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May 31, 2011 4:39PM

Waterboarding, Again

I have an article in today’s Los Angeles Times pointing out that waterboarding is dead as a tool for U.S. interrogators. So get over it. I also make the point that it died under Bush’s watch, so the next time Dick Cheney trots out a proposal to bring back waterboarding, he’s quarreling mostly with his old boss and not the current commander-in-chief. Over at the Washington Post, Allen McDuffee thinks this is unfair:

It may well be the case that Cheney has unfinished business with Bush over dropping the so-called enhanced interrogation techniques, but it is at least a selective reading for Rittgers to suggest that Cheney’s words are not directed at Obama with the hope that they carry political consequences for the administration. It is unlikely that even Cheney himself would make such a suggestion.

Of course Cheney’s comments are directed at Obama, as a rearguard action intended to make it politically impossible to prosecute those that made waterboarding and other coercive interrogation techniques our policy. Mission accomplished.

Waterboarding died in 2004 when the Office of Legal Counsel withdrew the memoranda supporting it, with other nails in the coffin provided by the Detainee Treatment Act and the Hamdan decision. Bush didn’t make these changes by himself. The OLC withdrawal was Jack Goldsmith’s doing, and a signing statement on the DTA showed Bush’s reluctance to accept limits on his power. But accept them he did. On the same day that Bush issued an executive order finessing the Geneva Conventions Common Article 3 as applied to the CIA, his OLC issued legal advice on what enhanced interrogation techniques are still on the table. It’s no human rights wishlist (sleep deprivation, reduced calorie diet, and four slapping/holding techniques), but waterboarding is nowhere to be found.

Yes, Obama restricted the intelligence community to the Army Field Manual. Waterboarding was long gone by that point. It has been resurrected as a talking point in defiance of legal reality, good policy, and core principles, but will not and should not be American policy. Again, get over it.

May 31, 2011 4:19PM

The “I‑Told‐​You‐​So” Blog Post about the Completely Predictable Failure of the Greek Bailout

Way back in February of 2010, I wrote that a Greek bailout would be a failure. Not surprisingly, the bureaucrats at the International Monetary Fund and the political elite from other European nations ignored my advice and gave tens of billions of dollars to Greece's corrupt politicians.

The bailout happened in part because politicians and international bureaucrats (when they're not getting arrested for molesting hotel maids) have a compulsion to squander other people's money. But it also should be noted that the Greek bailout was a way of indirectly bailing out the big European banks that recklessly lent money to a profligate government (as explained here).

At the risk of sounding smug, let's look at my four predictions from February 2010 and see how I did.

1. The first prediction was that "Bailing out Greece will reward over-spending politicians and make future fiscal crises more likely." That certainly seems to be the case since Europe is in even worse shape, so I'll give myself a gold star.

2. The second prediction was that "Bailing out Greece will reward greedy and short-sighted interest groups, particularly overpaid government workers." Given the refusal of Greek politicians to follow through with promised cuts and privatizations, largely because of domestic resistance, it seems I was right again. As such, I'll give myself another pat on the back.

3. My third prediction was that "Bailing out Greece will encourage profligacy in Spain, Italy, and other nations." Again, events certainly seem to confirm what I warned about last year, so let's put this one in the win column as well.

4. Last but not least, my fourth prediction was that "Bailing out Greece is not necessary to save the euro." Well, since everybody is now talking about two possible non-bailout options—either a Greek default (a "restructuring" in PC terms) or a Greek return to using the drachma—and acknowledging that neither is a threat to the euro, it seems I batted 4-4 in my predictions.

But there's no reward for being right. Especially when making such obvious predictions about the failure of big-government policies. So now we're back where we were early last year, with Greece looking for another pile of money. Here's a brief blurb from Reuters.

The European Union is racing to draft a second bailout package for Greece to release vital loans next month and avert the risk of the euro zone country defaulting, EU officials said on Monday.

If this second bailout happens (and it probably will), then I will make four new predictions. But I don't need to spell them out because they'll be the same ones I made last year.

We've reached the lather-rinse-repeat stage of fiscal collapse for the welfare state.

May 31, 2011 3:14PM

Senate Vote on Rand Paul’s Budget

Last week, a motion to proceed on a budget resolution introduced by Sen. Rand Paul (R-KY) was decisively defeated in the Senate (7 in favor, 90 opposed). Paul’s proposal would have balanced the budget in five years (fiscal year 2016) through spending cuts and no tax increases. Social Security and Medicare would not have been altered. Instead, the proposal merely instructed relevant congressional committees to enact reforms that would achieve "solvency" over a 75-year window.

That’s hardly radical.

Paul’s proposed spending cuts were certainly bold by Washington’s standards, but they weren’t radical either. For example, military spending would have been cut, in part, by reducing the government’s bootprint abroad. From the Paul proposal:

The ability to utilize our immense air and sea power, to be anywhere in the world in a relatively short amount of time, no longer justifies our expanded presence in the world. This budget would require the Department of Defense to begin realigning the over 750 confirmed military installations around the world. It would also require the countries that we assist to begin providing more funding to their own defense. European, Asian, and Middle Eastern countries have little incentive to increase their own military budgets, or take control of regional security, when the U.S. has consistently subsidized their protection.

Over 750 confirmed military installations around the world. That’s enough to make a Roman emperor blush. Isn’t continuing to go deeper into debt to subsidize the defense of rich allies the more “radical” position? (See these Cato essays for more on downsizing the Department of Defense.)

Other cuts included eliminating the Department of Housing & Urban Development, the Department of Energy, and most of the Department of Education. But unlike most Republicans, Paul didn’t apologize for the cuts or use the debt dilemma as a cop out. Instead, he explains in his plan why these federal activities are counterproductive and should be devolved to the states or left to the private sector.

It’s disappointing that Paul could only get seven Republicans and no Democrats to support his budget. For all the bluster about needing to cut spending, not raise taxes, and stop the Obama administration’s big government agenda, most Republican senators said “no dice” when given the chance to vote in favor of a plan that would accomplish all three objectives and balance the budget in five years.

May 31, 2011 1:28PM

E‑Verify and Common Sense

This weekend, New York Times op-ed columnist Ross Douthat wrote a piece full of common sense thinking about immigration control and the E-Verify federal background check system.

"Common sense"—or "what most people think"—is an interesting thing: When generations of direct experience accumulate, common sense becomes one of the soundest guides to action. Think of common law, its source deep in history, molded in tiny increments over hundreds of years. Common law rules against fraud, theft, and violence strike a brilliant balance between harm avoidance and freedom.

When most people lack first-hand knowledge of a topic, though, common sense can go quite wrong. Such is the case with "common sense" in the immigration area, which is not a product of experience but collective surmise. Douthat, who has the unenviable task of leaping from issue to issue weekly, indulges such surmise and gets it wrong.

Take, for example, the premise that American workers lose when immigration rates are high: "Amnesty," says Douthat, would "be folly (and a political nonstarter) in this economic climate, which has left Americans without high school diplomas (who tend to lose out from low-skilled immigration) facing a 15 percent unemployment rate."

On the whole, American workers do not lose out in the face of immigration. To the extent some do, it is penny-wise and pound foolish to retard our economy (in which displaced workers participate) and overall well-being (which affects displaced workers, too) in the name of protecting status quo jobs for a small number of native-borns.

Full immigration reform that includes generous opportunities for new low-skill workers is not folly, whatever its political prospects may be.

But I want to focus on Douthat's conclusion that E-Verify is the way forward for immigration control. He cites a study finding that Arizona's adoption of an E-Verify mandate caused the non-citizen Hispanic population of Arizona to fall by roughly 92,000 persons, or 17 percent, over the 2008–2009 period, and concludes:

[M]aybe — just maybe — America’s immigration rate isn’t determined by forces beyond any lawmaker’s control. Maybe public policy can make a difference after all. Maybe we could have an immigration system that looked as if it were designed on purpose, not embraced in a fit of absence of mind.

Though tentative, his implication is that a national E-Verify mandate is the solution. Everything that came before was the product of fevered impulses.  Maybe E-Verify is the most practical solution. Douthat's calm tone sounds like common sense.

Ah, but neither Douhtat or the authors of the study have thought that problem all the way through (and the study doesn't claim to): The decline in Arizona was not produced simply by moving illegal immigrants from Arizona back to Mexico and Central America. They went to Washington state and other places in the United States that are less inhospitable to immigrants. A national E-Verify mandate would offer no similar refuge, and the move to underground (or "informal") employment would occur in larger proportion than it did in Arizona.

The report also cautions that the honeymoon in Arizona may not hold:

[T]he initial effects of the legislation are unlikely to persist if actors in the labor market learn that there are no consequences from violating these laws. Hence, for long-term effectiveness, policymakers should also consider the role of employer sanctions, which have not played a large role in Arizona’s results so far. However, policymakers must weigh the sought-after drop in unauthorized employment against the costs associated with shifting workers into informal employment.

That's antiseptic language for: investigations of employers, raids on workers, heavy penalties on both, and growth in black markets and a criminal underground. "Balmy" is a way of describing the temperature potatoes pass through in a pressure cooker.

It's hard, on analysis, to see Arizona's experience being replicated or improved upon by an E-Verify mandate that's national in scale without a great deal of discomfort and cost. I surveyed the demerits of electronic employment eligibility verification in "Franz Kafka's Solution to Illegal Immigration."

There is more not to love in the Douthat piece. Take a look at this shrug-o'-the-shoulders to the deep flaws in the concept of "internal enforcement" and E-Verify:

Arizona business interests called it unfair and draconian. (An employer’s business license is suspended for the first offense and revoked for the second.) Civil liberties groups argued that the E-Verify database’s error rate is unacceptably high, and that the law creates a presumptive bias against hiring Hispanics. If these arguments sound familiar, it’s because similar critiques are always leveled against any attempt to actually enforce America’s immigration laws. From the border to the workplace, immigration enforcement is invariably depicted as terribly harsh, hopelessly expensive and probably racist into the bargain.

We should disregard these problems because they're familiar? With regard to E-Verify, they're familiar because they are the natural consequence of dragooning the productive sector into enforcing maladjusted laws against free movement of people from a particular ethnic category to where their labor is most productive.

Problem-solving is welcome, and columnists like Ross Douthat have to at least point to a solution with regularity. But this effort, sounding in common sense, does not rise to the challenge. The solution is not even more enforcement of laws inimical to human freedom. The solution is reforming immigration laws to comport with ... common sense!

May 31, 2011 12:09PM

Hoenig for FDIC

On July 8th, Sheila Bair will step down as Chair of the Federal Deposit Insurance Corporation (FDIC).  While I believe she's gotten a lot wrong (such as not preparing the fund for the coming crisis), she has been about the only voice among senior bank regulators for actually ending too-big-to-fail.  With her departure, we might lose that one voice.  Later this year, Kansas City Fed President Tom Hoenig is also scheduled to leave his current position.

Hoenig has actually gone beyond Bair in trying to address too-big-to-fail, having called for the largest banks to be broken up.  While I don't believe that should be our first approach, having an advocate for both the taxpayer and the overall economy at the helm of the FDIC could make a significant difference.

Given that Section 2 of the Federal Deposit Insurance Act requires the FDIC to have a bipartisan board, President Obama is faced with the choice of either appointing a non-Democrat or asking Vice-Chair Marty Gruenberg to leave.  While I have no idea as to Hoenig's politics, he'd likely be able to pass that test.

Hoenig has also been willing to publicly challenge Bernanke on a number of issues.  Given the narrow group-think among regulators that contributed to the crisis, having a loud, credible, independent voice among bank regulators is solely needed.  Hoenig again fits that bill.  His appointment would also offer Obama a chance to show that he is not completely beholden to the Geithner "never seen a bailout I didn't like" worldview.

Perhaps with Hoenig at the helm, we can actually begin a debate about reducing the moral hazard created by the Federal Reserve.  While Bair was all too willing to see both insurance coverage and regulatory powers of the FDIC expanded, Hoenig strikes me as open-minded to the very real excess bank risk-taking that is encouraged by the existence of the FDIC.

May 31, 2011 11:29AM

Antidumping Reform Crucial to U.S. Competitiveness

The Cato Institute today published its 13th policy paper on the topic of antidumping. "Economic Self-Flagellation: How U.S. Antidumping Policy Subverts the National Export Initiative" describes with compelling anecdotes and data how the outdated assumptions of a 90-year-old law—one purported to "level the playing field" and protect U.S. companies from "unfair" foreign competition—conspire with its overzealous application to erode the competitiveness of U.S. firms.

During the decade from January 2000 through December 2009, the U.S. government imposed 164 antidumping measures on a variety of products from dozens of countries. A total of 130 of those 164 measures restricted (and in most cases, still restrict) imports of intermediate goods and raw materials used by downstream U.S. producers in the production of their final products. Those restrictions raise the costs of production for the downstream firms, weakening their capacity to compete with foreign producers in the United States and abroad.

In all of those cases, trade-restricting antidumping measures were imposed without any of the downstream companies first having been afforded opportunities to demonstrate the likely adverse impact on their own business operations. This is by design. The antidumping statute forbids the administering authorities from considering the impact of prospective duties on consuming industries—or on the economy more broadly—when weighing whether or not to impose duties.

That asymmetry has always been insane, but given the emergence and proliferation of transnational production and supply chains and cross-border investment (i.e., globalization)—evidenced by the fact that 55% of all U.S. import value consists of raw materials, intermediate goods, and capital equipment (the purchases of U.S. producers)—it is now nothing short of self-flagellation.

Most of those import-consuming, downstream producers—those domestic victims of the U.S. antidumping law—are also struggling U.S. exporters. In fact those downstream companies are much more likely to export and create new jobs than are the firms that turn to the antidumping law to restrict trade. Antidumping duties on magnesium, polyvinyl chloride, and hot-rolled steel, for example, may please upstream, petitioning domestic producers, who can subsequently raise their prices and reap greater profits. But those same "protective" duties are extremely costly to U.S. producers of auto parts, paint, and appliances, who require those inputs for their own manufacturing processes.

President Obama acknowledges as much. On August 11, 2010, at a White House signing ceremony, the president offered the following rationale for a bill that he was about to sign into law:

The Manufacturing Enhancement Act of 2010 will create jobs, help American companies compete, and strengthen manufacturing as a key driver of our economic recovery. And here’s how it works. To make their products, manufacturers—some of whom are represented here today—often have to import certain materials from other countries and pay tariffs on those materials. This legislation will reduce or eliminate some of those tariffs, which will significantly lower costs for American companies across the manufacturing landscape—from cars to chemicals; medical devices to sporting goods. And that will boost output, support good jobs here at home, and lower prices for American consumers.

Higher input prices stemming from antidumping measures are only the first assault on these downstream firms. The next wave usually takes the form of stiffer competition from firms in countries where there are no antidumping duties on the critical input. As a result, the foreign competition often operates at a cost advantage in the United States and in other markets that enables it to sell profitably at lower prices than U.S. firms can charge.

Accordingly, the profits of downstream firms are squeezed by both higher costs, due to import restrictions, and lower revenues, due to lost sales. As a consequence, countless U.S. producers in downstream industries—including firms that were once thriving in the United States and foreign markets—have suffered severe losses, contraction, and bankruptcy.

Again, the administration is well aware of this connection. Indeed, the U.S. Trade Representative launched a formal complaint against China in the WTO for that country’s restrictions on exports of certain crucial raw materials, providing the following rationale:

China maintains a number of measures that restrain exports of raw material inputs for which it is the top, or near top, world producer. These measures skew the playing field against the United States and other countries by creating substantial competitive benefits for downstream Chinese producers that use the inputs in the production and export of numerous processed steel, aluminum and chemical products and a wide range of further processed products.

Moreover, the USTR demonstrates an appreciation for the fact that restrictions on upstream products generate downstream costs that compound at successive stages in the production supply chain:

These raw material inputs are used to make many processed products in a number of primary manufacturing industries, including steel, aluminum and various chemical industries. These products, in turn become essential components in even more numerous downstream products.

If you need more evidence that the antidumping status quo is weighted heavily against import-consuming U.S. industries, consider this gem: three of the nine mineral raw materials that are the subject of the U.S. case against China in the WTO (magnesium, silicon metal, and coke) are simultaneously subject to U.S antidumping restrictions. That's right! With our own import restrictions firmly in place, the United States is suing China to remove its export restrictions on the same products. That sounds like an excellent use of resources.

As a final indignity, many U.S. exporters suffer the wrath of foreign antidumping restrictions and other forms of protectionism that are often the result of persistent U.S. opposition to antidumping reform, as well as outright retribution for specific U.S. antidumping actions. Among recent victims are U.S. exporters to China of automobiles, fiber optic cable, chicken, grain, and paper. In countless ways, the antidumping status quo subverts U.S. competitiveness and is an albatross around the neck of the U.S. economy.

To bestow real and enduring benefits upon the U.S. economy, the antidumping law should be reformed to—at a minimum—give legal standing to manufacturers and workers in consuming industries; require the administering authorities to conduct an analysis of the economic impact of prospective antidumping duties and to deny imposition if the costs exceed a certain threshold; and require that any antidumping duties imposed not be excessive.

May 31, 2011 10:30AM

Presidents Should Obey the Law

In Star Wars III: Revenge of the Sith, when Chancellor Palpatine transforms the republic into an empire, Senator Amidala remarks:

So this is how liberty dies . . . with thunderous applause.

But it can also happen in silent acquiescence. For decades now, successive Congresses have evaded their responsibility to make decisions about the deployment of U.S. armed forces abroad. I write about the latest instance of this, in Libya, in today's Britannica column:

Presidents have an obligation to obey the Constitution and the law. But one of the ways that separation of powers works is that each branch of government is supposed to jealously guard its prerogatives from usurpation by the other branches. Too often Congress ducks that responsibility, preferring to let presidents make decisions, make law, and make war without the involvement of Congress. As Arthur M. Schlesinger, Jr., explained in his book The Imperial Presidency, the expansion of presidential war-making power has been “as much a matter of congressional abdication as of presidential usurpation.”

The president is derelict in his duty to obey the Constitution and the War Powers Resolution. And Congress is derelict in its duty to assert its constitutional authority. And I’m still wondering what’s happened to the antiwar movement, which ought to be loudly protesting not just the continuing wars in Iraq and Afghanistan but the newborn war in Libya.

As George Will said last week, "even if you think the War Powers Resolution is an unwise law—it is a law." And a former law professor who is now the president of the United States should obey the law. Will expanded on that point in his Sunday column, titled "Obama's Illegal War," in the old-fashioned print edition of the Washington Post.

Full Britannica column here.