Archives: 03/2008

DC’s Apathetic, Complacent Nonproducers ♥ Snow Jobs

I just came across this letter I wrote to the editor of the Washington Post.  Sadly, the editor declined to publish it.  Since the Supreme Court just heard oral arguments about the D.C. gun ban and the meaning of the Second Amendment in District of Columbia v. Heller, it remains relevant:

On January 5, we learned that District officials filed a brief with the Supreme Court [“Gun Law Prevents Harm, D.C. Argues,” Jan. 5] defending the city’s gun ban on the grounds that: the Second Amendment does not protect an individual right to keep and bear arms; the ban “does not deprive the people of reasonable means to defend themselves;” and “less restrictive approaches would not be adequate.”

Fifteen pages later, Colbert I. King [“Outfoxed In the District,” Jan. 5] wrote of the “conditions that threaten the quality of life of all who live in this city: criminals roaming the streets in search of human prey; an apathetic and complacent government workforce; nonproducers ensconced in high places; and elected leaders who fall for snow jobs.”

Draw your own conclusions.

Obama and the Cost of War

Thursday in West Virginia, Barack Obama gave a speech laying out the economic costs of the Iraq War, which he estimated as up to $3 trillion (Linda Bilmes and Joseph Stiglitz’s estimate) and $10 billion a month. He listed the many things that money could have bought. Robert Menendez made similar points in the Democrats’ weekly radio address.

Americans disagree on whether to stay in Iraq and the best use of the money we’d save by leaving, but everyone should acknowledge that this is the way to argue about the war. The questions that consume the media, whether the surge worked, whether we’re making progress, and so on, are important, but they alone cannot determine whether we ought to continue the occupation. That depends primarily on cost-benefit analysis, however uncertain. (Moral questions matter too but are not meaningful when divorced from consideration of costs and benefits.)

Since the cost of staying is enormous, the backers of continuing American participation in the war should enumerate the benefits that justify it (along with the deaths and the shifting of our constitutional design towards unbalanced executive power). War boosters seem to understand the terrible burden of their position, as evidenced by their tendency toward wild, worst-case accounts of the consequences of American departure. In my view, the war wouldn’t be worth continuing even if the surge were working, which it isn’t.

But since we’re talking opportunity costs, what about the rest of the national security budget – you know, the other 80 percent of American security spending, now approaching three quarters of a trillion dollars, which is mostly spent to defend us against a couple weak conventional enemies? Like most other Democrats, Obama not only avoids complaining about regular defense spending, but backs the ongoing plan to expand the ground forces, which will add $15-20 billion in annual defense costs in the name of better executing future occupations like Iraq. I understand the political calculus here, but let’s not give the guy too many medals for political courage.

Democrats like Obama and Menendez also argue that Iraq is a reason that we are shortchanging state-building efforts in Afghanistan. This talking point illustrates the trouble with conventional foreign policy thinking on the so-called left. By saying that Afghanistan needs the medicine Iraq is getting, Democratic foreign policy leaders are rushing to repeat a mistake they rightly condemn. As Harvey Sapolsky, Chris Preble and I have argued, this thinking shows that the hubris that brought us into Iraq is essentially intact.

Defending American interests in Afghanistan requires nothing more than the absence of haven for international terrorists and an example made of those who offer it. The latter is a lesson well taught. Should it fail, a small ground force can target terrorist camps and supporters via raids and air strikes guided by intelligence, even if Taliban militias gain power in some regions. Those missions never required that Afghanistan become a modern nation, democratic, or even stable.

Instead of this realistic approach, the next President will probably expand a second no-end-in-sight war, one meant to assert the control of a statelet in Kabul over an unruly territory offering little historic basis for the word “nation.” Afghanistan is full of arms and grievances. It lacks the basics of statehood: a road network, a national energy grid, widespread patriotism, and tax collection. The notion that a 30 or 50 percent increase of Western forces and investment can transform Afghanistan into a peaceful, centralized state shows idealism of stunning tenacity. Obama talks more sensibility about these matters than John McCain, but he should apply some cost-benefit analysis to that spending too.

USA Today Story on Corporate Tax Blames the Victim

Compared to other nations, the United States has a medium-sized tax burden. Most of Europe has harsher taxes, but there are plenty of place in the world that have lower tax burdens. But there is one area where America is behind almost every other nation, and that is the taxation of corporate income. The combined federal/state corporate rate is nearly 40 percent, exceeded by only Japan. Not only does the U.S. have a high tax rate, but the IRS taxes the “worldwide” income of companies, which means that it is especially hard for American companies to compete in foreign markets - particularly since almost every other nation relies on the common-sense approach of territorial taxation, which means they do not tax the “foreign-source” income earned by their companies. The only silver lining to this dark cloud is that American companies have some ability to postpone when they pay the additional layer of tax on their foreign-source income. In the minds of greedy politicians (and sloppy reporters), however, this “deferral” of a discriminatory tax is a loophole. Here’s what USA Today reported:

Democratic presidential contenders Hillary Rodham Clinton and Barack Obama have cast it as an outrage that should be a key target for the next president: a tax break they say encourages employers to ship American jobs abroad. The charge could be dismissed as typical campaign-trail exaggeration during a Democratic primary season marked by populism, except for one thing. Many analysts say it’s true. “The U.S. tax system does provide an incentive to locate production offshore,” says Martin Sullivan, a contributing editor to Tax Notes, a non-profit publication that tracks tax issues. At issue is the U.S. tax code’s treatment of profits earned by foreign subsidiaries of American corporations. Profits earned in the United States are subject to the 35% corporate tax. But multinational corporations can defer paying U.S. taxes on their overseas profits until they return them to the USA — transfers that often don’t happen for years. …”If you had two companies in Pittsburgh that both were going to expand capacity and create 100 jobs, our tax code puts the company who chooses to put the plant in Pittsburgh at a competitive disadvantage over the company that chooses to move to a tax haven,” says former White House economist Gene Sperling, a Clinton adviser.

But Senators Clinton and Obama, not to mention Martin Sullivan and Gene Sperling, have things backwards. It is America’s high tax rate that creates an incentive for jobs to be overseas. Deferral simply means that American companies are only somewhat disadvantaged in their efforts to earn market share in other nations. The USA Today story does acknowledge that America has a high corporate tax rate, but the reporter is surprised that this high rate means low revenue, even though it is actually a sign of “Laffer Curve” responses to punitive taxation:

The U.S. has one of the highest corporate tax rates in the world, and its corporate tax code has a well-earned reputation for complexity. But despite the high rate, the U.S. takes in less annual revenue from corporate taxes, measured as a percentage of economic output, than almost all other major economies.

The current system is bad for America, but critics have the wrong solution. Instead of making the U.S. tax code even more punitive by ending deferral, America needs a big reduction in the corproate tax rate. So long as America’s rate is far higher than other nations, companies will have an incentive to create jobs abroad. Ending deferral would not alter that incentive. All that would happen is that foreign companies would be creating a larger share of those jobs. The story does quote a couple of economists who have starkly different estimates of employment implications, but both agree the current system causes job losses:

Kimberly Clausing, a professor of economics at Reed College in Portland, Ore., says the corporate tax code may account for up to 3 million jobs being abroad. Gary Hufbauer, an economist who has written a book on international taxation, puts the number at just 200,000. …The Bush administration warned last year that U.S. corporate giants are at a competitive disadvantage in world markets because foreign rivals pay lower taxes in their home countries.

The article also notes that U.S. companies that create jobs abroad also create jobs in America. In other words, successful, growing firms tend to expand in all markets. A lower corprorate tax rates, needless to say, is one of the keys to a pro-growth environment for American companies. Ireland is a good example of a nation that reaps large benefits from a low corporate tax:

Matthew Slaughter, a Dartmouth College economics professor who worked in the Bush administration, says that historically, multinationals that have added jobs at their foreign affiliates also have expanded hiring in the USA. As U.S.-owned foreign units prosper, their corporate parents must add accountants, marketing specialists and other managers at their U.S. headquarters. In 2004, Slaughter released a study, based on employment data for the decade ending in 2001, which concluded that U.S. multinationals created two jobs in the USA for every job they added abroad. That comforting conclusion broke down in more recent years. From 1991 through 2005, multinationals created almost as many jobs abroad (3.6 million) as they added at home (3.8 million). …Evidence of legal tax-shifting can be seen in government statistics. In 2005, U.S. multinationals’ units in Ireland, which levies a corporate tax of just 12.5%, reported profits that were twice as large as the profits of all U.S. affiliates in Germany, France and Italy combined.

“Montana Wins REAL ID Standoff”

So reports the Missoulian on the Department of Homeland Security’s capitulation in the face of Governor Schweitzer’s resolute rejection of REAL ID.

On Friday, Montana Attorney General Mike McGrath notified the Department of Homeland Security that the state will not comply with REAL ID but will pursue the identity security policies it deems appropriate. McGrath urged DHS not to penalize the state for rejecting REAL ID.

DHS Assistant Secretary for Policy Stewart Baker chose to interpret McGrath’s letter as a request for an extension of the REAL ID compliance deadline and granted it.

In other words, DHS has abandoned any pretense that it can tell states what to do. A showdown with recalcitrant states around the May 11 compliance deadline would require the Transportation Security Administration to disrupt the passenger air travel system, something DHS evidently recognizes to be a losing proposition.

Montana wins.

More reporting at the Threat Level blog.

Seth Stodder’s Weak Defense of ATS-P

Seth M.M. Stodder with the Center for Strategic and International Studies, a former director of policy and planning for U.S. Customs and Border Protection, has a piece in the Federalist Society’s Engage magazine defending the Automated Targeting System — specifically ATS-P, which is a system for screening border crossers.

The piece starts with the gripping example of a man named Ra’ed Mansour al-Banna who was turned away from the U.S. border and later blew himself up in Iraq. DHS Assistant Secretary for Policy Stewart Baker (who undoubtedly now lives in fear of my relentless blogging!) told the story at a CSIS event in December 2006:

[In 2003,] he showed up at O’Hare International Airport in Chicago with a valid passport from Jordan, a valid visa to come to the United States to conduct business and he asked to be admitted. There’s no bar to his being admitted other than the fact that he had been selected for a second look by our Automated Targeting System. He was flagged as somebody who just ought to be looked at more closely.

And so one of the CBP officers did exactly that: interviewed him, asked him a bunch of questions about what he intended to do in the United States, and concluded, at the end of the day, he just didn’t like the answers. He wasn’t confident that this guy was going to live up to the obligations that we imposed under the visa and he said, I’m sorry, you’ve got a valid visa, you’ve got a valid passport, you’re not going to come into the United States, and he sent him back to Jordan. Eighteen months later, of course, he was in Hillah, Iraq driving the vehicle-borne IED.

Baker is a smart man and he chooses his words carefully. If al-Banna had been identified by ATS-P as a likely terrorist, Baker would have said so. But he didn’t. He talked about visa obligations.

Maybe the system identified him as a potential visa over-stayer — he had lived in California for two years — and when al-Banna couldn’t convince his interviewer otherwise, CBP excluded him. Maybe, as some news reports have it, CBP sent al-Banna back to Jordan because he falsified details on his visa application (after which he “became withdrawn, holing up in a makeshift studio apartment, sleeping late, and displaying a new interest in religion”). Others say that “Homeland Security officials had no reason to suspect that Albanna had become a terrorist.” Until the full story has been examined, this is anecdotal luck at best, not proof of a successful system.

In his paper, Stoddard claims to take on criticisms I have leveled at the program — and some I haven’t. Here’s the relevant part of Stoddard’s article:

Some have disagreed with the 9/11 Commission’s assessment of ATS-P’s effectiveness in assisting CBP, and have asserted that ATS-P is simply ineffective. Jeff Jonas and Jim Harper of the Cato Institute have asserted that, in general, “[t]hough data mining has many valuable uses, it is not well suited to the terrorist discovery problem,” because of the purported absence of “terrorism patterns” which [sic] to draw strategic intelligence. During a panel at the Center for Strategic and International Studies (CSIS), Jim Harper applied this analysis to ATS-P as well. But Jonas and Harper do not appear to understand all of ATS-P’s functions—including its link analysis function, operationalizing specific tactical intelligence by drawing linkages between known facts (e.g., a credit card number used by a known terrorist) and travelers seeking admission to the United States (e.g., if the PNR on a traveler indicates that traveler used that same credit card number to purchase his ticket). To the extent this conclusion also is pointed at ATS-P, Jonas and Harper may be uninformed. Indeed, the ultimate testimony to ATS-P’s effectiveness is not al-Banna, but its continued use by CBP and CBP’s ongoing efforts to improve it.

(link added)

Now let’s review what I said at the CSIS event:

The story of the suicide bomber in Iraq was gripping and thrilling, frankly, but I think it was an invitation to us to indulge in what’s known as the post hoc ergo propter hoc fallacy. That’s Latin for “because it followed in time, there must be correlation.” Because ATS existed, he was stopped at the border. It may be true, but [it’s] not necessarily true. Had he gotten into the country, he would have done in this country what he was able to do in Iraq. Maybe true, but probably not true. The infrastructure isn’t here and the support isn’t here to be able to pull off that kind of thing. So it’s, again, a gripping story, but not necessarily a good basis for policymaking.

In addressing what ATS is, it’s a check against the no-fly list. I think most people are aware of that. Link analysis, it makes pretty good sense in many cases. [Baker d]idn’t address the question of the risk score, which is the most concerning, I think, to most people, for a variety of reasons. And exactly how that risk score is created isn’t known, and I imagine that Secretary Baker and others would refuse to tell us how that risk score is created because that would create a security breach in the system. But it’s precisely there that the capacity for rank unfairness in the system is created. And it’s a system that doesn’t just apply, as I understand it, to foreigners coming to the country, but to everyone traversing the border, and that’s – I’m sorry to be so parochial, but I’m most interested in the rights of American citizens who are traveling internationally and returning to the country.

(emphases added)

Now, it’s true that I am less informed about ATS-P than Stodder and Baker. Homeland Security folks hold inside information and they try to use secrecy as a trump card. My oral recitation of ATS-P’s details lacks polish, but I know enough to have specifically approved of link analysis while disapproving predictive data mining. In our paper, Jeff Jonas and I excluded link analysis (referred to as “subject-based analysis”) from our criticisms. Stodder refutes an objection I did not make, suggesting that I’m uninformed.

And he does not address the objection I did make, based on the paper Jeff Jonas and I published: predictive data mining won’t catch terrorists.

His evidence that ATS-P works?: “[I]ts continued use by CBP and CBP’s ongoing efforts to improve it.” It takes several logical leaps and generous inferences to make that good evidence.

The only other successes with finding immigrating terrorists he cites beyond al-Banna (if indeed he was a terrorist at the time) are “Millennium Bomber” Ahmed Ressam and Mohammed al-Qahtani. Those two, though, were picked up by alert CBP officers unaided by ATS-P (so far as we know — and one expects we would know).

Two terrorists that perhaps should have been picked up by ATS-P but weren’t are Nawaf al-Hazmi and Khalid al-Midhar, 9-11 attackers who entered the country and lived openly in the United States even though they were known to be linked to the bombing of the U.S.S. Cole. Before U.S. authorities failed to look for them, ATS-P failed to pick them out for additional questioning at the border. That’s typical of data mining for terrorism: high false positives and high false negatives.

NYT Gets It Wrong, Story at 11

The New York Times Magazine’s most recent issue (March 16, 2008) simultaneously features a shariah apologetic and an accusation that the Supreme Court is in the pocket of big business

In the former, Harvard law professor Noah Feldman prescribes the election of Islamist parties and entrenchment of Allah’s law (as interpreted by a council of scholars) as the cure to the Muslim world’s ailments. In the latter, GW law professor Jeffrey Rosen contends that liberal and conservative elites — like NYT readers? — have colluded to do in the common man. There is so much wrong with these analyses, one hardly knows where to begin.  (For a point-by-point takedown of the Rosen piece, see Eric Posner’s post on Slate’s new legal blog.)

Feldman, who “had a small role advising the Iraqi [constitutional] drafters,” sees shariah as both a proto-aspirational document somewhat akin to our Declaration of Independence and a source of law more legitimate than duly constituted (secular) legal codes. But both of these things cannot be: Either shariah is the law of God as strictly interpreted (on what authority?) by man or it is a non-binding sentiment, much like American politicians’ references to America’s Judeo-Christian values. Advocates of shariah would be the first to admit that if you’re going in for God’s law, you can’t summarily ignore its anachronisms.  Let people live under shariah if they so desire, but be wary of its negative externalities.

Rosen, meanwhile, sees a conspiracy involving anyone who has ever studied the “economic analysis of law” (and uses phrases like “negative externalities”) while holding up as a paragon of judicial virtue a jurist who said he was “ready to bend the law … against the corporations.” At the same time, Rosen posits that the Chamber of Commerce destroyed Ralph Nader’s noble crusade to help the consumer and hoodwinked the Court — even, at times, that model of “liberal judicial restraint,” Justice Ruth Bader Ginsburg — by hiring a bunch of rich lawyers (presumably not the same rich lawyers who reap all the punitive damages from the state tort claims that Rosen lauds). These sentiments distort legal history and misunderstand the proper role of the judiciary; to paraphrase a salient point then-nominee John Roberts made at his confirmation hearings, the little guy should win when the law is on his side, and the big corporation should win when the law is on its side.

In short, those of us who believe in the rule of law rather than men and in a Constitution that circumscribes the powers of government are heartened by both the outcry against Rowan Williams and the Supreme Court’s near-unanimous view that corporations are people too (indeed, they are, but legal persons composed of human directors, officers, employees, and investors). But then perhaps we are all in on the conspiracy.

Let’s Talk Passport Privacy!

With the revelation that the passport files of all three major presidential candidates were wrongly accessed, Sen. John McCain’s office issued the following statement:

The U.S. government has a responsibility to respect the privacy of all Americans. It appears that privacy was breached and I expect a thorough review and a change in procedures as necessary to ensure the privacy of all passport files.

Yes, the government does have a responsibility to respect our privacy, retaining as confidential the data it collects as a condition of our exercising the right to travel.

And all the presidential candidates might want to take a look at a recent State Department notice in the Federal Register. It would open passport files to:

  • the Department of Homeland Security,
  • the Department of Justice, including the FBI, the BATFE, the U.S. Marshals Service, and other components,
  • the Internal Revenue Service,
  • INTERPOL and other international organizations,
  • the National Counterterrorism Center,
  • the Social Security Administration,
  • public and private employers,
  • Members of Congress,
  • contractors, and
  • foreign governments.

So, yes, let’s talk about passport privacy!