The War on Complacency

Secretary of Homeland Security Michael Chertoff is worried that we are letting our guard down. In the current issue of the Armed Forces Journal, he writes: “Among the security challenges America faces in the future, there is none greater than the problem of complacency.”

Some would call that good news. All the threats that we are told to fear — Iran, EMP pulses in the atmosphere, hackers, rusty Russian ships sailing to Venezuela, Bill Ayers — are apparently less worrisome than our failure to worry sufficiently about them. Doesn’t that mean we’re safe? Can we have a parade?

But note the Catch-22. That thought is itself the trouble. Safety leads you to think that you’re safe, which leaves you vulnerable. Then they get you. Safety is fleeting because it allows its own destruction. That’s some catch.

If complacency is the problem, then those who argue that we are safer than people like Michael Chertoff say are part of the threat.

I am particularly guilty. I have promoted complacency in the face of terrorism:

Terrorists, who get their name from an emotion, are psychological warriors. They make fear. By telling Americans in every corner of the nation to plan for attack and stay eternally alert, we deliver the terrorists’ message, at least to those still listening to their government’s warnings. If combating terrorists is war, it is primarily a psychological one, where the stakes are as much the American psyche as safety alone.

Victory is the return to normalcy, not for the intelligence agencies and the FBI, but for the man in the street. Victory is persuading — or permitting — regular Americans not to be afraid. Conventional pundits of homeland security worry that the public will become complacent. We should worry that it won’t.

Before they take me away, I want to clarify my position. I am only for some complacency.

For example, Secretary Chertoff is complacent about many dangers that worry me. His article sings the praises of US-VISIT, the program where we take the fingerprints of nearly all foreigners legally entering the United States. He is complacent about the threat of treating immigrants and tourists — who support our economy, enliven our universities, and start many of our most successful companies — like criminals. The article boasts about DHS’s Improvised Explosive Device Awareness campaign but is complacent about the cost of preventing the use of a weapon that has never been used in the United States. Chertoff mentions Project Bioshield, but he is complacent about the danger that our efforts to combat bioweapons are themselves heightening the risk of attack by spreading knowledge of the feared technology. And he is complacent about the danger that spending tens of billions to combat bioterrorism takes resources from efforts to fight diseases that kill infinitely more Americans (infinite because we are dividing by zero in most years) .

Elsewhere, Chertoff called terrorism a “significant existential threat” — existential was apparently an insufficient qualifier. He evidently remains complacent about the danger of that sort of threat inflation.

Something Smells Fishy

I don’t know if a sushi robot is really a necessity for the Los Angeles Unified School District. I strongly suspect it isn’t, but I don’t know enough about the state of modern chef-ing to say for sure that it isn’t a must for culinary arts instruction. Even if it is, though, this story stinks of bureaucratic incompetence. If truly necessary, you’d think some sushi teacher somewhere would be screaming “where in California is my CAL Roll 9000!?”

On the other hand, if no one noticed that the LAUSD Jawas failed to drop off their Roll2-D2, why the heck was it ordered in the first place?

Something just doesn’t smell right here.

The End of Jacob Weisberg

In an article for Slate (another version appears in Newsweek) entitled “The End of Libertarianism,” Jacob Weisberg mocks libertarians and other free-market supporters for arguing that interventionist government policies contributed to the financial crisis. In italicized exasperation he cries, “Haven’t you people done enough harm already?” According to Weisberg, it’s already clear that, when it comes to what caused the meltdown, “any competent forensic work has to put the libertarian theory of self-regulating financial markets at the scene of the crime.” Consequently, he argues, libertarians in general have now been utterly discredited. “They are bankrupt,” he concludes, “and this time, there will be no bailout.”

In firing this broadside, Weisberg poses as the pragmatic, empirically minded anti-ideologue. In fact, he is engaging in the lowest and most intellectually trivial form of ideological hack work.

As every good hack does, he bulls ahead with completely unjustified certainty. We’ve just experienced a global disruption of financial markets on a scale not seen in seven decades. And we’re still in the middle of it: the ultimate extent, severity, and consequences of this crisis remain unknown. Yet Weisberg can already sum up the story in a single sentence: the libertarians did it!

But consider the fact that it wasn’t until Milton Friedman and Anna Schwartz’s Monetary History of the United States — published in 1963, three decades after the event — that our contemporary understanding of the causes of the Great Depression began to take shape. That understanding has been further refined by contributions from, among others, Ben Bernanke and Barry Eichengreen during the 1980s and ’90s.

So serious people will be debating what triggered the current crisis for a long time to come. I’ve been reading voraciously in recent weeks, trying to get some handle on what’s going on, and I can tell you that there is nothing like a consensus among scholars yet — and certainly not a consensus in favor of some simple, monocausal explanation.

With regard to government interventionism as a cause of the crisis, Charles Calomiris and Peter Wallison have marshalled strong evidence that Fannie and Freddie played a major role in inflating the real estate bubble. Despite the fact that these two gentlemen have forgotten more about financial markets than Weisberg will ever know, Weisberg dismisses their analysis as not only wrong, but risible.

Here’s what I think, at least at this point. I think the whole system failed. Without a doubt, private actors succumbed to bubble psychology and perverse incentives, and their risk-taking grew increasingly reckless. Yet Weisberg’s simplistic morality tale that good prudent liberals were foiled by go-go free-marketeers doesn’t come close to mapping reality accurately. When exactly did Democrats try to arrest and reverse the steady relaxation of lending standards? When did they try to rein in the GSEs? Meanwhile, European banks are being battered by this crisis as well. Does anybody really think that European financial regulators are closet libertarians?

Far be it from Weisberg, though, to let such inconvenient questions get in the way of his cheap ideological point-scoring. Indeed, he isn’t content just to blame libertarianism for the financial crisis. He goes so far as to claim that libertarianism as a whole has now been decisively repudiated. Wow, talk about contagion! Because of what some people said about financial regulation, we no longer have to pay any attention to what other people say about trade, health care, energy, taxes, federal spending, etc. Here Weisberg further burnishes his hack credentials by demonstrating his facility with the wild, unsubstantiated smear.

To be truly shameless, a hack needs to mix his smears with double standards. And, bless him, Weisberg comes through once again. If one (alleged) error means we never have to listen to someone again, why is anybody still listening to Jacob Weisberg? After all, Weisberg admits that he “blew the biggest foreign-policy decision of the past decade” by supporting the Iraq war. (Full disclosure: I blew it, too, but my colleagues at Cato — whom Weisberg wants to write off for all time — got it right.) By his own standard, then, Weisberg should have had his pundit card permanently revoked.

All too aware of my own fallibility, I’m a more forgiving sort. But with this sloppy, shoddily reasoned attack on me and my colleagues (Cato and Reason, where I’m on the masthead as a contributing editor, are both mentioned by name), Weisberg is definitely testing my limits.

McCain Unleashes His Inner Goldwater

Dropping in the polls and running out of time, John McCain has finally gone on the offensive against Barack Obama on core Republican values that appeal to libertarians, conservatives, and Reagan Democrats. In his Saturday radio address he seized on Joe the Plumber’s question to candidate Obama:

My opponent’s answer showed that economic recovery isn’t even his top priority. His goal, as Senator Obama put it, is to “spread the wealth around.”

You see, he believes in redistributing wealth, not in policies that help us all make more of it. Joe, in his plainspoken way, said this sounded a lot like socialism. And a lot of Americans are thinking along those same lines. In the best case, “spreading the wealth around” is a familiar idea from the American left. And that kind of class warfare sure doesn’t sound like a “new kind of politics.”

This would also explain some big problems with my opponent’s claim that he will cut income taxes for 95 percent of Americans. You might ask: How do you cut income taxes for 95 percent of Americans, when more than 40 percent pay no income taxes right now? How do you reduce the number zero?

Well, that’s the key to Barack Obama’s whole plan: Since you can’t reduce taxes on those who pay zero, the government will write them all checks called a tax credit. And the Treasury will cover those checks by taxing other people, including a lot of folks just like Joe.

In other words, Barack Obama’s tax plan would convert the IRS into a giant welfare agency, redistributing massive amounts of wealth at the direction of politicians in Washington. I suppose when you’ve voted against lowering taxes 94 times, as Senator Obama has done, a new definition of the term “tax credit” comes in handy.

At least in Europe, the Socialist leaders who so admire my opponent are upfront about their objectives. They use real numbers and honest language. And we should demand equal candor from Senator Obama. Raising taxes on some in order to give checks to others is not a tax cut it’s just another government giveaway.

That just might remind lots of voters why they don’t like to elect Democrats. Of course, it might work better if the Republicans hadn’t raised spending more than a trillion dollars. And if the current Republican administration hadn’t just nationalized the banks. And if McCain himself didn’t have a health care “tax credit” that also means that “the government will write them all checks.”

Get Government Out of Housing

My final two installments in my Los Angeles Times debate are available. On Thursday, I explained why Fannie Mae and Freddie Mac should be shut down. On Friday, I broadened the argument to explain that eliminating government housing programs is the best way to protect against future bubbles.

I also provided some commentary to NPR on the issue of moral hazard. If you like the article, feel free to click “recommended” at the top of the screen so the bureaucrats at the government-financed radio network have an incentive to allow more free market analysis. Perhaps one day they’ll allow someone from Cato to explain why taxpayers subsidizing radio is not a legitimate function of the federal government.

Obama Sides with Big Business over the Little Guy

From an excellent column in The Examiner by Tim Carney:

McCain would end the special treatment of employer-based health insurance, and replace it with a broad tax benefit for all health insurance purchases, whether through your boss or on your own…

The New York Times reported that the U.S. Chamber of Commerce and the Business Roundtable didn’t like the idea of people breaking free from their employer for healthcare. “To some in the business community, this is very discomforting,” Chamber lobbyist Bruce Josten told the Times.

Of course it’s discomforting—it could spur entrepreneurship and boost employee independence. Currently, the tax code punishes you for finding health care outside of your employer, which makes you more likely to stay in your current job, which gives your employer more control over you. Rejected for a raise? You still can’t leave because you need health care. Want to strike out on your own? How will you afford health care for yourself and your employees?…

Small businesses would have a much easier time attracting employees if people owned and shopped for health insurance the same way they own and shop for their car insurance and life insurance—buying it on the market, and owning it regardless of your job.  Entrepreneurs would also strike out on their own more were it not for the difficulty in today’s market of finding insurance outside of your employer.

You see the battle lines here, and they are the same as always: Big businesses want things to stay the same and so they favor government barriers to markets; small businesses want a more level, open playing field, and so they want government to be out of the way—or at least more neutral.

News Flash for Ed Reporters: Yes, Vouchers Have Been Proven Effective

The Washington Post today reports on the presidential debate and the DC education reform connection, leading off with the biggest point of disagreement:

“I’ve got to tell you that vouchers, where they are requested and where they are agreed to, are a good and workable system. And it’s been proven,’ McCain said in an exchange with Sen. Barack Obama (D-Ill.), who opposes the idea.”

The WaPo reporters then claim, “But a U.S. Department of Education study released in June showed that students in the program generally scored no higher on reading and math tests after two years than public school peers.”

This is incorrect. The study found that students in the program did generally score higher. The reporters were confused by the fact that the findings for the whole group of students were not statistically significant at the prescribed cut-off. The researchers were only 91 percent certain (statistically) that the better performance of voucher-program students was due to the program rather than chance, and they had to be 95 percent certain. They did find statistically significant positive findings for some subgroups of students.

Compounding this error, the reporters then quote an education researcher saying, “We have no evidence that vouchers work.” This too is incorrect.

There have been ten analyses of random-assignment voucher program experiments (random-assignment being the gold-standard of testing treatment effects). All ten demonstrate positive voucher effects, 9 out of 10 find statistically significant effects for at least some subgroups, and 8 out of 10 find statistically significant effects for the whole voucher group.

And the parents involved are extremely happy with it and think their kids are safer. And the vouchers cost a third or less than what is spent in public schools. Oh, and these programs are all small and some highly regulated, which limits their effectiveness.

There is an embarrassment of solid evidence that vouchers are an effective, popular, and extremely efficient education reform.