Archives: February, 2012

Trying to Do Everything, Doing Nothing Well

One of the perennial laments about American strategy offered by people like me is that Washington seems incapable of setting out clear priorities in its foreign policy. Everything is urgently important. The business section of today’s New York Times highlights the unfortunate results of this orientation.

You may have heard by now that the United States and other allied countries are currently trying to strangle the Iranian economy to the point where the regime in Tehran feels enough pain—or, more accurately, fears for its survival enough—that it is forced to comply with the preconditions for negotiations and come to the table. This is deemed a Very Important Objective by the Washington foreign-policy elite.

But what you may have forgotten is that the United States is currently undertaking a “pivot” away from the Near East and toward the region where Washington believes the future of international politics lies: the Asia-Pacific. In pursuit of that objective, the United States is currently trying to pull together a coalition of junior partners to help diplomatically and militarily surround China so as to hem it in, should it have any ambition to take charge of the security environment in its region. This, too, is a Very Important Objective.

And before you get ahead of yourself, don’t forget about Poor Little Georgia, which got a chunk of its territory annexed after it lost a war to Russia in 2008. As President Bush pointed out, America’s vital interests and its deepest beliefs are now one. And surely our deepest beliefs don’t involve leaving a flawed-but-promising democratic nation to the tender mercies of a predatory and authoritarian Moscow regime, do they? So let’s agree that keeping Georgia safe is a vital interest.

The problem with this approach is that it’s very hard to pursue these difficult objectives at once. As the Times piece points out, the sanctions coalition against Iran conflicts with a number of these other objectives:

[N]ew threats to Iranian oil flow could have at least one beneficiary: Russia…

For Russian oil companies like Rosneft and Lukoil and the Russian-British joint venture TNK-BP, the international tensions that began over Iran’s nuclear development program last autumn have meant a windfall. Analysts estimate that Iran jitters have added $5 to $15 a barrel to the global price of oil, which means an extra $35 million to $105 million a day for the Russian industry. And the taxes the Russian government has received from those sales have been a political windfall for Prime Minister Vladimir V. Putin as he campaigns to return as Russia’s president. The extra money has helped further subsidize domestic energy consumption, tamping down inflation.

“It’s good for Putin,” Mr. Mercer said. “In the United States, when oil prices go up, the president’s ratings go down. In Russia, it’s the opposite.”

So our Iran policy helps Russia and Putin, and that’s bad. But wait:

[A]t least one exemption [to the Iran sanctions] under discussion is meant specifically to limit the strategic benefits for Russia, which has been an outspoken critic of American and European strictures against Iran.

The United States and European Union are negotiating an exemption that would continue to provide the former Soviet state of Georgia—a nation that is now a Western ally—an alternative to Russian natural gas. The workaround allows payments to an Iranian company, Naftiran Intertrade, that has a share of the Shah Deniz natural gas field in the Caspian Sea.

The field, managed by the Western petroleum giant BP, is a supplier to Georgia. It is also a potential source for the proposed Nabucco pipeline, which would be managed by a consortium based in Vienna and backed by some Western European governments to create European competition with Gazprom. But the pipeline, seen as a maneuver to weaken Russia’s hand in European energy politics, has been stalled in the planning phase for years.

So we’re carving out an escape hatch for Iranian natural gas to get to Georgia, because we have friends in Tbilisi. Oh, and what about that pivot to Asia? Any trouble on that front?

China, meanwhile, is expected to circumvent the Iranian sanctions with tacit American approval by settling its oil purchases with Iran through banks that have no dealings in the United States. India, for its part, has negotiated to barter wheat for oil, or pay Iran directly in rupees.

Hmm. Oh, and what about our war in Afghanistan, which has already cost hundreds of billions of dollars, with the meter currently running somewhere between $8 and $10 billion per month? What’s going on over there? Maybe the Post has something on that:

ISLAMABAD, Pakistan — At one end of the flower-festooned table sat the president of Iran, Mahmoud Ahmadinejad, perhaps the world’s most relentless America basher.

At the other end sat Hamid Karzai, Afghanistan’s leader, who owes his nation’s survival to the United States.

And in the middle was Pakistani President Asif Ali Zardari, whose country’s complex relationship with Washington swings from pole to pole.

If there existed any conflict among the chief executives of the three neighboring Islamic nations, they certainly weren’t showing it Friday at the close of a trilateral summit in Pakistan’s capital. At a news conference Zardari hosted in his splendid official residence, the theme was fraternal unity as the trio pledged to work for peace and prosperity in a region raging with war and terrorism.

It’s almost as if there are tradeoffs among our objectives.

Cross-posted from the Skeptics at the National Interest.

President Obama To Promote Possibly Limitless Corporate Welfare

The Wall Street Journal reports today that President Obama will formally announce his intention to let Beijing set U.S. export credit policy [$] at, fittingly enough, a Boeing plant. Boeing is obviously feeling a bit of political heat about the fact it benefits from almost half of Ex-Im’s disbursements, though, so they are pledging to commit more than $700 million to small business so they can better access credit. They’ve also stepped up their lobbying efforts, this time hiring a Republican-aligned lobbying firm to help them squash some mutinous feeling among Republican ranks.

Here’s Don Boudreaux’s take; spot-on, as usual.

Mandates in Practice: the Flap over Contraception Coverage

First, President Obama requires church-affiliated employers to offer insurance that covers contraception. When that’s properly challenged as a violation of religious liberty, the administration offers a supposed compromise that essentially shifts the burden to the insurance industry: the church-affiliated employer is off the hook, but its insurer has to provide coverage—and can’t charge for it. That’s right: private companies must provide free insurance for services that Obama’s HHS secretary has repeatedly called a major financial burden.

Government by fiat: to solve a First Amendment religious freedom problem that the president himself created, he orders private companies to offer contraception coverage at zero premium.

Then we’re treated to the nonsensical and unsupported assertion that insurers will save money in the long run because they won’t have to pay for pregnancies that contraception would have prevented. In other words, executives running a multi-billion dollar industry—until they were enlightened by HHS bureaucrats—were too stupid to realize that providing free contraception to everybody costs less than pregnancies by individuals who (a) had childbirth coverage, but (b) not contraception coverage, and (c) would have used contraception, but (d) didn’t, because (e) they couldn’t afford to. Of course, that’s just baloney. What’s really at work, as Charles Krauthammer has aptly characterized it, is breathtaking arrogation of power by the feds: a Washington, D.C. takeover of our private health care system.

David Brooks, Charles Murray, and Market Education

In a recent column, David Brooks considers Charles Murray’s thesis that “America is coming apart,” and concludes that:

The country… needs to rebuild orderly communities. This requires… building organizations and structures that induce people to behave responsibly rather than irresponsibly and, yes, sometimes using government to do so.

The first recommendation is reasonable. The second suggests Brooks is not very familiar with the history of education.

For the past century and a half, the biggest single intervention by the government in American lives has been our state school systems. Prior to the mid 1800s, all education in this country was local. The majority of children attended private schools, and those who attended the local “common” or “public” schools usually paid tuition. Even “common” schooling was only free for the truly destitute. Partly as a result of this direct financial responsibility, parents had ultimate control over what and by whom their children were taught.

From the 1830s to the 1850s, Massachusetts state senator Horace Mann and his colleague in the House, James Carter, imagined and ultimately laid the foundation of the state school system we know today. They did so for a variety of reasons, one being their belief that the common man and woman could not be trusted to educate their own children. Their solution was to take educational power and responsibility out of parents’ hands and place it under the control of state-trained, state-appointed experts.

Shockingly, taking responsibilities away from people does not make them more responsible. Responsibility is like a muscle: use it, or lose it. The kinds of  “organizations and structures that induce people to behave responsibly” are those that actually impose responsibilities upon them. When parents must not only choose but pay for their children’s education, they expect rather more from the system than when they are assigned “free” schooling by the state. And school efficiency rises as a result.

Some parents could not afford to pay for a good education for their children even without the heavy tax burden imposed by the present bloated state school monopolies. For those parents, we could easily provide financial assistance to cover most or (as necessary) all the cost of schooling. This is already being done on a small but growing scale in 8 states, thanks to k-12 education tax credit programs.

If Brooks wants “an organization and structure” that induces people to behave responsibly, he need look no further than the free enterprise system. “Using government” to achieve that end has been tried for 150 years, and the results are not impressive.

What Was the Point of Romney’s China Op-Ed?

Mitt Romney has an op-ed in today’s Wall Street Journal that Dan Drezner has aptly characterized as “Romney SMASH China!” Drezner takes Romney’s arguments on their own terms, but I’m more cynical, and accordingly I’m interested in why Romney wrote this piece. Sure, sure, maybe it’s possible that he just has strongly held ideas about U.S.- China policy and chose to voice them, but let’s be real: the man is trying to get the GOP nomination and then get elected president. He or someone in his campaign decided that now was a good time to reach out to the largest circulation conservative op-ed page in the country—one that gets read by a lot of people from whom he’d like to get contributions—with this message.

And what is the message? There’s the usual inchoate American nationalism (making the 21st “an American, not a Chinese century”) and criticism of Obama’s extravagant spending, sure, but there are also some fairly clear signs that Romney wants to signal he’ll get tough on China. He argues that Washington must “directly counter abusive Chinese practices in the areas of trade, intellectual property, and currency valuation.” On the latter, he goes so far as to promise that “on day one of my presidency I will designate [China] a currency manipulator…” despite gradual appreciation in the renminbi highlighted in today’s New York Times.

On the security side, he unsurprisingly suggests that the United States should bolster its role as the balancer-of-first-resort in the Asia-Pacific, claiming without evidence that our allies are worrying that we’re going to leave the region.

Now let’s go back to my question: What’s the play here? Does he think that this is some sort of mass appeal argument that will burnish his credentials in the eyes of the median Republican primary voter? Is he trying to tie economic malaise to the looming ChiCom menace? Maybe so, but does he think that the wealthy potential contributors who read the Journal op-ed page are going to be aroused by this message? That doesn’t seem right to me at all.

There are lots of people who’ve gotten wealthy running political campaigns who no doubt got this piece placed (and probably wrote it), but the questions remain: Why this message? Why this outlet? What was this piece supposed to accomplish? I can’t figure out a persuasive answer.

Chavez Launches Smears against His Opponent

I write on the Huffington Post that Venezuelan strongman Hugo Chavez is reaching into the age-old bag of anti-liberal smears to savage his newly nominated political opponent:

All of these epithets – homosexual, Jewish, bourgeoisie, and more recently, “American” – have been staples of illiberal rhetoric for centuries. Liberals – advocates of democracy, free speech, religious freedom, and market freedoms – have been tarred as “cosmopolitan” and somehow alien to the people, the Volk, the faithful, the fatherland, the heartland.

Read it all.

Fixing the House Transportation Bill

After catching flack from both fiscal conservatives and the transit lobby, House Speaker John Boehner has postponed consideration of a surface transportation bill. Fiscal conservatives (including my fellow Cato scholar Michael Tanner) objected to the bill’s deficit spending; transit interests (including Republicans from New York and Chicago), objected to the bill’s lack of dedicated funds to public transit.

Here are a few things you need to know about the transportation bill before it comes up again in a couple of weeks. First, the legislation now in effect, which passed in 2005, mandated spending at fixed levels even if gasoline taxes (the source of most federal surface transportation funds) failed to cover that spending. Gas taxes first fell short in 2007 and the program has been running a deficit ever since. Although the 2005 bill expired in 2009, Congress routinely extends such legislation until it passes a replacement bill.

Unlike the 2005 law, the controversial House bill only authorized, but did not mandate, deficit spending. Actual deficit spending would be considered on a year-by-year basis by the House and Senate appropriations committees. Should they decide not to deficit spend, passage of the House bill could potentially save taxpayers more than $60 billion over the next five years. Failure to pass a bill will only lead Congress to continue to deficit spend.

Second, transportation is big-time pork. The House Transportation and Infrastructure Committee is the largest committee in Congressional history because everyone wants a share of that pork. Fiscal conservatives’ dreams of devolving federal transportation spending to the states run into the roadblock made up of members of Congress from both parties who don’t want to give up the thrill of passing out dollars to their constituents.

The highway bill wasn’t always pork. When Congress created the Interstate Highway System in 1956, it directed that gas taxes be distributed to states using formulas based on such factors as each state’s population, land area, and road miles. While Congress tinkered with the formulas from time to time, once the formulas were written neither Congress nor the president had much say in how the states spent the money other than it was spent on highways.

That changed in 1982, when Congress began diverting gas taxes to transit–initially about 11 percent, now about 20 percent. The 1982 bill also saw the first earmarks; the 10 earmarks that year exponentially grew to more than 6,000 earmarks in the 2005 reauthorization.

Ron Paul recently defended earmarks, saying “Congress has an obligation to earmark every penny, not to deliver that power to the executive branch. What happens when you don’t vote for the earmark it goes into the slush fund, the executive branch spends the money.” But the Highway Trust Fund was not a slush fund; because it was distributed to the states by formulas, the executive branch had no say in how it would be spent.

In 1991, however, Congress decided to put billions of dollars of transit’s share of gas taxes into “competitive grant” programs. While competitive grants supposedly supported the best projects, in fact they were mainly slush funds distributed on political grounds either through earmarks or by the president.

The biggest competitive grant program is “New Starts,” which supports construction of new transit lines. Since the main way cities could get more money from this fund was to build the most expensive rail transit lines they could, New Starts gave cities incentives to replace low-cost buses with high-cost trains.

All over the country today, cities are waiting for Congress to pass a pork-laden transportation bill so they can continue to build ridiculously expensive rail transit lines, at least half of whose costs would be covered by the feds. Portland, Oregon, which spent about $200 million building a 17-mile light-rail line in 1986, now wants to build a 7-mile light-rail line at a cost of $1.5 billion. Honolulu wants to build a 20-mile elevated rail line for $5.1 billion.

Baltimore, whose transit ridership has declined by more than 20 percent since it started building rail transit in 1982, wants to spend $2.2 billion on a 15-mile light-rail line, nearly 80 percent of whose riders are expected to be people who were previously riding much more economical buses. San Jose wants to spend more than $5 billion building a 16-mile extension to the San Francisco BART system even though the project’s environmental impact statement says that it will not take enough cars off the road to increase speeds on any highway by even 1 mile per hour.

In 2005, then-Secretary of Transportation Mary Peters attempted to limit such wildly expensive projects by issuing a rule that rail lines could cost no more than $24 per hour that they saved travelers. Congress immediately exempted the San Jose BART line and several other projects from the rule. Planners tinkered with the numbers for other projects so that an amazing number appeared to cost around $23.95 per hour. Of course, after they received funds from the Federal Transit Administration, costs rose and ridership declined.

For example, in 2000 Minneapolis sought federal funds for what was to be an 80-mile commuter-rail line costing $223 million and projected to carry more than 10,500 riders per day in its first year. By 2004, the cost was up to $265 million but the line would only be 40 miles and was projected to carry just 4,000 riders per day. The line actually ended up costing $317 million, half of which was paid for by the feds, and in fact ended up carrying only about 2,200 riders per day in its first full year of operation, and even fewer in its second year.

To keep transit agencies from having to deal with Mary Peters’s pesky cost limit, the Obama administration proposed last month to rewrite the rules for New Starts. The new rules replace Peters’s $24 per hour limit with such subjective criteria as “livability,” “environmental justice,” and “multimodal connectivity.” In other words, cities can justify and the Secretary of Transportation can award grants for fantastically expensive projects based on just about any reason at all.

The House transportation bill addressed all of these issues. In addition to ending the 2005 bill’s mandatory spending, it completely eliminates earmarks and rededicates gas taxes to highways and put them all in formula funds. The deficit spending is almost all for transit, and while the bill still includes a New Starts program, it insists that projects be judged using firm quantitative criteria, not meaningless terms like livability.

Most importantly, the bill provides a path for the devolution that fiscal conservatives want. By taking all of the pork out of the gasoline tax, the bill makes it far more likely that Congress will be willing to devolve the tax to the states in the next go-around in about 2017.

Not surprisingly, the bill raised the ire of not only fiscal conservatives but the powerful transit lobby (which, because contractors can make far more profits building $100-million-per-mile rail lines than $10-million-per-mile highways, is far better funded than the supposedly powerful highway lobby). Transit advocates would prefer to retain transit’s 20-percent share of gas taxes than rely on Congress to fund transit out of deficit spending or some hoped-for oil and gas royalties.

As I see it, the bill’s authorization (but not mandate) for deficit spending was an attempt to get Democrats to support the elimination of earmarks and other pork. Since that has apparently failed, I would suggest another form of compromise.

First, end deficit spending, which means a bill that authorizes about $190 billion instead of $260 billion over the next five years. Second, distribute the money to the states exclusively through formulas with no earmarks and no competitive grants. Third, assuage transit interests by allowing the states to spend the money on either highways or transit, with no set formula for how much can go for either one.

Finally, encourage the states to spend the money as cost-effectively as possible by building user fees (defined as state or local taxes or fees paid by users that go to the facilities those users use) into the formula for allocating federal funds to the states. I have proposed a formula based 50 percent on user fees, 45 percent on population, and 5 percent on land area. This initially results in states getting about the same federal dollars as they receive today but gives states incentives to cater to users rather than politicians by investing their funds in projects the produce the most user fees. Most important, by taking the pork out of the gas tax, this keeps open the path to devolution in the next reauthorization cycle.