Obama and Original Sin

After the 1992 election, the philosopher Jean Bethke Elshtain wrote:

Those who assert that the cultural questions somehow got put behind us in 1992 because economic matters were first and foremost the issues and themes of the presidential election are pushing an illusory hope. The cultural questions — abortion, family values, drugs, and race relations — were all joined in 1992, often in language that underscored just how much people of all political persuasions still look to government as the remedy for every ill, personal and political.

The problem with such reliance is this: democratic politics can reasonably offer hope, but it cannot promise deliverance. Yet deliverance, a dramatic and rapturous sea change to bring in the new and sweep out the old and corrupt, is what loud voices and dominant groups on both the left and the right seek.

The very gridlock that the two major parties and Ross Perot’s angry, antiparty protesters all decried is generated by their own actions in promising deliverance and in deepening cultural cleavages rather than alleviating them by removing some questions from government’s purview, or at least from government’s control as the final arbiter.

One might wonder why the government can offer hope if it cannot provide deliverance. But some things never change.

Among the presidential candidates on offer, Barack Obama most clearly offers deliverance as well as hope. His mixing of religion and politics was clearly on view in a recent debate when he called money “the original sin of politics.”

Should he be elected, Obama will not provide “a dramatic and rapturous sea change to bring in the new and sweep out the old and corrupt.” That is, he will not provide deliverance because doing so is beyond the power of the government or at least beyond the ambit of a constitutionally limited government. Should Obama succeed in ridding politics of “money” (that is, of private financing of campaigns), we will live in a world where the government and its officials control all financing of political struggle. Some would find therein deliverance. Most would not.

In Obama’s defense, you can say that he no doubt truly believes he can bring deliverance to “the people.” And some voters no doubt are demanding deliverance through public financing and other, more coercive forms of the Lord’s work. But Obama is a thoughtful man, and I wonder why he does not realize that his promise of deliverance will frustrate his larger hope to restore faith in government.

As Elshtain suggests, Obama’s inevitable failure to provide deliverance will foster more distrust in the federal government. And rightly so. Such distrust is warranted at any time, not least because promises of deliverance through coercion inevitably violate individual rights. Still, it is puzzling why a thoughtful man like Obama does not conclude with Elshtain that “removing some questions from government’s purview” might be a better way to offer hope,  if not deliverance.

Insurer Plans to Escape Germany’s High Taxes

Tax-news.com reports on the likely shift to Ireland of a major German insurance company, Hannover Re. This is part of a trend as companies of all types are moving out of high-tax nations, with Ireland and Bermuda being major beneficiaries. (Interestingly, the article notes that the U.S. states of Vermont and South Carolina are havens for captive insurance companies.)

Hannover Re, one of the world’s largest reinsurance companies, is considering switching its operations to Ireland or another low tax jurisdiction, the company’s chief executive told a conference recently. According to Bermuda’s Royal Gazette, Wilhelm Zeller, CEO of Hannover Re, told a press conference at the annual reinsurance gathering, Le Rendez-Vous in Monte Carlo, that the $5.5 billion firm is considering moving from its present base in Germany…. “For us, the ideal location, from a fiscal point of view, would be Ireland,” Zeller stated, although he added that setting up headquarters in Dublin could be costly.

While Ireland’s low 12.5% corporate tax and location within the European Union is a big draw for reinsurance and other companies, Bermuda’s 0% rate of tax has lured many insurance companies to incorporate in the jurisdiction from high-tax countries like the UK. Last year, Lloyds of London underwriting firms Hiscox and Omega set up companies in Bermuda, citing the UK’s 30% income tax and its burdensome regulation. They were swiftly followed in January 2007 by another Lloyds firm, Hardy Underwriting plc.

…The 82 new Bermuda incorporations for 2006 compare very favourably with figures recorded by other jurisdictions such as Vermont, which had 37, South Carolina with 29, and the Cayman Islands with 50.

Growing Trade, Shrinking Deficit

The Commerce Department reported this morning that America’s current account deficit checked in at $190.8 billion for the second quarter of 2007. The number will undoubtedly provide fodder for critics of trade who see exports as the sole measure of success in the global economy and rising imports as a sure sign of failure.

The latest report is certainly newsworthy, but not in the negative way that many pundits and politicians will portray it.

The current account represents the broadest measure of America’s trade with the rest of the world, accounting for not only trade in goods but also services, investment income (such as interest, dividends, and profits), and unilateral transfers such as foreign aid and remittances.

The real news in today’s report is that America’s trade with the rest of the world continues to climb to new records despite the hand-wringing by many members of Congress and misguided pundits in cable TV land. Although the overall deficit declined slightly from the first quarter, our imports from the rest of the world are up 8 percent from a year ago and our exports are up 13 percent.

And although the rest of the world owns about $2.7 trillion more in U.S. assets than Americans own in assets abroad, we continue to earn more on our total investments abroad than foreigners earn on their investments here — about $16 billion more so far in 2007.

In a speech in Germany earlier this week, Federal Reserve Board chairman Ben Bernanke explained why running a current account deficit isn’t necessarily bad news for the U.S. economy, at least in the short to medium run. Among his main points:

First, these external imbalances are to a significant extent a market phenomenon and, in the case of the U.S. deficit, reflect the attractiveness of both the U.S. economy overall and the depth, liquidity, and legal safeguards associated with its capital markets….

Second, current account imbalances can help reduce tendencies toward recession, on the one hand, or overheating and inflation, on the other….

Third, although the U.S. current account deficit is certainly not sustainable at its current level, U.S. liabilities to foreigners are not, at this point, putting an exceptionally large burden on the American economy.

Check out the Center for Trade Policy Studies website for more on what the trade deficit means and what it doesn’t mean.

Bush and Iraq: The Story vs. the Headlines, Part II

President Bush generally got the headlines that he wanted from his speech to the nation last evening:

Alas, the country didn’t get the policy it wanted — and needed — as many of the stories behind the headlines showed. (Kudos especially to the Post’s Glenn Kessler for his “Fact Check.”)

A majority of Americans favor a timeline for withdrawing troops from Iraq, and 55 percent, according to an ABC News/Washington Post poll, would support legislation mandating that all combat forces be removed from Iraq by next spring. Given that Congress lacks the votes to force the president’s hand, it is highly unlikely that the public will get its way.

The support for a withdrawal timeline — any withdrawal timeline — is understandable. Americans want to know “how this ends.” In a FoxNews/Opinion Dynamics poll taken after Gen. David Petraeus and Ambassador Ryan Crocker had completed some of their congressional testimony, only 24 percent of respondents believed that the U.S. should “pull out [only] after Iraqi troops are capable of taking over.” In other words, more than 3 in 4 rejected the conditions-based withdrawal strategy that the president has advanced since the start of the war. (Remember “We’ll stay as long as necessary, and not a day longer” and “As they stand up, we’ll stand down”?) The president’s speech last night reaffirmed that we would only leave when the Iraqis were capable, a process that most experts believe will take many years.

Six in 10 Americans believe that the costs we have already paid far exceed the benefits that we will receive from invading and occupying Iraq. And they now know, as a result of the Petraeus/Crocker testimony from earlier this week, and from the president’s speech last night, that the costs of this war will continue to mount, at least through the end of the Bush presidency.

Now That’s an Interesting Lede

From the cover story in the September 3rd Weekly Standard:

The fascists are coming! Or rather, they’re already here, installed in the White House, planning like mad to subvert the Constitution and extend their reign in perpetuity, having first suppressed and eviscerated all opposition and put all of their critics in jail. Thus goes the rant of America’s increasingly unhinged left. If only, sigh many Bush partisans, wondering when this administration will get out of the fetal position and show some fighting spirit. [Emphasis in original.]

Now of course the Weekly Standard writer is kidding here. I’m sure of it. The folks at the Standard get a kick out of playing off the left’s caricature of neoconservatives as warmongering fanatics who think civil liberties are for sissies. This 2002 Weekly Standard piece, “The Case for the Empire,” is a classic of the genre. The writer is clearly having us on when he explains that, in the Star Wars movies, Darth Vader is actually the good guy:

the truth is that from the beginning, Lucas confused the good guys with the bad. The deep lesson of Star Wars is that the Empire is good….

the most compelling evidence that the Empire isn’t evil comes in “The Empire Strikes Back” when Darth Vader is battling Luke Skywalker. After an exhausting fight, Vader is poised to finish Luke off, but he stays his hand. He tries to convert Luke to the Dark Side with this simple plea: “There is no escape. Don’t make me destroy you… . Join me, and I will complete your training. With our combined strength, we can end this destructive conflict and bring order to the galaxy.” It is here we find the real controlling impulse for the Dark Side and the Empire. The Empire doesn’t want slaves or destruction or “evil.” It wants order.

Funny stuff, and entirely tongue-in-cheek. Right?… Right?

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The Problem with Betting on Every Horse

Dick Komer of the Institute for Justice takes issue today with a recent series of NRO op-eds by Cato’s Adam Schaeffer. I’m sure Adam will want to address some of the legal niceties he raised, so I’m going to restrict myself to explaining why Dick and I see the big picture on school choice policy very differently.

Dick’s position, which is the norm in the school choice movement, is captured by the title of his piece: “Educational Freedom by Every Means Available.” Dick argues that it is “unnecessary” and “premature” to favor some school choice policies over others. I disagree, and here’s why:

Like parents saving for their kids’ college years, advocates of educational freedom have limited resources. And like those parents, we have many different investment options — with different returns and different levels of security. What the “any choice is a good choice” mantra implies is that we should be indiscriminate in the way we invest — that we simply don’t know enough to prefer one school choice policy over another.

That is not the case. In modern times, international experiences with various forms of school choice date back nearly a century. Other relevant precedents in comparative school governance reach back millennia. There is enough evidence – both qualitative and quantitative – to compare our policy options and determine which are most likely to yield real, lasting dividends, and which have serious and as yet unresolved problems. Because that evidence exists, I see it as my duty as a policy scholar to study it and to make recommendations based on it; just as it is the duty of investment advisors to counsel parents on the most suitable investment options for their own children’s futures. If I did anything less I would consider myself guilty of professional malpractice.

Dick is right that states differ and that the legal impediments to vouchers vary among them. In some states, the legal barriers to enacting vouchers appear to be no higher than those to enacting tax credits. But legal barriers to passage are only one of the many respects in which vouchers are more problematic than education tax credits. The central difference between the policies – that vouchers are public funds while non-refundable tax credits are not – leads to a host of substantive differences in their desirability.

As I have already argued at length, and as Adam will argue in a forthcoming policy analysis, the use of government funding has caused existing voucher programs to begin their lives with much more intrusive regulations on participating schools. Direct parent funding is also associated, in the econometric literature, with greater school efficiency and responsiveness to the demands of families. The compulsion of all taxpayers to fund every kind of government approved voucher school also creates social tension over which sorts of schools will be approved, and adds an incentive for interest groups to lobby to exclude types of schooling they find objectionable. Tax credits provide taxpayers with the freedom to direct their educational funding as they see fit, alleviating this problem. Adam has also pointed to polling data and developed political arguments and evidence suggesting that tax credits are more popular with voters and more likely to mobilize constituencies for their long term preservation and expansion.

Finally, Dick is mistaken if he believes that Adam or I want to permanently and universally foreclose on the voucher option. We wouldn’t even if we could. We respect individual freedom, the marketplace of ideas and the laboratory of federalism. States will pursue different school choice policies and will learn from each others’ experiences. But, given the wealth of existing evidence comparing alternative school governance and funding arrangements, we feel it is counterproductive for the school choice movement not to focus its resources where they can best be invested. Betting on every horse, including the ones that you can see limping around the paddock before the start, is no way to invest for the future of American children.

More Bush Administration Lawbreaking

Over at Ars Technica, I report on the latest allegations of illegal activities by the Bush administration. Back in March, a Department of Justice report revealed that the FBI had sent hundreds of letters to telecom providers requesting that due to “exigent circumstances,” the providers turn over customer records without a warrant. The FBI later acknowledged that these letters were improper (read: illegal) and announced that the use of those “exigent letters” had been suspended.

Now, thanks to a freedom-of-information request by the Electronic Frontier Foundation, we learn that some of the letters not only requested call records for specific phone numbers, but also asked the providers to “provide a community of interest” for each phone number. It’s not clear exactly what information was provided in response to that request, but in a Monday blog post, EFF’s Kurt Opsahl argues that the request was almost certainly illegal—and would have been illegal even if they had been made as part of a legally-authorized warrant or national security letter.

“We need a new word for this,” Opsahl writes, “what do you call an illegality piled on top of another illegality? Illegal squared?”

Asked about the latest allegations of executive branch lawbreaking, White House Homeland Security Advisor Fran Townsend pointed to the creation of a new “compliance unit” in the FBI. It’s good to hear the FBI is taking the law so seriously, but I thought the Constitution already provides for a “compliance unit.” It’s called the judicial branch.