The Welfare Kings of Farming

There is an excellent op-ed in today’s LA Times on the special kind of corporate welfare given to farmers. David Boaz and I have both written blog entries (here and here) and done podcasts on the topic (mine on 05/30/06 and David’s on 07/25/06). As the farm bill comes up for extension/review/obliteration (okay, that last one was a bit optimistic), this topic is one to watch.

Transition in Cuba: How Would Raúl Rule?

Fidel Castro’s transfer of power to his brother Raúl is beginning to look like a test run for an eventual transition. As I wrote Tuesday (here, and in this op-ed in the Chilean newspaper La Tercera), the real question is whether the eventual permanent transfer of power will simply be a transition to new leadership or whether it will be a transition to a different kind of regime.

That’s a question to which probably nobody, even in Cuba, knows the answer. The Castro brothers have in fact been planning the transition to Raúl’s rule for some time. Given Raúl’s prominent treatment in the Cuban press recently, Cuba expert Brian Latell asked two months ago whether the transition has already begun.

Raúl has led the armed forces since the beginning of the revolution. The fall of the Soviet Union and the loss of massive subsidies to the island transformed Raúl’s role and that of the military. In the 1990s Raúl advocated policy changes that opened up the Cuban economy to foreign investment in a few sectors, such as tourism and mining, that earn foreign exchange. The Cuban economy also became dollarized. (Several years ago I asked the head of Cuba’s central bank why Cuba had become dollarized and whether he thought that was a good thing or bad thing. His response was a long one. He didn’t answer the first question, but did say they were not happy with the development and intended to dedollarize—something they began to do two years ago). As it happened, the military began running all sorts of businesses in Cuba in the 1990s including hotels, gas stations, travel services, and import-export agencies that generate hundreds of millions of dollars in revenue.

When I visited Havana four years ago, I saw how retired military officials also play a prominent role. They are the ones entrusted to run the major state-owned enterprises. They produce a certain level of revenue for the state, beyond which they engage in what appears to be quasi-private business activity, all of which amounts to a strange mixture of socialist statism with entrepreneurship.

Foreign exchange and increased economic activity have helped spread the informal economy, another factor that may affect Raúl’s rule. Thousands of Cubans now conduct business or other activities independent of the state in all manner of areas (taxis, messenger services, restaurants, libraries, etc.).

Two other observations struck me during my visit to Cuba: 1. I don’t think I met anybody who truly believed in communism. I met with high officials at ministries and top people at the University of Havana and official think tanks, some of whom were very intelligent and quite sophisticated, and all of whom left me with an impression that cynicism about the revolution was widespread. 2. Discontent with the status quo among the general population was also widespread. To this day, the economy has probably not yet bounced back to the income or consumption levels that existed in 1989 or 1990. Food rations are skimpy and clinics cannot afford to provide basic medicines or supplies (patients must finance those goods themselves). Why put up with the lack of freedom if the revolution can’t even guarantee basic necessities?

Since Venezuela began to provide massive subsidies to Cuba a few years ago, Havana has backtracked on its limited reforms. The subsidies have not significantly improved living conditions in Cuba, however, and have made doing business more cumbersome. For all of the above reasons, whoever follows Fidel, including Raúl, will have a difficult time maintaining the status quo. I believe that Raúl will be willing to compromise on socialist principles if only to benefit certain constituencies such as the military and shore up his power. Limited economic reform, not political reform, would be on the agenda. My guess is that that will be the beginning of more fundamental policy changes. My hope is that those changes will also lead to political change and (this part is most unlikely) that the transition to a more open society happens as swiftly as possible.

New Milestone for Federal Pay

New data was released today by the U.S. Bureau of Economic Analysis on federal employee wages and benefits. The data for 2005 shows that compensation for the average federal civilian worker ($106,579) is now exactly double the average compensation in the U.S. private sector ($53,289).

(See Tables 6.2D, 6.5D, and 6.6D here, www.bea.gov/bea/dn/nipaweb/index.asp).

The federal pay advantage has been soaring in recent years. The ratio of average federal to average private compensation increased from 1.51 in 1990, to 1.68 in 2000, to 2.00 today.

Both federal wages and benefits have been galloping ahead. The new data shows that the average federal civilian worker earned $71,114 in wages in 2005, compared to an average $43,917 in the private sector.

I discussed the federal pay advantage based on data for 2004 in a recent bulletin. I thought that new data for 2005 would show the federal advantage narrowing due to strong private sector growth. Instead, the federal advantage increased once again. Average federal wages rose 5.8 percent in 2005 compared to an increase of 3.3 percent in the private sector.

See the full details in a summary spreadsheet here [.xls].

Federal Education Tax Credits. So Close, and yet…

Senator Rick Santorum (R-PA) has introduced a federal education tax credit bill (“America’s Class Act”) modeled on a program in his home state. The Pennsylvania program is indeed an excellent concept, allowing businesses to make tax-creditable donations to private scholarship funds that in turn help low income families gain access to independent schools. Donation tax credit programs such as this are one of the two critical components in an ideal market education policy (the other being a personal tax credit for parents who choose independent schools for their children).

Unfortuntalely, the unmitigated merits of this policy at the state level are heavily mitigated at the federal level. First, because the Federal government is accorded no role in education whatsoever by our Constitution (“oh, that old thing?!”). And second, because any regulatory encroachment of the independent education sector by the federal government will suffocate schools from sea to sea, leaving nowhere for truly independent schools to thrive.

I’ve already made this case with respect to vouchers, and while I’m more fond of tax credits as a market education reform, federal involvement in this area is still problematic.

ID-Based Security Is Broken - and Can’t Be Fixed

The Government Accountability Office testified to the Senate Finance Committee today that investigators were easily able to pass through borders using fake documents. Indeed, sometimes documents were not checked at all.

“This vulnerability potentially allows terrorists or others involved in criminal activity to pass freely into the United States from Canada or Mexico with little or no chance of being detected.”

That’s true, but shoring up that vulnerability would add little security while devastating trade and commerce at the border.

Identity-based security works by comparing the identity of someone to their background and determining how to treat them based on that. To start, you need accurate identity information. That’s not easy to come by from people who are trying to defeat your identity system.

Here’s a schematic of how identification cards work from my book Identity Crisis.

As you can see, proof of identity involves three steps: Info goes from the person to the card issuer; info goes from the issuer to the verifier via the card; and the verifier checks to make sure the person and the card match.

Each of these steps is a point of weakness. Let’s take them in reverse order:

Obviously, as the GAO found, if nobody looks at the ID card, the “verifier check” can’t be done and the system fails. If the verifier is careless, the system will also fail. This weakness can be fixed with machine-read biometrics, but that is time-consuming and it typically subjects everyone to monitoring, tracking, surveillance – whatever you prefer to call it.

If the card can be forged or altered, this compromises card security, the second point of weakness in the process. Weakness in card security (non-obvious forgery) is what GAO sought to expose when it stumbled across the fact that border agents weren’t checking IDs at all. Card security can also be fixed various ways, though the best, such as encryption, will also tend to increase monitoring, tracking, and surveillance of every card-holder.

The first step is the hardest by far to fix: getting accurate information about people onto cards. For anyone wanting to defeat the current U.S. identification system, there is a substantial trade in documents that are false but good enough to fool Department of Motor Vehicle employees into issuing drivers’ licenses and cards. Criminals also regularly use the option of corrupting DMV employees to procure false documents. Can this problem be curtailed? Yes. Solved? No.

For the sake of argument, let’s fix all these things with a cradle-to-grave, government-mandated, biometric tracking system. Enough to make even the irreligious think “mark of the beast.” Even then, we will not have effective security against serious criminals and terrorists. The greatest weakness of identification-based security remains.

Knowing who a person is does not reveal what they think or what they plan to do. Examples are legion in terrorism, and routine in crime, of people with no record of wrongdoing being the ones who act.

For example, Al Qaeda selected operatives for the 9/11 attacks who had no known records of involvement in terrorism. (See 9/11 Commission report, page 234.) It was operating in a mode to defeat watch-listing well before the spasm of watch-listing that underlies identification-checks like the ones GAO has found so flawed.

If we were to have a comprehensive, mandatory, biometric identification system, it would help find bad people after they are identified, but do little to secure against attackers who are not already known. Al Qaeda planners would have to continue factoring in a risk they have already accounted for.

And having such a system should be a big “if.” Subjecting all Americans to increased monitoring, surveillance, and tracking, then delaying their lawful trade and travel at the borders, would do a lot of damage to liberty and commerce. It would provide only a tiny margin of security – almost no margin against sophisticated threats.

Hollywood for Ugly People

With the weather hotter than Hell here in Washington, and partisan warfare ramping up for the ‘06 elections, there are two pieces today that help remind us what a weird, perverse place Capitol Hill, in particular, has become.

First, in this morning’s New York Times, Mark Leibovich wedges his tongue firmly into his cheek and explores the phenomenon of the “Senators Only” elevators in the Senate.

The basic rule is this: nonsenators are allowed to ride only if asked by a senator. Such invitations typically occur when a reporter is in mid-interview with a senator walking off the Senate floor.

Lobbyists have been known to park themselves outside elevators with attractive young women, the better to win invitations. To be sure, such tactics took place only in earlier eras, when senators held a less enlightened view of women.

(In 1994, Senator Strom Thurmond of South Carolina was said to have engaged in excessive touching of his then-freshman colleague Patty Murray of Washington. Ms. Murray later asked for and received an apology from Mr. Thurmond, The Seattle Post-Intelligencer reported at the time. Through a spokeswoman, Ms. Murray declined to comment.)

[Former Louisiana senator John] Breaux concluded the matter with a nod to the public good: “I think the elevators are designed to keep members of the public from having to ride with senators,” he said.

Then, the New Republic runs a piece on the phenomenon of ostensibly pro-“traditional values” congresscritters jettisoning the ol’ ball and chain back home and taking up with nubile young Washington groupies. The piece could perhaps best be summed up by invoking

Susan LaTourette’s remarks in late 2003, after her husband of 21 years, Representative Steve LaTourette, revealed that he was having an affair with a lobbyist and wanted a divorce. “I think Washington corrupts people,” a furious Susan announced. “He was a wonderful husband and father, the best I ever saw, until he went there. … Now he’s one of them. All they care about is getting reelected. I hate them all.”

What can we do about the inflated egos, insularity, even cults of personality on the Hill? There’s a clear enough solution.

Feds Lock Up Blogger

The grand jury was created to check the government, but it has been turned into a prosecutorial bulldozer that now tramples over civil liberties.

Item: Josh Wolf, 24, is a freelance journalist and blogger. He wanted to be left alone, but the feds have locked him up because he will not help them investigate the crimes of other people. We generally have the freedom to help the police or to decline. It is up to us to decide. Not so with grand juries. Cooperate–or go to jail. As Mr. Wolf was escorted to his jail cell, the judge intoned that he was not being punished. Rather, the government was merely housing Mr. Wolf with suspected criminals so that he might “change his mind.” Mr. Wolf cannot even challenge the legality of this “procedure” before a real jury because he is not being “punished.” Mr. Wolf is in grandjuryland.

Item: Federal prosecutors are now perusing the phone records of reporters for the New York Times. There was no search warrant that was approved by a federal judge. The records were acquired by a grand jury subpoena, which does not require the approval of a judge. Indeed, prosecutors can issue such subpoenas without even notifying the grand jurors.

Few people appreciate the incredible powers of the grand jury–and it is safe to say that the government likes it that way.