Iran's Nuclear Coup. WSJ Editorial
Ahmadinejad and Lula expose Obama's hapless diplomacy.
WSJ, May 18, 2010
What a fiasco. That's the first word that comes to mind watching Mahmoud Ahmadinejad raise his arms yesterday with the leaders of Turkey and Brazil to celebrate a new atomic pact that instantly made irrelevant 16 months of President Obama's "diplomacy." The deal is a political coup for Tehran and possibly delivers the coup de grace to the West's half-hearted efforts to stop Iran from acquiring a nuclear bomb.
Full credit for this debacle goes to the Obama Administration and its hapless diplomatic strategy. Last October, nine months into its engagement with Tehran, the White House concocted a plan to transfer some of Iran's uranium stock abroad for enrichment. If the West couldn't stop Iran's program, the thinking was that maybe this scheme would delay it. The Iranians played coy, then refused to accept the offer.
But Mr. Obama doesn't take no for an answer from rogue regimes, and so he kept the offer on the table. As the U.S. finally seemed ready to go to the U.N. Security Council for more sanctions, the Iranians chose yesterday to accept the deal on their own limited terms while enlisting the Brazilians and Turks as enablers and political shields. "Diplomacy emerged victorious today," declared Brazil's President Luiz Inácio Lula da Silva, turning Mr. Obama's own most important foreign-policy principle against him.
The double embarrassment is that the U.S. had encouraged Lula's diplomacy as a step toward winning his support for U.N. sanctions. Brazil is currently one of the nonpermanent, rotating members of the Security Council, and the U.S. has wanted a unanimous U.N. vote. Instead, Lula used the opening to triangulate his own diplomatic solution. In her first game of high-stakes diplomatic poker, Secretary of State Hillary Clinton is leaving the table dressed only in a barrel.
So instead of the U.S. and Europe backing Iran into a corner this spring, Mr. Ahmadinejad has backed Mr. Obama into one. America's discomfort is obvious. In its statement yesterday, the White House strained to "acknowledge the efforts" by Turkey and Brazil while noting "Iran's repeated failure to live up to its own commitments." The White House also sought to point out differences between yesterday's pact and the original October agreements on uranium transfers.
Good luck drawing those distinctions with the Chinese or Russians, who will now be less likely to agree even to weak sanctions. Having played so prominent a role in last October's talks with Iran, the U.S. can't easily disassociate itself from something broadly in line with that framework.
Under the terms unveiled yesterday, Iran said it would send 1,200 kilograms (2,646 lbs.) of low-enriched uranium to Turkey within a month, and no more than a year later get back 120 kilograms enriched from somewhere else abroad. This makes even less sense than the flawed October deal. In the intervening seven months, Iran has kicked its enrichment activities into higher gear. Its estimated total stock has gone to 2,300 kilograms from 1,500 kilograms last autumn, and its stated enrichment goal has gone to 20% from 3.5%.
If the West accepts this deal, Iran would be allowed to keep enriching uranium in contravention of previous U.N. resolutions. Removing 1,200 kilograms will leave Iran with still enough low-enriched stock to make a bomb, and once uranium is enriched up to 20% it is technically easier to get to bomb-capable enrichment levels.
Only last week, diplomats at the U.N.'s International Atomic Energy Agency reported that Iran has increased the number of centrifuges it is using to enrich uranium. According to Western intelligence estimates, Iran continues to acquire key nuclear components, such as trigger mechanisms for bombs. Tehran says it wants to build additional uranium enrichment plants. The CIA recently reported that Iran tripled its stockpile of uranium last year and moved "toward self-sufficiency in the production of nuclear missiles." Yesterday's deal will have no impact on these illicit activities.
The deal will, however, make it nearly impossible to disrupt Iran's nuclear program short of military action. The U.N. is certainly a dead end. After 16 months of his extended hand and after downplaying support for Iran's democratic opposition, Mr. Obama now faces an Iran much closer to a bomb and less diplomatically isolated than when President Bush left office.
Israel will have to seriously consider its military options. Such a confrontation is far more likely thanks to the diplomatic double-cross of Turkey's Recep Tayyip Erdogan and Brazil's Lula, and especially to a U.S. President whose diplomacy has succeeded mainly in persuading the world's rogues that he lacks the determination to stop their destructive ambitions.
Tuesday, May 18, 2010
Press Briefing
May 18, 2010
Remarks by the President at the Signing of the Freedom of the Press Act
http://www.whitehouse.gov/the-press-office/remarks-president-signing-freedom-press-act
TThe New START Treaty. By Hillary Rodham Clinton, Secretary of State, Opening Remarks Before the Senate Committee on Foreign Relations
Washington, DC, May 18, 2010
http://www.state.gov/secretary/rm/2010/05/141960.htm
The New START Threat to Missile Defense
http://blog.heritage.org/2010/05/18/morning-bell-the-new-start-threat-to-missile-defense/
Cell Phones Safe, Rumors Persist
http://www.acsh.org/factsfears/newsID.1438/news_detail.asp
The WHO's International Agency for Research on Cancer completed a decade-long analysis of over 10,000 cell phone users and could not find a clear link between cell phone use and brain cancer risk.
NYT Blogs: The Twilight of the Welfare State?
http://roomfordebate.blogs.nytimes.com/2010/05/12/the-twilight-of-the-welfare-state
Readout of the President's Call with President Lee of the Republic of Korea
http://www.whitehouse.gov/the-press-office/readout-presidents-call-with-president-lee-republic-korea
Sens. Lieberman and Brown offer the wrong solution on dealing with citizen terrorists
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/16/AR2010051602948.html
Attributing systemic risk to individual institutions - BIS Working Papers No 308
by Nikola Tarashev, Claudio Borio and Kostas Tsatsaronis
http://www.bis.org/publ/work308.htm
Remarks by the First Lady at Healthy Weight Announcement Press Conference
http://www.whitehouse.gov/the-press-office/remarks-first-lady-healthy-weight-announcement-press-conference
Politically Correct = Scientifically Valid?
http://www.acsh.org/factsfears/newsID.1437/news_detail.asp
High-fat meals may increase inflammation in asthmatics and suppress their response to albuterol, a bronchodilator that increases air to the lungs, according to a weak study presented by Australian researchers at last week's American Thoracic Society's international conference in New Orleans. We are skeptic of it.
Statement by White House Press Secretary Robert Gibbs on Iran
http://www.whitehouse.gov/the-press-office/statement-white-house-press-secretary-robert-gibbs-iran
Iran's Nuclear Coup. WSJ Editorial
http://online.wsj.com/article/SB10001424052748703315404575250172000040654.html
Ahmadinejad and Lula expose Obama's hapless diplomacy
Public Enemies - Obama ratchets up his attacks even as Republicans begin to cooperate.
http://www.slate.com/id/2253835?wpisrc=xs_wp_0001
Obama's Attacks on Republicans Are Getting Feisty
Did the Federal Government Enable the Gulf Oil Spill?
http://blog.heritage.org/2010/05/17/morning-bell-did-the-federal-government-enable-the-gulf-oil-spill
Restoring Global Financial Stability: Part 1
http://www.cato.org/pubs/journal/cj30n2/cj30n2.html
US Department of State's Partnership with the National Italian American Foundation Assists the University of L'Aquila in its Earthquake Recovery
http://www.state.gov/r/pa/prs/ps/2010/05/141935.htm
Failure to Communicate, by Edward H. Crane
http://www.cato.org/pub_display.php?pub_id=11814
Kagan, Harvard, the US Military, and the Saudis
http://www.newt.org/newt-direct/kagan-harvard-us-military-and-saudis
Multipolarism sans the EU Pole? The Geopolitics of Europe's Economic Mess. By Leon T. Hadar
http://www.cato.org/pub_display.php?pub_id=11813
Fast Forward - Ethics and Politics in the Age of Global Warming. By William Antholis and Strobe Talbott, Brookings Institution Press 2010 c. 144pp.
http://www.brookings.edu/press/Books/2010/fastforward.aspx
The American Power Act: Climatologically Meaningless - Kerry-Liebermann
http://www.worldclimatereport.com/index.php/2010/05/13/the-american-power-act-climatologically-meaningless/
Remarks by the President at the Signing of the Freedom of the Press Act
http://www.whitehouse.gov/the-press-office/remarks-president-signing-freedom-press-act
TThe New START Treaty. By Hillary Rodham Clinton, Secretary of State, Opening Remarks Before the Senate Committee on Foreign Relations
Washington, DC, May 18, 2010
http://www.state.gov/secretary/rm/2010/05/141960.htm
The New START Threat to Missile Defense
http://blog.heritage.org/2010/05/18/morning-bell-the-new-start-threat-to-missile-defense/
Cell Phones Safe, Rumors Persist
http://www.acsh.org/factsfears/newsID.1438/news_detail.asp
The WHO's International Agency for Research on Cancer completed a decade-long analysis of over 10,000 cell phone users and could not find a clear link between cell phone use and brain cancer risk.
NYT Blogs: The Twilight of the Welfare State?
http://roomfordebate.blogs.nytimes.com/2010/05/12/the-twilight-of-the-welfare-state
Readout of the President's Call with President Lee of the Republic of Korea
http://www.whitehouse.gov/the-press-office/readout-presidents-call-with-president-lee-republic-korea
Sens. Lieberman and Brown offer the wrong solution on dealing with citizen terrorists
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/16/AR2010051602948.html
Attributing systemic risk to individual institutions - BIS Working Papers No 308
by Nikola Tarashev, Claudio Borio and Kostas Tsatsaronis
http://www.bis.org/publ/work308.htm
Remarks by the First Lady at Healthy Weight Announcement Press Conference
http://www.whitehouse.gov/the-press-office/remarks-first-lady-healthy-weight-announcement-press-conference
Politically Correct = Scientifically Valid?
http://www.acsh.org/factsfears/newsID.1437/news_detail.asp
High-fat meals may increase inflammation in asthmatics and suppress their response to albuterol, a bronchodilator that increases air to the lungs, according to a weak study presented by Australian researchers at last week's American Thoracic Society's international conference in New Orleans. We are skeptic of it.
Statement by White House Press Secretary Robert Gibbs on Iran
http://www.whitehouse.gov/the-press-office/statement-white-house-press-secretary-robert-gibbs-iran
Iran's Nuclear Coup. WSJ Editorial
http://online.wsj.com/article/SB10001424052748703315404575250172000040654.html
Ahmadinejad and Lula expose Obama's hapless diplomacy
Public Enemies - Obama ratchets up his attacks even as Republicans begin to cooperate.
http://www.slate.com/id/2253835?wpisrc=xs_wp_0001
Obama's Attacks on Republicans Are Getting Feisty
Did the Federal Government Enable the Gulf Oil Spill?
http://blog.heritage.org/2010/05/17/morning-bell-did-the-federal-government-enable-the-gulf-oil-spill
Restoring Global Financial Stability: Part 1
http://www.cato.org/pubs/journal/cj30n2/cj30n2.html
US Department of State's Partnership with the National Italian American Foundation Assists the University of L'Aquila in its Earthquake Recovery
http://www.state.gov/r/pa/prs/ps/2010/05/141935.htm
Failure to Communicate, by Edward H. Crane
http://www.cato.org/pub_display.php?pub_id=11814
Kagan, Harvard, the US Military, and the Saudis
http://www.newt.org/newt-direct/kagan-harvard-us-military-and-saudis
Multipolarism sans the EU Pole? The Geopolitics of Europe's Economic Mess. By Leon T. Hadar
http://www.cato.org/pub_display.php?pub_id=11813
Fast Forward - Ethics and Politics in the Age of Global Warming. By William Antholis and Strobe Talbott, Brookings Institution Press 2010 c. 144pp.
http://www.brookings.edu/press/Books/2010/fastforward.aspx
The American Power Act: Climatologically Meaningless - Kerry-Liebermann
http://www.worldclimatereport.com/index.php/2010/05/13/the-american-power-act-climatologically-meaningless/
Monday, May 17, 2010
Beijing is poised to project ever greater power in the Pacific. The U.S. doesn't appear up to the challenge
Farewell to America's China Station. By MARK HELPRIN
Beijing is poised to project ever greater power in the Pacific. The U.S. doesn't appear up to the challenge.
WSJ, May 17, 2010
The United States and China are on a collision course in the Western Pacific. Far sooner than once anticipated, China will achieve effective military parity in Asia, general conventional parity, and nuclear parity. Then the short road to superiority will be impossible for it to ignore, as it is already on its way thanks to a brilliant policy borrowed from Japan and Israel.
That is, briefly, since Deng Xiaoping, China has understood that, without catastrophic social dislocation, it can leverage its spectacular economic growth into X increases in per-capita GDP but many-times-X increases in military spending. To wit, between 1988 and 2007, a tenfold increase in per-capita GDP ($256 to $2,539) but a 21-fold purchasing power parity increase in military expenditures to $122 billion from $5.78 billion. The major constraint has been that an ever increasing rate of technical advance can only be absorbed so fast even by a rapidly modernizing military.
Meanwhile, in good times and in bad, under Republicans and under Democrats, with defense spending insufficient across the board the United States has slowed, frozen, or reversed the development of the kind of war-fighting assets that China rallies forward (nuclear weapons, fighter planes, surface combatants, submarines, space surveillance) and those (antisubmarine warfare capacity, carrier battle groups, and fleet missile defense) that China does not yet need to counter us but that we need to counter it.
We have provided as many rationales for neglect as our neglect has created dangers that we rationalize. Never again will we fight two major adversaries simultaneously, although in recent memory this is precisely what our fathers did. Conventional war is a thing of the past, despite the growth and modernization of large conventional forces throughout the world. Appeasement and compromise will turn enemies into friends, if groveling and self-abasement do not first drive friends into the enemy camp. A truly strong country is one in which people are happy and have a lot of things, though at one time, as Edward Gibbon describes it in "The Decline and Fall of the Roman Empire," "So rapid were the motions of the Persian cavalry," that the prosperous and relaxed citizens of Antioch were surprised while at the theater, and slaughtered as their city burned around them. And the costs of more reliable defense and deterrence are impossible to bear in this economy, even if in far worse times America made itself into the greatest arsenal the world has ever known, while, not coincidentally, breaking the back of the Great Depression.
China is on the cusp of being able to use conventional satellites, swarms of miniature satellites, and networked surface, undersea, and aerial cuing for real-time terminal guidance with which to direct its 1,500 short-range ballistic missiles to the five or six aircraft carriers the United States (after ceding control of the Panama Canal and reducing its carrier fleet by one-third since 1987) could dispatch to meet an invasion of Taiwan. In combination with antiship weapons launched from surface vessels, submarines, and aircraft, the missile barrage is designed to keep carrier battle groups beyond effective range. Had we built more carriers, provided them with sufficient missile defense, not neglected antisubmarine warfare, and dared consider suppression of enemy satellites and protections for our own, this would not be so.
Had we not stopped production of the F-22 at a third of the original requirement, its 2,000-mile range and definitive superiority may have allowed us to dominate the air over Taiwan nonetheless. Nor can we "lillypad" fighters to Taiwan if its airfields are destroyed by Chinese missiles, against which we have no adequate defense.
With the Western Pacific cleared of American naval and air forces sufficient to defend or deter an invasion, Taiwan—without war but because of the threat of war—will capitulate and accept China's dominion, just as Hong Kong did when the evolving correlation of forces meant that Britain had no practical say in the matter. If this occurs, as likely it will, America's alliances in the Pacific will collapse. Japan, Korea, and countries in Southeast Asia and even Australasia (when China's power projection forces mature) will strike a bargain so as to avoid pro forma vassalage, and their chief contribution to the new arrangement will be to rid themselves of American bases.
Now far along in building a blue-water navy, once it dominates its extended home waters China will move to the center of the Pacific and then east, with its primary diplomatic focus acquisition of bases in South and Central America. As at one time we had the China Station, eventually China will have the Americas Station, for this is how nations behave in the international system, independently of their declarations and beliefs as often as not. What awaits us if we do not awake is potentially devastating, and those who think the subtle, indirect pressures of domination inconsequential might inquire of the Chinese their opinion of the experience.
In the military, economic, and social trajectories of the two principals, the shape of the future comes clear. In 2007, a Chinese admiral suggested to Adm. Timothy J. Keating, chief of U.S. Pacific Command, that China and the United States divide the Pacific into two spheres of influence. Though the American admiral firmly declined the invitation, as things go now his successors will not have the means to honor his resolution, and by then the offer may seem generous.
None of this was ever a historical inevitability. Rather, it is the fault of the American people and the governments they have freely chosen. Perhaps five or 10 years remain in which to accomplish a restoration, but only with a miracle of leadership, clarity, and will.
Mr. Helprin, a senior fellow at the Claremont Institute, is the author of, among other works, "Winter's Tale" (Harcourt), "A Soldier of the Great War" (Harcourt) and, most recently, "Digital Barbarism" (HarperCollins).
Beijing is poised to project ever greater power in the Pacific. The U.S. doesn't appear up to the challenge.
WSJ, May 17, 2010
The United States and China are on a collision course in the Western Pacific. Far sooner than once anticipated, China will achieve effective military parity in Asia, general conventional parity, and nuclear parity. Then the short road to superiority will be impossible for it to ignore, as it is already on its way thanks to a brilliant policy borrowed from Japan and Israel.
That is, briefly, since Deng Xiaoping, China has understood that, without catastrophic social dislocation, it can leverage its spectacular economic growth into X increases in per-capita GDP but many-times-X increases in military spending. To wit, between 1988 and 2007, a tenfold increase in per-capita GDP ($256 to $2,539) but a 21-fold purchasing power parity increase in military expenditures to $122 billion from $5.78 billion. The major constraint has been that an ever increasing rate of technical advance can only be absorbed so fast even by a rapidly modernizing military.
Meanwhile, in good times and in bad, under Republicans and under Democrats, with defense spending insufficient across the board the United States has slowed, frozen, or reversed the development of the kind of war-fighting assets that China rallies forward (nuclear weapons, fighter planes, surface combatants, submarines, space surveillance) and those (antisubmarine warfare capacity, carrier battle groups, and fleet missile defense) that China does not yet need to counter us but that we need to counter it.
We have provided as many rationales for neglect as our neglect has created dangers that we rationalize. Never again will we fight two major adversaries simultaneously, although in recent memory this is precisely what our fathers did. Conventional war is a thing of the past, despite the growth and modernization of large conventional forces throughout the world. Appeasement and compromise will turn enemies into friends, if groveling and self-abasement do not first drive friends into the enemy camp. A truly strong country is one in which people are happy and have a lot of things, though at one time, as Edward Gibbon describes it in "The Decline and Fall of the Roman Empire," "So rapid were the motions of the Persian cavalry," that the prosperous and relaxed citizens of Antioch were surprised while at the theater, and slaughtered as their city burned around them. And the costs of more reliable defense and deterrence are impossible to bear in this economy, even if in far worse times America made itself into the greatest arsenal the world has ever known, while, not coincidentally, breaking the back of the Great Depression.
China is on the cusp of being able to use conventional satellites, swarms of miniature satellites, and networked surface, undersea, and aerial cuing for real-time terminal guidance with which to direct its 1,500 short-range ballistic missiles to the five or six aircraft carriers the United States (after ceding control of the Panama Canal and reducing its carrier fleet by one-third since 1987) could dispatch to meet an invasion of Taiwan. In combination with antiship weapons launched from surface vessels, submarines, and aircraft, the missile barrage is designed to keep carrier battle groups beyond effective range. Had we built more carriers, provided them with sufficient missile defense, not neglected antisubmarine warfare, and dared consider suppression of enemy satellites and protections for our own, this would not be so.
Had we not stopped production of the F-22 at a third of the original requirement, its 2,000-mile range and definitive superiority may have allowed us to dominate the air over Taiwan nonetheless. Nor can we "lillypad" fighters to Taiwan if its airfields are destroyed by Chinese missiles, against which we have no adequate defense.
With the Western Pacific cleared of American naval and air forces sufficient to defend or deter an invasion, Taiwan—without war but because of the threat of war—will capitulate and accept China's dominion, just as Hong Kong did when the evolving correlation of forces meant that Britain had no practical say in the matter. If this occurs, as likely it will, America's alliances in the Pacific will collapse. Japan, Korea, and countries in Southeast Asia and even Australasia (when China's power projection forces mature) will strike a bargain so as to avoid pro forma vassalage, and their chief contribution to the new arrangement will be to rid themselves of American bases.
Now far along in building a blue-water navy, once it dominates its extended home waters China will move to the center of the Pacific and then east, with its primary diplomatic focus acquisition of bases in South and Central America. As at one time we had the China Station, eventually China will have the Americas Station, for this is how nations behave in the international system, independently of their declarations and beliefs as often as not. What awaits us if we do not awake is potentially devastating, and those who think the subtle, indirect pressures of domination inconsequential might inquire of the Chinese their opinion of the experience.
In the military, economic, and social trajectories of the two principals, the shape of the future comes clear. In 2007, a Chinese admiral suggested to Adm. Timothy J. Keating, chief of U.S. Pacific Command, that China and the United States divide the Pacific into two spheres of influence. Though the American admiral firmly declined the invitation, as things go now his successors will not have the means to honor his resolution, and by then the offer may seem generous.
None of this was ever a historical inevitability. Rather, it is the fault of the American people and the governments they have freely chosen. Perhaps five or 10 years remain in which to accomplish a restoration, but only with a miracle of leadership, clarity, and will.
Mr. Helprin, a senior fellow at the Claremont Institute, is the author of, among other works, "Winter's Tale" (Harcourt), "A Soldier of the Great War" (Harcourt) and, most recently, "Digital Barbarism" (HarperCollins).
Sunday, May 16, 2010
Press Briefing
May 17, 2010
Remarks by The First Lady at George Washington University Commencement
http://www.whitehouse.gov/the-press-office/remarks-first-lady-george-washington-university-commencement
Remarks by The President at DCCC Dinner
http://www.whitehouse.gov/the-press-office/remarks-president-dccc-dinner
Learning From History on Financial Reform - The S&L crisis taught us that capping size doesn't always cap losses.
http://online.wsj.com/article/SB10001424052748703460404575244810777765420.html
Islam, Obama and the Empty Quarter - Why democracy activists miss George W. Bush
http://online.wsj.com/article/SB10001424052748703862704575099522687820394.html
Farewell to America's China Station
http://www.bipartisanalliance.com/2010/05/beijing-is-poised-to-project-ever.html
Beijing is poised to project ever greater power in the Pacific. The U.S. doesn't appear up to the challenge.
The Killing in Bangkok - Thai leaders can learn from the examples of Taiwan and Korea
http://online.wsj.com/article/SB10001424052748703745904575247601848520556.html
Remarks by the President at Ceremony Honoring TOP COPS
http://www.whitehouse.gov/the-press-office/remarks-president-ceremony-honoring-top-cops
Iran to ship uranium to Turkey in nuclear deal mediated by Brazil and Turkey
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/17/AR2010051700105.html
The Small Business Credit Crunch - The financial reforms currently contemplated will further restrict capital. Expect unemployment to stay high.
http://online.wsj.com/article/SB10001424052748703460404575244394011199892.html
Just Don't Call It a Climate Bill - John Kerry rearranges cap and tax—and hopes no one notices.
http://online.wsj.com/article/SB10001424052748703339304575240353420875226.html
The Revenue Limits of Tax and Spend. By DAVID RANSON
Whether rates are high or low, evidence shows our tax system won't collect more than 20% of GDP.
WSJ, May 17, 2010
http://www.bipartisanalliance.com/2010/05/revenue-limits-of-tax-and-spend-whether.html
A Hidden History of Evil - Why doesn’t anyone care about the unread Soviet archives?
http://city-journal.com/2010/20_2_soviet-archives.html
Remarks by The First Lady at George Washington University Commencement
http://www.whitehouse.gov/the-press-office/remarks-first-lady-george-washington-university-commencement
Remarks by The President at DCCC Dinner
http://www.whitehouse.gov/the-press-office/remarks-president-dccc-dinner
Learning From History on Financial Reform - The S&L crisis taught us that capping size doesn't always cap losses.
http://online.wsj.com/article/SB10001424052748703460404575244810777765420.html
Islam, Obama and the Empty Quarter - Why democracy activists miss George W. Bush
http://online.wsj.com/article/SB10001424052748703862704575099522687820394.html
Farewell to America's China Station
http://www.bipartisanalliance.com/2010/05/beijing-is-poised-to-project-ever.html
Beijing is poised to project ever greater power in the Pacific. The U.S. doesn't appear up to the challenge.
The Killing in Bangkok - Thai leaders can learn from the examples of Taiwan and Korea
http://online.wsj.com/article/SB10001424052748703745904575247601848520556.html
Remarks by the President at Ceremony Honoring TOP COPS
http://www.whitehouse.gov/the-press-office/remarks-president-ceremony-honoring-top-cops
Iran to ship uranium to Turkey in nuclear deal mediated by Brazil and Turkey
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/17/AR2010051700105.html
The Small Business Credit Crunch - The financial reforms currently contemplated will further restrict capital. Expect unemployment to stay high.
http://online.wsj.com/article/SB10001424052748703460404575244394011199892.html
Just Don't Call It a Climate Bill - John Kerry rearranges cap and tax—and hopes no one notices.
http://online.wsj.com/article/SB10001424052748703339304575240353420875226.html
The Revenue Limits of Tax and Spend. By DAVID RANSON
Whether rates are high or low, evidence shows our tax system won't collect more than 20% of GDP.
WSJ, May 17, 2010
http://www.bipartisanalliance.com/2010/05/revenue-limits-of-tax-and-spend-whether.html
A Hidden History of Evil - Why doesn’t anyone care about the unread Soviet archives?
http://city-journal.com/2010/20_2_soviet-archives.html
The Revenue Limits of Tax and Spend - Whether rates are high or low, evidence shows our tax system won't collect more than 20% of GDP
The Revenue Limits of Tax and Spend. By DAVID RANSON
Whether rates are high or low, evidence shows our tax system won't collect more than 20% of GDP.
WSJ, May 17, 2010
The Greeks have always been trendsetters for the West. Washington has repudiated two centuries of U.S. fiscal prudence as prescribed by the Founding Fathers in favor of the modern Greek model of debt, dependency, devaluation and default. Prospects for restraining runaway U.S. debt are even poorer than they appear.
U.S. fiscal policy has been going in the wrong direction for a very long time. But this year the U.S. government declined to lay out any plan to balance its budget ever again. Based on President Obama's fiscal 2011 budget, the Congressional Budget Office (CBO) estimates a deficit that starts at 10.3% of GDP in 2010. It is projected to narrow as the economy recovers but will still be 5.6% in 2020. As a result the net national debt (debt held by the public) will more than double to 90% by 2020 from 40% in 2008. The current Greek deficit is now thought to be 13.6% of a far smaller GDP. Unlike ours, the Greek insolvency is not too large for an international rescue.
As sobering as the U.S. debt estimates are, they are incomplete and optimistic. They do not include deficit spending resulting from the new health-insurance legislation. The revenue numbers rely on increased tax rates beginning next year resulting from the scheduled expiration of the Bush tax cuts. And, as usual, they ignore the unfunded liabilities of social insurance programs, even though these benefits are officially recognized as "mandatory spending" when the time comes to pay them out.
The feds assume a relationship between the economy and tax revenue that is divorced from reality. Six decades of history have established one far-reaching fact that needs to be built into fiscal calculations: Increases in federal tax rates, particularly if targeted at the higher brackets, produce no additional revenue. For politicians this is truly an inconvenient truth.
[Hauser's Law http://sg.wsj.net/public/resources/images/ED-AL524A_ranso_NS_20100516181943.gif]
![[ranson]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_uYePvI0DYEtpP1NbjgDA7pxEpME3l_MdDThV_VCk0SjyawAnudGDebVEi6e1wF55MBNjng5gvbS7eNufzRGS99HiMr0Fqd-6cU5khOIP6E-iLkoemmbbZsymHle18Kx1KFYiB8l-JwvWIiCySSv7mr6w=s0-d)
The nearby chart shows how tax revenue has grown over the past eight decades along with the size of the economy. It illustrates the empirical relationship first introduced on this page 20 years ago by the Hoover Institution's W. Kurt Hauser—a close proportionality between revenue and GDP since World War II, despite big changes in marginal tax rates in both directions. "Hauser's Law," as I call this formula, reveals a kind of capacity ceiling for federal tax receipts at about 19% of GDP.
What's the origin of this limit beyond which it is impossible to extract any more revenue from tax payers? The tax base is not something that the government can kick around at will. It represents a living economic system that makes its own collective choices. In a tax code of 70,000 pages there are innumerable ways for high-income earners to seek out and use ambiguities and loopholes. The more they are incentivized to make an effort to game the system, the less the federal government will get to collect. That would explain why, as Mr. Hauser has shown, conventional methods of forecasting tax receipts from increases in future tax rates are prone to over-predict revenue.
For budget planning it's wiser and safer to assume that tax receipts will remain at a historically realistic ratio to GDP no matter how tax rates are manipulated. That leads me to conclude that current projections of federal revenue are, once again, unrealistically high.
Like other empirical "laws," Hauser's Law predicts within a range of approximation. Changes in marginal tax rates do not make a perceptible difference to the ratio of revenue to GDP, but recessions do. When GDP falls relative to its potential, tax revenue falls even more. History shows that, in an economy with no "output gap" between GDP and potential GDP, a ratio of federal revenue to GDP of no more than 18.3% would be realistic.
In this form, Hauser's Law provides a simple basis for testing the validity of any government's revenue projections. Today, since the economy already suffers from a large output gap that is expected to take many years to close, 18.3% must be a realistic upper limit on the ratio of budget revenues to GDP for years to come. Any major tax increase will reduce GDP and therefore revenues too.
But CBO projections based on the current budget show this ratio reaching 18.3% as early as 2013 and rising to 19.6% in 2020. Such numbers implicitly assume that the U.S. labor market will get back to sustainable "full employment" by 2013 and that GDP will exceed its potential thereafter. Not likely. When the projections are tempered by the constraints of Hauser's Law, it's clear that deficit spending will grow faster than the official estimates show.
Mr. Ranson is the head of research at H. C. Wainwright & Co. Economics.
Whether rates are high or low, evidence shows our tax system won't collect more than 20% of GDP.
WSJ, May 17, 2010
The Greeks have always been trendsetters for the West. Washington has repudiated two centuries of U.S. fiscal prudence as prescribed by the Founding Fathers in favor of the modern Greek model of debt, dependency, devaluation and default. Prospects for restraining runaway U.S. debt are even poorer than they appear.
U.S. fiscal policy has been going in the wrong direction for a very long time. But this year the U.S. government declined to lay out any plan to balance its budget ever again. Based on President Obama's fiscal 2011 budget, the Congressional Budget Office (CBO) estimates a deficit that starts at 10.3% of GDP in 2010. It is projected to narrow as the economy recovers but will still be 5.6% in 2020. As a result the net national debt (debt held by the public) will more than double to 90% by 2020 from 40% in 2008. The current Greek deficit is now thought to be 13.6% of a far smaller GDP. Unlike ours, the Greek insolvency is not too large for an international rescue.
As sobering as the U.S. debt estimates are, they are incomplete and optimistic. They do not include deficit spending resulting from the new health-insurance legislation. The revenue numbers rely on increased tax rates beginning next year resulting from the scheduled expiration of the Bush tax cuts. And, as usual, they ignore the unfunded liabilities of social insurance programs, even though these benefits are officially recognized as "mandatory spending" when the time comes to pay them out.
The feds assume a relationship between the economy and tax revenue that is divorced from reality. Six decades of history have established one far-reaching fact that needs to be built into fiscal calculations: Increases in federal tax rates, particularly if targeted at the higher brackets, produce no additional revenue. For politicians this is truly an inconvenient truth.
[Hauser's Law http://sg.wsj.net/public/resources/images/ED-AL524A_ranso_NS_20100516181943.gif]
The nearby chart shows how tax revenue has grown over the past eight decades along with the size of the economy. It illustrates the empirical relationship first introduced on this page 20 years ago by the Hoover Institution's W. Kurt Hauser—a close proportionality between revenue and GDP since World War II, despite big changes in marginal tax rates in both directions. "Hauser's Law," as I call this formula, reveals a kind of capacity ceiling for federal tax receipts at about 19% of GDP.
What's the origin of this limit beyond which it is impossible to extract any more revenue from tax payers? The tax base is not something that the government can kick around at will. It represents a living economic system that makes its own collective choices. In a tax code of 70,000 pages there are innumerable ways for high-income earners to seek out and use ambiguities and loopholes. The more they are incentivized to make an effort to game the system, the less the federal government will get to collect. That would explain why, as Mr. Hauser has shown, conventional methods of forecasting tax receipts from increases in future tax rates are prone to over-predict revenue.
For budget planning it's wiser and safer to assume that tax receipts will remain at a historically realistic ratio to GDP no matter how tax rates are manipulated. That leads me to conclude that current projections of federal revenue are, once again, unrealistically high.
Like other empirical "laws," Hauser's Law predicts within a range of approximation. Changes in marginal tax rates do not make a perceptible difference to the ratio of revenue to GDP, but recessions do. When GDP falls relative to its potential, tax revenue falls even more. History shows that, in an economy with no "output gap" between GDP and potential GDP, a ratio of federal revenue to GDP of no more than 18.3% would be realistic.
In this form, Hauser's Law provides a simple basis for testing the validity of any government's revenue projections. Today, since the economy already suffers from a large output gap that is expected to take many years to close, 18.3% must be a realistic upper limit on the ratio of budget revenues to GDP for years to come. Any major tax increase will reduce GDP and therefore revenues too.
But CBO projections based on the current budget show this ratio reaching 18.3% as early as 2013 and rising to 19.6% in 2020. Such numbers implicitly assume that the U.S. labor market will get back to sustainable "full employment" by 2013 and that GDP will exceed its potential thereafter. Not likely. When the projections are tempered by the constraints of Hauser's Law, it's clear that deficit spending will grow faster than the official estimates show.
Mr. Ranson is the head of research at H. C. Wainwright & Co. Economics.
Saturday, May 15, 2010
Press Briefing
May 15, 2010
The White House Blog: Developing Our Sustainable Future. By Secretary Shaun Donovan on May 14, 2010 at 06:32 PM EDT
http://www.whitehouse.gov/blog/2010/05/14/developing-our-sustainable-future
Weekly Address: President Obama "Wall Street Reform Will Bring Greater Security to Folks on Main Street"
http://www.whitehouse.gov/the-press-office/weekly-address-president-obama-wall-street-reform-will-bring-greater-security-folks
Transmittal of the New START Treaty Documents to the United States Senate
http://www.state.gov/t/vci/trty/126118.htm
A late look at a troubling treaty - On New START
http://www.nypost.com/p/news/opinion/opedcolumnists/late_look_at_troubling_treaty_3JDfbEm5ULFcy2dY3rVcPO
Briefing On the U.S.-China Human Rights Dialogue. By Michael H. Posner, Assistant Secretary, Bureau of Democracy, Human Rights, and Labor.
Washington, DC, May 14, 2010
http://www.state.gov/r/pa/prs/ps/2010/05/141899.htm
New York Minorities More Likely to Be Frisked
http://www.nytimes.com/2010/05/13/nyregion/13frisk.html
Distorting the Truth About Crime and Race - The New York Times is at it again
http://city-journal.com/2010/eon0514hm.html
Why Liberal Education Matters - The true aim of the humanities is to prepare citizens for exercising their freedom responsibly
http://online.wsj.com/article/SB10001424052702303695604575182313286840550.html
Obama's Union Favors - The latest rule change slams the airlines
http://online.wsj.com/article/SB10001424052748703339304575240350067273536.html
Hobbling Charter Schools - They often lack the freedom they've been promised
http://online.wsj.com/article/SB10001424052748703961104575226433392497538.html
The Fed's Monetary Dissident - 'I really don't think we should be guaranteeing Wall Street a margin by guaranteeing them a zero or a near zero interest rate.' Talk with
Kansas City Federal Reserve Bank President Thomas Hoenig
http://online.wsj.com/article/SB10001424052748703460404575244050343571436.html
Very Low Fertility in Asia: Is There a Problem? Can It Be Solved? by Sidney B. Westley, Minja Kim Choe, and Robert D. Retherford. AsiaPacific Issues, No. 94.
Honolulu: East-West Center, May 2010.
http://www.eastwestcenter.org/pubs/3448
Fifty years ago, women in Asia were having, on average, more than five children each, and there was widespread fear of a "population explosion" in the region. Then birth
rates began to fall--in several countries more steeply than anyone had anticipated. This unexpected trend has now raised concerns about the social and economic impact
of extremely low fertility. Today, four of Asia's most prosperous economies--Japan, Singapore, South Korea, and Taiwan--have among the lowest birth rates in the world.
With women having, on average, only one child each, these societies have expanding elderly populations and a shrinking workforce to pay for social services and drive
economic growth. And in Japan, overall population numbers are already going down. Why are women choosing to have so few children? How are policymakers
responding to these trends? Government leaders have initiated a variety of policies and programs designed to encourage marriage and childbearing, but to what effect?
Given current social and economic trends, it is unlikely that Asia's steep fertility decline will be reversed, at least not in the foreseeable future.
Remarks by the President on the Ongoing Oil Spill Response
http://www.whitehouse.gov/the-press-office/remarks-president-ongoing-oil-spill-response
Tinkering With Miranda - Eric Holder's gambit on terrorist rights is too clever by half.
http://online.wsj.com/article/SB10001424052748704250104575239140685298952.html
Dispatch: Perchlorate in the Water
http://www.acsh.org/factsfears/newsID.1432/news_detail.asp
Reuters Health reports, “Everyday exposure to perchlorate, an industrial chemical found in drinking water and a range of foods, may not impair thyroid function in pregnant women, a new study suggests.” The CDC study found perchlorate in the urine of all 2,820 subjects tested.
“Perchlorate is found in all groundwater, as it is residue of various industrial processes,” explains ACSH’s Dr. Gilbert Ross. “Doctors use perchlorate in the treatment of overactive thyroid, since it does interfere with thyroid hormone production at sufficiently high doses. You could say it’s an actual endocrine disruptor, in that case.
However, the amount found in drinking water is five orders of magnitude less than the amount needed to affect thyroid function, and it has no effect whatsoever on human health at these environmental levels.
“As this study demonstrated, you can find perchlorate in the tissues or urine of anyone you analyze for it. So the lesson from this story is three-fold: First, environmental perchlorate does not affect thyroid function in pregnant women; second, the dose makes the poison; third, as we’ve always known about biomonitoring, being able to find trace amounts of a substance in someone’s body does not help you predict health outcomes.”
“We have to give credit to Reuters Health for publishing this report about the study,” says ACSH’s Jeff Stier. “All too often, the media reports when a study finds a supposed health hazard, and almost never when a study finds something to be safe. The public is left with a skewed point of view, thinking that every chemical causes every ailment, so it’s nice to see Reuters Health acknowledge that there is such a thing as a non-finding in scientific studies.”
Dispatch: Activist A-List
http://www.acsh.org/factsfears/newsID.1433/news_detail.asp
ACSH staffers can’t help but notice that the list of reviewers enumerated in appendix A of the President’s Cancer Panel’s recent report seems unbalanced.
“The report was an incredible distortion of cancer epidemiology,” says ACSH’s Dr. Elizabeth Whelan. “One of the panel’s recommendations to avoid cancer is to take your shoes off before you go into your home. It’s absolutely insane. So it’s no surprise to see how many of the people who contributed their input to the report are affiliated with radical ‘environmentalist’ groups like the Silent Spring Institute, the Breast Cancer Fund, and the Environmental Working Group.
“Even the American Cancer Society (ACS), which is generally mute on debates like these, came out and said that the report misrepresented the science of cancer. So my question is: Why haven’t we heard from the National Cancer Institute (NCI) on this? There were a number of NCI employees that signed their name to this list, and so far they haven’t stepped up like ACS to point out how unscientific this report is.”
Dispatch: PCBs in Red Hook
http://www.acsh.org/factsfears/newsID.1434/news_detail.asp
New York City officials will be investigating claims that the soil of Brooklyn’s Red Hook Park is contaminated with 110 times the EPA-established limit for the concentration of polychlorinated biphenyls (PCBs), which the state claims is a result of effluvia from the nearby, now-defunct manufacturing plant of plastics-additive maker Chemtura Corp.
“There are two questions here that, of course, no one has thought to ask,” says Dr. Ross. “First, has anyone measured PCB levels in anyone in Red Hook to see if they are being affected by this? More importantly, has anyone said there’s an adverse health outcome associated with PCBs at these contaminated sites? It seems to me that this has nothing to do with public health, and is all a question of regulatory adherence.”
The White House Blog: Developing Our Sustainable Future. By Secretary Shaun Donovan on May 14, 2010 at 06:32 PM EDT
http://www.whitehouse.gov/blog/2010/05/14/developing-our-sustainable-future
Weekly Address: President Obama "Wall Street Reform Will Bring Greater Security to Folks on Main Street"
http://www.whitehouse.gov/the-press-office/weekly-address-president-obama-wall-street-reform-will-bring-greater-security-folks
Transmittal of the New START Treaty Documents to the United States Senate
http://www.state.gov/t/vci/trty/126118.htm
A late look at a troubling treaty - On New START
http://www.nypost.com/p/news/opinion/opedcolumnists/late_look_at_troubling_treaty_3JDfbEm5ULFcy2dY3rVcPO
Briefing On the U.S.-China Human Rights Dialogue. By Michael H. Posner, Assistant Secretary, Bureau of Democracy, Human Rights, and Labor.
Washington, DC, May 14, 2010
http://www.state.gov/r/pa/prs/ps/2010/05/141899.htm
New York Minorities More Likely to Be Frisked
http://www.nytimes.com/2010/05/13/nyregion/13frisk.html
Distorting the Truth About Crime and Race - The New York Times is at it again
http://city-journal.com/2010/eon0514hm.html
Why Liberal Education Matters - The true aim of the humanities is to prepare citizens for exercising their freedom responsibly
http://online.wsj.com/article/SB10001424052702303695604575182313286840550.html
Obama's Union Favors - The latest rule change slams the airlines
http://online.wsj.com/article/SB10001424052748703339304575240350067273536.html
Hobbling Charter Schools - They often lack the freedom they've been promised
http://online.wsj.com/article/SB10001424052748703961104575226433392497538.html
The Fed's Monetary Dissident - 'I really don't think we should be guaranteeing Wall Street a margin by guaranteeing them a zero or a near zero interest rate.' Talk with
Kansas City Federal Reserve Bank President Thomas Hoenig
http://online.wsj.com/article/SB10001424052748703460404575244050343571436.html
Very Low Fertility in Asia: Is There a Problem? Can It Be Solved? by Sidney B. Westley, Minja Kim Choe, and Robert D. Retherford. AsiaPacific Issues, No. 94.
Honolulu: East-West Center, May 2010.
http://www.eastwestcenter.org/pubs/3448
Fifty years ago, women in Asia were having, on average, more than five children each, and there was widespread fear of a "population explosion" in the region. Then birth
rates began to fall--in several countries more steeply than anyone had anticipated. This unexpected trend has now raised concerns about the social and economic impact
of extremely low fertility. Today, four of Asia's most prosperous economies--Japan, Singapore, South Korea, and Taiwan--have among the lowest birth rates in the world.
With women having, on average, only one child each, these societies have expanding elderly populations and a shrinking workforce to pay for social services and drive
economic growth. And in Japan, overall population numbers are already going down. Why are women choosing to have so few children? How are policymakers
responding to these trends? Government leaders have initiated a variety of policies and programs designed to encourage marriage and childbearing, but to what effect?
Given current social and economic trends, it is unlikely that Asia's steep fertility decline will be reversed, at least not in the foreseeable future.
Remarks by the President on the Ongoing Oil Spill Response
http://www.whitehouse.gov/the-press-office/remarks-president-ongoing-oil-spill-response
Tinkering With Miranda - Eric Holder's gambit on terrorist rights is too clever by half.
http://online.wsj.com/article/SB10001424052748704250104575239140685298952.html
Dispatch: Perchlorate in the Water
http://www.acsh.org/factsfears/newsID.1432/news_detail.asp
Reuters Health reports, “Everyday exposure to perchlorate, an industrial chemical found in drinking water and a range of foods, may not impair thyroid function in pregnant women, a new study suggests.” The CDC study found perchlorate in the urine of all 2,820 subjects tested.
“Perchlorate is found in all groundwater, as it is residue of various industrial processes,” explains ACSH’s Dr. Gilbert Ross. “Doctors use perchlorate in the treatment of overactive thyroid, since it does interfere with thyroid hormone production at sufficiently high doses. You could say it’s an actual endocrine disruptor, in that case.
However, the amount found in drinking water is five orders of magnitude less than the amount needed to affect thyroid function, and it has no effect whatsoever on human health at these environmental levels.
“As this study demonstrated, you can find perchlorate in the tissues or urine of anyone you analyze for it. So the lesson from this story is three-fold: First, environmental perchlorate does not affect thyroid function in pregnant women; second, the dose makes the poison; third, as we’ve always known about biomonitoring, being able to find trace amounts of a substance in someone’s body does not help you predict health outcomes.”
“We have to give credit to Reuters Health for publishing this report about the study,” says ACSH’s Jeff Stier. “All too often, the media reports when a study finds a supposed health hazard, and almost never when a study finds something to be safe. The public is left with a skewed point of view, thinking that every chemical causes every ailment, so it’s nice to see Reuters Health acknowledge that there is such a thing as a non-finding in scientific studies.”
Dispatch: Activist A-List
http://www.acsh.org/factsfears/newsID.1433/news_detail.asp
ACSH staffers can’t help but notice that the list of reviewers enumerated in appendix A of the President’s Cancer Panel’s recent report seems unbalanced.
“The report was an incredible distortion of cancer epidemiology,” says ACSH’s Dr. Elizabeth Whelan. “One of the panel’s recommendations to avoid cancer is to take your shoes off before you go into your home. It’s absolutely insane. So it’s no surprise to see how many of the people who contributed their input to the report are affiliated with radical ‘environmentalist’ groups like the Silent Spring Institute, the Breast Cancer Fund, and the Environmental Working Group.
“Even the American Cancer Society (ACS), which is generally mute on debates like these, came out and said that the report misrepresented the science of cancer. So my question is: Why haven’t we heard from the National Cancer Institute (NCI) on this? There were a number of NCI employees that signed their name to this list, and so far they haven’t stepped up like ACS to point out how unscientific this report is.”
Dispatch: PCBs in Red Hook
http://www.acsh.org/factsfears/newsID.1434/news_detail.asp
New York City officials will be investigating claims that the soil of Brooklyn’s Red Hook Park is contaminated with 110 times the EPA-established limit for the concentration of polychlorinated biphenyls (PCBs), which the state claims is a result of effluvia from the nearby, now-defunct manufacturing plant of plastics-additive maker Chemtura Corp.
“There are two questions here that, of course, no one has thought to ask,” says Dr. Ross. “First, has anyone measured PCB levels in anyone in Red Hook to see if they are being affected by this? More importantly, has anyone said there’s an adverse health outcome associated with PCBs at these contaminated sites? It seems to me that this has nothing to do with public health, and is all a question of regulatory adherence.”
Friday, May 14, 2010
In Defense of Over-the-Counter Derivatives - Swaps grew out of the banking system because writing risky, custom contracts is a lot like making loans
In Defense of Over-the-Counter Derivatives. By MARK C. BRICKELL
Swaps grew out of the banking system because writing risky, custom contracts is a lot like making loans.
WSJ, May 14, 2010
In 1989, there were $2.5 trillion of swaps outstanding, according to the International Swaps and Derivatives Association. Today there are $464 trillion. Why?
Few business activities grow by 30% annually for decades, so this success deserves scrutiny. The first step is to understand that swaps—as federal law calls the custom-tailored derivatives that banks and their corporate customers privately negotiate—help companies shed the risks they don't want and take on risks they prefer to manage.
McDonalds, for example, is expert in training young workers, marketing, and managing global real estate. But if selling hamburgers worldwide generates revenue in Japanese yen and New Zealand dollars, it also means smaller profits when those currencies decline in value. A swap contract can shift that risk to a bank that is as good at managing currency risk as the corporation is at buying beef. By outsourcing the management of its financial risks, a company can focus on its true sources of comparative advantage. That strengthens the firm and speeds economic growth.
Within the financial system, transferring risks is no less important. Different banks specialize in managing different risks and have customers with differing needs. If banks lent money to or wrote swaps with no one but their clients, they would accumulate too much risk in their portfolios. They manage this by writing swaps with other banks or nonbank risk-takers like hedge funds to transfer some risks away.
More companies, governments and banks are using swaps for two reasons.
First, swaps can be custom tailored in helpful ways. For example, anticipating falling interest rates, a company with fixed-rate debt can "swap" from fixed to floating by having its bank pay the fixed interest rate on the firm's five-year bonds, precisely to the dollar and to the day. In return, the company pays the bank the floating rate of interest, as it changes during those five years. Simpler derivatives, like futures, lack this attribute because they must be standardized to trade on futures exchanges.
Swap contracts are also customized to manage the credit risk of losing money if a counterparty defaults. Using private credit information, banks can decide to make a swap without taking collateral, just as they would to make an unsecured loan.
Futures traders, in contrast, outsource the credit risk of all their derivatives to central counterparties called clearinghouses, which require cash collateral or "margin" payments. If American companies were required to make such margin payments on their swaps, they would have to set aside billions of dollars that would no longer be available, as 3M testified last year, to build more factories or create new jobs.
Second, it costs less to move risks with swaps than with cash. The treasurer of the company that prefers floating-rate liabilities could ask his investment banker to track down the investors who own his fixed-rate securities and buy them back. He could negotiate a new, floating-rate bank loan to pay for it. But think of the transaction costs involved. One phone call to a swap desk achieves the same result at less cost.
You can see why swap activity grew out of the banking system. Writing custom-tailored, long-term contracts with credit risk is a lot like making loans to companies. That's why a very high proportion of interest-rate, currency, equity, and credit default swaps has a bank on at least one side of the deal.
This is also why, in this country, a policy consensus has existed for more than 20 years that swaps are not appropriately regulated as futures or securities. Instead, swap activity has been monitored for the most part by the banking authorities. Banking supervisors have had a good window on the business, and the opportunity to give a nudge when they think banks need it. The contracts the banking supervisors don't see (the ones between nonbanks) are unlikely to be systemically important. They are fewer, smaller and shorter term—and with proper credit analysis even these swaps will pop up on the radar of banks and their supervisors.
Good business systems improve as they grow. Recently, swap banks have chosen to send roughly $200 trillion of interbank swap contracts to central clearinghouses. They have created central data repositories to record their deals and give all regulators a wider window on the business. They have increased their use of technology to confirm trades. All this was achieved without new laws or regulations.
But what of AIG? That federally regulated thrift holding company lost billions by writing mortgage insurance, purchasing mortgage-backed securities, and writing credit default swaps that guaranteed mortgage bonds owned by others. Its losses across multiple business lines were not a swaps problem, they were a mortgage problem—and what was true for AIG was true across the financial system.
More than a trillion dollars of losses accrued when virtually every institution in the housing finance chain, including mortgage lenders, securities underwriters, rating agencies, Fannie Mae and Freddie Mac, investors, and the federal regulator at each step of the process underestimated the likelihood of an increase in defaults by mortgage borrowers. No one, certainly not the federal banking supervisors who already have reviewed derivatives activity before and during the crisis, has attributed this problem to swaps. But swaps did enable a few, wiser investors to let some air out of the housing bubble by putting on short positions efficiently.
A system-wide misjudgment of mortgage risk caused the financial crisis; understanding how that happened is the essential first step toward the policy reforms that will help us achieve the goal of financial stability. Legislation that targets over-the-counter derivatives will not further that goal.
Mr. Brickell was a managing director at J.P. Morgan and served as chairman of the International Swaps and Derivatives Association.
Swaps grew out of the banking system because writing risky, custom contracts is a lot like making loans.
WSJ, May 14, 2010
In 1989, there were $2.5 trillion of swaps outstanding, according to the International Swaps and Derivatives Association. Today there are $464 trillion. Why?
Few business activities grow by 30% annually for decades, so this success deserves scrutiny. The first step is to understand that swaps—as federal law calls the custom-tailored derivatives that banks and their corporate customers privately negotiate—help companies shed the risks they don't want and take on risks they prefer to manage.
McDonalds, for example, is expert in training young workers, marketing, and managing global real estate. But if selling hamburgers worldwide generates revenue in Japanese yen and New Zealand dollars, it also means smaller profits when those currencies decline in value. A swap contract can shift that risk to a bank that is as good at managing currency risk as the corporation is at buying beef. By outsourcing the management of its financial risks, a company can focus on its true sources of comparative advantage. That strengthens the firm and speeds economic growth.
Within the financial system, transferring risks is no less important. Different banks specialize in managing different risks and have customers with differing needs. If banks lent money to or wrote swaps with no one but their clients, they would accumulate too much risk in their portfolios. They manage this by writing swaps with other banks or nonbank risk-takers like hedge funds to transfer some risks away.
More companies, governments and banks are using swaps for two reasons.
First, swaps can be custom tailored in helpful ways. For example, anticipating falling interest rates, a company with fixed-rate debt can "swap" from fixed to floating by having its bank pay the fixed interest rate on the firm's five-year bonds, precisely to the dollar and to the day. In return, the company pays the bank the floating rate of interest, as it changes during those five years. Simpler derivatives, like futures, lack this attribute because they must be standardized to trade on futures exchanges.
Swap contracts are also customized to manage the credit risk of losing money if a counterparty defaults. Using private credit information, banks can decide to make a swap without taking collateral, just as they would to make an unsecured loan.
Futures traders, in contrast, outsource the credit risk of all their derivatives to central counterparties called clearinghouses, which require cash collateral or "margin" payments. If American companies were required to make such margin payments on their swaps, they would have to set aside billions of dollars that would no longer be available, as 3M testified last year, to build more factories or create new jobs.
Second, it costs less to move risks with swaps than with cash. The treasurer of the company that prefers floating-rate liabilities could ask his investment banker to track down the investors who own his fixed-rate securities and buy them back. He could negotiate a new, floating-rate bank loan to pay for it. But think of the transaction costs involved. One phone call to a swap desk achieves the same result at less cost.
You can see why swap activity grew out of the banking system. Writing custom-tailored, long-term contracts with credit risk is a lot like making loans to companies. That's why a very high proportion of interest-rate, currency, equity, and credit default swaps has a bank on at least one side of the deal.
This is also why, in this country, a policy consensus has existed for more than 20 years that swaps are not appropriately regulated as futures or securities. Instead, swap activity has been monitored for the most part by the banking authorities. Banking supervisors have had a good window on the business, and the opportunity to give a nudge when they think banks need it. The contracts the banking supervisors don't see (the ones between nonbanks) are unlikely to be systemically important. They are fewer, smaller and shorter term—and with proper credit analysis even these swaps will pop up on the radar of banks and their supervisors.
Good business systems improve as they grow. Recently, swap banks have chosen to send roughly $200 trillion of interbank swap contracts to central clearinghouses. They have created central data repositories to record their deals and give all regulators a wider window on the business. They have increased their use of technology to confirm trades. All this was achieved without new laws or regulations.
But what of AIG? That federally regulated thrift holding company lost billions by writing mortgage insurance, purchasing mortgage-backed securities, and writing credit default swaps that guaranteed mortgage bonds owned by others. Its losses across multiple business lines were not a swaps problem, they were a mortgage problem—and what was true for AIG was true across the financial system.
More than a trillion dollars of losses accrued when virtually every institution in the housing finance chain, including mortgage lenders, securities underwriters, rating agencies, Fannie Mae and Freddie Mac, investors, and the federal regulator at each step of the process underestimated the likelihood of an increase in defaults by mortgage borrowers. No one, certainly not the federal banking supervisors who already have reviewed derivatives activity before and during the crisis, has attributed this problem to swaps. But swaps did enable a few, wiser investors to let some air out of the housing bubble by putting on short positions efficiently.
A system-wide misjudgment of mortgage risk caused the financial crisis; understanding how that happened is the essential first step toward the policy reforms that will help us achieve the goal of financial stability. Legislation that targets over-the-counter derivatives will not further that goal.
Mr. Brickell was a managing director at J.P. Morgan and served as chairman of the International Swaps and Derivatives Association.
U.S. Alliances in East Asia: Internal Challenges and External Threats
U.S. Alliances in East Asia: Internal Challenges and External Threats. By William Breer, Senior Adviser, Center for Strategic and International Studies
The Brookings Institution, May 2010
May 20 marks the 60th anniversary of the ratification of the U.S.-Japan alliance by Japan’s House of Representatives. While the alliance is a bilateral arrangement, it has had a significant impact on Asia as a whole and is regarded by other nations as a key part of the regional security structure. The following is a brief survey of the treaty's role in the maintenance of peace and stability in the Asia-Pacific. It also demonstrates that the tensions currently confronting the U.S.-Japan alliance are not unique, but in fact have been faced by various bilateral alliances in the region; some have been resolved successfully and some have not.
Most experts believe that the series of alliances the United States created after World War II was one of the most astute and far-sighted acts of diplomacy in history. The alliance with Japan laid the foundation for reconciliation between two enemy nations and the groundwork for the reconstruction of a nation whose industrial power, infrastructure, and morale lay in shambles but which rose to become the world’s second largest economy. The alliance played a key role in the Cold War by allowing the United States to cover the USSR's eastern flank and demonstrating to China and North Korea that we would defend our interests and those of our allies in East Asia.
The arrangements with Japan provided a base from which the U.S. was able to defend its Republic of Korea ally from aggression by the North. Although the Korean War ended in an armistice—not a victory for the ROK, U.S., and their allies—without the use of facilities in Japan the peninsula could have been lost. Another plus was that American protection relieved Japan of having to acquire an offensive military capability, possibly including nuclear weapons. This reassured Japan’s neighbors that it would not again become a threat to their independence.
The result has been five decades of peace in Northeast Asia without a serious arms competition and remarkably few serious threats to the peace. This, along with the stimulus of Korean War procurement, enabled Japan to devote its resources to economic development which resulted in a previously unimaginable economic expansion and improvement in living standards. The ROK, Taiwan, and later China, piggy-backing on Japan's success and partaking of Japan's foreign aid and investment policies, replicated Japan's experience and delivered even faster rates of economic growth and prosperity to their people. None of this would have been possible without the American alliance system and the stability it provided throughout the region. The American presence in East Asia has been reassuring to allies, and our naval and air deployments beyond the region have played a major role in protecting the key energy trade routes through the Malacca Strait and Indian Ocean.
American alliances around East Asia
While the results have been good and generations of alliance managers on both sides can take considerable satisfaction in their accomplishments, the presence of foreign military bases in sovereign countries is not necessarily a natural phenomenon. Many Americans feel that we are motivated by altruism in undertaking to defend other peoples and that our actions are benign. But this view is not necessarily shared by citizens of host countries, many of whom view the American presence as an extension of the occupation in the case of Japan, an intrusion on sovereignty, or as a nuisance. These feelings are reinforced by a complex legal regime governing our bases and serious incidents (rape, hit-and-run accidents, etc.) involving American personnel. At the same time, the base arrangements provide significant employment opportunities for local populations there are some who welcome their presence. The policies of the new Hatoyama government reflect these contradictory views.
Governments have responded to these issues in different ways. In Japan we have developed mechanisms for dealing with problems and have accumulated a great deal of experience in working together. As a result Japanese citizens have tolerated a foreign military presence remarkably well. This may be a historic first. The leaderships of both nations realize the important role that the alliance plays in maintaining stability in East Asia and have striven to protect it.
In the Philippines, where we had maintained major naval and air facilities for many decades, a combination of domestic political pressure, the destruction of one base by a volcanic eruption rendering it unusable, and a strategic reassessment in Washington resulted in the withdrawal of U.S. forces, but the continuation of the defense treaty. In recent years, small numbers of U.S. military advisors have assisted the Philippine armed forces in countering Muslim insurgents in the southern islands of Mindanao and the Sulu Archipelago.
This was followed a few years later by the New Zealand government's refusal to allow port calls by U.S. Navy vessels, as clearly envisioned in the ANZUS treaty, without a prior finding by the prime minister of New Zealand that the ships in question were not carrying nuclear weapons. This was contrary to our long-standing policy of neither confirming nor denying the presence of nuclear weapons aboard our ships and put at risk our arrangements with Japan. The result was a suspension of our defense relationship with New Zealand and strained relations with this ally for a number of years. When the U.S. Navy revised its "neither confirm nor deny" policy our defense relationship gradually improved. However, as Secretary of State George Shultz stated at the time of the break in 1986, "We remain friends, but we are no longer allies."
We do not have a security treaty with Taiwan and do not maintain forces on the island. Under the Taiwan Relations Act, however, we are obligated to provide certain defensive weapons and equipment and it is understood that we would come to Taiwan's defense in a clear-cut emergency. While this is not an explicit or legal commitment, U.S. policy toward Taiwan has assured the people of Taiwan and other countries in the region that the United States takes the security of Taiwan seriously and that only a peaceful, non-coercive resolution of the political issues across the Taiwan Strait would be satisfactory.
Under our mutual defense treaty with the Republic of Korea we deploy sizable ground and air forces to the peninsula to backup ROK defenses in the event of aggression by North Korea. We have made clear to the North that the American commitment to the defense of South Korea is rock solid, and the peace has been maintained. While the U.S. posture has effectively deterred North Korea from a frontal attack, it has not prevented North Korea from mounting provocations, ranging from the capture of the USS Pueblo in 1968, through the tree-cutting incident in 1976, to the recent apparent sinking of an ROK warship. The biggest challenge posed by North Korea is its determination to acquire deployable nuclear weapons which would threaten U.S. interests throughout East Asia, potentially pose an existential threat to Japan, and create a proliferation problem of vast proportions. Our treaty relationships with Japan and Korea, and our many decades of experience working together, have greatly facilitated our cooperation on this issue.
From time to time, base issues (one of our major bases is in the center of Seoul) and occasional incidents caused by American personnel have aroused latent nationalism among the people, which has in the past resulted in large scale demonstrations, strains in our relations with the host government, and pressure to relocate our facilities. That we are making necessary adjustments to our deployments without significantly reducing our support for the ROK or the effectiveness of our deterrent is a credit to the common sense and foresight of Korean and American officials, many of whom have devoted entire careers to the management of the defense of the ROK.
Australia and Southeast Asia have been direct beneficiaries of America's alliance structure. While Australia is a member of ANZUS it has never become a platform for large scale American deployments. It has a keen interest in the stability and economic well-being of Northeast Asia because of its enormous and profitable economic ties with the region. It is also a beneficiary of American attention to the sea lanes to its West and North on which it depends for the bulk of its international commerce. Australia has been a valued ally in a large number of military operations in which the U.S. has engaged over the last fifty years, despite periodic internal opposition to American policy.
What about the future?
Despite periodic outbursts of opposition to nuclear ship home-porting or other aspects of the U.S. deployment in Japan, support among the Japanese people for the security relationship has remained at a remarkably high level. As a result the U.S. has had a relatively free hand in the use of our facilities and in the deployment of forces there. Generations of Japanese leaders have cooperated with U.S. security needs. These include a contribution of $13 billion in support of the first Gulf War, the dispatch of ground forces in support of our operations against Saddam Hussein, and generous foreign assistance to many places in which we have a strategic interest, including Afghanistan. Japan has also for the past 25 years made major contributions - $4-5 billion per year - to the support of U.S. forces in Japan. Who would have imagined 60 years ago that there would be significant U.S. military facilities in Japan in 2010?
There are some clouds on the horizon. The planned relocation of Marine Corps Air Station Futenma has posed major political issues for both Japan and the United States. Okinawa is host for the majority of U.S. forces in Japan and has endured the lion's share of the impact of foreign bases. Under considerable local pressure, Tokyo and Washington in 2006 reached an agreement to move the noisy Futenma facility from a densely populated area in central Okinawa to a sparsely populated region in the north. But the new Japanese administration, which took office in September 2009, ran on a platform calling for the removal of the facility from Okinawa. The U.S. side has adamantly insisted that the agreement be implemented as is and the two sides have reached an impasse which could result in the resignation of the prime minister. This is not a satisfactory situation, especially when it is not clear that the Marine Corps deployment in Okinawa is a vital piece of our deterrent posture on which it is worth Japan spending more than $10 billion to relocate.
The decision to attack Iraq in 2003 and the sloppy execution of the war called into question American judgment and leadership. Uncertain progress in Afghanistan has compounded this. Neither of these has significantly weakened Japanese support for the alliance, but these creeping doubts, coupled with an increasingly inward-looking Japanese public, have helped create an era in which American strategic assessments and solutions will be viewed with greater skepticism. Another serious incident involving U.S. military personnel would put further strain on the relationship. This is not to say that we cannot cooperate on a wide range of issues, but such cooperation will require higher level USG attention and a willingness on both sides to listen more attentively to the other's point of view. On the Japanese side, it will require the development of greater expertise among its political leaders and greater awareness among the general public of the changing environment. The increasing economic, military, and political importance of China demands that our two nations work together to assure a successful outcome in Asia.
The Brookings Institution, May 2010
May 20 marks the 60th anniversary of the ratification of the U.S.-Japan alliance by Japan’s House of Representatives. While the alliance is a bilateral arrangement, it has had a significant impact on Asia as a whole and is regarded by other nations as a key part of the regional security structure. The following is a brief survey of the treaty's role in the maintenance of peace and stability in the Asia-Pacific. It also demonstrates that the tensions currently confronting the U.S.-Japan alliance are not unique, but in fact have been faced by various bilateral alliances in the region; some have been resolved successfully and some have not.
Most experts believe that the series of alliances the United States created after World War II was one of the most astute and far-sighted acts of diplomacy in history. The alliance with Japan laid the foundation for reconciliation between two enemy nations and the groundwork for the reconstruction of a nation whose industrial power, infrastructure, and morale lay in shambles but which rose to become the world’s second largest economy. The alliance played a key role in the Cold War by allowing the United States to cover the USSR's eastern flank and demonstrating to China and North Korea that we would defend our interests and those of our allies in East Asia.
The arrangements with Japan provided a base from which the U.S. was able to defend its Republic of Korea ally from aggression by the North. Although the Korean War ended in an armistice—not a victory for the ROK, U.S., and their allies—without the use of facilities in Japan the peninsula could have been lost. Another plus was that American protection relieved Japan of having to acquire an offensive military capability, possibly including nuclear weapons. This reassured Japan’s neighbors that it would not again become a threat to their independence.
The result has been five decades of peace in Northeast Asia without a serious arms competition and remarkably few serious threats to the peace. This, along with the stimulus of Korean War procurement, enabled Japan to devote its resources to economic development which resulted in a previously unimaginable economic expansion and improvement in living standards. The ROK, Taiwan, and later China, piggy-backing on Japan's success and partaking of Japan's foreign aid and investment policies, replicated Japan's experience and delivered even faster rates of economic growth and prosperity to their people. None of this would have been possible without the American alliance system and the stability it provided throughout the region. The American presence in East Asia has been reassuring to allies, and our naval and air deployments beyond the region have played a major role in protecting the key energy trade routes through the Malacca Strait and Indian Ocean.
American alliances around East Asia
While the results have been good and generations of alliance managers on both sides can take considerable satisfaction in their accomplishments, the presence of foreign military bases in sovereign countries is not necessarily a natural phenomenon. Many Americans feel that we are motivated by altruism in undertaking to defend other peoples and that our actions are benign. But this view is not necessarily shared by citizens of host countries, many of whom view the American presence as an extension of the occupation in the case of Japan, an intrusion on sovereignty, or as a nuisance. These feelings are reinforced by a complex legal regime governing our bases and serious incidents (rape, hit-and-run accidents, etc.) involving American personnel. At the same time, the base arrangements provide significant employment opportunities for local populations there are some who welcome their presence. The policies of the new Hatoyama government reflect these contradictory views.
Governments have responded to these issues in different ways. In Japan we have developed mechanisms for dealing with problems and have accumulated a great deal of experience in working together. As a result Japanese citizens have tolerated a foreign military presence remarkably well. This may be a historic first. The leaderships of both nations realize the important role that the alliance plays in maintaining stability in East Asia and have striven to protect it.
In the Philippines, where we had maintained major naval and air facilities for many decades, a combination of domestic political pressure, the destruction of one base by a volcanic eruption rendering it unusable, and a strategic reassessment in Washington resulted in the withdrawal of U.S. forces, but the continuation of the defense treaty. In recent years, small numbers of U.S. military advisors have assisted the Philippine armed forces in countering Muslim insurgents in the southern islands of Mindanao and the Sulu Archipelago.
This was followed a few years later by the New Zealand government's refusal to allow port calls by U.S. Navy vessels, as clearly envisioned in the ANZUS treaty, without a prior finding by the prime minister of New Zealand that the ships in question were not carrying nuclear weapons. This was contrary to our long-standing policy of neither confirming nor denying the presence of nuclear weapons aboard our ships and put at risk our arrangements with Japan. The result was a suspension of our defense relationship with New Zealand and strained relations with this ally for a number of years. When the U.S. Navy revised its "neither confirm nor deny" policy our defense relationship gradually improved. However, as Secretary of State George Shultz stated at the time of the break in 1986, "We remain friends, but we are no longer allies."
We do not have a security treaty with Taiwan and do not maintain forces on the island. Under the Taiwan Relations Act, however, we are obligated to provide certain defensive weapons and equipment and it is understood that we would come to Taiwan's defense in a clear-cut emergency. While this is not an explicit or legal commitment, U.S. policy toward Taiwan has assured the people of Taiwan and other countries in the region that the United States takes the security of Taiwan seriously and that only a peaceful, non-coercive resolution of the political issues across the Taiwan Strait would be satisfactory.
Under our mutual defense treaty with the Republic of Korea we deploy sizable ground and air forces to the peninsula to backup ROK defenses in the event of aggression by North Korea. We have made clear to the North that the American commitment to the defense of South Korea is rock solid, and the peace has been maintained. While the U.S. posture has effectively deterred North Korea from a frontal attack, it has not prevented North Korea from mounting provocations, ranging from the capture of the USS Pueblo in 1968, through the tree-cutting incident in 1976, to the recent apparent sinking of an ROK warship. The biggest challenge posed by North Korea is its determination to acquire deployable nuclear weapons which would threaten U.S. interests throughout East Asia, potentially pose an existential threat to Japan, and create a proliferation problem of vast proportions. Our treaty relationships with Japan and Korea, and our many decades of experience working together, have greatly facilitated our cooperation on this issue.
From time to time, base issues (one of our major bases is in the center of Seoul) and occasional incidents caused by American personnel have aroused latent nationalism among the people, which has in the past resulted in large scale demonstrations, strains in our relations with the host government, and pressure to relocate our facilities. That we are making necessary adjustments to our deployments without significantly reducing our support for the ROK or the effectiveness of our deterrent is a credit to the common sense and foresight of Korean and American officials, many of whom have devoted entire careers to the management of the defense of the ROK.
Australia and Southeast Asia have been direct beneficiaries of America's alliance structure. While Australia is a member of ANZUS it has never become a platform for large scale American deployments. It has a keen interest in the stability and economic well-being of Northeast Asia because of its enormous and profitable economic ties with the region. It is also a beneficiary of American attention to the sea lanes to its West and North on which it depends for the bulk of its international commerce. Australia has been a valued ally in a large number of military operations in which the U.S. has engaged over the last fifty years, despite periodic internal opposition to American policy.
What about the future?
Despite periodic outbursts of opposition to nuclear ship home-porting or other aspects of the U.S. deployment in Japan, support among the Japanese people for the security relationship has remained at a remarkably high level. As a result the U.S. has had a relatively free hand in the use of our facilities and in the deployment of forces there. Generations of Japanese leaders have cooperated with U.S. security needs. These include a contribution of $13 billion in support of the first Gulf War, the dispatch of ground forces in support of our operations against Saddam Hussein, and generous foreign assistance to many places in which we have a strategic interest, including Afghanistan. Japan has also for the past 25 years made major contributions - $4-5 billion per year - to the support of U.S. forces in Japan. Who would have imagined 60 years ago that there would be significant U.S. military facilities in Japan in 2010?
There are some clouds on the horizon. The planned relocation of Marine Corps Air Station Futenma has posed major political issues for both Japan and the United States. Okinawa is host for the majority of U.S. forces in Japan and has endured the lion's share of the impact of foreign bases. Under considerable local pressure, Tokyo and Washington in 2006 reached an agreement to move the noisy Futenma facility from a densely populated area in central Okinawa to a sparsely populated region in the north. But the new Japanese administration, which took office in September 2009, ran on a platform calling for the removal of the facility from Okinawa. The U.S. side has adamantly insisted that the agreement be implemented as is and the two sides have reached an impasse which could result in the resignation of the prime minister. This is not a satisfactory situation, especially when it is not clear that the Marine Corps deployment in Okinawa is a vital piece of our deterrent posture on which it is worth Japan spending more than $10 billion to relocate.
The decision to attack Iraq in 2003 and the sloppy execution of the war called into question American judgment and leadership. Uncertain progress in Afghanistan has compounded this. Neither of these has significantly weakened Japanese support for the alliance, but these creeping doubts, coupled with an increasingly inward-looking Japanese public, have helped create an era in which American strategic assessments and solutions will be viewed with greater skepticism. Another serious incident involving U.S. military personnel would put further strain on the relationship. This is not to say that we cannot cooperate on a wide range of issues, but such cooperation will require higher level USG attention and a willingness on both sides to listen more attentively to the other's point of view. On the Japanese side, it will require the development of greater expertise among its political leaders and greater awareness among the general public of the changing environment. The increasing economic, military, and political importance of China demands that our two nations work together to assure a successful outcome in Asia.
Press Briefing
May 14, 2010
Gender-Based Violence Must Be Addressed in Fight Against HIV/AIDS
http://blogs.state.gov/sgwi/index.php/site/entry/gbv_aids
The Wrong Kind of Toyotathon, by Ronald Bailey
http://reason.com/archives/2010/05/14/the-wrong-kind-of-toyotathon
The unintended consequences of an unintended acceleration panic
Remarks with Afghan President Hamid Karzai in a Moderated Conversation
http://www.state.gov/secretary/rm/2010/05/141825.htm
New START Will Require Diligent Senate Consideration
http://rpc.senate.gov/public/_files/EvalProcessNewStartFINAL_Public.pdf
The European Rescue Plan: Opportunities and Limitations. By Domenico Lombardi, Nonresident Senior Fellow, Global Economy and Development
The Brookings Institution, May 13, 2010
http://www.brookings.edu/interviews/2010/0513_euro_lombardi.aspx
Congress’ Historic Decision to Ignore Its Basic Duty
http://blog.heritage.org/2010/05/14/morning-bell-congress-historic-decision-to-ignore-its-basic-duty
Hello Supply Side, by Alan Reynolds
http://www.cato.org/pub_display.php?pub_id=11808
On Kevin D. Williamson's Goodbye Supply Side
Can We Revoke Faisal Shahzad's Citizenship? - The challenge of terrorists with U.S. passports is serious. We are not powerless to deal with it.
http://online.wsj.com/article/SB10001424052748704250104575238754192957856.html
Joint Statement By The Delegations Of The Russian Federation And The US On New Start Treaty
http://www.state.gov/r/pa/prs/ps/2010/05/141827.htm
In Defense of Over-the-Counter Derivatives - Swaps grew out of the banking system because writing risky, custom contracts is a lot like making loans
http://www.bipartisanalliance.com/2010/05/in-defense-of-over-counter-derivatives.html
The David and Nick Show - Call it the audacity of hope. [On David Cameron and Nick Clegg]
http://online.wsj.com/article/SB10001424052748704635204575242080717711608.html
Still Segregating Voters - Texas defies racial gerrymandering. WSJ Editorial
http://online.wsj.com/article/SB10001424052748704250104575238392761660272.html
WSJ, May 14, 2010
The courts and the U.S. Congress continue to insist that racially gerrymandered voting districts are necessary to elect minority candidates, but election returns tell another story.
On Saturday, Irving, Texas held its first city council elections under a new system imposed by a federal court last year. Hispanic activists had sued the city, which is more than 40% Latino, arguing that Irving's at-large system was discriminatory because no Hispanic had ever won a council seat. As part of the settlement, Irving created six single-member voting districts—including one that was drawn specifically to ensure the election of an Hispanic—and two at-large districts. So what happened?
The newly created "Hispanic district" was won by Mike Gallaway, a black candidate who easily beat Trini Gonzalez, an Hispanic. And Roy Santoscoy, another Hispanic, defeated a white incumbent for one of the open at-large seats that was supposedly out of reach to Hispanics due to Irving's allegedly racist voting system.
Texas is hardly an outlier when it comes to upending the notion that racial gerrymandering is necessary because whites vote in lock step against minority candidates. U.S. Representatives Keith Ellison of Minnesota and Emanuel Cleaver of Missouri are black Democrats who represent districts that are more than 60% white. In 2008 President Obama did better among white voters in North Carolina, South Carolina, Virginia, Georgia and Texas than either John Kerry or Al Gore had done.
"The irony is that the American voter has moved on," says Edward Blum, an expert on the Voting Rights Act at the American Enterprise Institute. "He's willing to take race and ethnicity out of the election equation, yet the liberal advocacy groups and the courts refuse to accept this reality."
The Credit Raters Brawl - Al Franken wants a cartel and a trial lawyer payday. George LeMieux rides to the rescue
http://online.wsj.com/article/SB10001424052748704635204575242381255759008.html
Hypothetical, Preemptive Alarmism on Replacements for BPA
http://www.acsh.org/factsfears/newsID.1431/news_detail.asp
Is Free-Range Meat Making Us Sick?
http://www.acsh.org/factsfears/newsID.1430/news_detail.asp
http://www.theatlantic.com/food/archive/2010/05/is-free-range-meat-making-us-sick/56333/
US-China Ten-Year Framework for Cooperation on Energy and Environment
http://www.state.gov/r/pa/prs/ps/2010/05/141822.htm
U.S. Alliances in East Asia: Internal Challenges and External Threats
http://www.bipartisanalliance.com/2010/05/us-alliances-in-east-asia-internal.html
Joint Statement on US-Russian Consultations on Adoption
http://www.state.gov/r/pa/prs/ps/2010/05/141820.htm
Eating soybeans increases soybean-specific IgG antibodies
http://academicsreview.org/reviewed-content/genetic-roulette/section-1/1-15-roundup-ready-soy-is-safe-6/
Incentives vs. Government Waste - What if bureaucrats could benefit financially from finding cost savings?
http://online.wsj.com/article/SB10001424052748703915204575104113794207730.html
Kagan and the 'Public Safety Exception' - Does the nominee share Justice Stevens's view on Miranda warnings?
http://online.wsj.com/article/SB10001424052748704635204575242013817367060.html
U.S. Satellite Shootdown: The Inside Story
http://spectrum.ieee.org/aerospace/satellites/us-satellite-shootdown-the-inside-story
Gender-Based Violence Must Be Addressed in Fight Against HIV/AIDS
http://blogs.state.gov/sgwi/index.php/site/entry/gbv_aids
The Wrong Kind of Toyotathon, by Ronald Bailey
http://reason.com/archives/2010/05/14/the-wrong-kind-of-toyotathon
The unintended consequences of an unintended acceleration panic
Remarks with Afghan President Hamid Karzai in a Moderated Conversation
http://www.state.gov/secretary/rm/2010/05/141825.htm
New START Will Require Diligent Senate Consideration
http://rpc.senate.gov/public/_files/EvalProcessNewStartFINAL_Public.pdf
The European Rescue Plan: Opportunities and Limitations. By Domenico Lombardi, Nonresident Senior Fellow, Global Economy and Development
The Brookings Institution, May 13, 2010
http://www.brookings.edu/interviews/2010/0513_euro_lombardi.aspx
Congress’ Historic Decision to Ignore Its Basic Duty
http://blog.heritage.org/2010/05/14/morning-bell-congress-historic-decision-to-ignore-its-basic-duty
Hello Supply Side, by Alan Reynolds
http://www.cato.org/pub_display.php?pub_id=11808
On Kevin D. Williamson's Goodbye Supply Side
Can We Revoke Faisal Shahzad's Citizenship? - The challenge of terrorists with U.S. passports is serious. We are not powerless to deal with it.
http://online.wsj.com/article/SB10001424052748704250104575238754192957856.html
Joint Statement By The Delegations Of The Russian Federation And The US On New Start Treaty
http://www.state.gov/r/pa/prs/ps/2010/05/141827.htm
In Defense of Over-the-Counter Derivatives - Swaps grew out of the banking system because writing risky, custom contracts is a lot like making loans
http://www.bipartisanalliance.com/2010/05/in-defense-of-over-counter-derivatives.html
The David and Nick Show - Call it the audacity of hope. [On David Cameron and Nick Clegg]
http://online.wsj.com/article/SB10001424052748704635204575242080717711608.html
Still Segregating Voters - Texas defies racial gerrymandering. WSJ Editorial
http://online.wsj.com/article/SB10001424052748704250104575238392761660272.html
WSJ, May 14, 2010
The courts and the U.S. Congress continue to insist that racially gerrymandered voting districts are necessary to elect minority candidates, but election returns tell another story.
On Saturday, Irving, Texas held its first city council elections under a new system imposed by a federal court last year. Hispanic activists had sued the city, which is more than 40% Latino, arguing that Irving's at-large system was discriminatory because no Hispanic had ever won a council seat. As part of the settlement, Irving created six single-member voting districts—including one that was drawn specifically to ensure the election of an Hispanic—and two at-large districts. So what happened?
The newly created "Hispanic district" was won by Mike Gallaway, a black candidate who easily beat Trini Gonzalez, an Hispanic. And Roy Santoscoy, another Hispanic, defeated a white incumbent for one of the open at-large seats that was supposedly out of reach to Hispanics due to Irving's allegedly racist voting system.
Texas is hardly an outlier when it comes to upending the notion that racial gerrymandering is necessary because whites vote in lock step against minority candidates. U.S. Representatives Keith Ellison of Minnesota and Emanuel Cleaver of Missouri are black Democrats who represent districts that are more than 60% white. In 2008 President Obama did better among white voters in North Carolina, South Carolina, Virginia, Georgia and Texas than either John Kerry or Al Gore had done.
"The irony is that the American voter has moved on," says Edward Blum, an expert on the Voting Rights Act at the American Enterprise Institute. "He's willing to take race and ethnicity out of the election equation, yet the liberal advocacy groups and the courts refuse to accept this reality."
The Credit Raters Brawl - Al Franken wants a cartel and a trial lawyer payday. George LeMieux rides to the rescue
http://online.wsj.com/article/SB10001424052748704635204575242381255759008.html
Hypothetical, Preemptive Alarmism on Replacements for BPA
http://www.acsh.org/factsfears/newsID.1431/news_detail.asp
Is Free-Range Meat Making Us Sick?
http://www.acsh.org/factsfears/newsID.1430/news_detail.asp
http://www.theatlantic.com/food/archive/2010/05/is-free-range-meat-making-us-sick/56333/
US-China Ten-Year Framework for Cooperation on Energy and Environment
http://www.state.gov/r/pa/prs/ps/2010/05/141822.htm
U.S. Alliances in East Asia: Internal Challenges and External Threats
http://www.bipartisanalliance.com/2010/05/us-alliances-in-east-asia-internal.html
Joint Statement on US-Russian Consultations on Adoption
http://www.state.gov/r/pa/prs/ps/2010/05/141820.htm
Eating soybeans increases soybean-specific IgG antibodies
http://academicsreview.org/reviewed-content/genetic-roulette/section-1/1-15-roundup-ready-soy-is-safe-6/
Incentives vs. Government Waste - What if bureaucrats could benefit financially from finding cost savings?
http://online.wsj.com/article/SB10001424052748703915204575104113794207730.html
Kagan and the 'Public Safety Exception' - Does the nominee share Justice Stevens's view on Miranda warnings?
http://online.wsj.com/article/SB10001424052748704635204575242013817367060.html
U.S. Satellite Shootdown: The Inside Story
http://spectrum.ieee.org/aerospace/satellites/us-satellite-shootdown-the-inside-story
Thursday, May 13, 2010
The Case for the New START Treaty, by Secretary Gates
The Case for the New START Treaty. By ROBERT M. GATES
The treaty has the unanimous support of America's military leadership.
WSJ, May 13, 2010
I first began working on strategic arms control with the Russians in 1970, an effort that led to the first Strategic Arms Limitation Agreement with Moscow two years later.
The key question then and in the decades since has always been the same: Is the United States better off with an agreement or without it? The answer for each successive president has always been "with an agreement." The U.S. Senate has always agreed, approving each treaty by lopsided, bipartisan margins.
The same answer holds true for the New START agreement: The U.S. is far better off with this treaty than without it. It strengthens the security of the U.S. and our allies and promotes strategic stability between the world's two major nuclear powers. The treaty accomplishes these goals in several ways.
First, it limits significantly U.S. and Russian strategic nuclear arsenals and establishes an extensive verification regime to ensure that Russia is complying with its treaty obligations. These include short-notice inspections of both deployed and nondeployed systems, verification of the numbers of warheads actually carried on Russian strategic missiles, and unique identifiers that will help us track—for the very first time—all accountable strategic nuclear delivery systems.
Since the expiration of the old START Treaty in December 2009, the U.S. has had none of these safeguards. The new treaty will put them back in place, strengthen many of them, and create a verification regime that will provide for greater transparency and predictability between our two countries, to include substantial visibility into the development of Russian nuclear forces.
Second, the treaty preserves the U.S. nuclear arsenal as a vital pillar of our nation's and our allies' security posture. Under this treaty, the U.S. will maintain our powerful nuclear triad—ICBMs, submarine launched ballistic missiles (SLBMs) and bombers—and we will retain the ability to change our force mix as we see fit. Based on recommendations of the Joint Chiefs of Staff, we plan to meet the Treaty's limits by retaining a triad of up to 420 ICBMs, 14 submarines carrying up to 240 SLBMs, and up to 60 nuclear-capable heavy bombers.
Third, and related, the treaty is buttressed by credible modernization plans and long-term funding for the U.S. nuclear weapons stockpile and the infrastructure that supports it. This administration is proposing to spend $80 billion over the next decade to rebuild and sustain America's aging nuclear infrastructure—especially our national weapons labs, and our science, technology and engineering base. This week the president is providing a report to the Congress on investments planned over the next 10 years to sustain and modernize our nuclear weapons, their delivery systems, and supporting infrastructure.
Fourth, the treaty will not constrain the U.S. from developing and deploying defenses against ballistic missiles, as we have made clear to the Russian government. The U.S. will continue to deploy and improve the interceptors that defend our homeland—those based in California and Alaska. We are also moving forward with plans to field missile defense systems to protect our troops and partners in Europe, the Middle East, and Northeast Asia against the dangerous threats posed by rogue nations like North Korea and Iran.
Finally, the treaty will not restrict America's ability to develop and deploy conventional prompt global strike capabilities—that is, the ability to hit targets anywhere in the world in less than an hour using conventional explosive warheads fitted to long-range missiles.
These delivery systems—be they land or sea based—would count against the new treaty limits, but if we deploy them it would be in very limited numbers. We are currently assessing other kinds of long-range strike systems that would not count under the treaty.
The New START Treaty has the unanimous support of America's military leadership—to include the chairman of the Joint Chiefs of Staff, all of the service chiefs, and the commander of the U.S. Strategic Command, the organization responsible for our strategic nuclear deterrent. For nearly 40 years, treaties to limit or reduce nuclear weapons have been approved by the U.S. Senate by strong bipartisan majorities. This treaty deserves a similar reception and result—on account of the dangerous weapons it reduces, the critical defense capabilities it preserves, the strategic stability it maintains, and, above all, the security it provides to the American people.
Mr. Gates is secretary of defense.
The treaty has the unanimous support of America's military leadership.
WSJ, May 13, 2010
I first began working on strategic arms control with the Russians in 1970, an effort that led to the first Strategic Arms Limitation Agreement with Moscow two years later.
The key question then and in the decades since has always been the same: Is the United States better off with an agreement or without it? The answer for each successive president has always been "with an agreement." The U.S. Senate has always agreed, approving each treaty by lopsided, bipartisan margins.
The same answer holds true for the New START agreement: The U.S. is far better off with this treaty than without it. It strengthens the security of the U.S. and our allies and promotes strategic stability between the world's two major nuclear powers. The treaty accomplishes these goals in several ways.
First, it limits significantly U.S. and Russian strategic nuclear arsenals and establishes an extensive verification regime to ensure that Russia is complying with its treaty obligations. These include short-notice inspections of both deployed and nondeployed systems, verification of the numbers of warheads actually carried on Russian strategic missiles, and unique identifiers that will help us track—for the very first time—all accountable strategic nuclear delivery systems.
Since the expiration of the old START Treaty in December 2009, the U.S. has had none of these safeguards. The new treaty will put them back in place, strengthen many of them, and create a verification regime that will provide for greater transparency and predictability between our two countries, to include substantial visibility into the development of Russian nuclear forces.
Second, the treaty preserves the U.S. nuclear arsenal as a vital pillar of our nation's and our allies' security posture. Under this treaty, the U.S. will maintain our powerful nuclear triad—ICBMs, submarine launched ballistic missiles (SLBMs) and bombers—and we will retain the ability to change our force mix as we see fit. Based on recommendations of the Joint Chiefs of Staff, we plan to meet the Treaty's limits by retaining a triad of up to 420 ICBMs, 14 submarines carrying up to 240 SLBMs, and up to 60 nuclear-capable heavy bombers.
Third, and related, the treaty is buttressed by credible modernization plans and long-term funding for the U.S. nuclear weapons stockpile and the infrastructure that supports it. This administration is proposing to spend $80 billion over the next decade to rebuild and sustain America's aging nuclear infrastructure—especially our national weapons labs, and our science, technology and engineering base. This week the president is providing a report to the Congress on investments planned over the next 10 years to sustain and modernize our nuclear weapons, their delivery systems, and supporting infrastructure.
Fourth, the treaty will not constrain the U.S. from developing and deploying defenses against ballistic missiles, as we have made clear to the Russian government. The U.S. will continue to deploy and improve the interceptors that defend our homeland—those based in California and Alaska. We are also moving forward with plans to field missile defense systems to protect our troops and partners in Europe, the Middle East, and Northeast Asia against the dangerous threats posed by rogue nations like North Korea and Iran.
Finally, the treaty will not restrict America's ability to develop and deploy conventional prompt global strike capabilities—that is, the ability to hit targets anywhere in the world in less than an hour using conventional explosive warheads fitted to long-range missiles.
These delivery systems—be they land or sea based—would count against the new treaty limits, but if we deploy them it would be in very limited numbers. We are currently assessing other kinds of long-range strike systems that would not count under the treaty.
The New START Treaty has the unanimous support of America's military leadership—to include the chairman of the Joint Chiefs of Staff, all of the service chiefs, and the commander of the U.S. Strategic Command, the organization responsible for our strategic nuclear deterrent. For nearly 40 years, treaties to limit or reduce nuclear weapons have been approved by the U.S. Senate by strong bipartisan majorities. This treaty deserves a similar reception and result—on account of the dangerous weapons it reduces, the critical defense capabilities it preserves, the strategic stability it maintains, and, above all, the security it provides to the American people.
Mr. Gates is secretary of defense.
Wednesday, May 12, 2010
Press Briefing
May 13, 2010
Gender-Based Violence Must Be Addressed in Fight Against HIV/AIDS
http://blogs.state.gov/sgwi/index.php/site/entry/gbv_aids
The Struggle for Mastery of the Pacific, by Yuriko Koike
http://www.project-syndicate.org/commentary/koike5/English
Can We Avoid Becoming Europe?
http://blog.heritage.org/2010/05/13/morning-bell-can-we-avoid-becoming-europe
Remarks At the 40th Washington Conference on the Americas. By Hillary Rodham Clinton, State Sec.
Loy Henderson Auditorium, Washington, DC, May 12, 2010
http://www.state.gov/secretary/rm/2010/05/141760.htm
Presidential Memorandum--Oil Supplemental Package
http://www.whitehouse.gov/the-press-office/presidential-memorandum-oil-supplemental-package
Autonomous Car Learns To Powerslide Into Parking Spot
http://spectrum.ieee.org/automaton/green-tech/advanced-cars/autonomous-car-learns-to-powerlslide-into-parking-spot
CPSS and IOSCO consult on policy guidance for central counterparties and trade repositories in the OTC derivatives market. May 12, 2010
http://www.bis.org/press/p100512.htm
Ermakova’s findings defy logic: Feeding Roundup Ready soy doesn’t result in infant mortality
http://academicsreview.org/reviewed-content/genetic-roulette/section-1/1-14-roundup-ready-soy-is-safe-5/
The Case for the New START Treaty - The treaty has the unanimous support of America's military leadership. By Robert M Gates, Defense Secretary
http://www.bipartisanalliance.com/2010/05/case-for-new-start-treaty-by-secretary.html
What's Happening to Faisal Shahzad? - The lack of a court appearance suggests prosecutors are getting information. But they shouldn't have to improvise.
http://online.wsj.com/article/SB10001424052748704250104575238620455479284.html
Notable & Quotable - Jacob Sullum and Michael Barone on Supreme Court nominee Elena Kagan
http://online.wsj.com/article/SB10001424052748703339304575240291154629742.html
Washington's Bungling Auto Engineers - Congress is designing everything from the braking system in your next car to the loan with which you'll finance it. Be very afraid.
http://online.wsj.com/article/SB10001424052748703880304575236373875947794.html
Obama's Kagan Admission - Confirmation and double standards
http://online.wsj.com/article/SB10001424052748703339304575240573955534404.html
Surveillance and Shahzad - Are wiretap limits making it harder to discover and pre-empt jihadists?
http://online.wsj.com/article/SB10001424052748704250104575238444182924962.html
The Treasury-Financial Complex - The Dodd bill is perfectly designed to create the largest and most powerful crony system in history
http://online.wsj.com/article/SB10001424052748704250104575238841836433282.html
The We're-Not-Europe Party - The bill comes due for a life of fairness at the expense of growth
http://online.wsj.com/article/SB10001424052748703339304575240591350076252.html
Remarks by the First Lady at National Military Family Association Summit
http://www.whitehouse.gov/the-press-office/remarks-first-lady-national-military-family-association-summit
Senator Kerry and Lieberman release their new energy tax bill
http://www.instituteforenergyresearch.org/2010/05/12/senator-kerry-and-lieberman-release-their-new-energy-tax-bill/
White House Task Force Hops on Activist Bandwagon - Obesity link to plastics!
http://www.acsh.org/factsfears/newsID.1425/news_detail.asp
Additional Information on the Potential Discretionary Costs of Implementing the Patient Protection and Affordable Care Act (PPACA)
http://www.cbo.gov/ftpdocs/114xx/doc11493/Additional_Information_PPACA_Discretionary.pdf
Statement by President Obama on Financial Reform
http://www.whitehouse.gov/the-press-office/statement-president-obama-financial-reform
No-More-Bailouts Bill Springs a Leak: Fannie and Freddie Ask for More
http://blog.heritage.org/2010/05/10/no-more-bailouts-bill-springs-a-leak-fannie-and-freddie-ask-for-more
How Badly Will the Democrats Do? - Rove on a few trends to watch ahead of November.
http://digs.by/adCGy3
Gender-Based Violence Must Be Addressed in Fight Against HIV/AIDS
http://blogs.state.gov/sgwi/index.php/site/entry/gbv_aids
The Struggle for Mastery of the Pacific, by Yuriko Koike
http://www.project-syndicate.org/commentary/koike5/English
Can We Avoid Becoming Europe?
http://blog.heritage.org/2010/05/13/morning-bell-can-we-avoid-becoming-europe
Remarks At the 40th Washington Conference on the Americas. By Hillary Rodham Clinton, State Sec.
Loy Henderson Auditorium, Washington, DC, May 12, 2010
http://www.state.gov/secretary/rm/2010/05/141760.htm
Presidential Memorandum--Oil Supplemental Package
http://www.whitehouse.gov/the-press-office/presidential-memorandum-oil-supplemental-package
Autonomous Car Learns To Powerslide Into Parking Spot
http://spectrum.ieee.org/automaton/green-tech/advanced-cars/autonomous-car-learns-to-powerlslide-into-parking-spot
CPSS and IOSCO consult on policy guidance for central counterparties and trade repositories in the OTC derivatives market. May 12, 2010
http://www.bis.org/press/p100512.htm
Ermakova’s findings defy logic: Feeding Roundup Ready soy doesn’t result in infant mortality
http://academicsreview.org/reviewed-content/genetic-roulette/section-1/1-14-roundup-ready-soy-is-safe-5/
The Case for the New START Treaty - The treaty has the unanimous support of America's military leadership. By Robert M Gates, Defense Secretary
http://www.bipartisanalliance.com/2010/05/case-for-new-start-treaty-by-secretary.html
What's Happening to Faisal Shahzad? - The lack of a court appearance suggests prosecutors are getting information. But they shouldn't have to improvise.
http://online.wsj.com/article/SB10001424052748704250104575238620455479284.html
Notable & Quotable - Jacob Sullum and Michael Barone on Supreme Court nominee Elena Kagan
http://online.wsj.com/article/SB10001424052748703339304575240291154629742.html
Washington's Bungling Auto Engineers - Congress is designing everything from the braking system in your next car to the loan with which you'll finance it. Be very afraid.
http://online.wsj.com/article/SB10001424052748703880304575236373875947794.html
Obama's Kagan Admission - Confirmation and double standards
http://online.wsj.com/article/SB10001424052748703339304575240573955534404.html
Surveillance and Shahzad - Are wiretap limits making it harder to discover and pre-empt jihadists?
http://online.wsj.com/article/SB10001424052748704250104575238444182924962.html
The Treasury-Financial Complex - The Dodd bill is perfectly designed to create the largest and most powerful crony system in history
http://online.wsj.com/article/SB10001424052748704250104575238841836433282.html
The We're-Not-Europe Party - The bill comes due for a life of fairness at the expense of growth
http://online.wsj.com/article/SB10001424052748703339304575240591350076252.html
Remarks by the First Lady at National Military Family Association Summit
http://www.whitehouse.gov/the-press-office/remarks-first-lady-national-military-family-association-summit
Senator Kerry and Lieberman release their new energy tax bill
http://www.instituteforenergyresearch.org/2010/05/12/senator-kerry-and-lieberman-release-their-new-energy-tax-bill/
White House Task Force Hops on Activist Bandwagon - Obesity link to plastics!
http://www.acsh.org/factsfears/newsID.1425/news_detail.asp
Additional Information on the Potential Discretionary Costs of Implementing the Patient Protection and Affordable Care Act (PPACA)
http://www.cbo.gov/ftpdocs/114xx/doc11493/Additional_Information_PPACA_Discretionary.pdf
Statement by President Obama on Financial Reform
http://www.whitehouse.gov/the-press-office/statement-president-obama-financial-reform
No-More-Bailouts Bill Springs a Leak: Fannie and Freddie Ask for More
http://blog.heritage.org/2010/05/10/no-more-bailouts-bill-springs-a-leak-fannie-and-freddie-ask-for-more
How Badly Will the Democrats Do? - Rove on a few trends to watch ahead of November.
http://digs.by/adCGy3
The Price of Wind - The 'clean energy revolution' is expensive
The Price of Wind. WSJ Editorial
The 'clean energy revolution' is expensive
WSJ, May 12, 2010
The ferocious opposition from Massachusetts liberals to the Cape Wind project has provided a useful education in green energy politics. And now that the Nantucket Sound wind farm has won federal approval, this decade-long saga may prove edifying in green energy economics too: Namely, the price of electricity from wind is more than twice what consumers now pay.
On Monday, Cape Wind asked state regulators to approve a 15-year purchasing contract with the utility company National Grid at 20.7 cents per kilowatt hour, starting in 2013 and rising at 3.5% annually thereafter. Consumers pay around nine cents for conventional power today. The companies expect average electric bills to jump by about $1.59 a month, because electricity is electricity no matter how it is generated, and Cape Wind's 130 turbines will generate so little of it in the scheme of the overall New England market.
Still, that works out to roughly $443 million in new energy costs, and that doesn't count the federal subsidies that Cape Wind will receive from national taxpayers. It does, however, include the extra 6.1 cents per kilowatt hour that Massachusetts utilities are mandated to pay for wind, solar and the like under a 2008 state law called the Green Communities Act. Also under that law, at least 15% of power company portfolios must come from renewable sources by 2020.
Two weeks ago, U.S. Interior Secretary Ken Salazar approved Cape Wind, placing it in the vanguard of "a clean energy revolution." A slew of environmental and political outfits have since filed multiple lawsuits for violations of the Endangered Species Act, the National Environmental Policy Act, the Outer Continental Shelf Lands Act, certain tribal-protection laws, the Clean Water Act, the Migratory Bird Treaty Act and the Rivers and Harbors Act.
There's comic irony in this clean energy revolution getting devoured by the archaic regulations of previous clean energy revolutions. But given that taxpayers will be required to pay to build Cape Wind and then required to buy its product at prices twice normal rates, opponents might have more success if they simply pointed out what a lousy deal it is.
The 'clean energy revolution' is expensive
WSJ, May 12, 2010
The ferocious opposition from Massachusetts liberals to the Cape Wind project has provided a useful education in green energy politics. And now that the Nantucket Sound wind farm has won federal approval, this decade-long saga may prove edifying in green energy economics too: Namely, the price of electricity from wind is more than twice what consumers now pay.
On Monday, Cape Wind asked state regulators to approve a 15-year purchasing contract with the utility company National Grid at 20.7 cents per kilowatt hour, starting in 2013 and rising at 3.5% annually thereafter. Consumers pay around nine cents for conventional power today. The companies expect average electric bills to jump by about $1.59 a month, because electricity is electricity no matter how it is generated, and Cape Wind's 130 turbines will generate so little of it in the scheme of the overall New England market.
Still, that works out to roughly $443 million in new energy costs, and that doesn't count the federal subsidies that Cape Wind will receive from national taxpayers. It does, however, include the extra 6.1 cents per kilowatt hour that Massachusetts utilities are mandated to pay for wind, solar and the like under a 2008 state law called the Green Communities Act. Also under that law, at least 15% of power company portfolios must come from renewable sources by 2020.
Two weeks ago, U.S. Interior Secretary Ken Salazar approved Cape Wind, placing it in the vanguard of "a clean energy revolution." A slew of environmental and political outfits have since filed multiple lawsuits for violations of the Endangered Species Act, the National Environmental Policy Act, the Outer Continental Shelf Lands Act, certain tribal-protection laws, the Clean Water Act, the Migratory Bird Treaty Act and the Rivers and Harbors Act.
There's comic irony in this clean energy revolution getting devoured by the archaic regulations of previous clean energy revolutions. But given that taxpayers will be required to pay to build Cape Wind and then required to buy its product at prices twice normal rates, opponents might have more success if they simply pointed out what a lousy deal it is.
Tuesday, May 11, 2010
Press Briefing
May 12, 2010
Egypt's Renewal of State of Emergency. By Hillary Rodham Clinton, Secretary of State. Washington, DC, May 11, 2010
http://www.state.gov/secretary/rm/2010/05/141736.htm
Club-K Container Missile System - See video
http://blog.heritage.org/2010/05/11/video-the-very-real-short-range-missile-threat-obama-is-ignoring
How to Prevent Another Trading Panic - The SEC should require price limits for sell orders
http://online.wsj.com/article/SB10001424052748703880304575236303198364676.html
Pennsylvania Kids Deserve School Choice - Bad public schools hurt poor and rural children the most. By Anthony H Williams, state senator from Pennsylvania and a candidate in the May 18 Democratic primary for governor.
http://online.wsj.com/article/SB10001424052748704448304575196191596419272.html
The Minnesota Prelude - Land of 10,000 tax increases
http://online.wsj.com/article/SB10001424052748704250104575238213436787960.html
OTC derivatives market activity in the second half of 2009
http://www.bis.org/press/p100511.htm
Finally, a passing grade in DC
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/11/AR2010051104207.html
Myths of Cap-and-Trade and Clean Energy Policies
http://www.instituteforenergyresearch.org/2010/05/11/myths-of-cap-and-trade-and-clean-energy-policies/
Microsoft gets more aggressive with free software
http://www.japantoday.com/category/technology/view/microsoft-gets-more-aggressive-with-free-software
Deadly Rotavirus Vs. Harmless Pig Virus
http://www.acsh.org/factsfears/newsID.1422/news_detail.asp
The Price of Wind - The 'clean energy revolution' is expensive
http://www.bipartisanalliance.com/2010/05/price-of-wind-clean-energy-revolution.html
Fannie the Unreformable - Democrats leave Chris Dodd alone to defend the indefensible.
http://online.wsj.com/article/SB10001424052748704250104575238641146885632.html
Press Briefing by Press Secretary Robert Gibbs and FEMA Administrator Craig Fugate
http://www.whitehouse.gov/the-press-office/press-briefing-press-secretary-robert-gibbs-and-fema-administrator-craig-fugate
Extend the Bush Tax Cuts—For Now —— Deficits are a real problem but the recovery is still too fragile to choke off growth with higher rates
http://online.wsj.com/article/SB10001424052748704370704575228123196462504.html
Shahzad and the Pre-9/11 Paradigm - In the 1990s we mocked the ineptness of jihadists and were confident civilian courts could handle them. Look where that got us.
http://www.bipartisanalliance.com/2010/05/shahzad-and-pre-911-paradigm-in-1990s.html
On Elena Kagan: "She is certainly a fan of presidential power." By Radley Balko
http://reason.com/blog/2010/05/10/she-is-certainly-a-fan-of-pres
Our Unsustainable Debt, by Veronique de Rugy - America is on the verge of financial disaster
http://reason.com/archives/2010/05/11/our-unsustainable-debt
Side Effects: Higher Premiums from Adult “Children” on Parents’ Health Plans
http://blog.heritage.org/2010/05/11/side-effects-higher-premiums-from-adult-children-on-parents-health-plans/
Side Effects: Get Ready to Lose Your Doctor
http://blog.heritage.org/2010/05/10/side-effects-get-ready-to-lose-your-doctor
Side Effects: Let the Employer Penalties Begin
http://blog.heritage.org/2010/05/04/side-effects-let-the-employer-penalties-begin
Side Effects: Physician-Owned Hospitals Face New Regulations, Limits on Growth
http://blog.heritage.org/2010/05/06/side-effects-physician-owned-hospitals-face-new-regulations-limits-on-growth
Will the Obama administration enable more of Hosni Mubarak's autocracy?
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/11/AR2010051104204.html
Egypt's Renewal of State of Emergency. By Hillary Rodham Clinton, Secretary of State. Washington, DC, May 11, 2010
http://www.state.gov/secretary/rm/2010/05/141736.htm
Club-K Container Missile System - See video
http://blog.heritage.org/2010/05/11/video-the-very-real-short-range-missile-threat-obama-is-ignoring
How to Prevent Another Trading Panic - The SEC should require price limits for sell orders
http://online.wsj.com/article/SB10001424052748703880304575236303198364676.html
Pennsylvania Kids Deserve School Choice - Bad public schools hurt poor and rural children the most. By Anthony H Williams, state senator from Pennsylvania and a candidate in the May 18 Democratic primary for governor.
http://online.wsj.com/article/SB10001424052748704448304575196191596419272.html
The Minnesota Prelude - Land of 10,000 tax increases
http://online.wsj.com/article/SB10001424052748704250104575238213436787960.html
OTC derivatives market activity in the second half of 2009
http://www.bis.org/press/p100511.htm
Finally, a passing grade in DC
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/11/AR2010051104207.html
Myths of Cap-and-Trade and Clean Energy Policies
http://www.instituteforenergyresearch.org/2010/05/11/myths-of-cap-and-trade-and-clean-energy-policies/
Microsoft gets more aggressive with free software
http://www.japantoday.com/category/technology/view/microsoft-gets-more-aggressive-with-free-software
Deadly Rotavirus Vs. Harmless Pig Virus
http://www.acsh.org/factsfears/newsID.1422/news_detail.asp
The Price of Wind - The 'clean energy revolution' is expensive
http://www.bipartisanalliance.com/2010/05/price-of-wind-clean-energy-revolution.html
Fannie the Unreformable - Democrats leave Chris Dodd alone to defend the indefensible.
http://online.wsj.com/article/SB10001424052748704250104575238641146885632.html
Press Briefing by Press Secretary Robert Gibbs and FEMA Administrator Craig Fugate
http://www.whitehouse.gov/the-press-office/press-briefing-press-secretary-robert-gibbs-and-fema-administrator-craig-fugate
Extend the Bush Tax Cuts—For Now —— Deficits are a real problem but the recovery is still too fragile to choke off growth with higher rates
http://online.wsj.com/article/SB10001424052748704370704575228123196462504.html
Shahzad and the Pre-9/11 Paradigm - In the 1990s we mocked the ineptness of jihadists and were confident civilian courts could handle them. Look where that got us.
http://www.bipartisanalliance.com/2010/05/shahzad-and-pre-911-paradigm-in-1990s.html
On Elena Kagan: "She is certainly a fan of presidential power." By Radley Balko
http://reason.com/blog/2010/05/10/she-is-certainly-a-fan-of-pres
Our Unsustainable Debt, by Veronique de Rugy - America is on the verge of financial disaster
http://reason.com/archives/2010/05/11/our-unsustainable-debt
Side Effects: Higher Premiums from Adult “Children” on Parents’ Health Plans
http://blog.heritage.org/2010/05/11/side-effects-higher-premiums-from-adult-children-on-parents-health-plans/
Side Effects: Get Ready to Lose Your Doctor
http://blog.heritage.org/2010/05/10/side-effects-get-ready-to-lose-your-doctor
Side Effects: Let the Employer Penalties Begin
http://blog.heritage.org/2010/05/04/side-effects-let-the-employer-penalties-begin
Side Effects: Physician-Owned Hospitals Face New Regulations, Limits on Growth
http://blog.heritage.org/2010/05/06/side-effects-physician-owned-hospitals-face-new-regulations-limits-on-growth
Will the Obama administration enable more of Hosni Mubarak's autocracy?
http://www.washingtonpost.com/wp-dyn/content/article/2010/05/11/AR2010051104204.html
Shahzad and the Pre-9/11 Paradigm - In the 1990s we mocked the ineptness of jihadists and were confident civilian courts could handle them
Shahzad and the Pre-9/11 Paradigm. By MICHAEL B. MUKASEY
In the 1990s we mocked the ineptness of jihadists and were confident civilian courts could handle them. Look where that got us.
WSJ, May 12, 2010
Some good news from the attempted car bombing in Times Square on May 1 is that—at the relatively small cost of disappointment to Broadway theater-goers—it teaches valuable lessons to help deal with Islamist terrorism. The bad news is that those lessons should already have been learned.
One such lesson has to do with intelligence gathering. Because our enemies in this struggle do not occupy a particular country or location, intelligence is our only tool for frustrating their plans and locating and targeting their leaders. But as was the case with Umar Faruk Abdulmutallab, who tried to detonate a bomb aboard an airplane over Detroit last Christmas Day, principal emphasis was placed on assuring that any statements Faisal Shahzad made could be used against him rather than simply designating him an unlawful enemy combatant and assuring that we obtained and exploited any information he had.
On Sunday, Attorney General Eric Holder said that in regard to terrorism investigations he supports "modifying" the Miranda law that requires law enforcement officials to inform suspects of their rights to silence and counsel. But his approach—extension of the "public safety exemption" to terror investigations—is both parsimonious and problematic. The public safety exemption allows a delay in Miranda warnings until an imminent threat to public safety—e.g., a loaded gun somewhere in a public place that might be found by a child—has been neutralized. In terror cases it is impossible to determine when all necessary intelligence, which in any event might not relate to an imminent threat, has been learned.
The lesson from our experience with Abdulmutallab, who stopped talking soon after he was advised of his rights and did not resume for weeks until his family could be flown here to persuade him to resume, should have been that intelligence gathering comes first. Yes, Shahzad, as we are told, continued to provide information even after he was advised of his rights, but that cooperation came in spite of and not because of his treatment as a conventional criminal defendant.
Moreover, once Shahzad cooperated, it made no more sense with him than it did with Abdulmutallab to publicize his cooperation and thereby warn those still at large to hide and destroy whatever evidence they could. The profligate disclosures in Shahzad's case, even to the point of describing his confession, could only hinder successful exploitation of whatever information he provided.
The Shahzad case provides a reminder of the permanent harm leaks of any kind can cause. An Associated Press story citing unnamed law enforcement sources reported that investigators were on the trail of a "courier" who had helped provide financing to Shahzad.
A courier would seem oddly out of place in the contemporary world where money can be transferred with the click of a mouse—that is, until one recalls that in 2006 the New York Times disclosed on its front page a highly classified government program for monitoring electronic international money transfers through what is known as the Swift system.
That monitoring violated no law but was leaked and reported as what an intelligence lawyer of my acquaintance referred to as "intelliporn"—intelligence information that is disclosed for no better reason than that it is fun to read about, and without regard for the harm it causes. Of course, terrorists around the world took note, and resorted to "couriers," making it much harder to trace terrorist financing.
In the hours immediately following the discovery and disarming of the car bomb, media outlets and public figures fell all over themselves to lay blame as far as possible from where it would ultimately be found. Secretary of Homeland Security Janet Napolitano suggested the incident was entirely isolated and directed her agency's personnel to stand down. New York Mayor Michael Bloomberg sportingly offered to wager a quarter on the proposition that the bomb was the work of a solitary lunatic, perhaps someone upset over passage of the health-care bill, and much merriment was had over how primitive the bomb had been and how doomed it was to fail.
This sort of reaction goes back much further than this administration. Consider the chain of events leading to the 1993 World Trade Center bombing and eventually 9/11.
In November 1990, Meir Kahane, a right-wing Israeli politician, was assassinated after delivering a speech at a Manhattan hotel by El-Sayid Nosair, quickly pigeonholed as a lone misfit whose failures at work had driven him over the edge. The material seized from his home lay largely unexamined in boxes until a truck bomb was detonated under the World Trade Center in 1993, when the perpetrators of that act announced that freeing Nosair from prison was one of their demands.
Authorities then examined the neglected boxes and found jihadi literature urging the attacks on Western civilization through a terror campaign that would include toppling tall buildings that were centers of finance and tourism. An amateur video of Kahane's speech the night he was assassinated revealed that one of the 1993 bombers, Mohammed Salameh, was present in the hall when Nosair committed his act, and the ensuing investigation disclosed that Nosair was supposed to have made his escape with the help of another, Mahmoud Abouhalima, who was waiting outside at the wheel of a cab.
Nosair jumped into the wrong cab and the terrified driver pulled over and ducked under the dashboard, at which point Nosair tried to flee on foot and was captured. Salameh was captured when the vehicle identification number on the truck that carried the bomb led investigators to a rental agency, where he showed up days later to try to retrieve the deposit on the truck so that he could finance his escape.
Despite the toll from the first World Trade Center blast—six killed, hundreds injured, tens of millions of dollars in damage—and the murder of Kahane, much sport was made of how inept the perpetrators were.
Nosair and the 1993 Trade Center bombers were disciples of cleric Omar Abdel Rahman, known as the "blind sheikh," who was tried and convicted in 1995 along with nine others for conspiring to wage a war of urban terror that included not only that bombing and the Kahane assassination but also a plot to bomb simultaneously the Holland and Lincoln Tunnels, the George Washington Bridge and the United Nations.
One of the unindicted co-conspirators in that case was a then-obscure Osama bin Laden, who would declare in 1996 and again in 1998 that militant Islamists were at war with the United States. In 1998, his organization, al Qaeda, arranged the near-simultaneous bombing of American Embassies in Kenya and Tanzania.
Despite the declaration of war and the act of war, the criminal law paradigm continued to define our response. Along with immediate perpetrators, and some remote perpetrators including Khalid Sheikh Mohammed, bin Laden was indicted, and the oft-repeated vow to "bring them to justice" was repeated. Unmoved, and certainly undeterred, bin Laden in 2000 unleashed the attack in Yemen on the destroyer USS Cole, killing 17.
That was followed by Sept. 11, 2001, and it appeared for a time that Islamist fanaticism would no longer be greeted with condescending mockery. To the phrase "bring them to justice" was added "bring justice to them." The country appeared ready to adopt a stance of war, and to be ready to treat terrorists as it had the German saboteurs who landed off Long Island and Florida in 1942—as unlawful combatants under the laws of war who were not entitled to the guarantees that the Constitution grants to ordinary criminals.
There have been more than 20 Islamist terrorist plots aimed at this country since 9/11, including the deadly shooting by U.S. Army Maj. Nidal Hasan, those of Abdulmutallab and Shahzad, and those of Najibullah Zazi and his cohorts, Bryant Neal Vinas and his, against commuter railroads and subways in New York; of plotters who targeted military personnel at Fort Dix, N.J., Quantico, Va., and Goose Creek, S.C., and who murdered an Army recruiter in Little Rock, Ark.; of those who planned to blow up synagogues in New York, an office building in Dallas, and a courthouse in Illinois, among others.
Yet the pre-9/11 criminal law paradigm is again setting the limit of Attorney General Holder's response, even to the point of considering the inapposite public safety exception to Miranda as a way to help intelligence gathering. He continues to press for a civilian trial for Khalid Sheikh Mohammed and others who had long since been scheduled to be tried before military commissions.
A significant lesson lurking in Shahzad's inadequacy, and the history that preceded it, is that one of the things terrorists do is persist. Ramzi Yousef's shortcomings in the first attempt to blow up the World Trade Center were made up for by Khalid Sheikh Mohammed. We should see to the good order of our institutions and our attitudes before someone tries to make up for Faisal Shahzad's shortcomings.
Mr. Mukasey was attorney general of the United States from 2007 to 2009.
In the 1990s we mocked the ineptness of jihadists and were confident civilian courts could handle them. Look where that got us.
WSJ, May 12, 2010
Some good news from the attempted car bombing in Times Square on May 1 is that—at the relatively small cost of disappointment to Broadway theater-goers—it teaches valuable lessons to help deal with Islamist terrorism. The bad news is that those lessons should already have been learned.
One such lesson has to do with intelligence gathering. Because our enemies in this struggle do not occupy a particular country or location, intelligence is our only tool for frustrating their plans and locating and targeting their leaders. But as was the case with Umar Faruk Abdulmutallab, who tried to detonate a bomb aboard an airplane over Detroit last Christmas Day, principal emphasis was placed on assuring that any statements Faisal Shahzad made could be used against him rather than simply designating him an unlawful enemy combatant and assuring that we obtained and exploited any information he had.
On Sunday, Attorney General Eric Holder said that in regard to terrorism investigations he supports "modifying" the Miranda law that requires law enforcement officials to inform suspects of their rights to silence and counsel. But his approach—extension of the "public safety exemption" to terror investigations—is both parsimonious and problematic. The public safety exemption allows a delay in Miranda warnings until an imminent threat to public safety—e.g., a loaded gun somewhere in a public place that might be found by a child—has been neutralized. In terror cases it is impossible to determine when all necessary intelligence, which in any event might not relate to an imminent threat, has been learned.
The lesson from our experience with Abdulmutallab, who stopped talking soon after he was advised of his rights and did not resume for weeks until his family could be flown here to persuade him to resume, should have been that intelligence gathering comes first. Yes, Shahzad, as we are told, continued to provide information even after he was advised of his rights, but that cooperation came in spite of and not because of his treatment as a conventional criminal defendant.
Moreover, once Shahzad cooperated, it made no more sense with him than it did with Abdulmutallab to publicize his cooperation and thereby warn those still at large to hide and destroy whatever evidence they could. The profligate disclosures in Shahzad's case, even to the point of describing his confession, could only hinder successful exploitation of whatever information he provided.
The Shahzad case provides a reminder of the permanent harm leaks of any kind can cause. An Associated Press story citing unnamed law enforcement sources reported that investigators were on the trail of a "courier" who had helped provide financing to Shahzad.
A courier would seem oddly out of place in the contemporary world where money can be transferred with the click of a mouse—that is, until one recalls that in 2006 the New York Times disclosed on its front page a highly classified government program for monitoring electronic international money transfers through what is known as the Swift system.
That monitoring violated no law but was leaked and reported as what an intelligence lawyer of my acquaintance referred to as "intelliporn"—intelligence information that is disclosed for no better reason than that it is fun to read about, and without regard for the harm it causes. Of course, terrorists around the world took note, and resorted to "couriers," making it much harder to trace terrorist financing.
In the hours immediately following the discovery and disarming of the car bomb, media outlets and public figures fell all over themselves to lay blame as far as possible from where it would ultimately be found. Secretary of Homeland Security Janet Napolitano suggested the incident was entirely isolated and directed her agency's personnel to stand down. New York Mayor Michael Bloomberg sportingly offered to wager a quarter on the proposition that the bomb was the work of a solitary lunatic, perhaps someone upset over passage of the health-care bill, and much merriment was had over how primitive the bomb had been and how doomed it was to fail.
This sort of reaction goes back much further than this administration. Consider the chain of events leading to the 1993 World Trade Center bombing and eventually 9/11.
In November 1990, Meir Kahane, a right-wing Israeli politician, was assassinated after delivering a speech at a Manhattan hotel by El-Sayid Nosair, quickly pigeonholed as a lone misfit whose failures at work had driven him over the edge. The material seized from his home lay largely unexamined in boxes until a truck bomb was detonated under the World Trade Center in 1993, when the perpetrators of that act announced that freeing Nosair from prison was one of their demands.
Authorities then examined the neglected boxes and found jihadi literature urging the attacks on Western civilization through a terror campaign that would include toppling tall buildings that were centers of finance and tourism. An amateur video of Kahane's speech the night he was assassinated revealed that one of the 1993 bombers, Mohammed Salameh, was present in the hall when Nosair committed his act, and the ensuing investigation disclosed that Nosair was supposed to have made his escape with the help of another, Mahmoud Abouhalima, who was waiting outside at the wheel of a cab.
Nosair jumped into the wrong cab and the terrified driver pulled over and ducked under the dashboard, at which point Nosair tried to flee on foot and was captured. Salameh was captured when the vehicle identification number on the truck that carried the bomb led investigators to a rental agency, where he showed up days later to try to retrieve the deposit on the truck so that he could finance his escape.
Despite the toll from the first World Trade Center blast—six killed, hundreds injured, tens of millions of dollars in damage—and the murder of Kahane, much sport was made of how inept the perpetrators were.
Nosair and the 1993 Trade Center bombers were disciples of cleric Omar Abdel Rahman, known as the "blind sheikh," who was tried and convicted in 1995 along with nine others for conspiring to wage a war of urban terror that included not only that bombing and the Kahane assassination but also a plot to bomb simultaneously the Holland and Lincoln Tunnels, the George Washington Bridge and the United Nations.
One of the unindicted co-conspirators in that case was a then-obscure Osama bin Laden, who would declare in 1996 and again in 1998 that militant Islamists were at war with the United States. In 1998, his organization, al Qaeda, arranged the near-simultaneous bombing of American Embassies in Kenya and Tanzania.
Despite the declaration of war and the act of war, the criminal law paradigm continued to define our response. Along with immediate perpetrators, and some remote perpetrators including Khalid Sheikh Mohammed, bin Laden was indicted, and the oft-repeated vow to "bring them to justice" was repeated. Unmoved, and certainly undeterred, bin Laden in 2000 unleashed the attack in Yemen on the destroyer USS Cole, killing 17.
That was followed by Sept. 11, 2001, and it appeared for a time that Islamist fanaticism would no longer be greeted with condescending mockery. To the phrase "bring them to justice" was added "bring justice to them." The country appeared ready to adopt a stance of war, and to be ready to treat terrorists as it had the German saboteurs who landed off Long Island and Florida in 1942—as unlawful combatants under the laws of war who were not entitled to the guarantees that the Constitution grants to ordinary criminals.
There have been more than 20 Islamist terrorist plots aimed at this country since 9/11, including the deadly shooting by U.S. Army Maj. Nidal Hasan, those of Abdulmutallab and Shahzad, and those of Najibullah Zazi and his cohorts, Bryant Neal Vinas and his, against commuter railroads and subways in New York; of plotters who targeted military personnel at Fort Dix, N.J., Quantico, Va., and Goose Creek, S.C., and who murdered an Army recruiter in Little Rock, Ark.; of those who planned to blow up synagogues in New York, an office building in Dallas, and a courthouse in Illinois, among others.
Yet the pre-9/11 criminal law paradigm is again setting the limit of Attorney General Holder's response, even to the point of considering the inapposite public safety exception to Miranda as a way to help intelligence gathering. He continues to press for a civilian trial for Khalid Sheikh Mohammed and others who had long since been scheduled to be tried before military commissions.
A significant lesson lurking in Shahzad's inadequacy, and the history that preceded it, is that one of the things terrorists do is persist. Ramzi Yousef's shortcomings in the first attempt to blow up the World Trade Center were made up for by Khalid Sheikh Mohammed. We should see to the good order of our institutions and our attitudes before someone tries to make up for Faisal Shahzad's shortcomings.
Mr. Mukasey was attorney general of the United States from 2007 to 2009.
Press Briefing
May 11, 2010
EIA's Annual Energy Outlook 2010
http://www.eia.doe.gov/oiaf/aeo/index.html
US Missile Defense and Regional Security. By Frank A. Rose, Deputy Assistant Secretary, Bureau of Verification, Compliance, and Implementation. Remarks At the First Annual Israel Multinational Ballistic Missile Defense Conference. Tel Aviv, Israel, May 5, 2010
http://www.state.gov/t/vci/rls/141673.htm
What’s Worse Than Energy Taxes? Renewable Electricity Standards
http://blog.heritage.org/2010/05/11/morning-bell-whats-worse-than-energy-taxes-renewable-electricity-standards
$145 Billion and Counting - Fannie and Freddie lose it all for you
http://online.wsj.com/article/SB10001424052748703880304575236270385307174.html
Kagan and the Military: What Really Happened - As dean, she upheld a policy already in place
http://online.wsj.com/article/SB10001424052748703880304575236502953055276.html
The World's Dollar Drug - Expect the greenback to remain the world's reserve currency, but that won't be a sign of U.S. strength
http://online.wsj.com/article/SB10001424052748704342604575222701291563876.html
K[G]L 101: A Glossary of Terms
http://www.instituteforenergyresearch.org/2010/05/10/kgl-101-a-glossary-of-terms/
Rats fed Roundup Ready Soy —no effect on pancreas
http://academicsreview.org/reviewed-content/genetic-roulette/section-1/1-11roundup-ready-soy-is-safe-2/
Purposes and Principles of US Engagement in Burma, by Kurt M. Campbell, Assistant Secretary, Bureau of East Asian and Pacific Affairs. Rangoon, Burma, May 10, 2010
http://www.state.gov/p/eap/rls/rm/2010/05/141669.htm
Defending Freedom Is a Choice, by Kim R. Holmes, Ph.D. Heritage Foundation, May 3, 2010
http://www.heritage.org/Research/Reports/2010/05/Defending-Freedom-Is-a-Choice
A Renewable Electricity Standard: What It Will Really Cost Americans. By David Kreutzer, Ph.D., Karen Campbell, Ph.D., William Beach, Ben Lieberman and Nicolas Loris. Heritage Foundation, May 5, 2010
http://www.heritage.org/Research/Reports/2010/05/A-Renewable-Electricity-Standard-What-It-Will-Really-Cost-Americans
EIA's Annual Energy Outlook 2010
http://www.eia.doe.gov/oiaf/aeo/index.html
US Missile Defense and Regional Security. By Frank A. Rose, Deputy Assistant Secretary, Bureau of Verification, Compliance, and Implementation. Remarks At the First Annual Israel Multinational Ballistic Missile Defense Conference. Tel Aviv, Israel, May 5, 2010
http://www.state.gov/t/vci/rls/141673.htm
What’s Worse Than Energy Taxes? Renewable Electricity Standards
http://blog.heritage.org/2010/05/11/morning-bell-whats-worse-than-energy-taxes-renewable-electricity-standards
$145 Billion and Counting - Fannie and Freddie lose it all for you
http://online.wsj.com/article/SB10001424052748703880304575236270385307174.html
Kagan and the Military: What Really Happened - As dean, she upheld a policy already in place
http://online.wsj.com/article/SB10001424052748703880304575236502953055276.html
The World's Dollar Drug - Expect the greenback to remain the world's reserve currency, but that won't be a sign of U.S. strength
http://online.wsj.com/article/SB10001424052748704342604575222701291563876.html
K[G]L 101: A Glossary of Terms
http://www.instituteforenergyresearch.org/2010/05/10/kgl-101-a-glossary-of-terms/
Rats fed Roundup Ready Soy —no effect on pancreas
http://academicsreview.org/reviewed-content/genetic-roulette/section-1/1-11roundup-ready-soy-is-safe-2/
Purposes and Principles of US Engagement in Burma, by Kurt M. Campbell, Assistant Secretary, Bureau of East Asian and Pacific Affairs. Rangoon, Burma, May 10, 2010
http://www.state.gov/p/eap/rls/rm/2010/05/141669.htm
Defending Freedom Is a Choice, by Kim R. Holmes, Ph.D. Heritage Foundation, May 3, 2010
http://www.heritage.org/Research/Reports/2010/05/Defending-Freedom-Is-a-Choice
A Renewable Electricity Standard: What It Will Really Cost Americans. By David Kreutzer, Ph.D., Karen Campbell, Ph.D., William Beach, Ben Lieberman and Nicolas Loris. Heritage Foundation, May 5, 2010
http://www.heritage.org/Research/Reports/2010/05/A-Renewable-Electricity-Standard-What-It-Will-Really-Cost-Americans
Monday, May 10, 2010
Press Briefing
May 10, 2010
http://digs.by/cgspol Remarks at the East-West Center's 50th Anniversary Celebration, by Judith A. McHale, Undersecretary for Public Diplomacy and Public Affairs. Capital Hilton Hotel, Washington, DC, May 6, 2010
http://digs.by/bdNTtP One of the Nation's Leading Legal Minds: The President Nominates Elena Kagan for the Supreme Court
http://digs.by/ccFPg5 Kagan Nomination Launches Constitutional Debate + http://digs.by/9HoCRb Supreme Court Nominee Elena Kagan
http://digs.by/b4eau0 Five Reasons Not to Support a Bailout of Greece
http://digs.by/cr09j1 The Carbon Recession - CO2 emissions plunge, along with the economy. Washington rejoices
http://www.bipartisanalliance.com/2010/05/euros-tribulations-dont-blame-single.html The Euro's Tribulations - Don't blame the single currency for the failures of Keynesian economics
http://digs.by/alQbF1 The FCC vs. Broadband Investors - The last thing Internet entrepreneurs need is a new period of regulatory uncertainty
http://digs.by/drVDrs Corporate governance: much better job than they get credit for, but here are a few suggestions for improvement
http://digs.by/dfMg6B Weekly Address: President Obama Praises the Benefits and Successes of Health Reform Already in Effect
http://digs.by/dBb9JN ObamaCare's Phony Medicaid 'Deal' - The new health law unconstitutionally coerces the states.
http://digs.by/91RSgh The Euro's Tribulations - Don't blame the single currency for the failures of Keynesian economics
http://digs.by/bFfSuO Arizona's Real Problem: Drug Crime - Violence in the border is not committed by migrant laborers.
http://digs.by/bNbJdi Islam's Nowhere Men-- Millions like Faisal Shahzad are unsettled by a modern world they can neither master nor reject
http://digs.by/cgspol Remarks at the East-West Center's 50th Anniversary Celebration, by Judith A. McHale, Undersecretary for Public Diplomacy and Public Affairs. Capital Hilton Hotel, Washington, DC, May 6, 2010
http://digs.by/bdNTtP One of the Nation's Leading Legal Minds: The President Nominates Elena Kagan for the Supreme Court
http://digs.by/ccFPg5 Kagan Nomination Launches Constitutional Debate + http://digs.by/9HoCRb Supreme Court Nominee Elena Kagan
http://digs.by/b4eau0 Five Reasons Not to Support a Bailout of Greece
http://digs.by/cr09j1 The Carbon Recession - CO2 emissions plunge, along with the economy. Washington rejoices
http://www.bipartisanalliance.com/2010/05/euros-tribulations-dont-blame-single.html The Euro's Tribulations - Don't blame the single currency for the failures of Keynesian economics
http://digs.by/alQbF1 The FCC vs. Broadband Investors - The last thing Internet entrepreneurs need is a new period of regulatory uncertainty
http://digs.by/drVDrs Corporate governance: much better job than they get credit for, but here are a few suggestions for improvement
http://digs.by/dfMg6B Weekly Address: President Obama Praises the Benefits and Successes of Health Reform Already in Effect
http://digs.by/dBb9JN ObamaCare's Phony Medicaid 'Deal' - The new health law unconstitutionally coerces the states.
http://digs.by/91RSgh The Euro's Tribulations - Don't blame the single currency for the failures of Keynesian economics
http://digs.by/bFfSuO Arizona's Real Problem: Drug Crime - Violence in the border is not committed by migrant laborers.
http://digs.by/bNbJdi Islam's Nowhere Men-- Millions like Faisal Shahzad are unsettled by a modern world they can neither master nor reject
The Euro's Tribulations - Don't blame the single currency for the failures of Keynesian economics
The Euro's Tribulations. WSJ Editorial
Don't blame the single currency for the failures of Keynesian economics.WSJ, Monday,May 10, 2010
Twelve years ago, economist Robert Mundell wrote a series of articles in these pages under the headline, "The Case for the Euro," touting the benefits of the single European currency due in 1999. The subsequent decade exceeded the rosiest scenarios set out by the "father of the euro." Sixteen countries came to enjoy prosperity and stability in the world's second most successful zone of sound money and free commerce (after the U.S.).
This year, the party has come to a crashing halt with Greece's financial meltdown, and one consequence has been a run on confidence in the euro. Last week, as the European Union and International Monetary Fund approved a €110 billion rescue and the Greeks adopted an austerity package, the euro tumbled to 14-month lows.
The euro will be tested in the coming months and years by policy makers and markets. The challenges ahead include continued economic weakness, particularly across a Mediterranean flirting with insolvency from Greece to Portugal, political tensions and calls to winnow euroland to the strong economies, or to shelve the euro altogether.
Europe's unprecedented monetary union can no doubt be improved, but its benefits in economic efficiency and monetary discipline should not be ignored, much less tossed away at the first serious challenge. It's also important to understand that the single currency is the scapegoat du jour for a crisis whose real causes are inconvenient for the political class.
***
In one anti-euro corner are weak-money neo-Keynesians. Greece was their model pupil, spending its way to supposedly drive growth. But when the time came to pay the piper, the lament now heard from Paul Krugman and elsewhere is that the Greeks are unjustly shackled by the euro. Take back national control over monetary policy and the EU's weak economies can once again devalue their way out of trouble. Blaming the euro for the failures of Keynesianism sets a new standard for chutzpah, and this prescription would debase not only the currencies but the middle class for a generation.
Then there's the idea to save the euro by creating a European super-state to set economic policy, harmonize taxes and ease transfers from rich countries to the poor. George Soros stands in this camp, as does prominent German central banker Otmar Issing, who earlier this year wrote that "starting monetary union without having established a political union was putting the cart before the horse." This is really a call for imposing on all countries the welfare state agenda that got Europe into this jam in the first place.
Before offering cures, let's diagnose the Greek disease properly. Joining the euro gave the poorer southern EU countries a perfect opportunity to "pull up their socks," in Professor Mundell's words. Some, like Italy and Spain, did so for a while. But sitting pretty inside the euro club, many politicians took the foot off the pedal of unpopular reforms, such as liberalizing labor codes or lowering costs to business.
Greek politicians in particular lived beyond their means and put much of this spending, in Wall Street parlance, off their balance sheet. The euro did enable bad habits by letting Greece borrow at German interest rates. This postponed the day of reckoning for the failures of reform, until a new Athens government last year came clean about the lies and the mess. But don't blame a currency for irresponsible leadership.
Europe isn't experiencing a currency crisis. It is a debt crisis driven by overborrowing, large and inefficient government, and insufficient economic growth. Some of the sickest countries use the euro as their legal tender, but others don't. Iceland, Latvia, Romania and Hungary were all forced into the arms of the IMF, though none of them is in the euro zone. Britain is also outside the euro bloc but is facing its own day of debt reckoning.
Iceland is a sobering might-have-been for the Greeks. The small Arctic island's financial crisis was compounded by a currency crisis. It's now fast-tracking an application to join the EU and the euro. The Icelanders understand that small countries with shallow capital markets are most vulnerable to currency volatility in a world of floating exchange rates.
Before Greece or Portugal seriously consider bringing back the drachma and escudo, and devaluing their way out of trouble, recall that Argentina took this advice in late 2001. Dropping its dollar peg, the Argentines beggared their people and avoided policy changes. They ended up defaulting and continue to fall behind Brazil and Chile.
The Greeks can leave the euro if they prefer, and neither Berlin nor Brussels would spill many tears. But the costs of dropping out would be substantial. The bulk of Greek financial contracts are in euros. Were a reconstituted drachma devalued by 50%, the public debt to GDP ratio would essentially double—in Greece's case to well over 200% of GDP. Our guess is that the Greeks restructure their debts or default before they drop out of the single currency.
***
While not the cause of this crisis, the euro has been tarnished by it. Greece's Madoff-like bookkeeping broke the mutual trust that is essential to any monetary compact, and this will take time to restore.
Shortcomings in the rules governing the euro zone were evident long before this crisis, and they now need to be addressed. In one of his 1998 Journal articles, Mr. Mundell wrote that the rules on fiscal deficits and public debts in the Stability and Growth Pact—adopted by euro-zone countries to govern the single currency—needed bite to guard against the obvious free-rider problem: Countries would be tempted to take advantage of a colossal and low-interest bond market believing that "when the chips are down the union will act as lender of last resort." He essentially predicted the problems of Greece and the proposed EU-IMF bailout.
Fines were decreased and the stability pact was never seriously enforced. Germany and France, which pushed hardest for strict penalties, were the first to break the rules without suffering any consequences. Five years ago, Berlin and Paris shot down the European Commission's proposal to oversee national statistical agencies to safeguard against Greek-like cheating.
On Tuesday, the Commission plans to unveil proposals on closer surveillance of euro-zone budgets. Next it should restore some teeth to the stability pact. These modest steps won't excite euro federalists as much as a grand and unrealistic political union, but they might do some actual good.
***
The future of the euro in the next decade depends on the will of European politicians. First the beggar-thy-currency crowd must be ignored. The European Central Bank has, at least so far, been a bulwark against such talk. On the other hand, the EU's decision to create a "bailout fund" tells creditors and borrower governments alike that they will always be rescued, increasing moral hazard and the odds of another crisis. If asked to foot the bill again, unhappy German or Dutch taxpayers may decide the euro isn't worth the price and themselves push for its dissolution.
Above all, the euro will thrive only if Europe thrives. Austerity plans intended to stem the fiscal hemorrhaging are no substitute for policies to promote growth. Should Europe use this crisis to make itself more competitive and rein in the welfare state, the Continent would be even better placed to take advantage of a huge single market underpinned by a stable currency and low inflation. And if that were to happen, the second decade of the euro could turn out to be better than the first.
Don't blame the single currency for the failures of Keynesian economics.WSJ, Monday,May 10, 2010
Twelve years ago, economist Robert Mundell wrote a series of articles in these pages under the headline, "The Case for the Euro," touting the benefits of the single European currency due in 1999. The subsequent decade exceeded the rosiest scenarios set out by the "father of the euro." Sixteen countries came to enjoy prosperity and stability in the world's second most successful zone of sound money and free commerce (after the U.S.).
This year, the party has come to a crashing halt with Greece's financial meltdown, and one consequence has been a run on confidence in the euro. Last week, as the European Union and International Monetary Fund approved a €110 billion rescue and the Greeks adopted an austerity package, the euro tumbled to 14-month lows.
The euro will be tested in the coming months and years by policy makers and markets. The challenges ahead include continued economic weakness, particularly across a Mediterranean flirting with insolvency from Greece to Portugal, political tensions and calls to winnow euroland to the strong economies, or to shelve the euro altogether.
Europe's unprecedented monetary union can no doubt be improved, but its benefits in economic efficiency and monetary discipline should not be ignored, much less tossed away at the first serious challenge. It's also important to understand that the single currency is the scapegoat du jour for a crisis whose real causes are inconvenient for the political class.
***
In one anti-euro corner are weak-money neo-Keynesians. Greece was their model pupil, spending its way to supposedly drive growth. But when the time came to pay the piper, the lament now heard from Paul Krugman and elsewhere is that the Greeks are unjustly shackled by the euro. Take back national control over monetary policy and the EU's weak economies can once again devalue their way out of trouble. Blaming the euro for the failures of Keynesianism sets a new standard for chutzpah, and this prescription would debase not only the currencies but the middle class for a generation.
Then there's the idea to save the euro by creating a European super-state to set economic policy, harmonize taxes and ease transfers from rich countries to the poor. George Soros stands in this camp, as does prominent German central banker Otmar Issing, who earlier this year wrote that "starting monetary union without having established a political union was putting the cart before the horse." This is really a call for imposing on all countries the welfare state agenda that got Europe into this jam in the first place.
Before offering cures, let's diagnose the Greek disease properly. Joining the euro gave the poorer southern EU countries a perfect opportunity to "pull up their socks," in Professor Mundell's words. Some, like Italy and Spain, did so for a while. But sitting pretty inside the euro club, many politicians took the foot off the pedal of unpopular reforms, such as liberalizing labor codes or lowering costs to business.
Greek politicians in particular lived beyond their means and put much of this spending, in Wall Street parlance, off their balance sheet. The euro did enable bad habits by letting Greece borrow at German interest rates. This postponed the day of reckoning for the failures of reform, until a new Athens government last year came clean about the lies and the mess. But don't blame a currency for irresponsible leadership.
Europe isn't experiencing a currency crisis. It is a debt crisis driven by overborrowing, large and inefficient government, and insufficient economic growth. Some of the sickest countries use the euro as their legal tender, but others don't. Iceland, Latvia, Romania and Hungary were all forced into the arms of the IMF, though none of them is in the euro zone. Britain is also outside the euro bloc but is facing its own day of debt reckoning.
Iceland is a sobering might-have-been for the Greeks. The small Arctic island's financial crisis was compounded by a currency crisis. It's now fast-tracking an application to join the EU and the euro. The Icelanders understand that small countries with shallow capital markets are most vulnerable to currency volatility in a world of floating exchange rates.
Before Greece or Portugal seriously consider bringing back the drachma and escudo, and devaluing their way out of trouble, recall that Argentina took this advice in late 2001. Dropping its dollar peg, the Argentines beggared their people and avoided policy changes. They ended up defaulting and continue to fall behind Brazil and Chile.
The Greeks can leave the euro if they prefer, and neither Berlin nor Brussels would spill many tears. But the costs of dropping out would be substantial. The bulk of Greek financial contracts are in euros. Were a reconstituted drachma devalued by 50%, the public debt to GDP ratio would essentially double—in Greece's case to well over 200% of GDP. Our guess is that the Greeks restructure their debts or default before they drop out of the single currency.
***
While not the cause of this crisis, the euro has been tarnished by it. Greece's Madoff-like bookkeeping broke the mutual trust that is essential to any monetary compact, and this will take time to restore.
Shortcomings in the rules governing the euro zone were evident long before this crisis, and they now need to be addressed. In one of his 1998 Journal articles, Mr. Mundell wrote that the rules on fiscal deficits and public debts in the Stability and Growth Pact—adopted by euro-zone countries to govern the single currency—needed bite to guard against the obvious free-rider problem: Countries would be tempted to take advantage of a colossal and low-interest bond market believing that "when the chips are down the union will act as lender of last resort." He essentially predicted the problems of Greece and the proposed EU-IMF bailout.
Fines were decreased and the stability pact was never seriously enforced. Germany and France, which pushed hardest for strict penalties, were the first to break the rules without suffering any consequences. Five years ago, Berlin and Paris shot down the European Commission's proposal to oversee national statistical agencies to safeguard against Greek-like cheating.
On Tuesday, the Commission plans to unveil proposals on closer surveillance of euro-zone budgets. Next it should restore some teeth to the stability pact. These modest steps won't excite euro federalists as much as a grand and unrealistic political union, but they might do some actual good.
***
The future of the euro in the next decade depends on the will of European politicians. First the beggar-thy-currency crowd must be ignored. The European Central Bank has, at least so far, been a bulwark against such talk. On the other hand, the EU's decision to create a "bailout fund" tells creditors and borrower governments alike that they will always be rescued, increasing moral hazard and the odds of another crisis. If asked to foot the bill again, unhappy German or Dutch taxpayers may decide the euro isn't worth the price and themselves push for its dissolution.
Above all, the euro will thrive only if Europe thrives. Austerity plans intended to stem the fiscal hemorrhaging are no substitute for policies to promote growth. Should Europe use this crisis to make itself more competitive and rein in the welfare state, the Continent would be even better placed to take advantage of a huge single market underpinned by a stable currency and low inflation. And if that were to happen, the second decade of the euro could turn out to be better than the first.
Sunday, May 9, 2010
Press Briefing
May 07, 2010
http://bit.ly/a816l3 Yuriko Koike: How to Undermine an Alliance
http://digs.by/bz8N5M Future Nuclear Arms Control and Nonproliferation: New START and Beyond, by Rose Gottemoeller, Assistant Secretary, Bureau of Verification, Compliance, and Implementation. Remarks at National Defense University, Center for the Study of Weapons of Mass Destruction 10th Annual Symposium. Washington, DC, May 5, 2010
http://digs.by/9uXyU7 Sergei Karaganov: The Dangers of Nuclear Disarmament
http://digs.by/cLRm3d The Next Capital Insurgency- In 1978 Jimmy Carter signed a cap gains cut to lift a sagging economy.
http://digs.by/dkxApG History is littered with tales of men who turned to violence because of bad real-estate investments
http://digs.by/aSKNOB Julius Caesar of the Internet - The FCC puts another industry under political control
http://digs.by/9rhbN8 At Last, More Jobs - The latest jobs report
http://digs.by/bcdSoY Moms to the Barricades - 'The tea parties are an extension of our need to protect the future for our children.'
http://digs.by/c0swOd The Markets Have Good Reasons To Be Nervous - Nobody will trust the euro like they used to.
http://digs.by/dvaCvj Cancer and the Environment
http://digs.by/a68PnA Deepwater Horizon - Focus on Cleanup, Not Politics
http://bit.ly/a816l3 Yuriko Koike: How to Undermine an Alliance
http://digs.by/bz8N5M Future Nuclear Arms Control and Nonproliferation: New START and Beyond, by Rose Gottemoeller, Assistant Secretary, Bureau of Verification, Compliance, and Implementation. Remarks at National Defense University, Center for the Study of Weapons of Mass Destruction 10th Annual Symposium. Washington, DC, May 5, 2010
http://digs.by/9uXyU7 Sergei Karaganov: The Dangers of Nuclear Disarmament
http://digs.by/cLRm3d The Next Capital Insurgency- In 1978 Jimmy Carter signed a cap gains cut to lift a sagging economy.
http://digs.by/dkxApG History is littered with tales of men who turned to violence because of bad real-estate investments
http://digs.by/aSKNOB Julius Caesar of the Internet - The FCC puts another industry under political control
http://digs.by/9rhbN8 At Last, More Jobs - The latest jobs report
http://digs.by/bcdSoY Moms to the Barricades - 'The tea parties are an extension of our need to protect the future for our children.'
http://digs.by/c0swOd The Markets Have Good Reasons To Be Nervous - Nobody will trust the euro like they used to.
http://digs.by/dvaCvj Cancer and the Environment
http://digs.by/a68PnA Deepwater Horizon - Focus on Cleanup, Not Politics
Thursday, May 6, 2010
Derivatives Clearinghouses Are No Magic Bullet - Another kind of institution that's too big to fail?
Derivatives Clearinghouses Are No Magic Bullet. By MARK J. ROE
Will the Dodd bill create another kind of institution that's too big to fail?WSJ, May 06, 2010
As the Senate finalizes its financial reform legislation, a consensus is developing that if we could just get derivatives traded through a centralized clearinghouse we could avoid a financial crisis like the one we just went through. This is false. Clearinghouses provide efficiencies in transparency and trading, but they are no cure-all. They can even exacerbate problems in a financial crisis.
If I agree to sell you a product next month through a clearinghouse, I'll deliver the product to the clearinghouse and you'll deliver the cash to the clearinghouse on the due date. Let's say we both have many trades going through the clearinghouse and we've posted collateral to cover any single trade that fails. This is more efficient than each of us posting collateral privately for each trade. Moreover, we're not worried that I won't deliver or you won't pay because we both count on the clearinghouse to deliver and pay up if one of us doesn't.
This clearing system makes trading more efficient. If you default, the cost is spread through the clearinghouse so I don't get hurt severely. And if the clearinghouse has enough collateral from you, there's no loss to spread. But there's also a potential downside: The clearinghouse reduces our incentives to worry about counterparty risk. Your business might collapse before you need to pay up, but that's not my problem because the clearinghouse pays me anyway. The clearinghouse weakens private market discipline.
Still, if the clearinghouse is as good or better at checking up on your creditworthiness as I am, all will be well. But one has to wonder how good a clearinghouse will be, or can be.
Consider two of our biggest derivatives-related failures—Long-Term Capital Management in 1998 and the subprime market in 2008. When Russia's ruble dropped unexpectedly, LTCM was exposed on its more than $1 trillion in interest-rate and foreign-exchange derivatives. It could not pay up and collapsed. Ten years later the market rapidly revalued subprime mortgage securities, rendering several institutions insolvent. AIG was over-exposed in credit default swaps tied to the value of subprime mortgages.
Could a clearinghouse really have been ahead of the curve in getting sufficient capital posted before these problems became serious and well-known? I'm not so sure. Worse yet, major types of derivatives have built-in discontinuities—"jump-to-default" in derivatives-speak.
For a credit default swap, one counterparty guarantees the debt of another company to you, in return for you paying a fee for that guarantee. If no one goes bankrupt, the counterparty just collects the fees from you. But if the guarantee is called because the company you were worried about goes bankrupt, the counterparty must all of a sudden pay out a huge amount immediately.
Yet the guarantor is often called upon to pay in a weak economy, just when it can itself be too weak to pay. You get credit default protection on your real-estate investments from me, just in case the economy turns sour. But just when you need me the most, in a sour economy, I turn out to be so overextended I can't pay up. Collateralizing and monitoring such discontinuous obligations will not be so easy for the clearinghouse.
Moreover, if trillions of dollars of derivatives trading goes through a clearinghouse, we will have created another institution that's too big to fail. Regulators worried that an interconnected Bear or AIG could drag down the economy. Imagine what an interconnected clearinghouse's failure could do.
AIG needed $85 billion in government cash to avoid defaulting on its debts, including its derivatives obligations. Could one clearinghouse meet even a fraction of that call without backup from the U.S.? True, we could have many clearinghouses, each not too big to fail—but then maybe each would be too small to do enough good.
The Senate bill would allow a clearinghouse to grab new collateral out from failing derivatives-trading banks to cover old, but suddenly toxic, debts the banks owe to the clearinghouse. This could harm other creditors and cause the firm to suffer a run. Nevertheless, to protect itself in a declining market, a clearinghouse would have to make those big collateral calls. That's good if it protects the clearinghouse. But it's bad if it starts a run on a weakened but important bank.
One key but missing element in the search for reform has yet to gain traction in Washington. Derivatives players obtained exceptions from typical bankruptcy and bank resolution rules in the past few decades for their contracts with a bankrupt counterparty. This allowed them to grab and keep collateral other creditors cannot. That gives derivatives traders reason to pay less attention to their counterparties' riskiness and weakens market discipline. These rules should be changed before the Senate is done.
To say that a clearinghouse solution is very incomplete is not to say there is an easy solution out there. We may be unable to do more than to make incomplete improvements and muddle through.
Derivatives trades first of all should not just be centrally cleared, but should also be taken out from the government-guaranteed entities, such as commercial banks (or at least we need to impose tight capital requirements on those banks that deal in derivatives). Derivatives traders like doing business with Citibank because they know the government won't let Citibank go down. But this puts taxpayers at risk. It would be better to run those trades through an affiliate, not through the bank, so counterparties realize they might not be bailed out if the affiliate failed. If a banking affiliate's counterparty is the clearinghouse, then the clearinghouse will have incentives to make sure that the affiliate is well-capitalized. This is particularly so if the clearinghouse won't get any special priority treatment in a bankruptcy.
Critics of proposals to establish separate bank affiliates for derivatives trading complain about the large amount of capital that would be needed for such affiliates. But the capital that might be needed to buttress a bank affiliate indicates some level of the value (i.e., the taxpayer subsidy) to derivatives players of trading with a too-big-to-fail entity that they know the government will step in to save. They are implicitly getting insurance and should pay for it.
And, since a clearinghouse is itself at risk of being too big to fail, regulators need to police its capital and collateral requirements. If the derivatives market sees the clearinghouse as too big to fail, the potential for derivatives players making overly risky derivatives trades becomes real. Clearinghouses can help manage some systemic risk if they're run right. If not, they can become the Fannie and Freddie of the next financial meltdown.
Mr. Roe is a professor at Harvard Law School, where he teaches bankruptcy and corporate law.
Will the Dodd bill create another kind of institution that's too big to fail?WSJ, May 06, 2010
As the Senate finalizes its financial reform legislation, a consensus is developing that if we could just get derivatives traded through a centralized clearinghouse we could avoid a financial crisis like the one we just went through. This is false. Clearinghouses provide efficiencies in transparency and trading, but they are no cure-all. They can even exacerbate problems in a financial crisis.
If I agree to sell you a product next month through a clearinghouse, I'll deliver the product to the clearinghouse and you'll deliver the cash to the clearinghouse on the due date. Let's say we both have many trades going through the clearinghouse and we've posted collateral to cover any single trade that fails. This is more efficient than each of us posting collateral privately for each trade. Moreover, we're not worried that I won't deliver or you won't pay because we both count on the clearinghouse to deliver and pay up if one of us doesn't.
This clearing system makes trading more efficient. If you default, the cost is spread through the clearinghouse so I don't get hurt severely. And if the clearinghouse has enough collateral from you, there's no loss to spread. But there's also a potential downside: The clearinghouse reduces our incentives to worry about counterparty risk. Your business might collapse before you need to pay up, but that's not my problem because the clearinghouse pays me anyway. The clearinghouse weakens private market discipline.
Still, if the clearinghouse is as good or better at checking up on your creditworthiness as I am, all will be well. But one has to wonder how good a clearinghouse will be, or can be.
Consider two of our biggest derivatives-related failures—Long-Term Capital Management in 1998 and the subprime market in 2008. When Russia's ruble dropped unexpectedly, LTCM was exposed on its more than $1 trillion in interest-rate and foreign-exchange derivatives. It could not pay up and collapsed. Ten years later the market rapidly revalued subprime mortgage securities, rendering several institutions insolvent. AIG was over-exposed in credit default swaps tied to the value of subprime mortgages.
Could a clearinghouse really have been ahead of the curve in getting sufficient capital posted before these problems became serious and well-known? I'm not so sure. Worse yet, major types of derivatives have built-in discontinuities—"jump-to-default" in derivatives-speak.
For a credit default swap, one counterparty guarantees the debt of another company to you, in return for you paying a fee for that guarantee. If no one goes bankrupt, the counterparty just collects the fees from you. But if the guarantee is called because the company you were worried about goes bankrupt, the counterparty must all of a sudden pay out a huge amount immediately.
Yet the guarantor is often called upon to pay in a weak economy, just when it can itself be too weak to pay. You get credit default protection on your real-estate investments from me, just in case the economy turns sour. But just when you need me the most, in a sour economy, I turn out to be so overextended I can't pay up. Collateralizing and monitoring such discontinuous obligations will not be so easy for the clearinghouse.
Moreover, if trillions of dollars of derivatives trading goes through a clearinghouse, we will have created another institution that's too big to fail. Regulators worried that an interconnected Bear or AIG could drag down the economy. Imagine what an interconnected clearinghouse's failure could do.
AIG needed $85 billion in government cash to avoid defaulting on its debts, including its derivatives obligations. Could one clearinghouse meet even a fraction of that call without backup from the U.S.? True, we could have many clearinghouses, each not too big to fail—but then maybe each would be too small to do enough good.
The Senate bill would allow a clearinghouse to grab new collateral out from failing derivatives-trading banks to cover old, but suddenly toxic, debts the banks owe to the clearinghouse. This could harm other creditors and cause the firm to suffer a run. Nevertheless, to protect itself in a declining market, a clearinghouse would have to make those big collateral calls. That's good if it protects the clearinghouse. But it's bad if it starts a run on a weakened but important bank.
One key but missing element in the search for reform has yet to gain traction in Washington. Derivatives players obtained exceptions from typical bankruptcy and bank resolution rules in the past few decades for their contracts with a bankrupt counterparty. This allowed them to grab and keep collateral other creditors cannot. That gives derivatives traders reason to pay less attention to their counterparties' riskiness and weakens market discipline. These rules should be changed before the Senate is done.
To say that a clearinghouse solution is very incomplete is not to say there is an easy solution out there. We may be unable to do more than to make incomplete improvements and muddle through.
Derivatives trades first of all should not just be centrally cleared, but should also be taken out from the government-guaranteed entities, such as commercial banks (or at least we need to impose tight capital requirements on those banks that deal in derivatives). Derivatives traders like doing business with Citibank because they know the government won't let Citibank go down. But this puts taxpayers at risk. It would be better to run those trades through an affiliate, not through the bank, so counterparties realize they might not be bailed out if the affiliate failed. If a banking affiliate's counterparty is the clearinghouse, then the clearinghouse will have incentives to make sure that the affiliate is well-capitalized. This is particularly so if the clearinghouse won't get any special priority treatment in a bankruptcy.
Critics of proposals to establish separate bank affiliates for derivatives trading complain about the large amount of capital that would be needed for such affiliates. But the capital that might be needed to buttress a bank affiliate indicates some level of the value (i.e., the taxpayer subsidy) to derivatives players of trading with a too-big-to-fail entity that they know the government will step in to save. They are implicitly getting insurance and should pay for it.
And, since a clearinghouse is itself at risk of being too big to fail, regulators need to police its capital and collateral requirements. If the derivatives market sees the clearinghouse as too big to fail, the potential for derivatives players making overly risky derivatives trades becomes real. Clearinghouses can help manage some systemic risk if they're run right. If not, they can become the Fannie and Freddie of the next financial meltdown.
Mr. Roe is a professor at Harvard Law School, where he teaches bankruptcy and corporate law.
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