Topic: Trade and Immigration

Downsizing the Federal Government

President-elect Obama has pledged to go through the federal budget “line by line” to root out waste. In this new video, Cato analysts Chris Edwards, Sallie James and Daniel Ikenson explain why the Department of Agriculture is a great place to start.

For more great videos from the Cato Institute, subscribe to our YouTube Channel.

Little Hope for Reformers in Obama’s Ag Sec Pick

President-elect Obama is expected to announce his candidate for Secretary of Agriculture today, former Iowa governor and Democratic presidential candidate, Tom Vilsack. Although a champion of shifting some money from traditional agricultural programs such as commodity subsidies into environmental management payments, and not the worst possible pick for Agriculture Secretary, Mr. Vilsack is still essentially a friend of the farmer. He believes that the federal government should play a role in agriculture. And he is a strong supporter of “food and energy independence,” a wrong-headed policy that is a farmer-welfare program in disguise.

Mr. Vilsack will be expected to support Mr. Obama’s “green energy” stimulus plans for creating “green jobs.” To his credit, he has advocated phasing out subsidies to corn-based ethanol (a brave stance for an Iowa man) and last year endorsed removing the tariff on Brazilian sugar-based ethanol. Having said that, he has been described as “sympathetic to big agribusiness” and “ ‘a very articulate spokesperson’ for agricultural interests”.

If one were hoping for a radical change in direction in U.S. agriculture policy, the Obama administration is unlikely to provide it.

Scrap E-Verify

The 111th Congress and the new Obama administration should scrap “E-Verify.” The federal government’s inchoate immigration background check system is the culmination of 20 years’ failure to create a tolerable “internal enforcement” program for U.S. immigration law. Rather than building on past failure, the new Congress and president should pull the plug on E-Verify and reform immigration law so that it aligns with the nation’s economic need for labor.

More here.

Observations about the Auto Bailout

Things went badly for Detroit’s automakers in Washington this week. What was to be a decisive lobbying blitz planned months in advance proved reminiscent of GM’s efforts to market the Chevy Nova in Latin America. Both were all show, no va!

The arguments against a bailout under any circumstances are well-established. A lot has been said and written lately, including this new piece, about the improprieties of so-called bailouts, generally, and in this case, specifically. Basically, we need a shakeout, not a bailout. What we’re witnessing is a shakedown.

Rather than emphasize those arguments here, there is a lot of subtext to this auto bailout frenzy. The subtext hasn’t received much attention, but is fascinating enough (to me at least) to write about.

Even before CorporateJetGate forced Democratic leaders Nancy Pelosi and Harry Reid to bid the CEOs an abrupt and scathing adieu, support for Detroit’s case to raid the Treasury was melting away. But there wasn’t that much of a partisan divide over the issue. In fact, early October’s limited government, fiscal conservative darling, Rep. Thaddeus McCotter (R-MI), who gave one of the most compelling, moving, forceful, principled floor-speeches I’ve ever seen on the House floor in opposition to the financial bailout, is this month’s political hack. Apparently, his principled opposition to bailing out the “very people who caused this problem” doesn’t extend across state lines into Michigan. What a bitter disappointment he turns out to be.

The failure to garner enough support for a bailout bill was mostly the result of intra-party squabbling between factions within the Democratic Party — the Greens and the Laborites. The Greens view Detroit as carbon-belching heathens who must be brought to their knees before the almighty Sierra, Goddess of Flora and Fauna. The Laborites view the Greens as the Palinistas view those big shots who go to college to learn and stuff.

A Wall Street Journal editorial today picks up on this theme, which colors the battle between Henry Waxman (of the ascendant Greens) and John Dingell (of the declining Laborites) for Dingell’s long-held seat as top Democratic on the House Energy and Commerce Committee. Much of the same cultural and class animus that popularly defined the Red State-Blue State divide is very much evident within the Democratic Party itself and could mean that we have some form of divided government after all.

Credit the Bush administration for helping to drive this wedge between the factions and sideline the bailout — for the time being at least. “Credit” might be too strong a word since, after all, it was the Bush administration that concocted the mother of all bailouts in the first place. The automakers just want a teensy-weensy $25 billion, or 3.57%, of the $700 billion pot.

But here’s how the administration played a role. First, Treasury secretary Henry Paulson claimed he was unauthorized to allocate any of the $700 billion to the automakers under the TARP law. Congress didn’t challenge that interpretation too vehemently, and set out to rewrite the law to specifically authorize $25 billion for Detroit. But the White House indicated it wouldn’t sign that legislation, but that it would go along with a bill to redirect the $25 billion already authorized under the energy bill for Detroit to “retool” its plants to produce higher-mileage vehicles. This seemed the more workable political solution, until the Waxman faction objected and mobilized. Prospects for a deal went south after that.

The corporate jet scandal was actually a gift to Pelosi and Reid. Instead of the focus being on the fractiousness of the Democratic Party and the question of whether those two can herd cats, the press had a field day with the spectacle of top hats and tails in soup kitchens.

It’s revealing, though, that the congressional leadership didn’t once ask how the $25 billion infusion would be used to right the ship until AFTER the bailout idea was made toxic by the CEOs’ choices of transportation. It should have been the very first question. Other than helping to cover operating expenses for four to five months, how is $25 billion going to rescue three companies that are bleeding $6 billion per month? Seems pretty straightforward. When you go to a bank for a loan and say you’re bleeding cash and facing imminent collapse, should you expect the loan officer to write you a check? Shouldn’t the banker at least be interested in a business plan?

Well, the idea of a business plan didn’t even strike Pelosi and Reid until yesterday, when they told the CEOs to go back, sharpen their pencils, and show us how you’ll succeed. In a statement this afternoon reported in CQ Daily, which reveals how utterly lost in space the leadership is when it comes to business, Pelosi said she and Reid “would make it clear [to the three auto companies] they want to know how the automakers ‘plan to make investments in the advanced technologies, so that they can compete in the marketplace, so that people will want to buy their cars.’ The letter will also reiterate demands for accountability, including a ban on bonuses for executives earning more than $200,000 and a freeze on dividend payments.”

Then, as though to give the Justice Department’s antitrust division one last task, Pelosi invited the companies to collude. About providing their business plans, she said, “They could do it singly, jointly or severally, however they wish. But we need to have that response” (as though it were akin to a permission slip signed by a parent).

Maybe someone will say I’m being too harsh. But this dismissive tone, this lack of understanding the purpose of business plans, this conflating of irreconciliable objectives (like stopping the immediate financial bleeding by investing in green car technology), all suggest that the congressional leadership, and probably most Greens and Laborites, don’t really care one bit what happens to the companies, as long as their own political objectives are served.

The Greens want to show the world that consideration of production costs and consumer demand is passé. It’s all about the product being made quietly and invisibly. Someone should remind them there were no latte stands in the Stone Age either.

The Laborites seem most concerned about making sure the unions persist, but act as though the companies’ health has nothing to do with the unions’. If they really cared about saving the Detroit automakers, they would support the bankruptcy process. The automakers cannot survive much longer unless they shred their labor contracts. But if they shred the contracts, union management will have less to give to the Laborite politicians. It’s tough business these days being a leach on a leach.

The Visa Waiver Program: Our Achilles’ Mouth

Senator Dianne Feinstein (D-CA) and Joseph Lieberman (D-CT) have slammed ($) DHS Secretary Michael Chertoff for certifying the expansion of the Visa Waiver program. Under the expansion, citizens of 34 countries that satisfy certain security and immigration-related requirements do not have to obtain visas to enter the United States for up to 90 days. The seven newly added countries are: the Czech Republic, Estonia, Hungary, the Republic of Korea, Latvia, Lithuania, and Slovakia.

In criticizing Chertoff and the Visa Waiver Program, Senator Feinstein is quoted by National Journal saying, “I continue to believe that the visa waiver program is our Achilles’ heel.”

Achilles is the mythical fighter in Greek and Roman poetry who was killed by an arrow striking his heel where there was a void in his armor. It’s a totally inappropriate metaphor for the security of the United States against terrorism.

The United States is a large and vibrant nation, and our security is nothing like the security of a lone fighter. A lone fighter may die if his armor fails, but there is no realistic strike against our body politic that could do us in. (Never mind what terrorists and their fear-monger allies concoct in their heads.)

The United States is too large and strong to be taken down by anything any terrorist could execute, and our country is too capable of self-repair. (This all assumes that ‘leaders’ like Feinstein don’t attack the mechanisms of self-repair - the nation’s vital organs of freedom, prosperity, and decentralized power - in the wake of any attack).

The error in Senator Feinstein’s thinking is significant because it drives the expectation that any harm coming to the country from terrorists is potentially fatal. This falsehood drives a zero-risk attitude about terrorism that is ultimately self-destructive. Excessive security around our trade and travel will hinder it and deny us its benefits. We hurt ourselves - shoot ourselves in the foot, as it were - if the costs imposed by security measures are greater than the risks they avert.

Restricting travel from countries in the Visa Waiver Program is like Achilles putting armor on his mouth. Doing so forecloses the possibility of being struck by an arrow in the mouth, yes, but it also makes it harder to breath and impossible to eat.

Security is hard, and metaphors like “Achilles’ heel” don’t help people understand the problems.

Secretary Chertoff has done the right thing by starting to re-open the country to trade and tourism. He should be commended rather than skewered. Senators Feinstein and Lieberman are wrong.

What Is an American Car?

Before “loaning” billions more in taxpayer money to some very bad credit risks, simply because they are old American brands associated with Detroit, we might ask what distinguishes these companies from others.

The not-so-big three are certainly are no less global than, say, Honda.  General Motors gets 44% of its revenue from other countries and Ford gets 53%, according to Forbes (April 21).  A German company, Daimler-Benz, still owns a fifth of Chrysler, and a group of affluent private investors owns the rest.

An “American” brand tells you little about where all the parts in a car are made.  I was once at a dinner with Lee Iaccoca where I teased him about my Dodge Stealth, made in Japan by Mitsubishi.  Similarly, today’s Chevy Aveo is imported from Daewoo in South Korea.  Yet Hyundai has a plant in Alabama.

Cars.com found only four cars and six light trucks with a domestic content (meaning US or Canadian) above 75%.  That list includes the Toyota Tundra and Sienna and the Honda Odyssey.  Other Honda’s have a 60-70% domestic content, barely missing the cut.

The “Detroit” metaphor for primarily domestic vehicles is also inappropriate.  Among the remaining seven vehicles with a very high domestic content, three are made outside Michigan —the Chevy Malibu from Kansas and Cobalt from Ohio, and the Ford Explorer from Kentucky.  Ford’s F-150 truck might be made in Michigan or Missouri, the Chevy Silverado in Michigan or Indiana.

The only strictly “Detroit” cars with high domestic content are the Pontiac G6 from Orion MI and the Chrysler Sebring from Sterling Heights MI.  Consumer Reports says, “The G6 isn’t a very good car” and “The Sebring is one of the least competitive family sedans on the market.”   Yet these are the only Detroit-made sedans with a high domestic content.  Does anyone really think taxpayer subsidies can save cars like that?  And why should the federal government offer special deals for uncompetitive cars made in Michigan, thus tilting the playing field against better cars made in, say,  Ohio, Tennessee or South Carolina?

As a Chicago Fed study documents, “the auto industry is increasingly characterized by international carmakers, as well as by parts suppliers that operate in multiple countries. Against a background of global supply chains, it has become quite difficult to identify and label products such as autos by nationality. Overall, the processes of globalization of markets and supply chains have served to noticeably lower prices of new cars for American consumers and businesses. On a quality-adjusted basis, for example, new vehicle prices have been falling at an average annual rate of 0.5% over the current decade. Importantly, higher quality and gains in longevity are among the improvements in today’s vehicles.”