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Cato Daily Dispatch for December 11, 2002

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U.S. Warns a Biological Attack Could Result in a Nuclear Retaliation
Bush Names Commission to Review Postal Service
Tax Cuts Spur Growth

U.S. Warns a Biological Attack Could Result in a Nuclear Retaliation

In a warning to Iraq and other hostile countries, the United States says it is prepared to use "overwhelming force," including nuclear weapons, in response to any chemical or biological attack, according to The Associated Press.

The threat was contained in a White House document, called the "National Strategy to Combat Weapons of Mass Destruction," to be delivered to Congress on Wednesday. The six-page statement underscores long-standing policy that the United States "reserves the right to respond with overwhelming force--including through resort to all of our options--to the use of WMD (weapons of mass destruction) against the United States, our forces abroad and friends and allies."

Ted Galen Carpenter, Cato Institute vice president for defense and foreign policy, argues in favor of this type of deterrence strategy in a recent Daily Commentary, "Can the U.S. no Longer Deter Aggression?". Carpenter argues against launching an attack on Iraq because the United States has, and can continue to, successfully dissuade an Iraqi attack on U.S. interests.

Carpenter writes: "Over the years, the United States has deterred the likes of Joseph Stalin, Nikita Khrushchev, Leonid Brezhnev and Mao Zedong. None of those leaders seriously contemplated attacking the United States or even key U.S. allies. And the reason for their restraint was quite simple: They knew that such an attack would mean their own annihilation.

"If it is difficult to deter tiny Iraq from coercing its neighbors in the Middle East, it would surely be more difficult to deter a much larger and more powerful China from taking action against Taiwan. Similarly, can U.S. officials be certain that Washington would be able to deter a post-Putin Russia from threatening Estonia and other small Baltic neighbors?

"The Bush administration needs to make up its mind. If it believes in deterrence, its policy toward Iraq makes no sense. If it no longer believes in deterrence, U.S. policy in other parts of the world makes no sense."

Bush Names Commission to Review Postal Service

The New York Times reports that the Bush administration plans to announce a commission today to make recommendations for overhauling the nation's troubled postal system, officials said.

The nine-member commission will be charged with identifying problems and proposing solutions for the Postal Service, which at the end of the last fiscal year reported $11 billion in losses and outstanding loans. President Bush has requested a report by July 31. The panel's findings are expected to clear the ground for the first major reorganization of the postal service since 1971.

In the "Cato Handbook for Congress", Cato Adjunct Scholar Edward Hudgins makes a strong case for privatizing the Postal Service. He writes: "In recent years the USPS has been under competitive pressures from e-mails, faxes, private package carriers, and services such as Federal Express that are allowed to offer overnight delivery of urgent communications. It also has suffered the internal pressure of high labor costs. As a result, in recent years the USPS has sought additional sources of revenue by offering everything from phone cards and coffee mugs to rental use of postal facilities by the private sector and electronic postmarks. Private sector competitors maintain that this is unfair competition from a government monopoly that pays no taxes, is not subject to many regulations, has a line of credit with the U.S. Treasury, and has its employees' pensions paid for in part by taxpayers."

"Mail @ the Millennium: Will the Postal Service Go Private?", a Cato book edited by Hudgins, is filled with essays by former Postmaster General William Henderson, Federal Express founder Frederick Smith, and Pitney Bowes CEO Michael Critelli, among others, that outline the future of the U.S. Postal Service.

Tax Cuts Spur Growth

According to today's editorial in The Wall Street Journal, now that President Bush has a new economic team, we keep reading that its first obligation is to repudiate Mr. Bush's economic policy. This is the sage Beltway counsel now being delivered to those alleged "budget hawks" who are said to be duty bound to defuse the "deficit bomb."

Do these journalists realize how foolish they look?

Their main substantive point seems to be that somehow budget deficits are going to send us all to recession. Their logic is that deficits have returned because of the Bush tax cuts, so any future tax cuts must be repealed and certainly no new ones passed. Otherwise we will get bigger and badder deficits that will cause interest rates to rise and render the economy less able to grow enough to be able to afford its long-term liabilities (e.g., Social Security).

Nonsense.

"President Bush's tax policy team started off in the right direction last year with tax rate reductions," write Cato President Edward H. Crane and Director of Fiscal Policy Chris Edwards in "Tax Cuts on Savings are the Rx for Strong Growth". "It made further progress with the capital investment tax cut enacted as part of the March stimulus bill. The president has indicated that the next tax proposal will be a pro-savings cut on dividends or capital gains. Tax cuts on personal savings have great potential to stimulate growth, whether pursued now or when the new Congress assembles next year."

Wyatt Dubois, editor, wdubois@cato.org