Archives: 12/2011

The Self-Congratulating Washington Establishment

My new post at Huffington Post looks at a dinner of the Panetta Institute and what it says about cozy relationships among the Washington establishment:

So let’s see … an institute founded by and bearing the name of the secretary of defense, who also served 17 years in Congress, including four years as chairman of the House Budget Committee, and as director of the Office of Management and Budget, White House chief of staff, and director of the CIA, is giving an award to his immediate predecessor, who also served as CIA director, and to a quintessentially establishment Washington journalist, and to a scholar at both Georgetown University and the Brookings Institution who in addition to her time at the Federal Reserve has served as director of the Congressional Budget Office, director of OMB, co-chair of the Bipartisan Policy Center’s Task Force on Debt Reduction. That is like an entire Washington establishment at one head table.

More on what this establishment has wrought, and right and wrong ways to break up the iron triangle, at the link.

Feds Palling Around With Mexican Cartels

Two years ago the Washington Post reported that the Immigration and Customs Enforcement agency brought dangerous Mexican drug traffickers to the U.S. who, while continuing their criminal activities in Mexico and the U.S., also served as informants to the federal authorities in their war on drugs.

In June, Operation Fast and Furious came to light where the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) allowed suspicious straw-purchasers of firearms to buy weapons in the U.S. and smuggle them into Mexico. The purpose was to track the guns all the way to the ultimate buyer—a Mexican drug trafficking organization. Overall, the ATF facilitated the purchase of hundreds of guns by Mexican cartels. Many were later found in crime scenes in Mexico, including one where a U.S. Border Patrol agent was assassinated.

On Sunday, the New York Times reported that the Drug Enforcement Agency has been laundering millions of dollars for Mexican cartels. The goal of the undercover mission is to follow the money all the way up to the top ranks of the criminal organizations. However, as the NYT notes, “So far there are few signs that following the money has disrupted the cartels’ operations and little evidence that Mexican drug traffickers are feeling any serious financial pain.”

So there we have it: in the name of the war on drugs, the federal government has provided safe havens to Mexican drug traffickers, facilitated their purchase of powerful firearms, and has even laundered millions of dollars for the cartels.

After spending millions of dollars toward fighting the drug war in Mexico, the United States has little to show for its efforts. It seems Washington is becoming more desperate each year to produce new leads and results. These three incidents display a stunning lack of foresight and borders on the federal government aiding the Mexican drug cartels, with little to show in return. The unintended consequences of these programs aimed at dismantling the cartels would be laughable were it not for the thousands that have died in Mexico’s drug related violence.

It is time for the United States to rethink the war on drugs and consider policies that will successfully undermine the Mexican drug cartels.

Will Congress Welcome Russia into the WTO?

Next week trade officials representing the more than 150 members of the World Trade Organization will gather in Geneva for a ministerial meeting. Most of the agenda will be a snoozer. The Doha Round is stuck in neutral, with no compromises in sight on agricultural protection, services trade liberalization, or anti-dumping reform. But one item of business will mark a major milestone: the admission of Russia into the club of trading nations.

As I argue in a Washington Times column this morning, and in a Cato Free Trade Bulletin co-authored with Douglas Petersen and released this week, Russia’s entry into the WTO will help to bring more rule of law to the former communist nation. It will also open its market further to U.S. exports, especially civilian aircraft, heavy machinery, computer software and hardware, and beef and poultry.

Approval by WTO members is a near certainty, but what remains an open question is whether the U.S. Congress will grant Russia permanent normal trade relations (PNTR). This will determine whether U.S. companies are granted the more favorable access to Russia’s market offered to other WTO members once it joins the organization. If Congress does not grant PNTR, Russia will join the WTO anyway, but U.S. companies will be at a competitive disadvantage.

In coming weeks, Congress will have an opportunity to welcome one of the world’s largest economies into the rules-based global trading system—and benefit the struggling U.S. economy in the bargain.

Big Brothers, PRODIGAL Sons, and Cybersecurity

I wrote on Monday that a cybersecurity bill overwhelmingly approved by the House Permanent Select Committee on Intelligence risks creating a significantly broader loophole in federal electronic surveillance law than its boosters expect or intend.  Creating both legal leeway and a trusted environment for limited information sharing about cybersecurity threats—such as the idenifying signatures of malware or automated attack patterns—is a good idea. Yet the wording of the proposed statute permits broad collection and disclosure of any information that would be relevant to protecting against “cyber threats,” broadly defined. For now, that mostly means monitoring the behavior of software; in the near future, it could as easily mean monitoring the behavior of people.

A recent—and somewhat sensationalistic—Fox News article rather breathlessly describes a newly-unveiled security system dubbed PRODIGAL, or Proactive Discovery of Insider Threats Using Graph Analysis and Learning, which “has been built to scan IMs, texts and emails … and can read approximately a quarter billion of them a day.” The article explains:

“Every time someone logs on or off, sends an email or text, touches a file or plugs in a USB key, these records are collected within the organization,” David Bader, a professor at the Georgia Tech School of Computational Science and Engineering and a principal investigator on the project, told

PRODIGAL scans those records for behavior – emails to unusual recipients, certain words cropping up, files transferred from unexpected servers – that changes over time as an employee “goes rogue.” The system was developed at Georgia Tech in conjunction with the Defense Advanced Research Projects Agency (DARPA), the Army’s secretive research arm that works on everything from flying cars to robotic exoskeletons.

Don’t panic just yet: This is strictly being deployed on the networks of government agencies and contractors that handle sensitive information—places where every employee is well aware that their use of the network is subject to close scrutiny, and with good reason.  There’s not really anything to say in principle against the use of such systems in this context, or for that matter on closed business networks where users are on clear notice that such monitoring occurs.

It would, by contrast, be a clear and quite outrageous invasion of privacy for such large-scale behavioral monitoring to be conducted on the residential or mobile broadband networks Americans rely on to provide their personal Internet connectivity—a fortiori if the goal is to share the results with the government without a court order.  As I read it, however, House Intel’s cybersecurity bill would at least arguably permit precisely that.

Under the current language, as long as an Internet provider had a credible good faith belief that it was collecting and sharing behavioral information for one of several broadly defined “cybersecurity purposes”—say, by creating behavioral profiles of potential hackers, disruptive cyberactivists, or “misappropriators” of intellectual property—they’d enjoy full civil and criminal immunity for such actions. That would make any contractual promises to abstain from such monitoring unenforceable—in the highly unlikely event that ordinary users were even able to determine reliably what sort of information was being shared. It would be, to put it as mildly as possible, extraordinarily poor civic hygiene to  enable the construction of this kind of quasi-public/quasi-private monitoring and profiling architecture.

This is not, I believe, the sort of thing the bill’s own architects aspire to bring about.  But the abstract language employed in pursuit of technological neutrality here avoids the risk of obsolescence only by sacrificing predictability.  Courts have recently begun signalling that they’re belatedly inclined to start insisting on full Fourth Amendment search warrants whenever government seeks digitally stored private contents, closing down statutory loopholes that sometimes gave investigators easier access. And now, just as one backdoor closes, a new backchannel granting access to otherwise private and protected material without any judicial process opens up? It does not take a cynic to predict that there will be a potent and persistent incentive to stretch any such channel as wide as the elastic bonds of the English language will permit.

The cleanest way to foreclose this is not to paste in a bunch of after-the-fact usage controls, minimization protocols, or special reports to Congress—though those aren’t bad ideas either. It’s to admit that Congress lacks psychic powers, which may entail that statutes regulating protean areas of technology  have to be (or ought to be) swapped for the newer model about as often as iPhones. The specific, narrow categories of sharing everyone thinks are important and unobjectionable from a privacy perspective can be specifically, narrowly authorized now. In a decade, when we’re beaming thoughts directly to each other via quantum-entangled biomechanical brain implants, we can decide what specific statutory language solves the novel security problems of that technology, in a manner consistent with the Fourth Amendment.

Let’s Divest of GM Yesterday

Writing in today’s Washington Post, Charles Lane posits that the time is now for the U.S. Treasury to divest of its remaining 500 million shares of General Motors stock.  I agree with that conclusion, but not with Lane’s rationale or his recommendation for a heavy-handed, government-imposed exit strategy.

Just to recap: the Treasury recouped $23 billion of taxpayers’ $50 billion outlay when it sold GM shares to the public in an IPO in November 2010; the outstanding 500 million shares in government coffers must be sold at an average price of $54 to recover the remaining $27 billion; the IPO price was $33; today’s price is $21.69.  If all 500 million shares could be sold at today’s price, the Treasury would raise $10.8 billion, leaving taxpayers at a loss of just over $16 billion. (Of course, the sale of such a large number of shares would drive the average selling price way below today’s price, resulting in a much larger taxpayer loss.)

Lane is correct to conclude that GM’s immediate future isn’t looking quite so rosy. Demand is tanking in Europe. Concerns remain about whether GM will continue to be able to fund its $128 billion pension plan. And sales of the “game-changing” Chevy Volt have been lagging since the vehicle’s commercial introduction some 13 months ago—well before its engines demonstrated an annoying propensity to spontaneously combust. (Not to worry, says GM’s public relations team: the engines don’t seem to catch fire while being driven, only an hour or two after they’ve been parked in the garage.) Recognizing that that qualifier hasn’t been reassuring enough, GM is now offering to buy back any Chevy Volt it has ever sold, which doesn’t bode well for the bottom line, but also affirms how few of these Government Motors show pieces have even sold.

That grim analysis is the basis for Lane’s preference for government divestment now. There is more downside risk than upside potential. It is an argument based on market-timing, rather than on the principle that bad things happen when the government has a stake in the outcome of a race that it can influence. Sure, the administration would love to divest of GM at a profit to taxpayers. But the longer it is allowed to wait for that train to arrive, the greater the temptation to grease the skids.

The government should divest now. It should have divested in June, when it was first legally permissible to do so.  But the administration (following, by logic, what would have been Lane’s advice at the time) rolled the dice, expecting the stock value to rise. Instead it fell. And then there was this.

But my bigger problem is with Lane’s proposal for a managed divestment.  He writes:

It’s time to cut our losses.  Treasury should start selling its stake in GM.

And I know just the buyer: GM. The company is sitting on more than $33 billion in cash, about triple the market value of Treasury’s 500 million shares, which is roughly $10.8 billion.

Though GM wants to dedicate much of its cash to shoring up its pension plan, it could still absorb most or all of Treasury’s shares, even if Treasury charges a modest premium over the current market price, as it should.

Lane proposes this under the guise of some perverse fealty to a “free-enterprise economy,” as it would spare shareholders from the stock price-depressing impact of an unnatural 500 million share dump. But those shareholders knew the risks they were taking when they purchased GM stock in the first place. They certainly knew that the largest single shareholder didn’t intend to hold its position for very long. Lane’s argument for protecting those shareholders in the name of free-enterprise in unconvincing, if not misplaced.

Furthermore, Lane’s zeal for sticking it to GM seems to eclipse any real commitment to free markets. Forcing GM to divert resources from where management wants to commit them in order to achieve some favorable political outcome (a smaller taxpayer loss) is just as coercive as some of the administration’s actions on the road to GM’s nationalization in the first place.

GM should not be entitled to any favors or exceptional treatment by virtue of its ownership structure. To be certain of that, it should be 100 privatized yesterday. But likewise, GM should not be subject to compensatory or otherwise countervailing policies designed to punish or remove any perceived advantage. For starters, it is impossible to measure the benefits received or the penalties suffered with any precision. Demanding that GM not be exposed to special treatment goes in both directions.


Border Security, the War on Drugs, and the 2012 GOP Presidential Race

The issue of border security has made its way into the 2012 GOP presidential race and candidates are jockeying to separate themselves from the pack. The topic garnered some attention at the Republican national security debate on November 22. An Associated Press story today examines the candidate’s platforms on the topic and as the title implies, rightly concludes securing the border is impossible. I am quoted in the article and make exactly that point:

Mitt Romney and Newt Gingrich have promised to complete a nearly 1,950-mile fence. Michele Bachmann wants a double fence. Ron Paul pledges to secure the nation’s southern border by any means necessary, and Rick Perry says he can secure it without a fence — and do so within a year of taking office as president.

But a border that is sealed off to all illegal immigrants and drugs flowing north is a promise none of them could keep.

“Securing the border is a wonderful slogan, but that’s pretty much all it is,” said Ted Galen Carpenter, a senior fellow at the libertarian Cato Institute. “Even to come close would require measures that would make legal commerce with Mexico impossible. That’s an enormous price for what would still be a very leaky system.”

The bottom line is the border is simply too big to control. Attempting to fully police the border must pass a simple cost-benefit analysis, and it is not clear that our current policy passes that test. And yet, the candidates all agree securing the border is necessary to combat terrorism, illegal immigration, and drug violence stemming from Mexico.

The candidates have little reason to reexamine that assumption. Not only is it politically advantageous to call for securing the border, but it is a convenient one-size-fits-all solution to those three broader policy issues. They have calculated that this is what voters want to hear.

But it is an illusory solution. Laws protecting the border must exist and be enforced, but it is not clear that this alone, even if done more effectively or efficiently, will prevent terrorists or illegal immigrants from entering the United States. And the “securing the border” panacea certainly will not end the flow of drugs into the United States.

Curiously, while the GOP candidates all express worries about terrorism and illegal immigration, the subject of the war on drugs has hardly been discussed.  Although drug violence in Mexico is the only major security problem the Untied States faces on any of its borders, the issue has not produced serious consideration thus far.  Rep. Ron Paul (R-TX) has been the only candidate to offer a thoughtful, consistent approach the issue, calling for an end to the failed policy.

The candidates should be pressured to answer why Washington continues to spend billions of dollars to wage the war on drugs each year with little to show for it. The power of the drug cartels has reached the point that the Mexican government no longer controls some areas of the country. And there are worrying signs that the violence is beginning to bleed across the border into the United States.

Our prohibitionist efforts have failed and a new policy is needed. Only by removing the lucrative black-market drug trade and thus effectively defunding the Mexican drug cartels can we begin to end the violence and illegal activity that plagues Mexico and the southern U.S. border region.

That is the substantive discussion that should be taking place in the GOP debates, rather than the posturing and repeated faux policy prescriptions to secure the border.