Tag: washington

Beijing Key in Controlling North Korea’s Recklessness

Shortly after unveiling a new uranium enrichment facility, North Korea has shelled a disputed island held by the Republic of Korea.  A score of South Koreans reportedly were killed or wounded.

These two steps underscore the North’s reputation for recklessness.  Unfortunately, there is no easy solution: serious military retaliation risks full-scale war, while intensified sanctions will have no impact without China’s support.

Instead, the U.S. should join with the ROK in an intensive diplomatic offensive in Beijing.  So far China has assumed that the Korean status quo is to its advantage.  However, Washington and Seoul should point out that Beijing has much to lose if things go badly in North Korea.

The North is about to embark on a potentially uncertain leadership transition.  North Koreans remain impoverished; indeed, malnutrition reportedly is spreading.  With the regime apparently determined to press ahead with its nuclear program while committing regular acts of war against the South, the entire peninsula could go up in flames.  China would be burned, along with the rest of North Korea’s neighbors.

The U.S. also should inform Beijing that Washington might choose not to remain in the middle if the North continues its nuclear program.  Given the choice of forever guaranteeing South Korean and Japanese security against an irresponsible North Korea, or allowing those nations to decide on their own defense, including possible acquisition of nuclear weapons, the U.S. would seriously consider the latter.  Then China would have to deal with the consequences.

Beijing’s best option would be to join with the U.S. and South Korea in offering a package deal for denuclearization, backed by effective sanctions, meaning the cut-off of Chinese food and energy assistance.  Otherwise, Beijing might find itself sharing in a future North Korean nightmare.

The GM ‘Turnaround’ in Bastiat’s View

GM’s long-rumored initial public stock offering will take place Thursday and self-anointed savior of the U.S. auto industry, Steven Rattner, is pretty bullish about the prospect of investors turning out in droves. 

I’ve been saying for a while that I thought the government’s exposure [euphemism for taxpayer losses] in the auto bailout was in the $10-billion to $20-billion range.

But since investor interest has pushed the initial price up from the $26-to-$29 per share range to the $32-$33 range, Rattner now believes:

[T]his exposure is in the single-digit billion range, and arguably potentially better.

I won’t argue with Rattner’s numbers.  After all, they affirm one of my many criticisms of the bailout: that taxpayers would never recoup the value of their “investment.”  My bigger problem is with Rattner’s cavalier disregard for the other enduring—and arguably more significant—costs of the auto bailouts.

Rattner is like the foil in Frederic Bastiat’s excellent, but not-famous-enough, 1850 parable, That Which is Seen and That Which is Unseen.    Rattner touts what is seen, namely that GM and Chrysler still exist.  And they exist because of his and his colleagues’ commitment to a plan to ensure their survival, along with the hundreds of thousands (if not millions, as some “estimates” had it) of jobs that were imperiled had those companies vanished.  (For starters, I very much question even what is seen here. I am skeptical of the counterfactual that GM and Chrysler would have disappeared and that there would have been significantly more job loss in the industry than there actually was during the recession and restructuring.  But I’ll grant his view of what is seen because, frankly, the specifics are irrelevant in the final analysis).

For what is seen, Rattner admirably admits of a cost.  And that cost is not insignificant.  It is anywhere from $65 billion to $82 billion (the range of the cost of the bailout) minus what is being paid back and what investors are willing to pay for GM shares—in the “single-digit billion range,” as Rattner says.  But Rattner is willing to stand by that trade-off, claiming his efforts and the billions in “government exposure” were a small price to pay for saving the U.S. auto industry, as it were.  It’s merely a difference in philosophy or compassion that animates bailout critics, according to this position.

No.  Not so fast.  All along (quite contemptuously in this op-ed, which I criticized here) Rattner has been unwilling to acknowledge the costs that are unseen.  Those unseen costs include:

  • the added uncertainty that pervades the private sector and assigns higher risks and thus higher costs to investing and hiring (whom might government favor or punish next?);
  • the diversion of resources from productive to political purposes in the business community (instead of buying that machinery to churn out better or more lawn mower engines, better to hire lobbyists to keep Washington apprised of how important we are or how this or that policy might be beneficial to the national employment picture!);
  • excessive risk-taking and other uneconomic behavior that falls under the rubric of moral hazard from entities that might consider themselves too-big-to-fail (perhaps, even, the New GM!);
  • growing aversion to—and rising cost of—corporate debt (don’t forget what happened to Chrysler’s “preferred” bondholders in the bankruptcy process!);
  • the sales and market share that should have gone to Ford or Honda or VW as part of the evolutionary market process;
  • the fruitful R&D expenditures of those more disciplined companies;
  • the expansion of job opportunities at those companies and their suppliers;
  • productivity gains passed on to workers in the form of higher wages or to consumers as lower prices;
  • the diminution of the credibility needed to discourage foreign governments from meddling in markets, often to the detriment of U.S. enterprises.

 The list goes on.

 Yet, Rattner, seemingly oblivious to the fact that the economy remains stuck in the mire, speaks triumphantly of the successful auto bailout.  But nobody ever doubted that taxpayer resources in the hands of policymakers willing to push the bounds of legality could “rescue” GM from a fate it deserved.  The concern was that policymakers would do just that, leaving behind wreckage to our institutions not immediately discernible.  But anemic economic activity, 9.6 percent unemployment, and a private sector unwilling to invest is pretty darn discernible at this point.

Rattner should take off the tails, put down the champagne flute, and acknowledge what was originally unseen.

A Little More Support for Killing Fed Ed

Yesterday, I wrote that rather than counseling incoming Republican Congress members to bolster federal intrusions in education, now is the time to start dismantling Washington’s unconstitutional education apparatus.  Exit polling from yesterday’s election, while certainly not focused on education, offers some support for this.

Quite simply, voters want less government in their lives, not more. Support for the Tea Party was very high considering that many people consider it something of a fringe movement, with 41 percent of voters saying they either “strongly” or “somewhat support” the Tea Party. Only 31 percent expressed opposition to the movement. Just as telling, if not more so, 56 percent of respondents said they thought “government is doing too many things better left to businesses and individuals.” Only 38 percent thought “government should do more to solve problems.”

It could be argued that the beginning of the end for the most recent Republican congressional majority was the No Child Left Behind Act, the party’s first major repudiation of what had been a core principle; in this case, that the federal government must stay out of education. Responding to voters now – not to mention following basic principles and the Constitution – by withdrawing federal tentacles from the nation’s classrooms would be a terrific way to start getting the party’s desperately needed credibility back.

Oh, and as I noted yesterday, it would also be the right thing to do for taxpayers and, most importantly, the children.

Rhee-buffeted?

We don’t know for certain that controversial DC Schools Chancellor Michelle Rhee will depart DC when her boss’s term ends – and it will end soon – but it seems very likely. Assuming she does leave, there is a big education lesson to be learned from Adrian Fenty’s re-election loss: Relying on crusading politicians to successfully and permanently reform a government schooling monopoly is a recipe for crushed hopes. Politics is simply too volatile – and enacting tough reforms too politically risky – for even good reforms to be sustained. It’s just another reason that the key to truly sustainable reform is school choice, in which parents control education funds, educators have to compete and perform for business, and children are no longer buffeted back and forth by the ever-changing winds of politics.

Concerning the End of “Combat Operations” in Iraq

Several of today’s front pages feature iconic images of U.S. troops marching onto troop transports and into the sunset in Iraq. Today’s story by Ernesto Londoño in the Washington Post, features Lt. Col. Mark Bieger of the 4th Stryker Brigade, 2nd Infantry Division,  “This is a historic mission!” Beiger bellows as his troops prepared to depart Baghdad for the last time, ”A truly historic end to seven years of war.”

No disrespect to Col. Bieger and his troops, but the war isn’t over, and it won’t be so long as there are significant number of U.S. troops in Iraq at risk of being caught in the cross-fire of a sectarian civil war.

The Iraqi government, more than five months after nationwide elections, remains in limbo. Talks over a power sharing arrangement have broken down. Meanwhile, violence is on the rise. Call it whatever you like, but the 50,000 troops who remain in Iraq are still dealing with a lot of challenges.

Much of the confusion in the media reporting revolves around semantics, words and phrases such as “combat” and “combat units.” It doesn’t help that George W. Bush declared on May 1, 2003 that ”major combat operations in Iraq have ended” under that infamous “Mission Accomplished” banner. But beyond Bush’s irrational exuberance, such terms are increasingly misleading in an era in which conventional, state vs. state organized violence – what we used to think of as war – has been replaced by murky, disorganized violence, perpetrated by disparate militias, or merely disgruntled individuals unhappy with their lot in life, and determined to take it out on anyone who happens to be around at the time.

Unfortunately, I have very little confidence that that state of affairs will change any time soon. And I seriously doubt that our people – our men and women in uniform, and, explains Michael Gordon in the New York Times, soon many more U.S. civilians and contractors – will be able to put everything right, and not for lack of trying. Meanwhile, I am deeply troubled by the rising chorus of voices calling on the Obama administration to ignore the remaining provisions of the status of forces agreement (SOFA) and prepare for an indefinite military presence in Iraq. (On this, see Ted Galen Carpenter’s latest entry at TNI’s The Skeptics blog.)

So, no, the war isn’t over. For better or worse (and chiefly the latter),  Americans will remain associated with an unpopular and government in Baghdad as it struggles to hold together the country’s disparate factions. They will be at great risk if the current political paralysis collapses into still wider violence.

Needless to say, I hope that doesn’t happen. But I won’t be striking up the band and declaring the war American in Iraq to be truly over, until all of our troops are back home.

Regulatory Spending Actually Rose under Bush

Analysts across the ideological spectrum generally agree that the government’s regulatory bodies fail far too frequently. However, analysts seem to learn different lessons from this experience.

Washington Post business columnist Steve Pearlstein cites numerous examples of failure and concludes, “It’s time for the business community to give up its jihad against regulation.”

He says:

It hardly captures the breadth and depth of these regulatory failures to say that during the Bush administration the pendulum swung a bit too far in the direction of deregulation and lax enforcement. What it misses is just how dramatically the regulatory agencies have been shrunken in size, stripped of talent and resources, demoralized by lousy leadership, captured by the industries they were meant to oversee and undermined by political interference and relentless attacks on their competence and purpose.

It’s true that regulators often do the bidding of the industries that they regulate. But “regulatory capture” is a long recognized phenomenon that undermines the contention that the government is well-suited to be a watchdog.

Regardless, is Pearlstein right that federal regulatory agencies were “dramatically” shrunk? Not according to a new study from George Washington University and Washington University in St. Louis. The figure shows that regulatory spending actually rose an inflation-adjusted 31 percent during the Bush administration (FY2002-FY2009):

Similarly, regulatory staff jumped by 42 percent under Bush’s watch:

Citizen Shahzad

Two smart guys on opposite sides of the political spectrum have sound points about the treatment of suspected Times Square bomber Faisal Shahzad.  First, Orin Kerr points out that investigators have some flexibility in determining when and whether to read Miranda rights.  In this case, they refrained initially and questioned Shahzad for a while under the public safety exception. And despite the apparent belief of the perpetually terrorized that Miranda warnings are some kind of magical incantation that causes the cone of silence to descend upon blabbermouths, they determined that he would probably continue cooperating even after being Mirandized. But as Kerr points out, they could have proceeded sans Miranda had that seemed necessary—provided they were willing to waive the ability to introduce Shahzad’s confession at trial. Given that there appears to be plenty of other evidence against him, that might well have been a viable option.

Either way, this surely seems like the kind of judgment call best left to the investigators on the scene, not Monday morning quarterbacks in Congress like Rep. Peter King (R-NY) who gave us this priceless reaction:

“Did they Mirandize him? I know he’s an American citizen but still,” King said.

Putting aside that nauseating “but still,” does King really imagine that he possesses some deep insight into the pernicious effect of Miranda warnings that the agents on the ground lacked? Again, Shahzad is apparently still cooperating—maybe they knew what they were doing.

From Steve Benen, meanwhile, we have one of many posts around the blogosphere pointing out the incoherence of a cowardly proposal mooted by Joe Lieberman (I-CT) that would revoke the citizenship of Americans who join foreign terror groups.  The blindingly obvious question: By what process do we determine that a suspected member of a foreign terror group is really a member of a foreign terror group?   As Glenn Greenwald writes, there’s not much point to having a Bill of Rights if the government gets to revoke those rights at its whim. But no, Lieberman wants to assure us that suspects would have a right to challenge the revocation of their citizenship in a court—a civilian court, one hopes. Except giving material support to a foreign terror groups is, in fact, a crime.  If there’s enough evidence to persuade a court of law that someone is a member of such a group—congratulations, there’s enough evidence to convict them in the civilian system as well! It’s heartening that there doesn’t seem to be a great deal of support for this odious proposal, but depressing that a sitting senator would treat the rights of citizenship so lightly for the sake of a vapid, strutting display of “toughness.”