China's War for Ore. By HOLMAN W. JENKINS, JR.
Business is being reshaped around the world.
WSJ, Jul 15, 2009
China was miffed by the outcome of what we last year called the corporate "deal of the century." But shareholder interests prevailed. How often will that be said in the future?
Politics, that ugly dynamic when mixed with business, was already back in play last week as Rio Tinto, an Australian mining giant at the heart of the controversy, saw four of its Chinese executives arrested in Shanghai on spying charges.
China says the busts are not retribution for the cancelled deal between Rio and a state-owned company, which received angry press in China. Instead, the arrests supposedly arise from skullduggery by Rio officials during fraught annual ore-price negotiations with mainland steelmakers. But the distinction may be irrelevant. Ore has become a major neuralgic concern for China. It sees its dependence on imported supply as strategically risky. It fears that its massive attempts to "stimulate" domestic job growth are being drained off as fatter profits for Australian mining companies.
When the intrigue is unraveled, moreover, don't be surprised if the arrests are partly aimed at corralling the mainland's own restive steelmakers, many of whom have not cooperated in Beijing's ore strategy but have been striking their own spot market deals at higher prices.
But let's step back. Rio has been wrongfooted over and over lately amid the zigzagging of the world's monetary conditions, whose chaos is now disastrously reshaping business-government relations globally (think the Obama administration's ownership of most of the Detroit auto industry).
When China was booming, Rio played coy in the face of a merger bid from fellow miner BHP Billiton 18 months ago, acknowledging the "industrial logic" of the deal but insisting the offering price was "several ballparks" short of fair value.
Oops. With the collapse of Lehman and the global meltdown, ore prices plummeted and BHP withdrew its bid. Suddenly, Rio needed its own debt bailout and turned to a company on the cash-rich mainland, state-owned Chinalco. Beijing was doubly pleased by the $19.5 billion Chinalco deal. Not only was China getting ownership of Australian ore assets at a bargain price, but the deal also killed off any chance of a BHP merger, seen on the mainland as an Aussie plot to gouge China.
Oops. The Chinalco proposal ran into a buzzsaw of nationalist opposition in Australia. And while a government review board dragged its feet, the delay allowed Ben Bernanke to rev up the monetary engine and China to launch its own massive stimulus. Ore prices recovered. A BHP joint venture was back on the table. In a jilting worthy of a Judy Blume novel, Rio last month dumped its Chinese savior and leapt into bed with its erstwhile Australian suitor.
Now the Chinese naturally see dirty politics at work, but the deal was actually scuttled by Rio's shareholders, who rightly saw more upside in BHP's offer. Yet it's also true the Chinalco bid would likely eventually have been torpedoed by the Australian government. Polls were running strongly against selling the country's mineral patrimony to a company ultimately controlled by the Chinese Communist Party. Australia Prime Minister Kevin Rudd, who prides himself on being an old China hand, must have been overjoyed when this icky chalice was taken from his lips by Rio's shareholders
Yet the politics have only turned ickier since the Rio arrests. And Beijing has other cards up its sleeve. It can take its opposition to the BHP-Rio deal to Europe's trustbusters, who voiced qualms about their earlier proposed tie-up. China also can make use of its own new anti-monopoly law, which has already been used to punish the U.S. for blocking an oil deal. Earlier this year, Chinese regulators nixed Coca-Cola's purchase of a local juicemaker on "competition" grounds that antitrust lawyers considered ludicrous.
More disturbing, China has upped its ore purchases in recent weeks even as mainland growth seems to be slowing, suggesting an effort to lay in a stockpile for a longer showdown against Rio-BHP.
If the Rio arrests mark the beginning of a Chinese war to remake the global ore market more to China's liking, Beijing might want to think again. Its clumsy attempt to make computer makers instruments of Internet censorship was not exactly confidence-inspiring. Ensuring nobody wants to do a business deal with China for fear of being charged with a death penalty crime hardly improves the case. Then there's the epic civil disorder in Xinjiang.
The final casualty may be China's overblown reputation for macroeconomic competence, on which so many hopes for global recovery depend. There are already signs its stimulus efforts are running off the rails. The world might appreciate a signal right now that China's government actually knows what it's doing.
Wednesday, July 15, 2009
Libertarian: Universal Health Care Isn't Worth Our Freedom
Universal Health Care Isn't Worth Our Freedom. By THOMAS SZASZ
What would Thoreau have made of the current debate?
WSJ, Jul 15, 2009
People who seek the services of auto mechanics want car repair, not "auto care." Similarly, most people who seek the services of medical doctors want body repair, not "health care."
We own our cars, are responsible for the cost of maintaining them, and decide what needs fixing based partly on balancing the seriousness of the problem against the expense of repairing it. Our health-care system rests on the principle that, although we own our bodies, the community or state ought to be responsible for paying the cost of repairing them. This is for the ostensibly noble purpose of redistributing the potentially ruinous expense of the medical care of unfortunate individuals.
But what is health care? The concept of reimbursable health-care service rests on the premise that the medical problem in need of servicing is the result of involuntary, unwanted happenings, not the result of voluntary, goal-directed behavior. Leukemia, lupus, prostate cancer, and many infectious diseases are unwanted happenings. Are we going to count obesity, smoking, depression and schizophrenia as the same kinds of diseases?
Many Americans would willingly pay for insurance to protect them against the exorbitant cost of treating their own leukemia. But how many Americans would willingly pay for insurance to protect them from the expenses of treating their own depression?
Everyone recognizes that the more fully we wish insurance companies to defray our out of pocket expenses for our car repairs, the higher the premium they will charge for the policy. Yet foregoing reimbursement for trivial or unnecessary health-care costs in return for a more suitable health-care policy is an option unavailable under the present system. Everyone with health insurance is compelled to protect himself from risks, such as alcoholism and erectile dysfunction, that he would willingly shoulder in exchange for a lower premium.
The idea that every life is infinitely precious and therefore everyone deserves the same kind of optimal medical care is a fine religious sentiment and moral ideal. As political and economic policy, it is vainglorious delusion. Rich and educated people not only receive better goods and services in all areas of life than do poor and uneducated people, they also tend to take better care of themselves and their possessions, which in turn leads to better health. The first requirement for better health care for all is not equal health care for everyone but educational and economic advancement for everyone.
Our national conversation about curbing the cost of health care is crippled by the vocabulary in which we conduct it. We must stop talking about "health care" as if it were some kind of collective public service, like fire protection, provided equally to everyone who needs it. No government can provide the same high quality body repair services to everyone. Not all doctors are equally good physicians, and not all sick persons are equally good patients.
If we persevere in our quixotic quest for a fetishized medical equality we will sacrifice personal freedom as its price. We will become the voluntary slaves of a "compassionate" government that will provide the same low quality health care to everyone.
Henry David Thoreau famously remarked, "If I knew for a certainty that a man was coming to my house with the conscious design of doing me good, I should run for my life." Thoreau feared a single, unarmed man approaching him with such a passion in his heart. Too many people now embrace the coercive apparatus of the modern state professing the same design.
Dr. Szasz is emeritus professor of psychiatry at Upstate Medical University in Syracuse, New York. He is author of "The Myth of Mental Illness," among other books (HarperCollins, 1961).
What would Thoreau have made of the current debate?
WSJ, Jul 15, 2009
People who seek the services of auto mechanics want car repair, not "auto care." Similarly, most people who seek the services of medical doctors want body repair, not "health care."
We own our cars, are responsible for the cost of maintaining them, and decide what needs fixing based partly on balancing the seriousness of the problem against the expense of repairing it. Our health-care system rests on the principle that, although we own our bodies, the community or state ought to be responsible for paying the cost of repairing them. This is for the ostensibly noble purpose of redistributing the potentially ruinous expense of the medical care of unfortunate individuals.
But what is health care? The concept of reimbursable health-care service rests on the premise that the medical problem in need of servicing is the result of involuntary, unwanted happenings, not the result of voluntary, goal-directed behavior. Leukemia, lupus, prostate cancer, and many infectious diseases are unwanted happenings. Are we going to count obesity, smoking, depression and schizophrenia as the same kinds of diseases?
Many Americans would willingly pay for insurance to protect them against the exorbitant cost of treating their own leukemia. But how many Americans would willingly pay for insurance to protect them from the expenses of treating their own depression?
Everyone recognizes that the more fully we wish insurance companies to defray our out of pocket expenses for our car repairs, the higher the premium they will charge for the policy. Yet foregoing reimbursement for trivial or unnecessary health-care costs in return for a more suitable health-care policy is an option unavailable under the present system. Everyone with health insurance is compelled to protect himself from risks, such as alcoholism and erectile dysfunction, that he would willingly shoulder in exchange for a lower premium.
The idea that every life is infinitely precious and therefore everyone deserves the same kind of optimal medical care is a fine religious sentiment and moral ideal. As political and economic policy, it is vainglorious delusion. Rich and educated people not only receive better goods and services in all areas of life than do poor and uneducated people, they also tend to take better care of themselves and their possessions, which in turn leads to better health. The first requirement for better health care for all is not equal health care for everyone but educational and economic advancement for everyone.
Our national conversation about curbing the cost of health care is crippled by the vocabulary in which we conduct it. We must stop talking about "health care" as if it were some kind of collective public service, like fire protection, provided equally to everyone who needs it. No government can provide the same high quality body repair services to everyone. Not all doctors are equally good physicians, and not all sick persons are equally good patients.
If we persevere in our quixotic quest for a fetishized medical equality we will sacrifice personal freedom as its price. We will become the voluntary slaves of a "compassionate" government that will provide the same low quality health care to everyone.
Henry David Thoreau famously remarked, "If I knew for a certainty that a man was coming to my house with the conscious design of doing me good, I should run for my life." Thoreau feared a single, unarmed man approaching him with such a passion in his heart. Too many people now embrace the coercive apparatus of the modern state professing the same design.
Dr. Szasz is emeritus professor of psychiatry at Upstate Medical University in Syracuse, New York. He is author of "The Myth of Mental Illness," among other books (HarperCollins, 1961).
Tuesday, July 14, 2009
Libertarian: Thinking Clearly about Economic Inequality
Thinking Clearly about Economic Inequality, by Will Wilkinson
Cato, Jul 14, 2009
Will Wilkinson is a research fellow at the Cato Institute and editor of Cato Unbound.
Recent discussions of economic inequality, marked by a lack of clarity and care, have confused the public about the meaning and moral significance of rising income inequality. Income statistics paint a misleading picture of real standards of living and real economic inequality. Several strands of evidence about real standards of living suggest a very different picture of the trends in economic inequality. In any case, the dispersion of incomes at any given time has, at best, a tenuous connection to human welfare or social justice. The pattern of incomes is affected by both morally desirable and undesirable mechanisms. When injustice or wrongdoing increases income inequality, the problem is the original malign cause, not the resulting inequality. Many thinkers mistake national populations for "society" and thereby obscure the real story about the effects of trade and immigration on welfare, equality, and justice. There is little evidence that high levels of income inequality lead down a slippery slope to the destruction of democracy and rule by the rich. The unequal political voice of the poor can be addressed only through policies that actually work to fight poverty and improve education. Income inequality is a dangerous distraction from the real problems: poverty, lack of economic opportunity, and systemic injustice.
Cato, Jul 14, 2009
Will Wilkinson is a research fellow at the Cato Institute and editor of Cato Unbound.
Recent discussions of economic inequality, marked by a lack of clarity and care, have confused the public about the meaning and moral significance of rising income inequality. Income statistics paint a misleading picture of real standards of living and real economic inequality. Several strands of evidence about real standards of living suggest a very different picture of the trends in economic inequality. In any case, the dispersion of incomes at any given time has, at best, a tenuous connection to human welfare or social justice. The pattern of incomes is affected by both morally desirable and undesirable mechanisms. When injustice or wrongdoing increases income inequality, the problem is the original malign cause, not the resulting inequality. Many thinkers mistake national populations for "society" and thereby obscure the real story about the effects of trade and immigration on welfare, equality, and justice. There is little evidence that high levels of income inequality lead down a slippery slope to the destruction of democracy and rule by the rich. The unequal political voice of the poor can be addressed only through policies that actually work to fight poverty and improve education. Income inequality is a dangerous distraction from the real problems: poverty, lack of economic opportunity, and systemic injustice.
WaPo Editorial On Nabucco and Russia's "campaign to turn its neighbors into satellites, using blunt instruments such as military force"
A Well-Placed Pipeline. WaPo Editorial
How Russia's 19th-century policies produced some 21st-century cooperation
Tuesday, July 14, 2009
PRESIDENT OBAMA'S appeal to Russia last week that it move beyond a "19th-century" foreign policy appears to have had little impact on President Dmitry Medvedev. Yesterday found Mr. Medvedev in Tskhinvali, the capital of the Georgian province of South Ossetia, which Russia invaded last August and then unilaterally recognized as an independent state. Coming just six days after Mr. Obama left Moscow, the message of Mr. Medvedev's provocative visit was unmistakable: Russia has no intention of abandoning its campaign to turn its neighbors into satellites, using blunt instruments such as military force and its control of energy supplies.
That's why it was encouraging that yesterday also brought a multinational meeting in Ankara at which Turkey and four European countries formally agreed to route a new natural gas pipeline across their territories. The Nabucco project would carry gas from the Caspian Sea region and the Middle East to Europe through Turkey, Bulgaria, Romania, Hungary and Austria -- thereby providing a path for European energy supplies not controlled by Russia. Though energy pipelines are not usually the subject of international politics and high diplomacy, Moscow has made them so. Twice in the past four years, it has turned off a pipeline that supplies countries across Europe in an attempt to undermine the democratic government of Ukraine, which, like Georgia, has refused to become a Kremlin vassal.
The midwinter blackmail, personally overseen by Mr. Medvedev's mentor, Vladimir Putin, has had the effect of vitalizing a project that once looked like little more than a pipe dream. Nabucco, which will extend 2,000 miles and cost more than $10 billion to construct, was championed tirelessly by the Bush administration. But the countries that would most benefit from it, such as Hungary and Austria, were more interested in negotiating new pipeline routes with Russia until recently. Now they appear to recognize that diversifying their sources of gas is essential to their national security -- and also to promoting a Russia that will not seek to use its natural resources as a means to rebuild the Soviet empire.
The new pipeline is hardly a panacea. At best it will supply about 10 percent of Europe's gas consumption, sometime after 2014. The product to fill it still needs to be found: Though Azerbaijan, Turkmenistan, Iraq, Syria and Egypt have all expressed interest in selling gas through Nabucco, none has committed to doing so. Still, yesterday's signing was an important step toward a more secure Europe; it is a lot more likely to produce results than Mr. Medvedev's lonely trip to Tskhinvali.
How Russia's 19th-century policies produced some 21st-century cooperation
Tuesday, July 14, 2009
PRESIDENT OBAMA'S appeal to Russia last week that it move beyond a "19th-century" foreign policy appears to have had little impact on President Dmitry Medvedev. Yesterday found Mr. Medvedev in Tskhinvali, the capital of the Georgian province of South Ossetia, which Russia invaded last August and then unilaterally recognized as an independent state. Coming just six days after Mr. Obama left Moscow, the message of Mr. Medvedev's provocative visit was unmistakable: Russia has no intention of abandoning its campaign to turn its neighbors into satellites, using blunt instruments such as military force and its control of energy supplies.
That's why it was encouraging that yesterday also brought a multinational meeting in Ankara at which Turkey and four European countries formally agreed to route a new natural gas pipeline across their territories. The Nabucco project would carry gas from the Caspian Sea region and the Middle East to Europe through Turkey, Bulgaria, Romania, Hungary and Austria -- thereby providing a path for European energy supplies not controlled by Russia. Though energy pipelines are not usually the subject of international politics and high diplomacy, Moscow has made them so. Twice in the past four years, it has turned off a pipeline that supplies countries across Europe in an attempt to undermine the democratic government of Ukraine, which, like Georgia, has refused to become a Kremlin vassal.
The midwinter blackmail, personally overseen by Mr. Medvedev's mentor, Vladimir Putin, has had the effect of vitalizing a project that once looked like little more than a pipe dream. Nabucco, which will extend 2,000 miles and cost more than $10 billion to construct, was championed tirelessly by the Bush administration. But the countries that would most benefit from it, such as Hungary and Austria, were more interested in negotiating new pipeline routes with Russia until recently. Now they appear to recognize that diversifying their sources of gas is essential to their national security -- and also to promoting a Russia that will not seek to use its natural resources as a means to rebuild the Soviet empire.
The new pipeline is hardly a panacea. At best it will supply about 10 percent of Europe's gas consumption, sometime after 2014. The product to fill it still needs to be found: Though Azerbaijan, Turkmenistan, Iraq, Syria and Egypt have all expressed interest in selling gas through Nabucco, none has committed to doing so. Still, yesterday's signing was an important step toward a more secure Europe; it is a lot more likely to produce results than Mr. Medvedev's lonely trip to Tskhinvali.
Picking on the Swiss - The Obama Administration blows up a tax treaty
Picking on the Swiss. WSJ Editorial
The Obama Administration blows up a tax treaty.
WSJ, Jul 14, 2009
President Obama has been traveling the world to "reset" diplomatic relations with the likes of Russia and Iran. But his Administration continues to do what it can to blow up America's long and amicable relationship with Switzerland.
In a federal court in Florida, the IRS and Justice Department are seeking to compel the Swiss bank UBS to hand over the names of 52,000 U.S. taxpayers with private-banking accounts in Switzerland. According to an affidavit filed with the court by the Swiss tax authorities, the summons "does not identify any facts that could be construed as constituting tax fraud or the like, but rather makes a broad demand for the identity of all U.S. taxpayers for which certain forms have not been filed."
This sort of fishing expedition expressly violates the U.S.-Swiss treaty on sharing tax information. The original treaty dates back 30 years, and under the pact the Swiss regularly provide the IRS with information on specific cases. But what the IRS is attempting here is a mass search of U.S. taxpayers merely for banking in Switzerland.
This is not to say that everyone caught up in the IRS's dragnet is pure. But the American system of justice contains probable cause and reasonable search requirements precisely to prevent law enforcement from rounding up everyone who might conceivably be guilty of some crime. And while Justice argues that UBS systematically marketed its private banking services in order to avoid U.S. taxation, the charges against UBS itself were settled in February, so this is not about the bank. It is about its customers, and an effort to grab perhaps a couple of billion dollars in allegedly unpaid taxes.
Those customers are protected by Swiss bank-secrecy laws that make it a felony to improperly disclose client identities. Those laws are very much in force, and the Swiss authorities have threatened to seize the client data demanded by the U.S. rather than permit UBS to comply.
Switzerland is a neutral country and so technically isn't an American ally, but it has long been a good friend, representing U.S. interests in Cuba and Iran, among other good offices. On Monday, Judge Alan Gold delayed until August a hearing on the case, giving UBS and the feds time to reach a settlement before the judge rules on the IRS demands. Justice is nonetheless still threatening to indict UBS if it fails to comply.
Apart from the diplomatic ramifications, the government's request for so broad a swath of information could well run afoul of the Fourth Amendment's protections against unreasonable search. The Obama Administration should use the court reprieve to rethink the whole case.
The Obama Administration blows up a tax treaty.
WSJ, Jul 14, 2009
President Obama has been traveling the world to "reset" diplomatic relations with the likes of Russia and Iran. But his Administration continues to do what it can to blow up America's long and amicable relationship with Switzerland.
In a federal court in Florida, the IRS and Justice Department are seeking to compel the Swiss bank UBS to hand over the names of 52,000 U.S. taxpayers with private-banking accounts in Switzerland. According to an affidavit filed with the court by the Swiss tax authorities, the summons "does not identify any facts that could be construed as constituting tax fraud or the like, but rather makes a broad demand for the identity of all U.S. taxpayers for which certain forms have not been filed."
This sort of fishing expedition expressly violates the U.S.-Swiss treaty on sharing tax information. The original treaty dates back 30 years, and under the pact the Swiss regularly provide the IRS with information on specific cases. But what the IRS is attempting here is a mass search of U.S. taxpayers merely for banking in Switzerland.
This is not to say that everyone caught up in the IRS's dragnet is pure. But the American system of justice contains probable cause and reasonable search requirements precisely to prevent law enforcement from rounding up everyone who might conceivably be guilty of some crime. And while Justice argues that UBS systematically marketed its private banking services in order to avoid U.S. taxation, the charges against UBS itself were settled in February, so this is not about the bank. It is about its customers, and an effort to grab perhaps a couple of billion dollars in allegedly unpaid taxes.
Those customers are protected by Swiss bank-secrecy laws that make it a felony to improperly disclose client identities. Those laws are very much in force, and the Swiss authorities have threatened to seize the client data demanded by the U.S. rather than permit UBS to comply.
Switzerland is a neutral country and so technically isn't an American ally, but it has long been a good friend, representing U.S. interests in Cuba and Iran, among other good offices. On Monday, Judge Alan Gold delayed until August a hearing on the case, giving UBS and the feds time to reach a settlement before the judge rules on the IRS demands. Justice is nonetheless still threatening to indict UBS if it fails to comply.
Apart from the diplomatic ramifications, the government's request for so broad a swath of information could well run afoul of the Fourth Amendment's protections against unreasonable search. The Obama Administration should use the court reprieve to rethink the whole case.
The Obama Democrats pick income redistribution over job creation and economic growth
The Small Business Surtax. WSJ Editorial
The Obama Democrats pick income redistribution over job creation and economic growth.
WSJ, Jul 14, 2009
Jason Furman owes an apology to Michael Boskin, the Stanford economist who wrote a year ago on these pages that Barack Obama would raise American income tax rates nearly to 60%. Mr. Furman, then in the Obama campaign and now at the White House, claimed this was wrong and that Democrats would merely raise taxes back to their Clinton-era level.
House Democrats are now proving that Mr. Boskin had it right, and before it's over even he may have underestimated how high taxes will go. In the middle of a recession and with rising unemployment, Democrats have been letting it leak that they want to raise U.S. tax rates higher than they've been in nearly 30 years in order to finance government health care.
Every detail isn't known, but late last week Ways and Means Chairman Charlie Rangel disclosed that his draft bill would impose a "surtax" on individuals with adjusted gross income of more than $280,000 a year. This would hit job creators especially hard because more than six of every 10 who earn that much are small business owners, operators or investors, according to a 2007 Treasury study. That study also found that almost half of the income taxed at this highest rate is small business income from the more than 500,000 sole proprietorships and subchapter S corporations whose owners pay the individual rate.
In addition, many more smaller business owners with lower profits would be hit by the Rangel plan's payroll tax surcharge. That surcharge would apply to all firms with 25 or more workers that don't offer health insurance to their employees, and it would amount to an astonishing eight percentage point fee above the current 15% payroll levy.
Here's the ugly income-tax math. First, Mr. Obama has promised to let the lower Bush tax rates expire after 2010. This would raise the top personal income tax rate to 39.6% from 35%, and the next rate to 36% from 33%. The Bush expiration would also phase out various tax deductions and exemptions, bringing the top marginal rate to as high as 41%.
Then add the Rangel Surtax of one percentage point, starting at $280,000 ($350,000 for couples), plus another percentage point at $400,000 ($500,000 for couples), rising to three points on more than $800,000 ($1 million) in 2011. But wait, there's more. The surcharge could rise by two more percentage points in 2013 if health-care costs are larger than advertised -- which is a near-certainty. Add all of this up and the top marginal tax rate would climb to 46%, which hasn't been seen in the U.S. since the Reagan tax reform of 1986 cut the top rate to 28% from 50%.
States have also been raising their income tax rates, so in California and New York City the top rate would be around 58%. The Tax Foundation reports that at least half of all states would have combined state-federal tax rates of more than 50%.
Mr. Rangel also wants to apply his surcharges to investment income like capital gains. So the combined effect of repealing the Bush tax cuts and the new surcharges would be to raise the tax on stock appreciation by at least 60% -- to as high as 24% from 15% today. President Obama has been worrying about a capital squeeze on small businesses, but raising the capital gains tax would only further starve them of funds.
Democrats claim these tax increases on the rich won't do any economic harm. They should read the work of Christina Romer before she became chief White House economist. Ms. Romer and her husband, David Romer, a Berkeley economist, have published multiple studies on the impact of tax policy changes over the past 100 years. One of their findings is that "tax increases appear to have a very large, sustained and highly significant negative impact on output." In other words, tax hikes are an antistimulus.
Another implication of the Rangel plan is that America's successful small businesses would pay higher tax rates than the Fortune 500, and for that matter than most companies around the world. The corporate federal-state tax rate applied to General Electric and Google is about 39% in the U.S., and the business tax rate is about 25% in the OECD countries. So the U.S. would have close to the most punitive taxes on small business income anywhere on the globe.
Mr. Rangel and House Democrats are also banking on the idea that raising tax rates by 20% will raise 20% more tax revenue, but that's like telling Wal-Mart it can raise prices by 20% and get 20% more profit. When taxes on the rich rise, their reported income tends to decline. The last time the top federal income tax rate was 50%, the richest 1% paid only about 25% of all income taxes. Today, at a 35% rate they pay nearly 40%.
A new study by the Kaufman Foundation finds that small business entrepreneurs have led America out of its last seven post-World War II recessions. They also generate about two of every three new jobs during a recovery. The more the Obama Democrats reveal of their policies, the more it's clear that they prize income redistribution above all else, including job creation and economic growth.
The Obama Democrats pick income redistribution over job creation and economic growth.
WSJ, Jul 14, 2009
Jason Furman owes an apology to Michael Boskin, the Stanford economist who wrote a year ago on these pages that Barack Obama would raise American income tax rates nearly to 60%. Mr. Furman, then in the Obama campaign and now at the White House, claimed this was wrong and that Democrats would merely raise taxes back to their Clinton-era level.
House Democrats are now proving that Mr. Boskin had it right, and before it's over even he may have underestimated how high taxes will go. In the middle of a recession and with rising unemployment, Democrats have been letting it leak that they want to raise U.S. tax rates higher than they've been in nearly 30 years in order to finance government health care.
Every detail isn't known, but late last week Ways and Means Chairman Charlie Rangel disclosed that his draft bill would impose a "surtax" on individuals with adjusted gross income of more than $280,000 a year. This would hit job creators especially hard because more than six of every 10 who earn that much are small business owners, operators or investors, according to a 2007 Treasury study. That study also found that almost half of the income taxed at this highest rate is small business income from the more than 500,000 sole proprietorships and subchapter S corporations whose owners pay the individual rate.
In addition, many more smaller business owners with lower profits would be hit by the Rangel plan's payroll tax surcharge. That surcharge would apply to all firms with 25 or more workers that don't offer health insurance to their employees, and it would amount to an astonishing eight percentage point fee above the current 15% payroll levy.
Here's the ugly income-tax math. First, Mr. Obama has promised to let the lower Bush tax rates expire after 2010. This would raise the top personal income tax rate to 39.6% from 35%, and the next rate to 36% from 33%. The Bush expiration would also phase out various tax deductions and exemptions, bringing the top marginal rate to as high as 41%.
Then add the Rangel Surtax of one percentage point, starting at $280,000 ($350,000 for couples), plus another percentage point at $400,000 ($500,000 for couples), rising to three points on more than $800,000 ($1 million) in 2011. But wait, there's more. The surcharge could rise by two more percentage points in 2013 if health-care costs are larger than advertised -- which is a near-certainty. Add all of this up and the top marginal tax rate would climb to 46%, which hasn't been seen in the U.S. since the Reagan tax reform of 1986 cut the top rate to 28% from 50%.
States have also been raising their income tax rates, so in California and New York City the top rate would be around 58%. The Tax Foundation reports that at least half of all states would have combined state-federal tax rates of more than 50%.
Mr. Rangel also wants to apply his surcharges to investment income like capital gains. So the combined effect of repealing the Bush tax cuts and the new surcharges would be to raise the tax on stock appreciation by at least 60% -- to as high as 24% from 15% today. President Obama has been worrying about a capital squeeze on small businesses, but raising the capital gains tax would only further starve them of funds.
Democrats claim these tax increases on the rich won't do any economic harm. They should read the work of Christina Romer before she became chief White House economist. Ms. Romer and her husband, David Romer, a Berkeley economist, have published multiple studies on the impact of tax policy changes over the past 100 years. One of their findings is that "tax increases appear to have a very large, sustained and highly significant negative impact on output." In other words, tax hikes are an antistimulus.
Another implication of the Rangel plan is that America's successful small businesses would pay higher tax rates than the Fortune 500, and for that matter than most companies around the world. The corporate federal-state tax rate applied to General Electric and Google is about 39% in the U.S., and the business tax rate is about 25% in the OECD countries. So the U.S. would have close to the most punitive taxes on small business income anywhere on the globe.
Mr. Rangel and House Democrats are also banking on the idea that raising tax rates by 20% will raise 20% more tax revenue, but that's like telling Wal-Mart it can raise prices by 20% and get 20% more profit. When taxes on the rich rise, their reported income tends to decline. The last time the top federal income tax rate was 50%, the richest 1% paid only about 25% of all income taxes. Today, at a 35% rate they pay nearly 40%.
A new study by the Kaufman Foundation finds that small business entrepreneurs have led America out of its last seven post-World War II recessions. They also generate about two of every three new jobs during a recovery. The more the Obama Democrats reveal of their policies, the more it's clear that they prize income redistribution above all else, including job creation and economic growth.
Obama Gets It Right on Africa - We'd be glad if the government only skimmed 20%
Obama Gets It Right on Africa. By BRET STEPHENS
We'd be glad if the government only skimmed 20%.
WSJ, Jul 14, 2009
http://online.wsj.com/article/SB124753013433935785.html
There's a striking passage in "Dreams From My Father," in which a young Barack Obama, on safari in Kenya, gets an unembellished picture of everyday African life from his driver, a man named Francis.
"[Francis] said he enjoyed his work with the travel agency but disliked being away from his family. 'If I could, I might prefer farming full-time,' he said, 'but the KCU makes it impossible.'
"'What's the KCU?' I asked.
"'The Kenyan Coffee Union. They are thieves. They regulate what we can plant and when we can plant it. I can only sell my coffee to them, and they sell it overseas. They say to us that prices are dropping, but I know they still get one hundred times what they pay to me. The rest goes where?' Francis shook his head with disgust. 'It's a terrible thing when the government steals from its own people.'"
Terrible indeed. And perhaps it was an echo of Francis's voice that shaped Mr. Obama's speech last Saturday in Ghana, by far the best of his presidency.
Here's some of what Mr. Obama said: "No business wants to invest in a place where the government skims 20% off the top." "The purpose of foreign assistance must be creating the conditions where it's no longer needed." "The West is not responsible for the destruction of the Zimbabwean economy over the last decade, or wars in which children are enlisted as combatants." "We must support strong and sustainable democratic governments." "America can also do more to promote trade and investment." "We have a responsibility to support those who act responsibly and to isolate those who don't, and that is exactly what America will do." "History shows that countries thrive when they . . . create space for small and medium-sized businesses that create jobs."
All this is not only true, it's groundbreaking. Since British Prime Minister Harold Macmillan gave his "Wind of Change" speech (also in Ghana) nearly 50 years ago, Western policy toward Africa has been a matter of throwing money at a guilty conscience (or a client of convenience), no questions asked. The result, as Mr. Obama pointed out, was that countries such as Kenya, which had a larger GDP than South Korea in 1961, "have been badly outpaced."
Maybe it took a president unburdened by that kind of guilt to junk the policy. Or maybe it simply took a conversation with some of the Francises of Africa -- the politically invisible middle classes held down by their own kleptocratic rulers. Whatever the case, Africa will be well served if Mr. Obama can make good on his rhetoric.
Now if only Mr. Obama would apply those same principles to the rest of his agenda, foreign and domestic.
For instance, if trade and investment are good ideas for the U.S.-Africa relationship, why has the Obama administration dragged its feet on free-trade agreements with Colombia and South Korea? Or, if the U.S. owes Africa no apologies for its recent disasters, why has Mr. Obama gone to such lengths to apologize to Iran for the 1953 Mossadegh coup, and, in his Cairo speech, to the entire Muslim world for the politics of the Cold War? Or if Mr. Obama wants to "isolate" irresponsible actors, why does he continue to promise engagement with Iran, Syria, Russia and perhaps North Korea no matter how they behave?
Similarly, while U.S. government officials don't usually demand bribes (at least outside of Illinois), the U.S. corporate tax rate, at 39%, is the second highest in the industrialized world. That's about 10 percentage points higher than the OECD average, or nearly twice the 20% "bribe tax" that scandalizes Mr. Obama.
As for creating "space for small and medium-sized businesses," it's ironic that Mr. Obama would make this point on the same weekend that House Ways and Means Chairman Charlie Rangel is calling for a 3% surtax on the wealthy -- many of whom, as Scott Hodge of the Tax Foundation notes, happen to be business owners. These are the same people now facing the prospect of next year's expiration of the Bush tax cuts and the return to the 55% top rate on estate taxes, another scourge of small-business owners.
Finally, if the $2.3 trillion the West has given in foreign aid over the past five decades -- a "stimulus" package if ever there was one -- has done nothing to raise Africa out of poverty, why does Mr. Obama think that any amount of stimulus spending is going to revive America's economic fortunes? At least in Africa's case, the West could periodically forgive its debts. Who will forgive ours?
In his conversation with Francis, Mr. Obama records his lament that Kenya's "big men" fail to take responsibility for their country:
"'Attitudes aren't so different in America,' I told Francis."
"'You are probably right,' he said. 'But you see, a rich country like America can perhaps afford to be stupid.'"
Somebody make this guy treasury secretary.
We'd be glad if the government only skimmed 20%.
WSJ, Jul 14, 2009
http://online.wsj.com/article/SB124753013433935785.html
There's a striking passage in "Dreams From My Father," in which a young Barack Obama, on safari in Kenya, gets an unembellished picture of everyday African life from his driver, a man named Francis.
"[Francis] said he enjoyed his work with the travel agency but disliked being away from his family. 'If I could, I might prefer farming full-time,' he said, 'but the KCU makes it impossible.'
"'What's the KCU?' I asked.
"'The Kenyan Coffee Union. They are thieves. They regulate what we can plant and when we can plant it. I can only sell my coffee to them, and they sell it overseas. They say to us that prices are dropping, but I know they still get one hundred times what they pay to me. The rest goes where?' Francis shook his head with disgust. 'It's a terrible thing when the government steals from its own people.'"
Terrible indeed. And perhaps it was an echo of Francis's voice that shaped Mr. Obama's speech last Saturday in Ghana, by far the best of his presidency.
Here's some of what Mr. Obama said: "No business wants to invest in a place where the government skims 20% off the top." "The purpose of foreign assistance must be creating the conditions where it's no longer needed." "The West is not responsible for the destruction of the Zimbabwean economy over the last decade, or wars in which children are enlisted as combatants." "We must support strong and sustainable democratic governments." "America can also do more to promote trade and investment." "We have a responsibility to support those who act responsibly and to isolate those who don't, and that is exactly what America will do." "History shows that countries thrive when they . . . create space for small and medium-sized businesses that create jobs."
All this is not only true, it's groundbreaking. Since British Prime Minister Harold Macmillan gave his "Wind of Change" speech (also in Ghana) nearly 50 years ago, Western policy toward Africa has been a matter of throwing money at a guilty conscience (or a client of convenience), no questions asked. The result, as Mr. Obama pointed out, was that countries such as Kenya, which had a larger GDP than South Korea in 1961, "have been badly outpaced."
Maybe it took a president unburdened by that kind of guilt to junk the policy. Or maybe it simply took a conversation with some of the Francises of Africa -- the politically invisible middle classes held down by their own kleptocratic rulers. Whatever the case, Africa will be well served if Mr. Obama can make good on his rhetoric.
Now if only Mr. Obama would apply those same principles to the rest of his agenda, foreign and domestic.
For instance, if trade and investment are good ideas for the U.S.-Africa relationship, why has the Obama administration dragged its feet on free-trade agreements with Colombia and South Korea? Or, if the U.S. owes Africa no apologies for its recent disasters, why has Mr. Obama gone to such lengths to apologize to Iran for the 1953 Mossadegh coup, and, in his Cairo speech, to the entire Muslim world for the politics of the Cold War? Or if Mr. Obama wants to "isolate" irresponsible actors, why does he continue to promise engagement with Iran, Syria, Russia and perhaps North Korea no matter how they behave?
Similarly, while U.S. government officials don't usually demand bribes (at least outside of Illinois), the U.S. corporate tax rate, at 39%, is the second highest in the industrialized world. That's about 10 percentage points higher than the OECD average, or nearly twice the 20% "bribe tax" that scandalizes Mr. Obama.
As for creating "space for small and medium-sized businesses," it's ironic that Mr. Obama would make this point on the same weekend that House Ways and Means Chairman Charlie Rangel is calling for a 3% surtax on the wealthy -- many of whom, as Scott Hodge of the Tax Foundation notes, happen to be business owners. These are the same people now facing the prospect of next year's expiration of the Bush tax cuts and the return to the 55% top rate on estate taxes, another scourge of small-business owners.
Finally, if the $2.3 trillion the West has given in foreign aid over the past five decades -- a "stimulus" package if ever there was one -- has done nothing to raise Africa out of poverty, why does Mr. Obama think that any amount of stimulus spending is going to revive America's economic fortunes? At least in Africa's case, the West could periodically forgive its debts. Who will forgive ours?
In his conversation with Francis, Mr. Obama records his lament that Kenya's "big men" fail to take responsibility for their country:
"'Attitudes aren't so different in America,' I told Francis."
"'You are probably right,' he said. 'But you see, a rich country like America can perhaps afford to be stupid.'"
Somebody make this guy treasury secretary.
If other countries have 'good ideas' it's up to Congress, not the courts, to copy them
Sotomayor and International Law. By COLLIN LEVY
If other countries have 'good ideas' it's up to Congress, not the courts, to copy them.
WSJ, Jul 14, 2009
Sonia Sotomayor will parry a wide range of questions about her judicial philosophy during her Supreme Court confirmation hearings in the Senate this week. The most revealing line of inquiry may be about her views on the use of foreign and international law when judging cases.
Like several of the judges on the left branch of the court, Judge Sotomayor has said she favors a broader consideration of foreign and international law in U.S. judicial opinions. While she rarely had occasion to dip into foreign sources during her time on the Second Circuit, she recently went out of her way to embrace the concept and its applications by the high court.
In a speech to the American Civil Liberties Union of Puerto Rico in April, Judge Sotomayor explained that "ideas have no boundaries," and that "international law and foreign law will be very important in the discussion of how to think about the unsettled issues in our own legal system." To discourage the use of foreign or international law, she added, would "be asking American judges to close their minds to good ideas."
That's political quicksand for a judge Democrats are eager to portray as a moderate inclined to narrow reading of text and precedent.
Of particular interest to the confirmation hearings will be Judge Sotomayor's favorable reference in the ACLU speech to the Supreme Court's reasoning in two recent cases citing foreign and international law: Roper v. Simmons and Lawrence v. Texas. In Roper, the Court drew on international criticism of the death penalty to buttress the argument that it should be prohibited for juveniles under the Eighth Amendment prohibition of cruel and unusual punishment.
In Lawrence v. Texas, the court overturned a Texas statute against sodomy on the grounds that it violated due process. In his opinion for the majority, Justice Anthony Kennedy cited the European Court of Human Rights to show that the court's earlier decision in Bowers v. Hardwick was incorrect. In both those cases, Judge Sotomayor said, the court was using the foreign or international law to "help us understand what the concepts meant to other countries and . . . whether our understanding of our own constitutional rights fell into the mainstream of human thinking."
Cases like Roper and Lawrence fit squarely into that area of overseas law most sought after for borrowing by the more liberal justices of the court -- that is, the realms of moral or social policy. The problem with such inspiration is that it is inherently subjective and arbitrary. The laws of the world are infinitely diverse, and praising one necessarily condemns another. Cherry-picking desirable law introduces the very kind of legal chaos our Constitution was designed to prevent. If one judge may look to the courts of Western Europe for expansion of liberal thoughts on human rights, why may another not look to decidedly less liberal ideas?
Iran allows women who appear without a hijab on the streets to be lashed 74 times. China limits families to bearing one child. Even the democracies of Western Europe have laws that differ broadly from ours. Few countries, for instance, share our rules protecting the rights of the accused, or have the U.S.'s constitutionally mandated separation of church and state.
In his dissent from the court's reliance on foreign law in Roper v. Simmons, Justice Antonin Scalia wrote that "The Court should either profess its willingness to reconsider all these matters in light of the views of foreigners, or else it should cease putting forth foreigners' views as part of the reasoned basis of its decisions. To invoke alien law when it agrees with one's own thinking and ignore it otherwise is not reasoned decision making, but sophistry."
There are plenty of ways to use foreign law appropriately -- most obviously in comparing standards for implementation in the case of treaties. Some judges have also looked to Constitutional antecedents like English jurist William Blackstone to help better understand the context and thinking of the Founders and their foundations in English common law.
Outside of that, using foreign law as a guidepost or inspiration raises issues of both sovereignty and democracy by permitting jurists outside the U.S. system to guide the trajectory of our democracy. The proper place for the consideration of whatever "good ideas" may be found in foreign law is not the courts but the Congress.
Judge Sotomayor insists in the ACLU speech that the brouhaha about foreign and international law is due to a misunderstanding about how she and others like Justices Stephen Breyer and Ruth Bader Ginsburg would propose to use it. The point, she says, isn't that judges actually use foreign decisions as precedent (er, well, of course they don't), but that they open their minds to the intellectual force of their foreign counterparts.
But either foreign ideas carry weight by butressing judicial arguments, or they don't. Judicial opinions are written with great precision and care because they matter, and each strand of argument becomes a part of the grit and texture of American law.
No one is suggesting that judges stop reading or learning in ways that help expand their understanding of the law and the cases they are hearing. But that is an altogether different matter than official citation in a decision.
Our system of government has stood the test of time not in spite of but because it is uniquely drawn from the priorities of our own citizens, and them alone. The responsibility of the Supreme Court is neither to win an international beauty pageant, nor to encourage the export of our ideas.
It is to extend principles of the Founders and the words of the Constitution into a world that still needs their wisdom.
Ms. Levy is a senior editorial writer for the Journal, based in Washington.
If other countries have 'good ideas' it's up to Congress, not the courts, to copy them.
WSJ, Jul 14, 2009
Sonia Sotomayor will parry a wide range of questions about her judicial philosophy during her Supreme Court confirmation hearings in the Senate this week. The most revealing line of inquiry may be about her views on the use of foreign and international law when judging cases.
Like several of the judges on the left branch of the court, Judge Sotomayor has said she favors a broader consideration of foreign and international law in U.S. judicial opinions. While she rarely had occasion to dip into foreign sources during her time on the Second Circuit, she recently went out of her way to embrace the concept and its applications by the high court.
In a speech to the American Civil Liberties Union of Puerto Rico in April, Judge Sotomayor explained that "ideas have no boundaries," and that "international law and foreign law will be very important in the discussion of how to think about the unsettled issues in our own legal system." To discourage the use of foreign or international law, she added, would "be asking American judges to close their minds to good ideas."
That's political quicksand for a judge Democrats are eager to portray as a moderate inclined to narrow reading of text and precedent.
Of particular interest to the confirmation hearings will be Judge Sotomayor's favorable reference in the ACLU speech to the Supreme Court's reasoning in two recent cases citing foreign and international law: Roper v. Simmons and Lawrence v. Texas. In Roper, the Court drew on international criticism of the death penalty to buttress the argument that it should be prohibited for juveniles under the Eighth Amendment prohibition of cruel and unusual punishment.
In Lawrence v. Texas, the court overturned a Texas statute against sodomy on the grounds that it violated due process. In his opinion for the majority, Justice Anthony Kennedy cited the European Court of Human Rights to show that the court's earlier decision in Bowers v. Hardwick was incorrect. In both those cases, Judge Sotomayor said, the court was using the foreign or international law to "help us understand what the concepts meant to other countries and . . . whether our understanding of our own constitutional rights fell into the mainstream of human thinking."
Cases like Roper and Lawrence fit squarely into that area of overseas law most sought after for borrowing by the more liberal justices of the court -- that is, the realms of moral or social policy. The problem with such inspiration is that it is inherently subjective and arbitrary. The laws of the world are infinitely diverse, and praising one necessarily condemns another. Cherry-picking desirable law introduces the very kind of legal chaos our Constitution was designed to prevent. If one judge may look to the courts of Western Europe for expansion of liberal thoughts on human rights, why may another not look to decidedly less liberal ideas?
Iran allows women who appear without a hijab on the streets to be lashed 74 times. China limits families to bearing one child. Even the democracies of Western Europe have laws that differ broadly from ours. Few countries, for instance, share our rules protecting the rights of the accused, or have the U.S.'s constitutionally mandated separation of church and state.
In his dissent from the court's reliance on foreign law in Roper v. Simmons, Justice Antonin Scalia wrote that "The Court should either profess its willingness to reconsider all these matters in light of the views of foreigners, or else it should cease putting forth foreigners' views as part of the reasoned basis of its decisions. To invoke alien law when it agrees with one's own thinking and ignore it otherwise is not reasoned decision making, but sophistry."
There are plenty of ways to use foreign law appropriately -- most obviously in comparing standards for implementation in the case of treaties. Some judges have also looked to Constitutional antecedents like English jurist William Blackstone to help better understand the context and thinking of the Founders and their foundations in English common law.
Outside of that, using foreign law as a guidepost or inspiration raises issues of both sovereignty and democracy by permitting jurists outside the U.S. system to guide the trajectory of our democracy. The proper place for the consideration of whatever "good ideas" may be found in foreign law is not the courts but the Congress.
Judge Sotomayor insists in the ACLU speech that the brouhaha about foreign and international law is due to a misunderstanding about how she and others like Justices Stephen Breyer and Ruth Bader Ginsburg would propose to use it. The point, she says, isn't that judges actually use foreign decisions as precedent (er, well, of course they don't), but that they open their minds to the intellectual force of their foreign counterparts.
But either foreign ideas carry weight by butressing judicial arguments, or they don't. Judicial opinions are written with great precision and care because they matter, and each strand of argument becomes a part of the grit and texture of American law.
No one is suggesting that judges stop reading or learning in ways that help expand their understanding of the law and the cases they are hearing. But that is an altogether different matter than official citation in a decision.
Our system of government has stood the test of time not in spite of but because it is uniquely drawn from the priorities of our own citizens, and them alone. The responsibility of the Supreme Court is neither to win an international beauty pageant, nor to encourage the export of our ideas.
It is to extend principles of the Founders and the words of the Constitution into a world that still needs their wisdom.
Ms. Levy is a senior editorial writer for the Journal, based in Washington.
Monday, July 13, 2009
The Media and the First Amendment - The Washington Post scandal is really about double standards
The Media and the First Amendment. By BERT GALL and STEVE SIMPSON
The Washington Post scandal is really about double standards.
WSJ, Jul 13, 2009
Our nation's capital is abuzz over the Washington Post's recent indiscretion. The newspaper planned to host a now-canceled salon at the home of Katharine Weymouth, the Post's publisher. For $25,000, lobbyists and corporate executives would be granted exclusive access to members of the Obama administration, Congress, and Post journalists.
Pundits have condemned the Post for acting as an influence peddler. But other news publications routinely host similar events. This shouldn't come as a shock. Media corporations have always had the privilege of influencing politics without the restrictions -- like campaign finance laws -- that other corporations face.
So while this episode has been treated as a scandal of journalistic ethics, it is really about double standards. When other business corporations attempt to influence politics -- by running political ads during elections -- editorial boards rush to condemn the corporations for "buying" elections or "unduly" influencing candidates. We should be concerned, the boards say, because those corporations have too much influence over the political debate. The public needs strict campaign finance laws to protect it from that influence.
The New York Times recently featured an editorial about the Supreme Court's current major campaign finance case, Citizens United v. Federal Election Commission (2009). The editorial counseled the high court against overturning precedent, referring to Austin v. Michigan Chamber of Commerce (1990). That case allows the government to prevent corporations from spending money on electoral advocacy. According to the Times, eliminating the government's power to ban corporate political speech "would be a disaster for democracy."
But if excessive influence is a reason to censor the speech of every other kind of corporation, then it is also a reason to censor the speech of media corporations. After all, the media spend millions of dollars each year on news stories about candidates and editorials endorsing them. This press is worth a lot. For example, the Washington Post's endorsement of Creigh Deeds is widely credited as the biggest factor in his rise from obscurity to victory in Virginia's Democratic gubernatorial primary this year.
So where are the editorials calling for limits on the amounts of "money" -- in the form of coverage and editorials -- media companies devote to candidates?
Of course, you'll hear no such thing from the nation's newspapers and media outlets. Media companies are exempt from campaign finance laws. Many in the press think that the First Amendment entitles them to special protections that don't apply to anyone else.
This is wrong. The Supreme Court has repeatedly made clear that the media's right to free speech is no greater than anyone else's. And in Austin and other campaign finance cases, the Supreme Court noted that the media's exemption from campaign finance laws was discretionary, not mandatory.
In short, the press's favored status is only as strong as Congress says it is, at least under current First Amendment jurisprudence. If, in the wake of the Post scandal, the public begins to believe that media companies are as corrupt as the press claims other corporations are, Congress's view on the matter could change. Alternatively, Congress may come up with some other reason to start limiting the freedom of the press. Congress is currently considering a bill that would throw struggling newspapers an economic lifeline by allowing them to operate as nonprofits -- thereby making their advertising and subscription revenue tax-exempt. The catch? Newspapers that take the deal would no longer be able to endorse political candidates.
This precarious position -- free speech at Congress's discretion -- is not exactly a recipe for a strong and independent press. It's tempting to think that media companies that have called for limits on everyone else's speech will ultimately get what they deserve when Congress gets around to censoring theirs. But that would be a mistake.
The press remains one of the most important bulwarks against tyranny. The solution is to protect free speech on principle, regardless of the identity of the speaker. Banning a corporation from spending its own money for political advocacy is censorship, plain and simple. The sooner the press understands this, the safer its rights -- and ours -- will be.
Messrs. Gall and Simpson are senior attorneys at the Institute for Justice.
The Washington Post scandal is really about double standards.
WSJ, Jul 13, 2009
Our nation's capital is abuzz over the Washington Post's recent indiscretion. The newspaper planned to host a now-canceled salon at the home of Katharine Weymouth, the Post's publisher. For $25,000, lobbyists and corporate executives would be granted exclusive access to members of the Obama administration, Congress, and Post journalists.
Pundits have condemned the Post for acting as an influence peddler. But other news publications routinely host similar events. This shouldn't come as a shock. Media corporations have always had the privilege of influencing politics without the restrictions -- like campaign finance laws -- that other corporations face.
So while this episode has been treated as a scandal of journalistic ethics, it is really about double standards. When other business corporations attempt to influence politics -- by running political ads during elections -- editorial boards rush to condemn the corporations for "buying" elections or "unduly" influencing candidates. We should be concerned, the boards say, because those corporations have too much influence over the political debate. The public needs strict campaign finance laws to protect it from that influence.
The New York Times recently featured an editorial about the Supreme Court's current major campaign finance case, Citizens United v. Federal Election Commission (2009). The editorial counseled the high court against overturning precedent, referring to Austin v. Michigan Chamber of Commerce (1990). That case allows the government to prevent corporations from spending money on electoral advocacy. According to the Times, eliminating the government's power to ban corporate political speech "would be a disaster for democracy."
But if excessive influence is a reason to censor the speech of every other kind of corporation, then it is also a reason to censor the speech of media corporations. After all, the media spend millions of dollars each year on news stories about candidates and editorials endorsing them. This press is worth a lot. For example, the Washington Post's endorsement of Creigh Deeds is widely credited as the biggest factor in his rise from obscurity to victory in Virginia's Democratic gubernatorial primary this year.
So where are the editorials calling for limits on the amounts of "money" -- in the form of coverage and editorials -- media companies devote to candidates?
Of course, you'll hear no such thing from the nation's newspapers and media outlets. Media companies are exempt from campaign finance laws. Many in the press think that the First Amendment entitles them to special protections that don't apply to anyone else.
This is wrong. The Supreme Court has repeatedly made clear that the media's right to free speech is no greater than anyone else's. And in Austin and other campaign finance cases, the Supreme Court noted that the media's exemption from campaign finance laws was discretionary, not mandatory.
In short, the press's favored status is only as strong as Congress says it is, at least under current First Amendment jurisprudence. If, in the wake of the Post scandal, the public begins to believe that media companies are as corrupt as the press claims other corporations are, Congress's view on the matter could change. Alternatively, Congress may come up with some other reason to start limiting the freedom of the press. Congress is currently considering a bill that would throw struggling newspapers an economic lifeline by allowing them to operate as nonprofits -- thereby making their advertising and subscription revenue tax-exempt. The catch? Newspapers that take the deal would no longer be able to endorse political candidates.
This precarious position -- free speech at Congress's discretion -- is not exactly a recipe for a strong and independent press. It's tempting to think that media companies that have called for limits on everyone else's speech will ultimately get what they deserve when Congress gets around to censoring theirs. But that would be a mistake.
The press remains one of the most important bulwarks against tyranny. The solution is to protect free speech on principle, regardless of the identity of the speaker. Banning a corporation from spending its own money for political advocacy is censorship, plain and simple. The sooner the press understands this, the safer its rights -- and ours -- will be.
Messrs. Gall and Simpson are senior attorneys at the Institute for Justice.
Federal President's comments on Moscow about the Cold War
Obama Rewrites the Cold War. By LIZ CHENEY
The President has a duty to stand up to the lies of our enemies.
WSJ, Jul 13, 2009
There are two different versions of the story of the end of the Cold War: the Russian version, and the truth. President Barack Obama endorsed the Russian version in Moscow last week.
Speaking to a group of students, our president explained it this way: "The American and Soviet armies were still massed in Europe, trained and ready to fight. The ideological trenches of the last century were roughly in place. Competition in everything from astrophysics to athletics was treated as a zero-sum game. If one person won, then the other person had to lose. And then within a few short years, the world as it was ceased to be. Make no mistake: This change did not come from any one nation. The Cold War reached a conclusion because of the actions of many nations over many years, and because the people of Russia and Eastern Europe stood up and decided that its end would be peaceful."
The truth, of course, is that the Soviets ran a brutal, authoritarian regime. The KGB killed their opponents or dragged them off to the Gulag. There was no free press, no freedom of speech, no freedom of worship, no freedom of any kind. The basis of the Cold War was not "competition in astrophysics and athletics." It was a global battle between tyranny and freedom. The Soviet "sphere of influence" was delineated by walls and barbed wire and tanks and secret police to prevent people from escaping. America was an unmatched force for good in the world during the Cold War. The Soviets were not. The Cold War ended not because the Soviets decided it should but because they were no match for the forces of freedom and the commitment of free nations to defend liberty and defeat Communism.
It is irresponsible for an American president to go to Moscow and tell a room full of young Russians less than the truth about how the Cold War ended. One wonders whether this was just an attempt to push "reset" -- or maybe to curry favor. Perhaps, most concerning of all, Mr. Obama believes what he said.
Mr. Obama's method for pushing reset around the world is becoming clearer with each foreign trip. He proclaims moral equivalence between the U.S. and our adversaries, he readily accepts a false historical narrative, and he refuses to stand up against anti-American lies.
The approach was evident in his speech in Moscow and in his speech in Cairo last month. In Cairo, he asserted there was some sort of equivalence between American support for the 1953 coup in Iran and the evil that the Iranian mullahs have done in the world since 1979. On an earlier trip to Mexico City, the president listened to an extended anti-American screed by Nicaraguan President Daniel Ortega and then let the lies stand by responding only with, "I'm grateful that President Ortega did not blame me for the things that occurred when I was 3 months old."
Asked at a NATO meeting in France in April whether he believed in American exceptionalism, the president said, "I believe in American Exceptionalism just as I suspect that the Brits believe in British exceptionalism and the Greeks believe in Greek exceptionalism." In other words, not so much.
The Obama administration does seem to believe in another kind of exceptionalism -- Obama exceptionalism. "We have the best brand on Earth: the Obama brand," one Obama handler has said. What they don't seem to realize is that once you're president, your brand is America, and the American people expect you to defend us against lies, not embrace or ignore them. We also expect you to know your history.
Mr. Obama has become fond of saying, as he did in Russia again last week, that American nuclear disarmament will encourage the North Koreans and the Iranians to give up their nuclear ambitions. Does he really believe that the North Koreans and the Iranians are simply waiting for America to cut funds for missile defense and reduce our strategic nuclear stockpile before they halt their weapons programs?
The White House ought to take a lesson from President Harry Truman. In April, 1950, Truman signed National Security Council report 68 (NSC-68). One of the foundational documents of America's Cold War strategy, NSC-68 explains the danger of disarming America in the hope of appeasing our enemies. "No people in history," it reads, "have preserved their freedom who thought that by not being strong enough to protect themselves they might prove inoffensive to their enemies."
Perhaps Mr. Obama thinks he is making America inoffensive to our enemies. In reality, he is emboldening them and weakening us. America can be disarmed literally -- by cutting our weapons systems and our defensive capabilities -- as Mr. Obama has agreed to do. We can also be disarmed morally by a president who spreads false narratives about our history or who accepts, even if by his silence, our enemies' lies about us.
Ms. Cheney served as deputy assistant secretary of state and principal deputy assistant secretary of state for near eastern affairs from 2002-2004 and 2005-2006.
The President has a duty to stand up to the lies of our enemies.
WSJ, Jul 13, 2009
There are two different versions of the story of the end of the Cold War: the Russian version, and the truth. President Barack Obama endorsed the Russian version in Moscow last week.
Speaking to a group of students, our president explained it this way: "The American and Soviet armies were still massed in Europe, trained and ready to fight. The ideological trenches of the last century were roughly in place. Competition in everything from astrophysics to athletics was treated as a zero-sum game. If one person won, then the other person had to lose. And then within a few short years, the world as it was ceased to be. Make no mistake: This change did not come from any one nation. The Cold War reached a conclusion because of the actions of many nations over many years, and because the people of Russia and Eastern Europe stood up and decided that its end would be peaceful."
The truth, of course, is that the Soviets ran a brutal, authoritarian regime. The KGB killed their opponents or dragged them off to the Gulag. There was no free press, no freedom of speech, no freedom of worship, no freedom of any kind. The basis of the Cold War was not "competition in astrophysics and athletics." It was a global battle between tyranny and freedom. The Soviet "sphere of influence" was delineated by walls and barbed wire and tanks and secret police to prevent people from escaping. America was an unmatched force for good in the world during the Cold War. The Soviets were not. The Cold War ended not because the Soviets decided it should but because they were no match for the forces of freedom and the commitment of free nations to defend liberty and defeat Communism.
It is irresponsible for an American president to go to Moscow and tell a room full of young Russians less than the truth about how the Cold War ended. One wonders whether this was just an attempt to push "reset" -- or maybe to curry favor. Perhaps, most concerning of all, Mr. Obama believes what he said.
Mr. Obama's method for pushing reset around the world is becoming clearer with each foreign trip. He proclaims moral equivalence between the U.S. and our adversaries, he readily accepts a false historical narrative, and he refuses to stand up against anti-American lies.
The approach was evident in his speech in Moscow and in his speech in Cairo last month. In Cairo, he asserted there was some sort of equivalence between American support for the 1953 coup in Iran and the evil that the Iranian mullahs have done in the world since 1979. On an earlier trip to Mexico City, the president listened to an extended anti-American screed by Nicaraguan President Daniel Ortega and then let the lies stand by responding only with, "I'm grateful that President Ortega did not blame me for the things that occurred when I was 3 months old."
Asked at a NATO meeting in France in April whether he believed in American exceptionalism, the president said, "I believe in American Exceptionalism just as I suspect that the Brits believe in British exceptionalism and the Greeks believe in Greek exceptionalism." In other words, not so much.
The Obama administration does seem to believe in another kind of exceptionalism -- Obama exceptionalism. "We have the best brand on Earth: the Obama brand," one Obama handler has said. What they don't seem to realize is that once you're president, your brand is America, and the American people expect you to defend us against lies, not embrace or ignore them. We also expect you to know your history.
Mr. Obama has become fond of saying, as he did in Russia again last week, that American nuclear disarmament will encourage the North Koreans and the Iranians to give up their nuclear ambitions. Does he really believe that the North Koreans and the Iranians are simply waiting for America to cut funds for missile defense and reduce our strategic nuclear stockpile before they halt their weapons programs?
The White House ought to take a lesson from President Harry Truman. In April, 1950, Truman signed National Security Council report 68 (NSC-68). One of the foundational documents of America's Cold War strategy, NSC-68 explains the danger of disarming America in the hope of appeasing our enemies. "No people in history," it reads, "have preserved their freedom who thought that by not being strong enough to protect themselves they might prove inoffensive to their enemies."
Perhaps Mr. Obama thinks he is making America inoffensive to our enemies. In reality, he is emboldening them and weakening us. America can be disarmed literally -- by cutting our weapons systems and our defensive capabilities -- as Mr. Obama has agreed to do. We can also be disarmed morally by a president who spreads false narratives about our history or who accepts, even if by his silence, our enemies' lies about us.
Ms. Cheney served as deputy assistant secretary of state and principal deputy assistant secretary of state for near eastern affairs from 2002-2004 and 2005-2006.
Congress prepares to kill more jobs - minimum wage
Mandating Unemployment. WSJ Editorial
Congress prepares to kill more jobs.
WSJ, Jul 13, 2009
Here's some economic logic to ponder. The unemployment rate in June for American teenagers was 24%, for black teens it was 38%, and even White House economists are predicting more job losses. So how about raising the cost of that teenage labor?
Sorry to say, but that's precisely what will happen on July 24, when the minimum wage will increase to $7.25 an hour from $6.55. The national wage floor will have increased 41% since the three-step hike was approved by the Democratic Congress in May 2007. Then the economy was humming, with an overall jobless rate of 4.5% and many entry-level jobs paying more than the minimum. That's a hard case to make now, with a 9.5% national jobless rate and thousands of employers facing razor-thin profit margins.
There's been a long and spirited debate among economists about who gets hurt and who benefits when the minimum wage rises. But in a 2006 National Bureau of Economic Research paper, economists David Neumark of the University of California, Irvine, and William Wascher of the Federal Reserve Bank reviewed the voluminous literature over the past 30 years and came to two almost universally acknowledged conclusions.
First, "a sizable majority of the studies give a relatively consistent (though not always statistically significant) indication of negative employment effects." Second, "studies that focus on the least-skilled groups [i.e., teens, and welfare moms] provide relatively overwhelming evidence of stronger disemployment effects."
Proponents argue that millions of workers will benefit from the bigger paychecks. But about two of every three full-time minimum-wage workers get a pay raise anyway within a year on the job. Meanwhile, those who lose their jobs or who never get a job in the first place get a minimum wage of $0.
Mr. Neumark calculates that the 70-cent per-hour minimum wage hike this month would kill "about 300,000 jobs for those between the ages of 16-24." Single working mothers would also be among those most hurt.
Keep in mind the Earned Income Tax Credit already exists to help low-wage workers and has been greatly expanded in recent years. The EITC also spreads the cost of the wage supplement to all Americans, not merely to employers, so it doesn't raise the cost of hiring low-wage workers.
For example, consider a single mom with two kids who earns the current $6.55 minimum at a full-time, year-round job. In 2009 she receives a $5,028 EITC cash payment from Uncle Sam -- or about an extra $2.50 per hour worked. Other federal income supplements, such as the refundable child tax credit, add another $1,900 or so. Thus at a wage of $6.55 an hour, her actual pay becomes $10.02 an hour -- more than a 50% increase from the current minimum. (See nearby table.)
But that single mom can't collect those checks if she doesn't have a job, and the tragedy of a higher minimum wage is that it will prevent thousands of working moms striving to pull their families out of poverty from being hired in the first place.
If Congress were wise and compassionate, it would at least suspend the wage hike for one or two years until the job market recovers. We know this Congress won't do that, but someone has to speak up for the poorest, least skilled Americans.
Congress prepares to kill more jobs.
WSJ, Jul 13, 2009
Here's some economic logic to ponder. The unemployment rate in June for American teenagers was 24%, for black teens it was 38%, and even White House economists are predicting more job losses. So how about raising the cost of that teenage labor?
Sorry to say, but that's precisely what will happen on July 24, when the minimum wage will increase to $7.25 an hour from $6.55. The national wage floor will have increased 41% since the three-step hike was approved by the Democratic Congress in May 2007. Then the economy was humming, with an overall jobless rate of 4.5% and many entry-level jobs paying more than the minimum. That's a hard case to make now, with a 9.5% national jobless rate and thousands of employers facing razor-thin profit margins.
There's been a long and spirited debate among economists about who gets hurt and who benefits when the minimum wage rises. But in a 2006 National Bureau of Economic Research paper, economists David Neumark of the University of California, Irvine, and William Wascher of the Federal Reserve Bank reviewed the voluminous literature over the past 30 years and came to two almost universally acknowledged conclusions.
First, "a sizable majority of the studies give a relatively consistent (though not always statistically significant) indication of negative employment effects." Second, "studies that focus on the least-skilled groups [i.e., teens, and welfare moms] provide relatively overwhelming evidence of stronger disemployment effects."
Proponents argue that millions of workers will benefit from the bigger paychecks. But about two of every three full-time minimum-wage workers get a pay raise anyway within a year on the job. Meanwhile, those who lose their jobs or who never get a job in the first place get a minimum wage of $0.
Mr. Neumark calculates that the 70-cent per-hour minimum wage hike this month would kill "about 300,000 jobs for those between the ages of 16-24." Single working mothers would also be among those most hurt.
Keep in mind the Earned Income Tax Credit already exists to help low-wage workers and has been greatly expanded in recent years. The EITC also spreads the cost of the wage supplement to all Americans, not merely to employers, so it doesn't raise the cost of hiring low-wage workers.
For example, consider a single mom with two kids who earns the current $6.55 minimum at a full-time, year-round job. In 2009 she receives a $5,028 EITC cash payment from Uncle Sam -- or about an extra $2.50 per hour worked. Other federal income supplements, such as the refundable child tax credit, add another $1,900 or so. Thus at a wage of $6.55 an hour, her actual pay becomes $10.02 an hour -- more than a 50% increase from the current minimum. (See nearby table.)
But that single mom can't collect those checks if she doesn't have a job, and the tragedy of a higher minimum wage is that it will prevent thousands of working moms striving to pull their families out of poverty from being hired in the first place.
If Congress were wise and compassionate, it would at least suspend the wage hike for one or two years until the job market recovers. We know this Congress won't do that, but someone has to speak up for the poorest, least skilled Americans.
Don't Shoot the Speculators
Don't Shoot the Speculators. By L. GORDON CROVITZ
They predict prices, not set them.
WSJ, Jul 13, 2009
Speculators don't get much respect. Short sellers last year were blamed for their trades warning about the credit crisis, and commodities traders are now accused of causing higher oil prices. Even when traders are later proven right -- maybe especially when they're proven right -- we blame them for delivering the bad news.
Maybe it's human nature to reject Shakespeare's warning and shoot the messenger. The good news is that a recent proposal aimed at one group of speculators could prove that speculators of all kinds deserve our thanks -- or if that's too much to ask, at least to be left alone to bring valuable information to markets.
The Commodity Futures Trading Commission is considering requiring more disclosure, intended to ferret out what politicians like to call "excessive speculation." Whatever the intention, enough transparency could instead show that oil speculators are heroes, not villains.
Last week, new CFTC head Gary Gensler said the agency might set new limits on oil speculators now that oil prices have doubled this year from a low of $34 a barrel. This was surprising because just last fall, the agency issued an exhaustive study concluding that speculators were not to blame for the runup in oil prices that reached $145 last summer. It's also telling that no one accused traders of harmful speculation when oil prices tumbled from their earlier highs.
The more interesting part of the CFTC proposal is for new transparency to the positions that different kinds of traders take in futures trading. Under current rules, the CFTC sets limits on trading positions based on Commitment of Traders reports, which date back to the 1920s. These put trading in two key categories, based on the type of user, not the positions they have in various contracts. This anachronism has long led to uncertainty about why prices move, a lack of transparency that also feeds the blaming of speculators.
Business users such as airlines and oil companies are considered in the "commercial" category, with hedge funds and other financial traders in the other, more regulated "noncommercial" category. But many commercial users have active trading desks. Likewise, financial firms need to hedge against movements in commodities such as oil because they have trading contracts that leave them as exposed to price risks as the companies that actually use the physical product.
More-detailed reporting on who has which kinds of positions in oil would make the market more understandable. It would show that so-called financial speculators are trying to predict price movements, but also trying to hedge risk. Likewise, commercial traders that take delivery of oil are hedging risks, while also predicting future prices. As oil expert Daniel Yergin points out, more visibility "will give a better sense of how much is the market responding to supply and demand in physical oil and how much is it responding to the supply and demand of money on the part of investors."
It doesn't make sense to shoot either kind of messenger. Markets are collections of information, translated through trading into prices. These prices, unless there is manipulation, are the best estimate of future supply and demand. Such price discovery should not be controversial, though it too often has been.
"Oil market speculation is back in the news," Bob McTeer, a former Dallas Federal Reserve president, wrote on his blog. "I'm afraid I don't have much to contribute since Milton Friedman convinced me long ago that profitable speculation is stabilizing and destabilizing speculation is unprofitable. Speculation is profitable if the speculator buys lower than he sells; it's unprofitable if he sells lower than he buys. Even if they don't make a profit, they are trying."
Or, as the sign in the 19th century saloon put it, "Don't shoot the piano player; he's doing the best he can." Oil industry experts, whether "speculators" or not, do their best to predict price movements. Some focus on uncertainty about Iran. Others point to demand trends from China and India. There's the inherent volatility in this market due to the OPEC cartel having a firm grip on the supply spigot.
Finally, there's the growing role that commodities are again playing as a hedge against inflation and a weak dollar. Increased trading in commodities is a danger-ahead warning about U.S. fiscal and monetary policies. While Washington might like to stifle these particular messengers for the warning they're sending, the rest of us should welcome information about troubles to come.
Congress has succeeded in rattling regulators at the CFTC into doing something about speculators. They have more regulation in mind, but if the CFTC can bring more transparency to oil trading, the result will be excellent even if unintended: We can focus our attention on the real pressures on oil prices instead of wallowing in searches for scapegoats. Better disclosure can reduce the human tendency to blame traders for rising prices when the responsibility lies elsewhere.
They predict prices, not set them.
WSJ, Jul 13, 2009
Speculators don't get much respect. Short sellers last year were blamed for their trades warning about the credit crisis, and commodities traders are now accused of causing higher oil prices. Even when traders are later proven right -- maybe especially when they're proven right -- we blame them for delivering the bad news.
Maybe it's human nature to reject Shakespeare's warning and shoot the messenger. The good news is that a recent proposal aimed at one group of speculators could prove that speculators of all kinds deserve our thanks -- or if that's too much to ask, at least to be left alone to bring valuable information to markets.
The Commodity Futures Trading Commission is considering requiring more disclosure, intended to ferret out what politicians like to call "excessive speculation." Whatever the intention, enough transparency could instead show that oil speculators are heroes, not villains.
Last week, new CFTC head Gary Gensler said the agency might set new limits on oil speculators now that oil prices have doubled this year from a low of $34 a barrel. This was surprising because just last fall, the agency issued an exhaustive study concluding that speculators were not to blame for the runup in oil prices that reached $145 last summer. It's also telling that no one accused traders of harmful speculation when oil prices tumbled from their earlier highs.
The more interesting part of the CFTC proposal is for new transparency to the positions that different kinds of traders take in futures trading. Under current rules, the CFTC sets limits on trading positions based on Commitment of Traders reports, which date back to the 1920s. These put trading in two key categories, based on the type of user, not the positions they have in various contracts. This anachronism has long led to uncertainty about why prices move, a lack of transparency that also feeds the blaming of speculators.
Business users such as airlines and oil companies are considered in the "commercial" category, with hedge funds and other financial traders in the other, more regulated "noncommercial" category. But many commercial users have active trading desks. Likewise, financial firms need to hedge against movements in commodities such as oil because they have trading contracts that leave them as exposed to price risks as the companies that actually use the physical product.
More-detailed reporting on who has which kinds of positions in oil would make the market more understandable. It would show that so-called financial speculators are trying to predict price movements, but also trying to hedge risk. Likewise, commercial traders that take delivery of oil are hedging risks, while also predicting future prices. As oil expert Daniel Yergin points out, more visibility "will give a better sense of how much is the market responding to supply and demand in physical oil and how much is it responding to the supply and demand of money on the part of investors."
It doesn't make sense to shoot either kind of messenger. Markets are collections of information, translated through trading into prices. These prices, unless there is manipulation, are the best estimate of future supply and demand. Such price discovery should not be controversial, though it too often has been.
"Oil market speculation is back in the news," Bob McTeer, a former Dallas Federal Reserve president, wrote on his blog. "I'm afraid I don't have much to contribute since Milton Friedman convinced me long ago that profitable speculation is stabilizing and destabilizing speculation is unprofitable. Speculation is profitable if the speculator buys lower than he sells; it's unprofitable if he sells lower than he buys. Even if they don't make a profit, they are trying."
Or, as the sign in the 19th century saloon put it, "Don't shoot the piano player; he's doing the best he can." Oil industry experts, whether "speculators" or not, do their best to predict price movements. Some focus on uncertainty about Iran. Others point to demand trends from China and India. There's the inherent volatility in this market due to the OPEC cartel having a firm grip on the supply spigot.
Finally, there's the growing role that commodities are again playing as a hedge against inflation and a weak dollar. Increased trading in commodities is a danger-ahead warning about U.S. fiscal and monetary policies. While Washington might like to stifle these particular messengers for the warning they're sending, the rest of us should welcome information about troubles to come.
Congress has succeeded in rattling regulators at the CFTC into doing something about speculators. They have more regulation in mind, but if the CFTC can bring more transparency to oil trading, the result will be excellent even if unintended: We can focus our attention on the real pressures on oil prices instead of wallowing in searches for scapegoats. Better disclosure can reduce the human tendency to blame traders for rising prices when the responsibility lies elsewhere.
O'Grady: Why Honduras Sent Zelaya Away
Why Honduras Sent Zelaya Away. By Mary A O'Grady
WSJ, Jul 13, 2009
"Two incidents earlier this year make the case. The first occurred in January when the country was preparing to name a new 15-seat Supreme Court, as it does every seven years. An independent board made up of members of civil society had nominated 45 candidates. From that list, Congress was to choose the new judges.
Mr. Zelaya had his own nominees in mind, including the wife of a minister, and their names were not on the list. So he set about to pressure the legislature. On the day of the vote he militarized the area around the Congress and press reports say a group of the president's men, including the minister of defense, went to the Congress uninvited to turn up the heat. The head of the legislature had to call security to have the defense minister removed."
WSJ, Jul 13, 2009
"Two incidents earlier this year make the case. The first occurred in January when the country was preparing to name a new 15-seat Supreme Court, as it does every seven years. An independent board made up of members of civil society had nominated 45 candidates. From that list, Congress was to choose the new judges.
Mr. Zelaya had his own nominees in mind, including the wife of a minister, and their names were not on the list. So he set about to pressure the legislature. On the day of the vote he militarized the area around the Congress and press reports say a group of the president's men, including the minister of defense, went to the Congress uninvited to turn up the heat. The head of the legislature had to call security to have the defense minister removed."
Sunday, July 12, 2009
The release of the Irbil Five - Quds Force commanders from Iran’s Islamic Revolutionary Guards Corps (IRGC)
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).
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).
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.
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