Archives: 10/2008

A Welcome Change

The Washington Post’s Walter Pincus reports:

Director of National Intelligence Mike McConnell has taken steps to make it easier for U.S. intelligence agencies to recruit first-generation Americans with foreign relatives.

The story, first broken by Steven Aftergood of the Federation of American Scientists, is likely to be overlooked given the focus on the campaign and on the financial markets, and might seem an obscure policy change given the high-profile national security challenges that our intelligence professionals and military personnel confront every day.

In fact, it is a crucial step toward leveraging our unique strengths as a nation. America’s openness is often seen as a vulnerability, but it should be seen instead as a sign of our vitality. The desire of millions of non-Americans to come to the United States and try to make a better life for their families remains strong, despite our recent troubles. To deny first-generation Americans the opportunities enjoyed by other Americans on the dubious grounds that they pose a unique security risk makes no more sense than any other form of blanket profiling. After all, we didn’t kick Lutherans of mixed Danish-Polish and German descent out of the FBI after Robert Hansen’s treason was discovered.

First-generation Americans, or Americans with other extensive foreign contacts (spouses, close friends, study abroad), are likely to have native or near-native proficiency in languages other than English that are in desperately short supply in our intelligence and law enforcement agencies. The hurdles for these citizens were never insurmountable; many ultimately do obtain needed security clearances. In his award-winning book The Looming Tower, Lawrence Wright profiled one of them: Ali Soufan, a Lebanese-American FBI agent, the only Arabic speaker in the New York office at the time of the USS Cole bombing, and one of only eight Arabic speakers in the entire agency.

But notwithstanding men like Soufan, the laborious and time-consuming process associated with obtaining a security clearance, and the prevailing presumption against such persons, doubtless discourages many well-intentioned people from even trying to obtain a job in law enforcement or intelligence. Here’s hoping that this change helps to open the doors to qualified men and women who are every bit as patriotic as Americans whose families have been here for generations.

For a Good Time Call the U.S. Fish & Wildlife Service

Back in September, the U.S. Fish & Wildlife Service became a punchline after issuing 3.5 million duck stamps with the wrong phone number. But it wasn’t just any ordinary wrong number.  Unassuming callers who were “lucky” enough to dial it were invited to “talk only to the girls that turn you on” for $1.99 a minute.

It’s a safe bet that were this to have happened in the private sector, someone would have been reprimanded or fired.  Not so in the public sector.  In fact, the Washington Post’s Al Kamen tells us this morning that an upcoming U.S. Fish and Wildlife Service trip “will send 28, that’s twenty-eight, senior officials to Mexico for a week of post-election R and R.  It includes a tour of the fabulous Mayan ruins in Palenque in the Lacandon rain forest.”

Kamen says, “It’s unclear what benefit will be derived by the wildlife agency’s director, Dale Hall, who’s retiring Jan. 3, and Assistant Interior Secretary Lyle Laverty, who should be moving on after Jan. 20. The group includes most of the agency’s regional directors and various assistant directors.”

The folks out there working hard today, whose taxes pay for incompetent, joy-riding career bureaucrats like Dale Hall, should bear stories like this in mind the next time some DC politician speaks of the federal budget being “tight.”

Bailouts: Where Will They End?

“There’s no logical end to it,” Cato Senior Fellow Gerald P. O’Driscoll Jr. said to Neil Cavuto on Fox Business. He’s talking about the incredible expanding bailouts. It started with Bear Stearns in March and then homebuilders in April. Then Fannie Mae and Freddie Mac in September, and after that the deluge. AIG, announced at $85 billion but quietly increased to $123 billion so far, and the $700 billion centerpiece and then money market funds and then bank nationalizations and an increase in the federal guarantee to bank depositors. Where will it stop?

Friday’s papers noted that the head of the FDIC said that the federal government might start guaranteeing home mortgages. On Saturday we learned that insurance companies want to get a piece of the money. Yesterday the Treasury said that automobile companies–which already got their own $25 billion program–might also be eligible for the general “financial rescue plan,” and their success might encourage other industries to try to get in on it.

As I noted before, Congress is talking about “a second economic stimulus package, totaling $50 billion in the form of money for infrastructure projects, relief for state governments struggling with rising Medicaid costs, home heating assistance for the Northeast and upper Midwest, and disaster relief for the Gulf Coast and the Midwestern flood zone.” And Transportation Secretary Mary Peters wants “an $8 billion infusion” for the federal highway trust fund.

Where does all this money come from? The total cost is hard to estimate, because we don’t know how many of these guarantees will actually result in payments. But some analysts are talking about a total bill of $2-3 trillion. Given the underestimate on the cost of the Iraq war, we shouldn’t have confidence in any claims that it will be less. So where does the money come from? Even Obama doesn’t want to raise taxes that much. And if you tax Americans to bail out as many Americans as we’re now talking about helping, eventually you’re going to be taxing people to bail themselves out. In fact, the government is likely to borrow some of the money and have the Federal Reserve create more of it. That process seems to be under way, as Greg Mankiw and Jeff Hummel have discussed. How can that astounding and unprecedented increase in the monetary base not lead to inflation, even hyperinflation? We’ve already decided to tax the prudent and thrifty to bail out the imprudent and irresponsible. Now the prudent may face a danger even worse than taxes: inflation that erodes their hard-earned savings.

Howard Baker famously called Ronald Reagan’s tax cuts a “riverboat gamble.” This is more like a “Celebrity Solstice gamble.”

Members of Congress Who Voted for the Financial Crisis

In late 2000, with the budgeting and spending process in collapse, Congress hurriedly passed a mammoth spending bill called the Consolidated Appropriations Act, 2001. It contained a provision preempting state regulation of financial derivatives under gambling or “bucket shop” laws. The result less than a decade later was the out-of-control market for credit default swaps that has caused so much financial, and perhaps economic, chaos.

One hundred fifty-five members of Congress who voted for the Consolidated Appropriations Act and the preemption of state law are still serving and are up for election next week. Twenty-two senators who stood by as the bill passed by unanimous consent are also up for election Tuesday.

Details are in a blog post entitled “Did Your Representative Cause the Financial Crisis?

Many gambling laws are nanny-statism, of course, but if they’re going to go away, they should be repealed by the legislatures that wrote them. This federal preemption gave special permission to certain parts of the financial services industry to run a huge gambling operation masquerading as a market in real assets.

All this is a good illustration of why it’s harmful for Congress to let the annual budgeting and spending process go off the rails. Maybe voters will hold some of their representatives accountable.

Ten Years of the DMCA, and Little to Cheer about

This week is the tenth anniversary of the Digital Millennium Copyright Act, which Bill Clinton signed into law on October 28, 1998. I was on last Friday’s Cato Daily Podcast discussing the DMCA’s detrimental effects on high tech innovation, and I’ve got a post at the Freedom to Tinker blog discussing one likely casualty of the DMCA, digital juke box software:

What we’re seeing in the video market is what the digital audio marketplace would have looked like if the recording industry had won its lawsuit against the first MP3 players. The recording industry lost that lawsuit, and entrepreneurs went on to build products that were much better than the “official” ones being pushed by the labels. Unfortunately, entrepreneurs in the digital video market don’t have that same option.

If the DMCA were not on the books, it seems likely that many of us would have set-top boxes with 500 GB hard drives capable of ripping dozens of DVDs to an open, standard format for subsequent streaming to any display in the user’s house. The existence of those boxes would spur the creation of a wider market for other digital video products designed to interoperate with the emerging open video standard.

Unfortunately, that’s not how things have gone. Hollywood has managed to do what the recording industry was unable to do: to ban users from converting their legally-purchased content to open formats. As a result, the market for open digital video devices is a pale shadow of what it would be in a competitive market. We’re stuck with clunky, proprietary, and non-interoperable products like Apple TV that require users to re-purchase their existing movie collections in order to watch them on the new device. I think everyone would agree that it was a good thing that the courts didn’t let the recording industry shut down the MP3 player market a decade ago. So why do we tolerate a law that effectively shuts down the analogous market for DVD jukeboxes?

Sen. Harry Reid’s Pork Park

When the weight of big government has me worn down at day’s end I occasionally look at a few politician photo-ops to keep me motivated.  A good source is the Department of Commerce’s Economic Development Administration (EDA): (See here.)

The latest EDA photo-op shows Sen. Harry Reid presenting a goofy oversized check from the U.S. Treasury (i.e., taxpayers) to some of his Nevada constituents to help build a technology park to be named after (drum roll please)…Sen. Harry Reid.

The arrogance is breathtaking, until one remembers that we’re talking about a man who earns his living spending other people’s money (largely against their will).  The picture also illustrates why it is difficult to get rid of even the most obvious losers in the federal budget.

The EDA provides grants and loans to state and local governments, nonprofit groups, and private businesses in regions under “economic distress.”  It was born in the 1960s and has survived several attempts to kill it, including efforts by the Reagan administration and congressional Republicans in the 1990s.  The EDA’s wasteful spending is legendary and it is notorious for exaggerating its successes, which have often proved to be illusory.  (A perfect example of an EDA boondoggle can be viewed here.)

Unfortunately, the EDA survives for a common reason: the agency’s benefits are concentrated on special interests and its costs dispersed across millions of taxpayers. EDA administrators are aware of this reality and cultivate support from Congress by including politicians in the publicizing of money given to constituents. Press releases are coordinated with congressional offices to maximize political gain for both the EDA and the benefiting legislator.

It is little wonder that former EDA director Orson Swindle labeled the agency a “congressional cookie jar.” He realized that private actors in unfettered markets, not government bureaucrats, are better at fostering economic development. Swindle said, “The minute politics enters the equation, rational financial management and economic decision-making goes out the window.”

Getting back to Sen. Reid, yes, I know I’m singling him out for tawdry behavior routinely engaged in by most of his colleagues.  But don’t feel too sorry for him. In February, the Nevada Biotechnology & Bioscience Consortium gave its first ever “Harry Reid Award for Biotechnology and Bioscience Achievements” to (one more drum roll please)…Sen. Harry Reid!