Archives: 03/2009

‘We’re Failing. Let’s Keep Trying’

Secretary of State Hillary Clinton’s diagnosis of the war on drugs:

“Neither interdiction [of drugs] nor reducing demand have been successful.”

“We have been pursuing these strategies for 30 years.”

“Our insatiable demand for illegal drugs fuels the drug trade.”

Secretary of State Hillary Clinton’s prescription for the war on drugs:

“We’ve got to take a hard look at what we can do to stop the bad guys”.

My prognosis:

“I think [trying harder to stop the bad guys] is going to fail.”

Regulations We’ve Got. Geithner’s Seeking Something Else

Another day, another mad power grab by Treasury Secretary Tim Geithner.

Only in government does failure bring more responsibility.

Federal agencies have long had extensive regulatory powers over commercial banks, but allowed the banking crisis to develop despite those powers.

It was a failure of will, not an absence of authority.

If the authority is extended over more institutions, there is no reason to believe we will have a different outcome.

This power grab is designed to divert attention away from the manifest failure of, first, the Bush Administration, and now the Obama Administration to devise a credible plan to deal with the crisis.

Sen. Hatch Does Not Owe His Friend My Freedom

Here’s one idea that needs to be put down right now: that we should enact health care reform as a tribute to Sen. Edward M. Kennedy (D-MA), who has terminal brain cancer.

Sen. Orrin Hatch (R-UT) was recently quoted:

I would like to do [health care reform] as a legacy issue for [Kennedy], if I can – this would mean a lot to him.

I mean no disrespect to Sen. Kennedy.  Aside from those who have actually given their own lives for this country, few have given as much as he has.  I wish him peace, and a miraculous recovery.

My problem is with the choice of tribute. The health care reforms that Congress is cobbling together would dramatically reduce each American’s freedom to control her income, run a business, and make her own health care decisions.

The United States of America is a republic.  We do not make tributes of our citizens or their rights to the aristocracy.  Sen. Hatch does not owe his friend my freedom.

No No-Fly Zones over Darfur

Should the United States lead a Western coalition to enforce a no-fly zone over Darfur, Sudan?

This idea, which has been kicking around since at least 2006, was articulated recently in the Washington Post by former Air Force Chief of Staff and Obama advisor Tony McPeak, writing with Kurt Bassuener. Back when they were campaigning, President Obama, Vice President Joe Biden and Secretary of State Hillary Clinton all backed it. So it stands a good chance of becoming US policy.

The goal is to protect Darfurians from their nominal government without a costly US effort. But the opposite seems a more likely outcome. The no-fly zone may increase the violence in Darfur. And by committing the US to Darfur’s protection and failing, it may suck us deeper into Sudan’s civil war.

Like most advocates of U.S. intervention in Sudan, McPeak and Bassuener avoid saying that what is occurring in Sudan is a war with sides rather than an irrational slaughter.  Attacks on civilians in Darfur, however reprehensible, are a tactic used by a weak, brutal central government to maintain power.

Sudan has some helicopters and Russian cargo aircraft converted into bombers that they use to support a counterinsurgency campaign executed mainly by its army and allied militias, some of which used to be rebels. The militias, in particular the horse-riding Janjaweed, kill and displace civilians because Darfur’s insurgent groups rely on them for things rebels need: intelligence, supply, and recruits.  According to the Christian Science Monitor, about 400 civilians died as result of air strikes in 2007 and 2008, a fraction of the total killed by ground forces.

Take away the air strikes, McPeak and Bassuener say, and you get leverage over Sudan’s government. The leverage can be used to compel Sudan to accept a UN peacekeeping force to augment the largely useless African Union force there now.

Leaving aside the question of logistics (patrolling Darfur would be very costly given its the massive size), this plan simply doesn’t bear much logical scrutiny.

It is an application of strategic airpower theory, which tends to make magical assumptions about the political impact of aircraft.  That theory tends to depict the enemy as an extremely cost sensitive actor ripped from the pages of economic textbooks rather than what we find in history:  governments motivated by nationalistic norms to pursue their political aims at extraordinary cost.  Sudan is not going to give up trying to unify its country because we won’t let helicopters and aircraft fly over it.

Because Darfur’s rebels could arm and police their territory behind the peacekeeper lines, allowing a real peacekeeping force into Sudan would be de facto recognition of Darfur’s secession. What leader of Sudan would accept that?

Beyond that, a no-fly zone is likely to make life worse for Darfur’s civilians. As Alan Kuperman notes, a no-fly zone, rather than forcing Khartoum to the table, is likely to drive it to increase ground attacks. We might see accelerated ethnic cleaning and slaughter occurring beneath NATO aircraft powerless to stop it, a repetition of past experience. Likewise, a no-fly zone may further discourage Darfurian rebels from coming to terms with the government, pouring further accelerant on the war. It would also keep Sudan from allowing aid workers to travel to Darfur.

A no-fly zone will also symbolize a US commitment to the dissolution of Sudan and the protection of Darfurian civilians. By accomplishing neither, it would likely produce calls for a more robust intervention – either US boots on the ground or air strikes against people on the ground. Acceding to these calls would make the United States a combatant in Sudan’s civil war. Those who push military intervention in Sudan should recognize that is the logical result of their position.

That position is not unreasonable. Full fledged intervention might protect civilians. And who wouldn’t be sympathetic to a revolt against an awful central government like Sudan’s?

But the United States needs to get out of the other people’s civil war business, not double down.  We are participating in two civil conflicts abroad now. That is too many already. And Darfur is not the world’s only humanitarian nightmare. Peacekeeping the Congo might have more humanitarian payoff.  We can’t fix everything.

That does not mean doing nothing. We should push Sudan to allow humanitarian workers full access to Darfur, condemn atrocities, and push the rebel factions to sign the peace deal outlined in 2006 or something like it.

Here’s A “Toxic Asset” for You…

The Obama administration seems obsessed with making American taxpayers eat toxic assets. And I’m not talking about bad paper, derivatives, or any other inscrutable financial stinkers. I’m talking about good ol’ American public schooling.

Truth be told, after listening to the president’s presser last night, even I started to think that the key to American economic success is “investing” in education. After all, once you’ve heard something for about the twentieth time, you start to believe it. I mean, that’s how propaganda works, right? But somehow my mind refused to give in, and it forced me to remember:

We’ve been “investing” in government schools for decades, and have been reaping nothing but AIG-like results!

I actually laid out the startlingly awful returns we’ve gotten for our education dollars in several blog entries last month, but thought I’d revisit the basic, revolting facts one more time. I want it to be absolutely clear that lavishing more money on education isn’t change, nor, given what we get for the money, could it possibly be the key to long-term economic success.

So what have we invested? Let’s start with total outlays for elementary through post-secondary education, taken from table 26 of the latest Digest of Education Statistics. In 1969 we spent a total of $347 billion in inflation-adjusted dollars. In 2007, we spent $981 billion, a 183 percent increase.

How about public k-12 spending on a per-pupil basis? Again using Digest data (table 181) – which understates total expenditures by excluding such things as “state administration expenditures” – we can see that we’ve been spending increasingly sizable amounts. After adjusting for inflation, in 1969 we spent $5,161 per child. By 2005, that number had more than doubled, hitting $11,643. And what has that “investment” yielded?

Other than massive bloat, bupkus! Looking at National Assessment of Educational Progress long-term trend scores for 17-year-olds – essentially, our schools’ final products – we see almost complete academic stagnation. In mathematics, the average scale score was 304 (out of 500) in 1973, and only a measly 3 points higher in 2004! That’s a one percent increase in math outcomes for a roughly 100 percent increase in funding! And that actually beats the “return” in reading, where 17-year-olds were at 285 in 1971 and, yup, 285 in 2004!

How about higher education? Here we don’t have very good outcome measures and it is difficult to break down overall per-pupil expenditures. What we do have, however, suggests another bad investment.

To get a feel for expenditures, we can examine the State Higher Education Executive Officers report (figure A) showing that total revenue collected per full-time-equivalent student at public institutions, adjusted for inflation, grew from $8,463 in 1983 to $11,037 in 2008, a 30 percent increase. We can also look at aid per student, most of which came through government. According to data from the College Board (table 3), in 1983 the average full-time-equivalent student received $3,769 in inflation-adjusted aid. In 2007 she got $10,392, a 176 percent increase.

What are the returns on these investments? Again, lots of bloat, but from what we can tell, relatively little of educational value. Graduation rates, for one thing, seem to be falling.

According to the Population Studies Center, within eight years of graduating high school, 51.1 percent of students in the high school class of 1972 had finished college degrees. In contrast, only 45.3 percent of 1992’s high school class had done the same. And grads seem to be getting less well educated; according to the National Assessment of Adult Literacy, between 1992 and 2003 literacy levels dropped for both Americans whose education maxed out at a bachelor’s degree and those with graduate degrees. Whether it was graduates’ ability to read prose, documents, or handle math, scores went down while costs went up.

So all told, what do we have to show for our education investment? Pretty much just empty bank accounts. And yet, some politicians just can’t seem to get enough of those toxic assets!

Sign the Petition against Protectionism

You only have to glance at the headlines to know that protectionist pressures are rising around the world – from the “Buy American” provision in the stimulus bill to the unnecessary trade war with Mexico to the World Bank’s report last week that 17 members of the G-20 have recently implemented restrictive trade measures.

And you only have to read a history of the 1930s to know that a worldwide turn to protectionism deepened and lengthened the global depression.

So some people are starting an international campaign to protect and expand free trade. The Atlas Economic Research Foundation, the International Policy Network, and the Atlas Global Initiative for Free Trade, Peace, and Prosperity are sponsoring a global Freedom to Trade Petition to be released just before the upcoming G-20 meeting in London. To help head off another Smoot-Hawley-type spiral, please sign the petition. Academic economists, business and labor leaders, authors, and all concerned citizens are encouraged to sign.

And click on ShareThis below to tell your friends!

Obama’s Tax Commission

The Obama administration has announced the formation of a task force to recommend major changes to the federal tax code. According to Congressional Quarterly today:

[Obama budget director Peter] Orszag said the task force will focus on three areas: tax simplification, reducing “corporate welfare” and shrinking the estimated $290 billion a year “tax gap” between taxes owed and taxes paid.

Isn’t Orzag missing something here? For goodness sakes, what about about economic growth? The economy is in the crapper, America has huge competitive challenges ahead with the rise of China, and the ratio of unproductive retirees to productive workers is soaring – it’s obvious that we need to reduce government hurdles to economic growth every way we can, and the high-rate federal tax code is one giant hurdle that policymakers need to start cutting. U.S. companies are not investing in China and elsewhere because our business tax code is too complex, but because our business tax rates are far higher than just about anywhere else.