Rubin Resigns from Giant Bank Taxpayergroup

The Washington Post reports:

Robert Rubin, a key figure in the U.S. financial boom as Treasury secretary and then as a senior adviser at Citigroup, announced his retirement from the troubled New York bank yesterday in the latest sign that Citigroup wants to break from its recent past.

Rubin joined Citigroup in 1999, soon after the company emerged as a financial services giant. He has since earned more than $115 million as Citigroup has suffered through setbacks and missteps that culminated in a November bailout by the federal government….

Citigroup, the long-time champion of free markets and deregulation, is increasingly dependent on the federal government, which has invested more than $50 billion to help it weather the economic crisis.

After we’ve invested $50 billion in the company, seems like we ought to call it Taxpayergroup. It’s not really a private company more, though private parties like Rubin may still profit handsomely from it.

“Fear Placebos” and Homeland Security

In the ongoing Cato Unbound discussion about how the government should respond to excessive fear of terrorism, Bernard Finel writes:

The cynical response focuses on continuing the sorts of grand, empty gestures we have already pursued since 9/11. We can continue to pack our shampoo in 3 oz bottles and ignore the color coded signs and tolerate the petty annoyances. Over time, fear will fade and it is unlikely that this unfocused motion will result in grievous consequences.

Finel rejects this approach in favor of what he calls a pragmatic one. I wonder if the cynical approach is the pragmatic one. A realist might say that we can never get the public to be rational about the odds of dying from terrorism, so let’s hold down spending and try to push it toward uses that have benefits other than counterterrorism, sort of like how fear of Soviet missiles justified spending on scientific research and highways. I called this the “fake it” option in a list of possible approaches to homeland security. This approach is dishonest and patronizing, but not necessarily wrong, especially if efforts to correct overwrought fears fail.

Apparently, Obama’s nominee to head the Office of Information and Regulatory Affairs is on the same page. Here’s the conclusion to a working paper called “Overreaction to Fearsome Risks” that Cass Sunstein wrote with Richard Zeckhauser:

Government regulation, affected as it is by the public demand for law, is likely to stumble on the challenge of low probability harms as well. The government should not swiftly capitulate if the public is demonstrating action bias and showing an excessive response to a risk whose expected value is quite modest. A critical component of government response should be information and education. But if public fear remains high, the government should determine which measures can reduce most cost effectively, almost in the spirit of looking for the best “fear placebo.” Valued attributes for such measures will be high visibility, low cost, and perceived effectiveness.

They meant, I believe, to include the word “it,” meaning “public fear” after “reduce.” So, in other words, fake it. It’s not surprising that Sunstein wrote this – his books, from which I learned a lot, head toward the same conclusion. But it will be interesting to see whether this kind of talk, shrouded though it may be in academic speak, gets him into any trouble now that he’s up for an important government job.

In other cost-of-fear-of-terrorism news, both Stephen Dubner of the Freakonomics blog and Bruce Schneier ask whether the diversion of federal attention from crime to terrorism since 9-11 helped cause an outbreak of financial fraud. They cite this New York Times article discussing the shift of FBI resources to counterterrorism. Dubner is unsure, but I say it’s a no-brainer that moving 2,400 FBI agents from crime to counterterrorism and the resulting 40 percent drop in financial crimes referred to US Attorney’s for prosecution caused more financial crime.

We will be discussing the cost of counterterrorism at the conference taking place Monday and Tuesday. Registration is closed because we’re full. But the event will be webcast live on C-SPAN will also be taping Monday afternoon.

Would Daschle’s Federal Health Board Ration Medical Care?

Matthew Holt implausibly says no.

Tom Daschle is a former majority leader of the U.S. Senate, and president-elect Barack Obama’s pick to head the Department of Health and Human Services.  Daschle will also head up the Obama administration’s health care reform efforts.

Which is why Daschle’s proposal for a Federal Health Board has received so much attention. Holt reports:

the main role of the Federal Health Board would be as a cost-effectiveness review organization with teeth—in that Medicare, Medicaid & FEHBP would all be bound to follow its guidelines.

Holt continues:

Critics on the loony right … will call this rationing.

What’s interesting about that comment is that Holt merely associates the “rationing” claim with people who are loony.  He doesn’t actually say they’re wrong.  In fact, Holt himself writes:

we need to make cardiologists in Miami behave like cardiologists in Minnesota with a consequent impact on the incomes of doctors, hospitals and stent & speedboat salesman in high cost areas … If the Federal Health Board has teeth, that’s what it’ll do, and the AMA, AHA, AdvaMed, PhRMA et al know it. Which is why the PhRMA front organizations have been railing against cost-effectiveness for so long.

So Holt acknowledges that the point of comparative- and cost-effectiveness research – and Daschle’s Federal Health Board – is to do something that would reduce the incomes of doctors, hospitals, and drug/device manufacturers.  That something would be so dramatic that it has the providers and manufacturers up in arms and funding front organizations.  If that something is not refusing to pay for some medical services – i.e., rationing – then what is it?

Rationing medical care is not just essential, it’s unavoidable.  And the way we ration medical care today is unconscionable.  But so too would be having the government ration medical care.  Which is probably why proponents of government rationing don’t want to call it that.

Too Close for Comfort

NPR reports on the Illinois legislative debate about impeaching Gov. Rod Blagojevich:

Their case for impeachment goes beyond criminal allegations. They say he abused the power of his office: bypassing the Legislature to create new programs he couldn’t pay for; circumventing hiring laws to give jobs to political allies; and misappropriating taxpayer funds.

“He has snubbed his nose at that oath of office and, therefore, snubbed his nose at the people and the constitution,” said Republican Rep. Mike Bost.

It’s a good thing for presidents that members of Congress don’t apply such standards in Washington.

Who’s Blogging about Cato

  • While running an online poll on Sanjay Gupta’s appointment, Ann Althouse quotes Michael D. Tanner on his views about the office of surgeon general.
  • Jason Shafrin cites a December Cato forum in which panelists Glen Whitman and Ezra Klein debated the state of the nation’s health care. A podcast from the forum, “Does America’s Health Care Sector Produce More Health?” is available here.

  • Insider Online contributor Alex Adrianson blogs about the most recent edition of Cato Journal, with an article by J.R. Clark and Dwight R. Lee that examines the relationship between government interference in the market and censorship.

The Measure of Our Own Liberties

As you may have heard, the Supreme Court recently granted certiorari to Ali Saleh Mohamed Kahlah al-Marri. The unclassified version of the evidence against him is available in the Rapp Declaration. It reads like a movie plot; I recommend it to you.  


After the 9/11 attacks, the FBI arrested al-Marri, an exchange student at Bradley University in Peoria, Illinois. The government indicted him for using false identification, bank fraud, giving false statements to the FBI, and possession of counterfeit credit card numbers. The government alleges that al-Marri met with Osama Bin Laden, was working with senior Al Qaeda organizers, has a more-than-casual interest in poisons, and was told by his handlers to be in America before September 11th or to forget about executing his mission here. 

Before al-Marri began trial, the government removed him to military custody and asked that the charges against him be dismissed with prejudice (meaning that they cannot be re-filed upon his release). He has since remained in a naval brig in South Carolina. He holds the distinction of being the only domestically detained enemy combatant in U.S. custody.  

The Fourth Circuit heard his habeas claim, releasing a fractured opinion. The panel found, 5-4 on each issue, that (1) the government can detain al-Marri as an enemy combatant; and that (2) al-Marri is owed more process to contest his status as an enemy combatant. 

Wrong on the Law

What happens to al-Marri is important because, according to Bush administration attorneys, the treatment he gets is what any American citizen would get if detained by the government as an enemy combatant. Congress did not give the president domestic carte blanche in the Authorization for Use of Military Force (AUMF) passed after 9/11. Detention of al-Marri as an enemy combatant is directly contrary to Senate rejection of proposed domestic military powers and Patriot Act provisions providing for temporary detention of “terrorist aliens.” 

The Supreme Court should reject this watering down of our essential civil liberties. Judge Motz of the Fourth Circuit does the math for us at page 45 of the Fourth Circuit’s opinion. Four justices (Stevens, Souter, Breyer, and Ginsburg) found in Rumsfeld v. Padilla that the AUMF “does not authorize … the protracted, incommunicado detention of American citizens arrested in the United States.” Justice Scalia filed a dissenting opinion in Hamdi v. Rumsfeld, holding that absent a suspension of the writ of habeas corpus, citizens cannot be held domestically as enemy combatants and must be tried in civilian courts. 

Wrong on Policy

The course we have taken with al-Marri is as wrong on policy as it is on the law. Rather than give suspected Al Qaeda operatives the opportunity to play the martyr and wage propaganda warfare against us, we should be putting them in their proper place. Nobody’s heard from or cared about would-be shoe bomber Richard Reid since his conviction. He received the life sentence he deserved and we all went on with our lives. As Judge William Young said at Reid’s sentencing, “we all know that the way we treat you, Mr. Reid, is the measure of our own liberties.”

The future of counterterrorism policy will be discussed at Cato’s upcoming conference, Shaping the Obama Administration’s Counterterrorism Strategy. Click here for more information.