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Cato Policy Report, May/June 2000
Vol. 22, No. 3

Cato Studies:

Avoid D.C., Rodgers Warns

T.J. Rodgers T.J. Rodgers at Cato Policy Forum on March 15.
The high-tech world should avoid becoming more entangled in the politics of Washington, D.C., warns a leading Silicon Valley CEO in "Why Silicon Valley Should Not Normalize Relations with Washington, D.C." T. J. Rodgers, president and CEO of Cypress Semiconductor, says that Silicon Valley's attempt to become skilled at politics is self-defeating. "I believe we could make no bigger mistake. Silicon Valley is what it is because of the values that drive our success," he says, adding that politics is "antithetical to—and highly destructive of—our core values." Rodgers writes that lobbying organizations such as Technet, founded to help high-tech companies maneuver through Washington's political jungle, have the potential to "normalize" relations with Washington, much to Silicon Valley's detriment. "A normalized relationship between Washington and Silicon Valley, through organizations such as Technet, offers only disadvantages," Rodgers says. "The collectivism that big government espouses undermines capitalism and therefore the fundamental wealth-producing process of Silicon Valley," he writes. He also advises fellow CEOs to stand together to vigorously defend high-tech firms subjected to antitrust suits. "Nothing is more dangerous to the ethic of success and innovation in Silicon Valley than the antitrust laws," which Rodgers described as "antiquated" and "illogical." CEOs must also ignore calls by political pundits and the media for Silicon Valley to build "industry-government partnerships." Silicon Valley "is an island of capitalism and freedom admired around the world. We must remember that free minds and free markets are the moral foundation that has made our success possible."

Open Federally Funded Research to Scrutiny
Independent review of federally funded research is crucial both for good science and for good public policy, write the authors of "The Case for Public Access to Federally Funded Research Data" (Policy Analysis no. 366). Michael Gough and Steven Milloy argue that Public Law 105-277 of 1998, known as the Shelby Amendment, is the best way to ensure that regulatory law is based on sound science. The authors write that federally funded research has frequently been tainted by poor methodology, dubious analysis, faulty data, politicized conclusions, and even borderline cases of fraud. The law, which has been under attack, guarantees public access to grantee-collected data that are used in support of rules or regulations. The study highlights several important cases in which third-party review revealed shoddy science that the government relied on to justify rules and regulations, including EPA-funded research on airborne asbestos; the National Cancer Institute's research on the herbicide 2,4-D; the FDA's campaign against fen-phen; and the American Lung Asso-ciation's research on particulate matter. "In many cases, third-party review served to correct or prevent costly regulatory mistakes. In some cases, however, independent review of federally funded science occurred too late to prevent significant economic and consumer harm. Requiring the government ‘to show its work' opens up the regulatory process," conclude Gough, a former staff member at the National Institutes of Health, and Milloy, author of Science without Sense: The Risky Business of Public Health Research.

Social Security Reform Plan Could Lead to S&L-like Bailout
The Archer-Shaw Social Security reform plan would create negative incentives that could lead to large taxpayer liabilities reminiscent of those occasioned by the savings and loan crisis, warns Andrew Biggs in "The Archer-Shaw Social Security Plan: Laying the Groundwork for Another S&L Crisis" (Cato Briefing Paper no. 55). While allowing individuals to make investment decisions, the plan proposed by Reps. Bill Archer (R-Tex.) and Clay Shaw (R-Fla.) would require the government to protect workers against any investment losses, says Biggs, a Social Security analyst at Cato. "The plan's proposal to privatize profit and socialize risk resembles the incentive structure that led to the S&L crisis of the 1980s, which cost taxpayers hundreds of billions of dollars," Biggs writes. That incentive structure "could again lead to large taxpayer liabilities if allowed to take root in the Social Security system." Economists use the term "moral hazard" to denote the presence of incentives for individuals to act in ways that incur costs that they do not have to bear. "To avoid moral hazard, a Social Security reform plan incorporating personal retirement accounts must give workers a stake in both the gains and the losses of the accounts under their control. Archer-Shaw fails to do so. That lack of true market discipline creates a moral hazard problem every bit as acute as that of the S&L industry," he concludes.

Highly Skilled Workers Benefit the Economy
American industry's explosive demand for highly skilled workers is unmet because of the federal quota on H-1B visas for foreign-born highly skilled workers, argue the authors of "The H-1B Straitjacket: Why Congress Should Repeal the Cap on Foreign-Born Highly Skilled Workers" (Trade Briefing Paper no. 7). The quota restrictions are hampering output, especially in high-tech sectors, and forcing companies to consider moving production offshore, write authors Suzette Brooks Masters, an attorney and member of the Board of Directors of the National Immigration Forum, and Ted Ruthizer, professor of immigration law at Columbia Law School and head of the Immigration Law Group at a New York law firm. They argue that "H-1B hiring has contributed significantly to the growth and continued good health of our economy and has helped, not hurt, the U.S. worker." The authors conclude that the market should determine how many H-1B visas are needed. Congress should abolish caps on immigration of highly skilled workers and return to U.S. employers, subject to minimal regulation and unhampered by artificially low quotas, the ability to fill gaps in their workforce with qualified foreign national professionals.

Stop, Frisk, and Shoot
The controversial killing of an unarmed immigrant in February 1999 by New York City police was neither an act of racist violence nor a fluke accident, according to a new Cato Institute study, "‘We Own the Night': Amadou Diallo's Deadly Encounter with New York City's Street Crimes Unit" (Cato Briefing Paper no. 56). Instead, the killing of Diallo, a 22-year-old West African immigrant, was the worst-case scenario of a reckless, confrontational style of policing, writes Timothy Lynch, director of Cato's Project on Criminal Justice. Plainclothes officers brandishing pistols and abruptly confronting city residents in the middle of the night invite disaster, Lynch maintains. Such a strategy carries an extraordinarily high level of risk for the officers, the suspect, and bystanders. The death of or serious injury to an innocent person was just a matter of time, Lynch says. The number of gun seizures increased as a result of a "stop-and-frisk" policy initiated by Mayor Rudolph Giuliani and then–police commissioner William Bratton in 1994 to confiscate illegal weapons from pedestrians. The number of illegal searches also increased. In 1998, for example, 18,000 cases were thrown out by prosecutors—double the number in 1994. Other cases were thrown out by the judiciary at the preliminary stage of trial proceedings.

Intervention in East Timor: The Next Kosovo?
The United States must continue to resist intense pressure to intervene militarily in the East Timor crisis, writes Leon T. Hadar in a new Cato Institute study, "Averting a ‘New Kosovo' in Indonesia: Opportunities and Pitfalls for the United States" (Policy Analysis no. 367). Australia, Japan, members of the Association of Southeast Asian Nations, and American foreign policy activists have urged the United States to take decisive action to avoid what they say could be a crisis resembling that of Yugoslavia. Hadar, a research fellow in foreign policy studies at Cato, defends the restrained American response, which has had a calming effect. "The surprisingly low-key U.S. involvement in resolving the East Timor crisis averted a Kosovo-like intervention and reduced the danger that the United States would become the focus for anti-Western sentiment in Indonesia and elsewhere in Southeast Asia," Hadar writes. He argues that Australia, Japan, and ASEAN have been excessively timid in dealing with the growing turmoil, hoping that the United States would take action. He concludes that the United States should maintain its detached military and diplomatic approach to end the "free-riding mentality" of its East Asian allies and to help the region to create a stable balance of power.

Build Bomber Now
The F-22 fighter aircraft program should be terminated and the development of a new heavy bomber should begin more than a decade ahead of schedule, according to a new Cato Institute study. In "The United States Should Begin Work on a New Bomber Now" (Policy Analysis no. 368), Williamson Murray argues that the Air Force is investing too much in two tactical fighter aircraft—the F-22 and the Joint Strike Fighter-—at the expense of bombers and the security of the nation. The service is spending billions of dollars on fighters that depend on access to overseas bases that are increasingly unavailable or are becoming vulnerable to enemy attack by ballistic missiles. "The United States confronts the fact that, at present and for the foreseeable future, far less infrastructure may be available abroad to support its air forces should an important conflict arise," writes Murray, Professor Emeritus of History at Ohio State University. Murray argues that the bombers would be a better long-term option because they deliver greater payloads than do fighters and have the longer range necessary to operate from less vulnerable bases farther away from the front. Yet the bomber force is being allowed to decay while funding accelerates for fighters. The Air Force does not plan to begin research on and development of a new bomber until 2013 and will not commence production until 2034, which means that the B-52 will be more than 80 years old when it is retired. Murray concludes that "the Air Force could cancel the F-22 air-superiority fighter—designed during the Cold War and unneeded after its end—and use some part of the savings to finance the development of the new bomber."

This article originally appeared in the May/June 2000 edition of Cato Policy Report.