The Enterprise Blog

Archive for October, 2009

Danielle Pletka

Obama’s Epic Fail

By Danielle Pletka

October 30, 2009, 12:59 pm

Iran’s rejection of Barack Obama’s open hand is an epic fail for the president’s signature foreign policy. We all know the drill: George Bush/axis of evil/alienating the world/bla bla bla. But it turns out that Barack Obama/no one nation is better than any other/sit down tough diplomacy is also a “complete failure.” The key test for the president, however, was not whether he would follow through on his campaign promise to sit down with America’s enemies. He did, and the American people knew what they were getting when they voted for him. The question is whether he will be honest enough to admit that the policy is a bust, that the strategy to loop Russia and China into tougher sanctions is also a bust, and that the time has come to aggressively isolate Iran and begin to consider military action.

None of these options is simple or attractive. The cocktail party circuit always looks better, especially to those who worship at the altar of diplomacy for diplomacy’s sake. Here’s some of what’s necessary now:343px-obama_in_sc

•   Introduce a more robust sanctions resolution in the Security Council, and dare the Russians and Chinese to veto.

•   Put in place multilateral sanctions outside the Security Council, as discussed last month with Britain, France, and Germany, including, among other things: expansion of Iran banking sanctions to all banks, a prohibition on insurance and reinsurance of Iranian vessels, an end to all export guarantees (we’re looking at you—France, Italy, Germany), a ban on visas for all regime officials, an end to landing rights for Iran Air, and export controls for all energy-related equipment, technology, and spare parts.

•   Lay the groundwork for comprehensive sanctions on Iran’s import of refined petroleum.

•   Hold regional security talks to assure Iran’s neighbors that the United States will stay the course, outlining expectations that sanctions-busting and double-dealing (that’s you, UAE and Qatar) will end.

This isn’t everything, but it’s a start. If Hillary Clinton meant it when she said “crippling sanctions,” and if the president meant it when he said an Iranian nuclear weapon would be “unacceptable,” it’s time to stop dithering and start bringing on the consequences threatened if Iran refused to engage. Iran certainly will have the option to reconsider its position in the face of such sanctions; if not, military action may be inevitable.

My friend Arnold Kling has described a divide between what he calls Chauffered America–Hollywood, investment bankers, and high government officials–and Strip Mall America–people who launch businesses like restaurants, hair salons, and other small enterprises. No matter how the government responded to the financial crisis, Chauffered America was always going to do just fine. But as Scott Shane details in his piece today for THE AMERICAN, things aren’t great for those with small enterprises.

Neena Shenai

‘Free and Fair Trade’?

By Neena Shenai

October 29, 2009, 11:37 am

We know we are living in interesting times when a Chinese vice premier stakes out a position that the United States and China should oppose all forms of protectionism, while his American counterparts talk about the Obama administration’s commitment to so-called “free and fair trade” (whatever that is supposed to mean).

That’s just what happened at the US-China Joint Committee on Commerce and Trade (JCCT) talks in Hangzhou earlier today. Apparently, a collection of trade spats—on President Obama’s September 11 decision to impose a safeguard on Chinese tires, the Chinese responding in kind on U.S. auto parts and chickens, as well as other disputes—is making for a tough JCCT.

It’s no surprise that, in the age of the Obama administration’s protectionist inclinations, there seems to be a complete disconnect between the anti-provocation approach with China—i.e., turning down a meeting with the Dalai Lama and backing off on the administration’s initial stance of China’s status as a currency manipulator—and the administration’s stance on trade. There seems to be a miscalculation regarding the importance of trade to China and a misunderstanding of the damage being caused to the U.S. reputation in this area vis-a-vis China and the rest of the world.

The United States needs to be tough on Chinese trade barriers, especially given that the United States offers China the largest, most open market in the world for its products. However, by U.S. abdication of leadership in trade we have no leg to stand on in pressing China to do anything in this regard. So, maybe that’s the strategy?

Danielle Pletka

Obama’s On-the-job Training

By Danielle Pletka

October 29, 2009, 10:43 am

President Obama has clearly resented suggestions he is dithering on the decision about troop levels in Afghanistan. Having suggested that he “will never rush the solemn decision of sending you into harm’s way” (though he should have added he won’t be rushing to send troops to protect those already on the ground either), he continues to study various options. Indeed, Hillary Clinton’s campaign-trail crack about Barack Obama needing on-the-job training seems more and more resonant with each passing day that the president continues to study for the test he doesn’t want to take.

Today, in an above-the-fold front-page piece, the Washington Post reports that Obama is now asking which of Afghanistan’s provincial governors have been naughty and which have been nice. A charitable assessment of the president’s latest effort to second-guess his handpicked commander in the field might be that the president wishes to reckon out where he can rely on local leaders; a less charitable read might be that the president is still looking for ways to say no to McChrystal, suspecting that further underscoring the unworthiness of our local partners will help. Certainly the incessant badmouthing of Afghanistan’s political leaders (they’re not Chicago quality, that’s for sure) would indicate the latter.

No matter what, it’s clear that McChrystal isn’t going to get his full ask. That loathsome Washington leaker, “U.S. official,” has told the Associated Press that “McChrystal light” is where the president is leaning. For a clearer understanding of what that will mean, take a look at the American Enterprise Institute’s Fred Kagan on what half measures will mean here.

michiganconfidence

Economist Scott Grannis: I’ve never paid much attention to surveys of confidence, mainly because they tend to be lagging indicators. Consumers are often quite happy until just before a recession starts, and quite depressed well after a recovery begins (see chart above of consumer sentiment).

Exhibit A: “Whining” hardly captures the extent of the gloom Americans feel about the current downturn. The slump is the longest, if not the deepest, since the Great Depression. Traumatized by layoffs that have cost millions of jobs during the slump, U.S. consumers have fallen into their deepest funk in years. Says University of Michigan economist Paul McCracken: “This is more than just a recession in the conventional sense. What has happened has put the fear of God into people.”

Exhibit B: If America’s economic landscape seems suddenly alien and hostile to many citizens, there is good reason: they have never seen anything like it. Nothing in memory has prepared consumers for such turbulent, epochal change, the sort of upheaval that happens once in 50 years. That may explain why so many polls reveal such ragged emotional edges, so much fear and misgiving. Even the economists do not have a name for the present condition, though one has described it as “suspended animation” and “never-never land.”

Both exhibits above are from Time Magazine articles (altered slightly) that appeared after the relatively mild July 1990 – March 1991 recession had already ended (the timing of the articles appear on the graph above); Exhibit A was from January 13, 1992 (ten months after the recession was over) and Exhibit B was from September 28, 1992 (21 months following the recession).

The blue shaded areas in the chart show the number of months it took following the 1990-1991 and 2001 recessions before consumer confidence returned to the pre-recession levels (33 months and 25 months, respectively). Following the end of both recessions, consumer confidence continued to fall for at least a year and it took more than two years in both cases for consumer sentiment to return to the same levels that existed in the periods before the recessions started.

Scott Grannis is exactly correct—consumer confidence is a lagging indicator and consumers do remain gloomy long after an economic recovery is well underway, as both the Time Magazine articles and the history of consumer sentiment tell us.

Bottom Line: Even though there is general consensus that the recession ended this summer (probably in June), consumer confidence will likely remain uneven and could continue to fall through next summer, and we’ll probably get reports like these post-recession, 1992-era “gloom and doom” news stories for at least another year as well.

Jay Richards

The Limits to Religious Freedom

By Jay Richards

October 29, 2009, 10:41 am

Over at The Church Report, I have a piece discussing the sad case of a Pennsylvania couple who has been charged with involuntary manslaughter in the death of their two-year-old son. They advocated “faith healing,” and so were apparently opposed to medical care.

This case and others like it raise important questions because they involve an apparent conflict of rights—in this instance, a conflict between the right to religious freedom and the right to life. If the accusations are correct, the parents are in the wrong on both legal and theological grounds. On legal grounds, I argue that we should recognize a hierarchy of rights, with the right to life coming before every other right. After all, the right to property and religion presupposes the right to life. So the parents’ freedom of religion doesn’t trump their son’s right to life. Manslaughter is still manslaughter, even if done for deeply held religious reasons.

What they allegedly did was also wrong theologically—at least from a Christian perspective. Christians traditionally have believed that God can work extraordinary miracles—when he chooses to do so. But he can also work his will, including the healing of illness, through so-called “secondary causes.” That includes the work of physicians. So “faith healing” is in error when it presumes to tell God that he must work through extraordinary miracles rather than through ordinary means. Read the rest here.

In his approach to foreign policy President Obama has downplayed human rights on almost every front, from matters of policy to matters of symbolism. It is clearly not something Obama or his secretary of State have much interest in. I noticed, for example, that recently the playwright-turned-politician Vaclav Havel asked a New York Times reporter if it was true that President Obama had refused to meet with the Dalai Lama in Washington. When told that the meeting had been postponed in order to mollify the Chinese, Havel said, “it is only a minor compromise. But exactly with these minor compromises start the big and dangerous ones, the real problems.”

The place human rights ought to have in American foreign policy will become an increasingly important topic in our political conversation. And in thinking through that relationship, I recently came across the words of two wise figures which bear on this matter. One is William F. Buckley Jr., who was asked in an interview in May 1970 what event or development in the 1960s stood out in his mind as important. Buckley answered, “the philosophical acceptance of coexistence by the West.” When asked why philosophical, Buckley said this:

Because a military acceptance of coexistence is one thing; that I understand. But since America is, for good reasons and bad, a moralistic power, the philosophical acceptance of coexistence ends up in hot pursuit of reasons for that acceptance. We continue to find excuses for being cordial to the Soviet Union; our denunciations of that country’s periodic barbarisms—as in Czechoslovakia—become purely perfunctory. This is a callousing experience; it is a lesion of our moral conscience, the historical effects of which cannot be calculated, but they will be bad.

Boston University’s Peter Berger took to the pages of Commentary almost a dozen years later, making a somewhat similar point. The United States, Berger wrote, is not a nation like any other, but one inextricably linked to a particular political creed. He went on to say this:

This political creed, which was the original raison d’etre and continues to be the principle of legitimacy of the American nation-state, has as its very core a number of propositions about human rights. It follows that the idea that American foreign policy could be conducted in a Machiavellian spirit detached from any moral considerations is not only repugnant to American traditions but eminently impractical. Put differently, in the case of the United States there is a necessary connection between national interest and national values, and even a Realpolitik worthy of that name will have to take this aspect of social reality into account.

Just so. But the president and his administration do not see things quite this way. They seem to view championing human rights as simply moralizing. They are the kind of people who, I think it’s fair to say, reacted with anger and contempt when Ronald Reagan referred to the Soviet Union as an “evil empire” and when George W. Bush referred to Iran, Iraq (under Saddam Hussein), and North Korea as an “axis of evil.” Set aside the fact that to use the adjective “evil” for these regimes was apposite; such things don’t really matter. Saying them in public—and acting as if the nature of regimes ought to matter in state-to-state dealings—is viewed as simplistic, antagonistic, and counterproductive.

The Obama administration is learning the hard way, though, that placating our adversaries is a road to failure, and can be a road to ruin. Applying moral categories to the problems we face is actually useful and deeply realistic. The president and his team will also learn soon enough, I think, that you cannot pry apart moral considerations from the conduct of American foreign policy without paying a price on the home front. We are a people, after all, who are blood of the blood and flesh of the flesh of those who wrote the Declaration, and that electric chord links us together even still.

I mentioned a while back that the net neutrality debate is getting more interesting. Here is further evidence from Sonia Arrison:

I was stunned last week when I saw many prominent tech VCs and CEOs from Silicon Valley sign letters endorsing the FCC’s move towards net neutrality, since, if the rule making goes ahead, it will mean regulating the Internet. I happen to know a bunch of these folks, so I decided to call them to see if they really were endorsing regulations for the Net or if something else was going on. Something else was going on.

Read her whole post to find out the whole story. Sonia is a thoughtful and prudent voice on tech issues and is in the camp of those of us trying to Avoid a Tech Train Wreck.

Why So Little Swine Flu Vaccine?

By The Editors

October 28, 2009, 3:17 pm

In addition to Scott Gottlieb’s WSJ op-ed today on why there is a shortage of H1N1 vaccines, take a look at this video:

Successful Revolutionaries

By The Editors

October 28, 2009, 10:51 am

Chris DeMuth’s appreciation of Irving Kristol is reprinted here along with selections from Kristol’s magnificent lecture on “The American Revolution as a Successful Revolution.”

Shovel-Ready Science?

By Adam Paul

October 28, 2009, 10:49 am

Washington has frequently treated budget arithmetic as an exercise in sleight of hand and the legislative process as if it were as much about salesmanship as statesmanship. The stimulus legislation—the Americans Recovery and Reinvestment Act (ARRA)—passed in February lives up to that tradition on both counts.

In a recent contribution in Forbes, colleagues Alex Brill and Amy Roden identified a portion of the stimulus package that Congress and the administration are not likely to let expire. They find that potential science spending could add billions to the deficit.

Greater government spending on science, we are told, will encourage more cutting-edge research and entry by students into upper-level science programs. House Speaker Nancy Pelosi espoused this view during the ARRA debate. “We all know that in business or in science or in education, capital attracts talent. You have to have the labs. And talent attracts capital. And so we want to make very wise investments in this recovery package so it is about innovation,” Pelosi told the House Democratic Steering and Policy Committee.

But there is a problem with what was actually passed. The ARRA required that the decisions made to fund new science projects be made in the ten months after the legislation passed, or exactly as much time required for the National Science Foundation’s (NSF) normal merit review process. But unlike highways, science is rarely shovel-ready. It takes time to craft a proposal to the NSF and the National Institutes of Health and time to evaluate them. As a practical matter, only those projects in the pipeline or close to being done had any prospects of receiving stimulus funds. Thus, there was little new research incentive in ARRA, only a lump-sum transfer to those lucky enough to be completing project applications. Even if ARRA encouraged some hasty applications, the projects still would have come from current researchers rather than attracting the new talent that Pelosi and others envision.

The stimulus bill may be ready to dig into projects, but it will not generate path-breaking research that would contribute to American’s economic competitiveness.

Adam Paul is a research assistant at AEI.

During the presidential campaign, Barack Obama promised to bring a more transparent and inclusive style to the White House. He said in August 2008, “I’m going to have all the negotiations around a big table. We’ll have the negotiations televised on C-SPAN, so that people can see who is making arguments on behalf of their constituents and who are making arguments on behalf of the drug companies or the insurance companies.”

Sadly, the president appears to have backtracked on his pledge. Backroom deals are being cut on healthcare, and no C-SPAN cameras have been in sight. Even many members of Congress are out of the loop on the healthcare bill.

Accordingly, Senator Jim Bunning (R-Kentucky) recently introduced an amendment that would require legislators to make all bills public for 72 hours, with legislative text and an official budget analysis from the Congressional Budget Office (CBO), prior to being considered. Democratic senators blocked the amendment.

It is unfortunate that the Democratic leadership has decided it would be easier to rush their legislation through rather than honoring the people’s right to know. At healthtransformation.net, we have posted a petition to Washington to support the principle of Senator Bunning’s amendment by requiring Congress to make all bills public for 72 hours before voting. All Americans have a right to know what Congress is doing. Read more about how we can make our voices heard in my Human Events newsletter today.

Andrew Biggs

Very Bad Signs on Entitlements

By Andrew Biggs

October 28, 2009, 10:39 am

The New York Times’s David Leonhardt has a very good column on the Social Security Cost of Living Adjustment (COLA) issue and the Obama administration’s proposal to make $250 payments to all retirees. Leonhardt shows clearly that seniors haven’t been the hardest hit by the recession and have actually seen their incomes rise as those for working-age households fell. The whole piece is well worth reading.

But there was one quote I thought worth commenting on. In defense of the $250 payments, Obama National Economic Council Director Larry Summers says, “we’re correcting an anomaly.” But the anomaly is that Congress pays a zero COLA in a year in which prices dropped, effectively increasing the real purchasing power of Social Security benefits by around $700. The correction? Add another $250 to the pot. This is the sort of argument I’m confident Summers would heap scorn on as an academic, yet in government those standards go out the window.

Leonhardt quotes tax economist Joel Slemrod saying, “if the long-term issue is entitlement reform, the fact that the political system cannot say no to $250 checks to elderly people is a bad sign.” A very bad sign indeed.

Mark J. Perry

106 Bank Failures in Perspective

By Mark J. Perry

October 28, 2009, 9:13 am

So far this year 106 banks have failed out of 8,195 FDIC-insured institutions, or slightly more than 1 percent of all banks. How does that compare to previous periods of financial stress and episodes of bank failures, and is there anything positive about bank failures?

banks1

This first graph displays annual bank failures (data here) from 1930 to 2009, showing the two most serious banking crises in U.S. history, the Great Depression (9,146 banks failed from 1930-1933) and the S&L Crisis (2,935 banks failed from 1980-1994). Compared to those two periods, 106 bank failures in a single year out of more than 8,000 banks in total appears pretty inconsequential.

banks2

The second graph shows annual bank failures since 1970 only, and puts some further perspective on the 106 bank failures this year, compared to the S&L crisis when almost 3,000 banks failed in total and there were was an entire decade when banks were failing at a rate of more 100 per year.

Further analysis shows that the assets of the 106 failed banks in 2009 totaled $106 billion (FDIC data here), which represents only 8/10 of one percent of the total U.S. bank assets, currently $13.301 trillion (data here). During the peak of the S&L crisis in 1989, failed bank assets were 3.5 percent of total bank assets, or more than four times the current level.

Certainly we can expect some more bank failures to follow this year, considering that there were 416 “problem institutions” listed by the FDIC in June. But by comparison, there were almost 1,500 banks on that same list in 1990, and more than 1,000 in both 1991 and 1992 during the S&L crisis.

Additionally, bank failures are currently not geographically widespread, and 16 states haven’t experienced a single bank failure in either 2008 or 2009, and another 13 states have had only one or two bank failures during the last two years. Almost half of this year’s 106 bank failures have been concentrated in only three states: California (15), Georgia (20), and Illinois (17). Even the state hit hardest by the recession, Michigan, has only seen one bank fail this year, following two last year. In contrast, during the S&L crisis no area of the country was spared from widespread bank failures.

Further, the assets and deposits of failed banks don’t disappear, they’re acquired by larger and healthier banks, which then strengthens the banking system overall. And consider that on a population-adjusted basis, the United States, with 27 banks per million population, has more than 12 times as many banks as Canada (only 2.2 banks per million). The United States probably still has too many banks as a legacy of previous legislation that forced bank to operate in a single state only (the McFadden Act of 1927, which was repealed in 1994), and the elimination of some of the smaller, weaker banks through bank failures can therefore actually be a positive development for the U.S. economy and banking system.

All in all, 106 bank failures in 2009 might sound quite ominous and it’s been getting a lot of news coverage, but putting the current banking situation in perspective suggests that we’re not yet anywhere close to an episode of bank failures like the Great Depression or the S&L crisis. And let’s hope that with an economic recovery just getting started, we’ll see the number of bank failures coming down by next year. For more information, see a 2008-2009 bank failure map here, and a 2008-2009 bank failure table here.

The Ecumenical Patriarch Bartholomew, the spiritual head of Greek Orthodox parishes worldwide, is in the United States advocating the cause du jour—environmentalism. He is apparently a strong advocate for environmental causes, and was given a platform in the October 26 issue of the Wall Street Journal.

Note the rhetorical context of the piece, which he makes explicit: “There are growing expectations that meaningful progress can be made in the United Nations Climate Change Conference scheduled to take place in Copenhagen this December.” So it’s not too much of a stretch to see his current activity, his call for “immediate action,” as an attempt to help move things in an Obamaish direction in Copenhagen.

Unfortunately, judging from his piece, “Our Indivisible Environment,” his thinking seems to be, well, fuzzy. This is especially troubling because of the prominence of his office, which is sometimes described as the “first among equals” of the Orthodox Patriarchs.

Environmental stewardship is a legitimate moral concern for Christians. But the Patriarch goes far beyond calling on Christians to be concerned. In fact, I think his argument, taken at face value, is misleading. Take the following two claims, which the Patriarch uses to justify Christian concern for the environment:

For if life is sacred, so is the entire web that sustains it.

Moreover, just as God is indivisible, so too is our global environment.

Let’s try to read these statements charitably. Perhaps his point is simply that life on Earth is connected and depends on its natural environment, and that since life has value in the eyes of God, so too does the natural environment on which it depends. Presumably all of creation has some intrinsic value (whether or not it’s part of our global environment) simply because God has created it. Scripture makes clear that God has purposes for his creation beyond human ken. As he asked Job: “Can you bind the chains of the Pleiades, Or loose the cords of Orion?”

But if that’s what Patriarch Bartholomew means, he could have said so more clearly.

In fact, the first statement, if not carefully qualified, might look like support for the radical, and anti-Christian, idea that every form of life is of equal worth. As PETA President Ingrid Newkirk famously said: “There’s no rational basis for saying that a human being has special rights. A rat is a pig is a dog is a boy. They’re all animals.” I’m sure the Patriarch would not assent to such an equation (but see John Couretas’s revealing piece at the Acton Powerblog for evidence of the Patriarch’s views on sanctity-of-life issues.) In any case, Newkirk’s attitude is a large part of the context in which the environmental debate takes place. One would think the Patriarch would construct his sentences to prevent that interpretation.

Next, he tells the readers of the Wall Street Journal: “Just as God is indivisible, so too is our global environment.” Huh?

This claim is a hopeless muddle. In fact, I don’t see how to make sense of it theologically. According to Christian theology, God, unlike physical creatures, is indivisible in the sense that his attributes and perfections can’t come apart. He can’t lose them. Whereas I might be loving just every so often, God’s love and justice are inseparable, eternal, and unimpeachable. To put it philosophically, there’s no possible world in which God is unloving, or ignorant, or unjust. He’s a perfect unity.

In contrast, however interconnected our global environment may be, it’s not indivisible “just as God is indivisible.” In fact, while the global environment is in some ways interconnected, it’s simply not true that every one of its features is essential to every other. The history of life is marked by all sorts of changes, extinctions, and disruptions. The global environment, and “life,” is apparently able to survive the deaths of entire classes of flora and fauna. To deny that is to deny the obvious. The idea that the environment always teeters on a razor’s edge—that any change is a catastrophe—is a dogma of the radical environmental movement, not of Christian theology. Again, Patriarch Bartholomew should choose his words more carefully.

For more detailed responses to Patriarch Bartholomew from fellow Orthodox Christians, read here.

Andrew Smarick

The Turnaround Fallacy

By Andrew Smarick

October 27, 2009, 3:55 pm

Education Next released my article “The Turnaround Fallacy,” which argues for an alternative to the education reform world’s current fixation on “turnarounds.”

In short, I make the case that turnarounds of long-failing schools have consistently failed for decades. Moreover, the research shows turnarounds seldom work in other fields and industries. Understanding this, those other fields and industries have developed sensible mechanisms for dealing with their lowest performers, be it liquidation, disbarment, loss of license, etc.

The equivalent in education would be school closures. This would not only bring an end to schools that have poorly served needy kids year after year (and are likely to do so into the future), it would set in motion a series of other practices that would help us finally build healthy urban school systems.

It is important to note that this is much more than a philosophical debate. Real lives and staggering sums of money—particularly American Recovery and Reinvestment Act (ARRA) funds—are at stake in the very near future. Education Secretary Arne Duncan has been touting turnarounds since his first days in office. The stimulus legislation provided $3 billion for “School Improvement Grants,” dollars that could be used in a number of ways to deal with failing schools but that the administration wants to use for turnarounds.

Other stimulus programs, such as the $50 billion State Fiscal Stabilization Fund and the $4.35 billion Race to the Top, are certain to be used in part to pursue turnarounds. And, possibly of most importance, Secretary Duncan is urging the nation’s best education reform organizations to get involved in turnarounds.

Through the Stimulus Watch series (here and here), I’ve been arguing that much of the ARRA funding allocated for schools has been supporting blatantly non-reform activities. Turnarounds appear to be reform-oriented—that’s how they are being billed—but in fact they amount to the same types of interventions applied to struggling schools for eons.

I admire and congratulate Secretary Duncan for shining a bright light on the nation’s lowest-performing schools and seeking to do something about them. But turnarounds are not the answer; if we go down this road, we could squander billions of ARRA dollars and incalculable sums of precious human capital.

If you want to learn more about why turnarounds don’t work in education or elsewhere and how our K-12 system can make use of the lessons of other fields and industries, give “The Turnaround Fallacy” a read.

The Center for American Progress’ Matt Yglesias writes:

It’s no coincidence that the cable company is always a go-to liberal example of private sector dysfunction … Appropriate regulation and public investment have a big role to play in this field.

The mind boggles. Video delivery has always been a heavily and haphazardly regulated field. Indeed, if anything it is a great example of public sector dysfunction (municipalities viewing the cable system as a tax collector, blocking entry, and so forth). For those interested, Tom Hazlett has a useful paper on cable here and an important book here.

joskow130

And as it happens I am reading Paul Joskow’s excellent new AEI monograph about deregulation. In a section on telecom regulation he points out that poorly conceived regulation

led to few technological improvements in the local networks and may have retarded such innovation. In particular, it probably slowed down investments in local networks that would have enabled the local telephone companies to compete effectively with cable companies to provide high-speed broadband service and video services sooner than has been the case [emphasis added].

core-knowledgeAfter being resolutely glum about the limits of educational improvement here, here, and here, it’s time for me to get in touch with my inner optimist. We can’t make our kids much smarter than they are naturally, but we can do a hugely better job of teaching them stuff. If you get away from the worst schools in the big cities, I think the central problem with the public schools is not poor teachers, but the curriculum teachers are given to teach, especially in elementary and middle school. There’s a great solution, packaged and ready to go, that doesn’t cost any more money than we’re already spending. It’s E.D. Hirsch’s Core Knowledge Curriculum. The Manhattan Institute’s Sol Stern has a wonderful description of it, and of the heroic work of E.D. Hirsch Jr. over the past quarter century. I commend it to all who might have influence with their local Board of Education. Install the Core Knowledge Curriculum in your local school, and some very large proportion of your complaints about public education will go away.

Ryan Streeter

What Prosperity Means

By Ryan Streeter

October 27, 2009, 10:28 am

The Legatum Institute, where I am a senior fellow, just released the 2009 Prosperity Index, the world’s only global assessment of wealth and well-being. The Index is based on what most people would consider a fairly intuitive concept of prosperity—namely that “prospering” requires money, but ultimately much more than money. When someone wishes you a “prosperous New Year” in one of the holiday cards you’ll receive at year’s end, you hope you’ll end 2010 with more money than you began, but you also hope you’ll have good health, stronger relationships, and greater happiness. The Prosperity Index builds a complex and sophisticated methodology on top of this basic and intuitive understanding of prosperity.

The index ranks 104 countries covering 90 percent of the world’s population. The index consists of nine sub-indexes that are themselves comprised of 79 variables. It assesses how well nations around the world perform on economic fundamentals, innovation, government policy, health, social capital, and more. Its nine sub-indexes are based on reams of research into what makes economies grow and citizens happy.

This year’s results are available at www.prosperity.com, and they provide some interesting insights. First, the Nordic North is a good place to live despite the yearly average temperatures. Finland tops the list, Sweden is third, Denmark fourth, and Norway fifth. Second place goes to a country not much farther south, which also tops the World Economic Forum’s Competitiveness Index: Switzerland. Second, if you’re not a Nordic country, it’s good to speak English. Australia is sixth, Canada seventh, the United States ninth, New Zealand tenth, Ireland eleventh, and Britain twelfth.

Among the world’s 25 most populous nations—namely those with populations over 50 million people—the United States comes in first. It remains the superpower among the super-nations. It is followed by the United Kingdom, Germany, Japan, and France.

Beyond the headline rankings, there are a few insights from the index this year that are worth highlighting.

1. Money doesn’t buy happiness … unless you are poor. If you live in one of the world’s poorest countries, a $3,000 increase in annual income will raise your overall level of happiness by 2 points on a 10-point scale, whereas it will only raise your happiness by .06 points if you live in a wealthy country such as the United States. In other words, the adage that money doesn’t buy happiness is rooted in the evidence. When every extra dollar in income increases your ability to take care of life’s basic needs exponentially, as it does in poor countries, your satisfaction increases greatly as well. But as you get richer, each dollar matters less and other things such as good health, good relationships, and an overall environment of freedom and opportunity will make you happier than money. We explain this on page 17 of the Prosperity Index report.

2. The European vision of growth leads you to … the United States. French President Nicolas Sarkozy recently released the results of a commission he created to find ways of defining progress that go beyond GDP-centric measures. Presumably, going beyond economic measures to things such as health, social capital, and government policy’s effect on citizen well-being would lead you to European social democracies. Not according to the Prosperity Index. Sure, the small and homogeneous Nordic nations show that economic growth and social welfare can happily coexist, but when one looks at larger countries, the United States leads the United Kingdom, Germany, and France. The “big three” in Europe trail the United States in domestic security, personal freedom, and social capital by a wider margins than they do in a reliable economic indicator such as innovation. The United States scores better than Germany and France in the sub-index that measures how well government policy increases the well-being of citizens. In other words, the United States beats the large European countries at their own game. When you try to look at the world through a wider lens than economic growth, which conventional wisdom expects would favor Europe, you actually end up back in America.

3. The BRICs have been rearranged to … the BIRCs. The Prosperity Index tells a very important story about the so-called BRICs (Brazil, Russia, India, and China). Brazil ranks 41st and India 45th, while Russia comes in at 69th and China at 75th. All four countries have fairly similar ranks on the sub-indexes that assess economic fundamentals and innovation, but when you look at other important contributing factors to prosperity such as personal freedom, good governance, and social capital, Brazil and India race ahead of Russia and China. If one looks at simple measures of prosperity such as per capita GDP, Russia outperforms Brazil, and China outdoes India. But when you look at all of the underlying factors of prosperity together, Brazil and India are leagues ahead. Given that the Prosperity Index looks at the drivers of prosperity over the long haul rather than snapshots of economic growth, Brazil and India emerge from this year’s Prosperity Index in a much stronger position than Russia and China.

The 2009 Prosperity Index offers policy makers, scholars, the media, and the interested public an opportunity to plumb the reality that is prosperity. The truth is that prosperity is not exactly what conventional wisdom says it is. It isn’t money alone. It isn’t European social democracy. It isn’t command and control capitalism, as Russia and China prove. It is rather in the robust world of social capital, freedom, opportunity, and reliable markets in which the most prosperous people live each day.

Mark J. Perry

A Second Look at the Second Sex

By Mark J. Perry

October 27, 2009, 7:25 am

In Stuart Taylor’s recent National Journal article “Selective Concern On Sex Imbalances” he writes:

It is an article of faith in the Obama administration, Congress, and much of the academic establishment that there are no innate differences between females and males in interests or cognitive capacities. From this dubious premise, they conclude that only pervasive, ongoing sexism and stereotypes can explain the huge gender disparities in academic fields—hard sciences, engineering, and mathematics—that are still male-dominated.

But advocates of this disparity-proves-discrimination dogma apply it quite selectively. They have shown virtually no concern about the small and shrinking percentages of males in colleges generally and in most academic fields.

Taylor concludes that amid the alleged “crisis” of gender bias in math and science departments, “The academic and political establishments treat as a non problem a real crisis that affects far more people: the ever-more-dramatic shrinkage in the percentage of males who graduate from college at all.”

In support of the sex imbalances in higher education that Taylor mentions, the graph and table below are based on recently released data that provide new evidence of the shrinking percentage of men graduating from college in general, and the female dominance in almost all academic fields at the graduate level.

collegedegrees

The graph documents the complete gender reversal between 1970 and 2007 in the percentage of college degrees granted to men and women, from men earning 59 percent of all college degrees in 1970, followed by a gradual and consistent shift towards women, so that by 2007 slightly more than 59 percent of all college degrees were awarded to women (Department of Education data here). For the class of 2007, 144 women graduated with a college degree (at all levels) for every 100 men. The shrinkage of males in higher education that Taylor discusses is real and will continue to worsen each year—within eight years the Department of Education estimates that 167 women will earn associate’s degrees for every 100 men, and 148 women will earn master’s degrees for every 100 men.

gradschool1

The table above displays graduate school enrollment by gender in 2008 using data recently released by the Council of Graduate Schools (CGS). Women represented 58.9 percent of all graduate students in 2008, meaning that there were more than 143 women enrolled in graduate school for every 100 men. Further, women outnumbered men in 7 out of the 10 fields of graduate study tracked by the CGS, and were underrepresented in only three fields (business, engineering, and physical sciences). In the field of health science, women now outnumber men in graduate school by almost 4 to 1, and in both education and public administration graduate programs, there are about three females enrolled for every male.

As Taylor correctly points out, the gender activists seem relatively unconcerned about the huge and growing statistical gender disparities in favor of women for college enrollment and degrees in general and now also in almost every academic field at the graduate level, as they continue to narrowly focus only on the areas of math, science, and engineering. And it is this selectivity in concern about gender disparities that exposes the gender-equity cops as being intellectually inconsistent, unprincipled, and dishonest. Further, Taylor’s commentary suggests that the gender activists can’t have it both ways—if gender disparities favoring men in the sciences are the result of stereotypes and pervasive gender bias as they would have us believe, then doesn’t the growing overrepresentation of women in higher education generally and in seven out of ten graduate fields also have to be exposing pervasive, unexamined sexism against men?

Taylor frames his insightful column around the issues raised in the book The Science on Women and Science, a collection of ten essays edited by Christina Hoff Sommers, forthcoming from AEI. I hope both Taylor’s column and Dr. Sommers’s forthcoming book will bring some much needed attention to the gender activists’ selective and inconsistent concerns about sex imbalances in academia, and also to the fact that men have gradually become the second sex in American higher education.

Nick Schulz

The Dreaded ‘R’ Word

By Nick Schulz

October 27, 2009, 7:19 am

Here is an interesting interview with FCC Chairman Julius Genachowski, in which he makes the following claim:

First of all, we are not regulating the Internet.

http://commons.wikimedia.org/wiki/File:Internet-Sign.jp

Photo Courtesy Cawi2001.

He immediately follows that by describing the FCC’s efforts on net neutrality this way:

What we did yesterday was launch a rule-making process where over the months ahead, we will be getting a lot of public input on what are fair, common-sense rules of the road to ensure that any small business, any entrepreneur, any speaker engaging in a lawful activity can have access to the Internet and the ability to reach an audience.

In other words: we are regulating the Internet.

The whole interview is worth a look. While the net neutrality efforts are problematic, the chairman is also talking about freeing up more spectrum for wireless developers, which would be a positive development.

As the West contemplates ever tighter regulations on how and where money can be spent, lent, and invested, their leaders should remember that economic and political liberty—while not the whole story—play a key role in prosperity. They are the engine driving much of what makes life worthwhile. Ryan Streeter and I discuss this today in the Wall Street Journal Europe.

Jay Richards

One Best Way on Immigration?

By Jay Richards

October 27, 2009, 6:28 am

The National Association of Evangelicals (NAE) was originally created to provide a counterweight to the leftward lurch of the National Council of Churches. Unfortunately, in recent years, the NAE has, at times, seemed to be playing catch-up with the NCC. And in doing so, they’re pulling away from the denominations they claim to represent.

The most recent flap is over a resolution on immigration reform. Much of it would be easy for any Christian to agree to. It just summarizes universal Christian beliefs, such as the idea that all human beings are made in God’s image, and ought to be respected. It also notes, wisely: “The Bible does not offer a blueprint for modern legislation, but it can serve as a moral compass and shape the attitudes of those who believe in God.” Sounds right to me. In fact, I like the document, right up until it issues a “call to action.”

Alas, the resolution goes on to endorse various policies that are highly debatable, and that don’t follow obviously from any distinctively evangelical belief. The most controversial suggestion is an amnesty program for illegals: “That the government establish a sound, equitable process toward earned legal status for currently undocumented immigrants, who desire to embrace the responsibilities and privileges that accompany citizenship.”

I find it hard to believe that the NAE staff who wrote this resolution thought that they were speaking representatively of all the evangelical denominations who are NAE members. I happen to think we should have a pretty liberal legal immigration policy coupled with a rigorous program of cultural assimilation that resists the corrupting influences of multiculturalism and the welfare state. So on immigration, my views are pretty close to the NAE. Still, I’m acutely aware that such policy judgments are prudential in the extreme. I wouldn’t want my judgments to be made into an official resolution that claims to speak for a large body of Christians that had no say in the resolution. So while I mostly agree with its content, I still think the resolution represents poor judgment on the NAE’s part.

The Institute on Religion and Democracy seems to be thinking much more clearly than the NAE on this issue. See here and here.

Gary Schmitt

New German Cabinet Is Good News

By Gary Schmitt

October 26, 2009, 11:57 am

This Wednesday, the new cabinet of the recently elected German center-right government will be sworn in. Much of the post-election commentary has focused on whether the incumbent German chancellor, Angela Merkel, will continue to govern as she did while in coalition with the Social Democratic Party (SPD), or use the new coalition of her Christian Democratic Union (CDU) and the Free Democrats (FDP) to set out on a more conservative reform path. To the consternation of many in her own party, but obviously pleasing to the larger German public given her reelection victory, the past few years have seen her govern with a “make no mistake” formula. Many, if not most, commentators seem to believe she will continue in this mode.

Frankly, it is too early to tell. Nevertheless, the character of the negotiations between the CDU and FDP over the past few weeks on what the coalition’s governing platform would be suggest that Merkel intends to keep a fairly tight reign on her coalition partner’s desire to substantially overhaul German tax and labor laws. What has resulted is a plan to cut taxes and promises to overhaul Germany’s healthcare system—controversial steps, to be sure, but not what many reform-minded Germans were hoping for.

But if “personnel is policy,” then this weekend’s announcement of the composition of the new German cabinet is quite good news, at least for those of us who work in the area of defense and security affairs. First off, there were concerns among allied intelligence and police agencies that the interior ministry, which had been in the hands of the CDU’s very able and serious Wolfgang Schäuble in the previous government, would be given over to the libertarian-leaning FDP as a reward for its success in September’s election. Faced with an increased threat from al Qaeda and evidence that a number of German Muslims have gone to terrorist training in Pakistan and now returned to Germany, the last thing German security needed was a minister who would see any increase in police and intelligence efforts as an affront to German citizens’ basic liberties. But the CDU kept the cabinet post, with Merkel’s chief of staff Thomas de Maiziere, in the chancellery since 2005, taking over at the interior ministry. Smart and tough, Maiziere appears to be an able replacement for Schäuble and he obviously enjoys the confidence of the chancellor—no small matter when it comes to overseeing domestic intelligence and security.

Particularly noteworthy, as well, is the appointment of Karl-Theodor zu Guttenberg, a member of the Christian Social Union (CSU),  the center-right, Bavarian-based party, to be German defense minister. Only 37, articulate, and perhaps Germany’s most popular politician, Guttenberg will be a marked change from the relatively stolid and inarticulate Franz Josef Jung, the previous defense chief. This change will be increasingly important in the coming months as the Bundestag debates whether to continue the mandate for Germany’s continued participation in the NATO mission in Afghanistan, and whether to increase the German military’s contribution and/or change the terms of what it can do there when it comes to military operations.

No one expects Guttenberg to somehow overnight convince either his coalition partners or the public that Germany’s role in Afghanistan should become substantially different. However, the hope is that he will be put an end to the downward drift in public support for the mission and, over time, increase the German military’s ability to contribute to the campaign there. Also of importance, at the Ministry of Defense Guttenberg offers a reassuring counterbalance to Guido Westerwelle, the head of the junior coalition partner, the FDP, and the new and inexperienced German foreign minister.

For Guttenberg, who undoubtedly could have chosen a less controversial cabinet position, this will be a high-wire political act to be sure. But should he succeed or be seen to succeed, it will be another feather in the cap of Germany’s most obvious rising political star.

The latest figures for foreclosures for the third quarter of the year and for September are in on the RealtyTrac website. Foreclosures were up 5 percent in the third quarter, and the figures indicate that the proportion of foreclosures resulting from recessionary stress is up and the proportion caused by the government’s inflating of the housing bubble and encouragement of subprime and Alt-A mortgages in fast-growing parts of the country is down. Specifically, in the third quarter 54 percent of the foreclosures were in the four “sand states,” California, Nevada, Arizona, and Florida, and 4 percent in Michigan (which, with its 15 percent–plus unemployment rate, is a good proxy for recessionary distress). The corresponding figures for September are 48 percent and 5 percent.

The rates of foreclosure are still far higher in the sand states than elsewhere, however. In the third quarter the percentage of houses in foreclosure were highest in Nevada (4.3 percent), California (1.9 percent), Arizona (1.9 percent), and Florida (1.8 percent). The only other states above the national average of 0.7 percent were Utah (1.0 percent), Idaho (1.0 percent), Georgia (0.8 percent), Michigan (0.8 percent), and Colorado (0.8 percent). Note that all of these except Michigan have been high-growth states, thus vulnerable to the same government-induced boom-and-bust experience so visible in the sand states.

Here’s an interactive blog post from the Associated Press that shows you where the foreclosures have been concentrated between January 2004 and September 2009. It highlights the states where the foreclosure rate hit 0.4 percent a month, a troublingly high percentage. (The percentages in the preceding paragraph are for a three-month period and so not commensurate.) No state hit that troubled percentage until March 2007, when Nevada did. In August 2007 California was in the trouble zone, then snapped out of it only to reappear in December 2007, after which it has remained in that territory. In April 2008 Florida and Arizona appeared in the troubled zone and have stayed there ever since. A few other states have popped into the troubled zone more recently, Virginia for one month in May 2009, Utah for one month in July 2009, Michigan for one month in August 2009, and Idaho in August and September 2009.

In the absence of those government policies that encouraged and subsidized subpar mortgage lending, there would be many, many fewer foreclosures nationally. And of course in the absence of those policies, the banks and other financial institutions would not have filled their portfolios with mortgage-backed securities and other financial assets that turned out to be worth far, far less than the ratings agencies and others projected. And what were those government policies? A good place to start would be the work of my American Enterprise Institute colleague Peter Wallison, who has been warning us about these policies for years.


The American Enterprise Institute takes no institutional positions on policy advocacy or political campaigns. The views expressed on The Enterprise Blog represent those of the individual writers.

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