Obama Frees Iranian Terror Masters. By Andrew C. McCarthy
The release of the Irbil Five is a continuation of a shameful policy.
NRO, July 11, 2009 7:00 AM
There are a few things you need to know about President Obama’s shameful release on Thursday of the “Irbil Five” — Quds Force commanders from Iran’s Islamic Revolutionary Guards Corps (IRGC) who were coordinating terrorist attacks in Iraq that have killed hundreds — yes, hundreds — of American soldiers and Marines.
First, of the 4,322 Americans killed in combat in Iraq since 2003, 10 percent of them (i.e., more than 400) have been murdered by a single type of weapon alone, a weapon that is supplied by Iran for the singular purpose of murdering Americans. As Steve Schippert explains at NRO’s military blog, the Tank, the weapon is “the EFP (Explosively Formed Penetrator), designed by Iran’s IRGC specifically to penetrate the armor of the M1 Abrams main battle tank and, consequently, everything else deployed in the field.” Understand: This does not mean Iran has killed only 400 Americans in Iraq. The number killed and wounded at the mullahs’ direction is far higher than that — likely multiples of that — when factoring in the IRGC’s other tactics, such as the mustering of Hezbollah-style Shiite terror cells.
Second, President Bush and our armed forces steadfastly refused demands by Iran and Iraq’s Maliki government for the release of the Irbil Five because Iran was continuing to coordinate terrorist operations against American forces in Iraq (and to aid Taliban operations against American forces in Afghanistan). Freeing the Quds operatives obviously would return the most effective, dedicated terrorist trainers to their grisly business.
Third, Obama’s decision to release the five terror-masters comes while the Iranian regime (a) is still conducting operations against Americans in Iraq, even as we are in the process of withdrawing, and (b) is clearly working to replicate its Lebanon model in Iraq: establishing a Shiite terror network, loyal to Iran, as added pressure on the pliant Maliki to understand who is boss once the Americans leave. As the New York Times reports, Gen. Ray Odierno, commander of U.S. forces in Iraq, put it this way less than two weeks ago:
Iran is still supporting, funding, training surrogates who operate inside of Iraq — flat out. . . . They have not stopped. And I don’t think they will stop. I think they will continue to do that because they are also concerned, in my opinion, [about] where Iraq is headed. They want to try to gain influence here, and they will continue to do that. I think many of the attacks in Baghdad are from individuals that have been, in fact, funded or trained by the Iranians.
Fourth, President Obama’s release of the Quds terrorists is a natural continuation of his administration’s stunningly irresponsible policy of bartering terrorist prisoners for hostages. As I detailed here on June 24, Obama has already released a leader of the Iran-backed Asaib al-Haq terror network in Iraq, a jihadist who is among those responsible for the 2007 murders of five American troops in Karbala. While the release was ludicrously portrayed as an effort to further “Iraqi reconciliation” (as if that would be a valid reason to spring a terrorist who had killed Americans), it was in actuality a naïve attempt to secure the reciprocal release of five British hostages — and a predictably disastrous one: The terror network released only the corpses of two of the hostages, threatening to kill the remaining three (and who knows whether they still are alive?) unless other terror leaders were released.
Michael Ledeen has reported that the release of the Irbil Five is part of the price Iran has demanded for its release in May of the freelance journalist Roxana Saberi. Again, that’s only part of the price: Iran also has demanded the release of hundreds of its other terror facilitators in our custody. Expect to see Obama accommodate this demand, too, in the weeks ahead.
Finally, when it comes to Iran, it has become increasingly apparent that President Obama wants the mullahs to win. What you need to know is that Barack Obama is a wolf in “pragmatist” clothing: Beneath the easy smile and above-it-all manner — the “neutral” doing his best to weigh competing claims — is a radical leftist wedded to a Manichean vision that depicts American imperialism as the primary evil in the world.
You may not have wanted to addle your brain over his tutelage in Hawaii by the Communist Frank Marshall Davis, nor his tracing of Davis’s career steps to Chicago, where he seamlessly eased into the orbit of Arafat apologist Rashid Khalidi, anti-American terrorists Bill Ayers and Bernardine Dohrn, and Maoist “educator” Michael Klonsky — all while imbibing 20 years’ worth of Jeremiah Wright’s Marxist “black liberation theology.” But this neo-Communist well from which Obama drew holds that the world order is a maze of injustice, racism, and repression. Its unified theory for navigating the maze is: “United States = culprit.” Its default position is that tyrants are preferable as long as they are anti-American, and that while terrorist methods may be regrettable, their root cause is always American provocation — that is, the terrorists have a point.
In Iran, it is no longer enough for a rickety regime, whose anti-American vitriol is its only vital sign, to rig the “democratic” process. This time, blatant electoral fraud was also required to mulct victory for the mullahs’ candidate. The chicanery ignited a popular revolt. But the brutal regime guessed right: The new American president would be supportive. So sympathetic is Obama to the mullahs’ grievances — so hostile to what he, like the regime, sees as America’s arrogant militarism — that he could be depended on to go as far as politics allowed to help the regime ride out the storm.
And so he has. Right now, politics will allow quite a lot: With unemployment creeping toward 10 percent, the auto industry nationalized, the stimulus revealed as history’s biggest redistribution racket (so far), and Democrats bent on heaping ruinous carbon taxes and socialized medicine atop an economy already crushed by tens of trillions in unfunded welfare-state liabilities, Iran is barely on anyone’s radar screen.
So Obama is pouring it on while his trusty media idles. When they are not looking the other way from the carnage in Iran’s streets, they are dutifully reporting — as the AP did — that the Irbil Five are mere “diplomats.” Obama frees a terrorist with the blood of American troops on his hands, and the press yawns. Senators Jeff Sessions and Jon Kyl press for answers about the release of the terrorist and Obama’s abandonment of a decades-old American policy against trading terrorists for hostages, and the silence is deafening.
Except in Tehran, where the mullahs are hearing exactly what they’ve banked on hearing.
— National Review’s Andrew C. McCarthy is a senior fellow at the National Review Institute and the author of Willful Blindness: A Memoir of the Jihad (Encounter Books, 2008).
Sunday, July 12, 2009
Democrats For a Flat Tax in California?
Democrats For a Flat Tax? By JOE MATHEWS
Some California legislators realize revenue from the rich is too volatile.
WSJ, Jul 11, 2009
Los Angeles
Karen Bass is an unlikely tax cutter. She's the Democratic speaker of the California State Assembly, a fierce defender of the labor movement, and an advocate for repealing a constitutional provision that requires that tax increases pass the state legislature with a two-thirds majority.
But as California faces a budget crisis that defies efforts to resolve it, there is a woman-bites-dog story developing with Ms. Bass at its center. By the end of the month, a commission she pushed to create is expected to recommend that the state adopt a flat (or at least flatter) personal income tax and cut or repeal corporate and sales taxes.
Normally, such proposals would be dead on arrival in Sacramento. But now many Democrats, including the speaker, are realizing that what they need is a tax base that will provide steady funding for their programs. In other words, they need a tax base that doesn't count on a large slice of revenue from taxes on a relatively small number of wealthy residents who can flee the state or who are themselves vulnerable to losing a substantial portion of income in a recession.
No one understands the political dynamics of volatile state revenues better than Ms. Bass. She's a progressive who has made finding more money for foster care and children's services a top priority. And after negotiating three rounds of budget cuts in the past year she has grown weary of deficit politics. So, determined to modernize the tax system, Ms. Bass is pledging to put whatever recommendations the commission comes back with to an up or down vote.
If that happens, California's tired budget debate -- which usually pits Democrats against Republicans -- will take on a new twist. This time the debate to watch will be among Democrats as they hash out whether taxes are too progressive to accomplish progressive political goals.
In a public meeting last month, a majority of the commission's 14 members -- seven of whom were appointed by Ms. Bass and her Democratic counterpart in the state Senate, the other seven by California's nominally Republican governor -- seemed to favor replacing the state's six income-tax brackets with a single 6% rate. The plan they mentioned would also eliminate corporate and sales taxes and replace them with a business net receipt tax.
"You have to admit," commissioner member Fred Keeley, a Democrat who is the treasurer of Santa Cruz County, said after the meeting, "that the package is a game changer."
In recent days, Mr. Keeley and other Bass appointees, have countered liberal objections with other proposals. But each adopts the logic of simpler taxation. One would create three income-tax brackets (0%, 4% and 7%). Another would cut corporate taxes and the income-tax rate for top earners while imposing a new fuels tax.
It remains unclear how much Ms. Bass will fight for the commission's recommendations. Underscoring the political sensitivity of tax reform, she has been cautious in recent public comments, emphasizing that she is "open-minded" about supporting the recommendations herself. She told me she didn't like the idea of a "flat tax" if it meant raising the tax burden on poorer and middle-class Californians. But she also said she worried about the state's heavy reliance on about 144,000 wealthy people to pay half of all income taxes for a state with a population of 38 million. "It's a crazy statistic," she said.
Late last year, Ms. Bass convinced Gov. Arnold Schwarzenegger and the state senate's Democratic leader, Darrell Steinberg, to create the Commission on the 21st Century Economy with a mandate for tax reforms that would reduce volatility in state revenue. The Democratic appointees include state tax expert Richard Pomp and Berkeley law school dean Christopher Edley Jr. The governor's appointees include economists Michael Boskin and John Cogan, as well as businessman Gerald Parsky.
"One of the reasons why Californians go through the annual budget ritual in a way that is most years very, very frustrating is that our sources of revenue are far too volatile," Mr. Steinberg said at a December press event.
Other Democrats have made similar points. U.S. Sen. Dianne Feinstein recently explained her state's problems to the New York Times by saying that 55% of state tax revenues come from income tax and 45% of that comes from the top brackets.
Susan Kennedy, a Democrat who serves as Mr. Schwarzenegger's chief of staff and who is the most important unelected official in the Capitol, was recently asked at a business event what the state tax system needed. "Flatness," she replied. "Our revenue stream is way too progressive."
But as the commission gets close to making recommendations, opposition is forming on the left. Liberal-leaning groups that study the budget argue that all taxes are volatile and that the state should raise taxes, particularly on property, to balance its budget. Public employee unions are demanding in blunt terms that Democrats make the tax code more progressive. The American Federation of State, County and Municipal Employees recently asked legislators to sign statements supporting some $44 billion in new taxes, much of them on the wealthy and industry.
Robert Cruickshank, a contributing editor at the progressive blog Calitics, says of the commission's expected recommendations: "Most progressives are not going to support these kind of regressive solutions. You would see a fight if the Democratic legislature made a move to do this."
The commission poses a political quandary for Republicans. Joel Fox, a former president of the Howard Jarvis Taxpayers Association, predicts that libertarians could embrace the flatter taxation while conservative populists might oppose the commission out of fear its reforms would increase government revenues.
But supporters of the commission's proposals are likely to get a fair hearing. Frustration with the California status quo crosses all ideological lines. Even those who disagree with the commission's thrust are glad to have something new to discuss. "I'm really glad they're trying something," said Rick Jacobs, chairman of the Courage Campaign, a progressive Internet network with more than 700,000 members. He argues that the existing state tax system is too regressive. "It's important to push the discussion out."
Privately, some Democrats hope that the commission sparks a debate that will lead to a tax hike. These Democrats want to end the two-thirds vote requirement on tax hikes and lift limits on commercial property taxes put in place by Proposition 13 in 1978. But regardless of the aims of some heading into this debate, the result is that by starting a discussion on tax reform Democrats could create a flatter, simpler tax code for California. These are strange times in the Golden State.
Mr. Mathews, a senior fellow at the New America Foundation, is the author of "The People's Machine: Arnold Schwarzenegger and the Rise of Blockbuster Democracy" (Public Affairs, 2006).
Some California legislators realize revenue from the rich is too volatile.
WSJ, Jul 11, 2009
Los Angeles
Karen Bass is an unlikely tax cutter. She's the Democratic speaker of the California State Assembly, a fierce defender of the labor movement, and an advocate for repealing a constitutional provision that requires that tax increases pass the state legislature with a two-thirds majority.
But as California faces a budget crisis that defies efforts to resolve it, there is a woman-bites-dog story developing with Ms. Bass at its center. By the end of the month, a commission she pushed to create is expected to recommend that the state adopt a flat (or at least flatter) personal income tax and cut or repeal corporate and sales taxes.
Normally, such proposals would be dead on arrival in Sacramento. But now many Democrats, including the speaker, are realizing that what they need is a tax base that will provide steady funding for their programs. In other words, they need a tax base that doesn't count on a large slice of revenue from taxes on a relatively small number of wealthy residents who can flee the state or who are themselves vulnerable to losing a substantial portion of income in a recession.
No one understands the political dynamics of volatile state revenues better than Ms. Bass. She's a progressive who has made finding more money for foster care and children's services a top priority. And after negotiating three rounds of budget cuts in the past year she has grown weary of deficit politics. So, determined to modernize the tax system, Ms. Bass is pledging to put whatever recommendations the commission comes back with to an up or down vote.
If that happens, California's tired budget debate -- which usually pits Democrats against Republicans -- will take on a new twist. This time the debate to watch will be among Democrats as they hash out whether taxes are too progressive to accomplish progressive political goals.
In a public meeting last month, a majority of the commission's 14 members -- seven of whom were appointed by Ms. Bass and her Democratic counterpart in the state Senate, the other seven by California's nominally Republican governor -- seemed to favor replacing the state's six income-tax brackets with a single 6% rate. The plan they mentioned would also eliminate corporate and sales taxes and replace them with a business net receipt tax.
"You have to admit," commissioner member Fred Keeley, a Democrat who is the treasurer of Santa Cruz County, said after the meeting, "that the package is a game changer."
In recent days, Mr. Keeley and other Bass appointees, have countered liberal objections with other proposals. But each adopts the logic of simpler taxation. One would create three income-tax brackets (0%, 4% and 7%). Another would cut corporate taxes and the income-tax rate for top earners while imposing a new fuels tax.
It remains unclear how much Ms. Bass will fight for the commission's recommendations. Underscoring the political sensitivity of tax reform, she has been cautious in recent public comments, emphasizing that she is "open-minded" about supporting the recommendations herself. She told me she didn't like the idea of a "flat tax" if it meant raising the tax burden on poorer and middle-class Californians. But she also said she worried about the state's heavy reliance on about 144,000 wealthy people to pay half of all income taxes for a state with a population of 38 million. "It's a crazy statistic," she said.
Late last year, Ms. Bass convinced Gov. Arnold Schwarzenegger and the state senate's Democratic leader, Darrell Steinberg, to create the Commission on the 21st Century Economy with a mandate for tax reforms that would reduce volatility in state revenue. The Democratic appointees include state tax expert Richard Pomp and Berkeley law school dean Christopher Edley Jr. The governor's appointees include economists Michael Boskin and John Cogan, as well as businessman Gerald Parsky.
"One of the reasons why Californians go through the annual budget ritual in a way that is most years very, very frustrating is that our sources of revenue are far too volatile," Mr. Steinberg said at a December press event.
Other Democrats have made similar points. U.S. Sen. Dianne Feinstein recently explained her state's problems to the New York Times by saying that 55% of state tax revenues come from income tax and 45% of that comes from the top brackets.
Susan Kennedy, a Democrat who serves as Mr. Schwarzenegger's chief of staff and who is the most important unelected official in the Capitol, was recently asked at a business event what the state tax system needed. "Flatness," she replied. "Our revenue stream is way too progressive."
But as the commission gets close to making recommendations, opposition is forming on the left. Liberal-leaning groups that study the budget argue that all taxes are volatile and that the state should raise taxes, particularly on property, to balance its budget. Public employee unions are demanding in blunt terms that Democrats make the tax code more progressive. The American Federation of State, County and Municipal Employees recently asked legislators to sign statements supporting some $44 billion in new taxes, much of them on the wealthy and industry.
Robert Cruickshank, a contributing editor at the progressive blog Calitics, says of the commission's expected recommendations: "Most progressives are not going to support these kind of regressive solutions. You would see a fight if the Democratic legislature made a move to do this."
The commission poses a political quandary for Republicans. Joel Fox, a former president of the Howard Jarvis Taxpayers Association, predicts that libertarians could embrace the flatter taxation while conservative populists might oppose the commission out of fear its reforms would increase government revenues.
But supporters of the commission's proposals are likely to get a fair hearing. Frustration with the California status quo crosses all ideological lines. Even those who disagree with the commission's thrust are glad to have something new to discuss. "I'm really glad they're trying something," said Rick Jacobs, chairman of the Courage Campaign, a progressive Internet network with more than 700,000 members. He argues that the existing state tax system is too regressive. "It's important to push the discussion out."
Privately, some Democrats hope that the commission sparks a debate that will lead to a tax hike. These Democrats want to end the two-thirds vote requirement on tax hikes and lift limits on commercial property taxes put in place by Proposition 13 in 1978. But regardless of the aims of some heading into this debate, the result is that by starting a discussion on tax reform Democrats could create a flatter, simpler tax code for California. These are strange times in the Golden State.
Mr. Mathews, a senior fellow at the New America Foundation, is the author of "The People's Machine: Arnold Schwarzenegger and the Rise of Blockbuster Democracy" (Public Affairs, 2006).
Thursday, July 9, 2009
Why We'll Leave L.A.
Why We'll Leave L.A. By RICK NEWCOMBE
The business climate is worse than the air quality.
WSJ, jul 10, 2009
Los Angeles
If New Yorkers fantasize that doing business here in Los Angeles would be less of a headache, forget about it. This city is fast becoming a job-killing machine. It's no accident the unemployment rate is a frightening 11.4% and climbing.
I never could have imagined that, after living here for more than three decades, I would be filing a lawsuit against my beloved Los Angeles and making plans for my company, Creators Syndicate, to move elsewhere.
But we have no choice. The city's bureaucrats rival Stalin's apparatchiks in issuing decrees, rescinding them, and then punishing citizens for having followed them in the first place.
I founded Creators Syndicate in 1987, and we have represented hundreds of important writers, syndicating their columns to newspapers and Web sites around the world. The most famous include Hillary Clinton, who, like Eleanor Roosevelt, wrote a syndicated column when she was first lady. Another star was the advice columnist Ann Landers, once described by "The World Almanac" as "the most influential woman in America." Other Creators columnists include Bill O'Reilly, Susan Estrich, Thomas Sowell, Roland Martin and Michelle Malkin -- plus Pulitzer Prize-winning political cartoonists and your favorite comic strips.
From the beginning, we've been headquartered in Los Angeles. But 15 years ago we had a dispute with the city over our business tax classification. The city argued that we should be in an "occupations and professions" classification that has an extremely high tax rate, while we fought for a "wholesale and retail" classification with a much lower rate. The city forced us to invest a small fortune in legal fees over two years, but we felt it was worth it in order to establish the correct classification once and for all.
After enduring a series of bureaucratic hearings, we anxiously awaited a ruling to find out what our tax rate would be. Everything was at stake. We had already decided that if we lost, we would move.
You can imagine how relieved we were on July 1, 1994, when the ruling was issued. We won, and firmly planted our roots in the City of Angels and proceeded to build our business.
Everything was fine until the city started running out of money in 2007. Suddenly, the city announced that it was going to ignore its own ruling and reclassify us in the higher tax category. Even more incredible is the fact that the new classification was to be imposed retroactively to 2004 with interest and penalties. No explanation was given for the new classification, or for the city's decision to ignore its 1994 ruling.
Their official position is that the city is not bound by past rulings -- only taxpayers are. This is why we have been forced to file a lawsuit. We will let the courts decide whether it is legal for adverse rulings to apply only to taxpayers and not to the city.
We work with hundreds of outside agents, consultants, independent contractors and support services -- many of whom pay taxes to the city of Los Angeles. This spurs a job-creating ripple effect on the city's economy. Yet I suspect many companies like ours already have quietly left town in the face of the city's taxes and regulations. This would help explain the erosion of jobs.
Regardless of the outcome of our case, the arbitrary and capricious behavior of some bureaucrats is creating a lose-lose situation for everyone involved. If we win in court, the taxpayers of Los Angeles will have lost because all those tax dollars will have been wasted on needless litigation.
If we lose in court, the remaining taxpayers in Los Angeles will have lost because their burden will continue to swell as yet another business moves its jobs -- and taxpayers -- to another city.
As long as City Hall operates like a banana republic, why is anyone surprised that jobs have left the city in droves and Los Angeles is teetering on the brink of bankruptcy?
Mr. Newcombe is president of Creators Syndicate.
The business climate is worse than the air quality.
WSJ, jul 10, 2009
Los Angeles
If New Yorkers fantasize that doing business here in Los Angeles would be less of a headache, forget about it. This city is fast becoming a job-killing machine. It's no accident the unemployment rate is a frightening 11.4% and climbing.
I never could have imagined that, after living here for more than three decades, I would be filing a lawsuit against my beloved Los Angeles and making plans for my company, Creators Syndicate, to move elsewhere.
But we have no choice. The city's bureaucrats rival Stalin's apparatchiks in issuing decrees, rescinding them, and then punishing citizens for having followed them in the first place.
I founded Creators Syndicate in 1987, and we have represented hundreds of important writers, syndicating their columns to newspapers and Web sites around the world. The most famous include Hillary Clinton, who, like Eleanor Roosevelt, wrote a syndicated column when she was first lady. Another star was the advice columnist Ann Landers, once described by "The World Almanac" as "the most influential woman in America." Other Creators columnists include Bill O'Reilly, Susan Estrich, Thomas Sowell, Roland Martin and Michelle Malkin -- plus Pulitzer Prize-winning political cartoonists and your favorite comic strips.
From the beginning, we've been headquartered in Los Angeles. But 15 years ago we had a dispute with the city over our business tax classification. The city argued that we should be in an "occupations and professions" classification that has an extremely high tax rate, while we fought for a "wholesale and retail" classification with a much lower rate. The city forced us to invest a small fortune in legal fees over two years, but we felt it was worth it in order to establish the correct classification once and for all.
After enduring a series of bureaucratic hearings, we anxiously awaited a ruling to find out what our tax rate would be. Everything was at stake. We had already decided that if we lost, we would move.
You can imagine how relieved we were on July 1, 1994, when the ruling was issued. We won, and firmly planted our roots in the City of Angels and proceeded to build our business.
Everything was fine until the city started running out of money in 2007. Suddenly, the city announced that it was going to ignore its own ruling and reclassify us in the higher tax category. Even more incredible is the fact that the new classification was to be imposed retroactively to 2004 with interest and penalties. No explanation was given for the new classification, or for the city's decision to ignore its 1994 ruling.
Their official position is that the city is not bound by past rulings -- only taxpayers are. This is why we have been forced to file a lawsuit. We will let the courts decide whether it is legal for adverse rulings to apply only to taxpayers and not to the city.
We work with hundreds of outside agents, consultants, independent contractors and support services -- many of whom pay taxes to the city of Los Angeles. This spurs a job-creating ripple effect on the city's economy. Yet I suspect many companies like ours already have quietly left town in the face of the city's taxes and regulations. This would help explain the erosion of jobs.
Regardless of the outcome of our case, the arbitrary and capricious behavior of some bureaucrats is creating a lose-lose situation for everyone involved. If we win in court, the taxpayers of Los Angeles will have lost because all those tax dollars will have been wasted on needless litigation.
If we lose in court, the remaining taxpayers in Los Angeles will have lost because their burden will continue to swell as yet another business moves its jobs -- and taxpayers -- to another city.
As long as City Hall operates like a banana republic, why is anyone surprised that jobs have left the city in droves and Los Angeles is teetering on the brink of bankruptcy?
Mr. Newcombe is president of Creators Syndicate.
King Canute at the G-8
King Canute at the G-8. WSJ Editorial
World leaders tell the Earth's temperature not to rise.
WSJ, Jul 10, 2009
"When King Canute of lore wanted to teach his citizens a lesson, he set his throne by the seashore and commanded the tides to roll out. Canute's spirit was back in business this week at the G-8 summit in Italy, where the assembled leaders declared that the world's temperature shall not rise: 'We recognize the scientific view that the increase in global average temperature above pre-industrial levels ought not to exceed 2 degrees [Celsius],' or 3.6 degrees Fahrenheit, said the summit declaration.
So let it be written, so let it be done.
As for how they will achieve this climate-defying feat, well, the leaders were somewhat less definitive: 'we will work . . . to identify a global goal for substantially reducing global emissions by 2050.'"
World leaders tell the Earth's temperature not to rise.
WSJ, Jul 10, 2009
"When King Canute of lore wanted to teach his citizens a lesson, he set his throne by the seashore and commanded the tides to roll out. Canute's spirit was back in business this week at the G-8 summit in Italy, where the assembled leaders declared that the world's temperature shall not rise: 'We recognize the scientific view that the increase in global average temperature above pre-industrial levels ought not to exceed 2 degrees [Celsius],' or 3.6 degrees Fahrenheit, said the summit declaration.
So let it be written, so let it be done.
As for how they will achieve this climate-defying feat, well, the leaders were somewhat less definitive: 'we will work . . . to identify a global goal for substantially reducing global emissions by 2050.'"
Fact Sheets: U.S. Commitment to Development
Fact Sheets: U.S. Commitment to Development
State Dept, Bureau of Public Affairs
Office of the Spokesman, Washington, DC, Thu, 09 Jul 2009 13:16:33 -0500
“To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow; to nourish starved bodies and feed hungry minds.”-President Barack Obama, Inaugural Address, January 20th, 2009
“We are committed to pursuing peace and prosperity in every corner – not only in the marble halls of governments, but also in the rural villages and distant cities where people strive to live, work, learn, raise families, contribute to their communities, and grow old with dignity. These are universal dreams that we seek to make a reality for more of the world’s people.”-Secretary Hillary Clinton, Remarks on World Refugee Day, June 20th, 2009
The United Nations reaffirmed the 2002 Monterrey Consensus for development at the International Conference on Financing for Development at Doha in 2008, calling on developing countries to establish sound economic, social and governance policies and calling on developed countries to support these efforts through an open trading system, private capital flows, and development assistance. The United States is working with other donors and multilateral development banks to ensure that all sources of development finance are available to developing countries as we pass through and beyond the global economic crisis. The United States is strongly committed to helping the world's poor through a broad variety of mechanisms. Preliminary 2008 U.S. Official Development Assistance (ODA) indicates that ODA has tripled over the last decade, and President Obama has pledged further increases.[1]
The U.S. Record
[1] All 2008 ODA data cited are preliminary figures. Final 2008 ODA data will be released in November 2009.
PRN: 2009/697
State Dept, Bureau of Public Affairs
Office of the Spokesman, Washington, DC, Thu, 09 Jul 2009 13:16:33 -0500
“To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow; to nourish starved bodies and feed hungry minds.”-President Barack Obama, Inaugural Address, January 20th, 2009
“We are committed to pursuing peace and prosperity in every corner – not only in the marble halls of governments, but also in the rural villages and distant cities where people strive to live, work, learn, raise families, contribute to their communities, and grow old with dignity. These are universal dreams that we seek to make a reality for more of the world’s people.”-Secretary Hillary Clinton, Remarks on World Refugee Day, June 20th, 2009
The United Nations reaffirmed the 2002 Monterrey Consensus for development at the International Conference on Financing for Development at Doha in 2008, calling on developing countries to establish sound economic, social and governance policies and calling on developed countries to support these efforts through an open trading system, private capital flows, and development assistance. The United States is working with other donors and multilateral development banks to ensure that all sources of development finance are available to developing countries as we pass through and beyond the global economic crisis. The United States is strongly committed to helping the world's poor through a broad variety of mechanisms. Preliminary 2008 U.S. Official Development Assistance (ODA) indicates that ODA has tripled over the last decade, and President Obama has pledged further increases.[1]
The U.S. Record
- World’s largest donor of bilateral foreign assistance.
- World’s largest donor of combined multilateral development assistance.
- The United States disbursed $26 billion in Official Development Assistance (ODA) in calendar year 2008, a $4.2 billion, or 19% increase from the 2007 level.
- U.S. bilateral ODA to sub-Saharan Africa increased to $6.5 billion in 2008 from $4.6 billion in 2007.
- U.S. bilateral ODA to least developed countries increased to $6.9 billion in 2008.
- $6.4 billion committed to Millennium Challenge poverty reduction Compacts in 18 countries.
- $25 billion in bilateral and multilateral HIV/AIDS and tuberculosis funding through 2009.$4.4 billion in U.S. humanitarian assistance provided in 2008.
- Top net goods importer from developing countries at $610 billion in 2008 ($1,089 billion in imports minus $479 billion in exports). Excluding China, net developing country imports total $325 billion in 2008 ($733 billion in imports minus $408 billion in exports).
- World’s largest provider of private financial flows to the developing world with net capital flows exceeding $99 billion in 2007.
[1] All 2008 ODA data cited are preliminary figures. Final 2008 ODA data will be released in November 2009.
PRN: 2009/697
Do We Need a Second Stimulus? Why so little is being spent from the first
Do We Need a Second Stimulus? By EDWARD P. LAZEAR
A more troubling question is why so little is being spent from the first.
WSJ, Jul 09, 2009
In "Brewster's Millions," a comedy starring Richard Pryor, a man is told he can keep $300 million if he manages to spend $30 million in one month. The movie documents -- with a great deal of humor -- his difficulties getting the money spent. The Obama administration is currently facing a similar problem with its "stimulus" spending, only without the humor.
With the economy weak and the labor market continuing to decline, there is now talk of a second stimulus (which is actually the third, counting President Bush's 2008 tax rebates). This would be a mistake. The truth is there hasn't been any stimulus to speak of so far this year. Moreover, what's being called stimulus is just a smoke screen for a permanent expansion of government. Let's start with some facts.
By June 26, about $56 billion was spent on the stimulus from the American Recovery and Reinvestment Act of 2009, passed Feb. 17. A large proportion of that actually reflects mere transfers from the federal government to state governments, so the amount that has gotten into the economy is significantly lower.
But even if we call all of the $56 billion spending, it's still not enough to make a meaningful impact. By this point of the year in 2008, the Bush administration's tax-rebates got out about $80 billion. Most economists believe the rebates had a positive but hardly dramatic effect on the economy.
The Obama stimulus, being significantly smaller, cannot possibly be expected to turn the economy around. The economy will improve. But it will do so because the financial sector is recovering, largely due to the Fed policies to enhance liquidity and the success of the Bush administration's Troubled Asset Relief Program, continued by the Obama team, in helping to recapitalize the banks.
Congress and the Obama administration have used the economic downturn as an excuse to expand the size of government. Calling it a stimulus, they have instead put in place a spending agenda that will unfold over the next two years. Although a little over one-third of the American Recovery and Reinvestment Act of 2009 goes to tax relief, the rest is in the form of spending programs that will be difficult to stop once they are up and running.
Only a small share of the spending will occur in 2009, even though Keynesians would argue that stimulus spending should be frontloaded to kick-start growth. The Congressional Budget Office estimates that the largest share of the spending will occur in 2010, with the amount in 2011 being slightly larger than in 2009. Again, the timing exacerbates the problem: It will be tough to cut back on spending written into budgets as far out as 2011.
Additional evidence that the Obama administration wants to expand government rather than stimulate the economy comes from the president's own statements about deficit reduction. When the budget came out, he announced a goal of reducing the deficit to around 4% of GDP by 2013, at which point the administration believes the economy will be fully recovered. Yet to keep the ratio of public debt to GDP constant, the deficit must actually stay below about 2.7%.
For perspective, recall that the Bush deficit, which has been criticized for being too large, reached a peak of 3.6% of GDP in 2004. But it fell steadily to 1.2% of GDP by 2007 before rising again to about 3% after TARP.
Some argue that a tax cut is a weaker stimulus than direct government spending. This point is debated among economists. But it is clearly much easier for Treasury to write checks to the public than it is to get agencies to rev up spending programs and do so in a way that does not simply throw away money.
It's a bit odd that the reaction by the Obama administration and some congressional leaders to a policy that has not worked is to consider putting a similar policy in place. One interpretation is that this is yet another opportunity to spend more on programs that Democrats have wanted for years.
It may be the case that the country wants more government, that Americans now believe the European model of big government is best. That is a decision that society must make. But it should do so with no illusions: The current stimulus and calls for a future one are primarily government growth policies, not strategies to shorten the current recession.
Mr. Lazear, chairman of the President's Council of Economic Advisers from 2006-09, is a professor at Stanford University's Graduate School of Business and a Hoover Institution fellow.
A more troubling question is why so little is being spent from the first.
WSJ, Jul 09, 2009
In "Brewster's Millions," a comedy starring Richard Pryor, a man is told he can keep $300 million if he manages to spend $30 million in one month. The movie documents -- with a great deal of humor -- his difficulties getting the money spent. The Obama administration is currently facing a similar problem with its "stimulus" spending, only without the humor.
With the economy weak and the labor market continuing to decline, there is now talk of a second stimulus (which is actually the third, counting President Bush's 2008 tax rebates). This would be a mistake. The truth is there hasn't been any stimulus to speak of so far this year. Moreover, what's being called stimulus is just a smoke screen for a permanent expansion of government. Let's start with some facts.
By June 26, about $56 billion was spent on the stimulus from the American Recovery and Reinvestment Act of 2009, passed Feb. 17. A large proportion of that actually reflects mere transfers from the federal government to state governments, so the amount that has gotten into the economy is significantly lower.
But even if we call all of the $56 billion spending, it's still not enough to make a meaningful impact. By this point of the year in 2008, the Bush administration's tax-rebates got out about $80 billion. Most economists believe the rebates had a positive but hardly dramatic effect on the economy.
The Obama stimulus, being significantly smaller, cannot possibly be expected to turn the economy around. The economy will improve. But it will do so because the financial sector is recovering, largely due to the Fed policies to enhance liquidity and the success of the Bush administration's Troubled Asset Relief Program, continued by the Obama team, in helping to recapitalize the banks.
Congress and the Obama administration have used the economic downturn as an excuse to expand the size of government. Calling it a stimulus, they have instead put in place a spending agenda that will unfold over the next two years. Although a little over one-third of the American Recovery and Reinvestment Act of 2009 goes to tax relief, the rest is in the form of spending programs that will be difficult to stop once they are up and running.
Only a small share of the spending will occur in 2009, even though Keynesians would argue that stimulus spending should be frontloaded to kick-start growth. The Congressional Budget Office estimates that the largest share of the spending will occur in 2010, with the amount in 2011 being slightly larger than in 2009. Again, the timing exacerbates the problem: It will be tough to cut back on spending written into budgets as far out as 2011.
Additional evidence that the Obama administration wants to expand government rather than stimulate the economy comes from the president's own statements about deficit reduction. When the budget came out, he announced a goal of reducing the deficit to around 4% of GDP by 2013, at which point the administration believes the economy will be fully recovered. Yet to keep the ratio of public debt to GDP constant, the deficit must actually stay below about 2.7%.
For perspective, recall that the Bush deficit, which has been criticized for being too large, reached a peak of 3.6% of GDP in 2004. But it fell steadily to 1.2% of GDP by 2007 before rising again to about 3% after TARP.
Some argue that a tax cut is a weaker stimulus than direct government spending. This point is debated among economists. But it is clearly much easier for Treasury to write checks to the public than it is to get agencies to rev up spending programs and do so in a way that does not simply throw away money.
It's a bit odd that the reaction by the Obama administration and some congressional leaders to a policy that has not worked is to consider putting a similar policy in place. One interpretation is that this is yet another opportunity to spend more on programs that Democrats have wanted for years.
It may be the case that the country wants more government, that Americans now believe the European model of big government is best. That is a decision that society must make. But it should do so with no illusions: The current stimulus and calls for a future one are primarily government growth policies, not strategies to shorten the current recession.
Mr. Lazear, chairman of the President's Council of Economic Advisers from 2006-09, is a professor at Stanford University's Graduate School of Business and a Hoover Institution fellow.
Systemic Risk and the Fed
Systemic Risk and the Fed. By ROBERT C. POZEN
It is a mistake to give the central bank vast new regulatory powers.
WSJ, Jul 09, 2009
Congress is currently debating how to cope with the widespread ripple effects when a large financial institution fails or a risky financial product blows up. The U.S. Treasury has proposed that a council of eight regulatory agencies be appointed to monitor the so-called problem of systemic risk. Treasury also wants the Federal Reserve to become the exclusive regulator of all financial institutions deemed systemically risky.
This gets things backward.
If the risk monitoring function is delegated to a council, no single agency will take the lead or likely take responsibility. Moreover, the U.S. needs one contact point to coordinate risk monitoring with other countries.
The most logical choice to monitor systemic risk is the Fed. This function is consistent with the Fed's broad review of economic and market developments, which is part of its traditional role in setting interest rates. In this role, the Fed takes a long-term perspective, which is critical to risk monitoring.
More importantly, the Fed has emergency lending powers to prevent a financial institution from suddenly failing. If the remedial action involves a bank holding company, it already has the power to act. If another type of financial institution is at risk, the Fed should work with the relevant regulatory agency to implement a plan. Disagreements should be settled by the council.
But the Fed should not be the exclusive regulator of all institutions posing a systemic risk. It's not possible to identify in advance such institutions; they'll change as market conditions change. Systemic risks also can arise from new products, like credit derivatives, which are used by institutions of various sizes. The Fed would not be able to develop enough expertise to regulate so many different types of financial firms -- hedge funds, pension plans, money funds and insurance companies, as well as banks.
Instead, large financial institutions should continue to be supervised by their functional regulators, such as the SEC in the case of money market funds. The other great benefit of this approach is that it avoids labeling an institution in advance as systemically risky. Once the government uses this label, investors will assume that the institution will always be bailed out by the government.
Giving the Fed the authority to monitor risk but not new regulatory authority also avoids granting it too much power. A good case can be made that the Fed already has too much power, and should give up its current authority to set customer rules for mortgages and credit cards. The Fed should be focused on macroeconomic issues -- not consumer protection.
To be sure, there are gaps in the current system of regulation that should be closed. For example, Congress should require most managers of hedge funds to register with the SEC under the Investment Advisers Act.
Such registration would subject those managers to periodic inspections without limiting their investment strategies. Furthermore, a handful of very large hedge funds (e.g., with assets over $25 billion) should submit to the SEC and the Fed nonpublic reports that include information, such as their leverage ratios, which are relevant to the monitoring of systemic risk.
Congress also should create a federal charter and agency for a small number of giant life insurers. AIG's collapse shows that a giant insurer can have adverse repercussions for the entire financial system. For that reason, almost all countries have a federal regulator of large insurance companies. The states will no doubt object, but they can continue to regulate property-casualty insurers and most life insurers.
In short, I believe the Treasury's proposal for dealing with systemic risk is misguided. To ensure that a risk monitor is accountable, the function should be located in a single entity. To supervise specific financial institutions and practices, however, Congress should look to the traditional functional regulators that already have the expertise necessary to understand and resolve issues specific to these institutions.
Mr. Pozen, chairman of MFS Investment Management, is the author of "Too Big to Save? How to Fix the U.S. Financial System," forthcoming from John Wiley.
It is a mistake to give the central bank vast new regulatory powers.
WSJ, Jul 09, 2009
Congress is currently debating how to cope with the widespread ripple effects when a large financial institution fails or a risky financial product blows up. The U.S. Treasury has proposed that a council of eight regulatory agencies be appointed to monitor the so-called problem of systemic risk. Treasury also wants the Federal Reserve to become the exclusive regulator of all financial institutions deemed systemically risky.
This gets things backward.
If the risk monitoring function is delegated to a council, no single agency will take the lead or likely take responsibility. Moreover, the U.S. needs one contact point to coordinate risk monitoring with other countries.
The most logical choice to monitor systemic risk is the Fed. This function is consistent with the Fed's broad review of economic and market developments, which is part of its traditional role in setting interest rates. In this role, the Fed takes a long-term perspective, which is critical to risk monitoring.
More importantly, the Fed has emergency lending powers to prevent a financial institution from suddenly failing. If the remedial action involves a bank holding company, it already has the power to act. If another type of financial institution is at risk, the Fed should work with the relevant regulatory agency to implement a plan. Disagreements should be settled by the council.
But the Fed should not be the exclusive regulator of all institutions posing a systemic risk. It's not possible to identify in advance such institutions; they'll change as market conditions change. Systemic risks also can arise from new products, like credit derivatives, which are used by institutions of various sizes. The Fed would not be able to develop enough expertise to regulate so many different types of financial firms -- hedge funds, pension plans, money funds and insurance companies, as well as banks.
Instead, large financial institutions should continue to be supervised by their functional regulators, such as the SEC in the case of money market funds. The other great benefit of this approach is that it avoids labeling an institution in advance as systemically risky. Once the government uses this label, investors will assume that the institution will always be bailed out by the government.
Giving the Fed the authority to monitor risk but not new regulatory authority also avoids granting it too much power. A good case can be made that the Fed already has too much power, and should give up its current authority to set customer rules for mortgages and credit cards. The Fed should be focused on macroeconomic issues -- not consumer protection.
To be sure, there are gaps in the current system of regulation that should be closed. For example, Congress should require most managers of hedge funds to register with the SEC under the Investment Advisers Act.
Such registration would subject those managers to periodic inspections without limiting their investment strategies. Furthermore, a handful of very large hedge funds (e.g., with assets over $25 billion) should submit to the SEC and the Fed nonpublic reports that include information, such as their leverage ratios, which are relevant to the monitoring of systemic risk.
Congress also should create a federal charter and agency for a small number of giant life insurers. AIG's collapse shows that a giant insurer can have adverse repercussions for the entire financial system. For that reason, almost all countries have a federal regulator of large insurance companies. The states will no doubt object, but they can continue to regulate property-casualty insurers and most life insurers.
In short, I believe the Treasury's proposal for dealing with systemic risk is misguided. To ensure that a risk monitor is accountable, the function should be located in a single entity. To supervise specific financial institutions and practices, however, Congress should look to the traditional functional regulators that already have the expertise necessary to understand and resolve issues specific to these institutions.
Mr. Pozen, chairman of MFS Investment Management, is the author of "Too Big to Save? How to Fix the U.S. Financial System," forthcoming from John Wiley.
A comparatively poor, high-immigration town across the border from super-violent Ciudad Juarez is one of the safest big cities in America
The El Paso Miracle. By Radley Balko
How can a comparatively poor, high-immigration town that sits across the border from super-violent Ciudad Juarez be one of the safest big cities in America?
Reason, July 6, 2009
By conventional wisdom, El Paso, Texas should be one of the scariest cities in America. In 2007, the city's poverty rate was a shade over 27 percent, more than twice the national average. Median household income was $35,600, well below the national average of $48,000. El Paso is three-quarters Hispanic, and more than a quarter of its residents are foreign-born. Given that it's nearly impossible for low-skilled immigrants to work in the United States legitimately, it's safe to say that a significant percentage of El Paso's foreign-born population is living here illegally.
El Paso also has some of the laxer gun control policies of any non-Texan big city in the country, mostly due to gun-friendly state law. And famously, El Paso sits just over the Rio Grande from one of the most violent cities in the western hemisphere, Ciudad Juarez, Mexico, home to a staggering 2,500 homicides in the last 18 months alone. A city of illegal immigrants with easy access to guns, just across the river from a metropolis ripped apart by brutal drug war violence. Should be a bloodbath, right?
Here's the surprise: There were just 18 murders in El Paso last year, in a city of 736,000 people. To compare, Baltimore, with 637,000 residents, had 234 killings. In fact, since the beginning of 2008, there were nearly as many El Pasoans murdered while visiting Juarez (20) than there were murdered in their home town (23).El Paso is among the safest big cities in America. For the better part of the last decade, only Honolulu has had a lower violent crime rate (El Paso slipped to third last year, behind New York). Men's Health magazine recently ranked El Paso the second "happiest" city in America, right after Laredo, Texas—another border town, where the Hispanic population is approaching 95 percent.
So how has this city of poor immigrants become such an anomaly? Actually, it may not be an anomaly at all. Many criminologists say El Paso isn't safe despite its high proportion of immigrants, it's safe because of them."If you want to find a safe city, first determine the size of the immigrant population," says Jack Levin, a criminologist at Northeastern University in Massachusetts. "
If the immigrant community represents a large proportion of the population, you're likely in one of the country's safer cities. San Diego, Laredo, El Paso—these cities are teeming with immigrants, and they're some of the safest places in the country."
If you regularly listen to talk radio, or get your crime news from anti-immigration pundits, all of this may come as a surprise. But it's not to many of those who study crime for a living. As the national immigration debate heated up in 2007, dozens of academics who specialize in the issue sent a letter (pdf) to then President George W. Bush and congressional leaders with the following point:
Numerous studies by independent researchers and government commissions over the past 100 years repeatedly and consistently have found that, in fact, immigrants are less likely to commit crimes or to be behind bars than are the native-born. This is true for the nation as a whole, as well as for cities with large immigrant populations such as Los Angeles, New York, Chicago, and Miami, and cities along the U.S.-Mexico border such as San Diego and El Paso.
One of the signatories was Rubén G. Rumbaut, a sociologist who studies immigration at the University of California, Irvine. Rumbaut recently presented a paper on immigration and crime to a Washington, D.C. conference sponsored by the Police Foundation. Rumbaut writes via email, "The evidence points overwhelmingly to the same conclusion: Rates of crime and conviction for undocumented immigrants are far below those for the native born, and that is especially the case for violent crimes, including murder."
Opponents of illegal immigration usually do little more than cite andecdotes attempting to link illegal immigration to violent crime. When they do try to use statistics, they come up short. Rep. Steve King (R-Iowa), for example, has perpetuated the popular myth that illegal immigrants murder 12 Americans per day, and kill another 13 by driving drunk. King says his figures come from a Government Accountability Office study he requested, which found that about 27 percent of inmates in the federal prison system are non-citizens. Colorado Media Matters looked into King's claim, and found his methodology lacking. King appears to have conjured his talking point by simply multiplying the annual number of murders and DWI fatalities in America by 27 percent. Of course, the GAO report only looked at federal prisons, not the state prisons and local jails where most convicted murderers and DWI offenders are kept. The Bureau of Justice Statistics puts the number of non-citizens (including legal immigrants) in state, local, and federal prisons and jails at about 6.4 percent (pdf). Of course, even that doesn't mean that non-citizens account for 6.4 percent of murders and DWI fatalities, only 6.4 percent of the overall inmate population.
What's happening with Latinos is true of most immigrant groups throughout U.S. history. "Overall, immigrants have a stake in this country, and they recognize it," Northeastern University's Levin says. "They're really an exceptional sort of American. They come here having left their family and friends back home. They come at some cost to themselves in terms of security and social relationships. They are extremely success-oriented, and adjust very well to the competitive circumstances in the United States." Economists Kristin Butcher and Anne Morrison Piehl argue that the very process of migration tends to select for people with a low potential for criminality.
Despite the high profile of polemicists such as Lou Dobbs and Michael Savage, America has been mostly welcoming to this latest immigration wave. You don't see "Latinos Need Not Apply" or "No Mexicans" signs posted on public buildings the way you did with the Italians and the Irish, two groups who actually were disproportionately likely to turn to crime. The implication makes sense: An immigrant group's propensity for criminality may be partly determined by how they're received in their new country.
"Look at Arab-Americans in the Midwest, especially in the Detroit area," Levin says. "The U.S. and Canada have traditionally been very willing to welcome and integrate them. They're a success story, with high average incomes and very little crime. That's not the case in Europe. Countries like France and Germany are openly hostile to Arabs. They marginalize them. And they've seen waves of crime and rioting."
El Paso may be a concentrated affirmation of that theory. In 2007 the Washington Post reported on city leaders' wariness of anti-immigration policies coming out of Washington. The city went to court (and lost) in an effort to prevent construction of the border fence within its boundaries, and local officials have resisted federal efforts to enlist local police for immigration enforcement, arguing that it would make illegals less likely to cooperate with police. "Most people in Washington really don't understand life on the border," El Paso Mayor John Cook told the Post. "They don't understand our philosophy here that the border joins us together, it doesn't separate us."Other mayors could learn something from Cook. El Paso's embrace of its immigrants might be a big reason why the low-income border town has remained one of the safest places in the country.
Radley Balko is a senior editor of Reason magazine.
How can a comparatively poor, high-immigration town that sits across the border from super-violent Ciudad Juarez be one of the safest big cities in America?
Reason, July 6, 2009
By conventional wisdom, El Paso, Texas should be one of the scariest cities in America. In 2007, the city's poverty rate was a shade over 27 percent, more than twice the national average. Median household income was $35,600, well below the national average of $48,000. El Paso is three-quarters Hispanic, and more than a quarter of its residents are foreign-born. Given that it's nearly impossible for low-skilled immigrants to work in the United States legitimately, it's safe to say that a significant percentage of El Paso's foreign-born population is living here illegally.
El Paso also has some of the laxer gun control policies of any non-Texan big city in the country, mostly due to gun-friendly state law. And famously, El Paso sits just over the Rio Grande from one of the most violent cities in the western hemisphere, Ciudad Juarez, Mexico, home to a staggering 2,500 homicides in the last 18 months alone. A city of illegal immigrants with easy access to guns, just across the river from a metropolis ripped apart by brutal drug war violence. Should be a bloodbath, right?
Here's the surprise: There were just 18 murders in El Paso last year, in a city of 736,000 people. To compare, Baltimore, with 637,000 residents, had 234 killings. In fact, since the beginning of 2008, there were nearly as many El Pasoans murdered while visiting Juarez (20) than there were murdered in their home town (23).El Paso is among the safest big cities in America. For the better part of the last decade, only Honolulu has had a lower violent crime rate (El Paso slipped to third last year, behind New York). Men's Health magazine recently ranked El Paso the second "happiest" city in America, right after Laredo, Texas—another border town, where the Hispanic population is approaching 95 percent.
So how has this city of poor immigrants become such an anomaly? Actually, it may not be an anomaly at all. Many criminologists say El Paso isn't safe despite its high proportion of immigrants, it's safe because of them."If you want to find a safe city, first determine the size of the immigrant population," says Jack Levin, a criminologist at Northeastern University in Massachusetts. "
If the immigrant community represents a large proportion of the population, you're likely in one of the country's safer cities. San Diego, Laredo, El Paso—these cities are teeming with immigrants, and they're some of the safest places in the country."
If you regularly listen to talk radio, or get your crime news from anti-immigration pundits, all of this may come as a surprise. But it's not to many of those who study crime for a living. As the national immigration debate heated up in 2007, dozens of academics who specialize in the issue sent a letter (pdf) to then President George W. Bush and congressional leaders with the following point:
Numerous studies by independent researchers and government commissions over the past 100 years repeatedly and consistently have found that, in fact, immigrants are less likely to commit crimes or to be behind bars than are the native-born. This is true for the nation as a whole, as well as for cities with large immigrant populations such as Los Angeles, New York, Chicago, and Miami, and cities along the U.S.-Mexico border such as San Diego and El Paso.
One of the signatories was Rubén G. Rumbaut, a sociologist who studies immigration at the University of California, Irvine. Rumbaut recently presented a paper on immigration and crime to a Washington, D.C. conference sponsored by the Police Foundation. Rumbaut writes via email, "The evidence points overwhelmingly to the same conclusion: Rates of crime and conviction for undocumented immigrants are far below those for the native born, and that is especially the case for violent crimes, including murder."
Opponents of illegal immigration usually do little more than cite andecdotes attempting to link illegal immigration to violent crime. When they do try to use statistics, they come up short. Rep. Steve King (R-Iowa), for example, has perpetuated the popular myth that illegal immigrants murder 12 Americans per day, and kill another 13 by driving drunk. King says his figures come from a Government Accountability Office study he requested, which found that about 27 percent of inmates in the federal prison system are non-citizens. Colorado Media Matters looked into King's claim, and found his methodology lacking. King appears to have conjured his talking point by simply multiplying the annual number of murders and DWI fatalities in America by 27 percent. Of course, the GAO report only looked at federal prisons, not the state prisons and local jails where most convicted murderers and DWI offenders are kept. The Bureau of Justice Statistics puts the number of non-citizens (including legal immigrants) in state, local, and federal prisons and jails at about 6.4 percent (pdf). Of course, even that doesn't mean that non-citizens account for 6.4 percent of murders and DWI fatalities, only 6.4 percent of the overall inmate population.
What's happening with Latinos is true of most immigrant groups throughout U.S. history. "Overall, immigrants have a stake in this country, and they recognize it," Northeastern University's Levin says. "They're really an exceptional sort of American. They come here having left their family and friends back home. They come at some cost to themselves in terms of security and social relationships. They are extremely success-oriented, and adjust very well to the competitive circumstances in the United States." Economists Kristin Butcher and Anne Morrison Piehl argue that the very process of migration tends to select for people with a low potential for criminality.
Despite the high profile of polemicists such as Lou Dobbs and Michael Savage, America has been mostly welcoming to this latest immigration wave. You don't see "Latinos Need Not Apply" or "No Mexicans" signs posted on public buildings the way you did with the Italians and the Irish, two groups who actually were disproportionately likely to turn to crime. The implication makes sense: An immigrant group's propensity for criminality may be partly determined by how they're received in their new country.
"Look at Arab-Americans in the Midwest, especially in the Detroit area," Levin says. "The U.S. and Canada have traditionally been very willing to welcome and integrate them. They're a success story, with high average incomes and very little crime. That's not the case in Europe. Countries like France and Germany are openly hostile to Arabs. They marginalize them. And they've seen waves of crime and rioting."
El Paso may be a concentrated affirmation of that theory. In 2007 the Washington Post reported on city leaders' wariness of anti-immigration policies coming out of Washington. The city went to court (and lost) in an effort to prevent construction of the border fence within its boundaries, and local officials have resisted federal efforts to enlist local police for immigration enforcement, arguing that it would make illegals less likely to cooperate with police. "Most people in Washington really don't understand life on the border," El Paso Mayor John Cook told the Post. "They don't understand our philosophy here that the border joins us together, it doesn't separate us."Other mayors could learn something from Cook. El Paso's embrace of its immigrants might be a big reason why the low-income border town has remained one of the safest places in the country.
Radley Balko is a senior editor of Reason magazine.
Obama v. the Tort Lawyers - The president's Auto Task Force worked hard to shield the new GM from jackpot justice
Obama v. the Tort Lawyers. WSJ Editorial
The president's Auto Task Force worked hard to shield the new GM from jackpot justice.
WSJ, Jul 09, 2009
Ask a CEO or small business owner to list his biggest economic problems, and near the top is always the depredations of the tort bar. Would you believe Uncle Sam feels the same way when he's the owner?
Apparently so, if we can judge from the sensible behavior of the Obama Administration's Auto Task Force. General Motors could emerge from bankruptcy as soon as today, leaving the federal government with a majority stake in the car maker. And it turns out the task force worked hard to shield the new GM from jackpot justice.
In its original reorganization plan, the Administration even proposed to leave behind in the old GM all tort claims arising from cars manufactured before bankruptcy. That would have meant that all past, present and future claims related to cars GM produced before June would have had next to no chance of meaningful recovery, as they would have had to stand in line with every other unsecured creditor of the bankrupt firm.
This was the arrangement approved by the courts in Chrysler's bankruptcy, and the task force sought to repeat the feat with GM. But 11 state Attorneys General and a group of tort lawyers cried foul and filed an objection to the bankruptcy plan with the court. In the end the Administration agreed to leave liability for future claims with the new company, while leaving behind current suits.
That's at least something. And the task force's attempt to shed these lawsuit liabilities shows that the feds recognize how expensive it can be to get caught in the sights of the tort lawyers. If only the Administration could see the issue with the same clarity when the targets of its trial-bar supporters are privately owned companies.
The president's Auto Task Force worked hard to shield the new GM from jackpot justice.
WSJ, Jul 09, 2009
Ask a CEO or small business owner to list his biggest economic problems, and near the top is always the depredations of the tort bar. Would you believe Uncle Sam feels the same way when he's the owner?
Apparently so, if we can judge from the sensible behavior of the Obama Administration's Auto Task Force. General Motors could emerge from bankruptcy as soon as today, leaving the federal government with a majority stake in the car maker. And it turns out the task force worked hard to shield the new GM from jackpot justice.
In its original reorganization plan, the Administration even proposed to leave behind in the old GM all tort claims arising from cars manufactured before bankruptcy. That would have meant that all past, present and future claims related to cars GM produced before June would have had next to no chance of meaningful recovery, as they would have had to stand in line with every other unsecured creditor of the bankrupt firm.
This was the arrangement approved by the courts in Chrysler's bankruptcy, and the task force sought to repeat the feat with GM. But 11 state Attorneys General and a group of tort lawyers cried foul and filed an objection to the bankruptcy plan with the court. In the end the Administration agreed to leave liability for future claims with the new company, while leaving behind current suits.
That's at least something. And the task force's attempt to shed these lawsuit liabilities shows that the feds recognize how expensive it can be to get caught in the sights of the tort lawyers. If only the Administration could see the issue with the same clarity when the targets of its trial-bar supporters are privately owned companies.
The Public Option Two-Step
The Public Option Two-Step. WSJ Editorial
Why Obama won't acknowledge the 'Trojan Horse' in the room.
WSJ, Jul 09, 2009
Americans unschooled in liberal health-care politics may have trouble deciphering the White House's conflicting proclamations this week about a new government insurance program for the middle class. Allow us to translate: President Obama loves this so-called public option, but he needs to sell it in a shroud of euphemism and the appearance of "compromise."
On Monday, chief of staff Rahm Emanuel told the Journal's Laura Meckler that the Administration would accept a health bill without a public option, as long as there is "a mechanism to keep the private insurers honest . . . The goal is non-negotiable; the path is." Progressives went bonkers, so on Tuesday Mr. Obama took a break from his Moscow trip to come out strongly in favor (again) of the new trillion-dollar entitlement. Meanwhile, New York's Chuck Schumer has been loudly suggesting that compromise is unnecessary given 60 Senate Democrats -- even as the likes of Ben Nelson, Evan Bayh, Joe Lieberman and Mary Landrieu back away.
The reason left-flank Democrats are so adamant about a public option is because they know it is an opening wedge for the government to dominate U.S. health care. That's also why the health-care industry, business groups, some moderates and most Republicans are opposed. Team Obama likes the policies of the first group but wants the political support of the second. And they're trying to solve this Newtonian problem -- irresistible forces, immovable objects -- by becoming less and less candid about the changes they really favor.
Mr. Emanuel echoes his boss and says a government health plan is needed to keep the private sector "honest," but then why don't we also need a state-run oil company, or nationalized grocery store chain? (Or auto maker? Never mind.) The real goal is to create a program backstopped by taxpayers that can exert political leverage over the market.
In its strongest version, the federal plan would receive direct cash subsidies, allowing it to undercut private insurers on consumer prices. This would quickly lead to "crowd out," the tendency of supposedly "free" public programs to displace private insurance. As a general rule, Congress has to spend $2 of taxpayer money to provide $1 in new benefits. More precise academic studies of expansions in Medicaid and the children's insurance program put the crowd-out effect somewhere between 25% and 60%.
Because this is so expensive, the public version Mr. Schumer favors would supposedly receive no special advantages. But this is meaningless when Democrats are planning to mandate the benefits that private insurers must provide, the patients they must accept, and how much they can charge. Oh, and a government plan would still have an implicit taxpayer guarantee a la Fannie Mae, giving it an inherent cost-of-capital advantage.
A few swing votes such as Maine's Olympia Snowe might accept a "trigger," in which a government-run plan would only come on line if certain targets aren't met, such as reducing costs. But that only delays the day of reckoning. Another pseudocompromise is North Dakota Democrat Kent Conrad's idea to give the states seed money to set up health insurance co-ops. These plans would still be run under a federal charter and managed by a federal board, so they merely split the public option into 50 pieces.
The other goal of a new public plan is to force doctors and hospitals to accept below-cost fees. This is how Medicare tries to control costs today, but it's like squeezing a balloon: Lower reimbursements mean that providers -- especially hospitals -- must recoup their costs elsewhere, either by shifting costs onto private payers or with more billable tests and procedures. The only way costs can conceivably be managed via price controls is if government is running the whole show, which naturally leads to severe restrictions on care while medical innovation withers.
A rhetorical gong Mr. Obama has been banging a lot lately is the idea that the people pointing all this out are liars. "When you hear the naysayers claim that I'm trying to bring about government-run health care," he said in one speech, "know this: They're not telling the truth." He adds that opposition to a public option isn't "based on any evidence" and that it is "illegitimate" to argue that his program is "is somehow a Trojan horse for a single-payer system."
So much for changing the political tone. Perhaps the President should check in with his more honest liberal allies. Jacob Hacker, now a professor of political science at Berkeley, came up with the intellectual architecture for the public option when he was a graduate student in the 1990s. "Someone once said to me, 'This is a Trojan horse for single payer,' and I said, 'Well, it's not a Trojan horse, right? It's just right there,'" Mr. Hacker explained in a speech last year. "I'm telling you, we're going to get there, over time, slowly."
The real question the political class is debating now is how slowly, or quickly, it takes to get there. And how they're best able to disguise this goal -- ideally as a "compromise."
Why Obama won't acknowledge the 'Trojan Horse' in the room.
WSJ, Jul 09, 2009
Americans unschooled in liberal health-care politics may have trouble deciphering the White House's conflicting proclamations this week about a new government insurance program for the middle class. Allow us to translate: President Obama loves this so-called public option, but he needs to sell it in a shroud of euphemism and the appearance of "compromise."
On Monday, chief of staff Rahm Emanuel told the Journal's Laura Meckler that the Administration would accept a health bill without a public option, as long as there is "a mechanism to keep the private insurers honest . . . The goal is non-negotiable; the path is." Progressives went bonkers, so on Tuesday Mr. Obama took a break from his Moscow trip to come out strongly in favor (again) of the new trillion-dollar entitlement. Meanwhile, New York's Chuck Schumer has been loudly suggesting that compromise is unnecessary given 60 Senate Democrats -- even as the likes of Ben Nelson, Evan Bayh, Joe Lieberman and Mary Landrieu back away.
The reason left-flank Democrats are so adamant about a public option is because they know it is an opening wedge for the government to dominate U.S. health care. That's also why the health-care industry, business groups, some moderates and most Republicans are opposed. Team Obama likes the policies of the first group but wants the political support of the second. And they're trying to solve this Newtonian problem -- irresistible forces, immovable objects -- by becoming less and less candid about the changes they really favor.
Mr. Emanuel echoes his boss and says a government health plan is needed to keep the private sector "honest," but then why don't we also need a state-run oil company, or nationalized grocery store chain? (Or auto maker? Never mind.) The real goal is to create a program backstopped by taxpayers that can exert political leverage over the market.
In its strongest version, the federal plan would receive direct cash subsidies, allowing it to undercut private insurers on consumer prices. This would quickly lead to "crowd out," the tendency of supposedly "free" public programs to displace private insurance. As a general rule, Congress has to spend $2 of taxpayer money to provide $1 in new benefits. More precise academic studies of expansions in Medicaid and the children's insurance program put the crowd-out effect somewhere between 25% and 60%.
Because this is so expensive, the public version Mr. Schumer favors would supposedly receive no special advantages. But this is meaningless when Democrats are planning to mandate the benefits that private insurers must provide, the patients they must accept, and how much they can charge. Oh, and a government plan would still have an implicit taxpayer guarantee a la Fannie Mae, giving it an inherent cost-of-capital advantage.
A few swing votes such as Maine's Olympia Snowe might accept a "trigger," in which a government-run plan would only come on line if certain targets aren't met, such as reducing costs. But that only delays the day of reckoning. Another pseudocompromise is North Dakota Democrat Kent Conrad's idea to give the states seed money to set up health insurance co-ops. These plans would still be run under a federal charter and managed by a federal board, so they merely split the public option into 50 pieces.
The other goal of a new public plan is to force doctors and hospitals to accept below-cost fees. This is how Medicare tries to control costs today, but it's like squeezing a balloon: Lower reimbursements mean that providers -- especially hospitals -- must recoup their costs elsewhere, either by shifting costs onto private payers or with more billable tests and procedures. The only way costs can conceivably be managed via price controls is if government is running the whole show, which naturally leads to severe restrictions on care while medical innovation withers.
A rhetorical gong Mr. Obama has been banging a lot lately is the idea that the people pointing all this out are liars. "When you hear the naysayers claim that I'm trying to bring about government-run health care," he said in one speech, "know this: They're not telling the truth." He adds that opposition to a public option isn't "based on any evidence" and that it is "illegitimate" to argue that his program is "is somehow a Trojan horse for a single-payer system."
So much for changing the political tone. Perhaps the President should check in with his more honest liberal allies. Jacob Hacker, now a professor of political science at Berkeley, came up with the intellectual architecture for the public option when he was a graduate student in the 1990s. "Someone once said to me, 'This is a Trojan horse for single payer,' and I said, 'Well, it's not a Trojan horse, right? It's just right there,'" Mr. Hacker explained in a speech last year. "I'm telling you, we're going to get there, over time, slowly."
The real question the political class is debating now is how slowly, or quickly, it takes to get there. And how they're best able to disguise this goal -- ideally as a "compromise."
Wednesday, July 8, 2009
Supply, Not Speculation, Responsible For Volatile Energy Prices
Supply, Not Speculation, Responsible For Volatile Energy Prices
Latest CFTC Action a Diversion from the Real Cause, Supply and Demand
Institute for Energy Research, Jul 08, 2009
WASHINGTON – This week, the Commodities Futures Trading Commission (CFTC) unveiled a new plan for government takeover of how energy commodities are traded, valued and sold. In response to these proposed actions, Thomas J. Pyle, president of the Institute for Energy Research (IER), issued the following statement:
“For politicians who consistently oppose responsible energy development here at home, the demonization of so-called speculators remains a popular tool for absolving themselves of responsibility for the historically high prices they helped create. But for those with a genuine interest in punishing speculators who make money when oil prices are high, no single action would hurt them more than flooding the market with new supply.
“The CFTC, at least as an institution, understands this fact, and has published dozens of studies over the past several years debunking the myth that market trading activity artificially inflates the price of energy. Unfortunately, it appears that the current head of the commission has not read much of its previous work, joining a long list of policymakers either unwilling or unable to understand the difference between cause and effect.
“Washington has kept billions of barrels of oil shale in the Inter-mountain West under lock-and-key. Billions of barrels of oil remain effectively off-limit in our deep oceans, especially in Alaska. And at the same time, Washington is working to halt American energy production even further through massive tax hikes, mandates, and job-killing regulations. Interested in understanding the real causes of high energy prices? Speculate no more.”
READ MORE:
- IER: Speculators Fixing Oil Prices? Don’t Bet On It
- IER: Question: How Many Times Has the FTC Found Evidence of Price Gouging by Energy Companies?
- Paul Krugman: “Speculative nonsense, once again … The mysticism over how speculation is supposed to drive prices drives me crazy, professionally … A futures contract is a bet about the future price. It has no, zero, nada direct effect on the spot price … As I’ve tried to point out, there just isn’t any evidence from the inventory data that this is happening.” (New York Times, 6/23/08)
- Krugman: “Hyperventilation over oil-market speculation is distracting us from the real issues.” (New York Times, 6/27/08)
- T. Boone Pickens: “A U.S. probe into whether speculators manipulated oil prices up to more than $135 a barrel is a ‘waste of time,‘ … ‘There’s nothing to it to start with,’ Pickens said.” (Bloomberg, 6/3/08)
- Pickens: “Speculation has become a ‘scapegoat’ for what is largely a supply and demand problem.” (Houston Chronicle, 7/10/08)
- Warren Buffett: “But it’s not speculation, it is supply and demand …” (CNBC’s Power Lunch, 6/25/08)
- Federal Reserve Chairman Ben Bernanke: “The most important cause [of high gas prices] is the global supply-and-demand balance.” (Congressional testimony, 7/16/08)
- Bernanke: “If financial speculation were pushing oil prices above the levels consistent with the fundamentals of supply and demand, we would expect inventories of crude oil and petroleum products to increase as supply rose and demand fell. But in fact, available data on oil inventories show notable declines over the past year.” (Congressional testimony, 7/15/09)
The economic reality of climate-change policy is sinking in at last in Europe
European Hot Air. WSJ Editorial
The economic reality of climate-change policy is sinking in at last.
WSJ, Jul 08, 2009
Climate change is set to figure prominently in this week's Group of Eight summit in Italy, but take any pronouncements about greenhouse-gas emissions targets with a grain of salt. While leaders may still think it's good politics to sing from the green hymnal, other realities are finally starting to sink in, especially in Old Europe. To wit: Restrictions on greenhouse-gas emissions involve huge costs for uncertain gains and are just what economies in recession don't need.
Concerns about high costs and lost jobs have already threatened carbon-emissions control plans in Australia and New Zealand, and to make sure cap-and-trade would pass in the U.S. House of Representatives, supporters had to push through the legislation before anyone could read it. The fraying of the anti-carbon consensus in Western Europe is especially striking. Polls consistently show that voters in most Western European countries support attempts to ameliorate climate change, at least in the abstract. The EU implemented a cap-and-trade Emissions Trading Scheme in 2005.
But that enthusiasm may be reaching its limit. Governments in industry-heavy countries are now less willing to sacrifice jobs for cooler temperatures. Germany's generally environmentalist Chancellor Angela Merkel insisted on exemptions for her country's industry from December's EU climate package, which pledged to reduce carbon emissions by 20% below 1990 levels by 2020. Germany also plans to build several dozen coal-fired power plants in the next few years.
Italy insisted on a clause in the December climate deal that requires the EU to renegotiate its climate policy after the United Nations summit in Copenhagen later this year. That amounts to a veto since China and India aren't expected to sign up for aggressive emissions targets; any renegotiated EU deal is likely to contain even more loopholes and exemptions to keep from denting European competitiveness.
Just as telling, Europe has been at best half-hearted in meeting its emissions-reduction targets under the 1997 Kyoto Protocol. To the extent Europe appears on track to meet its targets, it's largely because warmer weather and higher market prices for energy have driven consumption down.
Credit a deteriorating economy for this about-face. Businesses and unions finally are starting to speak out against intrusive and expensive emissions regulations. In December, Phillipe Varin, chief executive of Corus, Europe's second-largest steel producer, told the London Independent that the cost of carbon credits and new technologies needed to reduce emissions would destroy European steel production, forcing manufacturing overseas.
Jaroslaw Grzesik, deputy head of energy at Poland's Solidarity trade union said last month that the union estimated the EU's climate policy would cost 800,000 European jobs. Before the December negotiations, the London-based think tank Open Europe estimated the EU climate package would cost governments, businesses and householders in the EU-25 more than €73 billion ($102 billion) a year until 2020. No wonder leaders decided to water it down.
Meanwhile, the supposed economic benefits of climate-change amelioration are evaporating. In Germany, government subsidies for installing solar panels -- and, it was presumed, thereby creating domestic manufacturing jobs -- backfired when it turned out that it was cheaper to make solar panels in China. A recent paper by Gabriel Calzada Álvarez, an economics professor at Universidad Rey Juan Carlos, said that since Spain starting investing in "green jobs" policies in 2000, the country has lost 110,500 jobs in other parts of the economy. That amounts to 2.2 jobs lost for every new "green job" created.
This has politicians worried. They might have been willing to sacrifice a few jobs when they signed Kyoto in 1997. But economic times were flush then. Now a global slowdown is forcing a rethink on whether emissions control is worth the cost. With the scientific debate about the causes, effects and solutions of climate change growing more vigorous, that's a question worth asking.
Despite all the backtracking in practice, climate rhetoric is still alive and well. Sweden, which assumed the EU presidency last week, promises more action on emissions control. Gordon Brown, Nicolas Sarkozy and other leaders continue to talk a good game. Mr. Brown has even proposed a $100 billion-a-year fund to help countries like China and India clean up their emissions acts. Good luck getting that passed in the current fiscal and economic environment.
In other words, Western European leaders are the latest to discover that climate-change talk is cheap, but carbon-emissions regulation is expensive. That might be bad news for green activists, but it's very good news for Europeans worried about their jobs and their economy.
The economic reality of climate-change policy is sinking in at last.
WSJ, Jul 08, 2009
Climate change is set to figure prominently in this week's Group of Eight summit in Italy, but take any pronouncements about greenhouse-gas emissions targets with a grain of salt. While leaders may still think it's good politics to sing from the green hymnal, other realities are finally starting to sink in, especially in Old Europe. To wit: Restrictions on greenhouse-gas emissions involve huge costs for uncertain gains and are just what economies in recession don't need.
Concerns about high costs and lost jobs have already threatened carbon-emissions control plans in Australia and New Zealand, and to make sure cap-and-trade would pass in the U.S. House of Representatives, supporters had to push through the legislation before anyone could read it. The fraying of the anti-carbon consensus in Western Europe is especially striking. Polls consistently show that voters in most Western European countries support attempts to ameliorate climate change, at least in the abstract. The EU implemented a cap-and-trade Emissions Trading Scheme in 2005.
But that enthusiasm may be reaching its limit. Governments in industry-heavy countries are now less willing to sacrifice jobs for cooler temperatures. Germany's generally environmentalist Chancellor Angela Merkel insisted on exemptions for her country's industry from December's EU climate package, which pledged to reduce carbon emissions by 20% below 1990 levels by 2020. Germany also plans to build several dozen coal-fired power plants in the next few years.
Italy insisted on a clause in the December climate deal that requires the EU to renegotiate its climate policy after the United Nations summit in Copenhagen later this year. That amounts to a veto since China and India aren't expected to sign up for aggressive emissions targets; any renegotiated EU deal is likely to contain even more loopholes and exemptions to keep from denting European competitiveness.
Just as telling, Europe has been at best half-hearted in meeting its emissions-reduction targets under the 1997 Kyoto Protocol. To the extent Europe appears on track to meet its targets, it's largely because warmer weather and higher market prices for energy have driven consumption down.
Credit a deteriorating economy for this about-face. Businesses and unions finally are starting to speak out against intrusive and expensive emissions regulations. In December, Phillipe Varin, chief executive of Corus, Europe's second-largest steel producer, told the London Independent that the cost of carbon credits and new technologies needed to reduce emissions would destroy European steel production, forcing manufacturing overseas.
Jaroslaw Grzesik, deputy head of energy at Poland's Solidarity trade union said last month that the union estimated the EU's climate policy would cost 800,000 European jobs. Before the December negotiations, the London-based think tank Open Europe estimated the EU climate package would cost governments, businesses and householders in the EU-25 more than €73 billion ($102 billion) a year until 2020. No wonder leaders decided to water it down.
Meanwhile, the supposed economic benefits of climate-change amelioration are evaporating. In Germany, government subsidies for installing solar panels -- and, it was presumed, thereby creating domestic manufacturing jobs -- backfired when it turned out that it was cheaper to make solar panels in China. A recent paper by Gabriel Calzada Álvarez, an economics professor at Universidad Rey Juan Carlos, said that since Spain starting investing in "green jobs" policies in 2000, the country has lost 110,500 jobs in other parts of the economy. That amounts to 2.2 jobs lost for every new "green job" created.
This has politicians worried. They might have been willing to sacrifice a few jobs when they signed Kyoto in 1997. But economic times were flush then. Now a global slowdown is forcing a rethink on whether emissions control is worth the cost. With the scientific debate about the causes, effects and solutions of climate change growing more vigorous, that's a question worth asking.
Despite all the backtracking in practice, climate rhetoric is still alive and well. Sweden, which assumed the EU presidency last week, promises more action on emissions control. Gordon Brown, Nicolas Sarkozy and other leaders continue to talk a good game. Mr. Brown has even proposed a $100 billion-a-year fund to help countries like China and India clean up their emissions acts. Good luck getting that passed in the current fiscal and economic environment.
In other words, Western European leaders are the latest to discover that climate-change talk is cheap, but carbon-emissions regulation is expensive. That might be bad news for green activists, but it's very good news for Europeans worried about their jobs and their economy.
Tuesday, July 7, 2009
We Must Address Oil-Market Volatility
We Must Address Oil-Market Volatility. By GORDON BROWN and NICOLAS SARKOZY
Erratic price movements in such an important commodity are cause for alarm.
WSJ, Jul 08, 2009
For two years the price of oil has been dangerously volatile, seemingly defying the accepted rules of economics. First it rose by more than $80 a barrel, then fell rapidly by more than $100, before doubling to its current level of around $70. In that time, however, there has been no serious interruption of supply. Despite ongoing conflict in the Middle East, oil has continued to flow. And although the recession and price rises have had some effect on consumption, medium-term forecasts for demand are robust.
The oil market is complex, but such erratic price movement in one of the world's most crucial commodities is a growing cause for alarm. The surge in prices last year gravely damaged the global economy and contributed to the downturn. The risk now is that a new period of instability could undermine confidence just as we are pushing for recovery.
Governments can no longer stand idle. Volatility damages both consumers and producers. Those who rely on oil and have no substitutes readily available have been the victims of extreme price fluctuations beyond their control -- and apparently beyond reason. Importing countries, especially in the developing world, find themselves committed to big subsidies to shield domestic consumers from potentially devastating price shifts.
In Britain and France we also know how the price of crude dictates the price of petrol at filling stations and the effect on families and businesses. For countries heavily reliant on income from oil exports, the windfalls from brief price surges are offset by the consequent difficulties of planning national budgets and investment strategies.
Extreme fluctuations in price are encouraging energy users to reconsider their reliance on oil. The International Energy Agency, for instance, has cut its long-term forecast of oil consumption by almost a quarter. Producers are in danger of finding that their key national resource loses both its market and its long-term value.
More immediately, we as consumers must recognize that abnormally low oil prices, while giving short-term benefits, do long-term damage. They diminish incentives to invest, not only in oil production but also, in our own countries, in energy savings and carbon-free alternatives. As such, future problems are stored up in the form of shortages, greater dependence and an acceleration of global warming. Upstream investment worldwide is already down by 20% over the past year. And with some sources of supply in decline, such as Alaska and the North Sea, the resource we will all need as the economy recovers is being developed in neither an adequate nor a timely way.
There are no easy solutions and any progress must be made with the full co-operation of the world community and the oil industry. On Monday we used the U.K.-France summit in Evian to explore a way forward. We hope our ideas inform meetings both today, at the Group of Eight Summit in Italy, and in future talks between world leaders.
We are committed to intensifying the ongoing dialogue between producers and consumers through the International Energy Forum. Saudi Arabia and OPEC have expressed interest in this and we believe producers and consumers are closer now than at any time in the past 30 years to recognizing the huge common interest in giving clear and stable perspectives to long-term investment.
At the London Energy Meeting last December, all participants agreed that still closer co-ordination between the IEA, OPEC and the IEF was necessary to develop a shared analysis of future demand and supply trends. The Expert Group of the IEF should use this work to arrive at a common long-term view on what price range would be consistent with the fundamentals.
The experts should also consider any measures that could be put in place to reduce volatility. Discussions should look again into the question of whether trading activity is amplifying erratic price movements.
We therefore call upon the International Organization of Securities Regulators to consider improving transparency and supervision of the oil futures markets to reduce damaging speculation and to take forward the recommendations already made by its taskforce in March. This would serve the interests of orderly and adequate investment in future supplies. Volatility and opacity are the enemies of growth. In the absence of transparency, consumers and importing nations are losing confidence in oil. Climate change is also altering government attitudes to energy.
The world's economy is still reliant on secure supplies at prices that are not so high as to destroy the prospects of economic growth but not so low as to lead to a slump in investment, as happened in the 1990s.
It is a thorny issue, but complex markets need not be volatile or damaging to the wider global economy. We are convinced that producers and consumers alike would benefit from greater transparency, greater stability and greater consensus on the market fundamentals. After two years of destructive volatility the time has come for both sides to work together to build on this common interest.
Mr. Brown is prime minister of the United Kingdom. Mr. Sarkozy is president of France.
Erratic price movements in such an important commodity are cause for alarm.
WSJ, Jul 08, 2009
For two years the price of oil has been dangerously volatile, seemingly defying the accepted rules of economics. First it rose by more than $80 a barrel, then fell rapidly by more than $100, before doubling to its current level of around $70. In that time, however, there has been no serious interruption of supply. Despite ongoing conflict in the Middle East, oil has continued to flow. And although the recession and price rises have had some effect on consumption, medium-term forecasts for demand are robust.
The oil market is complex, but such erratic price movement in one of the world's most crucial commodities is a growing cause for alarm. The surge in prices last year gravely damaged the global economy and contributed to the downturn. The risk now is that a new period of instability could undermine confidence just as we are pushing for recovery.
Governments can no longer stand idle. Volatility damages both consumers and producers. Those who rely on oil and have no substitutes readily available have been the victims of extreme price fluctuations beyond their control -- and apparently beyond reason. Importing countries, especially in the developing world, find themselves committed to big subsidies to shield domestic consumers from potentially devastating price shifts.
In Britain and France we also know how the price of crude dictates the price of petrol at filling stations and the effect on families and businesses. For countries heavily reliant on income from oil exports, the windfalls from brief price surges are offset by the consequent difficulties of planning national budgets and investment strategies.
Extreme fluctuations in price are encouraging energy users to reconsider their reliance on oil. The International Energy Agency, for instance, has cut its long-term forecast of oil consumption by almost a quarter. Producers are in danger of finding that their key national resource loses both its market and its long-term value.
More immediately, we as consumers must recognize that abnormally low oil prices, while giving short-term benefits, do long-term damage. They diminish incentives to invest, not only in oil production but also, in our own countries, in energy savings and carbon-free alternatives. As such, future problems are stored up in the form of shortages, greater dependence and an acceleration of global warming. Upstream investment worldwide is already down by 20% over the past year. And with some sources of supply in decline, such as Alaska and the North Sea, the resource we will all need as the economy recovers is being developed in neither an adequate nor a timely way.
There are no easy solutions and any progress must be made with the full co-operation of the world community and the oil industry. On Monday we used the U.K.-France summit in Evian to explore a way forward. We hope our ideas inform meetings both today, at the Group of Eight Summit in Italy, and in future talks between world leaders.
We are committed to intensifying the ongoing dialogue between producers and consumers through the International Energy Forum. Saudi Arabia and OPEC have expressed interest in this and we believe producers and consumers are closer now than at any time in the past 30 years to recognizing the huge common interest in giving clear and stable perspectives to long-term investment.
At the London Energy Meeting last December, all participants agreed that still closer co-ordination between the IEA, OPEC and the IEF was necessary to develop a shared analysis of future demand and supply trends. The Expert Group of the IEF should use this work to arrive at a common long-term view on what price range would be consistent with the fundamentals.
The experts should also consider any measures that could be put in place to reduce volatility. Discussions should look again into the question of whether trading activity is amplifying erratic price movements.
We therefore call upon the International Organization of Securities Regulators to consider improving transparency and supervision of the oil futures markets to reduce damaging speculation and to take forward the recommendations already made by its taskforce in March. This would serve the interests of orderly and adequate investment in future supplies. Volatility and opacity are the enemies of growth. In the absence of transparency, consumers and importing nations are losing confidence in oil. Climate change is also altering government attitudes to energy.
The world's economy is still reliant on secure supplies at prices that are not so high as to destroy the prospects of economic growth but not so low as to lead to a slump in investment, as happened in the 1990s.
It is a thorny issue, but complex markets need not be volatile or damaging to the wider global economy. We are convinced that producers and consumers alike would benefit from greater transparency, greater stability and greater consensus on the market fundamentals. After two years of destructive volatility the time has come for both sides to work together to build on this common interest.
Mr. Brown is prime minister of the United Kingdom. Mr. Sarkozy is president of France.
"New START": The Chinese and Iranians must like what they see; not so Japan
A Troubling START. WSJ Editorial
The Chinese and Iranians must like what they see; not so Japan.
WSJ, Jul 08, 2009
President Obama leaves Moscow today happy to tout a breakthrough on arms control. The "joint understanding" with Russia pledges to replace the 1991 Strategic Arms Reduction Treaty with a new agreement -- the niftily named "New START" -- by year's end. This "moral" example, we are supposed to believe, will eventually lead to the nuclear-free world the President first promised this spring in Prague.
Before Nirvana renders the American nuclear umbrella obsolete, however, the Administration could clarify some details for us mere mortals. For starters, at what point do the reductions in the nuclear arsenal make the U.S. and our allies less safe? Why make such deep cuts in the number of strategic bombers and submarines that we're likely to need in any future conventional conflict? And, as long as we're talking details, shouldn't the Senate get a long look at a deal being rushed together to meet the artificial deadline of START's expiration in December?
The Administration's soaring rhetoric about denuclearization seems intended to blind everyone to these questions. In his comments in Moscow, Mr. Obama emphasized that Russia and the U.S. will set an example that the rest of world will follow.
"It's naïve for us to think . . . that we can grow our nuclear stockpiles," he said, "and that in that environment we're going to be able to pressure countries like Iran and North Korea not to pursue nuclear weapons themselves." Call us realists or even cynics, but we doubt Mr. Obama's performance in Moscow will matter at all to Iranian and North Korean nuclear ambitions. These and other rogues want the bomb to project their own power, not to defend against ours.
Some argue that this deal-making is nothing much because both sides will retain huge arsenals. Neither country actually has any desire, or in the Russian case ability, to grow its stockpile, so the new START treaty is said to be mostly for diplomatic show. But the Russians, though greatly diminished in global status, remain savvy negotiators, and Vladimir Putin has tried for most of this decade to cut the U.S. down to his size. "New START" could help him do it.
Monday's understanding gives negotiators the mandate to reduce the number of strategic warheads to between 1,500-1,675, down from the maximum allowable today of 2,200. More important are the strategic delivery vehicles, which will fall to a range of 500-1100. The current START treaty, which the Obama Administration chose to replace rather than simply extend, puts the ceiling at 1,600.
The Russians are already phasing out some of their delivery hardware, such as missiles and bombers, and they wouldn't mind getting double credit for it in a new treaty. The wide range noted in the "understanding" was inserted after Russia demanded steeper cuts than initially envisioned by Washington. Russian officials cite worries the U.S. could more easily retrofit missiles with new warheads, if necessary. As of January, America said it had about 1,200 delivery systems and Russia reported about 800.
Mr. Obama's negotiators would be wise to be wary. The odds that America will take part in a nuclear war are low. But the long-range bombers, submarines and missiles under discussion are an important part of the far superior American conventional arsenal. No wonder the Russians are so eager to have America reduce those numbers.
China, too, must be rooting for a lower floor. As delivery vehicle and warhead numbers go down, the U.S. will at some point approach strategic parity with rising powers such as China, which have a smaller nuclear arsenal and weaker army. A reduced U.S. posture may also give our allies -- Japan and South Korea in Asia, or Turkey in NATO -- cause to doubt America's commitment to a large and credible enough nuclear arsenal able to protect them. They will then seek to develop their own atomic bombs, however quietly. The Obama Administration's flagging commitment to missile defense, which is being cut in the 2010 budget, further undermines America's ability to defend itself and its allies from nuclear attack.
It is especially strange that the Administration has taken these steps before completing the review of nuclear strategy mandated by Congress. But then, the Administration may also do a run around the Senate (and the Constitution) with the new START treaty -- naturally, for the higher cause of peace in our time. The White House Coordinator for Weapons of Mass Destruction, Security and Arms Control, Gary Samore, said on Sunday that the Administration may have to enact certain provisions of the treaty by executive order and on "a provisional basis" to meet the December deadline.
Considering all of the other unanswered questions about the Administration's nuclear posture, an agreement with Russia that would lock the U.S. into steep cuts in its defenses needs far more public and Senate scrutiny than it is receiving.
The Chinese and Iranians must like what they see; not so Japan.
WSJ, Jul 08, 2009
President Obama leaves Moscow today happy to tout a breakthrough on arms control. The "joint understanding" with Russia pledges to replace the 1991 Strategic Arms Reduction Treaty with a new agreement -- the niftily named "New START" -- by year's end. This "moral" example, we are supposed to believe, will eventually lead to the nuclear-free world the President first promised this spring in Prague.
Before Nirvana renders the American nuclear umbrella obsolete, however, the Administration could clarify some details for us mere mortals. For starters, at what point do the reductions in the nuclear arsenal make the U.S. and our allies less safe? Why make such deep cuts in the number of strategic bombers and submarines that we're likely to need in any future conventional conflict? And, as long as we're talking details, shouldn't the Senate get a long look at a deal being rushed together to meet the artificial deadline of START's expiration in December?
The Administration's soaring rhetoric about denuclearization seems intended to blind everyone to these questions. In his comments in Moscow, Mr. Obama emphasized that Russia and the U.S. will set an example that the rest of world will follow.
"It's naïve for us to think . . . that we can grow our nuclear stockpiles," he said, "and that in that environment we're going to be able to pressure countries like Iran and North Korea not to pursue nuclear weapons themselves." Call us realists or even cynics, but we doubt Mr. Obama's performance in Moscow will matter at all to Iranian and North Korean nuclear ambitions. These and other rogues want the bomb to project their own power, not to defend against ours.
Some argue that this deal-making is nothing much because both sides will retain huge arsenals. Neither country actually has any desire, or in the Russian case ability, to grow its stockpile, so the new START treaty is said to be mostly for diplomatic show. But the Russians, though greatly diminished in global status, remain savvy negotiators, and Vladimir Putin has tried for most of this decade to cut the U.S. down to his size. "New START" could help him do it.
Monday's understanding gives negotiators the mandate to reduce the number of strategic warheads to between 1,500-1,675, down from the maximum allowable today of 2,200. More important are the strategic delivery vehicles, which will fall to a range of 500-1100. The current START treaty, which the Obama Administration chose to replace rather than simply extend, puts the ceiling at 1,600.
The Russians are already phasing out some of their delivery hardware, such as missiles and bombers, and they wouldn't mind getting double credit for it in a new treaty. The wide range noted in the "understanding" was inserted after Russia demanded steeper cuts than initially envisioned by Washington. Russian officials cite worries the U.S. could more easily retrofit missiles with new warheads, if necessary. As of January, America said it had about 1,200 delivery systems and Russia reported about 800.
Mr. Obama's negotiators would be wise to be wary. The odds that America will take part in a nuclear war are low. But the long-range bombers, submarines and missiles under discussion are an important part of the far superior American conventional arsenal. No wonder the Russians are so eager to have America reduce those numbers.
China, too, must be rooting for a lower floor. As delivery vehicle and warhead numbers go down, the U.S. will at some point approach strategic parity with rising powers such as China, which have a smaller nuclear arsenal and weaker army. A reduced U.S. posture may also give our allies -- Japan and South Korea in Asia, or Turkey in NATO -- cause to doubt America's commitment to a large and credible enough nuclear arsenal able to protect them. They will then seek to develop their own atomic bombs, however quietly. The Obama Administration's flagging commitment to missile defense, which is being cut in the 2010 budget, further undermines America's ability to defend itself and its allies from nuclear attack.
It is especially strange that the Administration has taken these steps before completing the review of nuclear strategy mandated by Congress. But then, the Administration may also do a run around the Senate (and the Constitution) with the new START treaty -- naturally, for the higher cause of peace in our time. The White House Coordinator for Weapons of Mass Destruction, Security and Arms Control, Gary Samore, said on Sunday that the Administration may have to enact certain provisions of the treaty by executive order and on "a provisional basis" to meet the December deadline.
Considering all of the other unanswered questions about the Administration's nuclear posture, an agreement with Russia that would lock the U.S. into steep cuts in its defenses needs far more public and Senate scrutiny than it is receiving.
McNamara and the Liberals' War
McNamara and the Liberals' War. WSJ Editorial
He deserves better from his liberal critics, since his real misfortune was to be the architect of their failed visions.
WSJ, Jul 08, 2009
Robert McNamara died on Monday at age 93 like he lived most of the latter half of his life, scorned and derided by his former liberal allies for refusing to turn against the Vietnam War as early as they did. As the New York Times put it in a page-one obituary headline, McNamara was the "Architect of Futile War."
In historical fact, Vietnam was the liberals' war, begun by JFK, escalated by LBJ, and cheered on for years by giants of the American left before they turned against it. In his 1995 memoir, McNamara apologized for the war. But he probably sealed his reputation on the left by also quoting the New York Times and liberal antiwar reporter David Halberstam for having opposed U.S. withdrawal as late as 1965. "To be fair to Halberstam," McNamara wrote dryly, "the hawkish views he was expressing reflected the opinion of the majority of journalists at the time."
Like JFK and Averell Harriman, Halberstam also supported the 1963 coup against South Vietnamese President Ngo Dinh Diem, a misguided foray into Vietnamese politics that led to deeper U.S. involvement. Only later as the war dragged on did these liberals lose their nerve, and they never forgave McNamara for fighting on -- even years later after he finally agreed they were right.
As with Vietnam, American liberals also turned against the Iraq war after first supporting it. The crucial difference is that President Bush never lost his nerve. Despite the difficulties after the 2003 invasion and the terrible setbacks of 2006, he replaced his generals, sent more troops and embraced a new counterinsurgency strategy. The insurgency was defeated, and Mr. Bush left office with Iraq as a united, self-governing ally.
Despite the fall of Saigon in 1975, Vietnam was not a "futile" conflict. The U.S. effort bought time for Thailand and other nations in East and Southeast Asia to develop in relative peace. Their prosperity, in turn, showed the world the difference between the fruits of capitalism and the poverty of socialism. Like the Korean War, Vietnam needs to be understood as an honorable battle fought to a draw in America's longer and victorious Cold War.
McNamara was a patriot whose faith in rationalism and bureaucratic planning led him to overconfidence both in the war on poverty during his years at the World Bank and at the Pentagon during Vietnam. But he deserves better from his liberal critics, since his real misfortune was to be the architect of their failed visions.
He deserves better from his liberal critics, since his real misfortune was to be the architect of their failed visions.
WSJ, Jul 08, 2009
Robert McNamara died on Monday at age 93 like he lived most of the latter half of his life, scorned and derided by his former liberal allies for refusing to turn against the Vietnam War as early as they did. As the New York Times put it in a page-one obituary headline, McNamara was the "Architect of Futile War."
In historical fact, Vietnam was the liberals' war, begun by JFK, escalated by LBJ, and cheered on for years by giants of the American left before they turned against it. In his 1995 memoir, McNamara apologized for the war. But he probably sealed his reputation on the left by also quoting the New York Times and liberal antiwar reporter David Halberstam for having opposed U.S. withdrawal as late as 1965. "To be fair to Halberstam," McNamara wrote dryly, "the hawkish views he was expressing reflected the opinion of the majority of journalists at the time."
Like JFK and Averell Harriman, Halberstam also supported the 1963 coup against South Vietnamese President Ngo Dinh Diem, a misguided foray into Vietnamese politics that led to deeper U.S. involvement. Only later as the war dragged on did these liberals lose their nerve, and they never forgave McNamara for fighting on -- even years later after he finally agreed they were right.
As with Vietnam, American liberals also turned against the Iraq war after first supporting it. The crucial difference is that President Bush never lost his nerve. Despite the difficulties after the 2003 invasion and the terrible setbacks of 2006, he replaced his generals, sent more troops and embraced a new counterinsurgency strategy. The insurgency was defeated, and Mr. Bush left office with Iraq as a united, self-governing ally.
Despite the fall of Saigon in 1975, Vietnam was not a "futile" conflict. The U.S. effort bought time for Thailand and other nations in East and Southeast Asia to develop in relative peace. Their prosperity, in turn, showed the world the difference between the fruits of capitalism and the poverty of socialism. Like the Korean War, Vietnam needs to be understood as an honorable battle fought to a draw in America's longer and victorious Cold War.
McNamara was a patriot whose faith in rationalism and bureaucratic planning led him to overconfidence both in the war on poverty during his years at the World Bank and at the Pentagon during Vietnam. But he deserves better from his liberal critics, since his real misfortune was to be the architect of their failed visions.
Ethanol and biofuels get 190 times as much subsidies as natural gas and petroleum liquids
So Much for 'Energy Independence.' By ROBERT BRYCE
The Wall Street Journal, Jul 07, 2009, p A15
Whenever you read about ethanol, remember these numbers: 98 and 190.
They offer an essential insight into U.S. energy politics and the debate over cap-and-trade legislation that recently passed the House. Here is what the numbers mean: The U.S. gets about 98 times as much energy from natural gas and oil as it does from ethanol and biofuels. And measured on a per-unit-of-energy basis, Congress lavishes ethanol and biofuels with subsidies that are 190 times as large as those given to oil and gas.
Those numbers come from an April 2008 report by the Energy Information Administration: "Federal Financial Interventions and Subsidies in Energy Markets 2007." Table ES6 lists domestic energy sources that get subsidies. In 2007, the U.S. consumed nearly 55.8 quadrillion British Thermal Units (BTUs), or about 9.6 billion barrels of oil equivalent, in natural gas and oil. That's about 98 times as much energy as the U.S. consumed in ethanol and biofuels, which totaled 98 million barrels of oil equivalent.
Meanwhile, ethanol and biofuels are getting subsidies of $5.72 per million BTU. That's 190 times as much as natural gas and petroleum liquids, which get subsidies of $0.03 per million BTU.
The report also shows that the ethanol and biofuels industry are more heavily subsidized -- in total dollar terms -- than the oil and gas industry. In 2007, the ethanol and biofuels industries got $3.25 billion in subsidies. The oil and gas industry got $1.92 billion.
Despite these subsidies, the ethanol lobby is queuing up for more favors. And they are doing so at the very same time that the Obama administration and Congress are pushing to eliminate the relatively modest subsidies for domestic oil and gas producers. Democrats want to cut drilling subsidies while simultaneously trumpeting their desire for "energy independence."
The cap-and-trade bill passed by the House aims to "create energy jobs" and "achieve energy independence." Meanwhile, Democrats are calling to eliminate drilling subsidies that have encouraged advances in technology that have opened up vast new U.S. energy sources. These advances have made it profitable to extract natural gas from the Barnett Shale deposit in Texas and the Marcellus in Pennsylvania -- deposits once thought too expensive to tap.
President Barack Obama's 2010 budget calls for the elimination of two tax breaks: the expensing of "intangible drilling costs" (such as wages, fuel and pipe), which allows energy companies to deduct the bulk of their expenses for drilling new wells; and the allowance for percentage depletion, which allows well owners to deduct a portion of the value of the production from their wells. Those breaks provide the bulk of the $1.92 billion in oil and gas subsidies.
In May, Mr. Obama called the tax breaks for the oil and gas industry "unjustifiable loopholes" that do "little to incentivize production or reduce energy prices."
That's flat not true. The deduction for intangible drilling costs encourages energy companies to plow huge amounts of capital into more drilling. And that drilling has resulted in unprecedented increases in natural gas production and potential.
An April Department of Energy report estimated that the newly available shale resources total 649 trillion cubic feet of gas. That's the energy equivalent of 118.3 billion barrels of oil, or slightly more than the proven oil reserves of Iraq.
Eliminating the tax breaks for drilling will make natural gas more expensive. Tudor, Pickering, Holt & Co., a Houston-based investment-banking firm, estimates that eliminating the intangible drilling cost provision could increase U.S. natural gas prices by 50 cents per thousand cubic feet. Why? Because without the tax break, fewer wells will be drilled and less gas will be produced. The U.S. consumes about 23 trillion cubic feet of gas per year. Simple arithmetic shows that eliminating the drilling subsidies that cost taxpayers less than $2 billion per year could result in an increased cost to consumers of $11.5 billion per year in the form of higher natural gas prices.
Amid all this, Growth Energy, an ethanol industry front-group, is pushing the Environmental Protection Agency to adopt a proposal that would increase the amount of ethanol blended into gasoline from the current maximum of 10% to as much as 15%.
That increase would be a gift to corn ethanol producers who have never been able to make a go of it despite decades of federal subsidies and mandates. Growth Energy is also pushing the change even though only about seven million of the 250 million motor vehicles now on U.S. roads are designed to run on fuel containing more than 10% ethanol.
There is plenty of evidence to suggest that gasoline with 10% ethanol is already doing real harm. In January, Toyota announced that it was recalling 214,570 Lexus vehicles. The reason: The company found that "ethanol fuels with a low moisture content will corrode the internal surface of the fuel rails." (The rails carry fuel to the engine injectors.) Furthermore, there have been numerous media reports that ethanol-blended gasoline is fouling engines in lawn mowers, weed whackers and boats.
Lawyers in Florida have already sued a group of oil companies for damage allegedly done to boat fuel tanks and engines from ethanol fuel. They are claiming that consumers should be warned about the risk of using the fuel in their boats.
There is also corn ethanol's effect on food prices. Over the past two years at least a dozen studies have linked subsidies that have increased the production of corn ethanol with higher food prices.
Mr. Obama has been pro-ethanol and anti-oil for years. But he and his allies on Capitol Hill should understand that removing drilling incentives will mean less drilling, which will mean less domestic production and more imports of both oil and natural gas.
That's hardly a recipe for "energy independence."
Mr. Bryce is the managing editor of Energy Tribune. His latest book is "Gusher of Lies: The Dangerous Delusions of 'Energy Independence'" (PublicAffairs, 2008).
The Wall Street Journal, Jul 07, 2009, p A15
Whenever you read about ethanol, remember these numbers: 98 and 190.
They offer an essential insight into U.S. energy politics and the debate over cap-and-trade legislation that recently passed the House. Here is what the numbers mean: The U.S. gets about 98 times as much energy from natural gas and oil as it does from ethanol and biofuels. And measured on a per-unit-of-energy basis, Congress lavishes ethanol and biofuels with subsidies that are 190 times as large as those given to oil and gas.
Those numbers come from an April 2008 report by the Energy Information Administration: "Federal Financial Interventions and Subsidies in Energy Markets 2007." Table ES6 lists domestic energy sources that get subsidies. In 2007, the U.S. consumed nearly 55.8 quadrillion British Thermal Units (BTUs), or about 9.6 billion barrels of oil equivalent, in natural gas and oil. That's about 98 times as much energy as the U.S. consumed in ethanol and biofuels, which totaled 98 million barrels of oil equivalent.
Meanwhile, ethanol and biofuels are getting subsidies of $5.72 per million BTU. That's 190 times as much as natural gas and petroleum liquids, which get subsidies of $0.03 per million BTU.
The report also shows that the ethanol and biofuels industry are more heavily subsidized -- in total dollar terms -- than the oil and gas industry. In 2007, the ethanol and biofuels industries got $3.25 billion in subsidies. The oil and gas industry got $1.92 billion.
Despite these subsidies, the ethanol lobby is queuing up for more favors. And they are doing so at the very same time that the Obama administration and Congress are pushing to eliminate the relatively modest subsidies for domestic oil and gas producers. Democrats want to cut drilling subsidies while simultaneously trumpeting their desire for "energy independence."
The cap-and-trade bill passed by the House aims to "create energy jobs" and "achieve energy independence." Meanwhile, Democrats are calling to eliminate drilling subsidies that have encouraged advances in technology that have opened up vast new U.S. energy sources. These advances have made it profitable to extract natural gas from the Barnett Shale deposit in Texas and the Marcellus in Pennsylvania -- deposits once thought too expensive to tap.
President Barack Obama's 2010 budget calls for the elimination of two tax breaks: the expensing of "intangible drilling costs" (such as wages, fuel and pipe), which allows energy companies to deduct the bulk of their expenses for drilling new wells; and the allowance for percentage depletion, which allows well owners to deduct a portion of the value of the production from their wells. Those breaks provide the bulk of the $1.92 billion in oil and gas subsidies.
In May, Mr. Obama called the tax breaks for the oil and gas industry "unjustifiable loopholes" that do "little to incentivize production or reduce energy prices."
That's flat not true. The deduction for intangible drilling costs encourages energy companies to plow huge amounts of capital into more drilling. And that drilling has resulted in unprecedented increases in natural gas production and potential.
An April Department of Energy report estimated that the newly available shale resources total 649 trillion cubic feet of gas. That's the energy equivalent of 118.3 billion barrels of oil, or slightly more than the proven oil reserves of Iraq.
Eliminating the tax breaks for drilling will make natural gas more expensive. Tudor, Pickering, Holt & Co., a Houston-based investment-banking firm, estimates that eliminating the intangible drilling cost provision could increase U.S. natural gas prices by 50 cents per thousand cubic feet. Why? Because without the tax break, fewer wells will be drilled and less gas will be produced. The U.S. consumes about 23 trillion cubic feet of gas per year. Simple arithmetic shows that eliminating the drilling subsidies that cost taxpayers less than $2 billion per year could result in an increased cost to consumers of $11.5 billion per year in the form of higher natural gas prices.
Amid all this, Growth Energy, an ethanol industry front-group, is pushing the Environmental Protection Agency to adopt a proposal that would increase the amount of ethanol blended into gasoline from the current maximum of 10% to as much as 15%.
That increase would be a gift to corn ethanol producers who have never been able to make a go of it despite decades of federal subsidies and mandates. Growth Energy is also pushing the change even though only about seven million of the 250 million motor vehicles now on U.S. roads are designed to run on fuel containing more than 10% ethanol.
There is plenty of evidence to suggest that gasoline with 10% ethanol is already doing real harm. In January, Toyota announced that it was recalling 214,570 Lexus vehicles. The reason: The company found that "ethanol fuels with a low moisture content will corrode the internal surface of the fuel rails." (The rails carry fuel to the engine injectors.) Furthermore, there have been numerous media reports that ethanol-blended gasoline is fouling engines in lawn mowers, weed whackers and boats.
Lawyers in Florida have already sued a group of oil companies for damage allegedly done to boat fuel tanks and engines from ethanol fuel. They are claiming that consumers should be warned about the risk of using the fuel in their boats.
There is also corn ethanol's effect on food prices. Over the past two years at least a dozen studies have linked subsidies that have increased the production of corn ethanol with higher food prices.
Mr. Obama has been pro-ethanol and anti-oil for years. But he and his allies on Capitol Hill should understand that removing drilling incentives will mean less drilling, which will mean less domestic production and more imports of both oil and natural gas.
That's hardly a recipe for "energy independence."
Mr. Bryce is the managing editor of Energy Tribune. His latest book is "Gusher of Lies: The Dangerous Delusions of 'Energy Independence'" (PublicAffairs, 2008).
The new talks with Moscow could put the U.S. nuclear deterrent in jeopardy
Arms Control Amnesia. By KEITH B. PAYNE
The new talks with Moscow could put the U.S. nuclear deterrent in jeopardy. Here are the facts.
The Wall Street Journal, p A15
Three hours after arriving at the Kremlin yesterday, President Barack Obama signed a preliminary agreement on a new nuclear arms-control treaty with Russian President Dmitry Medvedev. The agreement -- a clear road map for a new Strategic Arms Reduction Treaty (START) -- commits the U.S. and Russia to cut their nuclear weapons to the lowest levels since the early years of the Cold War.
Mr. Obama praised the agreement as a step forward, away from the "suspicion and rivalry of the past," while Mr. Medvedev hailed it as a "reasonable compromise." In fact, given the range of force levels it permits, this agreement has the potential to compromise U.S. security -- depending on what happens next.
In the first place, locking in specific reductions for U.S. forces prior to the conclusion of the ongoing Nuclear Posture Review is putting the cart before the horse. The Obama administration's team at the Pentagon is currently examining U.S. strategic force requirements. Before specific limits are set on U.S. forces, it should complete the review. Strategic requirements should drive force numbers; arms-control numbers should not dictate strategy.
Second, the new agreement not only calls for reductions in the number of nuclear warheads (to between 1,500 and 1,675), but for cuts in the number of strategic force launchers. Under the 1991 START I Treaty, each side was limited to 1,600 launchers. Yesterday's agreement calls for each side to be limited to between 500 and 1,100 launchers each.
According to open Russian sources, it was Russia that pushed for the lower limit of 500 launchers in negotiations. In the weeks leading up to this summit, it also has been openly stated that Moscow would like the number of deployed intercontinental ballistic missiles (ICBMs), submarine-launched missiles (SLBMS), and strategic bombers to be reduced "several times" below the current limit of 1,600. Moving toward very low numbers of launchers is a smart position for Russia, but not for the U.S.
Why? Because the number of deployed Russian strategic ICBMs, SLBMs, and bombers will drop dramatically simply as a result of their aging. In other words, a large number of Russian launchers will be removed from service with or without a new arms-control agreement.
The Obama administration will undoubtedly come under heavy pressure to move to the low end of the 500-1,100 limit on launchers in order to match Russian reductions. But it need not and should not do so. Based solely on open Russian sources, by 2017-2018 Russia will likely have fewer than half of the approximately 680 operational launchers it has today. With a gross domestic product less than that of California, Russia is confronting the dilemma of how to maintain parity with the U.S. while retiring its many aged strategic forces.
Mr. Medvedev's solution is to negotiate, inviting the U.S. to make real cuts, while Russia eliminates nothing that it wouldn't retire in any event.
This isn't just my conclusion -- it's the conclusion of many Russian officials and commentators. Russian Gen. Nikolay Solovtsov, commander of the Strategic Missile Troops, was recently quoted by Moscow Interfax-AVN Online as saying that "not a single Russian launcher" with "remaining service life" will be withdrawn under a new agreement. Noted Russian journalist Pavel Felgengauer observed in Novaya Gazeta that Russian leaders "have demanded of the Americans unilateral concessions on all points, offering practically nothing in exchange." Precisely.
Beyond the bad negotiating principle of giving up something for nothing, there will be serious downsides if the U.S. actually reduces its strategic launchers as much as Moscow wishes. The bipartisan Congressional Strategic Posture Commission -- headed by former secretaries of defense William J. Perry and James R. Schlesinger -- concluded that the U.S. could make reductions "if this were done while also preserving the resilience and survivability of U.S. forces." Having very low numbers of launchers would make the U.S. more vulnerable to destabilizing first-strike dangers, and would reduce or eliminate the U.S. ability to adapt its nuclear deterrent to an increasingly diverse set of post-Cold War nuclear and biological weapons threats.
Accepting low launcher numbers would also encourage placing more warheads on the remaining ICBMs -- i.e., "MIRVing," or adding multiple independently targeted warheads on a single missile. This is what the Russians openly say they are planning to do. Yet the U.S. has long sought to move away from MIRVed ICBMs as part of START, because heavy MIRVing can make each ICBM a more tempting target. One measure of U.S. success will be in resisting the Russian claim that severely reducing launcher numbers is somehow necessary and "stabilizing." It would be neither.
Third, the new agreement appears to defer the matter of so-called tactical nuclear weapons. Russia has some 4,000 tactical nuclear weapons and many thousands more in reserve; U.S. officials have said that Russia has an astounding 10 to 1 numerical advantage. These weapons are of greatest concern with regard to the potential for nuclear war, and they should be our focus for arms reduction. The Perry-Schlesinger commission report identified Russian tactical nuclear weapons as an "urgent" problem. Yet at this point, they appear to be off the table.
The administration may hope to negotiate reductions in tactical nuclear weapons later. But Russia has rejected this in the past, and nothing seems to have changed. As Gen. Vladimir Dvorkin of the Russian Academy of Sciences said recently in Moscow Interfax-AVN Online, "A treaty on the limitation and reduction of tactical nuclear weapons looks absolutely unrealistic." If the U.S. hopes to address this real problem, it must maintain negotiating leverage in the form of strategic launchers and weapons.
Fourth, Mr. Medvedev was quoted recently in RIA Novosti as saying that strategic reductions are possible only if the U.S. alleviates Russian concerns about "U.S. plans to create a global missile defense." There will surely be domestic and international pressure on the U.S. to limit missile defense to facilitate Russian reductions under the new treaty. But the U.S. need for missile defense has little to do with Russia. And the value of missile defense could not be clearer given recent North Korean belligerence. The Russians are demanding this linkage, at least in part to kill our missile defense site in Europe intended to defend against Iranian missiles. Another measure of U.S. success will be to avoid such linkages.
In short, Russian leaders hope to control or eliminate many elements of U.S. military power in exchange for strategic force reductions they will have to make anyway. U.S. leaders should not agree to pay Russia many times over for essentially an empty box.
Finally, Russian violations of its existing arms-control commitments must be addressed along with any new commitments. According to an August 2005 State Department report, Russia has violated START verification and other arms-control commitments in multiple ways. One significant violation has even been discussed openly in Russian publications -- the testing of the SS-27 ICBM with MIRVs in direct violation of START I.
President Obama should recall Winston Churchill's warning: "Be careful above all things not to let go of the atomic weapon until you are sure and more than sure that other means of preserving peace are in your hands." There is no need for the U.S. to accept Russian demands for missile-defense linkage, or deep reductions in the number of our ICBMs, SLBMs and bombers, to realize much lower numbers of Russian strategic systems. There is also no basis for expecting Russian goodwill if we do so.
Mr. Payne, a professor of defense and strategic studies at Missouri State University, is a member of the Perry-Schlesinger Commission, which was established by Congress to assess U.S. nuclear weapons capabilities. This op-ed is adapted from testimony given before the House Committee on Foreign Affairs on June 24.
The new talks with Moscow could put the U.S. nuclear deterrent in jeopardy. Here are the facts.
The Wall Street Journal, p A15
Three hours after arriving at the Kremlin yesterday, President Barack Obama signed a preliminary agreement on a new nuclear arms-control treaty with Russian President Dmitry Medvedev. The agreement -- a clear road map for a new Strategic Arms Reduction Treaty (START) -- commits the U.S. and Russia to cut their nuclear weapons to the lowest levels since the early years of the Cold War.
Mr. Obama praised the agreement as a step forward, away from the "suspicion and rivalry of the past," while Mr. Medvedev hailed it as a "reasonable compromise." In fact, given the range of force levels it permits, this agreement has the potential to compromise U.S. security -- depending on what happens next.
In the first place, locking in specific reductions for U.S. forces prior to the conclusion of the ongoing Nuclear Posture Review is putting the cart before the horse. The Obama administration's team at the Pentagon is currently examining U.S. strategic force requirements. Before specific limits are set on U.S. forces, it should complete the review. Strategic requirements should drive force numbers; arms-control numbers should not dictate strategy.
Second, the new agreement not only calls for reductions in the number of nuclear warheads (to between 1,500 and 1,675), but for cuts in the number of strategic force launchers. Under the 1991 START I Treaty, each side was limited to 1,600 launchers. Yesterday's agreement calls for each side to be limited to between 500 and 1,100 launchers each.
According to open Russian sources, it was Russia that pushed for the lower limit of 500 launchers in negotiations. In the weeks leading up to this summit, it also has been openly stated that Moscow would like the number of deployed intercontinental ballistic missiles (ICBMs), submarine-launched missiles (SLBMS), and strategic bombers to be reduced "several times" below the current limit of 1,600. Moving toward very low numbers of launchers is a smart position for Russia, but not for the U.S.
Why? Because the number of deployed Russian strategic ICBMs, SLBMs, and bombers will drop dramatically simply as a result of their aging. In other words, a large number of Russian launchers will be removed from service with or without a new arms-control agreement.
The Obama administration will undoubtedly come under heavy pressure to move to the low end of the 500-1,100 limit on launchers in order to match Russian reductions. But it need not and should not do so. Based solely on open Russian sources, by 2017-2018 Russia will likely have fewer than half of the approximately 680 operational launchers it has today. With a gross domestic product less than that of California, Russia is confronting the dilemma of how to maintain parity with the U.S. while retiring its many aged strategic forces.
Mr. Medvedev's solution is to negotiate, inviting the U.S. to make real cuts, while Russia eliminates nothing that it wouldn't retire in any event.
This isn't just my conclusion -- it's the conclusion of many Russian officials and commentators. Russian Gen. Nikolay Solovtsov, commander of the Strategic Missile Troops, was recently quoted by Moscow Interfax-AVN Online as saying that "not a single Russian launcher" with "remaining service life" will be withdrawn under a new agreement. Noted Russian journalist Pavel Felgengauer observed in Novaya Gazeta that Russian leaders "have demanded of the Americans unilateral concessions on all points, offering practically nothing in exchange." Precisely.
Beyond the bad negotiating principle of giving up something for nothing, there will be serious downsides if the U.S. actually reduces its strategic launchers as much as Moscow wishes. The bipartisan Congressional Strategic Posture Commission -- headed by former secretaries of defense William J. Perry and James R. Schlesinger -- concluded that the U.S. could make reductions "if this were done while also preserving the resilience and survivability of U.S. forces." Having very low numbers of launchers would make the U.S. more vulnerable to destabilizing first-strike dangers, and would reduce or eliminate the U.S. ability to adapt its nuclear deterrent to an increasingly diverse set of post-Cold War nuclear and biological weapons threats.
Accepting low launcher numbers would also encourage placing more warheads on the remaining ICBMs -- i.e., "MIRVing," or adding multiple independently targeted warheads on a single missile. This is what the Russians openly say they are planning to do. Yet the U.S. has long sought to move away from MIRVed ICBMs as part of START, because heavy MIRVing can make each ICBM a more tempting target. One measure of U.S. success will be in resisting the Russian claim that severely reducing launcher numbers is somehow necessary and "stabilizing." It would be neither.
Third, the new agreement appears to defer the matter of so-called tactical nuclear weapons. Russia has some 4,000 tactical nuclear weapons and many thousands more in reserve; U.S. officials have said that Russia has an astounding 10 to 1 numerical advantage. These weapons are of greatest concern with regard to the potential for nuclear war, and they should be our focus for arms reduction. The Perry-Schlesinger commission report identified Russian tactical nuclear weapons as an "urgent" problem. Yet at this point, they appear to be off the table.
The administration may hope to negotiate reductions in tactical nuclear weapons later. But Russia has rejected this in the past, and nothing seems to have changed. As Gen. Vladimir Dvorkin of the Russian Academy of Sciences said recently in Moscow Interfax-AVN Online, "A treaty on the limitation and reduction of tactical nuclear weapons looks absolutely unrealistic." If the U.S. hopes to address this real problem, it must maintain negotiating leverage in the form of strategic launchers and weapons.
Fourth, Mr. Medvedev was quoted recently in RIA Novosti as saying that strategic reductions are possible only if the U.S. alleviates Russian concerns about "U.S. plans to create a global missile defense." There will surely be domestic and international pressure on the U.S. to limit missile defense to facilitate Russian reductions under the new treaty. But the U.S. need for missile defense has little to do with Russia. And the value of missile defense could not be clearer given recent North Korean belligerence. The Russians are demanding this linkage, at least in part to kill our missile defense site in Europe intended to defend against Iranian missiles. Another measure of U.S. success will be to avoid such linkages.
In short, Russian leaders hope to control or eliminate many elements of U.S. military power in exchange for strategic force reductions they will have to make anyway. U.S. leaders should not agree to pay Russia many times over for essentially an empty box.
Finally, Russian violations of its existing arms-control commitments must be addressed along with any new commitments. According to an August 2005 State Department report, Russia has violated START verification and other arms-control commitments in multiple ways. One significant violation has even been discussed openly in Russian publications -- the testing of the SS-27 ICBM with MIRVs in direct violation of START I.
President Obama should recall Winston Churchill's warning: "Be careful above all things not to let go of the atomic weapon until you are sure and more than sure that other means of preserving peace are in your hands." There is no need for the U.S. to accept Russian demands for missile-defense linkage, or deep reductions in the number of our ICBMs, SLBMs and bombers, to realize much lower numbers of Russian strategic systems. There is also no basis for expecting Russian goodwill if we do so.
Mr. Payne, a professor of defense and strategic studies at Missouri State University, is a member of the Perry-Schlesinger Commission, which was established by Congress to assess U.S. nuclear weapons capabilities. This op-ed is adapted from testimony given before the House Committee on Foreign Affairs on June 24.
From McNamara to Obama
From McNamara to Obama. WSJ Editorial
This too is an era of soaring rhetoric, big plans and boundless self-regard.
The Wall Street Journal, Jul 07, 2009, p A13
Dwight D. Eisenhower famously said that "in preparing for battle I have always found that plans are useless but planning is indispensable." Robert S. McNamara, who spent many years thinking about the Vietnam War, first as an architect and then as a critic (and getting it wrong on both ends), was a man who believed mainly in plans.
McNamara, who died yesterday at 93, will go down as a cautionary tale for the ages, and perhaps none more than for the Age of Obama. Whatever else distinguishes JFK's New Frontier or LBJ's Great Society from Barack Obama's "New Foundation," this too is an era of soaring rhetoric, big plans and boundless self-regard, issued by an administration convinced it can apply technocratic, top-down solutions to huge and unpredictable systems -- the banking, auto and health-care industries, for instance, or the climate. These are people deeply impressed by their own smarts, the ones for whom the phrase "the best and the brightest" has been scrubbed of its intended irony.
When McNamara -- the "Whiz Kid" from Ford -- was first named defense secretary, in December 1960, Time magazine gushed that he "reads widely and well (current choices: The Phenomenon of Man, W.W. Rostow's The Stages of Growth). . . . His mind, says a friend who has seen him in Ann Arbor discussions, 'is a beautiful instrument, free from leanings and adhesions, calm and analytical.'" Nearly 50 years later, the Associated Press would lead its obituary by describing McNamara as "the cerebral secretary of defense." In between, David Halberstam -- who was for the Vietnam War before he was against it, but that's another story -- wrote that McNamara "symbolized the idea that [the Kennedy administration] could manage and control events, in an intelligent, rational way. Taking on a guerrilla war was like buying a sick foreign company; you brought your systems to it."
Of course it did not end well. Nor did it end well for McNamara with his next assignment as president of the World Bank, where he hugely increased lending on the theory that more inputs (money, "expertise") meant better outputs ("development"). Instead, McNamara's stewardship of the bank helped create the Third World debt crisis, fueled Africa's descent into chaos, swelled Mobutu's Swiss bank accounts, and backed the cruel and misbegotten campaign for population control.
A recurring pattern played itself out over the 20 years McNamara spent at the Pentagon and the Bank. Giant troves of quantitative data were collected, analyzed, disaggregated and reassembled. Plans -- typically on a five-year timetable -- were conceived and then, presumably, executed. He once called the Bank "an innovative, problem-solving mechanism . . . to help fashion a better life for mankind."
Nobel Prizes in economics would later be awarded for disproving this mechanistic notion of institutions. But no Nobel was required to understand that rationalism isn't a synonym for reason, much less common sense, or that a planned solution was a workable or desirable solution, or that war or poverty were "problems" in the same sense as, say, a deficit. There was also a human element, which -- depending on whom you believe -- McNamara either didn't get or didn't have.
None of this is to say that Vietnam was "unwinnable," the liberal nostrum in which the late McNamara took comfort, or that poverty is unbeatable. On the contrary, hundreds of millions of people have worked their way out of poverty -- no thanks to the World Bank -- while a war that only three years ago was deemed unwinnable now looks very nearly won.
But all that happened only after the Planners gave way to what development economist William Easterly has called the "Searchers." As Mr. Easterly writes in his book "The White Man's Burden," "a Planner thinks he already knows the answers; he thinks of poverty as a technical engineering problem that his answers will solve. A Searcher admits he doesn't know the answers in advance; he believes that poverty is a complicated tangle of political, social, historical, institutional, and technological factors. A Searcher hopes to find answers to individual problems only by trial and error experimentation. A Planner believes outsiders know enough to impose solutions."
So, from Chile to Taiwan, economic progress only came about when national governments junked the whole idea of the planned economy. So, too, in Iraq, America's fortunes only changed when the Bush administration went from sticking to a concept ("light footprint"), to searching, and finding, an answer in the surge, which combined new counterinsurgency tactics with sensitivity to local conditions. The U.S. might have won in Vietnam, too, if it had sooner discarded McNamara's concept of gradualism and gone after North Vietnam's center of gravity -- its dependence, via Haiphong harbor, on the resupply of Soviet arms.
Now that's old history. But the mentality of the planner remains alive and well in Washington today, along with the aura of cool intellectual certainty. Barack Obama might take a close look at McNamara's obituaries and note that he, too, is the whiz kid of his day.
This too is an era of soaring rhetoric, big plans and boundless self-regard.
The Wall Street Journal, Jul 07, 2009, p A13
Dwight D. Eisenhower famously said that "in preparing for battle I have always found that plans are useless but planning is indispensable." Robert S. McNamara, who spent many years thinking about the Vietnam War, first as an architect and then as a critic (and getting it wrong on both ends), was a man who believed mainly in plans.
McNamara, who died yesterday at 93, will go down as a cautionary tale for the ages, and perhaps none more than for the Age of Obama. Whatever else distinguishes JFK's New Frontier or LBJ's Great Society from Barack Obama's "New Foundation," this too is an era of soaring rhetoric, big plans and boundless self-regard, issued by an administration convinced it can apply technocratic, top-down solutions to huge and unpredictable systems -- the banking, auto and health-care industries, for instance, or the climate. These are people deeply impressed by their own smarts, the ones for whom the phrase "the best and the brightest" has been scrubbed of its intended irony.
When McNamara -- the "Whiz Kid" from Ford -- was first named defense secretary, in December 1960, Time magazine gushed that he "reads widely and well (current choices: The Phenomenon of Man, W.W. Rostow's The Stages of Growth). . . . His mind, says a friend who has seen him in Ann Arbor discussions, 'is a beautiful instrument, free from leanings and adhesions, calm and analytical.'" Nearly 50 years later, the Associated Press would lead its obituary by describing McNamara as "the cerebral secretary of defense." In between, David Halberstam -- who was for the Vietnam War before he was against it, but that's another story -- wrote that McNamara "symbolized the idea that [the Kennedy administration] could manage and control events, in an intelligent, rational way. Taking on a guerrilla war was like buying a sick foreign company; you brought your systems to it."
Of course it did not end well. Nor did it end well for McNamara with his next assignment as president of the World Bank, where he hugely increased lending on the theory that more inputs (money, "expertise") meant better outputs ("development"). Instead, McNamara's stewardship of the bank helped create the Third World debt crisis, fueled Africa's descent into chaos, swelled Mobutu's Swiss bank accounts, and backed the cruel and misbegotten campaign for population control.
A recurring pattern played itself out over the 20 years McNamara spent at the Pentagon and the Bank. Giant troves of quantitative data were collected, analyzed, disaggregated and reassembled. Plans -- typically on a five-year timetable -- were conceived and then, presumably, executed. He once called the Bank "an innovative, problem-solving mechanism . . . to help fashion a better life for mankind."
Nobel Prizes in economics would later be awarded for disproving this mechanistic notion of institutions. But no Nobel was required to understand that rationalism isn't a synonym for reason, much less common sense, or that a planned solution was a workable or desirable solution, or that war or poverty were "problems" in the same sense as, say, a deficit. There was also a human element, which -- depending on whom you believe -- McNamara either didn't get or didn't have.
None of this is to say that Vietnam was "unwinnable," the liberal nostrum in which the late McNamara took comfort, or that poverty is unbeatable. On the contrary, hundreds of millions of people have worked their way out of poverty -- no thanks to the World Bank -- while a war that only three years ago was deemed unwinnable now looks very nearly won.
But all that happened only after the Planners gave way to what development economist William Easterly has called the "Searchers." As Mr. Easterly writes in his book "The White Man's Burden," "a Planner thinks he already knows the answers; he thinks of poverty as a technical engineering problem that his answers will solve. A Searcher admits he doesn't know the answers in advance; he believes that poverty is a complicated tangle of political, social, historical, institutional, and technological factors. A Searcher hopes to find answers to individual problems only by trial and error experimentation. A Planner believes outsiders know enough to impose solutions."
So, from Chile to Taiwan, economic progress only came about when national governments junked the whole idea of the planned economy. So, too, in Iraq, America's fortunes only changed when the Bush administration went from sticking to a concept ("light footprint"), to searching, and finding, an answer in the surge, which combined new counterinsurgency tactics with sensitivity to local conditions. The U.S. might have won in Vietnam, too, if it had sooner discarded McNamara's concept of gradualism and gone after North Vietnam's center of gravity -- its dependence, via Haiphong harbor, on the resupply of Soviet arms.
Now that's old history. But the mentality of the planner remains alive and well in Washington today, along with the aura of cool intellectual certainty. Barack Obama might take a close look at McNamara's obituaries and note that he, too, is the whiz kid of his day.
"Exclusivity deals" between wireless carriers and handset makers to bring new devices to markets
Cellphone Politics. WSJ Editorial
The Wall Street Journal, Jul 07, 2009, p A14
One of the few bright spots in the current economic gloom has been the telecommunications industry, where competition is robust, innovation forges ahead and consumer prices continue to fall. Leave it to Congress and Beltway planners to mess with this success.
Yesterday, the Journal reported that the Justice Department has begun an informal investigation "to determine whether large U.S. telecom companies such as AT&T Inc. and Verizon Communications Inc. have abused the market power they've amassed in recent years." And last month the Senate Commerce Committee held a hearing on so-called "exclusivity deals" between wireless carriers and handset makers to bring new devices to market.
What's going on? Well, AT&T is the exclusive U.S. distributor of the Apple iPhone, and other big carriers like Sprint (Palm Pre) and Verizon (BlackBerry Storm) have cut similar distribution deals. Device makers like such arrangements because they can share the financial risks of developing and marketing new products. The partnerships lead to more choices and lower prices.
Nevertheless, some smaller carriers that lack the scale and resources to cut similar deals want Congress to ban them for everyone. To advance their argument, these carriers claim today's wireless markets are increasingly uncompetitive and underserving rural areas. Hu Meena of Cellular South, a Mississippi-based carrier with about 750,000 subscribers, told Congress that "the industry is trending back towards consolidation and the days of Ma Bell." Regional and rural carriers, he said, can't gain access to the latest gadgets because larger carriers have cut these exclusive deals. Mr. Meena is hoping to get some sympathy from Senators who represent rural states, like Mississippi Republican Roger Wicker and Minnesota Democrat Amy Klobuchar.
In fact, the wireless marketplace has never been more competitive. Eight years ago there were 100 million U.S. wireless customers. Today there are more than 270 million. It's true that AT&T (82 million) and Verizon (72 million) have the lion's share. But the next two largest carriers, Sprint and T-Mobile, have a combined 82 million, and the five carriers that round out the top 10 have another 18 million among them. Merely because Cellular South doesn't threaten Verizon's share doesn't mean other companies don't. As for rural areas, 96% of Americans have a choice of at least three carriers.
What these smaller carriers really want Congress to do is prevent bigger rivals from reaping the benefits of scale. But the government's role is to ensure competition, not protect competitors. AT&T, Verizon and other large carriers have invested billions to build the networks that device makers find so attractive.
There's also no denying that these distribution deals have benefited consumers. More than 30 devices have been introduced to compete with the iPhone since its debut in 2007. The fact that one carrier has an exclusive has forced other companies to find partners and innovate. In response, the price of the iPhone has steadily fallen. The earliest iPhones cost more than $500; last month, Apple introduced a $99 model.
If this is a market malfunction, let's have more of them. Isn't Washington busy enough re-ordering the rest of the economy?
The Wall Street Journal, Jul 07, 2009, p A14
One of the few bright spots in the current economic gloom has been the telecommunications industry, where competition is robust, innovation forges ahead and consumer prices continue to fall. Leave it to Congress and Beltway planners to mess with this success.
Yesterday, the Journal reported that the Justice Department has begun an informal investigation "to determine whether large U.S. telecom companies such as AT&T Inc. and Verizon Communications Inc. have abused the market power they've amassed in recent years." And last month the Senate Commerce Committee held a hearing on so-called "exclusivity deals" between wireless carriers and handset makers to bring new devices to market.
What's going on? Well, AT&T is the exclusive U.S. distributor of the Apple iPhone, and other big carriers like Sprint (Palm Pre) and Verizon (BlackBerry Storm) have cut similar distribution deals. Device makers like such arrangements because they can share the financial risks of developing and marketing new products. The partnerships lead to more choices and lower prices.
Nevertheless, some smaller carriers that lack the scale and resources to cut similar deals want Congress to ban them for everyone. To advance their argument, these carriers claim today's wireless markets are increasingly uncompetitive and underserving rural areas. Hu Meena of Cellular South, a Mississippi-based carrier with about 750,000 subscribers, told Congress that "the industry is trending back towards consolidation and the days of Ma Bell." Regional and rural carriers, he said, can't gain access to the latest gadgets because larger carriers have cut these exclusive deals. Mr. Meena is hoping to get some sympathy from Senators who represent rural states, like Mississippi Republican Roger Wicker and Minnesota Democrat Amy Klobuchar.
In fact, the wireless marketplace has never been more competitive. Eight years ago there were 100 million U.S. wireless customers. Today there are more than 270 million. It's true that AT&T (82 million) and Verizon (72 million) have the lion's share. But the next two largest carriers, Sprint and T-Mobile, have a combined 82 million, and the five carriers that round out the top 10 have another 18 million among them. Merely because Cellular South doesn't threaten Verizon's share doesn't mean other companies don't. As for rural areas, 96% of Americans have a choice of at least three carriers.
What these smaller carriers really want Congress to do is prevent bigger rivals from reaping the benefits of scale. But the government's role is to ensure competition, not protect competitors. AT&T, Verizon and other large carriers have invested billions to build the networks that device makers find so attractive.
There's also no denying that these distribution deals have benefited consumers. More than 30 devices have been introduced to compete with the iPhone since its debut in 2007. The fact that one carrier has an exclusive has forced other companies to find partners and innovate. In response, the price of the iPhone has steadily fallen. The earliest iPhones cost more than $500; last month, Apple introduced a $99 model.
If this is a market malfunction, let's have more of them. Isn't Washington busy enough re-ordering the rest of the economy?
Of NICE and Men
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.
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.
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