Superlative REAL ID Editorial

The Orange County Register has an editorial on the REAL ID Act this morning that captures the issues magnificently. Among other gems:

The big trouble is that there’s no evidence that this Draconian act, even if fully implemented, would be more than a minor inconvenience for a determined terrorist. But having all that information – including copies of birth certificates and Social Security cards – available in one database would make an irresistible target for identity thieves. And it would be a major inconvenience for millions of innocent Americans and a major expense for state governments – meaning taxpayers.

The Register’s conclusion? Congress should “bite the bullet and repeal this useless, intrusive, money-wasting law.”

The War in NATO

My recent op-ed in the Christian Science Monitor argues that the US objective in Afghanistan – preventing the creation of terrorist havens – does not require that Afghanistan become a peaceful, centralized state. I say that’s good news because it’s beyond us to build one. Absent this goal, the push for a surge of US or NATO forces in Afghanistan makes less sense.

I want to add couple points here that I couldn’t fit into the op-ed.

American leaders have lately been telling Europeans to make a bigger commitment to Afghanistan, even though the war is becoming unpopular in much of Europe. For instance, Secretary of Defense Robert Gates gave a speech at a conference in Munich in February where he explained the terrorist threat to the Europeans to get them to send more troops to Afghanistan. He did not say how counter-insurgency in Afghanistan serves counter-terrorism in Pakistan, which is where the terrorists in the region who should concern Europeans mostly live. At least in the short term, 55,000 thousand western soldiers across the border seem more likely to inflame Pakistani extremism than to suppress it.

This hectoring demonstrates the trouble with NATO. Back when NATO had a clear purpose, to defend Western Europe from the Soviets, it made sense to ask the Europeans to do more. The Europeans had an incentive to avoid military spending; to free ride. That was OK with Americans at the start of the Cold War, when we were eager to spark European economic growth as a bulwark against Communism. Once Western Europe got rich, we told them to ante up, in part via publications like the Allied Contribution of the Common Defense.

Most American policy-makers believe that we remain in that Cold War relationship; that our allies are free-riding to a shared goal. But, as Stanley Kober has observed, threat perceptions have diverged, and many Europeans, rather than appreciating our wars, dispute their efficacy. Europeans seem more inclined than Americans to wonder whether the war in Afghanistan is making them safer. By asserting a common cause without providing one, NATO clouds this reality. It deludes us into thinking that our efforts are a favor that the Europeans ought to return.

It has become popular to worry that Afghanistan will destroy NATO. That would be no great loss. Today, the principle effect of NATO and its eastward expansion is to antagonize Russia. The benefit that justifies this antipathy is unclear. How do the military responsibilities that the US has so casually accepted in recent years – to defend Estonia, for example, against Russia – serve US interests? This guarantee, if it’s believed, seems likely to encourage the war it defends against by provoking moral hazard; as the defense we provide our new allies frees them to offend Russia.

The thesis that the prospect of NATO membership spreads liberal values or institutions is plausible, but I’m not convinced. Nor is it clear that NATO matters much in signing up allies for wars. It’s possible we got a few more contributions in Afghanistan by virtue of the alliance, but I doubt it mattered much. The countries that went probably did so because they believed in the mission, not because they are in NATO.

Despite its strategic obsolescence, NATO has proven politically useful on both sides of the Atlantic. However hollow, NATO will survive. What we might lose in Afghanistan are misconceptions about its usefulness.

“Why Don’t You and Him Go Fight?”

The foreign-policy blog buzz of the day is probably the story, linked by Blake Hounshell at FP, and by Noah Shachtman at Wired, about al Qaeda second-in-command Ayman al Zawahiri’s online Q and A recently. Apparently, according to Blake’s excerpts, it’s tough out there for a jihadi:

The general tenor of the questions is sharply critical, so let me boil down the questioners’ main beefs here:

Al Qaeda talks a big game, but never attacks Israel (but we have killed plenty of Jews, Zawahiri responds)
Al Qaeda isn’t doing anything to overthrow the Egyptian regime (it ain’t easy, Zawahiri pleads, but it is inevitable)
Al Qaeda slaughters innocent Muslims (only if they get in the way)
Al Qaeda is too harsh on Hamas (just the leaders who have sold out sharia law, not the “mujahedin”)
Al Qaeda is rumored to be dealing with Iran (a charge Zawahiri has responded to before with a non-denial denial)
Influential clerics and ideologues have denounced al Qaeda (Zawahiri takes great pains to paint two in particular, Yusuf al-Qaradawi and Sayyid Imam al-Sharif, the subject of “Egypt’s Contrite Commander” from FP’s current issue, as Zionist-Crusader stooges)

It’s good to know that these bastards are having at least as tough a time with public diplomacy as we are. Apparently sowing mayhem and blowing up wedding parties is a bad PR move. Meanwhile, Noah Shachtman highlights Mr. al Zawahiri’s thoughts on Iran, whom, if you were listening to John McCain or the Weekly Standard on this stuff, you may have thought was an old pal of aQ:

The dispute between America and Iran is a real dispute based on the struggle over areas of influence, and the possibility of America striking Iran is a real possibility. As for what might happen in the region, I can only say that major changes will occur in the region, and the situation will be in the interest of the Mujahideen if the war saps both of them. If, however, one of them emerges victorious, its influence will intensify and fierce battles will begin between it and the Mujahideen, except that the Jihadi awakening currently under way and the degeneration state of affairs of the invaders in Afghanistan and Iraq will make it impossible for Iran or America to become the sole decision-maker in the region. (emphasis mine)

This sounds an awful lot like the old “why don’t you and him go fight?” strategy to me. Doesn’t seem like you’d be too inclined to push Iran to the brink of war with the United States if you were really working hand-in-glove with Tehran like some have been insinuating.

RIP Herb Alexander

Herbert Alexander was the founder of the study of campaign finance in political science. Long before mandatory disclosure of contributions, Herb published a review of campaign fundraising and spending after each presidential election year. Those volumes remain an invaluable resource for scholars studying American political history. These books were thorough and thoughtful, genuine scholarship on a topic that generates more than a little bluster. I remember reading Herb’s work and thinking what fine work they were, especially considering the law did not mandate disclosure.

I first met Herb in the late 1980s. He had some sympathy in those days for efforts to regulate campaign finance. Later he was much more skeptical, and I like to think it was a skepticism born from experience. I remember a lunch I had with Herb a few years ago. We were discussing some aspect or the other of McCain-Feingold and suddenly Herb said, “You know, John, there’s such a thing as free speech. These people have rights!” Indeed.

Herb was a fine scholar who did his work with integrity and care. He was also a good friend to those who came to know him. I and many others will miss his scholarship and his company.

How States Use Medicaid to Bilk Taxpayers in Other States

Today, the Government Accountability Office (GAO) testified before Congress on the many ways that states use the Medicaid program to defraud (my word) taxpayers in other states.  The following is an excerpt from GAO’s prepared testimony:

GAO has reported for more than a decade on varied financing arrangements that inappropriately increase federal Medicaid matching payments. In reports issued from 1994 through 2005, GAO found that some states had received federal matching funds by paying certain government providers, such as county-operated nursing homes, amounts that greatly exceeded established Medicaid rates. States would then bill CMS for the federal share of the payment. However, these large payments were often temporary, since some states required the providers to return most or all of the amount. States used the federal matching funds obtained in making these payments as they wished…[Such] financing arrangements effectively increase the federal Medicaid share above what is established by law…

Supplemental payments involving government providers have resulted in billions of excess federal dollars for states, yet accountability for these payments—assurances that they are retained by providers of Medicaid services to Medicaid beneficiaries—has been lacking. CMS has taken important steps in recent years to improve its financial management of Medicaid, yet more can be done.

Yes, more should be done.  Congress should reform Medicaid and the State Children’s Health Insurance Program the same way it reformed welfare: eliminate the federal entitlement to benefits, and replace those programs’ matching grants with lump-sum block grants.  That would eliminate many perverse incentives created by those programs, including the incentive to cheat taxpayers in other states.

Those reforms would also be a nice stepping stone toward giving the states full responsibility for maintaining those programs, and getting the federal government out of the business of providing medical care to the poor entirely.

Sentence of the Day

Mandarin of the Washington Establishment, Joe Klein of Time magazine appears to have had just about enough of Fred Kagan’s writing on Iraq:

On the day that John Yoo’s remarkable torture memo is released, this foolishness is a reminder that none of these people–none of the vicious, mendacious, naive, simplistic, unapologetic, neo-colonialist ideologues who promulgated this disaster–should have even the vaguest claim on the time or tolerance of fair-minded people.

Back story on the abominable green-lighting of torture is here. Kagan article on which Klein was commenting here.

Oil Subsidies in the Dock

Yesterday, Congress summoned the heads of BP, Shell, Chevron, ConocoPhilips, and ExxonMobil to defend the prices they’re charging at the pump and the subsidies they are receiving from the federal government. The former issue is of less interest to me than the latter.

The main issue is the so-called Section 199 tax credit passed in 2005. The credit is available to all domestic manufacturers - not just to oil and gas companies - and it allows the oil industry to write-off $13.6 billion over ten years that might otherwise be sent to the federal treasury. While a good case could be made to get rid of Section 199 in toto – the feds shouldn’t be in the business of artificially making some business activities more economically attractive than others – limiting that deduction for oil and gas companies and oil and gas companies only will compound the underlying economic distortion and encourage investors to put relatively less money in oil and gas production and more money in other industrial sectors. How is that a good thing with oil prices topping $100 a barrel?

Oil companies are already paying a staggering tax bill. In 2006, for instance, big-bad ExxonMobil faced an effective tax rate of 44 percent on a profit margin of around 11 percent, a figure that actually understates things because corporate revenues sooner or later find their way to oil company employees, contractors, shareholders, and those who do business with the same, and that revenue is taxed again via the personal income tax.

“So what?” you ask? Well, the more you tax “Big Oil,” the less return investors will get on money plowed into oil production. The less return on investment, the less investment there will be. Less investment equals less production, and less production equals higher prices. This is fact, not theory. Analysts at the Congressional Research Service report that the 1980 Crude Oil Windfall Profits tax reduced domestic oil production by 3-6 percent and increased oil imports by 8-16 percent for exactly that reason.

If the Congress were really interested in ending oil and gas subsidies, it could eliminate preferential tax treatment afforded intangible domestic drilling expenses, increase the amortization period for geological and geophysical expenditures from five years to seven, end preferential expensing for equipment used to refine liquid fuels, close the exemption from passive loss limitations for owners of working interests in oil and gas properties, and eliminate accelerated depreciation allowances for small oil producers, natural-gas distribution pipeline investments, and expenditures on dry holes. Such a plan would reduce – rather than compound – economic distortions produced by the tax code and deliver about $8.3 billion for the Treasury over 10 years. Congress is presumably less inclined to offer such a plan because those subsidies are far more important to “Little Oil” than they are to their “Big” brethren, and it’s the former – not the latter – that has most of the political clout in Washington.

Regardless, if getting rid of subsidies is such a good thing, then why does Congress propose to take those subsidies away with one hand but to reallocate them to the renewable energy business with the other? If renewable energy is economically competitive, it doesn’t need the subsidy, and if it’s not economically competitive now – with energy prices setting records across the board – then what makes anyone think that federal subsidies will make any difference? After all, they never have in the past. Ethanol has been lavished with government subsidy for 30 years, yet ethanol is still about $1.20 per gallon more expensive than conventional gasoline on wholesale markets last week after we adjust for the differential in energy content between the two. Nuclear energy has lived off a plethora of federal subsidies for five decades now, yet rather than being “too cheap to meter,” it’s still more expensive than any other conventional source of electricity once we account for the cost associated with building the reactor. Examples of similar subsidy boondoggles are legion.

Getting rid of energy subsidies is a fine thing, and Democrats are right to argue that those subsidies are even less warranted at a time when energy prices – and thus, energy profits – are relatively high. Too bad they aren’t serious about translating their rhetoric into legislative reality.