Archives: 10/2012

Our Broken Panopticon: Senate Report Finds Fusion Centers Expensive & Useless

For years, top officials at the Department of Homeland Security have touted  “fusion centers“—designed to share security information between state, local, and federal government agencies— as a “vital tool for strengthening homeland security,” a “proven and invaluable tool,” and “one of the centerpieces of our  counterterrorism strategy.” But a blistering new bipartisan Senate report paints a radically different picture, exposing these centers as a costly boondoggle that flouted civil liberties safeguards, lacked basic accountability, and produced “intelligence” that was overwhelmingly useless or irrelevant—or as one particularly candid official put it, “a load of crap.”

How costly are they? Incredibly, DHS can’t even say for certain: Estimates of federal spending on the centers range from $289 million to $1.4 billion. Given that most states had a distinct shortage of real terrorists to keep tabs on, much of that money went to purposes utterly unrelated to actual counterterrorism analysis. One center blew $75,000 on dozens of flat-screen televisions, supposedly for an intelligence training program that never materialized.  Now the TVs are being used to display calendars, and for “open-source monitoring”—also known as “watching the news.”  Other popular purchases included Sport Utility Vehicles, laptops, and high tech surveillance toys for ordinary law enforcement—many of which were then given away to other local government agencies.

How useless are they? One official estimated that 85 percent of the reports they produced were of no benefit whatever, and the large majority of reports were unrelated to terrorism. Most of these weren’t published or circulated for months, and they often just regurgitated information from public press reports. Almost all these reports came from centers in just three states: Most of the 77 fusion centers produced little or nothing at all. Sorry, make that 68 fusion centers—it turns out the official DHS tally included several that didn’t actually exist.

Unsurprisingly, DHS “struggled to identify a clear example” in which fusion center intelligence helped identify any actual terrorists—and indeed, may have hampered effective counterterrorism by clogging the intelligence arteries with “predominantly useless” information. To keep justifying those millions of taxpayer dollars, however, DHS touted bogus “success stories,” like a report that sowed panic over a Russian cyberattack on a city’s water system—a cyberattack that had never happened. When internal assessments began to reveal the ineffectuality of fusion centers years ago, DHS hid the results from Congress—and kept on praising them publicly.

Of course, civil liberties groups have been warning for years that fusion centers are more likely to facilitate improper monitoring of citizens than legitimate security goals. And the Senate report shows they had reason to worry. One key DHS official revealed a disturbing view of he value of intra-agency “cooperation” when he noted that “We had fire [departments] — one of the few people who can enter your home without a warrant is a firefighter.” One notorious fusion center report suggested that Libertarian Party members, Ron Paul supporters, and individuals flying the Gadsden Flag popular with Tea Partiers were likely to be violent extremists. Many reports were shelved because they documented only innocent, protected First Amendment activity—but the information in them was often retained anyway, in potential violation of the Privacy Act.

Yet perhaps because those earlier criticisms fit the familiar narrative of the “privacy versus security” debate, less attention was devoted to the more basic question:  Do these programs actually provide any security? Are the hundreds of millions in taxpayer dollars being spent on fusion centers making us any safer?

Unfortunately, this is something of a pattern—one I noted in National Review back in 2010. Utter the words “terrorism” or “national security” and even the most ardent deficit hawks are often cowed, fearful of being branded “soft on terror” if they dare to question whether the latest urgent effort to “do something” is really doing anything useful with taxpayer dollars. Cash-strapped local agencies and D.C. intelligence contractors are only too happy to accept funds unburdened by accountability. The result, as my colleague John Mueller has exhaustively documented, has been a decade of waste: Hundreds of billions squandered on one faddish new program after another, invariably touted as “vital” and “life-saving” when a veil of secrecy kept anyone from checking those dramatic claims—and all too often exposed, much later, as a costly gift to terrorists that had rendered us less safe by diverting resources and wasting the time of intelligence agents.

Perhaps, finally, Congress is ready to get serious about cost-benefit analysis, even for programs sporting a “security” label.  That this report got published suggests that at least a few federal legislators care about finding effective ways to keep us safe—not just throwing our money away in a desperate attempt to look tough. Alas, the final “Recommendations” section seems geared toward finding a way to “fix” fusion centers rather than scrapping them.  The “toughest” move now would be to admit that the centers are a failure, at least as a counterterrorism tool, that they’re unlikely to ever provide an intelligence benefit that remotely justifies their costs, and stop throwing good money after bad.

Why Are Conservatives Incoherent on Federal Education?

For a nice overview of the counterproductive incoherence of Republican education efforts over the decades, check out this piece by Frederick Hess and Andrew Kelly of the American Enterprise Institute. And for a sense of how confused conservatives remain when they write pieces telling other conservatives how to have “good” federal education policy, read the same piece. Its history section gives you the first part, and, unfortunately, its other sections give you the rest.

Hess and Kelly – who are generally pretty sharp – furnish a terrific overview of what happens when you talk “local control” of government schools and decry federal micromanaging, but can’t stop yourself from spending federal money and love ”standards and accountability.” Basically, you get a great big refuse heap of squandered money, red tape, educational stagnation, and political failure.

Having laid all that out pretty nicely, you’d think that Hess and Kelly would reach the logical conclusion: Conservatives should obey the Constitution and get Washington out of education. But they don’t. Instead they give precious little thought to the Constitution, and make policy prescriptions that fundamentally ignore that government tends to work for the people we’d have it control. You know, concentrated benefits, diffuse costs; iron triangles – basically, the big problems Hess and Kelly decry at state and local levels.

Start with their constitutional argument (such as it is):

The federal government does have a legitimate role to play in schooling — and it always has. From the Land Ordinance of 1785, which set aside land for the purpose of building and funding schools, through Dwight Eisenhower’s 1958 investment in math and science instruction after the launch of Sputnik, the federal government has recognized a compelling national interest in the quality of American education.

Wow! What a sweep of history! What a great many years this covers!

The thing is, most of those years see essentially no federal education activity, and the first year mentioned – 1785 – precedes the Constitution. Why very little activity between 1785 and 1958? Because relatively few people thought the national government had any role to play in governing education. That’s why neither the word “education” nor “school”  (or, for that matter, ”compelling national interest”) is in the Constitution, and even a commission created by Franklin Delano Roosevelt said that there is no constitutional federal role in education. Washington does have jurisdiction over District of Columbia schools, and a responsibility under the 14th Amendment to prohibit discrimination, but that’s it.

OK, to be fair, it could also be argued that Congress can constitutionally pass education provisions like those in the Land Ordinance. But not because Washington has power over education. No, because as you see in Article IV, Section 3 of the Constitution, it has power over territories. Of course, states and districts are not territories, and the 10th Amendment reiterates what is clear from the granting of only specific, enumerated powers to Congress:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

In an effort to deal with the very clear failures of federal education policy – but without the clarity of following the Constitution – Hess and Kelly offer three things they think the Feds can and should focus on: transparency, research, and “trust-busting.” However, all three ignore the fundamental political reality that school systems tend to be controlled by their employees because the employees have the most at stake. And what are their incentives? Same as mine and yours: to get compensated as generously as possible and have no one hold them accountable for their performance. The result, of course, has been oodles of money spent without meaningful academic improvement.

Start with transparency. Lauding No Child Left Behind for having improved “citizens’ ability to gauge and compare school quality,”  Hess and Kelly argue that the Feds “should require that states collecting federal school funds measure and report detailed data on school quality and educational costs in a consistent, uniform way.” They caution, however, that Washington shouldn’t prescribe standards or curricula, but should measure “schools’ return on public investment.”

Talk about conflicted! How exactly do Hess and Kelly expect the Feds to both stop short of mandating curriculum and standards, and provide an accepted measure of specific schools’ return on investment? Even if you could thread the needle for a while, it is very hard to imagine Washington not eventually narrowing acceptable measures down to a single curriculum and test so that results could be uniform and distilled into soundbites. And what would likely happen even if the standards started off rigorous and the testing tough? The employees who would ultimately be held accountable would simply move their dumbing-down pressure from state and local levels to the federal level, where policy was now being made.  Nothing would be solved, and there would be huge added problems of a new, monolithic standard that could in no way effectively serve greatly diverse kids, as well as the quashing of competing curricular ideas.

Next we’ve got the research argument, which is predicated on the well-known contention that the incentives for private-sector investment in “basic” scientific research – which doesn’t offer immediate returns – are too weak to provide for optimal amounts. The Feds, therefore, have to step in with oodles of grant money. Hess and Kelly would like to extend that model to education research.

Education, however, is not particle physics, the kind of research we generally imagine as “basic.” The need for major equipment investment is not nearly as great for education, nor are the likely benefits of, say, studying the effects of flash cards as far distant as the industrial applications of string theory. Moreover, if we had broad school choice, with schools able to seek profit without penalty, educators would have every reason to invest in research and find better, more efficient ways to teach kids. Finally, there is good evidence that science funding is just as likely to translate into rent-seeking benefits to the scientists as scientific benefits to the public.

Oh, and the constitutional basis for education research spending? Hess and Kelly don’t even try to offer one.

Finally, we have “trust-busting.” Here even Hess and Kelly’s examples illustrate how mistaken their ideas are. While sensibly calling for a reduction in calcifying federal rules and regulations, Hess and Kelly also argue that the Feds should be able to set up “private” entities to compete with the public-school monopoly. They cite as an example the American Board for Certification of Teacher Excellence, which provides a teacher preparation and certification process separate from those established by states. They also note that ABCTE has been “generally neglected.” Which is probably a good thing. After all, think of two other “private” federal creations: Fannie Mae and Freddie Mac. Seems there can be big problems when Washington creates supposedly private entities.

Then there’s this: “A related role for federal lawmakers is to help lift the burden of bad past decisions and troubling policy legacies that hinder reform-minded state and local leaders.” Hess and Kelly argue that Washington should create a form of bankruptcy that lets states and districts render null and void labor contracts and other obligations that make it hard for them to do business. And what example do they use of organizations that have been crippled by “legacy” contracts? General Motors and Chrysler.

Of course, thanks to the federal government, GM and Chrysler didn’t go through normal bankruptcy, did they? No, they went through processes jury-rigged to favor politically important special interests. That lesson should be screaming at Hess and Kelly: Give Washington power over something and they won’t use it for the common good. They will use it to reward the politically powerful, the very state and local problem Hess and Kelly are trying to solve!

The simple reality is that the federal government is no less subject to special-interest control – the ultimate result of the basic political problem of concentrated benefits and diffuse costs – than state and local governments. Except, that is, that Washington is even more distant from the people than state and local governments, and if people don’t like their state or local schools they can at least move.

There is, really, only one solution to the basic government problem of concentrated benefits and diffuse costs, and we do no one any favors by denying it: We need to end government control of education.  We need a free market, in which educators are free to teach as they see fit and are held accountable by having to earn the business of paying customers.

The federal role in getting to this, thankfully, is simpler than what must be done at state levels, where constitutional authority over education actually exists. All that Washington has to do is obey the Constitution and get out of education. And yes, Rick and Andrew, that is what the Constitution requires.

2012 Presidential Debate Live Blog

Join us Wednesday, October 3rd at 8:45 PM ET for live commentary during the first debate between Barack Obama and Mitt Romney.

Tweet questions during the debate to the live blog participants below:

Follow the Twitter list of all live blog participants here. You can also join the conversation with the official hashtag #DebateDenver and by following @CatoInstitute.

Click here for information on how to watch the debate online.

***UPDATE: You can watch the full debate video here.***


Hyperinflation Has Arrived In Iran

Since the U.S. and E.U. first enacted sanctions against Iran, in 2010, the value of the Iranian rial (IRR) has plummeted, imposing untold misery on the Iranian people. When a currency collapses, you can be certain that other economic metrics are moving in a negative direction, too. Indeed, using new data from Iran’s foreign-exchange black market, I estimate that Iran’s monthly inflation rate has reached 69.6%. With a monthly inflation rate this high (over 50%), Iran is undoubtedly experiencing hyperinflation.

When President Obama signed the Comprehensive Iran Sanctions, Accountability, and Divestment Act, in July 2010, the official Iranian rial-U.S. dollar exchange rate was very close to the black-market rate. But, as the accompanying chart shows, the official and black-market rates have increasingly diverged since July 2010. This decline began to accelerate last month, when Iranians witnessed a dramatic 9.65% drop in the value of the rial, over the course of a single weekend (8-10 September 2012). The free-fall has continued since then. On 2 October 2012, the black-market exchange rate reached 35,000 IRR/USD – a rate which reflects a 65% decline in the rial, relative to the U.S. dollar.

The rial’s death spiral is wiping out the currency’s purchasing power. In consequence, Iran is now experiencing a devastating increase in prices – hyperinflation.  As Nicholas Krus and I document in our recent Cato Working Paper, World Hyperinflations, there have been 57 documented cases of hyperinflation in history, the most recent of which was North Korea’s 2009-11 hyperinflation. That said, North Korea’s hyperinflation did not come close to the magnitudes reached in the recent, second-highest hyperinflation in the world, that of Zimbabwe, in 2008, nor has Iran’s hyperinflation – at least not yet.

‘No State Is Going to Be Able to Be Fully Certified on Jan. 1’

I was traveling when the Washington Post published this article on D.C.’s efforts to implement ObamaCare:

If you want to know what health reform in action looks like, here’s what you should picture: a nondescript conference room, on the fourth floor of a government building, with about four dozen people sitting in rows of red chairs and one fluorescent light that keeps flickering on and off…

[T]his is actually a pretty important place. It’s where government officials decide what the Obama administration’s signature legislative achievement will look like for residents of the nation’s capitol…

It started with the first agenda item: Deciding what set of essential health benefits the District of Columbia will require all insurance carriers to cover. Even in one of the most Democratic-leaning districts in the country, there’s was not exactly enthusiasm for this new piece of federal regulation.

“This is mandated by the law,” District of Columbia insurance commissioner Bill White noted. “This is not something anyone here decided to do.”

Still, they did have to set an essential benefit package…

That sounds like to me like bureaucratic hell in action more than health care reform in action. And the last part, about ObamaCare or federal bureaucrats requiring D.C. to make these decisions, isn’t even true.

One consolation is that it looks like not even the 14 states that want to establish ObamaCare’s health insurance Exchanges will be able to do so on time.

Even with widespread support, the District still has a to-do list that stretches 11 PowerPoint slides long…

All of it is supposed to be done by Jan. 1, 2013, but officials here recognize, despite their commitment, it’s just not possible. Even the most stalwart of Obamacare supporters just simply have too much work to meet that deadline…

“No state is going to be able to be fully certified on Jan. 1,” said Bonnie Norton, D.C’s acting director of health reform.. “When they passed the ACA, they were highly optimistic about the timeline for states to implement exchanges.”

Does anyone really think that ObamaCare’s Exchanges will be up an running on time by October 1, 2013?

Welfare, College, and Golf

Here’s a story from the sports pages with relevance to current debates on welfare, dependency, and whether college is good for you.

After the European win in the Ryder Cup, sports reporter Matthew Futterman of the Wall Street Journal wonders why “the best European golfers are better than the best Americans now.” His tentative answer:

One difference is that the 12 Americans on the Ryder Cup team all attended college. Just two members of Europe’s team, Graeme McDowell and Luke Donald, spent those crucial, formative years of development playing collegiate golf….

Here’s what happens when top golfers, tennis and soccer players attend college: They subject themselves to rules about how often they can compete and practice. They throw themselves at the mercy of coaching that is not always world-class. They live in housing filled with…let’s call them distractions. And in order to play, they have to pass classes in biology and political science.

Compared with the experience of Rory McIlroy or other European golfers, who turn pro as teenagers, then do little else but practice and compete (sometimes for their next meal or train ticket), the college life is pretty appealing.

And why is that a problem?

…the college life is pretty appealing.

But it’s also a safety net. It’s not crazy to think that the European approach creates athletes who work a bit harder and perhaps become just a wee bit tougher.

And that insight might apply to more than golf and tennis. As Peter Thiel suggests, smart young people might do better to leave college and “dedicate themselves to their work.”  ”Safety net” programs might trap people in long-term welfare dependency, unemployment benefits might prolong unemployment, and  establishing religion might make the established church lazy.

Election Pamphlets Raise Questions

I live in Virginia, which is a battleground state, and my mailbox has been littered with political propaganda in recent weeks. Here are some questions for the candidates:

  • George Allen (R) for Senate promises to “protect defense jobs from devastating cuts” while “restoring fiscal discipline in Washington.” But Allen was already in Washington and his party didn’t restore discipline. Is he proposing anything different this time?
  • Rep. Jim Moran (D) promises to “stand up for women” and protect their “rights” by ensuring they “have access to affordable contraception.” But what about men? Shouldn’t they get a tax credit for condoms or something?
  • Romney/Ryan (R) promise to “begin reducing the deficit and balancing the budget.” But how? Apparently not with defense savings because they will “protect and strengthen Virginia’s military jobs,” nor with Medicare savings because they will “preserve and strengthen” that program.
  • Romney/Ryan (R) promise to “champion small business.” But what about big business? Big business employs tens of millions of Americans and is subject to more intense global competition than is small business. So why do R/R want to specially favor small businesses?
  • Tim Kaine (D) for Senate says that he “dramatically increased the percentage of state contracts issued to small, women-owned and minority-owned businesses.” But are women’s businesses more important than men’s businesses? And is Kaine saying that he will use government power to favor minority businesses over other businesses? How does that square with his promise to create opportunities “for all”?
  • Tim Kaine (D) for Senate also promises to “strengthen Medicare, Social Security, and Medicaid.” Is he saying that even though rising spending on these programs will cause government finances to implode in coming years, he wants to spend even more on them? Does Kaine think it’s fair to enslave young people with even more debt from these programs just to gain votes from greedy geezers?  

In sum, I’m seeing a lot from both parties about “strengthening” spending, “protecting” big government, and “championing” some groups of Americans over others. What about voters who want their leaders to strengthen individual rights, protect equality under the law, and champion the United States Constitution?