Cato Media Updates

The U.S. Should Cease Escalation in Afghanistan

Thu, 02 Jul 2009 06:00:00 CDT

Malou Innocent, foreign policy analyst:

To combat the growing Taliban insurgency, the United States recently dispatched thousands of Marines to Afghanistan’s restive eastern and southern provinces bordering Pakistan.

Going after al Qaeda does not require Washington to pacify the entire country or sustain a heavy-booted military presence in the region. After all, Central Asia holds no intrinsic strategic value to the United States, and America’s security will not be endangered if an oppressive regime takes over a contiguous fraction of Afghan territory.

Ideally, the United States should have already reduced its visibility in the region. Denying a sanctuary to terrorists that seek to attack the United States can be done through aerial surveillance, retaining covert operatives for discrete operations against specific targets, and ongoing intelligence-sharing with the Afghan and Pakistani governments.

America’s objective has been to eradicate the parties responsible for the atrocities committed on September 11th. The United States should not go beyond that objective by combating a regional insurgency or drifting into an open-ended occupation.

Draw Down in Iraq a Positive First Step

Fri, 26 Jun 2009 06:00:00 CDT

Christopher A. Preble, director of foreign policy studies:

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.

A rash of recent bombings and terrorist attacks have raised fears that violence has been kept down by the U.S. presence, and that it will spike as our forces there are drawn down. There are valid concerns that Iraqi security forces are not up to the high standards of the U.S. military, or that Iraq could lapse back into civil war. But those risks will be there if U.S. troops stay for five years, or 50. The future of Iraq lies with the people of Iraq, and the Iraqi government, and it is well past the time when they must take the reins.

Of course, the same thing could be said of many other countries and governments around the world. If President Obama lives up to his promise to end the war, and bring all the troops home, it could signal a willingness to truly change the course of U.S. foreign policy in a direction that advances U.S. security, and at far less cost than our current strategy.

Americans want, and will support, change. What they should not tolerate is the status quo: countless solemn pledges of burden sharing -- of allowing others to stand up so that we can stand down -- that are never fulfilled. For decades, the United States has been in the business of doing for other governments what they should be doing for themselves. Now would be a good time to start to change this pattern.

Iraq is a test case for this change. Nothing that happens there should divert us from a new course.

Are Democrats Serious about Immigration Reform?

Thu, 25 Jun 2009 06:00:00 CDT

Daniel Griswold, director, Center for Trade Policy Studies:

President Obama is meeting today with a bipartisan group of lawmakers to talk about reforming our broken immigration system. The challenge for both parties will be whether they can overcome opposition within their respective bases to expanding legal immigration.

For Republicans, the chief opposition remains the faction of talk-radio-driven conservatives who just don’t like immigration, period, especially when it comes from Latin America . For Democrats, who now run Washington , the chief opposition to allowing more foreign workers to enter the country legally is represented by organized labor.

As the Wall Street Journal reports this morning, advocates of immigration reform “worry that Democrats will defer to the AFL-CIO on the issue of legal immigration. The labor confederation has opposed a robust guest-worker program or higher levels of legal immigration, fearing they would depress wages. A larger labor presence would splinter the coalition of business and pro-immigration groups that embraced past immigration efforts, only to see them falter in the Senate.”

As I’ve argued consistently in the past, immigration reform is not worth pursuing if it does not include expanding future flows of legal immigrants, both highly skilled and lower-skilled workers. If Congress confines itself to legalizing the 8 million or so workers already here illegally, with a vow to get tougher on enforcement, then we are just repeating the mistake of the 1986 Immigration Reform and Control Act.

We will know if President Obama and Democratic leaders in Congress are serious about fixing the problem of illegal immigration if they face down their labor-union allies and embrace a workable, market-oriented expansion of legal immigration. Otherwise, we are in for more futility, frustration and failure.

Supreme Court Stands Up for Student Privacy

Thu, 25 Jun 2009 06:00:00 CDT

David Rittgers, legal policy analyst:

The Supreme Court's decision today in Safford Unified School District #1 et al. v. Redding was a victory for privacy and decency. The Court held that a middle school violated the Fourth Amendment rights of a thirteen-year-old girl by strip searching her in a failed effort to find Ibuprofen pills and an over-the-counter painkiller.

The Cato Institute filed an amicus brief, joined by the Rutherford Institute, opposing such abuses of school officials' authority. The search in this case should have ended with the student's backpack and pockets; forcing a teenage girl to pull her bra and panties away from her body for visual inspection is an invasion of privacy that must be reserved for extreme cases. School officials should be authorized to conduct such a search only when they have credible evidence that the student is in possession of objects posing a danger to the school and that the student has hidden them in a place that only a strip search will uncover.

The Fourth Amendment exists to preserve a balance between the individual's reasonable expectation of privacy and the state's need for order and security. Unnecessarily traumatizing students with invasive and humiliating breaches of personal privacy upsets this balance. Today's decision restores reasonable limits to student searches and provides valuable guidance to school officials.

Cato Scholar Comments on the Obama Administration's Financial Regulation Reforms

Wed, 17 Jun 2009 06:00:00 CDT

Mark A. Calabria, director of financial regulation studies:

The Obama Administration is presenting a misguided, ill-informed remake of our financial regulatory system that will likely increase the frequency and severity of future financial crises. While our financial system, particularly our mortgage finance system, is broken, the Obama plan ignores the real flaws in our current structure, instead focusing on convenient targets.

Shockingly, the Obama plan makes no mention of those institutions at the very heart of the mortgage market meltdown – Fannie Mae and Freddie Mac. These two entities were the single largest source of liquidity for the subprime market during its height. In all likelihood, their ultimate cost to the taxpayer will exceed that of TARP, once TARP repayments have begun. Any reform plan that leaves out Fannie and Freddie does not merit being taken seriously.

Instead of addressing our destructive federal policies aimed at extending homeownership to households that cannot sustain it, the Obama plan calls for increased "consumer protections" in the mortgage industry. Sadly, the Administration misses the basic fact that the most important mortgage characteristic that is determinate of mortgage default is the borrower's equity. However, such recognition would also require admitting that the government's own programs, such as the Federal Housing Administration, have been at the forefront of pushing unsustainable mortgage lending.

While the Administration plan recognizes the failure of the credit rating agencies, it appears to misunderstand the source of that failure: the rating agencies' government-created monopoly. Additional disclosure will not solve that problem. What is needed is an end to the exclusive government privileges that have been granted to the rating agencies. In addition, financial regulators should end the outsourcing of their own due diligence to the rating agencies.

The Administration's inability to admit the failures of government regulation will only guarantee that the next failures will be even bigger than the current ones.

Reformist Victory in Iran? Positive Step for Peace, But Challenges Remain

Fri, 12 Jun 2009 06:00:00 CDT

Doug Bandow, senior fellow:

Reports from Iran indicate a heavy voter turnout, which has forced authorities to keep the polls open. The long lines are thought to favor reformer Hossein Mousavi over incumbent Mahmoud Ahmadinejad.

U.S. policymakers should resist the temptation to be overly encouraged by a Mousavi victory. They must keep in mind that the Iranian president’s power is limited; he does not, in fact, control the security forces or the nuclear program. Moreover, it is not only Islamic radicals who might believe that Iran should develop a nuclear weapon. What position a President Mousavi would take on Iran’s nuclear aspirations is unknown.

Still, a victory by Mr. Mousavi would certainly encourage dialogue between the U.S. and Iran. He has indicated his willingness to engage Washington, and his almost dull moderation stands in sharp contrast to the extreme and confrontational sentiments regularly espoused by President Ahmadinejad.

The people of Iran deserve to be free. If Mr. Mousavi triumphs, they will have taken an important though small step towards a more democratic and open society. The Obama administration should respond positively, even while recognizing the limits on Mr. Mousavi’s power and thus the impact of his victory, if that is the result.

Enlisting China against North Korea

Thu, 11 Jun 2009 06:00:00 CDT

Doug Bandow, senior fellow:

The U.S. and the other permanent members of the Security Council have agreed to strengthen sanctions against North Korea. In the main, the members plan to tighten the rules imposed in 2006 rather than impose significant new restrictions. It is more an incremental tightening of the screws, so to speak, than a dramatic attempt to crush the North Korean economy.

However, if enforced, the toughened sanctions should cause greater pain for the regime in Pyongyang by limiting its ability to engage in arms sales and finance its operations. As always, the most important player is China. If Beijing is willing to limit assistance and commerce with the North, then the Kim Jong-il regime will be under far greater pressure to adopt a policy of cooperation rather than confrontation.

Washington should engage in a concerted diplomatic effort to convince the People’s Republic of China that pressuring the North and even changing the North Korean regime would be in its interest, as well as the interest of the rest of the international community. In particular, the U.S. government should promise that it would not take geopolitical advantage of such a Chinese effort.

In the case of a reunified Korea, Washington would withdraw its troops rather than maintain military forces near China’s border. In the case of a flood of refugees northward after the collapse of the Kim regime, the U.S. would assist in humanitarian efforts. The benefits to the region and world would be obvious. The PRC would gain as well, reinforcing its claim to global leadership and its promise of a “peaceful rise.”

Enhanced United Nations sanctions against North Korea are but a small step forward. Winning Beijing’s assent for a much more active Chinese role is far more important. This should become a top priority for the Obama administration.

U.S. Presence Feeds Pakistan's Insurgency

Wed, 10 Jun 2009 06:00:00 CDT

Malou Innocent, foreign policy analyst:

Tuesday’s attack on Peshawar’s Pearl Continental Hotel was the latest signal of Pakistan’s growing Islamist insurgency.

Since the raid by the Pakistani government on the Red Mosque (Lal Masjid) in Islamabad in July 2007, a wave of revenge attacks against the army and the government has been launched by loose networks of suicide bombers. It’s possible, depending on the culprit, that the recent attack in Peshawar might have been retribution for the Pakistan army’s month-long offensive against extremists in the country’s northwest districts.

While the United States hopes to eliminate the threat from extremists in Afghanistan and Pakistan, increased U.S.-NATO efforts to stabilize Afghanistan destabilize Pakistan. America’s presence in the region feeds Pakistan’s insurgency. If America’s interests lie in stabilizing Pakistan, and ensuring that the virus of anti-American radicalism does not infect the rest of the country, the fundamental objective should be to get out of Afghanistan in a reasonable time frame.

You Pay, The Government Goes

Tue, 09 Jun 2009 06:00:00 CDT

Tad DeHaven, budget analyst:

President Obama on Tuesday endorsed statutory pay-as-you-go (PAYGO) rules that would require Congress to increase taxes or cut spending to offset new entitlements or tax cuts. For regular citizens struggling with their finances in the current economic downturn, this proposal might sound like a prudent step for a government awash in debt to clean up its act.

Unfortunately, PAYGO would only require offsets for new entitlement spending. Such a system will have no inhibiting effect on existing entitlement spending, which comprises around 60 percent of total government spending and rising.

Given that the current administration and its congressional allies have already gone on record as supporting massive new entitlement spending to be paid for, in part, with higher taxes, there is every reason to believe that PAYGO's "deficit neutral" requirement will result in higher taxes rather than offsetting spending cuts.

Implementation of PAYGO really isn't a deficit control mechanism as much as it is a smoke screen designed to provide the illusion of fiscal propriety while allowing the government to continue swelling. A more serious proposal to rein in out-of-control federal spending and debt would have called for statutory spending caps on discretionary spending and mechanisms to slow all entitlement spending.

Journalists as Bargaining Chips

Mon, 08 Jun 2009 06:00:00 CDT

Doug Bandow, senior fellow:

North Korea has announced the conviction of two American journalists, Laura Ling and Euna Lee, for illegally entering the North and exhibiting “hostility toward the Korean people.” They were sentenced to 12 years of “reform through labor.” Obviously, the case has nothing to do with justice and everything to do with politics. The good news is that there is little chance the two will serve 12 years. The bad news is that they may not be released soon. In 1996 the U.S. won the release of Evan Hunziker, who made a drunken swim across the Yalu. The process took about three months and, apparently, the payment of $100,000.

Unfortunately, tensions between Washington and the North are higher today. With the U.S. and United Nations Security Council considering additional sanctions in response to Pyongyang’s recent nuclear and missile tests, resolution of the case is not likely to come so easily. 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.

Treasury Is Its Own Worst Enemy

Mon, 08 Jun 2009 06:00:00 CDT

Mark A. Calabria, director of financial regulation studies:

The Treasury's handling of TARP shows again why government is often its own worst enemy. With limits on executive compensation, and continuing pressure to make and modify risky loans, the original purpose of TARP capital injections - bringing stability to the banking sector - is likely to be undermined as banks make every effort to get out from under TARP. When leaving TARP, the Treasury should make clear that such banks are no longer "too big to fail" and will be subjected to real market discipline. The worst outcome would be for these same banks to return their TARP funds, have those funds spent elsewhere, and then these same institutions become insolvent and given further injections of taxpayer money.

In letting some banks leave TARP while keeping others, the Treasury also risks picking winners and losers, for any banks not freed from TARP will likely be perceived as troubled. With some of the more stable TARP banks, the government may also get its money back. As these banks repay their TARP funds, there will be increasing pressure from both the financial sector and the non-financial sector to spend TARP funds elsewhere. The Treasury Secretary should commit to returning all re-paid TARP funds to the general Treasury. If Treasury is unwilling to do so, then Congress should eliminate Treasury’s ability to make any additional TARP purchases or investments. The time is long past for both Congress and Treasury to design an exit strategy.

OAS Lift on Cuba Is Bad Politics

Thu, 04 Jun 2009 06:00:00 CDT

Ian Vásquez, director, Center for Global Liberty and Prosperity:

The OAS’s decision to lift Cuba’s suspension from OAS membership is a symbolic victory for the Cuban dictatorship and makes a mockery of the organization’s purported mission to defend human rights and democracy. It was never credible that the OAS would be effective at promoting those ideals since Latin Americans viewed the organization as a tool of Washington even as it has often been a forum to criticize the United States.

The idea that the United States can or should promote democracy by relying on such multilateral political institutions or engaging in more aggressive approaches is dubious. The OAS has long been ineffective at defending basic freedoms in Latin America, having remained silent about serious violations of the rule of law, freedom of expression, and democracy in such countries as Venezuela, Bolivia and Ecuador in recent years. Nor is it the proper role of the United States to take on democracy building missions, something in which it has a poor record. But it is proper for the United States to condemn human rights violations when they occur, and membership in the OAS is explicitly based on the defense of such rights, the rule of law and representative democracy. That’s why the OAS’s decision on Cuba is a disappointing sign of the Obama administration’s policy toward Latin America and of the OAS’s continuing loss of credibility.

In its attempt to be well liked in the region, the Obama administration is trying to have it both ways: opening the door to an authoritarian regime for membership in a club of democratic countries, while claiming that the move will somehow pressure Cuba to democratize. As for Latin American governments, the move reflects the rise of populist politics in the region and the preference to criticize the United States rather than defend the liberties of Latin Americans. For those of us who regularly criticize Washington’s heavy-handed policies in the region—including the Cuban embargo—we can only hope that the U.S. administration’s new approach will indeed bring about positive change in hemispheric relations as it claims. One sign of such success would be the emergence of a vigorous campaign by all democratic governments of the hemisphere to condemn abuses of power and human rights violations wherever they occur in the region. Unfortunately, there is no reason to believe that is about to happen, especially now that Cuba has been welcomed back to the OAS.

20th Anniversary of Tiananmen:

Thu, 04 Jun 2009 06:00:00 CDT

James A. Dorn, vice president for academic affairs:

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.

The Chinese Communist Party's "Human Rights Action Plan" (2009–10) addresses several human rights abuses, but it fails to establish a well-defined boundary between the individual and the state that protects rights to life, liberty, and property. Until China limits the power of the CCP and allows people to exercise their natural rights, there will be corruption, and the goal of "social harmony" will be elusive. The lesson of Tiananmen is that the principle of nonintervention (wu wei) is superior to the heavy hand of the state as a way to bring about true harmony.

Cato Scholar Comments on President Obama's Speech in Cairo

Thu, 04 Jun 2009 06:00:00 CDT

Christopher A. Preble, director of foreign policy studies:

I listened live to the president's Cairo speech this morning on my ride into work. I know that it will be parsed and dissected. Passages will be taken out of context, and sentences twisted beyond recognition. 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. 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.

Two particular comments jumped out at me (the speech text can be found here):

1. The president clearly stated his goals for the U.S. military presence in Iraq. He pledged to "honor our agreement with Iraq's democratically-elected government to remove combat troops from Iraqi cities by July," "the removal of our combat brigades by next August," and "to remove all our troops from Iraq by 2012."

This might not seem like much. As noted, it is the established policy of the U.S. government and the Iraqi government under the status of forces agreement. Some recent comments by Army Chief of Staff Gen. George Casey, however, implied that U.S. troops might remain in Iraq for a decade. I'm glad that the president cleared up the confusion.

2. President Obama wisely connected U.S. policy in the 21st century to its founding principles from the earliest days to remind his audience — or perhaps to teach them for the very first time — that the United States was not now, nor ever has been, at war with Islam, or with any other religion. George Washington affirmed the importance of religious equality in his letter to the Hebrew Congregation in Newport, Rhode Island. President Obama quoted John Adams, who saw no reason why the United States could not enjoy good relations with Morocco, the first country to recognize the United States. When signing the Treaty of Tripoli, Adams wrote, "The United States has in itself no character of enmity against the laws, religion or tranquility of Muslims."

But the president also drew on the Founders to convey a broader message. They believed that the new nation should advance human rights and the cause of liberty by its example, not by military force. Some of our recent leaders seem to have forgotten that, and a few pundits have actually scorned the suggestion. The president wisely cast his lot with the earlier generation, quoting Thomas Jefferson who said "I hope that our wisdom will grow with our power, and teach us that the less we use our power the greater it will be."

The Tobacco Regulation Shell Game

Wed, 03 Jun 2009 06:00:00 CDT

Patrick Basham, adjunct scholar, Center for Representative Government:

Handing tobacco regulation over to the FDA, as Congress is poised to do, is an epic public health mistake. It is tantamount to giving the keys of the regulatory store to the nation's largest cigarette manufacturer, Philip Morris.

The legislation that will be voted on shortly in the Senate was cooked up out of public sight by Philip Morris, Sen. Ted Kennedy, Rep. Henry Waxman, and anti-tobacco lobbyists. Philip Morris staffers themselves even wrote large portions of the bill.

There are significant, and numerous, problems with the FDA regulating tobacco, and virtually no benefits to public health. Kennedy, Waxman, and the public health establishment present their legislation as a masterful regulatory stroke that will end tobacco marketing, prevent kids from starting to smoke, make cigarettes less enjoyable to smoke, and reduce adult smoking. But FDA regulation of tobacco will do none of these things.

The bill fails to correctly identify the reasons why young people begin to smoke, and concentrates almost exclusively on restricting tobacco marketing, while leaving the other risk factors for adolescent smoking unaddressed. There is nothing in the proposed legislation that shows the FDA understands the well-documented connections between education, poverty and smoking status, connections that provide the key to helping adults stop smoking.

Obama's Mideast Watchwords: Manage Expectations

Mon, 01 Jun 2009 06:00:00 CDT

Christopher A. Preble, director, Defense and Foreign Policy Studies:

During the course of his travels in the Mideast, but especially in his Cairo speech, President Obama must impress upon his audience that the United States cannot simply dictate the course of events in their region—or in the world at large. Moderating attitudes toward U.S. policies is key, for as long as extremists can dictate events on the ground—from Nablus to Gaza, and from Baghdad to Kandahar—the greatest danger is in creating unrealistic expectations for regional peace and security. Therefore, while the president might speak of his bold vision for the future, he must convey a sense of humility toward present-day challenges.

A key test case is the ongoing Israeli-Palestinian dispute, where the expansion of Israeli settlements in the West Bank is the key stumbling bloc to a resumption of serious negotiations.

The president will also want to talk about Iran, Iraq and Afghanistan. In the latter two cases, the president should reaffirm that his overriding objective is in helping the Iraqi and Afghan governments defend their own people, and that the U.S. government does not desire an open-ended military presence in either country.

With respect to Iran, presidential elections are less than two weeks away, and President Obama isn’t alone in hoping that Mahmoud Ahmadinejad’s days in power are numbered. But Obama was right to take a wait-and-see approach to Iran, and he should urge other countries in the region to do the same until after June 12th.

Finally, in terms of the Israeli-Palestinian peace process, President Obama has previously stated the U.S. government’s opposition to the expansion of Israeli settlements. He might now spell out what additional steps he is willing to take to stop this activity, while at the same time emphasizing that the United States cannot want peace more than the parties to the conflict.

Cato Scholar Comments on GM Bankruptcy and Ford's Future

Mon, 01 Jun 2009 06:00:00 CDT

Daniel J. Ikenson, associate director, Center for Trade Policy Studies:

It's not as if we didn't know this was going to happen to GM for a long time now. The real question we all should turn to is: What's going to happen to Ford? The government has a 60 percent stake in GM. Who's going to want to own Ford stock—and therefore, will Ford be able to raise capital—when the U.S. government has an incentive to tip the balance in GM's favor wherever it can?

Also, if I'm on the board of directors at Ford, now I'm thinking that the rest of the auto industry is surviving more or less on the whim of the U.S. government. So even if my balance sheet is healthy enough to go it alone, why am I not going to try to get whatever I can out of Washington? There's the specter that the taxpayer is now going to be on the hook for yet another $30-$40 billion once Ford's leadership decides, "Hey, this bankruptcy deal really isn't so bad."

News Release: Chávez Tries to Shut Down Pro-Free Market Educational Conference

Wed, 27 May 2009 06:00:00 CDT

CAUCAGUA, VENEZUELA -- A Cato Institute educational seminar fell victim to an attempt by the Venezuelan government to shut it down for expressing ideas critical of the Chávez regime.

Numerous Venezuelan government agencies harassed the Cato Institute event, called Universidad El Cato-CEDICE, or "Cato University," which took place in Caucagua, Venezuela May 24-26. The event is co-sponsored by the Venezuelan free-market think tank Centro de Divulgación del Conocimiento Económico por la Libertad (CEDICE) and was organized to teach and promote the classical liberal principles of limited government, individual liberty, free markets and peace.

During the course of the event on Monday, the National Guard, state television and a state representative from a ministry of higher education interrupted the seminar, demanding that the seminar be shut down on the grounds that the event organizers did not have permission to establish a university in Venezuela. When the authorities were told that neither Cato nor CEDICE was establishing a university and that the Cato Institute has long sponsored student seminars called Cato Universities, the authorities then insisted that the seminar was in violation of Venezuelan law for false advertising.

After two hours of groundless accusations, the Chávez representatives left but their harassment has continued. One of the speakers at the seminar, Peruvian intellectual Alvaro Vargas Llosa, was detained by airport authorities Monday afternoon for three hours for no apparent reason. He was released and told that he could stay in the country as long as he did not express political opinions in Venezuela.

"The government's attacks on freedom of speech are part of a worrying pattern of abuse of power in Hugo Chávez's Venezuela," said Ian Vásquez, director of Cato's Center for Global Liberty and Prosperity, from Caucagua. "But they have so far not managed to alter the plans of the Cato Institute here, and will hopefully not do so, as we continue to participate in further meetings the rest of this week."

North Korea: An Opportunity, Not a Crisis

Tue, 26 May 2009 06:00:00 CDT

Doug Bandow, senior fellow:

Nothing seems to upset North Korea more than being ignored. Hence Pyongyang's second nuclear test, punctuated by the separate firing of a short-range missile.

Although the nuclear test reinforces the North's irresponsible reputation, the blast has little practical importance. North Korea has long been known to be a nuclear state and tested a smaller nuclear device more than two years ago. The regime's missile capabilities also are well-known.

Washington should treat the North's latest offense as an opportunity to reprogram the latter's negotiating formula. 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 Beijing, 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. Washington should offer to support this or other efforts to transform North Korean policy.

Pyongyang's latest nuclear test further demonstrates that North Korea is a problem likely to be long with us. The administration should recognize the limitations inherent to any policy towards the North. Washington should offer the prospect of improved relations as a reward for improved North Korean behavior, but should let the North's neighbors, most notably China, take the lead in managing this most difficult of states.

Cato Scholars Comment on Obama Supreme Court Nominee Sonia Sotomayor

Tue, 26 May 2009 06:00:00 CDT

Roger Pilon, vice president for legal affairs:

In nominating Second Circuit Judge Sonia Sotomayor to fill the seat of retiring Supreme Court Justice David Souter, President Obama chose the most radical of all the frequently mentioned candidates before him.

Given the way she recently all but dismissed the Ricci case –- involving the complaint by New Haven, Connecticut, firefighters that the city had thrown out the results of an officers exam because the results did not come out "right" –- and the expectation, based on oral argument, that the Supreme Court will reverse the Second Circuit decision, there will likely be an extremely contentious confirmation battle ahead. If confirmation hearings are scheduled for summer, they will follow shortly upon the Court's decision in that explosive case.

Are we to imagine that President Obama chose as he did because he wants that battle?

Ilya Shapiro, senior fellow, Center for Constitutional Studies and editor-in-chief, Cato Supreme Court Review:

In picking Sonia Sotomayor, President Obama has confirmed that identity politics matter to him more than merit.

Judge Sotomayor is not one of the leading lights of the federal judiciary and would not even have been on the shortlist if she were not Hispanic.

She has a mixed reputation, with a questionable temperament and no particularly important opinions in over 10 years on the Second Circuit. Most notably, she was part of the panel that summarily affirmed the dismissal of Ricci v. DeStefano, where the City of New Haven denied firefighter promotions based on an admittedly race-neutral exam whose results did not yield the "correct" racial mix of successful candidates. Sotomayor's colleague José Cabranes—a liberal Democrat—excoriated the panel's actions and the Supreme Court will likely reverse the ruling next month.

If this is the kind of "empathy" the president wants from his judges, we are in for a long summer—and more bitter confirmation battles in the future.

News Release: John Cochrane Joins the Cato Institute

Fri, 22 May 2009 06:00:00 CDT

University of Chicago economist John Cochrane has joined the Cato Institute as an adjunct scholar.

Cochrane has done pioneering work on health insurance markets, demonstrating how market innovation can solve the problems posed by costly, long-term illnesses better than government health insurance programs or insurance regulations. He is a leading authority on market analysis, having published papers on such topics as the volatility of exchange rates, the relationship between stock prices and business cycles, and the dynamics of bond prices. His recent book, Asset Pricing, garnered TIAA-CREF Institute's Paul A. Samuelson Award for excellence in financial analysis.

Earlier this year the Cato Institute published Cochrane's authoritative study "Health-Status Insurance: How Markets Can Provide Health Security," which explains how markets can make medicine better and health insurance more secure for patients with high-cost illnesses.

"John Cochrane's work on health-status insurance could hold the secret to fighting off the latest nationalized health care scheme," said Cato founder and president Ed Crane.

In addition to holding the Myron S. Scholes professorship at the University of Chicago's Booth School of Finance, Cochrane is a past dean of the university's economics department. He is also a vice president of the American Finance Association, a research associate and past director of the asset pricing program of the National Bureau of Economic Research, and a fellow of the Econometric Society.

"The Cato Institute does a tremendous job of promoting individual liberty and free markets," said Cochrane. I am excited to contribute to the organization's efforts."

Cochrane earned his B.S. in physics from MIT, and a Ph.D. in economics from the University of California at Berkeley.

News Release: Vladimir Bukovsky Joins the Cato Institute

Thu, 21 May 2009 06:00:00 CDT

Author and Soviet-era political dissident Vladimir Bukovsky has joined the Cato Institute as a senior fellow.

"Vladmir personifies the struggle for freedom that animates the Cato Institute's mission," said Cato founder and president Ed Crane. "Not only is he an exceptional political mind and writer, but he is a stark reminder that people have been and will continue to be imprisoned for their political beliefs unless advocates for freedom speak out. We are happy to have him associated with Cato."

In his new capacity at Cato, Bukovsky will continue to write and speak on his experiences fighting Soviet tyranny, and about the dangers of repressive regimes.

Bukovsky spent twelve years in Soviet prisons, labor camps and forced-treatment psychiatric hospitals as punishment for his anti-communist activities. He later smuggled documents out of Russia and has worked to preserve archives on Soviet brutality. He has written several books about his experiences, including To Build a Castle (1978), Soul of Man Under Socialism (1979), and Soviet Hypocrisy and Western Gullibility (1987).

Though he settled in Cambridge, England, in 1976, Bukovsky visited Moscow after the fall of communism in 1991, and has remained an outspoken voice for democracy there. His more recent writings have criticized former President Vladimir Putin for trampling the Russian constitution and aggressively expanding his own political power.

Bukovsky was a founder of Committee 2008, whose mission was to ensure a free and fair Russian presidential election. He gained widespread support as a presidential aspirant himself, though his candidacy ultimately was not certified by the pro-Kremlin Central Election Commission.

No Warming Solution, Just a Pain in the Gas

Tue, 19 May 2009 06:00:00 CDT

Patrick J. Michaels, senior fellow in environmental studies:

President Obama's imposition of new mileage standards for cars demonstrates that he is willing to circumvent the legislative process when it comes to global warming. Why he would do so is no mystery. According to the Rasmussen Report, the American people rank global warming dead last among potential priorities for the Obama administration, mainly because they understand that climate change takes place at a glacial pace, and "remedies" such as new mileage standards or "cap and tax" proposals in fact do nothing at all about global warming.

New Administration, Same Multibillion Dollar War Bill

Thu, 14 May 2009 06:00:00 CDT

Benjamin H. Friedman, research fellow in defense and homeland security studies:

The $96.7 billion fiscal year 2009 war supplemental bill spends too much.

The bulk of the spending, $84.5 billion, funds military operations in Iraq and Afghanistan. The remainder goes to diplomacy, foreign aid, and the flu. That's on top of $65.9 billion supplemental Congress already passed to fund the wars in this fiscal year. So it's yet another year that the American taxpayer is spending upwards of $150 billion for nation-building efforts that are unlikely to succeed and only tangential to our security. President Obama's plans to end the war in Iraq are long overdue, but with the war in Afghanistan expanding, Americans should ask how long counterterrorism will require counterinsurgency wars of indefinite duration. It is time for a new approach to counterterrorism—one easier on our much-taxed wallets.

The bill includes a variety of measures the president did not request. Such additions are Congress' constitutional right—but some of these additions will not serve the national interest. Particularly egregious are the eight C-17 cargo aircraft. The C-17 buy is a sop to the workers, many of them in politically powerful southern California, who make the aircraft. The Air Force says it has all the airlift capability it needs; in fact, it probably has too much already.

The goods news is that the Obama administration plans to make this the last war supplemental. It will attach future war spending to normal defense appropriations requests (now running around $550 billion, by the way). By keeping the requests separate, the Bush administration avoided comparing the utility of spending on current wars (in supplementals) on spending with future wars (the regular defense budget). Now the comparison should be more straightforward, and the choices more transparent.

Old Enough to Die for Your Country, Too Young for a Credit Card

Thu, 14 May 2009 06:00:00 CDT

Mark A. Calabria, director of financial regulation studies:

While much of the debate around the so-called "Credit Cardholders' Bill of Rights" has been on ending various card policies aimed at disguising different credit risks, one group of cardholders is certain to lose their right to credit under this bill: adults between the ages of 18 and 21.

Under the current Senate bill, the only way for someone under the age of 21 to get a credit card would be either:

1) they have a co-signer, such as their parent, sign for it, or

2) they maintain a job with sufficient income to cover any obligations arising from the credit card.

By contrast, neither of these requirements is put in place for student loans; there is the clear expectation that you pay those loans back in the future from your increased future income that results from going to college. While the purpose of a student loan is to offer one the means to get a higher education, the purpose of any form of credit is to borrow against your future earnings in order to enjoy some consumption today. Whether that consumption is in the form of textbooks or beer and pizza should be left up to the individual—we are talking about adults here—and not the state.

As with any legislation, there are likely to be substantial unintended consequences. Of the approximately 18 million students enrolled in U.S. colleges, some number of those will not want to give up their credit cards (maybe they value their beer and pizza) and will accordingly take what may be their only option to maintain that consumption: a job in addition to their studies. As with any choice in lift, this one comes with a trade-off. One of the primary factors related to whether one graduates from college is if one is holding a job while in college—the relationship being that the more hours a student works unrelated to classes, the less likely they are to finish college. Some students are going to take that trade-off. That means one impact of this bill will be that slightly fewer students will finish college. If we are ever to expect college students to start behaving as adults, we should start treating them as such, including allowing them to make their own credit decisions.

Social 'Security' Now Officially a Laughable Euphemism

Tue, 12 May 2009 06:00:00 CDT

Michael D. Tanner, senior fellow:

The Social Security Trustees report released today shows that the program's financial crisis is growing worse while Congress has continued to duck the issue.

Moreover, critics of personal accounts for Social Security have pointed to the decline in the stock market over the last few years as an argument against allowing younger workers to privately invest a portion of their Social Security taxes. Yet as the new Trustee's Report shows, the same poor economy that hurts the stock market, hurts Social Security's ability to pay its benefits.

In the end, there are only three possible solutions to Social Security's problems. Taxes could be raised (and the Social Security payroll tax would have to be nearly doubled to keep the program afloat). Benefits could be cut. Or younger workers could be allowed to invest privately. We can have an honest debate about which of those options is the best choice. But, as the Trustee's Report makes clear, we cannot afford to avoid that debate.

It Begins: White House Unleashes the Health Care Tempest

Mon, 11 May 2009 06:00:00 CDT

Michael D. Tanner, senior fellow:

Monday's meeting between President Obama and representatives of the health care industry is part of an ongoing process of trying to strike a deal between government and industry over how to reform health care. Notably absent from that equation is the most important party: health care consumers.

Health care reform should be about empowering patients, not about how much increased government control the health care industry is willing to accept.

Moreover, any promised health care savings that come out of today's meeting are likely to prove illusory in the face of increased government regulation, subsidies, and interference that will almost certainly drive up the cost (and decrease the quality) of health care.

Michael F. Cannon, director of health policy studies:

The health care industry wants universal coverage, because that means more customers and more revenue. But universal coverage is expensive—on the order of $2 trillion—and coming up with the money will be tough. Sen. Baucus says he has reforms that will reduce health care spending over time, but the Congressional Budget Office doesn’t recognize those savings.

If you try to tax people, they revolt. If you try to “free up” the money by cutting payments to the industry, the industry revolts.

Meanwhile, health care spending grows by seven percent per year—faster than wages, inflation, or the economy. If health care spending grows at just six percent per year instead, that could mean wages will be higher and there will be fewer uninsured than there otherwise would be—but it could also mean less access to medical care.

Earth to Lawmakers: Available Credit Is a Good Thing

Mon, 11 May 2009 06:00:00 CDT

Mark A. Calabria, director of financial regulation studies:

With the House having passed credit card legislation and the Senate scheduled to take up its own bill this week, one questions keeps coming back to me: What's the hurry? 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? And the Federal Reserve has already proposed a rule that would address many of Congress' supposed concerns. The Fed rule will be implemented July 2010. Were Congress to get a bill to the president by Memorial Day, as he has asked, the Federal Reserve and the industry still couldn't implement it before maybe January, if they were lucky.

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.

It was the massive under-pricing of risk, often at the urging of Washington, that brought on our current financial market crisis. To now pressure credit card companies not to raise their fees or more accurately price credit risk, will only reduce the availability of credit while undermining the financial viability of the companies, ultimately prolonging the recession and potentially increasing the cost of bank bailouts to the taxpayer.

As Treasury Secretary Timothy Geithner has repeatedly said, some of the biggest credit card issuers will not be allowed to fail (think Citibank, American Express, Capital One, KepCorp) should they suffer significant losses to their credit card portfolios. Will taxpayers ultimately be the ones covering those losses?

Congress should also further examine the wisdom of restricting credit to college students under the age of 21. Outside of the obvious age discrimination, why treat adults between the ages of 18 and 21 any differently from those above 21? The basic premise of college is making sacrifices today in order to have a wealthier tomorrow—accordingly being able to borrow against that better tomorrow should be an option for any college student. Just as some small number of college students don't benefit from college, some don't benefit from credit cards, but throwing the "baby out with the bathwater" hardly seems the idea solution.

Still Waiting for the "Change," Mr. President

Thu, 07 May 2009 06:00:00 CDT

Tad DeHaven, budget analyst:

President Obama’s estimated $17 billion budget cuts for fiscal year 2010 amounts to a measly .5 percent of the president’s total proposed spending, and 1.5 percent of the president’s proposed deficit for the coming fiscal year. His offerings to cut the budget should be dismissed as unserious. In fact, this is reminiscent of the Bush administration’s annual list of minuscule proposed cuts in the face of profligate spending and mounting federal debt.

President Obama says his efforts “are just the next phase of a larger and longer effort needed to change how Washington does business and put our fiscal house in order.” Promising more spending and more debt while celebrating relatively insignificant cuts and ignoring the looming entitlement crunch represents businesses as usual, not change. Current and future taxpayers deserved a serious proposal to reduce the government’s burden on their wallets and the struggling economy. Instead, the president’s first budget represents an attempt to shove the government’s hand deeper into the American peoples’ pockets and lives.

The president made several questionable statements in his address earlier today. He promised “long overdue investments” in education. But federal spending on education has already increased dramatically with no positive results. He spoke of “undertaking health care reform so that we can control costs while boosting coverage and quality” and “investing in renewable sources of energy.” Yet we know any type of reform will mean higher taxes, government rationing, and slower economic growth.

Chris Edwards, director of tax policy studies:

The Obama administration has issued a modest list of budget cuts for programs that are "duplicative" and "ineffective." That's a good start for spending reforms, but a more substantial way to end "duplication" would be to terminate all $500 billion of federal subsidies sent to state governments each year, which duplicate properly state-level activities such as highway building.

Further, cutting some "ineffective" programs ignores the broader question of whether programs represent just and legitimate uses of government power. We can make farm subsidies more "effective," for example, but that does not make it ethical to transfer $20 billion each year from hard-working taxpayers to often high-income farm businesses.

I'd like to see the Obama administration attack Washington's overspending problem in a more dramatic and fundamental way.

Stress Tests: If Banks Can Stand Alone, Obama Needs to Let Them

Thu, 07 May 2009 06:00:00 CDT

Mark A. Calabria, director of financial regulation studies:

Even with the stress tests completed, the Obama administration lacks an exit strategy for its deepening involvement in supporting these banks. What the administration needs to do is give the American people a road map for getting out of the business of owning banks. However, instead of a roadmap, the Administration keeps digging more potholes. Secretary Geithner's recent remarks, in which he suggested imposing additional requirements before letting banks repay their TARP obligations, raise serious questions regarding the administration's desire to actually exit the current situation. Treasury should reconsider its position and not only allow banks to repay, but encourage them to do so. The quicker we get these institutions out from under the government, the quicker our financial markets will get moving again.

As the witching hour of 5 pm on the East Coast approaches, when the Treasury will release both aggregate and individual stress test results, the overwhelming feeling in Washington and on Wall Street is one of closure: finally the circus can come to an end. In terms of the actual results, details of which have been leaking for days, the stress tests come close to telling us absolutely nothing we did not already know.

One purpose of the stress tests was to determine if the 19 bank holding companies could withstand "higher losses than generally expected." However, what started out as extreme economic projections are beginning to look like the consensus forecast. For instance, the stress tests assume a base case level of unemployment of 8.9 percent for 2010, and an extreme "stress" level case of 10.3 percent for 2010. There's a good chance that we'll reach that extreme; what the new extreme is, one can only guess, but what we do know is that the banks have not been tested for it.

While the aggregate results have yet to be released, it is a good bet that they will fall somewhere within the range of exactly just how much TARP funds Treasury has left. We can expect Treasury to announce capital shortfalls of just over $100 billion, while the real shortfalls are likely to be in excess of $200 billion. Treasury is understandably reluctant to go back to Congress for additional TARP funds, so it will likely do its best to stretch its existing resources.

One way of stretching those resources is converting preferred equity holdings into common stock. How this is to be done, and what kind of voting rights Treasury will have is yet to be seen. As Treasury has repeatedly said it will not let any of these banks fail, shifting the government's holding from preferred to common equity is little more than an accounting game that fails to address the underlying economic realities at many of these institutions.

Since When Is Tax Competition a Bad Thing, Mr. President?

Mon, 04 May 2009 06:00:00 CDT

Daniel J. Mitchell, senior fellow:

When we think of "tax havens," many tend to imagine yacht-besotted enclaves of shadowy international dilettantes, dripping with jewelry and laughing about the latest tax loophole their accountants have found. This conventional wisdom serves President Obama's latest crusade well, but it could not be more wrong. We are all beneficiaries of tax havens in ways you might not expect.

If you live in a developed country, your taxes are probably much lower today than they were 30 years ago, thanks in part to tax havens. In 1980, top personal income tax rates in developed countries averaged more than 67 percent, and corporate rates that year averaged nearly 50 percent. To compound the damage, countries routinely imposed extra layers of tax on capital, including dividend taxes, capital gains taxes, inheritance taxes, and wealth taxes. These policies discouraged saving and investment, stifling economic growth and causing significant economic hardship.

Beginning with Reagan and Thatcher, governments have been racing to cut tax rates and reform tax regimes. Top personal tax rates now average only about 40 percent, and corporate rates have been reduced to an average of about 27 percent.

It is largely globalization—not ideology—that has driven this virtuous "race to the bottom." Governments are cutting taxes because they fear that jobs and investment will flee across national borders. Tax havens, by providing a safe refuge for people seeking to dodge confiscatory tax rates, have played a critical role in these positive developments. Better to get some revenue with modest tax rates, lawmakers have concluded, than impose high tax rates and lose out.

European duchies and Caribbean isles aren't the only places that welcome tax refugees. The United States, for instance, could be considered the world's largest tax haven. The U.S. government generally does not tax interest and capital gains received by foreigners who invest in America. And since the IRS does not collect data on those payments, there is rarely any information to share with foreign tax collectors. Moreover, U.S. corporate structures, such as Delaware and Nevada companies, are excellent vehicles for foreigners to manage their investments. Thanks in part to these attractive policies, foreigners today have more than $12 trillion invested in the United States.

But President Obama is determined to unravel all of those benefits. His proposals would put American corporations at a great disadvantage, which is a very foolish policy in a competitive global marketplace. And despite the administration's make-believe figure, this plan would produce virtually no new tax revenue at all.

Making the 'Stress Test' Work for the Taxpayer

Mon, 04 May 2009 06:00:00 CDT

Mark A. Calabria, director of financial regulation studies:

"As the bank stress tests are released, it is vital that the public receive specific and detailed information on each financial institution. The administration's and the Federal Reserve's continued policy of attempting to disguise the differing health of each bank has been a failure. What is best for the taxpayer and the investing public is sufficient information to separate the good banks from the bad.

"For those institutions which lack sufficient capital to remain solvent, they should seek private capital or else be closed. Too many taxpayer dollars have already been wasted keeping alive failed institutions. The administration's policy of keeping failed institutions on taxpayer-financed life-support only serves to retard the market's ability to move assets away from those who do not, or cannot, make productive use of them toward those who can. It is time to remember that the unparalleled wealth-creating engine of the market depends as much on allowing failure as it does in encouraging success.

"Banks passing the stress tests should be encouraged to re-pay their TARP funds as soon as possible, and with no additional strings attached. More importantly, the administration should use any returned TARP funds to pay-down the increasing government debt, rather than be diverted to bailing-out other failed companies."

Souter: End of An Error

Fri, 01 May 2009 06:00:00 CDT

Roger Pilon, vice president for legal affairs:

In choosing a Supreme Court nominee to replace Justice Souter, President Obama will have an opportunity to avoid the partisanship he promised to reduce on the campaign trail, which his legislative agenda has thus far only exacerbated. But given the way Bush nominees were treated by Senate Democrats, it won't be easy. After the stormy confirmation hearings for Judges Bork and Thomas, President Clinton's nominations of Judges Ginsburg and Breyer sailed through the confirmation process with little opposition and even less acrimony. With the return of Republican nominees after the election of George W. Bush, however, Senate Democrats resumed their scorched earth practices, starting with appellate court nominees and continuing to the nominations of Judges Roberts and Alito to the High Court. Hearings were never held, filibusters were threatened, and characters were assassinated. The question now for Senate Republicans will be, is turnabout fair-play? The answer may turn on just who President Obama selects. At the least, given this recent history, there is no reason Senate Republicans need to be unduly deferential to the president's nominee. We will need to know both the judicial philosophy and the constitutional philosophy of the nominee. That will require respectful but sharp questioning by members of the loyal opposition. Their duty under the Constitution requires nothing less.

Ilya Shapiro, senior fellow, Center for Constitutional Studies and editor-in-chief, Cato Supreme Court Review:

You could call it "the end of an error."

David Souter, the "stealth justice" picked mainly to avoid a confirmation battle and who so disappointed conservatives, is finally free to return to his native New Hampshire.

Speculation now turns to possible replacements. President Obama is under great pressure to appoint a woman, and the three leading female candidates are new Solicitor General Elena Kagan, Second Circuit Judge Sonia Sotomayor, and Seventh Circuit Judge Diane Wood.

Kagan would be an almost-certain pick a year from now, but having been just confirmed to be the so-called Tenth Justice, she might be seen as too green for elevation.

Sotomayor is an appealing candidate. She is Hispanic, and despite a mixed judicial record was the odds-on favorite until the Court took up the employment discrimination case of Ricci v. DeStefano (argued just last week), an appeal of a bizarre opinion Sotomayor joined that denied the claims of firefighters who had been passed over for promotion because of their race.

Wood, a renowned authority on antitrust, international trade, and federal civil procedure. Wood offers a seriousness of purpose and no ideological ax to grind, thus making her the best nominee for supporters of constitutionalism. (Full disclosure: I took two classes from Judge Wood in law school.)

In terms of the nomination battle: Don't expect the wild Senate fisticuffs many observers are predicting quite yet. Obama will have other judicial picks to make. Look for him to play this first one relatively safe, and for Republicans to keep their powder dry for future nominations that Obama will use to appease his base and push the Court left.

What history writes about Justice Souter will be brief compared to his colleague justices: He has always been inscrutable, at first leaning right, shifting toward the middle in the landmark abortion case, Planned Parenthood v. Casey, and Lee v. Weisman (prayer at high school graduation), and ending up at the left end of the Court alongside Justices Stevens, Ginsburg and Breyer—all the while employing an unpredictable jurisprudential method. And he has always been reclusive, refusing reporters' and scholars' interview requests and being the biggest opponent of video cameras inside the Court. Perhaps most memorably, Souter gained notoriety after his vote in the infamous eminent domian case Kelo v.New London, where he allowed the taking of a private home for the benefit of real estate developers, which spurred property rights activists to petition for the use of eminent domain to turn Souter's farm into the "Lost Liberty Hotel."

Credit Threatened by Credit Card Holders' Bill of Rights

Thu, 30 Apr 2009 06:00:00 CDT

Mark A. Calabria, director of financial regulation studies:

Congress should keep in mind that credit cards have been a significant source of consumer liquidity during this downturn. Now is the worst time to push measures that would curtail the availability of consumer credit, and that is what the so-called Credit Card Holders’ Bill of Rights will do.

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 during this downturn.

It was the massive under-pricing of risk, often at the urging of Washington, that brought on our current financial market crisis. To now pressure credit card companies not to raise their fees or more accurately price credit risk, will only reduce the availability of credit while undermining the financial viability of the companies, ultimately prolonging the recession and potentially increasing the cost of bank bailouts to the taxpayer.

The Federal Reserve recently issued regulations targeting practices in the credit card industry. While this regulation was itself overkill, it should be given an opportunity to work, and be modified if it results in significant contraction of credit. It is far easier to go back and change harmful regulations than legislation.

Chrysler: This Is What Needed to Happen

Thu, 30 Apr 2009 06:00:00 CDT

Daniel J. Ikenson, associate director of trade policy studies:

A small group of Chrysler debt holders rejected the Obama administration’s restructuring plan last night, leaving Chapter 11 bankruptcy as the most salient option for the company.

The Obama administration accused the investors who walked away of “failure to act…in the national interest.” But it’s not difficult to understand why these secured creditors rejected the government’s offer of essentially 29 cents on their investment dollar. If that is how the Obama administration treats capital markets, how exactly do they expect to spur private investment in American companies, as the White House claims it wants to do?

Bankruptcy reorganization will probably yield a better deal for investors than the government’s plan. It also will imbue the process with more financial sanity than anything the Obama administration cooked up. For instance: the historically overindulged United Auto Workers might be forced to make more “sacrifices” than being handed a 55 percent stake in the company—essentially what the core of the administration’s plan would have accomplished—or reducing their CBA-mandated breaks from 16 minutes to 13 minutes.

Bankruptcy has been the best option all along. That was clear the moment it was determined that new private capital or adequate sales revenues would not be available to fund operations. But once the Bush administration circumvented Congress to throw Chrysler (and GM) a lifeline, and the Obama administration followed suit with implicit backing, uncertainty prevailed and the problem persisted. The bankruptcy process will produce a less politically driven solution.

Pakistan Must Commit to Fighting the Right Enemy

Wed, 29 Apr 2009 06:00:00 CDT

Malou Innocent, foreign policy analyst:

Pakistan's decision to move 6,000 troops from the Indian border to the Afghan border, as well as the Obama administration's request for $400 million in counterinsurgency assistance to Pakistan, is promising news.

But the strategic rift between Islamabad and Washington persists. Pakistan's military and intelligence establishments still believe their country faces a greater threat from India than from the low-intensity guerilla insurgency its army is ill-equipped and poorly trained to fight.

Policymakers in Washington can do their best to assuage Pakistani fears of an Indian attack. But until hawkish elements in Pakistan's government and military establishments come to that conclusion themselves, the United States and NATO will not have Pakistan's full cooperation.

Ultimately, Pakistan's own civilian leaders and defense planners must determine for themselves if insurgents or India poses a greater threat. The U.S. cannot decide that for Pakistan.

FL School Choice Measure Passes with Overwhelming Bipartisan Support

Wed, 29 Apr 2009 06:00:00 CDT

Adam B. Schaeffer, policy analyst, Center for Educational Freedom:

Tuesday, the Florida Senate voted to significantly expand the revenue base for the state's business donation tax credit program. The House voted last week to do the same, and soon Governor Christ is expected to sign the bill.

Missing from most reports is how bipartisan the support for education tax credits has become in Florida.

Nearly half of House—47 percent—voted for the program expansion. House Republicans voted 100 percent in favor.

Nearly a third of Senate Democrats—31 percent—voted to expand the tax credit program. And 92 percent of their Republican colleagues voted for the bill.

In all, 43 percent of state Democratic legislators voted in favor of education tax credits.

Partisanship on choice is fading away in Florida. Politicians have come to realize that school choice saves money and children, and that it's the most proven and effective systemic reform available.

The future of education reform is looking bright in the Sunshine State and across the nation.

First 100 Days: Mixed Record on Foreign Policy Challenges

Wed, 29 Apr 2009 06:00:00 CDT

Ted Galen Carpenter, vice president for defense and foreign policy studies; Christopher A. Preble, director for defense and foreign policy studies:

On the plus side, Obama moved quickly to fulfill his most important foreign policy promise: ending the war in Iraq. That said, the policy that his administration will implement is consistent with the agreement that the outgoing Bush administration negotiated with the Iraqis. Given that the war has undermined U.S. security interests, and our continuing presence there is costly and counterproductive, Obama should have proposed to remove U.S. troops on a faster timetable.

Malou Innocent, foreign policy analyst:

The jury is still out on the other major, ongoing military operation, the war in Afghanistan. That mission is directly related to events in neighboring Pakistan, which is serving -- and has served -- as a safe haven for Taliban supporters for years. President Obama deserves credit for approaching the problem with both countries together, and also in a regional context, which includes Iran, as well as India. Still unknown is the scope and scale of the U.S. commitment. President Obama has approved a nearly 50 percent increase in the number of U.S. military personnel in Afghanistan. Some have suggested that still more troops are needed, and that these additional troop numbers might prevail for 10-15 years. That would be a mistake. The United States should be looking for ways to increase the capacity of both Afghanistan and Pakistan to confront the extremism in their countries, and should not allow either to grow dependent upon U.S. military and financial support.

Ted Galen Carpenter, vice president for defense and foreign policy studies; Christopher A. Preble, director for defense and foreign policy studies:

On Iran, President Obama made the right decision by agreeing to join the P5 + 1 negotiations, but that is only a first step. The two sides are far apart and President Obama has not signaled his intentions if negotiations fail to produce a definitive breakthrough. Sanctions have had a very uneven track record, and are unlikely to succeed in convincing the Iranians to permanently forego uranium enrichment. If the Iranians are intent upon acquiring nuclear weapons, military action would merely delay Iran 's program, and would serve in the meantime to rally support for an otherwise unpopular clerical regime, and a manifestly incompetent president.

Doug Bandow, senior fellow; Christopher A. Preble, director for defense and foreign policy studies:

A related problem is North Korea's ongoing nuclear program, an area where the president and his team seem to be grasping for answers. President Obama was mistaken if he believed that that the UN Security Council would render a meaningful response to Pyongyang's provocative missile launch. It was naive, at best, for him to believe that even a strong rebuke from the UNSC would have altered Kim Jong Il's behavior. The president must directly engage China, the only country with any significant influence over Kim. The North's reckless and unpredictable behavior does not serve Beijing's interests

Benjamin H. Friedman, research fellow; Christopher A. Preble, director for defense and foreign policy studies:

Obama and Defense Secretary Robert Gates are correct to apply greater scrutiny to bloated Pentagon spending, and to terminating unnecessary weapon systems, but the budget will actually grow slightly, at a time when we should be looking for ways to trim spending. If President Obama decided to avoid Iraq-style occupations, we could cut our ground forces in half. If we stopped planning for near-term war with China or Russia, the Air Force and Navy could be much smaller. Unless we commit to a grand strategy of restraint, and encourage other countries to provide for their own defense, it will be impossible to make the large-scale cuts in military spending that are needed.

Benjamin H. Friedman, research fellow; Jim Harper, director of information policy studies; Christopher A. Preble, director for defense and foreign policy studies:

Two other quick points. President Obama has moved away from some of the overheated rhetoric surrounding counterterrorism and homeland security, including dropping the phrase 'War on Terror". This was the right approach. The language surrounding the fight against terrorism is as important -- if not more important -- than the actual fight itself. Equally useful is his pledge to close the detention facility at Guantanamo Bay and his renunciation of the use of torture and other illegal means in the first against al Qaeda. These steps send an important message to audiences outside of the United States who cooperation is essential.

Juan Carlos Hidalgo, project coordinator for Latin America; Ian Vásquez, director, Center for Global Liberty & Prosperity:

Lastly, as was widely expected, President Obama has signaled a slight change on US-Cuba policy by softening some travel and financial restrictions. It is not as far I would have liked, but I think it is a step in the right direction -- towards greater engagement, as opposed to more isolation, which was the approach adopted by the Bush administration.

First 100 Days: On Education, "A" for Effort, "D" for Real Reform

Wed, 29 Apr 2009 06:00:00 CDT

Neal McCluskey, Neal McCluskey, associate director of the Center for Educational Freedom:

If you look just at dollar signs or rhetoric to measure the education success of Barack Obama's first one-hundred days, then the President should get an A. Base it on meaningful reform, however, and he'd be lucky to get a passing grade.

Obama's overwhelming education focus has been getting roughly $100 billion directed to education through the American Recover and Reinvestment Act (ARRA). But spending billions upon billions to save jobs in a system that's seen huge staffing increases, skyrocketing per-pupil expenditures, but achievement stagnation is not forcing reform -- it's rewarding failure. And sure, the President and his Secretary of Education have talked a lot about connecting accountability to all that cash, but rhetoric rarely turns into real reform, especially once the money's out the door.

Thankfully, there is a way to change the system that works: Instead of giving tax dollars to public schools, let parents control the cash. Enable parents to choose schools, and force schools to respond to them. Unfortunately, in one of the most troubling episodes of Obama's first 100 days, his administration helped usher along the death of the D.C. school choice program, burying evidence of vouchers' success in the Capital just as Congress was debating their fate, and barring 200 kids from using vouchers next year.

It didn't make sense to me to put more students in the program,' explained Secretary Duncan.

But here's what really doesn't make sense: spending unprecedented billions to save a hopeless system, while letting real reform die. Unfortunately, such has been Obama's first 100 days.

First 100 Days: Obama's Energy, Environment Ideas Are Cutting-Edge...for the 70's

Wed, 29 Apr 2009 06:00:00 CDT

Patrick J. Michaels, senior fellow and author of Climate of Extremes: Global Warming Science They Don't Want You to Know:

For all his good intentions, President Obama's solution to our energy "crisis" is oil.

Snake oil.

Obama supports cap-and-trade proposals that he said would make the price of energy "skyrocket," and would "bankrupt" anyone who decides to build a new coal-fired power plant. In doing so he claims that he will create millions of green jobs and help America to become "energy independent."

Is this change? Presidents Nixon, Carter and George W. Bush also said there were miracle technologies out there that would end our dependency on dreaded foreign oil. Nixon and Carter proposed nuclear power. Carter threw in a synthetic fuel boondoggle, and Bush argued that if we just burnt up our corn supply, rather than using it for food, that the nirvana of independence would be within reach.

In each case, our use of foreign oil increased as our need for energy went up along with economic growth. Obama merely substitutes solar energy and windmills, which his own Energy Information Adminstration says will remain bit players in the power game.

What's "changed" on the energy front during Obama's first 100 days? Nothing.

First 100 Days: More Government Spending Will Not "Fix" Economy

Wed, 29 Apr 2009 06:00:00 CDT

Daniel J. Mitchell, senior fellow:

The government, despite the massive stimulus package that President Obama pushed through during his first 100 days, can't and won't really help grow the economy.

This is mostly a debate about Keynesian economics, which is the theory that the economy can be boosted if the government borrows money and then gives it to people so they will spend it. This supposedly "primes the pump" as the money circulates through the economy. Keynesian theory sounds good, but it has a rather glaring logical fallacy: It overlooks the fact that, in the real world, government can't inject money into the economy without first taking money out of the economy. The economic theory that President Obama has followed during his first 100 days doesn't boost national income, it merely redistributes it. The pie is sliced differently, but it's not any bigger.

Both Hoover and Roosevelt dramatically increased spending, and neither showed any aversion to running up big deficits, yet the economy was terrible all through the 1930s. To be fair, the argument that government can create jobs is not dependent on Keynesian economics. Politicians from both parties, for instance, argued in favor of pork-filled transportation bills earlier this decade when the economy was enjoying strong growth — and job creation generally was their primary talking point.

Unfortunately, no matter how the issue is analyzed, there is virtually no support for the notion that government spending creates jobs. Indeed, the more relevant consideration is the degree to which bigger government destroys jobs. Both the theoretical and empirical evidence argues against the notion that big government boosts job creation. Theory and evidence lead to two unavoidable conclusions:

The theory of government-instigated job creation overlooks the loss of resources available to the productive sector of the economy. If the government decides to build a "Bridge to Nowhere," it is very easy to see the workers who are employed on that project. What is less obvious is that the resources to build that bridge are taken from the private sector and thus are no longer available for other uses.

So-called stimulus packages have little bang for the buck. Even if one assumes that money floats down from Heaven, government is never an efficient way to achieve an objective. Based on the amount of money the president and Congress included in the "stimulus" package and their claims of how many jobs will be created, Harvard Professor Greg Mankiw filled in the blanks and calculated that each new job (assuming they actually materialize) will cost $280,000. But since money doesn't come from Heaven, this calculation is only a partial measure of cost. In reality, the cost of each government job should reflect how that $280,000 would have been spent more productively in the private sector.

The best "stimulus" government can offer is simply to stop interfering with the market and the economy overall.

Tad DeHaven, budget analyst:

President Obama campaigned on a promise of change. But the first 100 days of his administration have seen a continuation of the Bush administration's irresponsible fiscal policies: more bailouts, higher spending, and mounting debt. The president has already signed a tax hike that disproportionately hurts lower-income people, and is seeking additional tax increases to fund a transition to a more centrally-planned, European-styled economy. Just as previous administrations have done, the president is using the current economic 'crisis' to justify further government encroachment upon the private sector. In doing so, dangerous precedents are being set that could have negative repercussions for future economic growth and individual liberty.

First 100 Days: The U.S. Role in Global Development

Wed, 29 Apr 2009 06:00:00 CDT

Ian Vásquez, director of the Center for Global Liberty and Prosperity:

The best way the United States can help the developing world is through economic recovery at home and a firm commitment to free trade. President Obama has pledged such a commitment, but his record is tainted by the decision to prohibit Mexican truckers from operating in the United States, thus violating the North American Free Trade Agreement and by the administration’s refusal to pursue the free trade agreement with Colombia.

Worse, the administration has supported a massive increase in international aid through the International Monetary Fund and the World Bank on a scale not seen before as a way to help poor countries deal with the global financial crisis. The idea that large wealth transfers can jump-start growth is an old and failed one and new permanent resources at the lending agencies will only aggravate the lack of accountability problems that they suffer. In the first 100 days, it looks like the Obama administration is embracing old approaches to global development based on government-to-government aid, rather than policies primarily based on wealth creation.

NAEP Report Shows More Spending Not Translating to More Learning

Tue, 28 Apr 2009 06:00:00 CDT

Andrew J. Coulson, director, Center for Educational Freedom:

The latest NAEP results reveal a productivity collapse unparalleled in any other sector of the economy. At the end of high school, students perform no better today than they did nearly 40 years ago, and yet we spend more than twice as much per pupil in real, inflation-adjusted terms.

While the stagnation in overall achievement masks a 3 to 5 percent gain in the achievement of African American 17-year-olds, the scores for whites at the end of high school are virtually unchanged.

Those who point to higher scores in the early grades as cause for celebration are missing the point. What parents care about is that their children are well prepared for higher education and future careers at the end of their secondary education. The fact that scores have risen somewhat in the early grades means little since those gains evaporate for the vast majority of students by the time they graduate.

Neal McCluskey, associate director, Center for Educational Freedom:

It's nice to see increases in academic outcomes for American students, but the upticks in the latest NAEP report are once again tiny, and high school seniors – our system's final products – remain mired in stagnation. Considering the huge spending increases we've see in education over the last several decades, that's simply unacceptable.

Unfortunately, many people are likely to grab onto the little gains on the latest NAEP and declare gigantic, top-down reforms like the completely irrational No Child Left Behind Act a triumph. Were a notion like that to become accepted wisdom, it would turn this report into an utter disaster. For one thing, given all the factors that affect student achievement, it is impossible to give credit to any single reform. Much more importantly, if these scores suggest anything, it is that all our grand five and ten-year reform plans have been almost complete failures, like we've been buying more and more bushels of oranges for decades and getting just a thimbleful of extra juice. Quite simply, we've been lavishing huge amounts of money on a government monopoly inherently incapable of meaningful improvement. If we ever want better than that, we must completely change the structure of American education, leaving behind our Soviet-style system and replacing it with a vibrant market like we have for computers, grocery stores, courier services, and almost every other good and service we take for granted every day. We need universal school choice, and we need it now.

Adam B. Schaeffer, policy analyst, Center for Educational Freedom:

Once again, national NAEP scores demonstrate overall stagnation and tiny improvements at best for some African American students. Decades of "reforms" and billions of dollars have accomplished nothing of lasting value.

How long must we wait for real results?

How many hundreds of billions of taxpayer dollars must we throw down this hole of inequity and failure?

How many generations of low-income children must we write off before trying a different approach to education reform?

School choice is the most rigorously studied and proven systemic education reform. It's far past time we focus on what is working now rather than what we hope, fruitlessly, might work someday.

What Will Help Africa?

Fri, 24 Apr 2009 06:00:00 CDT

Marian L. Tupy, policy analyst:

With over a trillion dollars in new resources pledged to them by the G-20 in London earlier this month, the World Bank and the IMF will likely spend this weekend reaffirming their commitments to more aid and greater debt relief for Africa.

What they are missing is the fact that aid has failed to stimulate growth in Africa.

Between 1975 and 2005, for example, per capita aid to Africa averaged almost $25 per year. By contrast, in China it averaged $1.50 and in India $2. Over the same time period, Chinese and Indian incomes rose by 888 percent and 174 percent respectively. In Africa, incomes fell by 5 percent.

Moreover, aid has encouraged waste and corruption. Inadvertently, it also financed, according to Paul Collier of Oxford University, "around 40 percent of Africa's military spending."

Similarly, the effects of debt relief remain ambiguous. Far from putting African countries on a firmer financial footing, debt relief has often led to yet more wasteful borrowing, necessitating more debt relief. Thus, the World Bank's and the IMF's Debt Relief Initiative for Heavily Indebted Poor Countries (HIPC) in 1996 was followed by the enhanced HIPC initiative in 1999 and then by the creation of the Multilateral Debt Relief Initiative in 2005.

Solution

Trade liberalization has the greatest potential to help Africa emerge from poverty. Unfortunately, the Doha round of negotiations on trade liberalization came to a halt and the threat of protectionism looms larger as the current global economic slowdown continues. More protectionist countries have more to gain from trade opening. Africa, much of which remains highly protectionist, should liberalize unilaterally. India and China have done so in the past and benefited.

Africa remains the poorest and least economically free region on earth. Rich nations should help Africa integrate with the rest of the world. They should end their farm subsidies and eliminate their remaining restrictions on African exports. But the main obstacles to economic growth in Africa rest with Africa's policies and institutions, such as onerous business regulations and weak protection of property rights.

Rich nations' emphases on foreign aid and debt relief take the spotlight away from Africa's internal problems and raise unrealistic expectations about the ability of rich countries to help reduce African poverty.

For more, read The False Promise of Gleneagles Misguided Priorities at the Heart of the New Push for African Development.

Tarred by TARP

Wed, 22 Apr 2009 06:00:00 CDT

Gerald P. O'Driscoll Jr., senior fellow:

Government-backed equity was offered to adequately capitalized banks in order to remove the "stigma" from banks receiving TARP funds, and the management of these institutions took the bait and accepted the money. Surprise, surprise: now they discover that the money came with strings.

Some banks want to pay back the TARP money to extricate themselves from government restrictions on compensation and pressure to make loans the banks view as unprofitable. Treasury Secretary Geithner has made it clear that the decision to pay back the funds early won't be left to the banks, but to Treasury: "My basic obligation is to make sure the system as a whole … has the ability to provide the credit that recovery requires.

The banking system has thus become a tool for the government to further its policies. And the bankers themselves put their institutions in that position. While taxpayers may understandably feel the bankers got their comeuppance, there are at least two major problems with the Bush/Obama policy.

First, Mr. Geithner has misdiagnosed the problem. We are in recovery from the effects of the bursting of a massive housing and finance bubble funded by debt. That boom in turn financed a consumption binge of monumental proportions. The only resolution of a spending binge is restraint in the form of saving. Recovery requires not more credit and another boom, but a dose of economic sobriety. Individuals and firms know that and are de-leveraging – unwinding what they now realize is excessive debt. That will take the rest of this year and the better part of 2010. Overall, credit is down because demand is down.

Second, and even more disturbing: it appears that the Obama administration wants to control the financial sector in order to gain control over what Lenin called the "Commanding Heights" of the U.S. economy: the major industries and sources of employment. The auto industry is a prime example, and one in which the administration has involved itself directly. It is also pressuring major recipients of TARP funds to ease the terms of the loans they have made to firms such as Chrysler. Treasury is attempting to use the banks to conduct fiscal policy through credit allocation.

The bankers taking TARP funds got their firms into a mess and deserve no sympathy. Anyone believing in free markets, however, must oppose this power grab by the Obama administration. Let the banks pay the funds back and let it be a lesson for CEOs and their stockholders: If you take government funds, you have taken on an unreliable business partner.

Supremes Should Find 'Reverse Discrimination' in Ricci v. DeStefano

Wed, 22 Apr 2009 06:00:00 CDT

Ilya Shapiro, senior fellow, Center for Constitutional Studies:

Today the Supreme Court heard argument in Ricci v. DeStefano, the "reverse discrimination" case where the city of New Haven refused to certify the results of a race-neutral promotion exam whose objective results would have required, under civil service rules, the promotion of only white and Hispanic (but no black) firefighters. The firefighters who were thus denied promotions sued the city, claiming racial discrimination under Title VII of the Civil Rights Act and the Equal Protection Clause of the Fourteenth Amendment. Remarkably, a panel of the Second Circuit Court of Appeals—including oft-mentioned Supreme Court contender Sonia Sotomayor—summarily affirmed the district court's ruling against the firefighters, though Judge José Cabranes (a Clinton appointee) later excoriated the panel for not grappling with the serious constitutional issues raised by the case.

The Cato Institute filed a brief, joined by the Reason Foundation and the Individual Rights Foundation, pointing out the absurd incentives at play: if the lower court's ruling stands, employers will throw out the results of exams (or other criteria) that produce racial disparity, even if those exams are race-neutral, entirely valid, and extremely important to the employer and (as in this case) the public.

Today the Court seemed starkly divided. The "liberal" justices hinted that an employer should be allowed to be "race conscious" to avoid Title VII lawsuits alleging "disparate impact" against minorities in hiring and promotions. The "conservatives" were disturbed that the only reason the firefighters weren't promoted was their race. Nobody seemed persuaded by the government's request—really an attempt to avoid taking a firm stand on a controversial issue—that the judgment be vacated and the case remanded for further factual development and legal rulings by the lower courts. Justice Kennedy will likely be the swing vote, and I predict that he will side with the conservatives, albeit narrowly in a separate concurrence as he did in Parents Involved in Community Schools v. Seattle School District No.1, the race-based school assignment case from 2007.

It was in Parents Involved that Chief Justice Roberts wrote: "The way to stop discrimination on the basis of race is to stop discriminating on the basis of race." Quite so. The Supreme Court should thus reverse the Second Circuit, establishing that an employer can only discount test results when there is a "strong basis in evidence" that the test is somehow biased against a particular racial group.

Cato Scholar Comments on English Language Education in Arizonia Schools

Mon, 20 Apr 2009 06:00:00 CDT

Andrew J. Coulson, director of the Center for Educational Freedom:

Today, the supreme court is hearing oral arguments in the Horne v. Flores case that will affect how and at what cost English is taught to non-native speakers in U.S. public schools. On one side are parents from southern Arizona who sued their school district for failing to properly teach their children English, and on the other are district and state officials who want the courts to butt out and let them teach students in whatever way, and at whatever cost, they choose.

Even if the parents "win," and the court orders their public school district to spend hundreds of millions of dollars more on English instruction, it won't do any good. A 1985 federal court order compelled the state of Missouri to spend an additional $2 billion over 12 years to desegregate Kansas City schools and improve the achievement of African American students. Neither goal was achieved, and even the presiding judge eventually admitted his order was a failure. Extra spending and court pressure do not improve public school performance, because public schools don't have to show improvement to get the money and because courts can't dismiss ineffective administrators or teachers.

The real solution is to empower parents to leave the schools that are failing them and move their children to more effective ones.

News Release: Harvard Economist Jeffrey Miron and Capitol Hill Veteran Mark Calabria Join the Cato Institute's Economic Policy Team

Mon, 20 Apr 2009 06:00:00 CDT

Jeffrey Miron, Director of Undergraduate Studies at Harvard's Department of Economics, has joined the Cato Institute as a Senior Fellow.

"I am delighted to be working with Cato," Miron said. "This is a crucial moment in our nation's history, and Cato's mission - increased understanding of the virtues of limited government, free markets, individual liberty, and peace - has rarely been more important."

Miron will help Cato's economic team promote dynamic market capitalism and economic freedom through media appearances and policy analyses, in addition to speaking engagements and outreach to the academic community. He is the author of Drug War Crimes: The Consequences of Prohibition (Independent Institute, 2004) and The Economics of Seasonal Cycles (MIT Press, 1996), in addition to numerous opeds and journal articles.

Miron will retain his affiliation with Harvard. Prior to joining Harvard, he served as chairman of the Department of Economics at Boston University. Miron received his Ph.D. in economics from the Massachusetts Institute of Technology.

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Mark Calabria, a veteran staff member of the Senate Committee on Banking, Housing & Urban Affairs, has joined the Cato Institute as Director of Financial Services Regulation.

"I join Cato with a great sense of excitement and urgency," Calabria said. "Cato has long been a strong, and sometimes the only, voice for expanding and protecting individual choice. We are confronted with stark choices regarding the regulation of our financial markets: whether to expand the role of politics in deciding who will get credit and what institutions will fail. In a time when markets and freedom are being questioned and attacked, Cato's mission of understanding the impact of government proposals is all the more necessary."

Calabria will lead Cato's efforts in developing solutions to what ails the U.S. financial markets that do not include more oppressive government regulation. He will also help educate the public, via media appearances and other outreach, as to how the government itself contributed heavily to the disruptions now occurring in the financial sector.

In addition to his work on Capitol Hill, Calabria served as Deputy Assistant Secretary for the Office of Consumer and Regulatory Affairs, U.S Department of Housing and Urban Development, and was also senior economist at the National Association of Realtors. Calabria earned his Ph.D. in economics from George Mason University.

"We are delighted to have two of the nation's most effective proponents of free markets and individual liberty on board now at Cato," said Cato founder and president Ed Crane. "Mark Calabria and Jeff Miron are distinguished economists who will play an important role in advancing Cato's mission in the months and years ahead."

Cato Institute scholars are available for comment on this and other major news issues of the day. To arrange an interview, please dial Cato Media Relations at 202-789-5200 or e-mail pr@cato.org.

Cato Scholar Comments on Pirate Bay Verdict

Fri, 17 Apr 2009 06:00:00 CDT

Timothy B. Lee, adjunct scholar:

It's hard to be surprised by the Pirate Bay verdict sending online file sharers to prison for a year. Trading copyrighted works without permission is illegal, and the Pirate Bay's operators were downright gleeful about helping millions of people flout the law.

Nevertheless, shutting down the Pirate Bay won't stop file sharing any more than shutting down Napster or Grokster did. New services will emerge, and copyrighted materials will continue to be readily available.

Policymakers need to recognize that prohibition doesn't work. Rather then continuing the hopeless fight against personal file sharing, policymakers should refocus copyright law on its traditional goal of protecting copyright holders' exclusive right to commercial exploitation of creative works.

Cato Scholar Comments on Gun Control in Mexico

Fri, 17 Apr 2009 06:00:00 CDT

David Rittgers, legal policy analyst:

An unfortunate aspect of President Obama's trip to Mexico is the false—but virtually unopposed—assertion that the vast majority of weapons being used in the Mexican drug war come south from the U.S.

Yes, there is a major problem with drug-related gun violence along the border. No, U.S. gun laws are not the main culprit—and to lay all the rhetorical blame on them is to ignore serious weaknesses in numerous other policy areas.

The claim that that 90 percent of the guns involved in Mexico's drug war come from the United States has already been debunked. The reality is that out of 29,000 firearms picked up in Mexico, 5,114 of the 6,000 guns successfully traced came from the United States. While that is 90 percent of traced guns, it means that only 17 percent of recovered guns come from the U.S. civilian market.

Where did the rest come from? A number of places. To begin with, over 150,000 Mexican soldiers have deserted in the last six years for the better pay and benefits of cartel life, some taking their issued M-16 rifles with them.

What the Obama administration should look at is the Direct Commercial Sales, the legal export of military-grade weapons monitored by the State Department. The FY 2007 report shows a record number of investigations and a record number of fraudulent sales. Unsurprisingly, the majority of "unfavorable" findings in the Americas are in small arms and ammunition. Cutting down the number of military weapons sold through front companies to the cartels will do more to combat the violence than restricting the Second Amendment rights of all Americans.

And, of course, sadly absent from this debate is the issue of enriching and empowering violent black marketeers through the U.S.'s empirically failed prohibition on drugs.

Cato Scholar Comments on the Summit of the Americas

Fri, 17 Apr 2009 06:00:00 CDT

Ian Vásquez, director, Center for Global Liberty and Prosperity:

As President Obama meets with other hemispheric leaders at the Summit of the Americas this week, he should keep in mind that the most effective way for the United States to help Latin America is to strengthen its own economy based on sound policies that encourage wealth creation.

U.S. economic growth, rather than foreign aid or other forms of U.S. largesse, should be welcomed by regional leaders. In practice, Obama should announce a commitment to supporting the Colombia and Panama free trade agreements and move away from the protectionist measures that ban Mexican truckers from driving in the United States, a policy that violates the North American Free Trade Agreement. Such an announcement would be a powerful signal to the region of the United States' continued interest in economic integration.

Greater integration should include Cuba as well, but all regional leaders should forcefully denounce the Castro dictatorship and human rights abuses in Cuba that are typically ignored by Latin America's democratic governments.

Other areas for positive U.S. policy change toward the region include liberalization of an immigration policy that is currently at odds with economic reality; and an end to the failed U.S.-led war on drugs that is undermining the institutions of civil society south of the Rio Grande.

Such moves by Washington would be major steps forward for inter-American relations. At the same time, they would require Latin American leaders to recognize that the United States can help, but not solve, the region's problems. The hard work of development has to be done by Latin Americans themselves.

Cato Scholar Comments on Obama's Easing of Cuba Restrictions

Tue, 14 Apr 2009 06:00:00 CDT

Ian Vásquez, director, Center for Global Liberty and Prosperity:

President Obama's decision to marginally ease restrictions on travel and exports to Cuba is a step in the right direction. But after 47 years of a failed embargo, Obama should act more boldly and lift all trade and tavel restrictions. A good first step would be to end the travel embargo on all Americans, not just Cuban Americans. That would put millions of Americans directly in contact with Cubans in the following years -- a phenomenon that would surely corrupt, more than uplift, Cuban communism.