Tilting at Windmill Jobs. WSJ Editorial
The 'stimulus' promised a jobless peak of 8%; it's now 9.5%.
The Wall Street Journal, Jul 03, 2009, p A12
About the best we can say about yesterday's June jobs report is that employment is usually a lagging economic indicator. At least we hope it is, because the loss of 467,000 jobs for the month is one more sign that the economy still hasn't hit bottom despite months of epic fiscal and monetary reflation.
The report is in many ways even uglier than the headline numbers. Average hours worked per week dropped to 33, the lowest level in at least 40 years. This means that millions of full-time workers are being downgraded to part-time, as businesses slash labor costs to remain above water. Because people are working less, wages have fallen by 0.3% this year. Factories are operating at only 65% capacity, while the overall jobless rate hit 9.5%. Throw in discouraged workers who want full-time work, and the labor underutilization rate climbed to 16.5%.
The news is even worse for young people, with nearly one in four teenagers unemployed. Congress has scheduled an increase in the minimum wage later this month, which will price even more of these unskilled youths out of a vital start on the career ladder. One useful policy response would be for Congress to rescind the wage hike to $7.25 an hour (from $6.55) that is scheduled for July 24. But the union economic model that now dominates Washington holds that wages only matter for those who already have jobs. The jobs that are never created don't count.
The goods producing sector -- Americans who make things -- shed 223,000 more jobs last month. Asked about these job losses by the Associated Press yesterday, President Obama said Congress should pass his cap-and-tax on carbon energy because "If we're weatherizing every building and home in America, if we are creating windmills and solar panels and biofuel facilities, that is a huge promising area not only for jobs here in the United States, but also for export growth." But even under the most optimistic scenario, not every hard-hat worker in America can make windmill blades and solar panels. With manufacturing on its back, enacting a new energy tax to drive more jobs offshore is crazy even on Keynesian grounds.
Of course, the economy can't keep falling forever, and most forecasters still see a recovery starting this year. The decline in manufacturing slowed last month and housing sales have picked up -- both positive leading indicators. The plunge in inventories means industrial production and durable goods orders are bound to increase. Consumers are also spending more again, albeit with more caution than if gasoline hadn't increased by $1 a gallon in recent months and if they felt more confident about their job security.
The real question is how strong and sustained any expansion will be. If the "stimulus" were working as advertised, it ought to be very strong. Washington has thrown trillions of dollars at this recession, including that famous $787 billion in more spending that was supposed to yield $1.50 in growth for every $1 spent. This followed the $168 billion or so stimulus that George W. Bush and Nancy Pelosi promised in February 2008 would prevent a recession. The jobless rate that month was 4.8%.
Most of this government spending has gone to transfer payments -- Medicaid, jobless benefits and the like -- that do nothing for jobs or growth. The spending that might create jobs -- on roads, say -- is dribbling out with typical government efficiency. Meanwhile, the money for all of this has to come from somewhere, and Democrats are already saying it will require big (unstimulating) tax increases in 2011, and perhaps sooner.
The Administration argues that the recession would be worse without the stimulus, which is impossible to disprove. However, it's worth recalling that Mr. Obama's economists predicted late last year that the stimulus would keep the jobless rate from exceeding 8%. That was a percentage point and a half ago. It's far more likely that the economy would have been better off without the spending, and the higher taxes and debt financing that it implies.
As always, a sustained expansion and job creation must come from private investment and risk-taking. Yet as America's entrepreneurs look at Washington they see uncertainty and higher costs from a $1 trillion health-care bill; higher energy costs from the cap-and-tax bill that just passed the House (see below); new restraints on consumer lending in the financial reform bill; new tariffs and threats of trade protection; limits on compensation and banker baiting; and the possibility of easier unionization, among numerous other Congressional brainstorms.
None of this inspires "animal spirits." The best thing Mr. Obama could do to create jobs would be to declare he's dropping all of this and starting over.
Thursday, July 2, 2009
Orszag nails it: The 'largest corporate welfare program' ever
The Carbonated Congress. WSJ Editorial
Orszag nails it: The 'largest corporate welfare program' ever.
The Wall Street Journal, Jul 03, 2009, p A12
President Obama is calling the climate bill that the House passed last week an "extraordinary" achievement, and so it is. The 1,200-page wonder manages the supreme feat of being both hugely expensive while doing almost nothing to reduce carbon emissions.
The Washington press corps is playing the bill's 219-212 passage as a political triumph, even though one of five Democrats voted against it. The real story is what Speaker Nancy Pelosi, House baron Henry Waxman and the President himself had to concede to secure even that eyelash margin among the House's liberal majority. Not even Tom DeLay would have imagined the extravaganza of log-rolling, vote-buying, outright corporate bribes, side deals, subsidies and policy loopholes. Every green goal, even taken on its own terms, was watered down or given up for the sake of political rents.
Begin with the supposed point of the exercise -- i.e., creating an artificial scarcity of carbon in the name of climate change. The House trimmed Mr. Obama's favored 25% reduction by 2020 to 17% in order to win over Democrats leery of imposing a huge upfront tax on their constituents; then they raised the reduction to 83% in the out-years to placate the greens. Even that 17% is not binding, since it would be largely reached with so-called offsets, through which some businesses subsidize others to make emissions reductions that probably would have happened anyway.
Even if the law works as intended, over the next decade or two real U.S. greenhouse emissions might be reduced by 2% compared to business as usual. However, consumers would still face higher prices for electric power, transportation and most goods and services as this inefficient and indirect tax flowed down the energy chain.
The sound bite is that this policy would only cost households "a postage stamp a day." But that's true only as long as the program doesn't really cut emissions. The goal here is to tell voters they'll pay nothing in order to get the cap-and-tax bureaucracy in place -- even though the whole idea is to raise prices to change American behavior. At the same time -- wink, wink -- Democrats tell the greens they can tighten the emissions vise gradually over time.
Meanwhile, Congress had to bribe every business or interest that could afford a competent lobbyist. Carbon permits are valuable, yet the House says only 28% of the allowances would be auctioned off; the rest would be given away. In March, White House budget director Peter Orszag told Congress that "If you didn't auction the permit, it would represent the largest corporate welfare program that has ever been enacted in the history of the United States."
Naturally, Democrats did exactly that. To avoid windfall profits, they then chose to control prices, asking state regulators to require utilities to use the free permits to insulate ratepayers from price increases. (This also obviates the anticarbon incentives, but never mind.) Auctions would reduce political favoritism and interference, as well as provide revenue to cut taxes to offset higher energy costs. But auctions don't buy votes.
Then there was the peace treaty signed with Agriculture Chairman Colin Peterson, which banned the EPA from studying the carbon produced by corn ethanol and transferred farm emissions to the Ag Department, which mainly exists to defend farm subsidies. Not to mention the 310-page trade amendment that was introduced at 3:09 a.m. When Congress voted on the bill later that day, the House clerk didn't even have an official copy.
The revisions were demanded by coal-dependent Rust Belt Democrats to require tariffs on goods from countries that don't also reduce their emissions. Democrats were thus admitting that the critics are right that this new energy tax would send U.S. jobs overseas. But instead of voting no, their price for voting yes is to impose another tax on imports from China and India, among others. So a Smoot-Hawley green tariff is now official Democratic policy.
Mr. Obama's lobbyists first acquiesced to this tariff change to get the bill passed. Afterwards the President said he disliked "sending any protectionist signals" amid a world recession, but he refused to say whether this protectionism was enough to veto the bill. Then in a Saturday victory lap, he talked about green jobs and a new clean energy economy, but he made no reference to cap and trade -- no doubt because he knows that energy taxes are unpopular and that the bill faces an even tougher slog in the Senate.
Mr. Obama wants something tangible to take to the U.N. climate confab in Denmark in December, but the more important issue is what this exercise says about his approach to governance. The President seems to believe that the Carter and Clinton Presidencies failed by fighting too much with Democrats in Congress. So his solution is to abdicate his agenda to Congress -- first the stimulus, now cap and trade, and soon health care. We wish he had told us he was running to be Prime Minister.
Orszag nails it: The 'largest corporate welfare program' ever.
The Wall Street Journal, Jul 03, 2009, p A12
President Obama is calling the climate bill that the House passed last week an "extraordinary" achievement, and so it is. The 1,200-page wonder manages the supreme feat of being both hugely expensive while doing almost nothing to reduce carbon emissions.
The Washington press corps is playing the bill's 219-212 passage as a political triumph, even though one of five Democrats voted against it. The real story is what Speaker Nancy Pelosi, House baron Henry Waxman and the President himself had to concede to secure even that eyelash margin among the House's liberal majority. Not even Tom DeLay would have imagined the extravaganza of log-rolling, vote-buying, outright corporate bribes, side deals, subsidies and policy loopholes. Every green goal, even taken on its own terms, was watered down or given up for the sake of political rents.
Begin with the supposed point of the exercise -- i.e., creating an artificial scarcity of carbon in the name of climate change. The House trimmed Mr. Obama's favored 25% reduction by 2020 to 17% in order to win over Democrats leery of imposing a huge upfront tax on their constituents; then they raised the reduction to 83% in the out-years to placate the greens. Even that 17% is not binding, since it would be largely reached with so-called offsets, through which some businesses subsidize others to make emissions reductions that probably would have happened anyway.
Even if the law works as intended, over the next decade or two real U.S. greenhouse emissions might be reduced by 2% compared to business as usual. However, consumers would still face higher prices for electric power, transportation and most goods and services as this inefficient and indirect tax flowed down the energy chain.
The sound bite is that this policy would only cost households "a postage stamp a day." But that's true only as long as the program doesn't really cut emissions. The goal here is to tell voters they'll pay nothing in order to get the cap-and-tax bureaucracy in place -- even though the whole idea is to raise prices to change American behavior. At the same time -- wink, wink -- Democrats tell the greens they can tighten the emissions vise gradually over time.
Meanwhile, Congress had to bribe every business or interest that could afford a competent lobbyist. Carbon permits are valuable, yet the House says only 28% of the allowances would be auctioned off; the rest would be given away. In March, White House budget director Peter Orszag told Congress that "If you didn't auction the permit, it would represent the largest corporate welfare program that has ever been enacted in the history of the United States."
Naturally, Democrats did exactly that. To avoid windfall profits, they then chose to control prices, asking state regulators to require utilities to use the free permits to insulate ratepayers from price increases. (This also obviates the anticarbon incentives, but never mind.) Auctions would reduce political favoritism and interference, as well as provide revenue to cut taxes to offset higher energy costs. But auctions don't buy votes.
Then there was the peace treaty signed with Agriculture Chairman Colin Peterson, which banned the EPA from studying the carbon produced by corn ethanol and transferred farm emissions to the Ag Department, which mainly exists to defend farm subsidies. Not to mention the 310-page trade amendment that was introduced at 3:09 a.m. When Congress voted on the bill later that day, the House clerk didn't even have an official copy.
The revisions were demanded by coal-dependent Rust Belt Democrats to require tariffs on goods from countries that don't also reduce their emissions. Democrats were thus admitting that the critics are right that this new energy tax would send U.S. jobs overseas. But instead of voting no, their price for voting yes is to impose another tax on imports from China and India, among others. So a Smoot-Hawley green tariff is now official Democratic policy.
Mr. Obama's lobbyists first acquiesced to this tariff change to get the bill passed. Afterwards the President said he disliked "sending any protectionist signals" amid a world recession, but he refused to say whether this protectionism was enough to veto the bill. Then in a Saturday victory lap, he talked about green jobs and a new clean energy economy, but he made no reference to cap and trade -- no doubt because he knows that energy taxes are unpopular and that the bill faces an even tougher slog in the Senate.
Mr. Obama wants something tangible to take to the U.N. climate confab in Denmark in December, but the more important issue is what this exercise says about his approach to governance. The President seems to believe that the Carter and Clinton Presidencies failed by fighting too much with Democrats in Congress. So his solution is to abdicate his agenda to Congress -- first the stimulus, now cap and trade, and soon health care. We wish he had told us he was running to be Prime Minister.
The Latest Toxin Activists Want to Ban - BPA
The Latest Toxin Activists Want to Ban. By Elizabeth M. Whelan, Sc.D., M.P.H.
Wednesday, June 24, 2009
This article first appeared on June 24, 2009 on Forbes.com
The "toxin du jour" these days is bisphenol A, otherwise known as BPA. Environmental activists claim BPA harms babies as it dissolves out of the sides of baby bottles and sippy cups, causing everything from cancer to learning disabilities and even obesity. Spurred by consumer groups, Connecticut Attorney General Richard Blumenthal wants Coca-Cola, Del Monte and other companies investigated for trying to stop anti-BPA legislation.
In fact, BPA has been used safely for about 60 years to make plastic bottles hard and shatter-proof, for the coatings of metal food containers and even in cellphones and medical devices. Nonetheless, the California Senate recently passed a law to ban the sale of sippy cups and baby bottles that contain BPA, and Chicago recently banned such products from city shelves.
There are two distinct ways of looking at the hysteria about BPA and the quest to purge it from our universe.
First, we can take the rational, scientific approach. There is no evidence that BPA in consumer products ever harmed a child or adult. The FDA has confirmed the safety of BPA in consumer products, as have scientific bodies around the world. The levels of BPA that may leach into food or liquid are so incredibly small that they can barely be measured.
In fact, even the cautious Centers for Disease Control and Prevention has pointed out that merely detecting a substance in our bodies does not mean that it's harmful or toxic. The only "evidence" that BPA is a hazard comes from high-dose animal studies (which have little relevance for humans) and from studies that measure BPA in urine.
But we can detect minute levels of virtually any chemical in blood and urine, and the presence of such an amount is not synonymous with a hazard. BPA as a health hazard is best described as only a "phantom risk."
But rational, scientific facts have taken a back seat in the debate about BPA and health. That brings us to the second, purely emotional case against the toxin.
Psychiatrists have long told us that we fear what we do not understand and cannot see. Further, parents are instinctively on high alert against potential threats to their infants and children. Thus, if an activist group makes a claim that BPA--or almost any other substance--in bottles poses an imminent danger to an innocent baby, the "fear factor" takes over.
Mom and dad are not familiar with this chemical; they can hardly pronounce it; they cannot see it; thus they fear it. And now they are perfect targets for manipulation by the toxic terrorists. Scientists or FDA officials--and certainly industry spokespeople--who dismiss the scare sound callous and unreliable.
Consider this further irrational dimension of the calls to ban BPA: Few people ever ask what the alternative to BPA would be. In their irrational state, they are willing to purge this chemical--a product with a decades-long safety record--from substances they use and instead accept some unknown, untested substitute without even asking what it might be and what its safety profile is.
Perhaps it is time we started responding to the public's irrational fears differently than we do to rational fears. For example, if you have a fear of flying--not a phobia, but a mild, rational concern--you might have your mind changed by a slew of statistics showing that flying from New York to Los Angeles is far safer than covering the same territory by car. We could reason with you on this issue, discussing your odds of injury and death in each scenario. You would then, most likely, choose to fly.
But a national panic about a "chemical"--be it Alar on apples 20 years ago or phthalates (plastic softeners used in rubber duckies and other products) and BPA today--is a different story.
Irrational fears of the sort conjured up in parents by weird-sounding chemicals do not respond well to a truckload of scientific facts. So what might work?
For one, inform parents that their instinct to protect their children is normal, indeed admirable--but subject to manipulation by agenda-driven activists.
And state the obvious. There is no end in sight to the anti-chemical witch hunt against "toxins" in products. Once BPA is banned, the activists will move onto another scare: Are there trace levels of dioxin in the paper cups your toddler drinks out of? Ban paper cups!
Could there be lead in the playground sand box? Close all sandboxes! If in five years the alternative to BPA is shown to cause cancer in rodents--well, ban that too.
Finally, underscore the fact that chemicals like BPA, which have been used for decades with no deleterious health consequences, may well be safer than hastily introduced alternatives.
Irrational fears need to be recognized for what they are--and treated with compassion and understanding but also a big dose of reality. Caring, loving parents have become victims of fear mongers and that, certainly, is one danger about which they deserve to be warned.
Elizabeth M. Whelan is president of the American Council on Science and Health.
Wednesday, June 24, 2009
This article first appeared on June 24, 2009 on Forbes.com
The "toxin du jour" these days is bisphenol A, otherwise known as BPA. Environmental activists claim BPA harms babies as it dissolves out of the sides of baby bottles and sippy cups, causing everything from cancer to learning disabilities and even obesity. Spurred by consumer groups, Connecticut Attorney General Richard Blumenthal wants Coca-Cola, Del Monte and other companies investigated for trying to stop anti-BPA legislation.
In fact, BPA has been used safely for about 60 years to make plastic bottles hard and shatter-proof, for the coatings of metal food containers and even in cellphones and medical devices. Nonetheless, the California Senate recently passed a law to ban the sale of sippy cups and baby bottles that contain BPA, and Chicago recently banned such products from city shelves.
There are two distinct ways of looking at the hysteria about BPA and the quest to purge it from our universe.
First, we can take the rational, scientific approach. There is no evidence that BPA in consumer products ever harmed a child or adult. The FDA has confirmed the safety of BPA in consumer products, as have scientific bodies around the world. The levels of BPA that may leach into food or liquid are so incredibly small that they can barely be measured.
In fact, even the cautious Centers for Disease Control and Prevention has pointed out that merely detecting a substance in our bodies does not mean that it's harmful or toxic. The only "evidence" that BPA is a hazard comes from high-dose animal studies (which have little relevance for humans) and from studies that measure BPA in urine.
But we can detect minute levels of virtually any chemical in blood and urine, and the presence of such an amount is not synonymous with a hazard. BPA as a health hazard is best described as only a "phantom risk."
But rational, scientific facts have taken a back seat in the debate about BPA and health. That brings us to the second, purely emotional case against the toxin.
Psychiatrists have long told us that we fear what we do not understand and cannot see. Further, parents are instinctively on high alert against potential threats to their infants and children. Thus, if an activist group makes a claim that BPA--or almost any other substance--in bottles poses an imminent danger to an innocent baby, the "fear factor" takes over.
Mom and dad are not familiar with this chemical; they can hardly pronounce it; they cannot see it; thus they fear it. And now they are perfect targets for manipulation by the toxic terrorists. Scientists or FDA officials--and certainly industry spokespeople--who dismiss the scare sound callous and unreliable.
Consider this further irrational dimension of the calls to ban BPA: Few people ever ask what the alternative to BPA would be. In their irrational state, they are willing to purge this chemical--a product with a decades-long safety record--from substances they use and instead accept some unknown, untested substitute without even asking what it might be and what its safety profile is.
Perhaps it is time we started responding to the public's irrational fears differently than we do to rational fears. For example, if you have a fear of flying--not a phobia, but a mild, rational concern--you might have your mind changed by a slew of statistics showing that flying from New York to Los Angeles is far safer than covering the same territory by car. We could reason with you on this issue, discussing your odds of injury and death in each scenario. You would then, most likely, choose to fly.
But a national panic about a "chemical"--be it Alar on apples 20 years ago or phthalates (plastic softeners used in rubber duckies and other products) and BPA today--is a different story.
Irrational fears of the sort conjured up in parents by weird-sounding chemicals do not respond well to a truckload of scientific facts. So what might work?
For one, inform parents that their instinct to protect their children is normal, indeed admirable--but subject to manipulation by agenda-driven activists.
And state the obvious. There is no end in sight to the anti-chemical witch hunt against "toxins" in products. Once BPA is banned, the activists will move onto another scare: Are there trace levels of dioxin in the paper cups your toddler drinks out of? Ban paper cups!
Could there be lead in the playground sand box? Close all sandboxes! If in five years the alternative to BPA is shown to cause cancer in rodents--well, ban that too.
Finally, underscore the fact that chemicals like BPA, which have been used for decades with no deleterious health consequences, may well be safer than hastily introduced alternatives.
Irrational fears need to be recognized for what they are--and treated with compassion and understanding but also a big dose of reality. Caring, loving parents have become victims of fear mongers and that, certainly, is one danger about which they deserve to be warned.
Elizabeth M. Whelan is president of the American Council on Science and Health.
The West must reaffirm its support for Georgia
Russia Is Back on the Warpath. By CATHY YOUNG
The West must reaffirm its support for Georgia.
The Wall Street Journal, Jul 02, 2009, p A11
http://online.wsj.com/article/SB124649267530483121.html
With President Barack Obama's trip to Moscow on Monday, you might expect Russia to avoid stirring up any trouble. Yet the Russian media are now abuzz with speculation about a new war in Georgia, and some Western analysts are voicing similar concerns. The idea seems insane. Nonetheless, the risk is real.
One danger sign is persistent talk of so-called Georgian aggression against the breakaway regions of Abkhazia and South Ossetia, which Russia recognized as independent states after the war last August. "Georgia is rattling its weapons . . . and has not given up on attempts to solve its territorial problems by any means," Gen. Nikolai Makarov, who commanded Russian troops in Georgia in 2008, told the Novosti news agency on June 17. Similar warnings have been aired repeatedly by the state-controlled media.
Independent Russian commentators, such as columnist Andrei Piontkovsky, note that this has the feel of a propaganda campaign to prepare the public for a second war. Most recently, Moscow has trotted out a Georgian defector, Lt. Alik D. Bzhania, who claims that Georgian President Mikheil Saakashvili "intends to restart the war."
Yet Russia is the one currently engaged in large-scale military exercises in Abkhazia, South Ossetia, and adjacent regions. Russia has also kicked out international observers from the area. On June 15, Moscow vetoed a U.N. Security Council resolution renewing the mandate of U.N. monitors in Abkhazia because it mentioned an earlier resolution affirming Georgia's territorial integrity. Negotiations to extend the mission of monitors for the Organization for Security and Cooperation in Europe have broken down thanks to Russian obstruction. Now, 225 European Union monitors are the only international presence on the disputed borders.
The expulsion of neutral observers seems odd if Russia is worried about Georgian aggression. But it makes sense if Russia is planning an attack.
What would the Kremlin gain? A crushing victory in Georgia would depose the hated Mr. Saakashvili, give Russia control of vital transit routes for additional energy resources that could weaken its hold on the European oil and gas markets, humiliate the U.S., and distract Russians from their economic woes. Mr. Piontkovsky also believes the war drive comes from Russian Prime Minister Vladimir Putin, who is anxious to reassert himself as supreme leader.
Still, the costs would be tremendous. Last year the Kremlin repaired some of the damage to its relations with Europe and the U.S. by portraying the invasion of Georgia as a response to a unique crisis, not part of an imperial strategy. Another war would cripple Russia's quest for respectability in the civilized world, including its vanity project of the 2014 Winter Olympics in Sochi.
And after the patriotic fervor wears off, domestic discontent would likely follow. Moreover, Russia would almost certainly find itself mired in a long guerilla war. This would further destabilize a region where Russia's own provinces, Ingushetia and Dagestan, are plagued by violent turmoil.
Given all this, a war seems unlikely. What's more probable is that Russia will seek to destabilize Georgia without military action. This saber-rattling may be meant to boost Georgian opposition to Mr. Saakashvili.
Still, Moscow's actions are not always rational. If the pro-war faction believes that the Western response to an assault on Georgia would be weak and half-hearted, it could be emboldened. In a June 25 column on the EJ.ru Web site, Russian journalist Yulia Latynina writes that the probability of the war "depends solely on the Kremlin's capacity to convince itself that it can convince the world that the war is its enemies' fault."
That is why it's essential for the United States and the EU to respond now -- by increasing their non-military presence in Georgia, expressing a strong commitment to Georgian sovereignty, and reminding Russia of the consequences of aggression. Such a statement from President Obama in Moscow would go a long way toward preventing the possibility of another tragedy.
Ms. Young is a columnist for RealClearPolitics.com and the author of "Growing Up in Moscow" (Ticknor & Fields, 1989).
The West must reaffirm its support for Georgia.
The Wall Street Journal, Jul 02, 2009, p A11
http://online.wsj.com/article/SB124649267530483121.html
With President Barack Obama's trip to Moscow on Monday, you might expect Russia to avoid stirring up any trouble. Yet the Russian media are now abuzz with speculation about a new war in Georgia, and some Western analysts are voicing similar concerns. The idea seems insane. Nonetheless, the risk is real.
One danger sign is persistent talk of so-called Georgian aggression against the breakaway regions of Abkhazia and South Ossetia, which Russia recognized as independent states after the war last August. "Georgia is rattling its weapons . . . and has not given up on attempts to solve its territorial problems by any means," Gen. Nikolai Makarov, who commanded Russian troops in Georgia in 2008, told the Novosti news agency on June 17. Similar warnings have been aired repeatedly by the state-controlled media.
Independent Russian commentators, such as columnist Andrei Piontkovsky, note that this has the feel of a propaganda campaign to prepare the public for a second war. Most recently, Moscow has trotted out a Georgian defector, Lt. Alik D. Bzhania, who claims that Georgian President Mikheil Saakashvili "intends to restart the war."
Yet Russia is the one currently engaged in large-scale military exercises in Abkhazia, South Ossetia, and adjacent regions. Russia has also kicked out international observers from the area. On June 15, Moscow vetoed a U.N. Security Council resolution renewing the mandate of U.N. monitors in Abkhazia because it mentioned an earlier resolution affirming Georgia's territorial integrity. Negotiations to extend the mission of monitors for the Organization for Security and Cooperation in Europe have broken down thanks to Russian obstruction. Now, 225 European Union monitors are the only international presence on the disputed borders.
The expulsion of neutral observers seems odd if Russia is worried about Georgian aggression. But it makes sense if Russia is planning an attack.
What would the Kremlin gain? A crushing victory in Georgia would depose the hated Mr. Saakashvili, give Russia control of vital transit routes for additional energy resources that could weaken its hold on the European oil and gas markets, humiliate the U.S., and distract Russians from their economic woes. Mr. Piontkovsky also believes the war drive comes from Russian Prime Minister Vladimir Putin, who is anxious to reassert himself as supreme leader.
Still, the costs would be tremendous. Last year the Kremlin repaired some of the damage to its relations with Europe and the U.S. by portraying the invasion of Georgia as a response to a unique crisis, not part of an imperial strategy. Another war would cripple Russia's quest for respectability in the civilized world, including its vanity project of the 2014 Winter Olympics in Sochi.
And after the patriotic fervor wears off, domestic discontent would likely follow. Moreover, Russia would almost certainly find itself mired in a long guerilla war. This would further destabilize a region where Russia's own provinces, Ingushetia and Dagestan, are plagued by violent turmoil.
Given all this, a war seems unlikely. What's more probable is that Russia will seek to destabilize Georgia without military action. This saber-rattling may be meant to boost Georgian opposition to Mr. Saakashvili.
Still, Moscow's actions are not always rational. If the pro-war faction believes that the Western response to an assault on Georgia would be weak and half-hearted, it could be emboldened. In a June 25 column on the EJ.ru Web site, Russian journalist Yulia Latynina writes that the probability of the war "depends solely on the Kremlin's capacity to convince itself that it can convince the world that the war is its enemies' fault."
That is why it's essential for the United States and the EU to respond now -- by increasing their non-military presence in Georgia, expressing a strong commitment to Georgian sovereignty, and reminding Russia of the consequences of aggression. Such a statement from President Obama in Moscow would go a long way toward preventing the possibility of another tragedy.
Ms. Young is a columnist for RealClearPolitics.com and the author of "Growing Up in Moscow" (Ticknor & Fields, 1989).
Wal-Mart buys protection by selling out its competitors
Everyday Low Politics. WSJ Editorial
Wal-Mart buys protection by selling out its competitors.
The Wall Street Journal, Jul 02, 2009, p A12
Corporate America's cheerleading for more government involvement in health care now includes Wal-Mart, that liberal paragon of social irresponsibility. The discount giant's ex-critics probably ought to be more skeptical, given that this seems to be anticompetitive special pleading in progressive drag.
This week the nation's largest employer blessed an employer mandate, aka "pay or play." This would require businesses that do not offer "meaningful coverage" -- i.e., government-approved -- to pay some percentage of their payroll to a federal insurance plan. This mandate is one of the more controversial policies in the Democratic health package, and Wal-Mart's endorsement will help it along, or at least give liberals political cover against business criticism.
Another way of putting it is that Andy Stern finally got his man. Wal-Mart CEO Mike Duke was joined in his show of support by Mr. Stern, president of the Service Employees International Union and probably the most influential U.S. labor leader, as well as by John Podesta, President Clinton's former chief of staff now running the leftward Center for American Progress. Both organizations regularly assail Wal-Mart. The SEIU, having failed in its drive to organize Wal-Mart stores, went on to help fund a harassment group called Wal-Mart Watch. The Podesta outfit provides ammunition for critics about the retailer's supposedly skimpy benefits -- especially health coverage -- and other corporate-greed outrages.
Then the fog of politics set in. Wal-Mart hired Leslie Dach, another former Clinton operative, to give its public image an extreme makeover. It has since rolled out green programs (most of which save it money in any case), and in 2007 the company joined with organized labor to call for universal health care by 2012. Two years before, it plumped for a higher minimum wage.
The employer-mandate endorsement falls into the same self-interest department. A boost in the minimum wage helps Wal-Mart because most of its workers already earn well over the wage floor, and it hurts smaller, less-profitable competitors that can't afford to pay more. On health care, an employer mandate will also reduce the margins of their rivals. This is especially true for businesses of a slightly smaller size that cannot insure on the same scale or currently don't reach the 55% of the 1.4 million Wal-Mart employees who are insured through the company. (Another 40% or so are covered by spouses or the likes of Medicaid.)
The Wal-Mart-Stern-Podesta troika made sure to specify that "shared responsibility" must be "fair and broad in its coverage," with an emphasis on the latter. The Mom & Pop stores that liberals accuse Wal-Mart of running out of town may get hit hardest. Democrats say they'll exempt certain small businesses, size details to be determined. But if the mandate is limited to large employers, it won't reduce the number of uninsured. According to the Kaiser Family Foundation, 99% of firms with more than 200 workers provide health benefits, only 62% of smaller firms.
Businesses are also largely indifferent whether compensation comes in the form of wages or benefits, so an employer mandate -- an indirect tax on employment -- may cause wages to rise more slowly. Or it may simply mean fewer jobs. In a 2007 paper, the economists Katherine Baicker of Harvard and Helen Levy of the University of Michigan estimate that 0.2% of all full-time workers and 1.4% of uninsured workers would lose their lobs because of an employer mandate. Most at risk are the 33% of the uninsured earning within $3 of the minimum wage. Thus many of the same people who shop at Wal-Mart because of its low prices -- and who Democrats claim to speak for -- would be worse off.
An employer pay-or-play tax is not only a revenue grab to fund government health care, but it is also meant to transfer the choices about coverage to government from consumers. Businesses are going along with this and other gambits in part because of a prisoners' dilemma: They're terrified of being shut out of Democratic health negotiations lest they get stuck with the bill. Wal-Mart may also be trying to pre-empt an employer mandate the Senate is considering that would target companies with predominantly low-wage, low-skilled or entry-level work forces.
Other big businesses are also trying to buy protection or some political reprieve. Big Pharma recently promised to reduce the cost of prescription drugs by $80 billion over the next decade, and the physician, hospital and insurance lobbies have made similar offerings. Yet the political class is simply pocketing these concessions and demanding more, hastening the day when government controls most U.S. health dollars -- and the businesses become the equivalent of utilities.
Mr. Stern has been clear that his major goal all along has been to pressure Wal-Mart into endorsing government health insurance. As for Wal-Mart's executives, please don't come running for help when Mr. Stern returns for his next political payoff.
Wal-Mart buys protection by selling out its competitors.
The Wall Street Journal, Jul 02, 2009, p A12
Corporate America's cheerleading for more government involvement in health care now includes Wal-Mart, that liberal paragon of social irresponsibility. The discount giant's ex-critics probably ought to be more skeptical, given that this seems to be anticompetitive special pleading in progressive drag.
This week the nation's largest employer blessed an employer mandate, aka "pay or play." This would require businesses that do not offer "meaningful coverage" -- i.e., government-approved -- to pay some percentage of their payroll to a federal insurance plan. This mandate is one of the more controversial policies in the Democratic health package, and Wal-Mart's endorsement will help it along, or at least give liberals political cover against business criticism.
Another way of putting it is that Andy Stern finally got his man. Wal-Mart CEO Mike Duke was joined in his show of support by Mr. Stern, president of the Service Employees International Union and probably the most influential U.S. labor leader, as well as by John Podesta, President Clinton's former chief of staff now running the leftward Center for American Progress. Both organizations regularly assail Wal-Mart. The SEIU, having failed in its drive to organize Wal-Mart stores, went on to help fund a harassment group called Wal-Mart Watch. The Podesta outfit provides ammunition for critics about the retailer's supposedly skimpy benefits -- especially health coverage -- and other corporate-greed outrages.
Then the fog of politics set in. Wal-Mart hired Leslie Dach, another former Clinton operative, to give its public image an extreme makeover. It has since rolled out green programs (most of which save it money in any case), and in 2007 the company joined with organized labor to call for universal health care by 2012. Two years before, it plumped for a higher minimum wage.
The employer-mandate endorsement falls into the same self-interest department. A boost in the minimum wage helps Wal-Mart because most of its workers already earn well over the wage floor, and it hurts smaller, less-profitable competitors that can't afford to pay more. On health care, an employer mandate will also reduce the margins of their rivals. This is especially true for businesses of a slightly smaller size that cannot insure on the same scale or currently don't reach the 55% of the 1.4 million Wal-Mart employees who are insured through the company. (Another 40% or so are covered by spouses or the likes of Medicaid.)
The Wal-Mart-Stern-Podesta troika made sure to specify that "shared responsibility" must be "fair and broad in its coverage," with an emphasis on the latter. The Mom & Pop stores that liberals accuse Wal-Mart of running out of town may get hit hardest. Democrats say they'll exempt certain small businesses, size details to be determined. But if the mandate is limited to large employers, it won't reduce the number of uninsured. According to the Kaiser Family Foundation, 99% of firms with more than 200 workers provide health benefits, only 62% of smaller firms.
Businesses are also largely indifferent whether compensation comes in the form of wages or benefits, so an employer mandate -- an indirect tax on employment -- may cause wages to rise more slowly. Or it may simply mean fewer jobs. In a 2007 paper, the economists Katherine Baicker of Harvard and Helen Levy of the University of Michigan estimate that 0.2% of all full-time workers and 1.4% of uninsured workers would lose their lobs because of an employer mandate. Most at risk are the 33% of the uninsured earning within $3 of the minimum wage. Thus many of the same people who shop at Wal-Mart because of its low prices -- and who Democrats claim to speak for -- would be worse off.
An employer pay-or-play tax is not only a revenue grab to fund government health care, but it is also meant to transfer the choices about coverage to government from consumers. Businesses are going along with this and other gambits in part because of a prisoners' dilemma: They're terrified of being shut out of Democratic health negotiations lest they get stuck with the bill. Wal-Mart may also be trying to pre-empt an employer mandate the Senate is considering that would target companies with predominantly low-wage, low-skilled or entry-level work forces.
Other big businesses are also trying to buy protection or some political reprieve. Big Pharma recently promised to reduce the cost of prescription drugs by $80 billion over the next decade, and the physician, hospital and insurance lobbies have made similar offerings. Yet the political class is simply pocketing these concessions and demanding more, hastening the day when government controls most U.S. health dollars -- and the businesses become the equivalent of utilities.
Mr. Stern has been clear that his major goal all along has been to pressure Wal-Mart into endorsing government health insurance. As for Wal-Mart's executives, please don't come running for help when Mr. Stern returns for his next political payoff.
Wednesday, July 1, 2009
Obama's Top Five Health Care Issues
Obama's Top Five Health Care Lies. By Shikha Dalmia
TonySopranoCare.
Jul 01, 2009, 12:01 AM EDT
President Barack Obama walked into the Oval Office with a veritable halo over his head. In the eyes of his backers, he could say or do no wrong because he had evidently descended directly from heaven to return celestial order to our fallen world. Oprah declared his tongue to be "dipped in the unvarnished truth." Newsweek editor Evan Thomas averred that Obama "stands above the country and above the world as a sort of a God."
But when it comes to health care reform, with every passing day, Obama seems less God and more demagogue, uttering not transcendental truths, but bald-faced lies. Here are the top five lies that His Awesomeness has told--the first two for no reason other than to get elected and the next three to sell socialized medicine to a wary nation.
Lie One: No one will be compelled to buy coverage.
During the campaign, Obama insisted that he would not resort to an individual mandate to achieve universal coverage. In fact, he repeatedly ripped Hillary Clinton's plan for proposing one. "To force people to buy coverage," he insisted, "you've got to have a very harsh penalty." What will this penalty be, he demanded? "Are you going to garnish their wages?" he asked Hillary in one debate.
Yet now, Obama is behaving as if he said never a hostile word about the mandate. Earlier this month, in a letter to Sens. Max Baucus, D-Mont., and Ted Kennedy, D-Mass., he blithely declared that he was all for "making every American responsible for having health insurance coverage, and making employers share in the cost."
But just like Hillary, he is refusing to say precisely what he will do to those who want to forgo insurance. There is a name for such a health care approach: It is called TonySopranoCare.
Lie Two: No new taxes on employer benefits.
Obama took his Republican rival, Sen. John McCain, to the mat for suggesting that it might be better to remove the existing health care tax break that individuals get on their employer-sponsored coverage, but return the vast bulk--if not all--of the resulting revenues in the form of health care tax credits. This would theoretically have made coverage both more affordable and portable for everyone. Obama, however, would have none of it, portraying this idea simply as the removal of a tax break. "For the first time in history, he wants to tax your health benefits," he thundered. "Apparently, Sen. McCain doesn't think it's enough that your health premiums have doubled. He thinks you should have to pay taxes on them too."
Yet now Obama is signaling his willingness to go along with a far worse scheme to tax employer-sponsored benefits to fund the $1.6 trillion or so it will cost to provide universal coverage. Contrary to Obama's allegations, McCain's plan did not ultimately entail a net tax increase because he intended to return to individuals whatever money was raised by scrapping the tax deduction. Not so with Obama. He apparently told Sen. Baucus that he would consider the senator's plan for rolling back the tax exclusion that expensive, Cadillac-style employer-sponsored plans enjoy, in order to pay for universal coverage. But, unlike McCain, he has said nothing about putting offsetting deductions or credits in the hands of individuals.
In other words, Obama might well end up doing what McCain never set out to do: Impose a net tax increase on health benefits for the first time in history.
Lie Three: Government can control rising health care costs better than the private sector.
Ignoring the reality that Medicare--the government-funded program for the elderly--has put the country on the path to fiscal ruin, Obama wants to model a government insurance plan--the so-called "public option"--after Medicare in order to control the country's rising health care costs. Why? Because, he repeatedly claims, Medicare has far lower administrative costs and overhead than private plans--to wit, 3% for Medicare compared to 10% to 20% for private plans. Hence, he says, subjecting private plans to competition against an entity delivering such superior efficiency will release health care dollars for universal coverage.
But lower administrative costs do not necessarily mean greater efficiency. Indeed, the Congressional Budget Office analysis last year chastised Medicare's lax attitude on this front. "The traditional fee-for-service Medicare program does relatively little to manage benefits, which tends to reduce its administrative costs but may raise its overall spending relative to a more tightly managed approach," it noted on page 93.
In short, extending the Medicare model will further ruin--not improve--even the functioning aspects of private plans.
Lie Four: A public plan won't be a Trojan horse for a single-payer monopoly.
Obama has repeatedly claimed that forcing private plans to compete with a public plan will simply "keep them honest" and give patients more options--not lead to a full-blown, Canadian-style, single-payer monopoly. As I argued in my previous column, this is wishful thinking given that government programs such as Medicare have a history of controlling costs by underpaying providers, who make up the losses by charging private plans more. Any public plan modeled after Medicare will greatly increase this forced subsidy, eventually driving private plans out of business, even if that weren't Obama's intention.
But, as it turns out, it very much is his intention. Before he decided to run for office--and even during the initial days of his campaign--Obama repeatedly said that he was in favor of a single-payer system. What's more, University of California, Berkeley Professor Jacob Hacker, who is a key influence on the Obama administration, is on tape explicitly boasting that a public plan is a means for creating a single-payer system. "It's not a Trojan horse," he quips, "it's just right there."
But even if Obama wanted to, it is simply impossible to design a public plan that could compete with private insurers on a level playing field and without "feeding off the public trough" as Obama claims.
At the very least, such a plan would always carry an implicit government guarantee that, should it go bust, no one in the plan would lose coverage. This guarantee would artificially lower the plan's capital reserve requirements, giving it an unfair edge over private plans. What's more, it is simply not plausible to expect that the plan wouldn't receive any start-up subsidies or use the government's muscle to negotiate lower rates with providers. If it eschewed all these things, there would be no reason for it to exist--because it would be just like any other private plan.
Lie Five: Patients don't have to fear rationing.
Obama has been insisting, including during his ABC Town Hall event last week, that the rationing patients would face under a government-run system wouldn't be any more draconian than what they currently confront under private plans. This is complete nonsense.
The left has been trying to address fears of rationing by trotting out an old and tired trope, namely, that rationing is an inescapable fact of life because every system rations whether by price or fiat. But there is a big difference between the two. If I can't afford caviar and champagne every night, any rationing involved is metaphoric, not real. Genuine rationing occurs when someone else controls access--how much of a particular good I can consume.
By that token, Obama's stimulus bill has set in motion rationing on a scale unimaginable in the land of the free. Indeed, the bill commits over $1 billion to conduct comparative effectiveness research that will evaluate the relative merits of various treatments. That in itself wouldn't be so objectionable--if it weren't for the fact that a board will then "direct financing" toward approved, standardized treatments. In short, doctors will find it much harder to prescribe newer or non-standard treatments not yet deemed effective by health care bureaucrats. This is exactly along the lines of the British system, where breast cancer patients were denied Herceptin, a new miracle drug, until enraged women fought back. Even the much-vilified managed care plans would appear to be a paragon of generosity in comparison with this.
Obama has repeatedly asked for honesty in the health care debate. It is high time he started showing some.
Shikha Dalmia is a senior analyst at Reason Foundation and writes a biweekly column for Forbes.
TonySopranoCare.
Jul 01, 2009, 12:01 AM EDT
President Barack Obama walked into the Oval Office with a veritable halo over his head. In the eyes of his backers, he could say or do no wrong because he had evidently descended directly from heaven to return celestial order to our fallen world. Oprah declared his tongue to be "dipped in the unvarnished truth." Newsweek editor Evan Thomas averred that Obama "stands above the country and above the world as a sort of a God."
But when it comes to health care reform, with every passing day, Obama seems less God and more demagogue, uttering not transcendental truths, but bald-faced lies. Here are the top five lies that His Awesomeness has told--the first two for no reason other than to get elected and the next three to sell socialized medicine to a wary nation.
Lie One: No one will be compelled to buy coverage.
During the campaign, Obama insisted that he would not resort to an individual mandate to achieve universal coverage. In fact, he repeatedly ripped Hillary Clinton's plan for proposing one. "To force people to buy coverage," he insisted, "you've got to have a very harsh penalty." What will this penalty be, he demanded? "Are you going to garnish their wages?" he asked Hillary in one debate.
Yet now, Obama is behaving as if he said never a hostile word about the mandate. Earlier this month, in a letter to Sens. Max Baucus, D-Mont., and Ted Kennedy, D-Mass., he blithely declared that he was all for "making every American responsible for having health insurance coverage, and making employers share in the cost."
But just like Hillary, he is refusing to say precisely what he will do to those who want to forgo insurance. There is a name for such a health care approach: It is called TonySopranoCare.
Lie Two: No new taxes on employer benefits.
Obama took his Republican rival, Sen. John McCain, to the mat for suggesting that it might be better to remove the existing health care tax break that individuals get on their employer-sponsored coverage, but return the vast bulk--if not all--of the resulting revenues in the form of health care tax credits. This would theoretically have made coverage both more affordable and portable for everyone. Obama, however, would have none of it, portraying this idea simply as the removal of a tax break. "For the first time in history, he wants to tax your health benefits," he thundered. "Apparently, Sen. McCain doesn't think it's enough that your health premiums have doubled. He thinks you should have to pay taxes on them too."
Yet now Obama is signaling his willingness to go along with a far worse scheme to tax employer-sponsored benefits to fund the $1.6 trillion or so it will cost to provide universal coverage. Contrary to Obama's allegations, McCain's plan did not ultimately entail a net tax increase because he intended to return to individuals whatever money was raised by scrapping the tax deduction. Not so with Obama. He apparently told Sen. Baucus that he would consider the senator's plan for rolling back the tax exclusion that expensive, Cadillac-style employer-sponsored plans enjoy, in order to pay for universal coverage. But, unlike McCain, he has said nothing about putting offsetting deductions or credits in the hands of individuals.
In other words, Obama might well end up doing what McCain never set out to do: Impose a net tax increase on health benefits for the first time in history.
Lie Three: Government can control rising health care costs better than the private sector.
Ignoring the reality that Medicare--the government-funded program for the elderly--has put the country on the path to fiscal ruin, Obama wants to model a government insurance plan--the so-called "public option"--after Medicare in order to control the country's rising health care costs. Why? Because, he repeatedly claims, Medicare has far lower administrative costs and overhead than private plans--to wit, 3% for Medicare compared to 10% to 20% for private plans. Hence, he says, subjecting private plans to competition against an entity delivering such superior efficiency will release health care dollars for universal coverage.
But lower administrative costs do not necessarily mean greater efficiency. Indeed, the Congressional Budget Office analysis last year chastised Medicare's lax attitude on this front. "The traditional fee-for-service Medicare program does relatively little to manage benefits, which tends to reduce its administrative costs but may raise its overall spending relative to a more tightly managed approach," it noted on page 93.
In short, extending the Medicare model will further ruin--not improve--even the functioning aspects of private plans.
Lie Four: A public plan won't be a Trojan horse for a single-payer monopoly.
Obama has repeatedly claimed that forcing private plans to compete with a public plan will simply "keep them honest" and give patients more options--not lead to a full-blown, Canadian-style, single-payer monopoly. As I argued in my previous column, this is wishful thinking given that government programs such as Medicare have a history of controlling costs by underpaying providers, who make up the losses by charging private plans more. Any public plan modeled after Medicare will greatly increase this forced subsidy, eventually driving private plans out of business, even if that weren't Obama's intention.
But, as it turns out, it very much is his intention. Before he decided to run for office--and even during the initial days of his campaign--Obama repeatedly said that he was in favor of a single-payer system. What's more, University of California, Berkeley Professor Jacob Hacker, who is a key influence on the Obama administration, is on tape explicitly boasting that a public plan is a means for creating a single-payer system. "It's not a Trojan horse," he quips, "it's just right there."
But even if Obama wanted to, it is simply impossible to design a public plan that could compete with private insurers on a level playing field and without "feeding off the public trough" as Obama claims.
At the very least, such a plan would always carry an implicit government guarantee that, should it go bust, no one in the plan would lose coverage. This guarantee would artificially lower the plan's capital reserve requirements, giving it an unfair edge over private plans. What's more, it is simply not plausible to expect that the plan wouldn't receive any start-up subsidies or use the government's muscle to negotiate lower rates with providers. If it eschewed all these things, there would be no reason for it to exist--because it would be just like any other private plan.
Lie Five: Patients don't have to fear rationing.
Obama has been insisting, including during his ABC Town Hall event last week, that the rationing patients would face under a government-run system wouldn't be any more draconian than what they currently confront under private plans. This is complete nonsense.
The left has been trying to address fears of rationing by trotting out an old and tired trope, namely, that rationing is an inescapable fact of life because every system rations whether by price or fiat. But there is a big difference between the two. If I can't afford caviar and champagne every night, any rationing involved is metaphoric, not real. Genuine rationing occurs when someone else controls access--how much of a particular good I can consume.
By that token, Obama's stimulus bill has set in motion rationing on a scale unimaginable in the land of the free. Indeed, the bill commits over $1 billion to conduct comparative effectiveness research that will evaluate the relative merits of various treatments. That in itself wouldn't be so objectionable--if it weren't for the fact that a board will then "direct financing" toward approved, standardized treatments. In short, doctors will find it much harder to prescribe newer or non-standard treatments not yet deemed effective by health care bureaucrats. This is exactly along the lines of the British system, where breast cancer patients were denied Herceptin, a new miracle drug, until enraged women fought back. Even the much-vilified managed care plans would appear to be a paragon of generosity in comparison with this.
Obama has repeatedly asked for honesty in the health care debate. It is high time he started showing some.
Shikha Dalmia is a senior analyst at Reason Foundation and writes a biweekly column for Forbes.
An Update on the Economic and Fiscal Crises: 2009 and Beyond
An Update on the Economic and Fiscal Crises: 2009 and Beyond. By William G. Gale, Vice President and Director, Economic Studies, and Alan J. Auerbach, University of California, Berkeley
The Brookings Institution, Jun 2009
The Brookings Institution, Jun 2009
The Wages of Chavismo
The Wages of Chavismo. WSJ Editorial
The Honduran coup is a reaction to Chávez's rule by the mob.
WSJ, Jul 01, 2009
"As military 'coups' go, the one this weekend in Honduras was strangely, well, democratic. The military didn't oust President Manuel Zelaya on its own but instead followed an order of the Supreme Court. It also quickly turned power over to the president of the Honduran Congress, a man from the same party as Mr. Zelaya. The legislature and legal authorities all remain intact.
We mention these not so small details because they are being overlooked as the world, including the U.S. President, denounces tiny Honduras in a way that it never has, say, Iran."
The Honduran coup is a reaction to Chávez's rule by the mob.
WSJ, Jul 01, 2009
"As military 'coups' go, the one this weekend in Honduras was strangely, well, democratic. The military didn't oust President Manuel Zelaya on its own but instead followed an order of the Supreme Court. It also quickly turned power over to the president of the Honduran Congress, a man from the same party as Mr. Zelaya. The legislature and legal authorities all remain intact.
We mention these not so small details because they are being overlooked as the world, including the U.S. President, denounces tiny Honduras in a way that it never has, say, Iran."
Monday, June 29, 2009
Scalia invites assaults on national banks
Spitzerism Revisited. WSJ Editorial
Scalia invites assaults on national banks.
The Wall Street Journal, Jun 30, 2009, p A14
Eliot Spitzer has departed the national stage in ignominy, but the damage he did as an unrestrained state Attorney General lives on, notably in a dubious 5-4 victory yesterday before the Supreme Court.
The case is Cuomo v. Clearing House Association, but it was Mr. Spitzer, New York AG Andrew Cuomo's promiscuous predecessor, who brought the suit in 2005. At issue was whether New York's AG could demand mortgage data from federally chartered banks to fish for evidence of discrimination under the state's fair lending laws. Mr. Spitzer was running for Governor, and he wanted to play the racial lending card even as he now denounces the same banks for lending too much to the same people.
We'll defend federalism as staunchly as anyone, but the National Bank Act dates all the way back to the Lincoln Administration, and over the years the courts, including the High Court, have been clear about its intent: A national bank should be regulated by federal overseers and not subject to harassment by states for the way it conducts banking. As recently as two years ago, in Watters v. Wachovia, the Supreme Court upheld precisely this principle. But now a five-Justice majority, improbably led by Antonin Scalia, who was joined by the Court's entire liberal wing, has opened the gates of state regulation against national banks.
Justice Scalia's opinion distinguishes between "visitorial" and "prosecutorial" power over national banks. By visitorial he means the power to demand whatever information may be necessary to regulate an institution. Mr. Scalia argues that while the federal Office of the Comptroller of the Currency (OCC) has sole visitorial power over federal banks, state AGs may nonetheless "prosecute" those banks for violations of state law.
There's nothing wrong with this argument as it pertains to, say, state employment law, fraud or other laws of general applicability. No one argues that a national bank should be immune from a state sexual harassment investigation simply because its banking activities are regulated by the OCC.
But as Justice Clarence Thomas points out in his dissent, lending, including mortgage lending, is a core banking activity authorized by the 1864 National Bank Act and already regulated by the OCC. It is exactly the kind of banking that national banks are supposed to have the freedom to do under a law designed to create a uniform regulatory environment across the entire country.
Justice Scalia argues that prosecutorial pursuit of a national bank is fundamentally different from a bank regulator's visitorial powers because prosecutors are subject to judicial checks and balances. The Justice must not have been paying attention to Mr. Spitzer, whose career is a living testament to the ways that an unscrupulous AG can twist the power to prosecute into the power to "visit" and regulate and legislate. Justice Scalia's opinion may well expose national banks to the depredations of 50 state AGs, making a mockery of "national" bank regulation.
When the political progeny of Mr. Spitzer crank up their fishing expeditions against national banks, we doubt those banks will take much comfort because they are being "prosecuted," rather than "visited."
Scalia invites assaults on national banks.
The Wall Street Journal, Jun 30, 2009, p A14
Eliot Spitzer has departed the national stage in ignominy, but the damage he did as an unrestrained state Attorney General lives on, notably in a dubious 5-4 victory yesterday before the Supreme Court.
The case is Cuomo v. Clearing House Association, but it was Mr. Spitzer, New York AG Andrew Cuomo's promiscuous predecessor, who brought the suit in 2005. At issue was whether New York's AG could demand mortgage data from federally chartered banks to fish for evidence of discrimination under the state's fair lending laws. Mr. Spitzer was running for Governor, and he wanted to play the racial lending card even as he now denounces the same banks for lending too much to the same people.
We'll defend federalism as staunchly as anyone, but the National Bank Act dates all the way back to the Lincoln Administration, and over the years the courts, including the High Court, have been clear about its intent: A national bank should be regulated by federal overseers and not subject to harassment by states for the way it conducts banking. As recently as two years ago, in Watters v. Wachovia, the Supreme Court upheld precisely this principle. But now a five-Justice majority, improbably led by Antonin Scalia, who was joined by the Court's entire liberal wing, has opened the gates of state regulation against national banks.
Justice Scalia's opinion distinguishes between "visitorial" and "prosecutorial" power over national banks. By visitorial he means the power to demand whatever information may be necessary to regulate an institution. Mr. Scalia argues that while the federal Office of the Comptroller of the Currency (OCC) has sole visitorial power over federal banks, state AGs may nonetheless "prosecute" those banks for violations of state law.
There's nothing wrong with this argument as it pertains to, say, state employment law, fraud or other laws of general applicability. No one argues that a national bank should be immune from a state sexual harassment investigation simply because its banking activities are regulated by the OCC.
But as Justice Clarence Thomas points out in his dissent, lending, including mortgage lending, is a core banking activity authorized by the 1864 National Bank Act and already regulated by the OCC. It is exactly the kind of banking that national banks are supposed to have the freedom to do under a law designed to create a uniform regulatory environment across the entire country.
Justice Scalia argues that prosecutorial pursuit of a national bank is fundamentally different from a bank regulator's visitorial powers because prosecutors are subject to judicial checks and balances. The Justice must not have been paying attention to Mr. Spitzer, whose career is a living testament to the ways that an unscrupulous AG can twist the power to prosecute into the power to "visit" and regulate and legislate. Justice Scalia's opinion may well expose national banks to the depredations of 50 state AGs, making a mockery of "national" bank regulation.
When the political progeny of Mr. Spitzer crank up their fishing expeditions against national banks, we doubt those banks will take much comfort because they are being "prosecuted," rather than "visited."
The health-care systems Democrats want to emulate don't allow contingency fees or large jury awards
How Other Countries Judge Malpractice. By RICHARD A. EPSTEIN
The health-care systems Democrats want to emulate don't allow contingency fees or large jury awards.
The Wall Street Journal, Jun 30, 2009, p A15
In his recent speech to the American Medical Association, President Barack Obama held out the tantalizing possibility of reforming medical malpractice law as part of a comprehensive overhaul of the U.S. health-care system. As usual, he hedged his bets by declining to endorse the only medical malpractice reform with real bite -- a national cap on damages for pain and suffering, such as the ones enacted in more than 30 states.
These caps are usually set between $250,000 to $500,000, and they can make a substantial difference. Other reforms, such as rules that limit contingency fees, shorten statutes of limitation, or confine each defendant's tort exposure to his proportionate share of the harm, have small and uncertain effects.
Medical malpractice, of course, is not just an American issue. And now that the U.S. is considering universal health-care systems similar to those found elsewhere, it's worth a quick peek at their medical malpractice systems -- which usually attract far less controversy, and are far less expensive, than our own.
Litigation in the U.S. has at least four distinctive procedural features that drive up malpractice costs. The first is jury trials, which can veer out of control and in any case introduce significant uncertainty. The second is the contingency-fee system, which allows well-heeled lawyers to self-finance litigation. The third is the rule that makes each side bear its own costs. This induces riskier lawsuits than are undertaken in most other countries, such as Canada, England and most of Europe, where the loser pays the legal costs of the winner. The fourth is extensive pretrial discovery outside the direct supervision of judges, which occurs far more readily here than elsewhere.
Even these features aren't the whole story. American judges frequently let juries decide whether honest mistakes are negligent. Judges in other nations are less likely to do so. American courts commonly think it proper for juries to infer medical negligence from the mere occurrence of a serious injury. European judges usually will not.
American plaintiffs are sometimes spared the heavy burden of identifying particular acts of negligence, or of showing the precise causal connection between a negligent act and an actual injury. Lastly, damage awards for lost income and medical expenses in the U.S. tend to dwarf awards made elsewhere -- in part because governments elsewhere provide this medical care from their nationalized systems. In sum, the medical malpractice system provides incentives for plaintiffs that really do matter. Americans, for example, file claims about 3.5 times more often than Canadians.
The overall picture is still more complex, since there are major variations in medical malpractice rules in different American states, and differences within states, such as between juries in big cities and those in small towns. Doctrinal reform cannot stop these abuses. What is needed is the replacement of juries with specialized commissions like those in France, which help reduce litigation expenses and promote uniformity in case outcomes across regions.
What then does this quick survey teach us about the ability of our system to deter medical injuries and compensate its victims? Not much that's encouraging.
A study led by David Studdert published in the 2006 New England Journal of Medicine concluded that the administrative expenses of the malpractice system were "exorbitant." And worse, it found errors in jury verdicts in about a quarter of the litigated cases. Juries denied compensation properly due in 16% of the cases, and awarded it about 10% of the time when it was unwarranted. These error rates don't include damage awards set at improper levels.
More disturbingly, a careful 1992 study by Donald Dewees and Michael Trebilcock in the Osgood Hall Law Journal concluded that the frequency of medical malpractice in Canada was about the same as in the U.S. -- for about 10% the total cost. In other words, our costly system doesn't seem to do much to deter malpractice. On medical malpractice at least, Canada does better than we do.
The U.S. cannot ignore serious reform. To be sure, medical malpractice premiums constitute well under 1% of the total U.S. health-care bill. But defensive medicine adds perhaps as much as 10%. High malpractice costs can shut down clinics that serve vulnerable populations, leading to more patient harm than the occasional case of malpractice.
The best reform would be to allow physicians, hospitals and patients to contract out of the liability mess by letting the parties reject state-imposed malpractice rules. They could, for example, choose to arbitrate, to waive jury trials, or to limit damage recovery. Stiff competition and the need to maintain reputation should keep medical providers in line in such a system. Market-based solutions that make the private sector more responsive should in turn undermine the case for moving head-first into a government-run health-care system with vast, unintended inefficiencies of its own.
Mr. Epstein is a professor of law at the University of Chicago, a senior fellow at the Hoover Institution, and a visiting professor at NYU Law School.
The health-care systems Democrats want to emulate don't allow contingency fees or large jury awards.
The Wall Street Journal, Jun 30, 2009, p A15
In his recent speech to the American Medical Association, President Barack Obama held out the tantalizing possibility of reforming medical malpractice law as part of a comprehensive overhaul of the U.S. health-care system. As usual, he hedged his bets by declining to endorse the only medical malpractice reform with real bite -- a national cap on damages for pain and suffering, such as the ones enacted in more than 30 states.
These caps are usually set between $250,000 to $500,000, and they can make a substantial difference. Other reforms, such as rules that limit contingency fees, shorten statutes of limitation, or confine each defendant's tort exposure to his proportionate share of the harm, have small and uncertain effects.
Medical malpractice, of course, is not just an American issue. And now that the U.S. is considering universal health-care systems similar to those found elsewhere, it's worth a quick peek at their medical malpractice systems -- which usually attract far less controversy, and are far less expensive, than our own.
Litigation in the U.S. has at least four distinctive procedural features that drive up malpractice costs. The first is jury trials, which can veer out of control and in any case introduce significant uncertainty. The second is the contingency-fee system, which allows well-heeled lawyers to self-finance litigation. The third is the rule that makes each side bear its own costs. This induces riskier lawsuits than are undertaken in most other countries, such as Canada, England and most of Europe, where the loser pays the legal costs of the winner. The fourth is extensive pretrial discovery outside the direct supervision of judges, which occurs far more readily here than elsewhere.
Even these features aren't the whole story. American judges frequently let juries decide whether honest mistakes are negligent. Judges in other nations are less likely to do so. American courts commonly think it proper for juries to infer medical negligence from the mere occurrence of a serious injury. European judges usually will not.
American plaintiffs are sometimes spared the heavy burden of identifying particular acts of negligence, or of showing the precise causal connection between a negligent act and an actual injury. Lastly, damage awards for lost income and medical expenses in the U.S. tend to dwarf awards made elsewhere -- in part because governments elsewhere provide this medical care from their nationalized systems. In sum, the medical malpractice system provides incentives for plaintiffs that really do matter. Americans, for example, file claims about 3.5 times more often than Canadians.
The overall picture is still more complex, since there are major variations in medical malpractice rules in different American states, and differences within states, such as between juries in big cities and those in small towns. Doctrinal reform cannot stop these abuses. What is needed is the replacement of juries with specialized commissions like those in France, which help reduce litigation expenses and promote uniformity in case outcomes across regions.
What then does this quick survey teach us about the ability of our system to deter medical injuries and compensate its victims? Not much that's encouraging.
A study led by David Studdert published in the 2006 New England Journal of Medicine concluded that the administrative expenses of the malpractice system were "exorbitant." And worse, it found errors in jury verdicts in about a quarter of the litigated cases. Juries denied compensation properly due in 16% of the cases, and awarded it about 10% of the time when it was unwarranted. These error rates don't include damage awards set at improper levels.
More disturbingly, a careful 1992 study by Donald Dewees and Michael Trebilcock in the Osgood Hall Law Journal concluded that the frequency of medical malpractice in Canada was about the same as in the U.S. -- for about 10% the total cost. In other words, our costly system doesn't seem to do much to deter malpractice. On medical malpractice at least, Canada does better than we do.
The U.S. cannot ignore serious reform. To be sure, medical malpractice premiums constitute well under 1% of the total U.S. health-care bill. But defensive medicine adds perhaps as much as 10%. High malpractice costs can shut down clinics that serve vulnerable populations, leading to more patient harm than the occasional case of malpractice.
The best reform would be to allow physicians, hospitals and patients to contract out of the liability mess by letting the parties reject state-imposed malpractice rules. They could, for example, choose to arbitrate, to waive jury trials, or to limit damage recovery. Stiff competition and the need to maintain reputation should keep medical providers in line in such a system. Market-based solutions that make the private sector more responsive should in turn undermine the case for moving head-first into a government-run health-care system with vast, unintended inefficiencies of its own.
Mr. Epstein is a professor of law at the University of Chicago, a senior fellow at the Hoover Institution, and a visiting professor at NYU Law School.
WaPo: The House considers a sensible bill to rein in the president's power to exclude court evidence
Fixing Abuses of State Secrets. WaPo Editorial
The House considers a sensible bill to rein in the president's power to exclude court evidence.
Monday, June 29, 2009
NO PRESIDENT should be trusted to be the sole arbiter of what evidence can and cannot be introduced in court. But that's essentially what has been happening for four decades in cases that touch on national security matters.
In the 1950s the Supreme Court gave the executive virtual carte blanche to determine what pieces of evidence or information must be withheld in civil lawsuits against the government; lower courts since then have routinely rubber-stamped the executive's secrecy claims.
The second Bush administration took the state secrets doctrine to new heights by arguing that an entire case should be dismissed -- sometimes at its earliest stages -- if it could touch on any information that could conceivably have national security ramifications. The Justice Department under President George W. Bush used this approach to try to quash litigation involving, among other things, domestic surveillance and extraordinary rendition (the forced transfer of detainees to countries where they may be tortured).
President Obama has said that the state secrets doctrine should be reformed, and he has promised to be more measured. Yet when confronted with actual cases the Obama Justice Department has adopted the same legal arguments as the Bush administration. The Obama administration, for example, recently asked the full U.S. Court of Appeals for the 9th Circuit to reconsider a panel decision that declined to dismiss a lawsuit brought by men who were subject to extraordinary rendition; the administration claimed that allowing the suit to go forward could harm national security. If Mr. Obama shapes a more circumscribed approach, as promised, that would be welcome.
But legislation is necessary to guarantee that all presidents abide by sensible rules that protect both national security and the ability of litigants to make their case in court. Rep. Jerrold Nadler (D-N.Y.) is the primary sponsor of legislation that sets out such rules; similar legislation has also been introduced in the Senate.
Under the State Secret Protection Act of 2009, a federal judge would be the arbiter and would make determinations on specific pieces of evidence. If a particular document or piece of evidence were deemed by the judge to be too sensitive to be shared with the plaintiff's lawyer, the government would be obligated to provide a redacted copy or, if that proved unworkable, an unclassified summary of what the evidence shows. If this approach still presented the risk of a national security breach, the judge could exclude the information but allow the plaintiff to proceed with the litigation unless the excluded information was absolutely necessary to the case. In these instances, the judge would be empowered to dismiss the case.
Independent scrutiny is necessary to ensure that the state secrets doctrine is being used legitimately and not to cover up embarrassing or incriminating evidence or episodes. The proposed legislation strikes the appropriate balance.
The House considers a sensible bill to rein in the president's power to exclude court evidence.
Monday, June 29, 2009
NO PRESIDENT should be trusted to be the sole arbiter of what evidence can and cannot be introduced in court. But that's essentially what has been happening for four decades in cases that touch on national security matters.
In the 1950s the Supreme Court gave the executive virtual carte blanche to determine what pieces of evidence or information must be withheld in civil lawsuits against the government; lower courts since then have routinely rubber-stamped the executive's secrecy claims.
The second Bush administration took the state secrets doctrine to new heights by arguing that an entire case should be dismissed -- sometimes at its earliest stages -- if it could touch on any information that could conceivably have national security ramifications. The Justice Department under President George W. Bush used this approach to try to quash litigation involving, among other things, domestic surveillance and extraordinary rendition (the forced transfer of detainees to countries where they may be tortured).
President Obama has said that the state secrets doctrine should be reformed, and he has promised to be more measured. Yet when confronted with actual cases the Obama Justice Department has adopted the same legal arguments as the Bush administration. The Obama administration, for example, recently asked the full U.S. Court of Appeals for the 9th Circuit to reconsider a panel decision that declined to dismiss a lawsuit brought by men who were subject to extraordinary rendition; the administration claimed that allowing the suit to go forward could harm national security. If Mr. Obama shapes a more circumscribed approach, as promised, that would be welcome.
But legislation is necessary to guarantee that all presidents abide by sensible rules that protect both national security and the ability of litigants to make their case in court. Rep. Jerrold Nadler (D-N.Y.) is the primary sponsor of legislation that sets out such rules; similar legislation has also been introduced in the Senate.
Under the State Secret Protection Act of 2009, a federal judge would be the arbiter and would make determinations on specific pieces of evidence. If a particular document or piece of evidence were deemed by the judge to be too sensitive to be shared with the plaintiff's lawyer, the government would be obligated to provide a redacted copy or, if that proved unworkable, an unclassified summary of what the evidence shows. If this approach still presented the risk of a national security breach, the judge could exclude the information but allow the plaintiff to proceed with the litigation unless the excluded information was absolutely necessary to the case. In these instances, the judge would be empowered to dismiss the case.
Independent scrutiny is necessary to ensure that the state secrets doctrine is being used legitimately and not to cover up embarrassing or incriminating evidence or episodes. The proposed legislation strikes the appropriate balance.
A Primer on the Employee Free Choice Act's Arbitration Provision
A Primer on the Employee Free Choice Act's Arbitration Provision. By F. Vincent Vernuccio
CEI, Jun 25, 2009
In the ongoing debate over the Employee Free Choice Act (EFCA, H.R. 1409, S 560), the Act’s card check provision has received a great deal of attention. This provision would effectively eliminate the secret ballot in union certification elections in favor of the card check process, in which union organizers ask workers to sign union cards out in the open. This exposes workers to high-pressure tactics that the secret ballot is designed to avoid. By focusing on its undemocratic nature, EFCA opponents have helped muster popular opposition to card check, and the bill has failed to move forward in Congress. However, EFCA supporters are now looking to craft a “compromise,” which would retain other harmful provisions in EFCA.
The Employee Free Choice Act’s Section 3, “Facilitating Initial Collective Bargaining Agreements,” has not received nearly as much attention as card check, but its implications could be enormous. If enacted as part of an EFCA “compromise,” it could fundamentally change the way businesses deal with their employees. Section 3 of EFCA empowers the federal government to impose mandatory binding compulsory interest arbitration, whereby government representatives are enjoined to create a fresh contract from scratch. It would allow the government to write “first contracts” between employers and unions even if one party objects.
Full Document Available in PDF
CEI, Jun 25, 2009
In the ongoing debate over the Employee Free Choice Act (EFCA, H.R. 1409, S 560), the Act’s card check provision has received a great deal of attention. This provision would effectively eliminate the secret ballot in union certification elections in favor of the card check process, in which union organizers ask workers to sign union cards out in the open. This exposes workers to high-pressure tactics that the secret ballot is designed to avoid. By focusing on its undemocratic nature, EFCA opponents have helped muster popular opposition to card check, and the bill has failed to move forward in Congress. However, EFCA supporters are now looking to craft a “compromise,” which would retain other harmful provisions in EFCA.
The Employee Free Choice Act’s Section 3, “Facilitating Initial Collective Bargaining Agreements,” has not received nearly as much attention as card check, but its implications could be enormous. If enacted as part of an EFCA “compromise,” it could fundamentally change the way businesses deal with their employees. Section 3 of EFCA empowers the federal government to impose mandatory binding compulsory interest arbitration, whereby government representatives are enjoined to create a fresh contract from scratch. It would allow the government to write “first contracts” between employers and unions even if one party objects.
Full Document Available in PDF
Sunday, June 28, 2009
A Letter to Ali Khameini
A Letter to Ali Khameini. By PARVANEH VAHIDMANESH
Your daughter and I are both Neda's age.
The Wall Street Journal, Jun 29, 2009, p A11
Dear Ali Khamenei,
You may not have heard of me, but your daughter knows me well. For eight years, I studied with Boshra at the Refah school in Tehran. The Refah School is where Ayatollah Khomeini resided during the Islamic Revolution. On its roof, leaders from the Shah's regime were executed. Sound familiar?
Boshra and I played volleyball together. I remember how she always arrived at school in a white Toyota with three escorts. And I remember how favorably the teachers treated her.
I will never forget the time when every class was asked to raise money to send to Bosnia during the Serbia-Bosnia crisis. The class with the highest amount of money raised would be awarded with a field trip to Lavasoon, a city near Tehran.
The next day, we all emptied our piggy-banks and brought our money to school. All together, the school raised between 4,000-5,000 tomans, the Iranian unit of currency. The competition boiled down to a 10-20 tomans difference among all the classes. In the midst of this, your daughter suddenly appeared and handed in 30,000 tomans to her class on behalf of you. The game was over and her class won the contest by a huge margin. We all objected to the result, complaining that the contest was between the money gathered from students' own pockets, not from their fathers. But no one really took notice of us, and Boshra's class was declared the winner.
I have many similar stories, but I am not writing here to share my memories. Rather, I am here to confess that we, Boshra's classmates, are now part of those disruptive demonstrators you refer to during your speeches.
Neda Soltan, the young innocent girl who was killed on Karegar Avenue, was the same age as me and your daughter. She came to the demonstrations with no weapons or knives. All she carried with her was her voice, a voice that cried out in protest against your regime.
Who said the response to such cries is a bullet? You, just like the shah, silence the voices of protestors with gunshots. But don't forget that the shah's harsh methods undid him and caused his regime to fall. Neda has died and her voice will no longer call out to disturb your slumber. But I beg you to consider if the prophet lived his life the way you have? Islam permits irreligious or secular rulers. It does not permit tyrants. I pity you. All the blood you've spilled has forever stained your 70 years of worship and piety.
While you may not hear the nation's shouts of Allahu Akbar! (God is great) every night, I am sure your daughter hears them. Since you have violated and abused your countrymen's trust, they are now calling out to the only God they know for refuge. A nation that once was great is now called villainous because of people like Mahmoud Ahmadinejad. So the Iranians vehemently cast their ballots on election day to oppose him, only to have their rights trampled upon.
If you, contrary to what I believe, are not aware of what's going on in the streets of your country -- if tear gas hasn't burned your eyes and the sounds of gunfire haven't pierced your ears -- then Boshra can direct you to some of the information available on the Internet. Ask her to show you the photos of Neda's last moments in the street. Neda, just like Boshra, has a father and a family who deeply loved and cared for her. Like Boshra, Neda cherished a thousand dreams in her heart.
Ali Khamenei, if you pursue the path you have been following, our people's anger will take a different form. It will turn you and your family, as it did the shah's and his, into forlorn and helpless individuals with the word "exile" stamped across your foreheads.
Before it's too late for you and your family, realize that Neda's voice is here to stay.
Ms. Vahidmanesh is an Iranian human-rights activist living in Washington, D.C.
Your daughter and I are both Neda's age.
The Wall Street Journal, Jun 29, 2009, p A11
Dear Ali Khamenei,
You may not have heard of me, but your daughter knows me well. For eight years, I studied with Boshra at the Refah school in Tehran. The Refah School is where Ayatollah Khomeini resided during the Islamic Revolution. On its roof, leaders from the Shah's regime were executed. Sound familiar?
Boshra and I played volleyball together. I remember how she always arrived at school in a white Toyota with three escorts. And I remember how favorably the teachers treated her.
I will never forget the time when every class was asked to raise money to send to Bosnia during the Serbia-Bosnia crisis. The class with the highest amount of money raised would be awarded with a field trip to Lavasoon, a city near Tehran.
The next day, we all emptied our piggy-banks and brought our money to school. All together, the school raised between 4,000-5,000 tomans, the Iranian unit of currency. The competition boiled down to a 10-20 tomans difference among all the classes. In the midst of this, your daughter suddenly appeared and handed in 30,000 tomans to her class on behalf of you. The game was over and her class won the contest by a huge margin. We all objected to the result, complaining that the contest was between the money gathered from students' own pockets, not from their fathers. But no one really took notice of us, and Boshra's class was declared the winner.
I have many similar stories, but I am not writing here to share my memories. Rather, I am here to confess that we, Boshra's classmates, are now part of those disruptive demonstrators you refer to during your speeches.
Neda Soltan, the young innocent girl who was killed on Karegar Avenue, was the same age as me and your daughter. She came to the demonstrations with no weapons or knives. All she carried with her was her voice, a voice that cried out in protest against your regime.
Who said the response to such cries is a bullet? You, just like the shah, silence the voices of protestors with gunshots. But don't forget that the shah's harsh methods undid him and caused his regime to fall. Neda has died and her voice will no longer call out to disturb your slumber. But I beg you to consider if the prophet lived his life the way you have? Islam permits irreligious or secular rulers. It does not permit tyrants. I pity you. All the blood you've spilled has forever stained your 70 years of worship and piety.
While you may not hear the nation's shouts of Allahu Akbar! (God is great) every night, I am sure your daughter hears them. Since you have violated and abused your countrymen's trust, they are now calling out to the only God they know for refuge. A nation that once was great is now called villainous because of people like Mahmoud Ahmadinejad. So the Iranians vehemently cast their ballots on election day to oppose him, only to have their rights trampled upon.
If you, contrary to what I believe, are not aware of what's going on in the streets of your country -- if tear gas hasn't burned your eyes and the sounds of gunfire haven't pierced your ears -- then Boshra can direct you to some of the information available on the Internet. Ask her to show you the photos of Neda's last moments in the street. Neda, just like Boshra, has a father and a family who deeply loved and cared for her. Like Boshra, Neda cherished a thousand dreams in her heart.
Ali Khamenei, if you pursue the path you have been following, our people's anger will take a different form. It will turn you and your family, as it did the shah's and his, into forlorn and helpless individuals with the word "exile" stamped across your foreheads.
Before it's too late for you and your family, realize that Neda's voice is here to stay.
Ms. Vahidmanesh is an Iranian human-rights activist living in Washington, D.C.
Target: Hawaii - Missile defenses for Oahu, but cuts for the rest of us
Target: Hawaii. WSJ Editorial
Missile defenses for Oahu, but cuts for the rest of us.
The Wall Street Journal, Jun 29, 2009, p A12
The Pentagon recently announced that it is repositioning ground-to-air radar and missile defenses near Hawaii in case North Korea decides to launch another long-range missile, this time toward the Aloha State. So at least 1.3 million Hawaiians will benefit from defenses that many officials in the current Administration didn't even want to build.
But what about the rest of us? It's an odd time to be cutting missile defense, as the Obama Administration is doing in its 2010 budget -- by $1.2 billion to $1.6 billion, depending on how you calculate it. Programs to defend the U.S. homeland are being pared, while those that protect our soldiers or allies are being expanded after the Pentagon decided that the near-term threat is from short-range missiles. But as North Korea and Iran show, rogue regimes aren't far from having missiles that could reach the U.S.
In case you're not convinced about the threat, consider this exchange between Arizona Republican Trent Franks and Lieutenant-General Patrick O'Reilly, head of the Missile Defense Agency, in a hearing last month at the House Subcommittee on Strategic Forces:
Rep. Franks: "Do you believe that the threat from long-range missiles has increased or decreased in the last six months as it relates to the homeland here?"
Gen. O'Reilly: "Sir, I believe it has increased significantly. . . . The demonstration of capability of the Iranian ability to put a sat[ellite] into orbit, albeit small, shows that they are progressing in that technology. Additionally, the Iranians yesterday demonstrated a solid rocket motor test which is . . . disconcerting. Third, the North Koreans demonstrated . . . that they are improving in their capacity and we are very concerned about that."
This 2006 image provided by the U.S. Navy shows the heavy lift vessel MV Blue Marlin entering Pearl Harbor, Hawaii with the Sea Based X-Band Radar (SBX) aboard. Among the losers in the Administration's budget are the additional interceptors planned for the ground-based program in Alaska. The number will be limited to 30 interceptor missiles located at Fort Greely in Alaska and Vandenberg Air Force Base in California. Also on the chopping block is the Airborne Laser, which is designed to shoot down incoming missiles in the boost phase, before they can release decoys and at a point in the missile trajectory when it would fall back down on enemy territory. This highly promising technology will be starved.
The Administration may also kill the plan for a missile defense system in Europe. The proposed system, which would place interceptors in Poland and a radar in the Czech Republic, is intended to protect Europe against Iranian missiles. As is often forgotten, it would also protect the U.S., by providing an additional layer of defense for the Eastern seaboard, which is a long way from the Alaskan defenses.
The Administration is reconsidering the European site due to opposition from Moscow, which says -- though it knows it's false -- that the European system is intended to defeat Russian missiles. In advance of Barack Obama's visit to Russia next week, there's talk of "cooperation" on missile defense, possibly by adding radars in southern Russia and Azerbaijan. From a geographical perspective, neither location would add much as an Iranian missile headed for Western Europe or the U.S. would be on the periphery of the radars' vision, at best.
Meanwhile, Moscow says that unless the Administration backtracks on missile defense, it won't agree to mutual reductions in nuclear arsenals under the START Treaty, which expires this year. Mr. Obama is eager to negotiate arms cuts. But it would be a mistake to tie decisions on missile defense to anything except what is best for the security of the U.S. and its allies.
In Congress, bipartisan efforts are afoot to restore some of the funding for missile defense. But even if more money is forthcoming, the bigger problem is the new U.S. mindset. The Obama Administration is staffed with Cold War-era arms controllers who still believe missile defense is destabilizing -- except, apparently, now that they need it for Hawaii. They also reject the essential next phase, which is to make better use of space-based systems.
Missile defense is no techno-fantasy. The U.S. has made major strides since President Bush exercised the option to withdraw from the ABM Treaty in 2001. If North Korea launches a missile toward Hawaii, the best demonstration of that ability -- and of U.S. resolve -- would be to shoot it down.
Missile defenses for Oahu, but cuts for the rest of us.
The Wall Street Journal, Jun 29, 2009, p A12
The Pentagon recently announced that it is repositioning ground-to-air radar and missile defenses near Hawaii in case North Korea decides to launch another long-range missile, this time toward the Aloha State. So at least 1.3 million Hawaiians will benefit from defenses that many officials in the current Administration didn't even want to build.
But what about the rest of us? It's an odd time to be cutting missile defense, as the Obama Administration is doing in its 2010 budget -- by $1.2 billion to $1.6 billion, depending on how you calculate it. Programs to defend the U.S. homeland are being pared, while those that protect our soldiers or allies are being expanded after the Pentagon decided that the near-term threat is from short-range missiles. But as North Korea and Iran show, rogue regimes aren't far from having missiles that could reach the U.S.
In case you're not convinced about the threat, consider this exchange between Arizona Republican Trent Franks and Lieutenant-General Patrick O'Reilly, head of the Missile Defense Agency, in a hearing last month at the House Subcommittee on Strategic Forces:
Rep. Franks: "Do you believe that the threat from long-range missiles has increased or decreased in the last six months as it relates to the homeland here?"
Gen. O'Reilly: "Sir, I believe it has increased significantly. . . . The demonstration of capability of the Iranian ability to put a sat[ellite] into orbit, albeit small, shows that they are progressing in that technology. Additionally, the Iranians yesterday demonstrated a solid rocket motor test which is . . . disconcerting. Third, the North Koreans demonstrated . . . that they are improving in their capacity and we are very concerned about that."
This 2006 image provided by the U.S. Navy shows the heavy lift vessel MV Blue Marlin entering Pearl Harbor, Hawaii with the Sea Based X-Band Radar (SBX) aboard. Among the losers in the Administration's budget are the additional interceptors planned for the ground-based program in Alaska. The number will be limited to 30 interceptor missiles located at Fort Greely in Alaska and Vandenberg Air Force Base in California. Also on the chopping block is the Airborne Laser, which is designed to shoot down incoming missiles in the boost phase, before they can release decoys and at a point in the missile trajectory when it would fall back down on enemy territory. This highly promising technology will be starved.
The Administration may also kill the plan for a missile defense system in Europe. The proposed system, which would place interceptors in Poland and a radar in the Czech Republic, is intended to protect Europe against Iranian missiles. As is often forgotten, it would also protect the U.S., by providing an additional layer of defense for the Eastern seaboard, which is a long way from the Alaskan defenses.
The Administration is reconsidering the European site due to opposition from Moscow, which says -- though it knows it's false -- that the European system is intended to defeat Russian missiles. In advance of Barack Obama's visit to Russia next week, there's talk of "cooperation" on missile defense, possibly by adding radars in southern Russia and Azerbaijan. From a geographical perspective, neither location would add much as an Iranian missile headed for Western Europe or the U.S. would be on the periphery of the radars' vision, at best.
Meanwhile, Moscow says that unless the Administration backtracks on missile defense, it won't agree to mutual reductions in nuclear arsenals under the START Treaty, which expires this year. Mr. Obama is eager to negotiate arms cuts. But it would be a mistake to tie decisions on missile defense to anything except what is best for the security of the U.S. and its allies.
In Congress, bipartisan efforts are afoot to restore some of the funding for missile defense. But even if more money is forthcoming, the bigger problem is the new U.S. mindset. The Obama Administration is staffed with Cold War-era arms controllers who still believe missile defense is destabilizing -- except, apparently, now that they need it for Hawaii. They also reject the essential next phase, which is to make better use of space-based systems.
Missile defense is no techno-fantasy. The U.S. has made major strides since President Bush exercised the option to withdraw from the ABM Treaty in 2001. If North Korea launches a missile toward Hawaii, the best demonstration of that ability -- and of U.S. resolve -- would be to shoot it down.
The less credible the U.S. deterrent, the more likely other states are to seek weapons
Our Decaying Nuclear Deterrent. By JON KYL and RICHARD PERLE
The less credible the U.S. deterrent, the more likely other states are to seek weapons.
The Wall Street Journal, Jun 29, 2009, p A13
A bipartisan congressional commission, headed by some of our most experienced national security practitioners, recently concluded that a nuclear deterrent is essential to our defense for the foreseeable future. It also recommended that urgent measures be taken to keep that deterrent safe and effective.
Unfortunately, President Barack Obama has adopted an agenda that runs counter to the commission's recommendations.
Consider the president's declaration, in a major speech this spring in Prague, of "America's commitment to seek the peace and security of a world without nuclear weapons." Will such a world be peaceful and secure? It is far from self-evident.
In the nuclear-free world that ended in 1945 there was neither peace nor security. Since then there have indeed been many wars but none has come close to the carnage that occurred regularly before the development of nuclear weapons, and none has pitted nuclear powers against each other.
Consider also that while the administration accepts the urgency of halting the spread of nuclear weapons, the policies it has embraced to reach that goal are likely to make matters worse.
Thus, in his Prague speech, Mr. Obama announced that the U.S. would "immediately and aggressively" pursue ratification of the comprehensive ban on the testing of nuclear weapons. The administration believes, without evidence, that ratification of the test-ban treaty will discourage other countries from developing nuclear weapons.
Which countries does it have in mind? Iran? North Korea? Syria? Countries alarmed by the nuclear ambitions of their enemies? Allies who may one day lose confidence in our nuclear umbrella?
There are good reasons why the test-ban treaty has not been ratified. The attempt to do so in 1999 failed in the Senate, mostly out of concerns about verification -- it simply is not verifiable. It also failed because of an understandable reluctance on the part of the U.S. Senate to forgo forever a test program that could in the future be of critical importance for our defense and the defense of our allies.
Robert Gates, who is now Mr. Obama's own secretary of defense, warned in a speech last October that in the absence of a nuclear modernization program, even the most modest of which Congress has repeatedly declined to fund, "[a]t a certain point, it will become impossible to keep extending the life of our arsenal, especially in light of our testing moratorium." Suppose future problems in our nuclear arsenal emerge that cannot be solved without testing? Would our predicament discourage nuclear proliferation -- or stimulate it?
For the foreseeable future, the U.S. and many of our allies rely on our nuclear deterrent. And as long as the U.S. possesses nuclear weapons, they must be -- as Mr. Obama recognized in Prague -- "safe, secure and effective." Yet his proposed 2010 budget fails to take the necessary steps to do that.
Those steps have been studied extensively by the Perry-Schlesinger Commission (named for co-chairmen William Perry, secretary of defense under President Bill Clinton, and James R. Schlesinger, secretary of defense under Presidents Richard Nixon and Gerald Ford). Its consensus report, released in May, makes numerous recommendations to increase the funding for, and improve the effectiveness of, the deteriorating nuclear weapons laboratory complex (e.g., the Los Alamos facility in New Mexico, the Pantex plant in Texas, and the dangerously neglected Y-12 plant in Tennessee) that has become the soft underbelly of our deterrent force.
The commission also assessed the nuclear weapons infrastructure that is essential to a safe, secure and effective deterrent and declared it "in serious need of transformation." It looked at our laboratory-based scientific and technical expertise and concluded that "the intellectual infrastructure" is in "serious trouble." A major cause is woefully inadequate funding. The commission rightly argued that we must "exercise the full range of laboratory skills, including nuclear weapon design skills . . . Skills that are not exercised will atrophy." The president and the Congress must heed these recommendations.
There are some who believe that failing to invest adequately in our nuclear deterrent will move us closer to a nuclear free world. In fact, blocking crucial modernization means unilateral disarmament by unilateral obsolescence. This unilateral disarmament will only encourage nuclear proliferation, since our allies will see the danger and our adversaries the opportunity.
By neglecting -- and in some cases even opposing -- essential modernization programs, arms-control proponents are actually undermining the prospect for further reductions of the U.S. nuclear arsenal. As our nuclear weapons stockpile ages and concern about its reliability increases, we will have to compensate by retaining more nuclear weapons than would otherwise be the case. This reality will necessarily influence future arms-control negotiations, beginning with the upcoming Strategic Arms Reduction Treaty follow-on.
For these negotiations, the Russians are insisting on a false linkage between nuclear weapons and missile defenses. They are demanding that we abandon defenses against North Korean or Iranian missiles as a condition for mutual reductions in American and Russian strategic forces. As the president cuts the budget for missile defense and cedes ground to the Russians on our planned defense sites in Poland and the Czech Republic, we may end up abandoning a needed defense of the U.S. and our European allies from the looming Iranian threat.
There is a fashionable notion that if only we and the Russians reduced our nuclear forces, other nations would reduce their existing arsenals or abandon plans to acquire nuclear weapons altogether. This idea, an article of faith of the "soft power" approach to halting nuclear proliferation, assumes that the nuclear ambitions of Kim Jong Il or Mahmoud Ahmadinejad would be curtailed or abandoned in response to reductions in the American and Russian deterrent forces -- or that India, Pakistan or China would respond with reductions of their own.
This is dangerous, wishful thinking. If we were to approach zero nuclear weapons today, others would almost certainly try even harder to catapult to superpower status by acquiring a bomb or two. A robust American nuclear force is an essential discouragement to nuclear proliferators; a weak or uncertain force just the opposite.
George Shultz, William Perry, Henry Kissinger and Sam Nunn have, on this page, endorsed the distant goal -- about which we remain skeptical -- of a nuclear-free world. But none of them argues for getting there by neglecting our present nuclear deterrent. The Perry-Schlesinger Commission has provided a path for protecting that deterrent. Congress and the president should follow it, without delay.
Mr. Kyl is a Republican senator from Arizona. Mr. Perle, a fellow at the American Enterprise Institute, was assistant secretary of defense in the Reagan administration.
The less credible the U.S. deterrent, the more likely other states are to seek weapons.
The Wall Street Journal, Jun 29, 2009, p A13
A bipartisan congressional commission, headed by some of our most experienced national security practitioners, recently concluded that a nuclear deterrent is essential to our defense for the foreseeable future. It also recommended that urgent measures be taken to keep that deterrent safe and effective.
Unfortunately, President Barack Obama has adopted an agenda that runs counter to the commission's recommendations.
Consider the president's declaration, in a major speech this spring in Prague, of "America's commitment to seek the peace and security of a world without nuclear weapons." Will such a world be peaceful and secure? It is far from self-evident.
In the nuclear-free world that ended in 1945 there was neither peace nor security. Since then there have indeed been many wars but none has come close to the carnage that occurred regularly before the development of nuclear weapons, and none has pitted nuclear powers against each other.
Consider also that while the administration accepts the urgency of halting the spread of nuclear weapons, the policies it has embraced to reach that goal are likely to make matters worse.
Thus, in his Prague speech, Mr. Obama announced that the U.S. would "immediately and aggressively" pursue ratification of the comprehensive ban on the testing of nuclear weapons. The administration believes, without evidence, that ratification of the test-ban treaty will discourage other countries from developing nuclear weapons.
Which countries does it have in mind? Iran? North Korea? Syria? Countries alarmed by the nuclear ambitions of their enemies? Allies who may one day lose confidence in our nuclear umbrella?
There are good reasons why the test-ban treaty has not been ratified. The attempt to do so in 1999 failed in the Senate, mostly out of concerns about verification -- it simply is not verifiable. It also failed because of an understandable reluctance on the part of the U.S. Senate to forgo forever a test program that could in the future be of critical importance for our defense and the defense of our allies.
Robert Gates, who is now Mr. Obama's own secretary of defense, warned in a speech last October that in the absence of a nuclear modernization program, even the most modest of which Congress has repeatedly declined to fund, "[a]t a certain point, it will become impossible to keep extending the life of our arsenal, especially in light of our testing moratorium." Suppose future problems in our nuclear arsenal emerge that cannot be solved without testing? Would our predicament discourage nuclear proliferation -- or stimulate it?
For the foreseeable future, the U.S. and many of our allies rely on our nuclear deterrent. And as long as the U.S. possesses nuclear weapons, they must be -- as Mr. Obama recognized in Prague -- "safe, secure and effective." Yet his proposed 2010 budget fails to take the necessary steps to do that.
Those steps have been studied extensively by the Perry-Schlesinger Commission (named for co-chairmen William Perry, secretary of defense under President Bill Clinton, and James R. Schlesinger, secretary of defense under Presidents Richard Nixon and Gerald Ford). Its consensus report, released in May, makes numerous recommendations to increase the funding for, and improve the effectiveness of, the deteriorating nuclear weapons laboratory complex (e.g., the Los Alamos facility in New Mexico, the Pantex plant in Texas, and the dangerously neglected Y-12 plant in Tennessee) that has become the soft underbelly of our deterrent force.
The commission also assessed the nuclear weapons infrastructure that is essential to a safe, secure and effective deterrent and declared it "in serious need of transformation." It looked at our laboratory-based scientific and technical expertise and concluded that "the intellectual infrastructure" is in "serious trouble." A major cause is woefully inadequate funding. The commission rightly argued that we must "exercise the full range of laboratory skills, including nuclear weapon design skills . . . Skills that are not exercised will atrophy." The president and the Congress must heed these recommendations.
There are some who believe that failing to invest adequately in our nuclear deterrent will move us closer to a nuclear free world. In fact, blocking crucial modernization means unilateral disarmament by unilateral obsolescence. This unilateral disarmament will only encourage nuclear proliferation, since our allies will see the danger and our adversaries the opportunity.
By neglecting -- and in some cases even opposing -- essential modernization programs, arms-control proponents are actually undermining the prospect for further reductions of the U.S. nuclear arsenal. As our nuclear weapons stockpile ages and concern about its reliability increases, we will have to compensate by retaining more nuclear weapons than would otherwise be the case. This reality will necessarily influence future arms-control negotiations, beginning with the upcoming Strategic Arms Reduction Treaty follow-on.
For these negotiations, the Russians are insisting on a false linkage between nuclear weapons and missile defenses. They are demanding that we abandon defenses against North Korean or Iranian missiles as a condition for mutual reductions in American and Russian strategic forces. As the president cuts the budget for missile defense and cedes ground to the Russians on our planned defense sites in Poland and the Czech Republic, we may end up abandoning a needed defense of the U.S. and our European allies from the looming Iranian threat.
There is a fashionable notion that if only we and the Russians reduced our nuclear forces, other nations would reduce their existing arsenals or abandon plans to acquire nuclear weapons altogether. This idea, an article of faith of the "soft power" approach to halting nuclear proliferation, assumes that the nuclear ambitions of Kim Jong Il or Mahmoud Ahmadinejad would be curtailed or abandoned in response to reductions in the American and Russian deterrent forces -- or that India, Pakistan or China would respond with reductions of their own.
This is dangerous, wishful thinking. If we were to approach zero nuclear weapons today, others would almost certainly try even harder to catapult to superpower status by acquiring a bomb or two. A robust American nuclear force is an essential discouragement to nuclear proliferators; a weak or uncertain force just the opposite.
George Shultz, William Perry, Henry Kissinger and Sam Nunn have, on this page, endorsed the distant goal -- about which we remain skeptical -- of a nuclear-free world. But none of them argues for getting there by neglecting our present nuclear deterrent. The Perry-Schlesinger Commission has provided a path for protecting that deterrent. Congress and the president should follow it, without delay.
Mr. Kyl is a Republican senator from Arizona. Mr. Perle, a fellow at the American Enterprise Institute, was assistant secretary of defense in the Reagan administration.
Honduras Defends Its Democracy - Fidel Castro and Hillary Clinton object
Honduras Defends Its Democracy. By MARY ANASTASIA O'GRADY
Fidel Castro and Hillary Clinton object.
The Wall Street Journal, Jun 29, 2009, p A11
Hugo Chávez's coalition-building efforts suffered a setback yesterday when the Honduran military sent its president packing for abusing the nation's constitution.
It seems that President Mel Zelaya miscalculated when he tried to emulate the success of his good friend Hugo in reshaping the Honduran Constitution to his liking.
But Honduras is not out of the Venezuelan woods yet. Yesterday the Central American country was being pressured to restore the authoritarian Mr. Zelaya by the likes of Fidel Castro, Daniel Ortega, Hillary Clinton and, of course, Hugo himself. The Organization of American States, having ignored Mr. Zelaya's abuses, also wants him back in power. It will be a miracle if Honduran patriots can hold their ground.
That Mr. Zelaya acted as if he were above the law, there is no doubt. While Honduran law allows for a constitutional rewrite, the power to open that door does not lie with the president. A constituent assembly can only be called through a national referendum approved by its Congress.
But Mr. Zelaya declared the vote on his own and had Mr. Chávez ship him the necessary ballots from Venezuela. The Supreme Court ruled his referendum unconstitutional, and it instructed the military not to carry out the logistics of the vote as it normally would do.
The top military commander, Gen. Romeo Vásquez Velásquez, told the president that he would have to comply. Mr. Zelaya promptly fired him. The Supreme Court ordered him reinstated. Mr. Zelaya refused.
Calculating that some critical mass of Hondurans would take his side, the president decided he would run the referendum himself. So on Thursday he led a mob that broke into the military installation where the ballots from Venezuela were being stored and then had his supporters distribute them in defiance of the Supreme Court's order.
The attorney general had already made clear that the referendum was illegal, and he further announced that he would prosecute anyone involved in carrying it out. Yesterday, Mr. Zelaya was arrested by the military and is now in exile in Costa Rica.
It remains to be seen what Mr. Zelaya's next move will be. It's not surprising that chavistas throughout the region are claiming that he was victim of a military coup. They want to hide the fact that the military was acting on a court order to defend the rule of law and the constitution, and that the Congress asserted itself for that purpose, too.
Mrs. Clinton has piled on as well. Yesterday she accused Honduras of violating "the precepts of the Interamerican Democratic Charter" and said it "should be condemned by all." Fidel Castro did just that. Mr. Chávez pledged to overthrow the new government.
Honduras is fighting back by strictly following the constitution. The Honduran Congress met in emergency session yesterday and designated its president as the interim executive as stipulated in Honduran law. It also said that presidential elections set for November will go forward. The Supreme Court later said that the military acted on its orders. It also said that when Mr. Zelaya realized that he was going to be prosecuted for his illegal behavior, he agreed to an offer to resign in exchange for safe passage out of the country. Mr. Zelaya denies it.
Many Hondurans are going to be celebrating Mr. Zelaya's foreign excursion. Street protests against his heavy-handed tactics had already begun last week. On Friday a large number of military reservists took their turn. "We won't go backwards," one sign said. "We want to live in peace, freedom and development."
Besides opposition from the Congress, the Supreme Court, the electoral tribunal and the attorney general, the president had also become persona non grata with the Catholic Church and numerous evangelical church leaders. On Thursday evening his own party in Congress sponsored a resolution to investigate whether he is mentally unfit to remain in office.
For Hondurans who still remember military dictatorship, Mr. Zelaya also has another strike against him: He keeps rotten company. Earlier this month he hosted an OAS general assembly and led the effort, along side OAS Secretary General José Miguel Insulza, to bring Cuba back into the supposedly democratic organization.
The OAS response is no surprise. Former Argentine Ambassador to the U.N. Emilio Cárdenas told me on Saturday that he was concerned that "the OAS under Insulza has not taken seriously the so-called 'democratic charter.' It seems to believe that only military 'coups' can challenge democracy. The truth is that democracy can be challenged from within, as the experiences of Venezuela, Bolivia, Ecuador, Nicaragua, and now Honduras, prove." A less-kind interpretation of Mr. Insulza's judgment is that he doesn't mind the Chávez-style coup.
The struggle against chavismo has never been about left-right politics. It is about defending the independence of institutions that keep presidents from becoming dictators. This crisis clearly delineates the problem. In failing to come to the aid of checks and balances, Mrs. Clinton and Mr. Insulza expose their true colors.
Fidel Castro and Hillary Clinton object.
The Wall Street Journal, Jun 29, 2009, p A11
Hugo Chávez's coalition-building efforts suffered a setback yesterday when the Honduran military sent its president packing for abusing the nation's constitution.
It seems that President Mel Zelaya miscalculated when he tried to emulate the success of his good friend Hugo in reshaping the Honduran Constitution to his liking.
But Honduras is not out of the Venezuelan woods yet. Yesterday the Central American country was being pressured to restore the authoritarian Mr. Zelaya by the likes of Fidel Castro, Daniel Ortega, Hillary Clinton and, of course, Hugo himself. The Organization of American States, having ignored Mr. Zelaya's abuses, also wants him back in power. It will be a miracle if Honduran patriots can hold their ground.
That Mr. Zelaya acted as if he were above the law, there is no doubt. While Honduran law allows for a constitutional rewrite, the power to open that door does not lie with the president. A constituent assembly can only be called through a national referendum approved by its Congress.
But Mr. Zelaya declared the vote on his own and had Mr. Chávez ship him the necessary ballots from Venezuela. The Supreme Court ruled his referendum unconstitutional, and it instructed the military not to carry out the logistics of the vote as it normally would do.
The top military commander, Gen. Romeo Vásquez Velásquez, told the president that he would have to comply. Mr. Zelaya promptly fired him. The Supreme Court ordered him reinstated. Mr. Zelaya refused.
Calculating that some critical mass of Hondurans would take his side, the president decided he would run the referendum himself. So on Thursday he led a mob that broke into the military installation where the ballots from Venezuela were being stored and then had his supporters distribute them in defiance of the Supreme Court's order.
The attorney general had already made clear that the referendum was illegal, and he further announced that he would prosecute anyone involved in carrying it out. Yesterday, Mr. Zelaya was arrested by the military and is now in exile in Costa Rica.
It remains to be seen what Mr. Zelaya's next move will be. It's not surprising that chavistas throughout the region are claiming that he was victim of a military coup. They want to hide the fact that the military was acting on a court order to defend the rule of law and the constitution, and that the Congress asserted itself for that purpose, too.
Mrs. Clinton has piled on as well. Yesterday she accused Honduras of violating "the precepts of the Interamerican Democratic Charter" and said it "should be condemned by all." Fidel Castro did just that. Mr. Chávez pledged to overthrow the new government.
Honduras is fighting back by strictly following the constitution. The Honduran Congress met in emergency session yesterday and designated its president as the interim executive as stipulated in Honduran law. It also said that presidential elections set for November will go forward. The Supreme Court later said that the military acted on its orders. It also said that when Mr. Zelaya realized that he was going to be prosecuted for his illegal behavior, he agreed to an offer to resign in exchange for safe passage out of the country. Mr. Zelaya denies it.
Many Hondurans are going to be celebrating Mr. Zelaya's foreign excursion. Street protests against his heavy-handed tactics had already begun last week. On Friday a large number of military reservists took their turn. "We won't go backwards," one sign said. "We want to live in peace, freedom and development."
Besides opposition from the Congress, the Supreme Court, the electoral tribunal and the attorney general, the president had also become persona non grata with the Catholic Church and numerous evangelical church leaders. On Thursday evening his own party in Congress sponsored a resolution to investigate whether he is mentally unfit to remain in office.
For Hondurans who still remember military dictatorship, Mr. Zelaya also has another strike against him: He keeps rotten company. Earlier this month he hosted an OAS general assembly and led the effort, along side OAS Secretary General José Miguel Insulza, to bring Cuba back into the supposedly democratic organization.
The OAS response is no surprise. Former Argentine Ambassador to the U.N. Emilio Cárdenas told me on Saturday that he was concerned that "the OAS under Insulza has not taken seriously the so-called 'democratic charter.' It seems to believe that only military 'coups' can challenge democracy. The truth is that democracy can be challenged from within, as the experiences of Venezuela, Bolivia, Ecuador, Nicaragua, and now Honduras, prove." A less-kind interpretation of Mr. Insulza's judgment is that he doesn't mind the Chávez-style coup.
The struggle against chavismo has never been about left-right politics. It is about defending the independence of institutions that keep presidents from becoming dictators. This crisis clearly delineates the problem. In failing to come to the aid of checks and balances, Mrs. Clinton and Mr. Insulza expose their true colors.
Saturday, June 27, 2009
U.S. Department of State Releases Fourth Annual Report to Congress on Water and Sanitation Strategy in Developing Countries
U.S. Department of State Releases Fourth Annual Report to Congress on Water and Sanitation Strategy in Developing Countries
US State Dept, Washington, DC, June 27, 2009
On June 26, 2009, the U.S. Department of State released the 2009 Senator Paul Simon Water for the Poor Act of 2005 Report to Congress (PDF) describing U.S. Government efforts to expand access to safe drinking water and sanitation, improve water resources management and increase water productivity in developing countries.
This report is required by Section 6 of the Senator Paul Simon Water for the Poor Act of 2005. The Act makes the provision of safe water and sanitation services in developing countries a component of U.S. foreign assistance. It requires the Secretary of State, in consultation with USAID, to develop and implement a strategy to support this goal within the context of sound water resource management. This is the Fourth Report to Congress.
In FY 2008, the United States obligated more than $1 billion for water- and sanitation-related activities in developing countries (excluding Iraq). Of that amount, over $820 million was obligated in 95 countries worldwide to improve access to safe drinking water and sanitation and promote hygiene. Investments in Sub-Saharan Africa rose to $646 million in FY 2008.
The United States remains one of the largest bilateral donors to water and sanitation activities in developing countries, accounting for 10 percent of all official assistance to the water and sanitation sector in 2006–2007. The United States also remains one of the largest donors to several multilateral development banks and intergovernmental organizations, which are significant contributors to water and sanitation projects. More important are the results we are achieving. As a result of USAID investments, more than 7.7 million people received improved access to safe drinking water and more than 6.2 million received improved access to sanitation. Of these, more than 4.6 million received first-time access to an improved drinking water source and more than 2.1 million to improved sanitation.
This year’s report includes – for the first time – country specific plans for achieving U.S. goals and objectives along with measurable indicators to track progress and report results. The report also highlights the work of U.S. agencies and departments to build partnerships, improve science and technology capacity, and increase the political will among developing and donor countries to address water and sanitation challenges.
We believe these are significant steps that represent a growing commitment by the United States to make water a core element of our foreign assistance. This and previous reports in response to the Act can be found at www.state.gov/g/oes/water.
PRN: 2009/650
US State Dept, Washington, DC, June 27, 2009
On June 26, 2009, the U.S. Department of State released the 2009 Senator Paul Simon Water for the Poor Act of 2005 Report to Congress (PDF) describing U.S. Government efforts to expand access to safe drinking water and sanitation, improve water resources management and increase water productivity in developing countries.
This report is required by Section 6 of the Senator Paul Simon Water for the Poor Act of 2005. The Act makes the provision of safe water and sanitation services in developing countries a component of U.S. foreign assistance. It requires the Secretary of State, in consultation with USAID, to develop and implement a strategy to support this goal within the context of sound water resource management. This is the Fourth Report to Congress.
In FY 2008, the United States obligated more than $1 billion for water- and sanitation-related activities in developing countries (excluding Iraq). Of that amount, over $820 million was obligated in 95 countries worldwide to improve access to safe drinking water and sanitation and promote hygiene. Investments in Sub-Saharan Africa rose to $646 million in FY 2008.
The United States remains one of the largest bilateral donors to water and sanitation activities in developing countries, accounting for 10 percent of all official assistance to the water and sanitation sector in 2006–2007. The United States also remains one of the largest donors to several multilateral development banks and intergovernmental organizations, which are significant contributors to water and sanitation projects. More important are the results we are achieving. As a result of USAID investments, more than 7.7 million people received improved access to safe drinking water and more than 6.2 million received improved access to sanitation. Of these, more than 4.6 million received first-time access to an improved drinking water source and more than 2.1 million to improved sanitation.
This year’s report includes – for the first time – country specific plans for achieving U.S. goals and objectives along with measurable indicators to track progress and report results. The report also highlights the work of U.S. agencies and departments to build partnerships, improve science and technology capacity, and increase the political will among developing and donor countries to address water and sanitation challenges.
We believe these are significant steps that represent a growing commitment by the United States to make water a core element of our foreign assistance. This and previous reports in response to the Act can be found at www.state.gov/g/oes/water.
PRN: 2009/650
The Washington Post Discovers the Problems with Energy Subsidies
The Washington Post Discovers the Problems with Energy Subsidies.
Institute for Energy Research, Jun 24, 2009
From the Washington Post editors:
"Uncertainties abound: What if the costs of clean coal don’t come down enough to make it economical relative to other measures? If clean coal turns out to be less than its advocates envision, can Congress ever work up the political will to kill the subsidy program? Subsidies are set to phase out after 10 years of paying for operating costs, but won’t powerful coal-state lawmakers fight to keep them going? And even if it does work, won’t members of Congress insist that big carbon repositories not be located in their districts?"
Institute for Energy Research, Jun 24, 2009
From the Washington Post editors:
"Uncertainties abound: What if the costs of clean coal don’t come down enough to make it economical relative to other measures? If clean coal turns out to be less than its advocates envision, can Congress ever work up the political will to kill the subsidy program? Subsidies are set to phase out after 10 years of paying for operating costs, but won’t powerful coal-state lawmakers fight to keep them going? And even if it does work, won’t members of Congress insist that big carbon repositories not be located in their districts?"
Friday, June 26, 2009
Obama, the Neocons and Iran
Obama, the Neocons and Iran. By Robert McFarlane
The president's new foreign policy will be judged on this crisis.
WSJ, Jun 26, 2009
The president's new foreign policy will be judged on this crisis.
WSJ, Jun 26, 2009
Thursday, June 25, 2009
The Dangers of Fannie Mae Health Care - A public plan would have certain advantages. That's precisely the problem
The Dangers of Fannie Mae Health Care. By JOHN E. CALFEE
A public plan would have certain advantages. That's precisely the problem.
The Wall Street Journal, Jun 26, 2009, p A15
President Obama and most congressional Democrats say they want to preserve private health insurance. They also want to add a "public plan" to compete with private insurance plans. Their basic argument is that a public plan would offer needed competition, save money through low administrative costs and zero profits, realize greater economies of scale, and be a superior negotiator of the prices of medical services and technology.
The first three arguments are bogus. The fourth argument is only half-bogus -- but the half that isn't reveals a great danger: If a public plan is inserted into private insurance markets, the American health-care system could rapidly evolve into a single-payer system, which would have devastating effects on R&D for new medical technology.
The first argument, that we need a public plan to spur competition, just isn't plausible. Hundreds of health insurance plans already exist, and employer benefit managers can choose among numerous alternatives. There is no lack of firms willing to compete to provide health insurance.
As to the second argument, what is to be saved by avoiding profits? Nonprofit health insurance firms are common, including many of the Blue Cross-Blue Shield plans. Nonprofit status has not proved to be a reliable source of efficiency and cost-saving. The addition of new nonprofit cooperatives and the like -- as a bipartisan group of senators has proposed -- would make little difference, unless the new plans are given the power to set prices and take on extra risk supported by government subsidies.
Would a public plan have lower administrative costs? Well, how often are public enterprises run more efficiently than private ones? Why did practically all economically advanced nations dismantle their public airlines, phone companies, and so on, invariably obtaining lower administrative costs and consumer prices?
As Stanford University health economist Victor Fuchs has pointed out, what "insurance" firms actually sell to large employers -- which account for the single largest segment of the entire health-care market -- is usually administrative services, not actual insurance. (Large companies are not insured; they pay benefits directly.) There is no reason to expect a Medicare-like public plan to match the administrative efficiency of Aetna, Blue Cross-Blue Shield, Cigna, UnitedHealth Group, and WellPoint. Medicare doesn't even try. It outsources most administrative services to the private sector.
Turning to public plans like Medicare and Medicaid for more efficient administration is a fool's errand.
What about economies of scale? Aetna currently serves about 18 million subscribers, UnitedHealth Care serves between 25 million and 30 million, and WellPoint more than 35 million. That is more than is served by the health-care monopoly of Canada (population 33.6 million), and more than the entire health-care systems of most European nations. Once a plan reaches a few million subscribers, there may not be a lot of economies of scale left that can enable public plans to provide lower prices.
Finally, there is the crucial task of negotiating prices for doctors, hospitals, clinics, drugs, devices and thousands of other items essential to modern health care. Here, there are really two arguments for a public plan. The first is about bargaining skill and the firm size, basic ingredients in any negotiating environment.
There is no reason to think the administrators of a public plan will possess skills superior to those honed by private plan personnel during years of negotiations under the pressure of competition. Nor is there any reason to think that mere size would help.
True enough, relatively small European nations routinely obtain better drug prices than are achieved by mammoth American pharmacy benefit managers such as Express Scripts (50 million patients) and Medco (60 million patients), each of whose numbers exceed the entire citizenry of all but the largest European nations. Even sparsely populated New Zealand (population four million) gets better prices than the giant drug-price negotiators in the American private market.
Their success is due to what economists call "monopsony power." Monopsony occurs when a single buyer negotiates prices with several competing sellers (as opposed to monopoly, where there are many buyers but one seller).
Thus, if you want to sell your branded drug in New Zealand, your prices are negotiated with PharMac, a branch of the government. Much the same is true when selling to Canada, Germany, the Netherlands, and essentially the entire developed world save the United States. The negotiating power of these government entities results from monopsony, not superior skill.
For example, the various sellers of cholesterol drugs (Lipitor, Crestor, and so on) have to compete with one another while they all face a single government negotiator. If one seller balks at government prices, it leaves competitors to pick up more sales. The same is true for most other drug classes and most medical devices. This uneven battle ensures that negotiated prices will be well below those in a competitive market.
But here is where the huge risks of creating a "public plan" to compete with private insurance firms come into focus. Foremost among these risks are the effects of monopsony power in the purchase of medical technology.
The U.S. is unique because it alone is the source of half of world-wide profits that provide the payoff for the complex, lengthy, and expensive process of developing new treatments. When other nations construct their health-care systems, they ignore the impact of their pricing policies on R&D incentives. As the dominant R&D funding wellhead, we do not have that option.
Competitive markets have generated the prices and the profits necessary to induce a steady flow of medical innovation in this country. A public plan option would tend to dismantle that system. The people in charge will not know how to set reimbursement levels to motivate reasonable R&D efforts, and there is no reason to expect them to try. In public plans, the tried-and-true method is to push the prices of suppliers down until something gives -- too few doctors willing to take on Medicare patients, for example -- and then to ease up. That is a destructive approach to medical technology R&D.
Who knows what drugs will not be developed if reimbursement levels for a new multiple-sclerosis treatment are too measly? In virtually every advanced economy but our own, pricing authorities simply make sure prices are high enough so that existing drugs continue to be made available. We can expect a public plan here to do the same. The inevitable result is to drastically under-incentivize R&D.
This problem would not matter if a public plan remained small -- but it would likely grow into a monster. Monopsony negotiating power will generate lower prices, so many consumers will switch to a public plan. Employers eager to offload health-care costs will also dump unwilling employees into the public plan. That is the basis for the Lewin Group's much-cited prediction that a public plan would come to dominate any market in which it is allowed to compete.
Bargaining power, however, is far from the only potential source of below-market prices for public plans. In the home mortgage market, the public plans -- known as Fannie Mae and Freddie Mac -- were for years viewed by investors as less risky because they would be bailed out by the federal government if they took on too much risk. That translated into lower prices (the interest rates paid by borrowers), which eventually translated into extraordinary and unseemly growth, culminating in bankruptcy and a federal bailout.
The lesson for health insurance is clear. All insurance plans -- especially in health-care markets -- have to take on risk. Prudent planning, including the maintenance of reasonable financial reserves, is necessary. That increases costs. It would be all too easy for a public plan to gain a competitive advantage by taking on extra risk while keeping prices low because everyone would expect the federal government to take care of financial surprises down the road.
In sum, a public plan would possess formidable and perhaps overwhelming competitive advantages -- generated not by efficiency but by the artificial advantages of "public" status. This would have two disastrous consequences. The first will be to cause most Americans now covered by private insurance to move to public insurance -- one step away from single-payer health care. The second will be to undermine incentives to develop more of the immensely valuable medical technology that is central to all of health care.
Mr. Calfee is a resident scholar at the American Enterprise Institute.
A public plan would have certain advantages. That's precisely the problem.
The Wall Street Journal, Jun 26, 2009, p A15
President Obama and most congressional Democrats say they want to preserve private health insurance. They also want to add a "public plan" to compete with private insurance plans. Their basic argument is that a public plan would offer needed competition, save money through low administrative costs and zero profits, realize greater economies of scale, and be a superior negotiator of the prices of medical services and technology.
The first three arguments are bogus. The fourth argument is only half-bogus -- but the half that isn't reveals a great danger: If a public plan is inserted into private insurance markets, the American health-care system could rapidly evolve into a single-payer system, which would have devastating effects on R&D for new medical technology.
The first argument, that we need a public plan to spur competition, just isn't plausible. Hundreds of health insurance plans already exist, and employer benefit managers can choose among numerous alternatives. There is no lack of firms willing to compete to provide health insurance.
As to the second argument, what is to be saved by avoiding profits? Nonprofit health insurance firms are common, including many of the Blue Cross-Blue Shield plans. Nonprofit status has not proved to be a reliable source of efficiency and cost-saving. The addition of new nonprofit cooperatives and the like -- as a bipartisan group of senators has proposed -- would make little difference, unless the new plans are given the power to set prices and take on extra risk supported by government subsidies.
Would a public plan have lower administrative costs? Well, how often are public enterprises run more efficiently than private ones? Why did practically all economically advanced nations dismantle their public airlines, phone companies, and so on, invariably obtaining lower administrative costs and consumer prices?
As Stanford University health economist Victor Fuchs has pointed out, what "insurance" firms actually sell to large employers -- which account for the single largest segment of the entire health-care market -- is usually administrative services, not actual insurance. (Large companies are not insured; they pay benefits directly.) There is no reason to expect a Medicare-like public plan to match the administrative efficiency of Aetna, Blue Cross-Blue Shield, Cigna, UnitedHealth Group, and WellPoint. Medicare doesn't even try. It outsources most administrative services to the private sector.
Turning to public plans like Medicare and Medicaid for more efficient administration is a fool's errand.
What about economies of scale? Aetna currently serves about 18 million subscribers, UnitedHealth Care serves between 25 million and 30 million, and WellPoint more than 35 million. That is more than is served by the health-care monopoly of Canada (population 33.6 million), and more than the entire health-care systems of most European nations. Once a plan reaches a few million subscribers, there may not be a lot of economies of scale left that can enable public plans to provide lower prices.
Finally, there is the crucial task of negotiating prices for doctors, hospitals, clinics, drugs, devices and thousands of other items essential to modern health care. Here, there are really two arguments for a public plan. The first is about bargaining skill and the firm size, basic ingredients in any negotiating environment.
There is no reason to think the administrators of a public plan will possess skills superior to those honed by private plan personnel during years of negotiations under the pressure of competition. Nor is there any reason to think that mere size would help.
True enough, relatively small European nations routinely obtain better drug prices than are achieved by mammoth American pharmacy benefit managers such as Express Scripts (50 million patients) and Medco (60 million patients), each of whose numbers exceed the entire citizenry of all but the largest European nations. Even sparsely populated New Zealand (population four million) gets better prices than the giant drug-price negotiators in the American private market.
Their success is due to what economists call "monopsony power." Monopsony occurs when a single buyer negotiates prices with several competing sellers (as opposed to monopoly, where there are many buyers but one seller).
Thus, if you want to sell your branded drug in New Zealand, your prices are negotiated with PharMac, a branch of the government. Much the same is true when selling to Canada, Germany, the Netherlands, and essentially the entire developed world save the United States. The negotiating power of these government entities results from monopsony, not superior skill.
For example, the various sellers of cholesterol drugs (Lipitor, Crestor, and so on) have to compete with one another while they all face a single government negotiator. If one seller balks at government prices, it leaves competitors to pick up more sales. The same is true for most other drug classes and most medical devices. This uneven battle ensures that negotiated prices will be well below those in a competitive market.
But here is where the huge risks of creating a "public plan" to compete with private insurance firms come into focus. Foremost among these risks are the effects of monopsony power in the purchase of medical technology.
The U.S. is unique because it alone is the source of half of world-wide profits that provide the payoff for the complex, lengthy, and expensive process of developing new treatments. When other nations construct their health-care systems, they ignore the impact of their pricing policies on R&D incentives. As the dominant R&D funding wellhead, we do not have that option.
Competitive markets have generated the prices and the profits necessary to induce a steady flow of medical innovation in this country. A public plan option would tend to dismantle that system. The people in charge will not know how to set reimbursement levels to motivate reasonable R&D efforts, and there is no reason to expect them to try. In public plans, the tried-and-true method is to push the prices of suppliers down until something gives -- too few doctors willing to take on Medicare patients, for example -- and then to ease up. That is a destructive approach to medical technology R&D.
Who knows what drugs will not be developed if reimbursement levels for a new multiple-sclerosis treatment are too measly? In virtually every advanced economy but our own, pricing authorities simply make sure prices are high enough so that existing drugs continue to be made available. We can expect a public plan here to do the same. The inevitable result is to drastically under-incentivize R&D.
This problem would not matter if a public plan remained small -- but it would likely grow into a monster. Monopsony negotiating power will generate lower prices, so many consumers will switch to a public plan. Employers eager to offload health-care costs will also dump unwilling employees into the public plan. That is the basis for the Lewin Group's much-cited prediction that a public plan would come to dominate any market in which it is allowed to compete.
Bargaining power, however, is far from the only potential source of below-market prices for public plans. In the home mortgage market, the public plans -- known as Fannie Mae and Freddie Mac -- were for years viewed by investors as less risky because they would be bailed out by the federal government if they took on too much risk. That translated into lower prices (the interest rates paid by borrowers), which eventually translated into extraordinary and unseemly growth, culminating in bankruptcy and a federal bailout.
The lesson for health insurance is clear. All insurance plans -- especially in health-care markets -- have to take on risk. Prudent planning, including the maintenance of reasonable financial reserves, is necessary. That increases costs. It would be all too easy for a public plan to gain a competitive advantage by taking on extra risk while keeping prices low because everyone would expect the federal government to take care of financial surprises down the road.
In sum, a public plan would possess formidable and perhaps overwhelming competitive advantages -- generated not by efficiency but by the artificial advantages of "public" status. This would have two disastrous consequences. The first will be to cause most Americans now covered by private insurance to move to public insurance -- one step away from single-payer health care. The second will be to undermine incentives to develop more of the immensely valuable medical technology that is central to all of health care.
Mr. Calfee is a resident scholar at the American Enterprise Institute.
The Albany-Trenton-Sacramento Disease
The Albany-Trenton-Sacramento Disease. WSJ Editorial
How three liberal states got into deep trouble with 'progressive' ideas.
The Wall Street Journal, Jun 2009, p A14
President Obama has bet the economy on his program to grow the government and finance it with a more progressive tax system. It's hard to miss the irony that he's pitching this change in Washington even as the same governance model is imploding in three of the largest American states where it has been dominant for years -- California, New Jersey and New York.
A decade ago all three states were among America's most prosperous. California was the unrivaled technology center of the globe. New York was its financial capital. New Jersey is the third wealthiest state in the nation after Connecticut and Massachusetts. All three are now suffering from devastating budget deficits as the bills for years of tax-and-spend governance come due.
These states have been models of "progressive" policies that are supposed to create wealth: high tax rates on the rich, lots of government "investments," heavy unionization and a large government role in health care.
Here's a rundown on the results:
Government spending as economic stimulus. State-local spending per capita is $12,505 in New York (second highest after Alaska), $10,136 per person in California (fourth) and $9,574 in New Jersey (seventh).
Has all this public sector "investment" translated into jobs? Not quite. California had the nation's third highest jobless rate in May (11.5%). New Jersey and New York had below average unemployment rates in May compared to the national average of 9.4%, but one reason is that so many discouraged workers have left those states. From 1998-2007, which included two booms on Wall Street, New York and New Jersey ranked 36th and 31st in job creation. From 2000 to 2007, the New Jersey Business & Industry Association calculates that nine out of 10 new Garden State jobs were in the government.
Soak the rich. Mr. Obama plans to pay for his government investments through higher tax rates on the top 1% and 2% of taxpayers. Our troika of liberal states are champions at soaking the rich. The state-local income tax burden, according to the Tax Foundation, is the highest in the nation in New York, second highest in California and sixth in New Jersey. New York City boasts the highest business tax rate, 17.6%, according to a study by the American Legislative Exchange Council. Seven of the 10 highest property tax counties in America are located in New Jersey.
Instead of balanced budgets, these high taxes have produced record red ink. California's deficit for 2010 is projected at $33.9 billion, New Jersey's $7 billion and New York's $17.9 billion, despite multiple tax increases this decade. The Manhattan Institute finds that three-quarters of the loss in revenues this year in Albany is a result of reduced income tax payments by rich people even though the state keeps raising taxes on high earners.
California's debt burden has multiplied so fast that it now has the worst bond rating of any state, and Governor Arnold Schwarzenegger and state legislators are pleading with Washington to command the other 49 states to pay off its IOUs. The interest rates on Golden State bonds have nearly tripled in the last two years.
Powerful unions. Mr. Obama believes union power is a ticket to the middle class. The middle class is getting creamed in all three of these "progressive" states, where organized labor is king. The unionized share of the workforce is 20% in California, 19% in New Jersey and 27% in New York compared to 13% across the country. All three are non-right-to-work states, have super-minimum wage requirements and provide among the nation's most generous public-employee pensions.
Workers in these paradises are indeed uniting -- by leaving. New York ranks first, California second and New Jersey third in moving vans leaving the state. A study by the National Institute for Labor Relations Research found that over the past decade these and other high-union states (mostly in the Northeast) had one-third the job growth of states with low union penetration.
Government health care. New York, New Jersey and California are among the leading states in government spending on and intervention into the medical market. A 2008 study by the Pacific Research Institute ranked the states on the basis of government regulation of health care and found that New York is most regulated, while New Jersey ranks sixth and California seventh. "New York," the report declares, "suffers from government health programs that are out of control, a grossly overregulated private insurance market and almost completely uncompetitive provider markets."
Have government controls and Medicaid expansions ("the public option") lowered costs? Here is what the American Health Insurance Plans found. For family coverage annual premiums in 2006-07, the national median cost was roughly $5,300; in California it was $5,884, in New Jersey $10,398, and in New York $12,254. New York's coverage mandates cause families to pay more than twice what they do in other states for insurance.
As a result, California and New York have more than one-third of their residents uninsured or in Medicaid -- much higher than the national average of 25%. More government involvement in health care in California, New Jersey and New York has raised costs and often reduced private coverage. That's hardly a model for the nation.
* * *
So goes the real-life experience of progressive governance, with heavy tax burdens financing huge welfare states, and state capitals dominated by public-employee unions. Formerly rich states, they are now known for job losses, booming deficits and debt, wage stagnation, out-migration and laughing-stock legislatures. At least Americans have the ability to flee these ill-governed states for places that still welcome wealth creators. The debate in Washington now is whether to spread this antigrowth model across the entire country.
How three liberal states got into deep trouble with 'progressive' ideas.
The Wall Street Journal, Jun 2009, p A14
President Obama has bet the economy on his program to grow the government and finance it with a more progressive tax system. It's hard to miss the irony that he's pitching this change in Washington even as the same governance model is imploding in three of the largest American states where it has been dominant for years -- California, New Jersey and New York.
A decade ago all three states were among America's most prosperous. California was the unrivaled technology center of the globe. New York was its financial capital. New Jersey is the third wealthiest state in the nation after Connecticut and Massachusetts. All three are now suffering from devastating budget deficits as the bills for years of tax-and-spend governance come due.
These states have been models of "progressive" policies that are supposed to create wealth: high tax rates on the rich, lots of government "investments," heavy unionization and a large government role in health care.
Here's a rundown on the results:
Government spending as economic stimulus. State-local spending per capita is $12,505 in New York (second highest after Alaska), $10,136 per person in California (fourth) and $9,574 in New Jersey (seventh).
Has all this public sector "investment" translated into jobs? Not quite. California had the nation's third highest jobless rate in May (11.5%). New Jersey and New York had below average unemployment rates in May compared to the national average of 9.4%, but one reason is that so many discouraged workers have left those states. From 1998-2007, which included two booms on Wall Street, New York and New Jersey ranked 36th and 31st in job creation. From 2000 to 2007, the New Jersey Business & Industry Association calculates that nine out of 10 new Garden State jobs were in the government.
Soak the rich. Mr. Obama plans to pay for his government investments through higher tax rates on the top 1% and 2% of taxpayers. Our troika of liberal states are champions at soaking the rich. The state-local income tax burden, according to the Tax Foundation, is the highest in the nation in New York, second highest in California and sixth in New Jersey. New York City boasts the highest business tax rate, 17.6%, according to a study by the American Legislative Exchange Council. Seven of the 10 highest property tax counties in America are located in New Jersey.
Instead of balanced budgets, these high taxes have produced record red ink. California's deficit for 2010 is projected at $33.9 billion, New Jersey's $7 billion and New York's $17.9 billion, despite multiple tax increases this decade. The Manhattan Institute finds that three-quarters of the loss in revenues this year in Albany is a result of reduced income tax payments by rich people even though the state keeps raising taxes on high earners.
California's debt burden has multiplied so fast that it now has the worst bond rating of any state, and Governor Arnold Schwarzenegger and state legislators are pleading with Washington to command the other 49 states to pay off its IOUs. The interest rates on Golden State bonds have nearly tripled in the last two years.
Powerful unions. Mr. Obama believes union power is a ticket to the middle class. The middle class is getting creamed in all three of these "progressive" states, where organized labor is king. The unionized share of the workforce is 20% in California, 19% in New Jersey and 27% in New York compared to 13% across the country. All three are non-right-to-work states, have super-minimum wage requirements and provide among the nation's most generous public-employee pensions.
Workers in these paradises are indeed uniting -- by leaving. New York ranks first, California second and New Jersey third in moving vans leaving the state. A study by the National Institute for Labor Relations Research found that over the past decade these and other high-union states (mostly in the Northeast) had one-third the job growth of states with low union penetration.
Government health care. New York, New Jersey and California are among the leading states in government spending on and intervention into the medical market. A 2008 study by the Pacific Research Institute ranked the states on the basis of government regulation of health care and found that New York is most regulated, while New Jersey ranks sixth and California seventh. "New York," the report declares, "suffers from government health programs that are out of control, a grossly overregulated private insurance market and almost completely uncompetitive provider markets."
Have government controls and Medicaid expansions ("the public option") lowered costs? Here is what the American Health Insurance Plans found. For family coverage annual premiums in 2006-07, the national median cost was roughly $5,300; in California it was $5,884, in New Jersey $10,398, and in New York $12,254. New York's coverage mandates cause families to pay more than twice what they do in other states for insurance.
As a result, California and New York have more than one-third of their residents uninsured or in Medicaid -- much higher than the national average of 25%. More government involvement in health care in California, New Jersey and New York has raised costs and often reduced private coverage. That's hardly a model for the nation.
* * *
So goes the real-life experience of progressive governance, with heavy tax burdens financing huge welfare states, and state capitals dominated by public-employee unions. Formerly rich states, they are now known for job losses, booming deficits and debt, wage stagnation, out-migration and laughing-stock legislatures. At least Americans have the ability to flee these ill-governed states for places that still welcome wealth creators. The debate in Washington now is whether to spread this antigrowth model across the entire country.
Tax Credits, Not Vouchers, Are Keeping School Choice a Viable Option
Tax Credits, Not Vouchers, Are Keeping School Choice a Viable Option. By Adam B. Schaeffer Culpeper Star-Exponent on June 25, 2009.
Many school choice supporters are discouraged after having suffered a series of setbacks on the voucher front, ranging from the loss of Utah's nascent voucher program last year to the recent death sentence handed to the D.C. Opportunity Scholarship program. A rambling and inaccurate article in the normally supportive City Journal got the chorus of naysayers rolling more than a year ago with the cry "school choice isn't enough."
The bright spot for vouchers in recent years has been the success of special-needs programs. Yet the Arizona Supreme Court ruled recently that school vouchers for disabled and foster children violate the state constitution, which forbids public money from aiding private schools.
Naturally, the pessimists and opponents of choice are forecasting the death of the voucher movement. They're wrong, because there never was a voucher movement to begin with. It has always been movement for educational freedom, and it is still going strong.
Over the past several years, there has been a gradual shift in focus from vouchers to an alternative mechanism: education tax credits. Illinois, Minnesota and Iowa already provide families with tax credits to offset the cost of independent schooling for their own kids. Florida, Pennsylvania, Arizona and three other states provide tax credits for donations to nonprofit scholarship organizations that subsidize tuition for lower-income families.
The fundamental difference between these programs and vouchers is that while vouchers use public money, credits do not. Credits are targeted tax cuts, and no public dollars are spent with them. That single distinction is the reason Arizona's Supreme Court struck down two voucher programs in March, but upheld the state's scholarship donation tax credit program in 1999.
In fact, tax credit programs have withstood every lawsuit raised against them. Since 1995, seven tax credit programs have been passed and all are still in operation. Four voucher programs (in Florida, Colorado and now two in Arizona) have been struck down by the courts in that same time.
This does not mean that credits are invulnerable. Arizona credits just received a temporary setback from the 9th Circuit Court of Appeals that is sure to be reversed by the U.S. Supreme Court, as is the case with so many other 9th Circuit Court decisions. Vouchers have certainly enjoyed some important legal victories, but vouchers' use of government funds opens them up for attacks to which credits are far less susceptible.
Credit programs have not simply survived, they have thrived. Scholarship donation programs now support more than three times as many low-income children as do voucher programs, though they are generally of more recent vintage. Direct K-12 education tax credits are benefiting hundreds of thousands of families, albeit in more modest dollar amounts.
However, these are not the only reasons that supporters of educational freedom have increasingly begun to favor credits over vouchers. Credits better preserve the autonomy of independent schools, and they extend choice and accountability to taxpayers as well as parents. Taxpayers get to choose to participate in credit programs as well as pick the recipient organization for their funds if they do. In addition, credits command increasingly bipartisan political support.
So while advocates of educational freedom regret that vouchers have been under heavy fire in many states, tax credit programs can be created or expanded to accommodate the children formerly served by vouchers.
Adam B. Schaeffer is a policy analyst at the Cato Institute's Center for Educational Freedom and an adjunct senior fellow with the Education Reform Initiative at the Virginia Institute for Public Policy.
Many school choice supporters are discouraged after having suffered a series of setbacks on the voucher front, ranging from the loss of Utah's nascent voucher program last year to the recent death sentence handed to the D.C. Opportunity Scholarship program. A rambling and inaccurate article in the normally supportive City Journal got the chorus of naysayers rolling more than a year ago with the cry "school choice isn't enough."
The bright spot for vouchers in recent years has been the success of special-needs programs. Yet the Arizona Supreme Court ruled recently that school vouchers for disabled and foster children violate the state constitution, which forbids public money from aiding private schools.
Naturally, the pessimists and opponents of choice are forecasting the death of the voucher movement. They're wrong, because there never was a voucher movement to begin with. It has always been movement for educational freedom, and it is still going strong.
Over the past several years, there has been a gradual shift in focus from vouchers to an alternative mechanism: education tax credits. Illinois, Minnesota and Iowa already provide families with tax credits to offset the cost of independent schooling for their own kids. Florida, Pennsylvania, Arizona and three other states provide tax credits for donations to nonprofit scholarship organizations that subsidize tuition for lower-income families.
The fundamental difference between these programs and vouchers is that while vouchers use public money, credits do not. Credits are targeted tax cuts, and no public dollars are spent with them. That single distinction is the reason Arizona's Supreme Court struck down two voucher programs in March, but upheld the state's scholarship donation tax credit program in 1999.
In fact, tax credit programs have withstood every lawsuit raised against them. Since 1995, seven tax credit programs have been passed and all are still in operation. Four voucher programs (in Florida, Colorado and now two in Arizona) have been struck down by the courts in that same time.
This does not mean that credits are invulnerable. Arizona credits just received a temporary setback from the 9th Circuit Court of Appeals that is sure to be reversed by the U.S. Supreme Court, as is the case with so many other 9th Circuit Court decisions. Vouchers have certainly enjoyed some important legal victories, but vouchers' use of government funds opens them up for attacks to which credits are far less susceptible.
Credit programs have not simply survived, they have thrived. Scholarship donation programs now support more than three times as many low-income children as do voucher programs, though they are generally of more recent vintage. Direct K-12 education tax credits are benefiting hundreds of thousands of families, albeit in more modest dollar amounts.
However, these are not the only reasons that supporters of educational freedom have increasingly begun to favor credits over vouchers. Credits better preserve the autonomy of independent schools, and they extend choice and accountability to taxpayers as well as parents. Taxpayers get to choose to participate in credit programs as well as pick the recipient organization for their funds if they do. In addition, credits command increasingly bipartisan political support.
So while advocates of educational freedom regret that vouchers have been under heavy fire in many states, tax credit programs can be created or expanded to accommodate the children formerly served by vouchers.
Adam B. Schaeffer is a policy analyst at the Cato Institute's Center for Educational Freedom and an adjunct senior fellow with the Education Reform Initiative at the Virginia Institute for Public Policy.
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