REAL ID Is a Dead Letter

Ten states have now passed legislation rejecting the REAL ID Act, the national ID law Congress passed without a hearing in May 2005.

Massachusetts may be next. According to the Boston Globe, the registrar of motor vehicles in that state issued scathing comments to the DHS on the regulations implementing the law. Apparently, there were 12,000 comments in total – quite a few of them negative, I’ll wager.

I have testified on REAL ID twice in the U.S. Senate, both times calling the law a “dead letter” – once in the Committee on Homeland Security and Governmental Affairs and once in the Judiciary Committee.

Gonzales’s Gambit

Still more reasons why Gonzales needs to go.

When Attorney General John Ashcroft and FBI Director Robert Mueller are threatening to resign because then-White House Counsel Gonzales is seeking surveillance powers that go “too far” …  you start to get a sense as to Gonzales’s views on state power.  

Cato will be hosting a debate on the NSA surveillance program and more next week.  For additional background, read this.

GOP Debate (Round 2)

A few thoughts on last nights GOP debate: It was a better performance than last time around, but the Republican debate in South Carolina last night showed that there still isn’t a Reagan-Goldwater small-government conservative among the front runners. The candidates tried hard to burnish their conservative credentials, but too often their definition of conservative seemed to come down to talking tough on Iraq and abortion. Among the top-tier of candidates in particular, no one articulated a clear Reaganesque vision of limited government.

A few thoughts on the candidates:

John McCain: He apparently got the decaf coffee this time around. Made some good points on congressional overspending (though the drunken sailor joke is getting a bit stale), but offered unpersuasive defense of McCain-Feingold campaign finance reform bill. And no matter how many times he repeated that if we leave Iraq “the terrorists will follow us home,” it doesn’t make it so.

Mitt Romney: He sure is smooth…but has a little problem with accuracy. He said that he balanced Massachusetts budget without tax increases. The truth is his proposed 2006 budget included some $170 million in increased business taxes. This increase comes on top of previous business tax increases of $140 million during his term, as well as some $500 million in increased fees and other forms or revenue. His support for No Child left Behind cements his credentials as a big-government conservative.

Rudy Giuliani: He had a much better performance this time around. He highlighted his fiscally conservative credentials and made a “libertarian” case for abortion rights. But his superhawk persona risks tipping over into Dr. Strangelove sometimes.

Ron Paul: Still largely alone in carrying the small-government banner, Dr. Paul showed how hard it is to make a complex historical argument in 60 seconds. His point about how US meddling overseas helped precipitate terrorism had substance, but landed with a thud.

Jim Gilmore: Scored points for blaming Republicans in Congress for overspending and for criticism of Romney health plan. Lost points for ducking question on entitlement reform.

Tommy Thompson: Looked like he was suffering from indigestion all night. Struggled to find a government program he would cut, finally coming up with an unspecified CDC “stockpile.” How about the Medicare prescription drug benefit? Oh, that’s right, he supports that one.

Duncan Hunter: Called for Jack Bauer to handle terrorism and sounded like a character on the show. “I’d get SecDef on the phone.” Seems to be going for the Pat Buchanan xenophobia vote, but does anyone care?

Tom Tancredo: Gets points for exposing his opponents flip flops, but failed to make his own case. I don’t agree with his position on immigration, but surely he has a better explanation for it than he gave. Loses points too for his gratuitous slap at Islam.

Mike Huckabee: His sense of humor plays well, but defense of tax hikes didn’t fly. He may win Mr. Congeniality, but didn’t do anything to win the nomination.

Sam Brownback: I’m sorry, was Sam Brownback part of this debate?

Of course the format and the questions didn’t help, but as I warn in my book, Leviathan on the Right, unless Republicans rediscover their limited government roots, they are destined for a repeat of their 2006 defeat. Last night gave a few small hints in that direction, but they still have a long way to go.

Irish Business Leader Explains Why Optional Tax Base Harmonization Leads to Mandatory Tax Rate Harmonization

Big businesses have rarely been principled defenders of individual liberty. A good example is the fight over a harmonized corporate tax base in Europe. Some multinational companies like this approach because it means one tax return instead of 27 tax returns. But this short-sighted approach overlooks the inevitable misuse of power by politicians who will want to manipulate the system for their own benefit. An Irish business leader explains in the Financial Times:

Businesses should wake up to the fact that, if work to harmonise European Union tax systems succeeds, they will face huge uncertainty regarding their tax liabilities, pay higher tax bills and face a more rigid corporate tax regime. Lázsló Kovács, the tax commissioner, is firmly set on introducing a legislative proposal by the end of 2008 to harmonise the corporate tax base across the Union. …Separate accounting for cross-border transactions within a group would be eliminated, and group profit would be shared by means of a set formula between member states and taxed at the rate applicable in each state. …To date, business has expressed surprisingly little scepticism about this untested assertion. Such a sanguine attitude is misplaced.

 …companies doing business in Europe would pay higher tax bills. …CCCTB would drive some investment to more flexible and competitive tax jurisdictions outside the EU. Business lobbies have only backed the scheme if CCCTB is optional for companies. But, for how long could it remain optional? If simplicity and a reduction in administration costs are part of the raison d’être , then running an additional system side by side with national tax regimes makes no sense. The Commission said in 2006 that: “CCCTB should initially [my italics] be proposed as optional for companies”, and on May 2 it said: “CCCTB should be optional … where these [existing rules] are maintained alongside the CCCTB by member states.” …Despite assurances that it does not intend to extend this work to cover the tax rate, the Commission has a long history of pushing for harmonised tax rates – and a common tax base is a prerequisite of tax rate harmonisation. When the Commission embarked on this initiative, France and Germany made no secret that their end-game was tax rate harmonisation.

Lobbying Reform Reformed

The Politico offers an article about House Democrats and their effort to legislate about lobbying. The Senate passed a lobbying bill in January.

The road to the Senate bill included a struggle over the disclosure of funding for grassroots lobbying. Groups like the National Rifle Association or the National Right to Life Committee sometimes pay firms to communicate with citizens and urge them to contact their members of Congress on issues of concern to the group. The usual “reform groups” wanted the Senate to force disclosure of the sums spent mobilizing public opinion in this way. The Senate left disclosure out of their bill.

The effort to mandate disclosure resumed when the House took up lobbying reform. We held a forum on the topic that can be seen here. It now appears that the mandated disclosure will not appear in House version of the bill though it may be offered as an amendment.

The grassroots lobbying disclosure effort looked a lot like normal politics. The new majorities in Congress were (on the whole) Democratic and liberal, the groups that would be forced to disclosure their political activities were (on the whole) Republican and conservative. The new powers-that-be were apparently looking at ways to harass and perhaps discourage speech they did not like. As I said, normal politics.

Why has mandated disclosure apparently failed? A leader of one of the targeted groups told me that she hoped Speaker Pelosi would include the mandate in the lobbying reform bill. This leader believed the Speaker and her party would end up with a political black eye from the fight. Perhaps Speaker Pelosi agreed in the end.

For now, at least.

U.S. Trade Policy, R.I.P.

The NY Times, Washington Post, and other major media outlets have been gushing praise upon congressional Democrats and the Bush administration for hammering out a deal that keeps the trade agenda alive.  Lending some credibility to those media perspectives, which are too often misinformed and misleading, are assessments from knowledgeable, respected trade policy scholars that the compromise deal struck last week does in fact constitute a major breakthrough.

In my view, only analytical laziness or low expectations about the capacity of the administration and Congress to agree on anything related to trade, or sheer desperation for a sign of progress could produce a thumbs-up assessment of last week’s deal.  The proper interpretation is this:

U.S. trade policy, RIP.  Here’s why.

There are four concluded bilateral trade agreements (with Korea, Colombia, Peru, and Panama) awaiting congressional approval.  There is the seriously stalled Doha Round of multilateral trade negotiations, which has been the elusive grand prize of trade policy during the Bush years.  And there is the June 30 expiration of Trade Promotion Authority, which enables the executive branch to negotiate agreements (that must also reflect the wishes of Congress as of 2002, when TPA was passed into law) and bring them back to the Congress for an up-or-down vote.  Without TPA, agreements would be undone, reconfigured, and made unrecognizable and ultimately unacceptable, as 535 congressional tinkerers got their hands on them.

The TPA 2002 language was silent about environmental provisions and specified that trade partners should be required to enforce the labor laws on their books.  The new Democratic Congress finds the TPA 2002 language unacceptable.   Trade deals must contain strict, enforceable labor and environmental provisions, if they are to win the support of the Democratic caucus – so they say. 

The agreement struck last week is akin to a supplemental to the TPA 2002 bill.  It doesn’t extend TPA beyond June 30, but it imposes additional conditions with which trade agreements must comport.  The administration agreed to the terms because, well, it had no choice!  The labor unions, which now dictate congressional trade policy, are unwilling to support trade liberalization.  The administration has nothing, absolutely nothing, with which to compromise.  Thus, by agreeing to last week’s terms, the U.S. Trade Representative is throwing a Hail Mary.  Trade policy will not advance without those terms, and there’s a remote change it could advance with them.  The problem is that it won’t.

Arguably, the left-of-center press is giddy about the fact that Congress compelled the Bush administration to agree to include strict, enforceable labor and environmental provisions in prospective trade agreements (There was more to the deal, but labor and environmental standards were the big issues).  It matters not to the ubersanctimonious of the media that if you’re really concerned about environmental quality and working standards in poor countries you should seek to remove (not create) conditions on investment inflows.  Oh well, at least they’ve acknowledged the plight of poverty. 

But they should also remember that just because two branches of the U.S. government agree to these provisions doesn’t mean our trade partners will.  With a few relatively minor exceptions, they won’t.

In 1996, WTO trade ministers at the conclusion of their first biannual meeting in
Singapore issued a strong statement of consensus on the issue of labor standards.  The statement declared support for core labor standards, but opposed the idea of enforceable labor provisions in trade agreements.  Standards are promoted by “economic growth and development fostered by international trade and further trade liberalization,” the statement read.  Imposing conditions on trade and investment with poor countries only slows economic growth, which prevents labor standards from rising, was the gist of the statement.

Today, the WTO comprises even more developing countries than in 1996.  Their position against enforceable labor standards is even more entrenched.  They don’t oppose better local labor and environmental conditions, but fear that rich countries will use those provisions as a fig leaf to achieve protectionist outcomes.  The legitimate concern is that the potential to allege labor or environmental violations, regardless of merit, will deter foreign investment in local factories and in other areas of the local economy, which is the real key to raising standards.

Thus, despite suggestions that the last week’s deal opens up the door to continued progress on Doha, reality is quite different.  The United States has only introduced another obstacle that will calcify the current North-South divide in the Doha negotiations.

There is a remote possibility that the agreements with Peru and Panama will come to fruition.  Both of those governments are vested heavily in a successful trade deal with the United States, so they may be inclined to bite the bullet.  It remains to be seen, however, if the Peruvian and Panamanian legislatures will approve the new terms.  And quite frankly, there is absolutely no guarantee that Democrats in the U.S. Congress will support these deals despite last week’s ballyhooed “breakthrough.”

Indeed, the Colombian deal has been identified as still problematic by the congressional leadership.  In a letter to the USTR last week, House Ways and Means Chairman Charles Rangel (D-NY) wrote that the Colombia agreement can not be supported by Democrats unless the Bogota government does a better job finding and punishing violent criminals.  And House Ways and Means Trade Subcommittee Chairman Sander Levin (D-MI) is actively opposing the Korea agreement since it doesn’t include his proposal to condition Korean access to the U.S. auto market on the success of U.S. auto sales in Korea.

Although the Democratic leadership has been asserting that its caucus would support trade liberalization if its positions on labor and the environment were accommodated, it appears their bluff has been called.  Opposition to Colombia and Korea has nothing to do with labor and environmental standards.  It has everything to do with union opposition to trade, period.

And without labor’s nod, Democrats will not support trade in sufficient numbers to keep U.S. trade policy on track. 

Thus, trade policy, RIP.

Spain: Immigration Up, Unemployment Down

The recent economic success of Spain has not received the attention it deserves. One element in Spain’s resurgence, which I didn’t previously know about, is a relatively liberal immigration policy. According to BusinessWeek:

Over the past decade, the traditionally homogeneous country has become a sort of open-door laboratory on immigration. Spain has absorbed more than 3 million foreigners from places as diverse as Romania, Morocco, and South America. More than 11% of the country’s 44 million residents are now foreign-born, one of the highest proportions in Europe. With hundreds of thousands more arriving each year, Spain could soon reach the U.S. rate of 12.9%.

And it doesn’t seem to have hurt much. Spain is Europe’s best-performing major economy, with growth averaging 3.1% over the past five years. Since 2002, the country has created half the new jobs in the euro zone. Unemployment has plummeted from more than 20% in the 1990s to 8.6%, within shooting distance of the 7.2% euro zone average. The government attributes more than half this stellar performance to immigration. “We are very thankful for all these people who have come here to work with us,” says Javier Vallés, economic policy chief for Prime Minister José Luis Zapatero.

Apparently all those immigrants haven’t “taken all the jobs.” Ask your favorite Lou Dobbs-loving friend to explain to you how this is possible.