Iraqi combat forces fully independent and effective, will stay as long as Iraq wants them. We should be prepared to maintain and strengthen our advisory teams to help Iraq develop effective police and a criminal justice system.
If necessary, we should provide military assistance and equipment until Iraq can emerge from the budget crisis triggered by the collapse of world oil prices -- a crisis that has sharply cut its planned budget to $58.6 billion from an anticipated $78 billion. The revenue shortfall has also forced a freeze on the expansion of Iraqi forces when the country needs some 60,000 recruits in the coming year and has delayed most major equipment purchases.
Second, we must help Iraq "build." U.S. help will steadily grow more important as the necessary transition from armed nation-building to post-conflict reconstruction occurs over the next three to four years. This means keeping our economic and governance advisers in place as long as Iraq wants them. It means keeping our Provincial Reconstruction Teams (PRTs) in the field and replacing their military members with civilians. It means a major U.S. effort to support Iraq in dealing with both the International Monetary Fund and its debt and reparations problems. It might require carefully targeted economic aid in select areas. Iraq's budgetary and governance problems are solvable, but they will require years of additional aid and support.
Active U.S. diplomacy will be equally important in helping Iraq move toward political accommodation and minimizing the risk of new conflicts between Arabs and Kurds, Sunnis and Shiites, or local violence. It will be critical to working with a strong U.N. team, and it should involve doing everything possible to seek support from other Arab states, Turkey, and even (possibly) Iran.
The final dimension of the "hold" effort requires giving the highest possible priority to helping Iraq develop its oil fields and renovate and increase its export capabilities. This does not mean financial aid. It means recognizing that some 95 percent of the Iraqi government's revenue will come from oil exports over the next five years and that fixing the petroleum sector as quickly as possible is the only way for Iraq to obtain the money and government revenue that can hold the country together and fund security and stability.
Iraq can maintain and expand its petroleum exports only through major investment and the technology transfers that come from foreign oil companies. Progress cannot wait until Baghdad can pass perfect petroleum laws. Helping Iraq does not mean pushing it into contracts with American firms or those that are not to Iraq's clear advantage. It does mean giving U.S. firms and teamed U.S. and foreign oil company efforts proper support, and prioritizing open, competitive bidding managed by the Iraqi government. Without this, Iraq cannot find the money to help bridge its ethnic and sectarian divisions, unemployment will get even worse, and young men will turn back toward violence. Iraq will not be able to make use of its past aid, pay for key services such as education and medical care, improve its infrastructure, or attract other forms of investment. In the short term, Iraq has no other options.
Yes, some of these actions will cost U.S. lives and dollars. Such costs, though, will be far lower than the mid- to long-term cost of throwing away a high probability of leaving Iraq with lasting security and stability. The United States must find a way to leave Iraq that ensures the stability of the Persian Gulf -- a region with close to half of the world's known oil and gas reserves and where America's future credibility will be as critical to dealing with jihadist terrorism as is the war in Afghanistan and Pakistan. In strategic terms, Vietnam was always expendable. Iraq and the Gulf are not.
The writer holds the Arleigh A. Burke Chair in Strategy at the Center for Strategic and International Studies.
WaPo, Tuesday, May 12, 2009
Despite the violence of the past few weeks, it is Iraq that now risks becoming the "forgotten war." Iraq has become both a perceived "victory" and a war that many Americans and members of Congress would like to forget. As a result, we may rush toward the "exit" without a strategy -- and lose both the ongoing war and the peace that could follow.
It is all too easy to forget that we "won" in Vietnam. We left having defeated the Viet Cong, having forced North Vietnam to halt its offensives -- and having gotten a Nobel Prize for the settlement. We created something approaching a functioning democracy, a reasonable level of development, and Vietnamese forces that seemed able to defend both without our support. It only took a few years, however, to show how costly an exit without a strategy can be.
There are limits to what we can do in Iraq. We cannot force Iraqis into political accommodation. We cannot develop their economy for them. And we cannot act as a lasting substitute for effective Iraqi forces or the creation of local security and a rule of law. But there are steps we can and should take to complete the "clear, hold and build" strategy that has changed the war so dramatically since 2007.
First, we need to ensure that Iraq can finish "winning" and continue to "hold." We should make clear that we will be flexible about the speed and level of our withdrawal of U.S. forces if an elected Iraqi government needs a limited amount of added help to defeat al-Qaeda and establish national security. We should also make clear that U.S. military advisory teams, including the embedded advisers necessary to make Iraqi combat forces fully independent and effective, will stay as long as Iraq wants them. We should be prepared to maintain and strengthen our advisory teams to help Iraq develop effective police and a criminal justice system.
If necessary, we should provide military assistance and equipment until Iraq can emerge from the budget crisis triggered by the collapse of world oil prices -- a crisis that has sharply cut its planned budget to $58.6 billion from an anticipated $78 billion. The revenue shortfall has also forced a freeze on the expansion of Iraqi forces when the country needs some 60,000 recruits in the coming year and has delayed most major equipment purchases.
Second, we must help Iraq "build." U.S. help will steadily grow more important as the necessary transition from armed nation-building to post-conflict reconstruction occurs over the next three to four years. This means keeping our economic and governance advisers in place as long as Iraq wants them. It means keeping our Provincial Reconstruction Teams (PRTs) in the field and replacing their military members with civilians. It means a major U.S. effort to support Iraq in dealing with both the International Monetary Fund and its debt and reparations problems. It might require carefully targeted economic aid in select areas. Iraq's budgetary and governance problems are solvable, but they will require years of additional aid and support.
Active U.S. diplomacy will be equally important in helping Iraq move toward political accommodation and minimizing the risk of new conflicts between Arabs and Kurds, Sunnis and Shiites, or local violence. It will be critical to working with a strong U.N. team, and it should involve doing everything possible to seek support from other Arab states, Turkey, and even (possibly) Iran.
The final dimension of the "hold" effort requires giving the highest possible priority to helping Iraq develop its oil fields and renovate and increase its export capabilities. This does not mean financial aid. It means recognizing that some 95 percent of the Iraqi government's revenue will come from oil exports over the next five years and that fixing the petroleum sector as quickly as possible is the only way for Iraq to obtain the money and government revenue that can hold the country together and fund security and stability.
Iraq can maintain and expand its petroleum exports only through major investment and the technology transfers that come from foreign oil companies. Progress cannot wait until Baghdad can pass perfect petroleum laws. Helping Iraq does not mean pushing it into contracts with American firms or those that are not to Iraq's clear advantage. It does mean giving U.S. firms and teamed U.S. and foreign oil company efforts proper support, and prioritizing open, competitive bidding managed by the Iraqi government. Without this, Iraq cannot find the money to help bridge its ethnic and sectarian divisions, unemployment will get even worse, and young men will turn back toward violence. Iraq will not be able to make use of its past aid, pay for key services such as education and medical care, improve its infrastructure, or attract other forms of investment. In the short term, Iraq has no other options.
Yes, some of these actions will cost U.S. lives and dollars. Such costs, though, will be far lower than the mid- to long-term cost of throwing away a high probability of leaving Iraq with lasting security and stability. The United States must find a way to leave Iraq that ensures the stability of the Persian Gulf -- a region with close to half of the world's known oil and gas reserves and where America's future credibility will be as critical to dealing with jihadist terrorism as is the war in Afghanistan and Pakistan. In strategic terms, Vietnam was always expendable. Iraq and the Gulf are not.
The writer holds the Arleigh A. Burke Chair in Strategy at the Center for Strategic and International Studies.
Monday, May 11, 2009
Aung San Suu Kyi's Health
Aung San Suu Kyi's Health. By Ian Kelly
Department Spokesman, Office of the Spokesman
Bureau of Public Affairs, Washington, DC, May 11, 2009
The United States Government is concerned about reports that Aung San Suu Kyi needs medical care and that Burmese authorities have detained her primary personal physician, Dr. Tin Myo Win. We urge the Burmese regime to allow Aung San Suu Kyi to receive immediate medical care from Dr. Tin Myo Win. We further call on the regime to permit Aung San Suu Kyi to meet with her personal attorney immediately.
As the anniversary of her detention approaches, we are reminded that the house arrest of Aung San Suu Kyi is unjust. We join with the calls of the international community and urge her immediate release, along with the release of all the more than 2100 political prisoners the Burmese regime currently holds.
PRN: 2009/442
Department Spokesman, Office of the Spokesman
Bureau of Public Affairs, Washington, DC, May 11, 2009
The United States Government is concerned about reports that Aung San Suu Kyi needs medical care and that Burmese authorities have detained her primary personal physician, Dr. Tin Myo Win. We urge the Burmese regime to allow Aung San Suu Kyi to receive immediate medical care from Dr. Tin Myo Win. We further call on the regime to permit Aung San Suu Kyi to meet with her personal attorney immediately.
As the anniversary of her detention approaches, we are reminded that the house arrest of Aung San Suu Kyi is unjust. We join with the calls of the international community and urge her immediate release, along with the release of all the more than 2100 political prisoners the Burmese regime currently holds.
PRN: 2009/442
What Is Macroeconomics? Why Study It?
Paraphrasing Macroeconomics: Understanding the Wealth of Nations. By David Miles, Imperial College, and Andrew Scott, London Business School. Chichester, UK: John Wiley & Sons, 2005
Soft start:
- [M]acroeconomics is far more than just an intellectual toolkit for understanding current events. It is also about understanding the long-term forces that drive the economy and shape the business environment
- [M]acroeconomics is about the economy as a whole ... how the whole economy evolves over time rather than on any one sector, region, or firm. Yet macroeconomics also considers the important issues from the perspective of the firm and/or the individual consumer. It is the overall, or aggregate, implications of tens of thousands of individual decisions that companies and households make that generates the macroeconomic outcomes.
- Economics is the study of the allocation of scarce resources ... Not all these needs can be satisfied, but economics should be able to help you (and society) meet as many of them as possible.
- Market economies allocate resources through prices. Prices tell producers what the demand for a particular product is—if prices are high, then producers know the good is in demand, and they can increase production. If prices are low, producers know that demand for the product is weak, and they should cut back production. Thus the market ensures that society produces more of the goods that people want and less of those that they do not.
- Broadly speaking, economics has two components: microeconomics and macroeconomics. ... microeconomics essentially examines how individual units, whether they be consumers or
firms, decide how to allocate resources and whether those decisions are desirable.
- Macroeconomics studies the economy as a whole; it looks at the aggregate outcomes of
all the decisions that consumers, firms, and the government make in an economy. Macroeconomics is about aggregate variables such as the overall levels of output, consumption, employment, and prices—and how they move over time and between countries.
- In terms of prices, microeconomics focuses on, for instance, the price of a particular firm’s product, whereas macroeconomics focuses on the exchange rate (the price of one country’s money in terms of that of another country) or the interest rate (the price of spending today rather than tomorrow).
The Difference between Macro and Microeconomics
[A] gray area exists between micro and macroeconomics that relates to aggregation—at what point do the actions of a number of firms cease to be a microeconomic issue and become a macroeconomic issue?
- another way of outlining the differences ... In microeconomics the focus is on a small group of agents, say a group of consumers or two firms battling over a particular market. ... economists pay a great deal of attention to the behavior of the agents the model is focusing on ... make assumptions about what consumers want or how much they have to spend, or about whether the two firms are competing over prices or market share, and whether one firm is playing an aggressive strategy, and so on. The result is a detailed analysis of the way particular firms or consumers should behave in a given situation.
- [T]his microeconomic analysis does not explain what is happening in the wider economic environment. Think about consumers’ choice of what goods to consume. In addition to consumers’ own income and the price of the goods they wish to purchase, their decisions depend on an enormous amount of other information. How high is unemployment? Is the government going to increase taxes? Is the exchange rate about to collapse, requiring a sharp increase in interest rates? ... [I]f imported materials are important for the firm’s production process, then a depreciating currency will lead to higher import costs, reducing profit margins even before the firm engages in a price war.
- While none of these background influences—shifts in interest rates or movements in the exchange rate—are under the control of the firm or consumer, they still influence their decisions.
Macroeconomics analyzes the backdrop of economic conditions against which firms and consumers make decisions.
- The economy, as a whole, represents the outcome of decisions that millions of individual
firms and consumers make ... The inflation rate reflects the number of firms that are increasing prices and the amount by which each firm is raising prices ... all of the individual pricing decisions that millions of firms make determine the macroeconomic environment.
- While microeconomics is mainly concerned with studying in detail the decisions of a few agents, taking as given the basic economic backdrop, macroeconomics is about studying how the decisions of all the agents who make up the economy create this backdrop.
- Consider, for instance, the issue of whether a firm should adopt the latest developments in information technology (IT), which promise to increase labor productivity by, say, 20%. A microeconomic analysis of this topic would focus mainly on the costs the firm faces in adopting this technology and the likely productivity and profit gains that it would create. Macroeconomics would consider this IT innovation in the context of the whole economy. In particular, it would examine how, if many firms were to adopt this technology, costs in the whole economy would fall and the demand for skilled labor would rise... this would lead to an increase in wages and the firm’s payroll costs... [could] also shift demand away from unskilled towards skilled workers, causing the composition of unemployment and relative wages to change.
- The microeconomic analysis is one where the firm alone is contemplating adopting a new technology, and the emphasis is on the firm’s pricing and employment decisions, probably holding wages fixed... the analysis assumes the firm’s decisions do not influence the background economic environment. [T]he macroeconomic analysis examines the consequences when many firms implement the new technology and investigates how this affects economy-wide output, wages, and unemployment. [W]hich [form of analysis] is more appropriate depends on the issue to be analyzed and the question that needs to be answered.
Why to study macroeconomics - limitations, relevance
- Understanding macroeconomics is not simply a useful aspect of the public relations role of the business person; nor is it solely related to better understanding government policy.
- Economists distinguish between two types of uncertainty: aggregate and idiosyncratic. Aggregate uncertainty affects all firms and sectors in the economy; idiosyncratic uncertainty affects only a few individuals, firms, or industries. Macroeconomics is essentially about the aggregate sources of uncertainty that affect firms, workers, and consumers.
- [W]hich source of uncertainty is more important for individual health ... ? Evidence (covering firms and consumers) shows that the biggest source of uncertainty in the short term for most firms is the idiosyncratic component. All firms should worry about loss through illness of key personnel, major clients canceling contracts, litigation, fire and theft, and so forth.
- For households, or individuals, idiosyncratic risk is also generally more important than systematic (or aggregate) uncertainty. Whether you pass an exam; how well you get along with your first boss; whether you avoid serious illness in your forties and fifties—for [most these] are likely to be more important for their standard of living over their lifetime than ... aggregate output or ... inflation.
- Consider ... unemployment. In recessions unemployment rises, but not everyone becomes unemployed. Most people carry on with their regular job even through the worst recessions. ...
Therefore, the aggregate measure of unemployment, while important, gives an incomplete
picture of what is happening to individuals in the labor market. Idiosyncratic factors are significant—even during the worst recession some firms ... will be doing well and hiring workers; it is just that more firms are doing badly.
- This does not mean macroeconomics is unimportant to business. Netherlands case in
the early 1980s, and ... the early 1990s, p. 9
- Aggregate uncertainty is also important because it generates a type of risk that, by definition, all firms and consumers share ... the only source of uncertainty that is fully portable between jobs in different industries is aggregate uncertainty.
- [O]nly a small part of corporate uncertainty in any one year is due to aggregate or macroeconomic uncertainty. However, the further ahead one looks, the more important aggregate uncertainty becomes.
C O N C E P T U A L Q U E S T I O N S
1. (Section 1.1) What factors do you think explain why the United States is so rich and Bangladesh is so poor? What do you think accounts for the growth that most economies have shown?
Answer: Despite ideological disputes, proposals to tax the rich more in some Swiss cantons or NY State, and calling big business owners locusts (some SPD candidate), etc., there is a consensus that (see Obama's inauguration, 2009), a relatively free market economy and the rule of law are essential for prosperity. We can summarize Bangladesh plight saying that the country have neither of those essentials, nor many other factors for growth. They even had a mutiny in the Army this year - that is not precisely what investors need to have confidence.
2. (1.3) Figure 1.5 shows the pattern of bankruptcies and interest rates in the Netherlands. What do you think might account for this pattern? What can firms do to try to minimize this cyclical risk of bankruptcy?
A.: It is a good explanation that those pikes in interest rates were costly for many companies. As to try to minimize that risk and the real effect of that risk, I cannot think of anything of value: if rates go from 7 to 12 pct, or from 3 to 6 pct, what can you do? It is a tragedy.
3. (1.3) Figure 1.6 shows the real price of oil since 1913. What other industries besides automobile manufacturers are affected by fluctuations in oil prices, and how are they affected? What are the effects on individual consumers? How do you suppose that national economies of oil-producing nations are affected by changes in oil prices? What about the economies of countries that use a lot of imported oil?
A.: Transportation of all goods, food producers, almost anyone, including individuals and countries that import oil, will see their monthly bills go up for the same or less productive work, less customers and less spending of those customers. Exporting oil countries, to some extent, get more for less, so they can pay debt (to foreign investors) and debts (pending pensions, civil servants' paychecks, etc.).
4. (1.4) Consider the differing impact of microeconomic and macroeconomic factors in the near term prospects of
(a) a graduating student
(b) a restaurant in a village
(c) a restaurant in an airport
(d) a manufacturer of low-price cars
(e) a manufacturer of luxury sports cars
A N A L Y T I C A L Q U E S T I O N S
1. (Section 1.1) Consider the data in Figure 1.2. What growth rate will Bangladesh have to
show to catch up with the 2002 U.K. and U.S. per capita income level within 10 years? 20
years? 30 years? How would population growth affect your calculations?
2. (1.3) Consider an economy made up of 5 equal sized firms (labeled A to E). Under one scenario the output of each firm alternates between
Firm A B C D E
Output 1 2 3 4 5
And
Firm A B C D E
Output 5 4 3 2 1
What is the balance between idiosyncratic and aggregate risk in this economy?
A.: aggregate risk is flat, since final output, number of employees, etc., is the same after the change than before it. But idiosyncratic damage is big for company E, and gains for company A are enormous too.
How does your answer change if each firm oscillates between
Firm A B C D E
Output 3 3 3 3 3
And
Firm A B C D E
Output 4 4 4 4 4
A.: aggregate risk is lower if output is not eaten by price changes, and the country is richer than it was. Also, idiosyncratic risk is lower, since all companies earn more, but also the employees probably will get a bigger chunk of the pie, so in the end there will be a pressure on costs that will transmit to the consumer.
Soft start:
- [M]acroeconomics is far more than just an intellectual toolkit for understanding current events. It is also about understanding the long-term forces that drive the economy and shape the business environment
- [M]acroeconomics is about the economy as a whole ... how the whole economy evolves over time rather than on any one sector, region, or firm. Yet macroeconomics also considers the important issues from the perspective of the firm and/or the individual consumer. It is the overall, or aggregate, implications of tens of thousands of individual decisions that companies and households make that generates the macroeconomic outcomes.
- Economics is the study of the allocation of scarce resources ... Not all these needs can be satisfied, but economics should be able to help you (and society) meet as many of them as possible.
- Market economies allocate resources through prices. Prices tell producers what the demand for a particular product is—if prices are high, then producers know the good is in demand, and they can increase production. If prices are low, producers know that demand for the product is weak, and they should cut back production. Thus the market ensures that society produces more of the goods that people want and less of those that they do not.
- Broadly speaking, economics has two components: microeconomics and macroeconomics. ... microeconomics essentially examines how individual units, whether they be consumers or
firms, decide how to allocate resources and whether those decisions are desirable.
- Macroeconomics studies the economy as a whole; it looks at the aggregate outcomes of
all the decisions that consumers, firms, and the government make in an economy. Macroeconomics is about aggregate variables such as the overall levels of output, consumption, employment, and prices—and how they move over time and between countries.
- In terms of prices, microeconomics focuses on, for instance, the price of a particular firm’s product, whereas macroeconomics focuses on the exchange rate (the price of one country’s money in terms of that of another country) or the interest rate (the price of spending today rather than tomorrow).
The Difference between Macro and Microeconomics
[A] gray area exists between micro and macroeconomics that relates to aggregation—at what point do the actions of a number of firms cease to be a microeconomic issue and become a macroeconomic issue?
- another way of outlining the differences ... In microeconomics the focus is on a small group of agents, say a group of consumers or two firms battling over a particular market. ... economists pay a great deal of attention to the behavior of the agents the model is focusing on ... make assumptions about what consumers want or how much they have to spend, or about whether the two firms are competing over prices or market share, and whether one firm is playing an aggressive strategy, and so on. The result is a detailed analysis of the way particular firms or consumers should behave in a given situation.
- [T]his microeconomic analysis does not explain what is happening in the wider economic environment. Think about consumers’ choice of what goods to consume. In addition to consumers’ own income and the price of the goods they wish to purchase, their decisions depend on an enormous amount of other information. How high is unemployment? Is the government going to increase taxes? Is the exchange rate about to collapse, requiring a sharp increase in interest rates? ... [I]f imported materials are important for the firm’s production process, then a depreciating currency will lead to higher import costs, reducing profit margins even before the firm engages in a price war.
- While none of these background influences—shifts in interest rates or movements in the exchange rate—are under the control of the firm or consumer, they still influence their decisions.
Macroeconomics analyzes the backdrop of economic conditions against which firms and consumers make decisions.
- The economy, as a whole, represents the outcome of decisions that millions of individual
firms and consumers make ... The inflation rate reflects the number of firms that are increasing prices and the amount by which each firm is raising prices ... all of the individual pricing decisions that millions of firms make determine the macroeconomic environment.
- While microeconomics is mainly concerned with studying in detail the decisions of a few agents, taking as given the basic economic backdrop, macroeconomics is about studying how the decisions of all the agents who make up the economy create this backdrop.
- Consider, for instance, the issue of whether a firm should adopt the latest developments in information technology (IT), which promise to increase labor productivity by, say, 20%. A microeconomic analysis of this topic would focus mainly on the costs the firm faces in adopting this technology and the likely productivity and profit gains that it would create. Macroeconomics would consider this IT innovation in the context of the whole economy. In particular, it would examine how, if many firms were to adopt this technology, costs in the whole economy would fall and the demand for skilled labor would rise... this would lead to an increase in wages and the firm’s payroll costs... [could] also shift demand away from unskilled towards skilled workers, causing the composition of unemployment and relative wages to change.
- The microeconomic analysis is one where the firm alone is contemplating adopting a new technology, and the emphasis is on the firm’s pricing and employment decisions, probably holding wages fixed... the analysis assumes the firm’s decisions do not influence the background economic environment. [T]he macroeconomic analysis examines the consequences when many firms implement the new technology and investigates how this affects economy-wide output, wages, and unemployment. [W]hich [form of analysis] is more appropriate depends on the issue to be analyzed and the question that needs to be answered.
Why to study macroeconomics - limitations, relevance
- Understanding macroeconomics is not simply a useful aspect of the public relations role of the business person; nor is it solely related to better understanding government policy.
- Economists distinguish between two types of uncertainty: aggregate and idiosyncratic. Aggregate uncertainty affects all firms and sectors in the economy; idiosyncratic uncertainty affects only a few individuals, firms, or industries. Macroeconomics is essentially about the aggregate sources of uncertainty that affect firms, workers, and consumers.
- [W]hich source of uncertainty is more important for individual health ... ? Evidence (covering firms and consumers) shows that the biggest source of uncertainty in the short term for most firms is the idiosyncratic component. All firms should worry about loss through illness of key personnel, major clients canceling contracts, litigation, fire and theft, and so forth.
- For households, or individuals, idiosyncratic risk is also generally more important than systematic (or aggregate) uncertainty. Whether you pass an exam; how well you get along with your first boss; whether you avoid serious illness in your forties and fifties—for [most these] are likely to be more important for their standard of living over their lifetime than ... aggregate output or ... inflation.
- Consider ... unemployment. In recessions unemployment rises, but not everyone becomes unemployed. Most people carry on with their regular job even through the worst recessions. ...
Therefore, the aggregate measure of unemployment, while important, gives an incomplete
picture of what is happening to individuals in the labor market. Idiosyncratic factors are significant—even during the worst recession some firms ... will be doing well and hiring workers; it is just that more firms are doing badly.
- This does not mean macroeconomics is unimportant to business. Netherlands case in
the early 1980s, and ... the early 1990s, p. 9
- Aggregate uncertainty is also important because it generates a type of risk that, by definition, all firms and consumers share ... the only source of uncertainty that is fully portable between jobs in different industries is aggregate uncertainty.
- [O]nly a small part of corporate uncertainty in any one year is due to aggregate or macroeconomic uncertainty. However, the further ahead one looks, the more important aggregate uncertainty becomes.
C O N C E P T U A L Q U E S T I O N S
1. (Section 1.1) What factors do you think explain why the United States is so rich and Bangladesh is so poor? What do you think accounts for the growth that most economies have shown?
Answer: Despite ideological disputes, proposals to tax the rich more in some Swiss cantons or NY State, and calling big business owners locusts (some SPD candidate), etc., there is a consensus that (see Obama's inauguration, 2009), a relatively free market economy and the rule of law are essential for prosperity. We can summarize Bangladesh plight saying that the country have neither of those essentials, nor many other factors for growth. They even had a mutiny in the Army this year - that is not precisely what investors need to have confidence.
2. (1.3) Figure 1.5 shows the pattern of bankruptcies and interest rates in the Netherlands. What do you think might account for this pattern? What can firms do to try to minimize this cyclical risk of bankruptcy?
A.: It is a good explanation that those pikes in interest rates were costly for many companies. As to try to minimize that risk and the real effect of that risk, I cannot think of anything of value: if rates go from 7 to 12 pct, or from 3 to 6 pct, what can you do? It is a tragedy.
3. (1.3) Figure 1.6 shows the real price of oil since 1913. What other industries besides automobile manufacturers are affected by fluctuations in oil prices, and how are they affected? What are the effects on individual consumers? How do you suppose that national economies of oil-producing nations are affected by changes in oil prices? What about the economies of countries that use a lot of imported oil?
A.: Transportation of all goods, food producers, almost anyone, including individuals and countries that import oil, will see their monthly bills go up for the same or less productive work, less customers and less spending of those customers. Exporting oil countries, to some extent, get more for less, so they can pay debt (to foreign investors) and debts (pending pensions, civil servants' paychecks, etc.).
4. (1.4) Consider the differing impact of microeconomic and macroeconomic factors in the near term prospects of
(a) a graduating student
(b) a restaurant in a village
(c) a restaurant in an airport
(d) a manufacturer of low-price cars
(e) a manufacturer of luxury sports cars
A N A L Y T I C A L Q U E S T I O N S
1. (Section 1.1) Consider the data in Figure 1.2. What growth rate will Bangladesh have to
show to catch up with the 2002 U.K. and U.S. per capita income level within 10 years? 20
years? 30 years? How would population growth affect your calculations?
2. (1.3) Consider an economy made up of 5 equal sized firms (labeled A to E). Under one scenario the output of each firm alternates between
Firm A B C D E
Output 1 2 3 4 5
And
Firm A B C D E
Output 5 4 3 2 1
What is the balance between idiosyncratic and aggregate risk in this economy?
A.: aggregate risk is flat, since final output, number of employees, etc., is the same after the change than before it. But idiosyncratic damage is big for company E, and gains for company A are enormous too.
How does your answer change if each firm oscillates between
Firm A B C D E
Output 3 3 3 3 3
And
Firm A B C D E
Output 4 4 4 4 4
A.: aggregate risk is lower if output is not eaten by price changes, and the country is richer than it was. Also, idiosyncratic risk is lower, since all companies earn more, but also the employees probably will get a bigger chunk of the pie, so in the end there will be a pressure on costs that will transmit to the consumer.
WaPo: The White House should join lawmakers in reforming the state secrets doctrine
Securing Lawsuits. WaPo Editorial
The White House should join lawmakers in reforming the state secrets doctrine.
WaPo, Monday, May 11, 2009
ON CONSECUTIVE days last month, a federal appeals court and the president of the United States revealed that they had come to the same conclusion: The state secrets doctrine, which has been used to shut down litigation that the government claims to be risky for national security, needs to be revamped.
During an April 29 news conference, President Obama called the doctrine "overbroad." "I think it is appropriate to say that there are going to be cases in which national security interests are genuinely at stake and that you can't litigate without revealing covert activities or classified information that would genuinely compromise our safety," Mr. Obama said, but he added, "There should be some additional tools, so that it's not such a blunt instrument."
Yet the Obama administration seized on the most blunt interpretation of the state secrets doctrine this year in a lawsuit brought by five men who sued Jeppesen DataPlan, claiming that the Boeing subsidiary helped the Bush administration carry out extraordinary renditions that led to their torture. The Obama Justice Department -- like the Bush administration -- argued that no part of the case could be litigated without the threat of compromising national security.
The day before the president's news conference, the U.S. Court of Appeals for the 9th Circuit roundly rejected the administration's assertions. In an April 28 opinion, the court ruled that a trial judge should proceed with the case and evaluate individual claims of government secrecy. If a piece of evidence is deemed too sensitive, it may be stricken, but the plaintiff may still try to prove his case using unclassified evidence.
The 9th Circuit's decision squarely conflicts with a 2007 decision of the Richmond-based 4th Circuit to throw out the case of Khaled al-Masri, a German national who was seized in 2004 by U.S. operatives and allegedly tortured. The Justice Department could appeal the 9th Circuit decision, so as to allow the Supreme Court to resolve the conflict. But a better course would be to begin working with lawmakers to fine-tune the proposed State Secrets Protection Act.
The bill, originally championed by Sen. Edward M. Kennedy (D-Mass.) and recently reintroduced by Senate Judiciary Committee Chairman Patrick J. Leahy (D-Vt.), would allow judges to privately review information that the government claims is too sensitive for public dissemination. If a specific piece of evidence was deemed too sensitive, the bill would allow the government to provide unclassified summaries of evidence to plaintiffs' lawyers with appropriate security clearances. If even that proved unworkable, the judge could exclude the evidence, but the entire case would not have to be dismissed.
The executive's prerogatives to protect national security must be respected, as must the rights of private litigants to have a fighting chance in court. Passage of the State Secrets Protection Act would ensure that these factors are weighed fairly no matter who sits in the Oval Office.
The White House should join lawmakers in reforming the state secrets doctrine.
WaPo, Monday, May 11, 2009
ON CONSECUTIVE days last month, a federal appeals court and the president of the United States revealed that they had come to the same conclusion: The state secrets doctrine, which has been used to shut down litigation that the government claims to be risky for national security, needs to be revamped.
During an April 29 news conference, President Obama called the doctrine "overbroad." "I think it is appropriate to say that there are going to be cases in which national security interests are genuinely at stake and that you can't litigate without revealing covert activities or classified information that would genuinely compromise our safety," Mr. Obama said, but he added, "There should be some additional tools, so that it's not such a blunt instrument."
Yet the Obama administration seized on the most blunt interpretation of the state secrets doctrine this year in a lawsuit brought by five men who sued Jeppesen DataPlan, claiming that the Boeing subsidiary helped the Bush administration carry out extraordinary renditions that led to their torture. The Obama Justice Department -- like the Bush administration -- argued that no part of the case could be litigated without the threat of compromising national security.
The day before the president's news conference, the U.S. Court of Appeals for the 9th Circuit roundly rejected the administration's assertions. In an April 28 opinion, the court ruled that a trial judge should proceed with the case and evaluate individual claims of government secrecy. If a piece of evidence is deemed too sensitive, it may be stricken, but the plaintiff may still try to prove his case using unclassified evidence.
The 9th Circuit's decision squarely conflicts with a 2007 decision of the Richmond-based 4th Circuit to throw out the case of Khaled al-Masri, a German national who was seized in 2004 by U.S. operatives and allegedly tortured. The Justice Department could appeal the 9th Circuit decision, so as to allow the Supreme Court to resolve the conflict. But a better course would be to begin working with lawmakers to fine-tune the proposed State Secrets Protection Act.
The bill, originally championed by Sen. Edward M. Kennedy (D-Mass.) and recently reintroduced by Senate Judiciary Committee Chairman Patrick J. Leahy (D-Vt.), would allow judges to privately review information that the government claims is too sensitive for public dissemination. If a specific piece of evidence was deemed too sensitive, the bill would allow the government to provide unclassified summaries of evidence to plaintiffs' lawyers with appropriate security clearances. If even that proved unworkable, the judge could exclude the evidence, but the entire case would not have to be dismissed.
The executive's prerogatives to protect national security must be respected, as must the rights of private litigants to have a fighting chance in court. Passage of the State Secrets Protection Act would ensure that these factors are weighed fairly no matter who sits in the Oval Office.
Saturday, May 9, 2009
WaPo: The administration's inflexible policy on lobbyists and lobbying is having some perverse effects
Cutting Off Competence. WaPo Editorial
The administration's inflexible policy on lobbyists and lobbying is having some perverse effects.
WaPo, Saturday, May 9, 2009
IN THE WAKE of the Jack Abramoff scandal, President Obama was right to err on the side of strictness in restricting lobbyists entering government, and we supported his rule. But we think it's worth asking whether the costs are outweighing the benefits.
The president was right to slow the revolving door so that those who serve in his administration cannot cash in quickly after leaving. The rules will prevent senior officials from lobbying the executive branch -- not just the departments in which they served -- for the remainder of Mr. Obama's service.
On the entry side of the revolving door, the administration barred those who had been registered lobbyists in the past two years from serving in departments that they had lobbied, even if their government work would not involve issues on which they had lobbied. This limitation had its silly aspects -- you want health-care experts at the Department of Health and Human Services, for example, and some very good health-care experts have been registered lobbyists -- but the administration built in some needed flexibility by allowing for waivers.
However, after an early waiver given to Raytheon Corp.'s chief in-house lobbyist, William J. Lynn, to become deputy defense secretary, the administration was bombarded with accusations of hypocrisy. The lesson that Team Obama took from this was not to use its waivers more wisely but to crack down on them -- and to broaden the prohibition, in practice, to exclude lobbyist candidates from consideration even for jobs in departments or agencies that they hadn't lobbied. As a result, too many qualified candidates have been denied positions for which they are suited simply because of a lobbyist taint.
This approach could have the perverse consequence of driving lobbying underground and reducing the openness that the Obama administration says it wants to promote. The decision about whether to register as a lobbyist isn't always clear-cut; in the past, many people registered out of an abundance of caution. Now, some are saying privately that they will avoid registering if at all possible, shedding less sunlight on lobbying activities.
The Obama administration is also making a mistake by barring lobbyists from, well, lobbying it in some circumstances. The administration's rules on distributing stimulus funds bar registered lobbyists from telephoning or meeting with government officials about specific projects; they can make contact only in writing, with documents to be posted on the government's Web site. We understand the good-government impetus here. But why distinguish between lobbyists and corporate executives or local government officials seeking the funds, who have the biggest interests at stake? The rules are up for review soon. They should be rethought.
The administration's inflexible policy on lobbyists and lobbying is having some perverse effects.
WaPo, Saturday, May 9, 2009
IN THE WAKE of the Jack Abramoff scandal, President Obama was right to err on the side of strictness in restricting lobbyists entering government, and we supported his rule. But we think it's worth asking whether the costs are outweighing the benefits.
The president was right to slow the revolving door so that those who serve in his administration cannot cash in quickly after leaving. The rules will prevent senior officials from lobbying the executive branch -- not just the departments in which they served -- for the remainder of Mr. Obama's service.
On the entry side of the revolving door, the administration barred those who had been registered lobbyists in the past two years from serving in departments that they had lobbied, even if their government work would not involve issues on which they had lobbied. This limitation had its silly aspects -- you want health-care experts at the Department of Health and Human Services, for example, and some very good health-care experts have been registered lobbyists -- but the administration built in some needed flexibility by allowing for waivers.
However, after an early waiver given to Raytheon Corp.'s chief in-house lobbyist, William J. Lynn, to become deputy defense secretary, the administration was bombarded with accusations of hypocrisy. The lesson that Team Obama took from this was not to use its waivers more wisely but to crack down on them -- and to broaden the prohibition, in practice, to exclude lobbyist candidates from consideration even for jobs in departments or agencies that they hadn't lobbied. As a result, too many qualified candidates have been denied positions for which they are suited simply because of a lobbyist taint.
This approach could have the perverse consequence of driving lobbying underground and reducing the openness that the Obama administration says it wants to promote. The decision about whether to register as a lobbyist isn't always clear-cut; in the past, many people registered out of an abundance of caution. Now, some are saying privately that they will avoid registering if at all possible, shedding less sunlight on lobbying activities.
The Obama administration is also making a mistake by barring lobbyists from, well, lobbying it in some circumstances. The administration's rules on distributing stimulus funds bar registered lobbyists from telephoning or meeting with government officials about specific projects; they can make contact only in writing, with documents to be posted on the government's Web site. We understand the good-government impetus here. But why distinguish between lobbyists and corporate executives or local government officials seeking the funds, who have the biggest interests at stake? The rules are up for review soon. They should be rethought.
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