Archives: October, 2010

A Clever British Campaign against Higher Capital Gains Tax Rates

Here are a handful of the posters being used in the United Kingdom to fight the perversely-destructive proposal to increase tax rates on capital gains. (for an explanation of why the tax should be abolished, see here)

Which one is your favorite? I’m partial to the last one because of my interest in tax competition.

But this isn’t just a popularity contest. With Obama pushing for higher capital gains rate in America, it’s important to find the most persuasive ways of educating people about the damage of class-warfare tax policy.

By the way, “CGT” is capital gains tax, and “Vince” and “Cable” refers to Vince Cable, one of the politicians pushing this punitive class-warfare scheme.

National Research Council Takes Biometrics Down a Notch

Late last month, the National Research Council released a book entitled Biometric Recognition: Challenges and Opportunities that exposes the many difficulties with biometric identification systems. Popular culture has portrayed biometrics as nearly infallible, but it’s just not so, the report emphasizes. Especially at scale, biometrics will encounter a lot of challenges, from engineering problems to social and legal considerations.

“[N]o biometric characteristic, including DNA, is known to be capable of reliably correct individualization over the size of the world’s population,” the report says (page 30). As with analog, in-person identification, biometrics produces a probabilistic identification (or exclusion), but not a certain one. Many biometrics change with time. Due to injury, illness, and other causes, a significant number of people do not have biometric characteristics like fingerprints and irises, requiring special accommodation.

At the scale often imagined for biometric systems, even a small number of false positives or false negatives (referred to in the report as false matches and false nonmatches) will produce considerable difficulties. “[F]alse alarms may consume large amounts of resources in situations where very few impostors exist in the system’s target population.” (page 45)

Consider a system that produces a false negative, excluding someone from access to a building, one time in a thousand. If there aren’t impostors attempting to defeat the biometric system on a regular basis, the managers of the system will quickly come to assume that the system is always mistaken when it produces a “nonmatch” and they will habituate to overruling the biometric system, rendering it impotent.

Context is everything. Biometric systems have to be engineered for particular usages, keeping the interests of the users and operators in mind, then tested and reviewed thoroughly to see if they are serving the purpose for which they’re intended. The report debunks the “magic wand” capability that has been imputed to biometrics: “[S]tating that a system is a biometric system or uses ‘biometrics’ does not provide much information about what the system is for or how difficult it is to successfully implement.” (page 60)

Biometric Recognition: Challenges and Opportunities” is a follow-on to the 2003 National Research Council report, “Who Goes There?: Authentication Through the Lens of Privacy.” That was one of few resources on identification processes and policy when I was researching my book, Identity Crisis: How Identification is Overused and Misunderstood. (Mine is quite a bit more accessible than this new book, so if you’re interested in the field, you might want to start there.)

There is nothing inherently wrong with biometrics. They will have their place, and they will make their way into use. But the dream of a security silver bullet in biometrics is not to be. Identity-based security—using the knowledge of who people are for protection—is valuable and useful in day-to-day life, but it does not scale. National or world ID systems would not secure, but they would carry large costs denominated in both dollars and privacy.

Law Professors Say: Yes on 19

A number of Cato friends – including senior fellow Randy Barnett, former tech policy director Tom W. Bell, David Friedman, Nadine Strossen, and Erik Luna (Lindsay Lohan’s favorite law prof) – have endorsed California’s Proposition 19, which would decriminalize and regulate marijuana. Also among the 65 signers of the petition are some professors with whom we have disagreed, such as Erwin Chemerinsky.

It remains to be seen whether a group of the country’s smartest legal scholars will be any match for the combined weight of the Obama administration, the leading Democratic and Republican candidates for office in California, and almost all the major newspapers in the state. Reason editor Matt Welch, who has been monitoring newspaper editorials, tells me that all of the 21 largest papers that have editorialized on Proposition 19 have opposed it.

That’s about as overwhelming as the editorial opposition to Proposition 13 back in 1978. All major papers except the now-defunct Los Angeles Herald Examiner opposed the granddaddy of tax-cutting initiatives, but it passed with 65 percent of the vote. Perhaps Proposition 19 will be equally successful as a way for voters to thumb their noses as the political establishment.

As Welch says:

I’ll reiterate and update my previous pitch: If Dianne Feinstein, Meg Whitman, Jerry Brown, Barbara Boxer, Dan Lungren, Steve Cooley, Lee Baca, 49 California congresspeople, the California Chamber of Commerce, the Sacramento Bee, the San Francisco Chronicle, and Dean Singleton’s MediaNews empire are against it, the vote-yes commercials write themselves.

The Saturday Wall Street Journal

Roger Pilon mentions two interesting articles on the tea party movement in today’s Wall Street Journal. I have a feeling lots of people don’t read the Saturday Wall Street Journal, even though the Journal has made great efforts to promote it, including promising to deliver it to your home or country estate or private island if you normally get the Journal at your office. As my weekend Washington Posts get thinner and thinner, I can’t help noticing that the weekend Journal is getting bigger. If you didn’t read today’s Journal, you missed – in addition to Haidt and Berkowitz on the tea parties – Judy Shelton’s interview with Robert Mundell, Theodore Dalrymple’s atheist take on the value of religion in the Chilean mine, a brave article by a Chinese activist already under “residential surveillance” about growing agitation for democracy, Matt Ridley on Fibonacci, Larry Miller on the Marx Brothers, Amity Shlaes on American capitalism, and more college football analysis than the Washington Post.

Topics:

Overstating Differences Within the Tea Party

In a long essay in this morning’s Wall Street Journal, “What the Tea Partiers Really Want,” University of Virginia psychology professor Jonathan Haidt argues, as the subtitle puts it, that “the passion behind the populist insurgency is less about liberty than a particularly American idea of karma.” Taking his cue from Dick Armey and Matt Kibbe’s claim in their new book, Give Us Liberty: A Tea Party Manifesto, that tea partiers “just want to be free, … so long as we don’t infringe on the same freedom of others,” Haidt notes that his research shows that while self-described libertarians agree most strongly with that view, liberals are not far behind, in contrast with the social conservatives “who make up the bulk of the tea party,” who are more tepid in their endorsement of that idea.

So why are libertarians and conservatives largely teamed up in the tea party? Haidt doesn’t really answer that question. Rather, his main aim, as noted, is to show that the tea party’s moral passion is not so much about liberty as about “an old and very conservative idea” of karma, which “combines the universal human desire that moral accounts should be balanced with a belief that, somehow or other, they will be balanced.” In other words, “kindness, honesty and hard work will (eventually) bring good fortune; cruelty, deceit and laziness will (eventually) bring suffering. No divine intervention is required; it’s just a law of the universe, like gravity.”

Yet in “the last 80 years of American history” the welfare state has undermined that moral balance, Haidt continues, nowhere more clearly, recently, than with the Bush bank bailout, using taxpayer dollars, which Armey and Kibbe claim was the real start of the tea-party movement.

Listen, for example, to Rick Santelli’s “rant heard ‘round the world” on CNBC last year and its most famous lines: “The government is promoting bad behavior,” and “How many of you people want to pay for your neighbors’ mortgage that has an extra bathroom and can’t pay their bills?” It’s a rant about karma, not liberty.

Haidt is certainly on to something here. And he develops and illustrates his thesis in some detail, including how the modern liberals’ focus on equality, and their attraction to government programs securing it, makes them uneasy with this karma, separating them from libertarians and conservatives. But he also argues that research that he and a colleague have done on “the five main psychological ‘foundations’ of morality” shows that “libertarians are morally a bit more similar to liberals than to conservatives,” leading him to conclude that it’s not clear how long the tea party blend of libertarians and conservatives can stay blended.

I won’t go into the details of Haidt’s five main psychological foundations of morality, except to say that, at least as presented in this essay, they raise as many questions as they answer. I will add, however, that lumping people into even self-identified ideological groupings is always problematic, since any such “group” will be constituted by individuals with a range of views and tendencies. Moreover, and more important, the contrast Haidt draws between liberty and what he calls karma is doubtless overdrawn. After all, the “libertarian” focus on liberty and the “conservative” focus on “karma” most often come to the same thing, at bottom. The “conservative” notion of individual responsibility, coupled with positive and negative sanctions, is fully realized only in a regime of liberty of a kind that “libertarians” have long promoted. In fact, to flesh that out more fully, the Journal has another useful essay this morning on the editorial page, Peter Berkowitz’s “Why Liberals Don’t Get the Tea Party Movement.” Much to think about as we cruise to the elections little more than two weeks away.

The ‘Spectacularly Misnamed Radicals’ Fire Back on Military Spending

Bill Kristol has a plan to help the US military

George F. Will has called neoconservatism “a spectacularly misnamed radicalism” whose adherents are “the most radical people in this town.”  (It is a shame that the Heritage Foundation has fallen so far from its sensible opposition to the neoconservative vision and evidently bought into the neoconservative program in toto.)

Like other radicals, however, they are pretty good at politics, which is clear from reading their latest offering, a talking points document [.pdf] produced by the “Defending Defense” initiative intended to demonstrate that U.S. military spending is not that large and should not be cut.

I have several things to say about the document, but all of the internet sniping and providing adversarial quotes to journalists probably aren’t the best way to adjudicate the debate.  To that end, on behalf of my colleagues I extend the offer of an open, public, live debate to the Defending Defense people:  Let’s debate the security of the United States, the strategy to best protect it, and the resources needed to fund the strategy.  Any time, any place.

The overarching problem in this debate is that the big spenders keep inserting the red herring of defense expenditures as a percentage of GDP into the debate.  This is relevant only as it pertains to their claim that “current levels of defense spending are affordable,” but last time I checked the mere fact that something wouldn’t, in itself, bankrupt the country is not a sufficient conservative justification for a government program.

The logic of basing the military budget on a percentage of GDP would imply that security and economic growth are inversely related.  Of course, the simple fact is that economic growth does not pose a threat to the United States and economic contraction does not make us safer.  During World War II we spent roughly 40 percent of GDP on our military, and given where we were, that seems sensible to this analyst.  But the “given where we were” part of that sentence is doing a lot of work.  Where are we today?  What are the threats we face?  How should we deal with them?  How much would it cost to do so?  Answers to those questions should provide the grounding for our military budget, not the deeply unconservative justification that “it won’t bankrupt us.”

Another point: It might sound pedantic, but many of what they characterize as “myths” can’t be myths.  They might be wrong.  They might be poor analytic points.  But they can’t be “myths.”  To correct just a few of what they call “myths”:

“Pentagon budgets were a “gusher” of new money in the Bush Administration.”
-    A metaphor can’t be a myth.

“The United States should not be ‘the world’s policeman.’”
-    Preferences aren’t myths.

“Defense spending should focus primarily on ‘winning the wars we’re in.’”
-    Again, preferences aren’t myths.

Myths are mistaken empirical claims that people believe, or the stories surrounding mistaken empirical claims that cause people to believe them.  For example, lots of people think President Obama signed the TARP.  That’s a myth.  President Bush did it.  The way the neoconservatives are using the word “myth” in the document is something more like “argument I disagree with.”

But let’s take these “myths” one by one and have a look at the analysis.

1)    “Additional defense spending is unnecessary as the United States already spends more on defense than half the world combined.”

Interestingly, the authors nowhere argue that additional military spending is necessary, although they strongly imply that it is.  In 2005 Tom Donnelly and Gary Schmitt wanted 5 percent of GDP to go to defense, which today would be roughly $730 billion.  It wasn’t clear whether they wanted to keep the supplementals going with the 5 percent comprising just the base budget, but with the wars we’re already spending roughly $730 billion on the military as it is.  (Also, just a factual correction, the best estimate is that we spend just under what the rest of the world spends combined, not just over.)

The authors also spirit in a normative claim in the first sentence to fend off scrutiny: “No other country in the world has the enduring vital national interests of the United States, and therefore the U.S. military has global reach and responsibilities.”  Given the weight hung around this claim, it would have been good if the authors could have offered even a superficial defense of it.  They did not.

Instead, they move on to observing that using purchasing power parity, Chinese defense spending is closer to $150 billion than the $78 billion that market exchange rates would indicate.  This is solid analysis.  I am glad to see that someone has convinced Heritage president Ed Feulner, a leader of “Defending Defense,” to distance himself from his problematic 2007 judgment that “Beijing’s military spending, in purchasing power parity terms, would be around $450 billion - about what America spends.”  (Maybe he read my blog post correcting him.)

2)    “Pentagon budgets were a ‘gusher’ of new money in the Bush Administration.”

Again, “a gusher” is in the eye of the beholder.  For facts, you should turn to the study authored by my colleagues Ben Friedman and Chris Preble.  There they point out that U.S. military spending has risen by 50 percent over the last 12 years, not including inflation or the wars.  If you include the wars, U.S. military spending has increased by more than 80 percent since 1998.  Military spending constitutes 23 percent of the federal budget.  That’s real money where I come from.

3)    “Cutting waste and excess from the Pentagon budget will provide sufficient funds to make up for shortfalls.”

Depending on whether we change our grand strategy, this is definitely true.  Our foreign policy is insolvent today.  Given our commitments, defense spending is too low, but the commitments are the problem.  We could spend less with fewer commitments and still be safe.

4)    “Current levels of defense spending are unaffordable.”

Even though the rhetoric the authors assemble to knock down this claim isn’t very good, I agree with them.  (I agree based primarily on Stephen Brooks and William Wohlforth’s excellent book, which makes a strong case that the United States can afford a massive military budget.)  Big, fabulously wealthy countries like ours can afford to do lots of expensive things, like Medicare Part D or funding a chunk of the defense of Europe, Japan, South Korea, and Israel ourselves.  But it doesn’t mean we should, necessarily.

5)    “The United States should not be ‘the world’s policeman.’”

Again, this is a preference, not a myth.  But the authors’ central defense of the implied claim that we should be the world’s policeman comes in the argument that “the cost of preserving America’s role in the world is far less than would be the cost of having to fight to recover it or, still greater, the cost of losing it altogether.  While many Americans would prefer to see our allies and partners play a larger part in securing the blessings of our common liberty, no president of either political party has backed away from America’s global leadership role —a bipartisan consensus that remains strong evidence that American leadership is still necessary to protect the nation’s vital interests.”

This argument, in turn, is based on an unstated theoretical premise, which is that when America isn’t somewhere, all hell breaks loose, and that when all hell breaks loose, it tends to land on our heads.  The balance of power doesn’t work, we live in a bandwagoning world not a balancing world, and therefore if we aren’t everywhere, chaos will be, and if chaos is everywhere, it’s going to hit us eventually.

I think this is a silly claim, and I also think the theoretical roots of neoconservative foreign-policy thought are underdeveloped, but it would be good if an actual neoconservative could speak for himself about his own theory of international politics rather than allowing others to try to assemble coherent theoretical groundings for his ideas.

6)    “Defense spending should focus primarily on ‘winning the wars we’re in.’”

This might be a surprising area of agreement, but as someone who has long thought that the wars we’re in are dumb (and deeply unconservative), I believe strongly that focusing our defense dollars on winning the wars we’re in is a dumb idea.

Again, though, there’s lots left to discuss, so let’s hope AEI, Heritage, or the Foreign Policy Initiative will agree to a debate.

Chinese Drywall Maker Held Accountable without Congressional Meddling

This summer, the House Energy and Commerce Committee approved a bill that would require foreign companies that import goods to the United States to appoint a legal representative in the United States who could be sued if their products caused injury. Exhibit A in the push for the bill was the case of contaminated drywall from China.

Advocates of the bill, titled the “Foreign Manufacturers Legal Accountability Act,” say it is necessary to ensure compensation for American consumers injured by faulty foreign-made products. Without a designated domestic agent, foreign companies could escape liability by dodging efforts to serve them with papers in a lawsuit. Hearings earlier this year highlighted the case of the drywall, in which damaged homeowners were finding it difficult to sue the Chinese producer.

The trouble with this approach, as my colleague Sallie James and I pointed out in a recent Cato Free Trade Bulletin, is that it would impose an additional burden on importers without adding significantly to the ability of consumers to gain compensation. We argued that sufficient remedies exist without adding a new law that looks suspiciously like a non-tariff trade barrier designed to protect U.S. manufacturers from foreign competitors.

As Exhibit A on our side, it was announced this week that a group of affected homeowners has struck a deal with the Chinese drywall company for compensation. As The Wall Street Journal reported in today’s edition:

Knauf Plasterboard Tianjin, along with suppliers and insurers, agreed to remove and replace the company’s drywall, as well as all the electrical wiring, gas tubing and appliances from 300 homes in four states.

They also agreed to pay relocation expenses while the houses, in Alabama, Mississippi, Louisiana and Florida, are repaired. The cost of fixing the houses, expected to take several months, is estimated from $40 to $80 per square foot per home. At $60 per square foot for a 2,500 square-foot home, the cost would be about $150,000.

Although the settlement involves a fraction of the homeowners who have file claims over the past few years, it is seen as a possible model for the resolution of other pending state and federal lawsuits …

The deal for compensation shows that the existing system works reasonably well for foreign-made as well as domestic-made goods. Congress should give up its efforts to place needless obstacles in the way of imports in the name of solving a problem that does not exist.