Archives: June, 2008

Property Rights and Free Speech

Dave Roland at the Show-Me Institute discusses an important case on free speech and property rights:

Tomorrow morning, the Eighth Circuit Court of Appeals will hear arguments in a rather unusual case. Jim Roos graduated from Concordia Seminary in 1970 and eventually founded Sanctuary in the Ordinary, a unique sort of ministry that provides ultra-low-income housing for those who would otherwise have nowhere to go, and tries to teach tenants some of the basics about living as part of a neighborhood. Roos renovated a number of properties in the McRee Town neighborhood, which later came to be targeted for redevelopment by the city of St. Louis. When it became clear that the city intended to use eminent domain to tear down the buildings that Roos’ ministry was trying to use for good, he painted a huge sign on one of them calling for an end to eminent domain abuse.

As it turns out, the city — and especially the Land Clearance Redevelopment Authority (LCRA) — didn’t much care for the criticism. The government cited Roos for illegally displaying a sign without a permit. Even though his right to free speech means that the city had no proper authority to require Roos to seek their permission to express his opinion about eminent domain, Roos complied with the city’s directive and applied for a permit. The LCRA persuaded the city’s Building and Inspection (B&I) Division to deny the permit, because Roos had not first gotten the LCRA’s permission to file the application. When Roos then sought the LCRA’s permission to pursue a sign permit, the LCRA denied his request. With the help of the Institute for Justice, Roos sued to enforce his constitutional rights to free speech.

I wrote about Roos’s ordeals with eminent domain abuse last year in my study for the Show-Me Institute about eminent domain abuse in Missouri.

Spending Money to Restrain Economic Growth

Sayeth the GAO:

Although DHS has not prepared official cost figures, USCIS officials estimated that a mandatory E-Verify program could cost a total of about $765 million for fiscal years 2009 through 2012 if only newly hired employees are queried through the program and about $838 million over the same 4-year period if both newly hired and current employees are queried. USCIS has estimated that it would need additional staff for a mandatory E-Verify program, but was not yet able to provide estimates for its staffing needs. SSA has estimated that implementation of a mandatory E-Verify program would cost a total of about $281 million and require hiring 700 new employees for a total of 2,325 additional workyears for fiscal years 2009 through 2013.

Defeating Terrorism Without Terrorizing Ourselves

I recently finished reading Michael Sheehan’s new book Crush the Cell: How to Defeat Terrorism Without Terrorizing Ourselves. It jibes with much of what I think about terrorism and terrorism counterstrategy, but there’s more than that to recommend it.

Sheehan has extensive, on-the-ground experience in counterterrorism operations and policy in the federal government, in the military, at the UN, and in New York City, where he did the work that he is obviously the most proud of. The book overflows with recollections and opinions from someone who has been working on fighting terrorism for many years. This focus almost guarantees differences of opinion with someone like me, whose focus is limited government and protection of liberty, but the differences are profitable to explore.

For example, Ben Friedman and I both credited the recent Rolling Stone article arguing that domestic terrorism threats are overblown. Much derision has been poured on domestic terror threats like the “Lackawanna Six” and their obvious incompetence. But Sheehan has a different take:

The case of the Lackawanna Six is an interesting one. To some, these were just some suburban boys who were wanna-be jihadists—certainly not terrorists. But let’s take a closer look. Six young men who grew up in Lackawanna, New York, a small town outside of Buffalo, were inspired to form an al Qaeda cell by a man named Kamal Derwish in the spring of 2001… . All six went to Afghanistan and attended the al Qaeda camps, where they met bin Laden and were very much aware of his responsibility for the East African bombings and that of the USS Cole.

Derwish, a proven fighter and recruiter, was meanwhile sent on to advanced training. While he was gone, it appears that the others’ enthusiasm waned. They returned to the United States, while Derwish, upon completion of his higher training, went back to Yemen. In Yemen, Derwish found himself in the wrong place at the wrong time… . No one knows what that cell might have become if Derwish had returned to the United States to organize them. But these were not the innocent travelers that they’ve been portrayed by some to be.

A good point, and the foundation of Sheehan’s theme: crush the cell. Relative incompetents like the Lackawanna Six and the “muscle hijackers” of 9/11 can be pretty dangerous when activated by a well-trained leader like Mohammed Atta. An essential part of counterterrorism is to crush the cell before they reach that stage.

How do you do that? Sheehan has lots to say about how not to:

Soon after 9/11, the National Counterterrorism Center (NCTC) was created, and a new building was constructed a few miles down the road from the CIA to house its staff. But that wasn’t enough. Later, Congress created the position of Director of National Intelligence (DNI), whose staff was charged with supervising and integrating all other intelligence-gathering agencies: more bureaucracy to manage the swollen intelligence monolith. It was a classic Washington solution to a problem: create a new agency, hire more bureaucrats, and increasingly outsource the work to contractors.

The cost of these new organizations is absolutely staggering, but I’ve yet to see how they’ve appreciably helped the so-called war on terror.

Instead of all this bureaucracy, Sheehan argues for focused intelligence work, about which he has a lot of stories and information to share. There are gems (and a few lumps of coal) throughout the book.

Insight into the economics of security shines through, for example, when he tells the story of the intense inspection his rental car gets at the entrance to the Marine Annex near the Pentagon, comparing it to the Sheraton across the street:

[S]ince 9/11, the military has had an almost unlimited budget … . The Pentagon cites the targeting of U.S. military facilities as the reason for tight security. But hotels have been attacked by terrorists around the world as well, and at least as often as U.S. military bases. But because the hotel has to pay for its own protection, security there is almost nil.

From the coal department, Sheehan casually endorses a national ID card, saying it would “go a long way in controlling who we allow in our midst.” His is not the only good, insightful book on counterterrorism I’ve read that throws in a pro-national ID sentiment at the back end. I think that, given time to do it, folks who recognize the futility of inspecting every shipping container or patrolling every inch of our land and sea borders would recognize the same dynamics at play in trying to use a national ID system for security against terrorism.

But that difference and differences on signals intelligence and eavesdropping are things to work on and discuss as we join in defeating a key product of the terrorism strategy: self-injurious overreaction. Time and again in his book Sheehan emphasizes the importance of avoiding fear and overreaction while crushing terror cells. This is a notion about which lifelong security people and advocates for limited government can speak in unison.

A Stagflation Sideshow: The Wall Street Journal’s Flawed Theory of Oil Prices

Yesterday’s Wall Street Journal editorial “The Stagflation Show” (June 9) has a graph showing the price of oil generally rising while the fed funds rate was falling (if you don’t look too closely at flat or falling oil prices from November through February).

The conclusion is that if the Fed had not cut interest rates since last September the oil price would not have go up. Perhaps so, but the most obvious reason for any link between Fed easing and oil prices is not mentioned at all. And the stated reason (a “dollar rout and commodity boom”) is at odds with the facts. The timing is way off.

The most obvious connection between oil prices and Fed policy is cyclical.

There have been nine big spikes in oil prices since the 1950s and every one of them was followed by a U.S./world recession within a year.

Every recession, in turn, was followed by a huge drop in the price of crude oil. West Texas crude fell by 44-71% in the wake of the last three recessions.

If the Fed had left the interest rates on bank reserves at 5 ¼% – the U.S. would very likely have led the world into a significant recession long before now. And a U.S./world recession would indeed have pushed the oil price down. But that is not what the Journal editorial page seems to be suggesting. Instead, they blame the Fed for a “dollar rout and commodity boom.”

The big spike in oil prices since early March happened when the dollar was not falling and also when prices of many non-energy commodity prices were falling. There has been no dollar rout and a no generalized commodity boom since February (when oil fell as low as $87 even as food prices soared).

The Fed’s trade-weighted index of the dollar’s value against 26 currencies was 95.77 in March and 95.83 in May. The narrower index of 7 major currencies was 70.32 in March and 70.75 in May.

From March 4 to June 3 The Economist index of 25 commodity prices – excluding oil –fell by 7.8% in dollars (from 271.9 to 250.6) but by only 5.7% in British pounds. The dollar price of wheat fell by 40%, cotton by 26%, and prices have also fallen sharply for livestock, lumber and most industrial metals. This is a “commodity boom”?

It is true that lower short-term interest rates have made it cheaper for producers and “speculators” to hold crude oil off the market (e.g., in tankers or in the ground) if they expect a higher price in the near future. But speculation in the futures market can’t keep prices in the cash (spot) market higher than the market will bear. And the world does not have an unlimited budget to pay more and more for petrochemicals and fuel. As firms cut back or shut down production in energy-intensive industries worldwide (U.S. airlines are just the most obvious example) the demand for oil can drop quickly.

Oil above $130 involves a massive transfer of income away from oil-importing countries, raising their cost of living and cost of production. That greatly increases the likelihood of a significant economic slowdown or contraction in most oil-importing countries, even India and China. And that, in turn, always causes the price of oil to collapse.

What Use are Campaign Economists?

An irony of modern presidential campaigns is that they bring on board top tier economic advisors, but that doesn’t stop them from injecting economic nonsense into candidate speeches.  

Candidate Obama just added some skilled economists, but that didn’t prevent him from making ridiculous claims about recent economic policies in a speech yesterday. Take one Obama statement: “our president sacrificed investments in health care, and education, and energy and infrastructure on the altar of tax breaks for big corporations and wealthy CEOs.” Obama is wrong on every point in this remark.

Here are the facts from the federal budget looking at Bush’s first 7 years in office (FY2001 to FY2008):

  • Department of Health and Human Services spending up 67 percent in 7 years of Bush.
  • Department of Education spending up 92 percent in 7 years of Bush.
  • Department of Energy spending up 42 percent in 7 years of Bush.
  • Federal capital investment outlays up 35 percent for nondefense and 131 percent for defense in 7 years of Bush.
  • Federal corporate tax revenues up a stunning 128 percent in 7 years of Bush.

All these figures are available to the Obama campaign in the Federal Budget—Historical Tables. There is no reason for Obama and his advisors to make up nonsense statements about supposed spending cuts, when there are plenty actual failed economic policies that Bush could be criticized for.

Obama Should Learn from King Canute

Legendary tale of King Canute:

“King Canute (995-1035) ruler of England, Denmark and Norway, was surrounded by sycophants. One day, he ordered his courtiers to take him to the sea shore, where he challenged them, saying, ‘Do you believe that I can halt the sea?’ None disputed the fact, so Canute commanded the sea to cease its upwards march. But soon Canute’s feet were covered in water, showing that even he was unable to hold back the tide.”

Legendary tale of candidate Obama:

“I am absolutely certain that generations from now, we will be able to look back and tell our children that this was the moment when… the rise of the oceans began to slow and our planet began to heal.”

Seasteading and Dynamic Geography

Over at Ars Technica, I have an in-depth discussion of seasteading, an effort by a group of Silicon Valley libertarians to develop technology for living on the open oceans in a cost-effective manner. They argue that government is an industry with excessive barriers to entry, and they aim to change that by creating a turnkey solution for starting your own community.

History is littered with utopian projects, libertarian and otherwise, that fell far short of their lofty goals. At first glance, the Seasteading Institute looks like just another utopian scheme. But there are at least two reasons to think this one might accomplish more than its predecessors. First, recognizing that it would take many decades to develop a self-sufficient ocean metropolis, Friedman and his partners have chosen to focus largely on short-term engineering challenges. They want to build cheap, durable sea platforms that anyone can purchase. Second, they’ve raised half a million dollars from Peter Thiel, the libertarian entrepreneur who co-founded PayPal and is now a major investor in Facebook. Thiel’s backing will allow them to move beyond the extensive background work they’ve already done and begin the expensive task of actually designing and building their first prototype, which they hope to splash down in San Francisco Bay in the next few years.

Will this ultimately lead to the creation of libertarian metropolises in the open ocean? There are certainly lots of reasons to be skeptical. But there are also plenty of examples of technological change undermining existing hierarchies of authority. The invention of the printing press helped to undermine the authority of the Catholic church by democratizing access to knowledge. And in the 1960s, “pirate radio” ships, operating in international waters, helped to undermine many European states’ monopoly on radio broadcasting by beaming the latest pop tunes to eager European listeners. In this month’s Cato unbound, we’re talking about the ways that technological change is challenging traditional copyright law. Swedish copyright activist Rasmus Fleischer kicks things off arguing that advances in Internet connectivity and portable digital storage will make it effectively impossible for the authorities to control the dissemination of copyrighted works. My reaction to his essay will be up tomorrow.

Hence, policy changes are frequently the result of technological progress. Hierarchical institutions often exert control through the exploitation of technological limitations. The Catholic Church exploited the high costs of reproducing the written word; today’s copyright industries are built on the formerly-high costs of reproducing copyrighted works. By the same token, today’s governments owe much of their authority to the high costs of changing jurisdictions. The technology of seasteading may change that by allowing “dynamic geography,” a situation in which any part of society is free to exit and take their homes and businesses with them. It may take many decades for this vision to be realized, if it can be realized at all. But it’s fun to see someone at least giving it a shot.