Obama the Planner

New Republic editor John Judis has a couple of insights about the Obama administration’s economic and social goals. He points out that, for more than a century, Progressive and free-market forces have gone through cycles of “reform and reaction.”

The Progressives — who my friend John Baden calls the “American counterrevolutionaries” — have repeatedly sought to increase the size and scope of government: railroad regulation, public land agencies, and the income tax in the 1900s; Social Security, low-interest home loans, and government ownership of power plants in the 1930s; Medicare, the war on poverty, and environmental laws in the 1960s.

In between, friends of free markets tried to roll back those reforms, but were never completely successful. Thus, each successive reform era has further increased government power and reduced free markets.

This reminds me of the basic strategy used by the wilderness movement (in which I was active from about 1975 through 1993). Wilderness activists basically considered land that had already been preserved as wilderness or some other classification to be “theirs,” while all remaining land was “potentially theirs.” Successive congressional land-use bills or presidential decrees would put more land in “their” category, but no matter how much they got, it was never enough.

At the time, I called this the “scorched earth policy,” meaning wilderness advocates embedded so many poison pills in the protected lands that no one would ever try to declassify them. This isn’t necessarily a deliberate strategy, just an effect of our political system.

Judis goes on to outline the ways in which Obama wants to build on past reforms. First, he wants to use “the budget to shift the locus of industrial production toward ‘green’ jobs and products.” He also wants to “make dramatic changes in transportation with [government’s] intervention in the auto industry and in its funding of high-speed rail.” Finally, he wants to institute a form of “national planning” in order to “reverse existing trends” towards “suburban housing [and shopping] malls.”

People who are attracted to such policies tend to judge them based on their intent rather than their results. In fact, these interventions have nearly all either backfired or had huge unintended consequences.

Railroad regulation was imposed just as trucks appeared on the scene in 1907, leaving railroads helpless against growing competition. “Progressive” income taxes ended up with so many loopholes that they weren’t really progressive. The federal loan companies, such as Fannie Mae and Freddie Mac, played a key role in the current crisis when they succumbed to political pressure to buy increasingly risky loans.

Social Security is a giant Ponzi scheme that is also one of the most regressive taxes on the books, not to mention that it has provided billions of dollars of surpluses for Congress to borrow with little hope of ever paying it back. Medicare is an even bigger Ponzi scheme, while the war on poverty created a semi-permanent underclass that has been all but forgotten by the liberals who claim to care most about them.

Environmental laws produced many benefits when they focused on technical solutions, but they failed miserably when they attempted to change people’s behavior. As transportation expert Alan Pisarski recently told the Institute of Transportation Engineers, technical solutions to air pollution are responsible for 95 to 105 percent of the improvements in air quality in the past 40 years, while behavior solutions produced only minus 5 to 5 percent of the improvements — minus 5 meaning some behavioral solutions made pollution worse.

Unfortunately, Obama’s plans are all about changing behavior. This means two things: they will be expensive — especially when counting the unintended consequences — and they won’t work. High-speed rail and urban revitalization, for example, are all about redesigning the country for yuppy elites, not ordinary Americans. The question for free-market advocates is: how can we minimize the damage now and roll back the reforms later?

“… and Replace It with REAL ID”

CNN wrote an exciting headline on Wednesday: “Homeland Security Chief Seeks to Repeal Real ID Act.” What they left out was that the replacement would be … the REAL ID Act.

Intentionally or not, Secretary of Homeland Security Janet Napolitano has created the impression that the national ID law might go away. But simply renaming the Department of Homeland Security’s national ID program is not a repeal of REAL ID.

The REAL ID revival bill that has been circulating is the same national identification and tracking system with a few of the sharpest corners taken off and the hope of federal money held out to up-to-now recalcitrant states. The REAL ID revival bill would corral every American citizen into the national ID system to try and attack illegal immigrants.

Bills to repeal REAL ID were introduced in the previous Congress, but they did not move because the Bush administration and Chertoff DHS would have eagerly demagogued the issue. Those political conditions no longer hold. And just 10 months ago, Secretary Chertoff delayed the implementation of REAL ID without bringing any political repercussions to the Bush administration whatsoever. Secretary Napolitano can do the same if Congress fails to truly repeal REAL ID, as it should.

Waste, Fraud, and Stimulus

At Capitol News Connection, brought to you each morning by your tax dollars, they reported this morning:

With more than a trillion tax dollars tied up in the Troubled Asset Relief Program and stimulus spending, Congress is trying to figure out how to account for every penny.

Uh-huh. Congress is always on top of our federal dollars.

Coincidentally, just hours after the CNC report, the Government Accountability Office released a report warning about the lack of oversight procedures in the kitchen-sink stimulus bill. And a few days earlier the inspector general for the TARP program reported that Treasury has no real details on how TARP funds are being spent. In fact, IG Neil Barofsky told Congress that there were 20 criminal investigations into possible TARP fraud already underway.

Two months ago Barofsky and the comptroller general had warned of the likelihood of waste in huge new government programs:

Neil Barofsky, the special inspector general for the $700 billion Troubled Asset Relief Program, told a House subcommittee that the government’s experiences in the reconstruction of Iraq, hurricane-relief programs and the 1990s savings-and-loan bailout suggest the rescue program could be ripe for fraud…

Gene Dodaro, acting comptroller general of the U.S., told the subcommittee that a reliance on contractors and a lack of written policies could “increase the risk of wasted government dollars without adequate oversight of contractor performance.”

One of Greg Mankiw’s readers worked on the new Department of Homeland Security and reported recently:

[Y]ou cannot juice up a government agency’s budget by tens of billions (or in the case of the stimulus package, hundreds of billions) and expect them to be able to process the paperwork to contract it out, much less oversee the projects or even choose them with any kind of hope for success. It’s like trying to feed a Pomeranian a 25 lb turkey. It’s madness. It was years before DHS got the situation under control and between the start and when they finally assembled a sufficiently capable team of lawyers, contracting officials, technical experts and resource managers, most of the money was totally wasted.

Linda Bilmes, coauthor with Nobel laureate Joseph Stiglitz of The Three Trillion Dollar War: The True Cost of the Iraq Conflict, analyzes the massive problems in three somewhat smaller government projects — the Iraqi reconstruction effort, Hurricane Katrina reconstruction, and the Big Dig artery construction in Boston — and finds that “in any organization that starts to increase spending very rapidly there are risks of waste, fraud and inefficiency.”

Milton Friedman summed up the basic problem with government waste back in 2002:

When a man spends his own money to buy something for himself, he is very careful about how much he spends and how he spends it. When a man spends his own money to buy something for someone else, he is still very careful about how much he spends, but somewhat less what he spends it on. When a man spends someone else’s money to buy something for himself, he is very careful about what he buys, but doesn’t care at all how much he spends. And when a man spends someone else’s money on someone else, he doesn’t care how much he spends or what he spends it on. And that’s government for you.

Members of Congress can make all the speeches they want about their commitment to ferreting out waste and fraud, but waste and fraud are inevitable in government spending and inevitably large in such massive programs. Some people think that’s fine. At least they’re realistic. But reporters shouldn’t fall for politicians promising to spend unprecedented sums of other people’s money quickly and wisely.

Cleveland Park Embraces Free Markets

Cleveland Park, an upscale neighborhood here in the District of Columbia, might be the last place you would expect appeals to the principles of the free market.  It is, after all, the home of what David Brooks once called ”Ward Three Morality,” an outlook that celebrates government control of the economy. But not always.

Recently an entrepreneur proposed opening a new wine store in Cleveland Park. He sought the support of the advisory neighborhood commission, a local government board, before making his case for a liquor license to DC’s Alcohol Beverage Control Board.  The most serious opposition to the entrepreneur’s plans seems to have come from an existing wine store nearby. According to its attorney, the existing wine store was “a beloved extension of the community.” More candidly he noted the new store would offer competition to the existing business. At this point, you might think: the Cleveland Park commission blocked opening of the new business while congratulating themselves on protecting the town from a ruthless “capitalist logic.”

Well, not quite. Peter Fonseca, the lawyer for the entrepreneur, reportedly “urged the commissioners to consider free-market principles when making their decision. ‘This is America.’” And they did: “Commissioner Richard Rothblum agreed, saying commissioners should not get in the way of free enterprise. ‘I don’t think we have any place telling people what their business plan should be.’” The commission then voted 8-0 to support the entrepreneur’s effort at the Alcohol Control Board. The appeal to “free market principles” seems to have carried the day in Cleveland Park!

Perhaps this is only the beginning. If the free market is desirable for fine wines, why not the auto industry and the banks?

The Joys of Stock Ownership

I happen to own shares in Bank of America, so I’ve just received a proxy statement for the upcoming annual meeting. The Board of Directors recommends that I authorize them to vote my shares FOR an uncontested slate of candidates for the board. Usually I go along with such proxy requests.

But this time I thought: Why should these people get something like $250,000 a year to take orders from President Obama and Secretary Geithner? It’s become pretty clear that the Obama administration intends to use the bailout money to control private companies. He intends to tell companies what cars to make, how much to lend, how much to charge for credit cards, what to pay their executives, what kinds of bonuses are acceptable, and other crucial management decisions.

So I decided to write in “Barack Obama” for all 18 positions on the Board of Directors. However, neither the paper ballot nor the online ballot allowed for write-ins. I guess the official slate will win. But make no mistake. Obama’s the boss.

The Danger of Charter Schooling

It’s an interesting problem for charter-school afficianados: many want charters to have all the freedom of private schools, but go to pains to let people know that charters are public schools whenever the schools are under fire (or want money). Well I’ve just learned – perhaps before reporters have even been able to write their stories, because I haven’t yet found a news link to it – that New York’s Public Employee Relations Board will force the KIPP AMP charter school in New York City to let its teachers unionize.

This will be a tough pill for KIPP AMP to swallow, especially since an integral part of the famous KIPP model is requiring employees to be available far beyond the normal working hours of traditional public school teachers – not something the United Federation of Teachers is known for loving.  But this is the chance you take when you run a charter school: No matter how much you want to act like a private school, sooner or later the public-schooling powers will remind you of what you really are.

“Soft” Interrogation Yields the Best Results

My colleague Chris Preble sketches out some of the moral pitfalls that come with authorizing torture in his post.  Beyond that, history shows that utilitarian claims that torture has enhanced our safety are also mistaken.

While torture can in some instances provide valid intelligence, it can also produce false information motivated only by a desire to end suffering.  Successful interrogators from World War II to the modern day have used rapport and psychology, not brutality, to get inside the heads of their enemies.

The Air Force interrogator who helped bag Abu Musab al Zarqawi, writing under the pseudonym Matthew Alexander, says that the difference between an interrogator and a used car salesman is that the interrogator has to abide by the Geneva Conventions.  No torture there, and a good read to boot.

This theme is echoed in Kyndra Rotunda’s book Honor Bound:

I knew one CITF agent and one FBI agent who were Muslims, and both knew how to coax the truth from detainees’ lips.  One word captures their effective, secret ingredient to successful interrogations - patience.  They each spent hours visiting with the detainee, sharing tea, bringing gifts of dried fruits, and talking endlessly about family, Allah, and the Quran.

This should come as no surprise, since it is a repackaging of the techniques of World War II interrogator Hanns Scharff, “Master Interrogator of the Luftwaffe.”  Scharff treated downed Allied pilots humanely, gaining their trust and sympathy while gleaning significant information about Allied air power and advance warning of the D-Day landing.  The Allies wanted to prosecute him after the war for interrogating their pilots so effectively, but dropped the charges when they couldn’t substantiate him so much as raising his voice.  He came to the United States after the war and did mosaic art work at Walt Disney World.

So color me unsurprised when a former FBI supervisory agent says that we gained actionable intelligence by traditional interrogation techniques, and that torture backfired on us.

The release of memoranda authorizing torture will help prevent the U.S. from ever traveling this dark path again.  The U.S. has consistently taken the moral high ground in armed conflicts, contrasting our behavior with the savagery our enemies engaged in for decades.  The historical record shows that mercy, not might, is the key to successful interrogation.