Archives: April, 2014

Chairman Ryan’s Supposed Budget Slashing

Chairman Paul Ryan’s budget released today “cuts spending by $5.1 trillion over the next ten years,” the document claims. Similarly, the headline from the Washington Post says that Ryan’s budget “would slash $5 trillion over next decade.”

Yet looking at the details of Ryan’s proposal, the federal government will spend $1.5 trillion more in 2024 than it is expected to spend in 2014.

How can spending both be “slashed” and increased by $1.5 trillion? It’s because of the bizarre way that Washington discusses spending, which is known as baseline budgeting.

Here is a graph of Ryan’s proposed federal outlays.

 

The graph shows that under Ryan’s budget, federal spending increases every year.

But here is another graph showing Ryan’s spending compared to the Congressional Budget Office (CBO) baseline projection of spending made in February.

Notice the gap? That’s the $5 trillion that is “slashed” from the federal budget.

In Washington, all spending proposals are compared to the CBO’s baseline projections. The CBO releases these projections a couple times a year, which are based on their estimates of current federal law. Every proposal is then compared to this baseline. Inside-Washington discussions of spending cuts or increases are relative to CBO’s figures.

But this is a very different way of thinking about budgeting than used by families, who don’t assume that their income will go up automatically every year. Families prioritize, and they cut back when they need to make the books balance. Sadly, few proposals in Congress make tough trade-offs and cut actual levels of spending.

Chairman Ryan’s budget would spend $42.6 trillion over the next ten years. Opponents will say that Ryan’s budget slashes federal spending, while supporters will say that it includes large budgetary savings. The reality is that Ryan’s budget would increase spending at an annual average rate of 3.5 percent, or from $3.54 trillion in 2014 to $5.0 trillion in 2024. Only in Washington would that be considered substantial restraint, let alone slashing.

Does Strong IP Protection Create Innovation and Jobs?

The story that many people tell is that intellectual property protection creates innovation, and here in the U.S. our IP-based industries lead to many high-paying, export-oriented jobs. So, we need strong IP protection, and so does the rest of the world, and thus we push other countries to sign on to strong IP protection through trade negotiations.

But is this story true? Does strong IP protection really create innovation and jobs?

First up, jobs.  Here’s the U.S. Chamber of Commerce:

IP is a clear indicator of the ingenuity of a country’s economy and the U.S. depends heavily on our IP for economic success; and IP accounts for 40 million U.S. jobs, 2/3 of all exports and $5.06 trillion in value.

The implication of this statement seems to be that, without our current level of IP protection, the U.S. would have 40 million fewer jobs, and only 1/3 as many exports.  But that can’t be right, can it?  If we had some lower level of IP protection, say, shorter copyright terms, perhaps fewer people would work in copyright-related industries.  But they wouldn’t just starve.  They would find something else to do.  If government policy didn’t skew the incentives in a way that moves people into copyright-related jobs, they would find something just as productive, if not more so, to do.  So, it may be true that 40 million people work in IP-related jobs.  But IP doesn’t create the jobs; government policy pushes people towards these jobs, away from other jobs.

But what about innovation?  Would there be any innovation at all without our existing levels of IP protection?  Here’s Rebecca Strauss of CFR:

no one has a good grasp of whether the U.S. patent system is doing what it was intended to do—promote innovation.

… in practice, economists have not yet come to any empirically robust conclusions about whether this theory pans out or how well the U.S. patent system is performing.

Even the most elemental components of patents have no clear economic analysis backing them up, including how long patent rights should last or whether the patent right should be granted to whoever files the application first versus whoever invents it first. 

In the absence of definitive economic analysis, the trend in U.S. patent reform over the past thirty years has been to strengthen the status quo system, with powerful corporate lobbies driving the policy discussion.

This means that the deal has generally gotten sweeter for patent holders. Congress has extended the lifeterm of patents, and most drastically for copyright, which lasts nearly four times longer today than in 1800. Curiously, whenever Disney’s Mickey Mouse copyright is due to expire, the official copyright lifeterm is lengthened. 

Does strong IP protection lead to more innovation?  The answer seems to be: We don’t know!

And I don’t know either.  My point is not that we should adopt policy X or policy Y with regard to IP protection.  Rather, what I think needs to happen is that we have an internal debate over appropriate levels of IP protection.  U.S. government folks say they want a debate.  But I don’t see it happening.  What I see is the U.S. pushing our existing policies on others through trade agreements, even though it’s not at all clear that these policies are good ones.

Chamber of Commerce and Business Roundtable: Borg Enablers

Remember the Borg? You know, the Star Trek cyborgs who would encounter a ship, tell its occupants “resistance is futile,” then turn them all into Borg? Of course the Enterprise always resisted, and always survived. But what if Captain Picard had instead ordered, “Surrender. Then they’ll leave us alone.”

The crew response to that would certainly have been, “ol’ Jean-Luc is losing it!” At least, it would have been for the few seconds before everyone was converted into mindless drones. Yet that is just the sort of order a group calling itself the “Higher State Standards Partnership” is trying to issue to conservatives and libertarians when it comes to the Common Core. Yesterday, the Partnership – a front for the U.S. Chamber of Commerce and Business Roundtable – wrote in the Daily Caller that opponents of the Core should stop resisting if they want to keep schools from being assimilated by the federal government.

You read that right: After blaming the Obama administration for using the Race to the Top to meddle “in a clearly state-led, locally controlled education initiative,” the Partnership counseled Core opponents to end their resistance. Defeating the Core, they wrote, “would only bolster the hand of the Administration and invite federal control into our schools.”

The Whistleblower Versus Robert Mugabe and the United Nations

Zimbabwe’s Robert Mugabe is a corrupt authoritarian.  The United Nations is a wasteful, inefficient organization that tolerates corrupt authoritarians.  Unfortunately, the two don’t make beautiful music together.

Not everyone at the UN is corrupt.  One hero is Georges Tadonki, a Cameroonian who for a time headed the UN Office for the Coordination of Humanitarian Affairs (OCHA) in Zimbabwe.  The others are three judges in a United Nations Dispute Tribunal who last year ruled for Tadonki in a suit against the international organization.

Soon we will find if members of a UN appeals panel possess equal courage.  That ruling is expected soon with rumors circulating that these judges might reverse course and absolve the organization of misconduct.

In 2008 President Robert Mugabe, who took power in 1980, and ZANU-PF, the ruling party, used violent intimidation to preserve their control.  At the time Tadonki had been on station for six years and predicted epidemics of both cholera and violence. 

Unfortunately, UN country chief Agostinho Zacarias dismissed Tadonki’s warnings.  By the end of the year 100,000 people had been infected with cholera and thousands had died.  During the election campaigns hundreds also had been killed by government thugs, who succeeded in derailing democracy. 

Naturally, no good deed went unpunished.  After extended discord between the two UN officials, Tadonki was fired in January 2009.  There was little doubt that the action was retaliation for being right and embarrassing Zacarias—who now serves the UN in South Africa. 

The controversy demonstrates that something is very wrong with the UN system.  Tadonki decided to fight, though he had to ask the international law firm Amsterdam & Peroff to handle the litigation on a pro bono basis.  Last year the UN Dispute Tribunal based in Kenya heard his case and Judges Vinod Boolell, Nkemdilim Izuako, and Goolam Merran issued their 104-page judgment. 

They concluded “that the Applicant was not, at all material times, treated fairly and in accordance with due process, equity and the core values of the Charter of the Organization” and that OCHA management ignored the UN’s “humanitarian values.”  The tribunal ordered the UN to apologize for its misbehavior, investigate the mistreatment of Tadonki, hold his superiors accountable for their misconduct, cover Tadonki’s litigation costs, pay past salary through the judgment date, and provide $50,000 in “moral damages for the extreme emotional distress and physical harm suffered by the Applicant.”

WTO Indictment of Chinese Export Restrictions Unearths U.S. Hypocrisy

Last week a WTO dispute settlement panel ruled that certain Chinese restrictions on exports of “rare earth” minerals are inconsistent with China’s WTO obligations and recommended that the PRC government bring its policies into compliance with the rules. The decision was hardly surprising, as export restrictions are prohibited under the WTO agreements – except under certain limited circumstances, which were not demonstrated to exist.

Formal complaints about these export restrictions were lodged in the WTO by the United States, the European Union, and Japan, whose manufacturers require rare earth minerals for production of a variety of high tech products, including flat-screen televisions, smart phones, and hybrid automobile batteries. By restricting exports, the complainants alleged, China’s actions reduce supply and raise prices abroad, putting foreign downstream manufacturers at a disadvantage vis-à-vis China’s domestic rare earth-using companies, who enjoy the effective subsidies of greater supply and lower input prices.

The WTO decision was lauded across Washington, but more for its dig on China than for its basis in principle or sound economics. Emblematic of official sentiment was the following statement from arch-import-foe-temporarily-turned-globalization-advocate, House Ways and Means Committee Ranking Member Sander Levin (D-MI):

Through the aggressive efforts of the Obama Administration, the WTO has struck down China’s efforts to block our companies from having access to key inputs.  Our high-tech industries, from smartphones to medical equipment to wind turbines, depend on access to these rare earths and other chemicals. Holding China accountable, and enforcing the rules of international trade are vital to U.S. businesses and workers and key to trade expansion efforts (emphasis added).

Great Moments in Academic Citation

Last year,* Twitter was, well, atwitter with news of a report from the UN Special Rapporteur on Extrajudicial, Summary, and Arbitrary Executions (who knew there was one of those?) calling for a moratorium on “lethal autonomous robots.” Readers who have seen Terminator 2 will know the potential for trouble in such platforms, but the UN came online with some concerns of its own.

The real utility of the UN’s call for a moratorium, however, is to allow me to start a competition: “great moments in academic citation.” What does academic citation have to do with autonomous robot armies, you ask? Simple. One of the entrants has to do with exactly that subject.

I think all scholars and policy wonks have occasionally come across a brilliantly witty turn of phrase buried in a footnote of an otherwise dry academic treatise. Three stuck in my mind enough that I kept them written down.

Sadly, though, I only have three entries worthy of competing against one another, and all are from my narrow reading in security studies. Which means I need your help: If you have another entrant, from a bona fide, published scholarly work (or approved dissertation) in whatever field but on this level of wit, email me to enter it in the competition. The prize is nothing. With that…

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