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July 25, 2006 3:39PM

Meanwhile, Back in Iraq…

…there’s this piece of bad news, courtesy of the Jamestown Foundation:

In the midst of rising tensions between the Turkish and Iraqi governments over the presence of Kurdistan Workers’ Party (PKK) rebels in northern Iraq, the PKK has managed to expand to other parts of Iraq outside of their traditional strongholds in the northern mountains. It seems that the PKK has taken advantage of the lax security in the capital city of Baghdad and government distraction to open the “Ocalan Culture Center,” a PKK contact bureau, just steps away from the Turkish Embassy. Although Iraq has pledged that it will do what it can to crack down on the presence of PKK fighters in Iraq, the Ocalan Culture Center was opened with the approval of local government authorities, according to documents plastered on the walls of the center (Turkish Daily News, July 14). This comes despite the fact that the PKK is ostensibly an outlawed organization in Iraq.


The PKK is also designated as a terrorist organization by the United States, the European Union and Turkey. Turkish intelligence estimates that there are between 4,000 to 5,000 PKK fighters in the mountainous border region in northern Iraq. The PKK began infiltrating back into Iraq from Turkey after it called off its unilateral cease‐​fire in the summer of 2004. The PKK already has a contact bureau in the northern Iraqi city of Kirkuk.


[…]Turkish officials fear that [the Baghdad center] will also be used to plan and facilitate terrorist operations around the border area and in Turkey (Cihan News Agency, July 12). Turkish officials officially opposed the opening of the Ocalan Culture Center in Baghdad. Diplomatic sources stated that Turkey delivered a note via the Turkish Embassy to the Iraqi government demanding the closure of the contact office, citing Iraq’s pledges that it would not allow Iraq to be a sanctuary for terrorist organizations (Anatolia News Agency, July 20).

The Turks have absolutely no love for the PKK, and things have been heating up both diplomatically and militarily between the Turks and the Iraqis. In a country that doesn’t need any more flashpoints, this could easily become one.

July 25, 2006 2:07PM

Mercantilist Logic Flounders at Sea

The good news from the listing cargo ship near Alaska’s Aleutian Islands is that all 23 crew members were plucked safely from the ship by helicopter last night. (See news story.) The bad news is that the 5,000 cars aboard the ship bound from Japan to Canada may not survive the mishap.


Come to think of it, would it be such bad news if those 5,000 cars sank to the bottom of the ocean? According to the mercantilist mindset that seems to dominate Washington’s discussion of trade policy, the loss of merchandise in transit from one country to another may be the best of all possible worlds.


Mercantilism is a centuries‐​old approach to trade that believes that exports are the big payoff from trade and imports a burden. By definition, then, a trade surplus signals success for trade policy and a trade deficit failure.


From a mercantilist point of view, then, the loss of those 5,000 cars at sea should be a blessing to the global economy. The people of Japan would have occupied themselves producing those 5,000 cars for export, while the people of Canada would not have shoulder the “burden” of accepting them as imports. Japan can add to its trade surplus without Canada being forced to suffer a deficit.


The great French economist Frederic Bastiat exposed this fallacy more than 150 years ago in an essay, “The Balance of Trade” (Chapter 6 of his Economic Sophisms). If the mercantilists are right, we should all be praying for bad weather in the sea lanes carrying all those cars, shoes, shirts, and laptop computers to our showrooms and store shelves.

July 25, 2006 2:05PM

Rent‐​Seeking Weasels

We’ve all heard about how actor‐​director Rob Reiner sponsored an initiative in California in 1998 to raise cigarette taxes to fund preschool programs. Reiner then became chairman of the state agency created by the initiative. And then he funneled $230 million of state spending through the ad and PR agencies that had worked on the initiative. And then he spent another $23 million of state money to support Proposition 82 this spring, to create universal preschool programs. He had to resign from his position, and voters turned down Prop 82.


But he’s not the only person sponsoring an initative that would benefit himself, his family, or his friends. A wealthy real estate developer who thought stem cell research would benefit his diabetic son spent $3 million of his own money to get Californians to create a $3 billion taxpayer‐​funded stem cell research organization, which he then became chairman of.


And now comes Vinod Khosla, a founder of Sun Microsystems and former partner in the fabulously successful Silicon Valley venture capital firm Kleiner, Perkins, Caufield and Byers, and recently number 1 on Forbes magazine’s Midas list of “the people who most successfully use venture capital to create wealth for their investors.” He’s been the subject of two admiring profiles in the Washington Post (one reprinted from Slate) in the past two days for his latest venture: ethanol. If Vinod Khosla says ethanol is a good investment, don’t bet against him. Or against fellow Silicon Valley megamillionaire Bill Gross, who says that “reinventing energy … dwarfs any business opportunity in history.”


But if it’s such a good investment, why is Khosla “supporting an initiative on this fall’s ballot in California that would tax oil companies to generate $4 billion to help encourage the use of alternative energy,” as Slate writer Daniel Gross notes? Khosla told Post columnist Sebastian Mallaby that he wants just a little help from the federal government, too: “Khosla wants government to require auto companies to make more flex‐​fuel cars that run on gasoline or ethanol.… Khosla wants government to require big gasoline distributors to install ethanol pumps at a tenth of their gas stations.” Oh, and a better subsidy.


Taxing your competitors to subsidize your industry is a rent‐​seeker’s dream. Usually you have to be more subtle about it. But if you have a “green” business idea, you can get liberal journalists to write gushing stories about you without even stopping to ask, “Hey, aren’t you going to benefit from these initiatives and laws you’re pushing? Isn’t that sort of like, you know, corporate welfare? Like we’re always accusing the oil industry of?”


We shouldn’t bet against Khosla. But if his latest investment is really such a great business opportunity, we should feel free to vote against subsidizing it.

July 25, 2006 12:08PM

Hillary’s Health Care Initiative Gets off to a Bad Start

Pop quiz. Finish the following sentence:


No factor does more to hold back America’s economic growth and keep American workers from earning as much as they deserve than _________________.

A. the soaring cost of health care [16.5 percent of GDP]

B. the soaring cost of government [31.4 percent of GDP]

If you understand the “greater than/​less than” thing, you picked B. But if you are Sen. Hillary Rodham Clinton, you picked A. In fact, that is how Senator Clinton completed the first sentence of the “Affordable Health Care” section of her “American Dream Initiative,” released yesterday. 

Just one sentence into her vision for health care, and I am already disappointed.

July 25, 2006 9:35AM

Confessions of a Former (and Maybe Future) Hawk

Once upon a time, way back in 2002-03, I had my own blog. Unsurprisingly, given the times, I wrote frequently about issues relating to the war on terrorism. I took a hawkish line, supporting the U.S. invasion of Iraq and the resort to force, if necessary, to prevent other terror-sponsoring states like Iran from developing nuclear weapons. Based on my blog writings, I was invited to participate in a Reason online debate with John Mueller back in November 2002 on whether to go to war with Iraq. I argued vociferously in the affirmative.

The views I expressed were extremely controversial within Cato and the larger libertarian camp. Cato’s foreign policy scholars, reflecting the "orthodox" libertarian opposition to an interventionist foreign policy, strongly opposed the Iraq invasion. But for a minority of policy staffers at Cato, as well as many other libertarians, waiting for the other guy to take the first swing no longer seemed to make sense in a post-9/11 world.

Since the fall of Baghdad, I haven't written a word about foreign policy. Virtually all my writing energies have been directed elsewhere: to a book, due out next spring, that examines the effect of mass affluence since World War II on American politics and culture. Much has changed in the past three-plus years, including my own views as I struggle to make sense of ever-changing circumstances. As a one-time outspoken "libertarian hawk," I feel a responsibility to explain where I stand now and how I got here. Given recent (and incorrect) speculation about my views on the brewing crisis with Iran, now is as good a time as any.

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July 25, 2006 9:28AM

The DLC Moves Left?

By teaming up with the Democratic Leadership Council, is Hillary Clinton moving to the center in preparation for a presidential run? Or is the DLC moving left to get closer to the front‐​runner? Yesterday Senator Clinton released a DLC plan, the “American Dream Initiative,” a laundry list of government transfers and handouts.


The New York Times called the programs “modest” and “relatively small‐​scale.” Taxpayers might have a different view if they read the Washington Post, which noted that DLC president Bruce Reed estimated the cost of the programs at $500 billion over 10 years — and taxpayers have learned by now that government entitlement programs often cost far more than their advocates estimate in advance. (Remember when Medicaid was projected to cost $1 billion a year? Oops.) And the DLC promises to raise taxes to cover the costs.


There are millions of libertarian‐​leaning voters disgruntled with the Republicans’ social conservatism, soaring spending, and ill‐​fated war. And Democrats are doing everything they can to discourage those voters from switching parties.