Archives: August, 2013

Violating the Law to Subsidize Egypt’s Coup: Bipartisan Foolishness in Washington

U.S. policy in Egypt is a disaster.  Washington long backed authoritarian rule.  Now military rule has supplanted short-lived democracy.  Washington should disengage and cut off all foreign “aid.”

Instead, the Obama administration has embraced putative dictatorship.  According to Secretary of State John Kerry, “the military did not take over to the best of our judgment so far.”

The administration could have acknowledged that Gen. Abdul-Fattah al-Sisi rules by force and then argued that the coup was justified.  But the case was weak.

President Mohamed Morsi misplayed his hand and the Muslim Brotherhood deserves suspicion.  But the first elected leader in Egypt’s 5000-year history was discrediting himself and political Islam.  Nor could he have become a dictator without the military’s support.

The administration refuses to call the coup a coup to avoid triggering the law which requires cutting off aid.  President Barack Obama’s policy towards Egypt is one of his greatest failures.

Washington backed the dictator Mubarak as Egyptians were rallying against him.  The administration then accepted President Morsi’s rise, unsuccessfully urging him to rule in an inclusive manner.  Several administration officials urged the Egyptian military not to stage a coup.  Subsequently Gen. Sisi ignored American advice not to persecute the Brotherhood.  Yet today virtually every Egyptian blames America. 

Still, leading Republicans have endorsed the Obama policy.  The Senate rejected an amendment from Sen. Rand Paul (R-KY) to cut off America’s $1.55 billion in annual foreign “aid.”

For instance, Florida’s Sen. Marco Rubio echoed the clueless Secretary Kerry, warning that if you cut off aid “you lose leverage.”  However, as I ask in my new article on American Spectator online:

Where, one wonders, is the evidence of this vaunted leverage—after nearly $75 billion in “assistance” over the years?  When Presidents Sadat and Mubarak jailed opponents, persecuted Coptic Christians, enriched supporters, and despoiled the economy?  When President Morsi claimed extraordinary power and refused to conciliate his opponents?  When Gen. Sisi staged the coup?  When the general ignored the administration’s advice to govern in an inclusive fashion?  When he embraced the corrupt and authoritarian Mubarak elite?  One unnamed official reluctantly admitted to the New York Times:  “what we say might not be part of their calculus.”

If the Obama administration is willing to torture language and ignore the law to keep shoveling money into Cairo, it is evident that nothing, except presumably war with Israel, would cause Washington to close the spigot.  Since Gen. Sisi and his fellow officers can count on America’s money—as well as a promised $12 billion from Saudi Arabia and other Persian Gulf states—they have no reason to pay the slightest attention to Secretary Kerry.

Sen. Lindsey Graham (R-SC) worried about the impact on Israel.  However, aid is not why Cairo has kept the peace with Israel for 40 years.  Syria has been at peace with Israel for the same period of time and received no money.  Both states know they would lose a war with Israel, which would be particularly bad news for Egypt’s generals. 

Unfortunately, the U.S. faces inevitable blowback.  Backing military rule risks generating the same sort of long-term harm that came from Washington’s support for the 1953 coup against Iran’s democratically elected prime minister, Mohammad Mossadegh. 

Washington should avoid being linked to the Brotherhood or the military.  Disengage and let Egyptians decide their own future. 

Free Trade in Medical Services? Bring It On!

The NY Times has a long article about the U.S. medical system, in which it notes how much cheaper things are abroad. I’ll leave it to my colleague Michael Cannon and others to comment on the accuracy of the piece, if they see anything worth commenting on.  I just want to weigh in on a trade policy aspect.  Economist Dean Baker responded to the article with a post that starts off as follows:

The NYT has an article today on the enormous savings available to people who had major surgeries performed in Europe rather than the United States. The piece reports that the cost of hip replacement or knee replacement surgery in the United States are more than five times higher than they are in comparable quality facilities in Europe. (The gap would be even larger with facilities in Thailand and India.)

This shows the enormous potential gains from increased medical trade. In effect, our hospitals, doctors, and medical equipment makers benefit from tariffs on the order of 500 percent or more. If the Obama administration really is interesting in promoting growth through trade it would be difficult to imagine a sector with larger potential gains than trade in medical care. The agreements would focus on setting clear liability rules, accreditation systems, and removing obstacles for insurers and government programs that prevent them taking advantage of lower cost medical services in other countries.

I think he is absolutely right that there are enormous gains to be had here.  I’m not sure about the recommendations he makes in the last sentence – I would want to talk to a health care expert about specific barriers before endorsing his proposals.  But I have no doubt that making it easier to trade medical services across borders would be of great benefit to consumers. If there are barriers getting in the way of trade, let’s get them out of the way.

But here’s where things get interesting.  Baker seems to think he has caught free trade advocates in some hypocrisy.  The post is entitled “Will Medical Trade Be Included in the EU Trade Deal and the TPP? If Not, Why Not?,” and he says:

If the trade deals do not include major openings on medical trade then it would be a clear example of why these deals are in fact about selective protectionism rather than free trade. Past trade deals have been quite explicitly focused on putting U.S. manufacturing workers in direct competition with the low paid manufacturing workers in developing countries.

Anyone who believes in free trade would want U.S. doctors and other professionals subjected to the same sort of competition. Otherwise, they really only want to use trade to lower the wages of less educated workers to benefit the the wealthy. (Low wages means cheap help.) It is dishonest to call that policy “free trade.”  

He then tweeted: “For some reason “free traders” don’t understand trade in medical services: Gains from eliminating protections enormous”.

Thus, his suggestion seems to be that there are some free traders out there who are arguing for free trade only in the manufacturing sector, not in professional service sectors, and as a result the two big trade talks going on right now might exclude these services.

Let me respond by noting that I have never met any free traders who take the view that professional services, or any other sectors (except perhaps defense), should be excluded.  Of course, if they did, they wouldn’t really be free traders.  Free trade doesn’t make a distinction between sectors.  So, to Dean Baker, let me just say that I, a confessed free trader, whole-heartedly endorse the idea of free trade in medical services!  And I’m pretty sure all other free traders feel the same way.

That’s not to say there aren’t people (i.e., special interest groups) out there who want protection for the medical service sector, just like there are people who want protection for the manufacturing sector.  No doubt U.S. doctors would love to impose a 25% tariff on foreign medical services, just like the tariff we impose on imports of SUVs.  But that’s just special interests doing what they always do, in all policy areas.  It’s our job to fight their efforts, and hopefully Baker will join in.  Baker mentions the Europe and Pacific trade talks underway right now.  With some good arguments and a bit of luck, those talks will go a long way towards getting rid of any protectionism in these and other sectors.

Grand Bargains and Budget Battles

The “Grand Bargain” refers to a yet-to-be-realized agreement between Republicans and Democrats to put the federal government’s finances on a more stable trajectory in which both sides capitulate on long-standing policy positions. For Republicans, that means agreeing to more tax revenues. For Democrats, it means agreeing to reduction in entitlement program benefits. 

(Ignore the new “grand bargain” proposed by the president on Tuesday, which called for meager corporate tax reform in exchange for blowing more taxpayer money on the administration’s favorite bad ideas. The offering was a DOA political stunt.) 

The “Grand Bargain”—as originally understood—hasn’t happened and it’s not going to anytime soon. A group of eight Republican senators has reportedly been discussing a possible deal with the White House, but similar efforts in the past have gone nowhere and the political landscape remains unchanged: Republicans control the House; Democrats control the Senate and White House. With the 2014 elections looming on the horizon, the House isn’t going to raise taxes and the Senate will continue to be in no hurry to touch entitlements. 

It’s already clear that Congress will once again not finish a budget for the upcoming fiscal year, which begins on October 1st. That means a continuing resolution to keep the government open. And shortly after, the government will no longer be able to stay below the statutory debt limit. Some conservatives have raised the idea of refusing to keep the government open/increase the debt limit unless Obamacare is repealed. That would be nice, but a lot of fellow Republicans have already thrown that idea under the bus. There’s pressure on the House leadership to go with that strategy, but it’s hard to imagine that Boehner & Co. will want to take a hostage that it isn’t prepared to shoot given that the president won’t sign legislation that defunds his signature boondoggle achievement. 

If there is going to be a “bargain,” it will involve sequestration. Sequestration, which largely affects discretionary spending, is increasingly frustrating spenders on both sides of the aisle. This week, the House Republican leadership was reportedly forced to pull the transportation-housing appropriations bill because the votes weren’t there to pass it. Apparently, too many Republicans were unhappy with the bill’s volume of spending reductions. On the other hand, Senate Republicans killed that chamber’s version of the bill because it spent too much. That suggests the possibility of a sufficient number of Republicans agreeing to lessen—but not eliminate—sequestration’s hit on discretionary spending. Democrats would probably accept that in exchange for keeping the government open, continuing to run up debt, and allowing Obamacare to start doing some real damage in January. 

Anyhow, that’s just my guess based on what I know and what has happened in the past with this set of characters. 

Will the continuing resolution fund the government for the entire year or will there eventually be an omnibus spending bill? If sequestration is “adjusted,” what will the breakdown be between defense and non-defense spending? Could gimmicky cuts to mandatory spending be used to offset increased discretionary spending above sequestration? 

We’ll find out. All I know is that I would bet a lot of money that we’ll see more of the same nonsense next year. Indeed, being a federal budget analyst has become like being the character Phil in the movie Groundhog Day

Free Trade Makes You Fat

Last month’s report from the United Nations Food and Agriculture Organization (FAO) made headlines for revealing that Mexico is now fatter than the United States. The ensuing media articles and commentary grappled with questions like why are Mexicans getting fatter and what should be done about it. Some have taken to blaming NAFTA for Mexican obesity because increased trade with the United States has enabled Mexicans to consume more junk food. 

The critics are absolutely right.  Free trade makes you fat—and that is awesome!

People in Mexico are on average fatter than they were 20 years ago, and by all accounts they are consuming a lot more unhealthy foods. But the fact remains that people in Mexico are getting fatter because they want to be fatter. Economic growth and, particularly, free trade with the United States have empowered more Mexicans to choose the food they like to eat instead of merely the food they need to eat.

Paternalism comes in many forms, and worrying about people’s diets is one of the worst. We should be celebrating trade for enabling people to make the choices they want to make, not condemning it simply because happier, wealthier people have the luxury to eat unhealthy food.

It’s Time for Washington to Shut Up about Promoting Democracy

The military regime in Cairo continues to kill supporters of ousted President Mohamed Morsi with Washington’s financial support. The Obama administration is turning hypocrisy into an art form. 

Washington labors under the delusion that it controls the world. The administration insists that it must preserve its influence by giving more money to the generals in Cairo. Yet when has the United States ever exercised influence in Egypt?

For four decades American taxpayers have subsidized dictatorial regimes. The administration tried to save former president Hosni Mubarak from revolution, before supporting his overthrow. Washington’s attempts to convince Morsi to rule more inclusively, and military commander Gen. Abdel Fattah al-Sisi not to stage a coup, failed completely. Now the coup leader is ostentatiously ignoring the administration’s plea that he not force the Muslim Brotherhood underground. 

Yet President Obama refuses to acknowledge the military coup, which under U.S. law would require the cut-off of American aid to Egypt. If that happened, says the administration, Gen. al-Sisi might ignore American advice! 

As I point out in my latest Forbes column:

It would have been better years ago had American officials simply shut up and done nothing. No money would have been wasted.  Washington’s impotence would not have been demonstrated. The U.S. would not be complicit in decades of military rule.

Alas, Egypt is not the first instance in which the U.S. government has managed to look stupid while spending a lot of money. In fact, that is far more the rule than the exception for Washington.

For decades Washington has given away tens of billions of dollars a year for economic “assistance.” Among the lucky recipients?   Crackpot communists such as Nicolae Ceausescu’s Romania and Mengistu Haile Mariam’s Ethiopia.

TAA and TPA: Together Again. And Not Necessarily For the Good.

It’s that time again; time for supporters of trade liberalisation to question the value of enhanced training and welfare programs for those who lose their jobs because of import competition, and for trade-skeptics to ask why we need trade liberalization at all.

This argument traditionally takes place in the context of the debate about renewing (or, as in 2009, expanding) the Trade Adjustment Assistance (TAA) program, and whether it should be linked to renewal—or, in the current context, reinstatement—of trade promotion or “fast-track” authority, power granted to an administration to negotiate trade agreements and submit them to Congress for an up-or-down vote with no scope for deal-killing amendments. The two have traditionally been combined so legislators who would not normally support any procedural mechanisms to ease trade liberalisation (e.g., those close to labor unions) feel politically covered to do so. I’m not a fan of the TAA program for many reasons, which I summarized for the Downsizing Government website, and in any case I have long suspected that renewing TAA doesn’t really buy much support for trade liberalization any more.

Apparently Sen. Orrin Hatch (R-UT) agrees, and said he is fed up with the deal:

Senate Finance Committee Ranking Member Orrin Hatch (R-UT) this week made clear that he sees a potential obstacle to moving a new fast-track or Trade Promotion Authority (TPA) bill in the demands by Senate Finance Committee Chairman Max Baucus (D-MT) and the Obama administration that it be linked to an extension of the expiring Trade Adjustment Assistance (TAA) program.

“One of the problems with TPA is that they want to push TAA, which generally has [sic] union encroachment on free trade,” Hatch told reporters after a July 30 speech to the American Enterprise Institute.

Asked whether he would oppose combining the two bills, Hatch said he would have to wait and see whether TAA is “just another improper gift to the unions.”  [Source: Inside U.S. Trade, July 31, 2013, subscription required]

Another Bust: Precipitation Forecasts Come A-Cropper

Global Science Report is a weekly feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

When people think about the weather, two variables are first to come to mind—temperature and precipitation. Unless it’s sunny when it’s not supposed to be (or vice-versa), near-term temperature forecasts tend to be pretty good.  What messes up your day is when it rains when it’s  not supposed to, and what really screws things up is when there is a significant unforecast snow, or a lot more (or less) than there was supposed to be. If whatever oracle you consistently consult, like The Weather Channel or Channel 9, consistently blows the precipitation forecast, you’ll soon be looking elsewhere for your forecast, and if changing forecasters doesn’t help, you’re going to sour on the whole weather forecasting business

Climate forecasts made by climate models running under scenarios of increasing human emissions of greenhouse gases are blowing both their  temperature and precipitation prognostications. They tend to predict far more warming to be taking place than is actually occurring, and when it comes to precipitation, the projections are all over the place—a characteristic dislexically summed up in the Second Assessment Report from the U.N.’s Intergovernmental Panel on Climate Change (IPCC)

Warmer temperatures will lead to a more vigorous hydrological cycle; this translates into prospects for more severe droughts and/or floods in some places and less severe droughts and/or floods in other places.

So, according to the IPCC, whatever happens to precipitation will have been correctly forecast!

In some areas of the U.S., it is actually possible to pin down specific climate model expectations for precipitation changes. Unfortunately (for the models), the actual observations show little if any correspondence to the magnitude, or even direction, of the modeled changes.