Tag: intervention

The Real Story Behind the Chrysler Bankruptcy

If you worry about the abuse of executive power and declining respect among elected officials for the rule of law, you should watch this eloquent illumination of what really went down in the Chrysler bankruptcy earlier this year. The speaker is Richard Mourdock, Treasurer of the state of Indiana. The setting is a Cato Institute policy forum on October 15 about the “sordid details of the Bush/Obama auto industry intervention.”

As state treasurer, Mourdock is the person responsible for investment decisions concerning Indiana’s state employee pension funds, some of which owned a small share of Chrysler’s $6.9 billion in secured debt and some of which opposed the administration’s offer of $.29 on the dollar for that debt. Though these small secured holders were publicly castigated by President Obama as “unpatriotic” and unwilling to sacrifice for the greater good, Mourdock led the effort to stop the “sale” of Chrysler all the way to the U.S. Supreme Court.

Mourdock’s presentation gives a flavor for the tactics employed by the  Obama administration to “encourage” senior, priority creditors to back off their claims so that chosen parties could take priority—tactics that included backroom reminders that some of those creditors had received and might seek more TARP funding, threats of bringing the full weight and measure of the White House press office to bear down on dissenters, public condemnation, and other forms of arm-twisting most Americans would find unseemly for a U.S. presidential administration.

At the Cato event, Mr. Mourdock was joined by University of Pennsylvania Law School professor and corporate law expert David Skeel, who demonstrated quite clearly that the “sale” of Chrysler, as orchestrated by the Obama administration under cover of Chapter 11 bankruptcy reorganization, was indeed a sham sale. Skeel’s presentation begins at 20:15 of this video.

If you want to have a better sense of what’s going on in Washington (or to affirm your worries), I recommend you watch Mourdock here, listen to Mourdock here, read the Indiana Pensioners’ petition for Writ of Certiorari (appeal to the Supreme Court), and read the Cato Institute’s amicus brief in support of the Indiana pensioners here.

U.S. Cutting Pay for Bailed Out Company Executives

According to reports, executives from bailed out companies Citigroup, Bank of America, GM, Chrysler, GMAC, Chrysler Financial and AIG are going to see major pay cuts this year, which will be enforced by the president’s “pay czar,” Kenneth R. Feinberg. WaPo:

NEW YORK – The Obama administration plans to order companies that have received exceptionally large amounts of bailout money from the government to slash compensation for their highest-paid executives by about half on average, according to people familiar with the long-awaited decision.

The administration will also curtail many corporate perks, including the use of corporate jets for personal travel, chauffeured drivers and country club fee reimbursement, people familiar with the matter have said. Individual perks worth more than $25,000 have received particular scrutiny.

The American people have every right to be upset about generous compensation packages for executives at financial firms that are being kept alive by subsidies and bailouts.

But their ire should be directed at the bailouts, because that is the policy that redistributes money from the average taxpayer and puts it in the pockets of incompetent executives. Unfortunately, rather than deal with the underlying problems of bailouts and intervention, some politicians want to impose controls on salaries. This might be a tolerable second-best (or probably fifth-best) outcome if the compensation limits only applied to companies mooching off the taxpayers, but some politicians want to use the financial crisis as an excuse to regulate compensation at firms that do not have their snouts in the public trough.

This would be a big mistake. So long as rich people make money using non-coercive means, politicians should butt out. It should not matter whether we are talking about Tiger Woods, Brad Pitt, or a corporate CEO. The market should determine compensation, not political deal making. Markets don’t produce perfect outcomes, to be sure, but political intervention invariably produces terrible outcomes.

I debate this further on CNBC:

C/P The Hill

Bush v. Obama on Diplomacy

The Hill’s Congress blog has a regular series that provides policy experts a forum to discuss current topics of the day. This week, the editors posed this question:

President Obama has taken a very different approach to diplomacy than President Bush. Does the new approach serve or undermine long-term U.S. interests?

My response:

What “very different approach?” Sure, President Bush implicitly scorned diplomacy in favor of toughness, particularly in his first term. But he sought UN Security Council authorization for tougher measures against Iraq; a truly unilateral approach would have bombed first and asked questions later. By the same token, President Obama has staffed his administration with people, including chief diplomat Hillary Clinton and UN Ambassador Susan Rice, who favored military action against Iraq and Serbia in 1998 and 1999, respectively, and were undeterred by the UNSC’s refusal to endorse either intervention.

There are other similarities. George Bush advocated multilateral diplomacy with North Korea, despite his stated antipathy for Kim Jong Il. President Obama supports continued negotiations with the same odious regime that starves its own people. Bush administration officials met with the Iranians to discuss post-Taliban Afghanistan and post-Saddam Iraq. In the second term, President Bush even agreed in principle to high-level talks on Iran’s nuclear program. President Obama likewise believes that the United States and Iran have a number of common interests, and he favors diplomacy over confrontation.

This continuity shouldn’t surprise us. Both men operate within a political environment that equates diplomacy with appeasement, without most people really understanding what either word means. Defined properly, diplomacy is synonymous with relations between states. As successive generations have learned the high costs and dubious benefits of that other form of international relations – war – most responsible leaders are rightly eager to engage in diplomacy. Perhaps the greater concern is that they feel the need to call it something else.

Somalia, Redux: A More Hands-Off Approach

SomaliaThe two-decade-old conflict in Somalia has entered a new phase, which presents both a challenge and an opportunity for the United States. To best encourage peace in the devastated country, Washington needs a new strategy that takes into account hard-learned lessons from multiple failed U.S. interventions.

In a new study, author David Axe argues that Washington should err on the side of nonintervention, and recommends:

The Obama administration should work to build a regional framework for reconciliation, the rule of law, and economic development that acknowledges the unique risks of intervention in East Africa….Somalia’s best hope for peace is the moderate Islamic government that has emerged from the most recent rounds of fighting, despite early opposition from the United States and its allies. There are ways in which the United States could help Somalia escape its cycle of violence and peacefully encourage progress by working with this former enemy, but Washington should err on the side of nonintervention.

Read the whole thing.

More Fear-Mongering Claptrap from Max Boot

Max Boot, fellow for National Security Studies at the Council on Foreign Relations and perhaps one of America’s most radical neo-imperialists, eight years ago this month likened the Afghan mission to British colonial rule:

Afghanistan and other troubled lands today cry out for the sort of enlightened foreign administration once provided by self-confident Englishmen in jodhpurs and pith helmets…This was supposed to be ‘for the good of the natives,’ a phrase that once made progressives snort in derision, but may be taken more seriously after the left’s conversion (or, rather, reversion) in the 1990s to the cause of ‘humanitarian’ interventions. [emphasis mine]

Just yesterday, this “stay-the-course” proponent said President Obama should fight on in Afghanistan and properly resource the counterinsurgency mission. Sadly, Boot’s arguments are so faulty and disjointed that it is difficult to decide where to begin first. Here I go…

Boot believes that the coalition should properly resource the war effort. What does that even mean? What Boot neglects to tell his readers is that our current policy requires more troops than we could ever send. The metric for successful counterinsurgency missions suggested by the U.S. Army and Marine Corps would require 200,000 counterinsurgents in southern Afghanistan alone, and upwards of 650,000 in the country as a whole, for upwards of 12 to 14 years—not including the last eight. The time and resources required for assisting Afghanistan would not be accomplished within costs acceptable to American and NATO publics.

Another critical point that Boot fails to disclose is how recklessly ambitious the current mission is. The cost in blood and treasure that we would have to incur—coming on top of what we have already paid—far outweighs any possible benefits, even accepting the most optimistic estimates for the likelihood of success. The United States does not have the patience, cultural knowledge, or legitimacy to transform what is a deeply divided, poverty stricken, tribal-based society into a self-sufficient, non-corrupt, and stable electoral democracy. And even if Americans did commit several hundred thousand troops and decades of armed nation-building, success would hardly be guaranteed, especially in a country notoriously suspicious of outsiders and largely devoid of central authority. Western powers could invest hundreds of thousands of troops and twice or three times the materiel and money and still not create a functioning state. Even in the unlikely event that we forged a stable Afghanistan, al Qaeda might simply reposition its presence into other regions of the world.

Of course, America could narrow its objectives in Afghanistan to degrading al Qaeda’s capabilities. But Boot pooh-poohs this alternative, arguing, “Vice President Joe Biden favors a smaller-scale strategy that would employ high-tech weapons and special forces to kill terrorists from afar. But such a strategy has rarely, if ever, succeeded.” Boot’s example of where such a strategy has not succeeded? “It has been employed by Israel against Hamas and Hezbollah. The result: Hamas controls Gaza, and Hezbollah controls southern Lebanon. It has been employed by the U.S. in Afghanistan and Pakistan. The result: The Taliban controls western Pakistan and large swaths of eastern and southern Afghanistan.”

Equating the United States vis-à-vis al Qaeda to Israel vis-à-vis Hezbollah is a stretch. For one, the two political and security situations are wildly dissimilar. Afghanistan presents a liberation insurgency that includes indigenous groups attempting to expel a foreign occupier, while Hezbollah is a national insurgency of indigenous groups attempting to control the government of Lebanon. Moreover, one could make the argument that Hezbollah presents a pressing existential threat to Israel, whereas al Qaeda presents nothing in the way of an existential threat to the United States.

In addition, the strategy that Boot casually dismisses, that of targeting key militant conspirators, had a far-reaching effect in Iraq, and, according to authoritative sources, was quite possibly the biggest factor in reducing violence there. These operations were highly classified direct action activities, dubbed “collaborative warfare,” which combined intelligence intercepts with precision strikes to eliminate key insurgent leaders of the Shia and Sunni insurgency. Bob Woodward accounts these techniques in his book The War Within: A Secret White House History 2006-2008.

Overall, I couldn’t disagree with Boot more. Instead of increasing troops, America should scale back its military presence. Rather than trying to protect Afghan villages from the Taliban, the United States should concentrate on al Qaeda cells in Pakistan through surgical tactic such as special forces operations, intelligence sharing, and Predator missile attacks when necessary. Whether al Qaeda coalesces in Sudan, in Yemen, or in Miami, Florida, our policy should not be to redesign a people’s way of life or tinker with the importance of their communal identity. Yet that is what Boot wants us to do in Afghanistan.

Sadly, people like Boot have lost sight of a crucial question: not about whether a state-building mission in Afghanistan is achievable, but whether it constitutes a vital U.S. national security interest. Central Asia holds little intrinsic strategic value to the United States, and America’s security will not necessarily be endangered even if an oppressive political faction takes over portions of Afghan territory. Given Afghanistan’s numerous challenges, and the fact that a protracted guerrilla war will weaken Western powers militarily and economically, the fundamental objective should be to get out of Afghanistan.

Curb Your Enthusiasm: Americans Should Not Expect Much from Obama’s Visit to the UN

Barack Obama speaks at the UN general assembly. Photo: Jeff Zelevansky/GettyPresident Obama’s address to the United Nations General Assembly this morning, and his chairing of the UN Security Council on Thursday, is a grand attempt to tell the world–after eight years of George W. Bush–that the United States will no longer go it alone.

The president has a very difficult task, however, if he expects to invest the United Nations with renewed credibility. The UN is a weak and fractured institution, whose limited power and authority has been steadily undermined by a progression of U.S. presidents, both Democrats and Republicans. We should not forget that President Bill Clinton explicitly circumvented the UN Security Council when he chose to intervene militarily in Kosovo in 1999. Clinton’s evasion of the UNSC established a precedent for future military intervention that the Bush administration happily capitalized upon to send troops into Iraq in 2003.

Susan Rice, our current UN ambassador, endorsed this approach in 2006 when she called for U.S. military action against Sudan. Prior UN approval of such a mission was unlikely, but ultimately unnecessary, Rice argued at the time, because of the precedent set by President Clinton in Kosovo.

For American policymakers who have demonstrated such disdain for the UN in the past to now profess great respect for the institution should not surprise us. The UN is only as relevant as the member states wish it to be. In areas of common concern, the desire to cooperate and compromise may temporarily trump concerns over protecting state sovereignty and preserving freedom of action to deal with urgent security threats. In most cases, however, we can expect the member states, with the United States in the lead, to pursue policies that they believe (not always correctly, as we learned in Iraq) will advance their security. And if the UN weakly sanctions such actions after the fact, or refuses to do so, that will only reveal its irrelevance.

Americans Don’t Want It

“Americans are more likely today than in the recent past to believe that government is taking on too much responsibility for solving the nation’s problems and is over-regulating business,” according to a new Gallup Poll.

New Gallup data show that 57% of Americans say the government is trying to do too many things that should be left to businesses and individuals, and 45% say there is too much government regulation of business. Both reflect the highest such readings in more than a decade.

Byron York of the Examiner notes:

The last time the number of people who believe government is doing too much hit 57 percent was in October 1994, shortly before voters threw Democrats out of power in both the House and Senate. It continued to rise after that, hitting 60 percent in December 1995, before settling down in the later Clinton and Bush years.

Also, the number of people who say there is too much government regulation of business and industry has reached its highest point since Gallup began asking the question in 1993.

That might give an ambitious administration pause. The independents who swung the elections in 2006 and 2008 clearly think things have gone too far. An administration as smart as Bill Clinton’s will take the hint and rein it in. Meanwhile, another recent poll, by the Associated Press and the National Constitution Center, shows that

Americans decidedly oppose the government’s efforts to save struggling companies by taking ownership stakes even if failure of the businesses would cost jobs and harm the economy, a new poll shows.

The Associated Press-National Constitution Center poll of views on the Constitution found little support for the idea that the government had to save AIG, the world’s largest insurer, mortgage giants Fannie Mae and Freddie Mac, and the iconic American company General Motors last year because they were too big to fail.

Just 38 percent of Americans favor government intervention - with 60 percent opposed - to keep a company in business to prevent harm to the economy. The number in favor drops to a third when jobs would be lost, without greater damage to the economy.

Similarly strong views showed up over whether the president should have more power at the expense of Congress and the courts, if doing so would help the economy. Three-fourths of Americans said no, up from two-thirds last year.

“It really does ratify how much Americans are against the federal government taking over private industry,” said Paul J. Lavrakas, a research psychologist and AP consultant who analyzed the results of the survey.

Note that 71 percent of the respondents opposed government takeovers, with 50 percent strongly opposed, before the “benefits” of such takeovers were presented.

President Obama is an eloquent spokesman for his agenda, and he has an excellent political team with a lot of outside allies to push it. But as the old advertising joke goes, you can have the best research and the best design and the best advertising for your dog food, but it won’t sell if the dogs don’t like it.