A Service to the Economy: Removing Barriers to "Invisible Trade"
by Sallie James
Sallie James is a policy analyst with Cato's Center for Trade Policy Studies.
Executive Summary
Although they are part of a large and growing segment of world trade—and a prominent feature in healthy, vibrant economies—services are often overlooked in trade negotiations in favor of higher-profile trade in agriculture and manufactured goods. Yet countries with more open services markets benefit from higher growth rates and living standards. Because services are an input to most other sectors of the economy, the benefits from open and competitive markets are pervasive. Indeed, the gains from lowering remaining trade barriers in services would eclipse the gains from trade liberalization in agriculture and manufacturing. The recently derailed Doha round of global trade talks seem to have put globally coordinated efforts towards liberalizing services trade on the back burner for the foreseeable future.
Fortunately, the United States does not have to wait for a negotiated trade agreement to benefit from a more open trade in services. The United States should continue to press other nations, including developing countries, to open their markets to American service providers, while removing unwieldy restrictions at home. By autonomously reducing the remaining barriers on maritime services, rail and air transportation services, distribution services, and restrictions on the temporary entry of workers from abroad, many of the benefits to American consumers and industry will be realized regardless of what other nations choose to do.
Text of Trade Policy Analysis No. 38 (PDF, 20 pgs, 301 kb)
China and India in the balance
More human beings have escaped poverty in the past 20 years than in any equivalent period in the history of the world.
Since 1990, China and India have pulled hundreds of millions of their people out of want. Their people eat better, live longer, and enjoy some measure of security. As they have prospered, they have in turn enriched the advanced world, selling us cheap goods and services and buying our food and technology.
Scary as this recession is for the developed world, it poses a terrible and lethal threat to the world’s two biggest emerging markets.
Economic activity is decelerating with terrifying rapidity in both countries. Reliable statistics are hard to come by in these two countries, but here are some indications of the post-October collapse:
– In the single month of November 2009, the value of China’s exports, calculated in Chinese currency, dropped by almost 10%.
– Up to one-fifth of the factories in Guangdong have closed in the past three months. Factory wages have dropped by nearly half. Millions of migrant workers have quit the industrial province to return home to the countryside.
– The big electrical-utilities companies of Guangdong province reported an 8% decline in sales in the month of December. The total drop in electrical production however is much greater.
– Corporate income tax collections in India are arriving 33% below projections, a shortfall of almost a trillion rupees.
– The World Trade Organization projects that world trade will decline by more than 2% in 2009.
Ominously, the anti-recession actions undertaken by the advanced countries may well aggravate the global trade collapse. The U.S. House of Representatives stuck a “Buy American” provision into its US$800-billion-plus stimulus package. The Senate has now extended the measure, with a requirement that “all manufactured goods” purchased with government money come from US suppliers. This protectionist amendment carries the strong backing of Senate Majority Leader Harry Reid.
In a Tuesday television interview, President Obama described Congress’ protectionist turn as a “mistake.” Now comes the first great test of muscle of his presidency: How hard will he work to halt this looming disaster?
Liberal economic commentators warn that the current downturn presents the gravest threat to global prosperity since the Great Depression. They are urging hyper-Keynesian spending in order to jolt the United States back into prosperity. And yet here is the party of the liberals repeating one of the very gravest policy errors of 1929-33 — the turn to protectionism that plunged the world into a downward spiral of trade war.
In the 1930s, trade war led to actual war. Our world is very different of course, and big wars between major powers have gone seriously out of style. But the internal stability of China and India cannot at all be taken for granted. Maoist insurgencies rage across northeastern India. China is already wracked with often violently suppressed protests and disturbances — and more to come.
Since 1990, China and India have struggled with the problems that arise from prosperity: environmental degradation, rapid social change and the challenge to traditional authority. Now they will have to contend instead with the problems of economic crisis, and those are even worse and more dangerous.
With global leadership goes global responsibilities. Barack Obama is delighted to talk about global inter-connectedness when the subject is war and peace. Will he understand that those global interrelationships matter at least as much when the subject is prosperity and poverty?
More than the dialogue that so fascinates Obama, what the world needs most is trade, more trade. It is up to him to champion it, for his own country’s sake, and the world’s.Our Brave New World
Our Brave New World
By Victor Davis HansonThe Apocalyptic Style
Be careful when one uses the superlative case--best, most, -est, etc.--or evokes end-of-the-world imagery. The new Secretary of Energy Chu, who seems eminently qualified and is a Nobel Prize Winner, strangely just declared, 'We're looking at a scenario where there's no more agriculture in California', and went on to declare vineyards all but doomed here--apparently due to global warming.
True, we've had this year (and part of last) a mini-drought. In my 50 years of memory of California there have been many; usually they last for a year or two, then we get matching wet years. (In some years in lieu of Sierra irrigation water, I have turned on our electric pumps (15 hp/1000 gallons a minute) in May and turned them off in late August--24/7. And over a 10-year span of dry/wet years, the seasons balance out (e.g., the water table in my front yard varies from 35 feet in wet years to 50 in dry; and my great-great-grandmother's abandoned 6-inch well, that in the 19th century used to provide hand-pumped water for the house, still, after 130 years, has water in its casing that goes down only 50 feet.)
More germanely, I drove Thursday from Los Angeles in a pouring rainstorm, and now am looking at a steady snowfall outside my window in the Sierra. Several feet are piled up on the ground as we are nearing mid-February blossom break for fruit trees--with more predicted on the way. Is the Secretary convinced that we will run out of water and have no crops (grapes, remember, grow well in the desert if they are irrigated), or does he think hotter weather means things simply don't grow? If the former, perhaps the Sec. might support raising the Sierra dams a few feet, or even building a new one, given that millions of acre feet of precious water pour out of the Sierra each spring and into San Francisco Bay from the Sacramento and San Joaquin watersheds, due to law suits and legislation that aim to restore 19th-century water runs that supposedly will bring back former populations of amphibians, insects, fish, and riparian mammalian life.
The truth is that we have plenty of water to farm and to support millions of people--if we utilize properly our resources and invest more in reservoirs and water conservation and storage. But we do not have enough water--if we insist on a business-as-usual infrastructure, designed for 15 million Californians that must now serve 36 million. Open borders, radical environmentalism, urbanization and edge-citification, enormous entitlements instead of infrastructure investments, high taxes that lead only to gargantuan deficits--not Mother Nature-- will, in the aggregate, ensure Dr. Chu's prediction of an end to California agriculture.
Hyperbolic
So it is unwise to use such hyperbole. Compare the Obama administration's much ballyhooed "most stringent ethics standards"--ever!--that only leads to 10 ("exempt") lobbyists appointed to the administration, and at least four tax cheats (an accurate rather than hyped description) nominated to Treasury, government oversight, HHS, and Labor, as well as someone like Richardson imploding, and complete silence about Rangel, Dodd, and Frank.
Likewise it is unwise to keep evoking "patriotic" to describe those who vote for the stimulus package, and cry 'catastrophic" if opponents disagree and the $1 trillion dollar debt program is delayed. If supporters in congress of Bush and Cheney were criticized for suggesting that to cut off funds for soldiers in the field or to declare a war "lost" was unpatriotic, then surely it is wrong to do the same for an opponent of a stimulus or tax plan.
The Obama Style
If one would carefully read Obama's al Arabiya interview, or the text of Biden's Munich address, or Eric Holder's acceptance speech, there is a now clear style:
1) preface your remarks with the fact that the last 8 years have been horrible (ruined relations with the Muslim world, politicization of the Justice Department, ruined relations with our allies, (fill in the blanks.).
2) Then evoke the superlative to promise something entirely new, singularly moral, historically ethical.
3) Hope that no one remembers 9/11 or that you just praised the Saudi king and trashed a US president, or that you once helped pardon a Most Wanted fugitive, or that we already enjoy good relations with Germany, Britain, Italy, France, etc., or that Russia, Iran, and radical Islam really do not care too much what we say--only whether we do pretty much what they want.
I think in political terms it would be far wiser for Team Obama to say that problems are complex and have no easy solutions; that they will try to continue with what they thought worked the last eight years and won't with they thought didn't; and that there are too often only bad and worse choices. All that would be honest and would lower expectations, much more honestly and effectively than the constant "We are in a Great Depression" rhetoric or "The world hates us" screaming.
Confused
So is rendition fascistic or necessary? Is FISA shredding the Constitution or problematic? Is the Patriot Act now necessary, and no longer dictatorial? Is Guantanamo a Gulag that must be shut down, or a complex issue requiring a task force and a year of study? Should we have been out of Iraq by March 2008, or are we to withdraw according to the General Betray US/"suspension of disbelief" Petraeus plan? Will there a Hollywood movie Rendition II? Or a Nicholson Baker Knopf sequel to Checkpoint?
Stimuli
I think we are ignoring three things about the stimulus package. First, the soaring deficits and mounting aggregate debt in the 2000s contributed to our present debacle. (Yes, Bush and the Republican Congress are to be blamed for spending sprees that cannot be explained entirely by 9/11, Katrina and the two wars). We were already 'stimulated' and running a Keynesian economy, so why is more of what got us into this trouble the solution?
Second, the crash in oil prices from $148 a barrel to less than $40 has resulted in, along with dives in imported natural gas, a monstrous stimulus-perhaps three-quarters of a trillion dollars per year for consumers. Can't we pause a month or three to see the effects of thousands of dollars in cheaper heating and transportation costs for the American household?
Third, interest on US treasury bonds is nearing almost nothing. Yet, Asia and Europe are still buying them. The result is that the US is receiving trillions in free loan money that should be translating into cheap mortgages and interest rates, and an infusion of cash that will soon kick in unexpectedly dramatic fashion.
In other words, while we scream about the Great Depression, there are insidious, rarely mentioned stimuli already in play that are far more helpful that borrowing a $1 trillion to redistribute and hire more government employees.
Brave New World
I wonder sometimes how many Americans think they are going crazy as they sense a certain reality that cannot be spoken of for a variety of political, or cultural reasons. What sort of system subsidizes an unemployed single mother to have fertility treatments to deliver 8 more children to ensure a family of 14, after receiving tens of thousands of dollars in past state entitlements? Was the Dr. involved desirous of the assured business from a subsidized patient, were the parents oblivious to the ill-equipped daughter living in their home, would the mother have delivered the children had she not been assured of free medical services?
I drove from Peppderdine to Fresno on Friday and tried to tune into local radio stations as they came in and went out of range. As I left the LA basin, went into the San Fernando Valley, descended into Bakersfield, passed through Delano, and whizzed on by Visalia, there was a disturbing pattern. In every on-the-half-hour news flash, some illegal alien or gang member was announced as wanted for hit-and-run/drunk driving, or arrested for gang shootings, or suspected of some sort of theft or armed robbery. At these moments I was looking around at hundreds of cars in the three lanes of freeways (yes, in the pouring rain), and wondering whether they too were listening to these frightening news accounts--and wondering about the billions of dollars necessary to offer emergency room surgeries, rehab, and follow ups, legal bills to try, defend, sentence, jail, and release such felons, and the tab for providing interpreters and entitlement support for dependents of such criminals. And then I remembered that even to cite the above is to incur the charge of racism or illiberality. Strange times.
It doesn't compute
One senses something is very wrong with our tax system when quite well-off people like Daschle, Geithner, Killefer, and Solis simply don't pay their taxes and then suddenly do only when they are nominated for administration posts. That raises the question: those of us who go to an accountant, pass on any deduction that is iffy, try to take a lot of withholding to pay the fed early, and do not quibble on anything with our quite legalistic accountant, are, well, in a minority.
Those who have more money, and know more about the tax code, seem not only to cheat, but to cheat until they are forced to pay something back at the 11th hour, and then are never charged for what might well have put the rest of us in jail. I have no idea whether the phenomenon is specific to Washington or liberal Democrats, or the rich in general. But I do know that there are thousands in my environs who work off the books, are paid in cash and do not pay their proper share either--as the country is ripped off by both the top and bottom ends of the spectrum. Past time for the fair or flat tax.
About every three weeks Andrew Sullivan posts something about what I wrote, apparently because he finds it illiberal--the latest my predictions (before the Obama apocalyptic ultimatums, the Solis tax problems, etc) of a near Obama meltdown. Odd--as I once wrote, my only connection with this bizarre person is a debate once in which quite animatedly he alleged that I had supported torture, before apologizing a few days later when he discovered I had written TMS columns taking the direct opposite stance. So I am absolutely baffled how and why someone like this can continue to be taken seriously: for weeks he peddled vicious, absolutely false rumors that Sarah Palin did not deliver her recent child. On the eve of Iraq, (he now seems to suggest that he was brainwashed by, yes, those sneaky neo-cons), he blathered on with blood and guts rhetoric, mixed with fawning references to Bush, and embraced apocalyptic threats, including the advocacy of using nuclear weapons against Saddam should the anthrax attacks be connected to him. He seems not merely to support any incumbent President, but to deify them, and can go from encomia about the rightwing Bush to praise of leftwing Obama without thought of contradiction. In the summer before 9/11 he was in the major news outlets, trying to save his career after accused (accurately as he confirmed) of trafficking anonymously in the sexual want ads as an HIV-positive would-be participant in the unmentionable. (In other words, someone who was caught in a well-publicized scandal about which he confirmed its main details, without much sensitivity to human fraility, helped to spread false information about a potential VP designed to ruin her reputation.) At some point, one would think such a suspect individual would have been ostracized by sane people--or indeed perhaps he already has.
Final Note
I had a conversation (an argument) recently with a European, about contemporary culture. I tried to explain the mutually reinforcing elements of socialism, atheism, utopianism, pacifism, and statism (he was giving America a second chance to morph into Euros under Obama). But if one believes in no transcendence, that there is nothing other than the present, then for too many satisfying the appetites becomes the prime directive. Childlessness, living at home in one's 30s, dependence on the state, all that derives from a system that ensures equality of result, and substitutes Logos and Ratio for any notion of a deity that sees sin and sacrifice, and reminds us that our souls are immortal and affected by their brief residences in our flesh. In other words, that Euros expect free health care, free care for their elderly parents, free schools, free defense from the USA, harbor little hopes for rising above the station of anyone else, find housing and jobs scarce, and don't feel they can or want to leave behind something for their children larger than what they inherited-- are all interrelated phenomena. European postmodern man offers mostly platitudes that he thinks please those who might be dangerous to him, and finds psychological recompense and solace by gratuitously trashing those who aren't. Note how such constitution peoples favor Hamas over Israel--and usually almost anyone over the US. Were Hamas a successful democracy that took no European aid and offered it in turn no threats, and Israel a failed fascistic terrorist movement that depended on Europe for aid and comfort, while engaging in terrorism and voicing postmodern platitudes about oppression, then we would expect Israel to be a strong European ally. (I think many Europeans are more sympathetic to the Palestinian Authority or Syria or Iran than the incipient democracy in Iraq).
Another two bite the dust
Lexington
Another two bite the dust
Barack Obama is paying the price for his high-flown rhetoric
ONLY the other day Tom Daschle looked certain to become one of the most powerful people in the Obama administration—simultaneously head of the mammoth Department of Health and Human Services (HHS) and the White House’s health-care tsar. Mr Daschle was to be in charge of delivering what Hillary Clinton singularly failed to deliver in 1993-94—a comprehensive reform of America’s expensive but ramshackle health-care system.
Mr Daschle’s career as a health reformer was killed this week by the revelation, on January 30th, that he had failed to pay $128,000 worth of taxes, mostly relating to a car and driver he had been given use of. At first the Washington establishment assumed that he would ride out the storm. Barack Obama declared his undying support. Mr Daschle pronounced himself “disappointed” by his behaviour. His former colleagues in the Senate competed to praise his public service (“My breast is clear and my support is strong”, declared Jay Rockefeller). Then on Tuesday morning Mr Daschle suddenly withdrew his name.
Why the Tuesday surprise? Mr Daschle claims that he read an editorial in that morning’s New York Times that called for him to step aside, and decided that “I can’t pass health care if I’m too much of a distraction.” Others whispered that he would have been pushed if he had not decided to jump.
Earlier that very morning Nancy Killefer had withdrawn her candidacy to be the government’s first “chief performance officer” because she had failed to pay taxes on a domestic employee. A third nominee in a row with tax problems qualified as a “trend” under an unwritten journalistic law. It also raised issues of gender equality: could Mr Obama allow two men, Tim Geithner (now confirmed as treasury secretary) and Mr Daschle, to get away with tax evasion while allowing a woman to take the rap?
Mr Daschle’s disappearance underlines one of the Obama administration’s biggest problems: the difficulty of managing the gap between the rhetoric of political campaigns and the reality of governing. All presidential candidates promise to reform Washington. Bill Clinton promised to create “the most ethical administration in history”. George Bush promised to put an end to the capital’s rancid partisan divisions. But Mr Obama raised the mantra of change to new rhetorical heights.
Throughout two years of high-flown speechifying he promised to clean the Augean stables of Washington, close the revolving door between power and money and raise ethical standards. In his inaugural address, he announced the dawn of a new “era of responsibility”; on his first day in office he unveiled a package of tight ethical guidelines, though they didn’t last long.
The failure of no fewer than three nominees for high office to pay all their taxes has scrambled this message. Aren’t liberals supposed to believe that government is a good thing? And aren’t people who are being considered to run big departments supposed to be able to run their own financial affairs? (Mr Geithner, who had such trouble understanding the tax code, is now the man in charge of the Internal Revenue Service.) During the presidential campaign, Joe Biden declared that richer Americans had a patriotic duty to pay higher taxes; back in 1998 Mr Daschle opined that “tax cheaters cheat us all, and the IRS should enforce our laws to the letter.” Now Democratic insiders were giving the impression that they think that taxes are just for the little people.
But Mr Daschle’s problems were deeper than the odd hundred thousand dollars in unpaid taxes. The man from South Dakota was the embodiment of the Washington that Mr Obama campaigned against—a former high-ranking politician who, on losing his Senate seat in 2004, immediately turned himself into an influence-peddler.
He earned more than $2m over the past two years as a “special policy adviser” at Alston & Bird, a law firm which conducts extensive lobbying for health-care companies. He earned $1m a year as a consultant to InterMedia Advisors, a private-equity firm founded by Leo Hindery, a big Democratic donor and the man who gave Mr Daschle the fatal “gift” of car and driver. He raked in $150,000 in 2008 from corporate speeches, many to health-care companies. He was also on the board of the Mayo Clinic, one of the most influential voices in the health-care debate.
The problem for Mr Obama is that, in terms of practical politics, many of Mr Daschle’s vices are also virtues. One reason why “Hillarycare” imploded was that Mrs Clinton failed to court the barons on Capitol Hill. Mr Daschle was ideally placed to sell his prospective reforms to his former colleagues in the Senate and the House. Another reason why it failed was that Mrs Clinton failed to pay enough attention to industry groups. Mr Daschle’s innumerable entanglements with those groups might have helped to assuage their worries. Mr Daschle was well-versed in the mind-boggling intricacies of health-care reform; his position as both White House insider and head of the department would also have increased the chances of producing a workable reform.
Post-pedestal politics
Mr Obama remains a forbiddingly powerful president, with a 64% approval rating and a Republican Party that is in a shambles. But he is paying a price for his inflated promises. He has already had to give himself a couple of get-out clauses, supporting Mr Geithner despite his problems with his taxes and nominating a former lobbyist for Raytheon to be number two in the Pentagon, one of the biggest-spending departments in the government, in defiance of his own new guidelines.
But the loss of Mr Daschle, one of Mr Obama’s closest allies, many of whose former aides hold key positions in the White House, is the heaviest blow so far. And there will be others. The problem with putting yourself on a pedestal is that it is hard to get down from it and engage in the humdrum work of politics.
Can the centrists hold?
Economic policy
Can the centrists hold?
As politics reverts to its usual fractious state, Barack Obama’s centrist advisers, the unions and the angry left in Congress are all competing for his ear
IT HAS been a rough few days for Barack Obama. He has lost, in Tom Daschle (see article and Lexington) a close ally on whom he depended for his health-reform plans. Mr Daschle is now the third of his planned appointees to fall by the wayside; Mr Obama’s carefully cultivated image of competence and coolness is starting to fray. Worse, as The Economist went to press the new president’s vast stimulus plan (now worth around $900 billion) faced the prospect of substantial change if it is to pass the Senate where Republicans hold a blocking minority; it was rammed through the House without attracting a single Republican vote in favour.
But the re-emergence of the usual partisan sound and fury obscures a much more interesting question. Mr Obama amassed a solidly liberal record as a senator, then moved towards the centre during the campaign and surrounded himself with centrist advisers. Is his party now dragging him back to the left?
It is early days, but those who see a leftward tilt have a case. On January 29th Mr Obama gave a clue to his priorities by making the first bill he signed into law the Lilly Ledbetter Fair Pay Restoration Act, which gives workers substantially more time to file suits claiming pay discrimination on the basis of sex, race or religion. The US Chamber of Commerce claimed it would “dramatically expand the number of frivolous and otherwise questionable” lawsuits against employers. The next day the president, in front of invited union representatives, signed executive orders making it harder for federal contractors to discourage union activities and requiring them to offer jobs to the previous contractor’s employees. “I do not view the labour movement as part of the problem; to me it’s part of the solution,” he declared.
Along with these pro-labour gestures came a series of broadsides against Wall Street. On January 29th Mr Obama attacked as “shameful” and the “height of irresponsibility” the $18.4 billion in bonuses that Wall Street bankers collected last year when their firms were receiving federal aid. On February 4th he announced that executives of companies receiving “exceptional” aid (there are currently only three such) would be restricted to $500,000 a year in pay. Earlier, Larry Summers (pictured above with the president), Mr Obama’s usually reliably centrist chief economic adviser, had told Congress that banks receiving additional bail-out money would face restrictions on mergers and dividends. Healthy banks would have to “increase lending above baseline levels”, a stricture that could lead to more bad loans.
Free-traders shuddered when, on January 22nd, Tim Geithner—then the nominee for treasury secretary but now confirmed in the job—accused China of manipulating its currency to gain a trade advantage. Whether it really does is debatable (see article), and his accusation antagonised China while stoking the fires of protectionism.
Still, there is less to all this than meets the eye. The Lilly Ledbetter Act more or less restores (though partly strengthens) the rights of aggrieved workers that a Supreme Court ruling circumscribed in 2007. Similarly, the Obama orders affecting federal contractors simply reversed Bush decisions, restoring the 1990s status quo.
Mr Geithner’s blast at China was a restatement of Mr Obama’s campaign position, and was buried in 102 pages of written answers to senators vetting his confirmation. It appears that his answer was prepared hastily, and administration officials have since played it down. And Mr Summers’s promise to judge banks against lending baselines was porous enough to allow considerable discretion in assessing whether a bank is lending enough.
The stimulus bill is itself a mishmash of Mr Obama’s progressive priorities and short-term expedience. In keeping with long-standing promises, it offers some $140 billion in “Making Work Pay” tax credits, worth up to $1,000 to families earning less than $150,000. Like his restrictions on executive pay, this will tilt the distribution of income away from the very rich. On the other hand, its health-care assistance to the poor and unemployed are piecemeal and temporary, designed for quick impact, not as a down-payment on Mr Obama’s more sweeping ambitions (see article).
Mr Obama made great show of his commitment to public infrastructure but the package spends almost as much on cash grants to states and the unemployed largely because this money can be spent quickly with a relatively large impact on gross domestic product (see table). It also includes a sprinkling of business tax cuts, in part to tempt Republicans to vote for it.
But the real litmus tests for Mr Obama are still to come. Labour’s priority is the “Employee Free Choice Act”, which would allow unions to organise without a secret ballot. Business is fiercely opposed. Mr Obama supported it as a candidate. But last month he told the Washington Post, “If we’re losing half a million jobs a month, then there are no jobs to unionise, so my focus first is on those key economic priority items.”
Whether Mr Obama has buried his past scepticism about trade will be revealed by whether he forces Congress to remove “Buy American” provisions from the fiscal stimulus bill; he has already persuaded the Senate (though not the House) to water them down. Federal procurement policies already include some provisions of this sort; the law would extend them to iron, steel, uniforms and potentially any manufactured products in projects paid for with stimulus money.
Gary Hufbauer and Jeffrey Schott of the Peterson Institute, a think tank, think they would create just 9,000 jobs while potentially costing far more through retaliation. Mr Obama said he opposes provisions that violate World Trade Organisation rules or “signal protectionism”. But if the provisions stay, will he veto the bill?
Another test will be whether the Treasury formally brands China a currency manipulator in a few months’ time. On fiscal policy, the president has yet to explain how the budget deficit, which this year will be the largest as a share of GDP since 1945, will be reined in, or how he will contain health and pension spending on the old. He has promised a “fiscal responsibility summit” to tackle those questions.
Mr Obama continues to seek sensible economic advice. It was emblematic of George Bush’s low regard for economists that in 2003 he moved the Council of Economic Advisers (CEA), the administration’s in-house think-tank, from the White House complex to a drab office building a block away. Mr Obama has moved it back. Each morning he gets a memo prepared the previous night by the CEA and the Treasury, then spends about 30 minutes with his economic team. In regular attendance are Mr Summers, Mr Geithner, Peter Orszag (the budget director) and Christina Romer, who chairs the CEA.
Mr Obama also continues to fill his administration with highly-regarded technocrats. They are said to include Gene Sperling, a former economic adviser to Bill Clinton; David Cutler, a Harvard health-care economist; Peter Henry, a Stanford University economist and advocate of free international capital movements; Jeremy Stein, a Harvard economist specialising in corporate finance; and Diana Farrell, who headed the think-tank affiliate of McKinsey. Joining Ms Romer on the council are Cecilia Rouse, a labour expert from Princeton, and Austan Goolsbee, a long-serving Obama adviser now grappling with the foreclosure crisis.
Mr Obama once called himself a “blank screen on which people of vastly different political stripes project their own views.” In the coming months, the world will have a chance to decide which image of Mr Obama is the right one.
Down in the dumps
Russia's currency
Down in the dumps
The rouble, a symbol of the Kremlin’s power, is looking sickly
Keeping her head downAT DAVOS Vladimir Putin, Russia’s prime minister, was oozing confidence. He had a go at America and insisted that Russia was coping admirably with the crisis, thanks to its large reserves. “We don’t need help. We are not invalids,” Mr Putin said in a withering answer to an offer of technology from Michael Dell, a computer tycoon.
On the face of it, Russia seems stable: there are no queues outside the banks. But behind this tranquillity lies an alarming reality. Growth has stopped, the rouble has lost more than a third of its value since August and inflation is running at around 13% a year. Oil prices have slumped and international currency reserves have fallen by more than $200 billion in six months to $388 billion. On February 4th Fitch, a rating agency, downgraded Russia by one notch.
Yet, for all the brave talk, there is a self-destructive streak in Russia which can turn a drama into a crisis in spectacular fashion—as was vividly demonstrated during its 1998 default. This time Russia has more reserves, but it is making the same mistakes, says Evgeny Gavrilenkov, an economist at Troika Dialog, a Moscow bank.
The most immediate concern is the currency. Instead of allowing a big devaluation in a single go, which would have been politically painful but economically productive, the government has let the rouble slide gradually. This has allowed people to adjust to the devaluation, but it has also stymied growth, Mr Gavrilenkov argues.
As the currency inched lower, the central bank injected rouble liquidity into a select group of banks allowing them to speculate on the currency market instead of lending money into the real economy. It has been lending between $10 billion- and $20 billion-worth of roubles a day through overnight repo operations at a monthly interest rate of less than 1%. As a result, Mr Gavrilenkov says, the beneficiaries could make a profit margin of nearly 70% on currency bets. In 1998, the government guaranteed almost the same rate of return through short-term debt obligations.
As oil prices fall, the rouble will naturally weaken, but the authorities are anxious to stop it. Capital controls, which Russia used to have before it decided to liberalise its capital account in 2006, are both economically and politically unpalatable; the convertibility of the rouble was hailed as a triumph for Mr Putin.
Another response is to put up interest rates—at least above inflation. Although in theory this could further slow economic activity, Rory MacFarquhar of Goldman Sachs argues that, since banks are not passing on the cheap central-bank funding to firms anyway, raising the central-bank rate would not make much difference to growth. “At least the banks would not be holding the whole country hostage.”
The central bank has now indicated that it might tighten monetary policy, yet it still wants to defend the rouble. On January 22nd it promised that the rouble would not fall below 41 to a euro/dollar basket of currencies. Less than two weeks later, it had almost hit that floor. Letting it drop further might prompt a massive onslaught.
But the currency is not the only problem. The banking system, which has more than 1,000 banks, needs cleaning up. Peter Aven, the head of Alfa Bank, estimates that between 10-20% of all loans could be in default by the end of the year. On February 4th the government said it would increase the capital of the top 50 banks which hold 80% of all assets by 15% if the private owners do the same.
Sergei Guriev, the head of the New Economic School in Moscow, says three main problems of the Russian banking system are the (still relatively) strong rouble, poor banking assets and an intolerable level of uncertainty in the government’s actions. None of Russia’s problems is unsolvable, but all require strategy and transparency rather than overconfident rhetoric.
Executive pay in America
Executive pay in America
Paying the piper
Will Barack Obama’s reform of executive pay work?
CREATING political theatre by cracking down on executive pay may prove to be the easy part for Barack Obama. Coming up with a sensible and effective way to compensate senior managers at companies bailed out by the American taxpayer will be far trickier—and the new president’s first effort, unveiled on Wednesady February 4th, is unlikely to be his last.
Capping the non-equity-based remuneration of executives in companies receiving “exceptional assistance” at $500,000 a year and banning “golden parachutes” for failed executives is likely to strike most Americans as fair, or even generous, given that Mr Obama himself earns a mere $400,000 and the rules will apply only to new bail-outs. Indeed, after the outrageous payment of billions of dollars in bonuses by Wall Street firms that had survived only because many more billions had been injected into them by the government, the executives should probably be grateful for getting off so lightly. Moreover, executives will be allowed grants of restricted stock (which they cannot sell until the taxpayer is repaid), so they may yet end up making a fortune.
Last time a president tried to curb fat-cat salaries was in 1993, when Bill Clinton signed a law restricting the tax deductibility of executive pay to $1m. This merely prompted a burst of creativity. Perks were devised that got around the cap, and there was a boom in paying executives with shares and options that, thanks to the bull stockmarket of the 1990s, made everybody far wealthier than they would have been using the old pay formulae.
Mr Obama has the dubious advantage of trying to cap pay amid a severe economic downturn, rising unemployment and structural changes in finance that will reduce pay anyway. A recent study of Wall Street pay, carried out by Thomas Philippon and Ariell Reshef for the National Bureau of Economic Research, found several periods during 1909-2006 when remuneration plunged, and argued that now could be another such period.
Nonetheless, even in these tough times, talented bankers are likely to find opportunities elsewhere that promise far more than $500,000. And even those that do not leave may simply choose to work less hard, says Alan Johnson, a pay consultant. As a result the new rules may weaken the management of rescued banks—just as low pay arguably weakened regulation and helped cause the financial crisis.
Will Mr Obama’s message to bosses that they have “got responsibilities not to live high on the hog” lead to restraint in executive pay more broadly? Ira Kay of Watson Wyatt, a pay consultant, thinks it might, because rising pay on Wall Street in recent years led to higher pay elsewhere—a trend that may now operate in reverse.
In the long run, the more significant change may be Mr Obama’s decision to give American shareholders a vote on executive compensation, through a “say on pay” resolution. A vote is certainly more sensible than a crude government limit—especially if it is extended to all public companies, not just those bailed out by Uncle Sam. A similar reform is reckoned to have made at least some difference in Britain, and not before time.
Stimulus Battle May Signal Tough Sell for Obama’s Bank Rescue
Feb. 8 (Bloomberg) -- President Barack Obama’s struggle to push an economic stimulus bill through Congress may seem easy compared to what he’ll encounter when he returns to Capitol Hill for additional funds to rescue the banking system.
Obama will likely need to ask Congress for more money to recapitalize banks, as much as $1 trillion on top of the roughly $300 billion remaining in the current Troubled Asset Relief Program, according to an estimate by former Federal Reserve economist Ward McCarthy. That will be an even tougher sell for the new president than the stimulus plan, which is headed for a Senate vote this week after passing the House with no Republican support.
That package, at least $780 billion of spending and tax cuts aimed at boosting consumer demand and creating jobs, is just a part of what it will take to pull the economy out of the 14- month-old recession. The stimulus will be effective only if credit markets, currently frozen by illiquid assets clogging banks’ balance sheets, begin to function again.
“It will take an enormous effort to build broader public support” for another bank rescue plan, said Thomas Mann, a congressional scholar at the Brookings Institution in Washington. “Had the stimulus gone through swimmingly it would have made it easier.”
Geithner’s Speech
Treasury Secretary Timothy Geithner has scheduled a speech tomorrow to outline new steps that include fresh capital injections into banks and ways to deal with toxic securities still on their balance sheets, according to people familiar with the matter.
Treasury will probably propose a combination of buying toxic bank assets, providing guarantees for other assets, and making additional capital infusions to banks, said McCarthy, now a principal at Stone & McCarthy Research Associates, an economic research firm in Skillman, New Jersey.
“The remaining TARP funds are not going to be enough for the job,” said McCarthy, who estimates that up to $1.5 trillion in government aid will be needed to save the banking system. “If they want to get the job done, they will have to scrape up more cash,” said McCarthy.
New funding for the banking system will be all the harder to justify because the original TARP, which so far has provided almost $400 billion to more than 360 banks, hasn’t shown much in the way of tangible benefits.
‘Insanity’
“They continue to assume that if you do something and it hasn’t worked, you have to continue to do more of it,” said Representative Darrell Issa, a Republican from California. “That’s the definition of insanity.”
Obama and his staff struggled last week to win support for the stimulus package from several moderate Republicans in the Senate, including Susan Collins and Olympia Snowe of Maine and Arlen Specter of Pennsylvania.
Support for another round of cash for ailing banks may be even tougher to win after reports last week raised new questions about the cost and effectiveness of the assistance provided already.
The chairman of the TARP’s Congressional Oversight Panel told the Senate Banking Committee that Treasury paid $254 billion of TARP funds for bank equity worth $176 billion, an overpayment of $78 billion. And even after the infusions of taxpayer funds, a majority of U.S. banks still made it tougher for consumers and businesses to get credit at the end of 2008, a Feb. 2 Federal Reserve report showed.
‘Fool Me Once’
Such findings give ammunition to lawmakers such as Utah Republican Senator Bob Bennett of Utah who say they were misled about how the TARP would work.
“Can we believe what we are told next time?” Bennett said at the Senate committee hearing. “Those of us who decided we were going to take the political risk of voting for this the first time will be faced with a constituency that will say, ‘Fool me once, OK, but don’t fool me twice.’”
Other lawmakers may balk at the idea of providing more rescue funds after hearing of banks that took billions in taxpayer money and continued to provide bonuses and lavish perks to employees.
New York financial institutions doled out $18.4 billion in bonuses last year, the sixth-biggest haul in history. A Merrill Lynch & Co. executive spent $1.2 million to redecorate his office while the company accepted $10 billion in government funds. Insurer American International Group Inc. hosted a $440,000 conference at a California resort in September after agreeing to a federal bailout.
“It will be harder for Obama to keep all the Democrats on board,” said Washington-based political analyst Stuart Rothenberg.
Stimulus ‘Hangover’
Not only will they resist the idea of additional money for banks, Rothenberg said, “but there may be some sort of hangover from the stimulus bill, with Democrats feeling as though the Senate compromised too much to get two or three Republican votes.”
The original TARP legislation failed to pass the House by a dozen votes on Sept. 29, sending the Dow Jones Industrial Average down 777 points. It was approved on a second attempt after several lawmakers changed their votes.
This time around fiscally conservative Blue Dog Democrats, troubled by another piece of legislation with a price tag in the hundreds of billions of dollars, may be the biggest obstacle for Obama.
“Blue Dog Democrats and Republicans will line up to tell Obama, you’ve got to do better than to say, ‘give us the money and trust us,’” said Representative Issa.
Public-Relations Push
Obama has already begun a public-relations push to build popular support for additional bank bailouts. Last week he introduced new executive pay guidelines for financial institutions needing government help to remain solvent. They included a $500,000 cap on executive pay and new disclosure rules on perks like corporate jets and holiday parties.
In addition, he continues to ratchet up his rhetoric on extravagant bank compensation and perks.
“For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste, it’s a bad strategy, and I will not tolerate it as president,” Obama said when he announced the new restrictions on Feb. 4.
He’ll also have to make any new financial rescue plan look starkly different from TARP, said Stan Collender, a former analyst for the House and Senate budget committees, now at Qorvis Communications in Washington.
“The new plan has got to have a different goal, a lot more for homeowners and individuals,” said Collender. “It’s got to be more than banks holding on to the money.”
Saturday, February 7, 2009
Stop the Assault on our Public Markets
Stop the Assault on our Public Markets
In a widely-circulated NY Times column (Jan 13, 2009), Bob Herbert proposes a 0.25% transaction tax on every stock trade. If this idea, which has been garnering support among politicians, passes into law, it will mark another devastating — perhaps fatal — blow to our public markets.
To appreciate what’s at stake, consider that public markets give companies easy access to a wide pool of investors from whom to raise capital. Simultaneously, they offer investors the ability to choose among thousands of opportunities to invest their savings. Public markets thus allow investors to efficiently allocate their capital to the most productive enterprises, fostering increased productivity and economic activity. Indeed it’s no exaggeration to say that America’s vibrant public markets played a significant role in her economic ascendance.
Yet public markets have been subject to mounting taxes and regulations for decades, reaching new heights with Bush’s passage of the sweeping Sarbanes Oxley bill (Sarbox). Instead of relying on existing laws, e.g. those against fraud used to prosecute Enron, Sarbanes Oxley sought to police public companies regardless of wrong-doing, operating on the unjust idea that corporations are guilty until proven innocent. Notably, Sarbanes Oxley made corporate leaders responsible for any errors or fraud committed within their companies, whether or not they knew of them; mandated onerous new annual audits; and turned corporate malfeasance into criminal offenses with penalties surpassing those for assault and other life-threatening crimes.
The results were predictable. Citing increased costs, a demotivating level of mistrust, and the desire to concentrate on customers rather than paperwork, many public firms went private, and many foreign firms listed elsewhere. Smaller firms, who could least bear the regulatory costs, delisted in droves; and the number of companies opting to go public dropped precipitously, from 250+ per year prior to Sarbanes Oxley, to only 6 last year.
So Sarbanes Oxley clearly puts public companies at a competitive disadvantage to their private counterparts. Yet public markets offer one benefit to mitigate these drawbacks: ample liquidity. Shareholders can increase or decrease their holdings whenever their circumstances warrant, and companies can easily raise additional capital.
Liquidity is a measure of the number of buyers and sellers of a stock. But even in public markets, liquidity isn’t automatic. Rather, it’s created by speculators, market-makers, hedge funds and other active traders who buy and sell stocks on a very frequent basis, trying to capture small price discrepancies with their trades. Typically their profits on any given trade are minimal, say less than 0.1% on average per transaction, but by doing hundreds of them each day, these traders can make money on the sheer volume of their activity.
The proposed transaction tax would eliminate the majority of short term trading, causing market liquidity to vanish — and with it, the one remaining advantage of being public. As such, it threatens to finish the destruction Sarbanes Oxley started, ultimately eviscerating the public markets.
Ironically, those whom regulators and legislators claim to be protecting, viz. small investors, are among those most aggrieved by this destruction. For public markets — where it’s possible to buy a single share of a company — are among the few financial venues in which those with limited capital can participate and grow.
Thus the assault on public markets — by preventing enterprising small businessmen from growing via IPO, and by eliminating a critical venue for astute small investors to build their wealth — has the effect of entrenching the status quo. No longer is it possible for the talented newcomer, whether businessman or investor, to climb the economic ladder.
But it doesn’t have to be this way. Historically an important moral appeal of laissez-faire capitalism was that it allowed social and economic mobility according to effort and ability. If we return to it, those virtues will once again prevail. Rejecting the proposed transaction tax — and the whole assault on our public markets — may be a fitting place to begin.
Amit Ghate is a guest writer to the Ayn Rand Center for Individual Rights and Capitalism Magazine and regularly blogs at Thrutch. He is a full-time trader who often speculates and shorts.
by Sheldon Richman,
Should people who disagree with Barack Obama hope he succeeds in his presidency? Conservatives are caught in this question because their leading radio star, Rush Limbaugh, said he hopes Obama fails. Radio stars need regular public controversy to keep their listeners tuned in, so there’s no point in analyzing what the Republican partisan might have meant. But the question may lead us to other insights.
Everything hinges on the underlying question: succeed or fail at what? If we assume Obama wants to use the power of government — the power of the gun, really — to redesign society, as some of his supporters would like, then advocates of individual liberty would hope he fails. The idea at the heart of the American Revolution was that society runs itself without a central plan. Government is already too involved in configuring the political economy, so a more comprehensive effort would only make things worse.
But if we define Obama’s goal sufficiently abstractly, our answer would be different. Assuming that Obama wants a free, prosperous, and peaceful America, any proponent of a free society would certainly hope for success. The crucial questions are about means.
The best chance for freedom, prosperity, and peace is through a radical retrenchment of government at all levels and a full flowering of the free market — without political privileges and burdens.
We know that Obama is not planning to free the economy. On the contrary, he is embarking on a major Keynesian program of government spending financed by borrowing and central-bank expansion of money and credit. Based on sound economic theory and experience, we know this approach cannot create sustainable economic growth. We also know that the program will violate individual liberty because inflation is an implicit tax that transfers wealth from those who have earned it to those who have not.
Given this knowledge, it is moot whether or not we should hope it succeeds. In the nature of things, success isn’t possible.
On the other hand, we can hope Obama succeeds in this sense: that he ignores his Keynesian advisers and discovers sound economics.
I’m not holding my breath, of course. The political breed finds it irresistible to not do something during a crisis. Unfortunately, undoing something doesn’t count. So I suspect that even a president who realized that Keynesian prescriptions are self-defeating would find it hard not to increase deficit spending, monetary expansion, and regulation. The incentives, perverse as they are, would be too strong to ignore.
In our modern society we pride ourselves on being free of superstition, yet many people fall for the hoary and groundless belief that prosperity can come from government’s borrowing and creating money. The Treasury and Federal Reserve System last year embarked on such a policy to “inject liquidity” into the financial system rocked by the failure of the mortgaged-based securities market. But how much thought does it take to see that government-created money is not wealth.
Money is a medium of exchange. A unit of money is recognized as an economic claim on some quantity of goods or services. In the normal course of events, people produce useful things and trade them for money. Thus a unit of money signifies that the holder had previously produced something of value. Thus indirectly goods trade for goods.
Now see what happens when government creates money. There is an increase in claims to goods and services without any increase in the goods and services. No general improvement can arise from this situation — quite the opposite. Prices will rise.
Worse, since the created money reaches some people before others, inflation is a subtle way for the government to transfer resources, with many victims being low-income people. And by tampering with interest rates, it also creates the conditions for recession.
The upshot is that inflation cannot make society better off.
One hopes Obama succeeds in ushering in an era of freedom, peace, and prosperity. But hope is idle. He will have to discover sound economic theory and a reservoir of courage to make it happen.
Sheldon Richman is senior fellow at The Future of Freedom Foundation, author of Tethered Citizens: Time to Repeal the Welfare State, and editor of The Freeman magazine. Visit his blog “Free Association” at www.sheldonrichman.com. Send him email.
The Wrath Of Khan, Part II
The Wrath Of Khan, Part II
WMDs: Pakistani nuclear scientist Abdul Qadeer Khan, the man most responsible for the proliferation of nuclear technology to terrorist regimes, has been set free in Islamabad. Is Pakistan trying to tell us something?
Khan was freed by Pakistan's Supreme Court from five years of house arrest, imposed after it was revealed that the German-trained scientist had promiscuously sold Pakistan's nuclear secrets to regimes around the world.
Is Khan a danger if he's free?
We're not talking innocent regimes here. In 2004, Khan himself confessed on TV to selling nuclear secrets to Iran, North Korea and Libya. Though he was pardoned by the government at the time, he was require to remain in his home under house arrest.
At the time, Khan seemed contrite. "I take full responsibility for my actions and seek your pardon," he said.
Today, things are different. Khan has retracted his admission of guilt and is reveling in his newfound freedom.
"The court has said as he was not involved in nuclear proliferation or criminal activity, there is no case against him, therefore he is a free citizen," said Ali Zafar, Khan's attorney.
In fact, however, the case against Khan is solid. Though 72 years old, he's still healthy and sound of mind, and thus poses a potential threat again to global stability.
Just last year, the International Atomic Energy Agency detailed how Khan's nuclear network smuggled plans for nuclear weapons to Iran, Libya and North Korea.
All told, Khan had 12 countries he was selling to. Last month, the U.S. State Department slapped sanctions on 13 people and three companies for dealing with Khan's nuclear network.
By letting Khan leave detention, Pakistan's government is sending a very bad signal about its cooperation with the U.S. and the West.
Khan headed Pakistan's nuclear program for 25 years, starting in 1976. He's a clever metallurgist, but he didn't create the bomb on his own. In fact, he stole much of the technology from Western Europe, where he worked and studied during the 1960s and '70s, and in 1983 was even convicted in absentia by a Dutch court for the crime.
In 1998, thanks to Khan's persistence, Pakistan surprised the world by exploding a nuclear weapon. "I never had any doubts I was building a bomb," Khan said. "We had to do it."
In Pakistan, that made Khan something of a national hero. He gave the tiny, struggling Third World nation a sense of pride by giving it a nuclear weapon — an equalizer, many Pakistanis believe, in its long, bitter struggle with its much-larger nuclear neighbor, India.
Khan was jailed under former military ruler Pervez Musharraf in 2004. A new regime took over in August of last year. What message are they trying to send by letting Khan go?
No doubt, they've been upset at the repeated attacks by U.S. Predator drones on al-Qaida targets in Pakistan's far-western tribal areas. But did they think we wouldn't care if he was let loose?
Khan is popular in Pakistan, so there's a political upside for the regime. And Pakistan surely noted recent shifts in U.S. policy.
After all, if we'll let 61 inmates out of Guantanamo to go back to their homelands and take up terrorism again, why can't Pakistan release just one metallurgist?
The father of Pakistan's nuclear bomb has shown a disregard for international law and a willingness to sell nuclear know-how to dangerous and unstable regimes — perhaps even to terrorists.
As for the new Obama administration, it says it wants to focus on nuclear nonproliferation. It's even talking to Russia about a new deal to cut nuclear weapons. But Russia should be the least of our worries.
As Britain's Telegraph newspaper noted last week, our efforts to curb the nuclear ambitions of Iran, North Korea and other pariah states "have failed." These are the biggest dangers we face now.
Khan's release is a warning. It shows how little the Pakistani government — or the world, for that matter — cares about proliferation.
If the now-freed Khan returns to the business he knows so well — serving as a middleman for rogue regimes to gain nuclear weapons technology — America and its allies will all be sorry they didn't do something about it. By the time they do, it might be too late.
Remember The Cole
Remember The Cole
War On Terror: Charges against the mastermind behind the bombing of the USS Cole are dismissed. He will be retried, but not by a military commission that would have given him the death penalty he deserves.
Pentagon spokesman Geoff Morrell announced on Thursday that Susan Crawford, the convening authority for military tribunals at Guantanamo, has made the decision to withdraw charges against Abd al-Rahim Hussain Mohammed al-Nashiri. This is the Saudi man believed to be the architect of the bombing of the guided missile destroyer USS Cole, killing 17 American sailors, as it sat in the Yemeni port of Aden.
The dismissal was politically necessary to clear the detainee docket at Guantanamo and facilitate the promised closing of the prisoner-of-war facility. The decision certainly pleases the ACLU, which argued that charges should be dropped altogether because he had been one of the three Gitmo detainees "tortured" by waterboarding.
The decision likely does not please the families of the Cole crew members who were killed. They met with President Obama on Friday. Family members of the 9/11 victims were also present.
The White House announced the president wanted "to talk with these families about resolving the issues involved with closing Guantanamo Bay while keeping the safety and security of the American people as his top priority."
Not so convinced is Kirk Lippold, the Cole's captain at the time of the attack. "It appears the Obama administration, without consideration for its immediate impact or long-term effects, will use a legal maneuver to prevent these detainees from being held accountable for their heinous acts," said Lippold, now retired. "The president must consider the impact of his policies on the military and their families who bear the burden of their sacrifice to protect our nation. To do any less demeans their service and sacrifice."
The rush to close Guantanamo hit a speed bump Jan. 29 when the chief military judge, Army Col. James Pohl, said the administration request to suspend proceedings against Guantanamo detainees and have al-Nashiri's hearing delayed was unreasonable. Pohl said his decision was necessary to protect "the public interest in a speedy trial."
The Gitmo trials came to a halt Jan. 21 after two other military judges granted the administration's request for a suspension. Obama's executive order keeping his campaign promise to close Guantanamo within a year was issued the following day.
In all, war crime charges are pending against 21 detainees. The administration asked for a 120-day suspension in proceedings against them while it considered whether to continue trying them before the current commissions, revamp them, send the detainees to foreign courts or have them tried in civilian courts.
Clearly the preference was not to try these detainees in a system created by President George W. Bush and Congress in 2006. In June, Air Force Brig. Gen. Thomas Hartmann said it was the military's intention to seek the death penalty against al-Nashiri.
The charges against him were dismissed "without prejudice," meaning they could be reissued at a future time. But trying this unrepentant jihadist in a civilian court with the ACLU at his side makes the death penalty, perhaps even a conviction, less likely.
Seventeen U.S sailors died on Oct. 12, 2000, when al-Qaida suicide bombers steered an explosive-laden boat into the Cole, blowing a huge hole in her side. The attack's mastermind should meet swift and certain justice regardless of whether water was poured down his nose. Otherwise, it's the families of those 17 sailors who are now being tortured.
ACORN Could Get Billions from Democrats' Trillion Dollar Spending Plan
"Job Creation" Bill Offers Taxpayer-Funded Bonanza for Organization Reportedly Under Federal Investigation
Washington, Jan 23 - The House Democrats’ trillion dollar spending bill, approved on January 21 by the Appropriations Committee and headed to the House floor next week for a vote, could open billions of taxpayer dollars to left-wing groups like the Association of Community Organizations for Reform Now (ACORN). ACORN has been accused of perpetrating voter registration fraud numerous times in the last several elections; is reportedly under federal investigation; and played a key role in the irresponsible schemes that caused a financial meltdown that has cost American taxpayers hundreds of billions of dollars since last f
House Republican Leader John Boehner (R-OH) and other Republicans are asking a simple question: what does this have to do with job creation? Are Congressional Democrats really going to borrow money from our children and grandchildren to give handouts to ACORN in the name of economic “stimulus?”
Incredibly, the Democrats’ bill makes groups like ACORN eligible for a $4.19 billion pot of money for “neighborhood stabilization activities.” Funds for this purpose were authorized in the Housing and Economic Recovery Act, signed into law in 2008. However, these funds were limited to state and local governments. Now House Democrats are taking the unprecedented step of making ACORN and other groups eligible for these funds:
| “For a further additional amount for ‘Community Development Fund,’ $4,190,000,000, to be used for neighborhood stabilization activities related to emergency assistance for the redevelopment of abandoned and foreclosed homes as authorized under division B, title III of the Housing and Economic Recovery Act of 2008 (Public Law 110–289), of which—
“(1) not less than $3,440,000,000 shall be allocated by a competition for which eligible entities shall be States, units of general local government, and nonprofit entities or consortia of nonprofit entities[.]”
“(2) up to $750,000,000 shall be awarded by competition to nonprofit entities or consortia of nonprofit entities to provide community stabilization assistance […]” |
The House Democrats’ trillion dollar spending bill also includes $1 billion for the Community Development Block Grant (CDBG) Program. CDBG funds are given by the federal government to state and local governments which often contract with nonprofits for services related to the purpose of the grant.
ACORN knows how to secure CDBG funds. Audit reports filed by ACORN’s headquarters with the Office of Management and Budget show that ACORN spent $1,588,599 in Community Development Block Grant (CDBG) Program funds from FY 2003 through FY 2007. It is not clear from these records when or from what source the funds were awarded to ACORN. It is also not clear whether ACORN chapters or affiliates have received CDBG grants on their own.
House Republican Leader John Boehner (R-OH) repeatedly urged President George W. Bush and other federal officials to withhold taxpayer funds from ACORN, including $17.2 million in federal grants awarded in December 2008 after numerous allegations of wrongdoing in connection with ACORN’s election activities were reported by the news media.
Leader Boehner also released a study of federal records in October 2008 listing tens of millions in federal grants received by ACORN. A new updated and more expansive study reveals that ACORN has actually received millions more than first thought. A review of the Federal Register and news releases issued by federal agencies showed that ACORN was awarded more than $53 million in taxpayer dollars. This amount does not reflect the millions more ACORN has received in federal block grant funds awarded to state and local agencies which passed them on to ACORN.
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