Free Markets, Free People

Bruce McQuain

I Don’t Think That Means What He Thinks It Means

Dan Neil, an LA Times entertainment writer, takes this lesson from the GM bankruptcy:

The final chapter of that merger plays out this week as GM weathers a reorganization that will leave the federal government owning 70% of the company. In the midst of the deepest recession since the 1930s, it’s hard not to see GM’s bankruptcy as a signal moment in a larger history. If mighty GM can fail, cannot also the United States? And the answer is, absolutely.

This is the lesson of GM’s bankruptcy, and it has little to do with market share and miles per gallon. It’s a rebuff of the notion of exceptionalism. Any organization that fails to sufficiently safeguard its means of self-correction and reform, that forsakes long-term investment for short-term gain, that piles up debt year after year, will eventually fail, no matter how grand its history or noble its purpose. If you don’t feel the tingle of national mortality in all this, you’re not paying attention.

While I essentially agree with the thrust of his point, I don’t think the term “exceptionalism” as it is used when speaking of America, has anything to do with flouting the laws of economics. They are called “laws” for a reason, and no one has yet to find an “exception” to them. We have, however, discovered over and over again that attempts to make exceptions to them fail miserably.

The exceptionalism most speak of when they use the term in conjunction with America has to do with law, ethics and philosophy of life – the foundations of the country that make it exceptional. But economics? Of course we can “fail” if we do the stupid things we’re doing. And, unfortunately, we seem bound and determined right now to prove that point. But that has nothing to do with our “exceptionalism”.


Feldstein: Cap-and-Trade A “Bad Idea”

Martin Feldstein, a professor of economics at Harvard University, president emeritus of the nonprofit National Bureau of Economic Research, and former chairman of the Council of Economic Advisers from 1982 to 1984 has concluded that the Waxman/Markey cap-and-trade legislation is a bad idea. He comes to that conclusion for a number of reasons.

First, his understanding of the legislation and its economic impact:

The leading legislative proposal, the Waxman-Markey bill that was recently passed out of the House Energy and Commerce Committee, would reduce allowable CO2 emissions to 83 percent of the 2005 level by 2020, then gradually decrease the amount further. Under the cap-and-trade system, the federal government would limit the total volume of CO2 that U.S. companies can emit each year and would issue permits that companies would be required to have for each ton of CO2 emitted. Once issued, these permits would be tradable and could be bought and sold, establishing a market price reflecting the targeted CO2 reduction, with a tougher CO2 standard and fewer available permits leading to higher prices.

Companies would buy permits from each other as long as it is cheaper to do that than to make the technological changes needed to eliminate an equivalent amount of CO2 emissions. Companies would also pass along the cost of the permits in their prices, pushing up the relative price of CO2-intensive goods and services such as gasoline, electricity and a range of industrial products. Consumers would respond by cutting back on consumption of CO2-intensive products in favor of other goods and services. This pass-through of the permit cost in higher consumer prices is the primary way the cap-and-trade system would reduce the production of CO2 in the United States.

Note that he doesn’t play any games when talking about where the cost of such permits will end up – passed through to consumers. He prefers the CBO’s lower estimate of the impact per family of about $1,600 per “typical” family to some of the higher estimates in the $3,000 t0 $4,000. But they’re all estimates and they all say, even at the low end, that the impact is going to be significant.

Feldstein then looks at the possible payoff and challenges Americans to ask a very pertinent question. He also calls the plan exactly what it is – a tax:

Americans should ask themselves whether this annual tax of $1,600-plus per family is justified by the very small resulting decline in global CO2. Since the U.S. share of global CO2 production is now less than 25 percent (and is projected to decline as China and other developing nations grow), a 15 percent fall in U.S. CO2 output would lower global CO2 output by less than 4 percent. Its impact on global warming would be virtually unnoticeable.

But its impact on the American economy? Well, you don’t have to be a Harvard economist to figure that out. And a quick glance at Europe and how quickly most of the countries there figured out a way to ignore Kyoto should tell you the rest of the story.

Feldstein may or may not believe the theory that says CO2 is a pollutant and the cause of “global climate change”. But what is clear is he certainly doesn’t believe our seeming desire to strap ourselves economically without the big emitters (China and India) doing the same is a) worth it economically and b) make a bit of difference in real terms.  Doing it without those two and all others included is about as smart as committing to unilateral nuclear disarmarment.

Feldstein goes on to attack the pending cap-and-trade legislation for other reasons as well – mostly on a revenue and impact basis (and how revenue can soften the impact – yeah, subsidy – at the “payee” end – i.e. consumers.  Of course, only a certain class of consumers would most likely be eligable and it will be up to the more well-to-do to pay their “fair share”).  But the two big points of his criticism are the most important in my thinking.

1. It will, regardless of how it is structured, have a negative economic impact on every American household and thus our economy.

2. It won’t make a bit of real difference unless everyone is involved in such reductions.  Exclusion of the big emitters makes our “economic sacrifice” literally worthless in terms of the supposed overall goal of cutting CO2 worldwide.

Because of those two points alone, we should demand that such legislation be voted down.  I think the focus on CO2 is a load of unscientific nonsense, but politically that has no legs at this time.  But what does have legs is the argument summed up in those two points and opponents of cap-and-trade should use them (and Feldstein’s name) to make the argument against the pending legislation.


Podcast for 31 May 09

In this podcast, Bruce, Michael, Billy, and Dale discuss the economy and the Sotomayor nomination.

The direct link to the podcast can be found here.


The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.

North Korea: Tough Talk But Little Else

While at a conference in Singapore with Asian defense leaders, Sec. Gates did a little podium thumping about North Korea’s recent nuclear test:

“We will not stand idly by as North Korea builds the capability to wreak destruction on any target in Asia — or on us,” Mr. Gates told a major defense conference here that has been dominated by North Korea’s test this week of a nuclear device and the firing of at least six short-range missiles, all in defiance of international sanctions.

It took a foreign journalist to point out to Sec. Gates that while the US may not recognize North Korea as a nuclear weapons state, it was, in fact, already a “defacto nuclear weapons state.”

And, of course, it was important that Gates do a little apologizing to the assembled group as well, since this seems to now be an integral part of any foreign visit:

Mr. Gates concluded that the United States, “in our efforts to protect our own freedom, and that of others” had “from time to time made mistakes, including at times being arrogant in dealing with others.” Mr. Gates did not name names, but then said, “We always correct course.”

Other nations in the region weighed in on the North Korea nuclear test as well:

In Moscow, the Kremlin issued a statement saying President Dmitri A. Medvedev and Prime Minister Taro Aso of Japan had agreed on the need for a serious response to the nuclear test, Reuters reported.

As is usually the case in these sorts of situations, no one has any idea of what might constitute a “serious response” . In essence, the most “serious response” discussed thus far at the conference has been tightening sanctions.  And we know how well sanctions have worked in NoKo and Iran.

Unofficially, about all that’s gone on is this:

“There’s no prescription yet on what to do,” said a senior American defense official who asked for anonymity because he was not authorized to speak publicly. The official said that one “prudent option” was “what should we be thinking about in the event that we need to start enhancing our posture, our defenses?” But the official said that it was premature to talk of building up American forces in the region — an echo of comments from Mr. Gates on Friday that the United States had no plans to reinforce some 28,000 American troops based in South Korea.

Well there you go. China also had a few words to say as well:

“We are resolutely opposed to nuclear proliferation,” General Ma said, adding that “we hope that all parties concerned will remain cool-headed and take measured measures to address the problem.”

China is resolutely opposed to nuclear proliferation only after NoKo. That means it wants no nukes in Japan. And its admonishment to all to remain “cool-headed” and take “measured measures” means it is in no hurry to do much of anything about the present problem. Of course, China holds the key(s) to dealing with NoKo and everyone knows it.

So? So as usual, North Korea does what it chooses to do and nothing of significance is being done to “punish” it for doing so. I’m sure, as is the MO of the Obama administration, that the blame for all of this will be laid at the previous administration’s feet, but a quick perusal of history going back later than 8 years will show than no US administration has actually dealt effectively with North Korea and the present one isn’t going to be any different – despite its apology.


“Transparancy” Apparently Trumps The 1st Amendment

From the White House Blog in an entry written by Norm Eisen, special counsel to the president for ethics and government reform in “the spirit of transparancy”:

… [T]he President’s March 20, 2009 Memorandum on Ensuring Responsible Spending of Recovery Act Funds. Section 3 of the Memorandum required all oral communications between federally registered lobbyists and government officials concerning Recovery Act policy to be disclosed on the Internet; barred registered lobbyists from having oral communications with government officials about specific Recovery Act projects or applications and instead required those communications to be in writing; and also required those written communications to be posted on the Internet.

However, a couple of changes have been made, among them:

First, we will expand the restriction on oral communications to cover all persons, not just federally registered lobbyists. For the first time, we will reach contacts not only by registered lobbyists but also by unregistered ones, as well as anyone else exerting influence on the process. We concluded this was necessary under the unique circumstances of the stimulus program.

So thinking this through, could “anyone” include a TV or print reporter asking an oral question to a government official concerning Recovery Ac Policy? Or a particular Recovery Act project that might impact their viewership or readership? Is it possible the information provided, if government officials are subjected to such oral scrutiny, might end up “exerting influence on the process”?

How about a concerned citizen who happens to be a blogger?

Doesn’t this give government officials the cover to duck such oral inquiries?  How does that enhance transparency?

And ultimately, doesn’t this smack of a wee bit of a conflict with the 1st Amendment (free speech, free press, the right to petition government)?

And if “the unique circumstances of the stimulus program” are enough to limit 1st Amendment rights, per this paragon of “ethics and government reform, what other “unique circumstances” might be cited in the future to do the same sort of thing, given the precedent this sets?

As Mark Tapscott says:

This is the Camel’s nose under the tent, being poked because of special circumstances.

Carter Wood notes:

“Lobbyists and organizations that lobby complained that the White House’s restrictions on lobbying on stimulus fund projects were discriminatory and unfair because the same restrictions didn’t apply to people like corporate executives or officials. So these memorandumly noted changes address that fairness issue by expanding the ban on orally petitioning the government or expressing one’s views through speech. In the interests of transparency the First Amendment must be sacrificed.

“The restrictions are also ambiguous enough that a lobbyist or other petitioner won’t be sure how to fully comply. So if someone runs afoul of White House officials, a phone call to a news outlet or a friendly prosecutor can punish the offender. Ambiguous rules plus capricious application equals negative rule of law.”

The only transparency in this process is the fact that the White House is telling you the rule. But the rule then precludes oral questioning which might make the process even more transparent. If even the remote possibility exists that such communication might “exert influence on the process” then it is prohibited.

The White House’s apparent intent is to run a transparent process. The result is overreaching by the executive branch with poorly thought through restrictions on speech that are seemingly unconstitutional. The problem is they obviously don’t feel that to be the case. Or if they do, they think they should have the right to restrict certain forms of communication between government and anyone they decide if “unique circumstances” are existent (guess who get’s to determine whether they are or not?).

Frankly that should bother you.

However, fear not – I’m sure those that continually cited the Bush administration for alleged expansion of executive power will be among the first to address this obvious abuse of Constitutional power and call for an immediate revocation of the rule.


Real Voter Intimidation – No Biggie!

Remember the uproar during the 2004 presidential election about supposed voter disenfranchisement and voter intimidation that allegedly took place in Florida. Reports of blacks being stopped at police roadblocks and turned away from voting places? The Civil Rights Commission as well as numerous media outlets descended on the state in an attempt to validate the rumors. The story remains an urban myth to this day despite the fact that no evidence of any of that taking place was found.

Fast forward to the 2008 election and these video tapes:

What you would expect to happen, at the time and given the video evidence, happened:

The incident – which gained national attention when it was captured on videotape and distributed on YouTube – had prompted the government to sue the men, saying they violated the 1965 Voting Rights Act by scaring would-be voters with the weapon, racial slurs and military-style uniforms.

Career lawyers pursued the case for months, including obtaining an affidavit from a prominent 1960s civil rights activist who witnessed the confrontation and described it as “the most blatant form of voter intimidation” that he had seen, even during the voting rights crisis in Mississippi a half-century ago.

What happened next, however, wasn’t expected, although for most it comes as no real surprise:

The career Justice lawyers were on the verge of securing sanctions against the men earlier this month when their superiors ordered them to reverse course, according to interviews and documents. The court had already entered a default judgment against the men on April 20.

Got that? A default judgment. A done deal. Guilty.

But they were ordered to drop the charges and case and settle for this:

A Justice Department spokesman on Thursday confirmed that the agency had dropped the case, dismissing two of the men from the lawsuit with no penalty and winning an order against the third man that simply prohibits him from bringing a weapon to a polling place in future elections.

Ed Morrisey asks the pertinent question:

Recall, please, that Democrats screamed about the supposed politicization at Justice during Alberto Gonzales’ tenure as Attorney General for replacing political appointees who serve at the pleasure of the President. They claimed that the replacement of nine US Attorneys was a plan by the Bush administration, supposedly through Karl Rove and Harriet Miers, to affect the outcome of investigations and prosecutions. It touched off a Constitutional fight over executive privilege that continues to this day, as the House and Senate Judiciary Committees are still conducting its “investigations” into this supposed politicization.

This looks significantly more like politicization of outcomes that anything alleged during the Bush administration, especially since the DoJ already won the case. In fact, the government had prepared arguments for penalties against the men as late as May 5th, before the political commissars under Attorney General Eric Holder ordered them to withdraw. Holder, during his confirmation hearing, had called career DoJ lawyers his “teachers” and the “backbone” of Justice. Apparently, the political leadership trumps teachers and backbone when it comes to voter intimidation on behalf of Barack Obama.

So will the same Congressional committees open an investigation into this reversal to benefit voter intimidation on behalf of the administration?

Just as important, will the same portion of the leftosphere which went berserk over Gonzo and made a cottage industry of the allegations treat this obvious politicization of justice the same way they treated the alleged politicization by the Bush administration?

Methinks probably not.  Let the spinning (or ignoring) begin.


Spinning The China Climate Talk Failure

You really can’t blame her for trying to put – excuse the expression since it seems to have become cliche – lipstick on a pig, but Nancy Peolsi’s attempt to change China’s mind concerning curbing its CO2 seems to have been an abject failure.

Pelosi called them “hopeful”. That’s diplo-speak for “absolutely nothing substantial changed from the previously held position”. The fact that they even saw her would be deemed as “hopeful” but certainly not substantive.

Rep. James Sensenbrenner (R-WI) sums up the trip:

“It’s business as usual for China,” said Mr. Sensenbrenner, the ranking Republican on the House Select Committee for Energy Independence and Global Warming. “The message that I received was that China was going to do it their way regardless of what the rest of the world negotiates in Copenhagen.”

“Their way” consists of giving lip service to curbs while demanding the “rich nations” pay the freight for curbing such emissions in China (and the rest of the “emerging nations”). China refuses to jeopardize its economic growth for something it obviously believes is much less of a threat than others do.  And why should they when it appears the upcoming conference plans on exempting them anyway?

We, on the other hand, seem bound and determined to try to do what would be tantamount to the task of cleaning up the ocean up by putting economy wrecking filters only on our shore line. Little or no effect. China and India share similar philosophies on this question and are emerging as the number one and two emitters on the planet. I think they’re right. The threat, if there is one, is minimal at best. Wrecking one’s economy to hopefully make a less that one degree Celsius change at some distant point in the future (maybe) seems to me to be the height of folly.

But that’s certainly where our politicians seem to be headed. And, to compound the problem, they’ve adopted a “damn the torpedoes, full speed ahead” philosophy, ignoring the 10 year cooling trend torpedo as well as the “China and India” aren’t going to play along” torpedo.

No one wants dirty air or dirty water – no one. But this hysterical reaction to what seems to be a natural earth cycle and the human hubris which claims we both effect and can change that cycle is going to put us all in the poor house unless some sanity (like in China) prevails.


The Upcoming Swing Through The Middle East

So what’s on the Middle Eastern agenda for the Obama administration?

Frankly that’s the question being asked by a lot of foreign policy watchers right now, especially since President Obama has added Saudi Arabia to his trip itinerary for an upcoming trip to the area. Originally scheduled to first make a stop in Cairo for a speech, he is now stopping in SA first. This, of course, has the Egyptians a bit miffed. Egypt was touting his trip and speech to Cairo as a sort of vindication of their foreign policy as well as their resurgent leadership role among Arabs in the area. Now that’s not quite as easy to claim.

So why is he adding Riyadh?

One group sees it as tied closely to the Israeli-Palestinian track, focusing on the Arab Peace Initiative and the coming unveiling of the Obama approach to Israeli-Arab relations. Another sees it as tied more closely to Iran, preparing the Saudis for the coming engagement (or confrontation) with Tehran.

I happen to think it is a little bit of both, but mostly tied to Iran. NoKo has popped a nuke (and we’re aware of the ties between Pyongyang and Tehran). Iran has fired a long range missile. Intelligence says Venezuela and Bolivia are providing Iran with uranium (which both deny). That requires a bit of a change in focus of the mission from one exclusively focused on Israel/Palestine. Iran has heated up and the Arabs are not friends of Iran, certainly feel threatened by them and darn sure don’t want to see Iran establish itself as a regional (and nuclear) power. SA would be a logical stop for discussions on that issue.

As to the Israel/Palestine question, Marc Lynch of Foreign Policy magazine wonders:

… will he reinforce or challenge the “moderates vs resistance” frame which he inherited from the Bush administration? The Arab leaders he has been meeting, like the Israelis, are perfectly comfortable with that approach, dividing the region between Israel and Arab “moderates” vs Iran and Arab “resistance” groups like Hamas and Hezbollah. That’s the easy path. If followed it is likely to fail badly, destroy the hopes for change which his engagement policy has raised, and leave the region right back where Bush left it.

I think there is no question he plans to shake up the status quo. But how he chooses to broker “change” in the engagement policy, his change may face the same risk of abysmal failure other policies have produced. The Hill is reporting that Obama plans on challenging Israel’s plan to continue to allow West bank settlements to grow.

“Each party has obligations under the road map,” Obama said after referencing his meeting last week with Israeli Prime Minister Benjamin Netanyahu. Obama said he has been “very clear” on the need to stop settlement and outpost activity, and he also said Israel has obligations to ensure a viable Palestinian state emerges from the peace process.

Israel has rejected that portion concerning the settlements on the West Bank. That rejection came after the Netanyahu/Obama meeting in Washington DC.

Netanyahu has set out the Israeli negotiating position:

“The government of Israel under my leadership is committed to the political and international agreements signed by the governments of Israel, and we expect others to honor their commitments as well,” Netanyahu told the Knesset. “We want an end to the conflict, and we want reciprocity in the claims on both sides and their implementation. Unfortunately, in this we are also being innovative. We should not have to innovate; it should have been obvious. However, when we are asked to recognize our international commitments, I say yes, and I want others to respect their commitments as well.

“We are prepared to act, and we will take concrete steps towards peace with the Palestinians,” Netanyahu continued. “We also expect the Palestinians to take such concrete steps on their side, and it would be good if the Arab countries joined in the effort towards peace, and take both concrete and symbolic steps towards normalization, and not later, but right now. They are asking us to act now, and so the Palestinians and the Arab countries should also be asked to act now.”

Or shorter Israeli stance – if we’re required to live up to international commitments, the same demand must be made of (and accepted by, and acted upon) by others included in these negotiations.

Right now, one of the major obstacles to any such negotiations is not with the Israelis, but among Palestinians:

The Palestinian Authority faces its own challenges in brokering a peace deal, namely the split between Hamas and Fatah — and, therefore, between Gaza and the West Bank — that essentially renders a two-state solution a three-state solution. Since the violent splinter between Hamas and Fatah in 2007, the U.S. has dealt only with Abbas.

So does the US change its policy and actively enter into negotiations with a terrorist group in hope of brokering a reconciliation? The chances of such a reconciliation seem remote. And of course, the splintering within the Palestinians makes the talk of a “two-state solution” an exercise in unachievable rhetoric for the time being. Why should Israel enter into serious negotiations about such a solution when they are unachievable as it stands today?

This will be an interesting trip to monitor.

More to come.


Edit: Changed Ecuador to Bolivia – thanks for the catch, looker.

Sotomayor – Reason To Be Concerned?

While there is all sorts of silly criticism emerging on the right (including the pronunciation of her name and the fact that she likes certain latin foods), there is an emerging criticism which I think has some validity. Most of of focuses on a speech she delivered at UC Berkley in 2001 and published later by The Berkeley La Raza Law Journal.

“While recognizing the potential effect of individual experiences on perception, Judge Cedarbaum nevertheless believes that judges must transcend their personal sympathies and prejudices and aspire to achieve a greater degree of fairness and integrity based on the reason of law,” Sotomayor said.

“Although I agree with and attempt to work toward Judge Cedarbaum’s aspiration, I wonder whether achieving that goal is possible in all or even in most cases. And I wonder whether by ignoring our differences as women or men of color we do a disservice both to the law and society.”

Although she attempts to have it both ways (“I agree” and “we do a disservice”), she seems to really be claiming that some level of gender or racial “empathy” is necessary to render “fair” judgments. And that only those who have lived that life are capable of such renderings. Here she essentially admits that to be the case as she perceives it:

“Personal experiences affect the facts that judges choose to see,” Sotomayor said. “My hope is that I will take the good from my experiences and extrapolate them further into areas with which I am unfamiliar. I simply do not know exactly what that difference will be in my judging. But I accept there will be some based on my gender and my Latina heritage.”

How else do you interpret her statement except to say, “we can’t change the fact that personal experiences affect our work and the best we can hope for is we will “take the good” for those experiences and apply them …?”

That, of course, helps explain the statement most of the right object too the most, i.e.:

“…a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion than a white male who hasn’t lived that life.”

Given what she said above, this makes perfect sense. Although she claims to agree “judges must transcend their personal sympathies and prejudices and aspire to achieve a greater degree of fairness and integrity based on the reason of law”, she then builds the case that a) such isn’t really possible, and b) in fact race and gender based experience is a positive that should be injected in such “reason of law”.

Her ruling in the case of the 18 white firefighters in New Haven CT seems to indicate she is indeed inclined to use race and gender bias in her decisions.

That is a legitimate and troubling point and certainly one which requires a very close look. But Republicans need to lay off the silliness (and words like “racist”) and stick with the legitimate points of contention her nomination bring. And they need to explain their concerns in a way which is both complete and easy to understand.