INTERMEX POST

The Snowball of Empire Mises Daily: Friday, by Nico Perrino

2012-02-20T15:29:00.001-07:00

Those of us who spent our younger years living in the coldest of the 50 states remember fondly those afternoons spent at play just after a fresh coat of snow blanketed the ground. We'd grab our jackets and gloves, run out of the house, and convene at the nearest large field (perhaps the backyard) and bask in the winter wonderland presented to us only sporadically during those very cold months.
Snowball fights, snowmen, and creating igloos were among some of the activities we'd all partake in; merrily disregarding frostbite to salvage one more minute outside.
But one activity among them all sticks out to a great number of us.
It was the simplest of games, yet always one of the most fun. When there was enough snow on the ground, everyone from the neighborhood or school would compete to try and roll the largest snowball.
As with all things, it would start out small; one kid packing a handful of snow and rolling it along the ground adding more and more snow with each cycle. A few minutes would go by and eventually the ball would be up to his knees — a few more, his waist.

Eventually the ball, given there was enough space and snow, would be too large for one child alone to manage, so he'd call over a friend and they'd push it until it was again too large to push. They'd call over another friend, and another, and another, until after awhile there were five to ten people trying to push the snowball, now towering way atop their heads.
The game always ended the same way, though. It always ended when the snowball, no matter the manpower, could no longer be pushed. It would forever remain in place, week after week, perhaps month after month, until warmer days came around to melt it away. It was always the last remnant of winter to disappear.
In many ways the United States' foreign policy is much like that winter snowball game.
At the beginning it started small and unpretentious like that first handful of snow. Our smartest of the Founding Fathers advocated for a humble foreign policy: "Peace, commerce, and honest friendship with all nations," said Thomas Jefferson, "entangling alliances with none." And for about a century, it remained this way.
But with the dawn of the 20th century, and the Industrial Revolution in full swing, things began to change.
The snowball began its first cycle in 1899 when on February 4 of that year the United States began a war against the Philippines. Two days later the Senate voted to annex the country despite the islanders' opposition. That country would not be returned to its people until 1934.
Not 20 years later, in 1917, America decided to enter World War I, forgoing Jefferson's plea to avoid entangling alliances, and, as a result, lost roughly 116,000 men, and millions of dollars, in the war.[1]
The snowball kept rolling with World War II, perhaps the only just war of the century, but as a result, our role in world affairs dramatically changed and NATO was formed in 1949. NATO was the ultimate entangling alliance — forever ensuring our seat at the table of any just or unjust future war.
The rest, as they say, is history. The snowball has been rolling full speed ahead ever since, creating an empire that is both all encompassing and pervasive.
Korea, the Soviet Union, Vietnam, Iran, Iraq, Pakistan, Somalia, Bosnia, Kosovo, Iraq again, and Afghanistan: the United States has had military personnel in (or engaged with) all these countries at one point or another throughout the past 50 years, and today is responsible for over 600 military bases in 40 countries across the world.[2]
As the Department of Defense states, "the United States military is currently deployed to more locations than it has been throughout history."[3]
The snowball, which started out as a flake, has now reached Leviathan status and is on a downward slope growing larger and larger with every revolution. The empire of the United States now touches every country, directly or indirectly, in the entire world.
But sooner or later the slope is going to level and the snowball is going to roll more slowly. By that time, however, the ball will have become so large that the mechanisms that have supported it for the past century will no longer be able push it forward and it will as a result remain stagnant and eventually melt away.
The United States has been lucky. For the past decade or so China has taken on the role of the "strong guy" in the neighborhood, helping us to move the snowball farther and farther through loans and debt when we could no longer do so ourselves.
Today China is the largest owner of US Treasury securities in the world, accounting for roughly 25 percent of all foreign owners, or roughly $1.15 trillion.[4] Without China lending us money, our current foreign policy could not exist.
If, or when, the snowball stops, it will be largely due to America's inability to afford it.
As of the writing of this essay, the United States is currently $15.2 trillion in debt. That is about $48,000 of debt for every man, woman, and child living with United States citizenship regardless of age.[5] A baby is born with $48,000 worth of debt before it even takes its first fresh breath of air, and this number does not account for the interest on that debt, which is much, much more.
The total budget request by the president for 2012 alone is roughly $3.729 trillion — $1.1 trillion more than the government's total requested revenue for the same fiscal year.[6]
And of that $3.729 trillion, $553 billion is allocated for defense spending — a $20 billion increase from 2010 and $150 billion more than what was spent during the height of the Cold War in 2012 inflation-adjusted dollars.[7]
But, what do all these numbers mean, one might ask?
They mean

we have no money and thus depend on additional taxes, borrowing, or printing of money to finance and run our country, and
we're spending a lot of money we don't have on the military.

The common responses to these two understandings are unfortunately too often the same: that we are engaged in one war and ending another abroad, and our world is becoming an increasingly dangerous place, necessitating an expansion of defense (or war) spending.
Thankfully, however, this is just not true. If one adds up all the military spending combined for the entire world, the United States accounts for 48 percent of it. The next-closest spender? Our NATO allies with 20 percent. After NATO, the next-largest spender is China, whom we outspend more than five to one, with 8 percent.[8]
And in the case of Iran, for whom the war drums are being beaten ever louder, their entire annual military budget — $7 billion or $12 billion, depending on whom you consult — accounts for around 2 percent of our annual military budget. And if they increased their military expenditures by 127 percent, as some are reporting, that would still put them at less than 4 percent.[9]
To put it bluntly, America has some individual citizens who make more money than entire countries spend on defense. No matter which way you look at it, America simply spends too much money on its military for there to be any conceivable physical threat to our country, despite what politicians might suggest to the contrary.
But just because we spend a lot of money on the military and there is no legitimate outside threat to our country does not mean we are safe and stable. As a matter of fact, the very spending we do to keep ourselves safe might very well account for our nation's greatest threat.
With so much spending on wars and empire, the United States is on the verge of suffering from an economic collapse similar to the one Greece experienced in the spring of 2010 and continues to experience as a result of excessive debt spending in social arenas.
Just listen to Alan Greenspan, the king of debt ignorance, when he said in June of 2010 in a Wall Street Journal article that "The United States, and most of the rest of the developed world, is in need of a tectonic shift in fiscal policy. Incremental change will not be adequate." And also his successor as Federal Reserve chairman, Ben Bernanke, who said in a June 2010 House Budget Committee hearing that "The federal budget appears to be on an unsustainable path."
These words come from the men who run our economy and dictate our monetary policy, and their words are crystal clear: if America does not start curtailing the spending and rethinking the path it's chosen of limitless borrowing and printing of money, it may very well suffer the economic collapse that spelled destruction for nearly every other empire of its time, including Rome and the Soviet Union.
All great empires end for two reasons, overexpansion and economic collapse (usually intertwined). Very rarely does an empire end for external reasons, and why should we judge America to be an exception? As Harvard's Niall Furguson states, "Imperial collapse may come much more suddenly than many historians imagine. A combination of fiscal deficits and military overstretch suggests that the United States may be the next empire on the precipice."
If there is any place in our budget where we can make an immediate impact on our deficit, it is in defense spending, because, when it comes to the military, our government shows no fiscal restraint. It spends more than $1 million per soldier per year in Afghanistan, while the enemy, which has sustained the war for 11 years (our nation's longest) spends far less.[10]
It spends roughly $106 million on a missile defense system — for Europe; it allocates 40,000 American soldiers to defend the border — of South Korea. [11]
And on a separate, yet relevant, note, the Iraq war in 2003 was estimated to cost the United States $50 to $60 billion, yet, as of 2008 the war had already cost 12 times that.[12] That is roughly $600 billion — not to mention the cost in lives. It was a gross miscalculation and a perfect example of America's lack of fiscal restraint in military spending.
Like it or not, the giant snowball that is our foreign policy is rolling to a halt after decades of forward expansion. China, the strong man on the block, will not for very much longer be able to keep it rolling forward, and all that country has to do to destroy our currency and country is call in our debt.
The issue is no longer red versus blue, liberal versus conservative, or poor versus wealthy. No matter your stance on the war or on defense budgets, we must listen to those, such as Bernanke, who say the spending must stop and our debt must be eliminated.
In order to do this, our interventionism and nation building across the world must also come to an end; it is the greatest threat to our national security. If we continue to fund an empire we cannot afford, we leave our economy vulnerable and our wealth dependent on other nations.
If America desires to remain a player on the world's stage, we must adopt a humbler, and more affordable, foreign policy in line with the wisdom of Jefferson. Remember, it was also Jefferson who said that "Peace is our most important interest, and a recovery from debt:" Two interests we as a country, in pursuing our foreign policy, have foolishly ignored.

As winter wanes and the sun rises higher in the sky, daylight is being shed on America's defective foreign policy. The snowball of empire is finally coming to a screeching halt and soon no outside actors will be able to help push it forward.
Even those who stood in ignorance for many years are recognizing this truth. Will America be able to withstand the summer heat or will it trudge on in ignorance as if winter never ends? Nobody knows for certain.
Only time will tell whether America will last through the summer, or fall, only to rise in a different place and in a different form next winter.

Totalitarians Unmasked

2012-02-20T15:27:00.001-07:00

"All within the state, nothing outside the state, nothing against the state."

Benito Mussolini

In many ways, the absolute state dreamed up by Machiavelli and other Renaissance Europeans couldn't hold a candle to the totalitarian regimes of the 20th century. If the old absolutists claimed potential and occasionally de facto total control over the lives of subjects, the total-war regimes made numerous "great leaps forward" to achieve ubiquitous surveillance, eradication of even the claim to individual rights, creation of concentration camps, ethnic cleansing on a scale unprecedented in human history, and mass killings of whole categories of individuals branded as "enemies of the state."

It may be an irony that the incubation period of the totalitarians was exactly contemporaneous with a breathtaking acceleration of Western thinking about power and liberty before World War I: Acton, the Austrian School of economics, the late 19th-century critique of the state, the recognition that war is the health of the state, and so forth. Tragically, only a generation or so later, the statists, socialists, and totalitarians seemed to have swept the field. Already before World War I, the imperial warfare-welfare state appeared to be in the ascendant. The First World War seemed to drive the last nails into liberty's coffin.
Yet in spite of the overwhelming forces crushing individual liberty, Ludwig von Mises devoted much of his life to fighting the various "great experiments" of the period hailed as a new golden age by his intellectual contemporaries such as Martin Heidegger, John Maynard Keynes, and Jean-Paul Sartre. The Bolsheviks were barely ensconced in Russia, the National Socialist German Workers Party (the Nazis) barely founded in Munich, before Mises was expending heroic effort to stave off totalitarian waves in Austria. The rest of his life was intertwined with the opposition to both of the "founder" regimes of the totalitarian world, the Soviet Union and the Third Reich. Significantly, the same body of Mises's files and papers seized by the Gestapo in the 1930s ended up after the war in the KGB secret archives!
The voice of Mises was a lonely one among Western intellectuals. National Socialism was widely condemned from the start, but the Soviet Union, and even Stalin himself, got a free pass from many leading intellectuals in the West. The insights of Ludwig von Mises regarding the close relationship of the "left-wing" and "right-wing" totalitarians and the extent to which the systems were simply variations on the same theme have only gradually made headway in the intellectual world. And Mises's analysis of the crucial and close relationship between the standard "pluralistic" Western interventionist states and the totalitarian regimes remains distinctly outside the mainstream.
Much of Mises's thought on all these subjects is summed up in his important work, Omnipotent Government, first published in 1944. This work will become the centerpiece of my new Mises Academy course, The Totalitarians. With this theoretical and historical framework in mind, we will be making a very close historical examination of the Soviet regime, the Third Reich, and — to a lesser extent — other totalitarian states.

Roughly one-fourth of the course will be devoted to a close reading of Omnipotent Government. Beyond this, we will be drawing on a wide variety of primary and secondary sources to try to deepen our understanding of totalitarianism, a subject crucial to any comprehensive view of modern history. Six sessions of the class will be devoted to developing a clear historical narrative and an effective analysis of the Soviet and Nazi regimes, applying the insights of the writings of Mises and others. We will make reference to Mussolini, Pol Pot, and various other totalitarians, but the main focus of the course will be the two "foundational" totalitarian regimes, The Soviet Union under Lenin and Stalin and the Third Reich under Hitler.
This course runs from February 26 — April 28, 2012. You can enroll online.

The Government and the Currency Mises Daily: Monday, by Ludwig von Mises

2012-02-20T15:25:00.004-07:00

[Human Action (1949)]

Media of exchange and money are market phenomena. What makes a thing a medium of exchange or money is the conduct of parties to market transactions. An occasion for dealing with monetary problems appears to the authorities in the same way in which they concern themselves with all other objects exchanged, namely, when they are called upon to decide whether or not the failure of one of the parties to an act of exchange to comply with his contractual obligations justifies compulsion on the part of the government apparatus of violent oppression. If both parties discharge their mutual obligations instantly and synchronously, as a rule no conflicts arise which would induce one of the parties to apply to the judiciary. But if one or both parties' obligations are temporally deferred, it may happen that the courts are called to decide how the terms of the contract are to be complied with. If payment of a sum of money is involved, this implies the task of determining what meaning is to be attached to the monetary terms used in the contract.

Thus it devolves upon the laws of the country and upon the courts to define what the parties to the contract had in mind when speaking of a sum of money and to establish how the obligation to pay such a sum is to be settled in accordance with the terms agreed upon. They have to determine what is and what is not legal tender. In attending to this task the laws and the courts do not create money. A thing becomes money only by virtue of the fact that those exchanging commodities and services commonly use it as a medium of exchange. In the unhampered market economy the laws and the judges in attributing legal tender quality to a certain thing merely establish what, according to the usages of trade, was intended by the parties when they referred in their deal to a definite kind of money. They interpret the customs of the trade in the same way in which they proceed when called to determine what is the meaning of any other terms used in contracts.
Mintage has long been a prerogative of the rulers of the country. However, this government activity had originally no objective other than the stamping and certifying of weights and measures. The authority's stamp placed upon a piece of metal was supposed to certify its weight and fineness. When later princes resorted to substituting baser and cheaper metals for a part of the precious metals while retaining the customary face and name of the coins, they did it furtively and in full awareness of the fact that they were engaged in a fraudulent attempt to cheat the public. As soon as people found out these artifices, the debased coins were dealt with at a discount as against the old better ones. The governments reacted by resorting to compulsion and coercion. They made it illegal to discriminate in trade and in the settlement of deferred payments between "good" money and "bad" money and decreed maximum prices in terms of "bad" money. However, the result obtained was not that which the governments aimed at. Their decrees failed to stop the process which adjusted commodity prices (in terms of the debased currency) to the actual state of the money relation. Moreover, the effects appeared which Gresham's law describes.
The history of government interference with currency is, however, not merely a record of debasement practices and of abortive attempts to avoid their inescapable catallactic consequences. There were governments that did not look upon their mintage prerogative as a means of cheating that part of the public who placed confidence in their rulers' integrity and who, out of ignorance, were ready to accept the debased coins at their face value. These governments considered the manufacturing of coins not as a source of surreptitious fiscal lucre but as a public service designed to safeguard a smooth functioning of the market. But even these governments — out of ignorance and dilettantism — often resorted to measures which were tantamount to interference with the price structure, although they were not deliberately planned as such. As two precious metals were used side by side as money, the authorities naively believed that it was their task to unify the currency system by decreeing a rigid exchange ratio between gold and silver. The bimetallic system proved a complete failure. It did not bring about bimetallism, but an alternating standard. That metal which, compared with the instantaneous state of the fluctuating market exchange rate between gold and silver, was overvalued in the legally fixed ratio, predominated in domestic circulation, while the other metal disappeared. Finally the governments abandoned their vain attempts and acquiesced to monometallism. The present silver purchase policy of the American government is not seriously a device of monetary policy. It is merely a device for raising the price of silver for the benefit of the owners of silver mines, their employees, and the states within whose boundaries the mines are located. It is a hardly disguised subsidy. Its monetary significance consists exclusively in the fact that it is financed by issuing additional dollar notes whose legal tender quality does not differ essentially from that of the Federal Reserve notes, although they bear the practically meaningless imprint "Silver Certificate."
Yet economic history also provides instances of well-designed and successful monetary policies on the part of governments whose only intention was to equip their countries with a smoothly working currency system. Laissez-faire liberalism did not abolish the traditional government prerogative of mintage. But in the hands of the liberal governments the character of this state monopoly was completely altered. The ideas which considered it an instrument of interventionist policies were discarded. No longer was it used for fiscal purposes or for favoring some groups of the people at the expense of other groups. The government's monetary activities aimed at one objective only: to facilitate and to simplify the use of the medium of exchange which the conduct of the people had made money. A nation's currency system, it was agreed, should be sound. The principle of soundness meant that the standard coins — i.e., those to which unlimited legal tender power was assigned by the laws — should be properly assayed and stamped bars of bullion coined in such a way as to make the detection of clipping, abrasion, and counterfeiting easy. To the government's stamp no function was attributed other than to certify the weight and the fineness of the metal contained. Pieces worn by usage or in any other way reduced in weight beyond the very narrow limits of tolerated allowance lost their legal tender quality; the authorities themselves withdrew such pieces from circulation and reminted them. For the receiver of an undefaced coin there was no need to resort to the scales and to the melting pot in order to know its weight and content. On the other hand, individuals were entitled to bring bullion to the mint and to have it transformed into standard coins either free of charge or against payment of a seigniorage generally not surpassing the actual expenses of the process. Thus the various national currencies became genuine gold currencies. Stability in the exchange ratio between the domestic legal tender and that of all other countries which had adopted the same principles of sound money was thus brought about. The international gold standard came into being without intergovernmental treaties and institutions.
In many countries the emergence of the gold standard was effected by the operation of Gresham's law. The role that government policies played in the process in Great Britain consisted merely in ratifying the results brought about by the operation of Gresham's law; it transformed a de facto state of affairs into a legal state. In other countries the governments deliberately abandoned bimetallism just at the moment when the change in the market ratio between gold and silver would have brought about a substitution of a de facto silver currency for the then prevailing de facto gold currency. With all these nations the formal adoption of the gold standard required no other contribution on the part of the administration and the legislature than the enactment of laws.

It was different in those countries which wanted to substitute the gold standard for a — de facto or de jure — silver or paper currency. When the German Reich in the 1870s wanted to adopt the gold standard, the nation's currency was silver. It could not realize its plan by simply imitating the procedure of those countries in which the enactment of the gold standard was merely a ratification of the actual state of affairs. It had to exchange the silver standard coins in the hands of the public against gold coins. This was a time-absorbing and complicated financial operation involving vast government purchases of gold and sales of silver. Conditions were similar in those countries which aimed at the substitution of gold for credit money or fiat money.
It is important to realize these facts because they illustrate the difference between conditions as they prevailed in the liberal age and those prevailing today in the age of interventionism.

Let's End Social Security as We Know It. by Doug Bandow

2012-02-20T15:23:00.001-07:00

Governments of most industrialized nations are staggering under mountainous debts. Aging populations and slowing economic growth have undermined generous welfare states. Least affordable are public pensions modeled after the infamous "investment" scheme popularized by Charles Ponzi. Collect money from current taxpayers to pay current beneficiaries, and let the future take care of itself.

With Washington facing its fourth straight trillion-plus dollar annual deficit Congress should be imposing tough budget cuts. But despite last year's multiple budget battles, Congress and the White House still refuse to confront America's spending problem. Republicans won't propose any serious reductions — such as means testing Social Security or Medicare, reducing military outlays, or slashing corporate welfare. Democrats just want to find someone else to tax.

Yet legislators currently are debating extending a temporary reduction in the Social Security payroll tax, which will lower federal revenues this year by$160 billion. With the two percent reduction set to expire on February 28, legislators are deadlocked over the details as both sides maneuver for political advantage.

Doug Bandow is a senior fellow at the Cato Institute and former special assistant to President Ronald Reagan.

More by Doug Bandow

But exactly how Congress fills this year's added budget gap doesn't much matter. Far more significant may be the long-term impact as the tax reduction erodes Social Security's political foundations.
The program is America's number one Ponzi scheme. It was created as a pay-as-you-go system but sold as social insurance with a special tax and a trust fund. President Franklin Delano Roosevelt created the illusion for political effect: "We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions." As a result, he said, "no damn politician can ever scrap my Social Security program."
But "his" system is wrecking America's finances. The largest domestic program, it will cost about $765 billion this year, more than will be spent on the military.The system turned negative in 2010, years earlier than expected, and is not likely to again run a surplus. Last year total unfunded liabilities for Social Security were estimated at $21.4 trillion, an increase of$1.4 trillion in 2011 alone.
There is a nominal trust fund, but it contains only worthless non-recourse bonds requiring the Treasury Department to repay the Social Security administration for the money borrowed. Even without those pieces of paper — which sit in a file cabinet in an office in West Virginia — politics would force the Treasury Department to "repay" the money. Alas, Congress will have to come up with the cash, presumably through more borrowing, higher taxes, or spending cuts.
The system's technical insolvency has not stopped Congress from preparing to extend last year's Social Security tax reduction. Job growth remains slow and the payroll levy acts as a direct tax on employment. In 2010 legislators exempted employers from "their" 6.2 percent share on new hires. Last year Congress dropped the rate for employees from 6.2 to 4.2 percent for the year.
Unfortunately, temporary rate reductions typically do little to promote long-term growth, since no company wants to add someone now only to have to fire them a year later. Moreover, by spending more money which it doesn't have Congress is further undermining America's fiscal future, which will reduce investor confidence in the American economy. Businesses will be less likely to expand and take risks.
Nevertheless, the political appeal of saving the average family about a thousand dollars a year is obvious. And a desperate Congress, unwilling to slash the unproductive and wasteful spending which pervades the federal budget, can think of little else to do.
Yet if legislators really believe Social Security to be social insurance, that is, self-financed by beneficiaries, then cutting the payroll tax is stupid even for Congress. The system already is financially unbalanced. How can the President and Congress reduce funding for Social Security and still keep faith with seniors counting on future checks?
They can't, unless policymakers acknowledge that Social Security is a fraud and political lie — in fact, a government Ponzi scheme. They must admit that program benefits have nothing to do with program taxes. Which means Social Security is not social insurance. And no one is legally entitled to any benefits.
That's always been the reality, despite the fake trust fund. Until now, however, no major political figure has been willing to acknowledge the truth.
But cutting Social Security taxes despite the program's de facto insolvency has effectively severed the supposed connection between taxes and benefits. The Internal Revenue Service even announced that "this reduced Social Security withholding will have no effect on employees' future Social Security benefits." Having ostentatiously separated taxes and benefits, Congress cannot easily put them back together.
Warned Social Security trustee Chuck Blahous, legislators were breaking "the link between contributions and benefits." For this reason the AARP expressed its concern last year: Vice President Nancy LeaMond insisted that the money be quickly repaid to "avoid undermining Social Security's long-term funding stream." Good luck.
Although Republican presidential candidates Mitt Romney and Newt Gingrich supported the tax reduction, Michelle Bachmann and Rick Santorum opposed the cut. Contended Bachmann: "It's put senior citizens at risk." Leading Senate conservatives Jim DeMint (R-SC) and Ron Johnson (R-WI) voted against the measure. The latter warned that "We will bankrupt Social Security."
Two of the Senate's most left-wing members, Iowa's Tom Harkin and Vermont's Bernie Sanders, also criticized the measure. Moreover, a gaggle of Democratic Congressmen wrote President Obama expressing their fear that the cut "may be used as the first step in a larger battle to fundamentally dismantle Social Security."
We can only hope so.
Advocates of limited government and fiscal responsibility should use the payroll tax cut to shrink Washington spending. Republicans should press for a permanent tax rate reduction. In fact, Congress should cut the employer's "share" — actually paid by employees — as well. The Social Security tax directly penalizes job creation. A permanent reduction would encourage employers to invest and expand. Let's put America back to work.
Of course, shrinking Social Security tax rates would significantly worsen the program's long-term unfunded liabilities. Yet this could help make obvious even to the most fiscally obtuse the necessity of enacting serious budget cuts.
End welfare for business. Get rid of the inefficient and wasteful farmers' dole. Stop providing "foreign aid," which so often acts as foreign hindrance. Clear out the underbrush of dozens and scores of duplicative and unnecessary programs. Kill low priority grants to individuals, groups, and local and state governments. Stop trying to pump up the housing industry. Quit using the U.S. military as a form of foreign aid, subsidizing prosperous and populous allies around the world, including the Europeans, Japanese, and South Koreans.
Equally important, advocates of fiscal responsibility should use Social Security's worsening financial situation to press for entitlement reform. For instance, instead of taxing the rich, why not stop paying them benefits they don't need, including Social Security and Medicare? It should now be obvious to all that the programs are not social insurance, so there is no reason to act as if they were. While Uncle Sam should make good his promises to current beneficiaries, young people should be allowed to opt out of the system, putting their money into private investment accounts.
Finally, the rate cut offers a good start for tax reform. The payroll tax is a bad tax, a direct penalty on job creation, and should be ended. At the same time Congress should rationalize and simplify the overall system, lowering rates while broadening the base. Either a flat income tax or a consumption tax would be an improvement. Eliminating the payroll tax would make sense in either case.
The temporary payroll tax break well illustrates the poverty of Washington policy-making. However, the shameless battle for political advantage still could advance fiscal responsibility. By wrecking the illusion that Social Security is social insurance, the rate cut should help spark a desperately needed debate over the role of government in America and especially the future of America's bloated welfare state.

Worrisome Belligerence: GOP Presidential Candidates and Foreign Policy. by Ted Galen Carpenter

2012-02-20T15:22:00.001-07:00

Foreign policy has not featured prominently in the campaign among Republican candidates for the presidential nomination. That may be a blessing in disguise. On the relatively rare occasions when those aspirants for the White House do address foreign policy topics, it is enough to make intelligent voters wish that the candidates would stick to domestic topics. With the notable exception of Congressman Ron Paul — who has almost no chance of getting the GOP nomination — all of the candidates have embraced an alarming, reckless belligerence.

One manifestation is the repeated allegation that President Obama engages in “appeasement” toward America’s adversaries. Mitt Romney, Rick Santorum, and Newt Gingrich have all accused the president of “apologizing for America,” not standing by “friends and allies” and even “throwing allies under the bus,” in a futile effort to win favor with Iran, Pakistan, China, Russia, and other “hostile” powers.
The president has fired back at his opponents, suggesting that they ask Osama bin Laden and the 22 other high-level al Qaeda operatives who have been killed since Obama took office whether he is an appeaser. He has a point: the Republican appeasement charge is bizarre. The popular definition of appeasement implies a weak-kneed tendency to make far-reaching, unwise concessions to aggressors. But Obama sharply escalated the war in Afghanistan, has led efforts to impose harsher economic sanctions on Iran, and was the godfather of NATO’s military campaign to overthrow Muammar Qaddafi. That’s not exactly a record reminiscent of Neville Chamberlain.

US foreign policy under Gingrich, Santorum, or Romney threatens to be Bush Jr.'s foreign policy on steroids.

Leaving aside the arrogant notion of the Republican presidential hopefuls that the United States is never wrong, and, therefore, should never apologize, it’s pertinent to wonder what the president has done that warrants allegations of appeasement. For the current crop of GOP contenders, merely exhibiting a willingness to negotiate with adversaries is evidence of weakness. And because Obama has attempted to open or advance dialogues with such adversaries, Republican activists excoriate him. That is a very disturbing standard. If the GOP candidates believe that it is improper even to talk to hostile foreign regimes, they effectively eliminate diplomacy as a meaningful foreign policy tool.
And that worrisome mentality is on display with respect to specific issues, especially the Iranian nuclear problem. Romney, Gingrich, and Santorum all vie to see who can take the most uncompromising, saber-rattling position toward Tehran. Romney stated bluntly that Iran would never get a nuclear weapon on his watch. Gingrich and Santorum are even a shade harsher, arguing that it is time to consider air strikes to take out Iran’s nuclear sites. Indeed, all three candidates advocate going far beyond the narrow objective of preventing Iran from gaining a nuclear-weapons capability. They want the United States to pursue a policy of forcible regime change.

Ted Galen Carpenter, a senior fellow at the Cato Institute, is the author of eight books on international affairs, including Smart Power: Toward a Prudent Foreign Policy for America.

More by Ted Galen Carpenter

In an effort to whip up support for military action against Iran, GOP presidential aspirants exaggerate to the point of absurdity the threat that a nuclear-armed Iran might pose. At a February 8 speech in Cleveland, Ohio, Gingrich admonished his audience to “think about the dangers to Cleveland, or to Columbus, or to Cincinnati, or to New York. Remember what it felt like on 9/11 when 3,100 Americans were killed. Now imagine an attack where you add two zeros. And it’s 300,000 dead. Maybe a half million wounded. This is a real danger. This is not science fiction.”
Such alarmism is a reckless effort to foment panic. Military experts conclude that even if Iran could enrich enough uranium to build a few nuclear devices, they would be primitive affairs with limited destructive capacity, not the massive city-busters that Gingrich implies. Moreover, it would be years before Iran could shrink the initial weapons enough to put on even short range missiles, much less ICBMs capable of reaching the United States. That danger is many years away, if it emerges at all. And the United States has a strategic arsenal with several thousand nuclear weapons to deter Iran or any other adversary.
Foreign policy jingoism surfaces with respect to other issues, especially relations with China. Mitt Romney has been especially hard-hitting. Pledging to “clamp down” on trade “cheaters,” Romney added (to strong applause during a debate) that “China is the worst example of that. They have manipulated their currency to make their products artificially inexpensive.” He also pledged to “go after them for stealing our intellectual property.”
Such harsh rhetoric is not confined to trade and currency issues. Criticisms of China’s human rights record and allegations that Beijing poses a security threat to the United States are also prominent. Both Gingrich and Santorum have blasted the Obama administration for not taking a more proactive stance on Beijing’s human rights abuses, and they cite that as yet another example of the president’s “appeasement” tendencies. One-time GOP presidential hopeful Michele Bachmann warned that “the Chinese just finished building 3,000 miles of underground tunnels where they are housing some nuclear weapons.” Romney, Santorum and Gingrich all cite China’s ongoing military modernization as a key reason why, they contend, the United States dare not make even small cuts in its defense budget — even though Washington already spends five times more than Beijing.
Jon Huntsman, a candidate who dropped out of the race, found Republican party activists extremely hostile to his advocacy of cooperation with China. Indeed, his service as US ambassador to China and his ability to speak Mandarin were widely regarded as major negatives for his candidacy.
The prospect that a Republican president would exhibit strident belligerence in foreign affairs ought to be troubling not only to Americans but to populations around the world. It was hardly encouraging when his opponents criticized, and a debate audience soundly booed, Ron Paul’s call for the United States to practice the Golden Rule in its conduct with other nations. Given the current crop of GOP presidential candidates, a new Republican administration would likely replicate George W. Bush’s surly unilateralism that regarded military force as the first, rather than the last, resort. US foreign policy under Gingrich, Santorum, or Romney threatens to be Bush Jr.’s foreign policy on steroids.

Obama's Busted Budget by Michael D. Tanner

2012-02-20T15:20:00.003-07:00

In a town where bipartisan budget chicanery has been raised to an art form, President Obama's latest budget proposal should be hailed as the da Vinci of fiscal obfuscation.

The president claims that his budget proposal reduces debt by $4 trillion over the next 10 years, combining $2.4 trillion in spending cuts with $1.6 trillion in tax hikes. Almost none of that is true.
Let's start with the idea that the president's budget would reduce the debt. That is true only using Washington math, under which a smaller increase is actually a decrease. In reality, the president's budget adds $6.7 trillion to the national debt over the next 10 years, bringing it to nearly $25.5 trillion by 2022. That would be more than 100 percent of our GDP.

The president's budget is dishonest and irresponsible.

And those spending cuts? The president actually counts $681 billion in cuts that were agreed to last year as part of the deal to raise the debt ceiling. Shouldn't there be some sort of statute of limitations for how long you can claim credit for cuts that you have already made? And it should probably be shorter for cuts that you fought against every step of the way. The president also counts as a cut the $741 billion we will save from not occupying Iraq over the next 10 years, and from not being in Afghanistan a decade from now. Considering that we were never going to spend that money in the first place, that seems like slightly dishonest accounting. After all, think of all the savings we can claim by not invading Syria. And, finally, $595 billion of the claimed budget cuts is actually interest savings resulting from not having to borrow for the other phony cuts.
On the other hand, the president's budget does include plenty of new spending. For example, there is $476 billion in new spending over 10 years for transportation projects, including the president's favorite boondoggle, "high-speed rail." There are also the usual bailouts for profligate state governments and teachers' unions, including $30 billion to build more schools and $30 billion to hire teachers. Another stimulus anyone?
Overall, the president would increase federal spending from $3.8 trillion in 2013 to $5.82 trillion in 2022. That might not be as big an increase there might otherwise be, but in no way can it be called a cut.
The president isn't even honest about his tax proposals. In the speech announcing his budget plan, President Obama devoted several paragraphs to a renewed push for the so-called Buffett rule, a new 30 percent minimum tax on the rich, based on the misleading claim that Warren Buffett pays a lower tax rate than his secretary. There is only one small problem: The president's budget does not actually include any revenue from the Buffett rule. In fact, the budget provides no clue as to when or how such a tax might be implemented. The Buffett Rule isn't even listed in the document's summary of revenues and outlays. A cynic might believe that the Buffett Rule has more to do with campaign rhetoric than an actual budget plan.

Michael Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.

More by Michael D. Tanner

Instead, what the budget does contain is a renewed call for tax increases on people and small businesses making as little as $200,000 per year. In addition, there's the usual panoply of tax hikes on energy products, businesses, investment, and pretty much anything else the president can think of. The budget also helpfully points out that 2013 is the year in which most of the new taxes under Obamacare will take effect. Overall, the president would increase tax revenue to 20.1 percent of GDP. That's a huge increase from the current 15.4 percent, and higher than the post–World War II average of 18.0 percent. Tax increases of that magnitude cannot help but slow economic growth and job creation.
But even if the president were to get every penny of the tax hikes he wants, his budget would never balance. The closest he would ever come would be in 2018, when the deficit would be only $575 billion. After that, deficits begin rising again, reaching $704 billion by 2022.
Fortunately for the president, he stops counting after 2022, about the time that the costs of entitlements such as Medicare and Social Security really begin to kick in, and his proposed budget does almost nothing to reform these troubled programs. One only has to look at the upward trajectory of both spending and taxes at the end of the budget window to see that president's budget leaves us on the road to future bankruptcy.
Appearing last Sunday on Meet the Press, the president's chief of staff — and former budget director — Jack Lew, declared that "The time for austerity is not now." Judging by the president's budget proposal, it's not ever.

Wars Should Be Hard to Start. by Benjamin H. Friedman

2012-02-20T15:19:00.001-07:00

The New York Times' report on Special Operation Command's proposal for more authority to deploy troops never quite says what new powers are sought. That vagueness, combined with the murky existing law on deploying special operations forces outside war zones, makes evaluating the proposal tough.

What is clear is that it is already too easy to deploy special operations forces on lethal missions. According to the Times, 12,000 special operators are deployed abroad and have operated in 70 nations in the last decade. Other reports claim that special operations forces have lately conducted operations in Syria, Nigeria, Iran, Algeria, and even Peru. In some cases, the special operators are reportedly collecting intelligence, a job various intelligence agencies already have. In others, the special operations forces are seemingly committing acts of war, which should require explicit congressional approval.

It is not clear that Congress has been briefed on these operations, let alone debated them. One can argue about whether they are legal—the statutes governing the special operations forces or the 2001 Authorization of Military Force may provide sufficient authority. But that debate is academic until Congress remembers its war powers. As long as these deployments proceed with little oversight, debate or public knowledge, they will be undemocratic and unwise.

The Constitution divides war powers not only to ensure democratic control but also to improve policy.

Wars should be hard to start in liberal states. The constitution divides war powers not only to ensure democratic control but also to improve policy. The need to justify policies and compromise makes blunders less likely. The history of U.S. covert operations demonstrates the point. More debate and oversight of CIA operations during the Cold War would likely have prevented several military and moral disasters. Efficiency is overrated in defense policy.
Certainly the secrecy and dispatch required by some military missions makes democratic debate inappropriate. Much of Special Operations Command's business, like raids on terrorists and hostage rescue, fits that mold. But missions that require limiting democracy should be minimized. The inclination to use force secretly often suggests that we shouldn't use it at all.

Benjamin H. Friedman is a Research Fellow in Defense and Homeland Security Studies at the Cato Institute.

More by Benjamin H. Friedman

Where special operations forces do undertake such missions, the decision to deploy them should be the president's. Because they get elected, they face more democratic control than military leaders. And presidents have a broader perspective. Military commanders, like other agencies' leaders, serve a particular government end. Presidents have incentive to weigh those competing ends, making their decisions better approximations of the national interest.

2012-02-20T15:08:00.002-07:00

Troops March On White House In Support Of Ron Paul

Ron Paul is the choice of the troops for president in 2012

Steve Watson

Marking President’s day today, February 20th, hundreds, perhaps thousands, of active duty troops and veterans will descend on Washington DC and the White House to show support for Ron Paul’s 2012 presidential campaign.

NDAA Is Now Law, and Libertarians Are Now Anti-Government Extremists!. by Gary D. Barnett

Democracy, which I consider to be the first step or beginning of socialism, thrives on propaganda, and uses this propaganda to indoctrinate the people. Once this indoctrination is complete, totalitarianism is the end result, and then propaganda is replaced by the razor’s edge of the state’s sword. This is our lot today. Propaganda has labeled those of us who desire to protect freedom as dissenters, and as enemies of the State. Given the now "legal" ability of the State to imprison indefinitely or murder any it chooses to, the sword has become the state’s weapon of choice. The circle is nearly complete!
According to a Reuter’s article published recently, the "FBI warns of threat from anti-government extremists." "Anti-government extremists opposed to taxes and regulations pose a growing threat to local law enforcement officers in the United States, the FBI warned on Monday." The article went on to say that: "These extremists, sometimes known as "sovereign citizens," believe they can live outside any type of government authority.

Coming into her own

Slowly but surely, the president is making her mark on the government

SÃO PAULO

DURING her first year as Brazil’s president, Dilma Rousseff was careful not to make changes so big that they might be seen as a rebuke to Luiz Inácio Lula da Silva, her predecessor and patron. She waited to replace the pork-barrel ministers she inherited from him until corruption charges against them became overwhelming, and implemented only limited reforms. Many pundits expected that in 2012 she would take advantage of the quiet period between Christmas and Carnival in February to be more ambitious—only to be disappointed by yet more incrementalism.

A way out of the woods

The euro may survive brinkmanship over Greece, but the road to recovery will be long and hard

LAST year every new jolt in the euro crisis sent financial markets into a spin. This year they have become blasé. They barely even registered the torching of buildings in Athens, nor the last-minute cancellation of a meeting of ministers that was supposed to agree on a new aid package for Greece.
Although a calm is welcome, nonchalance is not justified. A deal probably will be done on Greece, and there are promising signs of reform all over the continent. But, the problems ahead for the euro zone remain huge. The crisis is, in effect, moving from an acute to a chronic phase.

Schumpeter

America is becoming a less attractive place to do business

IS AMERICA fading? It seems an odd thing to say about a country that so dominates the industries of the future. Where else could Facebook have grown from a student prank to a $100 billion company in less than a decade? America has been gripped by worries about decline before, notably in the 1970s, only to roar back. But this time it may be serious.
There is little doubt that other countries are catching up. Between 1999 and 2009 America’s share of world exports fell in almost every industry: by 36 percentage points in aerospace, nine in information technology, eight in communications equipment and three in cars. Some loss of market share is inevitable as China and other economies emerge. But even in absolute terms, there is cause for worry. Private-sector job growth has slowed dramatically, and come to a halt in industries that are exposed to global competition. Median annual income grew by an anaemic 2% between 1990 and 2010.

by Taki

As I watched last week’s Western posturing after the Russo-Chinese veto of the UN Security Council’s resolution against Syria, Captain Renault of Casablanca fame kept coming to mind. Like the good captain, who was shocked to discover gambling was taking place at Rick’s Café (while pocketing his winnings), I was shocked that Uncle Sam’s Secretary of State and her British equivalent were so upset that the big bad Russkis and the tricky Fu Manchus could veto a resolution against the world’s worst man ever, Bashar al-Assad. Following the veto, ominous warnings were issued against the Syrian strongman by the fierce-looking William Hague—a Mister Clean lookalike who is reputed to have worn diapers until he was 16—and echoed by Hillary the Great, the only woman to have ever been cuckolded by Monica Lewinsky.
The reason for my shock was simple. Uncle Sam has been vetoing UN Security Council resolutions against Israel since the latter’s inception.

Jim Rogers: Don't Pay Attention to Governments. by Robert Wenzel

Jim Rogers, who received the Mises Institute's Schlarbaum Prize for the lifetime defense of liberty in 2010, proved today that he deserved the award.

“If you listen to governments, then you are not going to make a lot of money. Governments lie, distort and make mistakes,” he said this morning on CNBC.

And, he clearly recognizes the near-global money printing now being conducted by central banks.

“My way of playing this is to own real assets like commodities,” he said “You now have the Bank of England, the Bank of Japan, the Federal Reserve printing money. The way to protect yourself at a time like this is to own assets.”

A Greenbacker Invents a Nut-Case History of Libertarianism

Gary North

I have been asked by several of my subscribers to respond to this article: Proof Libertarianism is an Illuminati Ploy. It appears here: http://www.henrymakow.com/libertarianism_as_an_illuminat.html
Let me say, before I begin, that the author of this article is the only person I have come across who could profitably study with Ellen Brown.
There is a subhead: William S. Volker (1859-1947) was a wealthy German-Jewish businessman.
There is a biography of William Volker, Mr. Anonymous (1951). On Page 16, we read:

After supper they gatheredaround Dorothea to pray and to listen to her readpassages from the Bible. The Scriptures finished,she laid the Bible aside and explained the practicalapplication of each admonition. Dorothea alsopassed along to her children the plain homiliesshe had learned from her parents. She spoke withserious purposefulness; her steady voice revealedher deep conviction. William joined his mother'scircle of instruction before he could comprehendall her teachings. And each Sunday the wholefamily attended the Lutheran Church services inEsperke where the family prayers were supplementedwith more formal worship.

Down With the Presidency. by Llewellyn H. Rockwell, Jr.

The modern institution of the presidency is the primary political evil Americans face, and the cause of nearly all our woes. It squanders the national wealth and starts unjust wars against foreign peoples that have never done us any harm. It wrecks our families, tramples on our rights, invades our communities, and spies on our bank accounts. It skews the culture toward decadence and trash. It tells lie after lie. Teachers used to tell school kids that anyone can be president. This is like saying anyone can go to Hell. It's not an inspiration; it's a threat.

Obama’s Phony Theology Offers Phony Financing on Everything. John Ransom

Rick Santorum struck the right note with conservatives when he attacked Obama on his phony liberal theology. This is the red meat that conservatives have been waiting for. They want someone who will take the fight to the enemy, exposing the false religiosity of the liberal left.
“I just said that when you have a world view that elevates the Earth above man and says that, we can't take those [energy] resources because we're going to harm the Earth by things that frankly are just not scientifically proven- for example, that politicization of the whole global warming debate,” Santorum told liberal Grand Inquisitor Bob Scheiffer on CBS News’ Face the Music. “I mean, this is just all an attempt to centralize power and to give more power to the government.”

The Left Fuels Santorum Surge. Star Parker

A succession of high profile left wing decisions and initiatives of recent weeks drive home the extent to which the left is changing the face of America.
Notable among these are the decision of a federal appeals court in California to uphold a prior court decision finding California’s Proposition 8, defining marriage as between a man and a woman, unconstitutional; the reversal of a decision, due to a tsunami of left wing pressure, of the Susan G. Komen Foundation to withdraw its funding to Planned Parenthood; and the Obama administration rulemaking refusing to grant a religious exemption from the new health care law employer mandate requiring provision of free contraception and sterilization services as part of health coverage.
These developments are, I think, helping to buoy the newly surging candidacy of former Republican Senator from Pennsylvania Rick Santorum.
Why?

Michael Lewis: Advice From the 1%: Lever Up, Drop Out

Illustration by Ted McGrath

By Michael Lewis

About Michael Lewis

Michael Lewis is the author of the best-sellers The Big Short: Inside the Doomsday Machine; The Blind Side: Evolution of a Game; Moneyball: The Art of Winning an Unfair Game; and Liars Poker among other works.
More about Michael Lewis

To: The Upper OnesFrom: Strategy CommitteeRe: The Counterrevolution
As usual, we have much to celebrate.
The rabble has been driven from the public parks. Ouradversaries, now defined by the freaks and criminals among them,have demonstrated only that they have no idea what they aredoing. They have failed to identify a single achievable goal.

Santorum Challenge Is Romney’s Toughest One Yet: Ramesh Ponnuru

Illustration by Ryan Rhodes

By Ramesh Ponnuru

The latest not-Romney is thestrongest one yet. Mitt Romney has beaten back challenges fromRick Perry, Herman Cain and Newt Gingrich in succession.

Santorum’s Surge Raises Cheers From Camp Obama: Albert R. Hunt

“The one who can beat Obama: Rick Santorum,” the television commercial proclaims. That boastbrings cheers from two quarters: the faithful followers of theconservative Republican presidential candidate, and theDemocratic president’s political strategists.
The former Pennsylvania senator is on fire in theRepublican contest, threatening the front-runner, Mitt Romney,in the critical Michigan primary next week and nationally.

If U.S. Troops Pull Out, Economic Growth May Slow: Amity Shlaes

Out. Everywhere. Yesterday. Thosethree words sum up the mood here at home when it comes toAmerican military presence outside U.S. borders.
President Barack Obama is signaling he wants to get out ofAfghanistan so badly that he’s even taking a few politicalgambles to accelerate a pullout. There’s also a more generalsense that putting soldiers in other countries has proved a badinvestment for everyone involved, rendering those nationssadder, rougher and poorer.

The Six Mistakes of Germany’s Finance Minister: Charles Wyplosz

One can accuse Germany’s financeminister of many things, but not of hiding his views. By sayingthat a Greek default is possible because the rest of the euroarea can now bear it, Wolfgang Schaeuble has simply admittedthat the strategy adopted since late 2009 has been designed toprotect Germany, not to help Greece. By further suggesting thatelections be delayed in Greece and that technocrats replace theremaining politicians holding ministerial jobs, Herr Schaeublehas shown how little he cares about elementary democraticprinciples.

How the U.S.-Iran Standoff Looks From Israel: Efraim Inbar

Tehran is located 970 miles (1561 km) from Jerusalem. In 2010, Israel had adefense budget of $13 billion and 176,500 active armed forces personnel; Iran'sdefense budget was $7 billion with 523,000 active armed forces personnel.Israel's nuclear weapons arsenal is estimated to include 75-200 warheads; thecapacity of Iran's nuclear program is uncertain. Charts by Everything TypeCompany

By Efraim Inbar

Enlarge image

Sources: International Monetary Fund, Direction of Trade Statistics, 2011; International Institute for Strategic Studies Military Balance, 2010; Stockholm International Peace Research Institute Yearbook, 2011; World Bank; Arms Control Association; U.S. Energy Information Administration.

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New Economy Transformation: Obama Budget Won't Help

By Miriam Pemberton,

Two military policeman go through training at Fort Bragg, NC. Photo by Spc. Garett Hernandez

The last decade’s surge in military spending has pushed military contracting deeper into the foundations of our economy. Reversing this process, and transferring the savings to support the green economy, are necessary components of the project to build the new economic foundation we need.Here is a quick take on how little the President’s budget request, released this week, is going to help.
First a few bright spots. This budget is a milestone of sorts. For the first time, it offers less money to the military next year than we are spending this year. This is not the way the term “spending cut” tends to be defined in Washington-speak. Mostly “cuts” are made to last year’s expansive projections of the future. As in: the doubling of my salary that I projected last year didn’t happen, therefore I took a salary cut. All those military spending cuts referred to in previous years have been that kind.

Iranians Deserve Our Solidarity

Carlos Alberto Montaner

Madrid, Spain

Carlos Alberto Montaner is a Cuban-born writer, journalist, and former professor. He is one of the most influential and widely-read columnists in the Spanish-language media, syndicated in dozens of publications in Latin America, Spain and the United States.more »

The Current Discussion: Are we witnessing a pro-regime coup in Iran? What should the world do in response? How will the election aftermath affect Iran's projection of power into the Middle East?

Of course Democrats worldwide must support those in Iran who are trying to expand their freedoms. There are three very important reasons to give them that support:

Egyptian Muslim Brotherhood Leaders Plan Islamic Legislation; Blame “Friends Of Israel” For Criticism

Egyptian media is reporting that in a Friday symposium, Egyptian Muslim Brotherhood leaders said that the Brotherhood “aims to apply Islamic legislation” and blames “friends of Israel” for conducting “smear campaigns” against the organization. According to a report in Al-Masry Al-Youm:
The Muslim Brotherhood aims to apply Islamic legislation and we don’t seek an alternative. If Copts knew their rights in Islam, they would seek the application of Islamic law,’ said Sobhi Saleh, a leading Muslim Brotherhood (MB) member in a symposium called ‘Egypt Post Revolution.’ The event was held Friday in the city of Qafr al-Dawar in Beheira Governorate. ‘Any citizen has the right to run for any position, and voters have the right to say ‘yes’ or ‘no.’

Tackling the great decline debate.

BY DANIEL W. DREZNER, GIDEON RACHMAN, ROBERT KAGAN |

Dan Drezner:
Dear Bob and Gideon,
It's an honor to bemoderating this discussion between the two of you. You have both managed toauthor interesting and cogently argued books that are nevertheless at odds witheach other on the future of world order. Gideon, you are of the belief that theAge of Anxiety is upon us, due in no small part to the waning of American powerand the Western model of political economy more generally. Bob, you rebutarguments about American decline by pointing out the ways in which currentcommentators have wildly exaggerated American power in the past and the waysin which current U.S. power resources are still quite robust...

By Clyde Prestowitz

In theirOval Office meeting earlier this week, President Obama predictably warnedChina's visiting president-in-waiting Xi Jinping that China must play by therules in international trade. It sounded right and fair and slightly tough asit was carefully crafted to do by top White House political advisers, and the president may even believe it. But he shouldn't have said it.
Put asidefor the moment the indelicacy of implicitly calling the soon to be president ofthe a country that is the world's second most powerful and that highly values"face" (pride,dignity) a cheater. I mean, can you imagine the reaction here ifXi had lectured Obama on playing by the rules? But I digress.

Howto tackle -- and not tackle -- the most delicate assignment in journalism.

BY RON KAMPEAS

Evenbefore she gets to Israel, Jodi Rudoren, the new New York Times bureau chief, is already explaining why she'd prefernot having "Zionist" attached to her name.
Andto a Jewish reporter at a pro-Israel website, no less.
Rudoren,whom I've never met, should know this: It could be worse.
Insteadof telling Adam Kredo at the Washington Free Beacon why she's not aZionist, she could be explaining why she'd prefer not having "Jewish" attachedto her name.
It'shappened.

'Sweet Spot' for War Right Before Election

by Jason Ditz

While insisting that they “want to see sanctions work,” Obama Administration officials are convinced that the sanctions won’t lead Iran to abandon its civilian nuclear program and that either the US or Israel will attack Iran as a result.
The new reports come just one day after Secretary of Defense Leon Panetta conceded that Iran isn’t actually developing a nuclear weapon, and DIA chief Lt. Gen. Ronald Burgess said that Iran was unlikely to start any war on their own.
Officials say Obama has been telling Israel he wants to “give sufficient time” to the current round of sanctions before starting the war, though they say that in the end the result will start be a war because Iran is “behaving like sanctions don’t matter.”
It does seem to have pushed back the start of the war a bit, however, as Panetta had previously predicted Israel would launch an attack between April and June, but Obama advisors are now calling September or October the “sweet spot.”

Provocations Against Iran Follow a Rich Tradition

by Ivan Eland

Theapparent Israeli-U.S. covert operations to inhibit Iran’s missile andalleged nuclear weapons programs — using assassinations, computer worms,faulty parts, exploding factories, etc. — very likely has a secondaryobjective as well. When Iran haplessly and publicly vows revengeand retaliates — as it seemingly has with ham-handed attempts to assassinatethe Saudi Arabian ambassador in the United States and car bombings ofIsraeli embassy personnel in the countries of India and Georgia — itallows Israel and the United States to further hype the limited Iranianthreat to either country. By inflating the threat, both countriescan better justify any future military strike on Iran.

Voting Out the War Party?

The Limits of Electoral Politics

by Justin Raimondo

The brazen theft of the Maine Republican caucus by Mitt Romney and the Republican establishment should be a lesson to us in the antiwar movement – and, indeed, one that needs to be learned by all Americans hoping and working for real political change.

First, a word about the evidence left at the crime scene: this is a case of vanishing voters, caucus participants whose ballots simply disappeared. In the town of Belfast, the seat of Maine’s coastside Waldo county, the caucus resulted in a Ron Paul victory, but when the caucus chairman called the state party to report the results, he was told they already had the vote totals – which showed Romney had won. The caucus chair was puzzled, since he was the designated reporter, and no one else. He was told "Oh, I’ll be sure those numbers are changed." The numbers, however, have not changed. Indeed, all but one of the precincts in Waldo county have the same official tally: zero. According to the participants, Paul swept those precincts: the party establishment’s solution to this "problem" was to simply disappear those voters.

Jeff Bell, an 'early supply-sider,' on the roots of American social conservatism—and why the movement is crucial to building a Republican majority.

By JAMES TARANTO

If you're a Republican in New York or another big city, you may be anxious or even terrified at the prospect that Rick Santorum, the supposedly unelectable social conservative, may win the GOP presidential nomination. Jeffrey Bell would like to set your mind at ease.
Social conservatism, Mr. Bell argues in his forthcoming book, "The Case for Polarized Politics," has a winning track record for the GOP. "Social issues were nonexistent in the period 1932 to 1964," he observes. "The Republican Party won two presidential elections out of nine, and they had the Congress for all of four years in that entire period. . . . When social issues came into the mix—I would date it from the 1968 election . . . the Republican Party won seven out of 11 presidential elections."

2012-02-19T19:35:00.002-07:00

Social Issues and the Santorum Surge

Jeff Bell, an 'early supply-sider,' on the roots of American social conservatism—and why the movement is crucial to building a Republican majority.

By JAMES TARANTO

Opinion: Why Social Conservatives Win

Opinion: Santorum Holier-Than-Thou?

Capitalism and the Right to Rise

In freedom lies the risk of failure. But in statism lies the certainty of stagnation.

By JEB BUSH

Congressman Paul Ryan recently coined a smart phrase to describe the core concept of economic freedom: "The right to rise."
Think about it. We talk about the right to free speech, the right to bear arms, the right to assembly. The right to rise doesn't seem like something we should have to protect.

Brad Pitt Endorses Ron Paul On The Daily Show, 2/1/12

The Ron Paul Revolution DEFINED

Ron Paul Leaks His Choice for Vice President!!!

Is the not-Romney an improvement for conservatives?

By Jennifer Rubin

I had lunch with a conservative scholar and writer on Friday. Remarking on the rise of Rick Santorum, he exclaimed sarcastically, “Oh, swell, the Republicans have found a guy who’s a big spender AND an extremist on social issues!”
On one level it was a funny remark, symptomatic of the notion among many conservative curmudgeons that if there is a way to screw up an election the GOP will find it. On the other, it was an interesting statement that suggests that the Republicans, after winning a House majority in 2010 by stressing limited government and focusing much less on social issues, may undo their success by choosing a candidate with positions unpopular with a substantial majority of Americans — big government and excessive meddling in personal lives (having nothing to do with abortion, on which the GOP is virtually united and public opinion in general is at least evenly divided.)

Obama's Busted Budget. by Michael D. Tanner

In a town where bipartisan budget chicanery has been raised to an art form, President Obama's latest budget proposal should be hailed as the da Vinci of fiscal obfuscation.

Wars Should Be Hard to Start. by Benjamin H. Friedman

By George F. Will

James and Jeanne Harmon reside in and supposedly own a five-story brownstone on Manhattan’s Upper West Side, a building that has been in their family since 1949. But they have, so to speak, houseguests who have overstayed their welcome by, in cumulative years, more than a century. They are the tenants — the same tenants — who have been living in the three of the Harmons’ six apartments that are rent controlled.
The Harmons want the Supreme Court to rule that their home has been effectively, and unconstitutionally, taken from them by notably foolish laws that advance no legitimate state interest. The court should.

We Are on the Road to Bankruptcy. By John Stossel

President Obama said in his State of the Union speech, "We've already agreed to more than $2 trillion in cuts and savings."
That was reassuring.

The new budget he released this week promises $4 trillion in "deficit reduction" -- about half in tax increases and half in spending cuts. But like most politicians, Obama misleads.
Cato Institute economist Dan Mitchell cut through the fog to get at the truth of the $2 trillion "cut."
"We have a budget of, what, almost $4 trillion? So if we're doing $2 trillion of cuts," Mitchell said, "we're cutting government in half. That sounds wonderful."

Obama’s Deceptive Hidden Premises The “contraception mandate” is really a presidential power grab. By Michael Novak

The most evil thing about the Obama administration’s recent violation of the separation of church and state is its deceptiveness. With his order requiring inclusion of contraception and abortifacient drugs in insurance coverage, the president is smuggling the hidden premises of NARAL, Planned Parenthood, and other supporters of abortion into U.S. law, and doing so untruthfully.

The Department of Health and Human Services (HHS) instruction attacking religious institutions such as hospitals, universities, and programs for the poor rests on four hidden premises.

Obama’s Cynicism for Me, Not for Thee For the president, it’s a vice other people have. By Jonah Goldberg

Barack Obama on Meet the Press in 2008

Jonah Goldberg

‘My rival in this race,” President Obama announced early in 2007, “is not other candidates. It’s cynicism.”

It’s now clear that what he meant by this was other people’s cynicism — not his own.
As you may recall, Obama came into office a very inexperienced politician, spouting a lot of hopeful and idealistic rhetoric. He had made a name for himself by refusing to demonize conservatives and Republicans.
For instance, during a Nevada Democratic debate, then-senator Obama told the late Tim Russert that, “My greatest strength, I think, is the ability to bring people together from different perspectives to get them to recognize what they have in common and to move people in a different direction.”

Who Won the Payroll-Tax Fight?

By Kevin D. Williamson

Who has the power in Washington? Who won the payroll-tax battle? Not Republicans, not Democrats — government employees.

The new deal on the payroll-tax extension (which will do little or nothing to benefit the economy) was held up by a largely unrelated matter: requiring federal workers to contribute more toward the costs of their own pensions. (More, Congress? How does 100 percent strike you?) The original proposal would have required all federal workers to bear more of the costs of their own retirements, but Democrats representing Maryland, that tony little suburb of Leviathan, shrieked. The compromise instead will cover only new hires.

By Charles Krauthammer

Give him points for cleverness. President Obama’s birth control “accommodation” was as politically successful as it was morally meaningless. It was nothing but an accounting trick that still forces Catholic (and other religious) institutions to provide medical insurance that guarantees free birth control, tubal ligation and morning-after abortifacients — all of which violate church doctrine on the sanctity of life.
The trick is that these birth control/abortion services will supposedly be provided independently and free of charge by the religious institution’s insurance company. But this changes none of the moral calculus. Holy Cross Hospital, for example, is still required by law to engage an insurance company that is required by law to provide these doctrinally proscribed services to all Holy Cross employees.

Nonetheless, the accounting device worked politically. It took only a handful of compliant Catholic groups — Obamacare cheerleaders dying to return to the fold — to hail the alleged compromise and hand Obama a major political victory.

2012-02-17T20:02:00.002-07:00

Obama's Busted Budget. by Michael D. Tanner

In a town where bipartisan budget chicanery has been raised to an art form, President Obama's latest budget proposal should be hailed as the da Vinci of fiscal obfuscation.

Wars Should Be Hard to Start. by Benjamin H. Friedman

By George F. Will

We Are on the Road to Bankruptcy. By John Stossel

President Obama said in his State of the Union speech, "We've already agreed to more than $2 trillion in cuts and savings."
That was reassuring.

Obama’s Deceptive Hidden Premises The “contraception mandate” is really a presidential power grab. By Michael Novak

The Department of Health and Human Services (HHS) instruction attacking religious institutions such as hospitals, universities, and programs for the poor rests on four hidden premises.

Obama’s Cynicism for Me, Not for Thee For the president, it’s a vice other people have. By Jonah Goldberg

Barack Obama on Meet the Press in 2008

Jonah Goldberg

‘My rival in this race,” President Obama announced early in 2007, “is not other candidates. It’s cynicism.”

Who Won the Payroll-Tax Fight?

By Kevin D. Williamson

Who has the power in Washington? Who won the payroll-tax battle? Not Republicans, not Democrats — government employees.

By Charles Krauthammer

CNN Shocked by New Poll About Ron Paul

22,700 - Mexican Drug Cartels insider look

El Chapo Guzman-Americas Most Wanted

Get the Fed out of the housing market

Break up Fannie and Freddie into pieces no longer too large to fail

By Eric Grover

Illustration by William Brown

A stable dollar and prices are consistent with maximum sustainable job and wealth creation. However, the Fed’s dual mandate to pursue full employment and price stability has given it license to meddle in the economy to boost short-term employment, with disastrous consequences. The Fed’s recent politicking for more government intervention in the housing market is a clarion reminder that Congress should remove the central bank’s authority to manage job growth.

Sanctions may be changing Iran’s nuke plans

Tehran offers to resume U.N. talks

By Shaun Waterman

Iran’s leaders “may be changing their mind” about pressing ahead with their nuclear program in the teeth of international sanctions, the U.S. intelligence chief told senators Thursday.
Tehran has offered to resume stalled talks with the five permanent members of the U.N. Security Council and Germany, according to a letter from its chief nuclear negotiator reported by Agence France-Presse.
News of the letter came a day after Iranian leaders proclaimed new progress in creating nuclear fuel rods and threatened to cut oil exports to six European nations in retaliation for new European Union sanctions.
Calling news of the Iranian offer “interesting,” Director of National Intelligence James Clapper said it might be evidence that international sanctions are having an effect on Tehran’s decision-making about its nuclear program.

Rick Santorum Releases 4 Years Of Tax Returns Showing Just How "Blue Col...

Afghanistan Experiencing Building Boom! (Of U.S, Military Bases!)

Greece and the euro From tragedy to farce

From tragedy to farce

by J.R.

HAPPY endings were never much of a feature of classical Greek tragedies. Talks around a further bail-out of Greece have run the gamut of modern literary genres, taking in drama and thriller. Now they seem headed for farce.
On February 14th a meeting of finance ministers in the euro area was postponed when it became apparent that not all Greece’s main political parties were willing to pledge to honour tough new conditions demanded in return for a bail-out. A day later Antonis Samaras of the New Democracy party reversed course and wrote to the European Commission and International Monetary Fund promising to implement the austerity measures if his party wins a general election in April. On the streets of Greece, meanwhile, protestors have continued to demonstrate against the planned spending cuts. Events have taken an ugly turn, with some protestors burning the German flag while some right-wing newspapers have cast Germany’s chancellor, Angela Merkel, as a Nazi.

LightSquared

by M.G. | SAN FRANCISCO

AMERICAN telecoms firms are clamouring for more wireless spectrum. Hence the interest in LightSquared, a firm which had hoovered up a chunk of airwaves formerly used by satellite operators. It planned to build a high-speed terrestrial network and rent it out to others. But on February 14th America’s Federal Communications Commission (FCC) said no.

Sustainable capitalism

by M.B. | NEW YORK

THESE are busy days for Al Gore. In late January, the former vice-president turned climate-change warrior took to the high seas, leading a luxury cruise-cum-fact-finding mission to Antarctica for a bunch of billionaires and policy wonks. They were to see for themselves the melting ice shelf and enjoy what remains of the spectacular views. Then, on February 15th, he was in New York to launch a manifesto (pdf) for what he calls “sustainable capitalism”.

2012-02-16T15:29:00.001-07:00

The Upside of Government Default

By Jeffrey Rogers Hummel

There is a good chance that the U.S. government will be forced to default on its explicit and implicit promises within the next few decades. Fortunately, the state government experience of the 1840s suggests that this may provide the best and most durable long-run solution.

Few now doubt that the U.S. government is rushing headlong toward a major fiscal crisis. An outright default by the U.S. government on Treasury securities looks increasingly likely. Most automatically conclude that such an outcome would be catastrophic. But one striking historical case, from the early history of the United States, dramatically contradicts this common presupposition. Indeed, it suggests that, in the long run, default can usher in such desirable results as decreasing government intervention and expanding prosperity. The case involves not the default of the national government but of several state governments in the 1840s.

By Aparna Mathur

‘Rich corporations’ don’t pay taxes. Workers do.

President Obama’s budget speech on Monday expanded on the theme of economic “fairness,” like his State of the Union speech in January. He lectured Americans that if critical steps are not taken, the rise of the middle class will be threatened and disparities between the rich and the rest will continue to grow. A general theme was that taxing the rich would get us a long way towards reducing income inequality. This may be why President Obama failed to extend the promise he made last year to fight for corporate tax reform. Why lower tax rates on “rich” corporations if inequality is what really matters?

By Michael Wohlgenant and Vincent H. Smith

That Valentine’s Day hand on your back pocket billfold is not your sweetheart’s, it’s the sugar lobby’s.

For decades, sugar beet and sugar cane farmers and processors have been the beneficiaries of a sugar program that stealthily drives up sugar costs—and, consequently, the cost of that heart-shaped box of chocolates. Over the past 30 years, the annual burden on U.S. consumers has averaged over $3 billion in higher food prices.

By Roger Bate

The Kimberly Process has become a whitewash; Roger Bate reports from Africa.

CAPE TOWN, South Africa—Between 2000 and 2008, Zimbabwe collapsed.
The confiscation of white-owned farms precipitated the destruction of its economy; mad monetary policies led to the worst hyperinflation in Africa’s history; politically manipulated food distribution caused malnutrition; and, with woeful sanitation infrastructure, the already-weakened population succumbed to a cholera epidemic, plunging life expectancy to 35 years of age.

US: Growing risk posed by Iran-Venezuela axis – by Sen. Richard Lugar

The growing and deepening alliance between the mullahs of Iran and the America-bashing leader of Venezuela, Hugo Chávez, poses a serious threat to U.S. national interests, but the Obama administration has been behind the curve in appraising these risks and forging effective policies to counter them.

US: Obama is America’s Lenin – by Jeffrey T. Kuhner

Why does President Obama despise Christianity? Recently, his administration ruled most religious organizations must provide health insurance to employees that covers free contraception and sterilization procedures — including the morning-after pill. The decision provoked a furor among Catholics and non-Catholics. They rightly understood that the contraceptive mandate violates religious freedom and the conscience rights of the Catholic Church.

US: That jobs thing sure didn’t last long – by Paul Driessen

President Obama “is focused like a laser on putting people back to work,” Rep. Debbie Wasserman Schultz (D-Fla.) assured us last fall — echoing repeated statements by President Obama and Administration officials who “can’t wait” for Congress or others to take action and create jobs.

2012-02-16T09:54:00.002-07:00

The Muslim Brotherhood

Dialogue is the best defence

Despite its suspicions, the West should engage the moderate Islamist parties that win elections

WHEN revolutionaries first stormed public squares in north Africa a year ago and toppled ageing dictators, Islamist leaders were nowhere to be seen. Many feared failure or were uncomfortable with the rapid speed of change. Only belatedly did they agree to join the growing opposition. Yet when at last they contested elections, the Islamists were stunningly successful. In Egypt and Tunisia they won majorities; in Libya they are likely to follow suit and, if the Assad regime falls, they could well emerge on top in Syria too.

A way out of the woods

The euro may survive brinkmanship over Greece, but the road to recovery will be long and hard

United States' economy

The home of laissez-faire is being suffocated by excessive and badly written regulation

AMERICANS love to laugh at ridiculous regulations. A Florida law requires vending-machine labels to urge the public to file a report if the label is not there. The Federal Railroad Administration insists that all trains must be painted with an “F” at the front, so you can tell which end is which. Bureaucratic busybodies in Bethesda, Maryland, have shut down children’s lemonade stands because the enterprising young moppets did not have trading licences. The list goes hilariously on.

Opinion: Understanding Beijing's Chief Princeling

U.S. Constitution Still Supreme?

Michigan a Must-Win for Mitt?

Motown Mitt

By JAMES FREEMAN

Michigan's Feb. 28 Republican presidential primary is almost a must-win for Mitt Romney. But to his credit the candidate is renewing his attack on the federal bailout of two of the state's giant employers. In a Detroit News op-ed this week, Mr. Romney calls the Obama administration's 2009 bailout of General Motors and Chrysler "crony capitalism on a grand scale."
The stakes for Mr. Romney in Michigan could hardly be higher. As the candidate reminds voters in a new television advertisement, he grew up in the state and is the son of the late George Romney, who served as Michigan's governor in the 1960s. Born in Detroit, Mr. Romney parlayed his "favorite son" status into a victory in the 2008 Michigan GOP primary, even though he ended up losing the nomination to John McCain. Losing Michigan in 2012 would represent a significant setback for the candidate viewed by many as the inevitable Republican nominee.

The character of the Chinese government—one that marries aspects of the free market with suppression of freedom—shouldn't become the norm.

By MITT ROMNEY

Should the 21st century be an American century? To answer, it is only necessary to contemplate the alternatives.
One much bruited these days is that of a Chinese century. With China's billion-plus population, its 10% annual average growth rates, and its burgeoning military power, a China that comes to dominate Asia and much of the globe is increasingly becoming thinkable. The character of the Chinese government—one that marries aspects of the free market with suppression of political and personal freedom—would become a widespread and disquieting norm.

The Catholic church learns the true meaning of Obama's 'transformative' presidency.

By DANIEL HENNINGER

Pope John Paul II, surveying from his seat in the eternal hereafter the battle between the American Catholic Church and the Obama administration over mandated contraception services, must be permitting himself a sad smile. The pope knew more than most about the innate tensions between the state and its citizens.
The Obamaites will object that it is unfair to liken their government to the Communist Party of Poland. That is not the point. What the former Karol Wojtyla knew is that any state will claim benevolence on behalf of doing whatever it thinks it needs to do in pursuit of its goals.
White House Press Secretary Jay Carney invoked the good in defense of the Obama law's universal reach: "The administration decided—the president agrees with this decision—that we need to provide these services that have enormous health benefits for American women and that the exemption that we carved out is appropriate."

Enlarge Image

Chad Crowe The American Catholic Church, from left to right, is now being handed a lesson in the hierarchy of raw political authority. One hopes they and their supporters will recognize that they have not been singled out. The federal government's forcings routinely touch other groups in this country—schools, doctors, farmers, businesses. The church's fight is not the whole or the end of it.

Regarding the nation's purpose, Clint Eastwood and Barack Obama couldn't be further apart.

By DANIEL HENNINGER

The Barack Obama budget document just released is not a budget. It is a work of literature. It is Barack Obama's published apologia for a second presidential term, in which—as the budget and its tax proposals make clear—he will reset the historic balance in America between the public sector and the private sector. This reset will require large wealth transfers—from individuals and companies to the government, and from the government back to the people.
The Obama budget is described everywhere as a "political document," but it is more than that. Mr. Obama hasn't assembled these ideas just to get elected. This budget is a statement of belief. It is a road map of where he wants the country to go.
This being so, it behooves us to revisit the most controversial political event of the past two weeks—Clint Eastwood's Super Bowl commercial for the Chrysler car company.

Enlarge Image

Reuters/Chrysler This ad was widely viewed as an argument for a second Obama term. It is undoubtedly true that the pro-Obama admen who created the commercial embedded a pro-Obama spin. Asked about this afterward, Clint Eastwood said simply: "I certainly am not politically affiliated with Mr. Obama."

Fox Cancels Popular Show for Supporting Ron Paul

2012-02-15T13:13:00.000-07:00

John Stossel on Ron Paul

2012-02-15T13:12:00.000-07:00

This is why Ron Paul will WIN!

2012-02-15T13:11:00.000-07:00

2012-02-15T12:13:00.002-07:00

Krauze: Castro’s Demise Won’t Erase U.S. Legacy

Illustration by Jiro Bevis

By Enrique Krauze

Latin America’s romantic attachmentto the idea of revolution began in Cuba and achieved itsgreatest strength there. And it may well come to an end there.
The Spanish-American War of 1898 (Theodore Roosevelt’s“splendid little war”) was a major chapter in the Americanassertion of “manifest destiny,” which claimed the U.S.’sright to determine governments and policies for its Latin-American neighbors. Throughout the Spanish-speaking world, inLatin America and Spain itself, the conflict was experienced asan historical tragedy.

Tucker Carlson Digs Into the Journalistic Muck: The Ticker

By Francis Wilkinson

Tucker Carlson's Daily Caller has published a series of reports on Media Matters for America and its leader, David Brock. It's an intriguing piece of work.
"An internal Media Matters For America memo obtained by The Daily Caller reveals that the left-wing media watchdog group employs an `opposition research team' to target its political enemies," the report states.

Black Helicopters Hover Over Economic Reality: Caroline Baum

Maybe it’s inevitable that politicsplay a role in economic policy. After all, the two disciplineswere pretty much intertwined until the 20th century.
Today, political economy has taken on a whole new meaning.Perhaps “politicized economy” would be a more accuratedescription.
Some of the politicization is natural and understandable:Political philosophies dictate economic preferences and viceversa.

Santorum Challenge Is Romney’s Toughest One Yet: Ramesh Ponnuru

Illustration by Ryan Rhodes

By Ramesh Ponnuru

The latest not-Romney is thestrongest one yet. Mitt Romney has beaten back challenges fromRick Perry, Herman Cain and Newt Gingrich in succession.
But in Rick Santorum he faces a rival for the Republicanpresidential nomination who lacks those candidates’ glaringflaws and has some notable advantages over him.

Trenin: How the Iran Nuclear Standoff Looks From Russia

Tehran is located 1,531 miles (2,464 kilometers) from Moscow. In 2010, Russia had a defense budget of $59 billion and 1 million active armed forces personnel; Iran's defense budget was $7 billion with 523,000 active armed forces personnel. Russia's nuclear weapons arsenal is estimated to include 10,566 warheads; the capacity of Iran's nuclear program is uncertain. Charts by Everything Type Company

By Dmitri Trenin

Catholic Bishops Join the Culture War on Obama: Margaret Carlson

Illustration by Andy Rementer

By Margaret Carlson

About Margaret Carlson

Margaret Carlson is a Bloomberg View columnist appearing on Wednesdays. A former White House correspondent for TIME, she was also TIME's first woman columnist. She appeared on CNN's "Capital Gang" for 15 years.
More about Margaret Carlson

I was surprised when the bishopsdidn’t declare victory last week. Heeding their protests,President Barack Obama relieved Catholic institutions of theindignity of having to pay directly for contraception for theiremployees.

Greek Unrest Adds Urgency to Need for Real Debt Relief: View

Photograph by Simon Dawson/Bloomberg, Illustration by Bloomberg View

By the Editors

Greece’s extraordinary efforts topush through harsh austerity measures may soon win it a secondbailout package from euro-area governments. But the victory isgoing to be Pyrrhic if it fails to slow and eventually stop thecountry’s downward economic spiral.

Greece Struggles to Win Second Financial Bailout as Europe’s Doubts Mount. By James G. Neuger -

European officials ratcheted up thepressure on the Greek government to deliver spending cuts inexchange for a second bailout as they insisted that default isnot an option.
Finance ministers canceled a Brussels meeting slated fortoday and will hold a teleconference instead to prod Greece todo more to clinch an aid package worth 130 billion euros ($171billion) along with about 100 billion euros of debt relief fromprivate bondholders. Greece needs the money to make a 14.5billion-euro bond payment on March 20.

Europe ’Plays With Fire’ as Greek Rescue Hits Barrier. By James G. Neuger and Eleni Chrepa

Greece said that Europe’s wealthiercountries are “playing with fire” by toying with the idea ofexpelling it from the 17-nation euro area as talks over a secondaid program ran into new obstacles.
Finance Minister Evangelos Venizelos leveled the accusationafter a decision slated for tonight on aid totaling 130 billioneuros ($171 billion) was postponed until at least Feb. 20 andpossibly until after a full-time Greek government emerges fromelections later in the year.
“We are continually faced with new terms,” Venizelos toldreporters in Athens today. “In the euro area, there are plentywho don’t want us anymore. There are some playing with fire,domestically and abroad. Some are playing with torches and someare playing with matches. But the risk is equally great.”
Two years after pledging to pull Greece back from thebrink, European leaders are torn between pouring more aid intothe struggling economy or risking an unprecedented nationalbankruptcy that might force the country out of the euro andprompt renewed market tumult.

Henrique Capriles Becomes Venezuela’s Opposition Presidential Candidate By A Landslide

2012-02-14T17:54:00.000-07:00

(Yes! He can smile!)

Henrique Capriles, the candidate of Primero Justicia, Voluntad Popular and Podemos, today became the candidate of Venezuela’s united opposition by a landslide. In the end, it became a two man race, with only Capriles and Pablo Perez, who came a distant second, obtaining a significant amount of votes, with Capriles garnering with 95% of the vote counted, 1.81 million of the 2.904,000 votes cast, for a 62.3% of the votes, a true landslide, which did not surprise the Devil. (“He will win and will win big”)

But the story, besides the landslide, is the turnout, way above the most optimistic ones, at 2.904 million votes, more than 17% of the electorate. This suggests that a truly unified opposition will give Hugo Chavez a run for the Presidency and that political change may finally be in the air. The road is tough, but the toughest part may have been getting here. if all candidates work with Capriles and run a focused campaign, an opposition victory is certainly within reach .
A very exciting day and an even more exciting prospects for Venezuela.
Results with 95% of the votes counted:

Chavismo Is Very Concerned About Capriles’ MUDslide in Sunday’s Primaries

2012-02-14T17:53:00.000-07:00

While I expected the surprise factor to play a role in how Chavismo reacted to Sunday’s results, I am a little surprised by the fraud slant taken by most Chavista leaders. I mean, you can expect craziness from Mario Silva, but when Diosdado Cabello and Jorge Rodriguez step in to suggest fraud, when the Government controlled Electoral Board ran the election, you know these guys are nervous.

I do not care much for Mario Silva’s rant on Sunday, he clearly went bezerk with the results. But when the man that is trying to succeed Chavez comes out, military fatigue on, saying “It has to be determined whether if those numbers truly exist”, you know something is up.
To say nothing of former CNE President and Mayor of the Libertador Municipality Jorge Rodriguez, who came up with this very unprofessional looking chart, claiming it suggests fraud:

This chart claims to show the number of votes per candidate as a function of time and somehow the non-uniform rates are supposed to be evidence of fraud. And then comes the electoral expert from Chavez’ PSUV party who says it would have been impossible to get 3 million votes in the three hours allocated. Maybe he was the one that told the Government how to limit the number of voting machines in order to limit the number of votes. He obviously failed…
The truth is Capriles’ MUDslide los tiene locos. The total number of votes was an incredible 3.04 million votes, with Capriles getting over the 1.9 million number. When someone told me at 5 PM on Sunday that we could get three million votes, I found the number so incredible, that I dismissed the same person’s number that Capriles had 62% (He got 64.2%)
Meanwhile, the big autocrat has yet to say anything, while I think the MUD has to emphasize that the CNE is controlled by Chavismo. BTW, shame on the CNE Board members, only one of them, the lone non-Chavista has defended their integrity. Lucena, the President of the CNE, was wishy-washy. She did say that the CNE controlled the process in all but 160,000 votes, but she did not want to say much on the controversy. She is probably waiting for instructions from above.
For now, this is fun. When Chavismo does not establish the agenda and reacts to the news, you know they will screw up. So, for now, get the popcorn out and enjoy!

The Curious Downfall of the Heir Apparent to Hugo Chavez

2012-02-14T17:51:00.000-07:00

It was one of the biggest political surprises of the last few months, if not years, when Hugo Chavez announced that his Foreign Minister Nicolas Maduro, would be the candidate for Governor of Carabobo State in 2012. Maduro had been considered Chavez’ heir apparent if it became necessary for the Venezuelan President to step aside in 2012 due to health reasons. In fact, many people, including yours truly, believed that Chavez would name Maduro as his Vice-President some time in the very near future, replacing Elias Jaua, who is not popular among various Chavista factions.

That all was not well in Maduro-land was barely noticeable last week when his wife, Cilia Flores, was replaced in the leadership of Chavez’ political party PSUV by none other than Diosdado Cabello, once also considered Chavez’ clear successor. But Flores had been in the doghouse for a while, as she had been removed early in 2011, before Chavez’ illness surfaced, as President of the Venezuelan National Assembly.
It was unclear why the sudden change of heart for Maduro, who had been acting in roles beyond that of Foreign Minister, including being the main speaker at a service held for Hugo Chavez in Manhattan and being part of the commission studying the changes to the new Labor Law. Maduro was also the only Cabinet Minister to go back and forth between Caracas and La Habana, when Hugo Chavez received treatment for his cancer in that city between June and September.
Chavez’ announcement was made the day after Maduro received an ovation that apparently irked the President, but I am sure there is much more to the story. For now, Chavez is in the search for a new Vice-President, with most betting that it will remain all in the family with his son in law, Jorge Arreaza, the current Minister of Science and Technology, being named Vice-President early in 2012*. His current Vice-President Elias Jaua, had already been nominated as candidate for Governor of Miranda State by Chavez a few months ago in what was believed to be an elegant way of disposing of Jaua.
Chavez is making daily changes to his entourage, with rumors that new important military appointments will be made soon. For now, none of the groups fighting for power feels they hold in a solid position, as the downfall of the heir apparent may simply be a signal by Chavez that he has yet to make his mind up. When he does, Maduro may be back, in another sideways move by the Venezuelan President.
*I don’t think that Arreaza can be Vice-President if I understand what “parentesco por afinidad” means in Art. 238 of the Venezuelan Constitution, which bans the VP from being related by blood and/or affinity to the President. I believe, but I am not 100% sure that Chavez is related to Arreaza by affinity.

The federal budget

2012-02-14T16:35:00.000-07:00

Tax and build

by R.A. | WASHINGTON

WASHINGTON wonks are focused today on the release of the Obama administration's budget proposals for the 2013 fiscal year. We will have in depth coverage following the White House budget briefing. For now, a few things stand out. First, the president's proposals generate a federal deficit of $900 billion in fiscal 2013. If it is verified, that would be America's first deficit of less than $1 trillion since the 2008 fiscal year. It would also represent a reduction in the deficit, as a share of GDP, from 8.5% to 5.5%. Overall, the budget calls for a reduction in the deficit to 2.8% of GDP by 2019, where it is projected to remain through the end of the ten-year budget window. That's close to primary balance—the government's books would nearly balance net of interest costs. The 2013 budget's proposals result in less deficit reduction than the plan produced (but not agreed upon) by last fall's bipartisan budget "Supercommittee".

In the short term, much of the president's deficit reduction can be attributed to economic improvement. The budget envisions a recovery that accelerates, in real terms, through 2015, after which growth settles down to 2.5%. That's certainly an optimistic forecast, though it's not entirely unreasonable. Given the scope for catch-up growth back to potential, we would expect, in the presence of appropriate macro policy and absent severe shocks, for growth to be above trend for a few years. Of course, both policy and unexpected headwinds have constrained recovery since 2009.
Toward the end of the ten-year period, the biggest deficit cuts come from reductions in overseas military spending and from higher taxes on top earners, including the expiration of the Bush tax cuts for those earning more than $250,000 a year. Savings that aren't directed toward deficit reduction are focused, in the short term, on stimulative measures like an extension of a payroll-tax cut through 2013 and, in the long term, on infrastructure priorities, like a long-overdue reauthorisation of the nation's surface transportation laws and new spending on immediate transport needs. The budget for those items runs to nearly $170 billion over the ten-year window. That sounds like a lot, but the CBO has suggested that the economy could use that much spending every two years. The president is likely to make much of proposals to support manufacturing and "insourcing", but among his initiatives on this score, most of the budget room is allotted to an extension of the R&D tax credit, which is virtually guaranteed to take place anyway.
In the best of times, the budget document is best understood as a political document, used to frame administration priorities in a way that might possibly inform actual legislation, if the president is lucky and controls Congress. Amid a divided Congress and ahead of a presidential election, the budget is both an opening bid and a campaign tool. The White House cannot expect to get much of what it wants, but it can hope to show voters the difference between Mr Obama's goals and those of his Congressional antagonists.
At the end of the day, however, serious fiscal questions loom. The long-run debt picture is disconcerting, but more worrisome, perhaps, is the fiscal hit the economy will take if the parties are unable to agree on extensions of at least some of the many tax cuts scheduled to expire at year's end. Mr Obama hopes this budget will help get him re-elected, but if it makes actual budget deals more difficult to achieve, he could be in for a tough start to a second term.

Barack Obama's budget

2012-02-14T16:31:00.000-07:00

The phony war

by G.I. | WASHINGTON

TAKEN at face value, Barack Obama’s latest budget is a bold combination of fiscal rectitude, populist tax increases and industrial policy-lite: tax breaks for manufacturers, more money for community colleges, and a dollop of money for infrastructure.
Do not take it at face value. A president’s budget has always been hostage to whatever Congress is in a mood to grant. In the last three years, however, the gap between aspiration and reality has become so large as to be almost surreal.

Mr Obama promises to cut the deficit by $3.8 trillion over the next decade. Of that, $1.4 trillion comes from raising taxes on the wealthy. Most of this he has asked for since his first budget, in 2009, when he proposed eliminating George W. Bush’s tax cuts for those earning more than $250,000 and capping their deductions. This year, he adds a hefty new charge: repealing preferential rates on dividend income for the wealthy, which raises $206 billion over 10 years.
His proposal to shut down all sorts of tax breaks for multinationals and slap banks with a crisis fee return, once again, to the budget, along with a handful of populist new measures such as “removing tax deductions for shipping jobs overseas” (worth $90m over 10 years).
Such tax increase went nowhere when Democrats controlled both the House of Representatives and the Senate. With Republicans in charge of the House and able to filibuster almost anything in the Senate, the odds any of these tax proposals will pass this year are close to nil.
Much of his purported spending reduction is accounting legerdemain: he claims to save more than $800 billion from drawing down operations in Iraq and Afghanistan, but most of that was never going to be spent anyway. His cuts to Medicare and Medicaid consist almost entirely of squeezing health-care providers; benefits and beneficiaries are spared. There are painful cuts to discretionary spending excluding defence: it sinks from 3.1% of GDP in fiscal 2012 to 1.7% in 2022. Those cuts, however, were forced on him by budget deals last year, and it’s not clear how the federal government is supposed to fulfill so many of its responsibilities, from running the courts to fighting forest fires, on a starvation diet. Mr Obama did omit nearly $1 trillion of further cuts set to begin next year under last year’s budget deal (the “sequester”); he argued his budget provides a wiser alternative.
The gap between rhetoric and reality shows up plainly in the bottom line. In 2009, Mr Obama laid out a plan that would lower the budget deficit to 3.5% of GDP by this year; he now reckons it will be 8.5% instead. The national debt was supposed to peak as a share of GDP at 67% last year; he now figures it will peak next year, at a much higher 78%.
There are two reasons Mr Obama’s budgets have become irrelevant, one good and one bad. The first, good reason is that since 2008 balancing the budget has simply had to take a back seat to averting economic collapse. Nominal GDP this year will be 6%, or almost $1 trillion, smaller than Mr Obama projected three years ago. That miss alone explains some of the worsening in the deficit and debt ratios. The remainder is largely down to explicit decisions to delay tax increases and spending cuts. The resulting red ink is not pretty but plainly better than applying a fiscal vice at a time when monetary policymakers are running out of ideas for stimulating demand.
The second, bad reason is that the parties are deeply polarised, largely over Republicans’ refusal to consider tax increases on a scale that Democrats consider meaningful. The result of these two forces is that fiscal policy only gets made when it absolutely must, usually in late-night white knuckle negotiating sessions with a sword hanging over the heads of both parties: the expiration of Mr Bush’s tax cuts in December, 2010; a government shutdown in April, 2011; and a near-default last August.
Mr Obama’s advisers know how little the budget matters. As they went through the motions of explaining it today, they noted that big initiatives, such as corporate tax reform and the Buffett rule minimum tax for millionaires, are not part of it; they will come later as part of a broader reform proposal. Bigger changes to entitlements would likewise be part of a “grand bargain” between Republicans and Democrats and Mr Obama was not about to share his negotiating position with reporters.
Administration officials, like the Republicans, know the real fight comes after November, when the battle for the White House is over and several big deadlines loom. Chief among these are the expiration of Mr Bush’s tax cuts and the sequester. No one knows how that crunch will be avoided, and reading Mr Obama’s budget leaves one none the wiser.

Too close for comfort

2012-02-14T16:29:00.000-07:00

Afghanistan

In the war in Afghanistan it is not always obvious which side Pakistan is on

PAKISTAN REACTS WITH understandable resentment to criticism of its role in Afghanistan. During the long war there it has provided sanctuary to millions of refugees. It has lost far more troops fighting terrorists than has ISAF. After September 11th 2001 it swiftly repudiated the Taliban and threw in its lot with America and its “war on terror”. In 2004 it was named a “major non-NATO ally” by America. Its territory has provided ISAF with vital supply routes and bases for attacks on suspected terrorists by unmanned drone aircraft. Many of its civilians have also died in those and other attacks. It has provided intelligence that has led to the capture of a succession of al-Qaeda leaders. And the “American” war in Afghanistan has fuelled the rise of violent Islamist extremists in Pakistan itself, the “Pakistani Taliban”, bent on overthrowing the government.

Now, too, there is a reciprocal grudge against Afghanistan. Armed fighters from the Pakistani Taliban, defeated in the Swat region of Pakistan in 2009, have set up camp in eastern Afghanistan and continue to launch attacks on Pakistan. All of this helps fuel popular anti-Americanism, which is steadily worsening. The war is a political liability for the government.
Yet American politicians seethe at Pakistan’s refusal—despite large amounts of American aid lavished on the army—to start operations in the tribal area of North Waziristan against the Haqqani network, a group that Mike Mullen, then chairman of America’s Joint Chiefs of Staff, last year called a “veritable arm” of the Inter-Services Intelligence agency (ISI), Pakistan’s main spy service. This year a NATO report leaked into the public domain alleged that “Pakistan’s manipulation of the Taliban senior leadership continues unabated.”
Yet even American diplomats believe that some of these charges are overstated. Having helped form, train and arm the Taliban in the 1980s (with American backing) to fight the Soviet occupation of Afghanistan, and having in the 1990s used other terrorist outfits against India in Kashmir, the ISI has deep links with the extremists. But that does not make them all passive tools of the Pakistani state.
Publicly, the ISI plays down its links with such groups, mocking the tendency to see its shadowy hand everywhere. “We are a very responsible organisation,” says an ISI spokesman. “People think we are responsible for absolutely everything.” Yet at the same time the ISI somehow manages to give the impression that it has more control over the extremists than it probably does.
The army’s explanation for its restraint in North Waziristan is capacity. Roughly 150,000 soldiers are already deployed in the tribal areas; 10,000 are on UN peacekeeping missions; and 60,000-70,000 were diverted to providing flood relief in 2010 and 2011. Add in troops kept in reserve, and that leaves only around 200,000 to keep an eye on 2,900km (1,800 miles) of Pakistan’s eastern border with the traditional enemy: India.
Annus horribilis
In fact by late 2011 there were plenty of other reasons too for restraint in North Waziristan, argues Rifaat Hussain of the Quaid-i-Azam University in Islamabad. A severe humanitarian crisis in which one-third of the population of the Federally Administered Tribal Areas had already been displaced would have been made even worse by intervention. Divided tribal loyalties in the region might have coalesced in a united anti-army front. A relative lull in the second half of 2011 in suicide-attacks elsewhere in Pakistan might have been broken. And the army might not have won but instead got bogged down, as has happened to so many foreign armies in similar rugged terrain, across the border in Afghanistan.
The need for caution on the Indian border helps explain why Pakistan’s strategic objectives in Afghanistan seem at odds with ISAF’s. Its main goal is to thwart the establishment of any government that might align Afghanistan firmly with India. Partly this reflects its abiding fear of Indian invasion and the need for “strategic depth” to withstand it. Also, Pakistan sees the administration of President Hamid Karzai as dominated by former members of the anti-Taliban Northern Alliance, which was close to India and Russia. Officials in Islamabad claim India is already using Afghan territory to foment unrest in Pakistan, especially in the restive province of Balochistan.
Another reason why this does not seem Pakistan’s war is that the Taliban are dominated by Afghanistan’s largest ethnic group, the Pushtuns, many of whom also live on the Pakistani side of the frontier. And the Afghan government has never recognised the border with Pakistan dating from the British colonial era, the Durand Line. If a hostile Afghan government were to resurrect the dispute, recollecting old calls for a separate “Pushtunistan” that incorporates not just the tribal areas but most of Khyber Pakhtunkhwa and Balochistan, Pakistan would be destabilised further.

Pakistan’s strategic objectives in Afghanistan seem at odds with ISAF’s

In 2011 the continuing tensions between America’s and Pakistan’s objectives in Afghanistan became acute. From the perspectives of the American and Afghan governments, the evidence of Pakistani double-dealing became more flagrant. When bin Laden was found to have been living in Abbottabad, a town not far from Islamabad that is known for its elite military academy, it was hard to believe that no part of the Pakistani establishment was aware of his presence. After that, Admiral Mullen seemed to accuse the ISI of complicity in bloody attacks on America’s forces in Afghanistan and on its embassy in Kabul, blamed on the Haqqani network (though Hillary Clinton, the Secretary of State, later said there was no evidence implicating the ISI). Afghan politicians, for their part, blamed Pakistan for the assassination in September of Burhanuddin Rabbani, a former Afghan president involved in seeking a peace settlement.
With friends like these
From Pakistan’s perspective, however, 2011 was a year of ever more egregious American violation of its sovereignty. In January an American CIA contractor, going about his murky business, shot dead two robbers in Lahore. A third man was killed by the car sent to rescue him. America claimed the CIA contractor, Raymond Davis, had diplomatic immunity, and eventually had him set free. Pakistanis were appalled that an unknown number of trigger-happy Americans appeared to have a licence to kill on their streets.
The Navy SEAL raid in which bin Laden was killed was kept secret from the Pakistani government and army, apparently because they could not be trusted not to alert the target. That caused far greater outrage in Pakistan than did the revelation of the al-Qaeda leader’s whereabouts. Indeed, some Pakistanis, typically for a country where any event spawns countless conspiracy theories, believe the army’s commanders did know of the raid. In this theory, revealing for what it says about how the army is viewed, the generals thought it less damaging to their image at home—and, crucially, within their own lower ranks—to appear inept, rather than complicit in the killing of an old jihadi ally. Most Pakistanis blame the al-Qaeda attacks of September 11th 2001 on America or Israel.
Hopes of repairing ties were dashed by what was, at best, a terrible ISAF blunder. On November 26th 2011, 24 Pakistani soldiers were killed by the air support called in by Afghan and American troops on the border with the Pakistani tribal area of Mohmand. NATO called it an accident and said its troops had acted in self-defence. Many Pakistanis believed it was a deliberate attack. Barack Obama offered condolences but no apology.

It was an accident, said ISAF

In protest, Pakistan withdrew from a big conference in Germany in December on Afghanistan’s future. It ordered America to quit the base in the Pakistani province of Balochistan from which it was believed to be mounting drone attacks. And it curtailed the intelligence co-operation which presumably helped identify targets for those attacks, as well as lead to terrorist suspects in their hideouts. It also closed the two border crossings through which large quantities of ISAF supplies had been passing. ISAF has three other land routes, through Russia, Central Asia and the Caucasus, but they are more expensive and have political complications of their own.
Pakistan, for all its denials, can also influence the outcome in Afghanistan through the presence in its territory of the insurgent groups. They will not be defeated unless they are beaten in Pakistan, nor brought into a process of national reconciliation until Pakistan has helped nudge them to the table. ISAF commanders in Kabul believe that some Afghan Taliban leaders are chafing at their dependence on Pakistan and the ISI and might be willing to return home if it did not mean abandoning their families in Pakistan. ISAF has tried to coax them back with offers of safe passage. Recent agreement for the Taliban to open an office for negotiations in Qatar is another way of prising the group away from Pakistan and has brought a formal peace process a little closer. But it will still need Pakistani help.
In recent times Pakistan has often looked more like America’s enemy than its ally. An article published in November and December 2011 in the National Journal and the Atlantic, two American magazines, called it “The Ally from Hell”. It was deeply resented in Pakistan. In fact, the country’s ultimate objectives in Afghanistan are not that different from the West’s. It does not have an interest in perpetuating a war in which, as it points out, Pakistani soldiers and civilians are victims. Only a small minority in Pakistan hankers after a Taliban restoration in Kabul, which would encourage the Pakistani Taliban. In any event, such a restoration is highly unlikely, since any government ISAF leaves behind will probably be able to hold the big northern cities.
So Pakistan’s Afghan policy at times appears to be self-defeating. Partly this is a consequence of the ISI’s links with militant groups, both domestic and Afghan, which have created bonds of loyalty and patronage that are hard to untangle. But it is also a consequence of Pakistan’s abiding fears of the two countries best placed to help it, if only mutual trust could replace instinctive suspicion: America and India.

Ron Paul backer: "You would never hear of a 'former' Ron Paul supporter"

2012-02-14T16:27:00.000-07:00

GOP plotting to oust Ron Paul?

2012-02-14T16:26:00.000-07:00

Paul Craig Roberts: China isn't to blame for a weak US economy

2012-02-14T16:25:00.000-07:00

The Federal Reserve's Crony Capitalism. by James A. Dorn

2012-02-14T16:21:00.000-07:00

The Federal Reserve’s decision to release forecasts for short-term interest rates is supposed to clarify monetary policy and reassure the public. By keeping the federal funds rate close to zero for three more years, and switching from shorter to longer-term securities, the Fed hopes to spur investment and growth. The problem is that manipulating interest rates and allocating credit to favored parties fosters crony capitalism, not market liberalism.

Clarity in capital markets is not improved by distorting interest rates, which are relative prices. Nor is monetary policy improved by engaging in fiscal policy and the allocation of credit. Targeting inflation at 2 percent is 2 percent too much. Nominal interest rates should reflect real interest rates in a world of zero inflation, if they are to perform their function of allocating capital efficiently.
By pegging nominal interest rates at artificially low levels, the Fed is penalizing millions of people who have their assets in saving accounts or money market funds and are getting near zero nominal returns. With CPI inflation of 3 percent in 2011, the real rate on those assets is negative. The Fed’s low interest rate policy, designed to help fund big government and stimulate housing, is decapitalizing many households who do not want to take on more risky assets. Private virtue is being penalized by public vice.

Interfering with market interest rates is an exercise in market socialism, not capitalism.

Retirees, or those near retirement, typically prefer less risky assets. But with the average rate on a savings account at 0.24 percent, on a money market account at 0.22 percent, and on a 1-year CD at 0.53 percent, nominal returns are close to zero, and real returns are negative—even at relatively low rates of inflation.
The longer rates are held artificially low, the more savers will suffer, and the more tempted they will be to take on risks they never would have considered. Risk mismatches will complicate Fed policy when rates must rise to prevent serious inflation. Bond prices will collapse, and those investors who trusted the Fed to support longer-term asset prices will be especially harmed. There will be significant political pressure to keep all rates lower for longer, even if inflation is above the Fed’s 2 percent target. So how can that target be credible?

James A. Dorn is the vice president for academic affairs for the Cato Institute and editor of the Cato Journal.

More by James A. Dorn

Fed chairman Ben Bernanke has said that he will put equal weight on price stability and full employment, as dictated by the Fed’s dual mandate. But “price stability” means zero inflation, not 2 percent. The Fed has no fixed anchor: there is no rule to guide it, only discretion. And that discretion is still influenced by Keynesian thinking and a Phillips Curve mentality.
Bernanke is willing to tolerate a little more inflation to try to engineer less unemployment. Yet, he must know this is a Faustian bargain that cannot work. Indeed, the Fed’s press release following the FOMC meeting on January 25 admits, “The maximum level of employment is largely determined by nonmonetary factors.”
The Fed has largely lost its independence. Congress has asked too much of the Fed, and Bernanke has vastly expanded the Fed’s powers and balance sheet to comply. Some asset prices have been inflated (especially gold and bonds), but overall inflation has remained relatively low because people and businesses have been holding large cash balances, and banks have parked their excess reserves at the Fed for a risk-free return. The Fed has helped create its own “liquidity trap” by paying interest on excess reserves, which has reduced the so-called money multiplier.
However, as the economy regains steam and loan demand increases, those excess reserves will enter the marketplace and increase nominal spending and prices. The Fed will need to reduce the size of its balance sheet and nip inflation in the bud; but policymakers may act too late. The result will be stagflation.
Bernanke has placed the Fed in a precarious position. There is no way the FOMC can accurately forecast interest rates or determine what the efficient allocation of capital should be. Interfering with market interest rates is an exercise in market socialism, not capitalism.
In his press conference following the historic January 25 policy meeting, Bernanke was asked whether the Fed’s inflation target of 2 percent was intended to depreciate the purchasing power of the dollar. Bernanke replied that the real purpose is to “avoid deflation.” He then tried to downplay the idea that mild inflation would erode the value of money, because most people would protect their money by investing it, and not put it under the mattress. He admitted that interest rates are low now, but in the long run they tend to “compensate” for inflation.
This was an artful dodge. In fact, inflation always erodes the domestic purchasing power of the dollar. At the current 3 percent CPI inflation rate, the average level of money prices would increase by 34 percent in a decade, and by 81 percent in 20 years. Even at 2 percent, the price level would double every 35 years—no matter what the interest rate is. By suppressing nominal interest rates, the Fed is denying savers the means to safeguard their property; yet Bernanke barely gives that failure a mention.
Transparency is a noble goal, but it is best achieved under a rule of law and freely determined prices. The Fed’s transparency crusade has not imposed any rule on the Fed or moved us closer to sound money. Forecasting short-term rates near zero for the foreseeable future sends the wrong signal—namely, that financial repression and crony capitalism will continue

Attack of the Pork Hawks by Doug Bandow

2012-02-14T16:19:00.002-07:00

Conservative politicians want to cut spending — except for the military. Where that's concerned, they sound like liberals. In fact, conservatives have adopted several liberal ploys to justify today's bloated military budget.

First, big spenders on the right argue that Washington must continue doing everything that it has ever done abroad. House Armed Services Committee Chairman Howard "Buck" McKeon (R-Calif.), one of the leading pork hawks, has denounced the idea of doing "less with less."

Yet the Department of Defense spends most of its money to protect other nations, including those that are populous and prosperous. All together, the Europeans have a larger GDP and population than America and ten times the GDP and three times the population of Russia. South Korea has 40 times the GDP and twice the population of North Korea. Why is the U.S. taxpayer still paying for their protection, 67 years after World War II ended?

Doug Bandow is a senior fellow at the Cato Institute and former special assistant to President Ronald Reagan.

More by Doug Bandow

Even worse has been Washington's foray into militarized nation-building. The Balkans remains a mess nearly two decades after Washington intervened. The Iraq War weakened America and strengthened Iran. The U.S. has been trying to create a competent, honest, and democratic central government in Kabul for a decade. None of these missions advances U.S. security.
But that raises the second excuse that phony conservatives use to justify a bloated Pentagon. Like liberals spending on education, these right-wingers equate money with results. Thus bigger Pentagon budgets mean increased national security. Only it's not true: greater military spending is strategic waste on a grand scale.
While the world is dangerous, it is not particularly dangerous to America. The U.S. is surrounded by oceans east and west and friendly neighbors north and south. America is allied with every major industrialized state save Russia and China. Washington already has a thousand military installations around the world. The American navy is equivalent to that of next 13 navies combined, 11 of which belong to U.S. allies.
Washington spends as much as the rest of the world — and spends more, in real terms, than at any point during the Korean War, Vietnam War, or Cold War. America could spend less and still possess far larger and more capable forces than anyone else.
Such overcapacity actually encourages Washington to meddle in foreign conflicts that foolishly deplete our military capital. As a result, guys using AK-47s and improvised explosive devices tied down the world's greatest power for years in both Iraq and Afghanistan.
Terrorism remains a threat, but not an existential one like the old Soviet Russia. Moreover, Al-Qaeda has been wrecked by relatively inexpensive techniques short of conventional war: good intelligence, Special Forces strikes, international cooperation, financial sanctions. In contrast, the invasion of Iraq created an entirely new class of terrorists, some of whom have migrated to other conflicts, such as Libya and Syria.
The third idea spendthrift militarists have recycled from the liberals of yesteryear is using "baseline budgeting" to complain that Barack Obama has "cut" defense outlays. This is the same way Democrats once charged that Ronald Reagan drastically "cut" domestic spending — by reducing the rate of increase.
Total military outlays were $306 billion in 2001. Since then they have risen steadily, breaching the $700 billion barrier under Barack Obama in 2011. In real, inflation-adjusted terms, expenditures increased 74.5 percent over the last decade. In the Obama administration's first two years inflation-adjusted military spending rose 16.8 percent. Outlays last year, in real terms, were 23.5 percent above the Korean War peak in 1953, 22.5 percent above the Vietnam War peak in 1968, and 35.8 percent above the Reagan build-up peak in 1989.
Spending will stop racing ahead this year but not because of real cuts: the administration has only proposed reducing planned increases over the coming decade by $487 billion. As former House Majority Leader Richard Armey observed, these "cuts" are "only from the bloated CBO baseline. This means that [Obama] is merely reducing projected military spending, as opposed to cutting current spending."
If Congress does not trim overall spending by $1.2 trillion over the coming decade, the sequestration agreed to during last summer's debt ceiling debate is supposed to kick in, with the equivalent amount in cuts divided equally between domestic and military outlays. This prospect has caused much neoconservative wailing and gnashing of teeth.
In fact, say Veronique de Rugy of the Mercatus Center and Ben Friedman of the Cato Institute, non-war outlays would still increase, only "by about 10 percent today, as opposed to the 18 percent the administration wants." (War expenses are exempted.) Overall, they figure, as a result of sequestration military expenditures would grow by 18 percent rather than 20 percent from now through 2021.
The present rate of growth is too much even for some hawks. "Under sequestration, the Defense Department would still be spending more money in 2021 than it is spending today," adds Andrew McCarthy of the Foundation for Defense of Democracies. "Moreover, that spending increase — not cut, increase — comes atop a decade-long spending bonanza."
Yet some of the most prominent neoconservatives are scaremongers. Max Boot of the Council on Foreign Relations cites an estimate that the combined effect of all "cuts" would result in a 31 percent drop in real military spending. But even if this "worst case" came to pass, real outlays would be at 2007 levels, which were 39 percent higher than in 2001. Moreover, the reduction would come when the U.S. was no longer fighting wars in Iraq and Afghanistan. America would still lap the rest of the world in the global arms race.
The fourth tactic for conservatives addicted to military-industrial pixie dust is playing the "Washington Monument" game — threatening to kill the most important programs (in this case, weapon systems) first. Just as liberals, faced with demands for cuts to local budgets, will threaten schools, police, and fire departments first, pork hawks want to claim that DoD reductions must come out of indispensable programs. Again, that's not true: military cutbacks should start with force structure, especially army units.
With allies capable of defending themselves, the U.S. should not plan on fighting a major land war in Europe or Asia. And there should be no more nation-building. The U.S. should maintain superior air and naval forces, but in smaller numbers sufficient to prevent attack on America rather than to police the globe. Such a strategic readjustment does not mean the end of our ability to project force abroad: America would continue to act as an off-shore balancer capable of aiding friendly states against a hostile power seeking Eurasian hegemony. This would not only be more affordable but makes greater strategic sense than behaving as an in-region meddler determined to micromanage local conflicts.
Could the unexpected occur? Of course. Should the U.S. have a surge capacity in the event of an emergency? Certainly. Should Washington adjust its plans if international circumstances change? Definitely. But it makes no sense to maintain an oversized military for decades because someday a country like China might behave badly. When that time comes, a bloated Defense apparatus would be too slow and encumbered to act.
The fifth and last resort of Washington big-spenders is demagoguery. Advocates of a colossal military trash their opponents as "isolationists" who want to undermine America. Columnist Lurita Doan accused President Obama of seeking "to render our military neither well-armed nor well-planned." New Zealand blogger Trevor Loudon — neoconservatives are nothing if not globalist — charged that "hard-bitten Leninists and disciplined Marxists" were behind plans to reduce U.S. military outlays.
Just look at the hype. Reductions in military spending, we are told, would be "totally destructive" and "very dangerous to the survival of the country," would "destroy" the Pentagon, set America on a "perilous course," be "dangerous and irresponsible," leave America "in the greatest peril," "would decimate our military," threaten America's "national security interests," be "totally devastating," send "a very horrible message" to America's enemies, create the "threat of gutting national security," "break" the military, "invite aggression," cause "severe and irreversible impact," leave America "teetering on the precipice of disaster," cause "catastrophic damage," "put our national security on the chopping block," leave "a hollow force," "disarm the United States unilaterally," result in "American lives lost," fail "to provide for the safety and security of our country," and call "into question our nation's ability to remain a free people."
All of this from returning military outlays to 2007 levels.
The fundamental question is whether military spending should respond to the threat environment. Leading Republicans answer no: America must always and in every situation spend more.
Pork hawks routinely denounce the post-Cold War drawdown, a 27.8 percent drop in real outlays from peak to trough that was erased in just six years. The Soviet Union had disintegrated. The Warsaw Pact had dissolved. Maoism had disappeared from China. Colin Powell observed that he was running out of enemies — down to Kim Il-sung and Fidel Castro. Still the pork hawks wailed. And some go farther. Max Boot decries every previous drawdown, including after the Revolutionary War.
Congressman J. Randy Forbes (R-Va.) complains that spending reductions would result in an America "that can go fewer places and do fewer things." But what if going to most of those "places" and doing most of those "things" does not advance U.S. interests? Secretary of Defense Leon Panetta has testified that military cutbacks might require reducing "our presence perhaps in Latin America, our presence in Africa." So?
There are bad actors in the world, but they need not automatically be America's problem. Gen. Robert H. Scales (ret.) argues that "We cannot pick our enemies; our enemies will pick us." Actually, in recent years Washington has done most of the picking and attacking: Haiti, Bosnia, Serbia, Iraq, Libya.
Max Boot similarly asserts: "Certainly there has not been — nor is there likely to be — a decreased demand for the armed forces. They are constantly having new missions thrown their way, from defending our nation's computer networks to deposing a dictator in Libya and providing relief to Japanese tsunami survivors." None of these tasks justifies maintaining a titanic military in a constitutional republic facing a troubled future of deficits, debts, and unfunded liabilities.
Even those who say military outlays can never be cut must ultimately decide how much is enough. Half of the world's outlays? Three-quarters? Four-fifths? Even if Washington could afford to spend ever more, the rest of the world might not go along with America's plan. If the U.S. spends more to contain China, China is sure to ramp up its outlays to deter us. After all, Americans would not stand idly by if another country placed bases in Mexico and Canada, used its fleets to patrol the Gulf of Mexico and both coasts, and casually talked of war to contain American ambitions. China will act no differently.
America is more secure today than at any point since before World War II. Military outlays should be reduced accordingly.
That will require scaling back Washington's international objectives. But the U.S. should stop garrisoning the globe, subsidizing rich friends, and reconstructing poor enemies. Instead, it's about time Washington focused on defending America and its people.

Obama Has No Plan B. by Richard W. Rahn

2012-02-14T16:17:00.000-07:00

President Obama has just presented his new budget, which again ignores reality. It contains another trillion-dollar deficit, which assumes a large increase in revenue resulting from a tax-rate increase on “the wealthy” and corporations. He knows, and so does everyone else, that Congress is not going to pass the tax increase. Even if it did, the projected revenues would not be forthcoming because the “wealthy” people would change their behavior and find other ways to obtain income, and economic growth would decline, costing tax revenue. Corporate taxes are paid by consumers in higher prices and by workers in lower wages — so much for the promise not to increase taxes on those making less than $250,000. Every good tax economist knows this, but the president chooses to ignore reality and demagogue the issue.

Even more disturbing is the lack of discussion about a contingency plan if his projected economic scenario does not work out — and the probabilities are that it will not work out. The reality is that the United States and most other governments, particularly the Europeans, have reached or are close to reaching the limits of their ability to tax and borrow. This situation means there is going to have to be either massive cutbacks in government spending or very high inflation.
Everyone knows that if an individual or a business takes on too much debt, the interest payments on the debt eventually will crowd out all other spending unless one radically cuts spending or declares bankruptcy. Governments differ. The ones that print their own money, such as the United States, usually resort to inflation as a way to reduce the real value of government payments and the real value of the debt, leaving bondholders holding the bag. Governments that do not print their own money, such as Greece, California and Illinois, are forced to cut spending radically — whether they want to or not — or default on their debt, unless some other government or international agency chooses to bail them out.

Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.

More by Richard W. Rahn

The United States has been able to get away with greater-than-trillion-dollar deficits per year and a big increase in the ratio of gross domestic product to debt because the U.S., even though it’s in great fiscal trouble, is not as bad off as many European countries and others, so money still comes into this country. Also, the United States has been able to keep its debt-service interest payments low because the Federal Reserve has been buying the debt and now is the single biggest holder of the U.S. government debt. The Fed injects cash into the economy to pay for the government bonds it buys, which normally would result in higher inflation rates. But the banks, financial institutions and others have been increasing their cash balances (absorbing the Fed cash), in part because the government increased reserve requirements and there are so few low-risk lending opportunities.
However, this game has limits. At some point — next month, in six months or next year — the private economic players will stop hoarding cash and inflation will break out, or there will be a massive cut in government spending to reduce government borrowing.
Think about the following scenario. A war erupts involving Iran, most Iranian oil shipments cease, and shipping in the Persian Gulf is disrupted. As a result, oil prices soar, driving up the cost of almost everything. With the spike in inflation, bondholders refuse to lend at close-to-zero interest rates. The cost of financing government debt then also soars, and the government is forced either to reduce spending greatly or to print dollars (greatly reducing their value and making everyone poorer).
One can construct many scenarios that would trigger the fiscal crisis. With the high probability of a crisis, a prudent person, business or government would have a contingency plan in place to deal with the disaster when it comes. The Obama administration apparently has no contingency plan, other than wishful thinking. At the moment, almost 40 percent of federal spending is financed with debt. When the crisis comes, new low-cost debt cannot be sold and, because of the hit to the economy, tax revenues will fall. The federal government may then be forced to cut spending in half in real terms (either through explicit budget cuts or through inflation).
Almost two-thirds of government spending ($2.1 trillion) goes to Social Security, Medicare, Medicaid, food stamps, unemployment insurance and other income transfers. The other third of government spending ($1.3 trillion) is considered discretionary (in fact, it is all discretionary) and more than half of this is for defense-related items.
Business executives often are faced with having to make drastic cuts in the size of their operations — because of changes in technologies or markets — in order to preserve and rebuild the company. Good executives have contingency plans that include keeping only the most vital parts of the business and getting rid of the stuff that is not contributing to profit. Politicians and government executives often attempt to avoid hard choices — the new Obama budget being Exhibit 1. A fiscal contingency plan is needed now to avoid additional pain from the coming economic disaster.

Israeli Attack on Iran's Nuclear Facilities Easier Said than Done by David Isenberg

2012-02-14T16:15:00.000-07:00

Despite renewed media speculation regarding possible Israeli attacks against Iran's nuclear facilities as early as this spring, scepticism that such a campaign could actually be successfully carried out remains relatively high, raising the question of whether there is more bark than bite to Israeli threats.

It cannot expect a repeat of 1981 when the Israeli air force destroyed the Osirak reactor at Al-Tuwaythah, just south of Baghdad.

The Iranians are aware of both Israeli capabilities and the U.S.-made precision-guided penetrating munitions in the Israeli inventory. The Iranian programme has been dispersed all over the country — estimates range between 12 and more than 20 locations — and the facilities have been built with U.S. and Israeli capabilities in mind and are protected by modern Russian air defence systems.

David Isenberg is an adjunct scholar with the Cato Institute, a US Navy veteran, and the author of the book, Shadow Force: Private Security Contractors in Iraq.

More by David Isenberg

The single most critical element of the Iranian programme is thought to be the Natanz facility. The heart of the facility is the centrifuge area, located in an underground, hardened structure.
But even if Israel tries to limits the target set, it would still have to attack other facilities besides Natanz. For example, the newer Fordow fuel-enrichment plant near Qom, where Iran has already moved 3.5-percent enriched uranium from Natanz, is built into the side of a mountain and is heavily fortified. There is a uranium conversion plant at Isfahan, a heavy-water facility being constructed at Arak and centrifuge factories outside Tehran.
The straight-line distance between Israel and Natanz is almost 1,609 kilometers. Since the countries do not share a common border, Israeli aircraft or missiles must fly through foreign — and hostile — airspace to get to the target.
The least risky method of striking Natanz is with Israel's medium- range ballistic missiles, the Jericho II or III. It is believed that the Israeli missiles can reach Natanz. However, to travel that far the missiles will have a limited warhead weight, and it is doubtful that these warheads will be able to penetrate far enough underground to achieve the desired level of destruction.
Thus, an attack by the Israeli air force's U.S.-made fighter-bomber aircraft is the most likely option. The Israelis have 25 F-15I and about 100 F-16I jets.
The F-15I is capable of carrying four metric tons of fuel in its internal tanks, conformal fuel tanks (CFT), and detachable tanks. This enables it to fly about 4,450 kilometers. With midair refueling, the range can be extended further.
The F-15I can carry a very wide range of weapons such as various guided missiles and bombs, as well as iron bombs. All in all, the plane can carry about 10 metric tonnes of munitions.
The F-16I has an extended flight range that reportedly allows Israeli forces to attack targets well within Iran without having to refuel. Use of could CFT extends its effective mission range up to 50 percent. The baseline model has a combat radius of 1,370 kilometers with two 907-kilogramme bombs and two air-to-air missiles, with 3,936-litre external tanks.
Assuming an air attack, the question is how will the aircraft fly from their bases in Israel to a target located 322 kilometres miles inside Iran?
They could go either through Saudi Arabia or Iraq, possibly even using Jordanian airspace as well. Either route is a one-way trip of about 1,931 kilometers.
To overfly Saudi Arabia the strike aircraft depart southern Israel, enter Saudi airspace from the Gulf of Aqaba or Jordan, fly 1,287 kilometers miles of Saudi airspace to the Gulf and then 483 kilometers into Iran.
Since the Israeli air force does not operate stealth aircraft, there is a reasonable expectation that at some point the aircraft will be detected over Saudi Arabia. Whether Saudi defences could — or would — be able to stop the Israelis is uncertain. Given Saudi fears over Iran's nuclear programme, perhaps they would turn a blind eye and claim ignorance.
If they chose to traverse Iranian airspace, the strike aircraft depart southern Israel, cross 483 to 644 kilometers of Saudi airspace or a combination of Jordanian and Saudi airspace, and enter Iraqi airspace as soon as possible, continue across 805 kilometers of Iraq to the Persian Gulf and then on to the target.
Entering Iran from Iraqi airspace would be politically delicate. Although U.S. troops are no longer there, traversing Iraqi airspace would not be possible without the knowledge, and most likely the permission, of the United States.
The key question is whether Israel's fighter-bombers can conduct this mission without refuelling. Combat radius — the distance an aircraft can fly and return without refueling — is difficult to calculate, and depends on weapons payload, external fuel tanks, mission profile, etc.
The best "guesstimate" of the combat radius of the F-15I and F-16I, outfitted with conformal fuel tanks, two external wing tanks and a decent weapons load, is almost 1,609 kilometers. Either of the two possible flight routes above is about 322 kilometers further than that. To make up for the shortfall, the aircraft could be fitted with an additional external fuel tank, but this will require a reduction in the weapons load. Given the accuracy of the weapons in the Israeli inventory, that might not be problematic.
However, if the aircraft are detected and intercepted, the pilots will have to jettison the tanks in order to engage their attackers. Dropping the tanks will prevent the aircraft from reaching their target.
Air refuelling is a limitation for the Israelis. In recent years Israel has acquired five C-130 and four to seven Boeing 707 tanker aircraft. However, the tankers would have to refuel the fighters in hostile airspace. The 707 is a large unarmed aircraft and would be very vulnerable to air defences.
Theoretically, the Israelis could do this, but at great risk of failure. If they decide to attack Natanz, they will have to inflict sufficient damage the first time — they probably will not be able to mount follow-on strikes at other facilities.
The ultimate question, of course, is once Israeli planes have flown back, won't Iran be able to repair the damage and accelerate the nuclear programme? Or does Israel assume that the U.S. will pick up where they left and start a long-term war with Iran?

A Debate about Contraception Or Religious Freedom? No, a Debate about Economic Choice. by Michael D. Tanner

2012-02-14T16:13:00.000-07:00

Lost in the uproar over the Obama administration’s requirement that religiously affiliated organizations provide employees with insurance that covers contraceptives, including some abortifacients, is the fact that this rule is simply one more symptom of the fundamental problem with Obamacare. That problem is not papered over by the administration’s latest “compromise.”

First, let’s be clear: This issue never had anything whatsoever to do with women’s health. There is nothing that prevents any woman who wants contraceptives from purchasing them. No one is threatening to take that right away, and no one should.

The debate does not even have anything to do with whether or not women can get insurance that covers contraceptives. Most insurance plans already do so, and when they don’t, women can purchase a rider that provides the additional coverage.
What this debate was really about is who pays for that coverage. And as much as some would like to obscure it, there is a difference between having the freedom to buy something for yourself and forcing someone else to pay for it.

This issue never had anything whatsoever to do with women's health.

Obamacare creates this issue because it includes both an individual and employer mandate. The employer mandate requires all businesses with 50 or more employees to provide insurance to their workers starting in 2014. The individual mandate requires that anyone who doesn’t receive insurance through work (or through a government program like Medicare or Medicaid) purchase insurance for themselves. Individuals and businesses who fail to comply will be fined.
But these mandates do more than simply require that businesses and individuals purchase insurance. The insurance they buy must meet the government’s definition of acceptable insurance. Remember the President’s assurances that if you had insurance today and you like it, you could keep it? Not true.
That means that even if a business provides insurance to its workers today, it won’t satisfy the mandate unless that insurance includes all the benefits that the government says it should. Some of these mandated benefits are costly requirements for such things as mental health services, alcohol and drug rehabilitation, pharmaceutical products, and dental and vision care for children. Now, the administration has determined that it must include contraceptives.

Michael Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.

More by Michael D. Tanner

That would not really change with the proffered compromise. The latest offer would ostensibly shift the cost of providing contraceptive coverage from the employer to insurers, but would still leave the federal government dictating what benefits must be included in insurance coverage.
From the beginning, the debate over health care reform has been about power and control. On one side, the Obama administration has sought to centralize control over health care in the federal government. The government decides whether a business must provide insurance or whether an individual must purchase it, and what type of insurance that must be. The government decides what treatments should be available. The government decides how much things should cost and who should pay for them.
A better approach would to empower health care consumers to make their own decisions. Instead of mandating that employers provide a government-designed insurance package, we need to move away from a system dominated by employer-provided health insurance and instead make health insurance personal and portable. We should give individuals the same tax break for buying their own insurance as they currently get for employer-provided insurance.
That would make it easier for an employee of a religious organization who wanted an insurance plan covering contraceptives to take the money that the organization is currently paying for insurance and buy the policy that he or she wants, rather than a plan provided by the employer. The worker gets the coverage he or she wants, and the religious organization doesn't have to directly pay for contraceptive coverage. Everyone wins.
Of course, that still leaves workers subject to state insurance mandates. For example, about half of the states currently require some types of contraceptive coverage (although generally such requirements are far more limited than the new federal mandate). Therefore, workers should be free to purchase insurance across state lines, allowing them to shop for plans that include as many or as few benefits as they wish to pay for.
These reforms would force insurance companies to compete in a free market, bringing down health care costs, and lowering insurance premiums. But more importantly, it would mean that decisions about whether to purchase coverage for contraceptives, mental health, drug and alcohol therapy or anything else would be made by individual consumers — not the government.
Whether or not the administration's compromise proposal manages to assuage the Catholic Church, the underlying issues will not change. As long as Obamacare puts the government in charge of our health care decisions, our choices will be dictated by politicians.
That — and not birth control — is really what this debate is about.

No Winners in U.S.-China Trade War

2012-02-14T16:11:00.000-07:00

Posted by Daniel Ikenson
Chinese Vice President and assumed-future President Xi Jinping visits Washington this week amid growing concern that the U.S.-China economic relationship is headed for a difficult stretch. An emerging narrative in 2012 is that a proliferation of protectionist, treaty-violating, or otherwise illiberal Chinese policies is to blame for worsening U.S.-China relations.

Indeed, it is beyond doubt that certain Chinese policies have been provocative, discriminatory, protectionist and, in some cases, violative of the agreed rules of international trade. But, as usual, the story is more nuanced that. U.S. policies, politics, and attitudes have contributed importantly to the atmosphere of rising frictions, as have rabble-rousing politicians and a confrontation-thirsty media. If the public’s passions are going to be inflamed with talk of a trade war, prudence demands that the war’s nature be properly characterized and its causes identified and accurately described.
Politicians, policymakers, and members of the media should put down their battle bugles and consider that trade wars are never won. Instead, trade wars claim victims indiscriminately and leave significant damage in their wake. Even if one concludes that China’s list of offenses is collectively more egregious than the U.S. list of offenses, the most sensible course of action – for the American public, if not campaigning politicians –is to avoid mutually destructive actions and to pursue constructive measures that will reduce frictions with China.
Let’s hope some of those constructive measures are explored this week with Mr. Xi.

Meet the Parents of the Super PACs. by Edward H. Crane and David Keating

2012-02-14T16:10:00.000-07:00

If you are looking for the villains who created the so-called Super PACs, look no further. We are the guilty parties.

We are two of the winning plaintiffs in SpeechNow.org v. Federal Election Commission, which was decided by the U.S. Circuit Court of Appeals for the District of Columbia Circuit in March 2010. Contrary to the belief that Citizens United created Super PACs, SpeechNow.org made such groups possible and legal.
As Jan. 31's disclosure of the supporters of Super PACs showed, the majority of funding for almost all of them comes from individuals. In Citizens United v. Federal Election Commission (2010), the Supreme Court did not alter the $5,000 limit on individuals combining their efforts through traditional political action committees to promote a federal campaign. But SpeechNow.org recognized the right of individuals to give unlimited funds to any such committee organized solely to make independent expenditures(although the contributors and their contributions must be disclosed). What Citizens United did was to affirm the right of corporations and unions to make such independent expenditures.

David Keating is president of the Center for Competitive Politics. Edward H. Crane is president of the Cato Institute and a board member of the Center for Competitive Politics.

More by Edward H. Crane

To understand the larger context, let's step back. The most fundamental Supreme Court decision on campaign finance was Buckley v. Valeo (1976), which grappled with the 1974 amendments to the Federal Election Campaign Act (FECA). (Ed Crane was also a plaintiff in that case.) Virtually all aspects of those amendments enhanced the prospects for incumbents, not surprisingly since incumbents wrote them. Most self-serving, perhaps, was a radical spending limit on congressional campaigns. The Burger Court struck down the spending limit as a blatant affront to the First Amendment.
Yet the court in Buckley inexplicably affirmed a $1,000 contribution limit to federal campaigns — ignoring that contributions obviously affect spending levels. According to research by the Cato Institute's John Samples, incumbent re-election rates, already high, increased after that decision.
Nevertheless, in Buckley the court ruled that individuals could spend unlimited amounts to support a federal candidate if those expenditures were not coordinated with the candidate's campaign. SpeechNow.org went further. It held that the First Amendment allows two, or four, or 400 or more individuals to pool their resources and exercise the same right to make independent expenditures that one individual could make under Buckley. Hence, Super PACs.
Money is a proxy for information in campaigns. Yet Americans spend as much on potato chips as they do on all federal elections ($3.6 billion in 2010). Maybe that partly explains why most Americans cannot name their congressman, much less say where he or she stands on the issues.
That's why we believe Super PACs are a good thing. In the recent Republican South Carolina primary, Super PACs reportedly outspent the candidates' campaigns by two to one. That means more information was available on the candidates and more interest in the campaigns has been generated. It could be argued that Super PACS are the reason the GOP primary campaign this year is a horse race and not a coronation.
That said, we'd prefer to allow donors to give money to candidates' campaigns directly. Under such a system Super PACs would still exist, but they'd likely have less influence. And donors could give their candidates a stronger voice in the messaging about their campaigns.
It is instructive to recall the 1968 presidential campaign of Minnesota's late Democratic Sen. Gene McCarthy (who was also a plaintiff in Buckley). Popular support for the war in Vietnam was declining, yet no establishment candidate was available to challenge the war — certainly not Richard Nixon. On the Democratic side, President Lyndon Johnson was escalating the conflict. McCarthy was the most outspoken and articulate opponent of the war in the U.S. Senate, but he lacked the resources to conduct a serious presidential campaign.
Had the 1974 amendments to FECA, with their $1,000 contribution limits, been in place in 1968, there would have been no "Clean Gene for President" campaign. As it was, wealthy liberals such as Stewart Mott, Stanley Sheinbaum and the recently deceased Max Palevsky stepped up to make six- and seven-figure contributions to fund the McCarthy campaign, donations worth nearly $10 million in today's dollars.
Suddenly, tens of millions of antiwar Americans had a candidate. McCarthy didn't win the New Hampshire Democratic primary, but he did so well that President Johnson, seeing the handwriting on the wall, announced he was not going to run for re-election. Such is the manner in which campaign-finance laws can affect history.
According to a group called United for the Future, there are some 70 progressive organizations committed to overturning Citizens United. No doubt they'll also target the SpeechNow.org case, once its implications are fully understood. That is unfortunate. There was a time when liberals put their faith in freedom and the wisdom of the voters.

INTERMEX POST

The Snowball of Empire Mises Daily: Friday, by Nico Perrino

Totalitarians Unmasked

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Let's End Social Security as We Know It. by Doug Bandow

Worrisome Belligerence: GOP Presidential Candidates and Foreign Policy. by Ted Galen Carpenter

Obama's Busted Budget by Michael D. Tanner

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