Goldman and Washington's Wall Street Takeover. By EDWARD JAY EPSTEIN
The SEC's case is weak, but it helped the government justify sweeping new powers over the financial industry.WSJ, May 22, 2010
When President Obama signs the new financial regulation act the government will assume sweeping new powers over Wall Street. The passage of this bill did not occur in a vacuum. The administration carefully laid the groundwork by inculcating public fear that the great financial houses betray investors by rigging securities to fail. Exhibit A: the SEC's recent fraud case against Goldman Sachs.
The agency's complaint alleges that Goldman Sachs defrauded the investors in its Abacus 2007-AC1 fund by not disclosing the role played in the fund's creation by John Paulson, a hedge fund operator who stood to make an immense profit if the fund failed. It might be a great conspiracy case—if the SEC could come up with a plausible conspiracy.
Mr. Paulson wanted to make a billion dollar wager that subprime-backed mortgages would collapse. So he went to Goldman Sachs, which, like the other major financial houses, is in the business of creating such customized gambling products for clients.
For a $15 million fee from Mr. Paulson, Goldman created Abacus 2007-AC1. It provided exposure to a portfolio of 90 subprime home mortgage-backed securities. If the underlying securities did not default, those who took the long side of Abacus would collect handsome profits. If the housing bubble burst, those who took the short side would win heavily.
Goldman found three participants to bet long—ACA Capital Holdings, a bond insurer, IKB Deutsche Industriebank (a Germany-based specialist in mortgage securities), and itself. ACA went long on the deal. It sold a $900 million credit default swap on Abacus and effectively invested most of the $40 million it got from selling the swap to Goldman in the Abacus deal itself. ACA's wholly owned subsidiary, ACA Management, had sole authority to pick every one of the 90 securities in the portfolio. IKB bought $150 million worth of Abacas's notes, and Goldman put up $90 million to complete the financing.
Mr. Paulson was the lone short, buying ACA's credit default swap from Goldman. All four participants in the Abacus deal had the same data about the 90 underlying securities. What separated them was their opinion of the direction of the housing market. Mr. Paulson felt it was headed toward a collapse; ACA considered this so unlikely that it gave nearly 20 to 1 odds on its credit default swap. Mr. Paulson won the bet.
So where is the fraud? The SEC says Goldman withheld material information from ACA and IKB by not disclosing the history of the deal, including Mr. Paulson's role in the creation of Abacus. Of course, ACA knew someone was short the deal, since it sold Goldman a $900 million credit default swap precisely for that purpose. Goldman did not say that Mr. Paulson was that counterparty. But his identity may not have been a mystery to ACA.
Mr. Paulson's top lieutenant in the deal, Paolo Pellegrini, testified to the SEC in its investigation of the matter in 2008 that he had informed ACA Management that Mr. Paulson's hedge fund was betting against the transaction. If so—and Mr. Pellegrini had no reason to perjure himself since he had no obligation to disclose anything—ACA possessed the information that Goldman withheld, and went ahead with the deal. IKB bank, which bought Abacus's AAA-rated notes, may not have known about Mr. Paulson's role in Abacus.
The real issue here turns on the term "material," which the SEC defines as facts an investor would reasonably want to know before making an investment. The agency contends that Mr. Paulson's role in suggesting securities to ACA was "material." Prior to this case, the SEC did not always consider a deal's history material, taking the position in hundreds of other such deals that how a fund was constructed, including how its rating was achieved with rating agencies, did not require disclosure. That was before Wall Street became a political bete noire.
Nevertheless, the SEC voted in a split decision (all the Republicans voting against) to accuse Goldman of civil fraud. It alleges that Mr. Paulson "heavily influenced" ACA Management to pick losers but provides no theory as to why ACA Management, whose corporate parent was risking $940 million, would do anything but pick the least risky subprime bonds. As it turned out, the subprime securities ACA picked for the portfolio failed. But so did the vast majority of securities based on subprime mortgages. Since 99% of them were marked down by the rating agencies by the end of 2008, Abacus would have likely suffered the same fate had ACA picked 90 other such securities.
ACA's losses on Abacus were less than 5% of the $22 billion in losses it suffered in its other subprime funds (in which Mr. Paulson was not involved). When the time came to pay off the Abacus wager, ACA, hit by $68 billion in credit default swaps, couldn't make good. Its Abacus debt fell to the Dutch bank ABN-AMRO, which had back-stopped ACA. The Royal Bank of Scotland, which had the misfortune of merging with the Dutch bank, paid Mr. Paulson.
No one can fault the SEC for wanting to restore faith in Wall Street by ferreting out financial frauds. But its case against Goldman Sachs does not add up. It implies a conspiracy without co-conspirators. If Goldman had designed its own fund to fail, it could have retained the credit default swap it got from ACA for its own account rather than selling it to Mr. Paulson. Instead, it invested $90 million of its own money into Abacus. Goldman's records showed it lost $75 million (after taking its $15 million fees into account). The SEC has issued no complaint against Mr. Paulson in this deal.
Not only is there no motive or logic for Goldman to have sabotaged its own fund, but the SEC complaint fails to cite any evidence it did. Nevertheless, it has brilliantly succeeded in implanting that idea in the media. On April 18, Paul Krugman stated in his New York Times column that "the S.E.C. is charging that Goldman created and marketed securities that were deliberately designed to fail, so that an important client could make money off that failure. That's what I would call looting." In fact, the SEC complaint never alleges that Goldman deliberately designed any securities to fail.
Even though the widely echoed "designed to fail" charge is an invention, it helped convert a civil case of nondisclosure into one of Grand Theft Wall Street in the public imagination. The message—Wall Street deliberately betrays investors—served a political end. It helped provide cover for the government's desire to manage the financial universe.
Mr. Epstein is the author of "The Hollywood Economist" (Melville House, 2010).
Sunday, May 23, 2010
Press Briefing
May 23, 2010
Remarks At The Council On Foreign Relations, by James B. Steinberg, Deputy Secretary of State. Washington, DC, May 19, 2010
http://www.state.gov/s/d/2010/142120.htm
Five Questions for Pres. Obama on Fuel Economy Standards
http://www.instituteforenergyresearch.org/2010/05/21/five-questions-for-pres-obama-on-fuel-economy-standards/
Travel Diary: Secretary Clinton Op-Ed on U.S.-China Achievements Beyond Expo
http://blogs.state.gov/index.php/site/entry/travel_diary_clinton_op-ed_us_china
Gross National Debt: $13 trillion and counting
http://rpc.senate.gov/public/_files/debtchartsv2.pdf
Born to Veto - Christie saves New Jersey from a tax increase
http://online.wsj.com/article/SB10001424052748704852004575258751835748206.html
"New Jersey does not have a tax problem; New Jersey has a spending and size of government problem."
Dennis Blair Departs - Another victim of intelligence reform
http://online.wsj.com/article/SB10001424052748704852004575258382267478018.html
Intelligence disputes are usually murky, though the sacking of Dennis Blair isn't among them. Explanations for the Director of National Intelligence's exit this week range from Mr. Blair's turf wars with the CIA and at the White House to the failure to pre-empt three domestic terror attacks, two of which failed out of blind luck. But Mr. Blair is really a casualty of the failed "intelligence reform" of the last decade.
Mr. Blair's successor will be the fourth DNI in the five years since the office was stood up in 2005, and this unfortunate man or woman will also supposedly integrate and manage the 16 intelligence satraps. As we and other critics predicted at the time, however, the DNI has merely become another bureaucracy layered on top of the other bureaucracies, with some 1,500 employees often doing what others elsewhere also do. In a bureaucratic classic, Mr. Blair and CIA chief Leon Panetta clashed last year over naming intelligence chiefs abroad. Mr. Panetta won.
As good an illustration as any of the dysfunction is the report that nominally precipitated the former Admiral's pink slip. The Senate Intelligence Committee identified 14 gaps that might have prevented Umar Farouk Abdulmutallab from boarding his Christmas Day flight, one being that "no one entity within the IC [intelligence community] has sole responsibility nor bears the entire burden of either connecting dots or accountability for failing to do so." Except that isn't a Senate conclusion: It comes from the official statement the National Counterterrorism Center—the only agency Mr. Blair controlled day to day—gave to investigators.
The Senate indictment is damning, though its Senate authors unfairly exempt themselves. The 2004 bill that putatively made the Counterterrorism Center the government's one responsible, accountable entity—a kind of antiterror CEO—passed the House 336-75 and the Senate 89-2, rushed along by the cheerleading of the 9/11 Commission. Mr. Blair is another memento of how pointless if not detrimental this reshuffling of the bureaucratic deck chairs was for the realities of the w— on t——.
Plotting a Democratic Comeback - Pennsylvania's governor, Ed Rendell, says the tea parties will throw up flawed GOP candidates like Rand Paul and that his party should run on the success of the stimulus.
http://online.wsj.com/article/SB10001424052748704852004575258261059419530.html
Lessons From a Torpedo - Placating Kim Jong Il doesn't change North Korea's behavior.
http://online.wsj.com/article/SB10001424052748703691804575254583245786418.html
Remarks At The Council On Foreign Relations, by James B. Steinberg, Deputy Secretary of State. Washington, DC, May 19, 2010
http://www.state.gov/s/d/2010/142120.htm
Five Questions for Pres. Obama on Fuel Economy Standards
http://www.instituteforenergyresearch.org/2010/05/21/five-questions-for-pres-obama-on-fuel-economy-standards/
Travel Diary: Secretary Clinton Op-Ed on U.S.-China Achievements Beyond Expo
http://blogs.state.gov/index.php/site/entry/travel_diary_clinton_op-ed_us_china
Gross National Debt: $13 trillion and counting
http://rpc.senate.gov/public/_files/debtchartsv2.pdf
Born to Veto - Christie saves New Jersey from a tax increase
http://online.wsj.com/article/SB10001424052748704852004575258751835748206.html
"New Jersey does not have a tax problem; New Jersey has a spending and size of government problem."
Dennis Blair Departs - Another victim of intelligence reform
http://online.wsj.com/article/SB10001424052748704852004575258382267478018.html
Intelligence disputes are usually murky, though the sacking of Dennis Blair isn't among them. Explanations for the Director of National Intelligence's exit this week range from Mr. Blair's turf wars with the CIA and at the White House to the failure to pre-empt three domestic terror attacks, two of which failed out of blind luck. But Mr. Blair is really a casualty of the failed "intelligence reform" of the last decade.
Mr. Blair's successor will be the fourth DNI in the five years since the office was stood up in 2005, and this unfortunate man or woman will also supposedly integrate and manage the 16 intelligence satraps. As we and other critics predicted at the time, however, the DNI has merely become another bureaucracy layered on top of the other bureaucracies, with some 1,500 employees often doing what others elsewhere also do. In a bureaucratic classic, Mr. Blair and CIA chief Leon Panetta clashed last year over naming intelligence chiefs abroad. Mr. Panetta won.
As good an illustration as any of the dysfunction is the report that nominally precipitated the former Admiral's pink slip. The Senate Intelligence Committee identified 14 gaps that might have prevented Umar Farouk Abdulmutallab from boarding his Christmas Day flight, one being that "no one entity within the IC [intelligence community] has sole responsibility nor bears the entire burden of either connecting dots or accountability for failing to do so." Except that isn't a Senate conclusion: It comes from the official statement the National Counterterrorism Center—the only agency Mr. Blair controlled day to day—gave to investigators.
The Senate indictment is damning, though its Senate authors unfairly exempt themselves. The 2004 bill that putatively made the Counterterrorism Center the government's one responsible, accountable entity—a kind of antiterror CEO—passed the House 336-75 and the Senate 89-2, rushed along by the cheerleading of the 9/11 Commission. Mr. Blair is another memento of how pointless if not detrimental this reshuffling of the bureaucratic deck chairs was for the realities of the w— on t——.
Plotting a Democratic Comeback - Pennsylvania's governor, Ed Rendell, says the tea parties will throw up flawed GOP candidates like Rand Paul and that his party should run on the success of the stimulus.
http://online.wsj.com/article/SB10001424052748704852004575258261059419530.html
Lessons From a Torpedo - Placating Kim Jong Il doesn't change North Korea's behavior.
http://online.wsj.com/article/SB10001424052748703691804575254583245786418.html
Saturday, May 22, 2010
Press Briefing
May 22, 2010
Confronting a Resilient al-Qa'ida: The United States Strategic Response
Daniel Benjamin, Coordinator, Office of the Coordinator for Counterterrorism, The Washington Institute for Near East Policy. Washington, DC, May 21, 2010
http://www.state.gov/s/ct/rls/rm/2010/142110.htm
New nuclear deal is an Iranian triumph
http://www.thejc.com/news/world-news/32004/analysis-new-nuclear-deal-iranian-triumph
No More Crying ’Spanish Flu’. By Michael Fumento. Forbes.com, May 20, 2010
http://fumento.com/swineflu/spanish_flu.html
Every Day Is Trade Day. Dipnote, the US State Dept Blog
http://blogs.state.gov/index.php/site/entry/trade_day
Raising Arizona’s Defense
http://blog.heritage.org/2010/05/21/morning-bell-raising-arizonas-defense/
The Caribbean Basin Security Initiative: A Shared Regional Security Partnership
http://www.state.gov/r/pa/scp/fs/2010/142088.htm
Dismissing the Black Panthers and the Professionals at Justice
http://blog.heritage.org/2010/05/20/dismissing-the-black-panthers-and-the-professionals-at-justice
The Message to the U.S. in Germany’s Ascension
http://blog.heritage.org/2010/05/20/the-message-to-the-u-s-in-germany%E2%80%99s-ascension/
China Under Pressure - Chinese school stabbings. By Michelle Tsai
http://www.slate.com/id/2254176
After car accidents, for instance, drivers usually sort things out between themselves, figuring out how much money one owes the other and exchanging cash more or less on the spot. Most conflicts are settled peacefully in this way, but occasionally things get violent, and then an "eye for an eye" philosophy prevails.
Confronting a Resilient al-Qa'ida: The United States Strategic Response
Daniel Benjamin, Coordinator, Office of the Coordinator for Counterterrorism, The Washington Institute for Near East Policy. Washington, DC, May 21, 2010
http://www.state.gov/s/ct/rls/rm/2010/142110.htm
New nuclear deal is an Iranian triumph
http://www.thejc.com/news/world-news/32004/analysis-new-nuclear-deal-iranian-triumph
No More Crying ’Spanish Flu’. By Michael Fumento. Forbes.com, May 20, 2010
http://fumento.com/swineflu/spanish_flu.html
Every Day Is Trade Day. Dipnote, the US State Dept Blog
http://blogs.state.gov/index.php/site/entry/trade_day
Raising Arizona’s Defense
http://blog.heritage.org/2010/05/21/morning-bell-raising-arizonas-defense/
The Caribbean Basin Security Initiative: A Shared Regional Security Partnership
http://www.state.gov/r/pa/scp/fs/2010/142088.htm
Dismissing the Black Panthers and the Professionals at Justice
http://blog.heritage.org/2010/05/20/dismissing-the-black-panthers-and-the-professionals-at-justice
The Message to the U.S. in Germany’s Ascension
http://blog.heritage.org/2010/05/20/the-message-to-the-u-s-in-germany%E2%80%99s-ascension/
China Under Pressure - Chinese school stabbings. By Michelle Tsai
http://www.slate.com/id/2254176
After car accidents, for instance, drivers usually sort things out between themselves, figuring out how much money one owes the other and exchanging cash more or less on the spot. Most conflicts are settled peacefully in this way, but occasionally things get violent, and then an "eye for an eye" philosophy prevails.
Thursday, May 20, 2010
Press Briefing
May 21, 2010
United States reaffirms commitment to addressing global hunger and food security through Feed the Future initiative
http://www.usaid.gov/press/releases/2010/pr100520.html
NGO's BPA Report Intended to Frighten, Not Enlighten. By Robert L. Brent MD, PhD, D.Sc
http://www.acsh.org/factsfears/newsID.1445/news_detail.asp
The Dangerous Illusion of 'Nuclear Zero' - Why even speculate about a nuclear posture that would require world peace as a precondition?
http://www.bipartisanalliance.com/2010/05/dangerous-illusion-of-nuclear-zero-why.html
Timor-Leste Restoration of Independence Day
http://www.state.gov/secretary/rm/2010/05/142046.htm
The Never Ending Renewable Energy Handout: Senate Committee seeks to make renewable energy handout “permanent”
http://www.instituteforenergyresearch.org/2010/05/20/the-never-ending-renewable-energy-handout/
Privatization Can Help Greece - Keynesians warned against Thatcher's policies in 1981. They were proven wrong
http://www.bipartisanalliance.com/2010/05/privatization-can-help-greece.html
The Madness of Cotton - The feds want U.S. taxpayers to subsidize Brazilian farmers
http://www.bipartisanalliance.com/2010/05/madness-of-cotton-feds-want-us.html
Business Executives for National Security, Annual Policy Forum. Speech by Ellen Tauscher, Under Secretary for Arms Control and International Security
Washington, DC, May 19, 2010
http://www.state.gov/t/us/142005.htm
Goodbye, Employer-Sponsored Insurance - Companies are discovering that it's cheaper to pay fines to the government than to cover workers
http://online.wsj.com/article/SB10001424052748703880304575236602943319816.html
The Bankrupting of America - We have a ruinous collaboration of elected officials and unionized public workers
http://online.wsj.com/article/SB10001424052748703315404575250610059801620.html
State of Metropolitan America
http://www.brookings.edu/metro/StateOfMetroAmerica.aspx
The Fear Returns - Europe's policy panic is feeding another financial panic
http://online.wsj.com/article/SB10001424052748703559004575256843791551332.html
Estonia's Lessons for Greece - Europe's problem isn't the euro, but the failed fiscal policies of its political class
http://online.wsj.com/article/SB10001424052748703559004575256690853453952.html
United States to Assist Palestinian Refugees in Syria
http://www.state.gov/r/pa/prs/ps/2010/05/141996.htm
A Dose of Reality: Fact-Checking the White House on Health Insurance Policy
http://fixhealthcarepolicy.com/reality/
The White House Blog: Wall Street Reform and Sending Remittances
http://www.whitehouse.gov/blog/2010/05/20/wall-street-reform-and-sending-money-home
Junk Economics: A Closer Look at Those Shocking Health Insurance Profits
http://fixhealthcarepolicy.com/in-the-news/junk-economics-a-closer-look-at-those-shocking-health-insurance-profits
House Republicans Push Back Against Job-Killing Value-Added Tax
http://republicanleader.house.gov/blog/?p=884
United States reaffirms commitment to addressing global hunger and food security through Feed the Future initiative
http://www.usaid.gov/press/releases/2010/pr100520.html
NGO's BPA Report Intended to Frighten, Not Enlighten. By Robert L. Brent MD, PhD, D.Sc
http://www.acsh.org/factsfears/newsID.1445/news_detail.asp
The Dangerous Illusion of 'Nuclear Zero' - Why even speculate about a nuclear posture that would require world peace as a precondition?
http://www.bipartisanalliance.com/2010/05/dangerous-illusion-of-nuclear-zero-why.html
Timor-Leste Restoration of Independence Day
http://www.state.gov/secretary/rm/2010/05/142046.htm
The Never Ending Renewable Energy Handout: Senate Committee seeks to make renewable energy handout “permanent”
http://www.instituteforenergyresearch.org/2010/05/20/the-never-ending-renewable-energy-handout/
Privatization Can Help Greece - Keynesians warned against Thatcher's policies in 1981. They were proven wrong
http://www.bipartisanalliance.com/2010/05/privatization-can-help-greece.html
The Madness of Cotton - The feds want U.S. taxpayers to subsidize Brazilian farmers
http://www.bipartisanalliance.com/2010/05/madness-of-cotton-feds-want-us.html
Business Executives for National Security, Annual Policy Forum. Speech by Ellen Tauscher, Under Secretary for Arms Control and International Security
Washington, DC, May 19, 2010
http://www.state.gov/t/us/142005.htm
Goodbye, Employer-Sponsored Insurance - Companies are discovering that it's cheaper to pay fines to the government than to cover workers
http://online.wsj.com/article/SB10001424052748703880304575236602943319816.html
The Bankrupting of America - We have a ruinous collaboration of elected officials and unionized public workers
http://online.wsj.com/article/SB10001424052748703315404575250610059801620.html
State of Metropolitan America
http://www.brookings.edu/metro/StateOfMetroAmerica.aspx
The Fear Returns - Europe's policy panic is feeding another financial panic
http://online.wsj.com/article/SB10001424052748703559004575256843791551332.html
Estonia's Lessons for Greece - Europe's problem isn't the euro, but the failed fiscal policies of its political class
http://online.wsj.com/article/SB10001424052748703559004575256690853453952.html
United States to Assist Palestinian Refugees in Syria
http://www.state.gov/r/pa/prs/ps/2010/05/141996.htm
A Dose of Reality: Fact-Checking the White House on Health Insurance Policy
http://fixhealthcarepolicy.com/reality/
The White House Blog: Wall Street Reform and Sending Remittances
http://www.whitehouse.gov/blog/2010/05/20/wall-street-reform-and-sending-money-home
Junk Economics: A Closer Look at Those Shocking Health Insurance Profits
http://fixhealthcarepolicy.com/in-the-news/junk-economics-a-closer-look-at-those-shocking-health-insurance-profits
House Republicans Push Back Against Job-Killing Value-Added Tax
http://republicanleader.house.gov/blog/?p=884
The Dangerous Illusion of 'Nuclear Zero' - Why even speculate about a nuclear posture that would require world peace as a precondition?
The Dangerous Illusion of 'Nuclear Zero'. By DOUGLAS J. FEITH AND ABRAM N. SHULSKY
Why even speculate about a nuclear posture that would require world peace as a precondition?
WSJ, May 21, 2010
Moving toward "nuclear zero" is a signature theme of this administration. President Barack Obama's vision of a world without nuclear weapons is certainly grand. The problem is that our current policies lack coherence and rest on other-worldly assumptions.
Consider the administration's recently released Nuclear Posture Review (NPR). One of the conditions that would permit the United States and others to give up their nuclear weapons "without risking greater international instability and insecurity" is "the resolution of regional disputes that can motivate rival states to acquire and maintain nuclear weapons." Another condition is not only "verification methods and technologies capable of detecting violations of disarmament obligations," but also "enforcement measures strong and credible enough to deter such violations."
The first condition would require ending the Arab-Israeli conflict, settling the Korean War, resolving Kashmir and the other India-Pakistan disputes, and defusing Iran's tensions with its neighbors and with the U.S. It also means solving any other significant conflicts that might arise.
Verification would be tough, but even if technology could solve the problem, the question remains: What kind of "enforcement measures" do those who drafted the NPR imagine?
As of now, the U.N. Security Council is the only conceivable policing agency and its record is weak. What, for example, did the Security Council do when Iraq violated the Geneva Convention on poison gas in the 1980s, or when North Korea recently violated the Nuclear Non-Proliferation Treaty? There simply are no good grounds for relying on the Security Council's will to enforce treaties.
U.S. efforts to organize sanctions in response to Iran's illegal pursuit of nuclear weapons have been exercises in frustration. The Security Council deal announced on Tuesday falls far short of the "crippling sanctions" the administration had once intended. This experience undermines the credibility of any threat of enforcement measures—even against a state not allied with a veto-wielding Security Council member. And if China, Russia or an ally of either were someday to cheat on the ban, enforcement would be precluded by veto.
Is some kind of "world executive" envisioned to implement, or at least authorize, enforcement measures over objections from major powers? If so, it's hard to see how the U.S. or any other great power would relinquish its sovereign rights to independent action and self-defense.
"Strong enough" enforcement would have to include military measures. Is the idea here a U.N. military force that could fight large wars, as some diplomats proposed when the U.N. Charter was negotiated in the late 1940s? Or would military enforcement be the duty of the strongest state, presumably the U.S.? Only an arrangement verging on world government—an entity that could deploy overwhelming military power against a violator without interference by other powers—could possibly fill the bill.
The administration recognizes that knowledge about physics cannot simply be eradicated. "In a world where nuclear weapons had been eliminated but nuclear knowledge remains, having a strong infrastructure and base of human capital would be essential to deterring cheating or breakout, or, if deterrence failed, responding in a timely fashion," the NPR says. So even in a world of nuclear zero, the U.S. would have to remain able to rebuild its nuclear capability in a "timely" fashion. Presumably other nuclear-capable states would conclude the same for themselves.
In the event of a serious crisis, countries would race to reconstitute their nuclear arsenals. The winner would enjoy a fleeting nuclear monopoly, and then come under severe pressure to use its nuclear weapons decisively. The resulting instability could make the competitive mobilizations of the European armies in 1914 look like a walk in the park.
So what are the benefits of endorsing nuclear zero as America's goal? Proponents argue that embracing nuclear zero will increase cooperation from other countries against proliferators like North Korea and Iran. But what is this hope based on? America's embracing nuclear zero may take away a debating point from countries unwilling to cooperate with us, but it does nothing to change their interests. The deal Brazil and Turkey cut with Iran this week shows that Mr. Obama's embrace of nuclear zero does not translate into international cooperation where it really matters.
Endorsing nuclear zero makes it even harder for the U.S. government to maintain the nuclear infrastructure that the president says is essential for our security. Why should a bright young scientist or engineer enter a dying field—especially when innovation is discouraged by support for a permanent ban on weapons testing, and by the renunciation of new weapons development? The NPR states that the administration aims to "enhance recruitment and retention" of technical personnel, but its policies seem sure to drive them away.
The NPR stresses that the world's nonproliferation regime requires a strong U.S. nuclear umbrella. Yet the proposal can hardly increase confidence in America's determination to maintain its longstanding global role. U.S. friends overseas worry about their security in a world where America seems determined to shed its burdens as a nuclear power. This will likely spur nuclear proliferation—not discourage it.
President Obama has constructed U.S. nuclear-weapons policy on the assumption that it is helpful to set our goal as the complete abolition of such weapons. But the NPR makes clear that not even the Obama administration can really imagine a world without nuclear weapons. Meanwhile, the president's visionary notions appear likelier to undermine rather than further his own goals of nuclear nonproliferation and stability.
Mr. Feith, a former under secretary of defense for policy, is a senior fellow at the Hudson Institute and the author of "War and Decision: Inside the Pentagon at the Dawn of the War on Terrorism" (Harper, 2008). Mr. Shulsky is a senior fellow at the Hudson Institute and was director of strategic arms control policy at the Department of Defense from 1982 to 1985.
Why even speculate about a nuclear posture that would require world peace as a precondition?
WSJ, May 21, 2010
Moving toward "nuclear zero" is a signature theme of this administration. President Barack Obama's vision of a world without nuclear weapons is certainly grand. The problem is that our current policies lack coherence and rest on other-worldly assumptions.
Consider the administration's recently released Nuclear Posture Review (NPR). One of the conditions that would permit the United States and others to give up their nuclear weapons "without risking greater international instability and insecurity" is "the resolution of regional disputes that can motivate rival states to acquire and maintain nuclear weapons." Another condition is not only "verification methods and technologies capable of detecting violations of disarmament obligations," but also "enforcement measures strong and credible enough to deter such violations."
The first condition would require ending the Arab-Israeli conflict, settling the Korean War, resolving Kashmir and the other India-Pakistan disputes, and defusing Iran's tensions with its neighbors and with the U.S. It also means solving any other significant conflicts that might arise.
Verification would be tough, but even if technology could solve the problem, the question remains: What kind of "enforcement measures" do those who drafted the NPR imagine?
As of now, the U.N. Security Council is the only conceivable policing agency and its record is weak. What, for example, did the Security Council do when Iraq violated the Geneva Convention on poison gas in the 1980s, or when North Korea recently violated the Nuclear Non-Proliferation Treaty? There simply are no good grounds for relying on the Security Council's will to enforce treaties.
U.S. efforts to organize sanctions in response to Iran's illegal pursuit of nuclear weapons have been exercises in frustration. The Security Council deal announced on Tuesday falls far short of the "crippling sanctions" the administration had once intended. This experience undermines the credibility of any threat of enforcement measures—even against a state not allied with a veto-wielding Security Council member. And if China, Russia or an ally of either were someday to cheat on the ban, enforcement would be precluded by veto.
Is some kind of "world executive" envisioned to implement, or at least authorize, enforcement measures over objections from major powers? If so, it's hard to see how the U.S. or any other great power would relinquish its sovereign rights to independent action and self-defense.
"Strong enough" enforcement would have to include military measures. Is the idea here a U.N. military force that could fight large wars, as some diplomats proposed when the U.N. Charter was negotiated in the late 1940s? Or would military enforcement be the duty of the strongest state, presumably the U.S.? Only an arrangement verging on world government—an entity that could deploy overwhelming military power against a violator without interference by other powers—could possibly fill the bill.
The administration recognizes that knowledge about physics cannot simply be eradicated. "In a world where nuclear weapons had been eliminated but nuclear knowledge remains, having a strong infrastructure and base of human capital would be essential to deterring cheating or breakout, or, if deterrence failed, responding in a timely fashion," the NPR says. So even in a world of nuclear zero, the U.S. would have to remain able to rebuild its nuclear capability in a "timely" fashion. Presumably other nuclear-capable states would conclude the same for themselves.
In the event of a serious crisis, countries would race to reconstitute their nuclear arsenals. The winner would enjoy a fleeting nuclear monopoly, and then come under severe pressure to use its nuclear weapons decisively. The resulting instability could make the competitive mobilizations of the European armies in 1914 look like a walk in the park.
So what are the benefits of endorsing nuclear zero as America's goal? Proponents argue that embracing nuclear zero will increase cooperation from other countries against proliferators like North Korea and Iran. But what is this hope based on? America's embracing nuclear zero may take away a debating point from countries unwilling to cooperate with us, but it does nothing to change their interests. The deal Brazil and Turkey cut with Iran this week shows that Mr. Obama's embrace of nuclear zero does not translate into international cooperation where it really matters.
Endorsing nuclear zero makes it even harder for the U.S. government to maintain the nuclear infrastructure that the president says is essential for our security. Why should a bright young scientist or engineer enter a dying field—especially when innovation is discouraged by support for a permanent ban on weapons testing, and by the renunciation of new weapons development? The NPR states that the administration aims to "enhance recruitment and retention" of technical personnel, but its policies seem sure to drive them away.
The NPR stresses that the world's nonproliferation regime requires a strong U.S. nuclear umbrella. Yet the proposal can hardly increase confidence in America's determination to maintain its longstanding global role. U.S. friends overseas worry about their security in a world where America seems determined to shed its burdens as a nuclear power. This will likely spur nuclear proliferation—not discourage it.
President Obama has constructed U.S. nuclear-weapons policy on the assumption that it is helpful to set our goal as the complete abolition of such weapons. But the NPR makes clear that not even the Obama administration can really imagine a world without nuclear weapons. Meanwhile, the president's visionary notions appear likelier to undermine rather than further his own goals of nuclear nonproliferation and stability.
Mr. Feith, a former under secretary of defense for policy, is a senior fellow at the Hudson Institute and the author of "War and Decision: Inside the Pentagon at the Dawn of the War on Terrorism" (Harper, 2008). Mr. Shulsky is a senior fellow at the Hudson Institute and was director of strategic arms control policy at the Department of Defense from 1982 to 1985.
Privatization Can Help Greece - Keynesians warned against Thatcher's policies in 1981. They were proven wrong.
Privatization Can Help Greece. By ALLAN H. MELTZER
Keynesians warned against Thatcher's policies in 1981. They were proven wrong.
WSJ, May 21, 2010
What could the leaders of the International Monetary Fund and the European Union have had in mind when they agreed to lend Greece more than $100 billion in exchange for promises to restore stability? After initial relief, markets soon recognized that the program was not sufficient and not likely to be maintained.
When countries joined the common European currency, they gave up the right to use monetary policy to inflate or devalue. That left wage reduction and fiscal restraint as the only recourse in a crisis. With Greece's money wages and government debt too high, the IMF-EU relief effort does not add any new options. Instead it delays default by offering yet more debt as a solution to too much debt, and it gives the Greek government more time to do what it has been unable to do—lower public-sector wages by about 20% and reduce the budget deficit by 10% of GDP.
This only prolongs uncertainty and offers debt-holders a promise by the Greek government that will be hard to honor. No wonder markets are skeptical.
What would have worked? Much of Greece's industry and commerce, including much of the tourist industry, is owned by the state. It should be sold with the proceeds used to reduce public debt. That would make the remainder of the debt more sustainable and transfer workers to the private sector where competitive pressures for lower wages and increased productivity would more closely align employment costs and reality. If the socialist government returned more of the economy to the private sector, Greece would have a better chance of economic recovery.
Much of the Greek economy not owned by the state is "underground," in the so-called informal sector, where wages and incomes adjust quickly to the market. Greece also should offer an amnesty for unpaid back taxes to those who join the legal sector.
If after selling assets the remaining debt is still unsustainable, Greece will have to default (it will be called restructuring, but it is nonetheless default). To lessen the pain from losses borne by Greek and foreign lenders following default, the country should commit to fiscal policies monitored by the European Union. But it should reject the IMF-EU loan. More debt, even subsidized debt, is not the right answer.
The main benefit to Europe of the IMF-EU program is that the Spanish government has agreed to additional reductions in current and future spending. This was a difficult and unpopular political decision given the very high level of unemployment in Spain. A Spanish default would force France and Germany to choose either massive help to Spain or bailing out the losses on Spanish debt at German and French banks. German banks hold $240 billion of Spanish debt but only $43 billion of Greek debt.
Keynesians who think reducing public spending during a recession is a disastrous error should recall that they warned British Prime Minister Margaret Thatcher in 1981 that Britain would never recover if she continued with her tight fiscal and monetary policy during Britain's deep recession. Mrs. Thatcher declined to take their advice. Expectations about Britain's future changed for the better, and a long, productive recovery began soon after.
Greece's government should take heart from her example. The new government in Britain might remember this as well. And so might the Keynesians in the Obama administration.
Mr. Meltzer is a professor of economics at Carnegie Mellon University, the author of "A History of the Federal Reserve" (University of Chicago Press, 2004), and a visiting scholar at the American Enterprise Institute.
Keynesians warned against Thatcher's policies in 1981. They were proven wrong.
WSJ, May 21, 2010
What could the leaders of the International Monetary Fund and the European Union have had in mind when they agreed to lend Greece more than $100 billion in exchange for promises to restore stability? After initial relief, markets soon recognized that the program was not sufficient and not likely to be maintained.
When countries joined the common European currency, they gave up the right to use monetary policy to inflate or devalue. That left wage reduction and fiscal restraint as the only recourse in a crisis. With Greece's money wages and government debt too high, the IMF-EU relief effort does not add any new options. Instead it delays default by offering yet more debt as a solution to too much debt, and it gives the Greek government more time to do what it has been unable to do—lower public-sector wages by about 20% and reduce the budget deficit by 10% of GDP.
This only prolongs uncertainty and offers debt-holders a promise by the Greek government that will be hard to honor. No wonder markets are skeptical.
What would have worked? Much of Greece's industry and commerce, including much of the tourist industry, is owned by the state. It should be sold with the proceeds used to reduce public debt. That would make the remainder of the debt more sustainable and transfer workers to the private sector where competitive pressures for lower wages and increased productivity would more closely align employment costs and reality. If the socialist government returned more of the economy to the private sector, Greece would have a better chance of economic recovery.
Much of the Greek economy not owned by the state is "underground," in the so-called informal sector, where wages and incomes adjust quickly to the market. Greece also should offer an amnesty for unpaid back taxes to those who join the legal sector.
If after selling assets the remaining debt is still unsustainable, Greece will have to default (it will be called restructuring, but it is nonetheless default). To lessen the pain from losses borne by Greek and foreign lenders following default, the country should commit to fiscal policies monitored by the European Union. But it should reject the IMF-EU loan. More debt, even subsidized debt, is not the right answer.
The main benefit to Europe of the IMF-EU program is that the Spanish government has agreed to additional reductions in current and future spending. This was a difficult and unpopular political decision given the very high level of unemployment in Spain. A Spanish default would force France and Germany to choose either massive help to Spain or bailing out the losses on Spanish debt at German and French banks. German banks hold $240 billion of Spanish debt but only $43 billion of Greek debt.
Keynesians who think reducing public spending during a recession is a disastrous error should recall that they warned British Prime Minister Margaret Thatcher in 1981 that Britain would never recover if she continued with her tight fiscal and monetary policy during Britain's deep recession. Mrs. Thatcher declined to take their advice. Expectations about Britain's future changed for the better, and a long, productive recovery began soon after.
Greece's government should take heart from her example. The new government in Britain might remember this as well. And so might the Keynesians in the Obama administration.
Mr. Meltzer is a professor of economics at Carnegie Mellon University, the author of "A History of the Federal Reserve" (University of Chicago Press, 2004), and a visiting scholar at the American Enterprise Institute.
The Madness of Cotton - The feds want U.S. taxpayers to subsidize Brazilian farmers
The Madness of Cotton. WSJ Editorial
The feds want U.S. taxpayers to subsidize Brazilian farmers
WSJ, May 21, 2010
U.S. cotton farmers took in almost $2.3 billion dollars in government subsidies in 2009, and the top 10% of the recipients got 70% of the cash. Now Uncle Sam is getting ready to ask taxpayers to foot the bill for another $147.3 million a year for a new round of cotton payments, this time to Brazilian growers.
We realize that in today's Washington this is a rounding error. But the reason for the new payments to foreign farmers deserves attention. If it becomes a habit, it is unlikely to end with cotton.
Here's the problem: The World Trade Organization has ruled that subsidies to American cotton growers under the 2008 farm bill are a violation of U.S. trading commitments. The U.S. lost its final appeal in the case in August 2009 and the WTO gave Brazil the right to retaliate.
Brazil responded by drafting a retaliation list threatening tariffs on more than 100 U.S. exports, including autos, pharmaceuticals, medical equipment, electronics, textiles, wheat, fruits, nuts and cotton. The exports are valued at about $1 billion a year, and the tariffs would go as high as 100%. Brazil is also considering sanctions against U.S. intellectual property, including compulsory licensing in pharmaceuticals, music and software.
The Obama Administration appreciates the damage this retaliation would cause, so in April it sent Deputy U.S. Trade Representative Miriam Sapiro to negotiate. She came back with a promise from Brazil to postpone the sanctions for 60 days while it considers a U.S. offer to—get this—let American taxpayers subsidize Brazilian cotton growers.
That's right. Rather than reduce the U.S. subsidies to American cotton farmers that are the cause of the trade fight, the Administration is proposing that U.S. taxpayers also compensate Brazilian cotton farmers for the harm done by the U.S. subsidies. Thus the absurd U.S. cotton program would dip into the Commodity Credit Corporation to pay what is a bribe to Brazil so it won't retaliate.
Talk about taxpayer double jeopardy. As Senator Richard Lugar (R., Ind.) said recently, the commodity credit program was established to assist U.S. agriculture, "not to pay restitution to foreign farmers who won a trade complaint against a U.S. farm subsidy program."
Mr. Lugar wants the subsidies to U.S. farmers cut by the amount that will have to be sent to Brazil. He adds that a better option would be to take on the trade-distortions of the cotton program. "I am prepared to introduce legislation to achieve these immediate reforms," he wrote in an April 30 letter to President Obama.
This is probably tilting at political windmills, since Mr. Obama has shown no appetite for trade promotion, much less confronting a cotton lobby supported by such Democrats as Arkansas Senator Blanche Lincoln. But we're glad to see that at least Mr. Lugar is willing to call out the absurdity of U.S. taxpayers subsidizing foreign farmers to satisfy the greed of a few American cotton growers.
The feds want U.S. taxpayers to subsidize Brazilian farmers
WSJ, May 21, 2010
U.S. cotton farmers took in almost $2.3 billion dollars in government subsidies in 2009, and the top 10% of the recipients got 70% of the cash. Now Uncle Sam is getting ready to ask taxpayers to foot the bill for another $147.3 million a year for a new round of cotton payments, this time to Brazilian growers.
We realize that in today's Washington this is a rounding error. But the reason for the new payments to foreign farmers deserves attention. If it becomes a habit, it is unlikely to end with cotton.
Here's the problem: The World Trade Organization has ruled that subsidies to American cotton growers under the 2008 farm bill are a violation of U.S. trading commitments. The U.S. lost its final appeal in the case in August 2009 and the WTO gave Brazil the right to retaliate.
Brazil responded by drafting a retaliation list threatening tariffs on more than 100 U.S. exports, including autos, pharmaceuticals, medical equipment, electronics, textiles, wheat, fruits, nuts and cotton. The exports are valued at about $1 billion a year, and the tariffs would go as high as 100%. Brazil is also considering sanctions against U.S. intellectual property, including compulsory licensing in pharmaceuticals, music and software.
The Obama Administration appreciates the damage this retaliation would cause, so in April it sent Deputy U.S. Trade Representative Miriam Sapiro to negotiate. She came back with a promise from Brazil to postpone the sanctions for 60 days while it considers a U.S. offer to—get this—let American taxpayers subsidize Brazilian cotton growers.
That's right. Rather than reduce the U.S. subsidies to American cotton farmers that are the cause of the trade fight, the Administration is proposing that U.S. taxpayers also compensate Brazilian cotton farmers for the harm done by the U.S. subsidies. Thus the absurd U.S. cotton program would dip into the Commodity Credit Corporation to pay what is a bribe to Brazil so it won't retaliate.
Talk about taxpayer double jeopardy. As Senator Richard Lugar (R., Ind.) said recently, the commodity credit program was established to assist U.S. agriculture, "not to pay restitution to foreign farmers who won a trade complaint against a U.S. farm subsidy program."
Mr. Lugar wants the subsidies to U.S. farmers cut by the amount that will have to be sent to Brazil. He adds that a better option would be to take on the trade-distortions of the cotton program. "I am prepared to introduce legislation to achieve these immediate reforms," he wrote in an April 30 letter to President Obama.
This is probably tilting at political windmills, since Mr. Obama has shown no appetite for trade promotion, much less confronting a cotton lobby supported by such Democrats as Arkansas Senator Blanche Lincoln. But we're glad to see that at least Mr. Lugar is willing to call out the absurdity of U.S. taxpayers subsidizing foreign farmers to satisfy the greed of a few American cotton growers.
Press Briefing
May 20, 2010
The Conference Room That Re-Arranges Itself
http://spectrum.ieee.org/automaton/robotics/robotics-software/the-conference-room-that-rearranges-itself
Scientists Create First Synthetic Cell, Opening New Era in Biology
http://digs.by/dwFN8r
Our Global Challenges: Improving the Resources Trade. By Robert D. Hormats. Under Secretary for Economic, Energy and Agricultural Affairs
CSIS-University of Miami Council on Foreign Relations Roundtable. Washington, DC, May 18, 2010
http://www.state.gov/e/rls/rmk/2010/141987.htm
The Tax Cuts Didn't Cause the Budget Deficit
http://www.heritage.org/Research/Commentary/2010/05/The-Tax-Cuts-Didnt-Cause-the-Budget-Deficit
Remarks by President Obama at Official Arrival Ceremony
http://www.whitehouse.gov/the-press-office/remarks-president-obama-official-arrival-ceremony
Dodd Bill is Just the Beginning of 'Too Big to Fail'
http://blog.heritage.org/2010/05/20/morning-bell-dodd-bill-is-just-the-beginning-of-too-big-to-fail
United States-Mexico Security Partnership: Progress and Impact
http://www.state.gov/r/pa/prs/ps/2010/05/142019.htm
How About a Good Catholic Story? - Cristo Rey students work hard inside and outside the classroom
http://atheistsforchristianism.blogspot.com/2010/05/cristo-rey-network-students-work-hard.html
Public Schools Need a Bailout - Washington didn't let Wall Street fail. Why should we do less for our kids? By Randi Weingarten, president, American Federation of
Teachers
http://online.wsj.com/article/SB10001424052748703957904575252760030285560.html
The Reduced Credit Act - Seventeen Senate Republicans vote for price controls
http://online.wsj.com/article/SB10001424052748703315404575250563499231670.html
Germany Shoots the Messengers - First thing we do, let's kill all the short sellers
http://online.wsj.com/article/SB10001424052748703691804575253994183448372.html
Deal with Fannie and Freddie Now or We'll Pay Later
http://www.heritage.org/Research/Commentary/2010/05/Deal-with-Fannie-and-Freddie-Now-or-Well-Pay-Later
The Conference Room That Re-Arranges Itself
http://spectrum.ieee.org/automaton/robotics/robotics-software/the-conference-room-that-rearranges-itself
Scientists Create First Synthetic Cell, Opening New Era in Biology
http://digs.by/dwFN8r
Our Global Challenges: Improving the Resources Trade. By Robert D. Hormats. Under Secretary for Economic, Energy and Agricultural Affairs
CSIS-University of Miami Council on Foreign Relations Roundtable. Washington, DC, May 18, 2010
http://www.state.gov/e/rls/rmk/2010/141987.htm
The Tax Cuts Didn't Cause the Budget Deficit
http://www.heritage.org/Research/Commentary/2010/05/The-Tax-Cuts-Didnt-Cause-the-Budget-Deficit
Remarks by President Obama at Official Arrival Ceremony
http://www.whitehouse.gov/the-press-office/remarks-president-obama-official-arrival-ceremony
Dodd Bill is Just the Beginning of 'Too Big to Fail'
http://blog.heritage.org/2010/05/20/morning-bell-dodd-bill-is-just-the-beginning-of-too-big-to-fail
United States-Mexico Security Partnership: Progress and Impact
http://www.state.gov/r/pa/prs/ps/2010/05/142019.htm
How About a Good Catholic Story? - Cristo Rey students work hard inside and outside the classroom
http://atheistsforchristianism.blogspot.com/2010/05/cristo-rey-network-students-work-hard.html
Public Schools Need a Bailout - Washington didn't let Wall Street fail. Why should we do less for our kids? By Randi Weingarten, president, American Federation of
Teachers
http://online.wsj.com/article/SB10001424052748703957904575252760030285560.html
The Reduced Credit Act - Seventeen Senate Republicans vote for price controls
http://online.wsj.com/article/SB10001424052748703315404575250563499231670.html
Germany Shoots the Messengers - First thing we do, let's kill all the short sellers
http://online.wsj.com/article/SB10001424052748703691804575253994183448372.html
Deal with Fannie and Freddie Now or We'll Pay Later
http://www.heritage.org/Research/Commentary/2010/05/Deal-with-Fannie-and-Freddie-Now-or-Well-Pay-Later
Tuesday, May 18, 2010
The 'Disclose' Act would make election law even more incomprehensible and subject to selective enforcement for political gain
Chuck Schumer vs. Free Speech. By Joan Aikens, Lee Ann Elliott, Thomas Josefiak, David Mason, Bradley Smith, Hans A. von Spakovsky, Michael Toner and Darryl R. Wold
The 'Disclose' Act would make election law even more incomprehensible and subject to selective enforcement for political gain.
WSJ, May 19, 2010
Editor's note: The following article is co-authored by former Federal Election Commissioners Joan Aikens, Lee Ann Elliott, Thomas Josefiak, David Mason, Bradley Smith, Hans A. von Spakovsky, Michael Toner and Darryl R. Wold:
As former commissioners on the Federal Election Commission with almost 75 years of combined experience, we believe that the bill proposed on April 30 by Sen. Chuck Schumer and Rep. Chris Van Hollen to "blunt" the Supreme Court's decision in Citizens United v. FEC is unnecessary, partially duplicative of existing law, and severely burdensome to the right to engage in political speech and advocacy.
Moreover, the Democracy Is Strengthened by Casting Light On Spending in Elections Act, or Disclose Act, abandons the longstanding policy of treating unions and businesses equally, suggesting partisan motives that undermine respect for campaign finance laws.
At least one of us served on the FEC at all times from its inception in 1975 through August 2008. We are well aware of the practical difficulties involved in enforcing the overly complex Federal Election Campaign Act and the problems posed by additional laws that curtail the ability of Americans to participate in the political process.
As we noted in our amicus brief supporting Citizens United, the FEC now has regulations for 33 types of contributions and speech and 71 different types of speakers. Regardless of the abstract merit of the various arguments for and against limits on political contributions and spending, this very complexity raises serious concerns about whether the law can be enforced consistent with the First Amendment.
Those regulatory burdens often fall hardest not on large-scale players in the political world but on spontaneous grass-roots movements, upstart, low-budget campaigns, and unwitting volunteers. Violating the law by engaging in forbidden political speech can land you in a federal prison, a very un-American notion. The Disclose Act exacerbates many of these problems and is a blatant attempt by its sponsors to do indirectly, through excessively onerous regulatory requirements, what the Supreme Court told Congress it cannot do directly—restrict political speech.
Perhaps the most striking thing about the Disclose Act is that, while the Supreme Court overturned limits on spending by both corporations and unions, Disclose seeks to reimpose them only on corporations. The FEC must constantly fight to overcome the perception that the law is merely a partisan tool of dominant political interests. Failure to maintain an evenhanded approach towards unions and corporations threatens public confidence in the integrity of the electoral system.
For example, while the Disclose Act prohibits any corporation with a federal contact of $50,000 or more from making independent expenditures or electioneering communications, no such prohibition applies to unions. This $50,000 trigger is so low it would exclude thousands of corporations from engaging in constitutionally protected political speech, the very core of the First Amendment. Yet public employee unions negotiate directly with the government for benefits many times the value of contracts that would trigger the corporate ban.
This prohibition is supposedly needed to address concerns that government contractors might use the political process to steer contracts their way; but unions have exactly the same conflict of interest. So do other recipients of federal funds, such as nonprofit organizations that receive federal grants and earmarks. Yet there is no ban on their independent political expenditures.
Disclose also bans expenditures on political advocacy by American corporations with 20% or more foreign ownership, but there is no such ban on unions—such as the Service Employees International Union, or the International Brotherhood of Electrical Workers—that have large numbers of foreign members and foreign nationals as directors.
Existing law already prohibits foreign nationals, including corporations headquartered or incorporated outside of the U.S., from participating in any U.S. election. Thus Disclose does not ban foreign speech but speech by American citizen shareholders of U.S. companies that have some element of foreign ownership, even when those foreigners have no control over the decisions made by the Americans who run the company.
For example, companies such as Verizon Wireless, a Delaware corporation headquartered in New Jersey with 83,000 U.S. employees and 91 million U.S. customers, would be silenced because of the British Vodafone's minority ownership in the corporation. But competing telecommunications companies could spend money to influence elections or issues being debated in Congress.
The new disclosure requirements are unnecessary, duplicating information already available to the public or providing information of low value at a significant cost in reduced clarity for grass-roots political speech. In many 30-second ads, Disclose would require no fewer than six statements as to who is paying for the ad (the current law already requires one such statement). These disclaimers would take up as much as half of every ad.
The Disclose Act also creates new disclosure requirements for nonprofit advocacy groups that speak out. These groups already have to disclose their sponsorship, but Disclose requires them to go further and provide the government with a membership list. This infringes on the First Amendment rights of private associations recognized by the Supreme Court in NAACP v. Alabama. Groups can avoid this only by creating a new type of political action committee called a "campaign related activities account."
The result of these overly complex and unnecessary provisions is to force nonprofits to choose between two options that have each been found unconstitutional by the Supreme Court: Either disclose their members to the government or restrict their political spending to the campaign related activities account. This runs contrary to the explicit holding in Citizens United that corporations (and unions) may engage in political speech using their general treasuries.
These requirements will be especially burdensome to small businesses and grass-roots organizations, which typically lack the resources for compliance. So the end effect of all of this "enhanced disclosure" will be to ensure that only large corporations, unions and advocacy groups can make political expenditures—the exact opposite of what the sponsors claim to desire.
While the Disclose Act does include an exemption for major media corporations, it does not include websites or the Internet, which means the government can regulate (and potentially censor) political dialogue on the Web. Additionally, the law would require any business or organization making political expenditures to create and maintain an extensive, highly sophisticated website with advanced search features to track its political activities.
As a result, small businesses, grass-roots organizations, and union locals that maintain only basic websites would be discouraged from making any expenditures for political advocacy, because doing so would require them to spend thousands of dollars to upgrade their websites and purchase software to report information that is already readily available to the public from the FEC. Large companies and unions could probably meet this requirement, so once again the bill benefits large, institutional players over small businesses and grass-roots organizations.
The Disclose Act's abandonment of the historical matching treatment of unions and corporations will cause a substantial portion of the public to doubt the law's fairness and impartiality. It makes election law even more complex, more incomprehensible to ordinary voters, and more open to subjective enforcement by those seeking partisan gain.
The 'Disclose' Act would make election law even more incomprehensible and subject to selective enforcement for political gain.
WSJ, May 19, 2010
Editor's note: The following article is co-authored by former Federal Election Commissioners Joan Aikens, Lee Ann Elliott, Thomas Josefiak, David Mason, Bradley Smith, Hans A. von Spakovsky, Michael Toner and Darryl R. Wold:
As former commissioners on the Federal Election Commission with almost 75 years of combined experience, we believe that the bill proposed on April 30 by Sen. Chuck Schumer and Rep. Chris Van Hollen to "blunt" the Supreme Court's decision in Citizens United v. FEC is unnecessary, partially duplicative of existing law, and severely burdensome to the right to engage in political speech and advocacy.
Moreover, the Democracy Is Strengthened by Casting Light On Spending in Elections Act, or Disclose Act, abandons the longstanding policy of treating unions and businesses equally, suggesting partisan motives that undermine respect for campaign finance laws.
At least one of us served on the FEC at all times from its inception in 1975 through August 2008. We are well aware of the practical difficulties involved in enforcing the overly complex Federal Election Campaign Act and the problems posed by additional laws that curtail the ability of Americans to participate in the political process.
As we noted in our amicus brief supporting Citizens United, the FEC now has regulations for 33 types of contributions and speech and 71 different types of speakers. Regardless of the abstract merit of the various arguments for and against limits on political contributions and spending, this very complexity raises serious concerns about whether the law can be enforced consistent with the First Amendment.
Those regulatory burdens often fall hardest not on large-scale players in the political world but on spontaneous grass-roots movements, upstart, low-budget campaigns, and unwitting volunteers. Violating the law by engaging in forbidden political speech can land you in a federal prison, a very un-American notion. The Disclose Act exacerbates many of these problems and is a blatant attempt by its sponsors to do indirectly, through excessively onerous regulatory requirements, what the Supreme Court told Congress it cannot do directly—restrict political speech.
Perhaps the most striking thing about the Disclose Act is that, while the Supreme Court overturned limits on spending by both corporations and unions, Disclose seeks to reimpose them only on corporations. The FEC must constantly fight to overcome the perception that the law is merely a partisan tool of dominant political interests. Failure to maintain an evenhanded approach towards unions and corporations threatens public confidence in the integrity of the electoral system.
For example, while the Disclose Act prohibits any corporation with a federal contact of $50,000 or more from making independent expenditures or electioneering communications, no such prohibition applies to unions. This $50,000 trigger is so low it would exclude thousands of corporations from engaging in constitutionally protected political speech, the very core of the First Amendment. Yet public employee unions negotiate directly with the government for benefits many times the value of contracts that would trigger the corporate ban.
This prohibition is supposedly needed to address concerns that government contractors might use the political process to steer contracts their way; but unions have exactly the same conflict of interest. So do other recipients of federal funds, such as nonprofit organizations that receive federal grants and earmarks. Yet there is no ban on their independent political expenditures.
Disclose also bans expenditures on political advocacy by American corporations with 20% or more foreign ownership, but there is no such ban on unions—such as the Service Employees International Union, or the International Brotherhood of Electrical Workers—that have large numbers of foreign members and foreign nationals as directors.
Existing law already prohibits foreign nationals, including corporations headquartered or incorporated outside of the U.S., from participating in any U.S. election. Thus Disclose does not ban foreign speech but speech by American citizen shareholders of U.S. companies that have some element of foreign ownership, even when those foreigners have no control over the decisions made by the Americans who run the company.
For example, companies such as Verizon Wireless, a Delaware corporation headquartered in New Jersey with 83,000 U.S. employees and 91 million U.S. customers, would be silenced because of the British Vodafone's minority ownership in the corporation. But competing telecommunications companies could spend money to influence elections or issues being debated in Congress.
The new disclosure requirements are unnecessary, duplicating information already available to the public or providing information of low value at a significant cost in reduced clarity for grass-roots political speech. In many 30-second ads, Disclose would require no fewer than six statements as to who is paying for the ad (the current law already requires one such statement). These disclaimers would take up as much as half of every ad.
The Disclose Act also creates new disclosure requirements for nonprofit advocacy groups that speak out. These groups already have to disclose their sponsorship, but Disclose requires them to go further and provide the government with a membership list. This infringes on the First Amendment rights of private associations recognized by the Supreme Court in NAACP v. Alabama. Groups can avoid this only by creating a new type of political action committee called a "campaign related activities account."
The result of these overly complex and unnecessary provisions is to force nonprofits to choose between two options that have each been found unconstitutional by the Supreme Court: Either disclose their members to the government or restrict their political spending to the campaign related activities account. This runs contrary to the explicit holding in Citizens United that corporations (and unions) may engage in political speech using their general treasuries.
These requirements will be especially burdensome to small businesses and grass-roots organizations, which typically lack the resources for compliance. So the end effect of all of this "enhanced disclosure" will be to ensure that only large corporations, unions and advocacy groups can make political expenditures—the exact opposite of what the sponsors claim to desire.
While the Disclose Act does include an exemption for major media corporations, it does not include websites or the Internet, which means the government can regulate (and potentially censor) political dialogue on the Web. Additionally, the law would require any business or organization making political expenditures to create and maintain an extensive, highly sophisticated website with advanced search features to track its political activities.
As a result, small businesses, grass-roots organizations, and union locals that maintain only basic websites would be discouraged from making any expenditures for political advocacy, because doing so would require them to spend thousands of dollars to upgrade their websites and purchase software to report information that is already readily available to the public from the FEC. Large companies and unions could probably meet this requirement, so once again the bill benefits large, institutional players over small businesses and grass-roots organizations.
The Disclose Act's abandonment of the historical matching treatment of unions and corporations will cause a substantial portion of the public to doubt the law's fairness and impartiality. It makes election law even more complex, more incomprehensible to ordinary voters, and more open to subjective enforcement by those seeking partisan gain.
Press Briefing
May 19, 2010
The White House Blog: "The Right Thing to Do"
http://www.whitehouse.gov/blog/2010/05/18/right-thing-do
Vanguard's Bailout Warning - The Senate lets regulators pick creditor favorites
http://online.wsj.com/article/SB10001424052748703957904575252671939962604.html
India's Fake Drugs Are a Real Problem - Global trade in counterfeits is huge and penalties are minimal
http://online.wsj.com/article/SB10001424052748703315404575249901511960396.html
A message from the Vice President on Elena Kagan's nomination
http://my.barackobama.com/page/content/bidenforkagan?source=TW
BPA's Missing Link
http://www.acsh.org/factsfears/newsID.1439/news_detail.asp
Background on the President's Events Today in Youngstown, Ohio
http://www.whitehouse.gov/the-press-office/background-presidents-events-today-youngstown-ohio
Hillary at the Buzzer: She avoids a debacle on Iran—for now.
http://online.wsj.com/article/SB10001424052748703957904575252600443502256.html
The Clearinghouse Rescue Plan
http://online.wsj.com/article/SB10001424052748704370704575228500068113796.html
Taxpayers will still be on the hook for risks in derivatives trading
FDA's Bad Blood
http://www.acsh.org/factsfears/newsID.1441/news_detail.asp
Chuck Schumer vs. Free Speech
http://www.bipartisanalliance.com/2010/05/disclose-act-would-make-election-law.html
The 'Disclose' Act would make election law even more incomprehensible and subject to selective enforcement for political gain.
Small Businesses Still Left Empty-Handed
http://blog.heritage.org/2010/05/18/side-effects-small-businesses-still-left-empty-handed
Dealing with Iran, by Ted Galen Carpenter
http://www.cato.org/pub_display.php?pub_id=11810
Akbar Ganji is someone U.S. officials should heed when it comes to policy toward his native Iran. Ganji, a writer and journalist who became the fifth biennial recipient of the Milton Friedman Award for Advancing Liberty on May 13, hasn't just talked the talk when it comes to working to establish a democratic Iran, he has walked the walk far beyond what most people could endure. During the late 1990s, he presented evidence that the mullahs were behind the assassinations of exiled Iranian dissidents and had committed various other outrages. For his efforts, he served six years in prison, much of it in solitary confinement, and suffered tortures that Persians had perfected over the centuries. If there was ever a person who had every right to endorse a U.S.-led campaign to oust the current Iranian regime, Akbar Ganji is that person. And yet he cautions American officials to adopt a very different course.
Climate Change and the Courts. WSJ Editorial
http://online.wsj.com/article/SB10001424052748704635204575242361135307650.html
A curious case of judicial recusal on the Fifth Circuit.
One of the most destructive mass litigation theories ever devised—the climate tort—is working its way through the courts, and now with a troubling twist. To wit, green plaintiffs may have found a way to handpick sympathetic judges.
In the class-action Comer v. Murphy Oil, a dozen Gulf Coast property owners whose homes were damaged by Hurricane Katrina are suing 33 energy companies for the "nuisance" of the carbon emitted when people use their products. The claim is that these emissions allegedly contributed to climate change that allegedly increased global surface air and water temperatures that allegedly caused sea levels to rise and thus allegedly compounded the storm's damage.
Last year, Comer was dismissed by a district judge, who sensibly ruled that the Mississippi residents couldn't trace the harm they suffered to any specific company because global warming is, well, global. But the case was resurrected by a three-judge panel of the Fifth Circuit Court of Appeals—prompting the entire court to rehear the appeal en banc. The full court was expected to affirm the original district court decision, though seven of the 16 judges recused themselves because they held stock in one or more of the companies being sued.
The en banc arguments were scheduled for this month, until the Fifth Circuit announced in April that "new circumstances have arisen that make it necessary for another judge to recuse." That move deprived the panel of a quorum and thus its ability to rehear Comer. No further explanation was offered, but it's likely another judge acquired a financial interest in one of the defendants. Judges have the discretion to disclose in a situation like this but aren't required to do so, and a court spokesman didn't return our call.
The climate tort is gaining a legal toehold in part because any judge with reasonably diversified investments will have some kind of conflict of interest and will therefore be disqualified. Since any energy company—or any business or exhaling person—contributes in some way to carbon emissions, anyone could be sued if the courts allow this theory to move forward. More ominously, plaintiffs can add defendants to the suit for the purposes of targeting judicial recusals and a more favorable hearing, given that federal financial disclosure forms are public information.
In Comer, did one of the more liberal Fifth Circuit judges buy stock specifically to blow up the quorum? That isn't as far-fetched as it sounds. One of the appellate judges who waved a similar suit through the Second Circuit last year, Peter Hall, admitted at a February conference that he doubted these nuisance cases stood much chance of success.
"Expert evidence, which is the kind of thing that will be needed in this case, ultimately, to prove causative action and whether that can be done beyond preponderance of the evidence, certainly remains an open question," Judge Hall said. But he added that the "nuisance action by nuisance action" approach was so burdensome and costly that it was like "a sword of Damocles" hanging over companies that would eventually force the political branches to adopt climate policies.
In other words, these suits are naked political intimidation meant to coerce cap and tax or some other expensive carbon crackdown regardless of what Congress wants. The same judge-shopping strategy could also apply to the Supreme Court, where Samuel Alito and Stephen Breyer hold stock in Comer defendants and Sonia Sotomayor heard the Second Circuit case. If the Comer plaintiffs succeeded in forcing one more Justice to recuse, the High Court would lack a quorum and be left unable to rule on the merits even if it wanted to.
The Fifth Circuit will decide what to do this week, and we hope the judges will find a way to reconstitute their quorum before this damaging legal theory gains any more traction.
United States and Brazil Collaborate on Racial Equality
http://www.state.gov/r/pa/prs/ps/2010/05/141967.htm
The No-Cost Stimulus: A little Sarbox relief, thank you. WSJ Editorial
http://online.wsj.com/article/SB10001424052748703315404575250693201556662.html
Senate Majority Leader Harry Reid wants a floor vote this week on financial regulatory reform, and he should first add at least one provision worthy of the name. Senators Kay Bailey Hutchison (R., Texas) and Mary Landrieu (D., La.) have offered an amendment to spare the smallest public companies from the worst bureaucratic horrors of the 2002 Sarbanes-Oxley law.
Sarbox, the Beltway's previous attempt at financial-regulatory reform, was intended to improve the information investors receive about public companies. The law did nothing to prevent poor disclosure at companies like Lehman Brothers but it did saddle the U.S. economy with billions in unexpected costs. Even the Securities and Exchange Commission, a Sarbox cheerleader, found in a 2009 survey that the average public company pays more than $2 million per year complying with the law's Section 404. The indirect costs may be much greater, as initial public offerings of U.S. companies have never returned to pre-Sarbox levels.
The SEC admits that compliance burdens fall disproportionately on smaller companies. This is one reason the two Senators aim to exempt companies with less than $150 million of shares held by the public from "internal-controls" audits.
These audits are piled on top of the traditional financial audit, and on top of a company's own internal-controls review. The result is that going public in the U.S., once the dream of entrepreneurs world-wide, has for too many company founders become something to avoid. If President Obama is hoping for an unemployment rate below 9%, encouraging these job creators is an obvious step.
Thanks to New Jersey's Republican Scott Garrett and Democrat John Adler, the House has already passed a similar reform. Now the Senate should allow America's most innovative companies to create jobs at no cost to taxpayers.
The White House Blog: Yes, You Can Keep Your Health Plan
http://www.whitehouse.gov/blog/2010/05/18/yes-you-can-keep-your-health-plan
No, You Can't Keep Your Health Plan - Insurers and doctors are already consolidating their businesses in the wake of ObamaCare's passage.
http://online.wsj.com/article/SB10001424052748703315404575250264210294510.html
Statement by President Obama on Oil Liability
http://www.whitehouse.gov/the-press-office/statement-president-obama-oil-liability
The White House Blog: "The Right Thing to Do"
http://www.whitehouse.gov/blog/2010/05/18/right-thing-do
Vanguard's Bailout Warning - The Senate lets regulators pick creditor favorites
http://online.wsj.com/article/SB10001424052748703957904575252671939962604.html
India's Fake Drugs Are a Real Problem - Global trade in counterfeits is huge and penalties are minimal
http://online.wsj.com/article/SB10001424052748703315404575249901511960396.html
A message from the Vice President on Elena Kagan's nomination
http://my.barackobama.com/page/content/bidenforkagan?source=TW
BPA's Missing Link
http://www.acsh.org/factsfears/newsID.1439/news_detail.asp
Background on the President's Events Today in Youngstown, Ohio
http://www.whitehouse.gov/the-press-office/background-presidents-events-today-youngstown-ohio
Hillary at the Buzzer: She avoids a debacle on Iran—for now.
http://online.wsj.com/article/SB10001424052748703957904575252600443502256.html
The Clearinghouse Rescue Plan
http://online.wsj.com/article/SB10001424052748704370704575228500068113796.html
Taxpayers will still be on the hook for risks in derivatives trading
FDA's Bad Blood
http://www.acsh.org/factsfears/newsID.1441/news_detail.asp
Chuck Schumer vs. Free Speech
http://www.bipartisanalliance.com/2010/05/disclose-act-would-make-election-law.html
The 'Disclose' Act would make election law even more incomprehensible and subject to selective enforcement for political gain.
Small Businesses Still Left Empty-Handed
http://blog.heritage.org/2010/05/18/side-effects-small-businesses-still-left-empty-handed
Dealing with Iran, by Ted Galen Carpenter
http://www.cato.org/pub_display.php?pub_id=11810
Akbar Ganji is someone U.S. officials should heed when it comes to policy toward his native Iran. Ganji, a writer and journalist who became the fifth biennial recipient of the Milton Friedman Award for Advancing Liberty on May 13, hasn't just talked the talk when it comes to working to establish a democratic Iran, he has walked the walk far beyond what most people could endure. During the late 1990s, he presented evidence that the mullahs were behind the assassinations of exiled Iranian dissidents and had committed various other outrages. For his efforts, he served six years in prison, much of it in solitary confinement, and suffered tortures that Persians had perfected over the centuries. If there was ever a person who had every right to endorse a U.S.-led campaign to oust the current Iranian regime, Akbar Ganji is that person. And yet he cautions American officials to adopt a very different course.
Climate Change and the Courts. WSJ Editorial
http://online.wsj.com/article/SB10001424052748704635204575242361135307650.html
A curious case of judicial recusal on the Fifth Circuit.
One of the most destructive mass litigation theories ever devised—the climate tort—is working its way through the courts, and now with a troubling twist. To wit, green plaintiffs may have found a way to handpick sympathetic judges.
In the class-action Comer v. Murphy Oil, a dozen Gulf Coast property owners whose homes were damaged by Hurricane Katrina are suing 33 energy companies for the "nuisance" of the carbon emitted when people use their products. The claim is that these emissions allegedly contributed to climate change that allegedly increased global surface air and water temperatures that allegedly caused sea levels to rise and thus allegedly compounded the storm's damage.
Last year, Comer was dismissed by a district judge, who sensibly ruled that the Mississippi residents couldn't trace the harm they suffered to any specific company because global warming is, well, global. But the case was resurrected by a three-judge panel of the Fifth Circuit Court of Appeals—prompting the entire court to rehear the appeal en banc. The full court was expected to affirm the original district court decision, though seven of the 16 judges recused themselves because they held stock in one or more of the companies being sued.
The en banc arguments were scheduled for this month, until the Fifth Circuit announced in April that "new circumstances have arisen that make it necessary for another judge to recuse." That move deprived the panel of a quorum and thus its ability to rehear Comer. No further explanation was offered, but it's likely another judge acquired a financial interest in one of the defendants. Judges have the discretion to disclose in a situation like this but aren't required to do so, and a court spokesman didn't return our call.
The climate tort is gaining a legal toehold in part because any judge with reasonably diversified investments will have some kind of conflict of interest and will therefore be disqualified. Since any energy company—or any business or exhaling person—contributes in some way to carbon emissions, anyone could be sued if the courts allow this theory to move forward. More ominously, plaintiffs can add defendants to the suit for the purposes of targeting judicial recusals and a more favorable hearing, given that federal financial disclosure forms are public information.
In Comer, did one of the more liberal Fifth Circuit judges buy stock specifically to blow up the quorum? That isn't as far-fetched as it sounds. One of the appellate judges who waved a similar suit through the Second Circuit last year, Peter Hall, admitted at a February conference that he doubted these nuisance cases stood much chance of success.
"Expert evidence, which is the kind of thing that will be needed in this case, ultimately, to prove causative action and whether that can be done beyond preponderance of the evidence, certainly remains an open question," Judge Hall said. But he added that the "nuisance action by nuisance action" approach was so burdensome and costly that it was like "a sword of Damocles" hanging over companies that would eventually force the political branches to adopt climate policies.
In other words, these suits are naked political intimidation meant to coerce cap and tax or some other expensive carbon crackdown regardless of what Congress wants. The same judge-shopping strategy could also apply to the Supreme Court, where Samuel Alito and Stephen Breyer hold stock in Comer defendants and Sonia Sotomayor heard the Second Circuit case. If the Comer plaintiffs succeeded in forcing one more Justice to recuse, the High Court would lack a quorum and be left unable to rule on the merits even if it wanted to.
The Fifth Circuit will decide what to do this week, and we hope the judges will find a way to reconstitute their quorum before this damaging legal theory gains any more traction.
United States and Brazil Collaborate on Racial Equality
http://www.state.gov/r/pa/prs/ps/2010/05/141967.htm
The No-Cost Stimulus: A little Sarbox relief, thank you. WSJ Editorial
http://online.wsj.com/article/SB10001424052748703315404575250693201556662.html
Senate Majority Leader Harry Reid wants a floor vote this week on financial regulatory reform, and he should first add at least one provision worthy of the name. Senators Kay Bailey Hutchison (R., Texas) and Mary Landrieu (D., La.) have offered an amendment to spare the smallest public companies from the worst bureaucratic horrors of the 2002 Sarbanes-Oxley law.
Sarbox, the Beltway's previous attempt at financial-regulatory reform, was intended to improve the information investors receive about public companies. The law did nothing to prevent poor disclosure at companies like Lehman Brothers but it did saddle the U.S. economy with billions in unexpected costs. Even the Securities and Exchange Commission, a Sarbox cheerleader, found in a 2009 survey that the average public company pays more than $2 million per year complying with the law's Section 404. The indirect costs may be much greater, as initial public offerings of U.S. companies have never returned to pre-Sarbox levels.
The SEC admits that compliance burdens fall disproportionately on smaller companies. This is one reason the two Senators aim to exempt companies with less than $150 million of shares held by the public from "internal-controls" audits.
These audits are piled on top of the traditional financial audit, and on top of a company's own internal-controls review. The result is that going public in the U.S., once the dream of entrepreneurs world-wide, has for too many company founders become something to avoid. If President Obama is hoping for an unemployment rate below 9%, encouraging these job creators is an obvious step.
Thanks to New Jersey's Republican Scott Garrett and Democrat John Adler, the House has already passed a similar reform. Now the Senate should allow America's most innovative companies to create jobs at no cost to taxpayers.
The White House Blog: Yes, You Can Keep Your Health Plan
http://www.whitehouse.gov/blog/2010/05/18/yes-you-can-keep-your-health-plan
No, You Can't Keep Your Health Plan - Insurers and doctors are already consolidating their businesses in the wake of ObamaCare's passage.
http://online.wsj.com/article/SB10001424052748703315404575250264210294510.html
Statement by President Obama on Oil Liability
http://www.whitehouse.gov/the-press-office/statement-president-obama-oil-liability
Iran's Nuclear Coup - Ahmadinejad and Lula expose Obama's hapless diplomacy.
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.
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.
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_u82sakkClp51Z12pxRmAK485HZBDu7cqYbmM0jxXibZEIdwtcntMp6QgMtBvenZ-I76pgqtRFuI3KbEpuhzhgyv9uzu9vS83PZnws5bC_NBoUa-shEv5SiCGe9yZ9Qvkx_SmYLFHWlK-uOniTGe0GKiA=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
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