Tag: intervention

How’s that Stimulus Working, Mr. President?

The Bureau of Labor Statistics announced this morning that the unemployment rate jumped to 9.8 percent last month. As you can see from the chart, the White House claimed that if we enacted the so-called stimulus, the unemployment rate today would be about 7 percent today.

It’s never wise to over-interpret the meaning on a single month’s data, and it’s also a mistake to credit or blame any one policy for the economy’s performance. But it certainly does seem that the combination of bigger government and more intervention is not a recipe for growth.

Maybe the President should reverse course and try free markets and smaller government. After the jump is a helpful six-minute tutorial.

Woodward’s Narrative

The New York Times reports that the book, Obama’s Wars, by longtime Washington Post reporter Bob Woodward that is scheduled for publication next week, depicts an administration completely at odds over the war in Afghanistan.

According to Woodward, the president concluded from the start that “I have two years with the public on this.” He implored his advisers at one meeting, “I want an exit strategy,” and he set a withdrawal timetable because, “I can’t lose the whole Democratic Party.”

It’s unfortunate that the policy debate over Afghanistan will be further spun into a left-vs.-right issue. After all, there are growing, if nascent, signs that some on the political right have reservations about our continued military involvement in Afghanistan. Earlier this year, Congressman Tim Johnson (R-Ill.), who earned an 80 percent favorable rating from the American Conservative Union, was a GOP co-sponsor to Rep. Dennis Kucinich’s (D-Ohio) resolution to force the removal of U.S. forces from Afghanistan. In March, Congressman John Duncan (R-Tenn.) came to the Cato Institute and explained why “there is nothing conservative about the war in Afghanistan.”

And as Cato founder Ed Crane wrote last year in the pages of the LA Times:

Republicans should take this opportunity to return to their traditional non-interventionist roots, and throw their neoconservative wing under the bus and forcefully oppose the war in Afghanistan. The Republicans have a chance at this moment to reclaim the mantle of the party of non-intervention — in your health care, in your wallet, in your lifestyle, and in the affairs of other nations.

I am not a conservative, and neither are many of my Cato colleagues. But these comments are intended to highlight that leaving Afghanistan is far beyond Left vs. Right. In fact, many conservatives used to deride nation-building as a utopian venture that had little to do with the nation’s real interests. In the case of Afghanistan, troops are being deployed to prop up a regime Washington doesn’t trust, for goals our president can’t define. There is a principled case to be made that a prolonged nation-building occupation is weakening our country militarily and economically. It’s a question of scarce resources and limiting the power of government. The immense price tag for war in Afghanistan can no longer be swept under the carpet or dismissed as an issue owned by peaceniks and pacifists, much less “the Democratic Party.”

The Sleazy Combination of Big Business and Big Government

There’s an article today in the Wall Street Journal showing how already-established companies and their union allies will use the coercive power of government to thwart competition. The article specifically discusses efforts by less competitive supermarkets to block new Wal-Mart stores. Not that Wal-Mart can complain too vociferously. After all, this is the company that endorsed a key provision of Obamacare in hopes its hurting lower-cost competitors. The moral of the story is that whenever big business and big government get in bed together, you can be sure the outcome almost always is bad for taxpayers and consumers.

A grocery chain with nine stores in the area had hired Saint Consulting Group to secretly run the antidevelopment campaign. Saint is a specialist at fighting proposed Wal-Marts, and it uses tactics it describes as “black arts.” As Wal-Mart Stores Inc. has grown into the largest grocery seller in the U.S., similar battles have played out in hundreds of towns like Mundelein. Local activists and union groups have been the public face of much of the resistance. But in scores of cases, large supermarket chains including Supervalu Inc., Safeway Inc. and Ahold NV have retained Saint Consulting to block Wal-Mart, according to hundreds of pages of Saint documents reviewed by The Wall Street Journal and interviews with former employees. …Supermarkets that have funded campaigns to stop Wal-Mart are concerned about having to match the retailing giant’s low prices lest they lose market share. …In many cases, the pitched battles have more than doubled the amount of time it takes Wal-Mart to open a store, says a person close to the company. … For the typical anti-Wal-Mart assignment, a Saint manager will drop into town using an assumed name to create or take control of local opposition, according to former Saint employees. They flood local politicians with calls, using multiple phones to make it appear that the calls are coming from different people, the former employees say. …Former Saint workers say the union sometimes pays a portion of Saint’s fees. “The work we’ve funded Saint to do to preserve our market share and our jobs is within our First Amendment rights,” says Jill Cashen, spokeswoman for the United Food and Commercial Workers Union. Safeway declined to comment. …Mr. Saint says there is nothing illegal about a company trying to derail a competitor’s project. Companies have legal protection under the First Amendment for using a government or legal process to thwart competition, even if they do so secretly, he says.

Ron Paul, the Chamber of Commerce, and Economic Freedom

Tim Carney has a blog post at the Examiner that’s worth quoting in full:

The U.S. Chamber of Commerce has issued its 2009 congressional scorecard, and once again, Rep. Ron Paul, R-Tex. — certainly one of the two most free-market politicians in Washington — gets the lowest score of any Republican.

Paul was one of a handful of GOP lawmakers not to win the Chamber’s “Spirit of Enterprise Award.” He scored only a 67%, bucking the Chamber on five votes, including:

  • Paul opposed the “Solar Technology Roadmap Act,” which boosted subsidies for unprofitable solar energy technology.
  • Paul opposed the “Travel Promotion Act,” which subsidizes the tourism industry with a new fee on international visitors.
  • Paul opposed the largest spending bill in history, Obama’s $787 billion stimulus bill.

(Rep John Duncan, R-Tenn., tied Ron Paul with 67%. John McHugh, R-N.Y., scored a 40%, but he missed most of the year because he went off to the Obama administration.)

I wrote about this phenomenon last year, when the divergence was even greater between the Chamber’s agenda and the free-market agenda:

Similarly, Texas libertarian GOPer Rep. Ron Paul—the most steadfast congressional opponent of regulation, taxation, and any sort of government intervention in business—scored lower than 90% of Democrats last year on the Chamber’s scorecard.

Sen. Jim DeMint, R-S.C., had the most conservative voting record in 2008 according to the American Conservative Union (ACU), and was a “taxpayer hero” according to the National Taxpayer’s Union (NTU), but the U.S. Chamber of Commerce says his 2008 record was less pro-business than Barack Obama, Joe Biden, and Hillary Clinton.
This year’s picture was less glaring, but it’s still more evidence that “pro-business” is not the same as “pro-freedom.” The U.S. Chamber is the former. Ron Paul, and the libertarian position, is the latter.

I suspect that on issues such as free trade agreements and immigration reform, I might be closer to the Chamber’s position than to Ron Paul’s. But to suggest that Paul is wrong to vote against business subsidies – or that DeMint was wrong to vote against Bush’s 2008 stimulus package and the $700 billion TARP bailout – certainly does illustrate how much difference there can be between “pro-business” and “pro-market.” Instead of “Spirit of Enterprise,” the Chamber should call these the “Spirit of Subsidy Awards.”

Obama to Increase FHA Risk

The Federal Housing Administration is heading toward a taxpayer bailout, yet the president’s latest mortgage modification plan would further increase the agency’s exposure to risky mortgages. Mark Calabria calls it a “Backdoor Bank Bailout.”

The administration’s plan would encourage borrowers who owe more than their house is worth to refinance into FHA-insured mortgages. Therefore, the risk of a future foreclosure on these mortgages would fall to the government and taxpayers instead of private lenders.

A recent study from economists at New York University found that the FHA is underestimating its risk exposure. One of the problems is that the FHA isn’t properly accounting for the risk to underwater FHA mortgages that have been refinanced into new FHA mortgages. So it’s hard to see how the president’s plan to refinance private underwater mortgages into FHA mortgages won’t further exacerbate the situation.

To get these mortgages in better shape so the FHA can insure them, $14 billion in TARP money is going to be used to pay private lenders to reduce the amount borrowers owe on their mortgages. Some of this money will also be used to cover eventual losses on these loans. As a taxpayer whose mortgage is underwater, and who would rather go bankrupt than accept a government handout, I find it infuriating that my tax dollars are being used to bail out others in a similar situation.

But with government housing programs, it’s standard practice for officials to cannonball into the pool and worry about who gets splashed by the water later. On Sunday, CNN.com reported on “FHA’s Florida Fiasco,” where the collapse of the heavily FHA-insured condo market has contributed to the possibility of a FHA bailout. The FHA has now tightened its condo standards, but once again it’s a day late and possibly more than few bucks short.

The new FHA initiative is the latest in a series of efforts to “stabilize” the housing market with more subsidies. Policymakers seem oblivious that it was government interventions that helped instigate the housing meltdown to begin with. The housing market would stabilize itself if the supply of and demand for housing was allowed to be brought back into equilibrium. There would be pain in the short-term, but in the long-term we would have a smoother functioning housing market. Unfortunately, for politicians the long-term means the next election.

Tufts Academic Gives Two Thumbs Down to Cheap Food

I suspect I may be falling into a publicity trap here, but nonetheless I am unable to resist blogging about an email I received this morning from the Global Development and Environment Institute at Tufts University.  The email contained this teaser:

How does cheap food contribute to global hunger?  GDAE’s Timothy A. Wise, in this recent article in Resurgence magazine, explains the contradictory nature of food and agriculture under globalization. He refers to globalization as “the cheapening of everything” and concludes:

“Some things just shouldn’t be cheapened. The market is very good at establishing the value of many things but it is not a good substitute for human values. Societies need to determine their own human values, not let the market do it for them. There are some essential things, such as our land and the life-sustaining foods it can produce, that should not be cheapened.”

This sort of stuff could only be written by someone on full academic tenure and who has never had to worry about feeding his family.

It would take many hours to rebut all of the idiocies contained in the full article, but for now I will just say: Yes, it is true that U.S. government subsidies for corn, for example, cause environmental damage in the Gulf of Mexico (Cato scholars have in fact covered this before as part of our ongoing campaign to eliminate farm subsidies). And yes, poor farmers abroad have suffered because of government intervention in food markets. But those are problems stemming from government intervention, not the free market.

Helping the Haitians

The tragedy unfolding in Haiti has elicited an outpouring of sympathy, and it is hardly surprising that governments and NGOs from all over the globe are mobilizing resources to aid in recovery. Help is flowing to the shattered island: teams trained in rescue operations, emergency medical services, security personnel, and financial aid. This type of assistance will likely continue for some time.

The U.S. military is also involved. Several Navy and Coast Guard vessels shipped out almost immediately. A few thousand Marines are helping to restore order, and more might soon be on the way. Such a ground presence makes sense, provided that the mission is carefully defined, and the long-term expectations are tempered by a dose of humility. The United States has, after all, intervened repeatedly in Haiti, and it remains the poorest country in the hemisphere. One might even conclude that our interventions have contributed to Haiti’s chronic problems, a consideration which should give pause to those calling for the United States to commit to a long-term project to fix the country.

One can make an argument against sending military assets to deal with such crises. A nation’s military is designed and built for one purpose – to defend the nation – and when it is deployed for missions that do not serve that narrow purpose there is a risk that the institutions will be rendered less capable of responding to genuine threats. I question the wisdom of humanitarian intervention on those grounds in my book, The Power Problem, stipulating, among other things, that the U.S. military should be sent abroad only when vital U.S. interests are at stake.

All that said, President Obama’s decision to swiftly deploy U.S. personnel to Haiti is appropriate on at least two grounds. First, sending troops into harm’s way – and usually into the middle of a civil conflict, as we did in the Balkans and in Iraq – is very different from mobilizing our formidable military assets to ameliorate suffering after a natural disaster. The latter types of interventions are less likely to engender the ire of the people on the losing end (and there always are losers). Humanitarian missions are also less likely to arouse the suspicion of neighbors who might question the intervener’s intentions. Indeed, there was a measurable outpouring of support and goodwill toward the United States after the Bush administration deployed U.S. military personnel in and around Indonesia following the horrific tsunami of late 2004. Genuine humanitarian missions, “armed philanthropy” as MIT’s Barry Posen calls it, are likely to be far less costly than armed regime change/nation-building missions that must contend with insurgents intent on taking their country back from the foreign occupier.

Another important consideration is a country’s interests in its respective region. Humanitarian crises, even those whose effects are confined within a particular country’s borders, often pose a national security threat to neighboring states. What has happened in Haiti over the past 48 hours might meet that criteria, but the White House’s immediate motivations seem purely altruistic. My frustration is that the U.S. policy since the end of the Cold War of actively discouraging other countries from defending themselves ensures that they will have little to offer when a similar natural disaster occurs in their own backyard, which means that the U.S. military is expected to act – even when our own interests are not at stake.

But that is a discussion for another time. The scale of the tragedy in nearby Haiti cries out for swift action, and I am pleased to see that many organizations – both public and private – have stepped forward to help. I wish these efforts well.