Mr. Paulson on the Hot Seat. WaPo Editorial
A congressional inquiry into the financial crisis and bailout ignores what went right.
Friday, July 17, 2009
HERE, MORE or less, is the state of the U.S. financial system as we enter the second half of 2009: The top 20 U.S. banks -- once thought to be insolvent and possibly in need of nationalization -- have survived a government stress test and begun raising private capital. The three-month London Interbank Offered Rate, which rises when banks are illiquid, has declined steadily since March. Several recipients of government bailout funds have repaid them. The Treasury Department felt confident enough of the system's soundness to deny further help this week to CIT Group, a previous recipient of bailout money.
All of this good news must be marked "tentative," of course, for the simple reason that the banks are floating on a sea of government-supplied liquidity, in the form of a near-zero Federal Reserve target rate, open-ended Treasury support to Fannie Mae and Freddie Mac, and multiple government credit guarantees. This is far from a self-sustaining recovery, and a new shock could push the system back to the brink. But all things considered, we could be doing much worse.
Under the circumstances, you might have thought Congress would hold a hearing about what has gone right so far and how to turn this incipient and vulnerable progress into something more permanent. Instead, we got yesterday's backward-looking affair at the House Committee on Oversight and Government Reform, the latest in a series of sessions aimed at December's federally engineered merger of Bank of America and Merrill Lynch, which has ended up costing taxpayers about $50 billion. Resentment of bailing out Wall Street is a bipartisan affair, so both Republicans and Democrats on this committee are determined to show how wrong it was for officials, including Federal Reserve Chairman Ben S. Bernanke, then-New York Fed boss Timothy F. Geithner and then-Treasury Secretary Henry M. Paulson to strong-arm Bank of America chief executive Kenneth D. Lewis into swallowing Merrill even after it turned out that the former Wall Street powerhouse faced much bigger losses than previously known.
In the witness chair yesterday, Mr. Paulson pretty much pleaded guilty to telling Mr. Lewis that he would be out of a job if he reneged -- with the explanation that the alternative would have been worse, namely a financial meltdown that would have spread around the world and probably cost taxpayers many billions more than did the Merrill-Bank of America merger or the bailout of insurance giant AIG. "By far the biggest advantage to the taxpayers is what didn't happen," Mr. Paulson said. Unsatisfied, several committee members arraigned Mr. Paulson for allegedly bailing out the banks and AIG to benefit his former Wall Street firm, Goldman Sachs. As proof, they cited Goldman's record profit of $3.4 billion in the second quarter.
Even though Mr. Paulson didn't quite dare to say it, Goldman's good quarter is a sign that he and other decision-makers made the right calls back in the scary fall and winter of 2008. The objective of government policy should be to get financial firms to where they are once again profitable without taxpayer support. It's absolutely true, as members of the committee said and as Mr. Paulson acknowledged, that the bailout of Wall Street is fraught with moral hazard: It broke the basic rule of capitalism, which says that business executives should bear all the costs of their bad decisions. But it's also true that financial stability is a public good. When the collapse of one or more financial institutions threatens to destroy financial stability, a government bailout can serve the public interest. Believing that, Mr. Paulson and his colleagues made some very difficult decisions under dangerous conditions. The ultimate results of those tough choices are still unknown. A fairer congressional inquiry, though, would start from the premise that, if he had not taken the actions that he did, the subject of today's investigations might have been a much, much bigger catastrophe.
Friday, July 17, 2009
Judges Don't Belong on the Battlefield - Recent decisions have altered the way we're fighting in Afghanistan
Judges Don't Belong on the Battlefield. By DAVID B. RIVKIN JR. and LEE A. CASEY
Recent decisions have altered the way we're fighting in Afghanistan.
WSJ, Jul 17, 2009
Earlier this year, a Washington D.C.-based federal court extended the constitutional right to habeas corpus to three foreign nationals detained by U.S. forces in Afghanistan. The case, Maqaleh v. Gates, represents yet another step in the federal judiciary's transformation from Alexander Hamilton's "least dangerous branch" into a fully active policy maker.
Historically, the constitutional right to habeas corpus -- an ancient process permitting prisoners to challenge the legality of their confinement -- was available only to individuals present in the U.S., or to American citizens held by federal authorities overseas. In a leading World War II case, Johnson v. Eisentrager (1950), the high court decided, with "bright line rules," that habeas corpus is unavailable to foreign citizens held outside the U.S.
But last year, the high court reversed itself in Boumediene v. Bush. The court held, by a 5-4 vote, that foreign nationals detained at Guantanamo Bay, Cuba, also have a right to habeas corpus. Articulating a new, multifactor test for determining who can receive habeas corpus overseas, the court left open the possibility that aliens detained at any U.S. controlled foreign facility could sue the government for their release.
In Maqaleh the court concluded that three detainees, held at Bagram airbase in Afghanistan, but actually captured in other countries, have habeas corpus rights under the U.S. Constitution. It reasoned that permitting the president to move captured enemies from one location to another without judicial review would simply give the executive too much power.
What really is at stake is whether the president's actions overseas -- especially in military operations -- are to be subject to judicial supervision. In this light, the courts have never been so bold. Although the Maqaleh court denied it, the premise of its decision is that the Constitution permits judicial involvement in all U.S. actions abroad. While this particular ruling involves habeas rights in Afghanistan, there is in fact no principled limitation on the court's reasoning. The real test in any particular case is whether a federal judge believes the president is operating with insufficient constraints on his authority.
This new state of play has already affected U.S. military operations. American special forces, have now limited their activities in the Afghan-Pakistan border region -- where al Qaeda and the Taliban are now most active -- to avoid claims by enemy fighters that they were captured outside of Afghanistan, in Pakistan. If those enemy fighters were captured outside of Afghanistan, then according to the Maqaleh decision, they are eligible for habeas relief. This provides a strategic sanctuary for Pakistan-based enemy operatives, who are now effectively immune from U.S. ground attacks.
This is obviously not the first time the courts have overstepped their proper constitutional bounds, seeking a political role for themselves. Notorious examples include the Supreme Court's efforts to preserve slavery in Dred Scott v. Sandford (1857) and its determination to oppose federal economic regulation during President Franklin D. Roosevelt's New Deal. In each case, the judges have eventually been strong-armed back, through the force of the public opinion and political pressures, to a more appropriate role.
The sooner this process begins, the better. A good first step would be some questions for Supreme Court nominee Sonia Sotomayor by the Senate. Senate members should determine her views on the proper role of judges in reviewing U.S. military operations overseas.
Justice Robert Jackson, writing in the Eisentrager case, explained why foreign enemies should not have access to American courts. "It would be difficult to devise more effective fettering of a field commander than to allow the very enemies he is ordered to reduce to submission to call him to account in his own civil courts and divert his efforts and attention from the military offensive abroad to the legal defensive at home." The question is: Does Ms. Sotomayor agree?
Messrs. Rivkin and Casey, Washington D.C.-based attorneys, served in the Department of Justice during the Ronald Reagan and George H.W. Bush administrations.
Recent decisions have altered the way we're fighting in Afghanistan.
WSJ, Jul 17, 2009
Earlier this year, a Washington D.C.-based federal court extended the constitutional right to habeas corpus to three foreign nationals detained by U.S. forces in Afghanistan. The case, Maqaleh v. Gates, represents yet another step in the federal judiciary's transformation from Alexander Hamilton's "least dangerous branch" into a fully active policy maker.
Historically, the constitutional right to habeas corpus -- an ancient process permitting prisoners to challenge the legality of their confinement -- was available only to individuals present in the U.S., or to American citizens held by federal authorities overseas. In a leading World War II case, Johnson v. Eisentrager (1950), the high court decided, with "bright line rules," that habeas corpus is unavailable to foreign citizens held outside the U.S.
But last year, the high court reversed itself in Boumediene v. Bush. The court held, by a 5-4 vote, that foreign nationals detained at Guantanamo Bay, Cuba, also have a right to habeas corpus. Articulating a new, multifactor test for determining who can receive habeas corpus overseas, the court left open the possibility that aliens detained at any U.S. controlled foreign facility could sue the government for their release.
In Maqaleh the court concluded that three detainees, held at Bagram airbase in Afghanistan, but actually captured in other countries, have habeas corpus rights under the U.S. Constitution. It reasoned that permitting the president to move captured enemies from one location to another without judicial review would simply give the executive too much power.
What really is at stake is whether the president's actions overseas -- especially in military operations -- are to be subject to judicial supervision. In this light, the courts have never been so bold. Although the Maqaleh court denied it, the premise of its decision is that the Constitution permits judicial involvement in all U.S. actions abroad. While this particular ruling involves habeas rights in Afghanistan, there is in fact no principled limitation on the court's reasoning. The real test in any particular case is whether a federal judge believes the president is operating with insufficient constraints on his authority.
This new state of play has already affected U.S. military operations. American special forces, have now limited their activities in the Afghan-Pakistan border region -- where al Qaeda and the Taliban are now most active -- to avoid claims by enemy fighters that they were captured outside of Afghanistan, in Pakistan. If those enemy fighters were captured outside of Afghanistan, then according to the Maqaleh decision, they are eligible for habeas relief. This provides a strategic sanctuary for Pakistan-based enemy operatives, who are now effectively immune from U.S. ground attacks.
This is obviously not the first time the courts have overstepped their proper constitutional bounds, seeking a political role for themselves. Notorious examples include the Supreme Court's efforts to preserve slavery in Dred Scott v. Sandford (1857) and its determination to oppose federal economic regulation during President Franklin D. Roosevelt's New Deal. In each case, the judges have eventually been strong-armed back, through the force of the public opinion and political pressures, to a more appropriate role.
The sooner this process begins, the better. A good first step would be some questions for Supreme Court nominee Sonia Sotomayor by the Senate. Senate members should determine her views on the proper role of judges in reviewing U.S. military operations overseas.
Justice Robert Jackson, writing in the Eisentrager case, explained why foreign enemies should not have access to American courts. "It would be difficult to devise more effective fettering of a field commander than to allow the very enemies he is ordered to reduce to submission to call him to account in his own civil courts and divert his efforts and attention from the military offensive abroad to the legal defensive at home." The question is: Does Ms. Sotomayor agree?
Messrs. Rivkin and Casey, Washington D.C.-based attorneys, served in the Department of Justice during the Ronald Reagan and George H.W. Bush administrations.
WSJ Editorial Page: one of the greatest raids on private income and business in American history in a matter of weeks
A Reckless Congress. WSJ Editorial
Democrats want to ram through one of the greatest raids on private income and business in American history.
WSJ, Jul 17, 2009
Say this about the 1,018-page health-care bill that House Democrats unveiled this week and that President Obama heartily endorsed: It finally reveals at least some of the price of the reckless ambitions of our current government. With huge majorities and a President in a rush to outrun the declining popularity of his agenda, Democrats are bidding to impose an unrepealable European-style welfare state in a matter of weeks.
Mr. Obama's February budget provided the outline, but the House bill now fills in the details. To wit, tax increases that would take U.S. rates higher even than most of Europe. Yet even those increases aren't nearly enough to finance the $1 trillion in new spending, which itself is surely a low-ball estimate. Meanwhile, the bill would create a new government health entitlement that will kill private insurance and lead to a government-run system.
Hyperbole? That's what people said when we warned about this last fall in "A Liberal Supermajority," but even we underestimated the ideological willfulness of today's national Democrats. Consider only a few of the details:
[graph Top income tax rate including 2.9%. Some countries and US States. http://s.wsj.net/public/resources/images/ED-AJ861_1radic_NS_20090716184020.gif]
A huge new income surtax. The bill's main financing comes from another tax increase on top of the increase already scheduled for 2011 under Mr. Obama's budget. The surtax starts at one percentage point for adjusted gross income above $350,000 in 2011, rising to two points in 2013; a 1.5 point surtax at incomes above $500,000, rising to three in 2013; and a whopping 5.4 percentage points in 2011 and beyond on incomes above $1 million.
This would raise the top marginal federal tax rate back to roughly 47% or 48%, if you include the Medicare tax and the phase-out of certain deductions and exemptions. With the current top rate at 35%, this would be the largest rate increase outside the Great Depression or world wars.
The average U.S. top combined state-federal marginal tax rate would hit about 52%. This would be higher than in all but three (Denmark, Sweden, Belgium) of the 30 countries measured by the OECD. According to the nearby table compiled by the Heritage Foundation, taxpayers in at least five U.S. states would pay higher marginal rates even than Sweden. South Korea, which Democrats worry is stealing American jobs, would be able to grab even more as its highest rate is a far more competitive 38.5%.
House Democrats say they deserve credit for being honest about the tax increases needed to fund their ambitions. But then they also claim that this surtax would raise $544 billion in new revenue over 10 years. America's millionaires aren't that stupid; far fewer of them will pay these rates for very long, if at all. They will find ways to shelter income, either by investing differently or simply working less. Small businesses that pay at the individual rate will shift to pay the 35% corporate rate. When the revenue doesn't materialize, Democrats will move to soak the middle class with a European-style value-added tax.
Phony numbers. Democrats will have to come up with something, because even the surtax puts their bill at least $300 billion short of honest financing. The public insurance "option" doesn't even begin until 2013 and the costs are heavily weighted toward the later years, but the tax hikes start in 2011. So under Congress's 10-year budget window, the House bill is able to pay for seven years of spending with nine years of taxes. Andy Laperriere of the ISI Group estimates the bill would add $95 billion to the deficit in 2019 alone.
Then there's yesterday's testimony, from Congressional Budget Office (CBO) Director Doug Elmendorf, that ObamaCare's cost "savings" are an illusion. Mr. Obama claims government can cover more people and pay less to do it. But Mr. Elmendorf told the Senate Finance Committee that "In the legislation that has been reported we don't see the sort of fundamental changes that would be necessary to reduce the trajectory of federal spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health-care costs."
Further on the public plan: "It raises the amount of activity that is growing at this unsustainable rate."
No matter, Speaker Nancy Pelosi is whisking the bill through House committees even before CBO has had a chance to score it in detail. As Wisconsin Republican Paul Ryan put it to us, "We will not have read it, and we will not have a score of it, but we will have passed it out of committee."
A new payroll tax. Unemployment is at 9.5% and rising, but Democrats will nonetheless impose a new eight percentage point payroll tax on employers who don't provide health insurance for employees. This is on top of the current 15% payroll tax, and in addition to a new 2.5-percentage point tax on individuals who don't buy health insurance. This means that any employer with more than $400,000 in payroll would have to pay at least 25% above the salary to hire someone. Result: Many fewer new jobs, with a higher structural jobless rate, much as Europe has experienced as its welfare states have expanded.
Other new taxes, including an as yet undetermined levy on private health plans. This tax, which Democrats say could raise $100 billion or so, would make it even harder for private plans to compete with the government plan, which would already benefit from government subsidies and lower capital costs. For good measure, the House bill also gets the ball rolling on tax increases on foreign-source corporate income.
We could go on, and we will in coming days. But the most remarkable quality of this health-care exercise is its reckless disregard for economic and fiscal reality. With the economy still far from a healthy recovery, and the federal fisc already nearly $2 trillion in deficit, Democrats want to ram through one of the greatest raids on private income and business in American history. The world is looking on, agog, and wondering why the United States seems intent on jumping off this cliff.
Democrats want to ram through one of the greatest raids on private income and business in American history.
WSJ, Jul 17, 2009
Say this about the 1,018-page health-care bill that House Democrats unveiled this week and that President Obama heartily endorsed: It finally reveals at least some of the price of the reckless ambitions of our current government. With huge majorities and a President in a rush to outrun the declining popularity of his agenda, Democrats are bidding to impose an unrepealable European-style welfare state in a matter of weeks.
Mr. Obama's February budget provided the outline, but the House bill now fills in the details. To wit, tax increases that would take U.S. rates higher even than most of Europe. Yet even those increases aren't nearly enough to finance the $1 trillion in new spending, which itself is surely a low-ball estimate. Meanwhile, the bill would create a new government health entitlement that will kill private insurance and lead to a government-run system.
Hyperbole? That's what people said when we warned about this last fall in "A Liberal Supermajority," but even we underestimated the ideological willfulness of today's national Democrats. Consider only a few of the details:
[graph Top income tax rate including 2.9%. Some countries and US States. http://s.wsj.net/public/resources/images/ED-AJ861_1radic_NS_20090716184020.gif]
A huge new income surtax. The bill's main financing comes from another tax increase on top of the increase already scheduled for 2011 under Mr. Obama's budget. The surtax starts at one percentage point for adjusted gross income above $350,000 in 2011, rising to two points in 2013; a 1.5 point surtax at incomes above $500,000, rising to three in 2013; and a whopping 5.4 percentage points in 2011 and beyond on incomes above $1 million.
This would raise the top marginal federal tax rate back to roughly 47% or 48%, if you include the Medicare tax and the phase-out of certain deductions and exemptions. With the current top rate at 35%, this would be the largest rate increase outside the Great Depression or world wars.
The average U.S. top combined state-federal marginal tax rate would hit about 52%. This would be higher than in all but three (Denmark, Sweden, Belgium) of the 30 countries measured by the OECD. According to the nearby table compiled by the Heritage Foundation, taxpayers in at least five U.S. states would pay higher marginal rates even than Sweden. South Korea, which Democrats worry is stealing American jobs, would be able to grab even more as its highest rate is a far more competitive 38.5%.
House Democrats say they deserve credit for being honest about the tax increases needed to fund their ambitions. But then they also claim that this surtax would raise $544 billion in new revenue over 10 years. America's millionaires aren't that stupid; far fewer of them will pay these rates for very long, if at all. They will find ways to shelter income, either by investing differently or simply working less. Small businesses that pay at the individual rate will shift to pay the 35% corporate rate. When the revenue doesn't materialize, Democrats will move to soak the middle class with a European-style value-added tax.
Phony numbers. Democrats will have to come up with something, because even the surtax puts their bill at least $300 billion short of honest financing. The public insurance "option" doesn't even begin until 2013 and the costs are heavily weighted toward the later years, but the tax hikes start in 2011. So under Congress's 10-year budget window, the House bill is able to pay for seven years of spending with nine years of taxes. Andy Laperriere of the ISI Group estimates the bill would add $95 billion to the deficit in 2019 alone.
Then there's yesterday's testimony, from Congressional Budget Office (CBO) Director Doug Elmendorf, that ObamaCare's cost "savings" are an illusion. Mr. Obama claims government can cover more people and pay less to do it. But Mr. Elmendorf told the Senate Finance Committee that "In the legislation that has been reported we don't see the sort of fundamental changes that would be necessary to reduce the trajectory of federal spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health-care costs."
Further on the public plan: "It raises the amount of activity that is growing at this unsustainable rate."
No matter, Speaker Nancy Pelosi is whisking the bill through House committees even before CBO has had a chance to score it in detail. As Wisconsin Republican Paul Ryan put it to us, "We will not have read it, and we will not have a score of it, but we will have passed it out of committee."
A new payroll tax. Unemployment is at 9.5% and rising, but Democrats will nonetheless impose a new eight percentage point payroll tax on employers who don't provide health insurance for employees. This is on top of the current 15% payroll tax, and in addition to a new 2.5-percentage point tax on individuals who don't buy health insurance. This means that any employer with more than $400,000 in payroll would have to pay at least 25% above the salary to hire someone. Result: Many fewer new jobs, with a higher structural jobless rate, much as Europe has experienced as its welfare states have expanded.
Other new taxes, including an as yet undetermined levy on private health plans. This tax, which Democrats say could raise $100 billion or so, would make it even harder for private plans to compete with the government plan, which would already benefit from government subsidies and lower capital costs. For good measure, the House bill also gets the ball rolling on tax increases on foreign-source corporate income.
We could go on, and we will in coming days. But the most remarkable quality of this health-care exercise is its reckless disregard for economic and fiscal reality. With the economy still far from a healthy recovery, and the federal fisc already nearly $2 trillion in deficit, Democrats want to ram through one of the greatest raids on private income and business in American history. The world is looking on, agog, and wondering why the United States seems intent on jumping off this cliff.
Ted van Dyk: Obama Needs to 'Reset' His Presidency
Obama Needs to 'Reset' His Presidency. By TED VAN DYK
The president we have is very different from the man who campaigned for the office in 2008.
WSJ, Jul 17, 2009
Time out, Mr. President.
As we approach the August congressional recess, it's clear that our economic distress is deeper than we thought, and thus your health-care and energy initiatives are in danger of stalling out. You could use a reset button for domestic policy.
Let's take it from the top.
Your presidential campaign was superb. You restored hope to millions -- including me -- who had been demoralized by the political polarization that characterized the presidencies of Bill Clinton and George W. Bush. You talked about reaching across party and ideological lines to get the public's business done. Your biography was appealing, and for those of us who entered politics motivated by the civil-rights struggle, your candidacy represented an important culmination.
You displayed an intellect and sense of cool that made us think you would weigh decisions carefully and view advisers' proposals with skepticism.
The first warning signals for me came with your acceptance speech at the Democratic National Convention. In it, you stressed domestic initiatives that clearly were nonstarters in the already shrinking economy.
I had greater concern when you staffed your administration and White House with a large number of Clinton administration retreads who had learned their trade in the never-ending-campaign culture of the Clinton years. Some appeared to represent what you had pledged to eradicate in the capital.
Many of the missteps that have followed flowed, in part, from your reliance on these Clinton holdovers. Your chief of staff, Rahm Emanuel, defined your early strategy by stating that the financial and economic crises presented an "opportunity" to jam through unrelated legislation. To many of us, the remark was cynical and wrong-headed.
The crises did not represent an opportunity. They presented an obligation to do one thing: Return our financial system and our economy to good health.
Since January, your advisers have compared your situation to those of Presidents Franklin D. Roosevelt and Lyndon Johnson after their landslide victories in 1932 and 1964. In fact, your situation is quite different. Most centrally, FDR's and LBJ's victories and congressional majorities were far larger than yours. Thus their mandates were stronger.
FDR's first months in office were devoted entirely to financial and economic recovery. His big domestic initiative, Social Security, was not enacted until 1935. LBJ pushed an ambitious Great Society agenda into law in 1965. But the U.S. economy was growing robustly in 1965. Johnson referred to it as "an endless cornucopia" which would generate tax revenues to pay for the Great Society. When he learned in mid-1967 that the projected federal budget deficit was $28 billion -- almost twice the amount projected six months earlier -- he went to Congress to push for tax increases in order to prevent Vietnam War and Great Society spending from creating unacceptable deficits.
Your staff recently has compared your strategy in pushing health-care and energy initiatives to the way Johnson pushed his Great Society legislation. That's not a fair comparison. Johnson's initiatives were framed in the White House by his administration. But at every stage, congressional leaders of both political parties and financial, business, labor and other private-sector leaders were consulted. Johnson wanted to assure that his legislation was substantively sound and could get consensus support in the Congress and the country.
Your strategy, by contrast, has been to advocate forcefully for health-care and energy reform but to leave the details to Democratic congressional committee chairs. You did the same thing with your initial $787 billion stimulus package. Now, you're stuck with a plan that provides little stimulus until 2010. A president should never cede control of his main agenda to others.
This tactic has already had negative consequences. Frightened by the prospective costs of your health-care and energy plans -- not to mention the bailouts of the financial and auto industries -- independent voters who supported you in 2008 are falling away. FDR and LBJ, only two years after their 1932 and 1964 victories, saw their parties lose congressional seats even though their personal popularity remained stable. The party out of power traditionally gains seats in off-year elections, and 2010 is unlikely to be an exception.
What adjustments should be made?
- Cut back both your proposals and expectations. You made promises about jobs that would be "created and saved" by the stimulus package. Those promises have not held up. You continue to engage in hyperbole by claiming that your health-care and energy plans will save tax dollars. Congressional Budget Office analysis indicates otherwise.
It's time to re-examine these initiatives. Could your health plan be scaled back to catastrophic coverage for all -- badly needed by most families, but quite affordable if deductibles are set at the right levels? Should the Rube Goldbergian cap-and-trade proposals be replaced with a simple carbon tax, with proceeds to be allocated to alternative-fuels development?
The evolving health and cap-and-trade bills are loaded with costly provisions designed to gain support from congressional leaders and special-interest constituencies. In short, they have become an expensive mess. This legislation will not clear Congress by the August recess, as you have requested, and could be stalled for the remainder of 2009. Settle for incremental change: Do not press Democratic legislators to vote for something they fear will destroy them in 2010.
- Talk less and pick your spots.You are outdoing even Johnson and Mr. Clinton with your daily speeches in the capital and around the country.
Applause and adulation are gratifying. But the more you talk, the less weight your words will hold. Let voters see you at your desk, conferring with serious people about serious matters. When you do choose to talk, people will understand that it's important and they should listen.
- Conform your 2009 politics to your 2008 statements. During your campaign, you called for bipartisanship and bridge-building. You promised to reduce the influence of single-issue and single-interest groups in the policy process. Yet, in your public statements, you keep using President Bush as a scapegoat.
You have ceded content of your principal proposals to Democratic congressional leaders who in large part have yielded to special-interest constituencies and excluded Republican leaders from policy formulation. This certainly was the case with the stimulus plan. It has been the case with health and energy legislation, with the notable exception of Sen. Max Baucus's attempt in the Senate Finance Committee to develop genuinely bipartisan legislation.
You have an enormous reservoir of goodwill among Americans of all persuasions. They want you to succeed. Level with them and trim your proposals to what is practical in the current environment.
You had things right in 2008. Take a timeout. Get back to yourself. Make a fresh start.
Mr. Van Dyk was Vice President Hubert Humphrey's assistant in the Johnson White House and active in national Democratic politics over 40 years. He is the author of "Heroes, Hacks and Fools," (University of Washington Press, 2008).
The president we have is very different from the man who campaigned for the office in 2008.
WSJ, Jul 17, 2009
Time out, Mr. President.
As we approach the August congressional recess, it's clear that our economic distress is deeper than we thought, and thus your health-care and energy initiatives are in danger of stalling out. You could use a reset button for domestic policy.
Let's take it from the top.
Your presidential campaign was superb. You restored hope to millions -- including me -- who had been demoralized by the political polarization that characterized the presidencies of Bill Clinton and George W. Bush. You talked about reaching across party and ideological lines to get the public's business done. Your biography was appealing, and for those of us who entered politics motivated by the civil-rights struggle, your candidacy represented an important culmination.
You displayed an intellect and sense of cool that made us think you would weigh decisions carefully and view advisers' proposals with skepticism.
The first warning signals for me came with your acceptance speech at the Democratic National Convention. In it, you stressed domestic initiatives that clearly were nonstarters in the already shrinking economy.
I had greater concern when you staffed your administration and White House with a large number of Clinton administration retreads who had learned their trade in the never-ending-campaign culture of the Clinton years. Some appeared to represent what you had pledged to eradicate in the capital.
Many of the missteps that have followed flowed, in part, from your reliance on these Clinton holdovers. Your chief of staff, Rahm Emanuel, defined your early strategy by stating that the financial and economic crises presented an "opportunity" to jam through unrelated legislation. To many of us, the remark was cynical and wrong-headed.
The crises did not represent an opportunity. They presented an obligation to do one thing: Return our financial system and our economy to good health.
Since January, your advisers have compared your situation to those of Presidents Franklin D. Roosevelt and Lyndon Johnson after their landslide victories in 1932 and 1964. In fact, your situation is quite different. Most centrally, FDR's and LBJ's victories and congressional majorities were far larger than yours. Thus their mandates were stronger.
FDR's first months in office were devoted entirely to financial and economic recovery. His big domestic initiative, Social Security, was not enacted until 1935. LBJ pushed an ambitious Great Society agenda into law in 1965. But the U.S. economy was growing robustly in 1965. Johnson referred to it as "an endless cornucopia" which would generate tax revenues to pay for the Great Society. When he learned in mid-1967 that the projected federal budget deficit was $28 billion -- almost twice the amount projected six months earlier -- he went to Congress to push for tax increases in order to prevent Vietnam War and Great Society spending from creating unacceptable deficits.
Your staff recently has compared your strategy in pushing health-care and energy initiatives to the way Johnson pushed his Great Society legislation. That's not a fair comparison. Johnson's initiatives were framed in the White House by his administration. But at every stage, congressional leaders of both political parties and financial, business, labor and other private-sector leaders were consulted. Johnson wanted to assure that his legislation was substantively sound and could get consensus support in the Congress and the country.
Your strategy, by contrast, has been to advocate forcefully for health-care and energy reform but to leave the details to Democratic congressional committee chairs. You did the same thing with your initial $787 billion stimulus package. Now, you're stuck with a plan that provides little stimulus until 2010. A president should never cede control of his main agenda to others.
This tactic has already had negative consequences. Frightened by the prospective costs of your health-care and energy plans -- not to mention the bailouts of the financial and auto industries -- independent voters who supported you in 2008 are falling away. FDR and LBJ, only two years after their 1932 and 1964 victories, saw their parties lose congressional seats even though their personal popularity remained stable. The party out of power traditionally gains seats in off-year elections, and 2010 is unlikely to be an exception.
What adjustments should be made?
- Cut back both your proposals and expectations. You made promises about jobs that would be "created and saved" by the stimulus package. Those promises have not held up. You continue to engage in hyperbole by claiming that your health-care and energy plans will save tax dollars. Congressional Budget Office analysis indicates otherwise.
It's time to re-examine these initiatives. Could your health plan be scaled back to catastrophic coverage for all -- badly needed by most families, but quite affordable if deductibles are set at the right levels? Should the Rube Goldbergian cap-and-trade proposals be replaced with a simple carbon tax, with proceeds to be allocated to alternative-fuels development?
The evolving health and cap-and-trade bills are loaded with costly provisions designed to gain support from congressional leaders and special-interest constituencies. In short, they have become an expensive mess. This legislation will not clear Congress by the August recess, as you have requested, and could be stalled for the remainder of 2009. Settle for incremental change: Do not press Democratic legislators to vote for something they fear will destroy them in 2010.
- Talk less and pick your spots.You are outdoing even Johnson and Mr. Clinton with your daily speeches in the capital and around the country.
Applause and adulation are gratifying. But the more you talk, the less weight your words will hold. Let voters see you at your desk, conferring with serious people about serious matters. When you do choose to talk, people will understand that it's important and they should listen.
- Conform your 2009 politics to your 2008 statements. During your campaign, you called for bipartisanship and bridge-building. You promised to reduce the influence of single-issue and single-interest groups in the policy process. Yet, in your public statements, you keep using President Bush as a scapegoat.
You have ceded content of your principal proposals to Democratic congressional leaders who in large part have yielded to special-interest constituencies and excluded Republican leaders from policy formulation. This certainly was the case with the stimulus plan. It has been the case with health and energy legislation, with the notable exception of Sen. Max Baucus's attempt in the Senate Finance Committee to develop genuinely bipartisan legislation.
You have an enormous reservoir of goodwill among Americans of all persuasions. They want you to succeed. Level with them and trim your proposals to what is practical in the current environment.
You had things right in 2008. Take a timeout. Get back to yourself. Make a fresh start.
Mr. Van Dyk was Vice President Hubert Humphrey's assistant in the Johnson White House and active in national Democratic politics over 40 years. He is the author of "Heroes, Hacks and Fools," (University of Washington Press, 2008).
Wednesday, July 15, 2009
Big Pharma Gets Played: Congress repays business silence with price controls
Big Pharma Gets Played. WSJ Editorial
Congress repays business silence with price controls.
WSJ, Jul 16, 2009
As an old Washington hand, pharmaceutical lobbyist Billy Tauzin should know better than to trust a politician. His corporate clients and their shareholders may soon pay for his attempt to get cozy with ObamaCare.
Mr. Tauzin -- the former Democratic Congressman turned Republican turned pharmaceutical frontman -- has been assuring his CEO employers that he can get them a good deal if they negotiate with Democrats instead of opposing them on health care. And to show its bona fides, the drug lobby announced in June an agreement with Senate Finance Chairman Max Baucus, promising $80 billion over the next decade to defray drug costs for seniors and to finance the Obama plan. Mr. Tauzin believed this giveaway would spare his industry from price controls and the reimportation of cheaper foreign drugs that would reduce company margins and profits.
Mr. Tauzin should have demanded a pre-nup. House Democrats declared last week that they aren't bound by Senator Baucus's deal. And this week they released a health-care bill that pocketed the industry concessions for senior drug coverage, and also imposed the very price controls Mr. Tauzin thought he'd shelved. These mandatory "rebates" on drugs for seniors would cost the industry $50 billion more over a decade than the $80 billion the industry promised Mr. Baucus. And that's optimistic. Democrat Henry Waxman cheerfully explained it was only "equitable" to devote the industry's "windfall" profits to seniors.
Meanwhile, Mr. Tauzin's fellow Cajun, Louisiana Republican David Vitter, sponsored an amendment that passed the Senate last week to allow Americans to buy cheap drugs from Canada over the Internet. Among the 55 Senators who voted for this form of drug reimportation was none other than Mr. Baucus. As for the White House, Mr. Waxman last week said he'd been told that the Administration also doesn't feel bound by the $80 billion agreement. This isn't surprising since Mr. Obama had co-sponsored the same legislation with Mr. Vitter when he was an Illinois Senator in 2006.
In case this isn't enough of a doublecross, Senate Democrats are also considering hefty new taxes on health insurance and . . . pharmaceutical companies. Price tag: $100 billion. Let's just say the companies' return on their investment in Mr. Tauzin's political strategy is looking negative.
Meanwhile, the insurance and hospital industries that struck similar deals with Democrats are also being taken for a ride. Liberal Senators may pare back billions of dollars of tax breaks now claimed by nonprofit hospitals. The House legislation contains the new "public option" that insurance lobbyist Karen Ignagni hoped to forestall with her industry's cost savings proposals. It also guts payments for Medicare Advantage, which allows seniors to buy into private plans offered by Mrs. Ignagni's members.
Democrats remember the failure of HillaryCare, and they blame industry ads that alerted the public to the rationing and loss of choice that will accompany government health care. Their negotiations this time around are intended to buy business silence, at least long enough for Democrats to spring legislation into law before the companies have enough time to educate the public and defeat it.
Big Pharma and others have been played for suckers. We'd say these companies deserve what they get, except that the real victims of government health care will be American patients.
Congress repays business silence with price controls.
WSJ, Jul 16, 2009
As an old Washington hand, pharmaceutical lobbyist Billy Tauzin should know better than to trust a politician. His corporate clients and their shareholders may soon pay for his attempt to get cozy with ObamaCare.
Mr. Tauzin -- the former Democratic Congressman turned Republican turned pharmaceutical frontman -- has been assuring his CEO employers that he can get them a good deal if they negotiate with Democrats instead of opposing them on health care. And to show its bona fides, the drug lobby announced in June an agreement with Senate Finance Chairman Max Baucus, promising $80 billion over the next decade to defray drug costs for seniors and to finance the Obama plan. Mr. Tauzin believed this giveaway would spare his industry from price controls and the reimportation of cheaper foreign drugs that would reduce company margins and profits.
Mr. Tauzin should have demanded a pre-nup. House Democrats declared last week that they aren't bound by Senator Baucus's deal. And this week they released a health-care bill that pocketed the industry concessions for senior drug coverage, and also imposed the very price controls Mr. Tauzin thought he'd shelved. These mandatory "rebates" on drugs for seniors would cost the industry $50 billion more over a decade than the $80 billion the industry promised Mr. Baucus. And that's optimistic. Democrat Henry Waxman cheerfully explained it was only "equitable" to devote the industry's "windfall" profits to seniors.
Meanwhile, Mr. Tauzin's fellow Cajun, Louisiana Republican David Vitter, sponsored an amendment that passed the Senate last week to allow Americans to buy cheap drugs from Canada over the Internet. Among the 55 Senators who voted for this form of drug reimportation was none other than Mr. Baucus. As for the White House, Mr. Waxman last week said he'd been told that the Administration also doesn't feel bound by the $80 billion agreement. This isn't surprising since Mr. Obama had co-sponsored the same legislation with Mr. Vitter when he was an Illinois Senator in 2006.
In case this isn't enough of a doublecross, Senate Democrats are also considering hefty new taxes on health insurance and . . . pharmaceutical companies. Price tag: $100 billion. Let's just say the companies' return on their investment in Mr. Tauzin's political strategy is looking negative.
Meanwhile, the insurance and hospital industries that struck similar deals with Democrats are also being taken for a ride. Liberal Senators may pare back billions of dollars of tax breaks now claimed by nonprofit hospitals. The House legislation contains the new "public option" that insurance lobbyist Karen Ignagni hoped to forestall with her industry's cost savings proposals. It also guts payments for Medicare Advantage, which allows seniors to buy into private plans offered by Mrs. Ignagni's members.
Democrats remember the failure of HillaryCare, and they blame industry ads that alerted the public to the rationing and loss of choice that will accompany government health care. Their negotiations this time around are intended to buy business silence, at least long enough for Democrats to spring legislation into law before the companies have enough time to educate the public and defeat it.
Big Pharma and others have been played for suckers. We'd say these companies deserve what they get, except that the real victims of government health care will be American patients.
John Yoo: Why We Endorsed Warrantless Wiretaps
Why We Endorsed Warrantless Wiretaps. By JOHN YOO
The inspectors general report ignores history and plays politics with the law.
WSJ, Jul 16, 2009
It was instantly clear after Sept. 11, 2001, that our security agencies knew little about al Qaeda's inner workings, could not detect its operatives' entry into the country, nor predict where it might strike next.
Suppose an al Qaeda cell in New York, Chicago or Los Angeles was planning a second attack using small arms, conventional explosives or even biological, chemical or nuclear weapons. Our intelligence and law enforcement agencies faced a near impossible task locating them. Now suppose the National Security Agency (NSA), which collects signals intelligence, threw up a virtual net to intercept all electronic communications leaving and entering Osama bin Laden's Afghanistan headquarters. What better way of detecting follow-up attacks? And what president -- of either political party -- wouldn't immediately order the NSA to start, so as to find and stop the attackers?
Evidently, none of the inspectors general of the five leading national security agencies would approve. In a report issued last week, they suggested that President George W. Bush might have violated the 1978 Foreign Intelligence Surveillance Act (FISA) by ordering the interception of international communications of terrorists without a judicial warrant. The report also suggests that "other" intelligence measures -- still classified only because they are yet to be reported on the front page of the New York Times -- similarly lacked approval from other branches of government.
It is absurd to think that a law like FISA should restrict live military operations against potential attacks on the United States. Congress enacted FISA during the waning days of the Cold War. As the 9/11 Commission found, FISA's wall between domestic law enforcement and foreign intelligence proved dysfunctional and contributed to our government's failure to prevent the 9/11 attacks.
Under FISA, to obtain a judicial wiretapping warrant the government is supposed to show probable cause that a specified target is a foreign agent. Unlike, say, Soviet spies working under diplomatic cover, terrorists are hard to identify. Yet they are vastly more dangerous. Monitoring their likely communications channels is the best way to track and stop them. Building evidence to prove past crimes, as in the civilian criminal system, is entirely beside the point. The best way to find an al Qaeda operative is to look at all email, text and phone traffic between Afghanistan and Pakistan and the U.S. This might involve the filtering of innocent traffic, just as roadblocks and airport screenings do.
In FISA, President Bush and his advisers faced an obsolete law not written with live war with an international terrorist organization in mind. It was to meet such emergency circumstances that the Founders designed the presidency. As John Locke first observed, foreign threats "are much less capable to be directed by antecedent, standing, positive laws." Legislatures are too slow and their members too numerous to respond effectively to unforeseen situations. Only the executive can act to protect the "security and interest of the public."
The power to protect the nation, said Alexander Hamilton in the Federalist, "ought to exist without limitation," because "it is impossible to foresee or define the extent and variety of national exigencies, or the correspondent extent & variety of the means which may be necessary to satisfy them." To limit the president's constitutional power to protect the nation from foreign threats is simply foolhardy. Hamilton observed that "decision, activity, secrecy, and dispatch will generally characterize the proceedings of one man, in a much more eminent degree, than the proceedings of any greater number." "Energy in the executive," he reiterated, "is essential to the protection of the community against foreign attacks."
Clearly, the five inspectors general were responding to the media-stoked politics of recrimination, not consulting the long history of American presidents who have lived up to their duty in times of crisis. More than a year before the attack on Pearl Harbor, President Franklin Delano Roosevelt authorized the FBI to intercept any communications, domestic or international, of persons "suspected of subversive activities . . . including suspected spies." FDR did not hesitate long over a 1937 Supreme Court opinion (United States v. Nardone) interpreting federal law to prohibit electronic surveillance without a warrant. It is too late to do anything about it after sabotage, assassinations and 'fifth column' activities are completed," he wrote in a secret 1940 memo authorizing the wire tapping. Indeed, he continued to authorize the surveillance even after Congress rejected proposals from his attorney general, Robert Jackson, to authorize national security wiretapping without a warrant.
Every federal appeals court to address the question has agreed that the president may gather electronic intelligence to protect against foreign threats. This includes the special FISA appeals court, which in a 2002 sealed case upholding the constitutionality of the Patriot Act held that "the President did have inherent authority to conduct warrantless searches to obtain foreign intelligence information." The court said it took the president's power "for granted," observing that "FISA could not encroach on the President's constitutional power."
Now, according to the inspectors general, those of us in government following the 9/11 terrorist attacks should have assumed that the usual peacetime rules for domestic wiretaps applied and interpreted FISA in a most curious way -- to delete the president's traditional authority as commander in chief to collect signals intelligence in wartime.
The 1952 Supreme Court case of Youngstown Sheet & Tube v. Sawyer is the IG's lodestar. In Youngstown, the Court addressed President Harry Truman's effort to seize steel mills shut down by a labor strike during the Korean War. Truman claimed that maintaining production was necessary to supply munitions and material to American troops in combat. Youngstown correctly found that the Constitution gives Congress, not the president, the exclusive power to make law concerning labor disputes. It does not, however, address the scope of the president's power involving military strategy or tactics in war. If anything, it supports the proposition that one branch cannot intrude on the clear constitutional turf of another.
Moreover, earlier Justice Departments -- reaching across several administrations from both parties -- had likewise concluded that Youngstown did not limit the president's legitimate conduct of foreign affairs and national security policy. This is why all administrations have refused to accept the 1973 War Powers Resolution and have regularly engaged in military conflicts without congressional approval.
Our Constitution created a presidency whose function is to protect the nation from attack. Gathering intelligence -- including intercepting enemy communications -- has long been a key aspect of war. Our military and intelligence agencies cannot attack or defend the nation unless they know where to aim. As we confront terrorists who remain intent on attacking the U.S., using weapons we cannot anticipate, we should be skeptical of those who insist that we radically change the way this country has always made war.
Mr. Yoo is a law professor at the University of California, Berkeley. He was an official in the Justice Department from 2001-03 and is a visiting scholar at the American Enterprise Institute.
The inspectors general report ignores history and plays politics with the law.
WSJ, Jul 16, 2009
It was instantly clear after Sept. 11, 2001, that our security agencies knew little about al Qaeda's inner workings, could not detect its operatives' entry into the country, nor predict where it might strike next.
Suppose an al Qaeda cell in New York, Chicago or Los Angeles was planning a second attack using small arms, conventional explosives or even biological, chemical or nuclear weapons. Our intelligence and law enforcement agencies faced a near impossible task locating them. Now suppose the National Security Agency (NSA), which collects signals intelligence, threw up a virtual net to intercept all electronic communications leaving and entering Osama bin Laden's Afghanistan headquarters. What better way of detecting follow-up attacks? And what president -- of either political party -- wouldn't immediately order the NSA to start, so as to find and stop the attackers?
Evidently, none of the inspectors general of the five leading national security agencies would approve. In a report issued last week, they suggested that President George W. Bush might have violated the 1978 Foreign Intelligence Surveillance Act (FISA) by ordering the interception of international communications of terrorists without a judicial warrant. The report also suggests that "other" intelligence measures -- still classified only because they are yet to be reported on the front page of the New York Times -- similarly lacked approval from other branches of government.
It is absurd to think that a law like FISA should restrict live military operations against potential attacks on the United States. Congress enacted FISA during the waning days of the Cold War. As the 9/11 Commission found, FISA's wall between domestic law enforcement and foreign intelligence proved dysfunctional and contributed to our government's failure to prevent the 9/11 attacks.
Under FISA, to obtain a judicial wiretapping warrant the government is supposed to show probable cause that a specified target is a foreign agent. Unlike, say, Soviet spies working under diplomatic cover, terrorists are hard to identify. Yet they are vastly more dangerous. Monitoring their likely communications channels is the best way to track and stop them. Building evidence to prove past crimes, as in the civilian criminal system, is entirely beside the point. The best way to find an al Qaeda operative is to look at all email, text and phone traffic between Afghanistan and Pakistan and the U.S. This might involve the filtering of innocent traffic, just as roadblocks and airport screenings do.
In FISA, President Bush and his advisers faced an obsolete law not written with live war with an international terrorist organization in mind. It was to meet such emergency circumstances that the Founders designed the presidency. As John Locke first observed, foreign threats "are much less capable to be directed by antecedent, standing, positive laws." Legislatures are too slow and their members too numerous to respond effectively to unforeseen situations. Only the executive can act to protect the "security and interest of the public."
The power to protect the nation, said Alexander Hamilton in the Federalist, "ought to exist without limitation," because "it is impossible to foresee or define the extent and variety of national exigencies, or the correspondent extent & variety of the means which may be necessary to satisfy them." To limit the president's constitutional power to protect the nation from foreign threats is simply foolhardy. Hamilton observed that "decision, activity, secrecy, and dispatch will generally characterize the proceedings of one man, in a much more eminent degree, than the proceedings of any greater number." "Energy in the executive," he reiterated, "is essential to the protection of the community against foreign attacks."
Clearly, the five inspectors general were responding to the media-stoked politics of recrimination, not consulting the long history of American presidents who have lived up to their duty in times of crisis. More than a year before the attack on Pearl Harbor, President Franklin Delano Roosevelt authorized the FBI to intercept any communications, domestic or international, of persons "suspected of subversive activities . . . including suspected spies." FDR did not hesitate long over a 1937 Supreme Court opinion (United States v. Nardone) interpreting federal law to prohibit electronic surveillance without a warrant. It is too late to do anything about it after sabotage, assassinations and 'fifth column' activities are completed," he wrote in a secret 1940 memo authorizing the wire tapping. Indeed, he continued to authorize the surveillance even after Congress rejected proposals from his attorney general, Robert Jackson, to authorize national security wiretapping without a warrant.
Every federal appeals court to address the question has agreed that the president may gather electronic intelligence to protect against foreign threats. This includes the special FISA appeals court, which in a 2002 sealed case upholding the constitutionality of the Patriot Act held that "the President did have inherent authority to conduct warrantless searches to obtain foreign intelligence information." The court said it took the president's power "for granted," observing that "FISA could not encroach on the President's constitutional power."
Now, according to the inspectors general, those of us in government following the 9/11 terrorist attacks should have assumed that the usual peacetime rules for domestic wiretaps applied and interpreted FISA in a most curious way -- to delete the president's traditional authority as commander in chief to collect signals intelligence in wartime.
The 1952 Supreme Court case of Youngstown Sheet & Tube v. Sawyer is the IG's lodestar. In Youngstown, the Court addressed President Harry Truman's effort to seize steel mills shut down by a labor strike during the Korean War. Truman claimed that maintaining production was necessary to supply munitions and material to American troops in combat. Youngstown correctly found that the Constitution gives Congress, not the president, the exclusive power to make law concerning labor disputes. It does not, however, address the scope of the president's power involving military strategy or tactics in war. If anything, it supports the proposition that one branch cannot intrude on the clear constitutional turf of another.
Moreover, earlier Justice Departments -- reaching across several administrations from both parties -- had likewise concluded that Youngstown did not limit the president's legitimate conduct of foreign affairs and national security policy. This is why all administrations have refused to accept the 1973 War Powers Resolution and have regularly engaged in military conflicts without congressional approval.
Our Constitution created a presidency whose function is to protect the nation from attack. Gathering intelligence -- including intercepting enemy communications -- has long been a key aspect of war. Our military and intelligence agencies cannot attack or defend the nation unless they know where to aim. As we confront terrorists who remain intent on attacking the U.S., using weapons we cannot anticipate, we should be skeptical of those who insist that we radically change the way this country has always made war.
Mr. Yoo is a law professor at the University of California, Berkeley. He was an official in the Justice Department from 2001-03 and is a visiting scholar at the American Enterprise Institute.
Cross-Strait Relations Improve, but China Still Deploys Missiles
Cross-Strait Relations Improve; China Still Deploys Missiles. By Richard C. Bush III, Director, Center for Northeast Asian Policy Studies
Brookings, June 27, 2009
In the relations between Taiwan and China, something intriguing happened between last spring and this spring. I refer not to the impressive progress that the two sides have made since Taiwan President Ma Ying-jeou took office in May 2008. They have restored dialogue mechanisms; concluded agreements to enhance cooperation in the areas of trade, transportation, finance, and crime control; and made possible Taiwan’s participation as an observer at the annual meeting of the World Health Assembly. This significant progress occurred against the backdrop of fifteen previous years of deepening mutual mistrust, which led Beijing and Taipei each to craft policy based on fears of the other’s intentions rather than hopes for cooperation.
The intriguing development was what happened in the military field. In spite of progress in the political and economic arenas, the People’s Liberation Army’s procurement and deployment of equipment that puts Taiwan at risk continued unabated. According to the last two Pentagon report on China’s military power, released in March of 2008 and 2009, China’s short- and medium-range missiles, which target Taiwan, increased from a range of 995-1070 to 1050-1150. This rate of growth is a bit less than previous years, but still raises the question, what is going on?
Let us stipulate, for purposes of discussion, the following:
The first is bureaucratic: that the PLA procures equipment on a five-year cycle, and the adjustment to Ma will begin in the cycle that begins in 2011. The second concerns threat perception: PLA and other leaders do not believe that the threat of separatism has disappeared. Pro-independence forces could return to power and China must be prepared. The third possible reason is institutional. The PLA is increasingly a corporate entity that has its own view of how, within broad policy parameters, to protect China’s national security. It could be some combination of the three. We simply do not know.
China’s failure to adjust has important implications for the future of cross-Strait stability, because it affects the sustainability of Ma Ying-jeou’s policies. In his electoral campaign, he argued that that the best way to ensure Taiwan’s prosperity, security, and dignity in the face of a more powerful China to reassure and engage Beijing. His appeal, therefore, defines what he must achieve to secure re-election in 2012 for himself and his party. Moreover, Ma has made very clear that China’s existing military capabilities are an obstacle to creating a truly stable cross-Strait environment. As he told The New York Times last year, “We don't want to negotiate a peace agreement while our security is threatened by a possible missile attack.”
China derives significant strategic benefit from Ma Ying-jeou’s policies, because they diminish what it saw as a serious threat. Ironically, if the China is too grudging on what it offers in return, particularly in the area of security, it will undercut Ma’s core argument and the political support that sustains it. It was Taiwan fear of China’s buildup that helped create the previous vicious circle. It cannot be in China’s interest to restart a negative spiral.
What are the implications of this situation for the United States? Washington’s fundamental goal is the preservation of peace and stability in the Taiwan area. It does not believe that goal is served when Chinese military power creates a strong sense of insecurity on Taiwan. Taiwan is thus subject to coercion and intimidation because its own deterrent is weak and it cannot negotiate confidently with Beijing.
If by its actions Beijing demonstrates a continuing desire to increase Taiwan’s sense of insecurity, then it is proper for the United States to reduce it through arms sales and other forms of security cooperation. We should, of course, provide systems that strengthen Taiwan’s real deterrent, not those that are useful primarily as political symbols (China can easily tell the difference). True, continued arms sales will damage U.S.-China relations, but we are responding to a problem that China has itself created.
President Ma’s initiatives present a strategic opportunity to transform and stabilize cross-Strait relations. But opportunities must be seized. China has done so in some areas but certainly not in the military area. To further increase its own sense of security, China must be prepared to strengthen Taiwan’s as well.
Brookings, June 27, 2009
In the relations between Taiwan and China, something intriguing happened between last spring and this spring. I refer not to the impressive progress that the two sides have made since Taiwan President Ma Ying-jeou took office in May 2008. They have restored dialogue mechanisms; concluded agreements to enhance cooperation in the areas of trade, transportation, finance, and crime control; and made possible Taiwan’s participation as an observer at the annual meeting of the World Health Assembly. This significant progress occurred against the backdrop of fifteen previous years of deepening mutual mistrust, which led Beijing and Taipei each to craft policy based on fears of the other’s intentions rather than hopes for cooperation.
The intriguing development was what happened in the military field. In spite of progress in the political and economic arenas, the People’s Liberation Army’s procurement and deployment of equipment that puts Taiwan at risk continued unabated. According to the last two Pentagon report on China’s military power, released in March of 2008 and 2009, China’s short- and medium-range missiles, which target Taiwan, increased from a range of 995-1070 to 1050-1150. This rate of growth is a bit less than previous years, but still raises the question, what is going on?
Let us stipulate, for purposes of discussion, the following:
- The PLA’s buildup occurred over the past decade because China perceived that Ma Ying-jeou’s predecessors planned somehow to permanently separate Taiwan from China. It was necessary, therefore, to secure the ability to deter this challenge to China’s fundamental interests, and to punish Taiwan if deterrence failed.
- Some of the systems the PLA is acquiring have multiple uses, including surface ships, submarines, fourth-generation aircraft, and cyber-warfare. These can be used, for example, to protect China’s interests in the East China Sea as well as attack Taiwan. (But that is cold comfort for Taiwan’s security planners. They worry—correctly that those systems will be used against them, and to block the United States from coming to the island’s defense.)
The first is bureaucratic: that the PLA procures equipment on a five-year cycle, and the adjustment to Ma will begin in the cycle that begins in 2011. The second concerns threat perception: PLA and other leaders do not believe that the threat of separatism has disappeared. Pro-independence forces could return to power and China must be prepared. The third possible reason is institutional. The PLA is increasingly a corporate entity that has its own view of how, within broad policy parameters, to protect China’s national security. It could be some combination of the three. We simply do not know.
China’s failure to adjust has important implications for the future of cross-Strait stability, because it affects the sustainability of Ma Ying-jeou’s policies. In his electoral campaign, he argued that that the best way to ensure Taiwan’s prosperity, security, and dignity in the face of a more powerful China to reassure and engage Beijing. His appeal, therefore, defines what he must achieve to secure re-election in 2012 for himself and his party. Moreover, Ma has made very clear that China’s existing military capabilities are an obstacle to creating a truly stable cross-Strait environment. As he told The New York Times last year, “We don't want to negotiate a peace agreement while our security is threatened by a possible missile attack.”
China derives significant strategic benefit from Ma Ying-jeou’s policies, because they diminish what it saw as a serious threat. Ironically, if the China is too grudging on what it offers in return, particularly in the area of security, it will undercut Ma’s core argument and the political support that sustains it. It was Taiwan fear of China’s buildup that helped create the previous vicious circle. It cannot be in China’s interest to restart a negative spiral.
What are the implications of this situation for the United States? Washington’s fundamental goal is the preservation of peace and stability in the Taiwan area. It does not believe that goal is served when Chinese military power creates a strong sense of insecurity on Taiwan. Taiwan is thus subject to coercion and intimidation because its own deterrent is weak and it cannot negotiate confidently with Beijing.
If by its actions Beijing demonstrates a continuing desire to increase Taiwan’s sense of insecurity, then it is proper for the United States to reduce it through arms sales and other forms of security cooperation. We should, of course, provide systems that strengthen Taiwan’s real deterrent, not those that are useful primarily as political symbols (China can easily tell the difference). True, continued arms sales will damage U.S.-China relations, but we are responding to a problem that China has itself created.
President Ma’s initiatives present a strategic opportunity to transform and stabilize cross-Strait relations. But opportunities must be seized. China has done so in some areas but certainly not in the military area. To further increase its own sense of security, China must be prepared to strengthen Taiwan’s as well.
Defining Activism Down: A liberal vote cast in conservative judicial rhetoric
Defining Activism Down. WSJ Editorial
A liberal vote cast in conservative judicial rhetoric.
WSJ, Jul 15, 2009
After two days of Senate hearings on the nomination of Sonia Sotomayor, an onlooker could be forgiven for wondering where all the judicial liberals went. To hear the adjectives heaped on the judge by members of the President's party, you'd think Mr. Obama had nominated Chief Justice John Roberts's conservative cousin.
Judge Sotomayor is smart and accomplished, New York Democrat Chuck Schumer said Monday, "but most important . . . [her record] bespeaks judicial modesty" and shows she is a better "umpire" than Justice Roberts himself. Dick Durbin called her "restrained, moderate and neutral," while Pat Leahy said her record shows a "careful and restrained judge with a deep respect for judicial precedent."
The activists in Mr. Leahy's rhetorical show are, presto, the conservatives of the Roberts Court, which has very, very cautiously chipped away at some precedent in cases on issues like the Second Amendment and campaign finance reform.
Under this brave new meaning of judicial activism advanced several years ago by now-White House aide Cass Sunstein, a judicial activist is any judge invalidating a federal law, however shoddily made. Ergo, conservative judges are obliged to uphold liberal precedents no matter how narrow the vote and how recent the case, while liberals can overturn long-time principles in the name of the evolving Constitution.
The effect is a liberal ratchet, where precedents like Miranda v. Arizona and Roe v. Wade are cast in stone, but any rethinking by the Roberts Court of the six-year-old 5-4 campaign-finance ruling in McConnell v. FEC is a scandal. "So many of the rulings of the current conservative majority on the Supreme Court can be described as activist," Wisconsin Democrat Russ Feingold insisted. "The best definition of a judicial activist is when a judge decides a case in a way you don't like."
Actually, we have a better one. An activist judge is one who is willing to decide cases based on something other than what's in the Constitution. But that's a troublesome standard for Sonia Sotomayor, who in speeches and writings has shown she is open to a wide variety of sources, from human empathy to personal experience to foreign and international law to help her in judging cases, or to "set our creative juices flowing," as she said of the latter.
Under questioning yesterday on her controversial remark that a "wise Latina" would make better decisions than a white male, Judge Sotomayor backed away from the statement, calling it a "bad" play on the words of Sandra Day O'Connor that a wise old man and a wise old woman would reach the same conclusion. Still, she insisted, she was trying to inspire Hispanic law students "to believe that their life experiences would enrich the legal system, because different life experiences and backgrounds always do."
Democrats emphasize that Judge Sotomayor's record on the bench shows she is a moderate whose decisions were frequently in step with her colleagues on the Second Circuit Court of Appeals. According to a study by the left-leaning Brennan Center for Justice, Judge Sotomayor voted with the majority in 98.2% of her 217 constitutional cases, dissenting only four times.
Falling within the mainstream of liberal judges, however, is not the same as falling into the mainstream of the rest of the country. The judge's decision to deny a racial bias claim by white firefighters was overturned by the Supreme Court in Ricci v. DeStefano last month. Afterward, a Rasmussen poll found that 46% of voters considered her a political liberal compared to only 32% who thought she was a moderate. Justices shouldn't be confirmed based on polls, but the numbers do explain the concerted Democratic attempts to define her as a conservative.
In fact, what was once the Felix Frankfurter-Whizzer White school of liberal judicial restraint no longer exists in the polite echelons of the judicial left. The new school is now remarkably uniform in wanting to dictate racial outcomes, limit political speech, invoke foreign rulings as a legal guide, and do whatever else the activist cause of the moment demands.
Judge Sotomayor gives every sign of being of that school, and there's little reason to believe she wouldn't be a reliable liberal vote on every important issue. Elections have consequences, and Justice Sotomayor is almost certain to be confirmed. But for a President who was elected on the promise of moving beyond old racial divisions, Mr. Obama's first Supreme Court nominee looks jarringly passé.
A liberal vote cast in conservative judicial rhetoric.
WSJ, Jul 15, 2009
After two days of Senate hearings on the nomination of Sonia Sotomayor, an onlooker could be forgiven for wondering where all the judicial liberals went. To hear the adjectives heaped on the judge by members of the President's party, you'd think Mr. Obama had nominated Chief Justice John Roberts's conservative cousin.
Judge Sotomayor is smart and accomplished, New York Democrat Chuck Schumer said Monday, "but most important . . . [her record] bespeaks judicial modesty" and shows she is a better "umpire" than Justice Roberts himself. Dick Durbin called her "restrained, moderate and neutral," while Pat Leahy said her record shows a "careful and restrained judge with a deep respect for judicial precedent."
The activists in Mr. Leahy's rhetorical show are, presto, the conservatives of the Roberts Court, which has very, very cautiously chipped away at some precedent in cases on issues like the Second Amendment and campaign finance reform.
Under this brave new meaning of judicial activism advanced several years ago by now-White House aide Cass Sunstein, a judicial activist is any judge invalidating a federal law, however shoddily made. Ergo, conservative judges are obliged to uphold liberal precedents no matter how narrow the vote and how recent the case, while liberals can overturn long-time principles in the name of the evolving Constitution.
The effect is a liberal ratchet, where precedents like Miranda v. Arizona and Roe v. Wade are cast in stone, but any rethinking by the Roberts Court of the six-year-old 5-4 campaign-finance ruling in McConnell v. FEC is a scandal. "So many of the rulings of the current conservative majority on the Supreme Court can be described as activist," Wisconsin Democrat Russ Feingold insisted. "The best definition of a judicial activist is when a judge decides a case in a way you don't like."
Actually, we have a better one. An activist judge is one who is willing to decide cases based on something other than what's in the Constitution. But that's a troublesome standard for Sonia Sotomayor, who in speeches and writings has shown she is open to a wide variety of sources, from human empathy to personal experience to foreign and international law to help her in judging cases, or to "set our creative juices flowing," as she said of the latter.
Under questioning yesterday on her controversial remark that a "wise Latina" would make better decisions than a white male, Judge Sotomayor backed away from the statement, calling it a "bad" play on the words of Sandra Day O'Connor that a wise old man and a wise old woman would reach the same conclusion. Still, she insisted, she was trying to inspire Hispanic law students "to believe that their life experiences would enrich the legal system, because different life experiences and backgrounds always do."
Democrats emphasize that Judge Sotomayor's record on the bench shows she is a moderate whose decisions were frequently in step with her colleagues on the Second Circuit Court of Appeals. According to a study by the left-leaning Brennan Center for Justice, Judge Sotomayor voted with the majority in 98.2% of her 217 constitutional cases, dissenting only four times.
Falling within the mainstream of liberal judges, however, is not the same as falling into the mainstream of the rest of the country. The judge's decision to deny a racial bias claim by white firefighters was overturned by the Supreme Court in Ricci v. DeStefano last month. Afterward, a Rasmussen poll found that 46% of voters considered her a political liberal compared to only 32% who thought she was a moderate. Justices shouldn't be confirmed based on polls, but the numbers do explain the concerted Democratic attempts to define her as a conservative.
In fact, what was once the Felix Frankfurter-Whizzer White school of liberal judicial restraint no longer exists in the polite echelons of the judicial left. The new school is now remarkably uniform in wanting to dictate racial outcomes, limit political speech, invoke foreign rulings as a legal guide, and do whatever else the activist cause of the moment demands.
Judge Sotomayor gives every sign of being of that school, and there's little reason to believe she wouldn't be a reliable liberal vote on every important issue. Elections have consequences, and Justice Sotomayor is almost certain to be confirmed. But for a President who was elected on the promise of moving beyond old racial divisions, Mr. Obama's first Supreme Court nominee looks jarringly passé.
China's War for Ore - Business is being reshaped around the world
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.
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.
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.
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