Tag: obama

Week in Review: ‘Saving’ the World, Government Control and Drug Decriminalization

G-20 Summit Agrees to International Spending Plan

g-2The Washington Post reports, “Leaders from more than 20 major nations including the United States decided Thursday to make available an additional $1 trillion for the world economy through the International Monetary Fund and other institutions as part of a broad package of measures to overcome the global financial crisis.”

Cato scholars Richard W. Rahn, Daniel J. Ikenson and Ian Vásquez commented on the London-based meeting:

Rahn: “President Obama of the U.S. and Prime Minister Brown of the U.K. will be pressing for more so-called stimulus spending by other nations, despite the fact that the historical evidence shows that big increases in government spending are more likely to be damaging and slow down recovery than they are to promote vigorous economic expansion and job creation.”

Vásquez: “The push by some countries for massive increases in spending to address the global financial crisis smacks of political and bureaucratic opportunism. A prime example is Washington’s call to substantially increase the resources of the International Financial Institutions… There is no reason to think that massive increases of the IFIs’ funds will not worsen, rather than improve, their record or the accountability of the aid agencies and borrower governments.”

Ikenson: “Certainly it is crucial to avoid protectionist policies that clog the arteries of economic recovery and help nobody but politicians. But it is also important to keep things in perspective: the world is not on the brink of a global trade war, as some have suggested.”

Ikenson appeared on CNBC this week to push for a reduction of trade barriers in international markets.

With fears mounting over a global shift toward protectionism, Cato senior fellow Tom Palmer and the Atlas Economic Research Foundation are circulating a petition against restrictive trade measures.

Obama Administration Forces Out GM CEO

rick-wagonerPresident Obama took an unprecedented step toward greater control of a private corporation after forcing General Motors CEO  Rick Wagoner to leave the company. The New York Post reports “the administration threatened to withhold bailout money from the company if he didn’t.”

Writing for the Washington Post, trade analyst Dan Ikenson explained why the government is responsible for any GM failure from now on:

President Obama’s newly discovered prudence with taxpayer money and his tough-love approach to GM and Chrysler would both have more credibility if he hadn’t demanded Rick Wagoner’s resignation, as well. By imposing operational conditions normally reserved for boards of directors, the administration is now bound to the infamous “Pottery Barn” rule: you break it, you buy it. If things go further south, the government is now complicit.

Wagoner’s replacement, Fritz Henderson, said Tuesday that after receiving billions of taxpayer dollars, the company is considering bankruptcy as an option. Cato scholars recommended bankruptcy months ago:

Dan Ikenson, November 21, 2008: “Bailing out Detroit is unnecessary. After all, this is why we have the bankruptcy process. If companies in Chapter 11 can be salvaged, a bankruptcy judge will help them find the way. In the case of the Big Three, a bankruptcy process would almost certainly require them to dissolve their current union contracts. Revamping their labor structures is the single most important change that GM, Ford, and Chrysler could make — and yet it is the one change that many pro-bailout Democrats wish to ignore.”

Daniel J. Mitchell, November 13, 2008:  “Advocates oftentimes admit that bailouts are not good policy, but they invariably argue that short-term considerations should trump long-term sensible policy. Their biggest assertion is that a bailout is necessary to prevent bankruptcy, and that avoiding this result is critical to prevent catastrophe. But Chapter 11 protection may be precisely what is needed to put American auto companies back on the path to profitability. Bankruptcy laws specifically are designed to give companies an opportunity — under court supervision — to reduce costs and streamline operations.”

Dan Ikenson, December 5, 2008: “The best solution is to allow the bankruptcy process to work. It will be needed. There are going to be jobs lost, but there is really nothing policymakers can do about that without exacerbating problems elsewhere. The numbers won’t be as dire as the Big Three have been projecting.”

Cato Links

  • As the North Atlantic Treaty Organization celebrates its 60th birthday, there are signs of mounting trouble within the alliance and increasing reasons to doubt the organization’s relevance regarding the foreign policy challenges of the 21st century. In a new study, Cato scholar Ted Galen Carpenter argues that NATO’s time is up.
  • Should immigration agents target businesses knowingly hiring illegal immigrants? Cato scholar Jim Harper weighs in on a Fox News debate.
Topics:

Wednesday Podcast: ‘Turning a Corner on the War Metaphor’

Since President Bush’s “War on Terror” began in 2001, the use of a war metaphor has come with assertions of broader powers by the president. But the U.S. may be turning a corner on how terms like “war” are used, says Cato scholar David Rittgers.

In Wednesday’s Cato Daily Podcast,  Rittgers argues that President Obama’s choice to do away with the war metaphor is a step in the right direction.

Government Motors

Washingtonpost.com collected and posted sundry opinions about Rick Wagoner’s dismissal as GM CEO yesterday. Those opinions, including mine, are posted here. But to spare you the click, here’s what I wrote:

President Obama’s newly discovered prudence with taxpayer money and his tough-love approach to GM and Chrysler would both have more credibility if he hadn’t demanded Rick Wagoner’s resignation, as well. By imposing operational conditions normally reserved for boards of directors, the administration is now bound to the infamous “Pottery Barn” rule: you break it, you buy it. If things go further south, the government is now complicit.

It also means that Wagoner was perceived as an obstacle to whatever plans the administration has for GM. And that’s the real source of concern. If getting these companies back on their feet is the objective, a bankruptcy judge can make a determination pretty quickly about the viability of the firms and the steps necessary to get there. But if the objective is something more grandiose, such as transforming the industry into a model of green production, government oversight and close scrutiny of operations will be necessary. CEOs must be compliant and pliant. It is worth noting that a return to profitability and the metamorphosis of the industry according to a government script work at cross purposes.

Obama’s First Tax Hike Hits the Poor

It is curious that President Obama keeps claiming that he is not raising taxes on lower-income Americans, yet a tax hike that will impose a disproportionately large burden on the poor goes into effect Wednesday

In February, Obama signed into law a large tax hike on cigarette consumers. The federal tax on cigarette consumers is jumping from 39 cents per pack to $1.01 per pack – a huge 159 percent increase. If you smoke two packs per day, President Obama has raised your taxes by a $453 annually.

Next on the Obama low-income tax hike agenda: global warming taxes of about $80 billion per year, as revealed in the Obama budget, which equals an annual tax boost of $700 for every household in the United States.

Friday Podcast: ‘Obama’s Afghanistan Strategy’

President Obama has unveiled his plan for the war in Afghanistan, taking a more regional approach than the U.S. has in the past.

In Friday’s Cato Daily Podcast, foreign policy analyst Malou Innocent says it’s a critical step in the right direction, but stabilizing Afghanistan and fighting an insurgency can’t be accomplished while killing the livelihoods of so many Afghan farmers by destroying opium poppy.

In the future we should take Afghanistan as it is, rather than what we want it to be. So not only does that mean having a decreased reliance on a central state government from Kabul, but also understanding that many of the farms from these rural areas rely on the opium poppy crop for their own livelihood. So we should focus our efforts to targeting those who are in cahoots with   insurgent groups and not simply those who are depending on it for their livelihood.

Her forthcoming paper, “Pakistan and the Future of U.S. Policy” will be released next month.

Week in Review: No End to Spending and Regulation in Sight

Geithner to Propose Unprecedented Restrictions on Financial System

geithnerThe Washington Post reports, “Treasury Secretary Timothy F. Geithner plans to propose today a sweeping expansion of federal authority over the financial system… The administration also will seek to impose uniform standards on all large financial firms, including banks, an unprecedented step that would place significant limits on the scope and risk of their activities.”

Calling Geithner’s plan another “jihad against the market,” Cato senior fellow Jerry Taylor blasts the administration’s proposal:

What President Obama is selling is the idea that government must be the final arbiter regarding how much risk-taking is appropriate in this allegedly free market economy. It is unclear, however, whether anybody short of God is in the position to intelligently make that call for every single actor in the market.

Cato senior fellow Gerald P. O’Driscoll reveals the real reason behind the proposal:

Federal agencies have long had extensive regulatory powers over commercial banks, but allowed the banking crisis to develop despite those powers. It was a failure of will, not an absence of authority.   If the authority is extended over more institutions, there is no reason to believe we will have a different outcome.  This power grab is designed to divert attention away from the manifest failure of, first, the Bush Administration, and now the Obama Administration to devise a credible plan to deal with the crisis.

A new paper from Cato scholar Jagadeesh Gokhale explains the roots of the current global financial crisis and critically examines the reasoning behind the U.S. Treasury and Federal Reserve’s actions to prop up the financial sector. Gokhale argues that recovery is likely to be slow with or without the government’s bailout actions.

In the new issue of the Cato Policy Report, Cato chairman emeritus William A. Niskanen explains how President Obama is taking classic steps toward turning this recession into a depression:

Four federal economic policies transformed the Hoover recession into the Great Depression: higher tariffs, stronger unions, higher marginal tax rates, and a lower money supply. President Obama, unfortunately, has endorsed some variant of the first three of these policies, and he will face a critical choice on monetary policy in a year or so.

Obama Defends His Massive Spending Plan

President Obama visited Capitol Hill on Wednesday to lobby Democratic lawmakers on his $3.6 trillion budget proposal. Both the House and Senate are expected to vote on the plan next week.

obama-budget1In a new bulletin, Cato scholar Chris Edwards argues, “Sadly, Obama’s first budget sets a course for more government bloat, more economic distortions, and ultimately lower standards of living for everyone who is not living off of federal hand-outs.”

On Cato’s blog, Edwards discusses Obama’s misguided theory on government spending:

Obama’s budget would drive government health care costs up, not down. But aside from that technicality, the economics of Obama’s theory don’t make any sense.

Obama’s budget calls for a massive influx of government jobs. Writing in National Review, Cato senior fellow Jim Powell explains why government jobs don’t cure depression:

If government jobs were the secret of success, then the Soviet Union wouldn’t have collapsed, because it had nothing but government jobs. Communist China, glutted with government jobs, would have generated more income per capita than Hong Kong where, at least before the Communist takeover, there were hardly any government jobs, but Hong Kong’s per capita income was about 20 times higher than that on the mainland.

Multiplying the number of government jobs did nothing then and does nothing now to revive the private sector that pays all the bills, in large part because of the depressing effect of taxes required to pay for government jobs.

Cato on YouTube

Cato Institute is reaching out to new audiences with our message of individual liberty, free markets and peace. Last year, we launched our first YouTube channel, which has garnered thousands of views and subscriptions. Here are a few highlights:

No No-Fly Zones over Darfur

Should the United States lead a Western coalition to enforce a no-fly zone over Darfur, Sudan?

This idea, which has been kicking around since at least 2006, was articulated recently in the Washington Post by former Air Force Chief of Staff and Obama advisor Tony McPeak, writing with Kurt Bassuener. Back when they were campaigning, President Obama, Vice President Joe Biden and Secretary of State Hillary Clinton all backed it. So it stands a good chance of becoming US policy.

The goal is to protect Darfurians from their nominal government without a costly US effort. But the opposite seems a more likely outcome. The no-fly zone may increase the violence in Darfur. And by committing the US to Darfur’s protection and failing, it may suck us deeper into Sudan’s civil war.

Like most advocates of U.S. intervention in Sudan, McPeak and Bassuener avoid saying that what is occurring in Sudan is a war with sides rather than an irrational slaughter.  Attacks on civilians in Darfur, however reprehensible, are a tactic used by a weak, brutal central government to maintain power.

Sudan has some helicopters and Russian cargo aircraft converted into bombers that they use to support a counterinsurgency campaign executed mainly by its army and allied militias, some of which used to be rebels. The militias, in particular the horse-riding Janjaweed, kill and displace civilians because Darfur’s insurgent groups rely on them for things rebels need: intelligence, supply, and recruits.  According to the Christian Science Monitor, about 400 civilians died as result of air strikes in 2007 and 2008, a fraction of the total killed by ground forces.

Take away the air strikes, McPeak and Bassuener say, and you get leverage over Sudan’s government. The leverage can be used to compel Sudan to accept a UN peacekeeping force to augment the largely useless African Union force there now.

Leaving aside the question of logistics (patrolling Darfur would be very costly given its the massive size), this plan simply doesn’t bear much logical scrutiny.

It is an application of strategic airpower theory, which tends to make magical assumptions about the political impact of aircraft.  That theory tends to depict the enemy as an extremely cost sensitive actor ripped from the pages of economic textbooks rather than what we find in history:  governments motivated by nationalistic norms to pursue their political aims at extraordinary cost.  Sudan is not going to give up trying to unify its country because we won’t let helicopters and aircraft fly over it.

Because Darfur’s rebels could arm and police their territory behind the peacekeeper lines, allowing a real peacekeeping force into Sudan would be de facto recognition of Darfur’s secession. What leader of Sudan would accept that?

Beyond that, a no-fly zone is likely to make life worse for Darfur’s civilians. As Alan Kuperman notes, a no-fly zone, rather than forcing Khartoum to the table, is likely to drive it to increase ground attacks. We might see accelerated ethnic cleaning and slaughter occurring beneath NATO aircraft powerless to stop it, a repetition of past experience. Likewise, a no-fly zone may further discourage Darfurian rebels from coming to terms with the government, pouring further accelerant on the war. It would also keep Sudan from allowing aid workers to travel to Darfur.

A no-fly zone will also symbolize a US commitment to the dissolution of Sudan and the protection of Darfurian civilians. By accomplishing neither, it would likely produce calls for a more robust intervention – either US boots on the ground or air strikes against people on the ground. Acceding to these calls would make the United States a combatant in Sudan’s civil war. Those who push military intervention in Sudan should recognize that is the logical result of their position.

That position is not unreasonable. Full fledged intervention might protect civilians. And who wouldn’t be sympathetic to a revolt against an awful central government like Sudan’s?

But the United States needs to get out of the other people’s civil war business, not double down.  We are participating in two civil conflicts abroad now. That is too many already. And Darfur is not the world’s only humanitarian nightmare. Peacekeeping the Congo might have more humanitarian payoff.  We can’t fix everything.

That does not mean doing nothing. We should push Sudan to allow humanitarian workers full access to Darfur, condemn atrocities, and push the rebel factions to sign the peace deal outlined in 2006 or something like it.