America Should Charge the World for Defending It

Today the U.S. underwrites the defense of wealthy nations across the globe. Washington should stop using the Pentagon as a global welfare agency.

Uncle Sam at least should charge for his defense services, as Donald Trump has suggested. America shouldn’t be defending its rich friends for free.

Most Republican Party presidential candidates insist that Washington do more on behalf of its already subsidized, protected, coddled, and reassured allies. Why do U.S. politicians put the interests of other nations before those of America?

The Pentagon devotes much of its resources to defend other nations, mostly wealthy industrialized states. In most of these cases America has no important, let alone vital, interests at stake. Instead, Washington should allow allies and friends to protect themselves.

China: Historic Empire Transformed, Fragile Leader In The Making?

SHANGHAI, CHINA—Shanghai, China’s financial capital, enjoys a double skyline. The city proper, or “old city,” sports a fascinating mix of colonial buildings and modern architecture. The “New Area” of Pudong hosts Shanghai’s four tallest structures, on the east bank of the Huangpu River.

In contrast, when I first visited Shanghai a couple decades ago there were few buildings, commercial or residential, racing skyward. Pudong was mostly empty, with more brush and trash blowing down the streets than buildings with people working in them.

But there is another China. More distant towns offer a vision into the past—more traditional, less advanced, more isolated. Shift to the nearby countryside and incomes drop substantially, averaging less than $2000 per capita. My traveling group stopped by the remains of an ancient fortress and the Great Wall, which required walking along dirt roads lined by homes constructed with bricks taken from the ruins. The primitive toilet had holes in the wooden floor, through which the ground was visible.

Self-Serving Federal Bureaucrats

In the federal government, employees are paid to faithfully execute the laws, but they often pursue self-serving goals counter to those of the general public. Unionized federal workers actively oppose legislators who support reforms. Agency leaders try to maximize their budgets by exaggerating problems in society. They leak biased information to the media to ward off budget cuts. They put forward the most sensitive spending cuts in response to proposed reductions, which is the “Washington Monument” strategy.

Federal officials signal to the public that they are solving problems without actually solving them. Security agencies, for example, use “security theater” techniques that are visible to the public but do not make us safer.

Officials often trumpet the supposedly great jobs they are doing, but hide agency failures from the public. And officials stonewall congressional requests for information that may shed a bad light on them.

I describe these and other bureaucratic failures in this new essay at Downsizing Government.

The Washington Post reports on other ways that bureaucrats serve themselves and not the public. In one story the other day, the paper reported:

An assistant director of the Secret Service urged that unflattering information the agency had in its files about a congressman critical of the service should be made public, according to a government watchdog report released Wednesday.

That effort to smear Rep. Jason Chaffetz is disgraceful, but it is topped by another one in the Post the same day:

Senior executives at the Department of Veterans Affairs manipulated the hiring system to coerce two managers to accept job transfers against their will — then stepped into the vacant positions themselves, keeping their pay while reducing their responsibilities.

The executives also gamed VA’s moving-expense system for a total of $400,000 in what a new report by the agency’s watchdog described as questionable reimbursements, with taxpayers paying $300,000 for one of them to relocate 140 miles, from Washington to Philadelphia, Pa.

Rubens and Graves kept their salaries of $181,497 and $173,949, respectively, even though the new positions they took as directors of the Philadelphia and St. Paul, Minn. regional offices had way less responsibility, overseeing a fraction of the employees at lower pay levels. Rubens had been deputy undersecretary for field operations.

By and large, the federal government is not full of people that help us. They tax us, regulate us, defend their bureaucracies, and some of them try to actively fleece us. So in structuring the government, a basic assumption should be that it will not be populated by “public servants,” but by people who are in it for themselves. That is one reason why all of us should want to keep the government’s power strictly limited.

For more of the workings of the bureaucracy, see “Bureaucratic Failure in the Federal Government.”

U.S.–China Relations Hurt by American Antidumping Abuse

As expected, Chinese President Xi Jinping raised the issue of antidumping abuse during his recent visit to Washington.  Specifically, he called on the United States to stop using “nonmarket economy” methodology when imposing antidumping duties on imports from China.  The issue is going to become more and more pressing as a diplomatic problem over the next year, because the United States is required under WTO rules to end NME treatment by December 2016. 

NME methodology is one of many ways the United States inflates the protectionist impact of U.S. antidumping law.  My colleague Dan Ikenson has thoroughly documented the senselessness of NME treatment.  Last year, I wrote a Cato Policy Analysis looking at how U.S. officials and policymakers might respond to the December 2016 deadline.

That deadline coincides closely with the end of President Obama’s term in office.  The president can choose to leave his successor years of trade conflict and WTO litigation by refusing to act.  Or he can do the right thing for the American economy and U.S.–China relations by ending NME treatment as soon as possible. 

Mismatch Between 20th Century Trade Negotiations and 21st Century Trade Threatens TTIP’s Success

In today’s Cato Online Forum essay, Per Altenberg from the Swedish Board of Trade makes an interesting political economy argument and a compelling practical case for why the Transatlantic Trade and Investment Partnership will be a tough slog. Altenberg argues that the old model for trade negotiations, premised as it is on mercantilist reciprocity, which leverages the interests of exporters against import-competing industries to secure domestic support for liberalization, is no longer functional in a world where trade is dominated by intermediate goods trade along global value chains. Today, openness to trade is seen as essential, and trade negotiations cover matters that probe deeply into domestic regulatory space. To sum up, Per writes:

Traditional 20th-century reciprocity in market access negotiations will thus not be an effective mechanism in the context of 21st-century deep integration negotiations such as TTIP. Instead, deep integration issues require new approaches to trade negotiations.

Per’s essay elaborates on those approaches.  Read it.  Provide feedback.  And please register for Cato’s TTIP conference on October 12. 

Tired of Poverty? Expand Capitalism

Is capitalism a coercive system that creates poverty, as a recent article in the Washington Post argued, or is it a system of voluntary exchange that has led to the greatest reduction in poverty the world has ever seen?

According to the article, “capitalism is a coercive economic system that creates persistent patterns of economic deprivation,” and should be altered through the introduction of a universal basic income. While a guaranteed income is an interesting policy proposal with pros and cons, the article’s claims that capitalism is coercive and creates economic deprivation are both unfounded.

First, let us consider whether capitalism is “coercive.” The author writes,

The only way to break the coercion at the core of the employment relationship is to give people the genuine ability to say no to their employers. And the only way to make that feasible is to guarantee that [they] have some way to support themselves whether they work or not.

Of course, people already possess the genuine ability to say no to their employers. In the United States alone, around 2 million people voluntarily leave their jobs every month—and that’s despite a lackluster economy. Employees in a capitalist system choose to engage in a relationship of mutually beneficial exchange. Employers recognize this and companies compete to become more attractive as workplaces. According to Gallup, the majority of Americans are satisfied with most aspects of their workplace—particularly with their job security, the flexibility of their schedules, and with their immediate supervisors.

Second, let us examine the article’s claim that capitalism creates economic deprivation. According to the author, capitalism harms both workers and those who cannot work. If that is so, can the author, or anyone else for that matter, point to a time in history when the vulnerable were better off? In many ways, today’s poor live better than the kings of yesteryear.

Over the last few decades, infant and child mortality have been drastically reduced, lifespans are at an all-time high, fewer people are undernourished, educational attainment is growing, gender inequality is decreasing, and access to technology is expanding.

Free enterprise and innovation have done more to uplift humanity from a state of universal poverty than any international aid program or welfare scheme. Capitalism, far from being a cause of poverty, is the reason that there is enough wealth today to even contemplate a proposal like a universal basic income.

Waste in Military Purchasing

The longest running show on Broadway is The Phantom of the Opera at 27 years. The longest running show on television is Meet the Press at 68 years. The longest running show of waste in Washington is cost overruns on Pentagon weapon systems. That show has been ongoing for more than 220 years.

As one of the first major procurements under the Constitution, the federal government bought six Navy frigates in 1794. The ships were projected to cost $688,889, but a myriad of problems pushed the ultimate cost up 70 percent to $1,176,721. Nicole Kaeding and I mention that project and many recent ones in our new study “Federal Government Cost Overruns.”

The Washington Post reports today on yet another troubled defense program:

As the Gerald R. Ford-class aircraft carrier enters the annals of troubled acquisition programs—billions over budget, years behind schedule—it follows a familiar script, becoming yet another example of how the Pentagon struggles with buying major weapons systems.

The Navy’s program has become “one of the most spectacular acquisition debacles in recent memory. And that is saying something,” McCain (R-Ariz.) said during a Senate hearing on the troubled program Thursday.

The program is now $6 billion over budget, according to a review by McCain’s staff. And while the lead ship is expected to be delivered next year, the second ship in the fleet is five years behind schedule and won’t be ready until 2024.

Like many other programs, the Ford-class carriers suffered from unrealistic cost estimates and overly optimistic timelines. And key Pentagon officials pushed the program forward even though key technologies hadn’t been fully tested, developed or designed, officials testified.

The problem with Pentagon procurement is not just that federal officials deceive taxpayers about the costs of projects, but also that many cancelled projects—which never should have been started—end up throwing billions of dollars down the drain.

A story yesterday in the Washington Post put a staggering number on that aspect of waste:

The Pentagon spent $46 billion on at least a dozen programs, including a new fleet of presidential helicopters, between 2001 and 2011 that never became operational, according to an analysis by the Center for Strategic and Budgetary Assessments.

The Post reports that there are serious efforts to reform procurement currently moving forward. After 220 years of waste, military purchasing is long overdue for an overhaul.