Archives: June, 2012

Could Trade Remedy Reform Be on the Horizon?

Traditionally, it has been the U.S. and EU who are the biggest users of anti-dumping and countervailing duties (the most important of the so-called “trade remedies”), which allow domestic industries to take action against what they call “unfair” trade, through the imposition of additional tariffs. In recent years, though, developing countries such as China and India began to catch on to how this kind of protection can be used, and have become active participants in this area. (Brink Lindsey and my new boss Dan Ikenson discussed this in a long ago trade policy analysis.) Thus, we now have the odd situation where China imposes these tariffs against U.S. industries on the basis of alleged subsidies and low pricing. The tables have been turned as China is now, in effect, accusing the U.S. of unfair trade!

An example can be seen in last Friday’s WTO panel report relating to China’s anti-dumping and countervailing duties on certain steel products. The U.S. complained to a WTO dispute settlement panel that China’s tariffs were not applied consistently with WTO rules, and the WTO panel agreed, finding a number of violations.

For those looking for a reason to be optimistic about the future of free trade, perhaps these developments can give us hope. While the spread of anti-dumping and countervailing duties is not good news, the U.S. challenge to these tariffs at the WTO perhaps indicates that the duties have caused significant financial pain and concern to the U.S. producers who were affected. Companies who have traditionally used the trade remedy system to keep out imports, such as the U.S. steel companies affected in this case, are taking notice that these laws can also be used against them. Maybe, just maybe, this could lead to some of trade remedies’ biggest supporters re-thinking the value of the current system, and could pave the way for real reform.

OMB’s Laggard Transparency Record

On Monday, I wrote about the rapidly growing movement to replace the Office of Management and Budget with a different coordinator for standardized publication of government spending data. Why? Because the OMB hasn’t been standardizing and publishing data about government spending. That’s why.

Yesterday, Kaitlin Lee posted a three-part indictment of the OMB on the Sunlight Foundation blog, called “OMB’s Commitment to Data Quality: Too Little, Too Late.” Lee is deeply knowledgeable in this area and extraordinarily patient with the data problems the government throws at her. Credit what you read in her blog post.

(See also the Data Transparency Coalition’s rebuttal of OMB controller Danny Werfel, who appears to be guiding the Obama administration toward opposition to spending data transparency.)

The drumbeat for better data is growing louder, it’s pan-ideological, and it’s non-partisan. Will the OMB preempt the DATA Act by moving forward with real data reforms, or will Congress preempt the OMB’s role?

Drones, Special Operations, and Whimsical Wars

Asked the last week on 60 Minutes how many shooting wars the United States is in, Secretary of Defense Leon Panetta took a moment to answer. He eventually said we are going after al Qaeda in Pakistan and its “nodes” in Somalia, Yemen, and North Africa. Somehow, he left out the indefinite war we have going in Afghanistan.

It’s no wonder that Panetta can’t keep track of the wars he’s supposed to manage. On top of Afghanistan and the drone campaigns, 12,000 U.S. special operations forces are distributed around dozens of countries, increasingly outside declared war zones, where they train foreign militaries, collect intelligence, and occasionally launch lethal raids. As just reported in the Washington Post, some of these forces are now operating a dozen bases across Northern Africa, where their activities include overseeing contractors flying surveillance aircraft. Despite the Obama administration’s claims of great progress in fighting al Qaeda, the global shadow war shows no signs of abating.

The official rationale for using force across the world is that al Qaeda is global. But that’s true only thanks to a capacious definition of al Qaeda that imposes a sense of false unity of disparate groups. The always-overrated remnant of the organization that sponsored the 9/11 attacks barely exists anymore, even in Pakistan. Our counterterrorism efforts are directed mostly against others: terrorists that take up al Qaeda’s name and desire to kill westerners but have limited links to the real McCoy, as in Yemen and North Africa, and insurgents friendly to jihadists but mostly consumed by local disputes, like the Taliban in Afghanistanal Shabaab in Somalia, and al Qaeda’s Islamist allies in southern Yemen. Like the phony Communist monolith in the Cold War, the myth of a unified, global “al Qaeda” makes actions against vaguely-linked entities—many with no obvious interest in the United States—seem like a coherent campaign against globe trotting menace bent on our destruction.

The real reason we are fighting so much these days is that war is too easy. International and domestic restraints on the use of U.S. military power are few. And unrestrained power tends to be exercised. Presidents can use it whimsically, at least until they do something costly that creates a backlash and wakes up public opposition. Drones and special operations forces made this problem worse.

Most of the world is what the military calls a permissive environment, especially since the end of the Cold War. Most places lack forces capable of keeping our military out. Many potential allies invite it. The risks traditionally associated with war—invasion, mass death, etc.—are now alien to Americans. Since the draft ended, the consequences of even bad wars for most of us are minor: unsettling media stories and mildly higher taxes deferred by deficits. That’s why, as Nuno Monteiro argues, the U.S. military was already quite busy in the 1990s despite the absence of real enemies.

Because war is so cheap, the public has little reason to worry much about it. That leaves elected representatives without any electoral incentive to restrain presidential war powers. No surprise then that the imperial presidency grew as American power did. Technology gains and secrecy exacerbate the problem. Even more than strategic bombing from high altitude, which already prevented U.S. casualties, drones cheapen warfare. Covert raids are riskier, of course, but secrecy limits public appreciation of those risks.

The president and his advisors assure us that they use these forces only after solemn debate and nights spent (badly) reading just war theory. But a White House that debates the use of force only with itself short-circuits the democratic process. That is not just a constitutional problem but a practical one. Broad debate among competing powers generally produces better decisions than narrower, unilateral ones. That is why is it is naïve to suggest, as John Fabian Witt did last week in a New York Times op-ed, that the executive branch is developing sensible legal institutions to manage the gray area between war and peace occupied by drone strikes. What’s needed are checks and balances. That means Congress needs to use its war powers.

First, Congress should rewrite the 2001 Authorization of Military Force, which has morphed into a legal rationale for doing whatever presidents want in the name of counterterrorism. That bill authorized force against the organizers of the September 11 attacks and those who aided them, which seemed to mean al Qaeda and the Taliban in Afghanistan and maybe Pakistan. The new law should state that acts of war, including drone strikes, in other places require a new authorization of force. If Congress is for bombing stuff in Yemen and Somalia, it should debate those missions. Second, Congress should reform the convoluted laws governing the deployment of special operations forces, making their use more onerous and transparent. Those forces should engage in covert action only after a presidential finding, as with the CIA. Third, Congress should require that taxes or offsets fund wars. That would increase debate about their worth.

The trouble, as already noted, is that Congress has no interest in doing these things. Congressional leaders are today more interested in policing leaks about the president’s unilateral exercise of war powers than in restraining them. Short of a military disaster involving special operations forces or drones, this seems unlikely to change in the short term. In the longer term, we need a restoration of Congress’ institutional identity. Even without an electoral reason, politicians should want to exercise war powers simply because they can—because people like power. That’s the assumption behind Edward Corwin’s notion that the constitution’s is an “invitation to struggle” over foreign policy. Something has obstructed Congress’ desire to struggle. Those concerned by the president’s promiscuous use of force should try to identify and remove the obstruction.

Cross-posted from the Skeptics at the National Interest.

A Few Questions for Paul Krugman

I am not a budget expert, but I saw Paul Krugman interviewed on the PBS Newshour program last evening and had a few questions.

Here’s an excerpt from that interview:

PAUL KRUGMAN:

I guess I don’t know how you can be honest about what is actually going on in this country without sounding partisan. That’s the old line, right? The facts have a well-known liberal bias, because, right now, we’re in a world where deficits are a good thing and a little bit more inflation would also be a good thing.

PAUL SOLMAN:

A proposal that’s put him at odds with the man who hired him at Princeton, Fed Chairman Ben Bernanke.

Tom Ashbrook asked him about it.

TOM ASHBROOK:

Ben Bernanke calls your proposal very reckless.

PAUL KRUGMAN:

Odd, because he made the same proposal himself 12 years ago for Japan.

(LAUGHTER)

PAUL KRUGMAN:

Those of us who have been calling for a bit more inflation are calling for 4 percent inflation, which is what we had back during the reign of Ronald Reagan in his second term. It didn’t seem that terrible to me at the time.

PAUL SOLMAN:

But we could be taking a big risk, right? You have no way of knowing whether or not the interest rate we’re going to have to offer to borrowers might change overnight, as it has often recently.

PAUL KRUGMAN:

Well, I am reasonably sure that isn’t going to happen until or unless the U.S. economy is really on the path to recovery. And that’s the point also when – by the way, when I will support the austerity. Once we no longer need that support to keep the economy afloat, that’s when you do want to start raising taxes and cutting spending, but not now.

A few questions for Mr. Krugman:

  1. I don’t know whether you agree with the proposition that we’re about $100 trillion in debt, but if we were, could we really afford to postpone (again) deep spending cuts? Wouldn’t  the time for cuts be … yesterday?
  2. You say that you would support spending cuts when the overall economy gathers more strength, but isn’t the record clear that the pols have neglected to reduce spending during previous periods of economic growth?
  3. What evidence leads you to believe the pols will act differently if economic growth were robust? Wouldn’t they seek to avoid the political pain of cuts and be seduced (again) by those who say the United States can “grow our way out of the debt problem”?

What Does It Mean When Obama and His Former Top Economist both Reject Obamanomics?

To answer the question in the title, it means you need to read the fine print.

This is because we have a president who thinks the government shouldn’t confiscate more than 20 percent of a company’s income, but he only gives that advice when he’s in Ghana.

And the same president says it’s time to “let the market work on its own,” but he only says that when talking about China’s economy.

Now we have more evidence that the president understands the dangers of class-warfare taxation and burdensome government spending. At least when he’s not talking about American fiscal policy.

After the Greek elections, which saw the defeat of the pro-big government Syriza coalition and a victory for the supposedly conservative New Democracy Party, here’s some of what Politico reported.

President Barack Obama on Monday called the results of Greece’s election a “positive prospect” with the potential to form a government willing to cooperate with Europe.  “I think the election in Greece yesterday indicates a positive prospect for not only them forming a government, but also them working constructively with their international partners in order that they can continue on the path of reform and do so in a way that also offers the prospects for the Greek people to succeed and prosper,” Obama said after a meeting with the G-20 Summit’s host, Mexican President Felipe Calderon.

In other words, it’s “positive” when other nations reject big government and vote for right-of-center parties, but Heaven forbid that this advice apply to the United States.

Interestingly, it’s not just Obama who is rejecting (when talking about other nations) the welfare-state vision of bigger government and higher taxes.

Check out this remarkable excerpt from a Washington Post column by Larry Summers, the former chairman of the president’s National Economic Council.

… it is far from clear, especially after the French election, that there is any kind of majority or even plurality support for responsible policies.

Remarkable. Larry Summers is dissing French president Francois Hollande and the French people by implying they want irresponsible policies, even though the Hollande’s views about Keynesian economics and soak-the-rich taxation are basically identical to the nonsense Summers was peddling while in the White House.

It’s almost enough to make you cynical about America’s political elite. Perish the thought!

Farm Pig-Out Moves Forward in the Senate

Republicans and Democrats have reached a deal that substantially increases the prospects for passage of a massive farm bill in the Senate. The Senate will vote on 73 amendments and then vote on passage. According to Senate Agriculture Committee chairwoman Debbie Stabenow (D-MI), the deal “is really an example of the Senate coming together to agree to get things done.”

It’s also an example of Republicans and Democrats coming together to fleece taxpayers. Chris Edwards and I noted this in an op-ed we penned yesterday for The Hill:

Pundits claim that partisanship is creating gridlock in Washington. But in the Senate, the two parties still know how to make bipartisan deals on big government subsidy legislation. That chamber may move ahead with a massive agriculture bill that would spend almost $1 trillion over the next decade. Supporters are calling it a “reform” bill because it would trim a measly two percent from projected spending over the period.

Sen. Stabenow crowed that “We are now closer than ever to achieving real reform in America’s agriculture policy.” Here’s our response to that claim:

This year, Farm Bill supporters are claiming that their bill represents major a “reform.” It is true that the Senate bill would end some types of subsidies, such as “direct payments.” However, it would replace them with new subsidies, such as a “shallow loss” program to deliver more aid if farm revenues fell below the high levels of recent years. This new program could end up costing as much or more than direct payments, and may cause more distortions to agricultural markets…Real reform would entail abolishing farm subsidy programs and not replacing them with anything—except with the natural entrepreneurial skills of farm businesses.

Assuming that Stabenow & Co. have to votes for passage, attention is going to turn to the Republican-controlled House. Edwards and I note that thus far Speaker John Boehner (R-OH) and his lieutenants have been silent on the Senate version of the farm bill, which is curious because the House leadership has made its intentions clear on other major bills that the Senate wants to pass before the November elections:

Perhaps the House leadership is hoping that the Senate bill goes down in flames before they have to make any decisions on it. After all, House Republicans that favor major cuts to farm subsidies will face internal opposition. The House Agriculture Committee chairman, for example, is Rep. Frank Lucas of Oklahoma, who is a National Association of Wheat Growers “Wheat Champion.” For the passage of the last major Farm Bill in 2008, 100 House Republicans helped the Democrats override President Bush’s veto of that spending monstrosity.

Now that it appears that the Senate bill won’t be going down in flames, here’s the big question:  Will the more conservative House go along with the taxpayer-funded farm pig out?