Cato Recent Op-eds

Five Decades of Failure Are Enough by Tad DeHaven

Mon, 08 Feb 2010 23:00:00 -0600

With trillion-dollar deficits as far as the eye can see, policymakers need to scour the federal budget for departments to cut and eliminate. They should start with ones that are not just wasteful, but actively damaging to the economy. Top of the list would be the $60 billion Department of Housing and Urban Development.

HUD's negative impact on the economy is far larger than its multibillion-dollar budget.

HUD's policies played a key role in causing the housing boom and bust and then the recession in its wake. Weak lending standards on HUD-insured mortgage loans helped fuel risky non-prime lending. HUD also put pressure on banks and the failed housing giants Fannie Mae and Freddie Mac to make risky loans to underqualified borrowers. Thanks to those policies, Fannie and Freddie went bankrupt and already have received $112 billion in taxpayer bailouts.

Steady increases in home-buying subsidies in recent decades were motivated by political attempts to curry favor with special interests such as the Realtor and homebuilder lobbies. Politicians justify the subsidies on their claimed civic virtues. But, as we've seen in the wake of the housing bubble's bursting, there's nothing virtuous about putting people into homes they can't afford.

Since the financial crash, the politics of housing subsidies seem to have become even worse. The housing lobby groups continue pushing to expand federal intervention in housing markets, and politicians keep increasing subsides through the Federal Housing Administration and the Government National Mortgage Association, which insure and guarantee more than $700 billion in mortgages and mortgage-backed securities.

HUD's FHA has expanded so much that it is facing the possibility of an expensive taxpayer bailout because of rising defaults on mortgages it insures. As for Ginnie Mae, its portfolio has exploded, and there are growing concerns it could be the next Fannie or Freddie.

Like housing finance, HUD's other activities also are politically driven but economically unsound. The department spends about $10 billion a year on community development programs consisting primarily of grants to states and local governments for economic development and housing development and assistance. Community development funds originally were targeted to large cities in decline, but today, this congressional cookie jar confers largesse on communities rich and poor, large and small. In addition to complexity and bureaucracy, these programs are highly susceptible to financial abuses. Community development should be left to the private sector or local governments, where residents can better weigh the benefits of local projects with the tax costs.

HUD spends more than $30 billion a year on housing assistance, which includes money for public housing authorities and rental subsidies for tenants. Dilapidated and crime-infested public housing is a vivid reminder of the government's failure when it comes to solving social ills. In recent decades, policymakers have moved away from public housing in favor of housing vouchers. However, instead of bringing an end to "concentrated poverty," that has merely spread it around. Policymakers justify these programs on a lack of affordable housing, but state and local governments themselves make housing more expensive with zoning rules and housing regulations.

HUD's current failures are not unique. It has a long history of failure and scandal. In the 1980s, HUD Secretary Samuel Pierce's eight-year tenure was so scandal-prone that it led to 17 criminal convictions, including convictions of three former HUD assistant secretaries. In the 1990s, President Clinton's HUD secretaries, Henry G. Cisneros and Andrew Cuomo, helped lay the foundation for the housing bubble with their political strategy of increasing the homeownership rate. And most recently, George W. Bush HUD Secretary Alphonso Jackson oversaw the inflation of the housing bubble and then the bust while using his office to reward friends and political allies.

Far from solving America's housing and urban problems, HUD has made them worse.

HUD should be abolished. State and local governments should be left to decide what housing and community development programs they want to fund. Even better, housing should be left to private markets, which produced massive amounts of housing for people at all income levels for many decades before government encroachment.

Where Is the Inflation? by Richard W. Rahn

Mon, 08 Feb 2010 23:00:00 -0600

Most economists, including yours truly, have been saying that the huge budget deficits the country is running will result in inflation. So, where's the inflation? Inflation normally lags changes in the growth of the money supply by one to two years. The big monetary expansion took place in the last half of 2008. So if the economy follows past trends, one would expect to see growing inflation by the latter part of this year.

There are several reasons why inflation does not occur simultaneously with a sudden growth in the money supply. (Remember, inflation is caused by the money supply growing faster than the supply of goods and services.) The Fed greatly expands the money supply when it sees the economy is entering a recession in order to temporarily reduce interest rates and increase the supply of loanable funds. But a recession is a decline in business activity. When business declines because of a fall in demand, the normal reaction of businesspeople is to cut prices (deflation) to reduce excess inventories.

It appears that the inventory-reduction portion of the business cycle is over, and the data show that most businesses have begun to rebuild inventories. This inventory rebuilding is increasing the demand for basic commodities, but the rise in commodity prices has not yet overcome the big productivity gains the U.S. has experienced over the past three quarters.

When an economy goes into a recession, there normally is a fall in labor productivity because employers are reluctant to lay off workers, and hence, most businesses find themselves overstaffed, which means that output per hour of work declines. Employers eventually are forced to cut staff, and the workers who are let go usually are the least productive ones. When there are enough workers to meet demand for the product, but not an excess of workers, productivity normally shoots up because the more productive workers (and more motivated ones) are the ones who have kept their jobs. The increase in productivity means goods and services can be produced at lower costs, and this effect masks the monetary inflation.

When inflation rises (or is expected to rise), interest rates rise — except during the early stages of the business cycle, when there is a paradoxical result of larger government deficits being most often associated with lower interest rates. The noted economist John H. Makin explained this effect very well in a recent American Enterprise Institute paper in which he wrote: "in the United States, nonfederal government debt (currently about $27 trillion) is nearly four times as large as federal government debt (currently about $7.2 trillion). When the economy enters a recession, countercyclical fiscal policy boosts deficits and government debt while private debt falls. Given that the stock of private debt is so much larger than government debt, the drop in private borrowing in a recession overwhelms the impact on total borrowing of a rise in government deficits."

But alas, all of this is temporary. As the economy begins to recover, both business and individual borrowing increases, putting upward pressure on interest rates. Government borrowing merely accelerates the rise in real, inflation-adjusted interest rates. The higher interest rates go, the more costly it is for consumers to buy new homes, automobiles and other items they normally buy on credit and the more costly it is for businesses to borrow for new plants and equipment. These interest-rate increases begin to choke off demand for consumer durables and business plants and equipment, which slows down or even reverses economic growth.

The Federal Reserve and other central banks around the world can mask the rise in interest rates for awhile, as they are now, by making money available to the banks at very low rates (presently close to zero for short-term borrowing). And individuals and businesses can squirrel away much of the new money by increasing their savings rates. But what happens if people see a rise in inflation and at the same time are unable to obtain sufficiently high interest rates on their savings to cover the inflation and then some? Many increasingly will flee from holding cash balances and just buy "stuff," which can lead to an accelerating rate of inflation or even hyperinflation.

Or, as has happened in Japan, the people see the government accumulating so much debt that they don't believe the government will be able to fulfill its promises for the Japanese equivalent of Social Security and Medicare, so they hoard cash in a belief that they will need it for their retirement. A rising savings rate means lower consumption with little or no inflation, or even deflation, leading eventually to economic stagnation, which is what the Japanese have.

Studies show that once the government ratio of debt to gross domestic product rises above 90 percent, interest rates begin to accelerate to destructive levels. The debt projections by the administration and the Congressional Budget Office show the U.S. getting very close to such a level in the next few years, while more objective private forecasters see the debt-GDP ratio rising to much more than 100 percent.

The alternatives are simple — greatly reduce the growth in government spending or suffer a huge rise in inflation and/or economic stagnation. (Increasing tax rates, which already are at high levels, slows economic growth and job creation, which in turn increases the demand for government services and payments — and hence becomes more of a problem than solution.) Who, among our politicians, has actually produced a real plan to reduce the growth in government spending to the necessary levels?

GM Stake Compromises Obama in Toyota's Recalls by Daniel J. Ikenson

Mon, 08 Feb 2010 23:00:00 -0600

When he urged Americans to "stop driving" their Toyotas last week, was Transportation Secretary Ray LaHood speaking as the head of a federal agency concerned with highway safety or as a sales advocate for a nationalized General Motors?

In testimony before the House Appropriations subcommittee on transportation last Wednesday, LaHood said: "My advice to anyone who owns one of these vehicles is stop driving it, and take it to the Toyota dealership because they believe they have the fix for it."

Later that day, LaHood tried to clarify his remark, adding that the National Highway Traffic Safety Administration "will continue to hold Toyota's feet to the fire to make sure that they are doing everything they have promised to make their vehicles safe. We will continue to investigate all possible causes of these safety issues."

Certainly, Toyota's faulty accelerators and brakes are legitimate safety issues, as are many of the other 2,000 recalls a year logged by the NHTSA. However, La Hood's remarks, implying that Toyotas are unsafe to drive and that company leaders have been evasive about the problems, should raise some eyebrows.

After all, the Obama administration bought a 60 percent stake in General Motors costing taxpayers more than $50 billion and is thus vested politically in the company's success. That GM's value must exceed at least $83 billion (bearing in mind that the company's highest-ever market valuation was $60 billion in 2000) before taxpayers can be made whole is the prism through which the administration's words and actions on the auto industry should be viewed.

One important concern among auto industry analysts upon GM's emergence from bankruptcy has been whether and how the Obama administration might use regulation and the tax code to tilt the playing field in GM's favor.

Will consumers get special incentives to purchase high-mileage vehicles of the kind that -- surprise -- only Chevy Volt satisfies, for example?

Likewise, whether or not LaHood was exploiting an opportunity to reinforce doubts about Toyota and steer car buyers toward GM, there is no avoiding a conflict of interest when the government regulates an industry in which it has major stakes in one of the firms. One cannot objectively referee a race in which it has its own horse.

Often, to minimize conflicts between policy advocacy and personal enrichment, politicians create blind trusts to manage their personal assets. In this case, that option is foreclosed because the government's stake in GM can't be hidden.

So conflicts of interest -- or at least the appearance of conflicts -- in remarks from policymakers that can affect stock values, channel investment and invite class-action lawsuits will mar the competitive landscape until the government fully divests of GM.

If the government seeks to boost GM's value before divesting, it can do so even-handedly by working to scrap the 35.5 miles per gallon fuel-efficiency standards slated for 2016. That requirement penalizes GM, which doesn't fare well in a small car market, as the results of last year's cash-for-clunkers program proved.

It would also remove an incentive for administration officials to kick Toyota when it's down.

Time for Question Time? by Gene Healy

Mon, 08 Feb 2010 23:00:00 -0600

It's no surprise that President Barack Obama's State of the Union address was a snooze: the speech has long been a dull and pompous ritual. But no one was bored two days later when the president showed up to a House Republican confab in Baltimore for a lively, unscripted tussle with his opponents.

Inspired by that exchange, a diverse coalition of political luminaries set up www.demandquestiontime.com, a petition drive aimed at starting "a new American political tradition." The group — which includes lefties David Corn and Katrina vanden Heuvel, and right-wingers Grover Norquist and Glenn Reynolds — wants the parliamentary practice of Prime Minister's Questions, in which the chief executive is regularly grilled by his opponents, brought to the U.S.

They're on to something. An American Question Time might knock our presidents off their pedestals, and force them to grapple with alternative viewpoints.

Left to their own devices, presidents can isolate themselves in a cocoon of sycophants, even putting protesters in "Free-Speech Zones," where their signs can't offend the liege. The regal atmosphere of the office shields presidents from necessary feedback.

That's dangerous, political scientist Bruce Buchanan argued in his under-recognized 1978 classic, "The Presidential Experience," because it feeds the arrogance of power and warps presidential decision making.

One possible solution, Buchanan argued, was to demand Question Time. Adopting the practice "would force the president to expose himself in a setting he did not control."

Obama received fairly gentle treatment in Baltimore, handling his questioners ably and shocking anyone who expected him to be at sea without a teleprompter. The session was generally scored as a win for the president, and maybe that's why so many liberals have signed the petition.

But when Question Time's done right, it's done rude. An American version will only be worth having if it's conducted in the irreverent spirit the Brits bring to it.

Harold Macmillan, British P.M. from '57 to '63, once admitted that the pressure of Question Time used to make him vomit as he waited to face the music. Little wonder: Last May, The New York Times described a session of Prime Minister's Questions that made Gordon Brown seem "more piñata than politician."

"We've got a wasted year with an utterly busted government," Conservative leader David Cameron gleefully declared to Brown's face. "Isn't it clear you're just not up to the job?"

Our presidents rarely get handled that roughly. Maybe that's why President George W. Bush seemed to be the last American to realize that the war in Iraq wasn't going swimmingly, and why Obama has been painfully slow to appreciate that Obamacare has become his Iraq.

Indeed, for all his media ubiquity, Obama prefers venues he controls. He hasn't held a press conference in seven months and rarely takes questions from reporters at public appearances.

If the demanders succeed, presidents won't be able to get away with insulating themselves. Done right, Question Time could force presidents off script, puncture their air of majesty and force them to listen.

It's worth a shot. Besides, what do we have to lose?

KBR Is Asking for It by David Isenberg

Sun, 07 Feb 2010 23:00:00 -0600

To paraphrase comedian Henny Youngman's famous one-liner, take my KBR, please.

After all the bad press U.S. engineering and construction company KBR has received over the years for its operations in Iraq , both during its time as a Halliburton subsidiary and since, one might think it had learned a thing or two about how to avoid sticking its foot in its mouth.

But you would be wrong, As case in point consider the following legal brief KBR filed, which was posted online by the estimable Ms. Sparky -- who is to chronicling KBR misdeeds, including those against it own employees, as white is to rice -- in regard to the case of Jamie Leigh Jones.

For those who missed this news Ms. Jones is the then 20-year old former KBR/Halliburton worker, who says she was gang-raped by Halliburton/KBR coworkers in Baghdad in late July 2005.

The main points are by now well known. She says that just four days after arriving in Iraq she was raped by multiple men at a KBR camp in the Green Zone, the company put her under guard in a shipping container with a bed and warned her that if she left Iraq for medical treatment, she'd be out of a job.

In a lawsuit filed in federal court against Halliburton and its then-subsidiary KBR, Jones says she was held in the shipping container for at least 24 hours without food or water by KBR, which posted armed security guards outside her door, who would not let her leave.

According to her lawsuit, Jones was raped by "several attackers who first drugged her, then repeatedly raped and injured her, both physically and emotionally." Jones said that an examination by Army doctors showed she had been raped "both vaginally and anally," but that the rape kit disappeared after it was handed over to KBR security officers.

Ms. Jones had to be rescued from her American employer by U.S. State Department agents from the U.S. Embassy in Baghdad, after she was able to contact her father by cell phone, who then contacted his congressman, Rep. Ted Poe (R-TX), who contacted the State Department.

In late 2007, over two years after the reported rape occurred, the Justice Department had brought no criminal charges in the matter. In fact, an investigation by ABC News could not confirm any federal agency was investigating the case.

Early on, in a statement, KBR said it was "instructed to cease" its own investigation by U.S. government authorities "because they were assuming sole responsibility for the criminal investigations."

Since no criminal charges were filed, the only other option was the civil system, which Jones tried. But KBR didn't want this case to see the inside of a civil courtroom. Instead, KBR moved for Jones' claim to be heard in private arbitration, instead of a public courtroom. It says her employment contract requires it.

When Jones went to work for KBR in Texas, and later for its subsidiary, Overseas Administrative Services, she signed contracts containing mandatory binding arbitration clauses, which required her to give up her right to sue the companies and any right to a jury trial. Instead, the contracts forced Jones to press her case through private arbitration, which she did in 2006.

At the time of the alleged attack, KBR was a subsidiary of Halliburton. So Jones was covered by the Halliburton dispute-resolution program, which was implemented when Dick Cheney was Halliburton's CEO. On his watch, Halliburton, in late 1997, made it more difficult for its employees to sue the company for discrimination, sexual harassment, and other workplace-related issues.

One day, Halliburton sent all its employees a brochure explaining that the company was implementing a new dispute resolution system. The company sold the new program as an employee perk that would create an "open door" policy for bringing grievances to management and as a forum for resolving disputes without expensive and lengthy litigation. In practice, it meant that anyone who had a legitimate civil-rights or personal-injury claim signed away his or her constitutional right to a jury trial. Anyone who showed up for work after getting the brochure was considered to have agreed to give up his or her rights, regardless of whether the employees had actually read it. In 2001, the conservative and pro-business Texas Supreme Court overturned two lower courts to declare that this move was legal.

In arbitration, there is no public record or transcript of the proceedings, meaning that Jones' claims would not be heard before a judge and jury. Rather, a private arbitrator hired by the corporation would decide Jones' case.

When Ms. Jones testified before the House subcommittee on crime, terrorism, and homeland security in December 2007 the point was made that as KBR employees working on contract for the U.S. Army, Jones' attackers were almost certainly covered under the Military Extraterritorial Jurisdiction Act, more simply known as MEJA, which subjects all civilians working abroad with U.S. armed forces to a defined legal code. But in Jones' case, MEJA seems to have fallen short for a different reason: a lack of investigative muscle in the Green Zone. Both then and now the Department of Justice lacks investigators in Baghdad with responsibility for looking into crimes committed by private contractors against their own.

KBR has not shown much adroitness in its handling of Ms. Jones's case. In a December 2007 e-mail with the subject line titled "Recent media coverage," KBR President and Chairman Bill Utt said the company has disputed allegations by Jamie Leigh Jones.

"While the allegations raised by Ms. Jones are serious, after a review of the case KBR noted inaccuracies in the accounts of the incident in question, and disputes portions of Ms. Jones' version of the facts," Utt wrote in an e-mail obtained by the Houston Chronicle.

There is reason to think that Ms. Jones was not an isolated case. In her lawsuit, Jones asserted that "KBR and Halliburton created a 'boys will be boys' atmosphere at the company barracks which put her and other female employees at risk." Another former KBR employee, Linda Lindsey, supported Jones's claims about the "boys will be boys" environment of KBR barracks in Iraq. "I saw rampant sexual harassment and discrimination," said Lindsey in a sworn affidavit for Jones's case.

In a December 2007 letter to Secretary of Robert Defense Gates, Senator Bill Nelson (D-FL) mentioned "a second alleged assault, this time of a woman from Florida who reportedly worked for a KBR subsidiary in Ramadi, Iraq in 2005."

Since the attacks, Jones has started a nonprofit foundation called the Jamie Leigh Foundation, which is dedicated to helping victims who were raped or sexually assaulted overseas while working for government contractors or other corporations. Since Ms. Jones came forward, other women have come forward with similar lawsuits against KBR

It was primarily because of Ms. Jones that the fiscal 2010 Defense appropriations measure includes a provision barring the Defense Department from entering into contracts with companies that restrict alleged sexual assault victims from taking legal action.

The amendment was introduced by Sen. Al Franken, D-MN. Support for the amendment was broad, but far from universal. The provision passed the Senate 68-30 in October, when the chamber was considering an initial version of the spending bill. Some Republican opponents argued that it was not Congress' place to interfere in private sector contracts.

"Congress should not be involved in writing or rewriting private contracts," said Sen. Jeff Sessions, R-AL, during floor debate on the provision. "Instead of eliminating arbitration we should look into how to utilize arbitration more in these kinds of disputes." Sessions called the amendment a "political attack directed at Halliburton," KBR's former parent company.

The Obama administration and the Defense Department initially opposed the amendment, although the White House insisted it supported the provision's intent. The Pentagon's primary concern, according to a letter Defense officials sent to lawmakers before the Senate's vote, was enforcement.

"The Department of Defense, the prime contractor, and higher tier subcontractors may not be in a position to know about such things," the letter stated. "Enforcement would be problematic, especially in cases where privity of contract does not exist between parties within the supply chain that supports a contract."

The letter stated that if the Senate deemed these types of contract clauses to be unacceptable, it might be more effective to prohibit them in any business transaction within the jurisdiction of the United States.

Negotiations between the department and Capitol Hill eventually resulted in a number of changes, including an agreement that the restriction would apply only to companies with government contracts valued at more than $1 million and that it would contain a waiver for national security concerns.

The provision, now law, does not require companies to change existing employment contracts, but will bar the government from entering into future pacts with those firms if they do not modify employment clauses. When the provision passed the Senate, Franken said it "narrowly targets the most egregious violations."

With all this one might think that both KBR and Halliburton would have long ago seen given up trying to treat this as some sort of labor dispute, which should be handled by arbitration. Especially in light of recent court decisions.

Last September the United States District Court for the Southern District of Texas issued a decision in regard to an appeal from Halliburton regarding the case. According to the case summary:

PROCEDURAL POSTURE: Appellant employer sought review of a decision from the United States District Court for the Southern District of Texas, which partially refused to compel arbitration of some of appellee employee's claims against the employer, which stemmed from the alleged gang rape of the employee by coworkers while working in Iraq.

OVERVIEW: The employee alleged that she informed the employer that conditions at the barracks were not safe and that she was gang raped in her bedroom after a social gathering outside the barracks. The claims for assault and battery, emotional distress, negligent hiring, retention, and supervision, and false imprisonment were found not arbitrable. At issue was whether these claims were related to the employee's employment or constituted personal injury arising in the workplace, so as to render them arbitrable under the arbitration agreement. The employer argued that the claims were covered by the agreement because the alleged incident "related to" the employee's employment. The court disagreed. Sexual assault was not within the course and scope of employment. This was true even though the employee received workers' compensation benefits in connection with the incident, as the terms "course and scope of employment" were more narrowly defined under the agreement than in workers' compensation laws such as the Defense Base Act. That the employee lived in employer-provided barracks was inconsequential because she was off duty at the time, and the barracks were located away from the work place.

OUTCOME: The court affirmed the district court's decision and remanded the case to the district court for further proceedings.

Yet KBR is preparing to fight Ms. Jones over her right to settle her suit with the company, all the way to the Supreme Court. Its strategy? Destroying Jones' credibility.

In its most recent 188-page brief KBR petitions for a writ of certiorari, which is a document a losing party files with the Supreme Court asking the Court to review the decision of a lower court.

To quote from the brief:

This interlocutory appeal from a partial refusal to compel arbitration concerns the arbitrability vel non of tort claims by an employee who, while working at an overseas location, was allegedly gang-raped by her co-workers in her bedroom in employer-provided housing. Halliburton Company/Kellogg Brown & Root, and various affiliates (Halliburton/KBR), contest the denial, in part, of their motion to compel arbitration of Jamie Leigh Jones' claims concerning her alleged rape by Halliburton/KBR employees, while she was stationed at a company facility in Baghdad, Iraq. All of her claims were deemed arbitrable except for: (1) assault and battery; (2) intentional infliction of emotional distress arising out of the alleged assault; (3) negligent hiring, retention, and supervision of employees involved in the alleged assault; and (4) false imprisonment.

At issue is whether those four claims found non-arbitrable are, for purposes of Jones' employment contract, "related to [her] employment" or constitute personal injury "arising in the workplace". That contract incorporated Halliburton/KBR's dispute resolution program (DRP), which required her to arbitrate all claims brought against the company falling within the scope of related-to or workplace language. In the alternative, should the alleged rape be deemed covered by the arbitration clause, at issue is whether the doctrine of unclean hands precludes granting equitable relief of specific enforcement of that clause.

Not being a lawyer myself I can't comment on the jurisprudence of all this but I do find it amazing that KBR fights so hard to avoid doing the right thing; namely letting Ms. Jones have her day in court.

After all, on other issues, KBR can show signs of rationality. An example is the op-ed
that appeared in this past Sunday's Washington Post. The author, a former Air Force loadmaster, who was discharged for being gay, notes that within three weeks of his discharge, KBR hired him to go back to Iraq as a radio repair technician. (KBR knew that he was gay.)

So, for the time being, I can only suggest that KBR be subjected to the full barrage of ridicule it so richly deserves. After all, to cite a defense often heard in rape cases, it is asking for it.

Chinese Exports Are Everyone's by Daniel J. Ikenson and Alec van Gelder

Sun, 07 Feb 2010 23:00:00 -0600

To protectionists and Sinophobes, China surpassing Germany in 2009 to become the world's largest exporter heralds a new, unwelcome world order, with the United States in third place.

But more than a reflection of China's growing economic might, this development is testament to the erosion of economic, political, physical and technological barriers to production.

China's success is due to multilateral trade with the rest of the world, despite what the anti-China lobbies in Brussels, New Delhi and Washington argue. So when U.S. President Barack Obama and American lawmakers complain about China, they forget that Chinese exports include American exports.

Beginning with the widespread liberalization of trade and investment rules after World War II, barriers have been falling and incomes rising around the world.

China's opening to the West in 1978; the fall of the Berlin Wall in 1989 and of the Soviet Union two years later; the collapse of communism as a model for developing countries; and the advent and proliferation of containerized shipping, GPS technology, just-in-time supply and other marvels of the information, transport and communications revolutions have spawned a global division of labor and production that defies traditional analysis. This makes trade-flow accounting highly misleading.

Global economics is no longer a competition between "us and them," between "our" producers and "their" producers. Instead, because of cross-border investment and transnational production and supply chains, the factory has broken down its walls and now spans borders and oceans. Competition is often between international brands or production and supply chains that defy national identity.

So what does all of this have to do with China's status as the world's biggest exporter?

The vast majority of Chinese exports are hugely dependent on imports from the rest of the world: iron ore from Australia; microchips from Taiwan, South Korea or Singapore; software from teams in Redmond (in the state of Washington) and Bangalore (India); new designs from Cambridge (whether Massachusetts or England) and Toulouse (France); investments raised from consortiums based in New York City, S&#227o Paulo or Johannesburg.

China has become the world's largest exporter primarily because of the global division of labor that has helped reduce poverty and create wealth: China provides lower-value-added production. The components of Apple's iPods and iPhones are put together in China, but their designers in California are worth more to the company's bottom line. Denmark's Ecco has shoe factories across Asia, but its most valuable footwear is still designed and manufactured in Europe, where the quality is guaranteed and the workforce highly trained – and higher paid.

China has not become a key figure in global trade by accident. It has capitalized on the new reality of global production and supply chains: Since 1983, it has unilaterally removed barriers to trade, realizing they were primarily harming China.

True, China's trade policies remain far from perfect. But they have liberalized quickly and considerably, which helps explain the country's prominent role in global production and supply.

Calculating who earns the biggest amount from exports remains a problem. Intermediate goods are shipped to China from countries such as Japan, Taiwan, Singapore, Australia and the United States, snapped together (or perhaps a slightly higher-value-added operation) in China and then exported. As those goods leave the ports of Shanghai, Tianjin or Guangdong for export, simple trade accounting rules attribute the entire value of those exports to China, even when the Chinese value embedded in those goods accounts for a small fraction of the total.

That accounting method helps explain why China's exports have surged over the decades, as the division of labor evolved and manufacturing chains proliferated.

A recent study by economists at the University of California concluded that the Chinese-added value embedded in a 30G Apple iPod accounts for only $4 of the total $150 cost, yet the entire amount is chalked up as a Chinese export. Other studies estimate overall Chinese value added in all products exported from China to average somewhere between 35 percent and 50 percent, a large proportion but a lot less than gross export figures imply.

Indeed, "if China grows, this pushes the world's economy – and that's good for export-oriented Germany as well," a German Chamber of Industry and Commerce economist, Volker Treier, said recently.

As we consider China's new status as global export leader, it is important to understand what it means. This data speaks much more convincingly of the virtues of economic interdependence than of China's stand-alone export prowess: Such figures present opportunities for everyone to join the global economy, including a strategically placed historic trading nation such as Turkey.

Drug Czar Should Go by Tim Lynch

Fri, 05 Feb 2010 23:00:00 -0600

Voters are disgusted by the reckless spending of politicians in Washington. The backlash is coming, so policymakers are now scrambling to do something, or at least be seen as doing something, about the enormous federal debt. Now is a good time for Congress to abolish government agencies that are outdated, dysfunctional or just unnecessary.

A prime candidate for abolition is the office of the so-called "drug czar."

The position of the drug czar was created by the Anti-Drug Abuse Act in 1988. It was a time of drug war hysteria. Former first lady Nancy Reagan called casual drug users "accomplices to murder." President George H.W. Bush vowed to make the war one of his top priorities. During his inaugural address, he said, "Take my word for it. This scourge will stop." The conservative firebrand William Bennett became the first czar and made headlines with brash talk of beheading drug dealers. The nation's capital was declared to be a "high intensity drug-trafficking" zone. There were raids and arrests - including the notorious trial of then-Mayor Marion Barry.

In theory, the drug czar's office was supposed to develop a long-term strategy to win the drug war and bring about a "drug-free society." Each year, the czar would call for more governmental efforts to "reduce demand" and to "disrupt the supply" of narcotics. Instead of millions, the government started to spend billions.

The bureaucracy flourished as more agents were hired and more high-tech equipment was purchased. The criminal justice system expanded to handle the influx of cases. More prosecutors. More judges. More prison guards.

And yet, millions and millions of Americans continued using drugs.We now know that Presidents Obama and Clinton were among them. Indeed, nowadays, police agencies like the FBI can only recruit young people if the agencies are willing to overlook past drug use.

The goal of "disrupting supply" has been proved farcical. Drugs are as widely available as ever. Indeed, Washington remains a city with thriving drug traffic. There are open-air drug markets in many neighborhoods. More than a decade after the drug czar went into business, a commission on federal law enforcement practices gave this blunt assessment: "Despite a record number of seizures and a flood of legislation, this Commission is not aware of any evidence that the flow of narcotics into the United States has been reduced." No one thinks that hiring more Border Patrol agents will make a dent.

The violence and destabilization have become most acute at our southern border. According to the Los Angeles Times' ongoing project on the drug war in Mexico, more than 9,900 people have been slain in Mexican drug-related violence since January 2007. The kidnappings and killings that have become commonplace across the border are now spilling into the American Southwest. Government efforts in Colombia have already cost U.S. taxpayers more than $5 billion, and Mexico is slated to receive about $1.4 billion. Meanwhile, the killings continue at a rate that has prompted the State Department to issue travel advisories to Americans traveling to our southern neighbor.

The drug czar has also meddled in local politics. Some states, for example, have moved to change their laws to allow marijuana to be used by certain patients in consultation with doctors. Whenever a state has a referendum about medical marijuana on the ballot, the federal drug czar typically comes in to lobby against the measure. Since the czar was created to oversee federal policies, such politicking at the local level is outside his sphere - and is thus an abuse of power.

The office of the drug czar issues an annual report regarding the efficacy of drug policies. Scholars are skeptical of those reports because the bureaucrats invariably prepare reports that come to the defense of existing policy and "spin" the data to find good news and "progress." An independent analysis of the drug office in 2007 found "overwhelming evidence of consistently false and dishonest claims."

Perversely, Congress tends to reward government agencies that perform poorly. When the drug czar's office was created in 1990, its budget was $12 million; this year, the office will cost more than $400 million.

If Congress wants to take a serious step to curb reckless and wasteful spending, it ought to admit the futility of the drug war in the same way we came to realize that alcohol prohibition was misguided. If Congress is only ready to abolish some of its very worst mistakes, it should get rid of our drug czar.

Is Obama Failing? (Part 2) by David Boaz

Thu, 04 Feb 2010 23:00:00 -0600

Part 1 | Part 2

This article is David Boaz's rebuttal in a larger debate on The Economist's website.

If the measure of failure for President Obama is whether it looks like he is on the road to slowing the rise of the oceans, ending a war and restoring our image as the last, best hope on Earth, then he doesn't look so good. Elaine Kamarck proposes a stricter test: Has he encountered a swift and deadly drop in his personal reputation to Nixonian depths?

If we set a standard somewhere between these extremes, then Mr Obama does seem to be on shaky ground. His policies are not working, his ability to drive his agenda seems to have ground to a halt and the political environment has shifted sharply against him.

Ms Kamarck is right to say that Mr and Mrs Obama still command great personal respect. He looks good by comparison with such scandalous rivals as John Edwards. A recent Washington Post feature hailed the inspiring example he has set for young African-Americans, and given the plight of young people in many black communities, that is an achievement worth celebrating.

Actually, his personal approval rating has fallen from near 70% to just above 50%, though I do think the broad centre of Americans still admire him. But he has lost his aura—that "tingle up my leg," "agent of transformation," "quantum leap in American consciousness," "sort of God" image—that journalists and many voters swooned over. That matters when your personal power is part of your political strategy. A Democratic congressman told his home-state paper last month that Obama had wooed Blue Dog Democrats by telling them that health care would go better this time than in 1994 because "the big difference here and in '94 was you've got me".

One question here is how do you measure a politician's failure. Is it, for instance, a failure to get his policies enacted, or his success in enacting bad policies? Surveys of historians always give high marks to presidents who expanded government or fought wars. Washington's most-quoted political scientist, Norman Ornstein, recently defended the productivity of the current Congress; his article illustrated that to the Washington establishment the very definition of a productive Congress is the spending of more taxpayers' money, the creation of new agencies and bureaucracies, and the concentration of more power in the hands of federal regulators. Citizens might prefer a government that kept us out of war, let the economy grow, and left us alone.

That gets us to the problem of trust in government, which Ms Kamarck warned him back in 2008 not to ignore. One thing that surely reduces trust is the growing size and scope of government. When the federal government confined itself to a limited range of constitutional duties, voters trusted it more. Over the past few decades, as government took on more and more duties, trust fell. An expansive government is less able to satisfy everyone, even as it doles out more benefits to more people. The more complex and encompassing a policy gets, the more different aspects of life it touches. If government is going to fund and direct health care, then people are going to fight over whether it will cover abortion or Christian Science treatments; which providers or patients will get less than they expected; which treatments will be denied and so on. Each one of those decisions will reduce someone's trust in government to do the right thing.

In her 2008 study Ms Kamarck warned that Americans were evenly split on whether they want more activist government (43% for, 43% against). The numbers may be worse than that. As I mentioned previously, in a January Washington Post-ABC News poll, Americans said they prefer "smaller government and fewer services" to "larger government with more services" by 58% to 38%. And when you remind people that the cost of more services is higher taxes, and ask them whether they prefer a smaller government with fewer services and lower taxes or a more active government with more services and higher taxes, you get a margin of 66% to 22% in favour of smaller government (Rasmussen Reports, December).

In a country where government is already larger than the voters would prefer, and trust in government is low, it is difficult to advance ambitious activist programmes, unless there's a crisis. For 200 years the US government has tended to expand during wars and economic crises. After the 9/11 attacks we got the Patriot Act, federalisation of airport screeners, the Department of Homeland Security, rapid spending increases and arguably the war in Iraq. After the financial crisis of 2008 we got expanded powers for the Federal Reserve, Wall Street bailouts, takeovers of financial companies and carmakers and the kitchen-sink spending bill known as stimulus. Moreover, the Obama administration tried to present its programme of expanded federal control over energy, education, and health care as a response to the crisis.

Mr Obama now seems to have switched tactics. He is campaigning as a trust-busting, bank-bashing populist who is here to take on the big boys. But that is a problem for him. Not only was his career boosted by the biggest boys in Washington—Tom Daschle, Harry Reid, Ted Kennedy—he has also been a Wall Street man. He took in more money from Wall Street than John McCain did, and four times as much money from lawyers and lobbyists, and he reappointed or promoted two of the three architects of the Wall Street bailout. Huey Long he ain't.

And then there is the basic cognitive dissonance in his new theme, as George F. Will noted after the state-of-the-union address: "Obama's leitmotif is: Washington is disappointing, Washington is annoying, Washington is dysfunctional, Washington is corrupt, verily Washington is toxic—yet Washington should conscript a substantially larger share of GDP, and Washington should exercise vast new controls over health care, energy, K-12 education, etc."

Some analysts note that Ronald Reagan had low ratings at this point in his term, and a bad midterm election, but came back strong. As it turns out, tax cuts, spending restraint, deregulation and sound money tend to create strong economic recoveries. Threats of tax hikes, unprecedented levels of deficits, a wave of new regulations and fears about Fed monetisation may not.

Has Mr Obama failed, a year into his term? Of course not. But that's the direction he's headed.

How We Doing? Contractors and Their Lobbyists by David Isenberg

Thu, 04 Feb 2010 23:00:00 -0600

Private military and security contractors have long had their supporters, including various trade organizations, advocate their benefits. Supposedly the various private military and security contractors can let their actions speak for themselves. When I write this I am not being sarcastic. Most of them do provide valuable and critical services and fulfill the terms of their contracts under very difficult conditions.

But that is not to say that they don't do what every other industry angling for a piece of the federal budget does, meaning they lobby.

And while their expenditures may be dwarfed by their traditional, military industrial, weapons manufacturing behemoth brethren, their giving is not exactly what you would call shabby.

Here are some figures from OpenSecrets.org, run by the Center for Responsive Politics.

Contrary to what you might expect, Blackwater is a mixed bag, partly explained by the fact that it is not just one company, but a collection of numerous subsidiaries.

Blackwater Worldwide spent just $60,000 in 2007, which it used to pay two lobbying firms -- $40,000 to BCI Group and $20,000 to law firm Womble, Carlyle. But in 2008 its expenditures quadrupled to $240,000 - $70,000 to BCI Group, $160,000 to C&M Capitolink, and $10,000 to Womble, Carlyle.

Blackwater Lodge & Training Center spent $340,000 in 2008 and $90,000 in 2009.

Blackwater USA spent $160,000 in 2006 on C&M Capitolink. In 2007 it spent $332,000 -- $290,000 2006 on C&M Capitolink, $12,000 to lobbyist Richard Cockrum, and $332,000 to Gregory Hahn. In 2008 Hahn, for whatever reason earned much less, only $10,000, but C&M Capitolink received $160,000.

In 2002, the most recent year for which there is data, DynCorp's Internationaal Technical Services division, which in later years, shared the Worldwide Personal Protective Services contract in Iraq with Blackwater, spent a mere $1110,000 -- $50,000 to Colex & Assoc and $60,000 to Van Scoyoc Assoc.

Triple Canopy, another company which has shared the WPPS contract spent a mere $10,000 in 2004, but increased to $80,000 in 2005, then $100,000 in 2006, almost $135,000 in 2007, down to $96,000 in 2008, and $165,000 in 2009.

Lobbying is not just for U.S. firms. Aegis Defence Services, a British firm, which holds one of the biggest security contracts in Iraq, coordinating and tracking the movements of various private military contractors there spent $90,000 in 2007 and $80,000 in 2008.

In 2008 Evergreen International Aviation spent $210,000. In 2009 it spent $87,500.

Given the decision of the U.S. Supreme Court last month removing most of the existing restrictions on donations by corporations one can expect to see much more in the future.

Of course, some of these firms, as well as others, are members of various industry trade groups which also lobby on their behalf. It would be interesting for some bright economist to try and figure out which provides more bang for the buck; trade groups or employing lobbyists directly. After all, groups which has long argued their cost-effectiveness on the basis of their being lean, mean, corporate, private sector fighting machines would not want to waste their frequently taxpayer funded dollars on duplicative public relations spending.

Challenging the Rule of Law by Richard W. Rahn

Wed, 03 Feb 2010 23:00:00 -0600

IRS takes an exemption for itself

Do you think the General Electric Co., which owns NBC, should have freedom of speech, but not FedEx, which does not own a media company? Over the last two weeks, the rule of law has been strengthened in a couple of major cases, one in the United States and one in Switzerland, but has been undermined in an action — surprise, surprise — by the IRS.

The rule of law, as contrasted with arbitrary actions by individuals or governments, is necessary both for civil society and economic prosperity. For the rule of law to have meaning, the laws must be clear and reasonable — thou shalt not kill and thou shalt not steal are examples of clear and necessary laws. The laws and rules must also be few enough in number so that most people can be expected to be aware of them (unlike the 77,000-plus pages in the IRS Code, which no one understands).

On Jan. 22, the Supreme Court struck down limits on corporations running ads for or against a particular policy or candidate. However, this ruling did not allow domestic or foreign corporations to contribute directly to a candidate or foreign corporations to run ads for or against a candidate, which the president incorrectly asserted in his State of the Union address. The Constitution clearly states: "Congress shall make no law ... abridging the freedom of speech, or the press." Most newspapers (like the New York Times) and radio and TV news organizations are owned by corporations. Left-wing commentators, such as Chris Matthews and Rachael Maddow who have television shows on MSNBC (which is owned by GE), are perfectly free to act as shills for the Obama administration They do this despite the obvious conflict of interest because GE is a major government contractor, and the CEO of GE (Jeffery Immelt) serves on at least one of President Obama's advisory boards.

As would be expected, most newspapers editorialized against the decision (major exceptions being the Wall Street Journal, which is owned by NewsCorp, and The Washington Times). Other corporations will now have the same rights that media corporations enjoy. One overlooked aspect of the ruling is that in the Internet age, almost any company can create a low-cost electronic newspaper, making it easy to get around the restriction if the Supreme Court had left the old rule intact. (One does have to wonder about the four justices who voted against freedom of speech in the ruling — it appears they are unable to understand the clear language of the Constitution as well as the new technologies.)

Also on Jan. 22, a Swiss court upheld the rule of law by saying that an agreement between the U.S. and Swiss governments to turn over UBS files on private bank clients to U.S. authorities violated Swiss law. Switzerland has different laws than the United States regarding financial privacy and what parts of the tax law are felonies and which are not. Just because the Swiss law is different does not make it inferior to U.S. law. (In fact, Switzerland has direct democracy and a very long tradition of upholding human rights.) The United States considers it a felony not to file a W-9 tax form, while the Swiss do not consider the failure to file the appropriate form a felony.

An IRS official said, "We expect the Swiss government to continue to honor the terms of the agreement" — despite the agreement having been deemed unlawful. Of course, the IRS has a long tradition of ignoring the law and the Constitution when it suits its purposes. As an example, IRS Commissioner Doug Shulman, in a Jan. 26 speech, said some "taxpayers would be required to annually disclose uncertain tax positions in the form of a concise description of those positions and the maximum amount of U.S. income tax exposure if the taxpayer's position is not sustained." The Fifth Amendment to the Constitution clearly states: "No person ... shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty or property, without due process of law." Perhaps Mr. Shulman and his colleagues have never read the Constitution.

The 16th Amendment to the Constitution states: "The Congress shall have power to lay and collect taxes on incomes," yet the IRS routinely assesses taxpayers for taxes on "imaginary" income, such as the portion of capital gains that are solely a result of inflation. For instance, if you paid $1,000 for 100 shares of stock in a company in 1983, and sold the stock for $2,000 in 2006, the IRS would claim you had "income" of $1,000 and tax you on that. In fact, the consumer price index more than doubled in that period and you would not have been able to buy as much with the $2,000 in 2006 as you could have bought with the $1,000 in 1983. By any economic or dictionary definition of "income," you had none — yet the IRS lays what is, in effect, an unlegislated wealth tax on the inflation, which was caused by the government (i.e., the Federal Reserve).

The United States would be both freer and more prosperous if the officials at the IRS, Congress and the courts took their constitutional responsibilities more seriously. The Washington-based political class has put its lust for evermore tax revenue and power above the liberty of the people and the rule of rule.

Tea Partiers Shouldn't Date the GOP by John Samples

Wed, 03 Feb 2010 23:00:00 -0600

In recent months, the most influential political party in the country may not be the Republican Party or the Democratic Party, but the Tea Party. This murky, largely leaderless grassroots movement has been the driving force behind the derailment of President Barack Obama's dearest agenda items, notably health care reform and climate change legislation.

What are the goals of this movement? In part, that is the wrong question. The Tea Party effort rejects the notion that a politician or a pundit should define their movement. Rather, citizens themselves will tell us what the movement means.

As their name suggests, these citizens want to revive the ideas at the heart of the American Revolution: life, liberty and the pursuit of happiness. One chapter in Texas adopted these principles: limited government; fiscal responsibility; personal responsibility and the rule of law.

Tea Party groups are conducting online polling and deliberations to determine the priorities of the movement. This process will create a "Contract from America" to serve as a template for reforms to come. The most popular ideas now include a flat tax, congressional term limits and abolishing the U.S. Department of Education.

Those ideals and policies sound like what the Republican Party once espoused but have not practiced for at least a decade.

Not surprisingly, establishment conservatives have recently tried to make hay of the Tea Party movement's apparent lack of a recognizable face or national headquarters. Grover Norquist, the Rasputin behind countless conservative organizing activities, has offered tips to Tea Party organizers. Old (and perhaps new again) Republican apparatchiks like Dick Armey and Newt Gingrich have proclaimed their oneness with the Tea Party faithful and essentially offered their services as the movement's leaders. No doubt many Republican leaders would like to direct the energy of the Tea Party against the Obama administration and to receive the votes of these idealists come November.

We pray thee, Tea Partiers: Do not go there.

The quality that gives the Tea Party movement its legitimacy is that it is so fundamentally illegitimate: outside the establishment, bereft of representation on K Street, and without an identifiable face to speak for it on Meet the Press. This is a movement that sprang deep from within the viscera of America, not from some political poll or focus group.

It is not Republican; it is not even conservative. It has no interest in debating the merits of No Child Left Behind, abstinence-only sex education or George W. Bush's rationale for going to Iraq. Replacing a "spend and borrow" Democrat with a "spend and borrow" Republican is not the goal of the Tea Party movement.

This movement is simply saying: "We are fine without you, Washington. Now for the love of God, go attend a reception somewhere, and stop making health care and entrepreneurship more expensive than they already are."

Machiavelli once said a republic stays healthy by returning to its first principles from time to time. The Tea Party movement is trying to get our nation back to its first principles to prevent our decline. For their trouble, they have been denounced by many in the media and the Obama administration.

But they will continue to fight. They still believe in the promise of America. That faith may spread as Election Day approaches in the second and perhaps final year of what is supposed to be the Age of Obama.

What began as angry town meetings and grew into a political movement may end as a third political party in 2012. Maybe then Washington will finally listen.

The Wrong Manhood Test by Christopher Preble and Heather Hurlburt

Wed, 03 Feb 2010 23:00:00 -0600

In last week's State of the Union address, President Barack Obama declared that he would freeze government spending for three years, excepting Medicare, Medicaid, Social Security and "spending related to our national security."

This week, we can see what that blanket exemption for the Pentagon will cost us. The base budget (which excludes war costs) weighs in at a whopping $548.9 billion, the largest since the end of World War II. Military spending advocates might note that this represents just a 3.4 percent increase over last year, but inflation-adjusted spending on national defense has ballooned by 60 percent over the past 10 years. The fiscal year 2011 budget request also includes an additional $182 billion for the wars in Iraq and Afghanistan. The accumulated costs of these wars now total more than $1 trillion.

The media and politicians have made an expanding military budget into a manhood test for civilian leaders. But a real test of a leader's wisdom and strength would recognize that more spending does not equal greater security.

The president defends his decision to grow the Pentagon's budget because he is concerned about the strains on our troops and their families. That is a valid concern. Since the end of the Cold War, but especially since Sept. 11, huge increases in spending haven't closed the gap between the forces we have and the enormous missions with which we have saddled them.

But ultimately, because our national security rests on our economic health as well as on the strength of our military, a liberal and a libertarian can agree that the Pentagon should no longer get a pass. Congress must stop funding projects to satisfy parochial domestic interests. The Pentagon must stop buying weapons systems that are already outdated, unworkable or both. And the administration must carefully define our vital security interests, reshape our grand strategy to more equitably distribute the burdens of policing the globe and reduce the occasions when our military will be called on to fight.

Some cuts are easy, and they certainly would not undermine our security or endanger our troops in the field. Consider, for example, the spending that is driven chiefly by domestic politics — the bases, factories and depots that provide jobs for some Americans but not security for all Americans. The FY 2010 Pentagon budget included an estimated 1,720 earmarks totaling $4.2 billion. The correct number should be zero.

Then there is the problem of poor performance and mismanagement. A recent Government Accountability Office study found that defense contractors have consistently failed to complete the most important weapons systems within their original budgets, and these systems are delivered, on average, two years behind schedule. Ninety-five major systems exceeded their original cost estimates by a total of $295 billion from 2001 through 2007.

But eliminating the cost overruns and imposing more stringent oversight of public funds won't generate enormous savings in the grand scheme of things. Substantial reductions in U.S. military spending can come about only if we fundamentally change our approach to foreign policy. For nearly two decades, Republicans and Democrats in Washington have deployed the U.S. military as a police force of first resort. Now is the time for a change.

The just-issued Quadrennial Defense Review takes a few steps in this direction. But the defense budget could take many, many more. A range of programs and procurement habits survive on inertia and local politics but do not fit into the 21st-century vision of national defense or flat out don't work. Here are just three:

Our deployment of nuclear weapons in a triad — bombers, land-based intercontinental ballistic weapons and submarine-launched missiles — was developed during the Cold War, when we had more than 10,000 warheads and were facing an adversary with even more. But nuclear weapons are useless against terrorists and irregular fighters. As we negotiate with the Russians to make deep cuts in our arsenals, the strategic triad should become a dyad, and costly manned bombers should get out of the nuclear business.

Axing just one of the four additional F-22s — which the administration says it does not need — would save more than $200 million. That could provide a year's worth of counseling for 49,000 veterans suffering from post-traumatic stress syndrome and other psychological problems.

Canceling the purchase of one Virginia-class submarine (cost: $2 billion) would fund the first year of base pay for 117,000 new enlistees.

While the public strongly supports our military and its missions, it is also hungry for change. Most Americans want to be engaged in the world without having to be in charge of it. Recognizing that a significant portion of our military spending doesn't in fact relate to our national security would, in fact, be quite a test of manhood. Even by Washington standards.

A Growing Disconnect by Ted Galen Carpenter

Wed, 03 Feb 2010 23:00:00 -0600

A nasty spat has erupted between Washington and Beijing over the Obama administration's arms sales to Taiwan. As soon as the US made the official announcement of the US$6.4 billion package last Friday, Beijing responded with both harsh words and retaliatory measures. Deputy Foreign Minister He Yafei called in US Ambassador Jon Huntsman for a dressing down. Beijing also suspended scheduled military exchange programs and threatened to impose sanctions against any American company involved in the production or distribution of weapons destined for Taiwan.

The conventional wisdom in the United States is that this episode is no big deal. Those who take a relaxed view contend that China's reaction is in line with its response to previous arms sales. The new brouhaha, the reasoning goes, will subside and relations will soon return to normal.

Perhaps. But the arms sale showdown is just the latest in a series of incidents stoking tensions between China and the US. Those tensions encompass economic, diplomatic and security disputes.

Even before the Obama administration took office, US officials complained about a variety of practices that they believed gave China an unfair advantage in the global economic arena. Those ranged from an undervalued currency to import dumping and arbitrary exclusion of American products from China's domestic market. President Barack Obama's decision to impose punitive tariffs on imported Chinese tires last summer was a signal that US patience was wearing thin.

The annoyance is not confined to trade matters. Washington has long prodded Beijing to take a firmer stance against the North Korean and Iranian nuclear programs, and especially show a willingness to back more robust economic sanctions against those two countries.

Administration leaders hoped that the summit meetings with President Hu Jintao during Obama's visit to China would lead to progress on Washington's grievances. That did not happen. Not only did Chinese leaders largely rebuff the president's requests for policy changes, there was a widespread perception in the US that the Chinese treated Obama with a dismissive attitude that bordered on disdain.

That treatment created a propaganda bonanza for Obama's domestic political opponents. Critics excoriated him for "kowtowing" to the Chinese and argued that the China summit confirmed that Obama is a diplomatic lightweight who is incapable of defending important American interests. Most telling, his staunch defenders were few and far between regarding his performance in Beijing.

China's unwillingness to back serious carbon-emissions reduction measures at the Copenhagen climate change summit did not help relations with Washington. Once again the Chinese seemed to defy the Obama administration on a high-priority US goal.

But Beijing has its own grievances with the US. Chinese officials have expressed both veiled and explicit complaints about the huge and growing US federal budget deficits. In their view, Washington's profligate fiscal practices threaten to trigger an inflationary spiral that would undermine the value of China's vast dollar holdings.

Chinese leaders also grow weary of Washington's lectures about the need to get tough with North Korea and Iran. In Beijing's view, America's stubborn unwillingness to address the wider security concerns of those countries is at least as responsible as the recalcitrant attitude of the two regimes for the lack of progress on the nuclear issue. Moreover, officials believe that China is being asked to take measures that would undermine vital Chinese interests. They regard North Korea as an important security buffer and Iran as a crucial energy supplier, so are extremely reluctant to antagonize either regime. The announcement of the Taiwan arms sale, coming on the heels of US Secretary of State Hillary Rodham Clinton's harsh comment earlier the same day that China risked "isolation" within the international community if it did not endorse more robust sanctions against Iran, may have been the last straw for Beijing.

Contrary to the conventional wisdom, the Foreign Ministry's response to the arms sale contained one element that departed from previous reactions. China had never before sought to sanction US firms for such transactions. That threat was a significant escalation and seemed contrary to Beijing's obligations as a member of the World Trade Organization. One can hope that the conventional wisdom is right and that the latest dispute will soon fade.

But the bulk of the evidence suggests that storm clouds are building in the US-China relationship.

The world's largest economy and its soon-to-be-main rival are not likely to become overt adversaries anytime soon, but there is a noticeable chill in the air.

Snow Forecast: Cloudy With a Chance of Accuracy by Patrick J. Michaels

Tue, 02 Feb 2010 23:00:00 -0600

Central Virginians fear the snow. Forecast more than an inch and hordes descend upon Ukrop's, gas stations run on empty, beer and cigarettes fly out of the 7-Eleven, and schoolkids turn off Guitar Hero and turn on The Weather Channel.

More often than not, it seems, there's big disappointment. Instead of a pile of white, all people are left with is a full tank of gas, way too much milk and bread, and another day of school.

While forecasts of possible snowstorms days in advance have improved tremendously in the past 20 years, the very nature of mid-Atlantic storms and Virginia geography will forever conspire against precise snow forecasting more than 24 hours ahead of time. Even when a storm is imminent, we still bracket our forecasts with a lot of inches. Four-inch ("4 to 8") ranges are as common now as they were in 1980. No one goes out on a limb and says "tomorrow's snow total will be 7 inches."

The problem is that snow is water, and a little water makes a lot of snow, especially when the atmosphere is colder than it usually is around here, like it was on the last weekend in January. That allows picture-perfect snowflakes -- called dendrites -- to form, which fluffily add up on the ground into much deeper piles than our usual "wintry mix" of mushy snow, sleet, and freezing rain (which I prefer to conjunct into "sleeze"). Normally we will get about 8 inches of snow out of one inch of water, but the last storm's ratio was closer to 20-to-1 away from the immediate Atlantic coast.

A little bit of water makes a big difference in snow. How many people are upset, or even notice if a spring storm produces a tenth of an inch of rain when it was forecast to produce a half? But in the cold atmosphere of Jan. 30, that would be the difference between 2 and 10 inches of snow, something most people -- especially those who endured endless checkout lines -- will notice.

Virginia's heaviest snowstorms are matters of odd coincidence. Sure, we have plenty of low pressure areas ("northeasters") capable of throwing Atlantic moisture inland. It's the cold air that's usually in short supply, which is why we have so many more winter rainstorms than snowstorms.

It's worth noting that dreaded global warming should in fact warm the cold air of winter more than anything else, and therefore heavy snowstorms around here should become even more infrequent. They haven't. Richmond's snow history for the past century reveals decades of snowy winters and decades of rainy ones, but no overall trend.

Our big snows occur when the jet stream encourages enough cold air to pile up in New England and southern Canada at the same time that a northeaster spins up off the Georgia/South Carolina coast. The cold air slides down the Piedmont and coastal plain, "dammed" by the Appalachian mountains. Meanwhile, the warm Atlantic moisture from the northeaster rides aloft and tends to erode the cold air to the point that snow changes to sleet and rain. Consequently, there has to be a lot of cold air flowing in from the Northeast to keep the precipitation in the form of snow, but if there's too much, it's too dry and any snow that forms evaporates before it gets down to the surface.

Obviously (because of the rarity of heavy snow), the "window" between too little and too much cold air isn't very large, and the difference between a foot of snow and none is often a matter of miles, which is impossible to pinpoint three days in advance of a low pressure system that hasn't even formed!

The art of snow forecasting comes from trying to tease out of computer models where the rain/snow line will be and where the snow will cut to nothing.

Last weekend, the trick to the correct forecast was to look at the trends in the computer models as they whirred a new forecast every six hours. All agreed that there was going to be plenty of cold air, and that the snow/no snow line was going to be very sharp. Each succeeding run tended to bring that line a bit further to the north. Forecasters who bet that this meant that the computer models were underestimating the northward spread of heavy snow were right. Northern Virginia got a lot more than the computer said it would, and some areas in Southeastern Virginia got less. Richmond was in the middle and the forecasts were in general very good.

Good forecast or not, heavy snow will remain a peculiarity in Richmond, so one sure bet is that any rumor of accumulating snow will cause a run on groceries, gas, and drinks.

Obama's Targeted Killings in Yemen by Nat Hentoff

Tue, 02 Feb 2010 23:00:00 -0600

The president, in his State of the Union message, proudly emphasized that in his first year in office, "hundreds of al-Qaida's fighters and affiliates, including many senior leaders, have been captured or killed – far more than in 2008," George W. Bush's last year in office.

Obama, however, did not speak of his personal authorization of certain targeted killing in that body count. That news was revealed by Washington Post reporter Dana Priest in her Jan. 27 front-page story on joint secret operations: "U.S. military teams and intelligence agencies are deeply involved in secret joint operations with Yemeni troops who in the past six weeks have killed scores of people, among them six of 15 top leaders of a regional al-Qaida affiliate, according to senior administration officials."

These and other such operations, she continued, are "approved by President Obama." Working with Yemeni troops to plan the missions and provide weapons are "several dozen" members of our "Joint Special Operations Command" (Army Rangers, Navy Seals, Green Berets, Delta Forces), "whose main mission is tracking and killing suspected terrorists."

As I reported in my 2004 book, "The War on the Bill of Rights and the Gathering Resistance," such targeted killings were authorized by Bush soon after 9/11 and could have included American citizens believed to be involved in terrorist actions against the United States. As Priest added in her January story: "The Obama administration has adopted the same stance." A senior Obama administration official told her: "If a U.S. citizen joins al-Qaida, it doesn't really change anything from the standpoint of whether we can target them. They are then part of the enemy."

Accordingly, in the current operations in Yemen, there is, Priest adds, "a short list of U.S. citizens specifically targeted for killing or capture by the JSOC (our Joint Special Operations Command), military officials said. The officials, like others interviewed for this article, spoke on the condition of anonymity because of the sensitivity of the operations."

Secrecy of the specifics of the actual planning and killing is, of course, vital; but American citizens should at the very least know what is being done, in general, in our name without any judicial supervision.

Priest was one of the first U.S. reporters to blow the whistle – soon heard around the world – that the Bush administration was torturing terrorism suspects. In our prison at the Bagram Air Base in Afghanistan, she reported on the front page of the Dec. 26, 2002 Washington Post, "The traditional lines between right and wrong, legal and inhumane, are evolving and blurred." She gave illustrations, which have become commonplace in the torture history of the Bush administration.

In 2006, Priest wont the Pulitzer Prize for Beat Reporting for the further breaking news of secret CIA "black site" prisons in various countries; and now she has again demonstrated why the First Amendment is so crucial whenever we have an executive branch that believes it is vital to our national security to ignore due process and the separation of powers.

In the same article on targeted killings in Yemen by the Obama administration, Priest makes the connection between these deadly operations and the fact that, as I have described in previous columns, "Obama has ordered a dramatic increase in the pace of CIA pilotless drone-launched missile strikes into Pakistan in an effort to kill al-Qaida and Taliban members in the ungoverned tribal areas along the Afghan border." And also using more drones on Afghanistan.

How many Americans know that "there have been more such strikes in the first year of Obama's administration than in the last three years under President George W. Bush"? These drone strikes also often cause unintended innocent civilian deaths, which increasingly infuriates residents of Pakistan and Afghanistan who are not our enemies.

Among our national – and very individual – concerns about jobs and health care, Americans should also be concerned about the following commentary on the Priest story by Glenn Greenwald, a former constitutional lawyer who has become a trenchant reporter and analyst of such Bush and Obama extrajudicial actions as these targeting killings.

In "Presidential Assassinations of U.S. Citizens" (Salon.com and Common Dreams.org, Jan. 27), Greenwald writes: "If U.S. forces are fighting on an actual battlefield, then they ... have the right to kill combatants actively fighting against them, including American citizens. ... (But) the Obama administration – like the Bush administration before it – defines the "battlefield" as the entire world.

"So the president claims the power to order U.S. citizens killed anywhere in the world, while engaged even in the most benign activities carried out far away from any actual battlefield, based solely on his say-so and with no judicial oversight or other checks."

In addition to the corollary death of innocent civilians, these strikes do kill terrorists, don't they? But Greenwald reminds us, it is "the U.S. Government (that) has accused them of being a terrorist."

On what evidence? Remember Donald Rumsfeld assuring us "the worst of the worst" were being held at Guantanamo Bay? But, as Greenwald notes, federal judges reviewing habeas petitions of prisoners there have found, in some cases, "an almost complete lack of evidence to justify the accusations against them."

What does Obama's boasting of his mounting record of targeted killings on his own authorization tell us about our silence on these accelerating strikes and innocent civilian deaths? Anything? At least, under our rules of law, shouldn't Congress be looking into this?

You want to bet it will?

A Bleary-Eyed Attitude to Alcohol Research by Patrick Basham and John Luik

Tue, 02 Feb 2010 23:00:00 -0600

Ever since the House of Commons Health Select Committee grilled alcohol industry chief executives last summer, it has been open season on alcohol, especially alcohol advertising. Leading this campaign has been the British Medical Association (BMA), whose Board of Science recently called for a complete ban on all forms of alcohol advertising and marketing.

Now the campaign against alcohol promotion has been taken up by the BMA-owned British Medical Journal (BMJ), which recently published three articles attacking alcohol promotion and spawned headlines like Alcohol industry is 'targeting young people' in the national press. There are many claims within these pieces that are troubling, but two in particular deserve special attention.

First, there is the claim, explicit in the BMJ's Lobby Watch article, that researchers funded by the UK government are objective in the debate over alcohol advertising policy because they are 'independent', whereas researchers funded by the alcohol industry are not. Second, there is the claim that it is 'established' that alcohol advertising 'encourages young people to drink alcohol sooner and in greater quantities'.

The effect of these two claims is to suggest to the public and policymakers that, first, the debate over the effects of alcohol advertising is over and, second, only those people funded by the alcohol industry question this reality.

Is this true? The idea that people whose research is funded by the taxpayer are independent, and therefore objective in their findings and policy prescriptions, is naive at best, disingenuous at worst. Public Choice theory explains that the interests of those who claim to represent the public are themselves conflicted and self-serving, and certainly neither independent nor objective. Whoever supports their work, researchers have biases shaped by their education, experience, ideology, and the politics of their profession.

In the case of alcohol research, the public health research community is largely supported by a state that is Janus-faced over the appropriate place of alcohol in society, decrying and controlling on the one hand whilst happily taking its share of an immensely profitable undertaking. Are we seriously to believe that researchers from the public health community are unaware of the government's policy positions on alcohol when they undertake their research?

Indeed, they approach their research for the state knowing the policy outcome that will please their patron in the same fashion as an industry-supported researcher does. The recent controversy involving Professor David Nutt, chair of the Advisory Council on the Misuse of Drugs, who was fired by the home secretary Alan Johnson following his challenge to the current drug classification scheme, shows that the government neither wants nor appreciates policy-neutral, independent science.

The BMJ's Lobby Watch columnist, Claire Harkins, herself displays the absurdity of this position. In her statement of competing interests, she notes that she is 'negotiating over a report with Scottish Health Action on Alcohol Problems'. How is the fact that her research is funded by Scottish Health Action on Alcohol Problems different than, for example, a report that is funded by the alcohol industry? In both cases, the funders have interests and agendas.

Since all research, except for the rare independently wealthy researcher, is funded by someone, the fact that research is funded cannot by itself be taken as a reason for rejecting it. This suggests that the BMJ's real objection is not to the funding of research, but the fact that some funding is by 'good' funders, that is, funders who guarantee independence and objectivity, and some funding is by 'bad' funders, that is, funders who demand subservience and bias. Since the BMJ clearly thinks that the state funds research without strings attached, government-supported health research is good by definition; industry supported research is bad by definition. End of story.

But the history of alcohol policy research disproves this.

For example, the Framingham project, a multi-generational American epidemiological study financed by the US government, found early on that there were significant positive effects of moderate drinking on heart disease. Yet, the government denied the study's key researcher permission to publish these results because they would be 'socially undesirable in view of the major health problem of alcoholism that already exists in the country'. (See Seltzer, Journal of Epidemiology, 1997 50: 627-629.)

Therefore, the issue is not the black-and-white one that the BMJ posits. Both kinds of research have the potential to be shaped by the interests of the funder and both begin with biases, conscious or not. To simply reduce research to a question of funding avoids the hard question of the quality of the research itself. Rather than evaluating each piece of research on its individual merits, evidence which doesn't fit what the public health community wants to hear is simply dismissed or ignored on the grounds that it is done and funded by the wrong people.

As a case in point, our new research on the connection between alcohol advertising and youth consumption and overall consumption is shortly to be published in a peer-reviewed journal. It has not been funded by the alcohol industry, yet it profoundly challenges the views set out in the BMJ by Professor Gerard Hastings and others.

Here is what we found:

Only a handful of the 30 econometric studies of alcohol advertising and consumption and drinking initiation done over the last 20 years support the claim that alcohol advertising leads to drinking initiation or increases total consumption;
Virtually all of the studies of alcohol advertising exposure and recall fail to meet the minimal standards of science in that they are unable to warrant the integrity of their measurements. Further, their results, even when statistically significant, demonstrate only weak associations and fail to show causal connections between advertising and consumption, drinking initiation, and alcohol-related harm;
Of the 17 cross-sectional and longitudinal studies of the effects of advertising restrictions and bans (the draconian measures supported by the BMJ) on drinking initiation and consumption, only three find that such measures have a statistically significant effect on either initiation or consumption. Further, the evidence from jurisdictions that have removed bans shows that consumption has not increased when advertising has resumed.

Since we are not funded by the alcohol industry, we will leave it to the BMJ to tell us where we have gone so horribly wrong.

South of the Border, the Cult of the Presidency by Gene Healy

Mon, 01 Feb 2010 23:00:00 -0600

You could almost hear a collective groan go up when Barack Obama announced that he planned to deal with his recent setbacks by "speaking directly to the American people." After 158 interviews and 411 speeches in 2009, who's clamoring to hear more from a president whose microphone addiction rivals Bill Clinton's?

If you think we've got it bad, pity the Venezuelans, whose strongman president, Hugo Chavez, rules the airwaves with his own talk show. "Hello, President!" airs Sundays, sometimes for up to eight hours, and it features Chavez singing, insulting his enemies, giving shout-outs to Fidel Castro, and even, on one occasion, describing a gut-wrenching bout of diarrhea he'd had while filming the show.

From afar, the Chavez regime seems like something from a comic dystopian novel. But it's no laughing matter.

Last week, Chavez ordered six TV stations off the air, ostensibly for refusing to air his frequent and interminable speeches. His real motive was to squelch dissent amid raging inflation, rolling blackouts, and growing public disgust with his lawless rule. So far, two students have died in anti-censorship protests.

Undaunted, the combative caudillo declared that Twitter criticism of the president "is terrorism," and the protesters are "seeking death."

Chavez is only the most recent example of our southern neighbors' long-running problem with authoritarian presidents who decry U.S. "imperialism" as they push for increasingly imperial powers.

Ironically, though, when Latin American autocrats blame the region's problems on Yankee influence, they may be more right than they know.

When the region's former Spanish and Portuguese colonies gained independence in the early 19th century, they followed the U.S. example by adopting presidential systems. Instead of copying the British parliamentary system, where the chief executive is elected by, and accountable to, a legislative majority, they opted for the American model, with an independent executive who's harder to remove, and can invoke his electoral "mandate" to pose as the living embodiment of the popular will.

In an influential 1990 article, "The Perils of Presidentialism," political scientist Juan Linz argued that presidential systems are especially bad for developing countries, because they encourage cults of personality and foster instability. Subsequent studies have bolstered Linz's insights, showing that presidential systems are more prone to corruption and far more likely to suffer catastrophic breakdowns than parliamentary ones.

Presidentialism's perils are apparent throughout Latin America today, where populist despots invoke "democracy" in the service of one-man rule.

In recent years, Bolivia's Evo Morales, leader of the "Movement for Socialism" (acronym "MAS," for "more") forced constitutional changes that overturned a ban on his re-election and enhanced state control of the economy. Ecuador's Rafael Correa, a Chavez ally, frequently breaks into prime-time programming with Big Brother-style attacks on his opponents. Correa too has overturned presidential term limits and gained the power to dissolve the legislature.

Yet the American president retains staggering powers at home and abroad. He can send the world's most powerful military into battle at will, Congress' power "to declare war" notwithstanding; and he can reshape vast areas of American life unilaterally via executive order.

That's not to suggest that we ought to hold a constitutional convention and replace our presidential system with a parliamentary one. American-style separation of powers has its advantages, after all.

Without it, for example, there's little doubt we'd have had socialized medicine long ago. Yale's Ted Marmor, a leading historian of the U.S. health care system, argues that the main reason we don't is that our Constitution's framers rejected a parliamentary regime in which "electoral victories typically produce policy majorities."

But we should remain vigilant about the peculiar dangers of our system. The narcissistic despots who plague our southern neighbors offer a cautionary tale for those willing to cede still more power to populist presidents.

The lesson for all of us, north and south of the border, is watch our presidents closely, and check them when they try to slip their constitutional bonds.

Is Obama Failing? (Part 1) by David Boaz

Mon, 01 Feb 2010 23:00:00 -0600

Part 1 | Part 2

This article is David Boaz's opening remarks in a larger debate on The Economist's website.

The editors make it too easy when they remind us that in claiming the Democratic nomination in June 2008 Barack Obama declared that "generations from now, we will be able to look back and tell our children that this was the moment when we began to provide care for the sick and good jobs to the jobless … when the rise of the oceans began to slow and our planet began to heal … when we ended a war, and secured our nation, and restored our image as the last, best hope on Earth." It truly would take a Messiah to fulfil such soaring promises.

But part of President Obama's problem may be that he tried to fulfil too many of them, with no sense of the limits of the state's efficacy or the public's tolerance for expanded government. The claims of some of his advocates in 2008 that no one could spend 12 years at the University of Chicago without absorbing some sense of the benefits of markets, the limits of government and the hard lessons of the 20th century now seem as off-base as Ben Stein's buy recommendation on Merrill Lynch in late 2007.

On 20 January 2009, the day of Obama's inauguration, the Washington Post wrote, "The federal government itself is a far more potent instrument, in its breadth and depth of command over national life, than it has ever been before." President Obama has never quite thanked President Bush for the new powers he inherited, but he has certainly used them.

Bush raised the federal budget by more than $1.5 trillion. He bequeathed to Obama a FY2009 deficit of about $1.3 trillion, which Obama proceeded to increase with his "stimulus" bill, an earmark-heavy omnibus appropriations bill, Cash for Clunkers and more. But more than spending, he seemed bent on using a crisis atmosphere ("You never want a serious crisis to go to waste," said Rahm Emanuel) to amass more money and power in Washington. He proposed to bring the key health-care and energy industries under the direction of the federal government. He sought to tell financial companies how they could invest and what they could pay. I don't think he really wanted to nationalise the automobile companies; it's just that, as Uncle Duke said of the pension fund, the automobile industry was just sitting there. So he snatched it up, and he and Congress started imposing political rules: build "clean cars" rather than cars that consumers want to buy, don't build them in China, don't buy palladium from the cheapest overseas sources, use unionised trucking companies, keep inefficient dealerships open — and make enough profits to pay the taxpayers back.

His Environmental Protection Agency announced that it would use previously unknown powers to regulate greenhouse gases. His Labor Department plans to push through 90 rules and regulations in 2010 that would strengthen unions and add costs to employers. He sought to give more regulatory powers to the Federal Reserve, as a reward for causing the bubble and financial collapse. He has proposed various schemes to encourage more lending to homebuyers with insufficient credit, which were just those that combined with easy money to create the housing collapse in the first place. His top advisers "flipped through the tax code, looking for ideas" on taxes to raise, reported the Wall Street Journal.

In many ways, of course, Obama has just doubled down on George W. Bush's policies of bailouts, takeovers, expanded Fed powers and nationalisations. Some of the opposition to him reflects the public's sense that we've been piling up spending and debt for over a year now, so he is being punished for his predecessor's mistakes. But Bush or Obama, these policies take us in the wrong direction. After a crisis brought on by cheap money and distortionary subsidies, he is doing more of the same. In a recession he is adding debt, taxes and regulation to the burdens already felt by business.

The policies themselves are bad enough. The lobbying frenzy created by all this money on the table is not healthy for our politics. And the uncertainty created by this ambitious and protean agenda retards recovery. From last January ("growing anxiety on Wall Street about what the government would do next", New York Times) to this month ("The people that have money are sitting in kind of a cocoon — they're not making decisions because they're concerned about what's coming down in terms of taxation and vindictiveness against the wealthy," Denver Post), we see employers and investors worrying about what Washington might do next.

And now the voters are turning against this sweeping agenda that seeks to make America a European welfare state. Obama came into office on a wave of good feeling, with 69% expressing approval and only 12% expressing disapproval. Now his ratings are below 50%. Obama's approval rating fell 21 points during his first year in office, the largest first-year decline for any president since Gallup began tracking presidential approval ratings in the 1930s. Approval by independent voters has fallen from 62% to 45%. And even young people are leaving: The Politico/Insider Advantage poll showed Scott Brown leading among voters under 30 by 61% against 30%. In contrast, the 2008 exit poll showed 18-29-year-olds in Massachusetts voting for Obama 78-20.

Worse, the voters aren't just grumbling. They have switched parties in New Jersey, Virginia and even deep-blue Massachusetts. Congressional Democrats are scurrying for the exits, and even Vice-President Biden's son has decided to take a pass on the 2010 Senate race.

Worse yet for Obama, voters are not just reacting to the continuing economic weakness or engaging in fickle channel-changing. They are increasingly opposed to his plans to "remake this great nation". The longer Congress debates the health-care bill, the less voters like it. In a Wall Street Journal/NBC News poll 53% said they disapprove of the federal government's expanded role in the efforts to fix the nation's economy, 60% disapprove of the government's financial help to banks and other lending institutions and 65% disapprove of the government's ownership stake in General Motors.

It is not just specific policies. The director of Pew Research says that "anti-government sentiment, which had been building for years, was heightened by the financial bailout and stimulus program". In a January Washington Post-ABC News poll, Americans said they prefer "smaller government and fewer services" to "larger government with more services" by 58% to 38%. Since Obama won the Democratic nomination in June 2008, the margin of support for smaller government has increased in Post-ABC polls from five points to 20 points. Gallup data show that 57% of Americans say the government is trying to do too many things that should be left to businesses and individuals, the highest number since October 1994.

When your policies aren't working, the voters have noticed and your transformative ideological agenda is moving broad public opinion in the other direction, it's safe to say you're failing.

Multi-thinking about Iran: Let's Be Realist by Leon T. Hadar

Mon, 01 Feb 2010 23:00:00 -0600

I've been following with great interest the many heated exchanges online and elsewhere over Council on Foreign Relation (CFR) President Richard Haass's call in a Newsweek commentary for "promoting regime change" in Iran. Haass is a self-described "card-carrying realist" and a former official in the administrations of Bush I and Bush II (he was director of policy planning for the Department of State under Secretary Colin Powell) who after retiring from government has been expressing strong criticism of the neoconservative-driven policy in the Middle East under Bush II, including in his book, War of Necessity, War of Choice: A Memoir of Two Iraq Wars.

In fact, in his Newsweek article Haass compared President Barack Obama to George W. H. Bush, suggesting that the current White House occupant unlike Bush 43 and very much like Bush 41, "whose emissaries met with Chinese leaders soon after Tiananmen Square is cut more from the realist cloth." (Interestingly enough, a leading CFR scholar, Walter Russell Mead has compared Obama to the more Wilsonian President Jimmy Carter.) Haass who for a long time seemed to be in agreement with Obama's pursuit of diplomatic engagement with Iran, explained in Newsweek that against the backdrop of the stalled nuclear talks with Iran and the rise of the Green Movement in Iran, he "changed in mind" and he was supporting now of a policy "promoting regime change" in Tehran. His position is also shared now by many neoconservative intellectuals as well as by some of the fans of Iran's pro-democracy opposition on the left and among Iranian-Americans who like Haass tended to back U.S. engagement with Iran just until recently.

That a "card-carrying realist" seemed to be calling for the launching of a U.S.-led Democratic Crusade against Iran helped cheer-up Iran watchers like author Barbara Slavin who used to be an advocate of engagement with Iran but who has written that (in a post quoted on journalist Laura Rozen's blog) that when "an arch realist like Richard Haass says the time has come to change U.S. policy toward Iran from engagement to supporting regime change, the Obama administration should take notice." At the same time, it was not surprising that Harvard University professor and blogger Stephen Walt who prides himself as being "a realist in an ideological age" has argued — in a post on his blog titled, "Nothing More Dangerous than a Recovering 'realist?'" — that Haass's policy prescriptions are not very, well, realist. Reflecting the extent to which Haass's policy metamorphosis has ignited a somewhat nasty debate among foreign policy wonks, the Washington Post's Al Kaman reported that Flynt Leverett and Hillary Mann Leverett, two of Haass's former State Department colleagues and long-time realist proponents of engagement with Iran, "blasted Haass for his new position, skewering him for his central involvement in Powell's 'now-infamous' February 5, 2003, U.N. speech, which helped garner support for the invasion of Iraq, 'one of the biggest debacles in post-World War II American foreign policy.'"

As a member of the Realpolitik "Machiavelli Club" I can understand why a foreign policy realist who believes that Iran's acquisition of nuclear weapons could pose a direct threat to U.S. national security interests would support recent steps taken by the Obama Administration to increase the anti-missile capabilities by the United States in the Gulf and consider them more of defensive than an aggressive maneuvers (there are now Patriot batteries in four Gulf states — Kuwait, Bahrain, the United Arab Emirates and Qatar and U.S. anti-missile ships are also being stationed in the Gulf. I understand but disagree with that view and agree with the Leverrettsthat President Obama has failed to devise a coherent strategy for engagement with Iran similar to the one that created the conditions for Nixon Going to China. In fact, I had made the same arguments in a long article published in The American Conservative in November 22 2004. From that perspective, the Obama Administration's military moves in the Gulf could help ignite tensions between Tehran in Washington instead of achieving the goal of pressing Iran to make a diplomatic deal with the West.

But as someone who is "card-carrying realist" I find Haass's recommendation to "promote" — he does not actually call for "doing" — regime change in Tehran as running contrary to any sensible realist viewpoint. As Machiavelli (or your dad) cautioned you, never start a fight -especially with a bully — you are not sure you could finish and win. There are so many "what ifs" involved in any scenario under which the U.S. pursues a policy of regime change in Iran: What happens if Iran retaliates by destabilizing Iraq? What happens if tensions between the U.S. and Iran degenerate into full-scale war? And what happens if the political upheaval in Iran evolves into a bloody civil war?

Indeed, the third scenario should raise doubts about the morality of trying to intervene in a complex foreign internal political conflict. As demonstrated by the crushing of the pro-democracy movement in Hungary in 1956and the uprising by the Shiites and the Kurds in Iraq in 1991 (after Desert Storm) — in both cases officials in Washington expressed support and even encouraged the opponents of the regime to take action against it — unless Americans are willing to use the full force of their military power to do regime change, promoting it could end-up destroying the opposition and strengthening the power of the current regime. In that case, Washington is perceived — and rightly so — as sharing moral responsibility for that outcomes.

And after the failed U.S.-backed Orange Revolution in Ukraine, and even more significant, the victory of Hamas in the 2006 parliamentary election in the Palestinian territories — which the Bush Administration had promoted in the name of democratizing the Middle East — how is it that Haass and the other advocates of regime change in Tehran so, so confident that the Ayatollahs would be replaced by a regime whose interests and values will be more in line with those of Washington? How about some sense of humility when it comes to predicting foreign policy outcomes?

I am aware that after a realist makes these and similar arguments, critics counter with the accusation that for all practical purposes, he or she is providing support for Mahmoud Ahmadinejad and the other despicable characters that control Iran. Wrong! Those of us who oppose the notion that promoting regime change in Tehran is in the core national interest of the U.S. recognize that such a policy could risk a war with Iran that under the current diplomatic, economic and military conditions could have devastating effects on American interests — which the U.S. President and Congress are obligated to protect — as well as on Iran and the entire Middle East.

From a Realpolitik perspective, Washington and Tehran need to resolve their policy differences, which include Iran's alleged nuclear military program, Iraq, Afghanistan, Lebanon and Israel/Palestine. Washington should strive for some sort of a "grand bargain" under which Iran would put a freeze the Iranian development of nuclear military capability as part of a diplomatic deal that will also respond to some of Iran's concerns. If such an effort to reach a deal fails, Washington should work together with other regional and global powers in pursuing a policy of containment vis-à-vis Iran. In that context, Israeli nuclear bombs serving as deterrence against Iran's potential nuclear military capability.

And if the democratic opposition in Iran has so much public backing as many observers suggest (again, that is a questionable assumption), there is no reason why this movement could not continue mobilizing its supporters if and when the U.S. (and the West) make a deal with Iran. If anything, U.S. diplomatic ties as well as trade and investment with Iran should be in the interest of the westernized and educated pro-democracy activists in Iran (which explains why the Ayatollahs do not like the idea).

In any case, President Obama and U.S. Congress as well as various non-government organizations and the media will continue — as they should — to have an opportunity to express their disapproval of the human rights conduct and other domestic and foreign policies of the Iranian regime — without using American diplomatic and military power to replace it. After all, this is the same kind of policy that we apply today to our relationship with, say, Saudi Arabia and Egypt, or China and Russia. To paraphrase a familiar saying, the degree of a government's diplomatic intelligence is directly reflected by the number of conflicting attitudes it can bring to bear on the same foreign policy. Or as poet Walt Whitman once said, "Do I contradict myself? Very well then I contradict myself, (I am large, I contain multitudes.)

Contractors and the Civilian Extraterritorial Jurisdiction Act by David Isenberg

Mon, 01 Feb 2010 23:00:00 -0600

Senator Patrick Leahy (D-VT) and Congressman David Price (D-NC) have just announced a new bill to ensure accountability under U.S. law for American contractors and employees working abroad.

One might think, given the rush in recent years by various members of Congress to grandstand on this issue, that this is just more of the same. Industry trade groups have long claimed that private contractors operate under a myriad of international and national laws, rules, directives and regulations. That is true. But one has only to look at the most recent Congressional Research Service report on legal issues affecting private military contractors in Iraq and Afghanistan to see that there is still much ambiguity that needs to be clarified.

The bill's co-sponsors alone mean that the bill will be worth examination. Rep. Price has long been one of the leading members of the House on this issue. He is known for a careful, dispassionate, non-polemical approach.

Sen. Leahy is better known for his long and admirable work on banning antipersonnel landmines, as well as his work on judicial issues, as Chairman of the Senate Judiciary Committee. But he too is known for his painstaking, and non-sensationalistic approach.

The proposed legislation allows the government to prosecute government contractors and employees for certain serious crimes. The legislation expands on the Military Extraterritorial Jurisdiction Act (MEJA), which provides similar criminal jurisdiction over Department of Defense employees and contractors but does not clearly apply to U.S. contractors working overseas for other federal agencies, such as the Department of State.

The Civilian Extraterritorial Jurisdiction Act will:

Direct the Justice Department to create new investigative units to investigate, arrest and prosecute contractors and employees who commit serious crimes.
Allow the Attorney General to authorize federal agents to arrest alleged offenders outside of the United States, if there is probable cause that an employee or contractor has committed a crime.
Require the Attorney General to report annually to Congress the number of offenses received, investigated and prosecuted under the statute; the number, location, and deployments of the newly created investigative units; and any changes needed in the law to make it more effective.

Currently, the Domestic Security Section of the Department of Justice Criminal Division provides preliminary liaison with the Defense Department and other federal entities and to designate the appropriate U.S. Attorney's Office to handle a case.

But given the December 2009 opinion by Judge Urbina throwing our charges against five Blackwater contractors because of the way the Justice department handled the case it seems clear the Justice Department needs help.

It is also worth noting that currently the jurisdiction of MEJA for contractors working for a department other than Defense is uncertain. The decision by Judge Urbina meant that the defendants' argument that MEJA didn't apply to them as contractors working for the State Department in support of its mission never reached trial.

One irony is that back in October 2007 the House approved a bill introduced by Congressman Price which would ensure that the U.S. government has the legal authority to prosecute crimes committed by U.S. contractor personnel working in war zones. Defense Department contractors were already covered under U.S. law, but contractors who worked for the State Department and other agencies, were not liable for criminal activity under current law. Price's bill extended the jurisdiction of MEJA to cover all contractors working for the government in a war zone.

Price's bill also was supposed to ensure that the Administration has the tools it needs to investigate and prosecute allegations of abuse. The fact that two years later he is co-sponsoring another bill that, in part, has the same requirements as his previous bill shows how difficult it is to achieve meaningful governmental action in this area.