Cato Weekly Dispatch

Happy Independence Day from the Cato Institute

Wed, 01 Jul 2009 23:00:00 CDT

It was 233 years ago this week that the Founders of the United States declared independence from England, beginning one of the greatest and most successful political experiments in human history.

The Cato Institute would like to encourage people everywhere to remember the principles of government that are set forth in America's founding documents. As we celebrate our independence, let us remember that we're celebrating our independence from overweening government — British or American.

In "Celebrating Independence Day's Principles," Roger Pilon, director of Cato's Center for Constitutional Studies, writes:

When the Founders spoke of liberty, they meant that each of us has a right to plan and live his own life, as he thinks best, to pursue happiness in his own way, by his own lights, provided that in doing so he respect the equal rights of others to do the same. That basic idea is captured nowhere more clearly than in Thomas Jefferson's magnificently simple phrase, "the pursuit of happiness. Jefferson wrote that all men are created equal. He then immediately defined that equality by listing our rights to life, liberty, and the pursuit of happiness.

That right "to pursue happiness," which is nothing less than the foundation of individual liberty, is key to understanding the Declaration's basic principle — and our modern problem. Happiness, after all, is an individual, subjective notion. What makes you happy is not necessarily what makes me happy. You like vanilla; I like chocolate. That's what makes life interesting. It would be a dull world if our tastes were all the same. In a free society, we have a right to practice whatever religion, pursue whatever job, and buy whatever product we wish, as long as we respect the rights of others in the process.

In a time when government is growing larger and more intrusive, let us not forget the source of our rights and the role of government as the Founders defined it. Pilon writes:

We are all created equal, as defined by our natural rights; thus, no one has rights superior to those of anyone else. Moreover, we are born with those rights, we do not get them from government — indeed, whatever rights or powers government has come from us, from "the Consent of the Governed." And our rights to life, liberty, and the pursuit of happiness imply the right to live our lives as we wish — to pursue happiness as we think best, by our own lights — provided only that we respect the equal rights of others to do the same. Drawing by implication upon the common law tradition of liberty, property, and contract — its principles rooted in "right reason" — the Founders thus outlined the moral foundations of a free society.

Only then did they turn to government. We institute government, the Declaration says, to secure our rights — our natural rights and the rights we create as we live our lives. But the powers government may need to do that must be derived from our consent if they are to be just. Government is thus twice limited: by its end, which any of us would have a right to pursue were there no government; and by its means, which require our consent.

Iraq Withdrawal Begins

Wed, 01 Jul 2009 23:00:00 CDT

U.S. soldiers in Iraq have started pulling back from cities to nearby bases and turning over security to Iraqi police and soldiers. U.S. combat missions in Iraq are scheduled to end by August 2010, and all troops must withdraw by 2012. Cato scholar Christopher A. Preble comments, "The withdrawal of U.S. combat troops from Iraqi cities is just the first step in a long process of finally bringing the ruinous Iraq war to a close. It's what Americans want. It's what Iraqis want. Most importantly, it's the right thing to do."

As the withdrawal continues, Cato scholar Doug Bandow says that it is now time for Iraqis take the fullest advantage of their freedom:

Let us hope that Iraqis take advantage of the opportunity they now enjoy. It will take enormous statesmanship and restraint to accommodate those of different faiths and ethnicities, forgive past crimes committed by Sunni and Shia forces, eschew violence for retaliation and revenge, resolve even bitter disagreements peacefully, and accept political defeat without resort to arms.

Other peoples who have suffered less have failed to surmount similar difficulties. But it is in no one's interest, and especially that of the Iraqis, to lapse back into sectarian conflict and political tyranny. Let us hope — and dare I suggest, pray? — that they prove up to the challenge.

House Passes Cap-and-Trade

Wed, 01 Jul 2009 23:00:00 CDT

The House last week passed the American Clean Energy and Security Act (ACES), also known as the Waxman-Markey bill. The legislation not only includes "cap-and-trade" regulations for buying and selling permits to emit greenhouse gases, but also a provision that imposes stiff tariffs on our trading partners if they don't adopt aggressive carbon restrictions of their own. Cato scholars Patrick J. Michaels and Sallie James comment, "You heard correctly: progressives have authored a bill that earns the mortal enmity of domestic energy consumers and our most crucial trading partners at the same time."

Cato research fellow Will Wilkinson warns of the consequences of a successful passage of the Waxman-Markey bill through the Senate:

Cap-and-trade is sure to raise costs for struggling American consumers. But it won't much reduce warming unless countries like China and India fall in line. Yet neither the U.S. nor Europe can just force this to happen. If we try by imposing carbon duties, we'll hurt consumers even more by raising the cost of imports, and possibly start a trade war no one will win…. Cap-and-trade is a costly, risky gambit. But now's not the time. Suffering workers and consumers can't afford to lose again.

Cato Scholars Challenge Obama's Push for Government-Run Health Care

Thu, 25 Jun 2009 23:00:00 CDT

President Obama took to the airwaves Wednesday in an effort to promote his plan for a national government-run health care system. He answered questions on rising costs, taxing benefits and many other issues during an ABC News special on health care reform called "Questions for the President: Prescription for America." Cato analysts Michael D. Tanner and Michael F. Cannon offered live commentary and analysis the night of the program. In case you missed it, you can watch the show and follow along with expert analysis on Cato's blog.

For more commentary, watch Cannon and Tanner dissect the new health care plan in a special Cato video.

Writing on ABCNews.com, Cannon lists 11 questions the public needs to ask Obama about his plan before it goes any further. According to Cannon, the "health of millions depends" on Obama getting the answers to these questions right.

If, under his new plan, Americans will be forced to spend more on health care, where is that money going to come from? In a Tax and Budget Bulletin, Michael Tanner and Chris Edwards argue that the government may have to raise taxes on the middle class to pay for this kind of "reform:"

Expanding government health care will likely involve huge tax increases on the middle class….There has also been talk of using revenues from a cap-and-trade global warming plan to fund health care. Obama's budget included an $80 billion per year revenue increase for cap-and-trade, and economists calculate that the relative burden of such a plan would be far greater on lower-income than higher-income families. Thus, as Americans consider the current health care debate in Congress, they should remember the words of humorist P.J. O'Rourke: "If you think health care is expensive now—just wait until it's free."

The number of Americans without health insurance has been debated extensively. Estimates range as high as 46 million, but with a little help from Carl Bialik at The Wall Street Journal, Cannon points out some major flaws in that estimate:

Experts including the non-partisan Congressional Budget Office said that no, 40-some million is the number who are uninsured on any given day, and a lot of those people quickly regain coverage. The number of Americans who are uninsured for the entire year is actually 20-30 million. Yet the Church of Universal Coverage kept using that 40-some million estimate as if nothing had happened – even though the meaning of that estimate had completely changed.

The Congressional Budget Office also reports that as many as 15 percent of those 20-30 million chronically "uninsured" are eligible for government programs, so they're effectively insured.

According to economists Mark Pauly of the University of Pennsylvania and Kate Bundorf of Stanford, as many as three-quarters of the uninsured could afford coverage but choose not to purchase it. Again, according to the Congressional Budget Office, 60 percent of the uninsured are under age 35, and 86 percent are in good-to-excellent health.

Government intervention has made health insurance unnecessarily expensive for them, so these folks quite sensibly don't want to be ripped off. Mandating that they buy coverage is really about hunting them down and taxing them.

Cato scholar and Harvard economics professor Jeffrey A. Miron argues that whether it's 46 million people without insurance or 46, it does not matter:

The problem is thus that insurance companies can determine all too well who is a good health risk and who is not, so they will price insurance accordingly if the law permits. This strikes many people as unfair, so they want to subsidize insurance for those born with unhealthy genes.

If insurance subsidies had few unintended consequences, this might be a reasonable form of social insurance. The problem is that subsidizing insurance exacerbates moral hazard, the tendency of people with insurance to consume too much health care. This is a crucial reason for rapidly increasing health expenditures.

Policy must therefore accept a trade-off: subsidizing health insurance will increase some people's perceptions of fairness, but it will make the health care market less efficient.

A reasonable balancing of these two concerns suggests subsidizing insurance for the truly poor, but no more. In fact, the U.S. already does that via Medicaid. The uninsured are mainly people with too much income to qualify for Medicaid, or people eligible but fail to apply. Thus expansion of subsidized insurance to the currently uninsured, whatever their number, is likely to generate substantial inefficiency relative to any increase in "fairness" it creates.

For more Cato research on health care reform, visit Healthcare.Cato.org.

Obama's Cool Response to Iranian Politics Appropriate

Thu, 25 Jun 2009 23:00:00 CDT

As the voices of protest to the Iranian election grow louder, many have called upon President Obama to use bolder rhetoric when speaking about the elections in Iran. Last week, Charles Krauthammer and Paul Wolfowitz opined in The Washington Post that Obama's reaction has not been nearly enough. Cato foreign policy expert Christopher Preble disagrees, saying that Obama's calculated reaction is appropriate:

The louder the neocons become in their braying for a free and fair counting of the election results, the less likely it is to occur. In their more candid moments, a few are willing to admit that they would prefer Ahmadinejad to Mousavi.

…It is possible to view President Obama as a more credible messenger, given that he opposed the Iraq war from the outset and has shown a willingness to reach out to the Iranian people. Perhaps a full-throated, morally self-righteous, public address in support of Mousavi's supporters might have tipped the scales in the right direction.

It seems more likely, however, that Obama's patient, measured public response to recent events is well suited to the circumstances. As the president said earlier this week, Americans are right to feel sympathy for the Iranian protesters, and we should all be free to voice our sentiments openly. But it is incumbent upon policymakers to pursue strategies that don't backfire, or whose unintended consequences don't dwarf the gains that we are trying to achieve. In many cases, the quiet, private back channel works well. And if we discover that there is no credible back channel to Iran available, similar to those employed in 1986 and 1991, then we'll all know whom to blame.

Cato scholar Justin Logan says that the U.S. government should stay silent on Iran:

President Obama should keep quiet on the subject of Iran's elections. At least two pernicious tendencies are on display in the Beltway discussion on the topic. First is the common Washington impulse to "do something!" without laying out clear objectives and tactics. What, after all, is President Obama or his administration supposed to do to "support protesters" in Iran in the first place? What would be the ultimate goal of such support? Most importantly, what is the mechanism by which the support is supposed to produce the desired outcome? That we are debating how America should intervene in Iran's domestic politics indicates the sheer grandiosity of American foreign policy thought.

Michael Jackson: A Great American Capitalist

Thu, 25 Jun 2009 23:00:00 CDT

News sources confirmed that Michael Jackson died Thursday in Los Angeles, allegedly due to cardiac arrest.

Ilya Shapiro comments:

While the big news of the day wouldn't seem to have a public policy angle, Michael Jackson's death allows us to remember that such phenomenal career achievements can only be possible in an economic system that rewards and harnesses talent.

The King of Pop's creativity allowed him and his family to make hundreds of millions of dollars, yes, but it also created thousands of jobs in the music and marketing industries and brought joy to fans around the world. Whatever his personal eccentricities — perhaps, in part, as a result of them — Jackson represents a capitalist success story.

No central planner could have invented him, and no government bureaucracy could have transformed pop music in the way he did.

The Right Kind of Health Care Reform

Thu, 18 Jun 2009 23:00:00 CDT

We are facing some of the most sweeping changes health care has seen in decades. Reform is needed, but increasing government control over one-sixth of the economy and over important personal and private decisions would harm American taxpayers, health care providers and patients. Cato just launched a new Web site, Healthcare.Cato.org, which provides in-depth analyses of health care issues and reform initiatives that increase consumer choice and energize competition.

President Obama’s proposals will inexorably lead to a government takeover of the system. According to health care expert Michael D. Tanner, this “reform” effort will give government greater control over more and more of our health care decisions. The plan will compel Americans to purchase health insurance, control its content and determine whether Americans receive certain medical services.

According to Tanner, the plan “would not initially create a government-run, single-payer system such as in Canada or Britain. Private insurance would still exist, at least for a time, but it would be reduced to little more than a public utility, operating much like, for example, the electric company, with the government regulating and controlling every aspect of its operation.”

What will it cost taxpayers?

Tanner explains, “Obamacare will be expensive. The Congressional Budget Office’s initial scoring of Ted Kennedy’s health-care bill shows it would cost at least $1 trillion over the next ten years.”

The CBO study also found that the plan would result in roughly 23 million people losing the insurance they currently have. The actuarial firm Lewin Associates estimates as many as 118.5 million would shift from private to public coverage, resulting in a nearly 60 percent reduction in the number of Americans with private insurance.

Market Solutions

Thu, 18 Jun 2009 23:00:00 CDT

There are market-based solutions to the problems besetting the current health care system. In a Policy Analysis, John H. Cochrane explains how “free markets can solve this problem, and provide life-long, portable health security, while enhancing consumer choice and competition.”

The key, he says, is "Health-status insurance.” He writes:

If you are diagnosed with a long-term, expensive condition, a health-status insurance policy will give you the resources to pay higher medical insurance premiums. Health-status insurance covers the risk of premium reclassification, just as medical insurance covers the risk of medical expenses.

With health-status insurance, you can always obtain medical insurance, no matter how sick you get, with no change in out-of-pocket costs. With health-status insurance, medical insurers would be allowed to charge sick people more than healthy people, and to compete intensely for all customers. People would have complete freedom to change jobs, move, or change medical insurers. Rigorous competition would allow us to obtain better medical care at lower cost.

Cato health policy analyst Michael F. Cannon says that one way to fix the health care system is to make consumers care about cost:

More than 200 million Americans have public or employer-controlled coverage, and all are essentially purchasing it with someone else's money. And that's the problem: Americans demand more coverage than they would if they were spending their own money. In fact, we demand as much coverage as Canadians, for whom health care is supposed to be free. Both American and Canadian patients pay only about 14 cents for every dollar of medical care they consume.

…If we want to increase access to health care, our first priority must be to contain costs. Nothing would help more than 200 million cost-conscious consumers.

Letting Americans own their health care dollars is the right thing to do. And as it happens, it would also cover a lot of the uninsured.

For an extensive analysis on the health care system, Tanner and Cannon explain more market-based solutions in their book, Healthy Competition: What’s Holding Back Health Care and How to Free It.

Debating Health Care Reform

Thu, 18 Jun 2009 23:00:00 CDT

Cato held an all-day conference on health care reformWednesday, featuring speakers from across the political spectrum to debate the issues surrounding this year’s health care reform effort.

You can watch all of the speakers and see the schedule of events here and stay up to date on the health care debate at Healthcare.Cato.org.

Will Obama Raise Middle-Class Taxes to Fund Health Care?

Thu, 11 Jun 2009 23:00:00 CDT

President Obama is promoting an expansion in federal health care spending, and Democratic leaders are scrambling to find ways to pay for it. The plan is expected to cost about $1.5 trillion over the next decade, but the administration has promised that health care legislation won't add to already huge federal budget deficits. In a new paper, Cato scholars Michael D. Tanner and Chris Edwards argue that expanding government health care will likely involve huge tax increases on the middle class.

Tanner warns of "Obamacare" to come, saying that Obama's new health care plan will give "government control over one-sixth of the U.S. economy, and over some of the most important, personal, and private decisions in Americans' lives." Don't miss Tanner's in-depth analysis of the new health care plan that is making its way through Congress, which "would dramatically transform the American health care system in a way that would harm taxpayers, health care providers, and — most importantly — the quality and range of care given to patients."

A part of the plan would include "public option" (read: government-run) health care, which would allow the government to compete against private health care providers. Tanner says it would be the first step toward wiping out the private insurance market as we know it:

Regardless of how it is structured or administered, such a plan would have an inherent advantage in the marketplace because it would ultimately be subsidized by taxpayers. It could, for instance, keep its premiums artificially low or offer extra benefits, then turn to the U.S. Treasury to cover any shortfalls. Consumers would naturally be attracted to the lower-cost, higher-benefit government program.

…It is unlikely that any significant private insurance market could continue to exist under such circumstances. America would be firmly on the road to a single-payer health care system with all the dangers that presents. That would be a disaster for American taxpayers, physicians, and—most importantly—patients.

Treasury Seeks to Control Executive Pay Across the Private Sector

Thu, 11 Jun 2009 23:00:00 CDT

Fox Business reports, "The Treasury Department on Wednesday took new steps to rein in executive compensation, saying the Obama Administration would introduce legislation that could create stricter limits on pay; it also appointed an official to head up efforts on the issue."

In a 2008 Policy Analysis Ira T. Kay and Steven Van Putten explain the misconceptions many people have about executive pay, and why the market is a better arbiter than any bureaucrat in Washington.

Such populist sentiments are often based on misunderstandings about the role of corporate executives in the economy and the vigorous competition that exists for these highly skilled leaders. In the past, federal regulatory efforts based on such misunderstandings have generated unintended consequences, which have damaged the economy and hurt the ability of the market for executives to self-regulate over time.

The labor market for executives and the associated pay levels are already subject to high levels of regulation. Indeed, U.S. corporations are subject to more stringent executive pay disclosure requirements than corporations anywhere else in the world. Before additional regulatory and legislative efforts are unleashed, policymakers should examine the rationale for current pay structures and the strong links between executive pay and corporate performance.

In a Washington Times op-ed, Alan Reynolds says efforts to cap executive pay are wholly misguided:

Congressional hearings to barbecue Wall Street executives are as fun as a circus, but with more clowns. Presidential politics is now taking such political distractions to a lower level.

…Most top executives who were actually in charge during the craze of overinvestment in mortgage-backed securities have been fired. Executives who are fired are not in a position to be "giving themselves" anything.

In reality, top executives are mainly paid by accumulating a big stockpile of company stock and stock options. Estimates of annual CEO pay that Congress and the press have been focusing on look as high as they do only because of the high value of restricted stock or stock options at the time.

Writing in 2007 (before the first round of major bailouts), Cato scholars Jerry Taylor and Jagadeesh Gokhale took it a step further: "Pay Bosses More!":

Excessive executive compensation harms no one but perhaps the stockholders who put up with it. And stockholders put up with it because there's good reason to believe that sizable CEO compensation packages help — not harm — corporate performance, which redounds to their benefit, and that of the firms' workers.

Companies pay workers what they must to deliver their products and services to the market, and supply and demand establishes executive compensation packages the same way it establishes consumer prices. Any overcompensation comes out of the firm's bottom line — at a loss to the shareholders, not the workers.

North Korea Sentences Two U.S. Journalists to 12 Years Hard Labor

Thu, 11 Jun 2009 23:00:00 CDT

Two American journalists were convicted of entering North Korea illegally while on assignment, and exhibiting "hostility toward the Korean people." This week, a North Korean court sentenced them to 12 years in a labor prison.

Cato scholar Doug Bandow comments, "Washington should publicly downplay the controversy and present the issue to the Kim regime as a humanitarian matter. The Obama administration should indicate its willingness to open a broader dialogue with North Korea, but indicate that positive results will be possible only if Pyongyang responds with cooperation instead of confrontation. Releasing the two journalists obviously would provide evidence of the former.

"Regrettably, Laura Ling and Euna Lee are political pawns. As such, Washington's best strategy to achieve their release is to simultaneously reduce their perceived value to Pyongyang and ease tensions between the U.S. and North Korea. Patience may be the Obama administration's highest virtue and Ling's and Lee's greatest hope."

In a Cato Daily Podcast, Bandow discusses what can be done for the American prisoners, and how the U.S. government should react.

Obama Speaks to the Muslim World

Thu, 04 Jun 2009 23:00:00 CDT

In Cairo on Thursday, President Obama asked for a "new beginning between the United States and Muslims around the world," and spoke at some length on the Israeli-Palestinian conflict, Iran, Iraq, and Afghanistan. Cato scholar Christopher Preble comments, "At times, it sounded like a state of the union address, with a litany of promises intended to appeal to particular interest groups. ...That said, I thought the president hit the essential points without overpromising."

Preble goes on to say:

He did not ignore that which divides the United States from the world at large, and many Muslims in particular, nor was he afraid to address squarely the lies and distortions — including the implication that 9/11 never happened, or was not the product of al Qaeda — that have made the situation worse than it should be. He stressed the common interests that should draw people to support U.S. policies rather than oppose them: these include our opposition to the use of violence against innocents; our support for democracy and self-government; and our hostility toward racial, ethnic or religious intolerance. All good.

David Boaz contends that there are a number of other nations the president could have chosen to deliver his address:

Americans forget that the Muslim world and the Arab world are not synonymous. In fact, only 15 to 20 percent of Muslims live in Arab countries, barely more than the number in Indonesia alone and far fewer than the number in the Indian subcontinent. It seems to me that Obama would be better off delivering his message to the Muslim world somewhere closer to where most Muslims live. Perhaps even in his own childhood home of Indonesia.

Not only are there more Muslims in Asia than in the Middle East, the Muslim countries of south and southeast Asia have done a better job of integrating Islam and modern democratic capitalism…. Egypt is a fine place for a speech on the Arab-Israeli conflict. But in Indonesia, Malaysia, India, or Pakistan he could give a speech on America and the Muslim world surrounded by rival political leaders in a democratic country and by internationally recognized business leaders. It would be good for the president to draw attention to this more moderate version of Islam.

Tiananmen Square: 20 Years Later

Thu, 04 Jun 2009 23:00:00 CDT

It has been 20 years since the tragic deaths of pro-democracy protesters in Tiananmen Square in June 1989, and 30 years since Deng Xiaoping embarked on economic reform in China. Cato scholar James A. Dorn comments, "After 20 years China has made substantial economic progress, but the ghosts of Tiananmen are restless and will continue to be so until the Goddess of Liberty is restored."

In Thursday’s Cato Daily Podcast, Dorn discusses the perception of human rights in China since the Tiananmen Square massacre, saying that many young people are beginning to accept the existence of human rights independent of the state.

A few days before the anniversary, social media Web sites like Twitter and YouTube were blocked in China. Cato scholar Jim Harper says that it’s going to take a lot more than tanks to shut down the message of freedom in today’s online world:

In 1989, when a nascent pro-democracy movement wanted to communicate its vitality and prepare to take on the state, meeting en masse was vital. But that made it fairly easy for the CCP to roll in and crush the dream of democracy.

Twenty years later, the Internet is the place where mass movements for liberty can take root. While the CCP is attempting to use the electronic equivalent of an armored division to prevent change, reform today is a question of when, not if. Shutting down open dialogue will only slow the democratic transition to freedom, which the Chinese government cannot ultimately prevent.

Taxpayers Acquire Failing Auto Company

Thu, 04 Jun 2009 23:00:00 CDT

After billions of dollars were spent over the course of two presidential administrations to keep General Motors afloat, the American car company filed for bankruptcy this week anyway.

Last year Cato trade expert Daniel J. Ikenson appeared on dozens of radio and television programs and wrote op-eds in newspapers and magazines explaining why automakers should file for bankruptcy—before spending billions in taxpayer dollars.

Which leaves Ikenson asking one very important question: “What was the point of that?”

In November, GM turned to the federal government for a bailout loan — the one final alternative to bankruptcy. After a lot of discussion and some rich debate, Congress voted against a bailout, seemingly foreclosing all options except bankruptcy. But before GM could avail itself of bankruptcy protection, President Bush took the fateful decision of circumventing Congress and diverting $15.4 billion from Troubled Asset Relief Program funds to GM (in the chummy spirit of avoiding tough news around the holidays).

That was the original sin. George W. Bush is very much complicit in the nationalization of GM and the cascade of similar interventions that may follow. Had Bush not funded GM in December (under questionable authority, no less), the company probably would have filed for bankruptcy on Jan. 1, at which point prospective buyers, both foreign and domestic, would have surfaced and made bids for spin-off assets or equity stakes in the "New GM," just as is happening now.

Meanwhile, the government takeover of GM puts the fate of Ford Motors, a company that didn’t take any bailout money, into question:

Thus, what’s going to happen to Ford? With the public aware that the administration will go to bat for GM, who will want to own Ford stock? Who will lend Ford money (particularly in light of the way GM’s and Chrysler’s bondholders were treated). Who wants to compete against an entity backed by an unrestrained national treasury?

Ultimately, if I’m a member of Ford management or a large shareholder, I’m thinking that my biggest competitors, who’ve made terrible business decisions over the years, just got their debts erased and their downsides covered. Thus, even if my balance sheet is healthy enough to go it alone, why bother? And that calculation presents the specter of another taxpayer bailout to the tunes of tens of billions of dollars, and another government-run auto company.

Obama Picks Sotomayor for Supreme Court

Thu, 28 May 2009 23:00:00 CDT

President Obama chose federal Judge Sonia Sotomayor on Tuesday as his nominee for the U.S. Supreme Court, the first Hispanic to serve on the bench.

On Cato's blog, constitutional law scholar Roger Pilon wrote, "President Obama chose the most radical of all the frequently mentioned candidates before him."

Cato Supreme Court Review editor and senior fellow Ilya Shapiro weighed in, saying, "In picking Sonia Sotomayor, President Obama has confirmed that identity politics matter to him more than merit. While Judge Sotomayor exemplifies the American Dream, she would not have even been on the short list if she were not Hispanic."

Shapiro expands his claim that Sotomayor was not chosen based on merit at CNN.com:

In over 10 years on the Second Circuit, she has not issued any important decisions or made a name for herself as a legal scholar or particularly respected jurist. In picking a case to highlight during his introduction of the nominee, President Obama had to go back to her days as a trial judge and a technical ruling that ended the 1994-95 baseball strike.

Pilon led a live-chat on The Politico's Web site, answering questions from readers about Sotomayor's record and history.

And at The Wall Street Journal, Cato senior fellow John Hasnas asks whether "compassion and empathy" are really characteristics we want in a judge:

Paraphrasing Bastiat, if the difference between the bad judge and the good judge is that the bad judge focuses on the visible effects of his or her decisions while the good judge takes into account both the effects that can be seen and those that are unseen, then the compassionate, empathetic judge is very likely to be a bad judge. For this reason, let us hope that Judge Sotomayor proves to be a disappointment to her sponsor.

North Korea Tests Nukes

Thu, 28 May 2009 23:00:00 CDT

The Washington Post reports, "North Korea reportedly fired two more short-range missiles into waters off its east coast Tuesday, undeterred by the strong international condemnation that followed its detonation of a nuclear device and test-firing of three missiles a day earlier."

Writing in the National Interest online, Cato scholar Doug Bandow discusses how the United States should react:

Washington has few options. The U.S. military could flatten every building in the Democratic People's Republic of Korea (DPRK), but even a short war would be a humanitarian catastrophe and likely would wreck Seoul, South Korea's industrial and political heart. America's top objective should be to avoid, not trigger, a conflict. Today's North Korean regime seems bound to disappear eventually. Better to wait it out, if possible.

On Cato's blog, Bandow expands on his analysis on the best way to handle North Korea:

The U.S. should not reward "Dear Leader" Kim Jong-Il with a plethora of statements beseeching the regime to cooperate and threatening dire consequences for its bad behavior. Rather, the Obama administration should explain, perhaps through China, that the U.S. is interested in forging a more positive relationship with North, but that no improvement will be possible so long as North Korea acts provocatively. Washington should encourage South Korea and Japan to take a similar stance.

Moreover, the U.S. should step back and suggest that China, Seoul, and Tokyo take the lead in dealing with Pyongyang. North Korea's activities more threaten its neighbors than America. Even Beijing, the North's long-time ally, long ago lost patience with Kim's belligerent behavior and might be willing to support tougher sanctions.

Cato Media Quick Hits

Thu, 28 May 2009 23:00:00 CDT

Here are a few highlights of Cato media appearances now up on our YouTube channel:

Ted Galen Carpenter discuss the North Korean missile tests on WOR radio.
On Fox News, Chris Edwards disputes the idea of a federal sales tax.
Gene Healy comments on the future of Guantanamo detainees on BBC.
On CNBC, Dan Mitchell explains why California is like the "France of America."

Obama vs. Cheney Smackdown

Thu, 21 May 2009 23:00:00 CDT

In a speech at the National Archives Thursday, President Obama said he would try some of the Guantanamo Bay prison inmates in federal courts and place them in U.S. prisons. The president said that "strict adherence to the rule of law combined with an embrace of civil liberties is the most effective way to defeat America's enemies," reports The Washington Post.

Cato scholar Doug Bandow agrees, and says it is time to close the Guantanamo Bay facility and try the detainees:

Guantanamo may be a handy dumping ground for detainees, but it has become a symbol of everything wrong with U.S. anti-terrorism policy. Closing the facility would help the administration start afresh in dealing with suspected terrorists. The fact that Republicans are using the issue to win partisan points is to be expected. But the instant, unconditional Democratic surrender surprises even a confirmed cynic like me.

Immediately after Obama's speech, former Vice President Dick Cheney delivered a speech refuting Obama's comments about how to handle the Guantanamo detainees. David Rittgers comments on the two speeches:

On torture: "Torture is incompatible with our values and our national security interests. When we break our own rules (read: laws) against torture, we erode everyone's faith that America is the good guy in this global fight."

On moving detainees to federal prisons: "We held hundreds of thousands of prisoners of war in America during World War II. The detainees we have now are not ten feet tall and bulletproof, and federal supermax prisons hold the same perfect record of keeping prisoners inside their walls as the detainment facility in Guantanamo Bay."

On criminal prosecution: 'Obama basically said that we will try those we can, release those who we believe pose no future threat, and detain those that fit in neither of the first two categories. That's not a change in policy and that pesky third category isn't going away."

On messaging: "Terrorism is about messaging. America finds herself in the unenviable position of fighting an international terrorist group, Al Qaeda, that is trying to convince local insurgents to join its cause. Calling this a "War on Terror" can create a war on everybody if we use large-scale military solutions for intelligence, law enforcement, and diplomatic problems. We have to tie every use of force or governmental power to a message: drop leaflets whenever we drop a bomb, hold a press conference whenever we conduct a raid, and publish a court decision whenever we detain someone. Giving the enemy the initiative in messaging gives them the initiative in the big picture."

Congress Moves to Limit Access to Credit

Thu, 21 May 2009 23:00:00 CDT

Congress sent President Obama a bill Wednesday that would limit credit card issuers' ability to raise interest rates, charge fees, and extend credit to consumers under the age of 21. Cato scholar Mark A. Calabria disapproves, and argues, "To limit credit solely to the financially stable leaves those most in need outside of our formal financial system, instead forcing such households to borrow from less efficient, and often more costly, sources, such as friends and family, or pawn-shops and loan sharks."

Calabria says that in the midst of the recession, this is about the worst possible time to restrict credit access:

Congress should keep in mind that credit cards have been a significant source of consumer liquidity during this downturn. While few of us want to have to cover our basic living expenses on our credit card, that option is certainly better than going without those basic needs. The wide availability of credit cards has helped to significantly maintain some level of consumer purchasing, even while confidence and other indicators have nosedived.

In a recent Cato Daily Podcast, Calabria expanded on his belief that the availability of credit cards has been a major source of liquidity throughout the recession.

"Obamacare" on the Rise

Thu, 21 May 2009 23:00:00 CDT

President Obama has made it clear that reforming the American health care system will be one of his top priorities, and congressional leaders have promised to introduce legislation by this summer.

In a new study, Cato scholar Michael D. Tanner breaks down the key components of any plan likely to emerge from Congress, and explains how those proposals would "dramatically transform the American health care system in a way that would harm taxpayers, health care providers, and — most importantly — the quality and range of care given to patients."

At National Review Online, Tanner explains the potential pitfalls of Obama's plan, all of which could be coming to a hospital near you:

The plan would not initially create a government-run, single-payer system such as those in Canada and Britain. Private insurance would still exist, at least for a time. But it would be reduced to little more than a public utility, operating much like the electric company, with the government regulating every aspect of its operation.

In Thursday's Cato Daily Podcast, he described what health care will look like in years to come.

In an analysis of Barack Obama's beliefs about health care, Cato scholar Michael F. Cannon says that Obama's plans will take us even closer to a system of socialized medicine:

A reasonable definition of socialized medicine is possible. Socialized medicine exists to the extent that government controls medical resources and socializes the costs. Notice that under this definition, it is irrelevant whether we describe medical resources (e.g., hospitals, employees) as "public" or "private." What matters-what determines real as opposed to nominal ownership-is who controls the resources. By that definition, America's health sector is already more than half socialized, and Obama's health care plan would socialize medicine even further.

White House Official Says Government Will Stop Using Term 'War on Drugs'

Thu, 14 May 2009 23:00:00 CDT

The Wall Street Journal reports that White House Drug Czar Gil Kerlikowske is calling for a new strategy on federal drug policy and is putting a stop to the term "War on Drugs." "The Obama administration's new drug czar says he wants to banish the idea that the U.S. is fighting 'a war on drugs,' a move that would underscore a shift favoring treatment over incarceration in trying to reduce illicit drug use…. The Obama administration is likely to deal with drugs as a matter of public health rather than criminal justice alone, with treatment's role growing relative to incarceration, Mr. Kerlikowske said."

Will Kerlikowske's words actually translate to an actual shift in policy? Cato scholar Ted Galen Carpenter calls it a step in the right direction, but remains skeptical about a true change in direction. "A change in terminology won't mean much if the authorities still routinely throw people in jail for violating drug laws," he says.

Cato scholar Tim Lynch channels Nike and says when it comes to ending the drug war, "Let's just do it."

Cato scholars have long argued that our current drug policies have failed, and that Congress should deal with drug prohibition the way it dealt with alcohol prohibition. With the door seemingly open for change, Cato research shows the best way to proceed.

In a recent Cato study, Glenn Greenwald examined Portugal's successful implementation of a drug decriminalization program, in which drug users are offered treatment instead of jail time. Drug use has actually dropped since the program began in 2001.

In the 2009 Cato Handbook for Policymakers, David Boaz and Tim Lynch outline a clear plan for ending the drug war once and for all in the United States.

Help Wanted: Supreme Court Justice

Thu, 14 May 2009 23:00:00 CDT

Justice David Souter announced his retirement from the Supreme Court at the end of last month, sparking national speculation about his replacement.

Calling Souter's retirement "the end of an error," Cato senior fellow Ilya Shapiro makes some early predictions as to whom President Obama will choose to fill the seat in October. Naturally, there will be a pushback regardless of who he picks. Shapiro and Cato scholar Roger Pilon weigh in on how the opposition should react to his appointment.

Shapiro: "Instead of shrilly opposing whomever Obama nominates on partisan grounds, now is the time to show the American people the stark differences between the two parties on one of the few issues on which the stated Republican view continues to command strong and steady support nationwide. If the party is serious about constitutionalism and the rule of law, it should use this opportunity for education, not grandstanding."

Obama Pushing for Credit Card Regulation

Thu, 14 May 2009 23:00:00 CDT

President Obama has called for tighter regulation of credit card companies, a move that "would prohibit so-called double-cycle billing and retroactive rate hikes and would prevent companies from giving credit cards to anyone under 18," according to CBSNews.com.

But Cato analyst Mark Calabria argues that this is no time to be reducing access to credit:

We are in the midst of a recession, which will not turn around until consumer spending turns around — so why reduce the availability of consumer credit now?

Congress should keep in mind that credit cards have been a significant source of consumer liquidity during this downturn. While few of us want to have to cover our basic living expenses on our credit card, that option is certainly better than going without those basic needs. The wide availability of credit cards has helped to significantly maintain some level of consumer purchasing, even while confidence and other indicators have nosedived.

In a Cato Daily Podcast, Calabria explains how credit card companies have been a major source of liquidity for a population that is strapped for cash to pay for everyday goods.