So You Don’t Like Marketing, Huh?

Many of my privacy-advocate friends were pleased by the restrictions on uses of health data for marketing that went into the giant “economic stimulus” bill. (Germaneness? Not many people even know what that means around here.)

It’s a sensitive area, no doubt, and health information should be handled carefully and discreetly, but direct marketing is one of the best ways to get information about new treatments to people with diabetes, arteriosclerosis, depression, and hundreds of other diseases and conditions.

Heaven forbid that new parents should be subjected to marketing like this:

Where can I sign up to have my health information made available for marketing?

New Podcast: ‘Prospects for Drug Policy Reform’

Federal drug policy has changed only slightly in the last 30 years, but Ethan Nadelmann, executive director of the Drug Policy Aliance, an organization that promotes policy alternatives to the drug war, says he’s optimistic about the future.

He spoke at the Cato Institute this week to address the increasing violence in Mexico between the government and drug cartels. In today’s Cato Daily Podcast, Nadelmann discusses how the nation’s approach to drug policy could change under the new administration:

I’m feeling strangely optimistic these days. I think part of it is that Obama’s coming into office has just opened up a sense of something new being possible… These Democrats—Pelosi, George Miller, Henry Waxman, John Conyers, Barney Frank, and others—they understand that the drug war is a failure. They’re not going to show real leadership on this issue in the short-term future, but there’s at least an understanding about what’s so fundamentally wrong.

Talking up a Trade War

It seems the media are so obsessed with romanticizing the 1930s that a good trade war is all we need to complete the effect. Today’s Washington Post contains yet another trade scare story, the contents of which don’t even come close to supporting the bold headline or the lead.

“U.S.-China Trade Ties Erode Amid Accusations” is the attention grabbing headline, presumably chosen by someone other than the story’s writer, Ariana Eunjung Cha. But Ms. Cha is also guilty of promising her readers more than she delivers. “The global financial crisis is bringing out the worst in the trade relationship between the United States and China” is the story’s lead.

Here’s her supporting point number 1:

U.S. Treasury Secretary Timothy F. Geithner accused China of “manipulating” its currency, vowing in written testimony submitted for his confirmation hearing that the United States would act “aggressively” to remedy the situation.

Excuse me for not gasping, but I find that example rather bland. Legislation to compel China to allow the yuan to rise has been considered in every Congress since 2003. It’s nothing particularly new. Geithner was testifying before Senators who has sponsored some of those currency bills, and his uncertain confirmation prospects probably meant that he new what the committee wanted to hear.

Besides, later in her article, Cha concedes about Geithner’s testimony that:

The comments were later tempered by the Obama administration saying it hadn’t made any formal decision on the issue and Obama discussed the remarks with Chinese President Hu Jintao in a telephone call shortly after taking office.

Supporting point number 2:

The U.S. Trade Representative’s office, in a harshly worded and wide-ranging complaint to the World Trade Organization in December, alleged that China uses cash grants, cheap loans and other subsidies to illegally aid its exporters.

So a Bush Administration action from December is her second most compelling piece of evidence that the ‘financial crisis is bringing out the worst in the trade relationship”? Bringing cases to the WTO, instead of passing into law provocative unilateral trade sanctions (which scaremongering like Cha’s article is likely to encourage), is the ultimate sign of respect for the system. It is the proper way to resolve trade disputes, and I am positive that the Chinese are not affronted by that approach.

Supporting point number 3:

China, for its part, has bashed the “Buy America” program embedded in the just-passed stimulus package, calling it “poison to the solution” of the global economic crisis.

Well who hasn’t? The Canadians said the same thing and President Obama was in Ottawa yesterday assuring Prime Minister Harper that our countries remain best buds.

Supporting point number 4:

At the World Economic Forum meeting in Davos three weeks ago, Chinese Premier Wen Jiabao, without naming the United States explicitly, blamed the financial crisis on “unsupervised capitalism.”

Now them’s fightin’ words. Time to shut the borders to Chinese imports and close down all those American-owned factories in Shenzhen.

But the most compelling piece of analysis supporting the assertion that “U.S.-China Trade Ties Erode Amid Allegations” is supporting point number 5:

The crisis has pushed the China-U.S. relationship to a flash point. From now on, it will either become more stable or more confrontational,” said Mei Xinyu, a trade expert with the Chinese Commerce Ministry’s research arm.

Yes, and in 25 years I’ll be either alive or dead.

The remainder of the article goes on to cite old parochial grievances, clichés really, like U.S. textile industry complaints about a surge in Chinese imports or steel industry complaints about dumping and subsidization. Whining for protection by the textile and steel industries is nothing new. It has nothing to do with the financial crisis or global demand contraction per se.

But what is more troubling than these perennially parasitic industries demanding wealth transfers from unsuspecting Americans is the willingness of mainstream media to accept their adversarial narrative as an objective worldview.

Topics:

Week in Review: Deficit Spending, Troop Increases and More Auto Bailouts

With a Stroke of a Pen, Future Generations a Trillion More in the Red

Now that President Obama’s $787 billion spending measure has become law, will the plan work? Senior Fellow Richard Rahn takes a look back to see if history can offer guidance on whether this massive intervention of federal money will pull us out of the recession, or make things worse.

When President Obama signed the bill this week, many of the 1996 welfare reform provisions were chipped away, says Cato Senior Fellow Michael D. Tanner. In an op-ed for The New York Post, and in a Cato daily podcast, Tanner explains how parts of the new law actually offer states incentives to add people to their welfare rolls.

Both Presidents Obama and Bush have used fear-mongering rhetoric to radically expand the size of government. But wasn’t it Naomi Klein, who asserted in her book The Shock Doctrine:The Rise of Disaster Capitalism, that free-market advocates are the ones spending their careers waiting for a crisis that could be used as a springboard for implementing free-market ideas? In an article for The Guardian Online, Cato Executive Vice President David Boaz points out that Klein has it backward: When crisis strikes, government usually gets larger, not smaller.

In a Cato daily podcast, Boaz exposes Obama’s Shock Doctrine:

We had a financial crisis and what happened? Did the incumbent Republican administration say, now’s our chance to implement Milton Friedman’s program and privatize and deregulate? No, they did what governments always do: they expanded their own powers at the expense of civil society, and so in that sense, Obama’s just doing the same thing that Bush did. We could call this the Bush-Obama era.

Obama to Send 17,000 More Troops to Afghanistan

Time Magazine reports, “Afghanistan became President Obama’s war on Tuesday, when he ordered two more U.S. combat brigades into the fight. He will send 17,000 combat troops to join the 36,000-strong U.S. force already in the theater. The fact that the units now ordered to Afghanistan had originally been slated for Iraq underscores the new Administration’s shift in priorities.”

Blogging the day after the president’s announcement, Benjamin H. Friedman, research fellow in Defense and Homeland Security Studies, comments on the country’s new approach toward Afghanistan:

A stable Afghanistan is neither necessary to US security nor obviously possible at reasonable cost, as I have periodically written. It is not evident that Al Qaeda types would again find haven in Afghanistan should we go. But assuming that they would, there remains an alternative to trying to overcome Afghanistan’s anarchic history. We could attack only the remaining jihadists, their allies, and insurgents who will not settle for local power. That would require only a small U.S. ground presence, airstrikes and local allies.

The Bush Administration may no longer be in power, but don’t expect defense spending to drop substantially, says Friedman. In an article for World Politics Review, Friedman discusses the future of foreign policy under the new administration and why it’s unlikely Obama will rein in spending.

They’re Baaaack! Automakers Seek Billions More in U.S. Aid

After receiving billions of dollars from President Bush to rescue their companies, U.S. automakers are asking for billions more from the new administration. CNN.com reports that when the final dollar is received, the auto bailout tab could top $130 billion.

Daniel J. Ikenson, Cato’s associate director for trade policy studies, says this was to be expected:

Bush’s decision to defy Congress and provide “loans” to GM ($9.4 billion) and Chrysler ($4 billion) back in December wasn’t even intended as a cure all. It was designed to buy time for the producers to come up with detailed viability plans for their next bite at the apple. And as expected, central to both viability plans, which were unveiled yesterday, is more taxpayer money. At the moment, a combined $22 billion is being requested, which would bring the total doled out to just under $40 billion.

Not to say we told you so, but during the auto bailout debate, Ikenson warned time and time again about the pitfalls of bailing out these failing companies.

Topics:

Inflation and the Fed

In a National Review post on the recent Producer Price Index numbers, I argued that inflation worries are overwrought — for now. If inflation does become a problem, though, the Fed could have trouble controlling it. Here’s why.

According to a recent AP story, “Federal Reserve Chairman Ben Bernanke told an audience at the National Press Club on Wednesday that … once the economy begins to rebound and financial markets stabilize, the Fed will be able to quickly reverse the actions it has taken before inflation becomes a problem.”

That’s the trillion dollar question.

Federal Reserve bank credit rose from $890.4 billion on September 10 to $1.83 trillion by February 11, mainly because the Fed purchased a lot of semi-toxic securities (e.g., from Bear Stearns) and made huge loans against other dodgy assets. That allowed a similar doubling of the monetary base (bank reserves and currency). Even before that happened, the Fed was selling off Treasuries to make room for lesser investments. The Fed’s holding of government securities has fallen from $790.5 billion in September 2007 to $470.7 billion on February 11 (not counting some second-rate IOUs from Fannie Mae and Freddie Mac).

To assume, as Bernanke does, that inflation cannot possibly accelerate until “the economy begins to rebound and financial markets stabilize” is to assume stagflation is impossible, though 1973-75 and 1979-82 proved otherwise. If inflation catches the Fed by surprise, are they really “able to quickly reverse the actions,” as Bernanke says? How could they do that?

The Fed could certainly raise the interest rates on bank reserves — the fed funds and discount rate — which is how it makes money and credit tighter in normal times. But that rationing device would not prove so effective in times like these, because banks are already sitting on a mountain of untapped reserves. Besides, once expected inflation has begun to rise, the Fed has usually moved rates up in tiny 25-basis point steps — increases so small that perceived real interest rates can continue to fall even as nominal rates rise.

To literally reverse the actions that doubled its assets since last September, the Fed would have to sell nearly a trillion dollars worth of IOUs. Unfortunately, they don’t have nearly that many Treasury securities to sell. And even if the Fed were willing sell off all of its Treasury bills and bonds, the remaining backing for Federal Reserve notes would be little better than junk bonds. Meanwhile, private and agency securities acquired since last September must be very hard to sell — or else the Fed would not have felt obliged to buy them.

The Fed’s System Open Market Account at the Federal Reserve Bank of New York holds $39.4 billion in inflation-protected Treasury bonds — more than twice its $18.4 billion stash of short-term Treasury bills. Are they trying to tell us something?

China in Africa

Tom Ricks used to cover the Pentagon for the Wall Street Journal and the Washington Post. He wrote terrific books about the Marines and the war in Iraq. Now among other gigs, he is a blogger for Foreign Policy. It’s great when top-notch reporters write for blogs, even when they are overly enthusiastic about counterinsurgency warfare. That is an issue we will take up with Ricks when he visits Cato on March 13 for a forum on military reform.

I have a smaller bone to pick now. Ricks, like many Pentagon types, is worried about Chinese activities in Africa. He links to a story about a bridge-building project in Mali and suggests that the Chinese are doing something clever that we will someday realize has harmed us.

I hear variants of this all the time — China is doing stuff in Africa, so we must imitate them. It doesn’t make sense. Even if you think the United States has a zero-sum relationship with China where their gain is our loss (I don’t), you should worry about something else. There is little that China can do in Africa to make it stronger or to damage U.S. interests.

There are basically three things Americans worry about China doing in Africa: gaining influence from aid and diplomacy that it will use against us, gaining wealth from investments that it will use against us, or somehow screwing up our access to oil.

On the first concern, you have to ask what influence in Africa gets you, other than a happy feeling. Traditionally, as in World War II or the start of the Cold War, we worried about hostile states gaining industrial might by conquest that they could harness against us in a war. Whether or not that was a valid concern is open to academic debate, but there was never much reason to worry about Soviet efforts to buy support in poor countries during the Cold War. There was little to gain there in a geopolitical sense, outside of raw materials rare enough that they might be blocked from the market in a war. It makes even less sense to worry about China gaining influence in Africa now. If Mali likes China because it builds bridges there, so what? We are not poorer or less safe for it.

What about investments? Chinese investments in Mali are more useful to Mali and China than government aid, assuming the investments are sensible ones. If they are wise investments, however, U.S. companies won’t be far behind, and our national income will rise as a result. If they are not economically sensible, they will not enhance Chinese power, and we should not imitate them.

The biggest worry is that China is locking up energy supply in Africa. This concern is born of a failure to understand that oil is a global commodity. If the Chinese tap more of it, American consumers pay less too. If they own production facilities, that matters not at all if the oil is going to market. If the Chinese have a mercantilist energy policy, that is their problem. For more on energy alarmism, see here, here and here.

There is nothing sinister or clever about Chinese activity in Africa. Americans shouldn’t worry about it.

While we’re talking about Foreign Policy bloggers and developing countries, be sure to check Stephen Walt’s attack on his employers’ vacuous cover story: “The Axis of Upheaval.” Great stuff.