Tag: obama

O’Hanlon on Defense

Maybe you have wondered, is it possible to get an op-ed published in the Washington Post advocating increased US defense spending without any mention of the enemies the defense budget is meant to defend us against or the wars we might fight with them?  Yes! Michael O’Hanlon proves it.

He says: 1. The Pentagon needs two percent annual growth above inflation to maintain its current plans. 2. Therefore the zero percent real growth the Obama administration plans for the next five years is unwise and we need to add $150 billion over that period.

The first part is reasonable, but why should the Pentagon maintain all its current programs? O’Hanlon doesn’t say. What the article amounts to is an argument for higher defense spending because defense spending is expensive. That is not persuasive.

Also omitted is that fact that O’Hanlon is repeating the Secretary of Defense’s view. Here’s what Robert Gates said on April 7.

I don’t think that the department can sustain the programs that we have with flat growth. And therefore I believe that we need at least 2 percent real growth going forward.

Here’s O’Hanlon:

For the Defense Department to merely tread water, a good rule of thumb is that its inflation-adjusted budget must grow about 2 percent a year (roughly $10 billion annually, each and every year)…we need roughly 2 percent real growth per year, while Obama offers zero.

The zero percent real growth in defense spending figure that O’Hanlon takes issue with is from budget charts prepared by OMB. Time will tell whether that, Gates’ view, or something else becomes policy.  So it appears that O’Hanlon, knowingly, one hopes, is taking Gates’ view in an intramural Obama administration squabble. I’d say that’s worth knowing when you read this article.

Cash for Clunkers Lesson: How to Use the $$ to Buy a Gas Guzzler

My son’s station car is an old Ford Explorer AWD which, despite being a V-6, was rated at about 15 mpg.  Approaching 100,000 miles, the SUV’ s resale value is very low.

The House approved a bill to give him a $3,500 voucher to buy a car that is supposed to get only 18 mpg, or $4,500 if it gets 20 mpg.  Only 18-20 mpg?  That’s not moving us much closer to President Obama’s pie-in-the-sky 35.5 mpg goalpost is it?

Consider how easy it would be to game this giveaway program by using that $4,500 voucher to buy a big SUV or V-8 muscle car.

First of  all, with Chrysler and GM dealerships folding, it should be easy to buy a mediocre Chevy Cobalt or Dodge Caliber for about $10,000 more than the voucher.

What you do next is sell that boring econobox, even if you end up with $1,000 less than you paid – that still leaves you with $3,500 of free money, courtesy of taxpayers.

As this  process unfolds, the flood of resold small cars will make it even  harder for GM, Chrysler and Ford dealers to get a decent price for small cars, because of added competition from new cars being resold as used.

That’s their problem, not yours.

So, take the $9,000 net from reselling the crummy little car plus the $4,500 from Uncle Sam.  Then use that $13,500 to make a big down payment on a used Cadillac Escalade,  Toyota Tundra pickup or Corvette.

File this under “unintended consequences” (my own file is running out of space).

How to Encourage Terrorists

The news yesterday that a Guantanamo detainee has been moved to New York to stand trial struck me with bemusement.

The Obama administration has apparently determined that it can roll over opposition to bringing detainees into the country for trial and imprisonment. Arguments against doing so are fear-based pap, and political losers.

House Minority Leader John Boehner has not failed to provide. He said in a statement:

This is the first step in the Democrats’ plan to import terrorists into America… . . There are more than 200 of the world’s most dangerous men held at the Guantanamo Bay prison. Does the Administration plan to transfer all of them into our nation in this way?

Boehner’s apparent aim was to make political gains by appealing to the fears of a domestic U.S. audience, suggesting that President Obama is not safeguarding the country. He - and most U.S. politicians today - are “on tilt” about terrorism, playing to a “base” of caterwauling Islamophobes while the bulk of the American public looks on bewildered and disappointed.

But put aside domestic audiences. Think of what Boehner’s comment signals to international audiences, particularly, say, disaffected men in the Middle East: Americans are scared to death of terrorists. Just sitting in Guantanamo can make you “one of the world’s most dangerous men” to U.S. political leaders. Swathe yourself with the Al Qaeda brand and you can become a global menace. Boehner’s fear of terrorists encourages opponents of the U.S. to adopt terrorism as a tool against us.

Over the long haul, exhibiting bravery in the face of terrorism will tend to discourage it. Being brave is desirable and politically popular. Minority Leader Boehner has Republicans looking weak and scared in the face of terrorism and - having been ignored by Obama - politically weak too.

How Many Jobs Saved? We Do Not Know

In the past couple of days the administration has been discussing the employment impact of its stimulus package. Employment has declined steadily since adoption of the package, so it might seem odd to claim that it has already had beneficial impacts. The administration’s response is that employment would have declined even faster without the stimulus, so hundreds of thousands of jobs have been saved.

The administration might be right, but how can we know? The short answer is, we cannot know with any confidence because we cannot know what employment would have been in the absence of the stimulus. Thus, the concept of “jobs saved” is problematic; it allows the administration to conclude, no matter how bad things get, that the stimulus worked because the economy would have been even worse without the stimulus.

Indiana: Defender of “the Rule of Law”

While the majority of Chrysler’s senior creditors sacrificed their fiduciary duties and caved into political pressure in accepting the Obama Administration’s pre-packaged bankruptcy of Chrysler, a small group of state pension funds in Indiana has challenged the Obama plan and is asking the Supreme Court to review said plan. As in the 1930s, the protection of contractual rights, one of the most basic pillars of a free society, along with the rule of law, is now in the hands of the Supreme Court.

As discussed in today’s Washington Post, these pension funds believe their rights were infringed by the Administration’s placing of junior creditors in a preferred situation to senior creditors. It doesn’t take Ms. Manners to remind us that cutting in line, whether in traffic, at the grocery store, or in a bankruptcy, is plain rude. To have the government re-order the line for you is even worse.

To re-build confidence in our markets, trust in our institutions must be re-stored. Not simply in our private institutions, but also in our government. If players believe the game is going to be rigged, fewer will be willing to play. And while the Administration has portrayed Chrysler’s senior creditors as nothing more than greedy speculators, the Indiana request exposes that myth. President Obama should clearly articulate why retired state employees, such as teachers and firefighters, should have their pension funds raided solely for the benefit of the auto unions. Here’s to hoping Indiana goes all the way in this Court.

Week in Review: A Speech in Cairo, an Anniversary in China and a U.S. Bankruptcy

Obama Speaks to the Muslim World

cairoIn Cairo on Thursday, President Obama asked for a “new beginning between the United States and Muslims around the world,” and spoke at some length on the Israeli-Palestinian conflict, Iran, Iraq, and Afghanistan. Cato scholar Christopher Preble comments, “At times, it sounded like a state of the union address, with a litany of promises intended to appeal to particular interest groups. …That said, I thought the president hit the essential points without overpromising.”

Preble goes on to say:

He did not ignore that which divides the United States from the world at large, and many Muslims in particular, nor was he afraid to address squarely the lies and distortions — including the implication that 9/11 never happened, or was not the product of al Qaeda — that have made the situation worse than it should be. He stressed the common interests that should draw people to support U.S. policies rather than oppose them: these include our opposition to the use of violence against innocents; our support for democracy and self-government; and our hostility toward racial, ethnic or religious intolerance. All good.

David Boaz contends that there are a number of other nations the president could have chosen to deliver his address:

Americans forget that the Muslim world and the Arab world are not synonymous. In fact, only 15 to 20 percent of Muslims live in Arab countries, barely more than the number in Indonesia alone and far fewer than the number in the Indian subcontinent. It seems to me that Obama would be better off delivering his message to the Muslim world somewhere closer to where most Muslims live. Perhaps even in his own childhood home of Indonesia.

Not only are there more Muslims in Asia than in the Middle East, the Muslim countries of south and southeast Asia have done a better job of integrating Islam and modern democratic capitalism…. Egypt is a fine place for a speech on the Arab-Israeli conflict. But in Indonesia, Malaysia, India, or Pakistan he could give a speech on America and the Muslim world surrounded by rival political leaders in a democratic country and by internationally recognized business leaders. It would be good for the president to draw attention to this more moderate version of Islam.

Tiananmen Square: 20 Years Later

tsquare1It has been 20 years since the tragic deaths of pro-democracy protesters in Tiananmen Square in June 1989, and 30 years since Deng Xiaoping embarked on economic reform in China. Cato scholar James A. Dorn comments, “After 20 years China has made substantial economic progress, but the ghosts of Tiananmen are restless and will continue to be so until the Goddess of Liberty is restored.”

In Thursday’s Cato Daily Podcast, Dorn discusses the perception of human rights in China since the Tiananmen Square massacre, saying that many young people are beginning to accept the existence of human rights independent of the state.

A few days before the anniversary, social media Web sites like Twitter and YouTube were blocked in China. Cato scholar Jim Harper says that it’s going to take a lot more than tanks to shut down the message of freedom in today’s online world:

In 1989, when a nascent pro-democracy movement wanted to communicate its vitality and prepare to take on the state, meeting en masse was vital. But that made it fairly easy for the CCP to roll in and crush the dream of democracy.

Twenty years later, the Internet is the place where mass movements for liberty can take root. While the CCP is attempting to use the electronic equivalent of an armored division to prevent change, reform today is a question of when, not if. Shutting down open dialogue will only slow the democratic transition to freedom, which the Chinese government cannot ultimately prevent.

Taxpayers Acquire Failing Auto Company

After billions of dollars were spent over the course of two presidential administrations to keep General Motors afloat, the American car company filed for bankruptcy this week anyway.

Last year Cato trade expert Daniel J. Ikenson appeared on dozens of radio and television programs and wrote op-eds in newspapers and magazines explaining why automakers should file for bankruptcy—before spending billions in taxpayer dollars.

Which leaves Ikenson asking one very important question: “What was the point of that?

In November, GM turned to the federal government for a bailout loan — the one final alternative to bankruptcy. After a lot of discussion and some rich debate, Congress voted against a bailout, seemingly foreclosing all options except bankruptcy. But before GM could avail itself of bankruptcy protection, President Bush took the fateful decision of circumventing Congress and diverting $15.4 billion from Troubled Asset Relief Program funds to GM (in the chummy spirit of avoiding tough news around the holidays).

That was the original sin. George W. Bush is very much complicit in the nationalization of GM and the cascade of similar interventions that may follow. Had Bush not funded GM in December (under questionable authority, no less), the company probably would have filed for bankruptcy on Jan. 1, at which point prospective buyers, both foreign and domestic, would have surfaced and made bids for spin-off assets or equity stakes in the “New GM,” just as is happening now.

Meanwhile, the government takeover of GM puts the fate of Ford Motors, a company that didn’t take any bailout money, into question:

Thus, what’s going to happen to Ford? With the public aware that the administration will go to bat for GM, who will want to own Ford stock? Who will lend Ford money (particularly in light of the way GM’s and Chrysler’s bondholders were treated). Who wants to compete against an entity backed by an unrestrained national treasury?

Ultimately, if I’m a member of Ford management or a large shareholder, I’m thinking that my biggest competitors, who’ve made terrible business decisions over the years, just got their debts erased and their downsides covered. Thus, even if my balance sheet is healthy enough to go it alone, why bother? And that calculation presents the specter of another taxpayer bailout to the tunes of tens of billions of dollars, and another government-run auto company.

The GOP Is Not Serious about Cutting Down Spending

A month ago, President Obama issued a list of proposed spending cuts that I dismissed as “unserious” due to the fact that they were trivial when compared to his proposed spending and debt increases.  Today, the House Republican leadership released a list of proposed spending cuts.

I’d love to say I’m impressed, but I can’t.

Both proposals indicate that neither side of the aisle grasps the severity of the country’s ugly fiscal situation, or at least has the guts to do anything concrete about it.

The GOP proposal claims savings of more than $375 billion over five years, the bulk of which ($317 billion) would come from holding non-defense discretionary spending increases to no more than inflation over the next five years.

First, it should be cut – period.  Second, non-defense discretionary spending only amounts to about 17% of all the money the federal government spends in a year, so singling out this pot of money misses the bigger picture.  At least, defense spending, which is almost entirely discretionary, should be included in any cap.  But it has become an article of faith in the Republican Party that reining in defense spending is tantamount to putting a white flag in the Statue of Liberty’s hand.

The second biggest chunk of savings would come from directing $45 billion in repaid TARP funds to deficit reduction instead of allowing the money to be used for further bailing out.  That’s a sound idea as far it goes, but I can’t help but point out that the signatories to the document, House Republican Leader John Boehner and Minority Whip Eric Cantor, voted for the original $700 billion TARP bailout. Proposing to rescind the Treasury’s power to release the remaining funds, about $300 billion I believe, should have been included.

According to the proposal, the rest of the cuts and savings comes out to around $25 billion over five years.  Like the specific cuts in the president’s proposal, they’re all good cuts.  But the president detailed $17 billion in cuts for one year and I generously called it “measly.”  What am I to call the House Republican leadership specifying $5 billion a year in cuts?

Take for example, proposed cuts to the Department of Housing and Urban Development (HUD), which is likely to spend around $65 billion this year.  Having recently spent a couple months analyzing HUD’s past and present, I can state unequivocally that it’s one of the sorriest bureaucracies the world has ever seen.  Yet, the House Republican leadership comes up with only one proposed elimination: a $300,000 a year program that gives “$25,000 stipends for 12 students completing their doctoral dissertation on issues related to housing and urban development.”  The only other proposed cut to HUD would be $1.7 billion over five years to the Community Development Block Grant (CDBG) program.  This notoriously wasteful program is projected to spend over $8 billion this year alone.  Eliminate it!

The spending cuts the country needs must be substantial, serious, and put forward in the spirit of recognizing that the federal government’s role in our lives must be downsized.  Half-measures are not enough, and from the Republican House leadership, wholly insufficient for winning back the support of limited-government voters who have come to associate the GOP with runaway spending and debt.  For a more substantive guide to cutting federal spending, policymakers should start with Cato’s Handbook chapter on the subject.