Of NICE and Men. WSJ Editorial
The Wall Street Journal, Jul 07, 2009, p A14
Speaking to the American Medical Association last month, President Obama waxed enthusiastic about countries that "spend less" than the U.S. on health care. He's right that many countries do, but what he doesn't want to explain is how they ration care to do it.
Take the United Kingdom, which is often praised for spending as little as half as much per capita on health care as the U.S. Credit for this cost containment goes in large part to the National Institute for Health and Clinical Excellence, or NICE. Americans should understand how NICE works because under ObamaCare it will eventually be coming to a hospital near you.
* * *
Associated Press President Barack Obama speaks about health care during a town hall meeting at Northern Virginia Community College last Wednesday.The British officials who established NICE in the late 1990s pitched it as a body that would ensure that the government-run National Health System used "best practices" in medicine. As the Guardian reported in 1998: "Health ministers are setting up [NICE], designed to ensure that every treatment, operation, or medicine used is the proven best. It will root out under-performing doctors and useless treatments, spreading best practices everywhere."
What NICE has become in practice is a rationing board. As health costs have exploded in Britain as in most developed countries, NICE has become the heavy that reduces spending by limiting the treatments that 61 million citizens are allowed to receive through the NHS. For example:
In March, NICE ruled against the use of two drugs, Lapatinib and Sutent, that prolong the life of those with certain forms of breast and stomach cancer. This followed on a 2008 ruling against drugs -- including Sutent, which costs about $50,000 -- that would help terminally ill kidney-cancer patients. After last year's ruling, Peter Littlejohns, NICE's clinical and public health director, noted that "there is a limited pot of money," that the drugs were of "marginal benefit at quite often an extreme cost," and the money might be better spent elsewhere.
In 2007, the board restricted access to two drugs for macular degeneration, a cause of blindness. The drug Macugen was blocked outright. The other, Lucentis, was limited to a particular category of individuals with the disease, restricting it to about one in five sufferers. Even then, the drug was only approved for use in one eye, meaning those lucky enough to get it would still go blind in the other. As Andrew Dillon, the chief executive of NICE, explained at the time: "When treatments are very expensive, we have to use them where they give the most benefit to patients."
NICE has limited the use of Alzheimer's drugs, including Aricept, for patients in the early stages of the disease. Doctors in the U.K. argued vociferously that the most effective way to slow the progress of the disease is to give drugs at the first sign of dementia. NICE ruled the drugs were not "cost effective" in early stages.
Other NICE rulings include the rejection of Kineret, a drug for rheumatoid arthritis; Avonex, which reduces the relapse rate in patients with multiple sclerosis; and lenalidomide, which fights multiple myeloma. Private U.S. insurers often cover all, or at least portions, of the cost of many of these NICE-denied drugs.
NICE has also produced guidance that restrains certain surgical operations and treatments. NICE has restrictions on fertility treatments, as well as on procedures for back pain, including surgeries and steroid injections. The U.K. has recently been absorbed by the cases of several young women who developed cervical cancer after being denied pap smears by a related health authority, the Cervical Screening Programme, which in order to reduce government health-care spending has refused the screens to women under age 25.
We could go on. NICE is the target of frequent protests and lawsuits, and at times under political pressure has reversed or watered-down its rulings. But it has by now established the principle that the only way to control health-care costs is for this panel of medical high priests to dictate limits on certain kinds of care to certain classes of patients.
The NICE board even has a mathematical formula for doing so, based on a "quality adjusted life year." While the guidelines are complex, NICE currently holds that, except in unusual cases, Britain cannot afford to spend more than about $22,000 to extend a life by six months. Why $22,000? It seems to be arbitrary, calculated mainly based on how much the government wants to spend on health care. That figure has remained fairly constant since NICE was established and doesn't adjust for either overall or medical inflation.
Proponents argue that such cost-benefit analysis has to figure into health-care decisions, and that any medical system rations care in some way. And it is true that U.S. private insurers also deny reimbursement for some kinds of care. The core issue is whether those decisions are going to be dictated by the brute force of politics (NICE) or by prices (a private insurance system).
The last six months of life are a particularly difficult moral issue because that is when most health-care spending occurs. But who would you rather have making decisions about whether a treatment is worth the price -- the combination of you, your doctor and a private insurer, or a government board that cuts everyone off at $22,000?
One virtue of a private system is that competition allows choice and experimentation. To take an example from one of our recent editorials, Medicare today refuses to reimburse for the new, less invasive preventive treatment known as a virtual colonoscopy, but such private insurers as Cigna and United Healthcare do. As clinical evidence accumulates on the virtual colonoscopy, doctors and insurers will be able to adjust their practices accordingly. NICE merely issues orders, and patients have little recourse.
This has medical consequences. The Concord study published in 2008 showed that cancer survival rates in Britain are among the worst in Europe. Five-year survival rates among U.S. cancer patients are also significantly higher than in Europe: 84% vs. 73% for breast cancer, 92% vs. 57% for prostate cancer. While there is more than one reason for this difference, surely one is medical innovation and the greater U.S. willingness to reimburse for it.
* * *
The NICE precedent also undercuts the Obama Administration's argument that vast health savings can be gleaned simply by automating health records or squeezing out "waste." Britain has tried all of that but ultimately has concluded that it can only rein in costs by limiting care. The logic of a health-care system dominated by government is that it always ends up with some version of a NICE board that makes these life-or-death treatment decisions. The Administration's new Council for Comparative Effectiveness Research currently lacks the authority of NICE. But over time, if the Obama plan passes and taxpayer costs inevitably soar, it could quickly gain it.
Mr. Obama and Democrats claim they can expand subsidies for tens of millions of Americans, while saving money and improving the quality of care. It can't possibly be done. The inevitable result of their plan will be some version of a NICE board that will tell millions of Americans that they are too young, or too old, or too sick to be worth paying to care for.
Tuesday, July 7, 2009
Monday, July 6, 2009
Retro agenda: Arms control and arm-chair Kremlinology
Obama and Putin's Russia. WSJ Editorial
Retro agenda: Arms control and arm-chair Kremlinology.
The Wall Street Journal, Jul 06, 2009, p A12
An American President lands in Moscow today to negotiate an arms control treaty. Befitting that retro theme, thousands of Russian troops are in the midst of the biggest war games in the south Caucasus since the end of the Cold War, menacing the small, independent nation of Georgia.
President Obama's two days in Moscow are supposed to foster, in an adviser's words, "a more substantive relationship with Russia" -- the substance being Iran's atomic ambitions, the war in Afghanistan and a replacement for the soon-to-expire Strategic Arms Reduction Treaty. You know, the stuff of a quasi-superpower partnership. But Russia hardly looks super, or inclined to forge a partnership, except on its own terms.
Instead, Supreme Leader Vladimir Putin wants to settle old scores and establish what he calls "a zone of privileged interest." He must appreciate Mr. Obama's eagerness to change the subject from Russian belligerence to nuclear weapons, which plays up Russia's remaining claim to superpower status. How that serves America's interests isn't clear.
As in the weeks before Russia invaded Georgia in August, tensions are again on the rise. At least 8,500 Russian troops are involved in exercises around Abkhazia and South Ossetia, breakaway Georgian regions recognized as independent solely by Russia and Nicaragua. Last month, Moscow vetoed the renewal of U.N. and European observer missions in Abkhazia and South Ossetia. Both had been there since the early 1990s. President Mikheil Saakashvili, a young Columbia-trained lawyer who turned Georgia westward, remains an irritant for Russia. A pro-Kremlin regime in Georgia would give Moscow control over the energy routes through the Caucasus and influence independent-minded Azerbaijan and Armenia.
While Russia has failed even to comply with the terms of the truce, the U.S. and its allies are acting as if that war never happened. At this summit, Mr. Obama is to announce the restoration of bilateral military relations with Russia suspended by the Bush Administration. The NATO-Russian Council is also back in business. Meanwhile, Mr. Obama has put on hold plans by Poland and the Czech Republic to allow the U.S. to deploy American missile defenses on their soil. In a letter to Kremlin frontman Dmitry Medvedev earlier this year, Mr. Obama floated the idea of trashing those deals if Russia can prod Iran to give up its nuclear ambitions.
U.S. officials say they've ruled out quid pro quos on missile defense or Ukraine and Georgia's future. Nonetheless, Russian officials are all too happy to consider grand bargains. All start with America abandoning any future NATO expansion. In pre-summit interviews, Mr. Obama also skipped over such touchy Kremlin subjects as human rights and its designs on neighboring states. "The main thing that I want to communicate to the Russian leadership and the Russian people is America's respect for Russia," he told Russian media, noting that "it remains one of the most powerful countries in the world." Someone keeps telling American Presidents to stroke the bear's fragile ego above all else. Bill Clinton and George W. Bush also pursued this strategy, to little good effect.
Here's an idea. Set aside the dime-store national psychoanalysis and return to first American principles and interests. This summit rests on a fiction: That Russia is an equal power to the U.S. that can offer something concrete in return for American indulgence. Some Russians see through the pretense. "Let's be frank: There's not a single serious global issue where the United States is dependent on Russia today," the pro-Kremlin political analyst, Gleb Pavlovsky, wrote in Nezavisimaya Gazeta last week. Russia's decision to let the U.S. resupply its Afghan troops over Russian airspace is a goodwill gesture, but it was only offered after Russia failed to stop resupply via Kyrgyzstan.
From the moment Communism collapsed, America's overriding national interest in Europe and Eurasia has been to extend prosperity and freedom. In short, to offer formerly captive nations a choice to join the West. This can be done in part through membership in NATO, the EU or the World Trade Organization. The "West" is an idea as well as a place, a voluntary and open association. Successive U.S. Presidents, when push came to shove, have defended the right to make this choice freely and ignored Russian caterwauls.
The choice to join the free world is open to Russia, too. Mr. Putin is the one who has taken that option off the table -- most recently by pulling Russia's application to join the WTO. In the Putin decade, nationalism, corruption and cronyism have flourished while Russia has missed another chance to modernize. That's not America's fault.
Any U.S. administration will have plenty of business to carry out with Russia. But an American President in Moscow needs to keep his eyes on the bigger prize in Russia and the region. And that prize is an expansion of freedom, not a new START treaty.
Retro agenda: Arms control and arm-chair Kremlinology.
The Wall Street Journal, Jul 06, 2009, p A12
An American President lands in Moscow today to negotiate an arms control treaty. Befitting that retro theme, thousands of Russian troops are in the midst of the biggest war games in the south Caucasus since the end of the Cold War, menacing the small, independent nation of Georgia.
President Obama's two days in Moscow are supposed to foster, in an adviser's words, "a more substantive relationship with Russia" -- the substance being Iran's atomic ambitions, the war in Afghanistan and a replacement for the soon-to-expire Strategic Arms Reduction Treaty. You know, the stuff of a quasi-superpower partnership. But Russia hardly looks super, or inclined to forge a partnership, except on its own terms.
Instead, Supreme Leader Vladimir Putin wants to settle old scores and establish what he calls "a zone of privileged interest." He must appreciate Mr. Obama's eagerness to change the subject from Russian belligerence to nuclear weapons, which plays up Russia's remaining claim to superpower status. How that serves America's interests isn't clear.
As in the weeks before Russia invaded Georgia in August, tensions are again on the rise. At least 8,500 Russian troops are involved in exercises around Abkhazia and South Ossetia, breakaway Georgian regions recognized as independent solely by Russia and Nicaragua. Last month, Moscow vetoed the renewal of U.N. and European observer missions in Abkhazia and South Ossetia. Both had been there since the early 1990s. President Mikheil Saakashvili, a young Columbia-trained lawyer who turned Georgia westward, remains an irritant for Russia. A pro-Kremlin regime in Georgia would give Moscow control over the energy routes through the Caucasus and influence independent-minded Azerbaijan and Armenia.
While Russia has failed even to comply with the terms of the truce, the U.S. and its allies are acting as if that war never happened. At this summit, Mr. Obama is to announce the restoration of bilateral military relations with Russia suspended by the Bush Administration. The NATO-Russian Council is also back in business. Meanwhile, Mr. Obama has put on hold plans by Poland and the Czech Republic to allow the U.S. to deploy American missile defenses on their soil. In a letter to Kremlin frontman Dmitry Medvedev earlier this year, Mr. Obama floated the idea of trashing those deals if Russia can prod Iran to give up its nuclear ambitions.
U.S. officials say they've ruled out quid pro quos on missile defense or Ukraine and Georgia's future. Nonetheless, Russian officials are all too happy to consider grand bargains. All start with America abandoning any future NATO expansion. In pre-summit interviews, Mr. Obama also skipped over such touchy Kremlin subjects as human rights and its designs on neighboring states. "The main thing that I want to communicate to the Russian leadership and the Russian people is America's respect for Russia," he told Russian media, noting that "it remains one of the most powerful countries in the world." Someone keeps telling American Presidents to stroke the bear's fragile ego above all else. Bill Clinton and George W. Bush also pursued this strategy, to little good effect.
Here's an idea. Set aside the dime-store national psychoanalysis and return to first American principles and interests. This summit rests on a fiction: That Russia is an equal power to the U.S. that can offer something concrete in return for American indulgence. Some Russians see through the pretense. "Let's be frank: There's not a single serious global issue where the United States is dependent on Russia today," the pro-Kremlin political analyst, Gleb Pavlovsky, wrote in Nezavisimaya Gazeta last week. Russia's decision to let the U.S. resupply its Afghan troops over Russian airspace is a goodwill gesture, but it was only offered after Russia failed to stop resupply via Kyrgyzstan.
From the moment Communism collapsed, America's overriding national interest in Europe and Eurasia has been to extend prosperity and freedom. In short, to offer formerly captive nations a choice to join the West. This can be done in part through membership in NATO, the EU or the World Trade Organization. The "West" is an idea as well as a place, a voluntary and open association. Successive U.S. Presidents, when push came to shove, have defended the right to make this choice freely and ignored Russian caterwauls.
The choice to join the free world is open to Russia, too. Mr. Putin is the one who has taken that option off the table -- most recently by pulling Russia's application to join the WTO. In the Putin decade, nationalism, corruption and cronyism have flourished while Russia has missed another chance to modernize. That's not America's fault.
Any U.S. administration will have plenty of business to carry out with Russia. But an American President in Moscow needs to keep his eyes on the bigger prize in Russia and the region. And that prize is an expansion of freedom, not a new START treaty.
Pay More, Drive Less, Save the Planet
Pay More, Drive Less, Save the Planet. By GABRIEL ROTH
To fight climate change, Washington wants you to take a bus.
The Wall Street Journal, Jul 06, 2009, p A11
What is the appropriate response to Secretary of Transportation Ray LaHood, who as General Motors prepared to file for Chapter 11 bankruptcy protection declared that he wants to "coerce people out of their cars"? One might be inclined to dismiss these words as overkill -- except for recently introduced legislation by some congressional heavy-hitters that would take us down this road.
First there was the "Federal Surface Transportation Policy and Planning Act of 2009," introduced in May by Jay Rockefeller (D., W.Va.), chairman of the Senate Committee on Commerce, Science and Transportation, and Frank Lautenberg (D., N.J.), chairman of the Subcommittee on Surface Transportation. Next, in June, came the "Surface Transportation Authorization Act of 2009," introduced by James Oberstar (D., Minn.), chairman of the House Committee on Transportation and Infrastructure.
Messrs. Rockefeller and Lautenberg aim to "reduce per capita motor vehicle miles traveled on an annual basis." Mr. Oberstar wants to establish a federal "Office of Livability" to ensure that "States and metropolitan areas achieve progress towards national transportation-related greenhouse gas emissions reduction goals."
What does this mean? Most travel is not for its own sake. So reducing the total miles traveled -- whether the length or number of trips -- means people would have to reduce the activities they want and need to do. People would be "coerced," in effect, to live in less desirable places or work in less desirable jobs; shop in fewer and closer stores; see their doctor less frequently; visit fewer family members and friends.
There are three likely ways this could work. The cost of travel could be increased by raising the prices of vehicles or fuel; travel time could be increased by not expanding the highway system; or superior alternatives to the private car could be developed. The most likely way to increase the cost of travel would be by increasing fuel taxes perhaps to as much as $4 per gallon, as some have suggested.
Allowing congestion to increase travel times would be politically easier. In the name of "multimodal planning," for example, road-use taxes could be diverted, as Messrs. Rockefeller and Lautenberg suggest, to "increase the total usage of public transportation." But public transportation (where it's available) typically takes twice as long as automobile travel, so it's not practical for many Americans.
Moreover, public transportation (passenger rail services, subways, buses, light rail) requires heavy subsidies, while roads mostly pay for themselves through fuel taxes. Our roads would be even more self-sustaining if 20% of the federal fuel tax were not already diverted to public transit from the federal Highway Trust Fund. Messrs. Rockefeller, Lautenberg and Oberstar want to grab even more money from the trust fund.
Americans have always valued their independence and mobility. One way to reassert their rights would be to abolish the misnamed Highway Trust Fund, which finances highway construction and maintenance. Let the states decide what roads they need and how to finance them. The present system expires on Sept. 30 unless Congress reauthorizes it. Let it die.
Sen. Kay Bailey Hutchison (R., Texas) has in this regard introduced the "Highway Fairness and Reform Act of 2009," which would explicitly allow states to opt out of the federal financing system. A companion bill has been introduced in the House.
If a significant number of states opted out of the federal system, it would collapse and responsibility for roads would revert to the states. The vast majority of road users would benefit from such a change. And, if "livability" standards were deemed desirable, local preferences would determine them, rather than federal "greenhouse gas emissions reduction goals."
Mr. Roth is a research fellow at The Independent Institute and editor of "Street Smart: Competition, Entrepreneurship and the Future of Roads" (Transaction, 2006).
To fight climate change, Washington wants you to take a bus.
The Wall Street Journal, Jul 06, 2009, p A11
What is the appropriate response to Secretary of Transportation Ray LaHood, who as General Motors prepared to file for Chapter 11 bankruptcy protection declared that he wants to "coerce people out of their cars"? One might be inclined to dismiss these words as overkill -- except for recently introduced legislation by some congressional heavy-hitters that would take us down this road.
First there was the "Federal Surface Transportation Policy and Planning Act of 2009," introduced in May by Jay Rockefeller (D., W.Va.), chairman of the Senate Committee on Commerce, Science and Transportation, and Frank Lautenberg (D., N.J.), chairman of the Subcommittee on Surface Transportation. Next, in June, came the "Surface Transportation Authorization Act of 2009," introduced by James Oberstar (D., Minn.), chairman of the House Committee on Transportation and Infrastructure.
Messrs. Rockefeller and Lautenberg aim to "reduce per capita motor vehicle miles traveled on an annual basis." Mr. Oberstar wants to establish a federal "Office of Livability" to ensure that "States and metropolitan areas achieve progress towards national transportation-related greenhouse gas emissions reduction goals."
What does this mean? Most travel is not for its own sake. So reducing the total miles traveled -- whether the length or number of trips -- means people would have to reduce the activities they want and need to do. People would be "coerced," in effect, to live in less desirable places or work in less desirable jobs; shop in fewer and closer stores; see their doctor less frequently; visit fewer family members and friends.
There are three likely ways this could work. The cost of travel could be increased by raising the prices of vehicles or fuel; travel time could be increased by not expanding the highway system; or superior alternatives to the private car could be developed. The most likely way to increase the cost of travel would be by increasing fuel taxes perhaps to as much as $4 per gallon, as some have suggested.
Allowing congestion to increase travel times would be politically easier. In the name of "multimodal planning," for example, road-use taxes could be diverted, as Messrs. Rockefeller and Lautenberg suggest, to "increase the total usage of public transportation." But public transportation (where it's available) typically takes twice as long as automobile travel, so it's not practical for many Americans.
Moreover, public transportation (passenger rail services, subways, buses, light rail) requires heavy subsidies, while roads mostly pay for themselves through fuel taxes. Our roads would be even more self-sustaining if 20% of the federal fuel tax were not already diverted to public transit from the federal Highway Trust Fund. Messrs. Rockefeller, Lautenberg and Oberstar want to grab even more money from the trust fund.
Americans have always valued their independence and mobility. One way to reassert their rights would be to abolish the misnamed Highway Trust Fund, which finances highway construction and maintenance. Let the states decide what roads they need and how to finance them. The present system expires on Sept. 30 unless Congress reauthorizes it. Let it die.
Sen. Kay Bailey Hutchison (R., Texas) has in this regard introduced the "Highway Fairness and Reform Act of 2009," which would explicitly allow states to opt out of the federal financing system. A companion bill has been introduced in the House.
If a significant number of states opted out of the federal system, it would collapse and responsibility for roads would revert to the states. The vast majority of road users would benefit from such a change. And, if "livability" standards were deemed desirable, local preferences would determine them, rather than federal "greenhouse gas emissions reduction goals."
Mr. Roth is a research fellow at The Independent Institute and editor of "Street Smart: Competition, Entrepreneurship and the Future of Roads" (Transaction, 2006).
Developing Countries Need Trade
Developing Countries Need Trade. By Pascal Lamy
WSJ, Jul 06, 2009
"History tells us that no poor country has ever become wealthy without trade. Moreover, many developing country success stories -- Singapore, South Korea, Chile, China and Malaysia, to name only a few -- have, in recent decades, seen their national incomes grow by a percentage point or more per year as a result of open trade policies than would have been the case had they remained closed. The extra funds generated during this period have enabled them to respond to the crisis with stimulus packages that have prevented the crisis from turning into a protracted recession with its inevitable human costs."
WSJ, Jul 06, 2009
"History tells us that no poor country has ever become wealthy without trade. Moreover, many developing country success stories -- Singapore, South Korea, Chile, China and Malaysia, to name only a few -- have, in recent decades, seen their national incomes grow by a percentage point or more per year as a result of open trade policies than would have been the case had they remained closed. The extra funds generated during this period have enabled them to respond to the crisis with stimulus packages that have prevented the crisis from turning into a protracted recession with its inevitable human costs."
The President's Mission to Moscow
The President's Mission to Moscow. By DAVID SATTER
Obama doesn't need to engage Russia's leaders. He needs to deter them.
The Wall Street Journal, Jul 06, 2009, p A13
Moscow
President Barack Obama arrives here today facing a dilemma of his own making. Having called for a "reset" in U.S.-Russian relations, the U.S. side is virtually obliged to make some new overtures. But Russia does not need to be engaged. It needs to be deterred.
The expectations that Mr. Obama has inspired are substantial. Both officials and ordinary citizens in Russia interpret the call for a reset as an admission of U.S. guilt for ignoring Russia's interests. Sergei Rybakov, the Russian deputy foreign minister, said that mutual trust was "lacking over the last several years." It was the task of the U.S. to show its good intentions with "concrete actions" because in Russia, the U.S. is "deeply distrusted."
Accepting the Russian view of reality on the issues that divide the U.S. and Russia, however, would be a grave mistake. Russia aspires to resurrect a version of the Soviet Union in which it projects power and dominates its neighbors. To encourage its ambitions in any way would be to undermine not only U.S. security but, in the long run, the security of Russia as well.
There are three important areas of conflict between the U.S. and Russia: NATO expansion, the U.S. missile shield in Eastern Europe and the Russian human rights situation. In each case, any reset should be on the Russian side.
The most urgent issue may be NATO expansion. There are serious indications that Russia is preparing for a second invasion of Georgia. The first Georgian war was accompanied by a burst of patriotism in Russia but didn't achieve its strategic objectives. Georgian president Mikheil Saakashvili remains in power and Georgia remains a supply corridor to the West for energy from Central Asia and the Caspian Sea. Many Russian leaders want to finish the job. At a televised forum in December, Prime Minister Vladimir Putin was asked about press reports that he had told French president Nicolas Sarkozy that Mr. Saakashvili should be "hung by his ba**s." He replied, "Why only by one part?"
Under these circumstances, the best protection for Georgia is NATO membership. According to Pavel Felgenhauer, a defense analyst with Novaya Gazeta, the decision to invade Georgia last August came in April after NATO failed to offer outright a Membership Action Plan to Georgia and Ukraine at its annual summit in Bucharest.
Russia will argue strenuously that Georgia, Ukraine and the other former Soviet republics are part of its sphere of "privileged interests." This is an issue on which Mr. Obama cannot give way. If the former Soviet republics are denied NATO membership at Russia's behest, they either will be turned into Russian satellites with manipulated elections and a controlled foreign policy or form a zone of instability along Russia's borders with unpredictable consequences for both Russia and the West.
Beside the issue of NATO expansion, Russia and the U.S. have a critical conflict over U.S. plans to install a missile shield in the Czech Republic and Poland. Not only have U.S. experts argued that the anti-missile system is not aimed at Russia but Russia's military experts agree. Nonetheless, the system is described by Russian leaders as a threat and denunciations of the missile shield are a staple of the anti-Western programming on Russian state television.
According to Mikhail Delyagin, who served as an adviser to former Russian Prime Minister Mikhail Kasyanov, the placement of rockets in Poland is unacceptable to Russia for emotional and symbolic reasons. "It shows that the U.S. is now the master in Eastern Europe," he said. Any decision to yield to Russian objections, however, would effectively divide NATO into countries that need Russian approval for deployments and those that do not. Even dubious Russian promises to help with Iran would not compensate for the damage done to the alliance by such a concession to Russian pretensions.
Finally, there is the conflict between Russia and the U.S. over human rights. The status of human rights is a universal concern but it also has strategic implications. A population that lacks democratic rights and is subject to constant anti-Western propaganda can easily be mobilized against the U.S.
By any measure, the state of human rights in Russia is unacceptable. Russia today lacks honest elections or a separation of powers. The regime allows a degree of freedom but the features of daily life include police torture, prisoner abuse, political control of the courts and, for democratic activists, the danger of being beaten or killed. The result is that fear has returned to Russia less than two decades after the fall of the Soviet Union.
The regime is also taking steps to curtail freedom of speech. Freedom of the press has long been restricted under Mr. Putin with censorship on state run television and pressure on newspapers through their owners, to exercise self censorship. Peaceful demonstrations have also been forcibly dispersed. In recent weeks, however, a bill has been introduced in the State Duma that would make it illegal to deny the role of the Soviet Union in the victory in World War II or the crimes of Hitler's cronies (but not the crimes of Stalin and his entourage). The punishment both for Russian citizens and for foreigners will be three to five years in prison.
In the run up to Mr. Obama's visit, Russian academics and self described realists in the U.S. have called for a "grand deal" in which the U.S. accedes to Russian demands in the former Soviet Union in return for Russian help on Iran, North Korea and Afghanistan. In the case of Iran, Russia, which has repeatedly thwarted tough United Nations resolutions on that country's nuclear energy program, is offering to assist in dealing with a problem that it helped to create.
Unfortunately such a deal, the only "reset" in which the Russians have shown any interest, would eliminate moral criteria from the U.S.-Russian relationship and deprive the U.S. of any basis for limiting Russia's demands in the future. Under those circumstances, Russia's appetite is likely to grow.
Mr. Obama may wish to improve the U.S.-Russia relationship but the problems in that relationship come not from our actions but from assumptions on the Russian side about the prerogatives of power that we cannot possibly accept. Instead of resetting relations, we may just have to content ourselves with resisting Russian pretensions until such time as the mentality that gives rise to them can be changed.
Mr. Satter is a senior fellow at the Hudson Institute and a visiting scholar at the Johns Hopkins University School of Advanced International Studies (SAIS). He is writing a book on the Russian attitude to the Soviet past.
Obama doesn't need to engage Russia's leaders. He needs to deter them.
The Wall Street Journal, Jul 06, 2009, p A13
Moscow
President Barack Obama arrives here today facing a dilemma of his own making. Having called for a "reset" in U.S.-Russian relations, the U.S. side is virtually obliged to make some new overtures. But Russia does not need to be engaged. It needs to be deterred.
The expectations that Mr. Obama has inspired are substantial. Both officials and ordinary citizens in Russia interpret the call for a reset as an admission of U.S. guilt for ignoring Russia's interests. Sergei Rybakov, the Russian deputy foreign minister, said that mutual trust was "lacking over the last several years." It was the task of the U.S. to show its good intentions with "concrete actions" because in Russia, the U.S. is "deeply distrusted."
Accepting the Russian view of reality on the issues that divide the U.S. and Russia, however, would be a grave mistake. Russia aspires to resurrect a version of the Soviet Union in which it projects power and dominates its neighbors. To encourage its ambitions in any way would be to undermine not only U.S. security but, in the long run, the security of Russia as well.
There are three important areas of conflict between the U.S. and Russia: NATO expansion, the U.S. missile shield in Eastern Europe and the Russian human rights situation. In each case, any reset should be on the Russian side.
The most urgent issue may be NATO expansion. There are serious indications that Russia is preparing for a second invasion of Georgia. The first Georgian war was accompanied by a burst of patriotism in Russia but didn't achieve its strategic objectives. Georgian president Mikheil Saakashvili remains in power and Georgia remains a supply corridor to the West for energy from Central Asia and the Caspian Sea. Many Russian leaders want to finish the job. At a televised forum in December, Prime Minister Vladimir Putin was asked about press reports that he had told French president Nicolas Sarkozy that Mr. Saakashvili should be "hung by his ba**s." He replied, "Why only by one part?"
Under these circumstances, the best protection for Georgia is NATO membership. According to Pavel Felgenhauer, a defense analyst with Novaya Gazeta, the decision to invade Georgia last August came in April after NATO failed to offer outright a Membership Action Plan to Georgia and Ukraine at its annual summit in Bucharest.
Russia will argue strenuously that Georgia, Ukraine and the other former Soviet republics are part of its sphere of "privileged interests." This is an issue on which Mr. Obama cannot give way. If the former Soviet republics are denied NATO membership at Russia's behest, they either will be turned into Russian satellites with manipulated elections and a controlled foreign policy or form a zone of instability along Russia's borders with unpredictable consequences for both Russia and the West.
Beside the issue of NATO expansion, Russia and the U.S. have a critical conflict over U.S. plans to install a missile shield in the Czech Republic and Poland. Not only have U.S. experts argued that the anti-missile system is not aimed at Russia but Russia's military experts agree. Nonetheless, the system is described by Russian leaders as a threat and denunciations of the missile shield are a staple of the anti-Western programming on Russian state television.
According to Mikhail Delyagin, who served as an adviser to former Russian Prime Minister Mikhail Kasyanov, the placement of rockets in Poland is unacceptable to Russia for emotional and symbolic reasons. "It shows that the U.S. is now the master in Eastern Europe," he said. Any decision to yield to Russian objections, however, would effectively divide NATO into countries that need Russian approval for deployments and those that do not. Even dubious Russian promises to help with Iran would not compensate for the damage done to the alliance by such a concession to Russian pretensions.
Finally, there is the conflict between Russia and the U.S. over human rights. The status of human rights is a universal concern but it also has strategic implications. A population that lacks democratic rights and is subject to constant anti-Western propaganda can easily be mobilized against the U.S.
By any measure, the state of human rights in Russia is unacceptable. Russia today lacks honest elections or a separation of powers. The regime allows a degree of freedom but the features of daily life include police torture, prisoner abuse, political control of the courts and, for democratic activists, the danger of being beaten or killed. The result is that fear has returned to Russia less than two decades after the fall of the Soviet Union.
The regime is also taking steps to curtail freedom of speech. Freedom of the press has long been restricted under Mr. Putin with censorship on state run television and pressure on newspapers through their owners, to exercise self censorship. Peaceful demonstrations have also been forcibly dispersed. In recent weeks, however, a bill has been introduced in the State Duma that would make it illegal to deny the role of the Soviet Union in the victory in World War II or the crimes of Hitler's cronies (but not the crimes of Stalin and his entourage). The punishment both for Russian citizens and for foreigners will be three to five years in prison.
In the run up to Mr. Obama's visit, Russian academics and self described realists in the U.S. have called for a "grand deal" in which the U.S. accedes to Russian demands in the former Soviet Union in return for Russian help on Iran, North Korea and Afghanistan. In the case of Iran, Russia, which has repeatedly thwarted tough United Nations resolutions on that country's nuclear energy program, is offering to assist in dealing with a problem that it helped to create.
Unfortunately such a deal, the only "reset" in which the Russians have shown any interest, would eliminate moral criteria from the U.S.-Russian relationship and deprive the U.S. of any basis for limiting Russia's demands in the future. Under those circumstances, Russia's appetite is likely to grow.
Mr. Obama may wish to improve the U.S.-Russia relationship but the problems in that relationship come not from our actions but from assumptions on the Russian side about the prerogatives of power that we cannot possibly accept. Instead of resetting relations, we may just have to content ourselves with resisting Russian pretensions until such time as the mentality that gives rise to them can be changed.
Mr. Satter is a senior fellow at the Hudson Institute and a visiting scholar at the Johns Hopkins University School of Advanced International Studies (SAIS). He is writing a book on the Russian attitude to the Soviet past.
Sunday, July 5, 2009
Public Pensions Cook the Books
Public Pensions Cook the Books. By Andrew G Biggs
Some plans want to hide the truth from taxpayers.
The Wall Street Journal, Jul 06, 2009, p A13
Here's a dilemma: You manage a public employee pension plan and your actuary tells you it is significantly underfunded. You don't want to raise contributions. Cutting benefits is out of the question. To be honest, you'd really rather not even admit there's a problem, lest taxpayers get upset.
What to do? For the administrators of two Montana pension plans, the answer is obvious: Get a new actuary. Or at least that's the essence of the managers' recent solicitations for actuarial services, which warn that actuaries who favor reporting the full market value of pension liabilities probably shouldn't bother applying.
Public employee pension plans are plagued by overgenerous benefits, chronic underfunding, and now trillion dollar stock-market losses. Based on their preferred accounting methods -- which discount future liabilities based on high but uncertain returns projected for investments -- these plans are underfunded nationally by around $310 billion.
The numbers are worse using market valuation methods (the methods private-sector plans must use), which discount benefit liabilities at lower interest rates to reflect the chance that the expected returns won't be realized. Using that method, University of Chicago economists Robert Novy-Marx and Joshua Rauh calculate that, even prior to the market collapse, public pensions were actually short by nearly $2 trillion. That's nearly $87,000 per plan participant. With employee benefits guaranteed by law and sometimes even by state constitutions, it's likely these gargantuan shortfalls will have to be borne by unsuspecting taxpayers.
Some public pension administrators have a strategy, though: Keep taxpayers unsuspecting. The Montana Public Employees' Retirement Board and the Montana Teachers' Retirement System declare in a recent solicitation for actuarial services that "If the Primary Actuary or the Actuarial Firm supports [market valuation] for public pension plans, their proposal may be disqualified from further consideration."
Scott Miller, legal counsel of the Montana Public Employees Board, was more straightforward: "The point is we aren't interested in bringing in an actuary to pressure the board to adopt market value of liabilities theory."
While corporate pension funds are required by law to use low, risk-adjusted discount rates to calculate the market value of their liabilities, public employee pensions are not. However, financial economists are united in believing that market-based techniques for valuing private sector investments should also be applied to public pensions.
Because the power of compound interest is so strong, discounting future benefit costs using a pension plan's high expected return rather than a low riskless return can significantly reduce the plan's measured funding shortfall. But it does so only by ignoring risk. The expected return implies only the "expectation" -- meaning, at least a 50% chance, not a guarantee -- that the plan's assets will be sufficient to meet its liabilities. But when future benefits are considered to be riskless by plan participants and have been ruled to be so by state courts, a 51% chance that the returns will actually be there when they are needed hardly constitutes full funding.
Public pension administrators argue that government plans fundamentally differ from private sector pensions, since the government cannot go out of business. Even so, the only true advantage public pensions have over private plans is the ability to raise taxes. But as the Congressional Budget Office has pointed out in 2004, "The government does not have a capacity to bear risk on its own" -- rather, government merely redistributes risk between taxpayers and beneficiaries, present and future.
Market valuation makes the costs of these potential tax increases explicit, while the public pension administrators' approach, which obscures the possibility that the investment returns won't achieve their goals, leaves taxpayers in the dark.
For these reasons, the Public Interest Committee of the American Academy of Actuaries recently stated, "it is in the public interest for retirement plans to disclose consistent measures of the economic value of plan assets and liabilities in order to provide the benefits promised by plan sponsors."
Nevertheless, the National Association of State Retirement Administrators, an umbrella group representing government employee pension funds, effectively wants other public plans to take the same low road that the two Montana plans want to take. It argues against reporting the market valuation of pension shortfalls. But the association's objections seem less against market valuation itself than against the fact that higher reported underfunding "could encourage public sector plan sponsors to abandon their traditional pension plans in lieu of defined contribution plans."
The Government Accounting Standards Board, which sets guidelines for public pension reporting, does not currently call for reporting the market value of public pension liabilities. The board announced last year a review of its position regarding market valuation but says the review may not be completed until 2013.
This is too long for state taxpayers to wait to find out how many trillions they owe.
Mr. Biggs is a resident scholar at the American Enterprise Institute.
Some plans want to hide the truth from taxpayers.
The Wall Street Journal, Jul 06, 2009, p A13
Here's a dilemma: You manage a public employee pension plan and your actuary tells you it is significantly underfunded. You don't want to raise contributions. Cutting benefits is out of the question. To be honest, you'd really rather not even admit there's a problem, lest taxpayers get upset.
What to do? For the administrators of two Montana pension plans, the answer is obvious: Get a new actuary. Or at least that's the essence of the managers' recent solicitations for actuarial services, which warn that actuaries who favor reporting the full market value of pension liabilities probably shouldn't bother applying.
Public employee pension plans are plagued by overgenerous benefits, chronic underfunding, and now trillion dollar stock-market losses. Based on their preferred accounting methods -- which discount future liabilities based on high but uncertain returns projected for investments -- these plans are underfunded nationally by around $310 billion.
The numbers are worse using market valuation methods (the methods private-sector plans must use), which discount benefit liabilities at lower interest rates to reflect the chance that the expected returns won't be realized. Using that method, University of Chicago economists Robert Novy-Marx and Joshua Rauh calculate that, even prior to the market collapse, public pensions were actually short by nearly $2 trillion. That's nearly $87,000 per plan participant. With employee benefits guaranteed by law and sometimes even by state constitutions, it's likely these gargantuan shortfalls will have to be borne by unsuspecting taxpayers.
Some public pension administrators have a strategy, though: Keep taxpayers unsuspecting. The Montana Public Employees' Retirement Board and the Montana Teachers' Retirement System declare in a recent solicitation for actuarial services that "If the Primary Actuary or the Actuarial Firm supports [market valuation] for public pension plans, their proposal may be disqualified from further consideration."
Scott Miller, legal counsel of the Montana Public Employees Board, was more straightforward: "The point is we aren't interested in bringing in an actuary to pressure the board to adopt market value of liabilities theory."
While corporate pension funds are required by law to use low, risk-adjusted discount rates to calculate the market value of their liabilities, public employee pensions are not. However, financial economists are united in believing that market-based techniques for valuing private sector investments should also be applied to public pensions.
Because the power of compound interest is so strong, discounting future benefit costs using a pension plan's high expected return rather than a low riskless return can significantly reduce the plan's measured funding shortfall. But it does so only by ignoring risk. The expected return implies only the "expectation" -- meaning, at least a 50% chance, not a guarantee -- that the plan's assets will be sufficient to meet its liabilities. But when future benefits are considered to be riskless by plan participants and have been ruled to be so by state courts, a 51% chance that the returns will actually be there when they are needed hardly constitutes full funding.
Public pension administrators argue that government plans fundamentally differ from private sector pensions, since the government cannot go out of business. Even so, the only true advantage public pensions have over private plans is the ability to raise taxes. But as the Congressional Budget Office has pointed out in 2004, "The government does not have a capacity to bear risk on its own" -- rather, government merely redistributes risk between taxpayers and beneficiaries, present and future.
Market valuation makes the costs of these potential tax increases explicit, while the public pension administrators' approach, which obscures the possibility that the investment returns won't achieve their goals, leaves taxpayers in the dark.
For these reasons, the Public Interest Committee of the American Academy of Actuaries recently stated, "it is in the public interest for retirement plans to disclose consistent measures of the economic value of plan assets and liabilities in order to provide the benefits promised by plan sponsors."
Nevertheless, the National Association of State Retirement Administrators, an umbrella group representing government employee pension funds, effectively wants other public plans to take the same low road that the two Montana plans want to take. It argues against reporting the market valuation of pension shortfalls. But the association's objections seem less against market valuation itself than against the fact that higher reported underfunding "could encourage public sector plan sponsors to abandon their traditional pension plans in lieu of defined contribution plans."
The Government Accounting Standards Board, which sets guidelines for public pension reporting, does not currently call for reporting the market value of public pension liabilities. The board announced last year a review of its position regarding market valuation but says the review may not be completed until 2013.
This is too long for state taxpayers to wait to find out how many trillions they owe.
Mr. Biggs is a resident scholar at the American Enterprise Institute.
Russia Presents Test for Obama
Russia Presents Test for Obama. By Michael A. Fletcher and Philip P. Pan
Washington Post, Sunday, July 5, 2009
President Obama is scheduled to leave Washington tonight on a week-long trip that will help determine whether his personal popularity and fresh policy approaches can yield concrete results on difficult issues including arms control, missile defense and nuclear nonproliferation.
After seeking support for U.S. policies from allies in Europe and appealing for a new relationship with the Muslim world in Cairo on previous trips, Obama arrives in Moscow tomorrow for his first foray into high-profile, nuts-and-bolts negotiations with the leader of a nation that might be deemed an unfriendly rival.
On Wednesday, Obama will travel to L'Aquila, Italy, where he will meet with leaders of the world's major industrial powers. Climate change and the continued shaky global economy are expected to dominate the agenda. He is also to meet with Pope Benedict XVI.
On Friday, Obama will go to Ghana, where he is expected to highlight that nation's burgeoning democratic tradition and to deliver a speech on his administration's goals for the developing world.
Shortly after taking office, the Obama administration made clear that it wants to "reset" relations between the United States and Russia, which had deteriorated under President George W. Bush. During Obama's first meeting with Russian President Dmitry Medvedev, in London in April, the two agreed to a broad statement of cooperation on numerous issues.
Both the White House and the Kremlin hope to build on that with a summit in Moscow, and agreements on subjects including Afghanistan and nuclear proliferation are expected to be unveiled. But fundamental differences remain on key issues that have strained U.S.-Russian relations.
Medvedev wants U.S. pledges to scrap a missile defense system in Eastern Europe and to rule out military alliances with the former Soviet republics of Georgia and Ukraine. Obama wants Russia to back tough sanctions against Iran if diplomatic efforts to curb its nuclear program fail. Neither president has indicated any willingness to yield.
"We're not going to reassure or give or trade anything with the Russians regarding NATO expansion or missile defense," said Michael McFaul, special assistant to the president and senior director for Russian and Eurasian affairs. "We're going to define our national interests, and by that I also mean the interests of our allies in Europe with reference to these two particular questions."
Sergei Prikhodko, Medvedev's chief foreign policy adviser, struck a similar tone. "Saying that it will be easy to move forward would mean deluding ourselves," he told reporters. "The domestic agendas of both leaders and their agendas in dealings with allies do not always coincide. Sometimes, they contradict each other directly or indirectly. But the question is . . . whether we want to expand mutual understanding or focus on defending our own positions on sensitive issues."
Obama is scheduled to meet on Tuesday with Prime Minister Vladimir Putin, whom analysts called the preeminent power in Russian politics. Obama told the Associated Press last week that the former Russian president must move beyond a Cold War approach to relations with the United States.
The willingness of Obama and Medvedev to compromise will be tested when they discuss a treaty to replace the landmark START I nuclear arms control pact, which expires in December.
The United States and Russia control more than 90 percent of the world's nuclear weapons. After three months of talks, negotiators have agreed to modest reductions below the limits of 1,700 to 2,200 warheads established by the 2002 Treaty of Moscow. But they remain deadlocked on how to count and limit the number of "delivery systems," or missiles and heavy bombers, that each nation can keep.
Medvedev publicly declared two weeks ago that no treaty is possible unless "the United States lifts Russia's concerns" about its plans to build a missile defense system in Poland and the Czech Republic.
Obama has not decided what to do about the system, said a senior administration official, speaking on the condition of anonymity because he did not want to discuss internal deliberations publicly.
The United States is reviewing other options for missile defense and has tried unsuccessfully to engage the Kremlin on the issue, he said. "We're serious about cooperation on missile defense with the Russians," he said. "But the sense is the Russians are still nervous and don't trust us."
Russian officials have publicly endorsed the idea of cooperation on missile defense, but have called on Obama to abandon the Polish-Czech plan first and emphasized they want to be included from the ground up, beginning with joint assessment of threats. The two sides have discussed opening a Moscow-based joint data exchange center.
Obama hopes to gain Russian cooperation on other topics, including energy efficiency and climate change. Russia is one of the world's largest energy producers, but it is also a leading emitter of greenhouse gases, behind the United States and China, according to the Center for American Progress.
The summit is expected to produce a deal allowing the United States to ship weapons to Afghanistan through Russia. The two sides may also agree to share intelligence and fight Afghanistan drug trafficking. Officials said the sides are also working to revive a pact on civilian nuclear energy cooperation that the Bush administration suspended after Russia's war last year with Georgia, and to strengthen military ties, also downgraded after the war.
Some business deals, including one involving Boeing, are also expected, analysts said, but they could be overshadowed by disappointment over Putin's decision to withdraw Russia's application for World Trade Organization membership last month.
Obama also is scheduled to deliver a speech in Moscow in which aides say he will try to dispel the feeling in Russia that America's self-interest lies in a weak Russia.
"This is not 1974. This is not just where we go do an arms control agreement with the Soviets, but that we have a multidimensional relationship with the Russian government and with the Russian people," McFaul said.
Pan reported from Moscow. Staff writer Mary Beth Sheridan contributed to this report.
Washington Post, Sunday, July 5, 2009
President Obama is scheduled to leave Washington tonight on a week-long trip that will help determine whether his personal popularity and fresh policy approaches can yield concrete results on difficult issues including arms control, missile defense and nuclear nonproliferation.
After seeking support for U.S. policies from allies in Europe and appealing for a new relationship with the Muslim world in Cairo on previous trips, Obama arrives in Moscow tomorrow for his first foray into high-profile, nuts-and-bolts negotiations with the leader of a nation that might be deemed an unfriendly rival.
On Wednesday, Obama will travel to L'Aquila, Italy, where he will meet with leaders of the world's major industrial powers. Climate change and the continued shaky global economy are expected to dominate the agenda. He is also to meet with Pope Benedict XVI.
On Friday, Obama will go to Ghana, where he is expected to highlight that nation's burgeoning democratic tradition and to deliver a speech on his administration's goals for the developing world.
Shortly after taking office, the Obama administration made clear that it wants to "reset" relations between the United States and Russia, which had deteriorated under President George W. Bush. During Obama's first meeting with Russian President Dmitry Medvedev, in London in April, the two agreed to a broad statement of cooperation on numerous issues.
Both the White House and the Kremlin hope to build on that with a summit in Moscow, and agreements on subjects including Afghanistan and nuclear proliferation are expected to be unveiled. But fundamental differences remain on key issues that have strained U.S.-Russian relations.
Medvedev wants U.S. pledges to scrap a missile defense system in Eastern Europe and to rule out military alliances with the former Soviet republics of Georgia and Ukraine. Obama wants Russia to back tough sanctions against Iran if diplomatic efforts to curb its nuclear program fail. Neither president has indicated any willingness to yield.
"We're not going to reassure or give or trade anything with the Russians regarding NATO expansion or missile defense," said Michael McFaul, special assistant to the president and senior director for Russian and Eurasian affairs. "We're going to define our national interests, and by that I also mean the interests of our allies in Europe with reference to these two particular questions."
Sergei Prikhodko, Medvedev's chief foreign policy adviser, struck a similar tone. "Saying that it will be easy to move forward would mean deluding ourselves," he told reporters. "The domestic agendas of both leaders and their agendas in dealings with allies do not always coincide. Sometimes, they contradict each other directly or indirectly. But the question is . . . whether we want to expand mutual understanding or focus on defending our own positions on sensitive issues."
Obama is scheduled to meet on Tuesday with Prime Minister Vladimir Putin, whom analysts called the preeminent power in Russian politics. Obama told the Associated Press last week that the former Russian president must move beyond a Cold War approach to relations with the United States.
The willingness of Obama and Medvedev to compromise will be tested when they discuss a treaty to replace the landmark START I nuclear arms control pact, which expires in December.
The United States and Russia control more than 90 percent of the world's nuclear weapons. After three months of talks, negotiators have agreed to modest reductions below the limits of 1,700 to 2,200 warheads established by the 2002 Treaty of Moscow. But they remain deadlocked on how to count and limit the number of "delivery systems," or missiles and heavy bombers, that each nation can keep.
Medvedev publicly declared two weeks ago that no treaty is possible unless "the United States lifts Russia's concerns" about its plans to build a missile defense system in Poland and the Czech Republic.
Obama has not decided what to do about the system, said a senior administration official, speaking on the condition of anonymity because he did not want to discuss internal deliberations publicly.
The United States is reviewing other options for missile defense and has tried unsuccessfully to engage the Kremlin on the issue, he said. "We're serious about cooperation on missile defense with the Russians," he said. "But the sense is the Russians are still nervous and don't trust us."
Russian officials have publicly endorsed the idea of cooperation on missile defense, but have called on Obama to abandon the Polish-Czech plan first and emphasized they want to be included from the ground up, beginning with joint assessment of threats. The two sides have discussed opening a Moscow-based joint data exchange center.
Obama hopes to gain Russian cooperation on other topics, including energy efficiency and climate change. Russia is one of the world's largest energy producers, but it is also a leading emitter of greenhouse gases, behind the United States and China, according to the Center for American Progress.
The summit is expected to produce a deal allowing the United States to ship weapons to Afghanistan through Russia. The two sides may also agree to share intelligence and fight Afghanistan drug trafficking. Officials said the sides are also working to revive a pact on civilian nuclear energy cooperation that the Bush administration suspended after Russia's war last year with Georgia, and to strengthen military ties, also downgraded after the war.
Some business deals, including one involving Boeing, are also expected, analysts said, but they could be overshadowed by disappointment over Putin's decision to withdraw Russia's application for World Trade Organization membership last month.
Obama also is scheduled to deliver a speech in Moscow in which aides say he will try to dispel the feeling in Russia that America's self-interest lies in a weak Russia.
"This is not 1974. This is not just where we go do an arms control agreement with the Soviets, but that we have a multidimensional relationship with the Russian government and with the Russian people," McFaul said.
Pan reported from Moscow. Staff writer Mary Beth Sheridan contributed to this report.
Link Between Iraq Violence, Troop Withdrawals Considered
Link Between Iraq Violence, Troop Withdrawals Considered. By Greg Jaffe
Washington Post, Sunday, July 5, 2009
A recent spike in violence in Iraq is prompting senior defense officials to ask whether the gradual withdrawal of U.S. troops from Iraqi cities over the past several months has provided an opening to extremist groups eager to spark sectarian attacks between Sunnis and Shiites.
The latest bombings have highlighted the still-fragile state of the Iraqi government and security forces as the war enters a new phase and U.S. influence in the country continues to wane. Some senior defense officials speculated that the recent increase was part of a last push by Sunni extremist groups, who appeared to be marshaling their resources in May, to make their presence felt before the formal deadline for the U.S. withdrawal from Iraq's cities.
"We knew that if al-Qaeda in Iraq had only five bombs left, they were going to use them all as the last of our forces left the cities," said a senior defense official who follows Iraq. "They wanted to create the narrative that they had driven us from Iraq. Next, they'll want to build the narrative that the Iraqi security forces can't protect the people."
Iraqi civilian deaths, which had dropped in May to among the lowest levels of the war, almost doubled in June, to 447, according to a count by the Associated Press. Gen. Ray Odierno, the top commander in Iraq, played down the impact of the recent attacks. "I still believe that al-Qaeda has been significantly degraded here in Iraq," he told reporters on Tuesday.
Military officials said that in the coming weeks they will be watching closely to see whether al-Qaeda in Iraq and other extremist groups can sustain the recent spate of suicide bombs, which would be a sign that networks of fighters have reinvigorated themselves, and whether the attacks provoke retaliatory violence.
Over the long term, the concern is whether the relative peace between Shiites, who represent the majority in Iraq, and Sunnis can be sustained without a large presence of U.S. troops in Baghdad.
"If Sunnis and Shiites continue to work through their differences politically, Iraq will survive. If not, there is no way it will hold together," said retired Col. Pete Mansoor, who served as a senior aide to the top commander in Iraq in 2007 and 2008.
When U.S. troops moved into Baghdad in large numbers in 2007, they took up positions on the fault lines between Sunni and Shiite neighborhoods in an effort to stop the sectarian killing. "We put ourselves between the sects and functioned as honest brokers," Mansoor said. "That was our primary leverage."
A small number of U.S. advisers and several companies of American combat troops will remain in Baghdad over the coming year. But it will be largely up to Iraqi army and police forces to calm sectarian tensions, which are almost certain to flare as the next national elections, scheduled for January, draw closer.
Senior U.S. officials said they will watch closely for any signs that civilian casualties and sectarian murders in Iraq are increasing in the coming months. So far, the recent bombings have not spurred a cycle of retribution, and even with the recent spike in killings violence still remains at summer 2003 levels.
Another danger is that Iraqi army and police forces will revert to the overtly sectarian behavior of 2006 and 2007 without the stabilizing presence of U.S. forces operating alongside them. It will be difficult for the small number of U.S. advisers embedded with Iraqi units to accompany them on all missions. The conduct of Iraq's senior political leaders, including Prime Minister Nouri al-Maliki, and its top generals will play the biggest role in determining whether the country's security forces hold together or fracture on sectarian lines, military analysts said.
"In 1973 and 1974, there were a lot of good South Vietnamese battalion commanders, but that wasn't enough to compensate for the lack of leadership at senior levels," said Steven Metz, a counterinsurgency expert at the Army War College in Carlisle, Pa.
A major test will be how Maliki and other Iraqi leaders handle the armed groups known as the Awakening or Sons of Iraq. These largely Sunni forces include many former insurgents who agreed to drop their resistance in exchange for positions paying about $300 a month.
Despite its promise to integrate 20 percent of the former Sunni fighters into the Iraqi army and police forces, Maliki's government has found positions for about 5 percent of the 91,000 Iraqis in the program, according to the upcoming quarterly report to Congress on Iraq, which will be released this month. Maliki's government has also targeted a few of the Awakening leaders for arrest in recent months and, at times, has been slow to pay other militia members.
U.S. officials remain optimistic that the Iraqi government will not alienate the former insurgents. "The prime minister and his advisers understand they can't abandon these guys en masse," said the senior defense official.
Even if the government does not meet its promises to the former insurgents, it is unlikely that disaffected Sunnis will turn to groups such as al-Qaeda in Iraq for revenge, military analysts said.
"My worry is that you could see a huge uptick in criminality if the Sons of Iraq aren't integrated into the security forces," Mansoor said. "People have to feed their families, and will resort to oil smuggling, illegal checkpoints and shaking down business owners for protection money."
But if violence rises in Iraq, there is little political appetite in Washington or Baghdad for an increased U.S. role. Some military analysts worried that President Obama had not done enough of late to make it clear to his military commanders and the American people that U.S. troops will push back into Baghdad if necessary.
"Right now, you have a public that is starting to say the war is finished," said Peter D. Feaver, who focused on Iraq as a special adviser to the Bush White House and is a professor at Duke University. "The problem is that we're not done in Iraq. The president is the only one who can mobilize American public support for the war."
Washington Post, Sunday, July 5, 2009
A recent spike in violence in Iraq is prompting senior defense officials to ask whether the gradual withdrawal of U.S. troops from Iraqi cities over the past several months has provided an opening to extremist groups eager to spark sectarian attacks between Sunnis and Shiites.
The latest bombings have highlighted the still-fragile state of the Iraqi government and security forces as the war enters a new phase and U.S. influence in the country continues to wane. Some senior defense officials speculated that the recent increase was part of a last push by Sunni extremist groups, who appeared to be marshaling their resources in May, to make their presence felt before the formal deadline for the U.S. withdrawal from Iraq's cities.
"We knew that if al-Qaeda in Iraq had only five bombs left, they were going to use them all as the last of our forces left the cities," said a senior defense official who follows Iraq. "They wanted to create the narrative that they had driven us from Iraq. Next, they'll want to build the narrative that the Iraqi security forces can't protect the people."
Iraqi civilian deaths, which had dropped in May to among the lowest levels of the war, almost doubled in June, to 447, according to a count by the Associated Press. Gen. Ray Odierno, the top commander in Iraq, played down the impact of the recent attacks. "I still believe that al-Qaeda has been significantly degraded here in Iraq," he told reporters on Tuesday.
Military officials said that in the coming weeks they will be watching closely to see whether al-Qaeda in Iraq and other extremist groups can sustain the recent spate of suicide bombs, which would be a sign that networks of fighters have reinvigorated themselves, and whether the attacks provoke retaliatory violence.
Over the long term, the concern is whether the relative peace between Shiites, who represent the majority in Iraq, and Sunnis can be sustained without a large presence of U.S. troops in Baghdad.
"If Sunnis and Shiites continue to work through their differences politically, Iraq will survive. If not, there is no way it will hold together," said retired Col. Pete Mansoor, who served as a senior aide to the top commander in Iraq in 2007 and 2008.
When U.S. troops moved into Baghdad in large numbers in 2007, they took up positions on the fault lines between Sunni and Shiite neighborhoods in an effort to stop the sectarian killing. "We put ourselves between the sects and functioned as honest brokers," Mansoor said. "That was our primary leverage."
A small number of U.S. advisers and several companies of American combat troops will remain in Baghdad over the coming year. But it will be largely up to Iraqi army and police forces to calm sectarian tensions, which are almost certain to flare as the next national elections, scheduled for January, draw closer.
Senior U.S. officials said they will watch closely for any signs that civilian casualties and sectarian murders in Iraq are increasing in the coming months. So far, the recent bombings have not spurred a cycle of retribution, and even with the recent spike in killings violence still remains at summer 2003 levels.
Another danger is that Iraqi army and police forces will revert to the overtly sectarian behavior of 2006 and 2007 without the stabilizing presence of U.S. forces operating alongside them. It will be difficult for the small number of U.S. advisers embedded with Iraqi units to accompany them on all missions. The conduct of Iraq's senior political leaders, including Prime Minister Nouri al-Maliki, and its top generals will play the biggest role in determining whether the country's security forces hold together or fracture on sectarian lines, military analysts said.
"In 1973 and 1974, there were a lot of good South Vietnamese battalion commanders, but that wasn't enough to compensate for the lack of leadership at senior levels," said Steven Metz, a counterinsurgency expert at the Army War College in Carlisle, Pa.
A major test will be how Maliki and other Iraqi leaders handle the armed groups known as the Awakening or Sons of Iraq. These largely Sunni forces include many former insurgents who agreed to drop their resistance in exchange for positions paying about $300 a month.
Despite its promise to integrate 20 percent of the former Sunni fighters into the Iraqi army and police forces, Maliki's government has found positions for about 5 percent of the 91,000 Iraqis in the program, according to the upcoming quarterly report to Congress on Iraq, which will be released this month. Maliki's government has also targeted a few of the Awakening leaders for arrest in recent months and, at times, has been slow to pay other militia members.
U.S. officials remain optimistic that the Iraqi government will not alienate the former insurgents. "The prime minister and his advisers understand they can't abandon these guys en masse," said the senior defense official.
Even if the government does not meet its promises to the former insurgents, it is unlikely that disaffected Sunnis will turn to groups such as al-Qaeda in Iraq for revenge, military analysts said.
"My worry is that you could see a huge uptick in criminality if the Sons of Iraq aren't integrated into the security forces," Mansoor said. "People have to feed their families, and will resort to oil smuggling, illegal checkpoints and shaking down business owners for protection money."
But if violence rises in Iraq, there is little political appetite in Washington or Baghdad for an increased U.S. role. Some military analysts worried that President Obama had not done enough of late to make it clear to his military commanders and the American people that U.S. troops will push back into Baghdad if necessary.
"Right now, you have a public that is starting to say the war is finished," said Peter D. Feaver, who focused on Iraq as a special adviser to the Bush White House and is a professor at Duke University. "The problem is that we're not done in Iraq. The president is the only one who can mobilize American public support for the war."
Congress's cowardly move to tie the president's hands on detainee transfers
Hypocrisy on the Hill. WaPo Editorial
Congress's cowardly move to tie the president's hands on detainee transfers
The Washington Post, Sunday, July 5, 2009
FOR YEARS, Democrats clamored for the closing of the detention center in Guantanamo Bay, Cuba, using the prison to pummel President George W. Bush for abusing his authority, violating domestic and international law, and tarnishing the reputation of the United States. Sen. Dianne Feinstein (D-Calif.) felt so strongly about the issue that she sponsored legislation in 2007 to force Mr. Bush to shutter the facility.
Now lawmakers are making it nearly impossible for President Obama to close the notorious prison by year's end, as he promised to do.
Ms. Feinstein, Senate Majority Leader Harry M. Reid (Nev.) and 88 other senators -- including every Republican -- voted to attach to a must-pass, supplemental war spending bill several provisions that tie the president's hands. Ms. Feinstein complained that the president lacked a detailed plan to deal with detainees. Facing fear-mongering opponents who essentially accused Mr. Obama of having his heart set on letting hard-core terrorists roam through American backyards, the Senate withered and collapsed, with Maryland Democrats Barbara Mikulski and Benjamin L. Cardin and Virginia Democrats James Webb and Mark Warner joining the pack. Only six senators -- all Democrats -- had the courage to vote against this wrong-headed amendment: Richard J. Durbin (Ill.), Tom Harkin (Iowa), Patrick J. Leahy (Vt.), Carl M. Levin (Mich.), and Rhode Island's Jack Reed and Sheldon Whitehouse.
As a result of the vote, the president is prohibited from using taxpayer funds to order the release of any detainee into the United States, including those cleared by the Bush administration and the federal courts; he is likewise forbidden to bring any Guantanamo prisoners to the United States for preventive detention. The president must give lawmakers a 45-day heads up before ordering any detainee prosecuted in a U.S. court proceeding and he must give Congress 15 days' notice of his decision to send a detainee to another country.
It is therefore easy to understand why Mr. Obama may be tempted to circumvent lawmakers: The Post reported that he is considering an executive order to establish a preventive detention regime for those who may be too dangerous to release but against whom there is not enough usable evidence to file formal charges in a traditional courtroom. But he should resist the temptation of acting alone. Mr. Bush often did end runs around lawmakers for fear of being constrained; eventually the courts circumscribed his powers more than they likely would have if he had worked with Congress. Mr. Obama's best course lies in opening discussions with Congress on fashioning a preventive detention regime that will ensure due process and humane treatment of detainees. Let's hope that there will be leaders on the Hill available for thoughtful discussion.
Congress's cowardly move to tie the president's hands on detainee transfers
The Washington Post, Sunday, July 5, 2009
FOR YEARS, Democrats clamored for the closing of the detention center in Guantanamo Bay, Cuba, using the prison to pummel President George W. Bush for abusing his authority, violating domestic and international law, and tarnishing the reputation of the United States. Sen. Dianne Feinstein (D-Calif.) felt so strongly about the issue that she sponsored legislation in 2007 to force Mr. Bush to shutter the facility.
Now lawmakers are making it nearly impossible for President Obama to close the notorious prison by year's end, as he promised to do.
Ms. Feinstein, Senate Majority Leader Harry M. Reid (Nev.) and 88 other senators -- including every Republican -- voted to attach to a must-pass, supplemental war spending bill several provisions that tie the president's hands. Ms. Feinstein complained that the president lacked a detailed plan to deal with detainees. Facing fear-mongering opponents who essentially accused Mr. Obama of having his heart set on letting hard-core terrorists roam through American backyards, the Senate withered and collapsed, with Maryland Democrats Barbara Mikulski and Benjamin L. Cardin and Virginia Democrats James Webb and Mark Warner joining the pack. Only six senators -- all Democrats -- had the courage to vote against this wrong-headed amendment: Richard J. Durbin (Ill.), Tom Harkin (Iowa), Patrick J. Leahy (Vt.), Carl M. Levin (Mich.), and Rhode Island's Jack Reed and Sheldon Whitehouse.
As a result of the vote, the president is prohibited from using taxpayer funds to order the release of any detainee into the United States, including those cleared by the Bush administration and the federal courts; he is likewise forbidden to bring any Guantanamo prisoners to the United States for preventive detention. The president must give lawmakers a 45-day heads up before ordering any detainee prosecuted in a U.S. court proceeding and he must give Congress 15 days' notice of his decision to send a detainee to another country.
It is therefore easy to understand why Mr. Obama may be tempted to circumvent lawmakers: The Post reported that he is considering an executive order to establish a preventive detention regime for those who may be too dangerous to release but against whom there is not enough usable evidence to file formal charges in a traditional courtroom. But he should resist the temptation of acting alone. Mr. Bush often did end runs around lawmakers for fear of being constrained; eventually the courts circumscribed his powers more than they likely would have if he had worked with Congress. Mr. Obama's best course lies in opening discussions with Congress on fashioning a preventive detention regime that will ensure due process and humane treatment of detainees. Let's hope that there will be leaders on the Hill available for thoughtful discussion.
Thursday, July 2, 2009
Tilting at Windmill Jobs: The 'stimulus' promised a jobless peak of 8%; it's now 9.5%
Tilting at Windmill Jobs. WSJ Editorial
The 'stimulus' promised a jobless peak of 8%; it's now 9.5%.
The Wall Street Journal, Jul 03, 2009, p A12
About the best we can say about yesterday's June jobs report is that employment is usually a lagging economic indicator. At least we hope it is, because the loss of 467,000 jobs for the month is one more sign that the economy still hasn't hit bottom despite months of epic fiscal and monetary reflation.
The report is in many ways even uglier than the headline numbers. Average hours worked per week dropped to 33, the lowest level in at least 40 years. This means that millions of full-time workers are being downgraded to part-time, as businesses slash labor costs to remain above water. Because people are working less, wages have fallen by 0.3% this year. Factories are operating at only 65% capacity, while the overall jobless rate hit 9.5%. Throw in discouraged workers who want full-time work, and the labor underutilization rate climbed to 16.5%.
The news is even worse for young people, with nearly one in four teenagers unemployed. Congress has scheduled an increase in the minimum wage later this month, which will price even more of these unskilled youths out of a vital start on the career ladder. One useful policy response would be for Congress to rescind the wage hike to $7.25 an hour (from $6.55) that is scheduled for July 24. But the union economic model that now dominates Washington holds that wages only matter for those who already have jobs. The jobs that are never created don't count.
The goods producing sector -- Americans who make things -- shed 223,000 more jobs last month. Asked about these job losses by the Associated Press yesterday, President Obama said Congress should pass his cap-and-tax on carbon energy because "If we're weatherizing every building and home in America, if we are creating windmills and solar panels and biofuel facilities, that is a huge promising area not only for jobs here in the United States, but also for export growth." But even under the most optimistic scenario, not every hard-hat worker in America can make windmill blades and solar panels. With manufacturing on its back, enacting a new energy tax to drive more jobs offshore is crazy even on Keynesian grounds.
Of course, the economy can't keep falling forever, and most forecasters still see a recovery starting this year. The decline in manufacturing slowed last month and housing sales have picked up -- both positive leading indicators. The plunge in inventories means industrial production and durable goods orders are bound to increase. Consumers are also spending more again, albeit with more caution than if gasoline hadn't increased by $1 a gallon in recent months and if they felt more confident about their job security.
The real question is how strong and sustained any expansion will be. If the "stimulus" were working as advertised, it ought to be very strong. Washington has thrown trillions of dollars at this recession, including that famous $787 billion in more spending that was supposed to yield $1.50 in growth for every $1 spent. This followed the $168 billion or so stimulus that George W. Bush and Nancy Pelosi promised in February 2008 would prevent a recession. The jobless rate that month was 4.8%.
Most of this government spending has gone to transfer payments -- Medicaid, jobless benefits and the like -- that do nothing for jobs or growth. The spending that might create jobs -- on roads, say -- is dribbling out with typical government efficiency. Meanwhile, the money for all of this has to come from somewhere, and Democrats are already saying it will require big (unstimulating) tax increases in 2011, and perhaps sooner.
The Administration argues that the recession would be worse without the stimulus, which is impossible to disprove. However, it's worth recalling that Mr. Obama's economists predicted late last year that the stimulus would keep the jobless rate from exceeding 8%. That was a percentage point and a half ago. It's far more likely that the economy would have been better off without the spending, and the higher taxes and debt financing that it implies.
As always, a sustained expansion and job creation must come from private investment and risk-taking. Yet as America's entrepreneurs look at Washington they see uncertainty and higher costs from a $1 trillion health-care bill; higher energy costs from the cap-and-tax bill that just passed the House (see below); new restraints on consumer lending in the financial reform bill; new tariffs and threats of trade protection; limits on compensation and banker baiting; and the possibility of easier unionization, among numerous other Congressional brainstorms.
None of this inspires "animal spirits." The best thing Mr. Obama could do to create jobs would be to declare he's dropping all of this and starting over.
The 'stimulus' promised a jobless peak of 8%; it's now 9.5%.
The Wall Street Journal, Jul 03, 2009, p A12
About the best we can say about yesterday's June jobs report is that employment is usually a lagging economic indicator. At least we hope it is, because the loss of 467,000 jobs for the month is one more sign that the economy still hasn't hit bottom despite months of epic fiscal and monetary reflation.
The report is in many ways even uglier than the headline numbers. Average hours worked per week dropped to 33, the lowest level in at least 40 years. This means that millions of full-time workers are being downgraded to part-time, as businesses slash labor costs to remain above water. Because people are working less, wages have fallen by 0.3% this year. Factories are operating at only 65% capacity, while the overall jobless rate hit 9.5%. Throw in discouraged workers who want full-time work, and the labor underutilization rate climbed to 16.5%.
The news is even worse for young people, with nearly one in four teenagers unemployed. Congress has scheduled an increase in the minimum wage later this month, which will price even more of these unskilled youths out of a vital start on the career ladder. One useful policy response would be for Congress to rescind the wage hike to $7.25 an hour (from $6.55) that is scheduled for July 24. But the union economic model that now dominates Washington holds that wages only matter for those who already have jobs. The jobs that are never created don't count.
The goods producing sector -- Americans who make things -- shed 223,000 more jobs last month. Asked about these job losses by the Associated Press yesterday, President Obama said Congress should pass his cap-and-tax on carbon energy because "If we're weatherizing every building and home in America, if we are creating windmills and solar panels and biofuel facilities, that is a huge promising area not only for jobs here in the United States, but also for export growth." But even under the most optimistic scenario, not every hard-hat worker in America can make windmill blades and solar panels. With manufacturing on its back, enacting a new energy tax to drive more jobs offshore is crazy even on Keynesian grounds.
Of course, the economy can't keep falling forever, and most forecasters still see a recovery starting this year. The decline in manufacturing slowed last month and housing sales have picked up -- both positive leading indicators. The plunge in inventories means industrial production and durable goods orders are bound to increase. Consumers are also spending more again, albeit with more caution than if gasoline hadn't increased by $1 a gallon in recent months and if they felt more confident about their job security.
The real question is how strong and sustained any expansion will be. If the "stimulus" were working as advertised, it ought to be very strong. Washington has thrown trillions of dollars at this recession, including that famous $787 billion in more spending that was supposed to yield $1.50 in growth for every $1 spent. This followed the $168 billion or so stimulus that George W. Bush and Nancy Pelosi promised in February 2008 would prevent a recession. The jobless rate that month was 4.8%.
Most of this government spending has gone to transfer payments -- Medicaid, jobless benefits and the like -- that do nothing for jobs or growth. The spending that might create jobs -- on roads, say -- is dribbling out with typical government efficiency. Meanwhile, the money for all of this has to come from somewhere, and Democrats are already saying it will require big (unstimulating) tax increases in 2011, and perhaps sooner.
The Administration argues that the recession would be worse without the stimulus, which is impossible to disprove. However, it's worth recalling that Mr. Obama's economists predicted late last year that the stimulus would keep the jobless rate from exceeding 8%. That was a percentage point and a half ago. It's far more likely that the economy would have been better off without the spending, and the higher taxes and debt financing that it implies.
As always, a sustained expansion and job creation must come from private investment and risk-taking. Yet as America's entrepreneurs look at Washington they see uncertainty and higher costs from a $1 trillion health-care bill; higher energy costs from the cap-and-tax bill that just passed the House (see below); new restraints on consumer lending in the financial reform bill; new tariffs and threats of trade protection; limits on compensation and banker baiting; and the possibility of easier unionization, among numerous other Congressional brainstorms.
None of this inspires "animal spirits." The best thing Mr. Obama could do to create jobs would be to declare he's dropping all of this and starting over.
Orszag nails it: The 'largest corporate welfare program' ever
The Carbonated Congress. WSJ Editorial
Orszag nails it: The 'largest corporate welfare program' ever.
The Wall Street Journal, Jul 03, 2009, p A12
President Obama is calling the climate bill that the House passed last week an "extraordinary" achievement, and so it is. The 1,200-page wonder manages the supreme feat of being both hugely expensive while doing almost nothing to reduce carbon emissions.
The Washington press corps is playing the bill's 219-212 passage as a political triumph, even though one of five Democrats voted against it. The real story is what Speaker Nancy Pelosi, House baron Henry Waxman and the President himself had to concede to secure even that eyelash margin among the House's liberal majority. Not even Tom DeLay would have imagined the extravaganza of log-rolling, vote-buying, outright corporate bribes, side deals, subsidies and policy loopholes. Every green goal, even taken on its own terms, was watered down or given up for the sake of political rents.
Begin with the supposed point of the exercise -- i.e., creating an artificial scarcity of carbon in the name of climate change. The House trimmed Mr. Obama's favored 25% reduction by 2020 to 17% in order to win over Democrats leery of imposing a huge upfront tax on their constituents; then they raised the reduction to 83% in the out-years to placate the greens. Even that 17% is not binding, since it would be largely reached with so-called offsets, through which some businesses subsidize others to make emissions reductions that probably would have happened anyway.
Even if the law works as intended, over the next decade or two real U.S. greenhouse emissions might be reduced by 2% compared to business as usual. However, consumers would still face higher prices for electric power, transportation and most goods and services as this inefficient and indirect tax flowed down the energy chain.
The sound bite is that this policy would only cost households "a postage stamp a day." But that's true only as long as the program doesn't really cut emissions. The goal here is to tell voters they'll pay nothing in order to get the cap-and-tax bureaucracy in place -- even though the whole idea is to raise prices to change American behavior. At the same time -- wink, wink -- Democrats tell the greens they can tighten the emissions vise gradually over time.
Meanwhile, Congress had to bribe every business or interest that could afford a competent lobbyist. Carbon permits are valuable, yet the House says only 28% of the allowances would be auctioned off; the rest would be given away. In March, White House budget director Peter Orszag told Congress that "If you didn't auction the permit, it would represent the largest corporate welfare program that has ever been enacted in the history of the United States."
Naturally, Democrats did exactly that. To avoid windfall profits, they then chose to control prices, asking state regulators to require utilities to use the free permits to insulate ratepayers from price increases. (This also obviates the anticarbon incentives, but never mind.) Auctions would reduce political favoritism and interference, as well as provide revenue to cut taxes to offset higher energy costs. But auctions don't buy votes.
Then there was the peace treaty signed with Agriculture Chairman Colin Peterson, which banned the EPA from studying the carbon produced by corn ethanol and transferred farm emissions to the Ag Department, which mainly exists to defend farm subsidies. Not to mention the 310-page trade amendment that was introduced at 3:09 a.m. When Congress voted on the bill later that day, the House clerk didn't even have an official copy.
The revisions were demanded by coal-dependent Rust Belt Democrats to require tariffs on goods from countries that don't also reduce their emissions. Democrats were thus admitting that the critics are right that this new energy tax would send U.S. jobs overseas. But instead of voting no, their price for voting yes is to impose another tax on imports from China and India, among others. So a Smoot-Hawley green tariff is now official Democratic policy.
Mr. Obama's lobbyists first acquiesced to this tariff change to get the bill passed. Afterwards the President said he disliked "sending any protectionist signals" amid a world recession, but he refused to say whether this protectionism was enough to veto the bill. Then in a Saturday victory lap, he talked about green jobs and a new clean energy economy, but he made no reference to cap and trade -- no doubt because he knows that energy taxes are unpopular and that the bill faces an even tougher slog in the Senate.
Mr. Obama wants something tangible to take to the U.N. climate confab in Denmark in December, but the more important issue is what this exercise says about his approach to governance. The President seems to believe that the Carter and Clinton Presidencies failed by fighting too much with Democrats in Congress. So his solution is to abdicate his agenda to Congress -- first the stimulus, now cap and trade, and soon health care. We wish he had told us he was running to be Prime Minister.
Orszag nails it: The 'largest corporate welfare program' ever.
The Wall Street Journal, Jul 03, 2009, p A12
President Obama is calling the climate bill that the House passed last week an "extraordinary" achievement, and so it is. The 1,200-page wonder manages the supreme feat of being both hugely expensive while doing almost nothing to reduce carbon emissions.
The Washington press corps is playing the bill's 219-212 passage as a political triumph, even though one of five Democrats voted against it. The real story is what Speaker Nancy Pelosi, House baron Henry Waxman and the President himself had to concede to secure even that eyelash margin among the House's liberal majority. Not even Tom DeLay would have imagined the extravaganza of log-rolling, vote-buying, outright corporate bribes, side deals, subsidies and policy loopholes. Every green goal, even taken on its own terms, was watered down or given up for the sake of political rents.
Begin with the supposed point of the exercise -- i.e., creating an artificial scarcity of carbon in the name of climate change. The House trimmed Mr. Obama's favored 25% reduction by 2020 to 17% in order to win over Democrats leery of imposing a huge upfront tax on their constituents; then they raised the reduction to 83% in the out-years to placate the greens. Even that 17% is not binding, since it would be largely reached with so-called offsets, through which some businesses subsidize others to make emissions reductions that probably would have happened anyway.
Even if the law works as intended, over the next decade or two real U.S. greenhouse emissions might be reduced by 2% compared to business as usual. However, consumers would still face higher prices for electric power, transportation and most goods and services as this inefficient and indirect tax flowed down the energy chain.
The sound bite is that this policy would only cost households "a postage stamp a day." But that's true only as long as the program doesn't really cut emissions. The goal here is to tell voters they'll pay nothing in order to get the cap-and-tax bureaucracy in place -- even though the whole idea is to raise prices to change American behavior. At the same time -- wink, wink -- Democrats tell the greens they can tighten the emissions vise gradually over time.
Meanwhile, Congress had to bribe every business or interest that could afford a competent lobbyist. Carbon permits are valuable, yet the House says only 28% of the allowances would be auctioned off; the rest would be given away. In March, White House budget director Peter Orszag told Congress that "If you didn't auction the permit, it would represent the largest corporate welfare program that has ever been enacted in the history of the United States."
Naturally, Democrats did exactly that. To avoid windfall profits, they then chose to control prices, asking state regulators to require utilities to use the free permits to insulate ratepayers from price increases. (This also obviates the anticarbon incentives, but never mind.) Auctions would reduce political favoritism and interference, as well as provide revenue to cut taxes to offset higher energy costs. But auctions don't buy votes.
Then there was the peace treaty signed with Agriculture Chairman Colin Peterson, which banned the EPA from studying the carbon produced by corn ethanol and transferred farm emissions to the Ag Department, which mainly exists to defend farm subsidies. Not to mention the 310-page trade amendment that was introduced at 3:09 a.m. When Congress voted on the bill later that day, the House clerk didn't even have an official copy.
The revisions were demanded by coal-dependent Rust Belt Democrats to require tariffs on goods from countries that don't also reduce their emissions. Democrats were thus admitting that the critics are right that this new energy tax would send U.S. jobs overseas. But instead of voting no, their price for voting yes is to impose another tax on imports from China and India, among others. So a Smoot-Hawley green tariff is now official Democratic policy.
Mr. Obama's lobbyists first acquiesced to this tariff change to get the bill passed. Afterwards the President said he disliked "sending any protectionist signals" amid a world recession, but he refused to say whether this protectionism was enough to veto the bill. Then in a Saturday victory lap, he talked about green jobs and a new clean energy economy, but he made no reference to cap and trade -- no doubt because he knows that energy taxes are unpopular and that the bill faces an even tougher slog in the Senate.
Mr. Obama wants something tangible to take to the U.N. climate confab in Denmark in December, but the more important issue is what this exercise says about his approach to governance. The President seems to believe that the Carter and Clinton Presidencies failed by fighting too much with Democrats in Congress. So his solution is to abdicate his agenda to Congress -- first the stimulus, now cap and trade, and soon health care. We wish he had told us he was running to be Prime Minister.
The Latest Toxin Activists Want to Ban - BPA
The Latest Toxin Activists Want to Ban. By Elizabeth M. Whelan, Sc.D., M.P.H.
Wednesday, June 24, 2009
This article first appeared on June 24, 2009 on Forbes.com
The "toxin du jour" these days is bisphenol A, otherwise known as BPA. Environmental activists claim BPA harms babies as it dissolves out of the sides of baby bottles and sippy cups, causing everything from cancer to learning disabilities and even obesity. Spurred by consumer groups, Connecticut Attorney General Richard Blumenthal wants Coca-Cola, Del Monte and other companies investigated for trying to stop anti-BPA legislation.
In fact, BPA has been used safely for about 60 years to make plastic bottles hard and shatter-proof, for the coatings of metal food containers and even in cellphones and medical devices. Nonetheless, the California Senate recently passed a law to ban the sale of sippy cups and baby bottles that contain BPA, and Chicago recently banned such products from city shelves.
There are two distinct ways of looking at the hysteria about BPA and the quest to purge it from our universe.
First, we can take the rational, scientific approach. There is no evidence that BPA in consumer products ever harmed a child or adult. The FDA has confirmed the safety of BPA in consumer products, as have scientific bodies around the world. The levels of BPA that may leach into food or liquid are so incredibly small that they can barely be measured.
In fact, even the cautious Centers for Disease Control and Prevention has pointed out that merely detecting a substance in our bodies does not mean that it's harmful or toxic. The only "evidence" that BPA is a hazard comes from high-dose animal studies (which have little relevance for humans) and from studies that measure BPA in urine.
But we can detect minute levels of virtually any chemical in blood and urine, and the presence of such an amount is not synonymous with a hazard. BPA as a health hazard is best described as only a "phantom risk."
But rational, scientific facts have taken a back seat in the debate about BPA and health. That brings us to the second, purely emotional case against the toxin.
Psychiatrists have long told us that we fear what we do not understand and cannot see. Further, parents are instinctively on high alert against potential threats to their infants and children. Thus, if an activist group makes a claim that BPA--or almost any other substance--in bottles poses an imminent danger to an innocent baby, the "fear factor" takes over.
Mom and dad are not familiar with this chemical; they can hardly pronounce it; they cannot see it; thus they fear it. And now they are perfect targets for manipulation by the toxic terrorists. Scientists or FDA officials--and certainly industry spokespeople--who dismiss the scare sound callous and unreliable.
Consider this further irrational dimension of the calls to ban BPA: Few people ever ask what the alternative to BPA would be. In their irrational state, they are willing to purge this chemical--a product with a decades-long safety record--from substances they use and instead accept some unknown, untested substitute without even asking what it might be and what its safety profile is.
Perhaps it is time we started responding to the public's irrational fears differently than we do to rational fears. For example, if you have a fear of flying--not a phobia, but a mild, rational concern--you might have your mind changed by a slew of statistics showing that flying from New York to Los Angeles is far safer than covering the same territory by car. We could reason with you on this issue, discussing your odds of injury and death in each scenario. You would then, most likely, choose to fly.
But a national panic about a "chemical"--be it Alar on apples 20 years ago or phthalates (plastic softeners used in rubber duckies and other products) and BPA today--is a different story.
Irrational fears of the sort conjured up in parents by weird-sounding chemicals do not respond well to a truckload of scientific facts. So what might work?
For one, inform parents that their instinct to protect their children is normal, indeed admirable--but subject to manipulation by agenda-driven activists.
And state the obvious. There is no end in sight to the anti-chemical witch hunt against "toxins" in products. Once BPA is banned, the activists will move onto another scare: Are there trace levels of dioxin in the paper cups your toddler drinks out of? Ban paper cups!
Could there be lead in the playground sand box? Close all sandboxes! If in five years the alternative to BPA is shown to cause cancer in rodents--well, ban that too.
Finally, underscore the fact that chemicals like BPA, which have been used for decades with no deleterious health consequences, may well be safer than hastily introduced alternatives.
Irrational fears need to be recognized for what they are--and treated with compassion and understanding but also a big dose of reality. Caring, loving parents have become victims of fear mongers and that, certainly, is one danger about which they deserve to be warned.
Elizabeth M. Whelan is president of the American Council on Science and Health.
Wednesday, June 24, 2009
This article first appeared on June 24, 2009 on Forbes.com
The "toxin du jour" these days is bisphenol A, otherwise known as BPA. Environmental activists claim BPA harms babies as it dissolves out of the sides of baby bottles and sippy cups, causing everything from cancer to learning disabilities and even obesity. Spurred by consumer groups, Connecticut Attorney General Richard Blumenthal wants Coca-Cola, Del Monte and other companies investigated for trying to stop anti-BPA legislation.
In fact, BPA has been used safely for about 60 years to make plastic bottles hard and shatter-proof, for the coatings of metal food containers and even in cellphones and medical devices. Nonetheless, the California Senate recently passed a law to ban the sale of sippy cups and baby bottles that contain BPA, and Chicago recently banned such products from city shelves.
There are two distinct ways of looking at the hysteria about BPA and the quest to purge it from our universe.
First, we can take the rational, scientific approach. There is no evidence that BPA in consumer products ever harmed a child or adult. The FDA has confirmed the safety of BPA in consumer products, as have scientific bodies around the world. The levels of BPA that may leach into food or liquid are so incredibly small that they can barely be measured.
In fact, even the cautious Centers for Disease Control and Prevention has pointed out that merely detecting a substance in our bodies does not mean that it's harmful or toxic. The only "evidence" that BPA is a hazard comes from high-dose animal studies (which have little relevance for humans) and from studies that measure BPA in urine.
But we can detect minute levels of virtually any chemical in blood and urine, and the presence of such an amount is not synonymous with a hazard. BPA as a health hazard is best described as only a "phantom risk."
But rational, scientific facts have taken a back seat in the debate about BPA and health. That brings us to the second, purely emotional case against the toxin.
Psychiatrists have long told us that we fear what we do not understand and cannot see. Further, parents are instinctively on high alert against potential threats to their infants and children. Thus, if an activist group makes a claim that BPA--or almost any other substance--in bottles poses an imminent danger to an innocent baby, the "fear factor" takes over.
Mom and dad are not familiar with this chemical; they can hardly pronounce it; they cannot see it; thus they fear it. And now they are perfect targets for manipulation by the toxic terrorists. Scientists or FDA officials--and certainly industry spokespeople--who dismiss the scare sound callous and unreliable.
Consider this further irrational dimension of the calls to ban BPA: Few people ever ask what the alternative to BPA would be. In their irrational state, they are willing to purge this chemical--a product with a decades-long safety record--from substances they use and instead accept some unknown, untested substitute without even asking what it might be and what its safety profile is.
Perhaps it is time we started responding to the public's irrational fears differently than we do to rational fears. For example, if you have a fear of flying--not a phobia, but a mild, rational concern--you might have your mind changed by a slew of statistics showing that flying from New York to Los Angeles is far safer than covering the same territory by car. We could reason with you on this issue, discussing your odds of injury and death in each scenario. You would then, most likely, choose to fly.
But a national panic about a "chemical"--be it Alar on apples 20 years ago or phthalates (plastic softeners used in rubber duckies and other products) and BPA today--is a different story.
Irrational fears of the sort conjured up in parents by weird-sounding chemicals do not respond well to a truckload of scientific facts. So what might work?
For one, inform parents that their instinct to protect their children is normal, indeed admirable--but subject to manipulation by agenda-driven activists.
And state the obvious. There is no end in sight to the anti-chemical witch hunt against "toxins" in products. Once BPA is banned, the activists will move onto another scare: Are there trace levels of dioxin in the paper cups your toddler drinks out of? Ban paper cups!
Could there be lead in the playground sand box? Close all sandboxes! If in five years the alternative to BPA is shown to cause cancer in rodents--well, ban that too.
Finally, underscore the fact that chemicals like BPA, which have been used for decades with no deleterious health consequences, may well be safer than hastily introduced alternatives.
Irrational fears need to be recognized for what they are--and treated with compassion and understanding but also a big dose of reality. Caring, loving parents have become victims of fear mongers and that, certainly, is one danger about which they deserve to be warned.
Elizabeth M. Whelan is president of the American Council on Science and Health.
The West must reaffirm its support for Georgia
Russia Is Back on the Warpath. By CATHY YOUNG
The West must reaffirm its support for Georgia.
The Wall Street Journal, Jul 02, 2009, p A11
http://online.wsj.com/article/SB124649267530483121.html
With President Barack Obama's trip to Moscow on Monday, you might expect Russia to avoid stirring up any trouble. Yet the Russian media are now abuzz with speculation about a new war in Georgia, and some Western analysts are voicing similar concerns. The idea seems insane. Nonetheless, the risk is real.
One danger sign is persistent talk of so-called Georgian aggression against the breakaway regions of Abkhazia and South Ossetia, which Russia recognized as independent states after the war last August. "Georgia is rattling its weapons . . . and has not given up on attempts to solve its territorial problems by any means," Gen. Nikolai Makarov, who commanded Russian troops in Georgia in 2008, told the Novosti news agency on June 17. Similar warnings have been aired repeatedly by the state-controlled media.
Independent Russian commentators, such as columnist Andrei Piontkovsky, note that this has the feel of a propaganda campaign to prepare the public for a second war. Most recently, Moscow has trotted out a Georgian defector, Lt. Alik D. Bzhania, who claims that Georgian President Mikheil Saakashvili "intends to restart the war."
Yet Russia is the one currently engaged in large-scale military exercises in Abkhazia, South Ossetia, and adjacent regions. Russia has also kicked out international observers from the area. On June 15, Moscow vetoed a U.N. Security Council resolution renewing the mandate of U.N. monitors in Abkhazia because it mentioned an earlier resolution affirming Georgia's territorial integrity. Negotiations to extend the mission of monitors for the Organization for Security and Cooperation in Europe have broken down thanks to Russian obstruction. Now, 225 European Union monitors are the only international presence on the disputed borders.
The expulsion of neutral observers seems odd if Russia is worried about Georgian aggression. But it makes sense if Russia is planning an attack.
What would the Kremlin gain? A crushing victory in Georgia would depose the hated Mr. Saakashvili, give Russia control of vital transit routes for additional energy resources that could weaken its hold on the European oil and gas markets, humiliate the U.S., and distract Russians from their economic woes. Mr. Piontkovsky also believes the war drive comes from Russian Prime Minister Vladimir Putin, who is anxious to reassert himself as supreme leader.
Still, the costs would be tremendous. Last year the Kremlin repaired some of the damage to its relations with Europe and the U.S. by portraying the invasion of Georgia as a response to a unique crisis, not part of an imperial strategy. Another war would cripple Russia's quest for respectability in the civilized world, including its vanity project of the 2014 Winter Olympics in Sochi.
And after the patriotic fervor wears off, domestic discontent would likely follow. Moreover, Russia would almost certainly find itself mired in a long guerilla war. This would further destabilize a region where Russia's own provinces, Ingushetia and Dagestan, are plagued by violent turmoil.
Given all this, a war seems unlikely. What's more probable is that Russia will seek to destabilize Georgia without military action. This saber-rattling may be meant to boost Georgian opposition to Mr. Saakashvili.
Still, Moscow's actions are not always rational. If the pro-war faction believes that the Western response to an assault on Georgia would be weak and half-hearted, it could be emboldened. In a June 25 column on the EJ.ru Web site, Russian journalist Yulia Latynina writes that the probability of the war "depends solely on the Kremlin's capacity to convince itself that it can convince the world that the war is its enemies' fault."
That is why it's essential for the United States and the EU to respond now -- by increasing their non-military presence in Georgia, expressing a strong commitment to Georgian sovereignty, and reminding Russia of the consequences of aggression. Such a statement from President Obama in Moscow would go a long way toward preventing the possibility of another tragedy.
Ms. Young is a columnist for RealClearPolitics.com and the author of "Growing Up in Moscow" (Ticknor & Fields, 1989).
The West must reaffirm its support for Georgia.
The Wall Street Journal, Jul 02, 2009, p A11
http://online.wsj.com/article/SB124649267530483121.html
With President Barack Obama's trip to Moscow on Monday, you might expect Russia to avoid stirring up any trouble. Yet the Russian media are now abuzz with speculation about a new war in Georgia, and some Western analysts are voicing similar concerns. The idea seems insane. Nonetheless, the risk is real.
One danger sign is persistent talk of so-called Georgian aggression against the breakaway regions of Abkhazia and South Ossetia, which Russia recognized as independent states after the war last August. "Georgia is rattling its weapons . . . and has not given up on attempts to solve its territorial problems by any means," Gen. Nikolai Makarov, who commanded Russian troops in Georgia in 2008, told the Novosti news agency on June 17. Similar warnings have been aired repeatedly by the state-controlled media.
Independent Russian commentators, such as columnist Andrei Piontkovsky, note that this has the feel of a propaganda campaign to prepare the public for a second war. Most recently, Moscow has trotted out a Georgian defector, Lt. Alik D. Bzhania, who claims that Georgian President Mikheil Saakashvili "intends to restart the war."
Yet Russia is the one currently engaged in large-scale military exercises in Abkhazia, South Ossetia, and adjacent regions. Russia has also kicked out international observers from the area. On June 15, Moscow vetoed a U.N. Security Council resolution renewing the mandate of U.N. monitors in Abkhazia because it mentioned an earlier resolution affirming Georgia's territorial integrity. Negotiations to extend the mission of monitors for the Organization for Security and Cooperation in Europe have broken down thanks to Russian obstruction. Now, 225 European Union monitors are the only international presence on the disputed borders.
The expulsion of neutral observers seems odd if Russia is worried about Georgian aggression. But it makes sense if Russia is planning an attack.
What would the Kremlin gain? A crushing victory in Georgia would depose the hated Mr. Saakashvili, give Russia control of vital transit routes for additional energy resources that could weaken its hold on the European oil and gas markets, humiliate the U.S., and distract Russians from their economic woes. Mr. Piontkovsky also believes the war drive comes from Russian Prime Minister Vladimir Putin, who is anxious to reassert himself as supreme leader.
Still, the costs would be tremendous. Last year the Kremlin repaired some of the damage to its relations with Europe and the U.S. by portraying the invasion of Georgia as a response to a unique crisis, not part of an imperial strategy. Another war would cripple Russia's quest for respectability in the civilized world, including its vanity project of the 2014 Winter Olympics in Sochi.
And after the patriotic fervor wears off, domestic discontent would likely follow. Moreover, Russia would almost certainly find itself mired in a long guerilla war. This would further destabilize a region where Russia's own provinces, Ingushetia and Dagestan, are plagued by violent turmoil.
Given all this, a war seems unlikely. What's more probable is that Russia will seek to destabilize Georgia without military action. This saber-rattling may be meant to boost Georgian opposition to Mr. Saakashvili.
Still, Moscow's actions are not always rational. If the pro-war faction believes that the Western response to an assault on Georgia would be weak and half-hearted, it could be emboldened. In a June 25 column on the EJ.ru Web site, Russian journalist Yulia Latynina writes that the probability of the war "depends solely on the Kremlin's capacity to convince itself that it can convince the world that the war is its enemies' fault."
That is why it's essential for the United States and the EU to respond now -- by increasing their non-military presence in Georgia, expressing a strong commitment to Georgian sovereignty, and reminding Russia of the consequences of aggression. Such a statement from President Obama in Moscow would go a long way toward preventing the possibility of another tragedy.
Ms. Young is a columnist for RealClearPolitics.com and the author of "Growing Up in Moscow" (Ticknor & Fields, 1989).
Wal-Mart buys protection by selling out its competitors
Everyday Low Politics. WSJ Editorial
Wal-Mart buys protection by selling out its competitors.
The Wall Street Journal, Jul 02, 2009, p A12
Corporate America's cheerleading for more government involvement in health care now includes Wal-Mart, that liberal paragon of social irresponsibility. The discount giant's ex-critics probably ought to be more skeptical, given that this seems to be anticompetitive special pleading in progressive drag.
This week the nation's largest employer blessed an employer mandate, aka "pay or play." This would require businesses that do not offer "meaningful coverage" -- i.e., government-approved -- to pay some percentage of their payroll to a federal insurance plan. This mandate is one of the more controversial policies in the Democratic health package, and Wal-Mart's endorsement will help it along, or at least give liberals political cover against business criticism.
Another way of putting it is that Andy Stern finally got his man. Wal-Mart CEO Mike Duke was joined in his show of support by Mr. Stern, president of the Service Employees International Union and probably the most influential U.S. labor leader, as well as by John Podesta, President Clinton's former chief of staff now running the leftward Center for American Progress. Both organizations regularly assail Wal-Mart. The SEIU, having failed in its drive to organize Wal-Mart stores, went on to help fund a harassment group called Wal-Mart Watch. The Podesta outfit provides ammunition for critics about the retailer's supposedly skimpy benefits -- especially health coverage -- and other corporate-greed outrages.
Then the fog of politics set in. Wal-Mart hired Leslie Dach, another former Clinton operative, to give its public image an extreme makeover. It has since rolled out green programs (most of which save it money in any case), and in 2007 the company joined with organized labor to call for universal health care by 2012. Two years before, it plumped for a higher minimum wage.
The employer-mandate endorsement falls into the same self-interest department. A boost in the minimum wage helps Wal-Mart because most of its workers already earn well over the wage floor, and it hurts smaller, less-profitable competitors that can't afford to pay more. On health care, an employer mandate will also reduce the margins of their rivals. This is especially true for businesses of a slightly smaller size that cannot insure on the same scale or currently don't reach the 55% of the 1.4 million Wal-Mart employees who are insured through the company. (Another 40% or so are covered by spouses or the likes of Medicaid.)
The Wal-Mart-Stern-Podesta troika made sure to specify that "shared responsibility" must be "fair and broad in its coverage," with an emphasis on the latter. The Mom & Pop stores that liberals accuse Wal-Mart of running out of town may get hit hardest. Democrats say they'll exempt certain small businesses, size details to be determined. But if the mandate is limited to large employers, it won't reduce the number of uninsured. According to the Kaiser Family Foundation, 99% of firms with more than 200 workers provide health benefits, only 62% of smaller firms.
Businesses are also largely indifferent whether compensation comes in the form of wages or benefits, so an employer mandate -- an indirect tax on employment -- may cause wages to rise more slowly. Or it may simply mean fewer jobs. In a 2007 paper, the economists Katherine Baicker of Harvard and Helen Levy of the University of Michigan estimate that 0.2% of all full-time workers and 1.4% of uninsured workers would lose their lobs because of an employer mandate. Most at risk are the 33% of the uninsured earning within $3 of the minimum wage. Thus many of the same people who shop at Wal-Mart because of its low prices -- and who Democrats claim to speak for -- would be worse off.
An employer pay-or-play tax is not only a revenue grab to fund government health care, but it is also meant to transfer the choices about coverage to government from consumers. Businesses are going along with this and other gambits in part because of a prisoners' dilemma: They're terrified of being shut out of Democratic health negotiations lest they get stuck with the bill. Wal-Mart may also be trying to pre-empt an employer mandate the Senate is considering that would target companies with predominantly low-wage, low-skilled or entry-level work forces.
Other big businesses are also trying to buy protection or some political reprieve. Big Pharma recently promised to reduce the cost of prescription drugs by $80 billion over the next decade, and the physician, hospital and insurance lobbies have made similar offerings. Yet the political class is simply pocketing these concessions and demanding more, hastening the day when government controls most U.S. health dollars -- and the businesses become the equivalent of utilities.
Mr. Stern has been clear that his major goal all along has been to pressure Wal-Mart into endorsing government health insurance. As for Wal-Mart's executives, please don't come running for help when Mr. Stern returns for his next political payoff.
Wal-Mart buys protection by selling out its competitors.
The Wall Street Journal, Jul 02, 2009, p A12
Corporate America's cheerleading for more government involvement in health care now includes Wal-Mart, that liberal paragon of social irresponsibility. The discount giant's ex-critics probably ought to be more skeptical, given that this seems to be anticompetitive special pleading in progressive drag.
This week the nation's largest employer blessed an employer mandate, aka "pay or play." This would require businesses that do not offer "meaningful coverage" -- i.e., government-approved -- to pay some percentage of their payroll to a federal insurance plan. This mandate is one of the more controversial policies in the Democratic health package, and Wal-Mart's endorsement will help it along, or at least give liberals political cover against business criticism.
Another way of putting it is that Andy Stern finally got his man. Wal-Mart CEO Mike Duke was joined in his show of support by Mr. Stern, president of the Service Employees International Union and probably the most influential U.S. labor leader, as well as by John Podesta, President Clinton's former chief of staff now running the leftward Center for American Progress. Both organizations regularly assail Wal-Mart. The SEIU, having failed in its drive to organize Wal-Mart stores, went on to help fund a harassment group called Wal-Mart Watch. The Podesta outfit provides ammunition for critics about the retailer's supposedly skimpy benefits -- especially health coverage -- and other corporate-greed outrages.
Then the fog of politics set in. Wal-Mart hired Leslie Dach, another former Clinton operative, to give its public image an extreme makeover. It has since rolled out green programs (most of which save it money in any case), and in 2007 the company joined with organized labor to call for universal health care by 2012. Two years before, it plumped for a higher minimum wage.
The employer-mandate endorsement falls into the same self-interest department. A boost in the minimum wage helps Wal-Mart because most of its workers already earn well over the wage floor, and it hurts smaller, less-profitable competitors that can't afford to pay more. On health care, an employer mandate will also reduce the margins of their rivals. This is especially true for businesses of a slightly smaller size that cannot insure on the same scale or currently don't reach the 55% of the 1.4 million Wal-Mart employees who are insured through the company. (Another 40% or so are covered by spouses or the likes of Medicaid.)
The Wal-Mart-Stern-Podesta troika made sure to specify that "shared responsibility" must be "fair and broad in its coverage," with an emphasis on the latter. The Mom & Pop stores that liberals accuse Wal-Mart of running out of town may get hit hardest. Democrats say they'll exempt certain small businesses, size details to be determined. But if the mandate is limited to large employers, it won't reduce the number of uninsured. According to the Kaiser Family Foundation, 99% of firms with more than 200 workers provide health benefits, only 62% of smaller firms.
Businesses are also largely indifferent whether compensation comes in the form of wages or benefits, so an employer mandate -- an indirect tax on employment -- may cause wages to rise more slowly. Or it may simply mean fewer jobs. In a 2007 paper, the economists Katherine Baicker of Harvard and Helen Levy of the University of Michigan estimate that 0.2% of all full-time workers and 1.4% of uninsured workers would lose their lobs because of an employer mandate. Most at risk are the 33% of the uninsured earning within $3 of the minimum wage. Thus many of the same people who shop at Wal-Mart because of its low prices -- and who Democrats claim to speak for -- would be worse off.
An employer pay-or-play tax is not only a revenue grab to fund government health care, but it is also meant to transfer the choices about coverage to government from consumers. Businesses are going along with this and other gambits in part because of a prisoners' dilemma: They're terrified of being shut out of Democratic health negotiations lest they get stuck with the bill. Wal-Mart may also be trying to pre-empt an employer mandate the Senate is considering that would target companies with predominantly low-wage, low-skilled or entry-level work forces.
Other big businesses are also trying to buy protection or some political reprieve. Big Pharma recently promised to reduce the cost of prescription drugs by $80 billion over the next decade, and the physician, hospital and insurance lobbies have made similar offerings. Yet the political class is simply pocketing these concessions and demanding more, hastening the day when government controls most U.S. health dollars -- and the businesses become the equivalent of utilities.
Mr. Stern has been clear that his major goal all along has been to pressure Wal-Mart into endorsing government health insurance. As for Wal-Mart's executives, please don't come running for help when Mr. Stern returns for his next political payoff.
Wednesday, July 1, 2009
Obama's Top Five Health Care Issues
Obama's Top Five Health Care Lies. By Shikha Dalmia
TonySopranoCare.
Jul 01, 2009, 12:01 AM EDT
President Barack Obama walked into the Oval Office with a veritable halo over his head. In the eyes of his backers, he could say or do no wrong because he had evidently descended directly from heaven to return celestial order to our fallen world. Oprah declared his tongue to be "dipped in the unvarnished truth." Newsweek editor Evan Thomas averred that Obama "stands above the country and above the world as a sort of a God."
But when it comes to health care reform, with every passing day, Obama seems less God and more demagogue, uttering not transcendental truths, but bald-faced lies. Here are the top five lies that His Awesomeness has told--the first two for no reason other than to get elected and the next three to sell socialized medicine to a wary nation.
Lie One: No one will be compelled to buy coverage.
During the campaign, Obama insisted that he would not resort to an individual mandate to achieve universal coverage. In fact, he repeatedly ripped Hillary Clinton's plan for proposing one. "To force people to buy coverage," he insisted, "you've got to have a very harsh penalty." What will this penalty be, he demanded? "Are you going to garnish their wages?" he asked Hillary in one debate.
Yet now, Obama is behaving as if he said never a hostile word about the mandate. Earlier this month, in a letter to Sens. Max Baucus, D-Mont., and Ted Kennedy, D-Mass., he blithely declared that he was all for "making every American responsible for having health insurance coverage, and making employers share in the cost."
But just like Hillary, he is refusing to say precisely what he will do to those who want to forgo insurance. There is a name for such a health care approach: It is called TonySopranoCare.
Lie Two: No new taxes on employer benefits.
Obama took his Republican rival, Sen. John McCain, to the mat for suggesting that it might be better to remove the existing health care tax break that individuals get on their employer-sponsored coverage, but return the vast bulk--if not all--of the resulting revenues in the form of health care tax credits. This would theoretically have made coverage both more affordable and portable for everyone. Obama, however, would have none of it, portraying this idea simply as the removal of a tax break. "For the first time in history, he wants to tax your health benefits," he thundered. "Apparently, Sen. McCain doesn't think it's enough that your health premiums have doubled. He thinks you should have to pay taxes on them too."
Yet now Obama is signaling his willingness to go along with a far worse scheme to tax employer-sponsored benefits to fund the $1.6 trillion or so it will cost to provide universal coverage. Contrary to Obama's allegations, McCain's plan did not ultimately entail a net tax increase because he intended to return to individuals whatever money was raised by scrapping the tax deduction. Not so with Obama. He apparently told Sen. Baucus that he would consider the senator's plan for rolling back the tax exclusion that expensive, Cadillac-style employer-sponsored plans enjoy, in order to pay for universal coverage. But, unlike McCain, he has said nothing about putting offsetting deductions or credits in the hands of individuals.
In other words, Obama might well end up doing what McCain never set out to do: Impose a net tax increase on health benefits for the first time in history.
Lie Three: Government can control rising health care costs better than the private sector.
Ignoring the reality that Medicare--the government-funded program for the elderly--has put the country on the path to fiscal ruin, Obama wants to model a government insurance plan--the so-called "public option"--after Medicare in order to control the country's rising health care costs. Why? Because, he repeatedly claims, Medicare has far lower administrative costs and overhead than private plans--to wit, 3% for Medicare compared to 10% to 20% for private plans. Hence, he says, subjecting private plans to competition against an entity delivering such superior efficiency will release health care dollars for universal coverage.
But lower administrative costs do not necessarily mean greater efficiency. Indeed, the Congressional Budget Office analysis last year chastised Medicare's lax attitude on this front. "The traditional fee-for-service Medicare program does relatively little to manage benefits, which tends to reduce its administrative costs but may raise its overall spending relative to a more tightly managed approach," it noted on page 93.
In short, extending the Medicare model will further ruin--not improve--even the functioning aspects of private plans.
Lie Four: A public plan won't be a Trojan horse for a single-payer monopoly.
Obama has repeatedly claimed that forcing private plans to compete with a public plan will simply "keep them honest" and give patients more options--not lead to a full-blown, Canadian-style, single-payer monopoly. As I argued in my previous column, this is wishful thinking given that government programs such as Medicare have a history of controlling costs by underpaying providers, who make up the losses by charging private plans more. Any public plan modeled after Medicare will greatly increase this forced subsidy, eventually driving private plans out of business, even if that weren't Obama's intention.
But, as it turns out, it very much is his intention. Before he decided to run for office--and even during the initial days of his campaign--Obama repeatedly said that he was in favor of a single-payer system. What's more, University of California, Berkeley Professor Jacob Hacker, who is a key influence on the Obama administration, is on tape explicitly boasting that a public plan is a means for creating a single-payer system. "It's not a Trojan horse," he quips, "it's just right there."
But even if Obama wanted to, it is simply impossible to design a public plan that could compete with private insurers on a level playing field and without "feeding off the public trough" as Obama claims.
At the very least, such a plan would always carry an implicit government guarantee that, should it go bust, no one in the plan would lose coverage. This guarantee would artificially lower the plan's capital reserve requirements, giving it an unfair edge over private plans. What's more, it is simply not plausible to expect that the plan wouldn't receive any start-up subsidies or use the government's muscle to negotiate lower rates with providers. If it eschewed all these things, there would be no reason for it to exist--because it would be just like any other private plan.
Lie Five: Patients don't have to fear rationing.
Obama has been insisting, including during his ABC Town Hall event last week, that the rationing patients would face under a government-run system wouldn't be any more draconian than what they currently confront under private plans. This is complete nonsense.
The left has been trying to address fears of rationing by trotting out an old and tired trope, namely, that rationing is an inescapable fact of life because every system rations whether by price or fiat. But there is a big difference between the two. If I can't afford caviar and champagne every night, any rationing involved is metaphoric, not real. Genuine rationing occurs when someone else controls access--how much of a particular good I can consume.
By that token, Obama's stimulus bill has set in motion rationing on a scale unimaginable in the land of the free. Indeed, the bill commits over $1 billion to conduct comparative effectiveness research that will evaluate the relative merits of various treatments. That in itself wouldn't be so objectionable--if it weren't for the fact that a board will then "direct financing" toward approved, standardized treatments. In short, doctors will find it much harder to prescribe newer or non-standard treatments not yet deemed effective by health care bureaucrats. This is exactly along the lines of the British system, where breast cancer patients were denied Herceptin, a new miracle drug, until enraged women fought back. Even the much-vilified managed care plans would appear to be a paragon of generosity in comparison with this.
Obama has repeatedly asked for honesty in the health care debate. It is high time he started showing some.
Shikha Dalmia is a senior analyst at Reason Foundation and writes a biweekly column for Forbes.
TonySopranoCare.
Jul 01, 2009, 12:01 AM EDT
President Barack Obama walked into the Oval Office with a veritable halo over his head. In the eyes of his backers, he could say or do no wrong because he had evidently descended directly from heaven to return celestial order to our fallen world. Oprah declared his tongue to be "dipped in the unvarnished truth." Newsweek editor Evan Thomas averred that Obama "stands above the country and above the world as a sort of a God."
But when it comes to health care reform, with every passing day, Obama seems less God and more demagogue, uttering not transcendental truths, but bald-faced lies. Here are the top five lies that His Awesomeness has told--the first two for no reason other than to get elected and the next three to sell socialized medicine to a wary nation.
Lie One: No one will be compelled to buy coverage.
During the campaign, Obama insisted that he would not resort to an individual mandate to achieve universal coverage. In fact, he repeatedly ripped Hillary Clinton's plan for proposing one. "To force people to buy coverage," he insisted, "you've got to have a very harsh penalty." What will this penalty be, he demanded? "Are you going to garnish their wages?" he asked Hillary in one debate.
Yet now, Obama is behaving as if he said never a hostile word about the mandate. Earlier this month, in a letter to Sens. Max Baucus, D-Mont., and Ted Kennedy, D-Mass., he blithely declared that he was all for "making every American responsible for having health insurance coverage, and making employers share in the cost."
But just like Hillary, he is refusing to say precisely what he will do to those who want to forgo insurance. There is a name for such a health care approach: It is called TonySopranoCare.
Lie Two: No new taxes on employer benefits.
Obama took his Republican rival, Sen. John McCain, to the mat for suggesting that it might be better to remove the existing health care tax break that individuals get on their employer-sponsored coverage, but return the vast bulk--if not all--of the resulting revenues in the form of health care tax credits. This would theoretically have made coverage both more affordable and portable for everyone. Obama, however, would have none of it, portraying this idea simply as the removal of a tax break. "For the first time in history, he wants to tax your health benefits," he thundered. "Apparently, Sen. McCain doesn't think it's enough that your health premiums have doubled. He thinks you should have to pay taxes on them too."
Yet now Obama is signaling his willingness to go along with a far worse scheme to tax employer-sponsored benefits to fund the $1.6 trillion or so it will cost to provide universal coverage. Contrary to Obama's allegations, McCain's plan did not ultimately entail a net tax increase because he intended to return to individuals whatever money was raised by scrapping the tax deduction. Not so with Obama. He apparently told Sen. Baucus that he would consider the senator's plan for rolling back the tax exclusion that expensive, Cadillac-style employer-sponsored plans enjoy, in order to pay for universal coverage. But, unlike McCain, he has said nothing about putting offsetting deductions or credits in the hands of individuals.
In other words, Obama might well end up doing what McCain never set out to do: Impose a net tax increase on health benefits for the first time in history.
Lie Three: Government can control rising health care costs better than the private sector.
Ignoring the reality that Medicare--the government-funded program for the elderly--has put the country on the path to fiscal ruin, Obama wants to model a government insurance plan--the so-called "public option"--after Medicare in order to control the country's rising health care costs. Why? Because, he repeatedly claims, Medicare has far lower administrative costs and overhead than private plans--to wit, 3% for Medicare compared to 10% to 20% for private plans. Hence, he says, subjecting private plans to competition against an entity delivering such superior efficiency will release health care dollars for universal coverage.
But lower administrative costs do not necessarily mean greater efficiency. Indeed, the Congressional Budget Office analysis last year chastised Medicare's lax attitude on this front. "The traditional fee-for-service Medicare program does relatively little to manage benefits, which tends to reduce its administrative costs but may raise its overall spending relative to a more tightly managed approach," it noted on page 93.
In short, extending the Medicare model will further ruin--not improve--even the functioning aspects of private plans.
Lie Four: A public plan won't be a Trojan horse for a single-payer monopoly.
Obama has repeatedly claimed that forcing private plans to compete with a public plan will simply "keep them honest" and give patients more options--not lead to a full-blown, Canadian-style, single-payer monopoly. As I argued in my previous column, this is wishful thinking given that government programs such as Medicare have a history of controlling costs by underpaying providers, who make up the losses by charging private plans more. Any public plan modeled after Medicare will greatly increase this forced subsidy, eventually driving private plans out of business, even if that weren't Obama's intention.
But, as it turns out, it very much is his intention. Before he decided to run for office--and even during the initial days of his campaign--Obama repeatedly said that he was in favor of a single-payer system. What's more, University of California, Berkeley Professor Jacob Hacker, who is a key influence on the Obama administration, is on tape explicitly boasting that a public plan is a means for creating a single-payer system. "It's not a Trojan horse," he quips, "it's just right there."
But even if Obama wanted to, it is simply impossible to design a public plan that could compete with private insurers on a level playing field and without "feeding off the public trough" as Obama claims.
At the very least, such a plan would always carry an implicit government guarantee that, should it go bust, no one in the plan would lose coverage. This guarantee would artificially lower the plan's capital reserve requirements, giving it an unfair edge over private plans. What's more, it is simply not plausible to expect that the plan wouldn't receive any start-up subsidies or use the government's muscle to negotiate lower rates with providers. If it eschewed all these things, there would be no reason for it to exist--because it would be just like any other private plan.
Lie Five: Patients don't have to fear rationing.
Obama has been insisting, including during his ABC Town Hall event last week, that the rationing patients would face under a government-run system wouldn't be any more draconian than what they currently confront under private plans. This is complete nonsense.
The left has been trying to address fears of rationing by trotting out an old and tired trope, namely, that rationing is an inescapable fact of life because every system rations whether by price or fiat. But there is a big difference between the two. If I can't afford caviar and champagne every night, any rationing involved is metaphoric, not real. Genuine rationing occurs when someone else controls access--how much of a particular good I can consume.
By that token, Obama's stimulus bill has set in motion rationing on a scale unimaginable in the land of the free. Indeed, the bill commits over $1 billion to conduct comparative effectiveness research that will evaluate the relative merits of various treatments. That in itself wouldn't be so objectionable--if it weren't for the fact that a board will then "direct financing" toward approved, standardized treatments. In short, doctors will find it much harder to prescribe newer or non-standard treatments not yet deemed effective by health care bureaucrats. This is exactly along the lines of the British system, where breast cancer patients were denied Herceptin, a new miracle drug, until enraged women fought back. Even the much-vilified managed care plans would appear to be a paragon of generosity in comparison with this.
Obama has repeatedly asked for honesty in the health care debate. It is high time he started showing some.
Shikha Dalmia is a senior analyst at Reason Foundation and writes a biweekly column for Forbes.
An Update on the Economic and Fiscal Crises: 2009 and Beyond
An Update on the Economic and Fiscal Crises: 2009 and Beyond. By William G. Gale, Vice President and Director, Economic Studies, and Alan J. Auerbach, University of California, Berkeley
The Brookings Institution, Jun 2009
The Brookings Institution, Jun 2009
The Wages of Chavismo
The Wages of Chavismo. WSJ Editorial
The Honduran coup is a reaction to Chávez's rule by the mob.
WSJ, Jul 01, 2009
"As military 'coups' go, the one this weekend in Honduras was strangely, well, democratic. The military didn't oust President Manuel Zelaya on its own but instead followed an order of the Supreme Court. It also quickly turned power over to the president of the Honduran Congress, a man from the same party as Mr. Zelaya. The legislature and legal authorities all remain intact.
We mention these not so small details because they are being overlooked as the world, including the U.S. President, denounces tiny Honduras in a way that it never has, say, Iran."
The Honduran coup is a reaction to Chávez's rule by the mob.
WSJ, Jul 01, 2009
"As military 'coups' go, the one this weekend in Honduras was strangely, well, democratic. The military didn't oust President Manuel Zelaya on its own but instead followed an order of the Supreme Court. It also quickly turned power over to the president of the Honduran Congress, a man from the same party as Mr. Zelaya. The legislature and legal authorities all remain intact.
We mention these not so small details because they are being overlooked as the world, including the U.S. President, denounces tiny Honduras in a way that it never has, say, Iran."
Monday, June 29, 2009
Scalia invites assaults on national banks
Spitzerism Revisited. WSJ Editorial
Scalia invites assaults on national banks.
The Wall Street Journal, Jun 30, 2009, p A14
Eliot Spitzer has departed the national stage in ignominy, but the damage he did as an unrestrained state Attorney General lives on, notably in a dubious 5-4 victory yesterday before the Supreme Court.
The case is Cuomo v. Clearing House Association, but it was Mr. Spitzer, New York AG Andrew Cuomo's promiscuous predecessor, who brought the suit in 2005. At issue was whether New York's AG could demand mortgage data from federally chartered banks to fish for evidence of discrimination under the state's fair lending laws. Mr. Spitzer was running for Governor, and he wanted to play the racial lending card even as he now denounces the same banks for lending too much to the same people.
We'll defend federalism as staunchly as anyone, but the National Bank Act dates all the way back to the Lincoln Administration, and over the years the courts, including the High Court, have been clear about its intent: A national bank should be regulated by federal overseers and not subject to harassment by states for the way it conducts banking. As recently as two years ago, in Watters v. Wachovia, the Supreme Court upheld precisely this principle. But now a five-Justice majority, improbably led by Antonin Scalia, who was joined by the Court's entire liberal wing, has opened the gates of state regulation against national banks.
Justice Scalia's opinion distinguishes between "visitorial" and "prosecutorial" power over national banks. By visitorial he means the power to demand whatever information may be necessary to regulate an institution. Mr. Scalia argues that while the federal Office of the Comptroller of the Currency (OCC) has sole visitorial power over federal banks, state AGs may nonetheless "prosecute" those banks for violations of state law.
There's nothing wrong with this argument as it pertains to, say, state employment law, fraud or other laws of general applicability. No one argues that a national bank should be immune from a state sexual harassment investigation simply because its banking activities are regulated by the OCC.
But as Justice Clarence Thomas points out in his dissent, lending, including mortgage lending, is a core banking activity authorized by the 1864 National Bank Act and already regulated by the OCC. It is exactly the kind of banking that national banks are supposed to have the freedom to do under a law designed to create a uniform regulatory environment across the entire country.
Justice Scalia argues that prosecutorial pursuit of a national bank is fundamentally different from a bank regulator's visitorial powers because prosecutors are subject to judicial checks and balances. The Justice must not have been paying attention to Mr. Spitzer, whose career is a living testament to the ways that an unscrupulous AG can twist the power to prosecute into the power to "visit" and regulate and legislate. Justice Scalia's opinion may well expose national banks to the depredations of 50 state AGs, making a mockery of "national" bank regulation.
When the political progeny of Mr. Spitzer crank up their fishing expeditions against national banks, we doubt those banks will take much comfort because they are being "prosecuted," rather than "visited."
Scalia invites assaults on national banks.
The Wall Street Journal, Jun 30, 2009, p A14
Eliot Spitzer has departed the national stage in ignominy, but the damage he did as an unrestrained state Attorney General lives on, notably in a dubious 5-4 victory yesterday before the Supreme Court.
The case is Cuomo v. Clearing House Association, but it was Mr. Spitzer, New York AG Andrew Cuomo's promiscuous predecessor, who brought the suit in 2005. At issue was whether New York's AG could demand mortgage data from federally chartered banks to fish for evidence of discrimination under the state's fair lending laws. Mr. Spitzer was running for Governor, and he wanted to play the racial lending card even as he now denounces the same banks for lending too much to the same people.
We'll defend federalism as staunchly as anyone, but the National Bank Act dates all the way back to the Lincoln Administration, and over the years the courts, including the High Court, have been clear about its intent: A national bank should be regulated by federal overseers and not subject to harassment by states for the way it conducts banking. As recently as two years ago, in Watters v. Wachovia, the Supreme Court upheld precisely this principle. But now a five-Justice majority, improbably led by Antonin Scalia, who was joined by the Court's entire liberal wing, has opened the gates of state regulation against national banks.
Justice Scalia's opinion distinguishes between "visitorial" and "prosecutorial" power over national banks. By visitorial he means the power to demand whatever information may be necessary to regulate an institution. Mr. Scalia argues that while the federal Office of the Comptroller of the Currency (OCC) has sole visitorial power over federal banks, state AGs may nonetheless "prosecute" those banks for violations of state law.
There's nothing wrong with this argument as it pertains to, say, state employment law, fraud or other laws of general applicability. No one argues that a national bank should be immune from a state sexual harassment investigation simply because its banking activities are regulated by the OCC.
But as Justice Clarence Thomas points out in his dissent, lending, including mortgage lending, is a core banking activity authorized by the 1864 National Bank Act and already regulated by the OCC. It is exactly the kind of banking that national banks are supposed to have the freedom to do under a law designed to create a uniform regulatory environment across the entire country.
Justice Scalia argues that prosecutorial pursuit of a national bank is fundamentally different from a bank regulator's visitorial powers because prosecutors are subject to judicial checks and balances. The Justice must not have been paying attention to Mr. Spitzer, whose career is a living testament to the ways that an unscrupulous AG can twist the power to prosecute into the power to "visit" and regulate and legislate. Justice Scalia's opinion may well expose national banks to the depredations of 50 state AGs, making a mockery of "national" bank regulation.
When the political progeny of Mr. Spitzer crank up their fishing expeditions against national banks, we doubt those banks will take much comfort because they are being "prosecuted," rather than "visited."
The health-care systems Democrats want to emulate don't allow contingency fees or large jury awards
How Other Countries Judge Malpractice. By RICHARD A. EPSTEIN
The health-care systems Democrats want to emulate don't allow contingency fees or large jury awards.
The Wall Street Journal, Jun 30, 2009, p A15
In his recent speech to the American Medical Association, President Barack Obama held out the tantalizing possibility of reforming medical malpractice law as part of a comprehensive overhaul of the U.S. health-care system. As usual, he hedged his bets by declining to endorse the only medical malpractice reform with real bite -- a national cap on damages for pain and suffering, such as the ones enacted in more than 30 states.
These caps are usually set between $250,000 to $500,000, and they can make a substantial difference. Other reforms, such as rules that limit contingency fees, shorten statutes of limitation, or confine each defendant's tort exposure to his proportionate share of the harm, have small and uncertain effects.
Medical malpractice, of course, is not just an American issue. And now that the U.S. is considering universal health-care systems similar to those found elsewhere, it's worth a quick peek at their medical malpractice systems -- which usually attract far less controversy, and are far less expensive, than our own.
Litigation in the U.S. has at least four distinctive procedural features that drive up malpractice costs. The first is jury trials, which can veer out of control and in any case introduce significant uncertainty. The second is the contingency-fee system, which allows well-heeled lawyers to self-finance litigation. The third is the rule that makes each side bear its own costs. This induces riskier lawsuits than are undertaken in most other countries, such as Canada, England and most of Europe, where the loser pays the legal costs of the winner. The fourth is extensive pretrial discovery outside the direct supervision of judges, which occurs far more readily here than elsewhere.
Even these features aren't the whole story. American judges frequently let juries decide whether honest mistakes are negligent. Judges in other nations are less likely to do so. American courts commonly think it proper for juries to infer medical negligence from the mere occurrence of a serious injury. European judges usually will not.
American plaintiffs are sometimes spared the heavy burden of identifying particular acts of negligence, or of showing the precise causal connection between a negligent act and an actual injury. Lastly, damage awards for lost income and medical expenses in the U.S. tend to dwarf awards made elsewhere -- in part because governments elsewhere provide this medical care from their nationalized systems. In sum, the medical malpractice system provides incentives for plaintiffs that really do matter. Americans, for example, file claims about 3.5 times more often than Canadians.
The overall picture is still more complex, since there are major variations in medical malpractice rules in different American states, and differences within states, such as between juries in big cities and those in small towns. Doctrinal reform cannot stop these abuses. What is needed is the replacement of juries with specialized commissions like those in France, which help reduce litigation expenses and promote uniformity in case outcomes across regions.
What then does this quick survey teach us about the ability of our system to deter medical injuries and compensate its victims? Not much that's encouraging.
A study led by David Studdert published in the 2006 New England Journal of Medicine concluded that the administrative expenses of the malpractice system were "exorbitant." And worse, it found errors in jury verdicts in about a quarter of the litigated cases. Juries denied compensation properly due in 16% of the cases, and awarded it about 10% of the time when it was unwarranted. These error rates don't include damage awards set at improper levels.
More disturbingly, a careful 1992 study by Donald Dewees and Michael Trebilcock in the Osgood Hall Law Journal concluded that the frequency of medical malpractice in Canada was about the same as in the U.S. -- for about 10% the total cost. In other words, our costly system doesn't seem to do much to deter malpractice. On medical malpractice at least, Canada does better than we do.
The U.S. cannot ignore serious reform. To be sure, medical malpractice premiums constitute well under 1% of the total U.S. health-care bill. But defensive medicine adds perhaps as much as 10%. High malpractice costs can shut down clinics that serve vulnerable populations, leading to more patient harm than the occasional case of malpractice.
The best reform would be to allow physicians, hospitals and patients to contract out of the liability mess by letting the parties reject state-imposed malpractice rules. They could, for example, choose to arbitrate, to waive jury trials, or to limit damage recovery. Stiff competition and the need to maintain reputation should keep medical providers in line in such a system. Market-based solutions that make the private sector more responsive should in turn undermine the case for moving head-first into a government-run health-care system with vast, unintended inefficiencies of its own.
Mr. Epstein is a professor of law at the University of Chicago, a senior fellow at the Hoover Institution, and a visiting professor at NYU Law School.
The health-care systems Democrats want to emulate don't allow contingency fees or large jury awards.
The Wall Street Journal, Jun 30, 2009, p A15
In his recent speech to the American Medical Association, President Barack Obama held out the tantalizing possibility of reforming medical malpractice law as part of a comprehensive overhaul of the U.S. health-care system. As usual, he hedged his bets by declining to endorse the only medical malpractice reform with real bite -- a national cap on damages for pain and suffering, such as the ones enacted in more than 30 states.
These caps are usually set between $250,000 to $500,000, and they can make a substantial difference. Other reforms, such as rules that limit contingency fees, shorten statutes of limitation, or confine each defendant's tort exposure to his proportionate share of the harm, have small and uncertain effects.
Medical malpractice, of course, is not just an American issue. And now that the U.S. is considering universal health-care systems similar to those found elsewhere, it's worth a quick peek at their medical malpractice systems -- which usually attract far less controversy, and are far less expensive, than our own.
Litigation in the U.S. has at least four distinctive procedural features that drive up malpractice costs. The first is jury trials, which can veer out of control and in any case introduce significant uncertainty. The second is the contingency-fee system, which allows well-heeled lawyers to self-finance litigation. The third is the rule that makes each side bear its own costs. This induces riskier lawsuits than are undertaken in most other countries, such as Canada, England and most of Europe, where the loser pays the legal costs of the winner. The fourth is extensive pretrial discovery outside the direct supervision of judges, which occurs far more readily here than elsewhere.
Even these features aren't the whole story. American judges frequently let juries decide whether honest mistakes are negligent. Judges in other nations are less likely to do so. American courts commonly think it proper for juries to infer medical negligence from the mere occurrence of a serious injury. European judges usually will not.
American plaintiffs are sometimes spared the heavy burden of identifying particular acts of negligence, or of showing the precise causal connection between a negligent act and an actual injury. Lastly, damage awards for lost income and medical expenses in the U.S. tend to dwarf awards made elsewhere -- in part because governments elsewhere provide this medical care from their nationalized systems. In sum, the medical malpractice system provides incentives for plaintiffs that really do matter. Americans, for example, file claims about 3.5 times more often than Canadians.
The overall picture is still more complex, since there are major variations in medical malpractice rules in different American states, and differences within states, such as between juries in big cities and those in small towns. Doctrinal reform cannot stop these abuses. What is needed is the replacement of juries with specialized commissions like those in France, which help reduce litigation expenses and promote uniformity in case outcomes across regions.
What then does this quick survey teach us about the ability of our system to deter medical injuries and compensate its victims? Not much that's encouraging.
A study led by David Studdert published in the 2006 New England Journal of Medicine concluded that the administrative expenses of the malpractice system were "exorbitant." And worse, it found errors in jury verdicts in about a quarter of the litigated cases. Juries denied compensation properly due in 16% of the cases, and awarded it about 10% of the time when it was unwarranted. These error rates don't include damage awards set at improper levels.
More disturbingly, a careful 1992 study by Donald Dewees and Michael Trebilcock in the Osgood Hall Law Journal concluded that the frequency of medical malpractice in Canada was about the same as in the U.S. -- for about 10% the total cost. In other words, our costly system doesn't seem to do much to deter malpractice. On medical malpractice at least, Canada does better than we do.
The U.S. cannot ignore serious reform. To be sure, medical malpractice premiums constitute well under 1% of the total U.S. health-care bill. But defensive medicine adds perhaps as much as 10%. High malpractice costs can shut down clinics that serve vulnerable populations, leading to more patient harm than the occasional case of malpractice.
The best reform would be to allow physicians, hospitals and patients to contract out of the liability mess by letting the parties reject state-imposed malpractice rules. They could, for example, choose to arbitrate, to waive jury trials, or to limit damage recovery. Stiff competition and the need to maintain reputation should keep medical providers in line in such a system. Market-based solutions that make the private sector more responsive should in turn undermine the case for moving head-first into a government-run health-care system with vast, unintended inefficiencies of its own.
Mr. Epstein is a professor of law at the University of Chicago, a senior fellow at the Hoover Institution, and a visiting professor at NYU Law School.
WaPo: The House considers a sensible bill to rein in the president's power to exclude court evidence
Fixing Abuses of State Secrets. WaPo Editorial
The House considers a sensible bill to rein in the president's power to exclude court evidence.
Monday, June 29, 2009
NO PRESIDENT should be trusted to be the sole arbiter of what evidence can and cannot be introduced in court. But that's essentially what has been happening for four decades in cases that touch on national security matters.
In the 1950s the Supreme Court gave the executive virtual carte blanche to determine what pieces of evidence or information must be withheld in civil lawsuits against the government; lower courts since then have routinely rubber-stamped the executive's secrecy claims.
The second Bush administration took the state secrets doctrine to new heights by arguing that an entire case should be dismissed -- sometimes at its earliest stages -- if it could touch on any information that could conceivably have national security ramifications. The Justice Department under President George W. Bush used this approach to try to quash litigation involving, among other things, domestic surveillance and extraordinary rendition (the forced transfer of detainees to countries where they may be tortured).
President Obama has said that the state secrets doctrine should be reformed, and he has promised to be more measured. Yet when confronted with actual cases the Obama Justice Department has adopted the same legal arguments as the Bush administration. The Obama administration, for example, recently asked the full U.S. Court of Appeals for the 9th Circuit to reconsider a panel decision that declined to dismiss a lawsuit brought by men who were subject to extraordinary rendition; the administration claimed that allowing the suit to go forward could harm national security. If Mr. Obama shapes a more circumscribed approach, as promised, that would be welcome.
But legislation is necessary to guarantee that all presidents abide by sensible rules that protect both national security and the ability of litigants to make their case in court. Rep. Jerrold Nadler (D-N.Y.) is the primary sponsor of legislation that sets out such rules; similar legislation has also been introduced in the Senate.
Under the State Secret Protection Act of 2009, a federal judge would be the arbiter and would make determinations on specific pieces of evidence. If a particular document or piece of evidence were deemed by the judge to be too sensitive to be shared with the plaintiff's lawyer, the government would be obligated to provide a redacted copy or, if that proved unworkable, an unclassified summary of what the evidence shows. If this approach still presented the risk of a national security breach, the judge could exclude the information but allow the plaintiff to proceed with the litigation unless the excluded information was absolutely necessary to the case. In these instances, the judge would be empowered to dismiss the case.
Independent scrutiny is necessary to ensure that the state secrets doctrine is being used legitimately and not to cover up embarrassing or incriminating evidence or episodes. The proposed legislation strikes the appropriate balance.
The House considers a sensible bill to rein in the president's power to exclude court evidence.
Monday, June 29, 2009
NO PRESIDENT should be trusted to be the sole arbiter of what evidence can and cannot be introduced in court. But that's essentially what has been happening for four decades in cases that touch on national security matters.
In the 1950s the Supreme Court gave the executive virtual carte blanche to determine what pieces of evidence or information must be withheld in civil lawsuits against the government; lower courts since then have routinely rubber-stamped the executive's secrecy claims.
The second Bush administration took the state secrets doctrine to new heights by arguing that an entire case should be dismissed -- sometimes at its earliest stages -- if it could touch on any information that could conceivably have national security ramifications. The Justice Department under President George W. Bush used this approach to try to quash litigation involving, among other things, domestic surveillance and extraordinary rendition (the forced transfer of detainees to countries where they may be tortured).
President Obama has said that the state secrets doctrine should be reformed, and he has promised to be more measured. Yet when confronted with actual cases the Obama Justice Department has adopted the same legal arguments as the Bush administration. The Obama administration, for example, recently asked the full U.S. Court of Appeals for the 9th Circuit to reconsider a panel decision that declined to dismiss a lawsuit brought by men who were subject to extraordinary rendition; the administration claimed that allowing the suit to go forward could harm national security. If Mr. Obama shapes a more circumscribed approach, as promised, that would be welcome.
But legislation is necessary to guarantee that all presidents abide by sensible rules that protect both national security and the ability of litigants to make their case in court. Rep. Jerrold Nadler (D-N.Y.) is the primary sponsor of legislation that sets out such rules; similar legislation has also been introduced in the Senate.
Under the State Secret Protection Act of 2009, a federal judge would be the arbiter and would make determinations on specific pieces of evidence. If a particular document or piece of evidence were deemed by the judge to be too sensitive to be shared with the plaintiff's lawyer, the government would be obligated to provide a redacted copy or, if that proved unworkable, an unclassified summary of what the evidence shows. If this approach still presented the risk of a national security breach, the judge could exclude the information but allow the plaintiff to proceed with the litigation unless the excluded information was absolutely necessary to the case. In these instances, the judge would be empowered to dismiss the case.
Independent scrutiny is necessary to ensure that the state secrets doctrine is being used legitimately and not to cover up embarrassing or incriminating evidence or episodes. The proposed legislation strikes the appropriate balance.
A Primer on the Employee Free Choice Act's Arbitration Provision
A Primer on the Employee Free Choice Act's Arbitration Provision. By F. Vincent Vernuccio
CEI, Jun 25, 2009
In the ongoing debate over the Employee Free Choice Act (EFCA, H.R. 1409, S 560), the Act’s card check provision has received a great deal of attention. This provision would effectively eliminate the secret ballot in union certification elections in favor of the card check process, in which union organizers ask workers to sign union cards out in the open. This exposes workers to high-pressure tactics that the secret ballot is designed to avoid. By focusing on its undemocratic nature, EFCA opponents have helped muster popular opposition to card check, and the bill has failed to move forward in Congress. However, EFCA supporters are now looking to craft a “compromise,” which would retain other harmful provisions in EFCA.
The Employee Free Choice Act’s Section 3, “Facilitating Initial Collective Bargaining Agreements,” has not received nearly as much attention as card check, but its implications could be enormous. If enacted as part of an EFCA “compromise,” it could fundamentally change the way businesses deal with their employees. Section 3 of EFCA empowers the federal government to impose mandatory binding compulsory interest arbitration, whereby government representatives are enjoined to create a fresh contract from scratch. It would allow the government to write “first contracts” between employers and unions even if one party objects.
Full Document Available in PDF
CEI, Jun 25, 2009
In the ongoing debate over the Employee Free Choice Act (EFCA, H.R. 1409, S 560), the Act’s card check provision has received a great deal of attention. This provision would effectively eliminate the secret ballot in union certification elections in favor of the card check process, in which union organizers ask workers to sign union cards out in the open. This exposes workers to high-pressure tactics that the secret ballot is designed to avoid. By focusing on its undemocratic nature, EFCA opponents have helped muster popular opposition to card check, and the bill has failed to move forward in Congress. However, EFCA supporters are now looking to craft a “compromise,” which would retain other harmful provisions in EFCA.
The Employee Free Choice Act’s Section 3, “Facilitating Initial Collective Bargaining Agreements,” has not received nearly as much attention as card check, but its implications could be enormous. If enacted as part of an EFCA “compromise,” it could fundamentally change the way businesses deal with their employees. Section 3 of EFCA empowers the federal government to impose mandatory binding compulsory interest arbitration, whereby government representatives are enjoined to create a fresh contract from scratch. It would allow the government to write “first contracts” between employers and unions even if one party objects.
Full Document Available in PDF
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