Archives: August, 2010

More on Phony Defense Spending Cuts

On Saturday the Washington Post published a letter I wrote chastising their editorialists for inventing defense budget cuts:

The Aug. 12 editorial “Mr. Gates’s rough cuts” and David S. Broder’s Aug. 12 column, “Gates’s budget warning shot,” applauded the defense secretary for his plans to cut spending even though the plans will do no such thing. As Mr. Broder wrote, Mr. Gates proposed closing the U.S. Joint Forces Command and shedding contractors and generals in the Pentagon’s employ. But neither piece noted that these proposals are part of a plan to shift some Pentagon spending from administration to force structure – not to cut total spending.

The impetus for the cost-shifting plan is the White House’s reluctance to increase Pentagon spending by more than 1 percent above inflation for the next few years. Rapid growth in procurement and personnel spending makes that increase insufficient to cover the military’s programmatic costs.

Bloated administrative overhead is a good place to find funds for that end. But taxpayers gain nothing.

Mr. Gates has requested substantial increases in defense spending every year that he has been secretary. He opposes spending cuts, even after the wars end, even though the United States now spends more on defense than at any time during the Cold War, adjusting for inflation. He openly hopes that these proposals to heighten administrative efficiency deflect pressure to cut spending. By pretending that these changes do so, The Post helps shield Pentagon spending from scrutiny.

The point is straightforward: Stop confusing reforms explicitly intended to prevent spending cuts with real spending cuts.

The Post, however, repeated the error that my letter complained about in the title they gave it both online (“Will the defense cuts do what Robert Gates says they will?”) and in the actual newspaper (“Scrutinizing Mr. Gates’s Defense Budget Cuts”). The editor has yet to respond to my email noting the irony.

I wrote more on the media’s failure to portray these reforms accurately for the National Interest’s new Skeptics blog. (Chris Preble and I have already discussed this topic here.)

The Post’s editorial page typifies the fawning coverage that the Washington commentariat gives Gates.  He has a knack for getting even otherwise discerning analysts to portray him as a pragmatist/ realist/ conservative even as he asks Congress to increase a defense budget that is already larger than at any point during the Cold War and advocates endless nation-building warfare in Afghanistan. The keys to his success, I say, are (a) appearing moderate in contrast to the rest of the foreign policy elites in his party, which is easy, (b) skillful management that distracts people from his embrace of policies that are not realistic, pragmatic, or conservative, and (c) eloquently saying things that contradict his actions.

Fareed Zakaria’s latest column, for example, asserts that the only two conservatives in Washington are Gates and the portrait of Eisenhower hanging in his office. Like many, Zakaria is taken with Gates’ recent speech at the Eisenhower library, which praised Ike for restraining defense spending and avoiding intervention in Vietnam. It was such a good speech that you can almost forgive those that fail to note the irony of Gates’ sounding like someone proposing defense cuts and exiting Afghanistan.

Why I Love, and Hate, American Higher Education

Today, the annual U.S. News and World Report “Best Colleges” guide came out, and as always it is a slightly celebratory occasion for me. Though I agree with many people who critique the guide for its debatable methodology and implicit assumption that all schools can be cleanly ranked from best to worst, the simple fact that the issue exists makes me happy. When you spend the bulk of your time analyzing moribund, monopolistic, K-12 schooling, it’s just refreshing to dive into an education ocean where guides are abundant because consumers have plentiful, powerful choice. It also doesn’t hurt that, in stark contrast to elementary and secondary schooling, the United States seems to be the envy of the world in higher ed.

Unfortunately, my higher ed enthusiasm always ebbs fast, and aggravation quickly slips in, because there is copious, taxpayer-funded rot under America’s abundant ivy. The reality is, while being much more dynamic and consumer-driven than socialized K-12 schooling isn’t a bad thing, it’s hardly a major accomplishment. And as a new report from the Goldwater Institute reminds me, while college students are empowered to choose, they are empowered with massive taxpayer subsidies, both in the form of aid directly to students and government funding directly to schools. The result is major, painful distortions of the market, including the ever-growing administrative bloat detailed in Goldwater’s new paper:

Between 1993 and 2007, the number of full-time administrators per 100 students at America’s leading universities grew by 39 percent, while the number of employees engaged in teaching, research or service only grew by 18 percent. Inflation-adjusted spending on administration per student increased by 61 percent during the same period, while instructional spending per student rose 39 percent.

So today, celebrate that we have a major sector of education that is at least partially market based. And then, like me, get aggravated by all the government funding and control that renders so much of it a waste.

Ideological Warning Labels

A story this morning on NPR’s “Morning Edition” reminded me of my continuing complaint that the mainstream (liberal) media regularly put an ideological label on conservative and libertarian organizations and interviewees, but not on liberal and leftist groups.  In a report about states accepting stimulus funds, reporter Kathy Lohr quoted “Jon Shure of the Washington D.C.-based Center on Budget and Policy Priorities,” “Maurice Emsellem with the National Employment Law Project,” and “Tad DeHaven, a budget analyst with the fiscally conservative Cato Institute in Washington, D.C.” (Thanks! And I’d say the label is correct, even if I might prefer libertarian.)

Those are all legitimate sources for the story. But only one of them gets an ideological label – even though the other two groups are clearly on the left. They’re to the left of the Obama administration; indeed, they’re probably part of what the White House press secretary calls the “professional left.” So why not alert listeners that you might be getting a “liberal” or “leftist” perspective from those two sources, just as you warned them that the Cato Institute was speaking from a fiscally conservative perspective?

Back on March 23, I noted but did not blog about references on “Morning Edition” to “the libertarian Cato Institute,” the “conservative American Enterprise Institute,” and “the Brookings Institution.” No label needed for Brookings, of course. Just folks there. (A bit of Googling reveals that the Brookings reference came from Marketplace Radio, heard on WAMU as an insert into “Morning Edition.” But NPR never labels it either.)

NPR’s ombudsman noted in July that NPR uses the term “ultra-conservative” a lot more than “ultra-liberal.”

It’s all too typical of the mainstream-liberal media: They put ideological warning labels on libertarians and conservatives, lest readers and listeners be unaware of the potential for bias, but very rarely label liberals and leftists. Note the absence of labels on NPR in frequent references to the Center on Budget and Policy Priorities.

Journalists should be more even-handed: label all your sources ideologically, or none of them. It’s stacking the deck to label those on the right but not those on the left.

Topics:

Federal vs. Private Pay: A Response to OPM Director John Berry

The release of updated industry data from the Bureau of Economic Analysis, which show that the average federal employee continues to earn significantly more in compensation than the average private sector employee, has Office of Personnel Management Director John Berry on the defensive.

In light of Berry’s assertion that Cato and other critics of federal pay are not “advancing a factually-oriented debate,” I’d like to make a few comments:  

First, the Washington Post reports that top OPM officials point to Bureau of Labor Statistics data that “[f]ederal employees made on average 22 percent less than workers in similar private-sector jobs.” To Berry’s credit, he dismissed that figure (along with comparisons made using BEA data) as being “faulty.”

Even if the BLS data comparison were true, it would only reflect wages. Federal benefits are generally more generous than those found in the private sector. We use the BEA data because it provides the most comprehensive accounting for the value of employee benefits.

Second, defenders like Berry point to higher education levels in the federal workforce relative to the private sector as a reason for the higher average compensation in the former. Because the aggregate private data includes industries with lower-skilled employees, like restaurants, defenders say comparing averages isn’t fair. 

However, breaking the BEA data out across 72 industries shows that the federal civilian workforce as an industry ranks sixth in terms of average compensation. As one would expect, average compensation in the restaurant and bar industry is dead last, and financial services are at the very top. (See this blog for the breakdown.)  

Third, in addition to ignoring benefits, defenders also ignore other perks of federal employment, including extreme job security. According to BLS data, in 2009 a private sector employee was more than three times more likely to be laid off or fired than a federal employee. As my colleague Chris Edwards points out in an essay on federal pay, federal workers also “receive generous holiday and vacation schedules, flexible work hours, training options, incentive awards, generous disability benefits, and union protections.”

Fourth, BLS data shows that a federal employee is more than 8 times less likely to quit than a private sector employee. We’ve argued that this indicates that federal employees recognize that the generous combination of wages, benefits and job security is hard to match in the private sector, so they stay put.

Defenders of federal pay haven’t adequately addressed this point. Attributing this discrepancy to a selfless motivation on the part of federal employees to serve the nation would be nonsense. A question that defenders need to answer is: if comparable private sector pay is so much better, why don’t more federal employees leave for the private sector? If they’re as high-skilled and educated as defenders claim, why settle for less than they’re worth?

The question of worth leads to the fifth, and in my opinion, the most important point.

I think the most valid criticism defenders of federal pay offer up is that we’re comparing “apples and oranges.” However, although they have a point, it’s not for the reasons they suggest.

In the private sector, an employee’s compensation is a reflection of his or her value in the market. For instance, one may not like that LeBron James makes millions of dollars playing basketball, but that’s what the market for professional basketball players says his production is worth. It’s no different for a considerably lower-paid employee in the restaurant industry.

What’s a federal employee worth? How does one measure a government employee’s production? Government isn’t subject to market disciplines. It can’t go out of business. It has no competitor. It doesn’t need to earn a profit or even break even. It doesn’t receive its revenue from voluntary transactions – its revenues are obtained via taxation, which is paid by individuals under compulsion and force.

Therefore, federal employee compensation is a function of the political process. Government employees are plugged into a pay scale, and can move up the scale by simply sticking around. President Obama proposed in his fiscal year 2011 budget that federal civilian employees receive an arbitrary across-the-board 1.4 percent pay increase. What does that figure have to do with a federal employee’s worth?

Federal and private employees are apples and oranges because the former is dependent on the latter for its existence. In the natural world, this relationship is call parasitism. This is not a pejorative statement. Every dollar earned by a federal employee is one less dollar that a private sector employee earns. One can argue over a federal employee’s value to society, but one cannot argue that the perceived value doesn’t come at the expense of the private sector.

According to the BEA, total federal wages and benefits amounted to $240 billion in 2009. That’s $240 billion in economic resources extracted from the private sector. Given that the private sector has lost millions of jobs while federal employment continues to expand, defenders of federal pay can’t just dismiss the critics as being “unfair.”

Topics:

Mexican Retaliation for U.S. Truck Ban is Proper

The Mexican government announced yesterday that it will expand the list of U.S. products subject to punitive import duties in retaliation for a brazen, 15-year-long refusal of the United States to honor its NAFTA commitment to allow Mexican long-haul trucks to compete in the U.S. market.  Given continued U.S. intransigence on the issue, Mexico’s decision is understandable, if not laudable.

The dispute is not very complicated.  Under the terms of the deal, Mexican trucks were to have been able to compete in U.S. border states by 1995, and throughout the United States by 2000.  But President Clinton, at the behest of the Teamsters union, suspended implementation of the trucking provision on the grounds that Mexican trucks weren’t safe enough for U.S. highways.

By 1998, the Mexicans had had enough, and brought a formal complaint under the NAFTA dispute settlement system, and in 2001, prevailed with a unanimous panel decision that found the United States in violation of the agreement, and ruled that Mexican trucks meeting U.S. safety standards had to be given access to the U.S. market.

In response to the NAFTA decision, Congress stipulated 22 safety requirements that Mexican trucks had to satisfy in order to gain access to the U.S. market.  But before the U.S. Department of Transportation could grant any permits to Mexican truckers, in 2002, environmental and labor groups filed a lawsuit to block implementation on the grounds that the regulations violated U.S. environmental law.

In 2004, the U.S. Supreme Court unanimously struck down the truck ban, and soon after a government pilot program was developed to allow a limited number of Mexican trucks to serve the U.S. market.  But funding for the pilot program was cut off by a Teamsters-friendly Congress in 2008, which effectively put the U.S. market off limits to Mexican trucks once again—and the United States squarely in violation of its NAFTA obligations, again.

In August 2009, after it became apparent that the administration and Congress preferred the economic cost of the trucking ban to the political cost of crossing the Teamsters, the Mexican government tried to change the equation by imposing $2.4 billion in retaliatory duties on about 90 U.S. products.  A Mexican trucking association also filed a $6-billion lawsuit against the U.S. government.

But with no discernible progress toward resolution over the past year, the Mexican government announced yesterday that it will expand the list of U.S. products subject to punitive, retaliatory duties in an effort to convince Congress and the administration to finally live up to America’s word.

The Mexican government is right to retaliate—and to expand the list of products subject to punitive duties.  Of course, retaliation hurts innocents, like U.S. businesses and workers, and Mexican businesses and consumers, who have nothing to do with the central dispute.  And it increases the amount of red tape and the role of governments in international trade.  But retaliation—when authorized by agreement and properly targeted—can also be an effective tool in promoting trade liberalization, reducing red tape, and diminishing the impositions of government.

It is by changing the political calculus that retaliation can be effective.  Thus far, U.S. politicians have found the economic costs of the Mexican trucking ban and the retaliation to be tolerable (for themselves)—at least relative to the expected political costs from doing the right thing by ending the ban.  By expanding the list to include other products, like oranges, the Mexicans hope to impress upon other U.S. interests, like the citrus industry in a very important swing state, that they have dogs in this fight as well.

Between the rising costs on the economic side of the equation and the diminishing political benefits on the other, support among politicians for the truck ban should dissipate.

The Obama administration’s failure to connect the dots is surprising.  Its fealty to the Teamsters directly undermines the lofty goals of its National Export Initiative—which seeks to double U.S. exports in five years.  On trade policy, the administration appears yet to fully grasp that the hip bone’s connected to the thigh bone, the thigh bone’s connected to the knee bone, the knee bone’s connected to the ankle bone, etc.  When you restrict imports (in the immediate case, imports of Mexican trucking services), you restrict exports.

The rising economic and political costs of the truck ban suggest that something’s going to have to give soon.  By amplifying the stakes, the Mexicans are right to hasten that day.

Yes, Illegal Immigrants Are Influenced by ID Policies

It is a premise of national identification policy that requiring proof of lawful presence to get an ID, then requiring the use of that ID for many essential functions of life, would make it more difficult to be an illegal immigrant in the United States. The natural result of having a national ID and routine identity checks would be suppression of illegal immigration. The premise is undoubtedly true.

The question is how much influence it would have on illegal immigrants’ decision whether to come to, or remain in, this country. And how much it would cause illegal immigrants to take other steps, such as avoidance of ID checks?

A recent article in the Arizona Republic illustrates that leaving the country isn’t the obvious step for illegal immigrants faced with the lawful presence requirement. “Illegal Immigrants Flocking to 3 States to Obtain Identification” tells the story of how illegal immigrant Carlos Hernandez moved his family to Washington state after the passage of S.B. 1070 in Arizona. The story is illustrated with a picture of Hernandez watching his 2-year-old daughter play on a slide near their apartment in Burien, Washington.

“Hernandez said he knows other illegal immigrants who considered New Mexico because of the ease of getting a license. But he and others thought Washington would be safer.”

One inference from the story is that states with “weak” licensing requirements should tighten things up. But would Hernandez’ young daughter have better prospects if he moved the family to Puebla, Mexico, or would she be better off living in the United States with a father who acquired a false U.S. identification? In many cases, a family man like Hernandez will take the risk of acquiring and using false ID to provide his daughter the stable environment and opportunities the United States has to offer.

A national ID system, and background checks instituted for access to work, housing, and financial services, would suppress illegal immigration some, but it would also drive greater identity fraud and corruption.

The next question is how much inconvenience and tracking the natural-born and naturalized citizens of the country should suffer in order to achieve the marginal gains of presssuring illegal immigrants this way.

On balance, the gains are not worth the costs—especially when the “gains” include making life worse for Carlos Hernandez’ young daughter.

In Afghanistan, What’s News?

In a recent interview with the New York Times, top U.S. and NATO commander in Afghanistan, General David Petraeus, argued “against any precipitous withdrawal of forces by July 2011,” and added he did not take over merely to “preside over a ‘graceful exit.’”

That an active-duty army general is committed to a pending military engagement is nothing new. Nevertheless, I have some thoughts about this interview, and the rest of the general’s weekend “media blitz,” that I think are worth sharing.

First off, that Petraeus is against a “precipitous withdrawal” reminds me of the many straw man arguments bandied about during the most explosive days in Iraq. However, back then, even the staunchest (and more serious) anti-Iraq War critics did not endorse high-tailing it out of Mesopotamia, logistics be damned. Not only was a phased exit strategy deemed strategically necessary, but also the only option that was considered politically feasible. Today, in the case of Afghanistan, to suppress al Qaeda in a cost-effective manner, America and its allies could easily scale-down its campaign to a much narrower counterterrorism mission. Of course, that is unlikely to happen anytime soon, but Petraeus’s gratuitous “precipitous withdrawal” comment implies that critics of the present policy (a massive, long-term nation-building campaign) have no coherent or well-thought out alternative. That is certainly not the case.

Second, as my colleagues and I ask continuously, the issue is not exclusively about where we intend to fight, but rather how we intend to fight. More importantly, the question we need to ask in the case of Afghanistan is not “is Afghanistan winnable?” but rather “what do we hope to accomplish?” To endorse an open-ended nation-building mission blithely ignores the uncomfortable truth that “American taxpayers have inadvertently created a network of warlords across Afghanistan” who are fueling the very corruption and warlordism that we are pressing President Karzai to curtail. It neglects the perverse reality that the United States is “essentially waging a proxy war” against its ostensible ally, Pakistan. Perhaps even worse, it dismisses the fact that we are incinerating hundreds of billions of dollars—during a time of economic peril, no less—on a corrupt and illegitimate central government in Kabul that has every incentive to perpetuate the conflict.

The July 2011 drawdown should continue as the Obama Administration pledged. Government planners in Washington should begin to husband our nation’s ever-diminishing financial resources rather squander them, and learn how to manage our own affairs, not others’.